The principle of estoppel does not apply when defects in supplied goods are latent and discovered post-acceptance; contractual terms must be adhered to in respect of quality.

JUDGMENT

[Physical Hearing/Hybrid Hearing (as per request)]

Rajiv Shakdher, J. (Oral)

CM APPL. 43313/2021

1. Allowed, subject to just exceptions.

FAO (COMM) 195/2021

2. This appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 [in short "the 1996 Act"].

2.1. The appeal is directed against the judgment dated 18.02.2021, rendered by the Learned District Judge, Commercial Court-02, South District, Saket Court, New Delhi.

2.2. The appellant before us was the original claimant before the Arbitral Tribunal.

2.3. The respondent i.e., Central Warehousing Corporation [in short `CWC'], not only defended the claim lodged by the appellant, but also went on to file a counter-claim.

2.4. The Arbitral Tribunal, via award dated 26.09.2019, awarded Rs.65,306/- in favour of the appellant, and allowed the counter-claim to the extent of Rs.1,07,304/-. In addition to the above, the respondent was directed to refund to the appellant, the money deposited with it in the form of security deposit and EMD.

2.5. The Arbitral Tribunal had also indicated that, if payments towards the awarded amount(s) are not made within sixty days from the date of award, then interest @ 12% per annum will run on the awarded amount(s) from the date of the award till the date of payment. This direction for payment of interest applied to both the appellant i.e., the claimant, and the respondent i.e., the counter-claimant.

2.6. At this stage, it may be relevant to point out that the counter-claim was allowed in favour of the respondent qua cost incurred on account of the risk purchases made by it against defective supplies.

3. The broad facts, which are required to be noticed, to adjudicate upon the appeal are as follows:

3.1. The respondent/CWC floated an e-tender notice dated 14.02.2014, for supply of chemical/dunnage/equipment.

3.2. The appellant was awarded two supply orders.

3.3. The contract, concededly, included a clause, which guaranteed the viability of DDVP and Malathion for one year, commencing from the date of their manufacture.

3.4. The appellant, concededly, supplied, as was the requirement under the contract, the requisite chemicals i.e., Dichlorovos76% EC and Malathion 50% EC [hereafter referred to as "DDVP" and "Malathion"]. Insofar as DDVP was concerned, supplies were to be made for the period spanning between 08.07.2014 and 07.07.2015, and insofar as Malathion was concerned, supplies were to be made between 04.07.2014 and 03.07.2015.

3.5. The contract also provided for extension time for performance by two months, in case, it was not terminated.

3.6. It is not in dispute that supplies were made to the designated locations. It is also not in dispute that, under the contract, the appellant supplied a total of 7800 litres of DDVP and 4850 litres of Malathion.

3.7. However, supplies made by the appellant against two indents, dated 10.12.2014 and 08.12.2014 concerning 2000 litres each, of Malathion and DDVP respectively, made to respondent's depot located in Hyderabad, encountered problems. The date of manufacturing of both DDVP and Malathion was November 2014, and hence, the guarantee period provided in the contract would expire in and about November 2015.

3.8. Since complaints were received from the users i.e., Food Corporation of India (FCI) and Department of Civil Supplies, for whom the supplies were requisitioned, a joint sample was taken; which resulted in a report being generated by National Institute of Plant Health Management, Hyderabad [in short "NIPHM"], dated 17.07.2015.

3.9. It is also not in dispute that, in the interregnum, 90% of the supp