TMI Blog1999 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... d the tenders submitted by Transelectro to be the most satisfactory. The contract with Transelectro described the supplier as the principal supplier/contractor. It contemplated the performance of part of the services required to be performed under the contract by two other companies. Nevertheless, the responsibility for the work done by them was also to be taken by the principal contractor. The scope of the work, as set out in the contract reads as under : " 1.0 Scope of work : 1.1 In connection with the manufacture, supply, erection, and commissioning of three (3) steam generating units and auxiliaries for the proposed 3 x 210 MV installation a; Neyveli, Tamil Nadu, India, Neyveli Lignite Corporation Limited, Neyveli (hereinafter r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts payable for design, engineering abroad, for supply of equipment manufactured abroad, for setting up and essential spares and for special maintenance bills. Clause 7.8 sets out the term of payment for design and engineering. The dates by which the drawing for different components were to be supplied were also set out in the annexure to the contract. Clause 30.1 provided that the contract price was deemed to include royalties, fees and patent, covering materials, articles, apparatus, devices, equipment or processes used in the work. It also provided that the purchaser was to be kept indemnified by the contractor against all claims, suits, damages, losses, actions, costs, charges, etc., or for infringement of copyright or other right if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of this clause, 'royalty' means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head 'Capital gains'), for--- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property : (iii) the-use of any patent, invention, model, design, secret formula or process or trade mark or similar property ; (iv) the imparting of any information conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing of information concerning the design of a machine which is tailor-made to meet the requirement of a buyer does not by itself amount to transfer of any right of exclusive user, so as to render the payment made therefor being regarded as " royalty". In a contract for the design, manufacture, supply, erection and commissioning of machinery which does not involve licence of the patent concerning the machinery, or copyright of its design, mere supply of drawings before the manufacture is commenced to ensure that the buyer's requirements are fully taken care of and the supply of diagram and other details to enable the buyer to operate the machines, and also to assure the buyer, that the machines will perform to the specification require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... road and supplied to the purchaser. The information concerning the working of the machine is only incidental to the supply as the machinery was tailor made for the buyers. Unless the buyer knows the way in which the machinery has been put together, the machinery cannot be maintained in the best possible way and repaired when occasion arises. No licence of any patent is involved. Sub-clause (vi) and also (vii) of section 9(1) would have no application as the design was only preliminary to the manufacture and integrally connected therewith. The other three sub-clauses also in the circumstances of the case are not attracted. The Tribunal was therefore right in holding that the amount paid as part of the total contract price towards design an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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