Suraj Tiles Pvt Ltd vs Grain Processing Industries (India) Pvt Ltd

MR. Justice K.S. Gupta, Presiding Member-Complaint was filed, inter alia, alleging that the complainant was informed by Madhya Pradesh Urja Vikas Nigam Limited, opposite party No. 2 under the aegis of Ministry of Non-Conventional Energy Sources about an alternative form of cost effective energy for use by the complainant and if the complainant opted for it, the opposite party No. 2 would subsidise the installation/ running of the plant. Opposite party No. 2 recommended the name of opposite party No. 1 who had good reputation in the market. Along with letter dated 29.11.1994 the opposite party No. 2 forwarded to the complainant a brochure of the gas plant manufactured by opposite party No. 1. By the letter dated 8.12.1995, opposite party No. l gave offer for supply of a Rice Husk Gasification plant for generation of 200 kw electrical power. Cost of fabrication of the plant was quoted as Rs. 14 lakh in addition to Rs. one lakh for erection, commissioning and operational run of 30 days. Amount of Rs. 56,000 was also to be paid towards sales tax. Terms and conditions of sale supplied by opposite party No. 1 stipulated that supply and erection of the said plant will be completed within six months. However, in view of the urgent requirement of complainant the opposite party No. 1 agreed to reduce the period from six months to three months and plant was to be commissioned before 8.3.1996. By the letter dated 28.1.1996, the complainant complained of delay in commissioning the plant to opposite party No. 1. This letter was replied to vide letter dated 2.2.1996 by opposite party No. 1 making excuse for the delay on ground of having made certain modifications in their earlier design. In the reply, the opposite party No. 1 also mentioned that they would send their man with foundation drawing on 6th/7th February, 1996 and first truck of plant and machinery will be dispatched on 10.2.1996 while second and third truck loads on 16th and 23rd February, 1996. Since the time schedule assured in the reply dated 2.2.1996 was not adhered to, the complainant wrote letter dated 12.2.1996 which was followed by the letter dated 3.4.1996. Complainant again wrote letter on 18.5.1996 to opposite party No. 1 stating the urgency of erection and commissioning of the plant. Complainant received a letter dated 4.6.1996 from opposite party No. 2 who took a stern note of the delay caused by opposite party No. 1 in erection and commissioning of the plant. Opposite party No. 1 was given instructions to complete the erection and commissioning of plant by 30.6.1996. By the letter dated 19.6.1996, the opposite party No. 1 assured the complainant that there would be no delay in putting the plant into operation. Commissioning of the plant had not taken place by mid-October 1996 when the factory of the complainant was inspected by S.M. Deshpande, Executive Engineer working with opposite party No. 2. After commissioning of plant on 20.3.1997, the complainant wrote to opposite party No. 1 on 23rd May, 1997 about non-satisfactory tar separation and back-firing in the plant. After this problem was rectified, the plant started developing new problem of the firing was not taking place correctly. Gas was not available as the necessary temperature was not maintained. Complainant again made complaint to opposite party No. 1 on 26.9.1997. It was further pleaded that the technician deputed by opposite party No. 1 was unable to put the gasifier into operation. Opposite party No. 1 also admitted that there was some problem in the plant on 27.12.1997. Ultimately, complainant got a legal notice dated 11.4.1998 served on opposite party No. 1 with copy opposite party No. 2. Opposite party No. 1 sent reply to the notice on 30.4.1998. Opposite party No. 2 asked Prof. B.S. Pathak of Sardar Patel Renewal Energy Research Institute, Gujarat to visit the plant of the complainant and make suggestions for rectification of the problems. Opposite party No. 2 also wrote to opposite party No. 1 on 1.12.1998 asking them to provide a copy of test report of the gasifier system and detailed technical information and system design to said Prof. B.S. Pathak. On grounds of alleged defect and deficiency in service, the complainant has sought direction to opposite party No. 1 to pay a sum of Rs. 26,26,378 (Rs. 15,56,000+Rs. 11,10,378) as the cost of the plant including its erection plus interest calculated @ 18% p.a. (as per Annexure P-36). Direction is further sought to be passed to pay amount of Rs. 21,02,827 (Rs. 12,35,138.15+Rs. 8,67,688.85) as the cost of the generator set and other expenses and interest calculated @ 18% (as per Annexure P-39), to the complainant.

COMPLAINT was contested by filing separate written versions by the opposite parties. It was alleged by opposite party No. 1 that they had installed more than 30 such plants in India and abroad and are pioneer in manufacturing of "Biomas Gasification Plant" for generation of electrical power and thermal energy from Agro Waste like rice-husk, coconut shell, groundnut shell, etc. It was admitted that the brochure of gasifier was sent to the complainant which contained minutes details. It was stated that there are two legs of installation of a gasifier - one is cost of fabrication and supply of gasifier and another is erection and commissioning of gasifier. Cost of supply of plant was settled at Rs. 14 lakh. Cost of erection and commissioning was settled at Rs. one lakh. Complainant had initially placed order for Gasifier for the purpose of electric power generation on 8.12.1995. In the month of January 1996, the complainant changed mind and insisted for commissioning of gasifier for the purpose of Thermal energy generation required for firing of its kiln/furnace. Technology for production of electric power generation and thermal energy generation are entirely different and modification for different application was a tedious job, besides being expensive still the opposite party No. 1 did it. It was denied that answering opposite party agreed for erection and commissioning of plant within three months as alleged. Complainant''s letter dated 28.1.1996 was suitably replied on 2.2.1996. The time schedule got disturbed on account of the modification made in the basic design of the plant. Delay had occurred on account of indecisive attitude of the Managing Director of the complainant Company. It was claimed that gasifier was operated from 18.11.1996 to 24.11.1996 and the gas which was to be used for power generation was wasted by firing to the atmosphere as the complainant had not provided generator for running the plant and this fact had been concealed by the complainant. It was alleged that the gasifier had successfully run from 1.3.1997 to 19.3.1997. Certificate to that effect was given by the complainant to opposite party No. 2 who, in turn, issued a certificate to the answering opposite party. Senior management personnel of the complainant were trained by the answering opposite party and the gasifier was thereafter taken over by the complainant. Problems mentioned by the complainant had arisen due to mal-operation of the plant and the same can happen in any gas plant. Instructions given in the manual were obviously not followed by the complainant. Receipt of the legal notice dated 11.4.1998 is admitted. It was stated that complainant still owes a sum of Rs. 2,32,253 as arrears against the contractual price of the gasifier to the answering opposite party. Denying the alleged defect/deficiency in service the liability to pay the amount claimed was refuted.

IN its written version, opposite party No. 2 alleged that it is an organisation registered with the Ministry of Non-Conventional Energy Sources and provides subsidy to the industries for non-conventional energy projects in Madhya Pradesh. It was denied that opposite party No. 2 suggested any agency to the complainant for installation of the plant in question. It was admitted that S.M. Despande, Executive Engineer inspected the project on 16.10.1996 and looking at the problems faced by the complainant replying opposite party wrote a letter to Prof. B.S. Pathak of Sardar Patel Renewal Energy Research Institute, Gujarat for necessary suggestion. It was further admitted that the answering opposite party sent a strong letter to opposite party No. 1 warning that if the defects in the plant were not removed, the matter will be reported to MNES for black listing their name from the manufacturers list. It was alleged that though the plant was commissioned by opposite party No. 1 on 20.3.1997 but after that the plant never run satisfactorily. Opposite party No. 2 did not have any control over opposite party No. 1. Despite opposite party No. 1 being warned they did not care to remove the defects and presently the plant is totally non-functional. Opposite party No. 2 wrote to the Central Government Energy department for blacklisting opposite party No. 1.

WE have heard Mr. S.K. Sharma for the complainant. Ms. Geeta Vohra for opposite party No. 1 and Mr. Mohan Chauksey for opposite party No. 2 and have been taken through the records.

THERE is no dispute that complainant had placed a purchase order dated 8.12.1995 with opposite party No. 1 for supply of a Husk Gasification Plant the whereof was settled at Rs. 14 lakh and that of erection and commissioning at Rs. one lakh. Though the terms and conditions for sale provided supply and erection period as six months from the date of confirmed order but the same was reduced to three months by opposite party No. 1. It is also not in dispute that the gasification plant was commissioned on 20.3.1997 much beyond the agreed period. Complainant thereafter sent a letter dated 23rd May, 1997 to opposite party No. 1 stating that the plant had developed snags such as non-satisfactory tar separation and back-firing during pocking and the team of technicians deputed by opposite party No. 1 was looking only at the tar separation problem. It was requested that technicians be instructed also to attend to the backfiring problem. In the letter dated 7th June, 1997 written with reference to the letter dated 23.5.1997 the opposite party No. 1 informed the complainant that unless the plant runs continuously it is unable to monitor it and after the complainant arranges suitable number of operating staff it can again take up the operation and monitoring of the plant. Complainant sent the letter dated 16.7.1997 to opposite party No. 1 mentioning that though the plant has been restarted after removing the earlier deficiencies by their technicians, the complainant is faced with new problems. Firing is not taking place nor is the temperature available for gas being produced. There is also reference to the opinion of Ashish Seth, technician that right process of burning of husk is not taking place in the plant. Opposite party No. 1 was, therefore, asked to ensure that plant is immediately rendered fit. By the fax dated 26.9.1997, the complainant made grievance that it had been kept in dark that opposite party No. 1 had supplied entirely a new model of gasifier which was never tried. Opposite party No. 1 was asked to establish techno-commercial viability of the model supplied or compensate the complainant for the direct and indirect expenditures incurred. Vide letter dated 30th September, 1997 sent with reference to the said fax, the opposite party No. 1 assured the complainant that the gasifier will be put in operating condition very shortly to its entire satisfaction. By the letter dated 27.11.1997 sent with reference to above letter dated 30th September, 1997, the complainant informed opposite party No. 1 that the persons deputed by them tried to the best of their ability but have failed to put the gasifier in operation. Opposite party No. 1 was asked to collect the gasifier after settling the account within 10 days of the receipt of letter. By the letter dated 3rd December, 1997, the opposite party No. 1 confirmed despatch of a telegraph on that date intimating that the team of technicians will reach the complainant''s site on 10th February, 1997. Letter dated 27th December, 1997 sent by opposite party No. 1 to the complainant being material, omitting immaterial portions reads thus: "Sub: Status of Biomass Gasifier supplied by us We regret to bring to your kind notice that though the above plant was commissioned by us in March, 1997 and diesel replacement in your existing Generating set at the rate of 92% could be achieved, there are some problems in the plant for which the quality of the gas cannot be constantly maintained. You are aware that our team of technicians have made attempts for 6/ 7 times in the meantime and tried their best to put the plant right by making rectifications and modifications, but failed to achieve desired success. Ultimately, we contacted our consultant and designer Mr. A.K. Basu in Bombay who agreed to visit the plant and to do the needful. As planned, he arrived Nagpur on 26.12.1997 and was scheduled to visit Balaghat today. Unfortunately, he has fallen sick in Nagpur and as per advice of Doctor, he has to cancel his trip. You are reported to have also talked to him at Hotel Centre Point, Nagpur over telephone. However, please be informed that Mr. Basu shall be visiting the site as soon as he gets well. We assure you that the problems in the plant can be solved immediately after his visit. We are confident that we are going to hand you over shortly a plant, which would not only be beneficial but also be an asset to your industry in the long run. We are thankful and indebted to you for your co-operation and support. Please bear with us for few more days."

IN terms of the letter dated 4th February, 1998, the opposite party No. 1 informed the complainant that it has decided to make certain modifications in furnace, poke holes and a valve is to be placed at the top of gasifier for proper functioning of the plant and the drawings for this purpose is under preparation and fabrication will be made after the design is approved by Mr. Basu. In the reply dated 30th April, 1998 to the legal notice it was again assured that opposite party No. 1 would introduce certain modifications in the plant for better performance and better operating conditions thereof equipments have already been designed and same are under fabrication at their factory. In subsequent correspondence also such an assurance was repeated by opposite party No. 1. At this stage, it will be profitable to refer to the affidavit of Rajesh Srivastav filed on behalf of opposite party No. 2 in support of the written version. In para No. 7 of the affidavit, it is averred that though the plant was commissioned by opposite party No. 1 on 20.3.97, it never run satisfactorily. Despite opposite party No. 2''s many times warning opposite party No. 1, they did not care and the plant had been lying non-functional totally. The complainant filed the affidavit of evidence of K. Krisnamurthy as an expert witness. Paras 5 to 14 of that affidavit being material, are reproduced below: "5. That, they have tried in fact to improve, operating economy of the plant but went wrong some where either at designing stage or at fabrication stage. 6. That, Mr. A.K. Basu, B.Sc. (Hons.) B.Ch.E. (Hons.), C. Eng., M.I. Gas E. (LON), F.I. Chem. (LON), F.I. Chem. E. (INDIA), F.I.E.(INDIA), M.M.G.I. (INDIA), Chartered Gas Engineer and Chartered Chemical Engineer, P.O. Box No. 16152, Mumbai, 400 006, who have designed this plant, have visited the plant for trouble shooting and expressed inability to find the reason why the plant was behaving erratically. 7. That, it is evident, they have tried a technology without establishing its technical viability at the expense of M/s. Suraj Tiles (P) Ltd. and miserably failed. 8. That the hoppers used for supply of husk in the raw material chamber lead to entry of natural air effecting the very basic principle of controlled combustion. 9. That the furnace used to create steam has double jacket thus the required heat for exothermic reaction is not achieved. 10. That the heart of the plant is its furnace and steam jacket which do not match the process required for generation of gas. 11. That the ash management through poking rods is very accident prone as the poking holes expose the furnace to natural air and explode any time. Further, the uncontrolled entry of natural air through poking holes effect the controlled combustion. 12. That the Faulty cooling system unable to separate sufficient tar from the gas in the west scrubber stage. The excess of tar contents flowing out with the cooling water chock the cooling tower nozzles, resulting insufficient cooling of the water. Further, whatever quantity of producer gas generated shall be thoroughly unclean resulting damages to the engine which this gas supposed to fuel. 13. That the chemical process at all stages in the advent of producing the gas requires lot of accuracy. This very plant is not accurate in many aspects. 14. That in summary the whole plant is result of poor fabrication techniques and hence the gasifier plant in question cannot generate producer gas in specified quantities continuously for more than a couple of hours and not even smaller quantities continuously."

PLEA taken in written version by opposite party No. 1 that although the complainant had ordered for gasifier for producing ''Electrical Power'' but later on complainant wanted to use the gasifier plant for Thermal Application is not supported by any of the letters of opposite party No. 1. Admissions made in the letters, referred to above, by opposite party No. l and the two affidavits of K. Krishnamurthy and Rajesh Srivastav go to prove beyond any shadow of doubt that there were major problems in the plant in question. Opposite party No. 1 was grossly deficient in service in not removing those problems by making rectifications and modifications which they had been repeatedly assuring to carry out, till the date of filing of complaint. We are unable to accept yet another plea taken in the written version that after the commissioning of plant the opposite party No. 1 cannot be held deficient in service if the plant had not run properly. Deficiency in service relatable to commercial transaction has been taken out of the ambit of the Act of 1986 w.e.f. 15.3.2003, much after the filing of present complaint. Therefore, defence that the complaint is not maintainable under the Act of 1986 as the plant was purchased for commercial purpose being devoid of merit is also repelled.

IN the prayer clause, complainant has sought direction to opposite party No. 1 to pay sum of Rs. 15,56,000 being the cost of plant and its erection and Rs. 11,10,378 as interest @ 18% p.a. on that amount (as per Annexure P-36). Direction is further sought to be made to opposite party No. 1 to pay amount of Rs. 12,35,138.15 being cost of generator set and other expenses plus Rs. 8,67,688.85 being interest thereon calculated @ 18% (as per Annexure P-39). Affidavit of said Rajesh Srivastav would show that opposite party No. 2 had sanctioned subsidy of Rs. 3,60,000 to the unit of the complainant and amount of Rs. 3,24,000 was also released as subsidy to the complainant. Since the total cost of gasifier plant and erection and commissioning was settled and paid was Rs. 15 lakh, the complainant is entitled only to this amount and not Rs. 15,56,000. Calculation sheet at page 88 would show that interest has been calculated quarterly @ 18% p.a. from the date(s) the payments were made. Terms and conditions of sale accompanying the quotation/ proforma invoice and/or the purchase order do not provide for charging of interest nor is it pleaded that there was any stipulation for paying interest between the parties in such an eventuality. As is manifest from Annexure P-38 it contains account of the expenses allegedly incurred by the complainant towards meter and change over switch, etc. amounting to Rs. 12,35,138. Complainant has not filed bills in support of this expenditure of Rs. 12,35,138.15. In absence of bills and the supporting evidence, the complainant is not entitled to the consolidated amount of Rs. 21,02,827 including interest as claimed by way of direction No. (ii) in the prayer clause of the complaint. In our view, in the facts and circumstances of case including the factum of receipt of aforesaid subsidy amount, the complainant is entitled to interest from the date of the filing of complaint which we quantify @ 9% p.a. on the aforesaid mount of Rs. 15 lakh. Of course, opposite party No. 1 is entitled to dismantle and remove the gasifier plant in question from the complainant''s place at their costs.

FOR the foregoing discussion, complaint is partly allowed with direction to opposite party No. 1 to deposit amount of Rs. 15 lakh along with interest @ 9% p.a. from the date of filing of complaint and costs of Rs. 25,000 with this Commission within four weeks from today. On deposit of this amount, the opposite party No. 1 will be entitled to dismantle and remove the gasifier plant at their expenses within four weeks. Deposited amount will be released in favour of the complainant by the Registry on filing of affidavit that the gasifier plant has been removed by opposite party No. 1. Complaint against opposite party No. 2 against whom no relief was claimed, is dismissed. Complaint partly allowed.