The Bombay High Court has held that discarding the supplier’s in-house technical witnesses while accepting similarly placed buyer witnesses violated Section 18 of the Arbitration and Conciliation Act, 1996. At the same time, refunding the entire purchase price without proof of complete replacement also exceeded the contractual warranty. The Court held that Forech’s technical witnesses were competent to address the conveyor-speed issue, and their evidence could not be discarded merely because they were employed by Forech or were not specialised conveyor-system experts.
Whether the defects arose from manufacturing, the conveyor system’s operating conditions, or both could be determined only after considering both sides’ evidence. Rejecting Forech’s evidence wholesale while accepting similarly placed JSW witnesses amounted to one-sided appreciation and violated Section 18 of the Arbitration and Conciliation Act, 1996. Further, only 860 metres of the 3,490 metres supplied had been replaced. There was no evidence of replacement of the remaining 2,630 metres or purchase of an entirely new supply from other sources, added the Court.
The Court found that Clause 15 provided for free repair or replacement of defective or unserviceable parts. Given JSW’s acceptance and continued use of the belts, the Court treated the dispute as breach of warranty under Sections 12, 13 and 59(2) of the Sale of Goods Act, 1930, with damages to be assessed under Section 73 of the Indian Contract Act, 1872, not an unsupported refund of the entire purchase price.
Briefly, Forech India Limited challenged an arbitral award arising from its supply of conveyor belts to JSW Jaigarh Port Limited under two purchase orders issued in 2011. After joint inspection and supply, JSW reported waviness and air pockets in portions of the belts. Forech maintained that the defects were superficial or attributable to the operating conditions of JSW’s conveyor system. JSW encashed the performance bank guarantees and initiated arbitration.
The Tribunal awarded JSW Rs. 2.16 crores, representing the purchase price after deducting the encashed guarantees, with interest at 12% per annum, and rejected Forech’s counterclaim concerning the guarantees and damages. Forech challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.
A Single Judge Bench of Justice Arun R. Pedneker found that the Tribunal had discarded Forech’s technical witnesses because they were in-house witnesses and were not conveyor-system experts, while accepting evidence from similarly placed witnesses of JSW. The Court held that Forech’s witnesses were competent to address the technical issue and that their employment with Forech was not, by itself, sufficient to reject their evidence. Whether the defects were inherent in the belts, caused by the conveyor system’s operating speed, or attributable to both required consideration of both parties’ evidence. The Tribunal’s failure to engage with Forech’s evidence resulted in one-sided appreciation.
The Court also noted that JSW had accepted and continued using the belts, replacing only defective portions. It recorded replacement of 860 metres out of the 3,490 metres supplied, with no evidence that the remaining 2,630 metres had been replaced. Clause 15 of the purchase orders provided for free repair or replacement of defective or unserviceable parts within the stipulated warranty period. Thus, in the absence of evidence that the entire supply was defective or replaced, the Tribunal could not grant the entire purchase price contrary to that warranty provision.
