* IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on:
05. 11.2014 Judgment delivered on:
02. 12.2014 % + EX. P. 275/2011 CENTRAVIS PRODUCTION UKRAINE ..... Decree Holder Versus GALLIUM INDUSTRIES LIMITED ..... Judgement Debtor Advocates who appeared in this case: For the Decree Holder: Mr Amit Bansal, Ms Manisha Singh & Ms Senjul Khanna, Advocates. For the Judgement Debtor: Mr Kewal Singh Ahuja, Advocate. CORAM: HON’BLE MR. JUSTICE RAJIV SHAKDHER RAJIV SHAKDHER, J.
EA(OS) 134/2012 (Objections by judgement debtor) 1. These are objections filed by the judgement debtor. By these objections the prayer made is that the execution petition No.275/2011 filed by the decree holder to enforce the foreign award dated 31.03.2011, which has morphed into a decree, be dismissed. 1.1 By order dated 09.05.2012, both the execution petition, as well as the objections filed by the judgement debtor represented by the captioned application, were disposed of in view of the fact that the aforementioned award was pending challenge in the Court at Ukraine. While disposing of the execution petition though, liberty was given to either party to revive the proceedings, as the case may be – a course which was dependent on the outcome of the process pending in the Ukrainian Court.
2. Upon completion of the process under the Ukrainian Law, steps were taken by the decree holder for revival of the execution proceedings. 2.1 Counsels for the parties are agreed that the judgement debtor has exhausted its remedies under the Ukrainian law. I must also indicate herein that parties had attempted settlement in the matter which failed, whereupon arguments were addressed in support and against the contentions in the captioned application.
3. Mr Ahuja, who appears for the judgement debtor, raised the following objections to the execution of the decree. (i) That clause 14.4 of the contract, (I would assume he was referring to the delivery contract dated 06.07.2007), envisaged that the parties had to attempt a negotiation in the first instance before proceeding for arbitration. (i)(a). It was his say that in the present case, no negotiation was attempted prior to the decree holder filing its request for initiation of arbitration. (ii) The judgement debtor was denied opportunity of hearing of a meaningful kind. In other words, the dispute being of a technical nature, adequate opportunity, as expected, was not granted to the judgement debtor to present its case. (ii)(a). In this behalf, he adverted to the fact that on 18.03.2011, the judgement debtor had sent a letter to the International Commercial Arbitration Court of Chamber of Commerce and Industry of Ukraine (in short ICAC), to change the date of hearing from 21.03.2011 to 10.04.2011 due to non-receipt of visa from the Ukrainian Embassy in India, by the judgement debtor’s representative. In this regard, it was suggested that an application had also been made for grant of an express visa as well, which too, was not received, and that despite which, the hearing in the matter took place on 31.03.2011, followed by an award of even date. In substance, a case for breach of principles of natural justice was sought to be made out. (iii) The learned arbitrator has, inter alia, awarded reimbursement of 100% of the total arbitration fee incurred by the decree holder, which is unreasonable. It is suggested that such a determination amounts to “wagering”, which is in conflict with the public policy of India. (iv) The learned arbitrator in passing the award relied upon the submissions made by SGS (Ukraine), a power of attorney holder of the decree holder, without seeking the opinion of an expert. Furthermore, the judgement debtor’s right to cross-examine the representative of the decree holder was also declined. The award relies on the technical defects pointed out by the decree holder, without affording an opportunity to the judgment debtor, to present any technical evidence in the matter. (v) Contrary to the provisions of Article 23 of the ICAC Rules, the judgement debtor was not permitted to file comments/ objections to the statement of defence filed by the decree holder, qua the counter claim preferred by the judgement debtor. (vi) The award has determined the claims in foreign currency (i.e., in Euros). Consequently, the execution petition deserves to be dismissed in as much as it is not in conformity with the directions adverted to in paragraphs 70 and 71 of the judgment of the Supreme Court in the case of Forasol vs ONGC AIR1984SC241 (vii) The fact that the judgement debtor was not in breach of the contract, is evident on a bare perusal of the pre-dispatch inspection report. It was submitted that a joint inspection was carried out by the parties herein, whereupon it was clearly noted that the equipment in issue was found to be in a satisfactory condition. (viii) A breach of the contract was, in fact, committed by the decree holder as it not only delayed performing, its part of the obligations, but also, created hindrances in the due performance of contractual obligations. By way of example, a reference was made to the fact that the lay-out design of the equipment to be installed though sent on 01.10.2007, was approved only on 07.12.2007, after a delay of nearly two months. (viii)(a). It was also submitted, in this behalf, that the judgement debtor’s inquiry as to the type and characteristics of the lubricant, made on 20.08.2007, was “confirmed”, only after a delay of six months, i.e., on 01.02.2008. This resulted, according to the judgment debtor, in keeping the machine operable for the period of the said six months, causing damage to the equipment. To support its stand of not having breached its obligation qua the contract in issue, and to demonstrate the reasonability of the stand adopted by it, it was pointed out that the judgement debtor re-designed the lubricant system, and supplied a new lubricant system, to the satisfaction of the decree holder.
4. On the other hand, Mr Bansal, who appeared for the decree holder, refuted each and every submission made by Mr Ahuja. In support of his submissions, Mr Bansal relied upon the arbitral award and the record placed before the learned arbitrator for determination of the disputes, which had arisen between the parties. 4.1 Mr Bansal stressed the fact that this court was not required to re- appreciate the merits of the matter or the evidence placed before the learned arbitrator, while exercising jurisdiction under Section 48 of the Arbitration & Conciliation Act, 1996 (in short the Act). 4.2 It was Mr Bansal’s contention that the matter had been examined at three levels, after the pronouncement of the award by three different courts, set up under the Ukrainian Law. It was Mr Bansal’s submission that the enforcement of the award sought under the Act, can be refused only if it is contrary to : the fundamental policy of Indian Law; interest of India; and/or justice or morality. 4.3 According to Mr Bansal, none of the grounds raised, as objections by the judgement debtor, came within the scope of any of the three heads referred to by him. In support of his submissions, reliance was placed by Mr Bansal, on the judgement of the Supreme Court in: Shri Lal Mahal vs Progetto 2014 (2) SCC433 4.4 Furthermore, Mr Bansal, refuted pointwise, the objections taken by Mr Ahuja. In respect of the objection raised that no recourse to negotiation was taken, it was pointed out that joint inspections between representative of the decree holder and the judgment debtor took place, at least, on five (5) occasions, which having resulted in failure, led to recourse being taken to arbitration. In this behalf, reference was made to the minutes of the meeting dated 21.06.2008, 18.06.2009, 04.09.2009, 02.06.2010 and 04.06.2010. 4.5 On the aspect that no meaningful opportunity was given to the judgement debtor to present its case, Mr Bansal pointed to the fact that an oral hearing in the matter was fixed on 01.02.2011, which was rescheduled to 21.03.2011 at the request of the judgement debtor. Thereafter, the hearing was, once again, shifted to 31.03.2011, on the request of the judgement debtor. According to Mr. Bansal, the judgement debtor never sought an accommodation on the ground that its directors were required to remain personally present at the hearing(s). It was submitted by Mr Bansal, that this assertion, that the judgment debtor’s director(s), were prevented from making an appearance, was an after thought and only a ruse to assail the decree. 4.6 As regards Ex. P. 275/2011 arbitration cost to the decree holder, Mr Bansal said this this was a direction as per the rules of ICAC and was in consonance with its settled practice, which required, the unsuccessful party to completely reimburse the legal and arbitration cost incurred by the successful party. 4.7 The objection of Mr Ahuja with regard to the failure to give opportunity to the judgement debtor to file its response to the statement of defence preferred by the decree holder to the counter-claim of the judgement debtor, was met by Mr Bansal, by adverting to the fact that, the said request was made only on 15.04.2011, much after the conclusion of the final hearing, on 31.03.2011. This, according to Mr Bansal, was a request much delayed, in view of the fact that the statement of defence, to the counter claim, was made available to the judgement debtor, on 17.01.2011. 4.8 In so far as other objections advanced by Mr Ahuja, with regard to reliance placed by the learned arbitrator on the report of SGS Ukraine; the decree holder’s purported delay in fulfilling its obligations under the contracts in issue; and lastly, the alleged failure to consider the pre- dispatch inspection report – was met with the response that these were objections on the merits of the matter, which could not be examined by this court at this stage. 4.9 Mr Bansal concluded by submitting that the award, was a detailed award, wherein all defences of the judgement debtor (including its basic defence, that it was not in breach of its obligations under the contract), were adverted to and duly discussed by the arbitrator before reaching the conclusion, which he has, in the instant case. REASONS5 I have heard the learned counsels for the parties and perused the record. Most of the objections articulated by Mr Ahuja, on behalf of the judgement debtor, relate to the merits of the matter except those which relate to the allegation that principles of natural justice were breached. Submissions pertaining to those allegation and others, have been recorded hereinabove. However, before I proceed further, let me first give broad dates and events, which led to the passing of the award, in the present matter.
6. As indicated above, the judgement debtor has availed of all remedies available under the Ukrainian law for challenging the award dated 31.03.2011. In this background, the following needs to be noticed. 6.1 The parties herein, entered into an agreement for supply of an equipment, which is described as Tube Drawing Equipment GBD-40 Complete Set (hereafter referred to as the equipment). In respect of this, two contracts were executed between the parties herein. The first, was a delivery contract dated 06.07.2007, while the second, was a service contract dated 18.03.2008. Admittedly, both, the delivery contract and the service contract, had an arbitration clause incorporated in them. In the delivery contract, the arbitration clause is numbered as clause No.14.1, while in the service agreement, the relevant clause is 7.1. Both these clauses, required prior negotiation, and if, negotiation were to fail, they were to be settled by taking recourse to arbitration, under the aegis of ICAC. 6.2 The record shows that the decree holder in terms of its obligation had, admittedly, transferred 90% of the funds upon carrying out pre-dispatch inspection. The total consideration agreed to between the parties was Euros 5.60,000/-. As indicated above, the decree holder had transmitted Euros 5,04,000/- to the judgement debtor. 6.3 It appears that, there was nearly a seven months delay, in the equipment being supplied. The equipment, apparently, was shipped by the judgement debtor, on 14.10.2008. It was received by the decree holder, on 25.11.2008. 6.4 Upon installation of the equipment, the preliminary tests were carried out at the decree holder’s factory, which revealed defects in the equipment. 6.5 Accordingly, on 10.04.2009, a demand was raised by the decree holder with the judgement debtor, equivalent to Euros 28,000/- towards payment of contractual penalty for late delivery of the equipment. By this very communication, the judgement debtor, was asked to remove the defects. 6.6 The record shows that upon a joint inspection, the equipment was found to be inoperable, because of serious defects which required the equipment to be substantially modified. This is recorded in the minutes of meeting held between the parties, on 18.06.2009. 6.7 An agreement was reached that the acceptance tests should be carried out with participation of representatives of an independent party. In this case, the SGS was chosen as the independent party. The result of the aforesaid was that SGS, which was appointed as an independent expert, carried out the inspection between the period 07.09.2009 to 11.09.2009. A report was generated by the SGS, which is dated 11.09.2009. 6.8 It may also be noted that parties had also signed a pact, on 02.06.2010 to carry out repeated acceptance tests. Accordingly, on 04.06.2010, SGS repeated the inspection of the equipment. A report was generated by the SGS, once again, with regard to its inspection which is dated 14.06.2010. The inspectors of the SGS concluded in its report that “due to fundamental defects which could not be eliminated by operating setup, the equipment is not in conformity with technical specification to the contract No.04-3-2/655 dated July 6, 2007 and hereby is not liable to operation use and requires additional material expenses, expenditure of time and resources for elimination of the stated defects”.
7. It is in this background that on 21.06.2010, the decree holder lodged a claim with ICAC. After decree holder had paid the registration fee, as well as deposited its share of the arbitrator’s fee, it appears, on 09.07.2010, a copy of the statement of claims, along with documents annexed thereto, ICAC rules and ICAC recommendatory list of arbitrators, was dispatched to the judgement debtor. The address of the judgement debtor, as noted therein was, Plot No.129F & 129G/4, NSEZ, Noida, U.P.- 201305, India (in short the Noida address). There is also correspondence to the effect, on record, which is suggestive of the fact that the judgement debtor was asked to respond to the candidacy of one, Mr. Volodymyr V. Luts, as a sole arbitrator. Evidently, the judgement debtor vide communication dated 26.07.2010 indicated that it was not in agreement with Mr Volodymyr V. Luts, being appointed, as the sole arbitrator in the matter. 7.1 The record shows that several attempts were made to effect service of pleadings on the judgement debtor. I need not go into the detail of these communication sent to the judgement debtor. Suffice it to say that on 01.11.2010, ICAC received judgement debtor’s statement of defence, along with the counter claim. The decree holder on its part, on 26.11.2010, it appears, filed its objections to the statement of defence; a copy of which was sent to the judgement debtor. 7.2 On a motion being received from the decree holder for appointment of a sole arbitrator (in view of the fact that parties could not agree on the appointment of a sole arbitrator), the president of the Ukrainian Chambers of Commerce and Industries (in short UCCI), vide its decision dated 14.12.2010 appointed, one, Mr. Igor V. Drizhchany, as the sole arbitrator in the matter. Notices were sent to both parties on 14.12.2010 and, the hearing in the matter, was fixed for 01.02.2011. 7.3 On 10.01.2011, the ICAC received a letter dated 07.01.2011 from the judgement debtor, whereby a request was made that “oral hearing of the case be deferred from 1st February, 2011 to any date between 21st March to 26th March, 2011”. Based on the request of the judgement debtor, hearing was deferred to 21.03.2011. Accordingly, a notice in that behalf was sent to both the parties. The judgement debtor was also sent, along with the said notice, a copy of the statement of defence to the counter claim, which the decree holder had submitted to the ICAC, on 14.01.2011. 7.4 Evidently, on 25.02.2011, the decree holder submitted to ICAC a clarification of the cost of the claims, whereby it increased its total claimed amount to Euros 8,32,390.89/-. This clarification to the claim, sought by the decree holder, was dispatched to the judgement debtor, by courier, on 28.02.2011. The judgement debtor was requested to respond to the same by 21.03.2011. Additional fee for arbitration was also sought, which was paid by the judgement debtor vide a demand order dated 04.03.2011. 7.5 Evidently, by a facsimile dated 05.03.2011, the judgement debtor informed the ICAC that three of its representatives would attend the hearing on 21.03.2011. The said facsimile was followed by a facsimile dated 18.03.2011, whereby the judgement debtor communicated as follows:
“Its request for issue of visa is pending with the Ukrainian Embassy in Delhi.... and due to lack of visa it will not be able to attend to the hearing personally..”
. The ICAC was also informed that the judgement debtor had appointed, one, Ms Olga Lazarieva, a Ukrainian lawyer, to represent its case before the arbitrator. It was indicated that the Power of Attorney (POA) issued to the said lawyer did not carry an apostille; therefore, ICAC could either give an extension or allow its lawyer to attend hearing without the apostille; which could be submitted later. 7.6 This request was considered by the ICAC, on the date of hearing held on 21.03.2011. Based, on a motion sent by facsimile by the judgement debtor’s lawyer Olga Lazarieva, the hearing was postponed to 31.03.2011, in view of the fact that the POA did bear the apostille. The decree holder also did not object to the postponement of the hearing to 31.03.2011. 7.7 The arbitrator, held his hearing on 31.03.2011, as agreed to between the counsels for the parties. On that date the decree holder was represented by its lawyer, as was the judgment debtor. In addition, one Mr Igor Aseev (FE “SGS Ukraine”) was also present at the hearing. After hearing submissions of the representatives of parties, consideration of written submissions, as also, the answers to questions put by parties to each other, and the documents filed thereof – the arbitrator returned an award in the case. 7.8 By virtue of the award dated 31.03.2011, the decree holder’s claim with regard to: refund of 90% of the price, equivalent to Euros 5,04,000/-, recovery of penalty amounting to Euros 28,000/-, claim for damages in the sum of Euros 8,29,187/- and claim for recovery of expenses towards arbitral proceedings amounting to Euros 8517.77/-, and also 50% cost of the translation of documents – was allowed. The judgement debtor’s counter claims, though, were rejected in their entirety.
8. With these background facts in place, let me deal with specific objections of Mr Ahuja. 8.1 Negotiations. 8.2 The argument of Mr Ahuja, learned counsel for the judgement debtor, that no negotiations were held prior to decree holder proceeding to arbitration, as was required under clause 14.1 of the delivery contract, is untenable for two reasons. First, it relates to merits of the matter. Second, in any case, the record would show that several attempts were made to address the grievance of the decree holder with regard to defects in the equipment. A series of repeated acceptance tests were conducted after April, 2009 till June, 2010. It was only for this purpose, that SGS was appointed as an independent expert, with the consent of parties. Since, defects were found to be fundamental in nature, which the judgement debtor was unable to cure, the decree holder had no choice but to invoke the arbitration mechanism provided in the contracts executed with the judgement debtor. This submission, according to me, is misconceived, and thus, is rejected.
9. Lack of Opportunity 9.1 The other submission, which has been raised, and perhaps, is the only objection, which could be entertained at this stage of the proceedings, under section 48 of the Act, is that, no meaningful opportunity of hearing was granted in the case. The record and the broad facts recorded by me hereinabove, would show that apart from the fact that the judgement debtor, for a very long time, managed to get the proceedings delayed on the ground that, no service was effected on it, sought adjournments of hearing fixed, on two occasions. 9.2 The first time around the arbitrator had fixed the hearing on 01.02.1011. Since, a request was received by the ICAC via communication dated 07.01.2011 sent by the judgement debtor, which was suggestive of the fact that, the judgement debtor, would require more time to engage a Ukrainian lawyer, the hearing was adjourned to 21.03.2011. This fact was obviously, in the knowledge of the judgement debtor, which is why, on 05.02.2011, it sent a facsimile to ICAC, whereby it was informed that three representatives of the judgement debtor would be attending the hearing fixed on 21.03.2011. 9.3 However, just three days before the hearing, on 18.03.2011, the judgement debtor informed ICAC that, since, its visa request was pending with the Ukrainian Embassy in Delhi, the person(s) concerned will not be able to attend the hearing personally. It was further stated, in the very same communication, that the, judgement debtor, had appointed, one, Ms Olga Lazarieva, a Ukrainian lawyer (who was evidently a part of Sofocleous & Co. Consulting Ltd), to represent it in the matter. 9.4 The suggestion was that the judgement debtor could be represented by Ms Olga Lazrieva except that her POA did not carry an apostille. Therefore, it was sought to be communicated to ICAC that either they should give an extension for the said purpose or, allow its lawyer to attend the hearing on 21.03.2011, without the apostille; which could be submitted at a later point in time. 9.5 The aforesaid request of the judgement debtor dated 18.03.2011, was followed by a fax dated 21.03.2011, submitted by Ms Olga Lazrieva, seeking a postponement of the hearing till 31.03.2011. The arbitrator, in this background, postponed the hearing to 31.03.2011, to which, no objection was raised by the representative of the decree holder. 9.6 There is nothing on record to show that the judgement debtor insisted that the proceedings could not go on either on 21.03.2011 or, on the adjourned date, i.e., 31.03.2011 without its director(s) or employees being present on the said dates. As a matter of fact, as noted above, on 18.03.2011, the judgement debtor indicated that the hearing could be held on 21.03.2011, except that its lawyer’s POA did not carry an apostille. Apart from the above, a perusal of the award would show that a detailed hearing was held, in which, submissions of both parties, and the material placed on record by them, was considered. 9.7 For the judgement debtor now to contend, at this stage, having failed all through to get the award overturned, that no meaningful opportunity was given to it, to represent its case, is in my view, far too tenuous a ground, which is, as demonstrated above, completely unsustainable. Therefore, the plea advanced by Mr Ahuja, is rejected.
10. Reimbursement of Arbitrator’s Fee. 10.1 The other contention of Mr Ahuja that the arbitrator has granted reimbursement of entire fee paid to the arbitrator by the decree debtor, in my view, is also a contention, which cannot be accepted. The reason for this is, as noted in the award itself, is that, the rules, which govern the arbitration state that the arbitration fee will be charged to the party against which the award is made, unless otherwise agreed to between the parties. I have not been shown by Mr Ahuja any provision of the contract or, any document, executed between the parties, which would demonstrate that the parties had agreed otherwise. This contention is also, therefore, rejected. 10.2 I must note though that, very peculiarly, a contention has been raised that a direction, such as this, amounted to wager, and was, thus, in conflict with the public policy of India. 10.3 A wager, as is generally understood, is a contract between two or more parties whereby, they agree that a certain sum of money or other thing shall be paid or delivered to one of them or that they shall gain or lose on the happening of an uncertain event or upon ascertainment of a fact in dispute, where the parties have no interest in the event except that arising from a possibility of such gain or loss. (See Black’s Law Dictionary 6th Edition Page 1579). 10.4 As would be evident from the above, the argument of Mr Ahuja that such a direction would involve wager, is completely misconceived. The adjudication of the dispute between the parties to the contract is not an uncertain event. The possible outcomes are finite; the direction that an adjudicator issues qua the payment of costs, is dependent on the result of his adjudication. Thus, the contention that, direction of payment of arbitrator’s fee amounts to wager, and, is consequently, in conflict with public policy of India, is completely untenable.
11. Reliance on SGS Report 11.1 The other submission that arbitrator in passing the award relied upon completely the submissions of SGS, Ukraine, a POA holder of the decree holder, is untenable in the facts of the case for the following reason. The record shows that, the parties, had a choice in the appointment of an independent expert which could either be a member of UCCI or SGS. The parties came to an agreement that SGS, would be the independent expert, on whom reliance could be placed. The representatives of the judgement debtor, of their own volition, participated in the joint inspections, carried out in the presence of the representative of SGS. Therefore, for the judgement debtor to now turn around and say that the arbitrator wrongly relied upon the report of the SGS, cannot be accepted. 1.2 Furthermore, the argument advanced that no opportunity was given to cross-examine the SGS representative, is also, untenable, as Mr Ahuja did not show any document from the record which would demonstrate that such a request was made and declined. The submission being without merit, is thus rejected.
12. Opportunity to file Rejoinder to the Statement of Defence to the Counter-Claim. 12.1 The other submission that the judgement debtor was not permitted to file comments/ objections to the statement of defence, filed by the decree holder, qua the counter claims preferred by the judgement debtor, is also without merit for the following reason. The statement of defence to the counter claim was dispatched by the ICAC, to the judgement debtor, on 14.01.2011. The judgement debtor at no point in time sought to submit its comments or response to the same. It is only after, the award, has been passed, that the, judgement debtor has raised this objection. 12.2 Mr Ahuja has not shown me any document, placed on record of this court to establish that, a request had been made in that behalf, which was rejected. That being so, this submission of Mr Ahuja, cannot be accepted.
13. Award in Foreign Currency:
13. 1 The submission of Mr Ahuja that the award, which is in foreign currency, is contrary to the directions contained in paragraphs 70 and 71 of the judgement in the case of Forasol vs ONGC, is without merit. In this case, one of the issues which arose for consideration before the Supreme Court was: the rate of conversion, which a court, should apply qua a foreign award which, while directing payment in foreign currency does not prescribe a conversion rate. 13.2 The court after due deliberation came to the conclusion that out of the three dates available to it, that is, the date of the claim, the date of the suit and the date of decree – the last date, which is, the date of decree or any other date preceding the date of the decree and nearest in proximity would be fairest date to be taken, from the point of view of fixing the rate of conversion. 13.3 The award, rendered in the present case, also grants claims in favour of the decree holder in foreign currency. The award does not prescribe a rate of conversion. Therefore, as and when execution is preferred, the judgement debtor, will have various options available to it. 13.4 First, it could pay in foreign currency. The remittance will then be subject to requisite permissions, if any, required from the concerned authorities under extant provisions of the law. 13.5 Second, the judgement debtor could offer to pay in Indian rupees. In such a situation the applicable conversion rate will be one, which is operative, on the date of the decree. 13.6 In my opinion, none of the observations made in paragraph 70 and 71 of the Forasol vs ONGC case, impact the legal efficacy of and/or validity of the award in issue. The submission being untenable, accordingly, rejected.
14. Decree holder in breach:
14. 1 The other argument of Mr Ahuja that it was the decree holder, and not the judgement debtor, who was in breach of the contract. This submission is pivoted on the fact that the equipment was found in order in a joint inspection held at the pre-dispatch stage, and that, hindrances in the due performance of the contract were set up by the decree holder – are arguments which go to the merits of the case. 14.2 I must only note that the arbitrator, has dealt with contentions with regard to the effect of the pre-dispatch inspection report, as also, the stand of the judgement debtor, that the, decree holder, had delayed the execution of the contract. In so far as the pre-dispatch inspection is concerned, the arbitrator, while accepting the fact, that the, equipment was found in order at the pre-dispatch stage, has noted, in my view, quite correctly, that the predispatch inspection, under the terms of the contract obtaining between the parties, was with regard to quantity and visual state of the equipment. The performance of the equipment was required to be ascertained (under the terms of the contract), upon acceptance report being generated; post its installation and commissioning. Since defects were found in the equipment at that stage, a finding was recorded that, the judgement debtor, was in breach of a fundamental condition of the contract obtaining between the parties. 14.3 As regards the delay, as noted above, the arbitrator has dealt with the same both, while dealing with the claim of the decree holder, as well as, the counter claim. The relevant observations are as follows:
“...... Meanwhile, as the records of the Arbitral Tribunal show, on 7th March, 2008 the Respondent electronically communicated to the Claimant, that:
“the delay in project is mainly due to late delivery of some purchased items like DC Motor, Gear Box, Chain and Hydraulic Power Unit. These are the items which we ordered to other suppliers and they have taken a long delivery time than expected. Now they have informed that they will deliver these parts by first week of May 2008. Hence we have informed you the dispatch of your machine by middle of May, 2008. We have reviewed the situation of manufactured items also and found that most of the parts are under machining and will be completed by 3rd week of April 2008”. On 21 June 200 the parties signed the Minutes of Meeting of the Parties, wherein had fixed 4 months delay in delivery of the Equipment and confirmed that:
“since the project has been delayed by 4 months the penalty of 5% of the contract value can be applicable”. In the Minutes of Meeting of the Parties dated 18 June 2009 the Respondent agreed on that:
“in case if contractual tests are not executed successfully in term till 20 th of August 2009, with further signing of corresponding Act of acceptance of the equipment into operation. Starting from 21st of August 2009 the seller will pay to the buyer upon his first request penalties at rate 5% from total cost of the Contract [....].. So, as appears from the above mentioned documents, the Respondent admitted fault for delay in delivery of the Equipment and recognized the Claimant (Buyer)’s entitlement to the penalty charging in the amount of 5% from the total cost of the Equipment. Besides, in the Claimant’s opinion, “there is neither logical nor legal connection between the delay in delivery of the Equipment and the delay in delivery of the lubricant’s characteristics”, and the technical experts, who have taken part in the oral hearing, share this opinion;...... ....the Arbitral Tribunal concludes that: - the documentary evidence, produced by both Parties, prove that the Respondent has became in breach of the Delivery Contract by failure of deliver the Equipment within the time limit specifying in clause 3.1 of the Delivery Contract; the delay in delivery of the Equipment has made 7 months (32 weeks)’....... ..... As it has been established by the Arbitral Tribunal in section 6.1 of the present Award, the delay in shipment of the Equipment has occurred due to the fault of the Respondent as the Respondent failed to manufacture the Equipment in time and, therefore, has broken the delivery period specified by clause 3.1 of the Delivery Contract (as amended by the Additional Agreement No.2 to the Delivery Contract) by 7 months (226 days). Hence, the respondent, being a breaching party, is not entitled to the remedy for loss......”
15. General objections on merits. 15.1 The submission of Mr Ahuja that the decree holder delayed in furnishing a response to the judgement debtor’s inquiry as regards the type and characteristics of the lubricant to be used; an inaction which ultimately led to the equipment being damaged, is again, an aspect, which goes to the merits of the mater. Suffice it to say, the arbitrator has noted, while discussing one of judgement debtor’s counter claim (with regard to costs incurred for manufacture and supply of additional internal lubrication system and other extra items), that the, judgement debtor, while taking onus to eliminate the defects in the equipment had, in particular, undertaken to provide a final design of the lubricant submission system. Whether or not there was any connection between the alleged failure on the part of the decree holder to furnish details of type and characteristics of the lubricant, and the damage in the equipment, was not, articulated before me, with reference to any material on record. Notably though, what does come through from the finding returned by the learned arbitrator, is that, the defects, if any, which were found in the equipment, arose on account of action and/or inaction of the judgement debtor and not the other way around, as is sought to be contended by Mr Ahuja.
16. Therefore, for the foregoing reasons, I find no merit in any of the objections raised by Mr Ahuja, on behalf of the judgement debtor. Accordingly, EA No.134/2012 filed by the judgement debtor, is dismissed. EX. P. 275/2011 17. List on 20.01.2015. RAJIV SHAKDHER, J DECEMBER02 2014 kk