Full Judgment Text
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 27.07.2018
+ FAO(OS) (COMM) 74/2017
ZEMAN TECHNOGROUP ..... Appellant
Through: Mr. Saket Sikri, Mr. Junaid Nahvi,
Mr. Ajay Pal Singh, Mr. Neeraj Choudhary,
Mr. Niraj Singh, Advs.
versus
UNION OF INDIA ..... Respondent
Through: Mr. Anurag Ahluwalia, CGSC
with Mr. Abhigyan, Ms. Tejaswitha, Advs.,
Ms. Nidhi Mohan& Mr. Vikram Verma,
Deputy Director.
+ FAO(OS) (COMM) 30/2018
UNION OF INDIA ..... Appellant
Through: Mr. Anurag Ahluwalia, CGSC
with Mr. Abhigyan, Ms. Tejaswitha, Advs.,
Ms. Nidhi Mohan& Mr. Vikram Verma,
Deputy Director.
versus
M/S ZEMAN TECHNO GROUP ..... Respondent
Through: Mr. Saket Sikri, Mr. Junaid Nahvi,
Mr. Ajay Pal Singh, Mr. Neeraj Choudhary,
Mr. Niraj Singh, Advs.
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 1
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
S. RAVINDRA BHAT, J.(ORAL)
1. These two common appeals deal with the same subject
matter i.e. the legality and validity of an International arbitration
award dated 27.08.2015.
2. The parties i.e. M/s Zeman Technogroup (hereinafter
referred to as „Zeman‟), a Czech incorporated company, entered
into a contract for the supply of 29,740 pairs of Anti-Mine boots
(BAMI). The agreement was entered into by the parties on
23.03.2009. The payment terms were amended on 30.09.2009.
The working of the contract led to disputes between the parties.
These were referred to International Arbitration. In the majority
award rendered on behalf of the Tribunal by two of its
members, it was held that the Union of India (“Union”
hereafter) was in breach of the conditions. The Tribunal
rejected the Union‟s blast reports – which were its pretext for
denying the payments due to Zeman. It was directed that the
Tribunal held that the claimant/Zeman was entitled for refund of
the amount of the bank guarantee to the tune of US $377,698
which was encashed on 16.04.2012 along with 12% interest.
3. As to the issue of damages, the Tribunal concluded as
follows:
“As far as the Cranfield University report is
concerned, the Tribunal is not taking the findings
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 2
of the report or expenditure incurred for it, into
account as the blast test conducted was not as per
the ATP laid down in the contract between the
Claimant and the Respondent.
Therefore the Tribunal is of the opinion that the
Respondent followed the ATP laid down in the
contract to a large extent; however the Respondent
digressed from the procedure laid down in the ATP
only in so far as the use of fine dry sand is
concerned.
In light of the above findings the Tribunal holds
that the Blast tests carried out by the Respondent
were not as per the Accepted Test Procedure laid
down in the Contract. The Respondent ought to
have followed the blast test procedure laid down in
the contract as it is and any digression from the
procedure i.e. using alluvial soil instead of dry
sand leads to declaring the Report of the tests void.
As the Blast tests reports are held to be invalid, the
Respondents plea of encashing the Bank
Guarantees on the premise of failure of the Blast
tests and hence resulting in breach of Contract by
the Claimant's side does not hold the field.
Therefore the claimant is entitled for refund of the
amount of the performance bank guarantee of USS
377,698.00 encashed by the Respondent on
16.04.2012 alongwith 12% interest levied on the
said amount from the date of encashment until the
date of the award.
In so far as the Claimant's Claim in respect of the
Boots produced by them is concerned, the Tribunal
is of the view that the consignment of 29,740 pairs
of BAMI was produced by the Claimant and the
Respondent inspected the same. However the
Claimant did not bring on record any documentary
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 3
evidence to prove that the Claimant suffered actual
loss due to boots not being sold to the Respondent.
The Claimant has made no averments nor led any
evidence to prove that the boots produced by them
were incapable of being sold to a third party. They
also did not place any material on record to show
that the boots get wasted lying in the warehouse. It
was however submitted only during arguments that
the shelf life of the boots is only 3 years. Thus this
plea of the Claimant unsupported by pleading and
evidence cannot be accepted.
Therefore in light of the above findings it will not
be just and equitable to award the total sale price
of the 29,740 pairs of BAMI to the Claimant as the
Claimant has not been able to set out its case in so
far as the actual loss suffered by the Claimant is
concerned.
Having considered the following circumstances in
the present case:
A. That the Respondent followed the ATP to a
large extent and only one deviation was made
by the Respondent of not using fine dry sand
while conducting the blast test;
B. That the Claimant made no averments in
respect of the actual loss suffered by it due to
the boots not being bought by the
Respondent;
C. That the Bank Guarantee furnished by the
Claimant wrongly encashed by the
Respondent is being returned to the Claimant
along with 12 % interest;
We are of the view that the Claimant is entitled to
25% of the total amount of 7,494.480.00 US$ as
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 4
Claimed by the Claimant in its Statement of
Claim.”
4. The Union invoking Section 34 of the Arbitration and
Conciliation Act, 1996, approached this Court; a learned Single
Judge, by the impugned order rejected the petition so far as it
related to the contention vis-a-vis wrongful award on the
question of refund with respect to the underlining amounts of
the performance guarantee but upheld the challenge so far as it
related to the grant of Zeman damages to the tune of 25% of the
cost. The Single Judge reasoned as follows:
“25. Learned counsel for the Respondent argued
that the shelf life of these boots were only three
years and obviously the Respondent suffered a loss
because the boots were made specifically for the
Petitioner and could not be used for any other
purpose. Even this plea has been negatived by the
majority. It observed that "it was further submitted
only during arguments that the shelf life of the
boots is only three years. Thus this plea of the
Claimant unsupported by pleading and evidence
cannot be accepted”.
26. The fact remains that the above findings have
not been challenged by the Petitioner in this Court.
The unchallenged conclusion of the majority is that
the Respondent's claim was "unsupported by
pleadings and evidence". The question of
permitting the Respondent to refer to the evidence,
if any, on record to persuade this Court to overturn
the above findings of the AT, particularly when it
has not chosen to challenge those findings, simply
does not arise.
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 5
27. In light of the above findings of the majority,
and its conclusion that "the Claimant has not been
able to set out its case insofar as the actual loss
suffered by the Claimant is concerned" it is
inexplicable how it proceeded to allow 25% of the
total amount of $7,494,480 as claimed by the
Respondent. This part of the Award suffers from a
patent illegality and is opposed to the fundamental
policy of Indian law inasmuch as it is based on no
evidence and is not supported by reasons. It is
contrary to the statutory requirement under Section
31(3) of the Act which mandates that the
conclusions of the AT have to be supported by
reasons. In the present case, the reasons given by
the majority of the AT far from supporting the
above conclusion, contradict it. Consequently, the
Court has no hesitation in setting aside the
impugned majority Award to the extent that it
awards to the Respondent 25% of the total amount
of $7,494,480.”
5. It is urged by Mr. Saket Sikri, learned counsel appearing
for Zeman that the finding with respect to the loss of profits
rendered by the award is justified. Even the consistent trend of
judgments of this Court which have followed the Supreme
Court ruling in A.T. Brij Paul Singh & Ors. v. State of Gujarat
(1984) 4 SCC 59 and MSK Projects India (JV) Ltd. v . State of
Rajasthan (2011) 10 SCC 573.
6. The Union‟s appeal which was argued by Mr. Anurag
Ahluwalia, is that the Single Judge, did not consider the salient
fact that the Tribunal overlooked that there was no evidence to
support the finding with respect to the quality of the boots and
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 6
that there was absence of any expert evidence in this aspect as
well.
7. As far as Zeman‟s appeal is concerned, we notice that the
Tribunal in all relevant parts of its findings, held that no proof
of injury or the extent of it, to indicate the yardstick which
could form the basis of compensation had been led by the
claimant. The Single Judge in our opinion quite correctly
concluded that the figure of 20% was merely an assumption. It
goes without saying that one who claims any relief is under a
primary obligation to support it with appropriate evidence. The
reliance on A.T. Brij Paul Singh (supra) or any other decision,
in our opinion, is not apt because those were rendered in the
context of breach of construction contracts. The Court rulings
largely were based upon the settled principles of construction of
such contracts and the nature of the profit, indicated by a long
line of authorities and even by experts. In this case, however,
there is no such evidence. Those principles cannot be imported
uncritically. Moreover, it was within the claimant‟s claim to
support its submission with regard to the extent of injury
suffered by placing on record its consistent pattern of profits in
similar contracts or the industry practice as it were. Its failure
to do so, therefore, cannot result in an arbitrary figure
transmitting into a margin of profit. We also notice that the
recent judgment in Kinnari Mullick and Anr. v. Ghanshyam
Dass Damani (2018) 11 SCC 328, set outs extremely limited
circumstances whereby the Court can require re-adjudication
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 7
and the conditions applicable. Those conditions too do not
apply in this case.
8. As far as the Union‟s appeal in concerned, this Court is of
the opinion that, the evidence or the lack of it is a matter of
appreciation by the Tribunal, this fact was also noticed by the
Single Judge. Having regard to the limited nature of the
appellate review available under Section 37, the grievance
urged cannot be looked into. Besides, the Union has not
proffered acceptable explanation for its delay of 250 days in
filing of the appeal.
9. For these reasons, we find no merit in both the appeals,
and they are accordingly dismissed.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
JULY 27, 2018/ akv
FAO(OS) (COMM) 74/2017 & FAO(OS) (COMM) 30/2018 Page 8