J K Industries Ltd vs Texmaco Limited
2009 Latest Caselaw 1293 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                    CS(OS)385(A) of 1997



%09.04.2009                       Date of decision: 09.04.2009


J K INDUSTRIES LTD.                        .......        Plaintiff
                              Through: Mr. Anil Nauria, Advocate


                                Versus

TEXMACO LIMITED                           .......     Defendants
                              Through: Sumit Sen, Advocate


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.     Whether reporters of Local papers may          yes
       be allowed to see the judgment?

2.     To be referred to the reporter or not?         yes

3.     Whether the judgment should be reported
       in the Digest?                                 yes


RAJIV SAHAI ENDLAW, J.

1. Objections U/s. 30 & 33 of the Indian Arbitration Act, 1940 are

for consideration.

2. The disputes between the parties arose out of purchase order

dated 10th September, 1982 placed by the plaintiff J.K. Industries

Ltd. on the defendant M/s. Texmaco Ltd. for supply of Texmaco VU-

50 Type Coal fired Water Tube Boiler of 30,000 kgs per hour

continuous rating of steam at a working pressure of 300 PSIG at the

works of the plaintiff at Kankroli, Rajasthan. The value of the

contract was Rs.91.45 lakhs. The plaintiff paid Rs.111.14 lakhs

against the defendant‟s bills of Rs. 120.55 lakhs. The plaintiff

withheld payment of Rs.9.41 lakhs. The plaintiff also realized a sum

of Rs.4,57,230/- from the performance bank guarantee furnished by

the defendant in terms of the purchase order. It was the case of the

plaintiff that since the commissioning of the boiler in June 1984, the

plaintiff had been facing problems inter alia on account of

substandard workmanship faulty design and defective material. It

was further alleged that the boiler had failed to give the steam at the

rated capacity and on the account of breakdowns the boiler had to be

shut down several times. It was further contended that in spite of

various measures taken by the defendant on complaints by the

plaintiff, the boiler was never able to achieve the rated capacity.

3. In accordance with the arbitration clause in the purchase

order, the disputes and differences which had accrued between the

parties were referred to the Federation of the Indian Chambers of

Commerce and Industries (FICCI). FICCI in accordance with its

rules constituted an arbitral Tribunal of three arbitrators, one

arbitrator being nominated by each of the parties and the presiding

arbitrator being nominated by FICCI.

4. The plaintiff claimed from the defendant

(i) Rs.1,60,80,287/- towards extra coal consumption in the

boiler during the period January 1984 to December 1986

for the faulty design and substandard workmanship by

the defendant in the boiler.

(ii) Rs.15,38,000/- on account of losses suffered owing to the

frequent steam pressure drops from the boiler wherefor

tyres under process had to be scrapped.

(iii) Rs. 5,35,72,000/- on account of loss suffered in

production of tyre for steam shortage.

(iv) Rs.6,50,792/- on account of reduced life of boiler tubes,

elements, stoker main, drive shaft caused during the

three years prior to the inception of the arbitration

proceedings.

(v) Rs.9,32,000/- towards costs incurred in carrying out

works of modification/rectification of the boiler and

which works the defendant had failed to carry out and

which were stated to be necessary for making the boiler

workable. Originally a further sum of Rs.9 lacs was also

claimed under this head, towards further expenses to be

incurred on rectification/modification but the said claim

was subsequently not pressed.

(vi) Interest and costs of arbitration.

5. The defendant besides contesting the aforesaid claim also

made a counter claim before the Arbitral Tribunal against the

plaintiff for recovery of (i) Rs.10,42,942.29 on account of balance

amount due in respect of work executed under the contract (ii)

Rs.4,57,200/- illegally received by the plaintiff by encashment of

bank guarantee and (iii) for interests and costs.

6. The Arbitral Tribunal was unable to arrive at a consensus. The

presiding arbitrator and the arbitrator nominated by the plaintiff

rendered the majority award dated 21st September, 1996,

whereunder it was held

(i) That plaintiff was entitled to enforce the performance

bank guarantee and recover Rs. 4,57,230/- thereunder

from the defendant and the plaintiff was not liable to

refund this amount since the defendant was guilty of late

delivery of the boiler.

(ii) That the plaintiff is entitled to recover a sum of

Rs.9,32,000/- on account of expenditure incurred on the

rectification and modification of the boiler by replacing

the underthrow type by overthrow type manufactured by

Isgec John Thomson; the boiler supplied was defective.

(iii) That the plaintiff is not entitled to loss of profits because

the claim of the plaintiff was found to be for exceptional

loss and abnormal profits. However, the plaintiff was

held entitled to some general and perhaps conjectural

sum for loss of business reasonably to be expected, as

held by Asquith L.J. in Victoria Laundry case.

(iv) The defendant is not entitled to the claim in the sum of

Rs.10,42,942.29 on the ground that the boiler supplied

was defective and did not conform to the contract

specifications.

(v) In all the circumstances of the case a lumpsum award of

Rs.20 lakhs in favour of the plaintiff and against the

defendant inclusive of Rs.9,32,000/- and Rs.4,57,230/-

aforesaid was made. The defendant was thus held liable

to pay to the plaintiff Rs.20 lakhs in all in full and final

settlement of all the claims of the plaintiff in the

arbitration proceedings. Since this amount included

Rs.4,57,230/- realized by the plaintiff under the

performance bank guarantee, after deduction thereof, a

sum of Rs.15,42,770/- was directed to be paid by

defendant to plaintiff together with interest @18% p.a.

from the date of the award till the date of payment or

decree of the court whichever is earlier.

(vi) The parties were directed to bear their own costs of

arbitration.

7. The minority award dated 29th September, 1996 was rendered

by the nominee arbitrator of the defendant. Minority award

comprising of 9 pages, in the first over seven pages odd, the claim of

the plaintiff has been held to be barred by time, even though that

objection had admittedly not been taken by the defendant; thereafter

it proceeds to criticize the procedure in the arbitration proceedings

followed/adopted by the presiding arbitrator. Thereafter on last two

pages, in bullet points, it states that there was no breach of contract

on the part of the defendant; that it was the plaintiff which was not

ready with the coal feeding system when the boiler was installed

and it was the plaintiff which failed to feed the specified coal to the

boiler resulting in the same not meeting the agreed specified

specifications. It further held that the defendant gave every kind of

gratuitous help and cooperation to the plaintiff to sort out the

problems which was agreed by the plaintiff itself; that the plaintiff

had several other boilers which were supplying steam to its plant

and the plaintiff did not suffer any damage at all by reason of the

non-functioning of the boiler supplied by the defendant and which

non-functioning was entirely due to the plaintiff‟s default. It was

further held that the plaintiff having not suffered any loss, the

question of award of any damages did not arise. The minority award

also directed the plaintiff to refund Rs.4,57,230/- realized by the

plaintiff by encashment of the performance bank guarantee, together

with interest of 18 % per annum from 28th June, 1986.

8. The record shows that FICCI forwarded the majority as well as

the minority award together with the arbitral record to the Registrar

of this Court, having been authorized to do so under the majority

award. Upon receipt thereof in this Court, on 24th February, 1997,

notice of filing of the award was issued to the parties. The defendant

filed I.A. 3991/1998 U/s. 30 & 33 of the Act. The plaintiff has not

challenged the award. Upon completion of pleadings on 5th May,

1998, an issue was struck as to whether the award was liable to be

set aside on the objections of the defendant. Affidavit evidence has

been filed by the parties.

9. I may notice that I.A. 2297/1999 was preferred by the

defendant for summoning the arbitrator who had rendered the

minority award, before this Court. The said application was

dismissed on 10th March, 1999.

10. Before discussing the objections of the defendant, I.A.

7855/2008 filed by the defendant U/s. 141 of the CPC may be dealt

with. The defendant by the said application states that the questions

forming the subject matter of the arbitration primarily related to the

supply of the boiler at Kankroli, Rajasthan and the Courts at Delhi

had no nexus and /or connecting factors with the questions forming

the subject matter of the reference. Only the arbitration sittings

were held at New Delhi and which could not confer jurisdiction U/s.

2(c) of the 1940 Act. It is pleaded that the question of territorial

jurisdiction goes to the root of the matter and should be decided by

the Court before proceeding to hear the objections of the defendant

on merits. As recorded in the said application, at the time of filing

thereof, the matter was part heard before another Judge of this

Court. The record does not show any notice of the said application

having been issued. However, at the time of hearing of the

objections, the counsel for the defendant was permitted to argue the

aspect of territorial jurisdiction also.

11. It may be stated that in the objections as originally filed in

1997, no plea of this Court not having the territorial jurisdiction to

entertain the objections to the award or to entertain proceedings

U/s. 14 & 17 of the Act was taken. The said plea was taken after the

objections had remained pending for nearly 11 years. Not only the

said conduct but even otherwise I find the said plea of territorial

jurisdiction to be vexatious and malafide. A perusal of the purchase

order dated 10.09.1982 in the arbitral record shows that the same

was issued by the plaintiff from Delhi to the defendant at Calcutta.

The said purchase order in Clause 14 of Schedule B thereto provides

that all suits arising out of the order should be instituted in the Court

of competent jurisdiction situated in New Delhi and in no other

Court. The defendant vide its letter dated 21st September, 1982

accorded its acceptance to the purchase order. Though some

clarifications were also sought in the letter dated 13.10.1982, but no

clarification or controversy was raised with respect to the

jurisdiction clause aforesaid.

12. The record also reveals that the advocate for the defendant

also wrote a letter dated 04.11.1996 to FICCI enquiring as to

whether the award had been filed by FICCI in Delhi High Court, as

requested by the advocate for the plaintiff. At this stage also, it was

not said that the Delhi High Court had no territorial jurisdiction and

the award could not be filed there or ought to be filed in any other

Court. Such conduct of the defendant certainly estopps the

defendant from now objecting to the territorial jurisdiction of this

Court.

13. The counsel for the plaintiff has also contended that the

performance bond under the purchase order was to be negotiated

through bankers of the plaintiff in Delhi, payment were made by

plaintiff from Delhi, amendments were sought by the defendant from

the plaintiff at Delhi, discussions from time to time were held at

Delhi, the defendant also had a subordinate office at Delhi.

However, in my view, in the face of the clause aforesaid in the

purchase order restricting the jurisdiction to the Courts at Delhi,

attempt by the defendant at fag end of the proceedings to contest

the territorial jurisdiction of the Court ought to be deprecated.

14. Coming to the objections of the defendant to the majority

award, it was one of the contentions of the counsel for the plaintiff

that the arguments made by the counsel for the defendant during the

hearing were not pleaded. It is thus necessary to first record the

objections pleaded.

15. The bulk of the pleadings in the application U/s. 30 & 33 of the

Act are with respect to the procedure followed by the Presiding

Arbitrator and which in fact is a repetition of the minority award also

deprecating the procedure followed by the presiding arbitrator. It is

pleaded that the version in the minority award as to conduct of

proceedings ought to be accepted U/s. 114 of the Indian Evidence

Act. Besides it has been pleaded that the evidence of the witnesses

of the defendant has been ignored, that the minutes of the

inspections carried out jointly by the parties clearly establish that

the defendant had delineated the breach of contractual specifications

committed by the plaintiff; that the majority award has misconstrued

the letter dated 19.12.1983 of the defendant to the plaintiff; that if

all the evidence, material and records furnished by the defendant

had been considered, it would have been established that there was

no breach of contract on the part of the defendant and in fact the

plaintiff itself had failed to adhere to contractual specifications and

that the plaintiff had not suffered any damages at all by reason of

non-functioning of the boiler supplied by the defendant and which

non-functioning was entirely due to the plaintiff‟s fault.

16. From the aforesaid, it is clear that (A) the majority as well as

the minority award are in unison on at least the aspect that the

boiler did not perform as per the contracted specifications. This is

not disputed in the objections also.

(B) Neither the majority nor the minority award awarded the sum

of Rs. Rs.15,00,142/- claimed by the defendant. There is no

objection also with respect thereto.

(C) The minority award does not deal with that part of the majority

award where a sum of Rs.9,32,000/- has been awarded to the

plaintiff against the defendant for the expenditure incurred by the

plaintiff in carrying out modifications/ rectifications in the boiler.

There are no objections also in that respect. Thus the factum of

plaintiff having incurred the said expense is not in dispute.

17. The objections of the defendant to the majority award is (A) to

the manner of conduct of proceedings by the presiding arbitrator, (B)

to the award of approximately Rs. 15,42,770/- to the plaintiff against

the defendant upon finding in the majority award that the defendant

was in breach and out of which Rs.9,32,000/- is towards expenses

incurred by plaintiff in modification or rectification of the boiler and

the balance Rs.6,10,770/- is towards losses suffered by the plaintiff

on account of supply of defective boiler by the defendant and (C) to

the finding in the majority award of the performance bank guarantee

having been correctly encashed by the plaintiff.

18. The counsel for the defendant during the hearing has urged

that under the purchase order the liability of the defendant was

limited to only repair of the boiler and to the amount of the

performance bank guarantee; that the finding in the majority award

that the plaintiff was entitled to encash the performance bank

guarantee for delay by the defendant was incorrect because for the

reason of the delay the performance bank guarantee was to be

extended; U/s. 44 of the Contract Act, the defendant was entitled to

reasonable notice. It was further contended that as per the law in

Maulabux Vs. Union of India, 1970 SC 1955, the plaintiff can be

entitled to any damages only if had suffered a loss and the majority

award did not show any loss to have been suffered by the plaintiff

and the award of damages was conjectural. It was further contended

that the defendant had sent parts/accessories for repair/rectification

of the boiler and which had not been used by the plaintiff on the plea

of time being of the essence; no monetary compensation for any

defect in the boiler could be awarded as the loss of the defendant

was limited to replacement only. Even though no objection in this

regard has been pleaded as aforesaid but it was also argued that the

counter claim of the defendant had been summarily rejected without

any reason whatsoever. It was further contended that the majority

award merely states that the statements of witnesses and the

documents had been considered and it has not discussed or

assessed. The award of interest at 18 % per annum was also

contested though again there is no plea in that regard in the

objections filed. The counsel for the defendant in rejoinder

reiterated that cryptic discussion was not enough and the

contentions as to procedure followed by the presiding arbitrator in

the majority award had not been answered by the arbitrators

rendering the majority award. It was further contended that the

expert evidence of the defendant had not been considered. It was

thus the contention that the award was liable to be remitted for

reconsideration U/s. 16 of the 1940 Act.

19. The purpose of pleadings is to confine further proceedings i.e.

evidence and arguments within confines thereof. Ordinarily

arguments made at the time of the hearing and with respect whereto

no foundation in pleadings has been laid are to be rejected.

20. In the aforesaid conspectus in my view the objections can be

considered under the following heads :

(i) Misconduct if any in the matter of procedure by the presiding

arbitrator.

(ii) Award of damages of Rs.6,10,770/- on conjecture even

according to the majority award.

(iii) The legality / illegality of the encashment of the performance

bank guarantee.

(iv) Interest @18% p.a. in the majority award.

21. Though the defendant has supported the minority award but as

noticed above, the minority award also does not deal

with/discuss/assess any documents or evidence. The findings are

given in bullet points. In fact, the same does not contain any reason

whatsoever.

22. Coming to the misconduct owing to the procedure followed, it

is the version in the minority award that after 17 sittings had been

held by the earlier presiding arbitrator (who subsequently resigned)

and witnesses examined on several dates, the presiding Arbitrator

subsequently appointed by FICCI, stopped the plaintiff‟s witnesses

in mid-examination and announced that evidence would discontinue.

23. The plaintiff in the reply to the objections has stated that till

the making of the award, orders in the proceedings prior thereto had

been signed by all the three arbitrators and without objection /

demur whatsoever from the arbitrator who subsequently rendered

the minority award. This is not disputed in the rejoinder also. The

counsel for the defendant has also not shown any dissent being

raised by the arbitrator rendering the minority award, to the

procedure earlier being followed. The hearings having been held

and the procedure having been followed with the consent of all

members of the arbitral tribunal, in my view, it was not proper for a

member thereof to after the hearings berate of or decry the

procedure followed and to which he was a party. Had he any

reservations with respect thereto, he ought to have raised objection

at that time only instead of commenting adversely on the procedure

followed to which he was a party, in the award. The objections in

this regard are thus not found to be constituting any misconduct.

24. The arbitration proceedings remained pending for over seven

years. If the contention of the defendant as to the procedure to be

followed and as borne out from minority award were to be accepted,

the arbitration proceedings would have gone on for another 10

years. The arbitral record discloses that cross-examination of

witnesses running into hundred of pages was recorded. During the

hearing of the objections at least no reference thereto was made by

the counsel for the defendant. It is not as if the arbitrator rendering

the minority award has decided any differently. In fact the minority

award is found bereft of any reasons whatsoever. The majority of the

arbitrators were fully conscious of the plethora of documents and

evidence already adduced in the arbitration proceedings and

concluded:

"This performance test as envisaged in the purchase order was

not carried out. That no formal acceptance test was carried out is

not disputed by Texmaco. All that they say is that J.K. was never in a

position to ensure that the coal as specified would be made available.

.................................. By a registered letter dated 10/12 July, 1985,

J.K. called upon Texmaco to remove all the defects in the boiler.

They were told that if the defects are not removed in the boiler so as

to give satisfactory working, they, J.K. themselves, will arrange to

have the necessary modifications made in the boiler. Ultimately a

new feeder spreader system was obtained from M/s. Isgec John

Thomson and installed in the factory in June 1986. On the wording

of clause 6(d), it appears to us that Texmaco cannot be said to have

fulfilled their obligations under the contract because performance

test is a must to prove the fulfillment of the performance

guarantee.............The technical literature produced by J.K. also

shows that most, if not all, rotors manufactured today are of

overthrow type and that overthrow rotor design has the widest

usage. The underthrow type is not what we call state-of-the-art

technology in the industrial world........The contract in question was

for sale of the warranted machinery which owing to breach of the

warranty could not be used as it was not fit for the purpose for which

it was required............. In a case of breach of warranty, the buyer is

entitled to damages naturally resulting from breach of warranty. But

he is not entitled to damages for unusual consequences because they

are too remote.............The defect in the boiler prevented J.K. from

using it for the purpose for which they purchased it. A consumer will

certainly feel injured if he has to pay the full price for goods with

such defects as here where the boiler was not giving 30,000 kg per

hour steam. We, therefore, hold that the boiler was not of

merchantable quality nor fit for the purpose it was required..........

The seller has blamed the buyer for the quality of coal

fed in the boiler. We are not persuaded that the defect was in the

coal handling plant and not in the design of the boiler. In his letter

dated December 19, 1985, Ramesh Maheshwari, President of

TexMaco Ltd. wrote to Shri S.C. Sethi, President of J.K. Industries

Ltd. "However, notwithstanding the above, we have all the same

decided to effect major modifications in the Spreader design to

convert to the overthrow type. With this proposed arrangement we

feel quite confident that all your problems of wear and tear of the

blades, jamming and bearing failures would be duly resolved. As

agreed with your plant authorities, these changes shall be carried

out during the third/fourth week of February, 1986. We are

manufacturing the requisite components for the modifications on the

priority basis". Texmaco did not carry out major modifications. J.K.

had to do at their own expenses. This establishes, in our opinion,

beyond doubt that the defect resided in the design of the boiler. The

design was defective. The evidence shows that the underthrow type

is an out of date technology.................When J.K. at their own

expense changed from underthrow to overthrow type, the results

were quite satisfactory. This shows that there was a major defect in

the design of the boiler. The boiler was not fit for the purpose for

which it was purchased...............In our opinion, the boiler makers

have not been able to show that the boiler manufactured by them

was fit for the purpose for which it was required. Therefore, the

responsibility for the defects in the plan and design of the boiler

must be laid at the door of the maker and the manufacturer, that is,

Texmaco. They cannot blame the buyer because under the contract,

they have incurred an absolute obligation that the goods will be fit

for the purpose for which they were ordered.........

The particular purpose for which the goods were ordered

was expressly made known to the seller; the buyer relied on the skill

and the judgment of the seller; the sale was by description; the boiler

did not correspond with the description; the boiler was not fit for the

purpose for which it was ordered".

25. This Court is not sitting in appeal on the award. The counsel

for the plaintiff has rightly relied upon Arosan Enterprises Ltd.

Vs. Union of India (1999) 9 SCC 449 laying down that issues raised

in the matter on merits relating to default, time being of the essence,

quantum of damages are all issues of fact and the arbitrators are

within their jurisdiction to decide the issue as they deem it fit and

the courts have no authority or right to interdict an award on a

factual issue.

26. On merits of the pleas, though not required, he also relied

upon China Cotton Exporters Vs. Beharilal Ramcharan Cotton

Mills Ltd. 1961(3) SCR 845 to show that merely because there was

a provision of extension of time, as in the performance bank

guarantee in this case, did not mean that the time was not of the

essence. Since the majority award relies on the Victoria Laundry

case, the counsel for the plaintiff also invited the attention to M/s.

Murlidhar Chiranjilal Vs. M/s. Harishchandra Dwarkadas

1962(1) SCR 653 where the Apex Court while referring to Victoria

Laundry (Winsdsor) Ltd. Vs. Newman Industries Ltd. (1949 ) 1

All E.R. 997 did not hold that the same was contrary to the

principles of Sections 73 of the Contract Act.

27. Per contra the counsel for the defendant relied upon (i)

Essban Paints Pvt. Ltd. Vs. Union of India 2002 (1) RAJ 536 (Del)

wherein the single Judge of this Court had reiterated Maula Bux

(Supra) (ii) Sikkim Subba Associates Vs. State of Sikkim

2001(2) Arb. LR 17 (SC) where the award on the quantum of

damages was set aside by the Supreme Court while balancing the

equities and to ensure that no one is allowed to have their pound of

flesh unjustly against the other, (iii) Saroj Bala Vs. Rajive Stock

Brokers Ltd. 2005(3) Arb. LR 162 (Delhi) where another single

Judge of this Court in relation to the Arbitration Act 1996

emphasised the requirement therein of giving reasons (however this

is a case under the 1940 Act), (iv) Indo Gulf Industries Ltd. Vs.

U.P. State Industries Development Corporation 2003 III AD

(Delhi) 254 on the aspect of limitation and which as aforesaid was

not the plea before the Arbitrator and the minority award on its own

considered the same and on (v) Golden Peacock Overseas Ltd. Vs.

M/s. Ranjit Industries 2006 II A.D. (Delhi) 130 again on the aspect

of territorial jurisdiction ( and I may add that this judgment was

reversed by the Division Bench in Appeal).

28. In the present case on the basis of findings returned in the

majority award and as culled out herein above, I do not find any case

of interference U/s. 30 & 33 to have been made out. The findings are

factual in nature and/or on interpretation of the contract and the

correspondence between the parties and the arbitrator being the

forum chosen by the parties is final on such aspects.

29. As far as the objections on the ground of award of damages of

Rs.20 lacs on a conjectural basis is concerned, the majority award

after detailed discussion of law and facts holds:

"J.K.‟s claims are of two kinds. One is for late delivery of the

boiler. This is fully covered by contract clause 4(b). Under this

clause they were entitled to encash the performance guarantee of

Rs.4,57,200/-. Texmaco were guilty of delay and they cannot claim

refund of it. For delay J.K. has been fully compensated. This covers

the period of delay beyond 15.01.1984. But actually it was delivered

in June, 1984.................. The question is whether the buyer is

entitled to damages for loss caused by the defective goods prior to

repair or replacement by John Thomson. The answer is „yes‟

provided the loss is not too remote and subject to the duty to

mitigate. The claim is for breach of warranty. The boiler was not

rejected. Still the buyer is entitled to damages for breach of

warranty..........Damages are governed by Section 73 of the Indian

Contract Act, 1872 which is based on the rule in Hadley Vs.

Baxendale decided in 1854. The policy is to limit the liability of

defendants against amount of damages unforeseeable to an

unlimited number of plaintiffs over an indefinite period of time

(Pollock and Mulla - Indian Contract 11th ed. Vol. II p. 833) On a fair

reading of the terms of contract, we are of the view that the claim for

damages of this kind and loss of this type as made here is

inconsistent with clauses 4(b) and 7 of the Purchase Order. All that

can be awarded to J.K. is some general and perhaps conjectural sum

for loss of business reasonably to be expected, to use the words of

Asquith L.J. in Victoria Laundry‟s case........... In our opinion the

damages claimed by J.K. are of a speculative nature. Expected

profits are not allowable unless such a loss is proved to be within the

contemplation of the parties.............It appears to us that the present

case is a case of unexpected consequences and unexpected loss of

profits resulting from the breach of warranty.................On the

evidence, we cannot hold that the loss of the magnitude as has been

claimed by J.K. was within the horizon of the contemplation of

Texmaco. It is true that Texmaco with their engineering experience

cannot reasonably contend that the likelihood of some loss of

business was beyond their pre-vision. But the loss of profit now

claimed was not contemplated loss in their given state of knowledge.

We have to look at the contract with the eyes of the parties who

made them n 1982...........the assessment of damages is not an exact

science.

30. Therefore after holding the plaintiff entitled to Rs.9,32,000/-

towards replacement cost and not entitled to the damages claimed of

over rupees seven crores, but at the same time finding the plaintiff to

have suffered owing to breach of contract by the defendant, the

majority of the arbitrators awarded nominal damages of

Rs.6,10,770/- to the plaintiff, besides Rs.9,32,000/- towards costs of

modification/rectification and Rs.4,57,230/- for delay in delivery, i.e.

total Rs.20 lacs.

31. Such lumpsum award by arbitrators cannot faulted with. From

the face of the award it cannot be said that there is any error in the

factual finding of the plaintiff having suffered loss, specially when it

is the admitted position that the boiler supplied by the defendant did

not perform as agreed. The majority of arbitrators found fault to be

of the defendant. Considering the nature of goods and the purpose

for which they were required by the plaintiff, it cannot also be said

that for such breach by the defendant, no loss damage would have

been suffered by plaintiff. The arbitrators have assessed such

damage at Rs.6,10,770/- which is approximately 6% of the total value

of goods ordered and no error can possibly be found therewith.

32. That leaves the question of interest. The arbitrators have not

awarded interest for during the period of seven years when the

proceedings remained pending before them. Interest at 18 % per

annum w.e.f. the date of award has been allowed. Though the

counsel for the defendant challenged interest but it may be noticed

that even the minority award which is supported by the defendant,

awards interest at the rate of 18% per annum. The arbitrators are

thus unanimous as far as rate of interest is concerned. The

Arbitration Act, 1996 also provides for interest at such rate in the

absence of any direction as to interest in the award. I, therefore, in

the entirety of the facts specially when the arbitrator has made a

lumpsum award and while doing which they must have also taken

the rate of interest being awarded into consideration, find the rate

of interest also incapable of interference. However, I find these two

large corporates as the two parties herein are, involved in this

litigation for the last over 20 years. The stakes in the litigation do

not match up to the efforts and expenses which must have been

incurred therein. The litigation appears to be more of an ego issue

between the officers of the two corporates. Only for this reason and

in an attempt to bring this litigation to an end, I by way of incentive

and following the principle in Krishna Bhagya Vs. G.

Harischandra Reddy(2007) 2 SCC 720 of reduction in rate of

interest owing to the rates having fallen in the interregnum, reduce

the rate of interest from 18 per cent awarded, to 15 per cent subject

to the condition that the payment is made by the defendant to the

plaintiff within 30 days hereof. If the payment is not so made, there

would be no change in the award qua interest also.

33. The objections to the award are, therefore, dismissed. The

award is made rule of the Court; save for the modifications as

aforesaid qua interest a decree be drawn

up in terms thereof. The plaintiff shall also be entitled to future

interests from the date of the decree till the date of payment at the

rate of 12 % per annum. The plaintiff shall also be entitled to costs

of these proceedings from the defendant. Counsel‟s fee assessed at

Rs. 1,00,000/-.

RAJIV SAHAI ENDLAW (JUDGE) April 09, 2009 Jr