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[Cites 26, Cited by 0]

Bangalore District Court

Had Submitted His Comments On The ... vs No.1 Approving A Drawing And Gtp Of 160 ... on 22 March, 2022

                          61
                                  Com.O.S.No.4848/2017

 IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
           JUDGE, AT BENGALURU (CCH.83)

           THIS THE 22ND DAY OF MARCH 2022.

                     PRESENT:
        SRI.DEVARAJA BHAT.M., B.COM, LL.B.,
      LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
                    BENGALURU.

                Com. O.S. No.4848/2017

BETWEEN:

M/s    Bharat    Heavy
Electricial    Limited,
Regional     Operation
Division,   Integrated
office Complex, Lodhi
Road, New Delhi - 110
003, represented by
Mr.    M.K.   Sharma,
Executive     Director,
CPP, PMG, CC & ROD.


                                         : PLAINTIFF

(Represented by M/s.
Nextlegal Services -
Advocates)

                          AND
                              61
                                  Com.O.S.No.4848/2017

1. M/s. Easun Reyrolle
Limited,           havig
Registered Office at
Temple      Tower,    6th
Floor, no. 672, (Old No.
476),    Anna      Salai,
Nandanam,      Chennai,
Tamil Nadu - 600 035.

And also at No. 389,
Rasu         Kumaki,
Hulimavu, Begur Hobli,
Banerghatta     Road,
Bengaluru - 560 076,
represented   by   its
Managing Director.

2. M/s Easun - MR
Tap Changers Private
Limited,     No.     672,
Temple      Tower,     6th
Floor, CIT Nagar, Near
Evr    Building,    Anna
Salai,       Nandanam,
Chennai - 600 035,
represented      by    its
Managing Director.

                                  : DEFENDANTS

(Defendant    No.1   is
represented   by   Sri.
Raghavendra B. Hanjur
Advocate and Defendant
No.2 is represented by
                                 61
                                          Com.O.S.No.4848/2017

Sri.             K.V.Sathish
Advocate)

Date of Institution of the 17.07.2017
suit
Nature of the suit (suit on
pronote,        suit      for
declaration & Possession, Suit for recovery of money
Suit for injunction etc.)
Date of commencement of
recording of evidence   12.07.2018
Date  of   First  Case
Management Hearing
Time taken for disposal 33 days
from    the     date   of
conclusion of arguments
Date on which       judgment 22.03.2022
was pronounced
Total Duration                 Year/s     Month/s     Day/s
                                04         08          05



                              (DEVARAJA BHAT.M),
                     LXXXII Addl.City Civil & Sessions Judge,
                                   Bengaluru.

                     JUDGMENT

This is a suit filed by the Plaintiff for recovery of a sum of Rs.7,28,50,000/- from the Defendant with interest at the rate of 14% per annum from the date of suit till the date of realization.

61

Com.O.S.No.4848/2017

2. The contentions of the Plaintiff, in brief, are as follows:-

That the Plaintiff is operating under the control of the Central Government and it is under the administration of Department of Heavy Industries under Ministry of Heavy Industries, Government of India, that the Plaintiff is one of the largest public sector undertakings in the country established under the aegis of the Ministry of Heavy Industries and is engaged in the manufacturing of integrated power plant equipment, that the Plaintiff Company is engaged in the design, engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for the core sector of the economy, viz., Power, Transmission, Industry, Transportation, Renewable Energy, Oil & Gas and defence, that it is one of the largest engineering and manufacturing companies of Indian terms of turnover, that the Defendant No.1 is engaged in the business of supply of structure and equipment as an Engineering Procurement Constructions Contractor in the field of electrical power transmission and distribution, that the Defendant No.2 is an Associate Company of the Defendant No.1 and is a tap-changer manufacturer, that the Defendant No.1 was awarded a contract by M/s Chhattisgarh State Power Transmission Company Limited for the supply of structure and equipment of 220/132/33KV sub-station for the supply of 61 Com.O.S.No.4848/2017 structure and equipment of 220/132/33KV sub-station at Girwani District, Raigarh, Chhattisgarh on turnkey basis, that the Defendant No.1 approached the Plaintiff for the manufacture of the transformers for supplying to M/s CSPTCL, that the Plaintiff confirmed the offer via the letter dated 15.03.2013, that the Defendant No.1 issued a Purchase Order to the Plaintiff dated 18.03.2013, that the Purchase Order was valued for Rs. 8,70,00,000/-, that as per the terms of the purchase order, the date of delivery was on or before September 2013, that 10 % of the advance was to be paid by the Defendant No.1 within 60 days of Purchase Order, that the Plaintiff had submitted his comments on the Purchase Order as per the letter dated 22.03.2013, that the Plaintiff has submitted the revised prices on 27.03.2013, that the Defendant No.1 had insisted upon supplying the OLTC's on a free of cost basis to the Plaintiff through Defendant No.2, that the Purchase Order was modified on 10.04.2013, that the rate and the Total Order Value were also modified to Rs. 8,80,70,000/-, that the payment terms in the P.O. excluded Rs. 26,00,000/- of the OLTC's, that the date of delivery of the Purchase Order items remained the same as of September 2013, that the Plaintiff had provided the requisite drawings etc, to the Defendant No.1, in terms of the purchase order by May and June-2013, that there was considerable delay in the approval of the drawings by M/s 61 Com.O.S.No.4848/2017 CSPTCL, that on 03.08.2013 M/s CSPTCL issued a letter to the Defendant No.1 approving a drawing and GTP of 160 MVA power transformers furnished by the Plaintiff, that the Plaintiff submitted the advance Bank Guarantee of Rs. 84,40,080/-

dated 16.05.2013, that the Defendant No.1 did not furnish the advance payments in time and only after persistent follow-ups, the Defendant No.1 provided the advance amount of Rs. 85,99,773/- on 26.10.2013, that in view of the failure of the Defendant No.1 to comply with the terms of the advance payment, within the stipulated period of 60 days of the Purchase Order, the delivery date as on or before September 2013 as provided in the Purchase Order dated 18.03.2013 had to be modified, that the Defendant No.1 insisted the Plaintiff to revise the delivery date to 31.01.2014 without giving sufficient time to the Plaintiff, that the same was rejected by the Plaintiff via mail dated 07.11.2013, stating that the Plaintiff would not be able to supply the Purchase Order equipment before 31.07.2014, as the advance amount was released by the Defendant No.1 only on 26.10.2013 and hence requested to amending the delivery schedule to July 2014, that the Plaintiff assured that they would make required efforts for the earlier delivery of the transformers, that the Plaintiff had manufactured the Purchase Orders items by December 2013 to the extent possible, without the OLTC's much prior to the time proposed by 61 Com.O.S.No.4848/2017 the Plaintiff, even when the Defendant No.1 was not performing its obligations in due time, that thereafter a stage-I inspection of the Transformer Tank of 160 MVA Transformer and 63 MVA Transformer respectively manufactured by the Plaintiff, was conducted by M/s CSPTCL, that as per the terms of the Purchase Order the Defendant No.1 had to supply the OLTC's which is integral for the assembly of the Power Transformers, free of cost, directly to the Plaintiff's manufacturing division of Jhansi, around August 2013, that after manufacturing of the said items on 31.12.2013, the Plaintiff called upon the Defendant No.1 to provide the OLTC's in terms of the amended PO on an urgent basis, that the Defendant No.1 sent an email dated 31.12.2013, promised that the OLTCs would be dispatched immediately on 15.01.2014, after the finalization of the price and payments terms with the Defendant No.1, that on 01.01.2014, the Defendant No.1 sent an e-mail asserting that it was the Plaintiff's complete responsibility to get the materials from the vendor/Defendant No.2, that taken aback by the stance of the Defendant No.1, the Plaintiff reasserted via an email, on 02.01.2014, that as per the PO dated 01.04.2013, the terms clearly stipulated that it was the responsibility of the Defendant No.1 to deliver the OLTCs manufactured by the Defendant No.2, free of cost, to the Plaintiff, that the Plaintiff also expressed their concerns on the delay caused due to the non-delivery of 61 Com.O.S.No.4848/2017 the OLTC's, the pending Transformer Tank inspection, and the pending drawing approvals and also clarified that all these delays would be attributable to the Defendants, that there were disputes between both the Defendants regarding the payment terms of the OLTCs and there was no clear response from the Defendants, that the Plaintiff pressed these pending issues to the Defendants again through emails dated 06.01.2014, 14.01.2014 etc., but in vain, that the Defendants did not deliver the OLTC's by promised dated, that on 22.01.2014, M/s CSPTCL communicated to the Defendant No.1, that the inspection/test reports of 160 MVA were within the permissible limits of the approved drawing and GTP and that the transformer tank of 160 MVA manufactured by the Plaintiff was acceptable to them, that the Plaintiff again sent a email dated 05.02.2014 to the Defendant No.1, wherein the Plaintiff also attached the Photographs of the Core & Coil assembly, which were awaiting the OLTC's, that the Plaintiff division at Jhansi gave clearances to the OLTC, made by the Defendant No.2 after conducting the inspection on the OLTCs, that it is stipulated in Clause 12.2 of the specification directed by M/s CSPTCL, that an IP 55 Test was to be conducted on each type of OLTCs, in the presence of the representatives of M/s CSPTCL, that the Plaintiff had vide email dated 25.04.2014 informed the Defendant No.2 to submit the IP 55 Test Report, duly witnessed by the M/s 61 Com.O.S.No.4848/2017 CSPTCL representative, that this Test Report was not sent and was awaited for a long period, that event the OLTCs were not sent to the Plaintiff's Jhansi Division for the further assembly of the power transformers, that in spite of the delay in the delivery of OLTCs, which was expected to be delivered by January 2014, the Plaintiff continued with their efforts to deliver the material on time, that after manufacturing the transformer tanks, by December 2013, the Plaintiff had called upon M/s CSPTCL to inspect the same and grant their approval, that despite the Plaintiff communicating their readiness on the inspection of Tanks for the second item as per the Purchase Order 63 MVA Transformer on 03.03.2014, no confirmation was received form the side of the Defendant No.1 regarding the deputation of Inspecting Officials from M/s CSPTCL, that the customer inspection test schedule submitted by the Plaintiff via email dated 30.09.2013 and 10.12.2013 was also awaited without any approval, that the Plaintiff sent a detailed mail to the Defendant on 26.05.2014, expressing their concerns on the approval of certain critical drawing and also for the supply of the OLTCs at the earliest, that the various mail communications dated 05.06.2014 and 09.06.2014 were made to the Defendants to resolve the issues related to the supply of the OLTCs, regarding the pending inspections and test report approvals, that the Plaintiff again issued a letter dated 09.06.2014 pointing out all 61 Com.O.S.No.4848/2017 these issues to the Defendant No.1 and requested to rectify them at the earliest, that the Plaintiff also requested issue an amended purchase order in view of the delay of more than 4 months caused in the supply of the OLTCs, since the assembly of the transformers required a lead time of 8 to 10 weeks after the arrangement of the components, that the Plaintiff also pointed out that it required 4 months time period for the assembling of the power transformers before offering it for the final inspection, that it was not possible for the Plaintiff to go a head with the assembly of the transformers without the promised OLTCs, that the Defendant No.1 repeatedly failed to deliver the OLTCs to the Plaintiff, that on 12.06.2014, the Defendant No.1 arranged for the inspection of 1 st tank of 63 MVA transformer at Bhopal, that there was no action with regard to the 2nd Tank of 63 MVA transformer at Allahabad, that the tanks were lying ready for inspection since March 2014, that the Plaintiff sent mails on 12.06.2014 to the Defendants reminding them about the inspection of 2 nd Tank, as it was lying ready for the inspection at M/s Jyothi Fabricators at Allahabad for a long time, causing space constrained and also pointed out to sort out the OLTC issues and arrange delivery of the OLTC, that the IP 55 test for the OLTCs had been completed successfully at CPRI, Bengaluru, the test report of the same was not sent by the Defendants, that on 18.06.2014 the Plaintiff 61 Com.O.S.No.4848/2017 sent an e-mail requesting them to sent the IP 55 test report for the onward transmission to the Plaintiff's Jhansi Division and to M/s CSPTCL for seeking the dispatch clearance, that there was no advancement in the course of action of the Defendants, that there was severe space constrained in the Plaintiff's working space as the core & coil for the power transformers were lying ready in their shop floor since January 2014, that the Plaintiff's jhansi division had intimated the date of dispatch to be July 2014, that due to the Defendant's delay in the delivery of the OLTCs, the Plaintiff was not able to assemble and deliver the Transformers, that the Plaintiff on 23.06.2014 requested by a letter for resolving the pending action on an urgent basis which included the non-delivery of 5 OLTCs to the Plaintiff Jhansi Division and notified all the issues in the letter, that Plaintiff also pointed out that the price that they had agreed with the Defendant no. would not hold good as there had been an upward price escalation in the prices of the raw materials including the labour and power and that the date of delivery and the price should be on a re-negotiated rate, that the Plaintiff again informed that it would require 5 months time for assembling and offering the transformers and the tanks at their Jhansi Division for final inspection, form the date of receipt of OLTCs, that meanwhile, M/S CSPTCL vide letter dated 28.06.2014 to the Defendant No.1 informed that the 2 nd PO 61 Com.O.S.No.4848/2017 item, tank of 63 MVA was acceptable to them, that several communications were again made by the Plaintiff dated 24.06.2014, 11.07.2014 etc., reminding the Defendants for the approval of RTCC Panel drawings for both 160 MVA and 63 MVA transformers, for the approval of test schedules, for the dispatch of the 5 OLTCs to the Plaintiff Jhansi Division, inspection of the 2nd tank of transformer of 63 MVA etc., that since the RTCC Panel drawings were not approved, the manufacture of the RTCC Panels were on hold and hence was not in a position to offer the RTCC Panel for the inspection of M/s CSPTCL, that in spite of all these communications from the side of the Plaintiff, the Defendants neither took any action to resolve the issues nor gave any reply to the mails of the Plaintiff, that the latest status and readiness of the transformer were informed by the Plaintiff's Jhansi Division to the Plaintiff on 19.07.2014, that the Plaintiff also sent mails to the Defendant on 24.07.2014 and 11.08.2014 requesting for the expedition of the pending issues relating to the approval of the drawings and for the supply of the OLTCs and reminding the delayed delivery, that in the meantime, the Bank Guarantee had to be extended on the insistence of the Defendant No.1 and the same was sent from time to time, to the office of the Defendant No.1, that the Defendant No.1 was only keen in obtaining the extension of the Bank Guarantee furnished by the Plaintiff, that the further 61 Com.O.S.No.4848/2017 extension of the Bank Guarantee was informed by the Plaintiff vide a mail dated 21.08.2014, that the Defendant No.1 sent a mail on 08.09.2014, again trying to evade their responsibility of the supply of the OLTCs by demanding the Plaintiff to source the OLTCs directly in the Plaintiff's capacity, that the Plaintiff re- asserted via mail dated 09.09.2014, that the OLTCs were to be supplied solely by the Defendant No.1, free of cost and also cautioned the Defendant No.1 on the delayed activities, that in spite of all these correspondences, the Defendant No.1 willfully failed to supply the OLTCs to the Plaintiff, that the financial history of the Defendant No.1 revealed that the company had been suffering from losses over the last few years, that during meetings with the officials of M/S CSPTCL, they informed the Plaintiff that the work was going at a very slow pace and that M/s CSPTCL were not at all satisfied with the progress of the work of the Defendant No.1, that it was also clear from the discussion that the Defendant No.1 was going through severe financial crunch and most of the materials ordered for the project of M/S. CSPTCL were not received at site which was causing inordinate delay in the execution of work at Girwani, that meanwhile, the Plaintiff came to know that the contract awarded to the Defendant No.1 by M/s CSPTCL had been terminated on 07.11.2014, that the Bank Guarantee was duly extended by the Plaintiff and was extended to 31.01.2014, 61 Com.O.S.No.4848/2017 31.07.2017 and finally till 31.12.2014, that the Defendant No.1 in spite of failing to comply with their obligation, requested the Plaintiff to extend the Bank Guarantee for a further period of six month, till 30.06.2015, that before the SBI could extend the Bank Guarantee as per the request made by the Defendant No.1, the Defendant No.1 issued the letter dated 16.12.2014 to the SBI thereafter invoking the Bank Guarantee and sought remittance of the amount, that the invocation of said Bank Guarantee was completely a fraudulent act, that the Plaintiff approached the Hon'ble High Court of Delhi and obtained a status-quo order, that ultimately, the Plaintiff sent a letter dated 21.10.2015 to the 1st Defendant that they were still awaiting the delivery of the OLTCs for the transformers, that they Plaintiff gave a deadline of 05.11.2015 for the delivery of the OLTCs failing which the Plaintiff would be take suitable action, that in spite of this the Defendant No.1 had not given any reply for the same and is continuing to breach the terms of the contract and hence the Plaintiff has filed this suit for the above-mentioned reliefs.

3. Though this suit was pending on the file of CCH-70, as per the Notification No. 188/2018 dated 26.02.2018, this matter was transferred to CCH-39. Thereafter, as per hte Notification No. ADM-I (A) 21/2019 dated 10.01.2019 transferred to this 61 Com.O.S.No.4848/2017 Court. Though, the Defendants No. 1 and 2 were appeared before CCH-70, they had not filed their written statement and hence the written statement of Defendant No.1 and 2 was taken on not filed on 13.03.2018. Thereafter, the evidence of Plaintiff side was recorded. When the matter was posted for hearing arguments on 06.01.2020, the 1st Defendant filed his written statement alongwith an I.A., to condone the delay in filing the same. Similarly, the 2nd Defendant has filed his written statement on 25.02.2020 with an I.A. to condone the delay in filing the same. After hearing arguments i dismissed I.A. No. I to IV as per Separate Detailed Order dated 16.12.2021. Hence, there is no defence of the Defendants in this case. However, the 2nd Defendant has filed an I.A. No.V under Order I Rule 10 (2) of Civil Procedure Code to strike out the 2nd Defendant from the cause title and the arguments on the same is heard on 17.02.2022 along with main merits and the contentions taken in the said I.A. is also considered in this Judgment.

4. Based on the above pleadings, the following points arise for my consideration :-

1. Whether there is no privity of contract between the Plaintiff and the 2nd Defendant as contended in the I.A. No. V ?
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Com.O.S.No.4848/2017

2. Whether the Plaintiff is entitled for the Compensation/Suit Claim from the Defendants ?

3. What Order ?

5. On behalf of the Plaintiff, PW.1 is examined and Ex.P.1 to Ex.P.41 are marked.

6. I have heard the arguments of the Advocate for the Plaintiff. I have also heard the arguments of the Advocate for the 2nd Defendant on I.A. No.V.

7. My findings on the above Points are as under:

1. Point No.1 :- In the Negative.
2. Point No.2 :- In the Affirmative.
3. Point No.3 :- As per the final Order for the following reasons.

REASONS

8. Point No.1 :- The PW.1 has deposed that the Plaintiff is operating under the control of the Central Government and it is under the administration of Department 61 Com.O.S.No.4848/2017 of Heavy Industries under Ministry of Heavy Industries, Government of India, that the Plaintiff is one of the largest public sector undertakings in the country established under the aegis of the Ministry of Heavy Industries and is engaged in the manufacturing of integrated power plant equipment, that the Plaintiff Company is engaged in the design, engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for the core sector of the economy, viz., Power, Transmission, Industry, Transportation, Renewable Energy, Oil & Gas and defence, that it is one of the largest engineering and manufacturing companies of Indian terms of turnover, that the Defendant No.1 is engaged in the business of supply of structure and equipment as an Engineering Procurement Constructions Contractor in the field of electrical power transmission and distribution, that the Defendant No.2 is an Associate Company of the Defendant No.1 and is a tap-changer manufacturer, that the Defendant No.1 was awarded a contract by M/s Chhattisgarh State Power Transmission Company Limited for the supply of structure and equipment of 220/132/33KV sub- station for the supply of structure and equipment of 220/132/33KV sub-station at Girwani District, Raigarh, Chhattisgarh on turnkey basis, that the Defendant No.1 approached the Plaintiff for the manufacture of the 61 Com.O.S.No.4848/2017 transformers for supplying to M/s CSPTCL, that the Plaintiff confirmed the offer, that the Defendant No.1 issued Ex.P.2/ Purchase Order to the Plaintiff on 18.03.2013.

9. He has further deposed that the Ex.P.2 was valued for Rs. 8,70,00,000/-, that as per the terms of the Ex.P.2, the date of delivery was on or before September 2013, that 10 % of the advance was to be paid by the Defendant No.1 within 60 days of Ex.P.2, that the Plaintiff had submitted his comments on the Ex.P.2 as per the letter dated 22.03.2013, that the Plaintiff has submitted the revised prices on 27.03.2013, that the Defendant No.1 had insisted upon supplying the OLTC's on a free of cost basis to the Plaintiff through Defendant No.2, that the Ex.P.2 was modified on 10.04.2013 as per Ex.P.3.

10. Ex.P.31 and Ex.P.32 are the letters dated 24.06.2013 sent by the Plaintiff to the Defendant submitting GTP, Quality Plan, Vendor List in respect of 63 MVA Auto Transformer for approval.

11. The PW.1 has further deposed that the rate and the Total Order Value were also modified in Ex.P.3 to Rs. 8,80,70,000/-, that the payment terms in the Ex.P.3 excluded Rs. 26,00,000/- of the OLTC's, that the date of delivery of the 61 Com.O.S.No.4848/2017 items shown in Ex.P.3 remained the same as of September 2013, that the Plaintiff had provided the requisite drawings etc, to the Defendant No.1, in terms of the Ex.P.3 by May and June- 2013, that there was considerable delay in the approval of the drawings by M/s CSPTCL, that on 03.08.2013 M/s CSPTCL issued Ex.P.4/Letter to the Defendant No.1 approving a drawing and GTP of 160 MVA power transformers furnished by the Plaintiff.

12. The PW.1 has further deposed that based on the acceptance of the Defendant No.1, the Plaintiff initiated the manufacture of the item shown in Ex.P.3, that the Plaintiff submitted the advance Bank Guarantee of Rs. 84,40,080/- on 16.05.2013 as per Ex.P.5/ Letter dated 13.08.2013 sent to the Defendant No.1 in terms of Ex.P.3.

13. Ex.P.33 and Ex.P.34 are the Letters dated 30.08.2013 sent by the Plaintiff to the Defendant submitting the drawings and documents in respect of 160 MVA and 220/132/33 KV Auto transformer for approval. Ex.P.35 is the Letter sent by Plaintiff to the Defendant on 07.09.2013 submitting the quality plant, guaranteed technical parameters and sub-vendor list in respect of 63 MVA and 132/33 KV power transformers. Ex.P.37 is an E- mail dated 13.09.2013 sent by the Plaintiff to Defendant requesting for approval for drawings and documents of the 61 Com.O.S.No.4848/2017 power transformers. Thereafter, on 23.09.2013, the Plaintiff sent another Letter as per Ex.P.36 to the Defendant submitting the quality plant, guaranteed technical parameters and sub- vendor list in respect of 63 MVA and 132/33 KV power transformers. Thereafter on 28.09.2013 the Plaintiff sent Ex.P.38/E-mail requesting the Defendant for approval for drawings and documents of the power transformers. The Plaintiff has sent a similar mail as per Ex.P.39 on 04.10.2013.

14. The PW.1 has further deposed that the Defendant No.1 did not furnish the advance payments in time and only after persistent follow-ups, the Defendant No.1 provided the advance amount of Rs. 85,99,773/- on 26.10.2013. Ex.P.6 is the E-mail dated 28.10.2013 sent by the Commercial Engineer of the Jhansi Division of the Plaintiff to the Senior Manager of the Plaintiff attaching the copy of the Cash Collection Advice Sheet containing the details of the advance payment made by the Defendant No.1 on 26.10.2013.

15. The PW.1 has further deposed that in view of the failure of the Defendant No.1 to comply with the terms of the advance payment, within the stipulated period of 60 days of the Ex.P.3, the delivery date as on or before September 2013 as provided in the Ex.P.3 had to be modified, that the Defendant No.1 61 Com.O.S.No.4848/2017 insisted the Plaintiff to revise the delivery date to 31.01.2014 without giving sufficient time to the Plaintiff, that the same was rejected by the Plaintiff as per Ex.P.7/ E-mail dated 07.11.2013, stating that the Plaintiff would not be able to supply the equipment shown in Ex.P.3 before 31.07.2014, as the advance amount was released by the Defendant No.1 only on 26.10.2013 and hence requested to amending the delivery schedule to July 2014.

16. Ex.P.27 is the letter dated 11.11.2013, which reflects the extension of Bank Guarantee in favour of Defendant No.1. Ex.P.40 is the Letter dated 12.11.2013 sent by the Plaintiff to the Defendant submitting the drawings and documents in respect of 160 MVA and 63 MVA transformers for approval.

17. The PW.1 has further deposed that the Plaintiff assured that they would make required efforts for the earlier delivery of the transformers, that the Plaintiff had manufactured the items shown in Ex.P.3 by December 2013 to the extent possible, without the OLTC's much prior to the time proposed by the Plaintiff, even when the Defendant No.1 was not performing its obligations in due time, that thereafter a stage-I inspection of the Transformer Tank of 160 MVA Transformer and 63 MVA 61 Com.O.S.No.4848/2017 Transformer respectively manufactured by the Plaintiff, was conducted by M/s CSPTCL, that as per the terms of the Purchase Order the Defendant No.1 had to supply the OLTC's which is integral for the assembly of the Power Transformers, free of cost, directly to the Plaintiff's manufacturing division of Jhansi, around August 2013, that after manufacturing of the items shown in Ex.P.3 on 31.12.2013, the Plaintiff called upon the Defendant No.1 to provide the OLTC's in terms of the Ex.P.3 on an urgent basis, that the Defendant No.2 sent Ex.P.8/E-mail on 31.12.2013, promised that the OLTCs would be dispatched immediately on 15.01.2014, after the finalization of the price and payments terms with the Defendant No.1.

18. The PW.1 has further deposed that surprisingly on 01.01.2014, the Defendant No.1 sent Ex.P./E-mail asserting that it was the Plaintiff's complete responsibility to get the materials from the vendor/Defendant No.2.

19. The PW.1 has further deposed that taken aback by the stance of the Defendant No.1, the Plaintiff reasserted as per Ex.P.10/E-mail dated 02.01.2014, that as per the Ex.P.3, the terms clearly stipulated that it was the responsibility of the Defendant No.1 to deliver the OLTCs manufactured by the Defendant No.2, free of cost, to the Plaintiff.

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20. The PW.1 has further deposed that the Plaintiff also expressed their concerns on the delay caused due to the non- delivery of the OLTC's, the pending Transformer Tank inspection, and the pending drawing approvals and also clarified that all these delays would be attributable to the Defendants, that there were disputes between both the Defendants regarding the payment terms of the OLTCs and there was no clear response from the Defendants, that the Plaintiff pressed these pending issues to the Defendants again through Ex.P.11/E-mail dated 06.01.2014, 14.01.2014, but in vain.

21. The PW.1 has further deposed that the Defendants did not deliver the OLTC's by promised dated, that as per Ex.P.12/ Letter dated 22.01.2014, M/s CSPTCL communicated to the Defendant No.1, that the inspection/test reports of 160 MVA were within the permissible limits of the approved drawing and GTP and that the transformer tank of 160 MVA manufactured by the Plaintiff was acceptable to them.

22. The PW.1 has further deposed that the Plaintiff again sent Ex.P.13/E-mail on 05.02.2014 to the Defendant No.1, wherein the Plaintiff also attached the Photographs of the Core & Coil assembly, which were awaiting the OLTC's.

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Com.O.S.No.4848/2017

23. The PW.1 has further deposed that meanwhile the Plaintiff division at Jhansi gave clearances to the OLTC, made by the Defendant No.2 after conducting the inspection on the OLTCs, that however, it is stipulated in Clause 12.2 of the specification directed by M/s CSPTCL, that an IP 55 Test was to be conducted on each type of OLTCs, in the presence of the representatives of M/s CSPTCL, that the Plaintiff as per Ex.P.27/ E-mail dated 25.04.2014 informed the Defendant No.2 to submit the IP 55 Test Report, duly witnessed by the M/s CSPTCL representative.

24. The PW.1 has further deposed that the said Test Report was not sent and was awaited for a long period, that even the OLTCs were not sent to the Plaintiff's Jhansi Division for the further assembly of the power transformers, that in spite of the delay in the delivery of OLTCs, which was expected to be delivered by January 2014, the Plaintiff continued with their efforts to deliver the material on time, that after manufacturing the transformer tanks, by December 2013, the Plaintiff had called upon M/s CSPTCL to inspect the same and grant their approval, that despite the Plaintiff communicating their readiness on the inspection of Tanks for the second item as per the Ex.P.3, 63 MVA Transformers on 03.03.2014, no confirmation was received from the side of the Defendant No.1 61 Com.O.S.No.4848/2017 regarding the deputation of Inspecting Officials from M/s CSPTCL, that also the Customer Inspection Test Schedules submitted by the Plaintiff as per email dated 30.09.2013 and 10.12.2013 was also awaited without any approval, that the Plaintiff sent Ex.P.14/E-mail to the Defendant on 26.05.2014, expressing their concerns on the approval of certain critical drawing and also for the supply of the OLTCs at the earliest.

25. The PW.1 has further deposed that Ex.P.15/E-mails dated 05.06.2014 and 09.06.2014 were sent to the Defendants to resolve the issues related to the supply of the OLTCs, regarding the pending inspections and test report approvals.

26. The PW.1 has further deposed that the Plaintiff again issued Ex.P.16/ Letter dated 09.06.2014 pointing out all these issues to the Defendant No.1 and requested to rectify them at the earliest.

27. The PW.1 has further deposed that the Plaintiff also requested issue an amended purchase order in view of the delay of more than 4 months caused in the supply of the OLTCs, since the assembly of the transformers required a lead time of 8 to 10 weeks after the arrangement of the components, that the Plaintiff also pointed out that it required 4 months time 61 Com.O.S.No.4848/2017 period for the assembling of the power transformers before offering it for the final inspection, that it was not possible for the Plaintiff to go a head with the assembly of the transformers without the promised OLTCs, that the Defendant No.1 repeatedly failed to deliver the OLTCs to the Plaintiff, that in the mean time on 12.06.2014, the Defendant No.1 arranged for the inspection of 1st tank of 63 MVA transformer at Bhopal, that but there was no action with regard to the 2 nd Tank of 63 MVA transformer at Allahabad, that the tanks were lying ready for inspection since March 2014, that the Plaintiff sent Ex.P.17/E- mail on 12.06.2014 to the Defendants reminding them about the inspection of 2nd Tank, as it was lying ready for the inspection at M/s Jyothi Fabricators at Allahabad for a long time, causing space constrained and also pointed out to sort out the OLTC issues and arrange delivery of the OLTC.

28. The PW.1 has further deposed that in the mean time, the IP 55 test for the OLTCs had been completed successfully at CPRI, Bengaluru, that but the test report of the same was not sent by the Defendants, that again on 18.06.2014 the Plaintiff sent Ex.P.18/E-mail requesting them to send the IP 55 test report for the onward transmission to the Plaintiff's Jhansi Division and to M/s CSPTCL for seeking the dispatch clearance.

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29. The PW.1 has deposed that but there was no advancement in the course of action of the Defendants, that there was severe space constrained in the Plaintiff's working space as the core & coil for the power transformers were lying ready in their shop floor since January 2014, that the Plaintiff's jhansi division had intimated the date of dispatch to be July 2014, that due to the Defendant's delay in the delivery of the OLTCs, the Plaintiff was not able to assemble and deliver the Transformers, that the Plaintiff on 23.06.2014 requested by Ex.P.19/Letter for resolving the pending action on an urgent basis which included the non-delivery of 5 OLTCs to the Plaintiff's Jhansi Division and notified all the issues in the Ex.P.19/Letter.

30. The PW.1 has further deposed that the Plaintiff also pointed out that the price that they had agreed with the Defendant No.1 would not hold good as there had been an upward price escalation in the prices of the raw materials including the labour and power and that the date of delivery and the price should be on a re-negotiated rate, that the Plaintiff again informed that it would require 5 months time for assembling and offering the transformers and the tanks at their Jhansi Division for final inspection, from the date of receipt of OLTCs, that meanwhile, M/S CSPTCL as per Ex.P.20/Letter 61 Com.O.S.No.4848/2017 dated 28.06.2014 to the Defendant No.1 informed that the 2 nd PO item , tank of 63 MVA was acceptable to them.

31. The PW.1 has further deposed that he sent Ex.P.21/E- mail on 11.07.2014 reminding the Defendants for the approval of RTCC Panel drawings for both 160 MVA and 63 MVA transformers, for the approval of test schedules, for the dispatch of the 5 OLTCs to the Plaintiff Jhansi Division, and for inspection of the 2nd tank of transformer of 63 MVA.

32. The PW.1 has further deposed that since the RTCC Panel drawings were not approved, the manufacture of the RTCC Panels were on hold and hence was not in a position to offer the RTCC Panel for the inspection of M/s CSPTCL, that in spite of all these communications from the side of the Plaintiff, the Defendants neither took any action to resolve the issues nor gave any reply to the mails of the Plaintiff, that the latest status and readiness of the transformer were informed by the Plaintiff's Jhansi Division to the Plaintiff on 19.07.2014, that the Plaintiff also sent Ex.P.22/E-mails dated 24.07.2014 and 11.08.2014 to the Defendants requesting for the expedition of the pending issues relating to the approval of the drawings and for the supply of the OLTCs and reminding the delayed delivery.

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33. The Ex.P.27 is the Letter dated 11.08.2014 which reflects the extension of Bank Guarantee in favour of Defendant No.1.

34. The PW.1 has further deposed that in the meantime, the Bank Guarantee had to be extended on the insistence of the Defendant No.1 and the same was sent from time to time, to the office of the Defendant No.1, that the Defendant No.1 was only keen in obtaining the extension of the Bank Guarantee furnished by the Plaintiff, that the further extension of the Bank Guarantee was informed by the Plaintiff as per Ex.P.23/E-mail dated 21.08.2014.

35. The PW.1 has further deposed that the Defendant No.1 sent Ex.P.24/E-mail on 08.09.2014, again trying to evade their responsibility of the supply of the OLTCs by demanding the Plaintiff to source the OLTCs directly in the Plaintiff's capacity.

36. The PW.1 has further deposed that the Plaintiff re- asserted as per Ex.P.25/E-mail dated 09.09.2014, that the OLTCs were to be supplied solely by the Defendant No.1, free of cost and also cautioned the Defendant No.1 on the delayed activities, that in spite of all these correspondences, the Defendant No.1 willfully failed to supply the OLTCs to the Plaintiff.

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37. The PW.1 has further deposed that the financial history of the Defendant No.1 revealed that the company had been suffering from losses over the last few years, that during meetings with the officials of M/S CSPTCL, they informed the Plaintiff that the work was going at a very slow pace and that M/s CSPTCL were not at all satisfied with the progress of the work of the Defendant No.1, that it was also clear from the discussion that the Defendant No.1 was going through severe financial crunch and most of the materials ordered for the project of M/S. CSPTCL were not received at site which was causing inordinate delay in the execution of work at Girwani, that meanwhile, the Plaintiff came to know that the contract awarded to the Defendant No.1 by M/s CSPTCL had been terminated on 07.11.2014 as per Ex.P.26.

38. The PW.1 has further deposed that the Bank Guarantee was duly extended by the Plaintiff and was extended to 31.01.2014, 31.07.2017 and finally till 31.12.2014, that the Defendant No.1 in spite of failing to comply with their obligation, requested the Plaintiff to extend the Bank Guarantee for a further period of six month, till 30.06.2015, that before the SBI could extend the Bank Guarantee as per the request made by the Defendant No.1, the Defendant No.1 issued the letter dated 16.12.2014 to the SBI thereafter 61 Com.O.S.No.4848/2017 invoking the Bank Guarantee and sought remittance of the amount, that the invocation of said Bank Guarantee was completely a fraudulent act, that the Plaintiff approached the Hon'ble High Court of Delhi and obtained a status-quo order, that ultimately, the Plaintiff sent Ex.P.29/Letter dated 21.10.2015 to the 1st Defendant that they were still awaiting the delivery of the OLTCs for the transformers, that the Plaintiff gave a deadline of 05.11.2015 for the delivery of the OLTCs failing which the Plaintiff would be take suitable action, that in spite of this the Defendant No.1 had not given any reply for the same and is continuing to breach the terms of the contract.

39. The PW.1 has further deposed that the Plaintiff invested a huge sum of more than Rs. 8,00,00,000/- as of now with regards to the equipment shown in Ex.P.3, that so far, the Defendant No.1 has only paid an advance amount to the tune of Rs. 85,99,773/-, that now these Power Transformers are lying ready in the factory premises of the Plaintiff since last 3 years, which is also consuming the work space of the Plaintiff and causing loss to the Plaintiff, that the Defendants are well aware of the same since the Plaintiff had continuously communicated their grievances to the Defendant No.1, that the Purchase Order, when accepted by the Plaintiff, became a binding contract between the parties and had acted on the basis on the 61 Com.O.S.No.4848/2017 same, that it was an expressed term in the Purchase Order that the Defendant No.1 would issue the Defendant No.2 make Tap Changers free of cost to the Plaintiff.

40. The PW.1 has further deposed that the Plaintiff had started the manufacturing of the Purchase Order by August 2013 and had informed the Defendants from time to time about the progress of manufacture of the items and had also reminded about the pending works from the Defendant's part, that the Defendant's act of not delivering the OLTC's so the Plaintiff, till date, is a direct and explicit breach of contract, the non-delivery of OLTC's to the Plaintiff has made further performance of the contract impossible, that the Plaintiff has always ready and willing to perform their contractual obligations and the Defendants have no just or reasonable grounds to delay the supply of the promised materials/OLTC's especially when the manufacturing was done particularly to meet the specific requirements of the Defendants, that the items were manufactured as per the specifications put forth by M/s CSPTCL and the Defendants, and it is not possible for the Plaintiff to sell them to any other entity or market, hence the Defendant No.1 who has breached the contract is the only market for the Plaintiff for the manufactured Transformers in the present circumstances, that the same was communicated 61 Com.O.S.No.4848/2017 to the Defendants in a number of mails, that the Defendants did not show any willingness to implement its promise in the terms of the Purchase Order within the stipulated period or even within a reasonable time period, that since the OLTC's were not issued by the Defendant No.2, the Plaintiff could not complete the manufacture of the said items, that the acts of the Defendants constitute a clear revocation of its promise, that the Plaintiff had taken all reasonable efforts to avoid damage, that the Defendants were, without any valid reasons, postponing the supply of the OLTC's and the same can be constructed only as an act of refusal to perform the obligation under the contract, that the Plaintiff is entitled to get the damages, to compensate for the huge financial loss, as they have failed to recover what they spent, on the basis of the Purchase Order, that the Defendants are liable to pay for all the natural and direct consequences of their wrongful act, cost of manufacturing, pre-contractual expenses, damages for inconvenience, injury and loss, that the contract between the parties is purely commercial in nature, that besides the vast financial expenditure incurred a great deal of time and considerable manpower was also invested by the Plaintiff for the manufacturing process, that the Defendants have despite the above demands, failed and neglected to deliver the OLTC's as promised and has not complied with the terms of the 61 Com.O.S.No.4848/2017 contract, that the Defendant No.1 is also not accepting the manufactured the said items.

41. The PW.1 has further deposed that the non-performance of the contract by the Defendants may result in the Plaintiff spending a net amount of Rs. 7,28,50,000/- along with interest at the rate of 14% from January 2017 till the date of realization, towards the expense incurred under various heads towards the manufacture of the said items, after setting off the realizable amount towards the diversion of one 160 MVA Auto Transformer and the plan for savaging of 63 MVA Transformers, that this amount has to be paid by the Defendants, that the Plaintiff would not have incurred such huge cost, if the Defendant would have delivered the OLTC's on time, that with regard to the 63 MVA Transformers, the Plaintiff has incurred an amount of Rs. 5,75,00,000/- towards the total works price, that with regard to the 160 MVA transformers the Plaintiff had incurred an amount of Rs. 3,96,00,000/- towards the total works price, that the Plaintiff has also incurred an amount of Rs. 34,00,000/- and Rs. 13,50,000/- towards the Storage Charges of the 63 MVA Transformers respectively, at the rate of Rs. 50,000/- per month per transformer from March 2014 to December 2016, that the Plaintiff has spent around Rs. 10,18,50,000/- for the manufacturing and storage of the said items, that the interest 61 Com.O.S.No.4848/2017 at the rate of 14% when charged for the blocked capital amount, works to Rs. 1,52,00,000/- and Rs. 94,00,000/- for the 63 MVA Transformers respectively, after deducting the salvage value so recoverable on the sale of scrap of Rs. 1,56,00,000/- in respect of 63 MVA Transformers and the amount to be realized from diversion of 160 MVA transformers which the Plaintiff had been able to secure directly from M/s CSPTCL against another tender on competitive route i.e., Rs. 3,80,00,000/- claimed amounts to Rs. 7,28,50,000/- along with interest at the rate of 14% from January 2017 till the date of realization has to be compensated by the Defendants.

42. The learned Advocate for the Defendant No.2 has argued that the above facts and evidence makes it clear that the contract was only between the Defendant No.1 and the Plaintiff and that the Defendant No.2 was not a party to the contract, that it is also admitted by the Plaintiff that in response to its e-mail, the Defendant No.2 had mentioned that it will supply OLTCs after the finalization of the price and payment terms with the Defendant No.1, that there was no obligation on the part of the Defendant No.2 to make any supply to the Plaintiff and it was only through the Defendant No.2 any supply could have been made subject to receiving payment, that in the absence of any contract with the Defendant No.2 and no 61 Com.O.S.No.4848/2017 consideration having been paid, the Defendant No.2 cannot be made liable to the suit claim, that the provisions of the Companies Act also does not provide for any such liability foisted by the Plaintiff against the Defendant No.2, that in view of the same the Defendant No.2 is neither a necessary nor a proper party, that also no cause of action has arisen for the Plaintiff to file the suit against the Defendant No.2 and if allegedly any breach is committed by the Defendant No.1, by no stretch of imagination can the Defendant No.2 be held responsible, that the Defendant No.2 is neither an Associate Company nor the Defendants No.1 hold any shareholding in it, that there are two directors in common and 49% of its shareholding is held by a German Company namely, Maschinenfabrick Reinhausen Gmbh, Regensburg, Germany, that in view of the above facts and circumstances, the Defendant No.2 who has been unnecessarily arrayed as a party to this suit needs to be deleted from the array of parties, that mere exchange of e-mails between the Plaintiff and the Defendant No.2cannot give rise to a cause of action either to make it a party or to claim any amount, that there is admittedly no privity of contract as against the Defendant No.2 to file this suit. In support of said contentions, the Advocate for the 2nd Defendant has relied on a decision reported in LAWS (DLH) - 2009 (5) - 195 (K.K. Modi Investment and 61 Com.O.S.No.4848/2017 Financial Services Private Limited vs. Apollo International Inc).

43. Though the learned Advocate for the 2 nd Defendant has argued that the 2nd Defendant is not a sister concern of the 1 st Defendant, but he admits that some of the Directors are the common in both companies. Apart from that in Ex.P.8/E-mail, the 2nd Defendant has admitted about the present transaction with the Plaintiff. The said Ex.P.8/E-mail has to be considered along with other series of E-mail exchanged between the parties and the Ex.P.8 cannot be read in isolation. In the said circumstances, the ratio of the above-mentioned decision reported in LAWS (DLH) - 2009 (5) - 195 (K.K. Modi Investment and Financial Services Private Limited vs. Apollo International Inc), is not applicable to the facts of the present case.

44. Each company being a separate legal entity has separate legal rights and liabilities. Even if a company is an affiliate, it still retains its characteristic of being a separate legal entity. Therefore, an agreement made by one company of the same group cannot be binding on another company that is an affiliate of the parent concern. However, through the group of companies' doctrine an arbitration agreement entered into 61 Com.O.S.No.4848/2017 by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates.

45. In India, the group of companies' doctrine was first invoked by the Hon'ble Supreme Court in the decision reported in (2013) 1 - S.C.C. - 641 (Chloro Controls India Private Ltd. vs. Severn Trent Water Purification Inc) with respect to an international commercial agreement. The Hon'ble Supreme Court, in the decision reported in (2018) 15 - S.C.C.

- 678 (Ameet Lalchand Shah and Others vs. Rishabh Enterprises and Another), had the opportunity to interpret Section 8 of the Arbitration and Conciliation Act 1996, as amended by the Arbitration and Conciliation (Amendment) Act 2015. It ruled that in cases where the agreements are inter- connected and several parties are involved in a single commercial project executed through several agreements, all the parties can be made amenable to arbitration.

46. In the said case, the respondent Rishabh Enterprises had entered into four agreements i.e. (i) Equipment and material supply Contract, and (ii) Engineering, Installation and 61 Com.O.S.No.4848/2017 Commissioning Contract (1-2-2012) with Juwi India; (iii) Sale and Purchase Agreement (5-3-2012) with Astonfield; and (iv) Equipment Lease Agreement (14-3-2012) with Dante Energy. Dispute arose between the parties when the respondent alleged that Appellant No.3 Dante Energy had defaulted in payment of rent and that Astonfield committed fraud by inducing Rishabh Enterprises to purchase the Photovoltaic products by investing huge amount. The Respondents preferred a civil suit against all the appellants levelling various allegations including fraud and misrepresentation and in the said suit, appellant-defendants preferred an application under Section 8 of the Arbitration Act, seeking reference of the dispute to arbitration pertaining to all the four agreements. An arbitration clause existed only in the agreements (i), (ii) with Juwi India and (iv) mentioned above with Dante Energy, but the agreement (iii) between Rishabh Enterprises and Astonfield Renewables did not contain the arbitration clause. The question posed expressly was whether all the four agreements were interconnected to refer the parties to arbitration though there was no arbitration clause in the Sale and Purchase agreement between Rishabh Enterprises and Astonfield? i.e. whether the arbitration agreement between Rishabh Enterprises and Dante Energy could be extended to the agreement between Rishabh Enterprises and Astonfield Renewables even though the separate Sale Purchase 61 Com.O.S.No.4848/2017 agreement signed by Aston Renewables with the former did not contain any arbitration clause.

47. The Hon'ble Supreme Court held that all the four agreements were for the single purpose of commission 2 MWp Photovoltaic Solar Plant at Dongri, to be purchased by Rishabh Enterprises and for leasing the equipments to Dante Energy; further, averments in the plaint also prima facie indicated that all the four agreements were inter-connected; also, clauses in the Equipment and Material Supply Contract, Engineering, Installation and Commissioning Contract indicated that the agreement was entered into for the purpose of commissioning Photovoltiac Solar Plant; equally, the Sale and Purchase Agreement dated 5-3-2012 between M/s Astonfield and Rishabh Enterprises was also for onward leasing of goods to Dante Energy; that the Equipment Lease Agreement for commissioning of the Solar Plant was the principal/main agreement and two agreements of Rishabh Enterprises with Juwi India and Rishabh Enterprises's Sale and Purchase Agreement with Astonfield were ancillary agreements; and all parties can be covered by the arbitration clause in the main agreement i.e. Equipment Lease Agreement. Thus, parties can be referred to arbitration and the single Judge as well as Division Bench of the Hon'ble High Court of Delhi erred in dismissing the application filed under Section 8 of the Arbitration Act in the civil suit by the appellants. The Hon'ble Supreme Court relied on the above-mentioned decision reported in 61 Com.O.S.No.4848/2017 (2013) 1 - S.C.C. - 641 (Chloro Controls India Private Ltd. vs. Severn Trent Water Purification Inc) and applied the principle that if the transaction is of a composite nature where performance of the mother-agreement may not be feasible without aid, execution and performance of the supplementary or ancilliary agreements, for achieving the common object and collectively having bearing on the dispute, and if the Court is of the opinion that a composite reference of such parties would serve the ends of justice, even non-signatory parties can be subjected to arbitration without their prior consent. This case applies arbitration agreement to agreement in a Group of Agreements and goes beyond the 'parent-subsidiary' relationship.

48. It is to be noted that a 'composite transaction' refers to a transaction which is interlinked in nature; or, where the performance of the agreement may not be feasible without the aid, execution, and performance of the supplementary or the ancillary agreement, for achieving the common object, and collectively having a bearing on the dispute.

49. I may point out that in the above case, though Astonfield was not in any Group of Companies and though it was a non- signatory to the agreement between Rishabh Enterprises and Dante Energy, all the agreements were held to be 61 Com.O.S.No.4848/2017 interconnected and therefore it was held that it is a fit case to refer all of them including Astonfield to arbitration. Therefore, this case shows that for the application of the doctrine of Group of Companies, it is not necessary that it should be only among a parent Company and Subsidiaries, but the said principle can be applied even if one of the parties is not in the Group as such but is outside the Group but is involved and connected in the execution of the same project.

50. Recently in the decision reported in 2019 - S.C.C. - OnLine S.C. - 595 (Mahanagar Telephone Nigam Ltd. vs. Canara Bank and others), the doctrine of "Group of Companies" was invoked and applied by the Hon'ble Supreme Court in a case of domestic arbitration under Part I of the Act. The Hon'ble Supreme Court reiterated in this decision that a non-signatory can be bound by an arbitration agreement on the basis of the 'Group of Companies' doctrine, where the conduct of the parties evidences a clear intention of the parties to bind both the signatory as well as the non-signatory parties. It held that courts and tribunals have invoked this doctrine to join a non-signatory member of the group, if they are satisfied that the non-signatory company was by reference to the common intention of the parties, a necessary party to the contract. It 61 Com.O.S.No.4848/2017 explained that the said doctrine was invoked where an arbitration agreement is entered into by one of the companies in the group, and the non-signatory affiliate, or sister, or parent concern, is held to be bound by the arbitration agreement if the facts and circumstances of the case demonstrate that it was the mutual intention of all parties to bind both the signatories and the non-signatory affiliates in the group.

51. The Hon'ble Supreme Court explained that the 'Group of Companies' Doctrine could also be invoked to bind the non- signatory affiliate of a parent company, or include a third party to an arbitration if there is a direct relationship with the party which is a signatory to the arbitration agreement, direct commonality of the subject matter, and the composite nature of the transaction between the parties. Mahanagar refers to 'Composite transaction', 'single economic unit' or 'single economic reality'. It explained a 'composite transaction' to be one which is inter- linked in nature, or, where the performance of the agreement may not be feasible without the aid, execution, and performance of the supplementary or the ancillary agreement, for achieving the common object, and collectively having a bearing on the dispute.

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52. It held that the 'Group of Companies' doctrine has also been invoked in cases where there is a tight group structure with strong organizational and financial links, so as to constitute a single economic unit, or a single economic reality. In such a situation, signatory and non-signatories have been bound together under the arbitration agreement. This will apply in particular when the funds of one company are used to financially support or re-structure other members of the group.

53. In the said decision, CANFINA was a wholly owned subsidiary of Canara Bank and the dispute between the parties had arisen out of a transaction between CANFINA and MTNL with regards to the Bonds, which was purchased by Canara Bank. Therefore, there was a clear and direct nexus between the parties.

54. The group of companies' doctrine has been regarded as a controversial doctrine for one of the sole reasons that is against the principle of party autonomy, i.e. consent from each party to submit to arbitration to resolve the dispute. Even though the group of companies' doctrine has been used by Indian courts in the past, it is through the decision of the Hon'ble Supreme Court to invoke the group of companies' 61 Com.O.S.No.4848/2017 doctrine in the above-mentioned decision reported in 2019 - S.C.C. - OnLine S.C. - 595 (Mahanagar Telephone Nigam Ltd. vs. Canara Bank and others) that it has been made clear the different circumstances under which the group of companies' doctrine would be invoked.

55. Sections 4 and 6 of the Information Technology Act, 2000 provide for legal recognition of electronic records and their use in Government and its agencies. Section10-A of the said Act specifically provides for validity of contract through electronic means and accordingly provides that such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose. Section 12 of the said Act provides for acknowledgment of receipt including in an automated manner. Section 13 of the said Act provides for time and place of dispatch and receipt of electronic records. Upon careful consideration of all these provisions, it is seen that electronic records have been provided with full legal recognition.

56. Under the provisions of the Information Technology Act, 2000 particularly Section 10-A, an electronic contract is valid and enforceable, which states as follows:-

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Com.O.S.No.4848/2017 "Section 10-A: Validity of contracts formed through electronic means:- Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose."

57. E-Contracts can be entered into through modes of communication such as e-mail, internet and fax. The only essential requirement to validate an E-Contract is compliance with the necessary pre-requisites provided under the Indian Contract Act, 1872.

58. The evidenciary value of e-contracts can be well understood in the light of the Sections 85A, 85B, 88A, 90A and 85C deals with the presumptions as to electronic records whereas Section 65B relates to the admissibility of electronic record. In the present case, there is no dispute about the admissibility of various e-mails exchanged between the parties.

59. Formation of contracts online via emails has been recognized and given validity to by the Indian courts time and again. In the decision reported in 2010(1) - SCALE - 57 (Trimex 61 Com.O.S.No.4848/2017 International FZE Limited, Dubai vs. Vendata Aluminium Ltd.), the parties thoroughly agreed to the terms of the contract via emails. The Hon'ble Supreme Court upheld the validity of this contract and further held as follows:-

"Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initiated by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initiated."

60. In the said case, the Hon'ble Supreme Court after going through the various E-mails exchanged between the parties including an E-mail attaching the draft contract, which remained unsigned, opined as follows:-

"44. From the materials placed, it has to be ascertained whether there exists a valid contract with the arbitration clause. It is relevant to note that on 15- 10-2007 at 4.26 p.m. the petitioner submitted a commercial offer wherein Clause 6 contains the arbitration clause i.e. "this contract is governed by Indian law and arbitration in Mumbai courts". At 5.34 p.m. though the respondents offered their comments, as rightly pointed out by Mr K.K. Venugopal, no comments were made in respect of the "arbitration clause". It is further seen that at 6.04 p.m., the petitioner sent a reply to the comments made by the respondent. Again, on 16-10-2007 at 11.28 a.m., though the respondents suggested certain additional information on the offer 61 Com.O.S.No.4848/2017 note, here again no suggestion was made with regard to the arbitration clause...........".

61. The Hon'ble Supreme Court in the decision reported in (2001) 7 - S.C.C. - 328 (Smita Conductors Limited vs. Euro Alloys Limited), has commented about two contracts and held that one of the party had in his mind those contracts while opening the letters of credit and while addressing the letters to the bank in that regard and had also invoked force majuere clause in those contracts which would obviously mean that the parties had in their mind those two contracts which stood formed by those letters of credit. It is held by the Hon'ble Supreme Court that if two contracts stood affirmed by reason of conduct of the parties as indicated in the letters exchanged, it must be held that there was an agreement in writing between the parties in that regard. The said judgment of the Hon'ble Supreme Court was specifically approved by the Hon'ble Supreme Court in its subsequent above- mentioned decision reported in 2010(1) - SCALE - 57 (Trimex International FZE Limited, Dubai vs. Vendata Aluminium Ltd.).

62. In another decision reported in (2009) 2 - S.C.C. - 134 (Shakti Bhog Foods Ltd. vs. Kola Shipping Ltd.), the Hon'ble Supreme Court has held as follows:-

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Com.O.S.No.4848/2017 "The existence of an arbitration agreement can be inferred from a document signed by the parties, or an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement".

63. Therefore, the correspondence through Ex.P.8/E-mail can be considered as a valid binding agreement/contract between the parties and hence, the contention of the Advocate for the 2nd Defendant that there is no privity of contract between the Plaintiff and 2nd Defendant, cannot be accepted at all. Hence, I answer Point No.1 in the Negative.

64. Point No.2 :- As mentioned above, in this case, though the Defendants have entered appearance through their Advocates, their written statement is not taken on record as per my separate detailed Orders on I.A. No. I to IV dated 16.12.2021. In the absence of their written statement, the Court is empowered to pronounce the judgment as per Order VIII Rule 10 of Civil Procedure Code.

65. In the decision reported in A.I.R. - 1999 - S.C. - 3381 (Balraj Taneja vs. Sunil Madan ), the Hon'ble Supreme Court of India has held as follows :-

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Com.O.S.No.4848/2017 "29. As pointed out earlier, the Court has not to act blindly upon the admission of a fact made by the Defendant in his written statement nor the Court should proceed to pass judgement blindly merely because a written statement has not been filed by the Defendant traversing the facts set out by the plaintiff in the plaint filed in the Court. In a case, specially where a written statement has not been filed by the Defendant, the Court should be a little cautious in proceeding under Order VIII Rule 10 of the Civil Procedure Code. Before passing the judgement against the Defendant it must see to it that even if the facts set out in the plaint are treated to have been admitted, a judgement could possibly be passed in favour of the plaintiff without requiring him to prove any fact mentioned in the plaint. It is a matter of Court's satisfaction and, therefore, only on being satisfied that there is no fact which need be proved on account of deemed admission, the Court can conveniently pass a judgement against the Defendant who has not filed the written statement. But if the plaint itself indicates that there are disputed questions of fact involved in the case regarding which two different versions are set out in the plaint itself, it would not be safe for the Court to pass a judgement without requiring the plaintiff to prove the facts so as to settle the factual controversy. Such a case would be covered by the expression "the Court, may, in its discretion, require any such fact to be proved"
used in sub-rule (2) of Rule 5 of the Order VIII, or the expression "may make such order in relation 61 Com.O.S.No.4848/2017 to the suit as it thinks fit" used in Rule 10 of Order VIII."

66. In the decision reported in A.I.R. - 2000 - Delhi - 60 (Relaxo Rubber Limited vs. M/s. Selection Footwear ), the Hon'ble High Court of Delhi has held as follows :-

"3. Keeping in perspective the fact that at least four opportunities for filing written statement have not been availed of by the defendants I feel this is a fit case for invoking the provisions of Order VIII Rule 10. However, since no defence has come forward, it would be, to my mind, the duty of the Court to consider the correctness of the plaintiffs case. For this reason the plaint as well as documents filed along with it were perused and arguments were heard on behalf of the plaintiffs."

67. In the decision reported in A.I.R. - 2000 - Karnataka - 234 (Syed Ismail vs. Smt. Shamshia Begum), the Hon'ble High Court of Karnataka has held as follows :-

"3. The impugned order does not disclose the nature of pleading placed by the plaintiff and whether there is prima facie material to grant a decree in his favour. A judgement in favour of the plaintiff is not automatic. The Court has to consider the case of the plaintiff and grant a decree in his favour. The 61 Com.O.S.No.4848/2017 learned trial Judge has not referred to the pleadings of the plaintiff and the documents produced by him to substantiate even a prima facie case for grant of a decree in his favour. Therefore, the judgement and decree in favour of the plaintiff is not automatic on failure of the opposite party to put his defence. The Court can grant a judgement in favour of the party only upon consideration of the case of the plaintiff including appreciation of pleadings and evidence."

[

68. In the decision reported in A.I.R. - 2007 - Delhi - 164 (Union of India vs. Ram Prakash Juneja ), the Hon'ble Delhi High Court has held as follows :-

"4.....The judgement pronounced under Order VIII Rule 10 of the Civil Procedure Code should indicate that the Court has applied its mind to merits of the case before decreeing the case. The said judgement must satisfy the requirements of Section 2(9) of the Civil Procedure Code and the Court should go into the case and pronounced its judgement upon the facts, so far as they were before it. A mere statement that the suit of the plaintiff is decreed under Order VIII Rule 10 of the Civil Procedure Code cannot be sustained."
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69. The principles emerging from the precedents are that exercise of power under Order VIII Rule 10 of the Civil Procedure Code for pronouncement of judgment is not mechanical. This is an exercise of judicial discretion. The Court must consider the pleadings and the documents including any admission and should pronounce the judgment if the case does not involve disputed questions of facts. Such exercise must be informed by reason, application of judicial mind and consideration of the pleadings of the parties. However, in this case the Plaintiff has also adduced oral evidence of PW.1. The oral evidence of PW.1 with the documents relied on by him is already discussed while answering Point No.1 above.

70. The learned Advocate for the Plaintiff has arged that the Plaintiff had invested around Rs. 8,00,00,000/- on the above-mentioned items, so far the Defendant only made an advance payment of Rs. 85,99,000/-, that now the Power Transformers are lying around the factory premises since past 3 years, which is also consuming the work space of the Plaintiff and causing loss to the Plaintiff, that the Defendants are well aware of the same since the Plaintiff had continuously communicated their grievance to the Defendant No.1, that the Purchase Order, when accepted by the Plaintiff, became a 61 Com.O.S.No.4848/2017 binding contract between the parties and the Plaintiff had acted on the basis of the same, that it was an express term in the Ex.P.2, that the Defendant No.1 would issue Easun MR make OCTCs free of cost to the Plaintiff, that the Plaintiff started the manufacturing of the said items by August 2013 and had informed the Defendants form time to time about the progress of manufacture of the said items and had also reminded about pending works from the Defendant's part, that the Defendant's act of not delivering the OLTCs to the Plaintiff, till date, is a direct and explicit breach of the contract, that the non-delivery of OLTCs to the Plaintiff has made further performance of the contract impossible, that the Plaintiff was always ready and willing to perform their contractual obligations and the Defendants have no just or reasonable grounds to delay the supply of the promised materials/OLTC, especially when the manufacturing was done particularly to meet the specific requirements of the Defendants, that the said items were manufactured as per the specifications put forth by M/s CSPTCL and the Defendants, and it is not possible for the Plaintiff to sell them to any other entity or market, that the Defendant No.1, who has breached the contract, is the only market for the Plaintiff for the manufactured transformers in the present circumstances based on the Defendant's specifications, that the same was comunicated to the Defendants in various mails, that 61 Com.O.S.No.4848/2017 the Plaintiff had taken all reasonable efforts to avoid damages, that the Defendants were, without any valid reasons, postponing the supply of the OLTCs and the same can be construed only as an act of refusal to perform the obligation under the contract, that the Plaintiff is entitled to get the damages, to compensate for the huge financial loss, as they have failed to recover what they spent, on the basis of the Ex.P.2, that the Defendants are liable to pay for all the natural and direct consequences of their wrongful act, cost of manufacturing, pre-contractual expenses, damages for inconvenience, injury and loss, that the contract between the parties is purely commercial in nature, that besides the vast financial expenditure incurred a great deal of time and considerable manpower was also invested by the Plaintiff for the manufacturing process, that the only work pending from the Plaintiff's side is the asembly of their parts.

71. The learned Advocate for the Plaintiff has further argued that the Plaintiff duly performed their promises under the Ex.P.2 and was not able to conclude it because of non-performance by the Defendant which are well proven by the facts and circumstances, that the Plaintiff even finished the manufacturing of Transformers by December 2013, much before the proposed time but the Defendant failed to supply the OLTC's 61 Com.O.S.No.4848/2017 on time even after constant reminder and letters from the Plaintiff, that the Ex.P.2 contained the time of delivery, specificaitons to be followed in manufacture of machinery, use and delivery of OLTC etc., which forms a contractual agreement with expressed terms, that it is quite evident that the Plaintiff gave many chances and reminders to the Defendants to adhere to their obligations under the terms of the Ex.P.2, that the losses incurred by the Plaintiff are wholly attributable to the silence and non-performance of obligations on the part of the Defendants.

72. The learned Advocate for the Plaintiff has further argued that under Section 51, 52 and 54 of the Indian Contract Act, the Defendants are bound to perform their reciprocal promise under the contract in lieu of which the Plaintiff is entitled to compensation, for such non-performance of reciprocal promise.

73. The learned Advocate for the Plaintiff has further argued that the Plaintiff has incurred heavy losses to the tune of Rs. 7,26,50,000/- and the said items cannot be sold to other companies because of the specifications given by M/s CSPTCL, that the Plaintiff is legally entitled to get the compensation to avoid further loss of resource and labour, that under Section 73 of the Indian Contract Act, that the Plaintiff suffered huge 61 Com.O.S.No.4848/2017 losses by the Defendant's breach of terms of Ex.P.2 to which the Plaintiff had engaged in the manufacture of the item shown in Ex.P.2, that the Defendant had to supply the OLTC to the Plaintiff, which wa an integral part of the Ex.P.2, free of cost from Defendant No.2 which Defendant No.1 failed to supply and directly committed breach of the contractual agreement.

74. The learned Advocate for the Plaintiff has further argued that the definace of the Defendant towards their obligations and silence even after constant reminders and extensions, itself a proof of Defendant's neglect towards performance of their obligations under the contractual agreement which amounts to breach of contract, and the Defendant No.1 and 2 are liable under Section 73 of the Indian Contract Act.

75. The learned Advocate for the Plaintiff has further argued that the items shown in Ex.P.2 were duly manufactured by the Plaintiff by December 2013 on time as per the terms of the Ex.P.2 and have been lying since in the storage unit of the Plaintiff's factory due to non-delivery of OLTC, which was an integral part of the Ex.P.2 and attracting regular storage costs and which is causing a great monetary loss to the Plaintiff.

76. The learned Advocate for the Plaintiff has further argued 61 Com.O.S.No.4848/2017 that as the Transformers and other items shown in Ex.P.2 were manufatured according to the specifications given to Plaintiff by the Defendant and M/s CSPTCL, the Plaintiff is unable to sell the same to similar buyers in order to recover the manufacturing costs.

77. The learned Advocate for the Plaintiff has further argued that in this case, the condition related to the OLTC has to be performed by the Defendant, which is a reciprocal in nature, that the Defendant has completely failed to honour the promises and the same finally resulted in non-performance of contract and the contract became impossible to conclude at the side of the Plaintiff which resulted in huge loss.

78. I have already discussed about the evidence adduced by the Plaintiff while answering Point No.1 above. From the appreciation of said evidence and various documents, and also the points urged at the time of arguments by the learned Advocate for the Plaintiff it is very clear that the Defendants are liable to compensate the losses incurred by the Plaintiff. Hence, the Plaintiff is entitled for Rs. 7,28,50,000/- as claimed in the Plaint, with interest from the Defendants.

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79. As per Ex.P.26, the contract was terminated on 07.11.2014. This suit is filed on 17.07.2017. When such being the case, the suit is filed within limitation period.

80. The Plaintiff has prayed the interest at the rate of 14% per annum from the date of suit till realization. Since the Plaintiff has not complied with Rule 2-A of Order VII of the Civil Procedure Code, as amended under Section 16 of the Commercial Courts Act, after the transfer of this suit to this court and even in the evidence of PW.1, he has not deposed about the rate of interest according to the said provision, the interest at the rate of 14% per annum cannot be granted. But, taking into consideration the bank rates and trade practices, the rate of interest at 9% per annum only is granted from the date of suit till realization. Hence, the Plaintiff is entitled for Rs. 7,28,50,000/- with current and future interest at 9% per annum only. Hence, by considering the aspects of limitation, entitlement of the claim of the Plaintiff and rate of interest, I answer this Point in "Affirmative".

81. Point No.3 : -Therefore, I proceed to pass the following Order.

ORDER 61 Com.O.S.No.4848/2017 The Suit of the Plaintiff is decreed.

The Defendants No. 1 and 2 is hereby directed to pay jointly or severally to the Plaintiff, a sum of Rs.7,28,50,000/- (Rupees Seven Crores Twenty Eight Lakhs Fifty Thousand Only) along with interest at the rate of 9% per annum from the date of suit till realization.

The Defendants are hereby directed to pay cost of this suit to the Plaintiff. The Advocate for the Plaintiff is directed to file Memorandum of Cost before the Office within 5 days from today as required under Rule 99 and 100 of Karnataka Civil Rules of Practice.

Draw Decree accordingly.

The Office is directed to send copy of this Judgment to Plaintiff and Defendants to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.

( Dictated to the Stenographer, typed by her directly on computer, verified and then pronounced by me in open Court on this the 22nd day of March, 2022).

(DEVARAJA BHAT.M), 61 Com.O.S.No.4848/2017 LXXXII Addl.City Civil & Sessions Judge, Bengaluru.





                ANNEXURE

    LIST OF WITNESSES EXAMINED ON BEHALF OF THE
                      PLAINTIFF

P.W.1        Sri. Praveen Dangwal

LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE PLAINTIFF Ex.P.1 The Authorization Letter Ex.P.2 True Copy of the Purchase order issued by Defendant No.1 to the Plaintiff dated 18.03.2013.

Ex.P.3 True Copy of the Purchase order issued by Defendant No.1 to the Plaintiff dated 10.04.2013.

Ex.P.4 True Copy of the Purchase order issued by M/s CSPTCL to the Defendant No.1 dated 03.08.2013.

Ex.P.5 True copy of the letter dated 13.08.2013 sent by the Plaintiff to the Defendant No.1 Ex.P.6 E-mail dated 28.10.2013 in respect advance payment made by the Defendant No.1 26.10.2013.

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Com.O.S.No.4848/2017 Ex.P.7 E-mail dated 07.11.2013 sent by the Plaintiff to the Defendant No.1 with respect to delivery. Ex.P.8 E-mail communication between Plaintiff and Defendant No.2 dated 31.12.2013 requesting for delivery of the OLTCS.

Ex.P.9 E-mail dated 01.01.2014 by Defendant No.1 Deninine the responsibility to delivery OLTCS. Ex.P.10 E-mail dated 02.01.2014 sent by the Plaintiff to the Defendants to delivered OLTCS.

Ex.P.11 E-mail dated 06.01.2014 and 14.01.2014 by the Plaintiff.

Ex.P.12 True Copy of the letter dated 22.01.2014 intimating acceptance of report of 160MVA.

Ex.P.13 E-mail dated 05.02.2014 sent to the Plaintiff to the Defendant No.1 awaiting delivery of OLTCS.

Ex.P.14 E-mail dated 26.05.2014 sent by the Plaintiff to Defendant No.1.

Ex.P.15 E-mail dated 05.06.2014 and 09.04.2014 Ex.P.16 Copy of the Letter dated 09.06.2014. Ex.P.17 E-mail dated 12.06.2014.

Ex.P.18 E-mail dated 18.06.2014.

Ex.P.19 Letter dated 23.06.2014.

Ex.P.20 Copy of Letter dated 28.06.2014.

Ex.P.21 E-mail dated 11.07.2014.

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Com.O.S.No.4848/2017 Ex.P.22 E-mail dated 24.07.2014 and 11.08.2014.

Ex.P.23        E-mail dated 21.08.2014.
Ex.P.24        E-mail dated 08.09.2014.
Ex.P.25        E-mail dated 09.09.2014.
Ex.P.26        Termination letter dated 07.11.2014.
Ex.P.27        Letters dated 11.11.2013, 25.04.2014 and
               11.08.2014.
Ex.P.28        Certified Copy of the Order passed in Cs (O.S.)
               3969/2014.
Ex.P.29        Letter dated 21.10.2015.
Ex.P.30        Photographs of Crore and coil for 63MVA abe
               160MVA power transformer lying in the
               Plaintiffs shop since January 2014.

Ex.P.31 & 32 Letter dated 24.06.2013 sent by the Plaintiff to the Defendant submitting GTP, quality plan, vendor list in respect of 63MVA Auto transformer for approval. (2 Letter).

Ex.P.33 & 34 The letter sent by Plaintiff to the Defendant dated 30.08.2013, submitting the drawings and documents in respect of 160MVA and 220/132/33KV Auto transformer for approval. Ex.P.35 The letter sent by Plaintiff to the Defendant dated 07.09.2013, submitting the quality plan, guaranteed technical parameters and and sub vendor list in respect of 63 MVA and 132/33KV power transformer.

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Com.O.S.No.4848/2017 Ex.P.36 The letter sent by Plaintiff to the Defendant dated 23.09.2013, submitting the quality plan, guaranteed technical parameters and and sub vendor list in respect of 63 MVA and 132/33KV power transformer.

Ex.P. 37 to 39 E-mail dated 13.09.2013, 28.09.2013 and 04.10.2013 sent by the Plaintiff to Defendant requesting for approval for drawings and documents of the power transformers.

Ex.P.40 The letter dated 12.11.2013 sent by the Plaintiff to the Defendant submitting the drawings and documents in respect of 160 MVA and 63 MVA transformers for approval.

Ex.P.41 The calculation of the expenses incurred while manufacturing power transformers of 160MVA and 63 MVA.

LIST OF WITNESSES EXAMINED ON BEHALF OF THE DEFENDANTS

- NIL -

LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE DEFENDANTS

- NIL -

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Com.O.S.No.4848/2017 (DEVARAJA BHAT.M), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.