PHULCHAND EXPORTS LTDversusO.O.O. PATRIOT

               [2011] 15 (ADDL.) S.C.R 1129


               PHULCHAND EXPORTS LTD.                             A
                               v.
                       000 PATRIOT
            (CIVIL APPEAL NO. 3343 OF 2005)
                    OCTOBER 12, 2011
                                                                  B
   [R.M. LODHA AND JAGDISH SINGH KHEHAR, JJ.]

     Arbitration and Conciliation Act, 1996 - ss.47 and 48 -
Enforcement of award - Test of principles of public policy -
C/F Contract - The appellant-sellers shipped goods and the c
vessel freighted by the sellers left the port of loading viz.
Kand/a, India - The vessel carrying the goods, however,
suffered engine failure and consequently the goods did not
reach the port of destination (port of Novorossiysk, Russia) -
 The respondent-buyers lodged recovery claim against the
                                                                   0
sellers before the International Court of Commercial
Arbitration at the Chamber of Commerce and Industry of the
Russian Federation, Moscow - The said Arbitral Tribunal
held that there were breaches by the sellers and that the
clause for reimbursement could be invoked by the buyers -
 The Arbitral Tribunal, however, did not award the full price paid E
by the buyers to the sellers but instead awarded /Jalf of that
amount as there was delay by the buyers in invoking the
clause of reimbursement [clause 4 of the contract] and the
buyers also did not pass the shipping documents and the
insurance certificate to the sellers - Arbitration petition filed F
by respondent-buyers for enforcement of the award - Allowed
by High Court - Whether enforcement of the award in favour
of the respondent was contrary to public policy of India under
s.48(2)(b) of the Act - Held: The appellant-sellers breached
the terms of the contract at the very threshold by late shipment G
of goods and by loading on board the vessel which was no
longer to reach the port of Novorossiysk as the first port of
discharge - The sellers' failure to discharge the primary
obligation under the contract regarding the shipment of goods
                             1129                                 H
    1130 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A can be held to have resulted in postponement of transfer of
    title in goods to the buyers - Even if the property in the goods
    was deemed to have transferred to the buyers, since there was
    no delivery of the goods due to the fault of the sellers in
    shipment of the goods, the goods continued to be at the risk
B   of the sellers - In that situation, first proviso to Section 26 of
    the 1930 Act was clearly attracted - No merit in the case set
    up by the sellers that their liability ceased to exist on shipment
    of the goods or in any case when the shipping documents
    were handed over through the banking channels on
    negotiations of Letter of Credit - Stipulation for
C   reimbursement in the event stated in clause 4 of the contract
    was not in the nature of penalty; the clause was not in terrorem
    - It was neither punitive nor vindictive - No reason why the
    sellers should not be bound by it and the court should not
    enforce such term - The sellers and the buyers in the present
D   case were business persons having no unequal bargaining
    ppwers - Having regard to the subject matter of the contract,
    the clause for reimbursement or repayment in the
    circumstances provided therein was neither unreasonable nor
    unjust; far from being extravagant or unconscionable - It was
E   the precise sum which the sellers were required to reimburse
    to the buyers, which they had received for the goods, in case
    of the non-arrival of the goods within the prescribed time -
    More so, the fact of the matter was that goods never arrived
    at the port of,discharge - The Arbitral Tribunal only awarded
F   reimbursement of half the· price paid by the buyers to the
    sellers and, therefore, the award cannot be held to be unjust,
    unreasonable or unconscionable or contrary to the public
    policy of India - Sale of Goods Act, 1930 - s.26 - Contract
    Act, 1872 - ss.23, 73 and 74.
G        Arbitration and Conciliation Act, 1996 - s.48(2)(b) -
    Expression 'public policy of India' used in s.48(2)(b) - Held:
    Has "to be given wider meaning - Arbitral award can be set
    aside, 'if it is patently illegal'.
       Contract- CIF contract- Obligations upon a seller under
H a C.J.F. contract - Held: In relation to goods, the seller must
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                  1131


ship goods of contract description on board a ship bound to        A
the contract destination - If there is a late shipment or the
seller has put goods on board a ship not bound to the contract
destination as stipulated, the logical inference that must
necessarily follow is that the seller has not put on board goods
conforming to a contract destination.
                                                                   B
     Transaction relating to sale of 1000 Metric Tons of
Indian long grain polished rice 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)
Novoross.iysk, Russia basis was concluded, vide a                  c
contract between the appellant-sellers and respondent-
buyers. The appellant-sellers shipped goods - 16 days
later of the stipulated time and the vessel freighted by the
sellers left the port of loading viz., Kandla (India) - 38 days
later than the time of departure stipulated in the contract.
The goods, however, never reached the port of                      D
destination (port of Novorossiysk) inasmuch as the
vessel carrying the goods suffered an engine failure and
in salvage operation, the vessel was taken to the Turkish
sea port of Eregli where the concerned Admiralty court
took judgment to arrest vessel towards the cost of rescue          E
and the entire cargo was sold out to compensate the cost
of rescue of the vessel.
     The respondent-buyers lodged claim against the
sellers for recovery of amount in the International Court
of Commercial Arbitration at the Chamber of Commerce               F
and Industry of the Russian Federation (for short "the
Arbitral Tribunal"). The buyers' claim was founded on the
breach of contract by the sellers and particularly with
reference to clause 4 of the contract that provided, "in
case the goods do not arrive to the customs area of                G
Russian Federation within 180 days from the date of
payment the transferred amount is to be reimbursed to
the buyers' account".
    The Arbitral Tribunal held that there were breaches
by the sellers and that the clause for reimbursement               H
    1132 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A could be invoked by the buyers. The Arbitral Tribunal,
  however, did not award the full price paid by the buyers
  to the sellers but instead awarded half of that amount as
  there was delay by the buyers in invoking the clause of
  reimbursement and the buyers also did not pass the
  shipping documents and the insurance certificate to the
8
  sellers.
      The buyers filed Arbitration Petition under Sections
  47 and 48 of the Arbitration and Conciliation Act 1996 for
  enforcement of the above award. The sellers contested
C the petition on the ground that subject award was
  contrary to the principles of public policy and, therefore,
  the award was unenforceable. A Single Judge of the High
  Court over-ruled the objections raised by sellers and held
  that the award could be enforced as a decree of the
  Court. The Division Bench relying upon the decision of
D this Court in Renusagar Power held that award was
  purely based on findings of facts and no public policy
  was involved and upheld the order of the Single Judge.
      The question which arose for consideration in the
E instant appeal was whether enforcement of the award
  given by the International Court of Commercial
  Arbitration at the Chamber of Commerce and Industry of
  Russian Federation, Moscow in favour of the respondent
  was contrary to public policy of India under Section
  48(2){b) of the Arbitration and Conciliation Act, 1996.
F
        Dismissing the appeal, the Court
       HELD:1. In Renusagar Power case (as relied upon by
  the Division Bench of the High Court), a narrower
  meaning had been given to the expression 'public policy
G of India' while this Court in a subsequent decision in the
  case of Saw Pipes Ltd. has given wider meaning to that
  expression. In view of the decision in Saw Pipes Ltd., the
  expression 'public policy of India' used in Section 48(2){b)
  has to be given wider meaning and the award could be
H set aside, 'if it is patently illegal'. [Paras 12, 13] [1145-A-
  B: 1146-AJ
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                  1133


     Renusagar Power Co. Ltd vs. General Electric Co. AIR         A
1994 SC 860: 1993 (3) Suppl. SCR 22; Oil and Natural Gas
Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705: 2003
(3) SCR 691 - referred to.
     2.1. The title of Section 26 of the Sale of Goods Act,
1930 shows that the rule provided there-under is the              B
prima facie rule subject to the agreement otherwise
between the parties. This is clearly indicated by the
expression "unless otherwise agreed" with which the
section begins. The parties to the contract are, thus, free
to by-pass the prima facie rule provided in Section 26 by         c
making agreement otherwise. The prima facie rule in
Section 26 is that the goods remain at the seller's risk
until the property in the goods is transferred to the buyer.
But when the property in the goods is transferred to the
buyer the goods are at the buyer's risk whether delivery
                                                                  0
has been made or not. The above rule has some
exceptions. The first proviso provides that where delivery
of goods has been delayed due to the fault of either
buyer or seller, the goods are at the risk of the party in
fault as regards any loss which might not have occurred
but for such fault. The second proviso is further subject         E
to the first proviso and provides that nothing in the
section shall affect the duties or liabilities of either seller
or buyer as bailee of the goods of the other party. [Para
20] [1148-H; 1149-A·D]
       2.2. The obligations upon a seller under a C.l.F. F
 contract are well known, some of which are in relation to
 goods and some of which are in relation to documents.
 In relation to goods, the seller must ship goods of
 contract description on board a ship bound to the
 contract destination. If there is a late shipment or the G
 seller has put goods on board a ship not bound to the
 contract destination as stipulated, the logical Inference
  that must necessarily follow is that the seller has not put
. on board goods conforming to a contract destination.
  [Para 21] [1149-E-F]                                        H
    1134 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.


A         2.3. In the present case, there was late shipment of
    goods by 16 days. Besides delay in shipping the goods
    and the delayed departure of the vessel from the port of
    loading, the goods were shipped in a vessel having no
    firm commitment to reach the port of Novorossiysk as the
B   first port of discharge. As a matter of fact, the sellers gave
    a line bill of lading giving a carrier right to determine the
    line of unloading ancf the consecutive order of
    '.lestinatioo "l>f sea ports and as a result of that the goods
    were loaded on board the vessel that was no longer to
C   reach the port of Novorossiysk as first port of discharge.
    The contract between the parties clearly provided in
    clause 4 that shipment should be done by a vessel that
    is on way to Novorossiysk as the first port of discharge.
    This term in the contract is not inconsequential or
    immaterial but seems to be fundamental having regard to
D   the subject matter of the goods. The sellers breached the
    terms of the contract at the very threshold by late
    shipment of goods and by loading on board the vessel
    which was no longer to reach the port of Novorossiysk
    as the first port of discharge. The sellers having breached
E   the terms of the C.1.F. contract at the threshold, it is very
    difficult to hold that property in the goods got transferred
    out and out to the buyers on shipment of the goods or
    when the shipping documents were handed over to the
    bank for negotiations of UC. In a case such as this one,
F   the sellers' failure to discharge the primary obligation
    under the contract regarding the shipment of goods can
    be held to have resulted in postponement of transfer of
    title in goods to the buyers. In any case the prima facie
    rule contemplated in Section 26 of the 1930 Act stands
    rebutted in the facts of the present case. [Para 22) [1149·
G   G-H; 1150-A-D]
         2.4. Even if the property in the goods is deemed to
    have transferred to the buyers, since there was no
    delivery of the goods due to the fault of the sellers in
    shipment of the goods, firstly belatedly and then by a
H
  PHULCHAND EXPORTS LTD. v. 000 PATRIOT                  1135


vessel that was not on way to Novorossiysk as the first          A
port of discharge, the goods continued to be at the risk
of the sellers as they were in fault. In that situation, first
proviso to Section 26 of the 1930 Act is clearly attracted.
[Para 23] [1150-E-F]
     2.5. There is no merit in the case set up by the sellers    B
that their liability ceased to exist on shipment of the
goods or in any case when the shipping documents were
handed over through the banking channels on
negotiations of Letter of Credit. As in the present case,
the sellers were in breach at the threshold, it is immaterial    c
whether or not the buyers had a right of action against
the insurers or carrier. [Para 24] [1150-G]
    Johnson v. Taylor Bros. [1920] A.C. 144 - referred to.
     Lord Elphinstone vs. The Monk/and Iron and Coal
Company Limited and Liquidators 1886 House of Lords              D
VOL. XI page 332 and Dunlop Pneumatic Tyre Company
Limited vs. New Garage and Motor Company Limited (1915)
AC 79 [House of Lords] - cited.
     Kennedy's CIF contracts (Third edition) revised by          E
Dennis C. Thompson and CIF and FOB Contracts (Fourth
edition) by David M. Sassoon - referred to.
     3.1. Section 73 of the Contract Act, 1872 provides for
compensation for loss or damage caused by breach of
contract and Section 74 makes a provision for                    F
compensation for breach of contract where penalty is
stipulated for. Both these Sections provide for reasonable
compensation in a case of breach of contract. None of
these two Sections makes the award of liquidated
damages illegal. The plain reading of Section 74 would           G
show that it deals with the measure of damages in two
classes of cases (i) where the contract names a sum to
be paid in case of breach and (ii) where the contract
contains any other stipulation by way of penalty. [Paras
26, 27 and 28] [1151-E-F; 1153-A-D]
                                                                 H
    1136 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.


A      3.2. The stipulation for reimbursement in the event
  stated in clause 4 of the contract is not in the nature of
  penalty; the clause is not in terrorem. It is neither punitive
  nor vindictive. Moreover, what has been provided in the
  contract is the reimbursement of the price of the goods
8 paid by the buyers to the sellers. The clause of
  reimbursement or repayment in the event of delayed
  delivery/arrival or non-delivery is not to be regarded as
  damages. Even in the absence of such clause, where the
  seller has breached his obligations at threshold, the buyer
  is entitled to the return of the price paid and for damages.
C There is no reason why the sellers should not be bound
  by it and the court should not enforce such term. No way
  the clause is in the nature of threat held over the sellers
  in terror. [Para 29) [1154-B-E]
         3.3. The transactions covered by Section 23 of the
D 1872 Act are the transactions where the consideration or
  · object of such transaction is forbidden by law or the
    transaction is of such a nature that if permitted would
    defeat the provisions of any law or the transaction is
    fraudulent or the transaction involves or implies injury to
E the person or property of another or where the court
    regards it immoral or opposed to public policy. Whether
    particular transaction is contrary to a public policy would
    ordinarily depend upon the nature of transaction. Where
    experienced businessmen are involved in a commercial
F contract and the parties are not of unequal bargaining
    power, the agreed terms must ordinarily be respected as
    the parties may be taken to have had regard to the
    matters known to them. The sellers and the buyers in the
    present case are business persons having no unequal
G bargaining powers. They agreed on all terms of the
    contract being in conformity with the international trade
    and commerce. Having regard to the subject matter of the
    contract, the clause for reimbursement or repayment in
    the circumstances provided therein is neither
    unreasonable nor unjust; far from being extravagant or
H
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT              1137


unconscionable. It is the precise sum which the sellers      A
are required to reimburse to the buyers, which they had
received for the goods, in case of the non-arrival of the
goods within the prescribed time. More so, the fact of the
matter is that goods never arrived at the port of
discharge. The Arbitral Tribunal has only awarded            B
reimbursement of half the price paid by the buyers to the
sellers and, therefore, the award cannot be held to be
unjust, unreasonable or unconscionable or contrary to
the public policy of India. [Para 31] [1155-C-H]
     Mau/a Bux vs. Union of India 1969 (2) SCC 554: 1970     c
(1) SCR 928; Fateh Chand v. Balkishan Dass (1964) 1 SCR
515- referred to.
                   Case Law Reference:
  1993 (3) Suppl. SCR 22     referred to Paras 10,11,
                                                j2,          D
  2003 (3) SCR 691           referred to Para 11
  1970 (1) SCR 928           referred to Para 14
  1886 House of Lords VOL. Xlcited       Para 15
  (1915) AC 79               cited       Para 15             E
  [1920] A.C. 144            referred to Para 18
  (1964) 1 SCR 515              referred to Para 27
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3343 of 2005.                                    .           F
      From the Judgment & Order dated 3.5.2002 of the
Bombay High Court in Appeal No. 4 of 2002 in Arbitration
Petition No. 66 of 2001.
     Krishnan Venugopal, Kamal Budhiraja and Manu Seshadri   G
(for Dua Associates) for the Appellant.
    The Judgment of the Court was delivered by
    R.M. LODHA, J. 1. This appeal, by special leave,
occupied judicial time of almost whole day, and the basic
                                                             H
    1138 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A question raised is this : whether enforcement of the award dated
  October 18, 1999 given by the International Court of
  Commercial Arbitration at the Chamber of Commerce and
  Industry of Russian Federation, Moscow in favour of the
  respondent is contrary to public policy of India under Section
B 48(2)(b) of the Arbitration and Conciliation Act, 1996.
        2. By contract dated November 18, 1997, between -
  Phulchand Exports Limited, Mumbai, India ('the sellers') and
  000 Patriot, Moscow, Russia ('the buyers'), a transaction
  relating to sale of 1000 Metric Tons of Indian long grain 1.5 time
c 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 lncoterms-90 and included
  value of the goods, packing and marl<ing, loading into hold,
0
  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
E 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 :
        "1.   SUBJECT OF CONTRACT :
F
        ............. the Goods on CIF Novorossiysk port, Russia
        basis, ......... .
        2.    PRICE OF THE CONTRACT
        ......... The price is fixed on the terms of CIF (liner out)
G       Novorossiysk, Russia according to lncoterms-90 ........ .
        3.    TERMS OF PAYMENT
        Payment for the Goods, delivered under the present
        contract is to be effected by irrevocable documentary
H
PHULCHAND EXPORTS LTD. v. 000 PATRIOT                   1139
           [R.M. LODHA, J.]

Letter of Credit opened in favour of the sellers for the total   A
value of the contract for the period of 45 days ............ .
The L/C is governed by "ICC Uniform customs and
practice for documentary UC" .......... .
The L/C should be opened within 10 working days from             B
the date of signing of the contract.
The L/C is executed by the beneficiary's bank against
presentation by the sellers of the following documents:
 xxxxxxxx
 3.    Insurance Policy for 11 % of the value of the Goods,      C
       Covering all risks stipulated in the Institute Cargo
       Clauses (A), Institute War Clauses, Institute Strike
       Clauses till the completion of the unloading of !he
       Goods at the port of Novorossiysk, issued in the
       name of the Buyers Bank - Joint Stock Commercial          D
       Bank AVTOBANK, Moscow, Russia.
       xxxxxxx
4.    TERMS OF DELIVERY
Shipment should be done on the basis of CIF (liner out)          E
Novorossiysk, Russia in accordance with lncoterms - 90.
The Goods sold under the present contract should be
shipped within 40 days from the date of opening the UC.
The date of shipment is the date of loading of the Goods
to the board of vessel. ............... .
                                                                 F
Shipment should be done by a vessel that is on the way
to Novorossiysk as the first port of discharge. The Sellers
shall take all possible measures that transit time of the
Goods to Novorossiysk, Russia will not exceed 25 days.           G
xxxxxxxxx
The sellers shall take all possible measures for placing the
Goods in such a way that it will be free for examination and
will not be blocked up by any other cargo while unloading
at the port of Novorossiysk... ... . . . .                       H
    1140 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A      Insurance Policy for 110% of the value of the Goods,
       covering all risks, stipulated in the Institute Cargo Clauses
       (A), Institute War Clauses, Institute Strike Clauses till the
       completion of the unloading of the Goods at ~he port of
       Novorossiysk, issued in the name of the Buy~rs Bank -
       Joint Stock Commercial Bank AVTOBANK ......... .
B
       xxxxxxxx
       In case the Goods do not arrive to the customs area of
       Russian Federation within 180 days from the date of
       payment the transferred amount is to be reimbursed to the
C      Buyers' account.
       8.    PENALTY
       The Sellers are obliged within 5 working days from the <;late
       of receipt of the Buyers advice of the UC to open in favour
D      of the Buyers the Performance Bond issued by the Sellers
       Bank for 2% of the total value of the Contract in favour of
       the Buyers valid for 60 days from the date of opening of
       the L/C. The original of the said document should be
       dispatched to the Buyer's by courier mail. The copy of the
       AWB should be faxed to the Buyers immediately.
E
       xxxxxxxx
       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
F      non-delivered Goods per each day of delay from the 5th
       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.
G      9.    TERMS OF CANCELLATION OF THE CONTRACT
              The Buyers have the right to cancel the Contract
              under the following circumstances:
              The quality of the delivered Goods does not
              correspond to the Appendices No. 1 and No. 2 to
H
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                    1141
              [R.M. LODHA, J.]

            the present Contract (according to the report of the A
            State Board Inspection of Russian Federation for
            the testing of the Goods at the port of shipment
            Kandla (India).
            The date of shipment of the Goods is postponed
            by the Sellers beyond the period of more than 15 B
            days.
     The Sellers have the right to cancel the Contract if the date
     of the opening of the UC is postponed for the period of
     more than 15 days from the agreed date.
     xxxxxxxx."
                                                                     c
      3. The buyers opened irrevocable letter of credit ('L/C') for
the total value of the contract on December 3, 1997 with the
last date of shipment- January 12, 1998. On presentation of
documents by the sellers, the bank honoured UC and paid the 0 .
amount to the sellers. The sellers shipped goods on January
29, 1998 - 16 days later of the stipulated time and the vessel
freighted by the sellers left the port of loading viz., Kandla (India)
on February 20, 1998 - 38 days later than the time of
departure stipulated in the contract. The goods never reached E
the port of destination (port of Novorossiysk). It so happened
that the vessel carrying the goods suffered an engine failure as
a result of which it was declared 'General Average' by the
Master of the vessel. In salvage operation, the vessel was
rescued and taken to the Turkish sea port of Eregli. The owner
of the rescue vessel claimed to the Admiralty Court of Eregli F
to arrest the vessel with the cargo in an action for enforcement
of the lien against the vessel. The concerned court took
judgment to arrest vessel towards the cost of rescue and the
entire cargo was sold out to compensate the cost of rescue of
the vessel.                                                            G
     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 on the ground that risk of detention was not covered.          H
   1142 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A 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
8 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
c 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
D 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 negotiations
E 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
F 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
G 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
H did not find any merit in the defences set up by the sellers. It
   PHULCHAND EXPORTS LTD. v. 000 PATR!IOT                    1143
              [R.M. LODHA, J.]
held that the sellers broke the terms of the Contract (Article 4) A
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 8
 unloading and the consecutive order of destinalion 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 C
 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 D
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 E
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). F
The Arbitral Tribunal, 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 G
and also directed the sellers to pay the amount of USD
4,869.00 to recover claimanfs expenses to pay registry and
arbitrage fees.
     7. The buyers filed Arbitration Petition on December 22,
                                                                     H
    1144 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A 2000 before the High Court of Judicature at Bombay under
  Sections 47 and 48 of the Arbitration and Conciliation Act 1996
  (hereinafter referred to as 'the 1996 Act') for enforcement of
  the above award.
       8. The sellers contested the petition on the ground that
B subject award was contrary to the principles of public policy
  and, therefore, the award was unenforceable.
       9. The Single Judge of the Bombay High Court in his order
  dated July 16, 2001 did not find any merit in the objections
  raised by sellers; overruled the objections and held that the
C award dated October 18, 1999 could be enforced as a decree
  of the Court.
       10. Against the order of the Single Judge, the sellers
  preferred appeal before the Division Bench. The Division
D Bench relying upon the decision of this Court in Renusagar
  Power Co. Ltd vs. General Electric Co'. held that award was
  purely based on findings of facts and no public policy was
  involved and the Single Judge rightly dismissed the petition.
  Consequently, the Division Bench by its order dated May 3,
  2002 dismissed the appeal.
E       11. Mr. Krishnan Venugopal, learned Senior counsel for
  the appellant at the outset submitted that test concerning public
  policy applied by the Division Bench based on the decision of
  this Court in Renusagar Power Co. Ltcfl. is flawed. He referred
  to a subsequent decision of this Court in Oil and Natural Gas
F Corporation Ltd. vs. Saw Pipes LtcP. and submitted that this
  Court has given wider meaning to the expression "public policy
  of India" used in Section 34 of the 1996 Act in that case. He
  submitted that the wider meanir.g given to the expression
  "public policy of India" used in Section 34 by this Court has also
G been applied to the same expression occurring in Section 48
  (2)(b) of the 1996 Act. He, thus, submitted that the matter needs
  to be sent back to the High Court for reconsideration on this
  ground alone.
    1.   AIR 1994 SC 860.
H 2. (2003) 5 sec 10s
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                        1145
              [R.M. LODHA, J.]

     12. It is true that in Renusagar1, relied upon by the Division      A
Bench, a narrower meaning has been given to the expression
'public policy of India' while this Court in a subsequent decision
in the case of Saw Pipes Ltd.2 has given wider meaning to that
expression. This Court in the case of Saw Pipes Ltd.2 (para
31, page 727) stated as under:                                           B
    "31. Therefore, in our view, the phrase "public policy of
    India" used in Section 34 in context is required to be given
    a wider meaning. It can be stated that the concept of public
    policy connotes some matter which concerns public good
    and the public interest. What is for public good or in public        c·
    interest or what would be injurious or harmful to the public
    good or public interest has varied from time to time.
    However, the award which is, on the face of it, patently in
    violation of statutory provisions cannot be said to be in
    public interest. Such award/judgment/decision is likely to
                                                                         0
    adversely affect the administration of justice. Hence, in our
    view in addition to narrower meaning given to the term
    "public policy" in Renusagar case it is required to be held
    that the award could be set aside if it is patently illegal.
    The result would be - award could be set aside if it is
    contrary to:                                                         E
            (a) fundamental policy of Indian law; or
            (b) the interest of India; or
            (c) justice or morality, or
            (d) in addition, if it is patently illegal.                  F
    Illegality must go to the root of the matter and if the illegality
    is of trivial nature it cannot be held that award is against
    the public policy. Award could also be set aside if it is so
    unfair and unreasonable that it shocks the conscience of
    the court. Such award is opposed to public policy and is             G
    required to be adjudged void."
     13. There is merit in the submission of learned senior
counsel that in view of the decision of this Court in Saw Pipes
Ltd.2, the expression 'public policy of India' used in Section 48        H
(2)(b) has to be giv_en wider meaning and the award could be
    1146 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A set aside, 'if it is patently illegal'. At the first blush we thought
  of remanding the matter to the High Court, but on a deeper
  thought, we decided to hear the objections relating to patent
  illegality in the award ourselves as the award by the Arbitral
  Tribunal was given as far back as on October 18, 1999 and
B about 12 years have elapsed since then. We thought that the
  issue relating to enforceability of the subject award must be
  brought to an end finally one way or the other.
         14. Mr. Krishnan Venugopal, learned Senior counsel
  strenuously urged that the contract entered into between the
C sellers and the buyers was a CIF contract and the risk in the
  goods and the property passed over to the buyers upon the
  shipment of the goods on January 29, 1998 and in any case
  the property in the goods passed over to the buyers when the
  shipping documents were handed over to them through the
D Banking channels on negotiations of letter of credit on February
  19, 1998. He would submit that from this day the sellers'
  liabilities ceased to exist. In this connection he relied upon a
  decision of this Court in Mau/a Bux vs. Union of lndia 3 • He also
  referred to Section 26 of the Sale of Goods Act, 1930 (for short
E '1930 Act').
       15. Learned Senior counsel also submitted that the
  stipulation in clause 4, "in case the goods don't arrive the
  customs area of Russian Federation within 180 days from the
  date of payment the transferred amount is to be reimbursed to
F the Buyers' account" amounts to penalty within the meaning of
  Section 74 of the Contract Act, 1872 (for short, '1872 Act') and
  being unconscionable bargain is void under Section 23 of the
  1872 Act and, therefore, enforcement of the subject award by
  the Indian Courts is contrary to 'public policy of India'. He relied
  upon two decisions of House of Lords; (i) Lord Elphinstone vs.
G The Monk/and Iron and Coal Company Limited, and
   Liquidafr,Jr$4 ; and (ii) Dunlop Pneumatic Tyre Company
   Limited vs. New Garage and Motor Company Limitecf'.
   3.   1969 (2) sec 554.
   4.   1.886 House of Lords VOL. XI page 332.
H 5. (1915) AC 79.
     PHULCHAND EXPORTS LTD. v. 000 PATRIOT                      1147
                [R.M. LODHA, J.)
     16. C.1.F. (Cost, Insurance, Freight) contract is well-             A
understood by the people in commerce and in law. In Kennedy's
C.1.F. Contracts (Third Edition) revised by Dennis C. Thompson,
a C.l.F. contract is explained (at page 1) thus :
      "......... It is a contract which contemplates the carriage of
      goods by sea, and is the most common form of shipping              B
      contract in use today. It is known as a c.i.f. contract, for the
      price which the buyer has to pay is the cost of the goods,
      together with the insurance of the goods during transit and
      the freight to the port of destination.
             Under this form of contract the seller performs his C
      obligations by shipping, at the time specified in the contract
      or, in default of express provision in the contract, within a
      reasonable time, goods of the contractual description in
      a ship bound for the destination named in the contract, or
      by purchasing documents in respect of such goods already D
      afloat, and by tendering to the buyer, as soon as possible
      after the goods have been destined to him, the shipping
      documents, i.e., a bill of lading for carriage of goods, a
      policy of insurance covering the reasonable value of the
      goods, together with an invoice showing the amount due E
      from the buyer."
     17. In C.l.F. and F.O.B. Contracts (Fourth Edition) by David
M. Sassoon dealing with essence of C.l.F. contracts, it is stated
that essential feature of a C.l.F. contract is that delivery is
satisfied by delivery of documents and not by actual physical            F
delivery of the goods. Shipping documents required under a
C.1.F. contract are bill of lading, policy of insurance and an
invoice.
    18. In Johnson v. Taylor Bros. 6, Lord Atkinson in the
House of Lords explained the meaning of C.l.F. contract as               G
under:
      " ....... when a vendor and purchaser of goods situated as
      they were in this case (Seller in Sweden and buyers in

6.   [1920] A.C. 144 at p. 155.                                          H
    1148 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A       England) enter into a c.i.f. contract, such as that entered
        into in the present case, (Ordinary c.i.f. terms), the vendor
        in the absence of any special prov;sion to the contrary is
        bound by his contract to do six things. First, to make out
        an invoice of the goods sold. Second, to ship at the port
B       of shipment goods of the description contained in the
        contract. Third, to procure (There might be added the
        words "on shipment, .see ante, § 7") a contract of
        affreightment under which the goods will be delivered at
        the destination contemplated by the contract. Fourth, to
        arrange for an insurance upon the terms current in the
c       trade which will be available for the benefit of the buyer.
        Fifthly, with all reasonable despatch to send forward and
        tender to the buyer these shipping documents, namely, the
        invoice, bill of lading and policy of assurance, delivery of
        which to the buyer is symbolical of delivery of the goods
D       purchased, placing the same at the buyer's risk and
        entitling the seller to payment of their price ....... .".
         19. Section 26 of the 1930 Act upon which reliance was
    placed by the learned senior counsel for the sellers reads as
    follows:
E
        "S. 26. Risk prima facie passes with property.- Unless
        otherwise agreed, the goods remain at the seller's risk
        until the property therein is transferred to the buyer, but
        when the property therein is transferred to the buyer, the
        goods are at the buyer's risk whether delivery has been
F       made or not:
        Provided that, where delivery has been delayed through
        the fault of either buyer or seller, the goods are at the risk
        of the party in fault as regards any loss which might not
        have occurred but for such fault:
G
        Provided also that nothing in this section shall affect the
        duties or liabilities of either seller or buyer as bailee of the
        goods of the other party."
        20. The title of Section 26 shows that the rule provided
H
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                   1149
              [R.M. LODHA, J.]

there-under is the prima facie rule subject to the agreement A
otherwise between the parties. This is clearly indicated by the
expression "unless otherwise agreed" with which the section
begins. The parties to the contract are, thus, free to by-pass
the prima facie rule provided in Section 26 by making
agreement otherwise. The prima facie rule in Section 26 is that B
the goods remain at the seller's risk until the property in the
goods is transferred to the buyer. But when the property in the
goods is transferred to the buyer the goods are at the buyer's
risk whether delivery has been made or not. The above rule has
some exceptions. The first proviso provides that where delivery c
of goods has been delayed due to the fault of either buyer or
seller, the goods are at the risk of the party in fault as regards
any loss which might not have occurred but for such fault. The
second proviso is further subject to the first proviso and
provides that nothing in the section shall affect the duties or
liabilities of either seller or buyer as bailee of the goods of the D
other party.
     21. The obligations upon a seller under a C.l.F. contract
are well known, some of which are in relation to goods and some
of which are in relation to documents. In relation to goods, the E
seller must ship goods of contract description on board a ship
bound to the contract destination. If there is a late shipment or
the seller has put goods on board a ship not bound to the
contract destination as stipulated, in our view, the logical
inference that must necessarily follow is that the seller has not
put on board goods conforming to a contract destination.          F
     22. In the present case, as we see it, there is late shipment·
of goods by 16 days. Besides delay in shipping the goods and
the delayed departure of the vessel from the port of loading,
the goods were shipped in a vessel having no firm commitment
to reach the port of Novorossiysk as the first port of discharge. G
As a matter of fact the sellers gave a line bill of lading giving a
carrier right to determine the line of unloading and the
consecutive order of destination of sea ports and as a result
of that the goods were loaded on board the vessel that was no
 longer to reach the port of Novorossiysk as first port of H
    1150 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.


A discharge. The contract clearly provides in clause 4 that
   shipment should be done by a vessel that is on way to
   Novorossiysk as the first port of discharge. This term in the
  contract is not inconsequential or immaterial but seems to be
  fundamental having regard to the subject matter of the goods.
8 The sellers breached the terms of the contract at the very
  threshold by late shipment of goods and by loading on board
  the vessel which was no. longer to reach the port of Novorossiysk
  as the first port of discharge. The sellers having breached the
  terms of the C.l.F. contract at the threshold, it is very difficult to
  hold that property in the goods got transferred out and out to
C the buyers on shipment of the goods or when the shipping
  documents were handed over to the bank for negotiations of
  UC. In a case such as this one, the sellers' failure to discharge
  the primary obligation under the contract regarding the shipment
  of goods can be held to have resulted in postponement of
D transfer of title in goods to the buyers. In any case the prima
  facie rule contemplated in Section 26 of the 1930 Act stands
  rebutted in the facts of the present case.
        23. Even if the property in the goods is deemed to have
  transferred to the buyers, since there was no delivery of the
E goods due to the fault of the sellers in shipment of the goods,
  firstly belatedly and then by a vessel that was not on way to
  Novorossiysk as the first port of discharge, the goods continued
  to be at the risk of the sellers as they were in fault. In that
  situation, first proviso to Section 26 of the 1930 Act is clearly
F attracted.
       24. We do not find any merit in the case set up by the
  sellers that their liability ceased to exist on shipment of the
  goods on January 29, 1998 or in any case when the shipping
  documents were handed over through the banking channels on
G negotiations of Letter of Credit. As in the present case, the
  sellers were in breach at the threshold, it is immaterial whether
  or not the buyers had a right of action against the insurers or
  carrier.
       25. The buyers' claim was founded on the breach of
H contract by the sellers and particularly with reference to the last
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                  1151
              [R.M. LODHA, J.]

paragraph of clause 4 of the contract that provided, "in case A
the goods do not arrive to the customs area of Russian
Federation within 180 days from the date of payment the
transferred amount is to be reimbursed to the buyers' account".
The goods not only did not arrive to the customs area of Russian
Federation within 180 days from the date of payment but they 8
never arrived at all in the customs area of Russian Federation/
the port of Novorossiysk (port of discharge). The Arbitral Tribunal
held that there were breaches by the sellers and that the above .
clause for reimbursement could be invoked by the buyers. The
Arbitral Tribunal, however, did not award the full price paid by C
the buyers to the sellers but instead awarded half of that amount
as there was delay by the buyers in invoking the clause of
reimbursement and the buyers also did not pass the shipping
documents and the insurance certificate to the sellers. The
contention of the learned senior counsel for the sellers in
contesting the enforcement of the award is that the clause of D
reimbursement amounts to 'penalty' within the meaning of
Section 74 of the 1872 Act and also unconscionable bargain
and, therefore, void under Section 23 of that Act. He would,
thus, submit that enforcement of such award would be contrary
to public policy of India.                                          E
      26. Section 73 of the 1872 Act provides for compensation
for loss or damage caused by breach of contract and Section
74 makes a provision for compensation for breach of contract
where penalty is stipulated for. These two Sections - 73 and
74 - of the 1872 Act read as under:                                F
     "73. Compensation for loss or damage caused by breach
     of contract.- When a contract has been broken, the party
     who suffers by such breach is entitled to receive, from the
     party who has broken the contract, compensation for any
     loss or damage caused to him thereby, which naturally G
     arose in the usual course of things from such breach, or
     which the parties knew, when they made the contract, to
     be likely to result from the breach of it.
     Such compensation is not to be given for any remote and
     indirect loss or damage sustained by reason of the breach.    H
    1152 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A      Compensation for failure to discharge obligation
       resembling those created by contract-When an
       obligation resembling those created by contract has been
       incurred and has not been discharged, any person injured
       by the failure to discharge it is entitled to receive the same
B      compensation from the party in default, as if such person
       had contracted to discharge it and had broken his contract.
       Explanation.-ln estimating the loss or damage arising
       from a breach of contract, the means which existed of
       remedying the inconvenience caused by the non-
c      performance of the contract must be taken into account.
       S. 74. Compensation for breach of contract where penalty
       stipulated for.-When a contract has been broken, if a sum
       is named in the contract as the amount to be paid in case
       of such breach, or if the contract contains any other
D      stipulation by way of penalty, the party complaining of the
       breach is entitled, whether or not actual damage or loss
       is proved to have been caused thereby, to receive from
       the party who has broken the contract reasonable
       compensation not exceeding the amount so named or, as
       the case may be, the penalty stipulated for.
E
       Explanation.-· A stipulation for increased interest from the
       date of default may be a stipulation by way of penalty.
       Exception.- When any person enters into any bail-bond,
       recognizance or other instrument of the same nature, or
F      under the provisions of any law, or under the orders of the
       Central Government or of any State Government, gives any
       bond for the performance of any public duty or act in which
       the public are interested, he shall be liable, upon breach
       of the condition of any such instrument, to pay the whole
G      sum mentioned therein.
       Explanation.- A person who enters into a contract with
       Government does not necessarily thereby undertake any
       public duty, or promise to do an act in which the public are .
       interested."
H
     PHULCHAND EXPORTS LTD. v. 000 PATRIOT 1153
                [R.M. LODHA, J.]

     27. Both these Sections provide for reasonable                   A
compensation in a case of breach of contract. None of these
two Sections makes the award of liquidated damages illegal.
Section 74, as observed by this Court, in the case of Fateh
Chand v. Balkishan Dass7 is, "an attempt to eliminate the
somewhat elaborate refinements made under the English                 8
common law in distinguishing between stipulations providing
for payment of liquidated damages and stipulations in the
nature of penalty......... The Indian Legislature has sought to cut
across the web of rules and presumptions under the English
common law, by enacting a uniform principle applicable to all         C
stipulations naming amounts to be paid in case of breach, and
stipulations by way of penalty."
      28. The plain reading of Section 74 would show that it
deals with the measure of damages in two classes of cases
(i) where the contract names a sum to be paid in case of breach
and (ii) where the contract contains any other stipulation by way     D
of penalty. In Fateh Chand?, this Court held :
            "....The expression "if the contract contains any other
      stipulation by way of penalty" widens the operation of the
      section so as to make it applicable to all stipulations by      E
      way of penalty, whether the stipulation is to pay an amount
      bf money, or is of another character, as, for example,
      providing for forfeiture of money already paid. There is
      nothing in the expression which implies that the stipulation
      must be one for rendering something after the contract is
      broken. There is no ground for holding that the expression      F
      "contract contains any other stipulation by way of penalty"
      is limited to cases of stipulation in the nature of an
      agreement to pay money or deliver property on breach
      and does not comprehend covenants under which amounts
      paid or property delivered under the contract, which by the     G
      terms of the contract expressly or by clear implication are
      liable to be forfeited."
      29. In the case of Mauia Bux3 while dealing with Section

7.   (1964) 1 SCR 515.                                                H
    1154 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A 74 of the 1872 Act, this Courtwas concerned with the case of
   forfeiture of the amount of deposit. It was held, "forfeiture of
   reasonable amount paid as earnest money does not amount
   to imposing a penalty. But, if forfeiture is of the nature of penalty,
   Section 74 applies". It was further held, 'where under the terms
8 of the contract, the party in breach has undertaken to pay a sum
   of money or to forfeit a sum of money which he has already paid
   to the party complaining of a breach of contract, the undertaking
  1is of the nature of a penalty'. We are afraid the decision of this

   Court in Maula Bux3 does not support the contention of the
   learned senior counsel that the stipulation of reimbursement
C contained in last para of clause 4 of the contract to transfer the
   payment of goods already received by sellers in the event of
   non-delivery of the goods within 180 days in the customs area
   of Russian Federation amounts to penalty. The stipulation for
   reimbursement in the event stated in last para of clause 4 of
D the contract is not in the nature of penalty; the clause is not in
  terrorem. It is neither punitive nor vindictive. Moreover, what has
   been provided in the contract is the reimbursement of the price
   of the goods paid by the buyers to the sellers. The clause of
  reimbursement or repayment in the event of delayed delivery/
E arrival or non-delivery is not to be regarded as damages. Even
  in the absence of such clause, where the seller has breached
  his obligations at threshold, the buyer is entitled to the return
  of the price paid and for damages. We can see no reason why
  the sellers should not be bound by it and the court should not
F enforce such term. No way the clause is in the nature of threat
  held over the sellers in terror.
         30. Section 23 of the 1872 Act reads as under : .
         "S. 23. What considerations and objects are lawful, and
         what not.-The consideration or object of an agreement
G        is lawful, unless-
         it is forbidden by law; or
         is of such a nature that, if permitted, it would defeat the
         provisions of any law; or
H        is fraudulent; or
   PHULCHAND EXPORTS LTD. v. 000 PATRIOT                   1155
              [R.M. LODHA, J.]
    involves or implies injury to the person or property of        A
    another; or
    the Court regards it as immoral, or opposed to public
    policy.
    In each ot these cases, the consideration or object of an
                                                                   8
    agreement is said to be unlawful. Every agreement of
    which the object or consideration is unlawful is void."
      31. The transactions covered by Section 23 are the
transactions where the consideration or object of such
transaction is forbidden by law or the transaction is of such a c
nature that if permitted would defeat the provisions of any law
or the transaction is fraudulent or the transaction involves or
implies injury to the person or property of another or where the
court regards it immoral or opposed to public policy. Whether
particular transaction is contrary to a public policy would
ordinarily depend upon the nature of transaction. Where 0
experienced businessmen are involved in a commercial
contract and the parties are not of unequal bargaining power,
the agreed terms must ordinarily be respected as the parties
may be taken to have had regard to the matters known to them.
The sellers and the buyers in the present case are business E
persons having no unequal bargaining powers. They agreed on
all terms of the contract being in conformity with the international
trade and commerce. Having regard to the subject matter of
the contract, the clause for reimbursement or repayment in the
circumstances provided therein is neither unreasonable nor F
unjust; far from being extravagant or unconscionable. It is the
precise sum which the sellers are required to reimburse to the
buyers, which they had received for the goods, in case of the
non-arrival of the goods within the prescribed time. More so,
the fact of the matter is that goods never arrived at the port of G
discharge. The Arbitral Tribunal has only awarded
 reimbursement of half the price paid by the buyers to the sellers
 and, therefore, the award cannot be held to be unjust,
 unreasonable or unconscionable or contrary tci the public policy
 of India.
                                                                     H
    1156 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.


A      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
B 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
c   not chosen to appear, there shall be no order as to costs.
    B.B.B.                                       Appeal dismissed.