Projects & Equipments Corporation of India Ltd. v. Airtech Private Ltd.
2010-09-16
RAJIV SHAKDHER
body2010
DigiLaw.ai
Rajiv Shakdher, J. (Oral) 1. By this order I propose to dispose of the captioned petition which has been filed by Projects and Equipment Corporation of India Limited (hereinafter referred to in short as "PEC") under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to in short as "Arbitration Act") against an Award dated 06.11.1998 passed by the Arbitral Tribunal. 2. The petitioner was the respondent before the Arbitral Tribunal, and had opposed the claims filed by the respondent herein i.e., Airtech Pvt. Limited. For the sake of convenience, I would be referring to them as "PEC" & "Airtech". The objections to the award by PEC pertain to only one claim which involves the encashment of bank guarantee furnished by Airtech in the sum of Rs. 3,50,000/-. There is also an objection filed qua a consequential relief granted by Arbitral Tribunal with respect to payment of interest. The Arbitral Tribunal, apart from the claim qua return of money recovered by PEC and grant of consequential relief of interest thereon, rejected all other claims of Airtech. Similarly, the counter claims filed by PEC were also rejected by the Arbitral Tribunal. It is not disputed that neither Airtech filed cross objections against the Award nor has PEC filed objections vis--vis rejection of its claims. Therefore, I am only concerned with the claim allowed by Arbitral Tribunal qua encashment of the bank guarantee and the interest granted thereon. 3. For this purpose, it is necessary to briefly advert to the circumstances in the backdrop of which the disputes arose between the parties. 3.1 PEC in response to an invitation of tender for supply of Sewage Disposal Equipment (hereinafter referred to as the "Equipment") floated by Dhaka Water Supply and Sewage Authority (hereinafter referred to in short as "DWASA" ) submitted a bid. The bid submitted by PEC was accepted which, culminated in an agreement dated 13.12.1994 (hereinafter referred to as the "Contract"). 3.2 To be noted, a fact which is not disputed that prior to the submissions of the bid, communication had taken place between the PEC and Airtech. The reason for the same was that PEC not being a manufacturer of the Equipment which DWASA showed interest in buying, it had to seek the help and assistance of Airtech. Consequently, this fact was revealed to DWASA.
The reason for the same was that PEC not being a manufacturer of the Equipment which DWASA showed interest in buying, it had to seek the help and assistance of Airtech. Consequently, this fact was revealed to DWASA. The offer of PEC in point of fact was based on the offer of Airtech made to PEC. 3.3 At the moment, I am not required to deal with the terms of the agreement in detail. It would suffice for the purposes of this petition to only note that the offer which was finally accepted by DWASA was structured in a fashion whereby, Airtech undertook to supply and transport the goods till Benapole, a town situate at the border of India and Bangladesh; and from thereon it was the responsibility of PEC to ensure that equipment reached the final destination which was Pagla, Bangladesh. For this purpose, the services of a local Bangladeshi agent had to be solicited to ensure transportation of goods between Benapole and Pagla on a fee to be paid by PEC. 4. The terms of the offer which obtained between PEC and DWASA required PEC to supply the goods against a Letter of Credit (in short, "LC") to be opened by a local banker of DWASA i.e., one Janata Bank. It is not disputed that the LC was opened by Janata Bank. It is also not disputed that in terms of Clause 3.2 of the Special Conditions of the Contract (in short, "SCC"), the supply of the Equipment was to be made by PEC to DWASA within 180 days. For the sake of convenience, said clause 3.2 is extracted hereinbelow :- "Clause 3.2 - The supply of Sewage Disposal Equipment shall be completed in all respect within 180 (one hundred eighty) days from the date of signing the Contract or receipt of Letter of Credit whichever is later." 4.1 In terms of contract, PEC was required to furnish a performance bond in the form of a bank guarantee, drawn in favour of DWASA. As noticed hereinabove, since Airtech was inextricably involved in the execution of the contract being the manufacturer of the equipment, a back to back contract was executed as between PEC and Airtech. This contract was termed as "Associateship Agreement". The Associateship Agreement was executed on 23.01.1995.
As noticed hereinabove, since Airtech was inextricably involved in the execution of the contract being the manufacturer of the equipment, a back to back contract was executed as between PEC and Airtech. This contract was termed as "Associateship Agreement". The Associateship Agreement was executed on 23.01.1995. As per the terms of this Associateship Agreement, Airtech was required to furnish a bank guarantee in favour of PEC, which incidently is the bank guarantee in question. The said bank guarantee was drawn on State Bank of India, Nizamuddin Branch, New Delhi (in short, "SBI"). As a matter of fact, this bank guarantee was furnished by Airtech to PEC on 11.11.1995. 4.2 To complete the narration under the contract obtaining between PEC and DWASA, a LC was opened by DWASA in favour of PEC on 02.02.1995. The said LC was valid till 19.07.1995. As per clause 10 of the said LC dated 02.02.1995, it was clearly indicted that the letter of credit shall become operable only on receipt of a commitment letter from the Asian Development Bank (in short, "ADB"). In terms of the said clause 10 of the LC, a letter of commitment was issued by ADB on 07.04.1995. Intimation to that effect was sent to Airtech on 29.04.1995. It is not disputed by the PEC that on 27.04.1995, Airtech wrote to PEC for extension of the validity of the LC for the period of six months. It appears that based on this request, which was transmitted through PEC, Janata Bank advised vide communication dated 21.05.1995 that the LC had been extended till 10.08.1995. Thereafter, several letters were exchanged between Airtech and PEC whereby, Airtech sought extension of LC as per the terms of the contract. Importantly, by a letter dated 26.07.1995, Airtech, even while informing PEC that they were trying to "expedite" delivery with regard to the equipment, indicated to PEC that they should inform the buyer i.e., DWASA as regards their concern with regard to amendment of the LC. 4.3 It appears that on 29.09.1995, Janata Bank extended the LC till 15.10.1995, and thereafter till 04.11.1995. 4.4 It is important to note that in the interregnum, Airtech had written two crucial letters to PEC. First, being a communication dated 16.10.1995, and the second being: a communication dated 26.10.1995.
4.3 It appears that on 29.09.1995, Janata Bank extended the LC till 15.10.1995, and thereafter till 04.11.1995. 4.4 It is important to note that in the interregnum, Airtech had written two crucial letters to PEC. First, being a communication dated 16.10.1995, and the second being: a communication dated 26.10.1995. By its communication dated 16.10.1995, the Airtech informed PEC about the difficulties that it had been experiencing vis--vis the supplier in respect of the supply of "chassis" which was evidently required for mounting the Equipment. Airtech went on to say that the delay was not anticipated by them, and was totally beyond their control. Airtech ended the communication by calling upon PEC to request DWASA to extend the LC uptil 30.06.1996. This request was reiterated by Airtech in their communication dated 26.10.1995. As a matter of fact, Airtech referred to their earlier communication of 16.10.1995, in the communication of 26.10.1995. The request was identical, except to the extent that, Airtech found no good reason why the extension of the LC could not be carried out till 30.06.1996; as according to them, this was their "first such request". 4.5 In the background of this, PEC communicated to Airtech vide Comunication dated 20.10.1995 that the delivery period for shipment stood extended upto 30.11.1995. They sought a confirmation in respect of the same from Airtech. 5. It is not disputed that, in the background of the aforesaid circumstances, PEC failed to deliver the Equipment to DWASA, and consequently, their performance bond i.e., the bank guarantee furnished to DWASA was invoked and encashed. This triggered the invocation of the bank guarantee furnished by Airtech in favour of PEC. By a communication dated 06.11.1995, PEC invoked the bank guarantee furnished by SBI in its favour. It is pertinent to note by a communication dated 08.11.1995, Airtech disputed the right of PEC to invoke, and seek encashment of its bank guarantee. As a matter of fact, Airtech in the said communication, inter alia, objected to the encashment of its bank guarantee by PEC until such time PEC was able to prove that DWASA had actually encashed its bank guarantee; in view of the fact that, Airtech's bank guarantee was only a counter bank guarantee. 5.1 As noted above, parties are ad-idem that DWASA did encash the bank guarantee furnished by PEC. 6.
5.1 As noted above, parties are ad-idem that DWASA did encash the bank guarantee furnished by PEC. 6. It is in the background of these facts that the parties referred their disputes to the Arbitral Tribunal. 7. The Arbitral Tribunal in respect of the issue at hand, in substance, came to the conclusion that the period of the LC had to run concurrently with the period prescribed for delivery of the Equipment under the contract; which as noticed hereinabove was 180 days. The Arbitral Tribunal was also of the view, that the fact that, the LC was opened on 02.02.1995, and thereafter extended from time to time till 04.11.1995 could legally be ignored by Airtech as the LC had to, in accordance with the terms of the contract, run for a continuous period of 180 days. The relevant observations in regard to the same are extracted hereinbelow:- "...Giving a thoughtful consideration to the aforesaid contentions of the learned counsel for both the parties, the contention of learned counsel for the claimant is correct and must be accepted and that of the learned counsel for the respondent has to be rejected as untenable. When the contract does not provide for the delivery of goods in bits at different stages during the total period of delivery, the seller is entitled to deliver the goods at any point of time during subsistence of the total delivery period and in that situation the L/C which is a prompt and ready and immediate mode of payment for the seller for the supply of goods to the buyer, the buyer has to assure in all reasonableness that he opens the LC to safeguard the payment to the seller and the L/C has to be co-extensive with the delivery period and thus should be for a clear period of 180 days before the seller is to take steps for the supply of the goods.
When this assurance on the part of the buyer is the right of the seller, the seller, before taking any steps towards producing / procuring the goods contracted to be sold, must have before his eyes a clear and unambiguous total period of delivery in the L/C in one go and at one point of time, and this is the basic and underlined principle even in the facts of the case in hand regarding delivery and L/C and before the L/C is issued in this manner, the obligations of the seller cannot commence and all other things fall in the background and cannot be considered at all. The seller cannot be called upon by the buyer or even by the respondent in the case in hand to first show his bona fides by taking steps for effecting delivery, as in the circumstances referred to above the payment assurance in the form of a valid operational L/C is a must as a since qua non for the commencement of any obligations of the seller in the matter of production / procurement or delivery of goods. The matter of guaranteeing payment to the seller for his price of goods as a conditional precedent in the circumstances of the case in hand can be seen from another angle also as the delivery of goods by the claimant is not to be effected in bits at various stages during the period of 180 days, and he can deliver the entire goods at one point of time, he may choose to do so towards the closing time of the delivery period of 180 days and it is quite probable that L/C may lapse by that time, in which case the L/C would not be available to the claimant for his prompt and ready payment and who may have to fall back on a complicated and prolonged process for the recovery of his price. In order to obviate any such complications the buyer has to open the L/C which is valid and operational for the entire delivery period by way of assurance of payment to the seller before the seller takes any steps to produce / procure and deliver the goods. The claimant never had before his eyes at any point of time the L/C for a total delivery period of 180 days.
The claimant never had before his eyes at any point of time the L/C for a total delivery period of 180 days. The initial L/C being for a period shorter than 180 days, the claimant was within its right, to ignore the same and thus could ignore it for the period from 02.02.1995 the date of its issuance till 19.07.1995 the date of its expiry, and even for the period from 21.05.1995 the date of its extension during its continuance upto 30.08.1995 and even for the period from 29.07.1995 the date of second extension to 15.10.1995 or even 04.11.1995, all these periods could be legally ignored by the claimant by looking into the validity of the L/C which had to be or a continuous period of 180 days at one go and at one point of time and no valid L/C ever came into existence which could force the claimant to take steps towards delivery of the goods and thus his obligations under the contract for the supply of goods did not commence and in view of this, very important factor, the contention of the learned counsel for the respondent propounding the proposition of considering the requisite 180 days period of L/C in a cumulative manner, is bereft of all force and cannot be accepted." 8. Based on their finding with respect to the said issue, the Arbitral Tribunal held that PEC was in breach of the terms of the Associateship Agreement, and hence was required to pay the interest. Even though Airtech had demanded interest at the rate of 24% p.a., the Arbitral Tribunal found the rate to be excessive, and accordingly ordered that interest be paid by PEC at the rate of 18% p.a. w.e.f. 06.11.1995 i.e., the date when Airtech's bank guarantee stood invoked and encashed. 9. Mr. Oberoi assisted by Mr. Venu Gopal, who appeared for the Objector/PEC challenged the findings of the Arbitral Tribunal on the ground that they are perverse. For this purpose, he has drawn my attention to clause 2.3, 2.7, 2.8 and 3.2 of the SCC of the contract and clauses 2, 4.7 of the Associateship Agreement and clauses 2, 5, 8, 12 of the General Terms & Conditions (GCC) of the Associateship Agreement.
For this purpose, he has drawn my attention to clause 2.3, 2.7, 2.8 and 3.2 of the SCC of the contract and clauses 2, 4.7 of the Associateship Agreement and clauses 2, 5, 8, 12 of the General Terms & Conditions (GCC) of the Associateship Agreement. The finding of the Arbitral Tribunal that the LC opened by DWASA in favour of PEC had to run for 180 days, and because it did not do so, the obligations of Airtech did not get triggered, was according to him, contrary to the terms of the Associateship Agreement. Mr. Oberoi argued that there was no privity of contract obtaining as between the Airtech and DWASA. These were, according to him, two separate contracts though back- to-back. The first one involved DWASA and PEC; while the second one was executed between PEC and Airtech. Mr. Oberoi submitted that even though clause 4 of the Associateship Agreement, provided that PEC would make payment to Airtech on receipt of money from DWASA, it did not absolve PEC from making payment to Airtech, had Airtech fulfilled its part of the obligations under the Associateship Agreement. The obligation of PEC towards Airtech was independent of any obligation that PEC had towards DWASA. 9.1 In order to buttress his submission, Mr. Oberoi referred me to the letters dated 16.10.1995 and 26.10.1995. These letters have already been noticed by me hereinabove. Based on the contents of the said communication issued by Airtech, it was submitted by Mr. Oberoi that, the Arbitral Tribunal could not have come to the conclusion that the Associateship Agreement obtaining between PEC and Airtech had not become operative. In view of these facts, it was Mr. Oberoi's contention that the findings of Arbitral Tribunal were perverse and hence, the award deserved to be set aside. 9.2 Mr. Oberoi also laid stress upon clause 8 of the Associateship Agreement, which required Airtech to indemnify PEC in respect of any loss suffered by them qua the contract executed between DWASA and PEC. It was his case that even as per this clause PEC was entitled to money from Airtech in view of similar amount paid by PEC to DWASA. 9.3 Mr.
It was his case that even as per this clause PEC was entitled to money from Airtech in view of similar amount paid by PEC to DWASA. 9.3 Mr. Oberoi further argued that if period of LC is calculated from 02.02.1995 till 04.11.1995, it remained open for 220 days and if it is calculated from 07.04.1995 i.e, the date ADB issued its letter of commitment, the LC remained open for 191 days. Therefore, the finding of the Arbitral Tribunal, according to him, even on this score was contrary to the record. 10. As against, Mr. Mehra, Sr. Advocate assisted by Mr. Ritesh Verma addressed arguments on behalf of Airtech. 10.1 Mr. Mehra briefly confined his submissions to the following. First, even if this court were to come to a different conclusion, based on the material placed before the Arbitral Tribunal, it would not provide, in law, a sufficient ground to set aside the award. In his view, the challenge raised in the captioned petition did not fell within the purview of Section 34 sub section(2) of the Arbitration and Conciliation Act, 1996 (in short, "Arbitration Act"). 10.2 Second, that in view of clause 16 of the GCC of the Associateship Agreement, PEC could not rely on any correspondence which was exchanged between the parties as the same was "null and void" as per the terms of the said clause. This argument was directed to, the reference made by Mr. Oberoi, to letters dated 16.10.1995 and 26.10.1995. 10.3 Lastly, Mr. Mehra placed reliance on clause 17 of the GCC of the Associateship Agreement to contend that the contract obtaining between PEC and DWASA was necessarily an integral and inseparable part of the Associateship Agreement. The argument being that the terms of the LC and its period of validity, were material for the purposes of the Associateship Agreement obtaining between PEC and Airtech. 11. I have heard learned counsel for the parties. On reading of the award, in respect of, the only issue which presently arises between the parties i.e. encashment of the bank guarantee, it appears that the sum and substance of the finding of the Arbitral Tribunal is that, in order to trigger the obligations of Airtech to supply the equipment, a valid LC ought to have come into existence.
On reading of the award, in respect of, the only issue which presently arises between the parties i.e. encashment of the bank guarantee, it appears that the sum and substance of the finding of the Arbitral Tribunal is that, in order to trigger the obligations of Airtech to supply the equipment, a valid LC ought to have come into existence. A valid LC, according to the Arbitral Tribunal, would be an LC which remained open continuously for a period of 180 days. In this context, the Arbitral Tribunal noted that even though the LC, which had been decidedly opened on 02.02.1995, was extended from time to time till 04.11.1995 that, by itself was not legal and hence, the obligation of Airtech under the contract did not get triggered. 11.1 In this context, I may only note an argument of Mr. Oberoi that if the period of the LC is taken into account from 02.02.1995 to 04.11.1995, then the LC was actually opened for a period of, 228 days. In the alternative, it was submitted by Mr. Oberoi, as noticed hereinabove, that if the period were to commence from the date when letter of commitment was issued by ADB i.e., 07.04.1995, then the LC as a matter of fact remained open for 191 days. 11.2 Dehors the aforementioned argument, in my opinion there being no privity of contract obtaining between Airtech and DWASA the argument of Airtech that it was not legally bound to discharge its obligations under the Associateship Agreement was a complete red herring. In my view, the Arbitral Tribunal has overlooked this crucial aspect of the matter. It is not in dispute that PEC offered a bid in respect of tender floated by DWASA based on the assurance of Airtech that it would manufacture and supply the Equipment. As noticed above, even though this fact was in the knowledge of DWASA, parties did not execute a tri-partite contract, instead two separate and independent contracts were executed notwithstanding the overlap. DWASA, under its contract held only PEC responsible for discharge obligations provided in the contract executed with it. The obligations under the agreement obtaining between PEC and DWASA required them to deliver the equipment at Pagla in Bangaldesh.
DWASA, under its contract held only PEC responsible for discharge obligations provided in the contract executed with it. The obligations under the agreement obtaining between PEC and DWASA required them to deliver the equipment at Pagla in Bangaldesh. This obligation of PEC even though pivoted on Airtech supplying the equipment to PEC at Benapole, which is the border town between India and Bangladesh; required PEC to engage the services of a local agent to transport the Equipment from Benapole to Pagla. The Arbitral Tribunal lost sight of the fact that the LC which DWASA was required to open, had to be in favour of PEC. The LC was infact opened on 02.02.1995, and thereafter extended from time to time till 04.11.1995. As per the terms of the Agreement i.e., clause 3.2 it was the sole and exclusive obligation of PEC to ensure that the supply of Equipment was completed within 180 days from the date of signing of the contract or receipt of LC whichever was later in point of time. In view of this clause, PEC could not have taken a stand qua DWASA that 180 days would not commence from 02.02.1995. In order to ensure discharge of its obligations, DWASA had sought from PEC a performance bond in the form of bank guarantee, which PEC had furnished. On failure of PEC to discharge its obligations, one of the consequences was that DWASA could invoke and encash PEC's bank guarantee. As against this, the obligations which were undertaken by Airtech were independent of those which PEC had undertaken qua its agreement with DWASA. This is clear on reading clause 2 of the GCC of the Associateship Agreement which excluded Airtech's obligation qua the contract executed between PEC and DWASA to the extent they were "specifically reserved to be performed or fulfilled by PEC". Therefore, the incorporation by reference, the terms of contract obtaining between PEC and DWASA in the Associateship Agreement, would have in no way made Airtech liable to DWASA in the event of non supply of the Equipment by Airtech. Clause 17 of the GCC would have to be read in conjunction with clause 2 of the GCC and other terms of the Associateship Agreement. The findings of the Arbitral Tribunal that the obligations of Airtech did not commence in terms of their agreement with PEC is, in my view, perverse.
Clause 17 of the GCC would have to be read in conjunction with clause 2 of the GCC and other terms of the Associateship Agreement. The findings of the Arbitral Tribunal that the obligations of Airtech did not commence in terms of their agreement with PEC is, in my view, perverse. Best evidence of this is, the letters dated 16.10.1995 and 26.10.1995 wherein, Airtech had indicated that they were unable to make supplies in view of their difficulties with the supplier of chassis. As a matter of fact, they sought extension of LC till 30.06.1996. It could not have been a stand of PEC that, if equipment was supplied by Airtech, it would not make the payments to Airtech in case DWASA were to renege its obligation under the contract with PEC. The obligation interse PEC and Airtech to that extent were mutual and exclusive to the obligations obtaining in the contract subsisting between DWASA and PEC. 11.3 Furthermore, in the context of the above much stress was laid on Clause 4 of the Associateship Agreement and clause 17 of the GCC. It was sought to be argued that the obligation to furnish an LC, and to keep it open continuously for a period of 180 days by virtue of clause 17 of GCC, formed an inseparable part of the Associateship Agreement. First and foremost, each clause would have to be read in the context of all other clauses obtaining in Associateship Agreement. Clause 2 of GCC, as observed hereinabove, makes that crystal clear. In this context let's examine what is envisaged by clause 17 of GCC and clause 4 of the Associateship Agreement. The opening line of clause 17 stipulates that only those conditions, which are not agreed to in the Associateship Agreement, shall stand incorporated. Clause 4 of the Associateship Agreement, on the other hand, prescribed only the mode and the procedure for payment. The opening words of said clause 4, which read as follows, make that clear: "PEC shall pay the Associate by the following procedure". Therefore, the finding of the Arbitral Tribunal that the LC had to be kept open for a continuous period of 180 days; a term of the contract, could not in my view have been telescoped into the Associateship Agreement obtaining between PEC and Airtech.
Therefore, the finding of the Arbitral Tribunal that the LC had to be kept open for a continuous period of 180 days; a term of the contract, could not in my view have been telescoped into the Associateship Agreement obtaining between PEC and Airtech. 11.4 It is no one's case, as it cannot be, that the mode of payment to Airtech was by way of a LC. The terms of payments i.e., clause 4 of the Associateship Agreement clearly bring to fore that point. Thus, Airtech on supplies being made to PEC was to be paid in terms of clause 4 which did not envisage payment through LC. A perusal of clause 4 of the Associateship Agreement, shows that PEC undertook to make payment to Airtech on receipt of money from DWASA; that by itself could not construed to mean that Airtech, in law, was not required to commence manufacture of the Equipment since the LC had to remain valid for a continuous period of 180 days. The entire purpose, it appears, to provide for a validity period in the LC which, would run concurrently with the period provided for execution of the contract (obtaining between PEC and DWASA) seems to be that since, it was a contract for supply of Equipment, the supplies may not perhaps have been made in one go. Therefore, the period of LC being made co-terminus with the period of execution of the contract would perhaps have been incorporated to give comfort to PEC. Clause 3.2 of the SCC to the contract was for the benefit of PEC, and bound only PEC qua DWASA. It was the obligation of PEC to reach the Equipment to Pagla, for which it was given 180 days. Clause 3.2 of SCC made it clear that 180 day period would commence once an LC was opened. It is no one's case that encashment of bank guarantee took place before expiry of 180 days, which commenced with effect from 02.02.1995. Which is why, perhaps on 08.11.1995 Airtech wrote to PEC that it could encash its bank guarantee only if PEC's bank guarantee had been encashed. The fact that LC was not open for a continuous period of 180 days could not have given an excuse to Airtech to wriggle out of its promise to perform its obligation under the Associateship Agreement to supply the Equipment within a period of 180 days.
The fact that LC was not open for a continuous period of 180 days could not have given an excuse to Airtech to wriggle out of its promise to perform its obligation under the Associateship Agreement to supply the Equipment within a period of 180 days. 11.5 As a matter of fact, as per clause 7 of the Associateship Agreement, Airtech was required to furnish within 30 days of the execution of the said agreement, a detailed programme for manufacture of the Equipment, taking into account the delivery schedule stipulated in the contract. Airtech was required to inform PEC on a fortnightly basis the progress on the manufacture of the Equipment to be supplied under the contract obtaining between PEC and DWASA. Similarly, under clause 5 and 8 of the GCC of the Associateship Agreement, Airtech had to reimburse and / or indemnify PEC in respect of any claim by DWASA. These clauses give intrinsic evidence of the limited inter-linkage between the contract obtaining between PEC and DWASA on the one hand, and the Associateship Agreement obtaining between PEC and Airtech, on the other. To infer from this, that the obligations of Airtech to execute the contract did not commence as the LC was not opened for a continuous period of 180 days is, in my view, completely contrary to the terms of the Associateship Agreement. Furthermore, I am also in agreement with Mr. Oberoi's submission that the case set up by Airtech was that it had commenced in its obligations under the Associateship Agreement. Mr Oberoi had in this regard placed reliance on Issue No. 8 culled out in the Award. A reading of Issue No. 8 would show that Airtech sought to lay a monetary claim with respect to parts of Equipment which it had purportedly purchased and / or fabricated. In these circumstances for the Arbitral Tribunal to conclude that Airtech's obligations had not commenced appears to be contrary to the record; even though it is another matter that this claim was rejected by the Arbitral Tribunal. 11.6 Mr. Mehra's submission based on clause 16 of GCC of the Associateship Agreement that the correspondence obtaining between parties could not be referred to as, in terms thereof it had to be considered as null and void; is untenable.
11.6 Mr. Mehra's submission based on clause 16 of GCC of the Associateship Agreement that the correspondence obtaining between parties could not be referred to as, in terms thereof it had to be considered as null and void; is untenable. The reason being that a bare perusal of clause 16 of the GCC of the Associateship Agreement would show that it refers to correspondence which is exchanged, between the parties prior to the execution of the contract, and not post, the execution of the contract. 12. It is well settled that the award can be set aside on the ground of perversity. In this regard see the observations made in Security Printing and Minting Corporation of India Ltd. & Anr. v. Gandhi Industrial Corporation, (2007) 13 SCC 236 paragraph 16 at pages 244 and 245 and ONGC Ltd. v. Garware Shipping Corporation Ltd., (2007) 13 SCC 434 paragraph 30 at page 441. 13. The findings of the Arbitral Tribunal being perverse, the objections are allowed and the Award dated 06.11.1998 is set aside.