AI Drafter 
TaxTMI 
TaxTMI 
2018 (7) TMI 1873
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....g 2.22 per cent of the invoice value of the goods 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. ....
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....ct. Clause IV - To be amended to 6 Pct. Max I/O 3 Pct in total. All other 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 Let....
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.... buyer to produce the quality inspection certificate at the port of destination. Mr. Mitra refers to the payment clause 3 of the 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 th....
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....16 February, 2011 which is attached as Page 54. The Buyers however did not provide any Quality Inspection Report." 17. In paragraph 8 the claimant 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 t....
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.... Contract that the quality would 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 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 ....
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....be received after 30 days. This contract was modified on 7th December, 2010 which stated that US$ 440 was payable on receipt of shipping document and US$ 10 after quality inspection at destination port. The LC accordingly was also amended. The original LC states 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% a....
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....pportunity given to the petitioner to participate in the arbitration proceeding the petitioner has avoided participation and cannot be allowed to raise objection with regard to the enforcement of the award on any other grounds not covered under Section 48 of the Arbitration 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....
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....s buyer was obliged to provide certificate of analysis. Even in the claim submission it is not averred by the claimant that under GAFTA Sampling Rules 124 the buyer was obliged to provide certificate of analysis. This new case made out by the Arbitral Tribunal in paragraph 6.2.1 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 awar....
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.... report would be required to be furnished by the buyer. In short, obtaining an award for balance price without presentation of quality inspection report of the destination port and without inspection and finalization as proposed and agreed by the seller should shock judicial conscience. The award is totally contrary to Wednesbury's principle 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 T....
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....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 while scrutinizing an award. A sense of informality is attached to such proceeding. It cannot be scrutinized with an Eagle's eye or as an appellate authority. The objection to enforcement of a foreign award is extremely limited. 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....
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.... 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 to a man who founds his cause of action upon an immoral or illegal act. The rule has been further illustrated by Russel 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 tr....
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....9; claim for payment of USD 440.00 per metric ton for all three partial shipments succeeds. 6.15. In reference with the balance of USD 10.00 per metric ton for each partial shipment, as agreed under the Amendment dated 7th December, 2010, the Amendment provided that the "Balance amount @ US$ 10.00 per MT will be payable after receipt of quality inspection report of destination port". 6.16. This indeed establishes an alteration to the original provision of the Contract that the quality would 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 bal....
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....ly, but contend that it is under the parties' contract the sole method of payment agreed. Justice Bingham on consideration of the materials on record stated that "if the seller fails to obtain payment because he does not and cannot present the documents which the terms of the credit, supplementing the terms of the contract, require, the buyer is discharged: that was the Ficom case. In the ordinary case, therefore, of which the present is an example, the due establishment of the letter of credit fulfils the buyer's payment obligation unless the bank which 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 m....
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....either seller nor buyer deriving any benefit. In both cases it was held that the seller could only obtain the price through the letter of credit. In Shamsher Jute, Bingham J. said: If the seller fails to obtain payment because he does not and cannot present the documents which the terms of the credit, supplementing the terms of the contract, require the buyer is discharged: that was the Ficom case. In the ordinary case, therefore, of which the present is an example, the due establishment of the letter of credit fulfils the buyer's payment obligation unless the bank which 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. 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....
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....39;s obligation to open the credit or fails to present conforming documents to the bank within the time stipulated in the credit, this constitutes a repudiation of the contract of sale and the buyer is entitled to treat the contract as terminated and claim damages for non-delivery of the goods. 3-44. If the seller presents conforming documents to the bank, this will discharge his obligations under the contract in relation to the documents and he will be able to recover the sum due under the letter of credit. This will usually be the whole contractual consideration, but it need not be. If it is not the seller is entitled to recover such further consideration 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 ma....
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....by taking them if he had no title to them and no right to possession. This remedy is of particular use where the market has risen so that damages may exceed the contract price. In such a situation if the buyer has himself sold the goods - perhaps for a higher price - the seller may alternatively pursue a restitutionary action to recover the amount received by the buyer as the proceeds of his tort. If the goods have been delivered to the buyer without the buyer having duly presented bills of lading, the seller, if he retains the bills, will have a cause of action against the carrier for misdelivery, in English law for conversion. For an example of such a claim being made against a carrier and admitted by him in exchange 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 ....
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....cant. In the said judgment it was stated that: "if the seller fails to obtain payment because he does not and cannot present the document which the terms of credit to the supplementing the terms of the contract, require, the power is discharged" would not be applicable in that case as seller had never failed inasmuch as even if the interpretation of the amended payment terms of the Letter of Credit is construed in favour of the buyer which reads: "Certificate of quality inspection report at port of destination" would not have been possible as the validity of the Letter of Credit had expired on 15th January, 2011 and the acceptance of 97.78% of the invoice value is payable only 30 days after shipment date against submission of documents 1 to 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 corresponde....
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.... matter contrary to the terms of the contract. It is a possible view taken by the tribunal on the basis of the pleadings and evidence produced before the tribunal. I have already briefly indicated the nature of the documents that formed part of the statement of claim and also briefly indicated the reasoning of the tribunal based on such documents. It was open for the petitioner before the tribunal to raise all such objections which the applicant has conveniently avoided. The numerous correspondences between the parties would unmistakably show that the buyer had never raised the issue of production of quality inspection certificate at the port of destination by the buyer, inasmuch as the buyer although claimed to be in possession of the alleged inspection 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 arb....