RENUSAGAR POWER COMPANY LIMITED Vs. GENERAL ELECTRIC COMPANY

JUDGEMENT

(1.) THE Judgment of the court was delivered by

(2.) THESE two appeals raise the following two questions for our determination :

(3.) BY a contract- in writing dated 24/08/1964 (bearing Ref. IGE-9584) G.E.C. agreed to sell to Renusagar equipment for a thermal electric generating plant to be erected at Renukoot on the terms and conditions set out therein. The work to be performed under the contract included the supply of equipment, spare parts and services in accordance with the 'Proposed Specifications' dated 12/11/1963 and contained in G.E.C.'s letter dated 14/10/1963 together with the attached Minutes of the Meeting of 10/10/1963. The total purchase price, called the 'Contract Base Price' for all the work was $ 13,195,000.00 payable by Renusagar in lawful currency of the U.S.A. in the manner stipulated in the contract. It appears that the parties intended that delivery of the equipment and spare parts etc. would be completed within 15 months of the Contract Effective Date (which was December 31, 1964), i.e. up to 30/03/1966 and that the erection of the plant would be completed within sixteenth to thirtieth month (i.e. from 1/04/196 6/06/1967) and that the plant would be fully operational by the end of thirtieth month from the Contract Effective Date. The parties therefore, agreed that substantial payment of the purchase price by Renusagar should commence when the plant became operational, i.e. by 30/06/1967 ; it was also agreed that no interest would be payable by Renusagar during the delivery period, that interest shall be paid during the erection period (i.e. sixteenth to thirtieth month) and thereafter till payment but the interest during the erection period would be capitalised and added on to the principal. Accordingly, Article III of the contract stipulated that initially 10% of the total Contract Base Price (the amount coming to U.S. $1,319,500) should be paid either in cash or by means of a Letter of Credit within 30 days of the Contract Effective Date and that the balance of 90% of the purchase price plus interest at 61/2% per annum from sixteenth to thirtieth month <PG>688</PG> aggregating to U.S. $ 12,776,058.75 ($ 11,875.500 for principal plus $900.558.75 being the capitalised interest at the aforesaid rate for the aforesaid period) should be paid in accordance with the schedule of payments set out therein. The schedule for the payment of the said balance of 90% of the purchase price provided for payment to be made in sixteen six-monthly instalments of U.S. $ 798,503 .68 each, the first of such instalments being payable on 30/06/1967, the second on 31/12/1967, the third on 30/06/1968, the fourth on 31/12/1968 and so on with the last instalment falling due on 31/12/1974. The obligation to make such payment was to be evidenced by 4 series (A-B-C-D) of 16 unconditional negotiable promissory notes to be executed by Renusagar. It was further agreed that in case G.E.C. received an exemption from the government of India from payment of income-tax on interest receivable by it from Renusagar then the interest for that portion of the period shall be computed at 6% instead of 61/2% per annum and that the concerned promissory notes would be replaced or substituted by fresh promissory notes for amounts reflecting the adjustment in payment of interest necessitated by the grant of tax exemption. The contract further provided under Article XIV-B that should G.E.C.'s application for exemption be denied Renusagar may withhold the Indian income-tax applicable to any payments of interest but shall furnish G.E.C. with tax receipts on all withheld amounts paid to the government of India. Such provision was obviously made with a view to enable G.E.C. to obtain corresponding credit for the sum in their U.S. tax assessment. The contract also required Renusagar to furnish guarantee of the United Commercial Bank for payment of the full amount of promissory notes: the form of the promissory notes and the deed of guarantee were annexed to the contract. Under Article XIX-A it was provided that the rights and obligations of the parties would be governed in all respects by the laws of the State of New York, U.S.A. The contract contained an Arbitration Clause in Article XVII the relevant portion whereof runs thus :