The Bombay High Court has dismissed an appeal filed by the Islamic Republic of Iran (IRI) and imposed costs of ₹10 lakh on it in a dispute over sale of railway wagons.
A division bench of Justices KR Shriram and Rajesh Patil were hearing an appeal filed by Iran challenging an ex-parte order of a single judge directing it to pay compensation worth over USD 35 lakh to KT Steel Industries LLP, an Indian company with which it has a dispute over sale of railway wagons.
IRI, through the Iranian Islamic Republic Railways (RAI), had floated a global tender for purchase of railway wagons. At the time, the Indian government was exporting wagons through the State Trading Corporation (STC).
KT Steels submitted its bid through STC and on March 16, 1970, STC entered into a purchase contract with Iranian government. STC assigned the benefit of the contract to KT Steels through a separate contract in November 1970.
Contract amended in August 1976
Due to increase in international oil prices in 1972, the freight charges for shipment of wagons increased. Hence the contract was amended in August 1976. The export continued until 1977.
However, KT Steels claimed that IRI failed to pay the freight charges as agreed for 306 wagons in 1973 and 94 wagons shipped in 1977. It filed a suit in September 1996 but no one represented IRI.
In 2009, then HC judge DY Chandrachud (now CJI) passed an ex parte (without hearing the other party) judgment directing IRI to pay an amount of USD 1,387,727 for 304 wagons, USD 1,696,722 for 94 wagons and USD 484,840 towards damages — a total of USD 35,69,289. The court also ordered IRI to pay a 9% interest on the freight charges from date of instituting suit to the date of realisation of the amount.
Suit wrongfully filed against IRI, says RAI
More than 12 years after the order, RAI filed an appeal claiming that the suit had been wrongfully filed against IRI, when it should in fact have been filed against RAI.
RAI’s counsel claimed that it discovered about the proceedings only in July 2019 after it received papers from the Ministry of Foreign Affairs of Iran. Hence filed an appeal on February 25, 2020. For
The Court also noted that the appeal and condonation of delay application had been filed by IRI through RAI and the position that both parties were separate entities seemed to be an afterthought.
“We observe that the Iranian Government has chosen not to appear before this Court and still refuses to comply with the Court's orders. Applicant (IRI) has not made any submissions before this Court, but only RAI which is not even a party to the Appeal, has engaged a Counsel to appear,” the Court noted.
It also reasoned that if IRI thought that Iranian courts had the exclusive jurisdiction to hear the dispute arising out of the 1976 contract, it ought to have pointed out the same in the suit.
