TMI Blog2009 (2) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... llant, because it has been clearly stated that the concept of unequal bargaining power has no application in case of commercial contracts. A bare perusal of the Sub-section (8) of Section 31 and Section 38, clearly shows that the provision is to operate in the absence of agreement with regard to cost. It cannot be pressed into service to get over Sub-clause (7) of Clause 25-A. The stand taken by the appellant is squarely answered by what has been stated by this Court in Assistant Excise Commissioner and Ors. v. Issac Peter and Ors.[ 1994 (2) TMI 294 - SUPREME COURT] held that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts. It has been submitted by ld Counsel for the appellant that there should be a cap in the quantum payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court in Municipal Corporation, Jabalpur v. Rajesh Construction Company JT 2007 (5) SC 450 has opined as follows: In view of the decision of the Supreme Court, referred to above, as suggested on behalf of the respondent, the claimant is directed to deposit Rs. 1,81,14,815/- i.e 7% of the amount claimed in the statement of claim with the respondent and further arbitration proceedings would proceed only thereafter. The claimant was to comply with the above condition in agreement before steps could be taken to start arbitration proceedings. Hence, at this stage Arbitrators cannot assume jurisdiction to proceed with the arbitration. While allowing objection petition filed under Section 16 of the Arbitration and Conciliation Act, it is so ordered as above, accordingly. Challenge before the High Court was that the Arbitration and Conciliation Act, 1996 (in short the `Act') does not permit the parties to contract out of the provisions of the Act, and therefore the prescription under Sub-clause (7) of Clause 25-A of the agreement was in conflict with the provisions of Section 31(8) read with Section 38 of the Act. It was submitted that the costs involved cannot be more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance may be terminated at any time at the request of the Insured , and The Insurance may also at any time be terminated at the instance of the Company. These are all the words of the clause that matter for the present purpose. The words at any time can only mean at any time the party concerned likes . Shortly put Clause 10 says Either party may at its will terminate the policy. No other meaning of the words used is conceivable. 8. In General Assurance Society Ltd. v. Chandmull Jain and Anr. [1966]3SCR500 the decision was re-iterated as follows: 11. A contract of insurance is a species of commercial transactions and there is a well established commercial practice to send cover notes even prior to the completion of a proper proposal or while the proposal is being considered or a policy is in preparation for delivery. A cover note is a temporary and limited agreement. It may be self-contained or it may incorporate by reference the terms and conditions of the future policy. When the cover note incorporates the policy in this manner, it does not have to recite the term and conditions, but merely to refer to a particular standard policy. If the proposal is for a standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elves. Looking at the proposal, the letter of acceptance and the cover notes, it is clear that a contract of insurance under the standard policy for fire and extended to cover flood, cyclone etc. had come into being. Sub-clause (7) of Clause 25-A of the agreement reads as follows: (7) It is also a term of this contract agreement that where the party invoking arbitration is the contractor, no reference for arbitration shall be maintainable unless the contractor furnishes to the satisfaction of the executive Engineer-in-Charge of the work a security deposit of a sum determined according to details given below and the sum so deposited shall, on the termination of the arbitration proceedings be adjusted against the cost, if any, awarded by the arbitrator against the claimant party and the balance remaining after such adjustment in the absence of any such cost being awarded, the whole of the sum will be refunded to him within one month from the date of the award- Amount of claim Rate of Security deposit 1. For claims below Rs. 10,000/- 2% of amount claimed 2. For claims of Rs. 10,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost. It cannot be pressed into service to get over Sub-clause (7) of Clause 25-A. 11. In addition to the various pleas, the stand taken by the appellant is squarely answered by what has been stated by this Court in Assistant Excise Commissioner and Ors. v. Issac Peter and Ors. [1994]2SCR67 it has been stated as follows: 26. Learned Counsel for respondents then submitted that doctrine of fairness and reasonableness must be read into contracts to which State is a party. It is submitted that the State cannot act unreasonably or unfairly even while acting under a contract involving State power. Now, let us see, what is the purpose for which this argument is addressed and what is the implication? The purpose, as we can see, is that though the contract says that supply of additional quota is discretionary, it must be read as obligatory -- at least to the extent of previous year's supplies -- by applying the said doctrine. It is submitted that if this is not done, the licensees would suffer monetarily. The other purpose is to say that if the State is not able to so supply, it would be unreasonable on its part to demand the full amount due to it under the contract. In short, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass termination of District Government Counsel in the State of U.P. It was a case of termination from a post involving public element. It was a case of non-government servant holding a public office, on account of which it was held to be a matter within the public law field. This decision too does not affirm the principle now canvassed by the learned Counsel. We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts. It must be remembered that these contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State power being involved in such contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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