9911796707
TMI Blog2025 (2) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs was not based on clause 21 of the agreement. It is not the appellant's case that the respondent was called upon to replace the plant and machinery, and as the respondent failed to do so within a reasonable time, the appellant replaced the plant and machinery by themselves. The claim was on account of a refund of the amount spent by the appellant on the plant, as is evident from paragraph 16 of the statement of claim. The claim was not made in terms of Clause 21 of the Agreement. The claim was not on account of the breach of warranty. What is claimed is virtually the refund of the amount spent - the appellant was not entitled to the claim of Rs.68.15 lakhs as it was claimed in the statement of claim as the refund of the amount spent by the appellant on the acquisition of plant and machinery. Conclusion - The appellant got liquidated damages as provided in the agreement on account of breaches committed by the respondent. The claim for damages of the appellant will remain confined to what is expressly provided under the Agreement in view of Section 74 of the Contract Act. The appellant retained the plant and machinery and did not take the benefit of clause 21. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout prejudice to their rights and contentions. It provided for conducting one more trial run for 15 days after necessary modifications were made in the machine as suggested by the NCL. The modifications were to be made by the respondent at its own cost. By the MOU, the quantum of liquidated damages under clause 15 of the agreement was increased to 20% of the contract value, i.e. Rs. 18.64 lakhs, which would be payable if the machine failed to give guaranteed performance. According to the appellant's case, the fifth trial run conducted in August 1995 generated a yield of 224.54 litres per metric tonne of Molasses. 4. The appellant filed a statement of claim before the Arbitral Tribunal, claiming damages of Rs.233.75 lakhs. Broadly, the following claims were made:- a) For a delay of 24 weeks in the supply of plant and machinery - Rs.4.66 lakhs, which is 5% of the contract price b) Liquidated damages equivalent to 20% of the contract value - Rs.18.64 lakhs; c) On account of the failure of guaranteed performance of steam and power consumption - Rs. 9.30 lakhs at 10% of the contract value; d) Loss caused due to short production - Rs. 48.45 lakhs; e) The amount spent by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent; and d) Rs.10.63 lakhs being the past interest leviable on damages of Rs.68.15 lakhs. 9. Again, both the parties filed objections under Section 30 of the 1940 Act. By a judgment dated 6th November 2004, the Civil Court substantially upheld the second award except for the direction to pay interest of Rs.10.63 lakhs on the ground that interest cannot be made payable on the amount of damages till it is quantified. 10. Being aggrieved by the judgment of the Trial Court, the respondent preferred an appeal in which the appellant filed crossobjections. By the impugned judgment dated 6th February 2012, the High Court allowed the appeal and dismissed the cross-objections of the appellant. The High Court set aside the second award to the extent of a claim of Rs.68.15 lakhs. It was held that this claim was based on speculative and imaginary calculations. As regards the claim of Rs.2.09 lakhs and Rs.18.64 lakhs, the High Court recorded that the respondent has accepted the liability. On 13th April 2012, this Court issued a notice. The appellant was directed to deposit the amount involved with the High Court Registry by way of interim relief. SUBMISSIONS 11. Shri Vijay Hansaria, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r round. He stated that no interference is called for in the view taken by the High Court. 15. The appellant's submission was that they could not use the supplied machinery and that the machinery was no better than scrap because the fermentation performance was lower than promised. To deal with the said submission, the learned senior counsel for the respondent relied upon clause 21 of the agreement. He submitted that the appellant did not call upon the respondent to replace the machinery. At no stage is it claimed that the appellant had replaced the machinery at the respondent's cost. He pointed out that in paragraph 16 of the claim, the appellant stated that the agreement does not provide any specific clause for the total failure of the plant. Therefore, as per the Contract Act, the seller is liable for the actual damages. The learned senior counsel appearing for the respondent submitted that what was claimed by the appellant in the correspondence was a refund of the price. He submitted that the applicability of Section 59 of the Sale of Goods Act for a refund of the price or by way of damages is contrary to the express terms of the agreement. He would, therefore, submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alties/liquidated damages payable against nonperformance of fermentation section and penalties/liquidated damages payable for guaranteed performance towards steam and power shall be limited to a maximum of 10% of the contract price. 18. At this stage, it is also important to note clause 21 of the agreement which reads thus: "21.1 For a period of twelve months from the date of commission of the continuous fermentation plant or eighteen months from the date of last supply whichever is earlier called the maintenance warranty period the seller shall remain liable to rectify / replace any parts thereof such as may be found to be defective or below the rated. Capacity under proper use and maintenance arising due to faulty design, materials, or workmanship. The purchaser shall give the seller notice in writing stating the particulars of the defects or failures and the seller shall there upon make good the failures and the seller shall there upon make good the defective or underrated equipments or replace the same free of cost to make it comply with the requirements of the continuous fermentation plant. If the seller fail to do so within reasonable times so as to require the production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in any way be deemed to be limited to the amount of the performance guarantee." ( emphasis added ) 19. A supplementary agreement was executed on the same day in which the respondent agreed to pay liquidated damages of Rs. 2 lakhs for every one litre less production of alcohol subject to the maximum ceiling of 10% of the contract price. 20. The third agreement executed between the parties was styled as the MOU, under which the respondent agreed to supervise the reaction and commissioning of the machinery. 21. Now, we come to the claim made by the appellant. Before we refer to the claim, we must note that the real controversy remains confined to the claim granted by the Arbitral Tribunal to the sum of Rs.68.15 lakhs towards the damages for loss suffered due to non-performing machinery and equipment and, consequently, the interest thereon. 22. The case made out in the claim is that the respondent failed to commission the plant successfully so as to give guaranteed performance as per the agreement. Therefore, production loss continued. The following claims were made: a) Delay in supply of plant and machinery beyond the period of five and a half months from the effective dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall extend to the actual cost of rectification/replacement of defective items of the continuous fermentation plant and machinery. 26. Careful perusal of the claim made before the Arbitral Tribunal by the appellant shows that the claim for the sum of Rs.107.54 lakhs was not based on clause 21 of the agreement. It is not the appellant's case that the respondent was called upon to replace the plant and machinery, and as the respondent failed to do so within a reasonable time, the appellant replaced the plant and machinery by themselves. The claim was on account of a refund of the amount spent by the appellant on the plant, as is evident from paragraph 16 of the statement of claim. Paragraph 16 reads thus: "16. Purchaser had spent Rs. 107.54 lakh on the said plant. It is absolutely clear now that it will not give required results as agreed and all the investment goes waste. The agreement does not provide any specific clause for the total failure of plant. Therefore, as per contract act, seller is liable for actual damages. Since the entire plant goes waste seller is liable to pay for total investment of Rs. 107.54 lakhs and loss of interest at the rate of 18% per year from 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
