Case: M.P. Power Generation Co. Ltd. and Ors Vs. Ansaldo Energia SPA and Ors

a contract is not voidable if the party whose consent was taken had the means of discovering the truth with ordinary diligence, even if the consent was caused by misrepresentation. He also relied upon illustration (b), which deals with sale of a factory by B on the representation of A that 500 mounds of Indigo are made annually in the factory belonging to A. As B purchased the factory after examining the accounts of the factory, the contract was not voidable on account of As misrepresentation. Sh. Dave relied upon a judgment of the Full Bench of the Judicial Commissioners Court, Nagpur, in (Hazi) Mahomad Hazi Wali Mahomad v. Ramappa AIR 1929 Nagpur 254. In that case, the Defendant in the suit represented to the Plaintiff that the value of the property was about Rs. 9,000/-. Jackson A.J.C. held that even if such a statement was made by the Defendant, the Plaintiff was not entitled for a decree on the ground that it was impossible to believe that the Plaintiffs solely relied upon the statement of the Defendant as to the value of the property. It was further held that the Plaintiff could have obtained the value of the property without much trouble. In view of the above facts, the Judicial Commission observed as follows:Under Section 19, Contract Act, the rights given to a party who has entered into a contract under fraud or misrepresentation, are to avoid the contract or to insist on the contract being performed. The Section does not entitle the party to insist on an entirely different contract being performed. Moreover, the rights given by Section 19 are given only to a party whose consent to the contract was, in fact, caused by the fraud or misrepresentation.The said judgment has no application to the facts of this case. Similarly, Ganga Retreat & Towers Ltd. v. State of Rajasthan (2003) 12 SCC 91 relied upon by Sh. Dave would not be of any assistance to him.29. As discussed earlier, the evidence on record discloses that the Claimants could not ascertain the actual capacity and the functioning of the Units in spite of their best efforts. The relevant records were not furnished by the Board to enable the Claimants to ascertain the actual facts. The evidence on record supports the contention of the Claimants that it was not possible to ascertain the capacity and functioning of the Units only on the basis of visual inspections. We are afraid that we cannot agree with the submission of Sh. Dave on the point of misrepresentation as we find no good reason to differ from the view taken by the Arbitral Tribunal.Ext. GG-Value of the Equipments Supplied and Works Performed30. An amount of Rs. 11,14,55,042/- with interest was claimed towards the value of the RLA study and the performance of work relating to drum level system, UPA system, pressure parts and engineering drawings which could not be supplied due to the termination of the agreements. A detailed affidavit was filed by Sh. Fabio Rolla in lieu of his examination-in-chief. Voluminous evidence was produced to show the actual expenditure towards the above works. There was no meaningful cross-examination of Sh. Fabio Rolla on behalf of the Board. The determination of Issue No. 12 by the Arbitral Tribunal holding that the Claimants are entitled to the amounts claimed in Ex. GG annexed to the statement of claim i.e. Rs. 11,14,55,042/- is on the basis of appreciation of evidence. We have no hesitation in approving the said finding of fact of the Arbitral Tribunal.Ext. FF-Refund of amounts of Bank Guarantees31. The Claimants furnished three Bank Guarantees. Two Bank Guarantees dated 22.02.2000 and 23.02.2000 were for Rs. 9.29 crores and US $ 1,708,100/- towards the advance payment to be paid by the Board. The third Bank Guarantee was given by ANZ Grindlays Bank, New Delhi on behalf of the Claimant for Rs. 18.48 crores which was towards performance guarantee under Clause 4.1 of the Overall Coordination Agreement. The Bank Guarantees dated 22.02.2000 and 23.02.2000 were in terms of Clause 9.2 of the Onshore and Offshore Supply Contracts respectively. All the three Bank Guarantees were invoked by the Board on 23.06.2001. The Bank Guarantees given on 22.02.2000 and 23.02.2000 were conditional. The condition for invocation of such Bank Guarantees was non-fulfillment of the contractual obligations by the debtor. The third Bank Guarantee of 24.02.2000 was an unconditional Bank Guarantee. The Arbitral Tribunal was of the opinion that the invocation of the Bank Guarantee was improper as it was not preceded by a Notice of Default as contemplated in Clause 16.3 of the Supply Contracts and a subsequent notice of termination under Clause 17.1 of the Supply Contracts. In view of the finding of the Arbitral Tribunal that the Board committed a serious breach of the contract and wrongfully terminated the contract, the Claimant was held to be entitled to return of the amounts for which the Bank Guarantees were given.32. The Bank Guarantee given on 24.02.2000 was a Performance Bank Guarantee and the Claimant is entitled for return of the amount for which the Bank Guarantee was given. The Arbitral Tribunal, however, failed to take notice of the fact that the other two Bank Guarantees were given for the amounts to be advanced by the Board. In fact, the Board had advanced the said amounts to the Claimants. We are of the opinion that the Claimant is not entitled for return of the amounts involved in the Bank Guarantees dated 22.02.2000 and 23.02.2000 as they were towards the amounts advanced by the Board. The rejection of the claim pertaining to the damages mentioned in Ex. HH of the statement of claim which includes loss of profit, over-heads and loss of commercial opportunities clearly indicates that the Arbitral Tribunal never intended to grant any damages to the Claimant. The claims allowed by the Arbitral Tribunal pertained only to the return of the Claimants money involved in the Bank Guarantees and the amounts actually spent by the Claimants.Conclusion

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]22. The Arbitral Tribunal opined that the production of Letter of Comfort was a fundamental condition of the agreements and the Claimant cannot be said to have waived the production of Letter of Comfort. The contention of oral concession made by Sh. G. Ravindran was considered by the Arbitral Tribunal with reference to the evidence on record. The oral evidence of Sh. Saxena, Superintending Engineer and Sh. Shrivastava, Additional Superintending Engineer of the Board was referred to by the Arbitral Tribunal to hold that they admitted to the fact that there was no waiver to the production of Letter of Comfort in writing by the Claimants. Sh. Saxena, Superintending Engineer of the Board stated in his evidence that Sh. G. Ravinderan made a concession of waiver of production of the Letter of Comfort in a meeting. However, the details of the meeting could not be given by Sh. Saxena. The Arbitral Tribunal refused to accept the point canvassed by the Board relating to waiver on the basis of the evidence of Sh. Saxena. The contents of the letter dated 10.03.2000, written by the Claimant to the Board were examined by the Arbitral Tribunal to conclude that there was no waiver of production of the Letter of Comfort. According to the Arbitral Tribunal, the Claimant did not insist on the Letter of Comfort to be produced as a pre-condition to the Zero Date, which did not preclude to their seeking the same at a later date as per Clause 16.5 of the Overall Co-ordination Agreement and Clause 22 & 23 of the Supply and Services Contracts respectively. The production of the Letter of Comfort was a fundamental condition of the agreements and the failure to produce the same was a breach by the Board. The above findings on the Letter of Comfort are on appreciation of evidence. We do not see any reason to differ with the said findings26. On appreciation of the oral and documentary evidence produced by the parties, the assertion made by the Board that the Units were achieving a capacity of 120 MW when operating in accordance with the good industrial practice, was found to be incorrect by the Arbitral Tribunal. We do not intend to take a different view on the findings of the fact recorded by the Arbitral Tribunal27. Even if the Board believed that Units 3 and 4 were in fact designed for a capacity of 120 MW and operated at 120 MW, if it was found later that the assertion relating to the said capacity and functioning was not true, a clear case of misrepresentation, as per Section 18 of the Contract Act was made outThe said judgment has no application to the facts of this case. Similarly, Ganga Retreat & Towers Ltd. v. State of Rajasthan (2003) 12 SCC 91 relied upon by Sh. Dave would not be of any assistance to him29. As discussed earlier, the evidence on record discloses that the Claimants could not ascertain the actual capacity and the functioning of the Units in spite of their best efforts. The relevant records were not furnished by the Board to enable the Claimants to ascertain the actual facts. The evidence on record supports the contention of the Claimants that it was not possible to ascertain the capacity and functioning of the Units only on the basis of visual inspections. We are afraid that we cannot agree with the submission of Sh. Dave on the point of misrepresentation as we find no good reason to differ from the view taken by the Arbitral TribunalExt. GG-Value of the Equipments Supplied and Works Performed30. An amount of Rs. 11,14,55,042/- with interest was claimed towards the value of the RLA study and the performance of work relating to drum level system, UPA system, pressure parts and engineering drawings which could not be supplied due to the termination of the agreements. A detailed affidavit was filed by Sh. Fabio Rolla in lieu of his examination-in-chief. Voluminous evidence was produced to show the actual expenditure towards the above works. There was no meaningful cross-examination of Sh. Fabio Rolla on behalf of the Board. The determination of Issue No. 12 by the Arbitral Tribunal holding that the Claimants are entitled to the amounts claimed in Ex. GG annexed to the statement of claim i.e. Rs. 11,14,55,042/- is on the basis of appreciation of evidence. We have no hesitation in approving the said finding of fact of the Arbitral TribunalExt. FF-Refund of amounts of Bank Guarantees31. The Claimants furnished three Bank Guarantees. Two Bank Guarantees dated 22.02.2000 and 23.02.2000 were for Rs. 9.29 crores and US $ 1,708,100/- towards the advance payment to be paid by the Board. The third Bank Guarantee was given by ANZ Grindlays Bank, New Delhi on behalf of the Claimant for Rs. 18.48 crores which was towards performance guarantee under Clause 4.1 of the Overall Coordination Agreement. The Bank Guarantees dated 22.02.2000 and 23.02.2000 were in terms of Clause 9.2 of the Onshore and Offshore Supply Contracts respectively. All the three Bank Guarantees were invoked by the Board on 23.06.2001. The Bank Guarantees given on 22.02.2000 and 23.02.2000 were conditional. The condition for invocation of such Bank Guarantees was non-fulfillment of the contractual obligations by the debtor. The third Bank Guarantee of 24.02.2000 was an unconditional Bank Guarantee. The Arbitral Tribunal was of the opinion that the invocation of the Bank Guarantee was improper as it was not preceded by a Notice of Default as contemplated in Clause 16.3 of the Supply Contracts and a subsequent notice of termination under Clause 17.1 of the Supply Contracts. In view of the finding of the Arbitral Tribunal that the Board committed a serious breach of the contract and wrongfully terminated the contract, the Claimant was held to be entitled to return of the amounts for which the Bank Guarantees were given32. The Bank Guarantee given on 24.02.2000 was a Performance Bank Guarantee and the Claimant is entitled for return of the amount for which the Bank Guarantee was given. The Arbitral Tribunal, however, failed to take notice of the fact that the other two Bank Guarantees were given for the amounts to be advanced by the Board. In fact, the Board had advanced the said amounts to the Claimants. We are of the opinion that the Claimant is not entitled for return of the amounts involved in the Bank Guarantees dated 22.02.2000 and 23.02.2000 as they were towards the amounts advanced by the Board. The rejection of the claim pertaining to the damages mentioned in Ex. HH of the statement of claim which includes loss of profit, over-heads and loss of commercial opportunities clearly indicates that the Arbitral Tribunal never intended to grant any damages to the Claimant. The claims allowed by the Arbitral Tribunal pertained only to the return of the Claimants money involved in the Bank Guarantees and the amounts actually spent by the Claimants.