Phulchand Exports Ltd vs Ooo Patriot

2. By contract dated November 18, 1997, between -- Phulchand Exports Limited, Mumbai, India (`the sellers') and OOO Patriot, Moscow, Russia (`the buyers'), a transaction relating to sale of 1000 Metric Tons of Indian long grain 1.5 time polished rice PR-- 106 of 9 per cent broken maximum (for short, `the goods') for a price fixed at INR 12,450 (Indian Rupees twelve thousand four hundred fifty only) per one metric ton net on CIF (liner out) Novorossiysk, Russia basis was concluded. The price was fixed according to Incoterms-90 and included value of the goods, packing and marking, loading into hold, stowing of the cargo, fulfilling the customs formalities in the sellers' country, insurance, freight charges, berthing charges and unloading charges of the goods at the port of Novorossiysk. The total value of the contract was firm and fixed at INR 12,450,000,00 ( Indian Rupees twelve million four hundred fifty thousand only). It is upon this contract, and on what was done under it, that the above question in this appeal turns. Some of the relevant terms, and, omitting clauses which do not appear important, are as follows :

x x x x x x x x When failing to deliver the goods in time stipulated in clause 4 of the present Contract, the Sellers are to pay penalty to the Buyers at the rate of 0.3% of the value of non-delivered Goods per each day of delay from the 5 th day after expiry of the delivery date to the 15th day inclusive. Total amount of penalty should be paid to the Buyers within 10 days from the date of bill in the currency of the Contract.

4. The buyers lodged their claim with the United India Insurance Company Limited (insurers) on August 24, 1998 due to non-delivery of the goods to Novorossiysk. However, insurers denied their liability under the insurance policy for the loss of goods 6 on the ground that risk of detention was not covered. Their stand was that the insured voyage having been frustrated due to detention of the cargo, there was no liability under the policy. The sellers also took up the matter with the insurers and they were informed by the insurers vide letters dated September 16, 1998 and December 29, 1998 that the liability of the insurers was not established and the parties (the sellers and the buyers) must act as the goods were uninsured.

5. On November 27, 1998 the buyers lodged claim against the sellers for recovery of amount of USD 285,569.53 in the International Court of Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation (for short `Arbitral Tribunal"). The buyers' claim was admitted for consideration by the Arbitral Tribunal on December 7, 1998. The sellers did not acknowledge the buyers' claim and set up the defences that they have honoured all commitments under the contract; the risk in the goods and the property in the goods passed to the buyers upon shipment of the goods i.e. the date on which the goods were loaded on board the vessel being January 29, 1998 and in any event the property in the goods passed over to the buyers when their shipping documents were handed over through the banking channels upon 7 negotiations of the letter of credit, namely on February 19, 1998. According to the sellers, if for some reasons the goods were not received by the buyers then they had remedies under the policy of insurance against insurers or against the ship owners but in so far the sellers were concerned, they were not liable. The sellers also set up the defence that the delayed shipment was acquiesced to and accepted by the buyers as they were informed of the delay of shipment; the buyers had right to repudiate the contract on the ground of delay in shipment which they never did. The sellers thus submitted before the Arbitral Tribunal that the claim was misconceived and liable to be dismissed.

6. The Arbitral Tribunal held its sessions on various dates; heard the parties through their representatives and delivered its judgment (verdict) on October 18, 1999. The Arbitral Tribunal did not find any merit in the defences set up by the sellers. It held that the sellers broke the terms of the Contract (Article 4) and shipped goods on January 29, 1998 - 16 days later of the stipulated time and the vessel freighted by the sellers left the port of Kandla (India) on February 20, 1998 - 38 days later than the time of departure stipulated in the contract. The sellers gave a line bill of lading giving a carrier right to determine the line of unloading and the consecutive 8 order of destination of sea ports and, thus, at the moment of loading on board the vessel was no longer to reach the port of Novorossiysk as the first port of discharge in accordance with the terms of contract. The vessel with cargo had not arrived at the port of Novorossiysk on the date of lodging the claim (as a matter of fact the vessel never reached the port of destination). The Arbitral Tribunal held that there was clear term about the commitment of the sellers to reimburse the paid amount towards goods in case of non- arrival. The Arbitral Tribunal referred to the sellers' conduct in sending its representatives to Eregli (Turkey) to find out the situation of goods and observed that it was evident therefrom that the sellers did not consider themselves exempted from the commitment for fate and safety of the goods. It was held by the Arbitral Tribunal that the sellers did not prove the fact of force majeure which could discharge them from their liability. The Arbitral Tribunal, however, found that there was delay on the part of the buyers in acting in accord with clause 4 of the Contract; they (buyers) did not pass the insurance certificate and cargo documents to the sellers and the buyers did not demand from the sellers reimbursement of the transferred amount immediately after expiration of 180 days (i.e. 26-27/11/1998). The Arbitral Tribunal, 9 therefore, split the amount of losses between the parties - buyers and sellers - in equal parts and ordered that the sellers shall pay the amount of USD 138,402.03 to the buyers. The Arbitral Tribunal awarded interest in the some of USD 2,562.71 payable by sellers to the buyers and also directed the sellers to pay the amount of USD 4,869.00 to recover claimant's expenses to pay registry and arbitrage fees.

32. Mr. Krishnan Venugopal, learned senior counsel would submit that the goods were insured and the buyers were made beneficiaries in the insurance policy and, therefore, they have right to claim loss for goods from the insurance company and not the sellers. Moreover, the right to claim under insurance policy is not subrogated in favour of the buyers. The argument is noted to be rejected having no merit at all for the reasons already indicated above.

33. In view of the above there is no merit in the appeal and it is dismissed accordingly. Since the buyers (respondent) have not chosen to appear, there shall be no order as to costs.

(Jagdish Singh Khehar) NEW DELHI.

OCTOBER 12, 2011.