Shriram Pistons And Rings Ltd. vs Buckeye Machines (P) Ltd.
2006 Latest Caselaw 1888 Del

JUDGMENT

Pradeep Nandrajog, J.

1. Disputes between the parties were referred to a panel of Arbitrators who published an award on 15.9.1995.

2. Claimant M/s. Sriram Pistons and Rings Ltd. filed a petition under Section 14 of the Arbitration Act, 1940 with a prayer that the Arbitral Tribunal be directed to file the award in this Court and further proceedings be taken as per law.

3. Directions were issued to the Arbitrators to file the award in this Court. The award was filed but unfortunately was not placed in file of CS(OS) No. 2706-A/1995. Award was registered as a fresh suit being CS(OS) No. 2664A/1996. Notice of filing of the award was served upon the parties in CS(OS) No. 2664A/1996. Vide IA No. 2828/1998, M/s. Buckeye Machines Pvt. Ltd. have filed objections to the award.

4. Proceedings in CS(OS) No. 2706-A/1995 have therefore become infructuous.

5. To appreciate the objections, backdrop facts are that 3 work orders, one dated 13th September, 1989 and two dated 23rd March, 1990 each were placed by Sriram Pistons and Rings Limited upon M/s. Buckeye Machines Pvt. Ltd.

6. Vide work order dated 13.9.1989, a vertical boring machine as per specifications was to be fabricated by M/s. Buckeye Machines Pvt. Ltd. and supplied to Sriram Pistons and Rings Limited. Notified date of delivery was 15th January, 1990.

7. Vide first purchase order dated 23rd March, 1990 M/s. Buckeye Machines Pvt. Ltd. was to fabricate and supply a hydraulically operated semi-automatic gravity dyecasting machine. Date of delivery notified was 30th June, 1990. By and under the second order dated 23rd March 1990, Sriram Pistons and Rings Limited placed an order upon M/s. Buckeye Machines Limited for overhauling its dyecasting machine. The work was to be completed by 15.6.1990.

8. Under the first purchase order, sum payable was Rs. 9 lacs. Under the second purchase order sum payable was Rs. 6.3 lacs. Under the third order, amount payable was Rs. 2.75 lacs.

9. M/s. Buckeye Machines Pvt. Ltd. failed to fabricate 2 machines and failed to recondition the dye casting machine within time prescribed under the agreements. From time to time, Shriram Pistons and Rings Ltd. extended delivery period. Finally, vide letters dated 17.6.1991, 15.10.1991 and 28.10.1991, the three orders were cancelled.

10. Advances which were paid under the three contracts by Shriram Pistons and Rings Ltd. were required to be refunded by M/s. Buckeye Machines Pvt. Ltd. Rs. 63,000/- received as advance under contract No. CA 167 dated 23.3.1990 was returned by M/s. Buckeye Machines Pvt. Ltd. Sum of Rs. 1.1 lacs and Rs. 2.35 lacs respectively received under the other two contracts was not refunded.

11. Matter went to the lap of the learned arbitrators.

12. Apart from seeking refund of the advance paid under the two contracts Shriram Pistons and Rings Ltd. sought damages and interest.

13. Pertaining to contract CA 167, learned arbitrators have awarded damages in sum of Rs. 90,000/-. Under contract No. 118 no damages have been awarded but Rs. 8,600/- towards the missing part of the machines which was supplied for being reconditioned were directed to be paid. Refund of advance received has been ordered. Under the third contract, refund of Rs. 2.35 lacs was allowed. Damages in sum of Rs. 2 lacs have been granted.

14. Common to all the three contracts, Shri Sandeep Sharma, learned Counsel for the objector urges that having extended time for completion of the contract, time was not treated to be of the essence of the contract and therefore no damages could be claimed for breach of contract by his client.

15. I am afraid, the submission made by learned Counsel has no legs to stand on.

16. Learned arbitrators have held that effect of extending time for reconditioning one machine and fabricating the other two and supplying the same, would be that the extended time would be the period within which contract had to be performed. Learned arbitrators have noted that the contract was for sale of goods (two contracts), third being for reconditioning of the machinery. Learned arbitrators have held that pertaining to sale of goods, time is normally to be considered as essence of the contract.

17. Shri Sandeep Sharma, learned Counsel for the objector did not dispute that for a contract relating to the sale of movable goods, time has ordinarily to be considered and treated as of the essence of the contract. But, as noted above, submission made was that by extending the time for completion of the sale, time ceased to be of the essence of the contract.

18. Way back in the year 1922, in the report published as AIR 1922 PC 178, Muhammad Habidullah v. Bird and Co., it was held that language of Section 55 and Section 63 of the Indian Contract Act was clear to the effect that where originally agreed time is extended by a party to the contract, without reserving a right to claim damages, no damages could be claimed for breach of contract but if within the extended time, contract is not completed, right accrues to claim damages treating extended date to be the one on which breach has been committed.

19. In the report published as AIR 1946 Bombay 429, The Paper Mills Ltd. v. Chokhani Bros., it was held that in a contract for sale of goods, extended time has to be treated as of the essence of the contract for the reason where parties by mutual agreement extend time for fulfilllment of the contract, it does not necessarily mean that parties did not intend to treat time as not of the essence of the contract.

20. Similar view was expressed in the report published as , Orissa Textile Mills v. Ganesh Das.

21. It is a settled principle of law that in commercial contracts for supply of goods, time has to be treated as essence of the contract unless the contra is proved. (See China Cotton Exporters v. Union of India ; Mahabir Prasad Rungta v. Durga Datta and Bhikraj Jaipuria v. Union of India .)

22. I need not bother myself any further for the reason as long as a view taken by the arbitrators is not perverse and is based on a correct application of a legal principle, it would not be within my jurisdiction to re-appreciate evidence and the law as applied by the learned arbitrators.

23. Needless to state, objector failed to perform its obligations under the three contracts and therefore has been rightly held liable to refund the advance received under the two contracts; learned arbitrators have noted that advance received under one contract was returned.

24. On the issue of damages, learned Counsel for the objector states that there is no material on which damages could be computed by the learned arbitrators.

25. As noted above, for breach under the two contracts, damages have been awarded.

26. Awarding damages in sum of Rs. 90,000/- for breach of one contract, learned arbitrators have noted that evidence led by the claimant, duly supported by documents, showed that the price of similar machines had gone up by Rs. 90,000/- on date of breach. Similarly in respect of contract CA 138 wherein damages awarded are in sum of Rs. 2 lacs, learned arbitrators have noted a letter dated 30.10.1991 as per which Shriram Pistons and Rings Ltd. had placed a purchase order on a third party for the machine which was to be fabricated/manufactured by the objector pursuant to purchase order CA 138. On the basis of said purchase order, damages have been computed.

27. It is quite settled that measure of damages in a supply contract is the difference between the contract price and the market price as on the date of the breach. If market rates on date of breach are not available, rates prevalent just before and just after that date may be taken account of. If the subject matter of the contract is not marketable, then in that case the value must be taken as fixed by the price which actually has to be paid for the best and nearest available substitute.

28. It is thus not a case of no evidence. Learned arbitrators have awarded damages on basis of evidence before them.

29. Last objection urged is to the rate at which interest has been awarded.

30. Learned arbitrator has awarded interest @18% per annum.

31. Having perused the purchase orders, it is clear that the three contracts did not provide for any interest. No evidence of market usage has been led. Thus, interest payable has to be the one which scheduled banks were offering on fixed deposits.

32. Noting that the transactions relate to the year 1990 and having knowledge that scheduled banks were offering interest @11% per annum, compounded quarterly, I reduce the interest awarded by the learned arbitrator to 12% per annum.

33. IA No. 2828/1998 stands disposed of modifying award dated 15.9.1995 published by Mr.Praveen Kumar, Mrs.Shyamala Pappu and Prof. P.S. Sangal, to the extent that interest awarded stands reduced from 18% per annum to 12% per annum. CS(OS) No. 2664-A/1996 and CS(OS) No. 2706-A/1995

1. For the reasons recorded herein above, CS(OS) No. 2706-A/1995 is disposed of as infructuous.

2. For the reasons recorded herein above disposing of IA No. 2828/1998, CS(OS) No. 2664-A/1996 stands disposed of modifying the award dated 15.9.1995 passed by Mr.Praveen Kumar, Mrs.Shyamala Pappu and Prof. P.S. Sangal to the limited extent that interest awarded stands reduced from 18% per annum to 12% per annum. Remaining award is upheld. The award as modified be made a rule of the Court. Post decretal interest from date of decree till date of realization is awarded at 10% per annum.

3. No costs.