JUDGMENT
S.C. Jain, J.
(1) As per the case put forward by Jagson International Ltd, hereinafter referred to as the petitioner, they entered into an agreement on 26.4.1991 for the repair of Domier 228 Aircraft bearing registration No. A5-RGB at Paro Airport, Bhutan with Hindustan Aeronautics Ltd. Kanpur Division, hereinafter referred to as the respondent No. 1. As per clause 4 of the agreement the cost of repair of the said aircraft was fixed at Rs. 61.50 lakhs which included the scope of work as mentioned in para 1 of the agreement. The said agreement also provided the following items for which no extra charges were payable by the petitioner : 1. Cost of structural items required to be replaced as per Annexure-1 2. Transportation of items, tools and jigs etc required for repair at Bhutan excluding those mentioned in para 3 above. 3. traveling and daily allowance for Hal team. 4. Fuel cost for ground run, local flight testing at Bhutan and ferry flight Jagson International Ltd. Vs. Hindustan Aeronautics Limited & Ans. 81 from Bhutan to Delhi/Kanpur.
(2) As per the case of the petitioner under the said agreement it was also agreed between the parties that the petitioner would pay extra cost for repair/replacement of any item which would be found damaged during the course; of repair and which would not .have been ascertained at the time of executing the agreement on the basis of actual labour/material consumed plus 10% of the said cost. In accordance with the agreement the petitioner paid to respondent No. 1 Rs. 61.50 lakhs towards full and final settlement of consolidated amount as agreed upon between the parties with regard to the repair of the aircraft. In addition to the aforesaid payment of Rs. 61.50 lakhs the petitioner has also paid further sum of Rs. 45 lakhs to respondent No. 1 in the bonafide belief that the same represents the cost of items used by respondent No. I which was not identified by the experts during inspection/investigation of the aircraft and the said items did not form part of the consolidated amount of Rs. 61.50 lakhs. Despite the payment of the contractual amount of Rs. 61.50 lakhs and additional amount of Rs. 45 lakhs, the respondent failed to deliver the aircraft, after repairing the same to the petitioner. On the contrary, the petitioner was shocked and surprised to receive letter dated 20.3.92 from respondent No. I whereby respondent sent an invoice dated 10.3.92 for Rs. l,94,27,684.00 towards various jobs carried out by respondent No. 1 on the said aircraft. Along with the said letter dated 10.3.92 the respondent also enclosed a statement and claimed balance of Rs. 3,07,92,734.00 . Respondent No. 1 instead of sending the aircraft sent another invoice dated 27th March, 1992 for Rs. 39.07.487.00 being the cost of materials issued for repair of the said aircraft.
(3) Vide telex dated 27.3.91 received from resident No. I the petitioner was asked to pay Rs 3,47,85,505.00 before taking delivery of the aircraft. The demand made by the respondent through these invoices/bills has been alleged to be arbitrary, excessive and unrealistic and, therefore, the petitioner filed this petition under Section 20 of the Arbitration act for referring the disputes and differences between the parties to the Arbitrator as per agreement dated 20.4.92.
(4) The petitioner has moved this application, I.A. 6089/92 mentioning therein that the petitioner has already paid Rs. l,06,50,000.00 To respondent towards repairs of the aircraft and that despite this fact delivery of the aircraft has not yet been made by the respondent and non delivery of the aircraft despite repeated requests and reminder, the petitions is suffering a loss of Rs. l,25,000.00 per day. Besides this the tourists, Indian as well as foreign, who are also facing a lot of problems of commuting to the small hill stations in the Himalayas, where the Indian Airlines is n6t operating. Interim mandatory injunction has been sought directing respondent No. I to deliver the aircraft to the petitioner immediately.
(5) The respondents contested the petition as well as the interim application and submitted a reply pleading inter alia that the agreement dated 26-4-91 was only with respect to repair to the aircraft to be carried out at Paro Airport Bhutan and repairs carried out at Kanpur is subject matter of a separate contract. The agreement dated 26.4.91 related to the work enumerated at paras I and 4 which were covered by the cost estimate of Rs. 61.50 lakhs as also repairs/replacement of parts as stated in para 4.1 which were not included in the cost of Rs 61.50 lakhs but were to be charged separately. After adjusting Rs. l,06,50,000.00 paid by the petitioner against the outstanding invoices an amount of Rs. 114.50- lakhs is still due under the agreement dated 26.4.91 and Rs. 233.35 lakhs towards the work done at Kanpur In pursuance to a subsequent contract. It is,in fact, the respondent No. I who is deprived of huge amount of Rs. 347.85 lakhs which is legitimately due to them. The petitioners have no prima facie case and the balance of convenience is also not in their favor and they are not entitled for interim mandatory injunction at all unless the balance amount due to the respondents is paid.
(6) I have heard the counsel for the parties and gone through the record.
(7) Learned counsel for the petitioner argued that there is only one agreement which is dated 26.4.1991 which covers all repairs and as per this agreement the petitioners have paid Rs. l,06,50,000.00 and further demand of Rs 3,47,85,000.00 is illegal, arbitrary and against the terms of the contract. Elaborating his argument the learned counsel submitted that the respondent was to charge only labour/material cost consumed plus ten per cent. The respondents did not show the invoices showing the actual cost of the material consumed in repairing of the aircraft. The rates of the material consumed have been shown to be exorbitant and at enhanced foreign exchanges rates. The respondent cannot charge more than the actual labour/material cost consumed plus ten per cent. My attention has also been drawn, towards the reports of the Local Commissioners dated 20.5.92 and 8.6.92, who were appointed to go into the invoice sand to inspect the aircraft and to indicate the extent of repairs undertaken by the respondents. According to the learned counsel, as a general practice Aircraft Scares (rotable, rubberised items etc.) have a shelf life of five to ten years. As per report of the Local Commissioners 1500 items provided by the respondent were allegedly imported for air force and presumably must have been in stock for three or four years and as such they should have been manufactured by M/S Domier about five years ago. Complete scrutiny of shelf life, date of manufacture and purchase and assessment of residual life and value of the spares has not been taken note of by the respondent while raising the bills in dispute.
(8) The learned counsel further argued that the amount demanded by the respondent is contrary to the terms of the agreement and that the balance of convenience is operating in favor of the petitioner as the aircraft is lying idle in the premises of the respondent No. I and therefore, the petitioner is entitled for interim mandatory injunction as claimed for.
(9) Learned counsel for the respondent argued that the agreement dated 26.4.91 stands satisfied as soon as the work of repairs to the aircraft was completed at Paro airport Bhutan and it was brought to Kanpur. He drew my attention to para 2 of the agreement which provides that if Jagson wants to get the work done mentioned at ‘a’ to ‘h’ from Hal , Hal will quote for the same separately for consideration of Jagson. The cost of repair and time frame for these items is not included in the total cost as stipulated in para 4 and 6. According to the learned counsel there is no arbitration clause in the second agreement and therefore the petition under Section 20 of the Arbitration Act does not lie. According to him, as per the survey and the report of the Local Commissioners approx. 1500 items were found to have been provided by the respondent in the repair of the said aircraft. These items on the request of the petitioner were taken out from their stock which was meant for defense service and naturally the price of these items should be as on the date when they were fitted in the aircraft. The petitioner has also to pay sales tax, custom and excise duty as applicable. The respondent has been deprived of considerable amount for no fault of it. The petitioner is not entitled to delivery of the aircraft till the amount of various bills is paid, which runs into crores of rupees.
(10) Without commenting upon the merits of the case at this stage and without going into the question whether the petition under Section 20 of the Arbitration Act lies or not it has to be seen whether the petitioner is entitled to the interim relief of mandatory injunction for delivery of the aircraft in question and if so on what terms and conditions ? Record shows that initially the agreement dated 26.4.1991 was entered into for repair of the aircraft at Paro Airport Bhutan only to the extent that it can be ferried to Delhi/Kanpur. The scope of the work included inter alia
A)heavy landing checks as per Maintenance Manual and crack detection to the extent possible at site;
B)structural repair/replacement of items, details of which are given in Annexure-
1 to the said agreement;
C)checking of serviceability of notables on test bench which are available with Hal and identify the unserviceable and missing items.
D)Fitment of serviceable rotables on the air craft.
E)Functional checks of various, aircraft system e.g. power plant, hydraulics, fuel system, flight controls, landing gear, retraction, power supply, communication, navigation, light, flight instruments etc.
F)Engine ground run and flight testing.
G)Ferrying the aircraft from Paro to Delhi/Kanpur as per Jagson’s advise.
(11) For that work the cost of repair of the aircraft was fixed at Rs 61.50 lakhs which included the scope of work as mentioned above and also the following items for which no extra cost was to be paid to the respondent i.e. 1. Cost of structural items required to be P replaced as per Annexure-1. 2. Transportation of items, tools and jigs etc required for repair at Bhutan excluding those mentioned in para 3 above. 3. traveling and daily allowance for Hal team. 4. Fuel cost for ground run, local flight testing at Bhutan and ferry flight from Bhutan to Delhi/Kanpur.
(12) It was specifically mentioned in that agreement that if the petitioner wanted to get some other work done as mentioned in para 2 items (a) to (h) the respondent would quote separately for consideration of the petitioner and the cost of repairs and time frame is not included in the total cost as mentioned in that agreement.
(13) In para 4.1 costs indicated in para 4 does not include the price of repair/replacement of any item which will be found damaged during the course of repair excluding the structural repair as per Annexure-1 which would be charged extra on the basis of actual labour/material consumed plus 10%. Admittedly, at the request of the petitioner the aircraft was further repaired at Kanpur and about 1500 items were incorporated as per the report of the Local Commissioners. The Local Commissioners in order to facilitate the technical scrutiny of these items segregated these items incorporated in the aircraft in four groups.
(14) Group 1 comprises mainly of hardware and structural items. These are imported items and have no specified shelf life and include such items as nuts, bolts, screws, brickets, skins, sections etc, as listed in Annexure-A attached with the report. The date of purchase of these items could not be established with referenced to the purchase invoices as they were not produced by the respondent. The price of these items has been computed by the respondent from October, 1991 Price Catalogue of M/S Domier – the suppliers. As the prices in the printed price list are in D.M the conversion rate of the D.M. into rupees has been done as Rs 18.55 per D.M. prevailing in March, 1992. The items covered in this group number 920 and have been priced at Rs. 5.16 lakhs.
(15) Group 2. covers items such as structural parts, pipelines, brickets and furnishing items, fabricated by the respondent and in some case locally purchased. These items have no specified shelf life as in the case of Group 1 items. The items so covered are listed in Annexur: ‘B’ attached with the report and account for 388 items. The actual cost of fabrication of these items has not been determined by the respondent. The price of these items is based on Domier’s priced catalogue of October, 1981 and the conversion rate of Dm to rupees has been taken as 18.55 as in Group I items. Instead of custom duty, excise duty has been levied on the price so determined. The price of these items has been discounted at 20% of the imported price, to arrive at the cost of fabricated items computed by the respondent as Rs 78.89 lakhs.
(16) Group 3 items are imported items and generally have a defined shelf life, as given by the manufacturer. These items on expiry of shelf life can be re-conditioned and used again There are 96 items in this group such as pumps, motors, actuators, valves etc. These items have also been priced by Hal with reference to October, 1991 price list of M/S. Domier. The printed prices in Dm have been converted into Indian rupees at Rs 18.55 per Dm prevailing in March, 1992. Based on such price computation and after levy of customs duty at 20% and sales tax at 10%.the price of these items has been fixed by Hal as Rs 211.55 lakhs.
(17) Group N0.4. Items in this group are mainly rubberised imported items such as hoses, tyres, tubes, batteries etc. These have specified shelf life but are not usable after expiry of the prescribed shelf life and as such have to be discarded after use. These have been listed in Annexure D of the report and account for 85 items. Hal has not priced these items with reference to invoices which were not made available and have adopted October, 1991 priced spare list for pricing these items at Dm Rupees conversion rate Of Rs 18.55 per Dm as in the case of items falling in other groups. Customs duty at the rate of 20% and sales tax at 10% has been levied on the-price so determined as Rs. 4.86 lakhs.
(18) Segregating these items in four groups, local commissioners found total number of items incorporated as 1489 valued at Rs 3,51,55,000.00 as computed by the respondent. The question of residual life in case of 920 imported items falling in group 1 and 388 items falling in group 2 does not arise as they do not have any specified shelf life. Thus 1308 items out of 1489 have no specified shelf life, leaving a balance of 181 items where defined shelf life aspect has to be kept in view. Of the 181 items which may have a defined shelf life, some fail under the category which after expiry of shelf life can be reconditioned. Other items on expiry of shelf life have to be discarded. In the Indian Air Force if the items have 2/3rd of residual life, they are treated as new. Technical scrutiny has revealed that all the items have more than 2/3rd shelf life. According to the report the date of purchase of items falling in group I and date of fabrication of items under group 2 has no effect on shelf life.
(19) According to the report of the Local Commissioners the total value of the invoices is Rs 4,18,21,120.00 out of which labour cost is Rs. 79,22,000.00 and the material cost is Rs. 2,62,98,325.00 custom / excise duty is Rs.45,10,857 and sales tax is Rs 30.89.938.00 .
(20) Out of the total cost, Rs 76.01 lakhs is on account of customs duty levied at the rate of 20%, excise duty levied at the rate of 15.5% and sales tax levied is at the rate of 10%. These are estimates of Hal and the admissible levy will depend on the assessment of the taxes by concerned authority. Normally customs duty is payable on actual basis. As per the report at present customs duty on imported aircraft spares is 3%. Similarly sales tax is also payable on actual basis. In this context the total value of material component was reduced and the cost was scaled down by 20% in the report dated 29.5.92 of the local commissioners.
(21) Without going into the question as to what exact amount is payable by the petitioners to respondent as labour charges and price of the components it is apparent that besides the labour charges, price of the components supplied by the respondent and the fact that customs and excise duty and sales tax is also payable, it would be in the fitness of things that in case the petitioner further pays Rs. 2 crores in account in addition to the amount already paid by it and furnishes bank guarantee for the balance amount, the respondent No.1 is directed to hand over the aircraft in question to the petitioner. This is, however, without prejudice to the rights of the parties and without any expression of opinion on the merits of the case.
(22) This application stands disposed of accordingly.