9911796707
TMI Blog2018 (7) TMI 1873X X X X Extracts X X X X X X X X Extracts X X X X ..... oods are to be released only upon presentation of the quality inspection certificate at the port of destination and that being the only source and mode of payment, the award-holder having failed to produce such quality inspection certificate, is not entitled to any amount. There is no obligation on the part of the award-debtor to discharge de hors the terms mentioned in the Letter of Credit. The award-holder has not even alleged that the award-debtor was under an obligation to produce the quality inspection certificate at the port of destination and has acted in breach thereof. In the absence of any such pleading and allegation and having regard to the payment terms in the Letter of Credit, the award-holder could not have maintained an action before the Tribunal. The Tribunal had no jurisdiction to refer to the GAFTA Rules in order to find out ways and means for the award-holder to obtain an award as such rules were never part of the contract. 4. These objections without reference to the authorities relied upon by Mr. Mitra are to be considered in juxtaposition to the claim made by the award holder before the Arbitral Tribunal. 5. The award-holder (hereinafter referred to as ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther specifications will be remain unchanged. 3. Payment Value @ US$ 440.00 per MT of the contracted cargo payable at 30 days after shipment date and balance amount @ US$ 10.00 per MT will be payable after receipt of quality inspection report of destination port. 4. Shipment By 31/12/2010 5. Documents Required Certificates under Sl. No. G, I, J & K issued by ISC are acceptable I/O existing." (emphasis added) 9. Under the amended contract dated 7th December, 2010, shipment was to be made by 31st December, 2010. The buyer, accordingly, amended the Letter of Credit on 9th December, 2010 by extending the period of shipment. The validity period of the Letter of Credit after first amendment was 15th January, 2011 and the latest date of shipment was mentioned as 31st December, 2010. 10. The effect of the above said amendment on payment condition was that the LMJ was to pay only 97.78% of the total invoice value on receipt of the shipping documents and the balance 2.22% of the total invoice value after receipt of the quality inspection report at the destination port. The Letter of Credit was also amended. The validity of the Letter of Credit was extended till January, 15, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addendum No. 1 dated 7th December, 2010 to the original contract and submits that under the said clause US $ 10% per MT. would be payable after receipt of quality inspection report of destination port. The modified Letter of Credit however contains a clause which requires a "certificate of quality inspection report at port of destination". This was a specific term in the amended LC although in the addendum clause there is no mention of any certificate. The parties have agreed that only upon production of a quality inspection certificate at the port of destination that the payment under the LC would be receivable. Mr. Mitra submits that once the parties have agreed that the only mode of payment is through Letter of Credit and is the obligation of the Sleepwell to produce such certificate at the port of destination in order to get payment under the LC, and Sleepwell having failed to do so cannot independently sue for the price of the goods sold to buyer. The buyers stand discharge from its obligation to make any payment as the seller had failed to submit the required documents. Mr. Mitra has referred to a decision of the Queen's Bench Division (Commercial Court) in 'Shamsher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had referred to an email dated 15th February, 2011 in which the claimant had categorically stated that the sales were based on weight/quality final at loading port as per surveyor certificate appointed by LMJ which were given to LMJ along with other documents and accepted by LMJ and on that basis has paid 97.78%. The correspondence mentioned in paragraph 9 to 15 of the claimant's submissions would show that Sleepwell has all throughout insisted for payment and such payment was denied by LMJ only on a specious plea that the goods supplied were of inferior quality. LMJ had even gone to the extent of referring to test reports allowed to be in its possession without disclosing them although asked for by Sleepwell. LMJ had never disputed that under the amended LC, LMJ is not required and/or expected to submit the quality inspection report at the destination port. In fact, at the port of loading, the quantity and quality of the goods were certified by the surveyor of LMJ which fact has not been disputed. It is evident from record that that by the time the dispute arose with regard to the payment of 2.22%, the validity of the LC had expired. The Letter of Credit was opened by LMJ and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its Amendment dated 7 December 2010, the Tribunal notes that the Amendment itself defines in "1. Quantity" that the weight in accordance with the Contract would be still "final at loading" while the amended Payment Term now states that "a balance amount of US$ 10.00 per MT" would only "be payable after receipt of a quality inspection report of destination port." 6.15 WE THEREFORE FIND THAT the Contract had been validly altered to the provision that Sellers could only have triggered payment of the balance of USD 10.00 per metric ton after presentation of a quality inspection report from the port of destination i.e. Bangladesh. 6.16 As no such quality inspection report had been presented by Buyers, despite various reminders by Sellers, until the present day, the GAFTA Sampling Rules No. 124, cl. 6:1 provided that a "certificate of analysis" should be sent to the other party "within 14 consecutive days" after dispatch of the samples to the analyst. 6.17 Buyers by means of their debit note of 12 February 2011 firstly purported that the quality of the cargo was inferior. 6.18 The Tribunal THEREFORE FINDS THAT Buyers, with respect to cl. 6:1 of the GAFTA Sampling Rules No. 124 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes date of issue as 11th November, 2010 and clauses 41D and 42C state that credit is available by any bank by negotiation and payment by draft would be at 30 days after shipment. LC was amended on several occasions. The first amendment is dated 12th November, 2010 which also states that drafts would be at 30 days sight. The second amendment dated 9th December, 2010 is more important and new date of expiry is mentioned as 15th January, 2011. Clause 46B of the LC states the documents required. For payment No. 1 it is mentioned that 97% will be made only after 30 days' shipment against submission of all documents. These 30 days would expire on 27th January, 2011. Payment No. 2 states that payment of 3% would be made at site against submission of certificate of quality inspection at port of destination provided payment No. 1 is accepted. The third amendment of the LC is dated 10th December, 2010 and 97% was changed to 97.78% and 3% was changed to 2.22% and "all other terms and conditions remain unchanged". Mr. Tilak Bose, learned senior counsel, relying on such chain of events has accordingly submitted that, there is no way the payment No. 2 could have been triggered before 27th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration and Conciliation Act. The submission of Mr. Mitra that reference to GAFTA contract No. 48 - GAFTA Sampling Rules No. 124 Clause 6:1 is contrary to contract is not accepted. Neither the contract nor the amended payment term under the Letter of Credit stipulates as to who would be required to produce the quality inspection certificate. As mentioned earlier, the goods both with regard to the quality and quantity were duly certified by an appointed agent of LMJ at the port of loading. 23. The dispute with regard to inferior quality was raised by LMJ after 15th January, 2011, that is say, after the expiry of the validity of Letter of Credit. There is nothing on record to show that prior to expiry of the validity of Letter of Credit any such dispute was raised. The debit note was issued only on 12th February, 2011. The claimant had disclosed documents before the Tribunal to show that the claimant had never received any inferior quality claim from LMJ prior to February 15, 2011. In absence of any dispute being raised prior to the expiry to the validity of Letter of Credit it is no more open for LMJ to insist that the agreed mode of payment is through Letter of Credit and LMJ is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the award is also in violation of principles of natural justice. The buyer was never informed that such new case would be made out by the Arbitral Tribunal in their award. The new cases made out by the Arbitral Tribunal were beyond the scope of submission to arbitration and, accordingly, not enforceable under Section 48(1)(c) of the Act. The Tribunal has no jurisdiction to make out a new case or to consider the dispute not raised by the claimant in their claim submission. In this regard reliance is placed on Mathuradas Goverdhandass v. Khusiram Benarshilal reported at 53 CWN 873 and Jasraj Inder Singh v. Hemraj Multanchand reported at AIR 1977 SC 1011. The third objection is that the award is perverse. The Arbitral Tribunal's uncalled for reliance on GAFTA Sampling Rules 124 clause 6.1 is wholly perverse. The contract as amended and recorded in the award in Paragraphs 6, 15, 6.16 and 6.17 does not provide that the buyer was to obtain quality inspection report of the destination port and to hand over the same to the seller nor does the amendment provide that if the quality inspection report of the destination port is not provided by the buyer, the seller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple of reasonableness and would shock judicial conscience. The learned Senior Counsel has referred to the contract terms set out at page 5 of the claim submission which reads:- "all other terms/conditions not in contradiction with the above as per GAFTA Contract No. 48." The amendment of the contract is also admitted by the claimant in the claim submission and also by the Tribunal in Paragraph 6.17 of the award. There is no explanation, reason or justification given by the Arbitral Tribunal on the basis of which it holds that the buyers were obliged to provide the certificate of analysis. Clause 6.1 of the GAFTA Sampling Rules No. 124 nowhere provides that the buyers were obliged to provide the certificate of analysis. There is a complete non-judicial approach. The findings of the Arbitral Tribunal in paragraphs 6.18, 6.20 and 6.22 is contradictory to its own finding given in paragraphs 6.15, 6.16 and 6.17 of the award which would demonstrate that the Tribunal lacked judicial approach in the matter. The Arbitral Tribunal has failed to apply its mind and has not at all considered that since GAFTA Contract No. 48 is in contradiction with the amended contract and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Moreover, in view of the order passed by the Division Bench in refusing to pass any order of injunction restraining commencement and/or continuation of the arbitration proceedings it cannot be said that the award was passed in violation of any order passed by a superior Court. The relevant observations of the Division Bench in this regard are:- "The intention of the parties to have their disputes resolved by arbitration cannot be doubted. The parties have entered into such contract with their eyes wide open. They have decided that all disputes are to be resolved, adjudicated and decided by arbitral tribunal to be constituted under the GAFTA Rules. The principal ground for avoiding the said Tribunal is of forum inconvenience. The additional grounds appeared to be that there is no agreement between the plaintiff and the defendant to refer any dispute arising out of the said contract to arbitration either as per GAFTA Rules, 125 in London or otherwise. In deciding the said issue, the reference is required to be made to the contract containing such arbitration clause. There cannot be any dispute that the obligation to make payment or avoidance of any such payment is arising out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by stating that grounds of public policy on which an award may be set aside include: (1) that its effect is to enforce an illegal contract; (2) that the arbitrator, for instance manifested obvious bias too late for an application for his removal to be effective before he made his award. None of the above conditions apply in the instant case. The petitioner is not alleging fraud or bias by the arbitrator. Even under the domestic award, a possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, and then he is the last word on facts. The construction of the terms of the contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person would do, of course, the arbitrator canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be final at the port of loading, at least as far as the balance of USD 10.00 per metric ton is concerned. On interpretation and construction of the Contract itself and its Amendment dated 7th December, 2010, the Tribunal notes that the Amendment itself defines in "1. Quantity" that the weight in accordance with the Contract would be still "final at loading" while the amended Payment Term now states that "a balance amount of US$ 10.00 per MT" would only "be payable after receipt of a quality inspection report of destination port". 6.17. We therefore find that the Contract had been validly altered to the provision that Sellers could only have triggered payment of the balance of USD 10.00 per metric ton after presentation of a quality inspection report from the port of destination, i.e. Bangladesh. 6.18 As no such quality inspection report had been presented by Buyers, despite various reminders from Sellers, until the present day, the GAFTA Sampling Rules No. 124, cl. 6:1 provide that a "certificate of analysis" should be sent to the other party "within 14 consecutive days" after dispatch of the samples to the analyst. 6.19. Buyers in their message of 5 February, 2011 firstly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h opens the credit fails for any reason to make payment in accordance with the credit terms against documents duly presented. I know of no case where a seller who has failed to obtain payment under a credit because of failure on his part to comply with its terms has succeeded in recovering against a buyer personally. If this were an available road to recovery, many of the familiar arguments about discrepancies in documents would be unnecessary. Bearing in mind the likelihood that buyers will (as here) sell on to sub-buyers, such a result would, I think, throw the course of international trade into some confusion. It must in my view follow that the sellers here, not having complied with the credit terms, cannot recover against the buyers personally". The aforesaid decision is distinguishable on facts inasmuch as the award is passed on interpretation of the contract clause read with the GAFTA sample rules. The Tribunal held that the buyer has failed to furnish proof of inferior quality of food grains. In Ficom S.A. (supra) the Court was concerned with a contract of sale in which the terms of the letter of credit and in particular of the documents to be presented under the letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails for any reason to make payment in accordance with the credit terms against documents duly presented. I know of no case where a seller who has failed to obtain payment under a credit because of failure on his part to comply with its terms has succeeded in recovering against a buyer personally. 3-30 In the Shamsher Jute, Bingham, J. was dealing with a case where the failure to present documents required by the terms of the credit is the fault of the seller. In Saffron v. Societe Miniere Cafrika the seller shipped goods under an F.O.B contract in circumstances which enabled the buyer to obtain control of the goods upon shipment prior to issue of the bill of lading. The buyer then obtained a bill of lading made out in terms that prevented the seller from complying with the terms of the credit and as a result the seller could not obtain payment from the bank. The seller sued for the price. The High Court of Australia upheld the claim, saying: The question could only arise in special circumstances, e.g. if the bank responsible for the credit were to become insolvent, or as here, where notwithstanding that the documents tendered were not in conformity with the letter of credit, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from the buyer as is payable under the contract of sale. If, when the goods are delivered, they do not conform to the contract quality, the buyer may claim damages for breach of warranty, or if the facts justify it may reject the goods and claim damages for non-delivery or return of the price as for a consideration that has wholly failed. 3-45. If it transpires that the documents tendered to the bank are fraudulent (by, for example, the bill of lading being ante-dated) and the bank pays the seller, the buyer may be able to recover damages from the seller for breach of contract or, if the facts justify it in deceit." (emphasis supplied) Jack on Documentary Credits, 4th Edition has also discussed this aspect of the matter. The learned Author observed:- "3.60 Whether the credit is conditional or absolute payment, if the seller presents documents to the bank that do not comply with the credit and are rejected the seller cannot sue the buyer directly unless the buyer has actually obtained the goods. This is so whether or not the goods conform to the contract. This is the clear outcome of both Soproma (1) and Shamsher Jute (2). 1 [1966] 1 Lloyd's Rep 367: see para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for an assignment of the seller's rights under the credit, see Mannesman Handel AG v Kaunlaran Shipping Corpn." The aforesaid decision was cited primarily that when the contract is silent as to who would produce the quality certificate, terms of the letter of credit can be looked into to fill up the gap, if any, in order to ascertain whose obligation it would be to produce such certificate. It is an admitted fact that when the third consignment was received by that time the validity of the L/C had expired and the parties had agreed to replace the L/C by bill of exchange. There was no stipulation concerning the said consignment that the payment is subject to production of the Quality Inspection Report by the seller at the port of destination. Even for 2.22% there was no valid and subsisting L/C. The buyer nonetheless obtained the goods. The findings of the Tribunal would show that the buyers in spite of notice did not furnish any proof of inferior quality of the goods. The Tribunal has interpreted the contract clause with regard to furnishing a quality certificate at the port of destination to be the responsibility of the buyer and, in absence of any document to show that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 13 which clearly shows that the seller would receive payment 30 days after shipment date against production of such documents. Although Mr. Mitra urged that this was not a case made out in the statement of claim but this has now become necessary in view of nature of objections raised in this proceeding with regard to the enforcement of the foreign award. This issue was never raised before the Tribunal, not even in any of the correspondences between the parties. 28. Mr. Mitra has relied upon the decision of Delhi High Court in Toepfer International Asia Pvt. Ltd. v. Priyanka Overseas Pvt. Ltd. reported at 2007(4) Arbitration Law Report 499 for the proposition that the fundamental policy of Indian Law is that the law of the land must be obeyed and the law of the land is that an arbitral tribunal is bound by the terms of contract of which its creation is not in dispute. The said principle would apply provided the conditions are fulfilled. The interpretation of a contract is a matter for the arbitrator to determine, even if, it gives rise to determination of a question of law. Arbitration is consensual and some amount of laxity should be given which scrutinizing an award. A sense of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on reports showing inferior quality, had never disclosed or furnished such reports to the seller or even the tribunal. The buyer, as could be seen from the email of 1st June, 2011, had written off its quality claim against the seller. LMJ could have submitted its defence in a communication to the tribunal, disclosing such report. 30. It is a settled law that interpretation of the contract and appreciation of the evidence by the arbitral tribunal cannot be reopened by arguing that the foreign award is contrary to the contract and, therefore, its enforcement would offend public policy of India. A party who has consciously and deliberately avoided a proceeding knowing fully well that the result of the proceeding may be adverse to its interest cannot complain of violation of natural justice. The petitioner was under no disability and nothing has prevented the petitioner to file its statement of defence along with documents. The petitioner is in effect seeking a review of the foreign award on merit which is not permitted in this proceeding. Lord Mansfiled in Holman v. Johnson stated that the principle of public policy is ex dolo malo non oritur action. No Court of law will lend its aid ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
