Bharat Sanchar Nigam Ltd. & Anr. vs. Motorola India Pvt. Ltd.

Judgment of the above noted case bearing Appeal (civil) No. 5645 OF 2008 arising out of SLP(C) No. 3459 of 2007 was delivered by the bench of Supreme Court of India comprising of Mr. Tarun Chatterjee J. and Mr. Lokeshwar Singh Panta J. on September 15, 2008.

This appeal was directed against the judgment and final order dated 26th of October, 2006 of the High Court of Kerala at Ernakulam in AR No 18 of 2006 whereby, the High Court had allowed the prayer for appointment of the arbitrator at the instance of the respondents and directed the parties to submit their disputes to arbitration. The question to be decided in this case was: i) whether the levy of liquidated damages under clause 16.2 of the tender document is an "excepted matter" in terms of clause 20.1 of the said document so that the same cannot be referred to arbitration or looked into by the arbitrator. And ii) whether clause 62 of the special conditions of the tender document will prevail over clause 16.2 of the general conditions of the contract.

The Supreme Court observed that High Court had pointed out correctly that the authority of the purchaser (BSNL) to quantify the Liquidated Damages payable by the supplier Motorolla arises once it is found that the supplier is liable to pay the damages claimed. The decision contemplated under clause 16.2 of the agreement was the decision regarding the quantification of the Liquidated Damages and not any decision regarding the fixing of the liability of the supplier. Pursuant to section 4 of the Arbitration and Conciliation Act, 1996, a party who knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. Clause 62 referring to special clauses had an overriding effect on Clause 16.2, cannot be accepted. There was in fact no conflict between clause 62 and 16.2. Clause 62 had two parts in it. One part referring to the Liquidated damages and the other part refers to incentives in case the respondent/Motorola performs its part of the contract within time. The part dealing with Liquidated Damages under clause 62 in fact refers it back to clause 16.2 dealing with the quantification of Liquidated Damages. So it was apparent that there was no dispute between clause 62 and clause 16.2.

The Appeal therefore was dismissed.

For getting complete judement as pronounced by the court, please follow link below:

http://judis.nic.in/supremecourt/qrydisp.aspx