2009 (10) TMI 956 - HC - Indian Laws

Summary

Issues Involved:
1. Claim of Flowmore for the balance price payable.
2. Refund claim with respect to the bank guarantees encashed by NTPC.
3. The claim of NTPC for liquidated damages.
4. Respective claims of the parties for interest.

Issue-wise Detailed Analysis:

1. Claim of Flowmore for the Balance Price Payable:
The majority award entitled Flowmore to the balance price of 10% amounting to Rs. 21,63,105/-. The arbitrators found that Flowmore had performed the contract and NTPC had no complaints regarding the pumps. The contract's performance tests were conducted satisfactorily, and NTPC had accepted and retained the equipment without rejection. The arbitrators referenced the Sale of Goods Act, 1930, and concluded that NTPC could not retain the goods without paying the balance price. However, an adjustment of Rs. 2,30,910/- was made for an unadjusted advance lying with Flowmore, reducing the payable amount.

2. Refund Claim with Respect to the Bank Guarantees Encashed by NTPC:
The arbitrators held that Flowmore was entitled to the amounts of the bank guarantees encashed by NTPC as NTPC's counterclaims, including liquidated damages, were dismissed. The court found no fault with this part of the award, as the amounts encashed were ultimately towards the net amount due under the contract.

3. The Claim of NTPC for Liquidated Damages:
The court recognized that Flowmore was guilty of breach of contract and delay in performance, thus entitling NTPC to liquidated damages without proof of actual loss, as supported by the Supreme Court's judgment in ONGC vs. Saw Pipes Limited. However, the arbitrators erroneously dismissed NTPC's claim for liquidated damages as time-barred, which the court found unreasonable and perverse. Consequently, NTPC was entitled to Rs. 5,39,100/- for liquidated damages.

4. Respective Claims of the Parties for Interest:
The court decided to award a uniform rate of 9% per annum simple interest to Flowmore against NTPC on the net amount granted by the award and modified by the judgment. This decision was influenced by recent Supreme Court judgments emphasizing lower interest rates in the changed economic scenario. The net amount due to Flowmore from NTPC was Rs. 13,93,095/- plus Rs. 19,35,826/- from bank guarantees.

Additional Claims and Adjustments:
- NTPC's claim for the cost of spares was denied as NTPC refused to pay Flowmore for the spares, and Flowmore was willing to supply them if payment was made.
- NTPC's claim for risk and purchase costs of pumps from Johnston was rejected as the purchased pumps did not conform to the original contract's specifications (S.S. impellers) and Flowmore was not given the opportunity to supply the substituted items.
- NTPC's additional claim of Rs. 76,27,631/- was reduced to Rs. 34,85,572/- as the arbitrators found no prior claim before arbitration proceedings commenced.

Costs:
The court directed Flowmore to file an affidavit detailing the costs incurred for the legal proceedings, supported by certificates from their advocates. NTPC was ordered to pay 75% of the certified costs to Flowmore.

Final Order:
The objection petition was disposed of, and the award dated 19.11.1996 was made the rule of the court, subject to modifications. The net amount awarded to Flowmore was Rs. 13,93,095/- plus Rs. 19,35,826/- with 9% per annum simple interest until actual payment. The suit was disposed of accordingly.