UNION OF INDIA versus COL. L.S.N. MURTHY & ANR.

UNION OF INDIA versus COL. L.S.N. MURTHY & ANR.

A departmental letter prescribing rejection of tenders below 20% of reasonable rates is not 'law' under Section 23 of the Indian Contract Act or Article 13(3)(a) of the Constitution. Therefore, the supply contract is not void ab initio, and the arbitrator's award declaring it void based on the letter was patently illegal and opposed to public policy.

Parties
Appellant: Union of India; Respondent No.1/arbitrator: Col. L.S.N. Murthy; Respondent No.2: Respondent No.2 (tenderer for supply of fruits)
Jurisdiction
India
Judgment Date
23 November 2011
Procedural Posture
Civil Appeal / Supreme Court Appeal From High Court Judgment
Outcome
Appeal allowed
Legal Topics
Validity of Agreements, Scope of 'law' Under Article 13, Section 23 Indian Contract Act, Arbitrator's Jurisdiction, Public Policy and Arbitral Awards
Contract Law Constitutional Law Arbitration Law Validity of Agreements Scope of 'law' Under Article 13 Section 23 Indian Contract Act Arbitrator's Jurisdiction Public Policy and Arbitral Awards

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Parties

Union of India

Appellant

Col. L.S.N. Murthy

Respondent No.1/arbitrator

Respondent No.2 (tenderer for supply of fruits)

Respondent No.2

Procedural Posture

Civil Appeal / Supreme Court Appeal From High Court Judgment

Legal Issues

  1. 1 Whether the contract between the appellant and respondent No.2 was void and not enforceable due to the Government of India letter dated 31.08.1990.
  2. 2 Whether the arbitrator wrongly decided the contract as void ab initio under Article 13 and Section 23 of the Indian Contract Act.

Ratio Decidendi

A departmental letter prescribing rejection of tenders below 20% of reasonable rates is not 'law' under Section 23 of the Indian Contract Act or Article 13(3)(a) of the Constitution. Therefore, the supply contract is not void ab initio, and the arbitrator's award declaring it void based on the letter was patently illegal and opposed to public policy.

Court Disposition

Appeal allowed

Orders

  • Award of arbitrator and judgments of City Civil Court and High Court set aside.
  • Matter remitted to arbitrator for deciding claims of appellant and respondent No.2, in accordance with findings on Issue Nos. 1, 2, and 3 and this judgment.