Delhi District Court
The National Small Industries vs M/S General Radiator Workshop (Regd.) on 23 January, 2008
IN THE COURT OF SH. RAKESH KUMAR
ADDITIONAL DISTRICT JUDGE: DELHI
(FAST TRACK COURT)
Suit No.261/06/87
The National Small Industries
Corporation Limited,
A company registered under the
Indian Companies Act, 1913
(Act VII of 1913) having its
Registered Office at
Okhla Industrial Estate, New Delhi
as well as a Regional Office
near Industrial Estate, Okhla,
New Delhi - 110020. .....Plaintiff.
Versus
1. M/s General Radiator Workshop (Regd.),
B - 1, Industrial Area,
G.T. Karnal, Road, Delhi.
(Through: its partner, Sh. Inder Jeet Singh
and/or Sh. Satwant Singh)
2. The Oriental Fire and General Insurance
Company Limited,
57, Nehru Place, New Delhi - 110019.
(Service to be effected through its
Secretary/General Manager/Manager). .....Defendants.
Date of filing of suit : 13.07.1987
Date of decision of suit : 23.01.2008
SUIT FOR RECOVERY OF MONEY AND
POSSESSION OF THE MACHINERIES.
JUDGMENT
1. The above mentioned plaintiff, (through Sh. G. L. Nangia, the then General Manager and one of the Principal Officers of the plaintiff company, who was duly authorized by means of a General Power of Attorney dated 23.08.1982 executed by the Chairman of the plaintiff company in his favour), filed the present suit against the aforementioned defendants interalia making the following prayers that:-
(i).A decree for Rs.6,47,374.27ps. may be passed in favour of plaintiff and against the defendant no.1 alongwith interest @ 16 ½ % per annum w.e.f. 01.03.1987 till the date of payment;
(ii).A decree for Rs.7,32,605/- may be passed in favour of plaintiff and against the defendant no.2 on account of Insurance claim alongwith interest at the rate of 16 ½ % per annum w.e.f. 01.03.1987 till the date of payment;
(iii).In the event of a decree being passed against defendant no.2 for the amounts claimed, defendant no.1 would be entitled to the adjustment of the amounts claimed from it in this suit by the plaintiff;
(iv).A decree for possession of the machinery supplied under the Hire Purchase Agreement in question may be passed in favour of the plaintiff and against the defendant no.1. In the alternative in case the recovery of possession of the machinery in its original condition is not possible then a decree for Rs.6,89,706/- may be passed in favour of plaintiff and against the defendant no.1.
(v).Cost of the suit is also demanded.
2. The brief facts of the case as per plaint are that the defendant no.1 is a partnership concern of S. Inder Jeet Singh, S. Sharan Jeet Singh, S. Param Jeet Singh, S. Satwant Singh, S. Jasbir Singh and S. Hardeep Singh, all sons of S. Gurbachan Singh and residents of 41-5/6, Singh Sabha Road, Shaktinagar, Delhi-110007 under a Partnership Deed dated 27.02.1974, who have also executed a General Power of Attorney on a Non Judicial Stamp Paper of Rs.10/- in favour of Sh. Inder Jeet Singh, S/o Shri Gurbachan Singh, R/o B-1, G. T. Karnal Road, Delhi-110033 to act in their name and on behalf of Partnership Firm. On 15.09.1981, defendant no.1 applied for the supply of the following five machines on Hire Purchase basis to the plaintiff:-
(i).Automatic Strip Tinneer Model Cortin;
(ii).Automatic Tube Drawing M/s Model Curtub;
(iii).Automatic Fin Roller machine Model Cortim;
(iv).Adjustable Pressing Tool Set Model Corplat;
(v).Adjustable Pressing Tool Set Model Corplat.
3. The defendant no.1 submitted as Invoice dated 27.08.1981 from Hans Georg Lammer, Rondenburg 52, D - 2000, Hamburg - 54, West Germany, in which 14 machines were mentioned which were for the manufacture of radiators and entitled as ''Core making equipment''. On 16.02.1982, the plaintiff accepted the application of defendant no.1 for the supply of above mentioned five machines to defendant no.1 on Hire Purchase basis. In the acceptance letter it was agreed to supply the machines for Rs.4,49,610/- besides other charges. By the letter dated 28.04.1982 defendant no.1 sent a Bank Draft no.288678 dated 28.04.1982 for Rs.36,000/- drawn on State Bank of India, New Delhi alongwith a Bank Guarantee for Rs.1,08,000/- and requested that an order with the foreign suppliers be placed. The receipt of said Bank Draft of Rs.36,000/- was acknowledged by the plaintiff vide endorsed copy of letter dated 08.06.1982. On 16.06.1982, the plaintiff placed an order with the foreign suppliers on the basis of the quotations dated 27.08.1981 and 21.05.1982. The plaintiff received an Import License no.G/T2434289/GII dated 22.06.1982 for the value of Rs.4,33,200/- CIF. On 02.07.1982, defendant no.1 gave an undertaking to the plaintiff in writing to the following effect:-
''I/we hereby undertake to pay The National Small Industries Corporation Limited, New Delhi all the incidental charges, including wharfage bank charges and any other charges incurred for any reason whatsoever while clearing the goods at port for import of the machinery covered by the supply Order no.FFE/D/35/82 dated 16.06.1982 as and when demanded by the Corporation.'' On 02.07.1982, the foreign supplier confirmed the order. On 31.08.1982, the plaintiff opened Letters of Credit with the State Bank of India, Okhla, New Delhi. The defendant no.1 submitted a photocopy of letter dated 05.10.1983 received by it from the foreign supplier requesting it to inspect the machines and its demonstration at their place alongwith its letter dated 15.10.1983 in which defendant no.1 requested the plaintiff to give authority to enable it to get Exchange Permit from the Reserve Bank of India for their visit to Hamburg, West Germany. The said permission was immediately given by the plaintiff to the defendant no.1.
By letter dated 25.01.1984, the foreign supplier informed the plaintiff that in terms of the letter received from defendant no.1, it had already dispatched the goods by air lift with their official invoice no.01/84/4535 of 17.01.1984. Inspection was carried out by one of the partners of defendant no.1 before shipment was effected by the foreign supplier. On 15.05.1984, the foreign supplier addressed a letter to defendant no.1 and endorsed a copy to the plaintiff alongwith its letter dated 16.05.1984. The letter dated 15.05.1984 of the foreign supplier which was addressed to defendant no.1 reads as follows:-
''For the attention of Mr. Sharanjit Singh Dear Mr. Singh, Sub: Bill of Lading No.34 dated 24.11.1983 short shipment of goods.
Ref: Order No. FFE/D/35/82 dated 16.06.1982.
Further to our letter of 27.04.1984 we wish to state items at your specific instruction contained in your telex dated 30.12.1983 and your confirmatory letter no.GRW/1824/83-84 dated 03.01.1984 requesting us to send the items by Air Parcel - freight paid declaring that this is a part of the machine already dispatched earlier and without this part the machine is of no use, being a part and parcel of the same.
In the next para of your letter you have stated that ''on the basis of such a letter, NSIC will obtain short landing certificate from the authority which will help in retiring the Air Parcel from Customs.
We have also been informed that although the vessel ''JALARATNA'' arrived at the Bombay docks on 01.01.1984, the consignment has been cleared by the forwarding agents of NSIC, M/s VAZ FORWARDING PVT. LTD. BOMBAY, only in the month of March, 84 in the presence of one of the partner of your company Mr. SATWANT SINGH. Hence, you cannot claim now that it is because of our delayed dispatch of short shipped items, the consignment is incurring exhorbitant costs in terms of demurrage, re-inspection etc. for which your are holding us responsible:
We very much regret the above developments and the inconvenience caused to your.'' After signing the Hire-Purchase Agreement, defendant no.1 got copies of the Hire Purchase Agreement duly attested by a Notary Public on 23.01.1984 before sending the same to the defendant for its acceptance and signatures. The date of the Agreement, was, however, to be filled in on the date of acceptance and signatures by the plaintiff. On 05.01.1984, the plaintiff made a quarry from defendant no.1 as it failed to indicate its option to submit the security for Rs.8,200/- or to make the payment in order to enable the plaintiff to issue dispatch instructions. Pending completion of the execution of the Hire Purchase Agreement, on 07.02.1984 the plaintiff forwarded all the shipping documents to the Assistant Director (Shipping), Directorate of Suppliers and Disposal, Bombay for taking the short-shipment certificate from the Customs Authorities and necessary endorsement on the import license and sent back the same to the plaintiff to enable it to clear the items at Delhi Airport. On 17.02.1984, the plaintiff required defendant no.1 to complete all formalities to enable the plaintiff to issue Dispatch Instructions. It was also mentioned that in the event of non completion of the formalities by defendant no.1 any demurrage, if incurred, will be on their account. By letter dated 22.02.1984, M/s Vaz Forwarding Pvt. Ltd. informed the Assistant Director (Shipping), Bombay that when the case was opened for Custom examination the Appraiser could not identify some of the items which were indicated in the invoice and hence he made an endorsement on the reverse of the B/E 'Party to explain engineering'. A copy of the same was also endorsed to the plaintiff. On 24.02.1984, the plaintiff informed defendant no.1 that the Clearing Agents, M/s Vaz Forwarding Pvt. Ltd., Bombay had asked to depute an Engineer to explain/identify to the Customs about some of the items. Accordingly, defendant no.1 was requested to depute its Engineer for helping the clearance of the consignment. On 02.03.1984 defendant no.1 expressed its inability to spare Rs.8,200/- as security. On 09.03.1984, defendant no.1 requested the plaintiff to get the machines from Bombay Port to Delhi through M/s Delite Carriers (Regd.). On 13.03.1984, defendant no.1 requested the plaintiff to issue Dispatch Instructions. On 14.03.1984, the Clearing Agents, M/s Vaz Forwarding Pvt. Ltd., informed defendant no.1 that the consignment could not be cleared without payment of Customs Duty of the remaining two items. It was also stated that the Clearing Agents had suggested defendant no.1 to survey the same on the 13.03.1984 after getting the panchnama report from the Police under Customs supervision and the consignment would be bonded under Section 49 to avoid demurrage charges. A copy of the same was also forwarded by the clearing Agents to the plaintiff. On 24.03.1984, the plaintiff requested the Assistant Director (Shipping), Directorate of Supplies and Disposal, Bombay to dispatch the machinery to defendant no.1 through M/s Delite Carriers (Regd.), Bombay as desired by defendant no.1. By letter dated 24.03.1984, defendant no.1 wrote to the supplier as follows:-
''Due to the short shipment of item no.4 & 5 of your Invoice referred above, we are facing heavy obstruction in clearing the goods from Bombay Customs as well as from Delhi Customs.
This is causing us heavy loss in our business due to non-receipt of the machines. The consignment is incurring exorbitant costs in terms of demurrage, re-inspections etc. etc. We hereby state that you shall be held responsible for all costs and consequences including demurrage and other charges, which please note.'' On 31.03.1984, the clearing Agents wrote to defendant no.1 that they had again re-submitted the B/E in the Customs and requested them not to charge duty for two items which had arrived in Delhi. A copy of the same was also endorsed by the Clearing Agent to the plaintiff. On 31.03.1984, the clearing Agents wrote to defendant no.1 that they had again re- submitted the B/E in the Customs and requested them not to charge duty for two items which had arrived in Delhi. A copy of the same was also endorsed by the Clearing Agent to the plaintiff. On 11.04.1984, the Clearing Agent informed the defendant no.1 by Telegram that the consignment was released and delivered to Delite Carriers. A confirmatory copy of the same was sent to defendant no.1 as well as to the plaintiff. On 21.04.1984, the plaintiff forwarded the G.R. Etc. to defendant no.1 and asked it to take open delivery if the consignment was outwardly in damaged condition and also to obtain a certificate from the carriers and lodge a proper claim with the carriers immediately under advice to the plaintiff and the suppliers telegraphically. By letter dated 27.04.1984 defendant no.1 acknowledged the receipt of the consignment. On 10.05.1984, the plaintiff forwarded the documents to M/s Continental Carriers, New Delhi with a request to arrange clearance of the consignment from Delhi Airport. Defendant no.1 remitted the balance amount of Earnest Money to the plaintiff. The Hire Purchase Agreement was, thereafter, accepted and signed by the Officers of the plaintiff on 23.06.1984 and a complete copy of the Agreement Bond was also sent under Registered A/D cover to defendant no.1, vide the plaintiff's letter dated 22.11.1984. Under the Hire Purchase Agreement, the Hire Purchase Value was fixed at Rs.12,18,771/- out of which defendant no.1 has paid a sum of Rs.1,39,195/- on account of Earnest Money and the balance amount of Rs.10,79,576/- inclusive of Insurance Charges of Rs.36,630/- was payable in 13 installments. The first installment of Rs.1,28,576/- inclusive of Rs.5,238/- on account of Insurance Charges was payable on or before 01.05.1985 and the remaining installments, each of Rs.79,250/- inclusive of Insurance amount of Rs.2,616/- was payable half yearly on 1st November and 1st May, each year. The defendant no.1 has also agreed to pay 16 ½ % interest per annum on the defaulted installment or part thereof as the case may be until payment, under clause 6 of the Hire Purchase Agreement.
On 21.07.1984, the plaintiff sent a reminder to M/s Continental Carriers directing them to deliver the consignment to defendant no.1 as defendant no.1 had informed them that it had not received the delivery of the consignment till then. On 25.07.1984, M/s Continental Carriers informed the plaintiff that the consignment could not be got cleared until and unless technical expert was deputed to explain the goods to the Customs Authorities. On 04.08.1984, the plaintiff sent a telegram to defendant no.1 to depute its technical expert to explain the nature of the goods to Customs Authorities to enable the Clearing Agents to get the consignment cleared from Delhi Airport. On 27.10.1984, the plaintiff sent a proposal to defendant no.2 through Special Messenger for insuring the machines supplied to defendant no.1 for the period from 27.10.1984 to 27.10.1985. According to the Agreement between the plaintiff and defendant no.2, the Insurance of the machines deemed to have been effected on the date the proposal was sent, viz., 27.10.1984 and any damage or loss to the machines was to be made good by defendant no.2 in terms of the proposal irrespective of the fact whether the insurance policy had been issued or not. Till November, 1984 defendant no.1 did not make any complaint to the plaintiff regarding the machines supplied under the Hire Purchase Agreement. It was only by letter dated 07.11.1984 that defendant no.1 informed the plaintiff about the fire alleged to have taken place in the factory on 01.11.1984. On 09.11.1984, the plaintiff also received a telegram from defendant no.1 regarding the fire alleged to have taken place on 01.11.1984 in the factory. On 19.11.1984 defendant no.2 issued an insurance policy for Rs.7,32,605/- for the period from 16.11.1984 to 16.11.1985. However, the said Insurance Policy was not in terms of the Agreement between the plaintiff and defendant no.2 as the policy ought to have been issued with effect from 27.10.1984, the day on which the proposal was sent by Special Messenger in the Office of defendant no.2 and not from the 16.11.1984. On 23.11.1984, the plaintiff wrote to defendant no.1 to get the loss assessed and take further suitable action thereon under intimation to the plaintiff. On 10.12.1984, the plaintiff sent another reminder to M/s Continental Carriers regarding the clearance of the consignment and delivery to defendant no.1. A copy of the same was also endorsed to defendant no.1. On 17.12.1984, the plaintiff inquired from defendant no.1 about the receipt of the consignment by it from M/s Continental Carriers. On 19.12.1984, the plaintiff informed defendant no.2 that the proposal from dated 27.10.1984 sent by post might be treated as withdrawn as the original proposal form sent through Special Messenger had already been delivered on 27.10.1984 which was duly received by defendant no.2. A photocopy of the proposal form and the Peon Book had also been furnished to defendant no.2. On 31.12.1984, the Senior Divisional Manager of defendant no.2 sent a reply to the letter dated 19.12.1984 to the plaintiff. On 3rd/5th of January, 1985 the plaintiff sent a detailed reply to defendant no.2. On 14.01.1985 the Chairman of the plaintiff - Corporation sent a D.O. Letter to Sh. K.N. Malhotra, Chairman- cum-Managing Director of defendant no.2. On 31.01.1985 the plaintiff required defendant no.1 to furnish certain details in connection with its application for the import of capital goods from England for Manufacture of Radiators as a riot affected case. On 26.02.1985, defendant no.2 rejected the claim of the plaintiff in respect of the damaged property on the ground that there was no valid cover in respect of the damaged property. On 15.03.1985, Sh. T. Radhakrishna, Chairman-cum-Managing Director of the plaintiff wrote a D.O. Letter to Sh. K.N. Malhotra, Chairman-cum- Managing Director of defendant no.2. On 19.03.1985, the plaintiff wrote a letter to defendant no.2 stating therein that the policy which had been issued by defendant no.2 ought to have been for the period from 27.10.1985 to 27.10.1985 and not for the period from 16.11.1984 to 16.11.1985 as stated therein. On 29/30.03.1985, the plaintiff again sent a reply stating therein clearly that the proposal was sent on the 27.10.1984 and the risk was to be covered for the period from 27.10.1984 to 27.10.1985. In this connection it was also stated that till a final reply from the Chairman- cum-Managing Director to the letter dated 15.03.1985 the claim cases should not be filed. On 03.04.1985, the plaintiff sent a notice for the installment due to defendant no.1. On 11.04.1984, defendant no.2 sent a reply to the letter dated 19.03.1985 to the plaintiff. On 26/30.04.1985, the plaintiff sent an acknowledgment of the letter dated 12.03.1985 received from defendant no.1 intimating that a detailed reply to the same would follow. On 15.10.1985, the plaintiff sent a notice for the second installment to defendant no.1. On 26.12.1985, Sh. O.P. Sharma, Under Secretary, Ministry of Industries, Department of Public Enterprises forwarded a representation of defendant no.1 to the plaintiff. On 16.01.1986, the Ministry asked for the comments of the plaintiff. On 21.01.1986, the plaintiff sent a detailed reply addressed to Sh. R.B. Ajwani, Under Secretary, Government of India, Ministry of Industries, Department of Public Enterprises, New Delhi explaining the entire case, who made some quarries in respect of the reply dated 22.01.1986. On 14.02.1986, the plaintiff sent a reply to the said quarries. On 25.06.1986, Under Secretary to the Government of India forwarded another representation from defendant no.1 to the plaintiff. On 08.07.1986, the plaintiff sent a reply to the Under Secretary to the Government of India. The plaintiff also sent various other reminders to defendant no.2 for expediting the claim. The Officers of the plaintiff had also held meetings with higher Officers of defendant no.2 in connection with the claim. However, it appears that defendant no.2 is in no mood to pay the amount of Insurance for the machines which were duly insured with it vide proposal dated 27.10.1984. Similarly, defendant no.1 had neither paid the installments due inspite of notices served by the plaintiff nor it was returned the alleged burnt machines to the plaintiff till date. Apart from this, defendant no.1 had received short shipped items only much after the alleged fire in its factory on 01.11.1985 and, as such, the said two items are still in power and possession of defendant no.1. Hence, defendant no.1 is liable to pay the amount of installments due in respect of the machines supplied to it by the plaintiff under the Hire Purchase Agreement.
The cause of action arose in favour of plaintiff and against the defendant no.1 when the installments fell due and were not paid by it inspite of notices of demand and against defendant no.2 when it refused to pay the claim amount in respect of burnt machines which it was bound to pay in view of the fact that the proposal dated 27.10.1984 delivered in its office by Special Messenger against receipt on the Peon Book and the same deemed to have been insured from that very day whereas the fire had taken place only on 01.11.1984. Hence, defendant no.2 was liable to pay the insurance amount to the plaintiff. The suit has been properly valued for the purpose of court fee and jurisdiction. This court has jurisdiction to try and entertain the present suit.
4. Defendant no.1 & 2 contested the suit by filing their separate Written Statements.
5. In its Written Statement, defendant no.1 has denied that Sh. G. N. Nangia, is the General Manager or one of the Principal Officer of the plaintiff company. It is claimed that Sh. G. N. Nangia has no authority to institute the present suit and as such the suit is not maintainable in law. It is claimed that for the purpose of the manufacture of automobile radiators, the defendant no.1 applied to the plaintiff for supply of a plant consisting of the following five machines for the purpose of manufacture of a radiator core:-
(i).One strip tinner Model CORTIN for tin coating both sides of brass strips with non-corrosive flux.
(ii).Automatic tube drawing machine Model CORTUB for manufacturing Tubes COR standard upto max. 1250 mm.
(iii).Automatic Fin Roller machine Model CORFIN complete with roller dies upto 6 Rows for Fin System (German type)
(iv).Adjustable pressing tool set model CORPLAT for punching lower header plate upto maximum 6 Rows (Germany Type)
(v).Adjustable pressing tool set model CORPLAT for punching upper header plates upto max. 6 Rows (Germany Type).
The said components formed a complete plant as each item was to be used independently to produce different attachments of a radiator core. It is further claimed that as per procedure of the plaintiff, the applicant is required alongwith with its application for supply of a machine on Hire Purchase basis to submit the proforma invoice of the supplier for procurement of the machinery equipment etc. Therefore, the defendant no.1 alongwith its application submitted the proforma invoice from M/s Hans George Lammers of Hamburg, West Germany. The said manufacturer submitted a list of 14 items which were in different combination usable for manufacture of cores of different sizes and specifications. All the 14 items were not required to be used for the manufacture of one single core of one size or specification. The defendant no.1 is not aware of letter dated 16.06.1982 alleged to be sent to the foreign supplier by the plaintiff. It is denied that the defendant no.1 requested for permission from the plaintiff for the purpose of inspection of the machines and/or its demonstration as alleged. Although one of the Partners of defendant no.1 namely Sh. Saranjit Singh left Delhi on 27.11.1983 for Hamburg and reached there on 28.11.1983 but when he visited the office of the foreign supplier, he was informed that the machine had already been shipped on 24.11.1983. Thus, he left Hamburg without visiting the factory of the foreign supplier. It is further submitted that two short shipped items of the machinery were dispatched by air by foreign supplier. The receipt of letter dated 15.05.1984 from the foreign supplier is not denied. It is also claimed that the Agreement is arbitrary and one sided and is illegal too. Although it is not denied that as per the letter dated 05.02.1984, defendant no.1 made the payment of Rs.8,200/- to the plaintiff but defendant no.1 was not legally liable and bound to make the aforesaid payment and yet in order to expedite the receipt of machinery, the payment was made under coercion. It is claimed that the defendant no.1 was threatened by the plaintiff in its letter dated 17.02.1984. However, defendant no.1 is not aware of the alleged letter dated 22.02.1984. It is submitted that the defendant no.1 deputed one of its partners Sh. Satwant Singh, who went to Bombay though it was not bound to do the needful since it was the responsibility of the plaintiff to deliver the machinery to the answering defendant at Delhi. All the expenses incurred by defendant no.1 on that account is entitled to be reimbursed by the plaintiff. It is also submitted that the defendant no.1 came to know from people in the trade that M/s Delite Carriers are able and competent to handle the machine during transportation from Bombay Port to Delhi, and that they will deliver the goods at the factory premises of defendant no.1. Therefore, the letter was written in view thereof. The receipt of letter dated 14.03.1984 from M/s Vas Forwarding (P) Ltd. is not denied. However, it is submitted that the defendant no.1 was not bound to do the needful, since it was the responsibility of the plaintiff to get the goods cleared and delivered to the answering defendant at Delhi. However, in order to expedite the delivery of the machinery, the defendant no.1, at the request of the plaintiff, did assist the plaintiff and its forwarding agents to get the machines cleared from the customs. It is also submitted that the answering defendant was compelled to address the letter on 24.03.1984 in view of the fact that the plaintiff was taking its own time in having the machinery delivered to the defendant no.1 at Delhi though it had arrived in Bombay Port in December, 1983. The receipt of letter dated 31.03.1984 is not denied. It is submitted that the plaintiff's Clearing Agents M/s Vaz Forwarding (P) Ltd. was acting in a high handed manner since it was also a Government Company like the plaintiff. The Clearing Agent was taking its own time for doing the work for which the plaintiff had engaged him. The delay in clearing of the Machinery etc. at Bombay Port, as well as the other related problems which arose subsequently in getting two short shipped items cleared at Palam Air Port was due to its acts of omission and commission. The defendant no.1 had to incur heavy expense as well as undergo loss because of activities of the said Forwarding Agent. Receipt of letter dated 11.04.1984 is not denied. However, it submitted that the Clearing Agent of the plaintiff did not act in the best interest of the defendant no.1 which led to the delay in release of the machinery at the Bombay Port. Receipt of letter dated 21.04.1984 is not denied. It is also submitted that as advice by the plaintiff, the defendant no.1 took open delivery of the consignment. It is claimed that according to the purported agreement of Hire Purchase the value was fixed at Rs.12,67,521.84ps. which included an amount of Rs.36,630/- towards Insurance Charges, as well as Sales Tax of Rs.48,750.84ps. It is also submitted that the amount of Hire Purchase which included the Insurance Charges but minus Sales Tax was payable in 13 installments. It is further submitted that no Sales Tax was payable on the supply of the machines, if at all, at least till the transaction fructified into a sale. Therefore, the amount of Rs.48,750.84ps. was illegally collected by the plaintiff. It is also submitted that because of inequality in the bargaining power of the defendant no.1 from that of the plaintiff, the clauses in the contract were and are illegal and void under Sec. 23 of the Contract Act as opposed to public policy. It needs no reiteration that the plaintiff is nothing but the Government operating behind a corporate veil, carrying out the governmental activity and the governmental functions of vital public importance. These are the activities of the nature carried out by a modern welfare state. In any case, the defendant no.1 craves leave to refer to and reply upon the purported agreement of Hire Purchase dated 23.06.1984. It is denied that the defendant no.1 agreed to pay 16½ % interest on the alleged defaulted installments or part thereof, as alleged. It is submitted that the agreement to that extent is illegal and void in view of the inequity in bargaining power of the parties to the agreement. Hence the defendant no.1 is not bound by the Clause (6) of the purported Hire Purchase Agreement. It is also submitted that the defendant no.1 did not receive the short shipped items by and before 21.07.1984. However, the defendant no.1 is not aware of any communication between the plaintiff and M/s Continental Carriers as alleged. It is also submitted that the contents of para under reply prove on record the submission of the defendant no.1 that till at least July, 1984, the supply of the machines as agreed to between the plaintiff and the defendant no.1 was not complete and as such the defendant no.1 was not liable for the payment of any alleged installments and the provisions of the alleged Hire Purchase Agreement were not attracted at all. The receipt of a Telegram dated 04.08.1984 is not denied. However, in pursuance to the said Telegram, the defendant no.1 deputed one of its partners to assist M/s Continental Carriers for getting the consignment of two short shipped items cleared from the Custom authorities at Palam (Delhi). Although, the authorities were satisfied with the explanations given by the partner of the defendant no.1, yet they plaintiff and/or his Clearing Agent could not get the goods released from the Customs Authorities for a fairly long time. It was only in May, 1985 that the Clearing Agent could get the goods released from the Custom Authorities at Palam Air Port, when due to unfortunate events, the release or supply of these machines became irrelevant and inconsequential. It is also submitted that defendant no.1 on receipt of a part of the Machines, could not use and utilize the same for the avowed purpose of manufacture of the Radiation Cores as the three machines, which were so far supplied by the plaintiff could not manufacture the complete Radiator Cores in the absence of the two short shipped items. Therefore, the defendant no.1 was in no position to check about the working of the three machines. Moreover, due to the riots of 1984, the factory of the plaintiff was burnt by the unruly mob and the machines of the Radiator Plant as supplied by the plaintiff till then were totally destroyed on or about 05.11.1984. The plaintiff was duly informed of the same. A complaint was lodged with the Police on the said date but it was received by the Police Station at Kingsway Camp only on 06.11.1984. Therefore, the plaintiff could be informed of the tragic event of riots, arson and file only on 07.11.1984. It is further submitted that a letter dated 13.11.1984 was received from the plaintiff in which the defendant no.1 was advised to get the loss/damage surveyed by one of the approved Surveyor of defendant no.2 and to file an FIR with the police authorities and to arrange to forward a copy of the Surveyor Report to the plaintiff for further necessary action. However, on inquiry from the Oriental Insurance Company (defendant no.2), the defendant no.1 came to know that the machines as supplied by the plaintiff were not insured by the plaintiff with the Insurance Company. The said information/decision was conveyed to the plaintiff with a copy to the defendant no.1 by defendant no.2 in its letter dated 15.11.1984. It is also submitted that the plaintiff illegally sent a notice for the installments although by then the supply of the machines as agreed to be supplied by the plaintiff to the defendant no.1, was not complete and even the supplied machines had got burnt down in Riots of October/November, 1984. The Insurance Company was also denying its liability to pay because of the acts of omission and commission of the plaintiff and or its officers and employees in getting the machines insured as it was required to do under the terms of agreement dated 22.06.1984. Therefore, the alleged notice was returned back to the plaintiff with the aforesaid remarks by the defendant no.1. It is denied that any notice dated 15.10.1985 was received by the defendant no.1 from the plaintiff, or that it could at all be sent in view of the facts and circumstances of the case. It is also submitted that despite exchange of voluminous correspondence and meetings with the Chairman and other Officers of the plaintiff nothing fruitful could be emerged, therefore, the defendant no.1 was compelled to serve a Legal Notice dated 19.09.1985 on the plaintiff, thereby requesting the plaintiff to do the needful within 10 days from the date of receipt of said notice but all in vain. Defendant no.1 again served a notice dated 15.04.1986 upon the plaintiff thereby calling upon to pay the claim of defendant no.1 amounting to Rs.7,60,000/- as detailed therein. The defendant no.1 repeatedly approached the plaintiff to remove the machinery from its premises and to refund the amount paid to it by the defendant no.1, but despite repeated assurance of the plaintiff, it has failed to lift or remove the machinery from the premises of the defendant. The plaintiff is thus liable to pay the rent of the premises and to refund the amounts paid to it by the defendant no.1 or the supply of the aforesaid plant. The plaintiff is also liable to pay interest on the market rate from the date when the different amounts were paid to it as also on other amounts payable by it by way of damages etc. as detailed in the plaint of suit no.1193/86. It is further submitted that it was an express or implied condition of the Hire Purchase Agreement dated 23.06.1984, that the plaintiff would import and deliver to defendant no.1 the aforesaid Radiator plant complete in all respects and in accordance with the specifications of the order placed by the defendant no.1 with the plaintiff. In view of the breach of the alleged Agreement, the said Agreement is neither valid nor binding, and the same is in fact null and void. The said Agreement was got signed from the plaintiff in January, 1984, even before the machinery, had been got cleared from the Customs Authorities at Bombay and delivered to defendant no.1 in Delhi. Therefore, no inspection, examination or testing was allowed before the execution of the Hire Purchase Agreement and the supply of the plant. Therefore, the same is illegal, void and against public policy. The defendant no.1 signed the Agreement believing in plaintiff's representations. But the plaintiff was failed to fulfill its obligation. The notice dated 15.04.1986 was also duly received in the office of the plaintiff company on 17.04.1986 but it failed to make the payment of the amount in suit to defendant no.1 and take back the plant. It is denied that any cause of action has been arisen in favour of the plaintiff and against the defendant no.1. The suit of the plaintiff is liable to be stayed U/s 10 of the Code of Civil Procedure, in view of the pendency of the suit no.1193/86, filed by the defendant no.1 against the plaintiff. It is also denied that the defendant no.1 is at all liable to the plaintiff for the alleged amount of Rs.6,47,374.27ps. as alleged. On the contrary, the plaintiff is liable to the defendant no.1 to pay damages and losses which the defendant no.1 suffered on account of breach and violations of the agreement and the plaintiff's utter failure to supply the Radiator Plant to defendant no.1 as per agreement. The defendant no.1 suffered the following damages:-
(i).For the purpose of installation and initial working of the plant, defendant no.1 had engaged the service of a consultancy agency, and for regular running and maintenance of the important plant the services of a qualified engineer. Defendant no.1 paid to the said consultancy agency and the qualified engineer an amount of Rs.36,000/- which it is entitled to recover the same from the plaintiff.
(ii).Moreover, defendant no.1 had also engaged the services of a Mechanic and a helper, as also engaged two labourers in the factory to run the plant. Thus the defendant no.1 incurred an expense of Rs.19,950/- towards the salary of the employees from April, 1984 till November, 1984.
(iii).For the purpose of use in the plant, the defendant no.1 imported specialized type of copper sheets to be used in the imported plant, weighing 922 Kg. The same became a total loss because of the riots in October - November, 1984 and had to be sold as a junk.
Thus the defendant suffered a loss of Rs.55,000/- on the import of the said raw-material. In the report lodged with the Police Station, the defendant duly mentioned the loss of this raw - material which was specially imported for use in the Radiator plant in question.
(iv).An amount of Rs.5,127/- was paid towards freight and labour charges to the road carrier for delivery of the plant from Bombay to the site of the defendant's factory at Delhi.
(v).That for the purpose of the publicity for sale of the Radiator Cores to be manufactured from the radiator plant in question, defendant no.1 spent an amount of Rs.10,826/- on advertisement and publicity. The plaintiff is also liable to compensate defendant no.1 for the said loss.
(vi).Defendant no.1 is also entitled to an amount of Rs.1,17,000/- towards the rent of the premises and exclusively for the purpose of installation and running of the plant in question @ Rs.4,500/- per month from the date of supply of the plant till the date of filing of the suit i.e. from April, 1984 to May, 1986.
(vii).That admittedly at the request of the plaintiff, the answering defendant got the plant surveyed in November, 1984 after the riots and paid an amount of Rs.2,500/- to the Surveyor. This expense was incurred specifically at the instance of the plaintiff. Thus on this account the plaintiff is liable to pay to defendant no.1 an amount of Rs.2,46,403/-, apart from the amount of Rs.2,81,592.84ps.
admittedly paid by defendant no.1 to the plaintiff as mentioned in para 20 of the plaint in suit no.1193/86. Thus the plaintiff is liable to pay to the defendant no.1 an amount of Rs.5,79,995.84ps. with interest etc. for which the defendant no.1 has filed a suit being suit no.1193/86 titled as General Radiator Vs. NSIC.
6. The defendant no.2 also contested the suit by filing the Written Statement in which it is claimed that the suit is not maintainable in its form and the same is also bad for mis joinder of parties as the plaintiff has claimed the recovery of amount on the basis of the default of the installments of defendant no.1 and against defendant no.2 on the basis of insurance claim. The suit is also not maintainable as the plaintiff had not taken any cover of insurance during the alleged period of damages caused by fire and during the riots period. Thus there is no cause of action arises against defendant no.2.
On merits side it is claimed that the present suit has not been signed, verified and filed by duly competent and authorized person. The defendant no.2 has no concern with the dispute between the plaintiff and defendant no.1. It is claimed that no proposal whatsoever for insurance dated 27.10.1984 was ever received by the defendant no.2 through a special messenger of the plaintiff. The alleged proposal sent by the plaintiff for insurance was actually received by the answering defendant only on 16.11.1984 and not on 27.10.1984. Thus at the time of out break of riots during which the machinery is alleged to have been damaged and/or destroyed there was no cover of insurance alive or had been taken by the plaintiff or by defendant no.1. It is also submitted that the present suit does not suit lie at all against defendant no.2. The plaintiff's servants and employees on account of their own negligence did not take the cover of insurance during the alleged period of damage caused by the riots, and to camouflage their negligence are trying to attribute the liability on the insurance company in a most unbecoming and illegal manner. It is also submitted that a confidential investigation report was submitted by M.P. Bakshi Surveyors Pvt. Ltd. to the defendant no.2 and in the said report, it is very categorically mentioned that the plaintiff's servants and employees appeared to have created certain entries and fabricated the documents of their's in an efforts which appears to have been made to pass on the responsibility on the insurance company. There is no agreement whatsoever between the plaintiff and defendant no.2 too. The defendant no.2 was not bound under any agreement to issue an insurance policy when there was no proposal for renewal of insurance or from the back date. The claim put up by the plaintiff for loss and damage caused to the machinery was rejected by the defendant no.2 as the plaintiff had not taken the cover of insurance during the out brake of riots in Delhi on account of which damage/loss was caused to the machinery of the plaintiff by fire. There is no question of any liability of defendant no.2 to the extent of Rs.7,32,605/- because there was no cover of insurance.
7. The plaintiff filed the separate replications to the Written Statements of both the defendants wherein the plaintiff has reiterated the contents of the plaint and denied the allegations made in the Written Statements. It is specifically denied that there is any collusion between the plaintiff and defendant no.1 It is specifically denied that there was no cover of insurance taken by the plaintiff for the period when damage was caused.
8. After completions the pleadings of the parties following issues were framed vide order dated 22.10.1991:-
(i).Whether the plaint has been signed, verified and the suit has been instituted by a duly authorized person? OPP.
(ii).Whether the machines mentioned in para 5 of the Written Statement of defendant no.1 formed a composite plant to produce different attachments of a Radiator Core? OPD1.
(iii).Whether the short supplied items of machines were at all supplied?
If so, when and what is its effect? OPP.
(iv).Whether the hire purchase agreement is arbitrary, one sided, illegal and void being opposed to public policy? OPD1.
(v).Whether the hire purchase agreement was executed by the defendant no.1 under threat as alleged in the Written Statement of defendant no.1? OPD1.
(vi).Whether the payment was made by defendant no.1 under coercion, as alleged in the Written Statement? OPD1.
(vii).Whether defendant no.1 was compelled to address letter dated 24.03.1984, as alleged in the Written Statement? If so, to what effect? OPD1.
(viii).Whether the plaintiff had insured the machinery supplied as per the terms of the agreement dated 22.06.1984? If so, from whom and when? OPP.
(ix).In case issue no.8 is not proved, what is its effect? OPParties.
(x).Whether the machines supplied got burnt in the riots of October/ November, 1984? If so, what was the extent of the damages and to what effect? OPD1.
(xi).Whether the plaintiff is not entitled to recover sales tax from the defendant no.1 under the hire purchase agreement? OPD1.
(xii).Whether the defendant no.1 is not liable to pay interest as per the terms of the hire purchase agreement? OPD1.
(xiii).Whether a proposal was served upon defendant no.2 by special messenger of 27.10.1984? OPP.
(xiv).Whether the proposal was received by defendant no.2 only on 16.11.1984, as alleged? OPD2.
(xv).To what amount, if any, the plaintiff is entitled towards principal and interest and from whom? OPP.
9. In support of the case of the plaintiff Sh. K.G.S. Moorthy appeared in the witness box as PW-1. Besides him one more witness namely Sh. Rajesh Kumar also got recorded his statement as PW-2. On the other hand the defendant no.1 has examined only one witness namely Sh. Satwant Singh to support its stand, whereas no witness was produced by defendant no.2.
10. In his examination-in-chief tendered by way of affidavit, PW-1 Sh.
K.G.S. Moorthy repeated the contents of the plaint and exhibited the following documents:-
(i).Ex.PW1/1 : Photocopy of Power of Attorney dated 23.08.1982.
(ii).Ex.PW1/2 : Invoice dated 27.08.1981.
(iii).Ex.PW1/3 : Letter dated 08.06.1982.
(iv).Ex.PW1/4 : Letter dated 16.06.1982.
(v).Ex.PW1/5 : Plaintiff's letter dated 28.06.1982.
(vi).Ex.PW1/6 : Letter dated 02.07.1982.
(vii).Ex.PW1/7 : Letter dated 25.01.1984.
(viii).Ex.PW1/8 : Letter dated 15.05.1984.
(ix).Ex.PW1/9 : Letter dated 16.05.1984.
(x).Ex.PW1/10 : Carbon copy of Letter dated 07.02.1984.
(xi).Ex.PW1/11 : Carbon copy of Letter dated 17.02.1984.
(xii).Ex.PW1/12 : Carbon copy of Letter dated 22.02.1984.
(xiii).Ex.PW1/13 : Carbon copy of Letter dated 24.02.1984.
(xiv).Ex.PW1/14 : Carbon copy of Letter dated 14.03.1984.
(xv).Ex.PW1/15 : Carbon copy of Letter dated 24.03.1984. (xvi).Ex.PW1/16 : Carbon copy of Letter dated 31.03.1984. (xvii).Ex.PW1/17: Carbon copy of Telegram dated 11.04.1984. (xviii).Ex.PW1/18: Plaintiff's letter dated 21.04.1984. (xix).Ex.PW1/19 : Carbon copy of Letter dated 10.05.1984. (xx).Ex.PW1/20 : Carbon copy of Letter dated 21.07.1984.
(xxi).Ex.PW1/21 : Letter dated 25.07.1984.
(xxii).Ex.PW1/22 : Carbon copy of Letter dated 12.11.1984. (xxiii).Ex.PW1/23 : Letter dated 10.12.1984.
(xxiv).Ex.PW1/24 : Letter dated 17.12.1984.
(xxv).Ex.PW1/25 : Letter dated 31.01.1985.
(xxvi).Ex.PW1/26 : Notice dated 03.04.1985.
(xxvii).Ex.PW1/27 : Notice dated 15.10.1985.
(xxviii).Ex.PW1/28: Letter dated 26.12.1985.
(xxix).Ex.PW1/28A: Carbon copy of Letter dated 16.01.1986. (xxx).Ex.PW1/29 : Carbon copy of Letter dated 21.02.1986. (xxxi).Ex.PW1/30 : Letter dated 29.01.1986.
(xxxii).Ex.PW1/31 : Letter dated 14.02.1986.
(xxxiii).Ex.PW1/32: Letter dated 25.06.1986.
During cross examination he conceded that the original documents of the plaintiff have been filed and exhibited in evidence in this case and not in the other case titled as General Radiator Works Shop Vs. NSIC. He confirmed the receipt of the confirmation letter dated 10.11.1984 after the telegram Ex. P 16. He also confirmed the receipt of Legal Notice dated 19.09.1985 Ex.PW1/D1 sent by the defendant. He also confirmed the receipt of letter dated 17.04.1984 Ex.PW1/D2 from the Office of foreign supplier. He proved the letter dated 13.11.1984 Ex.PW1/D3. He also confirmed that a letter dated 13.11.1984 Ex.PW1/D4 was received from defendant no.1 containing the information that an imported machinery has burnt out. He denied the receipt of letter dated 15.11.1984 from the insurance company. He confirmed that a letter dated 17.11.1984 (copy of which is Ex.PW1/D5) was written by plaintiff to defendant no.1. He confirmed the receipt of letter dated 19.11.1984 Ex.PW1/D6 from defendant no.1 but he denied the contents of the same. He also confirmed the receipt of the letter dated 26.11.1984 Ex.PW1/D7 from defendant no.1. He also confirmed the receipts of the letter Ex.PW1/D8 to Ex.PW1/D10 but he denied their contents. He admitted that the representation dated 26.05.1985 was received under covering letter dated 25.06.1986 from the Government of India. The alleged Legal Notice dated 15.11.1986 through counsel Sh. J.N. Aggarwal was not received in their office. Similarly letter dated 17.02.1992 from the foreign supplier (addressed to the plaintiff) was not received in their office. The report dated 17.02.1992 sent by the Surveyor was not given to NSIC. He could not confirm the receipt of telegram Ex. P 16 in their office. He confirmed the receipt of the letters of the defendant dated 13.11.1984, 19.11.1984, 12.03.1985, 05.08.1985. He conceded that the telegram intimating the machinery burnt and fire and by mob violence was received in the office on 09.11.1984. He admitted that a letter dated 25.06.1986 was received from Under Secretary Govt. of India with a copy of the representation dated 26.05.1986 from defendant no.1. The said representation is the part of the document Ex.PW2/7X and also Ex.PW1/32. He confirmed the receipt of the premium from defendant no.1 by their office and the corporation was to get the machinery insured with the insurance company at his own level. He also confirmed that the premium was received for the insurance of the machinery from the defendant no.1.
11. PW-2 Sh. Rajesh Kumar has confirmed in his examination-in-chief tendered by way of affidavit that certain machines were supplied to defendant no.1 under Hire Purchase Agreement dated 23.06.1984. Under the said agreement the hire purchase value of the machine was fixed as Rs.12,18,771/- out of which defendant no.1 paid a sum of Rs.1,39,195/- on account of earnest money and the balance amount of Rs.10,79,576/- inclusive of insurance charges of Rs.36,630/- was payable in 13 installments. The installment of Rs.1,28,576/- inclusive of Rs.5,238/- on account of insurance charges was payable on or before 01.05.1985 and the remaining installments each of Rs.79,250/-, inclusive of insurance amount of Rs.2,616/- was payable half yearly on 1st of November and 1st of May each year. Defendant no.1 also agreed to pay 16½ % interest per annum of the defaulted installments or part there of. As per books of accounts maintained by plaintiff in its regular course of business, the defendant no.1 is liable to pay a sum of Rs.6,47,374.27ps. under the Hire Purchase Agreement in respect of machines supplied. The plaintiff is not only entitled to the above amount but is also entitled to recover possession of the machines in question. In case the plaintiff is not able to recover possession of the machines in question, the plaintiff is entitled to a sum of Rs.6,89,706/-. The defendant no.2 is liable to pay a sum of Rs.7,32,605/- on account of insurance claim for the burnt machines. The plaintiff is also entitled to interest @ 16½ % on the defaulted installments. The original statement of account is Ex.PW2/1.
During cross examination he confirmed that the Hire Purchase Agreement dated 23.06.1984 came into enforcement from 23.06.1984. The first installment of hire purchase was due on 01.05.1985. He confirmed that a sum of Rs.1,39,195/- was paid initially towards earnest money and balance was to be paid in installments for working out the hire purchase value, cost of the machinery, service charges, interest and insurance charge are all added together. First installment of hire purchase will include service charges, insurance, interest charges and interest tax, if any. He stated that first installment of hire purchase falling on 01.05.1985 was not paid by defendant no.1 and the same was not received by the Corporation Office. He could not say as to whether after the first installment of hire purchase falling due, the plaintiff office issued any letter of ownership of the machinery subject to the condition that the ownership acceptance letter has to be signed by the borrower and sent to the Corporation Office. The balance 10% last payment was made to the supplier on 02.07.1985. The payment of Rs.1,39,195/- is reflected in the statement of account Ex.PW2/1. The insurance charges relating to the import of the machinery in question have not been reflected in the statement of account Ex.PW2/1. He could not tell as to whether the payment of Rs.36,000/- received from defendant no.1 by plaintiff under bank draft no.288678 dated 28.04.1982 has been shown as Insurance Charges earlier to the supply of machinery to defendant no.1. He conceded that the plaintiff would be the owner of the machinery supplied till the last installment of hire purchase value stands paid. He admitted that the statement of account Ex.PW2/1 showing the balances up to January, 1987 and un-accrued installment also which are to be fallen due after January, 1987. He conceded that insurance of the machinery supplied was to be done by the plaintiff itself and not by defendant no.1. Whether machinery was insured or not it is the job of the executive section of the plaintiff.
12. DW-1 Sh. Satwant Singh has also reiterated the contents of the Written Statement of defendant no.1 in his examination-in-chief tendered by way of affidavit Ex.DW1/A. He has also proved on record the document Ex.DW1/1 which is a Letter dated 10.11.1984 (which is also exhibited as Ex.PW1/1 in suit no.231/04).
During cross examination he confirmed that he is one of the partners of defendant no.1, who submitted an application dated 15.09.1984 to the plaintiff and the defendant no.1 had also submitted an invoice dated 27.08.1981 from the foreign supplier. The said application was accepted by the plaintiff on 16.02.1982. In the said acceptance letter, it was agreed to supply the machines for Rs.4,49,610/- besides other charges. He admitted that on 15.10.1988 the defendant no.1 had sought permission of the plaintiff to inspect the machines in question before shipment by the foreign supplier. The said permission was granted by the plaintiff. He however denied that the machines were inspected by one of the partners of the defendant no.1. The machines in question could not be inspected as the same were shipped before the partner of defendant no.1 reached Germany. He admitted that a hire purchase agreement was executed between the plaintiff and defendant no.1 on 23.06.1984 and the hire money was to be re-paid by the defendant to the plaintiff in installments. Three machines were supplied to defendant no.1 in April, 1984 and the remaining two were supplied in May, 1985. He conceded that the foreign supplier was selected by defendant no.1 itself. The burnt machines are still lying at B-1, G.T. Karnal Road, Industrial Area, Delhi. The two machines which were supplied in May, 1985 were not returned back to the plaintiff as the same were dropped at some other place. He denied the suggestion that the defendant no.1 had taken the delivery of two machines directly from the clearing agent. They had informed the plaintiff that the factory premises had been shifted from Roshanara Road to G. T. Karnal Road. He conceded that the defendant no.1 never wrote any letter to the plaintiff informing that the factory premises had been shifted to G.T. Karnal Road. He confirmed that the amount shown in para 12 of his affidavit i.e. a sum of Rs.36,630/- and a sum of Rs.1,66,597.84ps. are correct, whereas the sum of Rs.5,02,597.84ps. is not correct. The plaintiff NSIC never wrote any letter to defendant no.1 stating that the plaintiff would remove the machines from the factory premises of defendant no.1. He confirmed that defendant no.1 is in existence at B-1, G.T. Karnal Road, Industrial Area since 1974 and has not been shifted to any other place since than. The defendant no.1 informed the plaintiff several times to remove the machines. He conceded that the hire money was not paid by the defendant no.1 to the plaintiff after burning of the machines.
13. I have carefully heard the rival submissions of the counsels for the parties. I have also thoroughly perused the entire relevant material placed in the file.
My issues wise findings are as under:-
14. ISSUE No.1:-
Whether the plaint has been signed, verified and the suit has been instituted by a duly authorized person? OPP.
The onus to prove this issue has been placed upon the plaintiff. In order to discharge the onus, PW-1 has testified in para 3 of his examination-in-chief tendered by way of affidavit that the suit has been signed, verified and instituted by Sh. G.L. Nangia, the then Principal Officer and Constituted Attorney of the plaintiff Corporation, who was duly authorized to sign, verify and institute the suit on behalf of the plaintiff in terms of the Power of Attorney Ex.PW1/1 issued by Board of Director/Chairman of the plaintiff Corporation in his favour. He also identified the signatures of Sh. J.S. Suneja (Chairman) on the Power of Attorney at point A. he also identified the signatures of Sh. G.L. Nangia on the plaint at point B & C and also on the vakalatnama at point D. He confirmed that he had worked with them and seen them writing and signing. On the other hand, the defendant has led no evidence in rebuttal. Thus the issue is liable to be decided in favour of the plaintiff and against the defendants and same stands decided accordingly.
15. ISSUE No.2:-
Whether the machines mentioned in para 5 of the Written Statement of defendant no.1 formed a composite plant to produce different attachments of a Radiator Core? OPD1.
The onus to prove this issue has been placed upon defendant no.1, who has claimed in para 5 of its Written Statement that for the purpose of the manufacture of automobile Radiator Core the following five machines were required to be supplied:-
(i).One strip tinner Model CORTIN for tin coating both sides of brass strips with non-corrosive flux.
(ii).Automatic tube drawing machine Model CORTUB for manufacturing Tubes COR standard upto max. 1250 mm.
(iii).Automatic Fin Roller machine Model CORFIN complete with roller dies upto 6 Rows for Fin System (German type)
(iv).Adjustable pressing tool set model CORPLAT for punching lower header plate upto maximum 6 Rows (Germany Type)
(v).Adjustable pressing tool set model CORPLAT for punching upper header plates upto max. 6 Rows (Germany Type).
and the said components formed a complete plant as each items was to be used independently to produce different attachment of a Radiator Core. If one or two machines is/are supplied and four/three are missing the same will be of no use. As such, all the five components/parts of this Compact Radiator Core plant were to be supplied and installed at the same time, and only then the five components/sub-parts of the plants will work and function together to give output to the Radiator Core. In the corresponding para of the replication, the plaintiff has denied the claim of the defendant and asserted that the short shipped items were delivered to the defendant No.1 when consent of the same was given by the defendant No.1 to the plaintiff corporation and the foreign supplier. In this case this is an admitted fact that all the five components were not supplied together rather three machines were supplied by the plaintiff corporation to the defendant No.1 by placing an order with the foreign supplier during April, 1984 and then remaining two machines were sent separately in May, 1985.
Can the three machines supplied during April, 1984 be said to be of any use to the defendant firm?
According to Ld. Counsel for defendant, the three machines supplied during April, 1984 were of no use to the defendant, whereas according to Ld. Counsel for plaintiff, the acceptance of the three machines by the defendant without any protest or objection is sufficient to rebut the claim of the defendant.
Under the letter of 16.05.1984 Ex.PW1/8, the foreign supplier wrote to the defendant firm, the contents of the same are as under:-
''Further to our letter of 27.04.1984 we wish to state that we sent the short shipped items at your specific instructions contained in your telex dated 30.12.1983 and your confirmatory letter no.
GRW/1824/83-84 dated 03.01.1984 requesting us to send the items by air parcel freight paid declaring that this is a part of the machine already dispatched earlier and without this part the machines is of no use, being a part and parcel of the same.'' Since, the production could not be carried on with only those three machines, the two machines therefore immediately needed. They therefore immediately contacted the supplier and the plaintiff. The aforesaid letter Ex.PW1/8 from the foreign supplier to the defendant firm speaks of the requests given to the foreign supplier for immediate supply of these two machines. It was a compulsion with absolutely no option for the defendant firm. It clearly demonstrates that production could not carried on till the balance of two machines are delivered to the defendant firm. It was pointed out to the plaintiff corporation through letter and telex were made alert that the delivery of the machinery has been delayed and they were asked to supply those two machines immediately. Objection is for the delivery of the components/sub-parts of the compact plant in two parts, which clearly demonstrates that production could not carried on till the balance of two machines are delivered to the defendant firm. On the other hand plaintiff led no evidence in the rebuttal. After hearing the rival submissions of the counsels for the parties on this issue, I have come to the considered opinion that for the purpose of the manufacture of automobile radiator core, all the five machines mentioned in the Written Statement of defendant no.1 were required to be supplied together. The production could not be carried on with only three machines supplied in April, 1984. Therefore, the issue is liable to be decided in favour of defendant no.1 and against the plaintiff. Issue stands decided accordingly.
16. ISSUE No.3:-
Whether the short supplied items of machines were at all supplied? If so, when and what is its effect? OPP. The onus to prove this issue has been placed upon the plaintiff who claimed that the short items of machines were supplied to defendant no.1 in May, 1985. The three machines which were already supplied during April, 1984 was supplied so at the instance and with the consent of defendant no.1 themselves, so the plaintiff is entitled to the recovery of the amount claimed in the plaint. The machines were supplied in installments as per the desire and demand of the defendant no.1, so now they can not raise any grievance.
On the other hand as per Ld. counsel for defendant no.1, the three machines already supplied during April, 1984, was a short supplied. Since the production could not be carried on with only those three machines, so request letter was sent to the foreign supplier for immediate supply of the balance two machines. At the time when three machines were delivered, the plaintiff corporation and the foreign supplier were also informed of this short supply and they were alerted by their letter and telex message. The defendant firm could not imagine at that time that there will be bad days in future, therefore, it should refuse the delivery of these machines. If the delivery of three machines was taken, it was a compulsion for the defendant firm and the defendant firm was forced to wait for the supply of balance two machines. Three machines were delivered on 27.04.1984 and after six months of this delivery, there happened an unfortunate incident i.e. Anti Sikh riots, on 31.10.1984/ 01.11.1984 occurred in which the three machines which were already supplied got burnt. The balance two items were received during May, 1985. The three machines already delivered could not be made use of in the absence of the remaining two and also because of the fact that these three machines were damaged and burnt by violent mob on 01.11.1984, the delivery of remaining two machines also became meaningless for the defendant no.1 in May, 1985. Then there could be no consent, even imagine, and it cannot be said that the defendant firm consented for non delivery of the two machines. Documents Ex.PW1/28 dated 02.12.1985, Ex.PW1/D-6 letter dated 19.11.1984, Ex.PW1/D-9 Representation dated 12.03.1985 are relevant in that context. Complaint dated 07.11.1984 addressed to the PS Kingsway Camp, Delhi and formal FIR No.785/84 registered on that basis are the proof of the incidents. The balance two machines reached around 31.03.1985 at Delhi Airport. There can be no consent for taking delivery of the balance two machines after 07.11.1984 the said two machines were delivered without any intimation at the old premise of the defendant firm during May, 1985, which was not under the possession or control of the defendant firm at that time. Also there is no delivery receipt for the same. Further these two machines were received at Delhi Airport around 31.03.1985 and despite of the information by foreign supplier to the plaintiff corporation through their letters Ex.PW1/7, 8 & 9 that the delayed consignment had already been dispatched through Air Freight packed free of cost even then the plaintiff took no steps for getting them cleared at Delhi Airport. Subsequently, they were delivered forcibly to the defendant firm by the Officers of the Corporation during May, 1985. It served no purpose as no production could be carried on in the absence of machinery which were already burnt and destroyed. Hence the defendant firm has suffered due to the default/negligence on the part of the plaintiff corporation and they have violated the terms and agreement of the Hire Purchase Agreement.
I have given my due consideration to the rival submissions of the counsels for the parties in respect of this issue. Although, this is not in dispute that the balance two machines were delivered by the officials of the plaintiff at the office of defendant no.1 in the month of May, 1985 but by that time their delivery had become meaningless in the circumstances that during the anti Sikh riots the three machines which were already supplied to defendant no.1 were got burnt and damaged. While deciding issue no.2 I have already come to the conclusion that all the five components of machines were necessary for the production and in the absence of any one of these components the others were of no use. The three machines supplied on 27.04.1984 were of no use in the absence of remaining two machines and when those two machines were supplied in May, 1985, they became meaningless in the absence of first three machines which were already got burnt and damages during the said riots. Resultantly, the defendant no.1 has suffered due to the default on the part of the plaintiff corporation. Issue stands decided accordingly in favour of defendant no.1 and against the plaintiff.
17. ISSUE No.4:-
Whether the hire purchase agreement is arbitrary, one sided, illegal and void being opposed to public policy? OPD1. The onus to prove this issue has been placed upon the defendant no.1, who has claimed that the Hire Purchase Agreement dated 23.06.1984 Ex.P-18 is illegal and against the public policy, whereas as per the case of the plaintiff the aforesaid Hire Purchase Agreement was duly executed and accepted by defendant no.1 and in the event when the plaintiff has duly performed its part by supplying the machines in accordance with the terms and conditions as settled in Agreement Ex.P-18, so now defendant no.1 can not be allowed to escape from their liability towards the plaintiff. According to Ld. Counsel for defendant no.1, the Agreement Ex.P-18 was sent to the defendant firm under covering letter dated 22.11.1984 Ex.P-19. The plaintiff Corporation and its officers knew it well that the machinery had already been burnt, so acceptance of the terms and conditions of the Hire Purchase Agreement dated 23.06.1984 by the Corporation will have no meaning. If at all, it was accepted, this acceptance has been known to the defendant firm on 22.11.1984 Ex.P-19. This conveying of acceptance of Hire Purchase Agreement dated 23.06.1984 was made known to the defendant firm on 22.11.1984 and it does not carry any value. It is no acceptance at all. There was no unity of mind between both the sides. The chattel of the agreement was already gone and it was non existence at that time, i.e. on 22.11.1984. So the consent obtained on the terms and conditions of the Hire Purchase Agreement on blank forms was one sided, it was only a proposal. This proposal could be said to have been accepted by the plaintiff Corporation under Ex.P-19 dated 22.11.1984. Any acceptance made on 22.11.1984 or any acceptance conveyed on 22.11.1984 will not make the contract complete in the eyes of Law. On this day the defendant firm was having a mind not to accept the terms and conditions of Hire Purchase Agreement for the reason that property/machinery under the Hire Purchase Agreement was not in existence. If any acceptance has been done on that day, this is a foul play, it a cunningness and cleverness on the part of the plaintiff Corporation. It was only a mechanism/device to avoid their own responsibility and to thrust the said responsibility on the shoulder of the defendant firm. So any acceptance of the Hire Purchase Agreement by the plaintiff Corporation, consequent upon any proposal made by the defendant firm is illegal, null and void. The contract was also violated by the plaintiff Corporation at its own level, for the reason that there was no insurance of the machinery supplied on 27.04.1984.
Under Ex.PW1/D-4 which is a letter dated 13.11.1984, it was made known to the plaintiff Corporation that they have failed to insure the machinery with Insurance Company, inspite of having charged the insurance premium, of Rs.36,630/- for a total period of seven years. In this manner the plaintiff Corporation failed to protect the interest of the defendant firm. So, it was requested that the huge amounts invested by the defendant firm should be refunded and also the firm should be compensated for the loss and damages which they suffered due to non supply of radiator cores to big concerns like MARUTI UDYOG LIMITED and SWARAJ MAZDA. This letter dated 19.11.1984 Ex.PW1/D-6 was acknowledged by the plaintiff Corporation on 23.11.1984 under Ex.PW3/17. Under letter dated 12.03.1985 Ex.PW1/D-9, addressed to the Chairman of NSIC, it was submitted that the machines and other components have been damaged in the arson, looting and riots during November, 1984 and that the plaintiff Corporation had failed to get the machinery insured, whereas it was the obligation of the Corporation under Clause 2 (X) at page 3 of the Hire Purchase Agreement, which is reproduced hereunder:-
'' XXXX XXXXXXXXXX XXXXXXXXXX 2 (X): Besides the above said hire purchase referred to in clause 1 hereof and all other hirers liabilities under this agreement, it has also been agreed between the owner and hirer during the seven years term of this agreement within which the hirer is supposed to pay all sorts of dues in full recoverable from him under this agreement, the owner shall get the property insured against the risk of fire, riot, strike and civil commotion and on that account the hirer hereby stipulates to pay total sum of Rs.36,630/-. ................... Non payment of these insurance charges will be considered a breach of very material term of this agreement.'' If the above term applied in favour of the plaintiff Corporation, then it equally applies in favour of the defendant firm.
Under clause 4 at page 4 of the Hire Purchase Agreement, the hirer has been given the option to determine the Hire Purchase Agreement, the material portion of this clause is reproduced hereunder:
'' ........... the hirer may determine the hiring at any time, by notice in writing to the owner at his address mentioned in clause 1 above and by actually returning the said property to the owner at the hirer's risk and cost at its place of business.'' The letter dated 12.03.1985 Ex.PW1/D-9, was served upon the plaintiff Corporation under which the agreement dated 23.06.1984 was terminated. Thereafter, the Legal Notice dated 19.09.1985 Ex.PW1/D-1 was issued by the defendant firm for claiming damages and compensation and also refund of all the amounts paid to the plaintiff Corporation. A representation was made to the then Minister of Industries, Govt. of India, under representation dated 02.12.1985 (Ex.P-20, Ex.PW1/28 and Ex.PW1/28A).
In the case of Installment Supply Vs. S. T. O., Ahmadabad (AIR 1974 SC 1105), it has been held as under:
''A contract of sale should be distinguished from a contract of hire purchase. A contract of hire purchase is properly speaking a contract of hire by which the hirer is granted an option to buy but is not, as under a contract of sale, under a legal obligation to do so. The contract of hire purchase is one of the variations of the contract of bailment, but it is a modern development of commercial life, and the rules with regard to bailments, which were laid down before any contract of hire purchase was contemplated, cannot be applied simpliciter, because such a contract has in it not only the element of bailment but also the element of sale. At common law the term ''hire purchase'' properly applied only to contracts of hire conferring an option to purchase, but it is often used to describe contracts which are in reality agreements to purchase chattels by installments, subject to a condition that the property in them is not to pass until all installments have been paid. The distinction between those two types of hire purchase contracts is, however, a most important one, because under the latter type of contract there is a binding obligation on the hirer to buy and the hirer can therefore pass a good title to a purchaser or pledgee dealing with him in good faith and without notice of the rights of the true owner, whereas in the case of a contract which merely confers an option to purchase there is no binding obligation on the hirer to buy, and a purchaser or pledgee can obtain no better title than the hirer had. (Halsbury's Laws of England, 3rd Edn., Vol. 19, para 823, pp.
510-511) ........ THE main point to notice is that in a hire purchase agreement there is only an option to purchase and there is no sale till that option is exercised........
IN the case of a sale in which the price is to be paid by installments, the property passes as soon as the sale is made, even though the price has not been fully paid and may later be paid in installments. This follows from the definition of sale in S. 4 of the Indian Sale of Goods Act (as distinguished from an agreement to sell) which requires that the seller transfers the property in the goods to the buyer for a price. The essence of a sale is that the property is transferred from the seller to the buyer for a price, whether paid at once or paid later in installments, on the other hand, a hire purchase agreement, as its very name implies, has two aspects. There is first an aspect of bailment of the goods subjected to the hire purchase agreement, and there is next an element of sale which fructifies when the option to purchase, which is usually a term of hire purchase agreements is exercised by the intending purchaser. Thus the intending purchaser is known as the hirer so long as the option to purchase is not exercised, and the essence of a hire purchase agreement properly so called is that the property in the goods does not pass at the time of the agreement but remains in the intending seller, and only passes later when the option is exercised by the intending purchaser. The distinguishing feature of a typical hire purchase agreement therefore is that the property does not pass when the agreement is made but only passes when the option is finally exercised after complying with all the terms of the agreement.'' In the case of Jainsons Clothing Corporation Vs. State Trading Corporation of India Ltd., 1986 (30) DLT 359, it has been held as under:-
''IT can be stated at once that a Bank Guarantee is in the nature of an irrecoverable letter of credit to pay in certain circumstances. But those circumstances must exist in fact as well as in law before the payment can be physically made. As pointed out by the Ld. Single Judge, there are two conditions for the encashment of the guarantee-(a) non-performance by the contractor and (b) a demand by the State Trading Corporation based on that non-performance. If the non-performance is the result of frustration then it is not a case of non-performance, but a case in which performance is excused by law. In such circumstances, the Bank Guarantee cannot be invoked. Again, even if there is non-
performance, there may be cases in which the non performance does not lead to any right to claim damages for breach. Even in such a case, it is difficult to see how the Bank Guarantee can be encashed.
When the contract stands frustrated and it could not be carried on further due to the default of the plaintiff Corporation for violating the terms and conditions of the fire purchase agreement, three machines already being burnt in riots, no Insurance of the machinery which was the duty and obligation of the plaintiff Corporation under the hire purchase agreement, the foundation of the hire purchase agreement i.e. machinery, already gone and is non existent, in that situation the contract will stand frustrated due to supervening impossibility. It has been held in the case reported as Sushila Devi Vs. Hari Singh AIR 1971 SC 1756 that ''...........S. 56 of the Indian Contract Act lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. The impossibility contemplated by S. 56 of the Contract Act is not confined to something which is not humanly possible. If the performance of a contract becomes impracticable or unless having regard to the object and purpose the parties had in view then it must be held that the performance of the contract has become impossible. But the supervening events should take away the basis of the contract and it should be of such a character that it strikes at the root of the contract..........'' Thus the Hire Purchase Agreement dated 23.06.1984 being illegal, void/voidable, impossible to perform due to the supervening events i.e. burning of machinery during riots and failure on the part of plaintiff Corporation to get the machinery insured is not enforceable. Issue stands decided accordingly.
18. Since issue no.5, 6 & 7 are interconnected, so I will take all of them together.
19. ISSUE No.5:-
Whether the hire purchase agreement was executed by the defendant no.1 under threat as alleged in the Written Statement of defendant no.1? OPD1.
ISSUE No.6:-
Whether the payment was made by defendant no.1 under coercion, as alleged in the Written Statement? OPD1.
ISSUE No.7:-
Whether defendant no.1 was compelled to address letter dated 24.03.1984, as alleged in the Written Statement? If so, to what effect? OPD1.
The onus to prove all these issues are placed upon the defendant no.1. The plaintiff Corporation has taken the stand that the defendant firm itself gave its consent to receive the three machines and these were acknowledged vide letter dated 27.04.1984 which is Ex.P-13, so no allegation of coercion or compulsion can be sustained against the plaintiff. On the other hand as per submissions of Ld. Counsel for defendant no.1, it is not a consent to the receipt of the incomplete machinery. It is an acknowledgment, if at all it is to be so taken, with respect to the three machines and not all the five machines. When the consignment consisting of three machines reached Bombay and was lying with the Customs Authorities, and the Custom Authorities were waiting for clearance certificate from the plaintiff Corporation at Delhi and the said clearance certificate issued by the Corporation reached at Bombay, the clearing agent of the plaintiff Corporation got cleared the delivery and thereafter the said delivery of three machines was handed over to the carriers. Can it be said that the balance of two machines was not required to be imported? Can it be said that this consent consent and willingness relates to all the five machines and not three? Is there any indication in this letter dated 27.04.1984 Ex.P-13 from the defendant firm side that balance of two machines were not needed and required at all?
In my view, the letter dated 27.04.1984 can not be taken a consent and acknowledgment under any circumstances, of the delivery of balance two machines which were short shipped by the foreign supplier. These two machines were however delivered at the old premises of the defendant firm at Roshanara Road and not at G.T. Karnal Road. It was done by the Staff of the plaintiff Corporation in order to get away with their responsibility. The plaintiff Corporation and its officers were in full knowledge that a dispute had already occurred between the defendant firm and the plaintiff Corporation for the supply of the machinery, during April, 1984. It was also known to them that a claim of refund of the huge amounts paid by the defendant firm has been lodged with the plaintiff Corporation, after the machinery was burnt during the anti Sikh riots. The officers and staff of the plaintiff Corporation were also knowing it fully well that the machinery was not insured with the Oriental Fire and General Insurance Company. This omission and commission was on the part of the officers and the staff of the plaintiff Corporation. When the defendant firm already knew it well that the imported machinery was not insured with the Insurance Company, can it be said in that situation that the defendant firm will receive the delivery of the balance two machines during May, 1985? The answer is in the negative. It was just a cleverness on the part of the officers of the plaintiff Corporation that they delivered the two machines during 1985 without any intimation to the defendant firm. There is no receipt of the delivery taken by the defendant firm during May, 1985. In order to avoid their own responsibility, which was clearly of negligence for non insurance, they have done delivery at their own risk with the sole purpose in order to foist their own responsibility upon the defendant firm. Under this issue, it is argued by plaintiff Corporation that the defendant firm can not make any grievance about the dispatch of incomplete machinery by the suppliers. The grievance is against the plaintiff Corporation and not against the foreign supplier. The responsibility for supply of complete machinery was of the plaintiff Corporation which is a Financer of the machinery imported, the plaintiff Corporation is also responsible for taking delivery of the balance two machines from the Custom Authorities at Bombay during May, 1985. The plaintiff Corporation knew it well that the earlier machinery supplied to the defendant firm was not insured and a dispute of pending between the parties even then the plaintiff Corporation took delivery of the balance two machines during May, 1985 from Delhi Airport. Thus it is established that the Hire Purchase Agreement Ex.P-18 was executed and the payment was made by defendant no.1 under coercion and therefore defendant no.1 was compelled to address letter dated 24.03.1984. Accordingly, all the issues are decided in favour of defendant no.1 and against the plaintiff.
20. Now I will proceed to take issue no.8 & 9 together as they too are interconnected.
21. ISSUE No.8:-
Whether the plaintiff had insured the machinery supplied as per the terms of the agreement dated 22.06.1984? If so, from whom and when? OPP.
ISSUE No.9:-
In case issue no.8 is not proved, what is its effect? OPParties. The onus to prove issue no.8 was placed upon the plaintiff, whereas both the parties were asked to prove issue no.9 in their favour. This is the case of the plaintiff that they had duly got the machinery insured by sending the proposal to defendant no.2 and the insurance was effected for the period from 27.10.1984 to 27.10.1985. On the other hand according to defendant no.1, despite of the fact that they had duly paid the amount towards the insurance of the machinery, the plaintiff was failed to get it insured as a result of which when their claim was reached to defendant no.2, it was rejected on the ground that the insurance policy cover was not available.
In his examination-in-chief tendered by way of affidavit PW-1 confirmed the receipt of the premium from defendant no.1 by their office and the plaintiff corporation was to get the machinery insured with the Insurance Company at its own level. He also confirmed that the premium was received for the insurance of the machinery from the defendant no.1. He further testified that on 27.10.1984 the plaintiff sent an insurance proposal to defendant no.2 through special messenger for insuring the machines supplied to defendant no.1 for the period from 27.10.1984 to 27.10.1985. As per agreement, the insurance of the machines in question deemed to have been affected on the date the proposal was sent i.e. 27.10.1984. He conceded that vide letter Ex.PW1/22, the plaintiff informed defendant no.2 that neither the insurance policy nor the bill was received by the plaintiff. He conceded that the insurance policy Ex.P-22/2 was issued by defendant no.2 w.e.f. 19.11.1984. PW-2 has also confirmed in his examination-in-chief that a sum of Rs.1,39,195/- was paid by defendant no.1 to the plaintiff on account of earnest money and the Insurance Charges amounting to Rs.36,630/-. He also conceded that the insurance of the machinery supplied was to be done by the plaintiff corporation itself and not by the defendant no.1. Whether machinery was insured or not it is the job of the executive section of the plaintiff.
According to Ld. Counsel for defendant no.1, when the machinery was burnt by violent mob on 01.11.1984, a telegram was sent to the plaintiff corporation dated 07.11.1984 Ex.P-16. Letters dated 07.11.1984 and 10.11.1984 were sent to the plaintiff corporation under letter dated 13.11.1984 Ex.PW1/D-3. These letters have also been acknowledged by the plaintiff corporation under letter dated 23.11.1984 Ex.P-19. A letter dated 13.11.1984 Ex.P-7 was received from the plaintiff corporation wherein the corporation admitted to have received the letter dated 07.11.1984 and 10.11.1984 and further direction was given to the defendant firm to get the loss and damage surveyed by one of the approved surveyors of the Oriental Insurance Company. In this letter a direction was also given to lodge FIR, which was already done. The said Insurance Company has denied its responsibility on the ground that the machinery was not insured under any policy. The Written Statement filed by the Insurance Company in this context is relevant.
I have heard the rival submissions of the counsels for the parties. The plaintiff corporation has stressed that a proposal was sent for insurance on 27.10.1984 while the Insurance Company has denied to have received the same on 27.10.1984. There being no Insurance on 27.10.1984, the Insurance Company has flatly refused to take account for any loss/damage and consequently has refused to pay the said loss to the defendant firm. It is admitted by the plaintiff corporation that to get the machinery Insured was their duty and liability. The officer of the company appeared as PW-1 and he has admitted in his cross examination on 10.02.2005 as under:-
''It is correct that the premium was received from defendant no.1 by our office and the corporation was to get the machinery insured with the insurance company at his own level. It is correct that premium was received for the insurance of the machinery from defendant no.1'' This officer Sh. K. G. S. Moorthy, also appeared as DW-1 in the connected case titled as General Radiator Workshop Vs. NSIC and there he admitted in his cross examination on 18.07.2005 as under:-
''It is correct that the insurance of the machinery supplied was the responsibility of the Corporation'' Even otherwise, the ownership of the machinery was retained by the plaintiff corporation with itself, so the responsibility of the Insurance was of the plaintiff corporation. The only duty upon the defendant firm was to pay the Insurance Premium, which it did in this case. This PW-1, Sh. K. G. S. Moorthy appeared as DW-1 in the connected case and deposed in the cross examination on 18.07.2005 as under:-
''It is correct that there is no settlement with the insurance company till date regarding claim of the corporation as well as the claim of the defendant firm both.'' If the machinery was insured by the plaintiff corporation, then it being the owner of the machinery, the loss and damages should be suffered by the plaintiff corporation. It cannot be put upon the defendant firm. The claim of the defendant firm is that the plaintiff corporation should refund the amounts received under the Hire Purchase Agreement dated 23.06.1984 to the extent of Rs.5,79,995/- for which a separate suit has been filed by the defendant no.1.
In the connected case titled as General Radiator Workshop Vs. NSIC the evidence of DW-1 in cross examination on 18.07.2005 is reproduced hereunder:-
''I have checked up my records, if there is any office note or record and also devices, if the later two machines supplied by the defendant firm could have been used independent for production, thereby meaning that the other three machines supplied earlier to the defendant firm were not required for these two machines. I am not a technical person, so I cannot say these two machines could be used independent of each other three machines for production purpose of Radiator cores ...............
It is correct that a team from our office as per procedure goes to the spot for physical inspection of the machines so damaged or burnt. I have been dealing with this case for the last one and a half years.'' In the said connected case titled as General Radiators Workshop Vs. NSIC on 18.07.2005, DW-1 Sh. K.G. S. Moorthy has deposed on oath as under:-
''The claim was lodged with the Insurance Company by the defendant (Corporation) in this case but it was not settled. It is correct that there were two consignments of machinery supplied. Three machines under one consignment was supplied during April, 1984. other consignment of two machines was supplied during May, 1985........ The delivery mode of the two machines during May, 1985 has been filed in other case pending before this court i.e. NSIC Vs. General Radiators.
Our team has gone for physical verification of the machinery burnt and destroyed and burnt in the factory in question on 19.11.1984. In this regard our file contains an office note dated 30.11.1984 wherein it is written:
''During the course of inspection if was found that outwarding machine was substantially damaged. The unit was advised to set the machine surveyed and lodged proper claimed with the underwriters. We however, do not appeared to have heard anything from the unit further so far.'' It is correct that this office note dated 30.11.1984 had been signed by the Regional Manager, Joint Manager Recovery & Deputy Manager, who has visited the factory premises on 19.11.1984. We do not have any record to show that the defendant was directed to return the salvage of the machinery burnt to the Corporation.
It is correct that there is no settlement with the Insurance Company till date regarding of the Corporation as well as claim of the defendant firm, both. There is no report in our record that all the five machines are being used for production purpose by the defendant firm. It is correct that the insurance of the machinery supplied was the responsibility of the plaintiff Corporation.'' Since the plaintiff was failed to get the machinery insured despite of the receipt of insurance amount from the defendant no.1 well in time and it was the sole responsibility of plaintiff to get the machinery insured with the defendant no.2 and it was failed to do so as a result of which the claim lodged by defendant no.1 was rejected by defendant no.2, so it is the plaintiff only who is liable to make the good of the loss sustained by defendant no.1. Issue stands decided accordingly.
22. ISSUE No.10:-
Whether the machines supplied got burnt in the riots of October/ November, 1984? If so, what was the extent of the damages and to what effect? OPD1.
The onus to prove this issue was placed upon the defendant no.1. To discharge the onus, DW-1 Sh. Satwant Singh has proved the complaint lodged with the police station on 06.11.1984 and the copy of FIR no.785/84 dated 07.11.1984. The defendant sent a telegram Ex.P-16 which is a clear proof that the machinery imported during April, 1984 was burnt by the violent mob during November, 1984. Under Ex.PW1/22 dated 12.11.1984, the Oriental Fire and General Insurance Company was also informed by the plaintiff Corporation that the machines were burnt and destroyed by the violent mob. A copy of the letter was also sent to the Chairman of the plaintiff Corporation under Ex.PW1/D-4 dated 13.11.1984. The plaintiff Corporation has acknowledged the letters dated 07.11.1984 and 10.11.1984 sent by the defendant firm under the letter dated 13.11.1984 Ex.PW1/D-3. In another letter from the defendant firm dated 13.11.1984 Ex.PW1/D-4, addressed to the Chairman of the plaintiff Corporation, it was pointed out that the Insurance Premium has been charged by the Corporation, therefore, the Corporation should deal with the Insurance Company to lodge the claim as per the Insurance Policy.
This letter was also received by the plaintiff Corporation on 17.11.1984 Ex.PW1/D-5. Vide detailed letter dated 19.11.1984 Ex.PW1/D-6, it was pointed out to the plaintiff Corporation that the Insurance Company has refused to depute their surveyors for assessment of the loss and damage caused to the machinery, therefore the responsibility lies with the plaintiff Corporation. The three machines already supplied had become redundant and cannot be put in operation. The amount paid to the Corporation in the form of margin money, insurance charges, bank guarantee, taxes paid are liable to be refunded to the defendant firm for non compliance with the obligations. So the responsibility lies with the plaintiff Corporation for such harassment and violation of the obligations. Any loss sustained by the defendant firm will be borne by the plaintiff Corporation. When the factum of fire by the violent mob, burning and destroying the machinery, is not refuted by the plaintiff Corporation, it is a sufficient proof that the factory premises including three machines were burnt during the riots of November, 1984. As regards to the question of extent of damages is concerned, the defendant has made no submissions probably because they have preferred their claim separately vide a separate suit. Issue stands decided accordingly.
23. ISSUE No.11:-
Whether the plaintiff is not entitled to recover sales tax from the defendant no.1 under the hire purchase agreement? OPD1. Under this issue there can be no liability of payment of Sales Tax on the part of defendant firm. There was no complete and binding contract between the parties. So the liability against the defendant firm does not arise. The plaintiff Corporation has not sold the machinery to the defendant firm and the defendant firm has not purchased the machinery from the plaintiff Corporation. So there is no sale and purchase in the eyes of law. The plaintiff corporation retained ownership of the machinery with itself, so the liability of Sales Tax cannot be fastened against the firm, who has not purchased any goods under the Hire Purchase Agreement. Issue stands decided accordingly.
24. For convenience sake, I will take issue no.13 & 14 prior to issue no.12. ISSUE No.13:-
Whether a proposal was served upon defendant no.2 by special messenger of 27.10.1984? OPP.
The onus to prove this issue has been placed upon the plaintiff, who has claimed that the proposal of insurance was served upon defendant no.2 by special messenger on 27.10.1984, however it has been failed to establish its claim. It has neither examined the said special messenger not led any documentary material to that effect. As such the issue is liable to be decided against the plaintiff and the same stands decided accordingly.
25. ISSUE No.14:-
Whether the proposal was received by defendant no.2 only on 16.11.1984, as alleged? OPD2.
The onus to prove this issue was placed upon defendant no.2 but after filing of the Written Statement it has preferred not to contest the suit, so the issue is liable to be decided against defendant no.2. Same stands decided accordingly.
26. Now I will take issue no.12 & 15 together as they are interconnected.
27. ISSUE No.12:-
Whether the defendant no.1 is not liable to pay interest as per the terms of the hire purchase agreement? OPD1.
ISSUE No.15:-
To what amount, if any, the plaintiff is entitled towards principal and interest and from whom? OPP.
Since while deciding the foregoing issues, I have already come to the conclusion that the plaintiff is responsible for the damages/loss suffered by the defendant no.1, so no question of payment of any amount alongwith interest from defendant no.1 arises. The plaintiff corporation has failed to abide by the terms and conditions of the Hire Purchase Agreement dated 23.06.1984 (effective from 22.11.1984), which was thus determined and terminated by the defendant firm, the corporation having failed to get insured the imported machinery with the Insurance Company, and the chattel of the agreement being burnt by the violent mob on 01.11.1984. So the defendant no.1 is not liable to pay any interest. Both the issues stand decided accordingly.
28. RELIEF:-
In view of my findings on the foregoing issues, suit of the plaintiff is dismissed. No order as to cost.
29. Decree Sheet be prepared accordingly.
30. File be consigned to Record Room after completion of necessary formalities.
(Announced in the open (RAKESH KUMAR)
court today on 23.01.2008) ADDL. DISTRICT JUDGE
DELHI