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Para 9.3.7 - Denial Clause | KartavyaDesk

Goods Manual

Original Rule Text

9.3.7 Denial Clause (DC) The buyer should protect himself against extra expenditure during the extended period by stipulating a denial clause (over and above the levy of LD) in the letter informing the supplier of the extension of the delivery period. In the denial clause, wherever delay in delivery is due to a default by the seller, any increase in statutory duties and/or upward rise in prices due to the PVC clause and/or any adverse fluctuation in foreign exchange are to be borne by the seller during the extended delivery period, while the purchaser reserves his right to get any

What This Means

Para 9.3.7 of the Manual for Procurement of Goods, 2017, introduces the 'Denial Clause' (DC). Think of it as a safety net for the government when a supplier fails to deliver goods on time and gets an extension. This clause protects the government from unexpected cost increases during that extended period, specifically if the delay is the supplier's fault. It ensures the government doesn't have to pay more due to factors like increased taxes, price hikes according to a Price Variation Clause (PVC), or unfavorable changes in currency exchange rates.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •The Denial Clause protects the buyer (government) from extra costs during an extended delivery period.
  • •It applies when the supplier is at fault for the delivery delay.
  • •The supplier bears the burden of increased statutory duties, price increases (PVC), and adverse foreign exchange fluctuations during the extension.
  • •The Denial Clause is included in the letter granting the extension of the delivery period.
  • •It operates *in addition* to any Liquidated Damages (LD) already being levied.

Practical Example

The Ministry of Textiles contracted 'Silk Weavers Ltd.' to supply 10,000 silk sarees by December 31st, 2024, with a Liquidated Damages (LD) clause for late delivery. Silk Weavers Ltd. faced production delays due to a labor strike and requested an extension until February 28th, 2025. The Ministry granted the extension but included a Denial Clause in the extension letter. During the extension, the government increased GST on silk. Because of the Denial Clause, Silk Weavers Ltd., not the Ministry, had to bear the increased GST cost for the sarees delivered during the extended period. If the price of silk yarn had also increased according to a pre-agreed PVC, Silk Weavers Ltd. would also be responsible for that increase.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What happens if the delay is not the supplier's fault?▼
The Denial Clause only applies when the delay is due to the supplier's default. If the delay is due to unforeseen circumstances beyond the supplier's control (force majeure), the Denial Clause may not be applicable, and the specific terms of the contract would need to be reviewed.
Is the Denial Clause mandatory?▼
While Para 9.3.7 advises the buyer to protect themselves with a Denial Clause, it's not explicitly mandatory. However, it's a recommended practice to safeguard public funds.
How does the Denial Clause relate to Liquidated Damages (LD)?▼
The Denial Clause operates *in addition* to Liquidated Damages. LD is a penalty for late delivery, while the Denial Clause protects against increased costs during the extended period.
Where should the Denial Clause be mentioned?▼
The Denial Clause should be clearly stated in the letter informing the supplier about the extension of the delivery period.
What kind of price increases are covered by the PVC in the Denial Clause?▼
The PVC (Price Variation Clause) typically covers increases in the cost of raw materials or other inputs that are directly related to the production of the goods being procured. The specific items covered by the PVC should be clearly defined in the original contract.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 9.3.7 of the Manual for Procurement of Goods, 2017, the Denial Clause (DC) primarily protects the buyer from which of the following during an extended delivery period?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

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