9911796707
TMI Blog2003 (3) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 12-3-2003 - DORAISWAMY RAJU AND SHIVARAJ V. PATIL, JJ. K.K. Venugopal, Krishnan Venugopal, Sanjiv Jha, Saleem Hasan and Sanjay Kapur for the Appellant. F.S. Nariman, Anil Malhtora, Ravi Bishoni, Sanjeev Kumar Singh and Bharagava V. Desai for the Respondent. JUDGMENT Shivaraj V. Patil J. - Leave granted. The question that arises for consideration in this appeal is whether a Letter of Comfort furnished on the same day of a Settlement arrived at during conciliation signed by both the parties and authenticated by the Conciliators is enforceable in the same manner as an arbitration award under section 74, read with sections 30 and 36 of the Arbitration and Conciliation Act, 1996? 2. The appellant-Mysore Cement Limited contracted by its letters dated April 22, 1994 and July 30, 1994 with the respondent-Svedala Barmac Limited, a company based in New Zealand, for the supply and commissioning of two sets of Barmac 9600 DUOPACTOR rock-crushing machines for its cement plant at Damoh vide two separate letters dated July 30, 1994. Mysore Cements also contracted with another subsidiary of Barmac Ltd. for the supply and commissioning of four Vibrating Ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 30, 1998 and line I by August 30, 1998. According to the appellant, respondent could not complete the modification work of line II by April 30, 1998. Another round of conciliation was called at the request of the respondent and some more time was granted to carry out modifications; the respondent admitted that the best results guaranteed could not be demonstrated/achieved on a consistent basis during trial; the respondent was not able to fulfill any of their assurances. The parties met again on 12-13, August, 1998 but could not reach on any consensus and decided to call off the third conciliation proceedings. The appellant issued a legal notice dated 27th August, 1998 to the respondent demanding refund of the amount of Rs. 937.56 lacs being the price of the Barmac Crushing System and associated equipment required for it alongwith interest at the rate of 24 per cent per annum and also damages amounting to Rs. 567 lacs as on August 22, 1998 for the loss incurred due to non-functioning of Barmac Crushing System. In addition, it called upon the respondent to compensate the appellant at the rate of Rs. 40 lacs per month in view of the Memorandum of Conciliation and Letter of Conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala. V.Svedala will take the following steps : 1. Supply the Electric/Hydraulic Cascade Control Device, which will allow for the control of the cascade and therefore motor power draw from the control room. 2. Supply the Remote Thermal Model read out meter which will allow the operators to monitor the power draw and with the aid of the Cascade Control Device to avoid motor overload. 3. Supply the Control Device to integrate the existing feed rate control and closed circuit load measurement equipment. This control device will automatically regulate the new feed rate to the Barmac Circuit based on the Closed Circuit tonnage being fed into the Barmac Crusher. 4. Supply Suitable Belt weigher (Belt Scale). 5. Supply of 2 300 KW, 415 Volts motors and motor control equipment to increase capacity of the Barmac Crusher. 6. Recommend the appropriate screening media to ensure availability for trial. If this media is not already available, Svedala to arrange supply. 7. Provide the Engineering in time, for the installation of a conveyor discharge device that will be activated by a metal detector (supplied by Mysore Cements Ltd.). This discharge device will allow for the remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame themselves. XI.It is again made clear that the conciliation proceedings and whatever else is said, done and agreed is without prejudice to all rights of the parties. XII.Nothing contained in this Memorandum shall amount to any admission by either party nor the parties assume any additional liability other than those stipulated in the contract. XIII.Now the conciliation proceedings stand adjourned and shall be resumed as and when need arises in future. Sd/-Sd/- R. RajagopalanD.C. Singhania The terms of the conciliation settlement are agreed to and accepted by us. For Svedala Barmac Ltd. For Mysore Cements Ltd." "2. LETTER OF COMFORT December 18, 1997 M/s. Mysore Cements Ltd. (Units - Diamond Cements Diamond II Damoh, Narasingarh, M.P. 3rd Floor, Tower B-1 Golden Enclave Airport Road Bangalore-500 107 Dear Sirs, 1.In pursuance of our agreement in the conciliation proceedings to undertake the modification work of Line II and Line I, we hereby assure you that the modification work of Line II shall be completed by 30th April, 1998 and on completion of the trial run of this line, modification work on Line I shall thereafter also be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conciliation settlement agreement to be binding and enforceable. It was submitted that to refuse to enforce the settlement agreement, would amount to rewarding bad faith in the conciliation process. He urged that in the present case, the conciliation settlement agreement dated December 18, 1997 entered into by the parties satisfied all of the requirements of section 73 of the Act. In particular, the Conciliation Settlement was drafted by the conciliators and the parties during conciliation proceedings as provided in section 73(2) and bears the signature of the representatives of both parties at the end of the document as required by section 73(3) of the Act. It has also been authenticated by the conciliators at the end of the document as required by section 73(4) of the Act. Consequently, the Conciliation Settlement has become final and binding on the parties as set out in section 73(3) of the 1996 Act. He also submitted that there is no overlap between the current proceedings for execution of the Conciliation Settlement and the arbitration proceedings separately being conducted pursuant to the arbitration clause; the two proceedings are distinct and independent and the Concil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under section 76( a ) by the signing of the Settlement Agreement by the parties on the date of Agreement. According to him, Letter of Comfort is only an interim arrangement and the dispute is pending before the Arbitrators. He submitted that where a statute prescribes a procedure for doing something, the same course must be followed and the procedure prescribed must be adhered to. Since the Letter of Confort and the Memorandum of Conciliation do not meet the requirements of section 73, they cannot be given status of Settlement Agreement under section 74 to deem them as an arbitral award under section 30 so as to enforce them in execution proceedings straightaway. 7. We have carefully considered the submissions made on behalf of either side. 8. The relevant sections of the Act which are required to be kept in view while deciding the appeal are extracted below : "30. Settlement - (1) It is not incompatible with an arbitration agreement for an arbitral Tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral Tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r justified, on the date of the declaration; or ( c )by a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or ( d )by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration." 9. The High Court dismissed the petition for enforcement by way of execution under section 36 of the Act by the impugned order for the reasons that (1) in the decision of the Conciliators, no finding has been given as to what will happen in the event of the respondent not carrying out the modification within the period mentioned therein; (2) there was no settlement agreement within the meaning of section 74 of the Act; (3) assuming it to be a decision of the Conciliators under the provisions of the Act, there was no finding that the Conciliators had fixed any compensation to be paid to the appellant in case the work was not completed within the stipulated period; (4) moreover, there was a dispute as to who was responsible for not completing the work within the period m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even in case of dispute as to the satisfactory completion of modification work, still the compensation amount has to be paid, that too in the absence of any adjudication by any authority in that regard. This Letter of Comfort in the beginning itself states that it is pursuant to the agreement in the conciliation proceedings and not that it shall form part of the Memorandum of Conciliation. 10. Section 73 of the Act speaks of Settlement Agreement. Sub-section (1) says that when it appears to the Conciliator that there exist elements of settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observation. After receiving the observations of the parties, the Conciliator may reformulate the terms of a possible settlement in the light of such observations. In the present case, we do not find there any such formulation and reformulation by the Conciliator. Under sub-section (2), if the parties reach a settlement agreement of the dispute on the possible terms of settlement formulated, they may draw up and sign a written settlement agreement. As per sub-section (3) when the parties sign the sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the act has been followed by the conciliator. The conciliator appears to have held some meetings with the parties in which there was discussion and thereafter drew up the so-called settlement agreement by himself in secrecy and sent the same to the court in a sealed cover. Naturally the so-called settlement agreement drawn up by the conciliator does not bear the signatures of the parties. As the impugned order shows, the said settlement has been given a status higher than an arbitral award inasmuch as the Court has refused to even entertain any objection against the said settlement agreement reiterating the position that the settlement arrived at by the conciliator will be binding on the parties. The conciliator who is a former judge of the High Court and the learned judge who passed the impugned order failed to take note of the provisions of the Act and the clear distinction between an arbitration proceeding and a conciliation proceeding. The learned judge in passing the impugned order failed to notice the apparent illegalities committed by the conciliator in drawing up the so-called settlement agreement. Keeping it secret from the parties and sending it to the Court without the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties. Conciliators and both the parties also have signed the same but the procedure as indicated and various steps contemplated in section 73 of the Act were not adhered to. This apart, as already stated above, in this Memorandum neither consequences for not completing the modification work are stated nor any amount of compensation is fixed. In this case virtually Letter of Comfort is sought to be enforced. This Letter of Comfort, in our view, could not be accorded the status of Settlement Agreement to bring it within the meaning of section 74 of the Act to treat it as an arbitral award under section 30 of the Act so as to enforce it under section 36 of the Act. In the present case, the Conciliation proceedings were not terminated but they were only adjourned. Under section 76 of the Act, the proceedings shall be terminated as per clauses ( a ) to ( d ) of the said section. If there was Settlement Agreement under section 73, Conciliation Proceedings would have been terminated under section 76( a ) of the Act. This is yet another pointer against the appellant s case. It is also not possible to agree with the submission that this Memorandum of Conciliation and the Letter of Comfort ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
