The court's decision clarified the interpretation of the term "prime" in the context of a contract for the sale of steel sheets, the applicability of the FOB condition in an international sale contract, and the calculation of damages in a breach of contract case involving defective goods.

S. RAVINDRA BHAT, J.

1. Thyssen Krupp Materials, AG, the appellant (hereafter “Thyssen”) is aggrieved by an order of a learned single judge, dated 10.01.2002 by which Suit no. 352A/1998 (hereinafter referred to as the “suit”) for enforcement of an arbitral award, was rejected. The impugned judgment completely set aside the arbitral award; therefore, this appeal under Section 39 of the (old) Arbitration Act 1940 (“the Act”), read with Section 10 of the Delhi High Court Act.

2. Thyssen was previously known as TSU Thyssen Stahlunion GmbH and is registered under the provisions of laws of Germany. Thyssen is acting through its Constituted Power of Attorney, Mr. D.K. Jain. The Respondent - Steel Authority of India (hereinafter referred to as “SAIL”) is a central public sector company incorporated under the Companies Act, 1956.

3. Briefly, the facts are that Thyssen contracted, with SAIL by agreement dated 04.03.1994 (hereafter “the agreement”) to purchase 10,000 MT, plus-minus 5%, Prime Cold Rolled Mil Steel Sheets in coils (hereinafter “CRC”) in terms of specifications given in Annexure 1 to the agreement. Thereafter, Thyssen contracted to purchase an additional 10,000 MT of CRC from SAIL under the said agreement of 04.03.1994 and consequently, inserted an addendum/amendment to the agreement for the supply of second lot on 12.05.1994 (hereafter “the amendment”). Thyssen’s officers and experts made regular visits to SAIL’s Bokaro Steel Plant and made reports of the same. SAIL had agreed to regular inspection of the CRC in its plant in Bokaro and also during the pre-shipment stage at the port of loading. Such inspection was carried out by SGS, India appointed by Thyssen. The first lot of CRC was sent to New Orleans, USA via ‘IRENES DIAMOND’ under a Bill of Lading dated 11.08.1994 and was to arrive between 15.09.1994 and 21.09.1994. SAIL was invited to inspect the de-coiling and de-canning of the CRC upon discharge but it declined to do so by its letter dated 08.10.1994. Upon its discharge, Thyssen’s customers informed it that the CRC supplied was defective and the material was not suitable for continuous coil cutting and leveling into flat sheets and/or slitting. Since the goods were deemed to be defective and were rejected by Thyssen’s buyers they had to be sold by way of salvage as a result of which it suffered considerable losses. Thyssen claimed damages –both compensatory and exemplary alleging breach of the agreement and supplementary agreement. SAIL contended that it had not breached the contract and that the supplementary agreement had not been entered into. It also urged that the goods supplied by it were in terms of the contract and further that Thyssen could not claim damages, since its nominated representative/agency had inspected the goods prior to dispatch.

Arbitral Proceedings:

4. In terms of clause 13 of the agreement, the parties resorted to arbitration, to resolve their disputes, in accordance with rules of Conciliation and Arbitration of the ICC. The Chairman of the Arbitral Tribunal appointed a sole arbitrator (Mr. Cecil Abrahams) and the arbitration proceedings took place in New Delhi. The applicable law, as agreed by the parties, were the laws of India for the time being in force. Thyssen, the claimant, contended that it had an enforceable contract for the supply of 20,000 MTs of CRC to be supplied in two lots by the SAIL. It argued that the first lot so received was not in compliance with either the express terms of the contract and/or the implied terms such as those enshrined in Sections 15, 16 and 17 of the Sale of Goods Act. The first lot, which arrived in the United States, was rejected by the buyers and was to be sold by way of salvage, which caused a loss to them.

5. The Claimant contended that in terms of the pre-contractual negotiations followed by the agreement of 04.03.1994, the Respondents were required to deliver “prime cold rolled mild steel sheets in coil in compliance with ASTM A568 completely