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D) Upon completion of manufacture of the two machines, the petitioner issued "inspection release note" and the claimant 'the dispatch clearance'. The two machines in terms of the Agreement were then shipped and transported by the petitioner to the End User's designated plant in Kazakhstan. In the presence of technical experts including one Mr. Arun Khanwalker on behalf of ITL, on March 9, 2004 erection and commissioning process of the two machines commenced. E) The End User alleged that due to diverse defects and deficiencies in the basic design, the two machines failed to attain the production level stipulated in the Agreement. One Jayanta Chakraborty, the local representative of the End User, by an e-mail dated April 29, 2004 wrote to ITL with copies endorsed to the claimant and the respondent. In the letter, the End User complained that even after one and a half month's efforts by ITL's supervising engineers, the machines could not be made fully operational, as the machines had basic design problems and the components used were of inferior quality and unreliable. It was further alleged that the welded joints had started leaking and the paint on the machines was peeling off.

In allowing the claim on account of loss suffered by the claimant, the arbitrator has relied upon the communication dated 29th April, 2004 to ITL in which it was, inter alia, alleged that "After one and half months of efforts by your Supervising Engineers" the machines were not fully operational. Both the machines have basic design problem, components used are unreliable, welded joints are leaking, even the painting is peeling off at various places". In the letter it is significant that ITL was cautioned that it was for the manufacturers to bring its experts and "make the machines fully functional and capable of meeting the contact specifications by 15th May, 2004", or "take the machines back and return the entire payment". On the same date Mr. Naik on behalf of the ITL the manufacturer of the machines replied. In the letter Mr. Naik assured the claimant once again that ITL would send its "Technical Director ... to overcome all the problems...and the coming "Technical Director . . . to overcome all the problems . . and the coming team comes well equipped to overcome all the defects". There was not a word of denial on behalf of ITL in respect to the above mentioned serious allegations made in the claimant's letter that there was a defect in the basic design. It would, therefore, appear that ITL, the actual manufacturer, was fully aware and had clearly admitted that the machines were not functioning due to basic design defects. In other words, the machines could not have been manufactured in conformity with the specifications stipulated in the Agreement as sought to be claimed new. Whatever the petitioner had manufactured admittedly it would appear was not what the subject matter of the contract was or what was intended by the parties at the time of entering into the contract is the finding of the arbitrator which does not call for any interference.

The oral evidence of Mr. Naik that the machines have been commissioned on June 18, 2004 was rejected as an unreliable piece of evidence. It would appear that immediately after receiving the copy of the claimant's letter dated May 11, 2004 the petitioner had written to ITL on June 18, 2004. The letter reiterated the claimant's allegations that "the system is not at all functioning due to serious design limitations with respect to the basic requirement/order specification, and that the commissioning is getting further delayed". In the letter the petitioner directed ITL to "ensure trouble free commissioning and commercial production . . . . . .set right these machines and successful commissioning and handing over all these machines to I.K. . . . establishing the performance guarantee parameters successfully commissioning these machines". A voluntary admission by the petitioner of the case made out by the claimant.

concerning the "serious difficulties being faced by the End User...........on account of this problematic situation". This conduct of the petitioner was held to be a clear admission of the allegations of the claimant. The arbitrator found, rightly so, that neither the petitioner nor ITL in any of their correspondence between themselves or with the claimant, at any material time, denied the claimant's contention that the machines were not eventually fully commissioned or erected due to basic defects in design and there was no denial at any material time that the machines were not manufactured in conformity with the specifications stipulated in the agreement. In fact, the petitioner in writing proposed to "settle the matter". In other words, as rightly observed by the arbitrator, it must be understood that the petitioner having admitted that what had been manufactured by ITL was anything but the subject matter of the contract was in favour of the settlement.