2011 (11) TMI 851 - SC - Indian Laws

Summary

Issues Involved:
1. Legality and enforceability of the contract.
2. Discharge of obligations under the contract.
3. Impossibility of performance.
4. Interpretation of ASE Specification No. 68.

Summary:

Legality and Enforceability of the Contract:
The arbitrator held that the contract was void ab initio and not enforceable, citing a letter dated 31.08.1990 from the Government of India, Ministry of Defence, which instructed that rates quoted below 20% of reasonable rates should be treated as fictitious and rejected. The Supreme Court found this reasoning untenable, stating that the letter was not an Act of the legislature and did not render the contract unlawful u/s 23 of the Indian Contract Act. The arbitrator's conclusion that the contract was void was deemed patently illegal and opposed to public policy.

Discharge of Obligations under the Contract:
The arbitrator concluded that Respondent No. 2 discharged the Appellant from its obligations by not supplying fruits, allowing the Appellant to sue for breach of contract and damages under the Indian Contract Act.

Impossibility of Performance:
The arbitrator rejected Respondent No. 2's claim of impossibility of performance due to short supply of fruits, holding that this did not excuse non-performance of the contract.

Interpretation of ASE Specification No. 68:
The arbitrator dismissed Respondent No. 2's contention regarding ASE Specification No. 68, noting that Respondent No. 2 had accepted and signed the chart and performed the contract until June 2000.

Conclusion:
The Supreme Court set aside the Award of the arbitrator and the judgments of the City Civil Court, Hyderabad, and the High Court. The matter was remitted to the arbitrator for deciding the claims of the parties in accordance with the findings on Issue Nos. 1, 2, and 3 and the Supreme Court's judgment. The appeal was allowed with no order as to costs.