Cuprum Bagrodia Limited vs Gainwell Commosales Private ...
2021 Latest Caselaw 126 Cal/2

                                          1


                             A.P. No. 308 of 2020
                      IN THE HIGH COURT AT CALCUTTA
                       Ordinary Original Civil Jurisdiction
                                 Original Side
                           Cuprum Bagrodia Limited
                                       v.
                     Gainwell Commosales Private Limited


     For the petitioner        : Mr. Ranjan Bachawat, Sr. Advocate
                                 Mr. Debnath Ghosh, Advocate

     For the Respondent        : Mr.   S.N. Mitra, Sr. Advocate

Mr. Anirban Ray, Advocate Mr. Shounak Mitra, Advocate Mr. Rishav Dutt, Advocate

Hearing concluded on : January 19, 2021 Judgment on : February 9, 2021

DEBANGSU BASAK, J. :-

1. The petitioner has sought interim protection under section 9 of the

Arbitration and Conciliation Act, 1996 by way of the present petition.

2. Learned Senior advocate appearing for the petitioner has submitted

that, the petitioner carries on business of coal mining. The petitioner has

been using the High Wall Mining System for extracting coal. In such

system, a specialised machinery is utilised. The only manufacturer of such

machinery in India is the respondent. The petitioner had placed an order

for delivery of High Wall Miner, model HW 300 on the respondent to be

delivered by August 2018. The petitioner had also placed a separate order

for the Low Seam Cutter Module CM210 on the respondent to be used

together with the High Wall Miner, model HW 300.

3. Learned Senior Advocate appearing for the petitioner has submitted

that, the parties have entered into a contract for supply of High Wall

mining system on May 10, 2019. He has referred to the various terms and

conditions of such contract. He has submitted that, such contract has

stipulated the terms of payment. He has drawn the attention of the court

to the terms of payments as specified in the contract. He has submitted

that, the respondent was supposed to procure vital parts of the machinery

from Caterpillar, the USA manufacturer. He has submitted that, the

petitioner has always been and still is ready and willing to pay for the

machinery. He has referred to the clause of the contract which has dealt

with the title, property and risk. He has referred to Clause 7 of the

contract which has stipulated the delivery date, transportation, insurance,

assembly and testing of the machinery. He has submitted that, under

clause 8 of the contract, the contract cannot be cancelled after execution

of the same.

4. Learned Senior advocate appearing for the petitioner has submitted

that, the contract for supply of the machinery is by its nature non-

terminable. The parties have not terminated the contract. He has

submitted that, the petitioner cannot purchase such machinery from any

other manufacturer in India. The respondent is the only manufacturer.

5. Learned Senior Advocate appearing for the petitioner has referred to

the scope of supply and pricing under the contract. He has submitted

that, the machinery that the respondent had agreed to supply, has a

particular number being GHWM 00186.

6. Learned Senior Advocate appearing for the petitioner has submitted

that, the respondent had part performed the contract. The petitioner had

paid such portion of the total contracted value for the machinery as was

required under the contract to be paid. He has submitted that, the

petitioner inspected the machinery that the respondent was

manufacturing for the petitioner. On such inspection, the petitioner had

found that, the work for the machinery not to be up to the mark. He has

submitted that, the petitioner became aware that the respondent was

trying to enter into the business arena of the petitioner and was trying to

utilise the machinery that was meant for the petitioner, for execution of a

contract that the respondent entered into with the coal companies.

According to him, the respondent had diverted the machinery belonging to

the petitioner for the use of the respondent.

7. Learned Senior Advocate appearing for the petitioner has submitted

that, the respondent has taken different stand at different points of time

with regard to the manufacture and delivery of the machinery. He has

referred to the orders passed from time to time by the court. He has

submitted that the Receiver appointed by the Court could not find the

machinery. He has referred to the Receiver's report. He has submitted

that, the Receiver recorded that, the machinery meant for the petitioner

was not found at the manufacturing area of the respondent. He has drawn

the attention of the Court to the purchase orders for purchasing parts of

the machinery that the respondent placed before the Receiver. He has

submitted that the purchase orders which the respondent claims to have

placed for the purpose of buying different components of the machinery to

be manufactured and supplied to the petitioner, were not for the

machinery of the petitioner. Such orders were for the next machinery that

the petitioner has been assembling at its works. The respondent had

manufactured the machinery having number GHWM 00186. The part of

the machinery that the Receiver has found in his two visits are parts of the

machinery bearing number GHWM 00187.

8. Learned Senior Advocate appearing for the petitioner has submitted

that, the respondent is now manufacturing a machinery with the serial

number 187. The machinery with the serial number 186 belongs to the

petitioner. The respondent had manufactured such machinery bearing

serial No. 186 and is now wrongfully and illegally utilising such machinery

for its own use. The court should take appropriate measures so as to

make the machinery bearing serial number 186 available to the petitioner.

9. The respondent has opposed the application. Learned Senior

Advocate appearing for the respondent has submitted that, the parties had

entered into a contract on May 10, 2019. He has referred to various

provisions of the contract between the parties. He has submitted that, the

contract contains provisions for delay. The contract has provisions for the

time schedule for delivery. He has referred to paragraph 10 of the petition

and submitted that, the petitioner had delayed in making the stage wise

payments. Referring to clause 7.1 of the contract, learned senior advocate

appearing for the respondent has submitted that, in case of delay of

receipt of stage payments, the time for delivery will get extended. He has

referred to an electronic mail dated January 10, 2020 and has submitted

that, the time to make delivery stood extended from February 5, 2020 to

April 30, 2020.

10. Learned senior advocate appearing for the respondent has referred to

the averments made in the petition as well as the correspondence

exchanged between the parties. He has also referred to the affidavits used

by the parties. He has submitted that, there was delay in payment on the

part of the petitioner which caused the delay in delivery. Subsequently,

the petitioner had expressed a desire to procure a different machinery. The

parties had negotiated on such machinery. Ultimately, the petitioner had

gone back to the original specifications. The petitioner had consumed time

in negotiating with the respondent on the kind of machinery that it wants

to purchase. In fact, there has been no delay on the part of the

respondent. The petitioner had wanted changes in the specifications of the

original machine. Ultimately, the parties had agreed to a delivery schedule

and progress of work on September 7, 2020. The petitioner had moved the

court on October 14, 2020. He has submitted that, the delay if any, in

making and delivering the machinery, cannot be attributed to the

respondent.

11. Referring to clause 6 of the contract, learned senior advocate

appearing for the respondent has submitted that, the title to the

machinery has been agreed to pass to the petitioner on delivery. Since the

petitioner has not paid the entire agreed amount and the manufacture of

machine is yet to be completed, the title to the machinery has not passed

to the petitioner. The claim of the petitioner is at best on account of loss

and damages for which no mandatory order of injunction as prayed for

should be passed. He has referred to and relied upon Sections 19 and 21

of the Sale of Goods Act, 1930. In support of his contentions, he has relied

upon 1995 SCC online Bombay 43 (The Commissioner of Sales Tax,

Maharashtra State, Bombay v. M/s. Mazgaon Dock Ltd.) and 1975

Volume 3 SCC 424 (T.V. Sundram Iyengar & Sons v. State of

Madras). According to him, the parties had set the time to make the

delivery at large. He has referred to Section 55 of the Indian Contract Act,

1872 and 1979 Volume 2 SCC 70 (Hind Construction Contractors v.

State of Maharashtra).

12. Learned senior advocate appearing for the respondent has submitted

that, the petitioner is guilty of suppression of facts which are material for

the purpose of adjudication of the disputes between the parties. He has

referred to the averments made by the respondent in the affidavit in

opposition and particularly to paragraph 3 thereof. He has submitted that,

the petitioner is not entitled to any interim protection.

13. The petitioner had entered into a contract with the respondent for

purchase of a High Wall Miner, Model HW 300, Low Seam Cutter Module

CM210 and one High Wall Mining system including a Cutter Module to be

manufactured under licence from Caterpillar, USA along with spare parts

and services. Apparently, the respondent is the sole manufacturer of such

machines under licence from Caterpillar, USA. The parties have entered

into a contract dated May 10, 2019 for such purpose. Such contract has

an arbitration clause. The Court has been informed in the course of

hearing of the petition that the petitioner made a reference of the disputes

and differences to arbitration in terms of the arbitration agreement.

14. By and under the contract dated May 10, 2019, the petitioner had

agreed to pay a sum of Rs. 60,12,93,000/- in staggered manner for the

machinery. A sum of Rs. 6 crores had been agreed to be paid along with

the execution of the contract. A sum of Rs. 6 crores had been agreed to be

paid within 30 days from the date of signing of the contract again receipt

of initial component package and a sum of Rs. 12 crores within 90 days

from first payment against receipt of major components. The payment

clause in the contract dated May 10, 2019 had provided for the balance

payments are to be made in a staggered manner.

15. The dates of payments which the petitioner has disclosed in

paragraph 10 of the petition states that, the first payment had been made

on May 15, 2019 for a sum of Rs. 6 crores. The next payment made by the

petitioner had been on July 26, 2019 for a sum of Rs. 6 crores and the

third payment had been made on January 15, 2020 for the sum of Rs. 12

crores. The schedule of payment as has been disclosed by the petitioner in

its petition demonstrates that the petitioner did not pay in accordance

with the agreed payment schedule under the contract. Whether the

petitioner had been justified in doing so and the ultimate consequences

thereof should best to be decided in arbitration.

16. The contract dated May 10, 2019 had provided that the delivery of

the machinery will be 8 months and 10 days from the date of receipt of 10

per cent advance payment on ex-work basis. The payment terms has also

stipulated that, the receipt of subsequent payments as per the payment

terms are imperative to maintain the delivery schedule. According to the

petitioner, it had made production linked payment to the respondent.

According to the respondent, the petitioner had failed to adhere to the

agreed payment, under the contract dated May 10, 2019.

17. The parties had held joint inspection of the machinery on July 17,

2019 and on November 12, 2019 to ascertain the progress of the

manufacture. By an electronic mail dated November 20, 2019, the

petitioner had called upon the respondent to state the firm delivery

schedule of the machinery. According to the petitioner, the respondent

had to inform the petitioner as to the firm delivery date by November 11,

2019. By an electronic mail dated November 23, 2019, the respondent had

informed the petitioner that the machinery should be ready for ex-work

Asansol by the last week of April, 2020. The respondent had stated in

such e-mail that such date was the firm schedule. The respondent had

called upon the petitioner to release balance payments at the earliest.

18. It appears from the materials made available on record, that, on

January 2, 2020 a meeting had been held between the parties where, the

team of the banker of the petitioner was also present. The respondent had

confirmed that the machinery would be delivered by April 30, 2020 if the

third advance payment of Rs. 12 crores was made on January 15, 2020.

The petitioner had paid the sum of Rs. 12 crores on January 15, 2020 as

has been noted above.

19. According to the petitioner, the respondent had failed to deliver the

machinery within the stipulated date of April 30, 2020. The petitioner had

by the e-mail dated May 8, 2020 asked the respondent for the schedule of

the pre-despatch testing of the machinery to enable the petitioner to send

its representatives for inspection.

20. The country as also the whole world has been suffering from the

ongoing pandemic. The Central Government as well as the State

Government had declared lockdown. By an electronic mail dated May 9,

2020, the respondent had informed the petitioner that in view of the

Covid-19 pandemic, the operations at the factory and plant of the

respondent remained suspended. In response to the electronic mail dated

May 9, 2020, the respondent through its electronic mail dated May 15,

2020 had informed the petitioner that there has been no change in the

lock down notification.

21. According to the petitioner, it had sent reminders on June 16, 2020

and July 31, 2020 with regard to pre-despatch inspection. According to

the petitioner, the respondent has not replied thereto. According to the

respondent, the petitioner had modified its order consequent upon which,

the respondent could not manufacture and deliver the machinery by April

30, 2020. The respondent has also taken the plea of the pandemic and

the declaration of the lockdown for inability of delivery the machinery

within April 30, 2020.

22. The documents disclosed by the parties suggest that, the parties had

agreed to a delivery of the machinery on April 30, 2020 subject to the

petitioner making the payments as agreed in the contract. The documents

in this proceeding as has been disclosed and as annexed to the several

affidavits that they have used suggest that, the petitioner had made three

payments and that those payments were not in accordance with the time

prescribed under the contract. There are correspondence on record

namely, electronic mail dated August 01, 2020, August 15, 2020 and

August 25, 2020 which have suggested that, the parties were negotiating a

different specification of the machinery from what was earlier agreed to.

The parties have relied a minutes of the meeting dated August 10, 2020.

The minutes of the meeting dated August 10, 2020 apart from the other

machinery that the respondent was to supply to the petitioner, has dealt

with the machinery in-question. The minutes has recorded that there

would be cost escalation and that the issues with regard to the cost

escalation and the delivery would be discussed finally on mutually agreed

terms. By the electronic mail dated September 07, 2020, the petitioner

had called upon the respondent to provide the delivery schedule with

month wise progress so that the same can be monitored by the customer

of the petitioner and also the banker of the petitioner. The petitioner had

sent a reminder electronic mail on September 15, 2020.

23. By an electronic mail dated September 15, 2020, the respondent has

placed on record the mutually agreed points, inter alia, to the effect that

the cutter module would be GCM 235 in place of GLM 210. The

respondent has also informed the petitioner that there would be

substantial cost escalation because of the changes and that cost

escalation for changing cutter module GLM 210 to GCM 235 should be

paid by the petitioner.

24. The parties had exchanged further electronic mails. By the

electronic mail dated October 01, 2020 the petitioner has stated that it did

not want any change in the scope of supply. The petitioner had specified

that the equipment should be supplied as per the contract.

25. The contention of the respondent that, the delay in delivery of the

machinery that has been occasioned, is not attributable to the respondent,

prima facie appears to be of some substance. The petitioner did not make

the payments strictly in accordance with the terms of the contract. The

petitioner is yet to pay the entirety of the amount agreed. The parties had

negotiated a modification of the specifications of the machinery.

Ultimately, by the electronic mail dated October 1, 2020, the petitioner

had stated that, it did not want any change in the scope of supply. There

has been a declaration of lockdown during the ongoing pandemic.

Therefore, up to the period of October 1, 2020, prima facie, it appears

that, the respondent cannot be faulted for not having the machinery in a

deliverable state. The parties had been negotiating the specifications till

October 2020. Therefore, it would be a naive to except that the machinery

would be made ready by the respondent immediately after October 1, 2020

given the nature of the machinery. The petitioner had approached Court

on October 14, 2020 when the first order was passed.

26. By interim orders, the Court had appointed a Receiver over the

machinery. According to the petitioner, the respondent had manufactured

the machinery meant for the petitioner and had sent that machinery to a

different place. In fact the respondent had been using such machinery or

at least was contemplating user of such machinery. According to the

respondent, it could not manufacture the machinery as ordered by the

petitioner in view of the pandemic, non payment and negotiations with

regard to specifications contending till October 1, 2020.

27. The Receiver appointed by the Court had visited the workshop of the

respondent twice. The petitioner has not produced any material to

conclusively establish that, the machinery lying at the workshop of the

respondent is not that of the petitioner and that, the respondent had

manufactured another machinery and had taken the same away. It is not

for the Court to fish out evidence for any of the parties. The onus is on the

petitioner to establish by cogent evidence that, the machinery lying on the

floor of the respondent is not that what has been made for the petitioner

under the contract but some other machinery. The respondent has also

failed to establish the whereabouts of the machinery that the petitioner

claims that the respondent had manufactured for the petitioner.

28. There is one more aspect to the matter. Admittedly, the petitioner

has not paid the entire amount for the machinery. Out of sum in excess of

60 crores required to be paid under the contract, the petitioner has paid a

sum of Rs. 20 crores.

29. Section 19 of the Sale of Goods Act, 1930 has stipulated that,

property in the goods passes when the same has been intended to pass by

the parties. In the facts of the present case, Clause 6 of the contract has

specified that, the risk and title to the machinery shall pass to the

petitioner on delivery. Section 21 of the Sale of Goods Act, 1930 has

specified that, where there is a contract for the sale of specific goods and

the seller is bound to do something to the goods for the purpose of putting

them into a deliverable state, the property does not pass until such thing

is done and the buyer has noticed thereof. In the facts of the present case,

the contract has obligated the respondent as the seller to manufacture the

machinery in accordance with the specification of the petitioner as the

buyer and make the machinery at a deliverable state. Admittedly, the

respondent is yet to make the machinery at a deliverable state. Therefore,

prima facie, it appears that, the petitioner not having paid the entirety for

the machinery and the machinery not being in deliverable state, it cannot

be said that, the title to the machinery has passed on to the petitioner.

Therefore, at this stage, the question of passing a mandatory order

directing the respondent to deliver the machinery to the petitioner does

not arise. The machinery, appears on the basis of the materials made

available on record not to be in a deliverable state. The petitioner has

failed to establish that the other machinery with the petitioner is speaking

of, is actually the machinery which is meant for the petitioner.

30. The respondent has referred to and relied upon Section 55 of the

Indian Contract Act, 1872. In the facts and circumstances of the instant

case the issue as to whether, the respondent is entitled to declare a

portion of the contract void or the issue as to whether there was delay by

reason of failure of the petitioner in not adhering to the terms of the

contract or the issue as to what would be the respective rights and

obligations of the parties under the contract by reason of the alleged non

performance by the respondent should best be decided in the arbitration.

31. T.V. Sundram Iyengar & Sons (supra) has considered the issue as

to whether the supply for consideration of bus bodies constructed and

fitted to chassis provided by the customer amounts to sale chargeable to

sales tax or not. It has answered such issue by holding that the supply of

the bus bodies after fitting them to the chassis supplied by the customer

amounts to sale of goods. In M/s. Mazgaon Dock Ltd. (supra), the Court

has considered the issue whether the transaction of building and

supplying a motor launch is a works contract and not a sale. It has

answered such issue by holding that the contract was for sale of the

complete motor launch.

32. The Supreme Court in Hind Construction Contractors (supra) has

held that, whether time is of the essence of the contract, is a question of

intentions of the parties to be gathered from the terms of the contract.

Applying such ratio to the facts of the present case, at this interim stage it

would not be appropriate to garner the intentions of the parties and come

to a definite finding without affording the parties an opportunity to lead

evidence in the arbitration.

33. In view of the discussions above, the application of the petitioner

fails. AP No. 308 of 2020 is dismissed. The Receiver appointed stands

discharged without the requirement to submit accounts.

[DEBANGSU BASAK, J.]