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G-2, 17/41, West Punjabi Bagh, Delhi- 110026 ..... Plaintiff
Through: Mr. Siddharth Dutta, Ms. Gunjan Malhotra and Ms. Nawang Chuney, Advocates.
JUDGMENT
1. M/S PS EXIM (HK) LTD. Having its Office at: - 9th Floor, BEL Trade Commercial Centre, 3, Burrows Street, Wanchai, Hong Kong. And also at: A-310-311 RG City Centre, Desh Bandhu Gupta Road, Motia Khan, Pahar Ganj, New Delhi - 110055.
2. M/S PISCES EXIM INDIA PRIVATE LTD. Having its head office at: A/1, Ground Floor, Rane Sadan, Natwar Nagar, Road No. 5, Jogeshwari (East), Mumbai – 400060. And branch office also at: A-310-311 RG City Centre, Desh Bandhu Gupta Road, Motia Khan, Pahar Ganj, New Delhi - 110055.
3. MR.
SOUMIT RANJAN JENA Managing Director, M/s Pisces Exim India Private Ltd A/1, Ground Floor, Rane Sadan, Natwar Nagar, Road No. 5, Jogeshwari (East), Mumbai - 400060. (Defendant No.2 & 3 were deleted vide Order Dated 21st March, 2014)..... Defendants Through: None. CORAM: HON'BLE MS.
JUSTICE NEENA BANSAL KRISHNA J U D G E M E N T
1. A suit for Damages amounting to ₹5,79,59,550.65/- along with pendent lite and future interest @ 18% per annum has been filed by the plaintiff.
2. The facts in brief are that the plaintiff Company is engaged in the business of trading in Iron Ore. It purchases Iron Ore from various mine owners and thereafter supply it to various suppliers aside from being diversified into Infrastructure, Real Estate and Beverage Industry. The defendant No.1, a Company which is a part of defendant No.2 Group of Companies, is carrying on business of sale/ purchase of various metals like Iron Ore, etc. The Defendant No.1 comprises of Pisces Exim India Private Ltd., Pisces Steel Private Ltd. and the defendant No.1 PS Exim (HK) Ltd. The defendant No.2 deals in sale/purchase, chartering, quality control and logistics, while defendant No.1 deals with marketing, documentation and financing of defendant No.2 Group. The defendant No.2 on its Letter Head deposited the amount in the bank account of plaintiff Company. Furthermore, on the website of Pisces Exim both defendant No.1 and 2 are reflected as closely related to each other with common Management. Defendant No.3 is the Managing Director of defendant No.1 and is actively involved in the present issue. (Defendant No.2 & 3 were deleted vide Order Dated 21st March, 2014)
3. It is asserted that the plaintiff Company entered into a Contract dated 12th May, 2011 with defendant No.1 Company which was signed by the plaintiff Company at Delhi. As per Clause 3 of the Contract, the defendant Company agreed to purchase 86000 Wet Metric Tons (Wet means Iron Ore in its Natural Wet State) (+/- 5% buyer’s option) of Iron Ore Fines @ 162 U.S. Dollar (USD) Per Metric Ton FOB (Free on Board) (hereinafter referred to as “PMT”) from the plaintiff Company. It was agreed that the loading port of cargo would be Visakhapatnam Port, India. The shipment of this cargo was to be delivered at any main port in China (to be specified by the buyer). It was further agreed in terms of Clause 7 of the Contract that defendant No.1 shall pay a sum of $2.25 million to the plaintiff Company as advance before loading the cargo. It was further agreed that for the balance amount, an irrevocable Letter of Credit with an International Bank shall be opened by defendant No.1 within ten working days from the date of signing of the Contract i.e. by or on 22nd May, 2011. Clause 22 of the Contract specifically provided that any amendment or modification to the Contract shall be made in writing and would be subject to confirmation by the contracting parties. Clause 24 stated that the entire Agreement between the parties and the terms and conditions set forth therein constituted the sole terms and conditions. No other terms and conditions whether contained in Buyer’s Purchase Order, Shipping Releases or elsewhere shall be binding upon the Seller. It further stated that all proposals, negotiations and representations made prior to the date hereof were merged herein and no modification or assignment shall be effective unless agreed to in writing. The Letter of Credit was to be opened by the defendant Company with all the specific conditions incorporated in the Agreement. No unilateral modification could be done by either party. However, after signing the Contract, defendant No.1 Company kept silent and failed to abide by the terms of the Contract.
4. It is stated that on 21st May, 2011 defendant No.2 deposited a sum of Rs.[1] Crore directly into the bank account of the plaintiff which shows that both defendant No.1 and defendant No.2 were having common management. Defendant No.2 further deposited a sum of Rs.[3] Crores on 08th June, 2011. However, this deposit of total Rs.[4] Crores by defendant No.2 was not in accordance with the Contract, but was merely an illusion of performance. As per the Contract, a sum of $2.25 million was to be paid in advance before loading the cargo. However, the defendant No.1 Company merely deposited ₹4,00,00,000/- in the account of the plaintiff Company.
5. In the meanwhile, total quantity of 90,300/- MT (86000 MT plus 5% i.e. 93000 MT) Iron Ore Fines was stacked by the plaintiff Company at Visakhapatnam Port in the month of May, 2011 for loading as per the Contract. However, to the utter shock and surprise of the plaintiff Company, defendant No.2 vide email dated 11th June, 2011sent on its Letter Head, unilaterally amended the clauses of Contract by way of an Addendum dated 11th June, 2011and also informed that aforesaid payment of ₹4,00,00,000/had been deposited on behalf of defendant No.1 Company. The plaintiff never consented to any modification/ amendment in the clauses of the Contract. Such unilateral modification by way of Addendum was not valid in the eyes of law.
6. The defendant No.1 made unilateral amendments in the Contract vide Addendum dated 11th June, 2011 as under: “..Clause 3B (LAY CAN): 13th JUNE 2011 to 20th JUNE Clause 5 (Base Price): Price Of USD 157.50 PDMT on the BSS of Fe Content 62% Fraction Pro-Rata for Visakhapatnam Port, India Clause 6a (Price Adjustment /Fe Content): If Fe Content is Below 61% New Base Price Will Effect USD150.50 PDMT on Fe BSS 61% Fraction Pro-Rata And Penalty Will Be USD[2] For Each 1% Fe Less Than 61% Upto 60%. Clause 7 (Payment): Buyer Shall Open An Irrevocable Letter Of Credit For 100% For Value From A 1st Class International Bank In Hong Kong Payable At 100% Sight In Favour of The Seller Through An Advising Bank in India at whose Counter the L/C Should Be Negotiable For An Amount in USD. L/C Shall Be Established For Fe 62% BSS, Rejection 61%...”
7. The defendant No.1 unilaterally reduced the Base price of goods from $162 PMT to $157.50 PMT. The plaintiff has asserted that the original Base Price could not have been amended unilaterally without its consent.
8. A reply vide email dated 14th June, 2011 to both, the email and the Addendum, was given by the plaintiff strongly refuting the alleged amendments and intimated to the defendant No.1 that they had never received the advance payment of $2.25 million before loading nor Letter of Credit has been opened in favour of the plaintiff for the balance contract value as per the terms of the Contract. It further referred to the breaches vide its email dated 14th June, 2011 and also mentioned about the late shipment. It also informed that no arrangements had been made by the defendant No.1 Company for lifting the goods which were lying stacked at Visakhapatnam Port in accordance with the Contract. It was further put to notice that the goods were ready for delivery at Visakhapatnam Port. However, defendant No.1 abandoned the Contract and failed to comply with the terms of Contract. In fact, plaintiff offered last opportunity for taking the delivery of goods by making 100% payment of the contract value failing which the amount of Rs.[4] Crores was to be forfeited without any further notice and the plaintiff Company being free to sell the goods/ material in market as per choice. The plaintiff was left with no option but to cancel the Contract and forfeit the advance payment of Rs.[4] Crores deposited by defendant No.2.
9. The defendant No.1 Company sent a letter dated 17th June, 2011 alleging that plaintiff had agreed to some negotiations in respect of price and threatened to claim alleged losses in case Contract was not executed, as per their whims and terms. The plaintiff responded vide reply dated 19th June, 2011 refuting the claim of the defendant and asserted that it never ever negotiated any price reduction.
10. The plaintiff has claimed that it suffered huge losses due to non-lifting of goods by the defendant Company from Visakhapatnam Port for a long time. The Iron Ore Fines were exposed in open and quality continuously deteriorated day by day. It was constrained to pay heavy holding charges for the goods stacked at the Port. In order to prevent further loss and damage, plaintiff had to sell the aforesaid goods to one M/s Shenglong Resources Company Ltd. at the base price of $153, but subsequently the goods could be sold at the base price of $151.75 PMT.
11. The plaintiff has explained that Iron Ore is prone to moisture. More is the content of moisture, less is the value of Iron Ore. Due to excessive moisture, many a times, Iron Ore gets liquefied and goods deteriorate. The moisture content in the Iron Ore of the plaintiff Company was 5.07% at the time of signing of Contract. However, the moisture content increased to 5.16% as per the Certificate of Analysis dated 30th May, 2012 and it further increased to 10.90% as per Certificate of Analysis dated 21st June, 2012.
12. The total losses suffered by the plaintiff are as under: PARTICULARS AMOUNT (In USD) AMOUNT (IN INR) Loss on account of moisture 685151.25 3,08,42,083.52 Holding Charges 2,80,839.72 1,26,42,000 Interest 2,84,587.55 1,28,10,708.50 Loss on account of Rate Difference 9,25,575,00 4,16,64,758.63
GROSS TOTAL 21,76,153.52 9,79,59,550.65
13. The plaintiff has stated that defendant No.1 sent a letter dated 07th July, 2011 to which a reply dated 20th July, 2011 was given by the plaintiff and it forwarded a Debit Note dated 30th June, 2012 in respect of the losses suffered by the plaintiff. However, defendant No.1 filed a petition A.O.P No.805 of 2011 under Section 9 of Arbitration & Conciliation Act, 1996 being before the Additional District Judge, Vishakhapatnam. The reply was filed by the plaintiff and the petition was dismissed vide Order dated 12th July, 2011.
14. The defendant preferred an appeal being C.M.A No.739/ 2011 before the Hon’ble Andhra Pradesh High Court, but the appeal was also dismissed vide Order dated 24th August, 2011. However, the defendants carried on its misadventures by criminally intimidating, insulting and annoying the employees of the plaintiff Company for which a Police Report dated 16th September, 2011 was lodged with Assistant Commissioner of Police, Punjabi Bagh, Delhi. A false complaint dated 28th December, 2011 was made by defendant Company with Additional Commissioner of Police EOW Crime Branch, Mandir Marg, Delhi, against the plaintiff Company to illegally pressurize them. They also filed a fresh false and frivolous complaint against the plaintiff Company in the Court of ACMM, Tis Hazari, Delhi.
15. The plaintiff served a Legal Notice in July, 2012 calling upon the defendant No.1 to pay the losses. Another letter dated 08th September, 2012 was issued to the defendant Company informing that the date of Legal Notice was 09th July, 2012 and not 09th July, 2011. No reply, however, was received to the said Notice. Hence, the present suit has been filed for recovery of ₹5,79,59,550.65 along with pendent lite and future interest @ 18% per annum.
16. An application I.A. No.4127/2013 under Order I Rule 10 CPC was filed on behalf of defendant No.2 and 3 for deleting their names from the array of defendants. In a detailed Order dated 21st March, 2014 it was observed that defendant No.2 and 3 were not a party to the Contract and their names were deleted from the array of defendants.
17. The defendant No.1 could not be served through ordinary process and was served by way of publication in Newspaper, Hongkong Edition dated 01st May, 2019. Despite service by way of publication, none appeared on behalf of defendant No.1 which was proceeded ex-parte on 27th September,
2019.
18. The plaintiff in support of its case examined PW[1] Shri Sanjeev Tekriwal as the Director of the plaintiff Company who tendered his affidavit of evidence as Ex.PW1/A. The documents relied upon by the witness are Ex.PW1/1 to Ex.PW1/7.
19. Submissions heard.
20. The basic question which arises for determination is whether the plaintiff is entitled to the damages in the sum of ₹5,79,59,550.65.
21. The unrebutted and unchallenged testimony of the plaintiff proves that it entered into a Contract dated 12th May, 2011 (Ex. PW 1/2) with defendant No.1 for sale of Iron Ore Fines. The country of origin was India and the Port of loading was agreed to be Vishakhapatnam Port and the Port of discharge was any main Port of China. The specifications of the goods to be sold were mentioned in the Contract and the Base price was determined as 162 US Dollars PMT on the basis of Fe content 62% Fraction Pro-Rata Free On Board Visakhapatnam Port. Clause 6(A) provided for price adjustment. It states that in case the shipment did not meet the Fe specifications set forth in Clause 4, the base price shall be adjusted in accordance with the Fe content. The relevant Clauses of the Contract are reproduced as under:
6) PRICE ADJUSTMENT (A) Fe Content In respect of a shipment of Ore, which does not meet the Fe specification set forth in Clause 4, the base price shall be adjusted in accordance with Fe content as follow: The base price shall be increased by USD[1].00 per dry metric ton for each1% Fe content above 62.00% Fe content, fraction Pro Rata. The base price shall be decreased by USD[2].00 per dry metric tone for each 1% Fe content below 62.00% upto 61.00% (including 61.00%) fe Fraction Pro-Rata. If Fe content is below 61.00 the new base price will be effected. USD 153.00 PDMT on Fe basis 61.00% fraction prorate and penalty will be USD 2.00 for each 1.00% Fe below 61.00 upto 60.00. If Fe content below 60.00%, the Buyer has the right to reject the cargo or can renegotiate the price, In case no conclusion than the Seller should bear all the losses. Clause 6(D) Moisture Penalty: In the event that the free moisture loss at 105 degrees centrigrade as finally determined in accordance with Clause 4 exceeds the guaranteed 8% maximum, Seller shall pay to Buyer half actual ocean freight for the corresponding quantity of the excess moisture over 8% to 9%, at prorate bases and full actual ocean freight for the corresponding quantity of the excess moisture above 9% at prorate basis, which is to be deducted from invoice.” Clause 7 PAYMENT: Buyer shall pay 2.25m USD in advance before loading and for balance amount shall open the Letter of Credit within 10 working days from the date of signing of the contract from a 1st Class International bank in Hong Kong an irrevocable Letter of Credit payable at 100% (after deduction of advance) Sight in favour of the Seller through an advising bank in India at whose counter the L/C should be negotiate for an amount in U.S. Dollar.” Clause 22: Amendment of the Contract: Any amendment or modification to this contract shall be made in writing and subject to confirmation by the contracting parties.”
22. The Contract terms were accepted and were acted upon, and ₹4 crores in all was deposited in favour of plaintiff which is also established by letter dated 11.06.2011 (Ex. PW 1/3) written by M/s Pisces Exim India Private Ltd. defendant no. 2 in favour of the plaintiff.
23. PW[1] had deposed that vide Addendum dated 11th June, 2011 Ex PW 1/4 received from defendant No.1, the amendments were proposed in the Clause 3(b), wherein the date was changed from 13th June 2022 to 20th June 2011; Clause 5 (Base Price) was changed to 157.50 PDMT on the basis of Fe content of 62%; Clause 6(A) (Price Adjustment/ FE Content), wherein it was proposed that if the Fe content is below 61% the base price will shall be USD 150.50 PDMT on Fe BSS 61% fraction pro-rata and penalty will be USD[2] for each 1% FE less than 61& upto 60%; According to Clause 7 (Payment) Buyer shall open an irrevocable Letter of Credit for 100% FOB value from a 1st Class International Bank in Hong Kong payable at 100% sight in favour of seller through an Advising Bank in India in whose counter the L/C should be negotiable for an amount in USD.
24. It is deposed by PW[1] that the proposed Addendum was never agreed to by the plaintiff and in terms of Clause 22 of the Contract there could be no change in the terms of the Contract except with the mutual consent of the parties. The proposed Addendum for changing the Clauses of the Contract is therefore, not binding and the Contract as originally signed was binding between the parties.
25. Clause 22 of the Agreement Ex.PW1/2 clearly envisaged that any amendment or modification to the Contract shall be made in writing and shall be subject to confirmation by the contracting parties. It has been rightly deposed by PW[1] that it was only a proposed Addendum which was sent by the defendant and it had no meaning since the plaintiff did not agree or concede to the proposed addendum reducing the price of the goods contracted to be sold. The Addendum on which the defendant had claimed reduced price of the agreed goods, was of no consequence and did not have any effect of reducing the price of the goods. Rather this Addendum which was sent by the defendant, confirms the Contract between the parties and also the original agreed price.
26. PW[1] Shri Sanjeev Tekriwal has further proved letter of cancellation of Contract dated 14th June, 2011 Ex.PW 1/5 sent to defendant No.1 stating therein that neither any advance payment of 2.25 million US Dollar had been deposited nor any Letter of Credit had been opened in terms of the Contract. Only a sum of Rs.[4] Crores was received as advance against the aforesaid Contract. It was informed that the goods were ready for delivery at Vishakhapatnam Port and since defendant No.1 had failed to comply with the terms of the Contract, the Contract was cancelled and the amount of Rs.[4] Crores so received on behalf of the defendant, was forfeited. However, an offer was given that in case the 100% payment of Contract value was made within five days, the plaintiff would still deliver the material in terms of their Contract. The plaintiff has thus, proved that though in part performance Rs.[4] Crores were paid for and on behalf of defendant No.1, but thereafter it failed to comply with the terms of the Contract and the Contract was rescinded vide letter dated 14th June, 2011.
27. The facts as proved by the plaintiff are corroborated by the Written Statement of Defendant No.2 and 3 (though they have been since deleted) wherein it was admitted that the defendant had approached the Court at Vishakhapatnam for interim relief under Section 9 of Arbitration & Conciliation Act. The Order of the learned Additional District Judge, Vishakhapatnam dated 12th July, 2011, copy of which has also been filed by the plaintiff, contains the complete conspectus of the factual matrix of the Contract between the parties. It is recorded therein about the Contract as narrated above was entered between the parties wherein the defendant had agreed to purchase 86000 MT of wet Iron Ore @ 162 US Dollars. It is also mentioned therein that because of the sudden slump in the price of Iron Ore, the defendant No.1 herein had offered to unilaterally reduce the rates to 157.[5] US Dollars, a fact which is also reflected in the Addendum email dated 11th June, 2011, but was rejected by the plaintiff herein.
28. The basic terms of Contract have therefore, been proved from the admissions of the defendants in their Petition under S.[9] Arbitration and Conciliation Act. It is established that the original contract was for sale of 86000 MT (+/- 5% buyer’s option) of wet Iron Ore @ 162 US Dollars PMT. It is also proved that after entering into the Agreement, the defendant No.1 failed to honour the Contract essentially on account of the sudden slump in the price of Iron Ore Fines. The plaintiff has proved that because of the breach of the terms of Contract, the same was rescinded. Quantum of Damages:
29. The next question which arises is the quantum of damages that are payable by the defendant. (a) Loss on account of Goods at reduced Price:
30. PW[1] Shri Sanjeev Tekriwal has deposed that on account of the goods lying at the Port and being exposed to the open, the moisture content of FE increased, thereby bringing down the value of the Iron Ore. To corroborate this, the plaintiff has proved the Certificate of Analysis dated 10th May, 2011 which gave the moisture content as 5.07%. Another Analysis was got done wherein Certificate of Analysis 30th May, 2011 gave the moisture content as 5.6%. In the third Certificate of Analysis dated 21st June, 2011 the content of moisture was noted to be 10.90%. The Certificates of Analysis are collectively Ex. PW1/6.
31. The plaintiff has deposed that because of the deteriorating condition of the goods and to prevent further loss and damage, it was left with no option but to sell its goods @ $151.75 PMT to M/s Shenglong Resources Company Ltd. The Letter of Credit No.TF1117402164 dated 24th June, 2011 of HDFC Bank, though not exhibited, clearly reflects this transaction.
32. The plaintiff has proved that on account of rescission of Contract by defendant, it was compelled to sell the Iron Ore, the moisture content of which had got enhanced from 5.01% to 10.09% at the reduced rate of $151.75 PMT which implies that the plaintiff had to sell the goods at a price differential of $10.25 PMT. The Contract was for sale of 86000 MT with (+/- 5% buyer’s option). The plaintiff thus mitigated the loss by selling it @
151.75
USD PMT but suffered a loss of $10.25 PMT which comes to $8,81,500 (86000 X 10.25 = 881500). The plaintiff has stated that the value of the Dollar at the relevant time was ₹45.5/-.
33. It is proved by the plaintiff that because of the increase in the moisture content, the goods could be sold at a lesser price of $151.75 PMT. The loss is thus calculated at ₹4,01,08,250/- (881500 X 45.[5] = 40108250). (b) Stacking Charges:
34. It is deposed by PW[1] Shri Sanjeev Tekriwal that as per the agreed terms of the Contract, it had stacked 90,300 MT Iron Ore, at Vishakhapatnam Port in the month of May, 2011 for the purpose of loading. On account of the failure of the defendant Company to lift the goods, the plaintiff suffered loss on account of holding charges. The average holding charges were ₹140 PMT. The Invoice No. SVKS/115/11-12 dated 23rd July, 2011 Ex.PW1/7 was issued by M/s SVK Shipping Services Pvt. Ltd. (Handling and Stock Management Agents) reflecting charges in the sum of ₹1,26,42,000/- as handling charges from May to June, 2011 which were the total charges thus paid by the plaintiff Company, which it is entitled to recover.
(c) Loss on account of Moisture:
35. The plaintiff has separately calculated the loss on account of increase in the moisture content in the Iron Ore.
36. Clause 4 of the Contract provided for Specifications, as under: “4) SPECIFICATION (A) Chemical Composition Guaranteed (on dry basis) (percentage by weight) Fe 62.00 Basis/61.00 Min (Rejection below 60%) S102 4.00 Max. A1203 4.40 Max S 0.04 Max P 0.06 Max Moisture 8.00 Max (free moisture loss at 105 degrees Centigrade) B) Physical Specification (On Natural Basis) Above 10 mm 10% MAX 0 – 10 mm 90% MIN Below 0.15 mm 35% MAX”
37. According to these specifications, the maximum moisture content could have been 8%. There is no evidence led on behalf of the plaintiff that there was change in any chemical composition. It has also not led evidence to show that there was any additional loss on account of increase in moisture content aside from the price per metric ton being reduced by $10.25.
38. It cannot be over looked that it is on account of increase in the moisture content in the Iron Ore Fines that the price got reduced from $162 PMT to $151.75 PMT. The loss of price itself was on account of increase in the moisture content and no separate damages can be calculated on this account. The plaintiff has not been able to prove any loss on account of increase in moisture content and the same cannot be granted to the plaintiff. Interest
39. The plaintiff has also claimed interest on the amount that was outstanding and due to the plaintiff.
40. Considering that it is a commercial transaction entered into between the parties, it is held that the plaintiff is entitled to interest @ 7% per annum from the date of breach of Contract i.e. June, 2011 till the date of payment. Relief
41. The claim of the plaintiff is allowed as under:
(i) Loss on account of Damages: ₹4,01,08,250/-
(ii) Holding Charges: ₹1,26,42,000/-
(iii) Interest: @ 7% w.e.f. June, 2011
42. The suit of the plaintiff is thus decreed for a sum of ₹5,27,50,250/along with interest @ 7% per annum from the date of breach of the Contract i.e. June, 2011 till the date of payment. Parties to bear their own costs. Decree Sheet be prepared accordingly.
JUDGE DECEMBER 6, 2022