The main legal point established in the judgment is that the principle of economic duress does not apply to commercial contracts if the bargaining power of the contracting parties is equal or almost equal, and the plaintiff must satisfy specific tests/factors to claim economic duress.

Manmohan, J.

1. Plaintiff has filed the present suit for recovery of US$ 2,72,110.91 along with pendente lite and future interest at the rate of 6% per annum from the date of filing of the present suit till its realization along with costs.

2. The facts of the present case are that the defendant placed a purchase order on the plaintiff for supply of 41,000 Wet Metric Tonne (WMT) processed Indian Iron Ore Fines (goods) produced from mines in India with minimal 61% Iron (Fe) content. For this purpose, the parties entered into a formal contract dated 28th January, 2008. The iron ore was sent vide two shipments. The present dispute pertains to the second and final shipment of 6000 WMT of iron ore fines.

3. In accordance with the formal contract dated 28th January, 2008, Assayers of the plaintiff and defendant conducted tests at loading port and certified presence of Iron (Fe) content to be above 61% in the goods.

4. On 23rd March, 2008, the plaintiff’s shipment reached Lanshan Port, China and the defendant unloaded the shipment on 25th March, 2008. On the same day itself, defendant informed the plaintiff that as per CIQ analysis at the discharge port, the content of Iron (Fe) was found to be only 60.59%.

5. Since the analysis was different at the loading port, plaintiff requested that testing by CIQ be done in presence of its representative on fresh samples. Plaintiff also sought appointment of neutral umpire for testing in accordance with the provisions of the formal contract dated 28th January, 2008.

6. The defendant vide e-mail dated 09th May, 2008 demanded payment of US$ 136,013.57 on account of deficiency in content of Iron (Fe). Further, instead of carrying out fresh test, defendant in September, 2008, lifted the goods from Lanshan Port, China without allowing any further test.

7. The defendant also refused to pay the balance 2% for the shipment, that means, US$ 116,883.68.

8. On 25th July, 2008, plaintiff entered into a contract with a third party, namely, M/s. Horner Resources (International) Company for supplying 20,300 WMT Iron Ore Fines cargo to Lanshan Port, China. When the goods reached the Lanshan Port, China on 29th August, 2008, M/s. Horner Resources (International) Company rescinded the contract.

9. After seventy-five days of the third party goods having reached Lanshan Port, China, plaintiff identified a new buyer M/s. Zhejiang Materials Industry International Company Limited and executed a contract on 14th November, 2008. It is pertinent to mention that as per Customs Law of China if goods lie for more than ninety days on port, the Custom Authorities are bound to auction and sell the goods.

10. In pursuance to the said contract, M/s. Zhejiang Materials Industry International Company Limited opened a Letter of Credit in favour of the plaintiff. However, before the plaintiff could negotiate the Letter of Credit, it received an e-mail on 20th November, 2008 from M/s. Zhejiang Materials Industry International Company Limited stating that they had received an intimation from the Port Authorities that part of the cargo had been attached and sealed by the Intermediate People’s Court (Rizhao).

11. It later transpired that the defendant had filed a proceeding before the Intermediate People’s Court (Rizhao) on 10th November, 2008 wherein the court directed sealing of plaintiff’s cargo to the extent of 6000 WMT amounting to USD 141,163.14/- inclusive of interest @ 6%.

12. Subsequently, the defendant vide its e-mail dated 24th November, 2008 demanded that the plaintiff instruct M/s. Zhejiang to pay a sum of US$ 140,440.57 to the defendant from the amount due from M/s. Zhejiang Materials Industry International Company Limited to the plaintiff.

13. Meanwhile having received intimation from M/s. Zhejiang Materials Industry International Company Limited, the plaintiff vide its e-mail dated 21st November, 2008 protested against the illegal and coercive demand of the defendant. Since considerable emphasis has b