M/S Bellary Steels & Alloys Ltd. vs M/S Ojsc Power Machines ??? Zlt, ...
2010 Latest Caselaw 3142 Del

R-20
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

+                             O.M.P. NO.181/2004

                     Date of Decision: 07th July, 2010


      M/S BELLARY STEELS & ALLOYS LTD.     ..... Petitioner
                     Through:   Mr. C. Mohan Rao, Advocate


                     versus


      M/S OJSC POWER MACHINES - ZLT, LMZ ..... Respondent
                     Through:  Mr. Amar Gupta, Mr. Mayank
                               Mishra & Mr. Chetan Chopra,
                               Advocates


      CORAM:
      HON'BLE MR. JUSTICE VIPIN SANGHI

      1. Whether the Reporters of local papers may
         be allowed to see the judgment?           No

      2. To be referred to Reporter or not?           No

      3. Whether the judgment should be reported
         in the Digest?                               No


%                              JUDGMENT (Oral)

VIPIN SANGHI, J.

1. In challenge in these proceedings under Section 34 of the

Arbitration and Conciliation Act is the award dated 11.12.2003 made

by an arbitral tribunal consisting of three learned arbitrators. The

respondent herein was the claimant before the arbitral tribunal. The

petitioner had also raised certain counter claims. The arbitral tribunal

substantially awarded the claims of the respondent.

2. The parties had entered into an agreement whereunder the

respondent agreed to supply one complete 12 MW Turbo generation

set with auxiliaries for a total consideration of US$ 1,600,000.00 (One

Million Six Hundred Thousand US Dollars only). The equipment under

the agreement was to be delivered at the Madras port. The same was,

however, delivered at Bombay port. Under the terms of the agreement

a sum of US$ 1,440,000.00 (One Million Four Hundred Forty Thousand

US Dollars only) stands paid to the respondent. The last instalment of

10% of the value, amounting to US$ 160,000 (One Hundred and Sixty

Thousand US Dollars Only) was, however, not paid. Under the

contract, the payment was made through the mechanism of a letter of

credit.

3. It appears that the last instalment of US$ 160,000.00 could

not be paid due to delay in the shipment of the equipment, caused as

a result of the change of port from Madras to Bombay and the expiry of

the validity of the letter of credit in the meantime.

4. As the petitioner failed to make payment of the balance

consideration of US$ 160,000.00, the respondent invoked the

arbitration clause contained in the agreement between the parties.

The matter was referred to the arbitral tribunal consisting Mr. Justice

Attamjit Singh Nehra, Presiding Arbitrator, Mr. Justice J.K. Mehra,

Arbitrator and Mr. Justice N.C. Kochhar, Arbitrator. The arbitral tribunal

rendered a unanimous award in favour of the respondent.

5. The respondent raised three claims in the arbitration

proceedings. The first claim was towards the payment of the balance

amount of US$ 160,000.00 towards the cost of the turbo generator set

and accessories. The second claim was for US$ 65,000 towards

expenses stated to have been incurred in maintaining the performance

bank guarantee provided by the respondent to the petitioner. The

third claim was for interest @ 3.1% per annum amounting to US$

17,773/- till the date of filing of the statement of claim, besides the

claim for pendente lite and future interest. The respondent, apart from

denying the liability towards payment of the amount claimed by the

respondent also raised its counter claim in the sum of Rs.75,22,000/-,

the details whereof are as follows:

1.    Value of missing generator parts                           6 lakhs

2.    Custom duty and penalty paid on Engineering             13.72 lacs

drawings for non-assessment/ improper assessment

3. Demurrage charges 4 lacs

4. Legal expenses & other litigation charges, additional 1.5 lacs freight, L/C amendment charges etc.

5. Loss suffered by the respondent in completing the 50 lacs project due to breaches committed by the Complainant

6. Before the arbitral tribunal the parties relied on documents

filed by them along with their pleadings and admitted the documents

filed by the opposite party and did not lead any evidence. The tribunal

heard the counsels for the parties and on the basis of the record and

the written arguments submitted before it, proceeded to pass the

award. The arbitral tribunal allowed the claim of the respondent for

US$ 160,000 with interest @ 3.1% per annum w.e.f. 03.06.2003 i.e. the

date of filing of the statement of claim, till realisation. It also allowed

the claim towards legal expenses incurred by the claimant/respondent

herein amounting to Rs.2,94,300/-. The tribunal, however, disallowed

the counter claim preferred by the petitioner herein in its entirety. For

disallowing the counter claim preferred by the petitioner, the tribunal

adopted the reason that no such claim had ever been asserted by the

petitioner and, consequently, it could not be said that a dispute had

been raised by the petitioner in respect of its claims which had been

repudiated by the respondent. It was held that no dispute arose which

could be arbitrated, so far as the counter claim was concerned. The

tribunal found that the counter claims had been raised for the first time

in the reply/counter statement filed before the arbitral tribunal.

7. Mr. Rao, learned counsel for the petitioner/objector, does not

challenge the rejection of the counter claim by the tribunal as not

being maintainable. His submission, however, is that while allowing

the claim of the respondent the tribunal has not considered the

defence of the petitioner that the amount claimed was not payable to

the respondent.

8. Before proceeding to examine the award on this aspect, it

would be useful to refer to some of the contractual terms. Article 3 of

the contract provided that the delivery of the equipment under the

contract shall take place within 10 months of the opening of the letter

of credit. The date of bill of lading was to be considered as the date of

delivery. Article 4 provided the terms of payment. The payment was

to be made through an irrevocable confirmed letter of credit which was

to be opened by the petitioner within 10 days of the signing of the

contract for the total contract value. The payment was to be made in

four instalments, the last being 10% of the contract value i.e. US$

1,60,000 within 7 days of the presentation of the following documents:

(i) invoice in three copies, (ii) copy of guarantee of the respondent in

favour of the petitioner for the equivalent amount for the guarantee

period. The bank guarantee was to be issued by the respondent in

favour of the petitioner in the prescribed proforma.

9. The letter of credit opened at the instance of the petitioner

provided the destination of the shipment as Madras port. A perusal of

the award shows that the claimant/respondent herein had written to

the petitioner herein that though the generators were ready, but since

no vessel was going to Madras port in the near future, it was not

possible to send the same to Madras port and the same could be

transported to Mumbai port, for which the vessel was available. The

petitioner vide letters dated 18.02.1998 & 03.03.1998 requested the

respondent to send the generator sets to Mumbai port. Consequently,

the destination port was changed to Mumbai port from Madras port at

the instance of the petitioner vide amendment of the letter of credit

dated 26.02.1998. The generator was accordingly sent to Mumbai port

where delivery was taken by the petitioner herein.

10. Reference may also be made to Article 8A which dealt with

claims on quality and quantity. The claims on quality and quantity of

the delivered goods was to be sent by the petitioner directly to the

respondent. Clause 8.2 provided that the claims on quality and

quantity of the goods could be made within two months from the date

of receipt of equipment at site, but not later than three months from

the date of delivery. Clause 8.3 further provided that claims of

shortage of goods, if responsibility of the carrier is excluded, could be

made within two months from the date of receipt of equipment at site,

but not later than three months from the date of delivery. The claims

both on quality and quantity of goods were required to contain the

description of the goods, the contract number, the nature of the

petitioner's claim and demands. The same was to be forwarded by

registered post along with the necessary documents.

11. The submission of learned counsel for the petitioner is that in

its reply and counter claim preferred before the arbitral tribunal, the

petitioner had raised various defences to deny the claim of the

respondent. The petitioner had asserted that there was delay on the

part of the respondent in the shipment of the equipment which led to

the expiry of the letter of credit. According to the petitioner the

change of port from Madras to Bombay led to the petitioner incurring

additional charges and damages. The petitioner further asserted that

it incurred demurrage charges, penalty and litigation charges since the

equipment was sent to the Bombay port. It was further asserted that

the respondent had failed to supply the engineering drawings with

proper declaration the shipped equipment. This also led to delay in the

release of the equipment and led to the petitioner incurring additional

customs duty, demurrage, additional transportation etc. As aforesaid,

the submission of learned counsel for the petitioner is that none of

these defences have been considered by the arbitral tribunal while

allowing the claim of the respondent.

12. On the other hand, learned counsel for the respondent has

supported the award in its entirety. He submits that the petitioner

never raised any of the disputes which form the basis of the counter

claim and also did not, at any stage, raise any of the defences as were

sought to be raised for the first time in the reply and counter

statement before the arbitral tribunal. He submits that, on the

contrary, the petitioner repeatedly promised that the balance of US$

160,000 would be released to the respondent shortly and the reason

for the delay in release of the said amount was stated to be the

financial stringency of the petitioner.

13. Having heard learned counsels for the parties and perused

the impugned award, I am of the view that there is absolutely no merit

in the objections raised by the petitioner and the same deserve to be

dismissed. The award passed by the arbitral tribunal is well reasoned

and does not call for any interference. There is no merit in the

submission of learned counsel for the petitioner that its defences have

not been considered by the arbitral tribunal. Mr. Rao has not been

able to point out any material whatsoever from the record to suggest

that in support of the petitioners aforesaid defences even a shred of

paper had been produced as evidence before the tribunal to

substantiate the petitioners plea that there was any delay or default on

the part of the respondent in their performance of the agreement. Not

an iota of evidence appears to have been led, and no document was

produced to substantiate the plea that the petitioner has incurred

additional costs due to any act or omission of the respondent. So far

as the change of port of destination is concerned, from the award itself

it is evident that the same had been changed as there was no vessel

available to take the equipment to Madras port, whereas a vessel was

available which could deliver the shipment at Bombay port. On this

being informed, the petitioner itself had instructed the respondent

supplier to ship the equipment to Bombay port. The consent of the

petitioner to the change of the port is also evidenced from the

amendment in the letter of credit as aforesaid. Obviously, the

additional expenses, if any, incurred by the petitioner on account of

the change of port could not have been claimed from the respondent in

these circumstances. The decision to change the port of the dispatch

was that of the petitioner. In any event, the petitioner, it appears,

produced no material whatsoever to substantiate its claim towards

demurrage, higher duty, transportation charges etc. on account of

change of port from Madras to Bombay.

14. Learned counsel for the petitioner has also not been able to

show that the petitioner produced any material before the tribunal in

support of the submission that the respondent had failed to supply the

correct engineering drawings and thereby breached the contractual

obligations. No correspondence appears to have been brought on

record to show the raising of any grievance in this regard by the

petitioner. No particulars of the damages claimed to have been

suffered were stated before the tribunal.

15. I have already referred to the contractual terms, which

required the petitioner to raise its claims regarding the quality and

quantity of the goods being deficient within two months, and certainly

not later than three months from the date of delivery. There is nothing

to show that any such grievance or claim was ever raised by the

petitioner. In this background, obviously the tribunal could not have

been expected to deal with the wholly unsubstantiated defence of the

petitioner.

16. Learned counsel for the respondent has submitted that the

respondent had placed before the arbitral tribunal correspondence to

show that the principal claim of the respondent stood unconditionally

admitted. He has referred to the letters sent by the petitioner on

31.01.2000, 06.04.2000, 15.05.2001, 16.06.2001 etc. and lastly on

06.03.2002 wherein the petitioner repeatedly expressed its regret for

not being able to release the last instalment of 10% of the equipment

cost and assured the respondent that the same would be released very

soon.

17. For all the aforesaid reasons, I find no merit in this petition.

The same is, accordingly, dismissed.

VIPIN SANGHI, J.

JULY 07, 2010 rsk