Indian Kanoon - Search engine for Indian Law

5.For appreciating the submissions made on behalf of the parties the facts shortly stated, leading to the filing of the present appeals are as follows.

6.Sometime in 1982 M/s Indian Metals & Ferro Alloys Ltd., (in short 'IMFA' - defendant 13) issued a global tender for setting up a captive power plant, viz. a coal-fired steam power plant in Choudwar, Orissa. The tender indicated that credit by the suppliers will be preferred. Defendants 1 to 3 (hereinafter referred to as the 'suppliers' submitted their tenders in this regard. Since the tender indicated that suppliers' credit for the entire project is preferred, the suppliers approached defendant 4 (one of the lenders) to finance the project. Inquiries were made to find out the possibilities for financial assistance by the Swedish Government in the form of interest at subsidised rates.

18.The basis of the plaintiff's claim against defendants 1 to 12 was that defendants 1 to 3 had promised to supply the captive power plant of the capacity of 108 MW worked with teacher coal whereas on working, the plant was found to be of the capacity of 60 MW. The case of the plaintiff further was that all the agreements between the borrower and the suppliers and borrower and lenders are interconnected and constituted one transaction and are vitiated by fraud committed by defendants 1 to 4. It was pleaded that the plaintiff was fraudulently led into entering of contracts with the suppliers by fraud of the suppliers and defendant 4, the lender. The suppliers were not competent enough to manufacture 108 MW plant. They fraudulently persuaded the plaintiff to go in for a 'stoker fired' boiler instead of a 'pulverised fuel' boiler in spite of the recommendations of the Central Electricity Authority to the contrary. The representatives of the consortium/suppliers visited Bhubaneshwar and Choudwar in the second week of March 1983 and during discussions represented to the plaintiff that the recommendations of the Central Electricity Authority were not correct and that their vast experience in this field had shown that 'stoker fired' boilers were preferable over 'pulverised fuel' boilers in the instant case, with talcher coal as the basic raw material. The defendants 1 to 3 further represented that they had arranged credit facility for the proposed captive power plant through defendant 4 at a very low interest rate and specifically indicated that their offer was limited to the setting up of only 'stoker fired' boilers. It was further alleged in the plaint that the plaintiff relying on the judgment, representation and advice given by the suppliers decided to go ahead with setting up of the power plant although Central Electricity Authority and other advisors had expressed reservations that the boilers of the size as suggested by the suppliers would be less effective. Since the plaintiff had never undertaken and were unaware of the technology/expertise required for the setting up of the captive power plant they had no other option/altemative but to rely totally upon the skill of the suppliers in this regard. It was further pleaded that subsequently in August 1983 with a view to further induce the plaintiff to act on the representations made by consortium that the suppliers were capable of setting up a 108 MW plant with 'stoker fired' boiler, defendant 4 on behalf of itself and defendants 5 to 11 approached the plaintiff directly and represented that the said defendant 4 would finance the project of setting up the captive power plant at a very low interest rate if the plaintiff accepted the offer of suppliers for supply, erection and commission of the said plant with 'stoker fired' boilers. It was alleged that defendant 4 further represented to the plaintiff that the suppliers are the valued clients of defendant 4 and that defendant 4 was aware of the background and experience of the suppliers.

20.It was further pleaded that defendant 4, in fact, acted as a representative or an agent of defendants 1 to 3. It was also pleaded that in fact the supply of the plant and financing thereof through deferred credit was one composite transaction in which defendant 4 was integrally involved and interconnected as defendants 1 to 3. It was pleaded that the plaintiff relying upon the representations made by defendants 1 to 3 and 4 entered into three separate contracts with the suppliers on September 28, 1984 for erection and commissioning of the captive power plant.

21.It is not necessary at this stage to elaborately refer to the terms and conditions of the suppliers' agreements with the borrower except to mention that under the first contract, defendant I had agreed to supply turbine and other accessories for a total consideration of Swedish Kroner 432 million; under the second contract between the borrower and defendant 2, defendant 2 had agreed to supply 4 'chain grate stoker fired' boilers with other accessories and under the third contract defendant 3 agreed to erect and commission the captive power plant. The third agreement in clauses 12. 1, 12.2, 12.7 and 13.1 provided as under: