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2019 Supreme(Del) 2224
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
Steel Authority of India Ltd - Appellant
Versus
Psysteme and Another - Respondents
Original Miscellaneous Petition No. 172 of 2014
Decided On : 26-08-2019
A.S. Chandiok, Adv., Sharat Kapoor, Adv., Ritesh Kumar, Adv., Shrey Kumar, Adv., Ramya Kutty, Adv., Taran Singh, Adv., Kush Sharma, Adv., Shrutika Garg, Adv.
The main legal point established in the judgment is that SAIL's failure to insist upon strict performance did not constitute a waiver of its rights, as per the non-waiver clause in Article 44 of the General Conditions of Contract.
Headnote:
CME Insurance - Obligation of Suppliers - Clause 17, General Conditions of Contract - The judgment discusses the obligation of the Suppliers to obtain comprehensive marine cum erection insurance (CME insurance) as per Clause 17 of the General Conditions of Contract. The court analyzes the bid, acceptance letter, and general conditions to establish the Suppliers' obligation to provide CME insurance for the entire job valid up to commissioning and handing over of the facilities to SAIL. The court also highlights the non-waiver clause in Article 44 of the General Conditions, emphasizing that SAIL's failure to insist upon strict performance does not constitute a waiver of its rights.
Fact of the Case:
The case involves a dispute between Steel Authority of India Limited (SAIL) and Psysteme GmbH and M/s Mantri Enterprises regarding the obligation to obtain comprehensive marine cum erection insurance (CME insurance) for the supply and installation of a width measurement system in a steel plant. The Suppliers failed to provide CME insurance, leading to a fire that damaged the equipment. The matter was referred to arbitration, and the Arbitrator found that the Suppliers were obligated to provide CME insurance as per the contract.
Finding of the Court:
The court found that the Suppliers were obligated to provide CME insurance as per Clause 17 of the General Conditions of Contract. However, the court also held that SAIL's acceptance of the equipment without CME insurance did not constitute a waiver of its rights, as per the non-waiver clause in Article 44 of the General Conditions. The court rejected SAIL's counter claim for a refund of the entire payment made to the Suppliers, considering SAIL's own fault in failing to adhere to the terms and conditions of the contract.
Issues: The main issue was the obligation of the Suppliers to obtain CME insurance as per the contract. The court also addressed SAIL's counter claim for a refund of the entire payment made to the Suppliers.
Ratio Decidendi: The court's decision was based on the interpretation of the contract terms, including Clause 17 and Article 44 of the General Conditions of Contract. The court emphasized that SAIL's failure to insist upon strict performance did not constitute a waiver of its rights. The court also considered SAIL's own fault in failing to adhere to the terms and conditions of the contract.
Final Decision: The court held that the Suppliers were obligated to provide CME insurance as per the contract, but SAIL's acceptance of the equipment without CME insurance did not constitute a waiver of its rights. The court rejected SAIL's counter claim for a refund of the entire payment made to the Suppliers.
JUDGMENT :
Prathiba M. Singh, J.
The short question that arises in the present case is as to whether there existed an obligation on Respondent No.1-Psysteme GmbH and Respondent No.2-M/s Mantri Enterprises (hereinafter the Suppliers) for obtaining comprehensive marine cum erection insurance (hereinafter CME insurance) and if so, the scope of the said insurance policy. The Petitioner-Steel Authority of India Limited (hereinafter "SAIL") floated a global tender on 20th October, 2000 for design, engineering, supply of plant equipment and installation, commissioning and testing of width measurement system (hereinafter, system) in its Hot Strip Mill, Rourkela Steel Plant. Respondent No. 1, a German company and its Indian agent, Respondent No.2-M/s Mantri Enterprises submitted their bids. The Suppliers were asked to accept the ocean freight and insurance policy in Indian rupees, and were asked to quote prices as per revised format. Finally, the bid of the Supplier was found to be the lowest bid and the letter of intent was issued on 2nd July, 2002, for the award of work of a total value of Rs.83,78,377/-, which was accepted by the Supplier on 14th August, 2002. The acceptance of tender was issued on 28th August, 2002. Various amendments/clarifications had been issued after the initial bid. The bid, clarification letters, the terms of tender and the general conditions of the contract together constitute the contract.
2. It was the Suppliers' case that the acceptance of tender was issued without application of mind and thus, various amendments had to be resorted to. The system was partly imported and partly supplied indigenously. Design and engineering of the system was done in Germany and the same was shipped to India in October, 2003. The system reached Kolkata Port in a container on 27th November, 2003. After inspection at the port, delivery of the same was taken. The system was cleared at Calcutta port by SAIL and its officials without intimation to the Suppliers. The transportation of the goods from the port to Rourkela plant was also effected. According to the Suppliers, clearing from the port and subsequent transportation was done without their knowledge. The shipping documents were, however, not handed over to the Supplier. Thereafter, the installation work was commenced. During the time when erection was going on at the plant, a fire broke out on 25th May, 2004 in the Hot Strip Mill at Rourkela Steel Plant. The fire then spread to the area where the commissioning of the system was taking place and substantial part of the equipment got damaged. The Indian agent called upon SAIL in respect of replacement of the cables and the equipment, which was destroyed in the fire. Disputes then arose between the parties as to who was in breach. The area of dispute was in respect of port clearance having been made by SAIL and the installation being commenced, without prior intimation to the Supplier. SAIL, on the other hand insisted that a CME insurance policy ought to have been taken to cover up such eventualities until the stage of commissioning.
3. In view of these disputes, the matter was referred to the Indian Council of Arbitration, and a ld. Sole Arbitrator was appointed to adjudicate the disputes. The ld. Arbitrator arrived at the following findings:
That the tender was silent in respect of providing CME insurance policy.
That the letter of acceptance of tender dated 28th August, 2002 contained a modified and revised clause relating to insurance i.e. Clause 17, which imposed an obligation upon the Suppliers to provide insurance policy for transit storage, watch and ward, workmen compensation etc., including third party coverage for the entire job valid up to commissioning and handing over of the facilities to SAIL.
Respondent No. 1 had conveyed its acceptance on 7th October, 2002, and a further letter dated 7th October, 2002 was relie
