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2021 Supreme(Del) 724
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Marsons Electrical Industries - Appellant
Versus
Fedders Lloyd Corporation Ltd. - Respondent
O.M.P. (Comm) No.2 of 2020
Decided on : 07-12-2021
For the Appellant :Mr. A.K.Thakur, Mr. Sujeet Kumar and Mr. Tarun Ghai, Advocates.
For the Respondent:Mr. Abhishek Singh, Ms. Aayushi Mishra and Mr. S.S. Ahluwalia, Advocates.
Point of Law : The cause of action would clearly arise when payments become due. Unless the period is extended by acknowledgment or by part payment, it would expire on expiry of a period of three years of the date of cause of action.
Headnote:
Arbitration and Conciliation Act, 1996 - Section 34 and 21 - Arbitration award - Challenged - Letters of Credit - Whether Arbitral Tribunal’s decision to reject MEI’s claim amount towards loss of profit, business opportunity, goodwill etc. can be faulted - Impugned award was rendered in the context of disputes that had arisen between the parties in connection with Purchase Order placed by the respondent Fedders Lloyd Corporation Ltd. (‘FLCL’) on MEI for purchase of 4964 numbers of transformers of varying specifications - The PO was accepted by MEI and it had agreed to supply 4964 numbers of transformers at an aggregate value - The transformers were to be supplied by FLCL for the Public Procurement and Property Disposal Service (PPPDS) in Ethiopia.
Finding of the Court :
Impugned award cannot be faulted as there is no material to substantiate MEI’s claim. The contention that Arbitral Tribunal was required to assess the same on an ad-hoc basis, is without any merit - High Court denied same as appellant had not produced strict proof and primary documents for establishing the quantum of loss of profits. The appellant had relied upon decision of same High Court in another connected proceeding, where High Court had found that loss of profit computed at rate of 15% of value of remaining work of contract was not unreasonable and had allowed the same. However, High Court did not accept the assessment as done in other case, which was a case of a similar contract between same parties - If it is well-established that respondent was guilty of breach of contract inasmuch as rescission of contract by the respondent is held to be unjustified, and the plaintiff-contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15 per cent of the value of the remaining parts of the work contract, the damages for loss of profit can be measured.
Result: Petition dismissed
JUDGMENT :
VIBHU BAKHRU, J
1. MEI Power Pvt. Ltd., a proprietorship of Marsons Electrical Industries, (hereafter ‘MEI’), has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the ‘A&C Act’) impugning an arbitral award dated 07.08.2019 (hereafter the ‘impugned award’) passed by the Arbitral Tribunal constituted by Justice (Retd.) Manmohan Sarin, former Chief Justice of the Jammu & Kashmir High Court, as the Sole Arbitrator (hereafter the ‘Arbitral Tribunal’).
2. MEI’s challenge to the impugned award is limited to the extent that its Claim no.1, Claim no.4 and Claim no.6, have been rejected.
3. The impugned award was rendered in the context of disputes that had arisen between the parties in connection with the Purchase Order dated 15.11.2012 (hereafter ‘PO-0106’) placed by the respondent Fedders Lloyd Corporation Ltd. (hereafter ‘FLCL’) on MEI for the purchase of 4964 numbers of transformers of varying specifications. The PO-0106 was accepted by MEI and it had agreed to supply 4964 numbers of transformers at an aggregate value of Rs.98,38,37,700/- (Rupees Ninety-Eight Crores Thirty-Eight Lacs Thirty-Seven Thousand and Seven Hundred Only). The transformers were to be supplied by FLCL for the Public Procurement and Property Disposal Service (PPPDS) in Ethiopia.
4. Subsequently, the PO-0106 was split into twelve separate Purchase Orders; all dated 04.12.2012. Each Purchase Order was for a specified number of transformers and for a specified value. However, cumulatively 4964 numbers of transformers were required to be supplied in terms of the twelve Purchase Orders for an aggregate value of Rs.98,38,37,700/-
5. Clause 8 of the PO-0106, inter alia, stipulated that the entire payment for transformers would be made through Letters of Credit. 90% payment would be made through the irrevocable Letter of Credit for a period of one hundred and twenty days and the remaining 10% of the payment would be made within thirty days from the date of acceptance of the transformers by the buyer, within the Letter of Credit validity period.
6. MEI claims that it had supplied 2817 numbers of transformers to FLCL in four lots, as instructed by FLCL from time to time. Against the aforesaid supplies, MEI raised invoices (Invoice nos. 19 to 48) aggregating to an amount of Rs.32,29,24,800/-(Rupees Thirty Two Crores Twenty-Nine Lacs Twenty-Four Thousand and Eight Hundred Only). 90% of the invoice value, that is, Rs.29,06,32,320/-(Rupees Twenty-Nine Crores Six Lacs Thirty-Two Thousand Three Hundred and Twenty Only) was paid through the Letters of Credit. MEI claims that the balance amount of Rs.3,22,92,480/-(Rupees Three Crores Twenty-Two Lacs Ninety-Two Thousand Four Hundred and Eighty Only) remained outstanding and payable against the transformers supplied to FLCL.
7. MEI claims that it had also raised invoices for the fifth lot of transformers (640 in number) for a value of Rs.13,86,55,200/-(Rupees Thirteen Crores Eighty-Six Lacs Fifty-Five Thousand and Two Hundred Only). However, FLCL neither opened the Letter of Credit nor issued the necessary instructions for dispatch of the said fifth lot. MEI claims that it was compelled to sell the said transformers as scrap and recovered a sum of Rs.5,17,48,930/-(Rupees Five Crores Seventeen Lacs Forty-Eight Thousand Nine Hundred and Thirty Only) from such sale. MEI, accordingly, claimed that FLCL was liable to pay the remaining amount of Rs.8,69,06,270/-(Rupees Eight Crores Sixty-Nine Lacs Six Thousand Two Hundred and Seventy Only) as remaining invoice value.
8. MEI filed its Statement of Claims before the Arbitral Tribunal on 04.10.2017. A tabular statement summarising the claims made by MEI, as set out in the impugned award, is reproduced below:
| 1. | Amount recoverable towards 10% balance payment for the transformers supplied following inspection | Rs.3,22,92,480/ |
