Dismissed

Sri Pavani Impex v. Karnataka Soaps and

Karnataka HC27 Jan 2021MFA/4993/2019

Case brief

AI extract

What is this about?

The First Appellate Court dismissed an appeal filed by a vendor challenging a judgment that set aside an arbitral award. The court held that since the vendor nominated a third party to supply goods and the third party received payment without objection, the vendor could not claim damages for short closure or delay.

What did the court decide?

The miscellaneous first appeal filed under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 is dismissed; the learned First Appellate Court judgment is upheld.

Sri Pavani Impex Vs Karnataka Soaps and — Arbitration | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 27^TH DAY OF JANUARY, 2021

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PRESENT

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THE HON’BLE MRS. JUSTICE B.V. NAGARATHNA

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AND

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THE HON’BLE MRS.JUSTICE M.G.UMA

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MISCELLANEOUS FIRST APPEAL NO.4993 OF 2019 (AA)

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BETWEEN:

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SRI.PAVANI IMPEX NO.6, 2^ND CROSS STREET TTK ROAD, CHENNAI-600 018. REPRESENTED BY ITS KARTHA SRI.P.VENKATA RAO SON OF RAMAIAH AGED ABOUT 69 YEARS.

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... APPELLANT

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(BY SRI:K.S.MAHADEVAN, ADVOCATE FOR SRI:V.RAGHUNATH, ADVOCATE (PH))

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AND:

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KARNATAKA SOAPS AND DETERGENTS LIMITED POST BOX NO.5531 SANDAL CITY

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BENGALURU-PUNE HIGHWAY RAJAJINAGAR

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BENGALURU-560 055.

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SHRI.S.B.CHANAL SOLE ARBITRATOR ARBITRATION CENTRE KHANIZ BHAVAN

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RACE COURSE ROAD BENGALURU-560 001.

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.. RESPONDENTS

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(BY SMT:SUNITHA SRINIVAS, ADVOCATE FOR SRI:M.R.C.RAVI, ADVOCATE FOR R1(PH) R2 – NOTICE DISPENSED WITH V/O/DTD 18/12/2019)

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THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER SECTION 37(1)(C) OF THE ARBITRATION AND CONCILIATION ACT, 1996 AGAINST THE JUDGMENT DATED 07.03.2019 PASSED IN A.S.NO.20 OF 2016 ON THE FILE OF THE VI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CITY (CCH-11), ALLOWING THE SUIT FILED UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT.

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THIS MISCELLANEOUS FIRST APPEAL COMING ON FOR ORDERS THIS DAY, M.G.UMA, J., DELIVERED THE FOLLOWING:

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J U D G M E N T

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The legality and correctness of the judgment dated 07/03/2019 passed in A.S.No.20 of 2016 by the learned VI Additional City Civil and Sessions Judge, Bengaluru City, (hereinafter referred to as “the Trial Court” for the sake of brevity), is called in question by the appellant.

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Brief facts of the case are that, respondent No.1 - Karnataka Soaps and Detergents Limited (KSDL) is the Government of Karnataka undertaking incorporated under the Companies Act, 1956 engaged in manufacturing

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soaps, detergents, fatty acids, sandal wood oil, agarbathis and other allied products. It had called for tender for supply of Palm Fatty Acid Distilate (PFAD) and the appellant herein was the successful bidder. Several purchase orders were issued in favour of the appellant and there was short closure of one of the purchase order which was originally for supply of 500 MTs, which was short closed for 250 MTs. The appellant communicated its inability to supply PFAD as required by respondent No.1 and nominated M/s Ruchi Soya Industries Limited (M/s RSIL) to supply the materials. The said nomination was accepted by respondent No.1 and accordingly, M/s RSIL supplied the required materials and accepted the payment.

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The appellant herein claimed Rs.67,69,514/vide Ex.P12 towards interest for delayed payment and contract settlement amount for short closing one of the orders, failing which, suggested to appoint an Arbitrator to resolve the dispute. Respondent No.1 turned down the demand for payment of interest towards delayed payment

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by issuing the reply vide Ex.P13. Therefore, an Arbitrator was appointed. The Sole Arbitrator after recording the evidence of both parties passed the award dated 30/10/2015 allowing the claim of the appellant and directing respondent No.1 to pay Rs.31,57,514/- towards interest on delayed payment and also to recover Rs.36,12,000/- towards the loss sustained due to short closure of 250 MTs plus 5% MTs with future interest at 15% per annum from the date of short closure together with cost of the proceedings as provided under the Arbitration Act and the Rules framed there under. The award was passed entitling the appellant to recover a total sum of Rs.67,69,514/-.

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Being aggrieved by the said award passed by the Sole Arbitrator, respondent No.1 filed the suit in A.S.No.20 of 2016 before the Trial Court. The Trial Court considered the contentions of both the parties and passed the impugned judgment allowing the appeal and setting aside the award passed by the Sole Arbitrator. Aggrieved

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by the judgment of the Trial Court, the appellant is before this Court seeking to set aside the same and to restore the award passed by the Sole Arbitrator.

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We have heard Sri.K.S.Mahadevan, learned counsel for the appellant and Smt.Sunitha Srinivas, learned counsel for the respondents. The Trial Court records has been received and we have perused the same.

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Learned counsel for the appellant submitted

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that even though the supply of the material was by M/s RSIL as per the agreement, it is the appellant who is the vendor and is entitled for the benefit of the terms and conditions of the contract entered into between the parties. The contention of appellant’s counsel was that, when there was short closure and delay in payment of the invoice amount, the appellant is entitled for damages and therefore, the Arbitrator rightly passed the award taking into consideration the agreement between the parties.

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Per contra, learned counsel for respondent No.1 resisting the claim contended that the appellant had never supplied any material as per contract. On the other hand, he himself suggested M/s RSIL to supply the materials which was accepted by respondent No.1. Accordingly, the name of the supplier in the agreement was agreed to be changed from ‘Sri.Pavani Impex’ to ‘M/s RSIL’. After supply of materials, M/s RSIL raised invoice and granted 30 days time for payment of their invoice. Accordingly, the payment was made to M/s RSIL under the invoice which has no grievance about the same. When the appellant has not delivered the goods, on the other hand, nominated M/s RSIL to do so, it cannot have any objection or grievance in the matter. As per the request of the appellant, the payment was directly made to M/s RSIL. Therefore, the appellant cannot now contend that it is entitled for damages on any count. Therefore, he prayed for dismissal of the appeal.

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The undisputed facts of the case disclose that

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the appellant was the successful bidder for supply of PFAD

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to respondent No.1. One of the purchase order was placed by respondent No.1 for supply of 500 MTs of PFAD. But, within two days, there was short closure by demanding to supply 250 MTs instead of 500 MTs. However, the appellant communicated its inability to supply PFAD as required by respondent No.1 and it nominated M/s RSIL, Mangaluru - a third party to supply the same. Such nomination was accepted by respondent No.1 and the supplier’s name in the purchase order was amended to include M/S RSIL in place of the appellant, while other terms and conditions remain unchanged. Accordingly, M/s RSIL supplied the PFAD in favour of respondent No.1. Since the appellant instructed respondent No.1 to make payment directly to the supplier i.e., M/s RSIL, the payment was directly done against the invoice that was raised.

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The appellant issued legal notice as per Ex.P12

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to respondent No.1 calling upon it to make payment of Rs.67,69,514/- towards delayed payment in respect of

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various purchase orders i.e., purchase order Nos.1616 dated 06/05/2010, O & F–001 dated 17/08/2010, O & F– 004 dated 02/11/2012, O & F–005 dated 15/12/2012, O & F–006 dated 14/01/2011, O & F–007 dated 24/05/2011, O & F–013 dated 02/08/2011 and O & F–021 dated 11/11/2011 and also claiming contract settlement amount. It also informed that failing to settle the dues will result in referring the matter to the Arbitrator in terms of the agreement. Respondent No.1 issued the reply as per Ex.P13 informing that there was no provision for assignment of purchase order or sub contracting the order through the third party. However, since the appellant regretted its inability to supply the materials and requested its supply through the third party i.e., M/s RSIL, the same has been accepted. As a result, the purchase order was issued in the name of M/s RSIL who supplied the materials and raised invoices. The payment towards the materials supplied by M/s RSIL was directly made in favour of M/s RSIL within the credit period of thirty days for payment of their invoices. Therefore, it is stated that the

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appellant cannot claim any damages for the so called delayed payment. It is also stated that even though initially purchase order was issued on 24/04/2012 for supply of 500 MTs of PFAD, the same was short closed in view of the steep rise in the price and it was decided to make certain major changes in the production programme. Therefore, within two days of placing order, the short closure was intimated to the appellant and as such, no inconvenience could have been caused to the appellant.

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Admittedly, series of purchase orders were placed by respondent No.1 with the appellant for supply of various quantities of the materials. It is also admitted that the appellant nominated M/s RSIL as the supplier of the materials and it also requested respondent No.1 to make payment through RTGS directly in favour of the supplier. Ex.P21 is one such letter dated 18/08/2010 addressed by the appellant to respondent No.1 informing about the nomination of M/s RSIL for supply of PFAD against purchase order and also requested to make payment

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directly through RTGS in favour of supplier. As per Ex.P22, respondent No.1 accepted the nomination of M/s RSIL and it informed the appellant regarding amending the supplier’s name in the purchase order and also informed that all other terms and conditions remain unchanged. Admittedly, M/s RSIL has not raised any dispute either with regard to non payment or delayed payment for the materials supplied by it.

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Now, the grievance of the appellant is that since there was short closure for supply of PFAD after placing order and since there was delay in making payment to M/s RSIL, as per the terms of the agreement it is entitled to claim Rs.67,69,514/- as determined by the Sole Arbitrator.

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On perusal of the material on record, it is clear that the appellant had expressed its inability to supply PFAD as required by respondent No.1 and as per Exs.P20 and 21, nominated M/s RSIL as supplier of the materials. It also requested respondent No.1 to make payment

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through RTGS in favour of M/s RSIL and the same was accepted by respondent No.1 vide letter dated 23/08/2010 vide Ex.P22. Therefore, it is clear that the appellant has never supplied the goods as agreed, but on the other hand, nominated M/s RSIL to supply the goods.

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M/s RSIL is not a party before us. It has not raised any objection either regarding short closure or delayed payment. When such is the position, the appellant could not have demanded the damages on any count, particularly, when the contract was not acted upon by it. No materials are placed before us to demonstrate that the appellant in fact had sustained damages on any count. Under such circumstances, we are of the opinion that the appellant cannot claim damages for the so called short closure and delayed payment by respondent No.1.

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We have gone through the impugned judgment passed in A.S.No.20 of 2016 setting aside the award passed by the Sole Arbitrator and rejecting the claim of the appellant. The Court has considered the rival contentions

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of the parties with reference to the documents exhibited and arrived at a conclusion that the claim of the appellant is not sustainable. We do not find any irregularity or perversity in the said finding. Therefore, we are of the view that the appeal is liable to be dismissed as being devoid of merits.

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Accordingly, the appeal is dismissed.

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Parties to bear their respective costs.

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In view of dismissal of the appeal, IA.1 of 2019 filed

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for condonation of delay is disposed.

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Sd/JUDGE

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Sd/JUDGE

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*bgn/-

Sri Pavani Impex v. Karnataka Soaps and

Case brief

What is this about?

What did the court decide?

Sri Pavani Impex v. Karnataka Soaps and

Case brief

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