MAA HARSIDDHI INFRA DEVELOPERS PRIVATE LIMITED v. MAHAVIR TRANSMISSION LIMITED

9.7. The parties were aware that the goods were to be supplied for an important turnkey project where the Petitioner was a Contractor and therefore, the Respondent ought to have adhered to the delivery schedule as agreed between the parties.

9.8. There is no provision which entitled the Respondent to pause its obligations under the Agreement and unilaterally repudiate the same on account of alleged delay in payments.

9.9. The Agreement dated 27th November, 2019 does not consider delay in payment as a breach but only stipulates specific consequences for delay, such as encashment of post-dated cheques (‘PDC’s), or charging interest on the due amount, or claiming it from TSECL or recovering it through legal process. Cancellation right is available with the Petitioner in case of abnormal delay in supply; there is no such corresponding right with the Respondent.

9.10. The findings of the Arbitral Tribunal in paragraph 40 of the impugned award, are against the oral understanding between the parties. The conditions stipulated in Annexure 1 for furnishing corporate guarantee were not fulfilled by the Respondent and therefore the Petitioner was entitled to withhold payments. This aspect has been overlooked by the Arbitral Tribunal.

10. The Court has carefully considered the afore-noted grounds of challenge. They do not demonstrate any perversity or patent illegally in the impugned award, or fall under any of the provisions under Section 34 of the Act. The crux of the dispute, as noted in paragraph 40 of the impugned award, is the question – “Was the Claimant justified in not dispatching 540 KM Cable length? And further supplies?” This has been answered while dealing with Issue Nos. 2 and 4, as follows: “36. The aforesaid Issues relate to the second tranche of 25% of · the goods to be supplied under the 4 purchase orders. Ex.C- 33 (Colly) (pages 703-706) evince that on 23.12.2019 the Claimant intimated the respondent that 810 KM, 765 KM, 788 KM and 890 KM conductors were ready and could be inspected after giving 3 days prior intimation to enable the Claimant to arrange the inspection. Evidence establishes that on 09.01.2020 vide E.x.C-52, TSECL granted approval to inspect only 765 KM cables for Package 2, further intimating that the inspection would be conducted on 15.01.2020. Thus, in the absence of any inspection notice being served upon the Claimant 3 days prior to the date of inspection, the Claimant was fully justified in offering inspection of only 765 KM cables when the inspecting team reached its factory premises on 15.01.2020. Learned counsel for the respondent conceded that there is no evidence of a 3 days prior intimation being served upon the Claimant to inspect the other 3 lots which were also offered for inspection. Admittedly the 765 KM cables were inspected over 2 days from 15.01.2020 to 16.01.2020 and the joint inspection report dated 16.01.2020 (Ex.C-35 (Colly) at page 711) was drawn up. In the absence of any prior intimation for inspection of other 3 lots offered for inspection, the Claimant was justified in not offering any further inspection, but as argued, since testing equipment was available and the inspecting team was at the factory of the Claimant it offered inspection of further 810 KM cable length for which the joint inspection report dated 17.01.2020 (E.x.C-35 (Colly) at page 765) was drawn up. (…) xx … xx … xx

40. This takes the Tribunal to the core issue, decision whereof would be determinative of the claims and the counter claims. Was the Claimant justified in not dispatching 540 KM cable length? And further supplies? The Claimant justifies non dispatching on the ground that payments due for the first tranche of the cables delivered had not been made. A sub-issue arises: Whether the field covered by the agreement dated 27.11.2019 Ex.C-21 superseded the same field covered by the purchase orders Ex.C-4 to Ex.C-7?

41. As observed in paragraph 34 above, when the Purchase Orders Ex.C-4 to Ex.C-7 were sent under the cover of email dated 11.09.2019 Ex.C-8, Annexure-I to the Purchase· Orders in which the terms and conditions of the supply were listed were not sent and that said Annexure was sent by the respondent to the Claimant vide email dated 21.11. 2019 Ex.C-17. By said date the Claimant had manufactured 2 5% of the table length of the Dog Conductors and vide Ex.C-9 to Ex.C-12 had raised inspection calls upon the respondent on 26.09.2019, 07.10.2019,07.10.2019 and 02.11.2019.

TSECL vide Ex.C- 13 had intimated the date of inspection to be 20.11.2019. It is the case of the Claimant that when it received Annexure-I on 21.11.2019, it noted that the terms and conditions of the supply were not in conformity with what was orally agreed to and thus the parties executed the agreement dated 27.11.2019 Ex.C-21.

42. If the terms and conditions of the supply had to be, as set out in Annexure-1, where was the need to execute the agreementEx.C-21? Learned counsel for the respondent had no answer to furnish. The reason is obvious, what was orally agreed did not conform to the printed conditions of the purchase order and thus the agreement being executed.

43. Whether the fields covered by the agreement are in supersession of the fields covered by the purchase orders? The answer is yes. It is settled law that a subsequent document which is inter-party supersedes a previous interparty document insofar it is at variance with the former.

44. The agreement had no recitals. But clause 1 shows that it is actually a recital and not a term of the agreement inasmuch as it records that the respondent has placed the purchase orders referred to in the clause for supply of Dog Conductors. Clause 2 records that the material manufactured would be got inspected from the representatives of TSECL or its consultant and that the supply shall be as per comfort and mutual agreement between the parties. Clause 3 enjoins upon the respondent to make payment for the material supplied within 60 days from the date of Goods Receipt Note (GRN) and in case of delay interest would be payable@ 12% per annum. Clause 10 stipulates that the Claimant shall bear the defect liability period of 2 years from the date of supply of material on 18 months from the date of operational acceptance by TSECL whichever is later.

45. There is no reference in the agreement to any Indemnity Bond or Corporate Guarantee. The requirement of clause 10, of the Claimant to bear the defect liability period mentioned therein has to be given a meaning. It could well be an Indemnity Bond. It could well be a Corporate Guarantee. It could well be a Guarantee Certificate. Clause 11 breaks the deadlock. It refers to recovery of defective material through legal process against Guarantee Certificate. The Terms and Conditions in Annexure-1, vide S. No.4 contain the Payment Terms and vide S. No.5 contain the ‘Documents To Be Submitted With The Dispatch Of The Material For Payment Credit’. The Payment Terms read: 'The payment shall be made on receipt of billing document at Head Office. The billing documents shall be as mentioned below in clause No.5. Any incomplete/ incorrect documents hall not be considered for payment processing. The complete payment will be recovered from your outstanding or process legally against corporate guarantee & Indemnity Bond of supplied value of any defect found during the erection; commissioning; guarantee period or during the defect liability as per TSECL said contract terms & condition. Your firm/ company will be solely responsible for any type of defect upto defect liability period. And the financial losses will be recovered from you; your firm/ company'. The documents required to be submitted with the dispatch of the material for payment credit are 10 in number. They are: ‘a) Delivery Challan; b) Tax Invoice; c) Packing List; d) LR Copy; e) Octroi receipt (if applicable); f) Installation Manual (if applicable); g) Inspection Report; h) Guarantee certificate; i) Drawing (One time) and j) Test Certificates.’ A perusal of clauses 4 and 5 reveal a hiatus, in that, pertaining to the documents to be submitted, the reference is to a Guarantee Certificate and pertaining to payment terms, the second sentence of clause 4 contemplates the billing documents to be the ones as per clause 5. To this extent there is a complete harmony. But the fourth sentence of clause 4 strikes a discordant note, inasmuch as it refers to payment to be recovered through a legal process against Corporate Guarantee and Indemnity Bond. Thus, it could be argued that to give a complete effect to the intention of Annexure-I a Corporate Guarantee and Indemnity Bond was a must. But that would be only for the purposes of affecting a recovery upon the goods found to be defective during the defect liability period and would not be a payment term inasmuch as the first 3 sentences only contemplate billing documents as per clause 5 to be submitted along with dispatch of the materials, and as noted herein before the document required is a Guarantee Certificate. The case of the Claimant is that the agreement Ex.C-21 was executed on 27.11.2019 when vide email dated 21.11.2019, Ex.C-17, Annexure-1 was sent to it and the Claimant noted that the terms and conditions contained thereunder were not in sync with what was orally agreed upon. In paragraph 42 above the Tribunal has already held that this was the reason for the agreement to be executed i.e. reflect the true bargain between the parties. As noted, the agreement does not enjoin upon the Claimant to execute any Corporate Guarantee or Indemnity Bond. The only requirement is to issue a Guarantee Certificate as per clause 11 of the agreement. The Tribunal concurs with the argument of the Claimant that it issued Indemnity Bond and Corporate Guarantees Ex.C-30 to Ex.C-32 (Colly) at pages 688-701 because the respondent was refusing to make the payment. Economic hardship forced the Claimant to do so. Estopple by conduct thus does not apply. The case pleaded by the Claimant is that the agreement superseded the purchase orders insofar as the field by the 2 was the same, which argument has been accepted by the Tribunal. As per clause 3(i) of the agreement the payment was to be released within 60 days from the date of the Goods Receipt Note (GRN), a document to be furnished by the respondent, which it did not do and cannot take advantage of its wrong. The pleadings of the Claimant in paragraph 5.12 of the Statement of Claim are responded to in paragraph 10 of the Statement of Defence in which it is pleaded: ‘The contents of these paragraph are admitted. However, it is specifically stated that the invoice will become payable only after issuance of “Goods receipt note” or GRN and after submission of invoice along with relevant documents in compliance of clause 4 and 5 of the Purchase Order.’ The Tribunal notes at this stage that clause 11 of the agreement dated 21.11.2019, Ex.C-21, is a copy paste, probably from the agreement between the utility i.e. TSECL and the respondent. The clause reads: That if during the liability period any defect found in the Design, Engineering, Material Workmanship and Operation ofthe Material supplied, the first party shall promptly rectify the defect and at its cost, repair, replace or otherwise make good as the utility shall determine at its discretion, within fifteen days after getting written or telephonic complaint by the Second Party. If the first party fails to rectify the fault in the specified period; then penalty @ 0.5% per week maximum of 5% of the cost of defective material will be deducted from the pending bills of the First Party or from the defect liability guarantee recovery through legal processagainst Guarantee Certificate. Now, the Design, Engineering, Workmanship and Operation of the electricity transmission line did not fall within the scope of the supply by the Claimant. These activities fell within the scope of work of the respondent. the Claimant only supplied the Dog Conductors and thus could be bound to the warranty offered by it and no more.

46. Besides, it is the receipt of the goods which is material and not the issuance of GRN which is a mere formality. It was not disputed by the respondent that after the first tranche was inspected on 21-22.11.2019 and the joint inspection report Ex.C-14 was issued on 22.11.2019, TSECL issued dispatch instructions on 02.12.2019 vide Ex.C-16. The goods were to be delivered within 21 days of the dispatch instructions and it is not the· case of the respondent that they were not delivered within said period. There is no evidence before the Tribunal of the exact date(s) when the goods were delivered, but in the absence of any plea by the respondent that the goods were delivered late, the Tribunal proceeds on the basis that the goods were delivered within 21 days of the dispatch instruction. The goods were dispatched on 03.12.2019 and the invoices were raised after GST was deposited after 03.12.2019 as per Ex.C-29. The Tribunal would be failing to highlight the defence concerning the commencement of the 60 days period within which payment had to be made is that the period commences when the GRN was issued. The Tribunal has already held that the respondent cannot take advantage of its wrong. During arguments, counsel for the Claimant had argued that the 60 days period would commence from 03.12.2019 and would come to an end on 02.02.2020, the same was argued by learned counsel for the respondent. The defence projected was that for a short delay in making payments by the respondent, the Claimant would not be justified in not supplying further goods. The Tribunal notes that for the first tranche of goods the dispatch instructions were issued on 02.12.2019 and the goods were dispatched on 03.12.2019. The payments were released in parts commencing from 08.03.2020. The Tribunal accordingly takes 03.12.2019 to be the date to reckon 60 days when payment in sum of INR 7,63,21,500.00 had to be paid for the 1126.861 KM cable length, for this was the common stand of both parties during arguments. The respondent had issued 2 post -dated cheques totalling INR 7,12,38,214.00. At the asking of the respondent the Claimant did not present the cheques for payment and the respondent paid:

(i) INR 2,86,80,980.00 on 08.03.2020; (ii) INR 1,97,55,053.00 on

17.03.2020 and (iii) INR 1,40,11,200.00 on 24.03.2020. The dispatch instructions for the 540 KM and 510 KM cable length of the manufactured conductors pertaining to the second tranche was issued by the respondent vide email dated 20.02.2020. There was obviously a default by said date in not making payment. Not a penny had been paid till that date. The payment due was INR. 7,12,38,214.00. The Claimant was accordingly justified in not affecting any further delivery. That it made partial delivery as a gesture of goodwill cannot impinge upon its rights to claim full payment for the first tranche of goods supplied before affecting further delivery. Thus, the Tribunal holds· that the Claimant was justified in supplying only 511.921 KM cable length. A word needs to be spoken on the issues being decided, concerning the language of the 2 issues. The pleadings were a little fuzzy and hence the issues settled referred to the manufactured goods having length 1575 KM stated to be inspected on 15-17th January, 2020. But, as noted above the evidence which has emerged is that the Claimant manufactured 1575 KM cable length and offered the same for inspection vide inspection notices dated 23.12.2019 but received only 1 inspection notice dated 09.01.2020, but 2lots got inspected between 15-17th January, 2020. Evidence establishes that the respondent was obliged to give 3 days prior notice for inspecting the offered goods and that it did not give any inspection notice for the 4 quantities of goods which Claimant had manufactured and had offered for inspection. Issues Nos.(ii) and (iv) are decided in favour of the Claimant and against the respondent.” [Emphasis supplied]

11. The Arbitral Tribunal has held that since there was a default on the part of the Petitioner in making the payment, Respondent/Claimant was justified in not effecting any further delivery. This finding has been impugned on the basis of: (a) the terms contained in Annexure 1 and (b) the provisions of the Sale of Goods Act, 1930.

12. With respect to Annexure 1, Petitioner’s mainstay is the condition of furnishing corporate guarantee and indemnity bond. On this aspect, Issue NO. 3 was framed which has been dealt with by the Arbitral Tribunal in paragraph 47 onwards of the impugned award. The finding and reasoning thereon is given in paragraph 42 as extracted above. The Arbitrator agreed with the Respondent’s contention that the Agreement dated 27th November, 2019 was executed since the email dated 21st November, 2019, enclosing Annexure-1, was not in sync with what was orally agreed upon, and did reflect the true bargain between the parties. The final agreement indeed does not enjoin upon the Respondent to execute any Corporate Guarantee or Indemnity Bond. The Arbitrator was thus justified in excluding Annexure I out of its purview and holding the conditions contained in Annexure 1 to be inconsequential. This finding of the Arbitrator has been rendered on a holistic reading of the conditions stipulated in Annexure 1 and the Agreement dated 27th November, 2019, which the Court finds to be reasonable. Moreover, interpretation of the terms of the contract is well within the scope of the powers of the Arbitrator. The limited scope of interference under Section 34 does not warrant these reasonable findings of the Arbitrator to be re-appreciated on merits.

13. Next, reliance has been placed upon Section 11 and Section 38(2) of the Sale of Goods Act, 1930. Section 11 of the Sale of Goods Act, 1930 provides as under: “11. Stipulations as to time. — Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other Stipulation as to time is of the essence of the contract or not depends on the terms of the contract.”

14. The opening words of the provision “unless a different intention appears from the terms of the contract”, indicate that stipulations as to the time of payment are not deemed to be essence of the contract, unless a different intention is borne out from the terms of the contract. The contract terms have been analysed and the Arbitrator has noted in paragraph 46 (emphasised above) that the Petitioner was in breach of the payment obligations for the quantity supplied. This term was vital for the reciprocal performance obligations of the contract. Since this condition was breached by the Petitioner, the Respondent, being the innocent party, was entitled to repudiate the contract. Petitioner is stressing on the fact that it had made substantial part payments, forgetting that as on the date of issuing dispatch instructions, it was in huge default and payment of Rs. 7,12,38,214.00 was overdue. While, a small or solitary delay or non-payment may not be repudiatory breach if viewed independently, however, if there are multiple breaches of the payment obligations, it would amount to a repudiatory conduct. Here, the Petitioner had clearly received the goods and was not making payment. The Respondent had the option to either ignore the wrongful failure of Petitioners’ performance obligations and keep the contract alive for the benefit of the Petitioner as well its own or treat the Petitioner’s failure as wrongful repudiation and the put the contract to an end. The Respondent therefore was entitled to withhold supplies, as rightly held by the Arbitrator.

15. Further, the language of sub-Section 2 of Section 38(2) of the Sale of Goods Act, 1930 also clearly specifies that the question relating to instalment deliveries is a question to be determined in each case depending on the terms of the contract and the circumstances of the case. Whether there was a repudiation of the whole Agreement, or whether it was s severable breach giving rise only to compensation – has to be determined on case to case basis. This critical aspect is to be taken into consideration while adjudicating a dispute relating to a short supply or non-supply of the balance quantity. The fact that there has been default on the part of the Petitioner is not in dispute. The Respondent had tendered the conductors, as held by the Arbitrator, but was then entitled to treat the contract as discharged in view of Petitioner’s conduct. The Petitioner has cited adverse economic conditions on account of COVID-19 pandemic as the reason for delay in payment which cannot be a justifiable ground for non-payment to compel the Respondent to keep the contract alive.

16. With that, the next question to be determined is whether the Petitioner was entitled to any liquidated damages and risk purchase damages, which forms the basis of their counter-claim. The Arbitrator has held that Petitioner appropriated the goods supplied and raised a false plea that the goods were found to be defective, without any evidence. The liquidated damages levied upon the Petitioner by TSECL have not been proved. Pertinently, since there was no default by the Respondent, levy of any penalty for late delivery does not arise. Moreover, on the issue of liquidated damages, law is well settled. Merely because a contract term provides for liquidated damages that does not entitle the aggrieved party to liquidated damages, as a matter of right. Its entitlement to recover damages has to be in terms of Sections 73 and 74 of the Indian Contract Act, 1872 only to the extent of actual losses proved to have been suffered by it. On this aspect, it is essential to note the findings of the Arbitral Tribunal which are as follows: “53. The reserved comment on the risk purchase. The respondent claimed to have purchased the balance quantities from M/s Anurag Traders and paid an additional amount of INR 6,27,63,225.00. Except for proving Ex.RW-10 (Colly) being purchase orders placed on M/ s Anurag Traders, there is no evidence of any purchase being made. The cross-examination of RW -1 on this aspect makes an interesting reading. The answers to Question No.52 to 61 are interesting and tell a story. The questions and their answers read as follows: Q52 Is M/ s. Anurag Traders a registered vendor with TSECL? Ans. No. (VoL) Neither was the Claimant. The practice is that if we place an order on a vendor, the vendor gets itself registered with TSECL on the strength of our recommendation. Alternatively, the vendor can in tum procure the material from a registered vendor and make supply. Q53 Has M/ s. Anurag Traders got itself registered as a vendor with TSECL. or any other State Electricity Board or State Government? Ans. I do not know. Q54 Is M/ s. Anurag Traders a manufacturer or a supplier only? Ans. M/ s. Anurag Traders does not have any manufacturing units. It is a trader. Q55 What do you have to say on the Purchase Orders Ex. RW-10 (Colly) with reference to non-signature of the supplier in token of acceptance thereof? Ans. It is correct that there is no signature of the supplier in token of acceptance thereof. However, Special Instruction-1 of the Purchase Order may be referred to. Q56 Has M/ s. Anurag Traders supplied any material to you in furtherance of these Purchase Order? Ans. Not yet (VoL) We are not pushing M/ s. Anurag Traders because we are hopeful of persuading the Claimant to settle the dispute and effect delivery. Q57 Is M/ s. Anurag Traders registered with the Tax Authorities pertaining to GST? Ans. I do not know. Q58 Has any Escrow Account has been opened since it is the requirement of your agreement with M/ s. Anurag Traders? Ans. No. Q59 Has M/ s. Anurag Traders served any inspection notice upon you and/ or TSECL? Ans. No. Q60 Why is there a time lag between the Claimant informing you that it would not be supplying the balance quantity of conductors and placement of Purchase Order upon M/ s. Anurag Traders? Ans. As replied above we were hopeful of a settlement with the Claimant. Q61 When the Claimant had refused to effects supply why did you further engaged with them for supply of material for other projects? Ans. We always desired a settlement. The Claimant reciprocated. Its letter dated 21.[1] 0.2020 part of Ex. RW-11 (Colly) at page 43 of documents filed along with my affidavit referred to.”

17. It is therefore manifest that Claimant could not prove the levy on liquidated damages. No documentary evidence or any other material was produced before the Arbitral Tribunal to sustain the claim for liquidated damages. If on account of short supply or non-supply on the part of the Respondent, the Petitioner had indeed suffered such loss, it was imperative for them to produce cogent evidence to prove the same.

18. Accordingly, the Court does not find any ground to interfere on this aspect as well.

19. In light of the foregoing, the Court finds no ground to interfere in the impugned award.

20. Dismissed.