w w w . L a w y e r S e r v i c e s . i n

Triveni Engineering Industries Ltd v/s Dasuya Co-opertive Sugar Mills Ltd. & Others

Company & Directors' Information:- TRIVENI ENGINEERING AND INDUSTRIES LIMITED [Active] CIN = L15421UP1932PLC022174

Company & Directors' Information:- TRIVENI ENGINEERING AND INDUSTRIES LIMITED. [Amalgamated] CIN = U99999UP1997PLC022266

Company & Directors' Information:- TRIVENI ENGINEERING LIMITED [Active] CIN = U29119UP2006PLC032060

Company & Directors' Information:- TRIVENI ENGINEERING AND INDUSTRIES LIMITED [Not available for efiling] CIN = U99999DL1986PLC023275

Company & Directors' Information:- D P ENGINEERING INDUSTRIES LIMITED [Active] CIN = U27310DL2008PLC176856

Company & Directors' Information:- A K ENGINEERING INDUSTRIES (INDIA) PRIVATE LIMITED [Active] CIN = U25206DL1997PTC085204

Company & Directors' Information:- G L ENGINEERING INDUSTRIES PRIVATE LIMITED [Active] CIN = U28920MH1981PTC023662

Company & Directors' Information:- B V M ENGINEERING INDUSTRIES LIMITED [Active] CIN = U28111DL1972PLC005983

Company & Directors' Information:- R R R ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1993PTC055069

Company & Directors' Information:- A. V. ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1974PTC007360

Company & Directors' Information:- G D R ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U27109UP1971PTC003388

Company & Directors' Information:- TRIVENI SUGAR LIMITED [Active] CIN = U15122UP2014PLC063454

Company & Directors' Information:- L S ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1977PTC008484

Company & Directors' Information:- I B I ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U45202PB1974PTC003422

Company & Directors' Information:- A H B ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U35999WB1988PTC044786

Company & Directors' Information:- O K ENGINEERING INDUSTRIES PRIVATE LTD [Active] CIN = U74899DL1987PTC027660

Company & Directors' Information:- R P ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1973PTC006781

Company & Directors' Information:- S V ENGINEERING INDUSTRIES PVT LTD [Under Liquidation] CIN = U74210TG1981PTC003174

Company & Directors' Information:- TRIVENI INDUSTRIES LIMITED [Active] CIN = U15122UP2015PLC072202

    CS (OS) No.2708A of 1996 & and IAs 5243 of 1997, 5655 of 1997

    Decided On, 20 January 2006

    At, High Court of Delhi


    For the Petitioner: Sanjeev Anand, Abhishek, Advocates. For the Respondents: R2, Abhijit Puri, Advocate.

Judgment Text

A.K. Sikri, J.

On 27th April 1991 the Dasuya Co-operative Sugar Mills Ltd., Dasuya, District Hoshiarpur (hereinafter referred to as the 'respondent no.1') which expression includes its successors and assignees entered into a contract with M/s. Triveni Engineering Works Ltd., New Delhi (hereinafter referred to as the 'claimant'), to design, manufacture and procure, supply, transport to site and supervise the erection and commissioning of the respondent no.1's proposed sugar plant at Village Randhawa, Tehsil Dasuya, District Hoshiarpur, according to the specifications etc., given in annexures I to V forming part of the Agreement, against a total consideration of Rs.1690.00 lacs. The claimant undertook to commission and make ready for commercial production, the sugar plant by 30th September, 1992. The time was the essence of the contract.

2. As disputes arose between the parties, the claimant invoked the arbitration clause contained in the agreement. Sh. R.N. Aggarwal, Retired Chief Justice of this Court, was appointed as the Sole Arbitrator. The claimant impleaded, along with defendant no.1, the Punjab State Industrial Development Corporation Ltd. (in short the 'PSIDCL') and Northland Sugar Mills Ltd. as respondents no.2 and 3 in the arbitration proceedings. The Arbitrator entered upon the reference and ultimately made and published the award dated 13th September 1996 and intimated this fact to the parties vide letter dated 13th September 1996. The Sole Arbitrator also filed the award in this Court which was registered as CS (OS) No. 2708A/96. Notice of filing of this award was served upon the parties. Pursuant thereto, the claimant as well as PSIDCL and Northland Sugar Mills Ltd. filed their objections which are registered as IAs No.5243, 5655/97 respectively.

3. Para 85 of the award would indicate that following claims of the claimant are awarded:-

“Claim No.1 Rs.14,49,397.00

Claim No.3 Rs.10,29,658.00

Claim No.5 Rs. 3,50,000.00

Claim No.6 Rs. 20,000.00

Claim No.10”

The respondent shall furnish the requisite sales tax Form C/XXII to the claimant company in respect of bills No.50, 51, 52, 247, 248, 253, 271 and 272 in the value of Rs.34,79,194.60 paisa within two months of the making of the award failing which the respondents shall be liable to pay Rs.2,08,752.00 on account of sales tax.

4. In so far as claimant is concerned, its objections are with respect to claims no.2, 3, 4 and 5. Under these claims, the claimant had prayed for grant of interest on various items which has not been awarded by the learned Arbitrator. Therefore, the grievance of the claimant essentially is against that portion of the award whereby interest claimed by it is rejected.

5. In so far as PSIDCL is concerned, though number of objections are taken, learned counsel appearing on its behalf mainly pressed the objections contained in grounds no.6 and 8 thereof. Let me first deal with the objections of the PSIDCL. I may point out that arguments were heard in the case on November 14, 2005. However, since learned counsel for respondent no.2 wanted to file written submissions as well for which he was given one week's time, judgment was reserved to await the written submissions. Though substantial time has elapsed, written submissions are not filed and, therefore, I have no option but to proceed with the order after taking into consideration the oral submissions made.

6. First submission of the learned counsel was that PSIDCL was not a party to the contract and, therefore, there could not have been any arbitration with PSIDCL as a party and the reference was invalid. It is, however, not in dispute that the respondent no.1 had assigned the contract to PSIDCL who, in turn, had assigned it to the respondent no.3. The contract dated 27th April 1991 entered into between the claimant and the respondent no.1 describes the defendant no.1 as a purchaser and states that this expression includes its successors and assignees. Therefore, on assignment of the work by the defendant no.1 to PSIDCL, PSIDCL became a party to the contract and was governed by the arbitration agreement. On 24th June 1993 two separate agreements were signed as per which, first the respondent no.1 sugar mill was transferred to PSIDCL and thereafter by an even date agreement the sugar mill was transferred to the respondent no.3. This aspect is noted by the learned Arbitrator in the following words:-

“4. After the above extension certain events supervened which may be briefly noticed here. On 24th June, 1993 the Punjab State Federation of Co-operative Sugar Mills Ltd., and the Dasuya Co-operative Sugar Mills Ltd., assigned the contract firstly to respondent No.2, Punjab State Industrial Development Corporation Ltd., and on the same date the contract was further assigned to Northland Sugar Mills Ltd., Dasuya (Respondent No.3). Thereafter, the parties, that is, the claimant company, respondent No.2, respondent No.3 and the Punjab State Federation of Co-operative Sugar Mills Ltd., entered into a controversy, the Seller wanted the respondents No.2 and 3 to first settle the pending claims and thereafter to enter into a new Agreement. The Respondents 1 and 2 and the Punjab State Federation of Cooperative Sugar Mills Ltd., adopted the easier course to absolve themselves of any responsibility by stating that the contract had been assigned to respondent No.3, Northland Sugar Mills and the Seller should settle the dispute and decide on the further course of action with the Northland Sugar Mills. The controversy kept dragging on without any settlement. The time limit for enforcing the bank guarantee was coming to a close, and the respondents wrote to the bank invoking the bank guarantees. This led to the seller filing a suit in the Delhi High Court for restraining the respondents from invoking the bank guarantees and for reference of the disputes to arbitration, in terms of the arbitration clause. On 12th December 1994, Hon'ble Justice Ms. Usha Mehra referred the disputes to arbitration and appointed me as the Sole Arbitrator.”

It is significant to state that the PSIDCL did not even raise this issue before the Arbitrator and admitting the aforesaid legal position, participated in the arbitration proceedings and not only contested the claims of the claimant but preferred counter claim also. Therefore, it is too late in the day for the PSIDCL to raise such an objection.

7. In ground no.6 it is pleaded by the objector that the learned Arbitrator has given contradictory finding and, therefore, the award suffers from an error apparent on the face of record. It is sought to argue that after coming to the specific conclusion that the contract was not completed, the learned Arbitrator went on to grant payment against the disputes bills while accepting the objections raised with regard to the bills by making certain deductions from the amount claimed and, therefore, committed an error in granting an amount of Rs.14,59,394/- under claim no.1. I have gone through the award in respect of claim no.1. Claim no.1 was for an amount of Rs.2,71,15,584.83 against the supplies made by the claimant to the respondent. The respondent had contested this claim. Parties had also led their evidence. After taking note of the respective plead of both sides and analysing the pleadings, documents as well as evidence, the learned Arbitrator reached following conclusion in para 28 of the award:-


According to the claimant the value of the materials/equipments supplied vide its 101 bills totalled Rs.7,80,93,512.83 paisa. The respondent no.1 paid Rs.3,34,68,803.00. The advance amount paid is Rs.4,12,50,000.00. The total payments come to Rs.7,47,18,803.00. After adjusting the above amount, the balance payable comes to Rs.33,74,709.00. I may clarify here that I have not taken into account adjustments out of the advance amount and the retention amount @ 10% in the determination of the amount payable to the claimant company. The respondents are to be given credit of Rs.8,86,597.00 on account of the price of the goods diverted by the claimant company. The respondents shall further be entitled to a credit of Rs.10,28,718.00 on account of the excess billing in P-62. The total of the above amounts comes to Rs.19,15,315.00. Thus, after adjusting Rs.19,15,315.00 out of Rs.33,74,709.00, Rs.14,59,394.00 is payable by the respondents to the claimant company, under claim no.1.

I may notice here that in the statement of claim the claimant company had not given credit to the respondents regarding the balance amount outstanding in the advance account. The claimant company in their replication admitted that the respondents are to be given credit for the balance amount outstanding in the advance account.”

8. It is clear from the above that after threadbare analysis of the material supplied, bills raised and the amount received by the claimant, the learned Arbitrator came to the conclusion that a sum of Rs.14,59,394/- was still payable and awarded this amount. There is no merit in the plea of the objector that after coming to the conclusion that the contract was not completed the amount should not have been awarded. The amount was against supplies and the aforesaid balance was found payable which has rightly been awarded. Even on the aspect of non completion, the learned Arbitrator has concluded that since claimant was not getting payments against the supplies already made, it was justified in not making further supplies and, therefore, there is no contradiction in this finding and the award of the amount.

9. Next objection is with regard to claim no.10. It is the submission that once it was proved on record that it was the respondent no.3 alone which could have given C Forms against use of the material, the PSIDCL could not have been fastened with the liability under this claim.

10. Under claim no.10 the claimant had sought direction to the respondents to furnish the necessary sales-tax forms referred to in annexure V to the statement of claims and/or in the alternative they be ordered to pay Rs.38,17,767.80 on account of sales tax. This claim is discussed by the learned Arbitrator in paras 67 to 75. The learned Arbitrator has concluded that the amount of sales-tax payable in the event of non-furnishing of sales-tax forms shall be Rs.2,08,752.00. It would be appropriate to reproduce para 75 which sums up the discussion:-

“75. Shri Dhanoa, the Learned Advocate, for the Respondent No.3 on 14th July, 1996, stated that Respondent No.3 would be willing to furnish the relevant Sales Tax Forms in respect of the materials supplied under the disputed bills and which were utilized by Respondent No.3 in the erection of the Sugar Mill. I, therefore, hold that the Respondent No.3 is liable to furnish the Sales Tax Forms in respect of the bills detailed in Annexure V valued at Rs.34,79,194.60 paisa. The Respondent No.3 shall furnish the relevant Sales Tax Forms to the claimant company within two months of the making of the Award, failing which the Respondent No.3 shall be liable to pay the Sales Tax @ 6% on the above said value of the goods (Sales Tax @ 4% has already been included in the bills). The amount of Sales Tax payable, in the event of non-furnishing of Sales Tax Forms, shall be Rs.2,08,752.00.”

11. It is clear from the aforesaid that it is the respondent no.3 which undertook to supply the relevant Sales-Tax Forms and the learned Arbitrator has clearly stated that in the event the respondent no.3 fails to furnish the forms, it is the respondent no.3 which shall be liable for the claim and there is no direction to PSIDCL as far as this claim is concerned. Therefore, apprehension is clearly ill-founded. In view of the foregoing discussion, objections of PSIDCL are hereby rejected.

12. Coming to the objections filed by the claimant it may be noted that the claimant had under claim no.2 prayed for interest on non-payment of bills, which was the subject-matter of claim no.1. Likewise, claim no.3 was for reimbursement of insurance charges along with interest. Claim no.4 was for escalation in price along with interest and claim no.5 was for payment in respect of construction of foundation of RCC Chimney along with interest. While awarding claim no.1 to the extent mentioned above, interest is not allowed on this and claim no.2 is consequently rejected. Likewise, while making award in respect of claims no.3, 4 and 5 interest demanded thereon is rejected. Therefore, the claimant's objection is primarily against non-grant of interest. As far as claim no.2 is concerned, it is discussed in paras 29 to 42 of the award. One reason for rejection of interest is given in para 36 which is as follows:-

“A perusal of the relevant clauses of the agreement which are reproduced in the earlier part of the Award bring out, (one) the seller was to start dispatching material and equipment as per sequence set out in Proforma 'A' and, (two) the seller was to ensure that the machinery and equipment are delivered in sequence of priority for erection so that the items which are to be erected first as per erection schedule are sent first and in the same order of priority. In short, the supply of the plant and machinery and the erection work were to commence and progress side by side. A scrutiny of all the invoices totalling 101 raised by the seller would reveal that between 30th July, 1991 and March/April, 1992 except for two bills at serial no.1000 and 101 dated 14th November, 1992, the materials and equipments worth over 7.80 crores were sent without there being any corresponding erection progress at the site of the plant. My finding is that most of th

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e supplies were made in total disregard of Final Proforma 'A'. This finding by itself, would be enough to reject the claim for interest.” 13. Apart from that, the matter is looked into from equity angle. The learned Arbitrator also took into consideration that the engineering and technical services were paid in advance. Thus, the learned Arbitrator has given cogent reasons for rejecting the interest. The argument of the counsel for the claimant that advance given was to be adjusted over a period of time and, therefore, the reason to deny interest would be without any merit. The learned Arbitrator was the best judge to come to a particular conclusion. After analysing all relevant facts he formed the opinion that no interest is payable. Where two views are possible and the view of the arbitrator is plausible, this Court would not substitute its view for that of the learned Arbitrator. Same reasoning shall apply in respect of rejection of the interest on claims no.3, 4 and 5. Therefore, the objections of the claimant are also merit less and are hereby dismissed. It may be noted that the claimant is awarded interest @ 18% per annum from the date of the award till the awarded amount is paid or till the passing of the decree whichever is earlier. With award of such a high rate of interest, the claimant is duly compensated. However, the claimant shall be entitled to interest from the date of the decree till payment @ 9% per annum. Award as published by the learned Arbitrator is made rule of the court. Decree be drawn accordingly.