Genuine Paints And Chemicals Co. vs Union Of India (Uoi)
2006 Latest Caselaw 22 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. The respondent has filed an application under Section 30 of the Arbitration Act, 1940 for setting aside the award made by the sole Arbitrator, Mr K.D. Singh, Additional Legal Adviser to the Government of India, Ministry of Law, Justice and Company Affairs, New Delhi. The award was made on 30.03.1993 in Arbitration Case No.244-B/91 between the petitioner and the respondent.

2. The relationship between the petitioner and the respondent was that the petitioner was to make supplies of paint to the respondent by virtue of a contract dated 06.08.1982. The only relevant clause of the contract is clause No.12 which reads as under:-

The contractor hereby declares that the goods sold to the buyer under this contract shall be of the best quality and workmanship and shall be strictly in accordance with the specification and particulars mentioned in the clause of the contract there of and the contractor hereby guarantees that the said good would continue to conform to the description and quality aforesaid for a period of 12 months from the date of the delivery of the said goods to the Purchaser and that notwithstanding the fact that the Purchaser (Inspector) may have inspected and/or approved the said goods, if during the aforesaid period the said goods discovered not to conform to the description and quality aforesaid or have deteriorated the decision of the purchaser in that behalf will be final and conclusive the purchaser will be entitled to reject the said goods or such portion thereof as may be discovered not conforming to the said description and quality on such rejection and the goods will be at the seller's risk and all the provisions herein contained relating to rejection of goods etc. shall apply.

3. The petitioner had made two claims and the respondent had made three counter-claims. By the impugned award, only one claim of the petitioner has been allowed and the counter-claims of the respondent have been rejected. The entire focus of this application for setting aside the award is based upon the findings given in respect of the claim 'a' whereby the petitioner had claimed a sum of Rs.3,46,705/- from the respondent Along with interest @ 21% per annum from 16.05.1989 till actual payment.

4. It is the case of the respondent/objector that the said clause 12 of the contract specifically required that the paint supplied by the petitioner ought to have retained its quality for a period of 12 months from the date of delivery. The goods were dispatched by the petitioner to the respondent on 10.08.1983 and the same were rejected within the period of 12 months by the respondent vide their rejection letter dated 28.02.1984. Therefore, according to the learned counsel for the objector / respondent, the petitioner was not entitled to any part of the claim inasmuch as the respondent had acted within the four corners of clause 12 of the contract.

5. Mr Khorana, who appeared on behalf of the petitioner, submitted that the award has been passed based upon a correct appreciation of the facts and legal principles. He further submitted that, therefore, this court ought not to interfere with the award as passed. He further submitted that the paint quality had deteriorated because of the acts of omission and commission on the part of the respondent for which the respondents cannot hold the petitioner responsible. He says so because of the fact that the paint was offered for inspection as far back as on 26.11.1982 and it was, in fact, even cleared on 27.01.1983 by the National Test House, Calcutta. However, for some odd reason, the inspection certificate by the Assistant Inspector was only released after a delay of over six months on 22.07.1983. He further drew my attention to the letter dated 28.02.1984 by which the goods were rejected and in particular to the portion whereby a copy of the said letter was marked to DGSandD (I), New Delhi for information. The said endorsement is very material and, therefore, the same is reproduced hereinbelow:-

As evident the stores were rejected vide letter dated 28.2.84. From the aforesaid circumstances, I do not think it to be justified to have rejected the goods at such belated stage and hold the claimants liable under the Warranty Clause.

Upon a reading of the above endorsement, Mr Khorana submitted that it is the respondents own case that the damage to the consignment was caused because of the delay in release of the inspection certificate. He submitted that this damage was caused at the hands of the respondents for which the petitioner was not responsible. He further submitted that although the terms of the said clause 12 are quite explicit, they are to be understood in the context of the provisions of Section 51 to 54 of the Indian Contract Act, 1872, particularly when the parties are required to perform reciprocal promises. It is his case that the petitioner could be bound by the terms of clause 12 upon the respondent performing its part of the reciprocal promise of carrying out the inspection expeditiously and not delaying the inspection. This promise was not carried out by the respondent and, therefore, the delay caused by the respondent which resulted in the deterioration of the quality of the paint could not be held against the petitioner. He submitted that it is under these circumstances that the learned Arbitrator has allowed the claim of the petitioner to the extent indicated in the award and, therefore, there can be no fault found with such a determination.

6. Having considered the arguments advanced by the parties, I am in agreement with the submissions made by Mr Khorana. First of all, the proceedings before this court are not in the nature of an appeal and do not require this court to undertake a microscopic examination of the evidence for ascertaining the foundations of the findings on fact and law. Secondly, it appears to me that the learned Arbitrator was conscious of the provisions of clause 12 of the contract. At the same time, he was conscious of the fact that a part of the delay was caused by the respondent itself for which the responsibility could not be foisted upon the petitioner. It is well-known that paints have a specific shelf life and if the inspection of the paint and issuance of the certificate itself is delayed, then the time taken for this process eats into the determinate shelf life of the paint. In the present case, the learned Arbitrator has rightly found as a fact that the delay was caused by the respondent in issuing the inspection certificate as a result of which the dispatch date / delivery date was also delayed. Had the inspection certificate been issued in normal course, which according to the parties is normally within 15 days of offering for inspection, this problem would not have arisen. This is so because the paint was offered for inspection on 26.11.1982 and 15 days from that date would take it to some time by the 10th of December, 1982 and the goods were certainly in good condition till December, 1983 inasmuch as the rejection letter has come about only on 28.02.1984.

7. Keeping in mind all these circumstances, I am of the view that no interference is called for. The objections are rejected and the award is directed to be made a rule of the court. The petitioner shall be entitled to future interest also @ 12% per annum.