SAHAKARMAHARSHI BHAUSAHEB THORAT SAHAKARI SAKHAR KARKHANA LTD Vs. THYSSEN KRUPP INDUSTRIES INDIA PVT.LTD

JUDGEMENT

(1.) FACTUAL ASPECTS : The issues involved in this appeal are limited, but the litigation has a chequered history. An agreement was executed on 17/11/1992 by and between the appellant and the respondent. Under the said agreement, the respondent agreed to design, procure, manufacture and supply to the appellant machinery and equipment for a continuous fermentation process based on the Encillium process, patented by the National Chemical Laboratory, Pune (for short, 'the NCL'). The agreement contained an arbitration clause. The total consideration was of Rs.93,20,000.00. One of the clauses in the agreement was that the fermentation plant that was to be supplied by the respondent must have a guaranteed minimum yield of 280 litres of alcohol per metric tonne of Molasses. According to the appellant's case, when the agreement was entered into, the existing yield in their factory was 245 litres per metric tonne of Molasses. Under the agreement, the plant and machinery were to be supplied within a period of five and half months from the effective date of the agreement, i.e., by 15/5/1993, for a total consideration of Rs.93.20 lakhs.

(2.) According to the appellant, there was a delay of about 24 weeks in the delivery of the machinery. The appellant's case was that four trial runs were conducted on the machinery supplied by the respondent. The yield was much less than the guaranteed yield of 280 litres per metric tonne of Molasses. The maximum yield in trial runs was 237.68 litres per metric tonne of Molasses. Therefore, on 19/10/1994, the appellant issued a legal notice to the respondent claiming a sum of Rs.237.83 lakhs as damages. As expected, the respondent disputed the said claim. That is how the appellant invoked the arbitration clause by appointing its nominee arbitrator.

(3.) According to the appellant's case, a memorandum of understanding dtd. 24/7/1995 (for short, 'the MOU') was executed by and between the parties without prejudice to their rights and contentions. It provided for conducting one more trial run for 15 days after necessary modifications were made in the machine as suggested by the NCL. The modifications were to be made by the respondent at its own cost. By the MOU, the quantum of liquidated damages under clause 15 of the agreement was increased to 20% of the contract value, i.e. Rs.18.64 lakhs, which would be payable if the machine failed to give guaranteed performance. According to the appellant's case, the fifth trial run conducted in August 1995 generated a yield of 224.54 litres per metric tonne of Molasses.