Bangalore District Court
M/S Mecolam Engineering Pvt. Ltd vs M/S Avitech India Pvt. Ltd on 10 January, 2023
IN THE COURT OF XLII ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, BENGALURU (CCH-43)
Present: Sri. Kengabalaiah,
B.Com., LL.B.
XLII Addl. City Civil & Sessions Judge.
Dated this 10 th Day of January, 2023
O.S.No. 8479/2015
Plaintiff/s : M/s MECOLAM Engineering Pvt. Ltd.,
Viratnagar, Off Begur Road,
Bommanahalli, Bangalore - 68.
Rep. by its Director
[By Sri. M.R.C.R., Adv.]
-Vs-
Defendant/s : M/s Avitech India Pvt. Ltd.,
8, Gopal Nagar,
Choudhury Layout,
Nagpur - 440022
Rep. by its Director
[By Sri. L.F., Adv.]
Date of institution of the suit 06.10.2015
Nature of the suit Money suit
Date of commencement of 06.7.2017
recording the evidence
Date on which the judgment 10.01.2023
was pronounced
OS.No.8479/2015
2
Total duration Years Months Days
07 03 04
(Kengabalaiah),
XLII Addl. City Civil & Sessions Judge.
*********
JUDGMENT
The plaintiff has filed this suit against the defendant for recovery of money.
2. The case of the plaintiff is that, the plaintiff is a private limited company registered under the Companies Act established in the year 1982, having its at Viratnagar, Off Begur Road, Bommanahalli, Bangalore. The Plaintiff deals with the manufacture of fibre glass components for the automobile industry and is also engaged in the business of the procurement of aircraft spares predominantly for the defence sector. The Defendant is engaged in the business of importing aircraft components and supplying the same to the aviation industry among whom is the defence sector also. The Plaintiff and the Defendant had business dealings since 2010 and their relationship has been cordial. Towards the end of 2013 the Plaintiff had placed certain orders on the Defendant OS.No.8479/2015 3 for the supply of aviation parts which were meant for further supply to the Indian Navy for fitment on the TU-142 M aircraft which is of Russian origin being operated by the Indian Navy. The Purchase Order No.326 dated 4.10.2013 was placed by the Plaintiff on the Defendant as under :
a) Static Pressure Sensor Module, Part No.BDSD, Quantity - 5 each costing Rs.2,74,694/- Totaling Rs.13,73,740/- ;
b) Stabilisation Amplifier, Part No.U-167-2 Quantity 8 each costing Rs.2,83,555/- Totally Rs.22,68,440/- ;
c) Assembly, Part PA4, Quantity 4, each costing Rs.3,19,000/- 1 °tally Rs.12,76,000/-
The total value of the Purchase Order inclusive of CST against Form-C was Rs.50,16,268/-.
3. It is further submitted that the items so ordered by the Plaintiff were procured by the Defendant as per the terms of the Purchase Order and were received by the end user which is the Indian Navy, Material Organization-Goa, India. Bill No.002 dated 20.12.2013 for a total amount of Rs.50,16,268/- was raised by the Defendant which was promptly cleared by the Plaintiff in two tranches by making part payment of Rs.28,00,000/- on 27.12.2013 and the balance of Rs.22,16,268/- was paid on 10.01.2014. On receipt OS.No.8479/2015 4 of the aircraft spares by the Indian Navy, a detailed audit of the supplies was carried out and on verification revealed that Certificate of Conformity issued by M/s AVIA Exports dated 02.12.2013 which was received along with the items supplied was of no relevance to the goods supplied as M/s AVIA Exports is not a manufacturer of aviation spares and does not have export licence for military goods. The Indian Navy vide their letter No.MO/GA/CMP/958-(1) dated 19.04.2014 has raised doubts about the genuineness of the supplies made and called for an explanation from the Plaintiff on the relevance of the Certificate of Conformity issued by M/s AVIA Exports and as to how the items were exported by M/s AVIA Exports when there was no export licence for military goods and Original Equipment Manufacturers traceability. The Plaintiff approached the Defendant to urgently resolve the issue on the observations made by the Indian Navy regarding the Certificate of Conformity and the Original Equipment Manufacturers traceability vide e-mails dated 19.03.2014 and 28.04.2014. However, the Defendant had given untenable and vague explanation. The Plaintiff vide their letter No.MEG/AVI- TECH059/2014-15 dated 03.07.2014 again informed the OS.No.8479/2015 5 Defendant that the documents submitted with the supply of the 3 items were found to be irrelevant and therefore unacceptable to the end user-Indian Navy. The Plaintiff also requested the Defendant to furnish genuineness of the Air Way Bill, Proof of Customs Clearance and the correspondence of the AWB No. in shipment. The Defendant was further informed that for want of these documents the Plaintiff would be blacklisted/De-Registered by the Indian Navy. The Plaintiff once again reminded the Defendant vide letter No.MEL/AVI-TECH/112/2014-15 dated 12.09.2014 that the documents supplied along with the items were not genuine and the India Navy has raised apprehensions and suspicion that the items have not been sourced from Russia. The end user-Indian Navy has contacted the Defendant's supplier in Russia and they have denied having made any supplies to the Defendant. In the absence of genuine documents, the Indian Navy is planning to black list/De- Register the Plaintiff and in that event, the Plaintiff would be barred from making supplies to the Defence sector and this would result in serious business and other ramifications. The Defendant was further informed that in case the Defendant OS.No.8479/2015 6 does not arrange for genuine documents within 30 days, the payment for the items ordered and paid for in full and final may be refunded.
4. It is further submitted that the quantity 5 Static Pressure Sensor Module supplied by the Defendant to the Indian Navy were subjected to extensive user trials and it was conclusively found during flight trials that all the items were unserviceable and requested the Plaintiff to collect the unserviceable parts for replacement with serviceable items in lieu along with relevant traceable documents. The Indian Navy had also conducted extensive user trials and assessments of the Stabilizer Amplifiers Quantity 8 that were supplied by the Defendant wherein it was determined that out of the items supplied only 3 were serviceable. Therefore the items were rejected as the items were not only found be unserviceable but also lacking in proper documentation. Due to the un- serviceability of the spares supplied, non-traceability of documentation and the doubts raised by the Indian Navy regarding the source of the said spares, the Indian Navy cancelled the Plaintiff's registration with them. The long relationship that the Plaintiff had with the Indian Navy was OS.No.8479/2015 7 reduced to ashes due to the negligence of the Defendant whose acts of commission/omission are responsible for the de-registration. The Plaintiff vide its letter No.MEL/AVI- TECH/146/2014-15 dated 06.11.2014 apprised the Defendant regarding the unfortunate action of the Indian Navy and requested the Defendant to refund the payment made for the goods. The Defendant vide letter No.AVUMEL/11-14-15 dated 07.11.2014 has contended that the procedure/methodology of testing/flight trials have neither been justified nor demonstrated in the presence of the Defendant's representative and it is established that if the Certificate of Conformity has not been provided items can be inspection cleared based on user/functional trials. In this regard the Plaintiff reiterates that the Indian Navy in the subject matter has carried out extensive trials both on the test benches as well after fitting the spares which were supplied by the Defendant on the aircraft for flight trials which conclusively determined that the said parts are unserviceable and unfit for fitment on the aircraft operated by the Indian Navy. Therefore the Defendant's claims that the items can be inspection cleared based on user/functional trials does not hold water.
OS.No.8479/2015 8 Further the Defendant has claimed that the said items were sourced from Russia however the supply route is not clear. The Plaintiff refutes these claims as baseless and false and vehemently states that the Defendant is making these contentions/claims purely to divert the core issue which is to replace the unserviceable parts so supplied by the Defendant or to refund the payment received for the same from the Plaintiff. The Defendant asked the Plaintiff to furnish test and inspection results. The Indian Navy which is the end user of the aircraft spares does not disseminate any information regarding its inspection and testing procedures due to security reasons. The Defendant is well aware of the policy of the Indian Navy that confidentiality is paramount and is the prerogative of the Defence Forces and no other agency is privy to the test procedures which undoubted, adhere to stringent standards of flight safety. There is no compromise on the aspect of airworthiness of its aircraft. Therefore there is no question of the Defendant insisting on verifying the test results and having the presence of the Defendant's representative during inspection and user trials.
OS.No.8479/2015 9
5. It is further submitted that the Defendant vide e- mail dated 25.09.2014 and the Defendant vide letter dated 07.11.2014 demanded the same from the Plaintiff. The Plaintiff in order to recover the payment made for the supply of the goods to the Defendant was left with no option but to have a legal notice issued to the Defendant vide its legal notice No.RSS/1062/2165 dated 11.04.2015 made a demand on the Defendant to refund the amount of Rs.50,16,268/- paid towards the Defendant's bill No.002 dated 20.12.2013, together with interest ©15% per annum. The Defendant after an inordinate delay of 40 days got a reply notice dated 20.05.2015 issued through their Counsel and contended that it is in a position of a sub-contractor who is procuring aviation parts for the Plaintiff and as such is not liable to answer queries raised by the Indian Navy. There is a existing contract which is enforceable between the Plaintiff and the Defendant as a Purchase Order has been made by the Plaintiff on the Defendant. The Defendant also made various allegations and untenable statements which are baseless and irrelevant to the transaction between the Plaintiff and the Defendant. The Defendant has not offered any clarity to the issue on hand and OS.No.8479/2015 10 has merely made denials and stated falsehoods with the primary motive of diverting the core issue to replace the unserviceable aircraft parts supplied/refund the payment made by the plaintiff. The Defendant is avoiding the payment which is legally due to the Plaintiff. Hence, the Plaintiff is constrained to file the present suit for recovery of Rs.50,16,268/- along with interest @ 15% p.a. from 11.4.2015 to 31.8.2015 amounting to Rs.2,94,792 and legal notice charges of Rs.10,000/-, in all amounting to Rs.53,21,060/- together with future interest at the rate of 15% p.a. from the date of suit till realisation. The cause of action for the suit arose on 11.4.2015 when the plaintiff issued the legal notce to the defendant. Hence, the suit.
6. In pursuance of the summons, the defendant has appeared through its counsel and filed the written statement contending that the statement made by the plaintiff that it is a private limited company registered under the provisions of the Companies Act, 1956 and was established in the year 1982 seems to be incorrect. On a bare perusal of the certificate of incorporation, it becomes crystal clear that the plaintiff company has been incorporated only in the year 2004, and OS.No.8479/2015 11 more particularly on 24 May 2004, and it has been allotted the registration No.33996 by the Registrar of Companies, Bangalore. Its Corporate Identification Number is UO2520KA2004PTCO33996. Thus, the plaintiff is concealing material particulars from this Court. Thus, plaintiff has not approached this Court with clean hands, and therefore, it is not entitled to any relief. The defendant is indeed engaged in the business activities of forestry, logging, and related service activities. Hence, it is crystal clear that the statement made by the plaintiff that the plaintiff deals with the manufacture of Fiberglas components for the automobile industry, and has also engaged in the business of procurement of aircraft spares predominantly for the defence sector is completely false and fabricated. The statement of the plaintiff with regards to the business of the defendant, the same is a matter of record and needs no comments. The defendant has denied the rest of the allegations made in para-3 of the plaint. He denied that towards the end of 2013, the plaintiff had placed certain orders on the defendant for supply of aviation parts which were meant for further supply the Indian Navy for fitment on TU-142 M aircraft which is of Russian Origin and is OS.No.8479/2015 12 operated by the Indian Navy. That, the purchase order No.326, dated 4.10.2013, is admitted. It is expressly submitted that the said goods came to be supplied to the plaintiff by the defendant as per the terms of the contract entered into between them in the month of December 2013. In view of the assertion given by the plaintiff as well as in view of the fact that the defendant was required to comply with the purchase order issued by the plaintiff, delivery of the items came to be given to the plaintiff as per the contract at Goa. Subsequent to the said delivery which was made by the defendant, the plaint has made 100% payment to the defendant. The plaintiff also did not raise any objection for a period of 3 months after the receipt of items.
7. It is further submitted that the defendant does not have any privity of contract with the Indian Navy. The plaintiff had only requested the defendant to supply the goods to the Indian Navy. Therefore, by supplying the goods at Goa, the defendant had completed all the material requisites of the purchase order, and therefore, the plaintiff had released the payment of the defendant after successful completion of the said contract in 2 installments. The defendant received the OS.No.8479/2015 13 said amount. That, the statement made by the plaintiff in the memo of plaint, with regards to the items delivered by the defendant being received by the end-user which is the Indian Navy, is not related to the defendant. As the defendant is not aware as to what happened to the items after they were handed over to the plaintiff. The defendant is not a party to the understanding between the plaintiff and the Indian Navy, the defendant is not aware of any such audit having been conducted by the Indian Navy. Similarly, the defendant is not aware about the fact that any audit which came to be carried out by the Indian Navy revealed that a Certificate of Conformity issued by M/s Avia Exports dated 2.12.2013, which was received along with the items supplied was of no relevance to the goods supplied as M/s Avia Exports through whom the defendant sourced the items is not a manufacturer of aviation spares and does not have an export licence for military goods. The defendant was only given a purchase order for said goods by the plaintiff. The plaintiff was supplied the goods in accordance with the aforesaid mentioned purchase order, and that upon successful completion of the said purchase order, the plaintiff had made full payment OS.No.8479/2015 14 against the said goods. Therefore, any action of the Indian Navy of issuing a communication/carrying on audits is not directly related to the defendant, and therefore, the defendant is not answerable to the plaintiff or the navy, as such, the defendant has no role to play whatsoever in it.
8. It is further submitted that, the defendant is not aware about any communication which has been issued by the Indian Navy dated 19.4.2014, asking about the genuineness of the supplies made, and calling for an explanation from the plaintiff on the relevance/significance of the Certificate of Conformity issued by M/s Avia Exports, and as to how whenever was no export licence for military goods, items were exported, and also about Original Equipment Manufacturers traceability. Since the Indian Navy has not served the defendant with a copy of the said communication between the plaintiff and the Indian Navy, the defendant does not have any knowledge about the same, and therefore, the same is expressly denied for want of knowledge. The founder director of the plaintiff company Mathew Paul had handed over an authorisation letter dated 15.10.2010 pertaining to the supply of items through M/s Avia Exports. The aforesaid OS.No.8479/2015 15 mentioned firm M/s Avia Exports has mandated that the plaintiff through its director was to represent the interest of the firm for the supply of Russian aircraft space in India. The period of validity of this communication is up to the year 2019. Hence, the plaintiff which represents the interests of the firm in India, and therefore, asking any questions to the defendant about the same is of no relevance. The defendant is not at all aware of the plaintiff supplying the goods to any 3 rd party. Further more, at the time of receiving the goods as per the order, the plaintiff had taken the delivery of the goods in the month of December itself. The entire payment of the defendant towards the said goods were released by the plaintiff, as the plaintiff was satisfied with the documents as well as the goods supplied by the defendant. So far as the issue of Indian Navy making observations with regards to Certificate of Conformity and Original Equipment Manufacturers Traceability are concerned, the same is a matter which is to be taken up by the plaintiff and the Indian Navy amongst themselves, and that the defendant has no role to play therein. The defendant has not supplied goods to the Indian Navy. The defendant was not required to supply goods OS.No.8479/2015 16 the Indian Navy as the purchase order was drawn on the defendant by the plaintiff, and hence, the defendant has no relation whatsoever to any goods which might have been supplied by the plaintiff the Indian Navy, and also any problems that the Indian Navy might have had with those goods. The rest of the allegations made in para-7 of the plaint are denied as false.
9. It is further submitted that the defendant had supplied the goods to the plaintiff as per the contract entered into between them and accordingly taken delivery of the goods and the documents after ascertaining the correctness by himself of the documents as well as the quality of the goods. Thereafter, the plaintiff being satisfied with the goods supplied to him along with the requisite documents, had released the entire payment of the defendant in 2 installments. No objection was raised till last payment was made in March 2013. Hence, the contract entered into between the plaintiff and the defendant with regard to the said goods and the documents, on the basis of the purchase order issued by the plaintiff came to an end. The defendant never informed that the goods were to be supplied to the Indian OS.No.8479/2015 17 Navy. There was no mention about the lane in the contract. The defendant was a subcontractor, which is specifically prohibited as per the contract which was allotted to the plaintiff. Even otherwise, it is clarified that the plaintiff does not have any permission to deal with goods and their supply to the defence sector as per the provisions of the Companies Act, 1956. After the issuance of the Passport by the OEM, it was confirmed that the items conform to the standards of manufacture and performance. Thus, a separate COC had no relevance in the matter and hence, had raised no query at the time of receiving the goods in pursuance of the purchase order raised by the plaintiff on the defendant. The objection with regards to the serviceability of the static pressure sensor was taken 9 months after the receipt of the goods. The contentions raised by the plaintiff that, all the 5 quantities of the static pressure sensor modules supplied by the plaintiff to the Indian Navy were subjected to intensive trials and were conclusively found during flight trials as unserviceable is completely false to the knowledge of the defendant. The plaintiff has not verified the truthfulness of the same.
OS.No.8479/2015 18
10. It is further submitted that contentions raised by the plaintiff with regard to the objections having been raised by the Indian Navy, without any documents being placed on record to substantiate the same, and so also, without there being any confirmatory statement being made by the Indian Navy in the plaint, or without making the Indian Navy as a necessary party under the provisions of Order 1, Rule 10 of the Code of Civil Procedure, 1908, the statement made by the plaintiff cannot be relied upon. In fact, no registration of the plaintiff with the Indian Navy has ever been cancelled. The plaintiff was trying to cheat the Indian Navy by attempting to supply goods through a subcontractor, without informing the Indian Navy about the same. As the plaintiff has concealed this material fact of supply of goods by subcontractor, Indian Navy might have reprimanded the plaintiff, and the same would have resulted in cancellation of his registration. The plaintiff is unnecessarily blaming the defendant for his wrongs. The entire claim of the plaintiff is a hoax, cannot be trusted. The submission of the plaintiff is contrary to his own stand taken in the earlier preceding paragraphs. On one hand, the plaintiff submits that the Indian Navy has informed that the OS.No.8479/2015 19 parts do not meet the quality requirements, and on the other hand, the plaintiff is making a submission that the Indian Navy does not disclose any information regarding its inspection and testing procedures due to security forces, as confidentiality is paramount and prerogative of the defence forces and no other agency is privy to the test procedures which undoubtedly added to stringent standards of safety. The plaintiff is not absolute liberty to take contrary stands in subsequent paragraphs. The rest of the allegations made in para-14 to 19 are denied as false. The court fee paid by the plaintiff is insufficient.
11. It is further submitted that the objection of the plaintiff that M/s Avia Exports is not manufacturer of any aviation spare parts and does not have any export licence for military goods and hence the certificate of conformity has no relevance to the items supplied is completely false. In fact the plaintiff firm which represents the interest of M/s Avia Exports of India and in Indian market. The plaintiff company is also registered in the IHQ based on the authorisation given to them by M/s Avia Exports. Mathew Pul who had handed over the authorisation letter pertaining to the supply of items M/s OS.No.8479/2015 20 Avia Exports and by way of said communication dated 15.10.2010, M/s Avia Exports has mandated the plaintiff company through its aforesaid mentioned founding director to represent their interest or supply of Russian aircraft spares in Indian region for a validity period up to 2019. The transactions took place between the plaintiff and the defendant in the past also. Hence, sought for dismissal of the suit.
12. On the basis of the above pleadings, my learned predecessor has framed the following issues and this court has framed the additional issues :-
1) Whether the plaintiff proves the supply of goods and materials more fully stated in para 3 of the plaint worth Rs.50,16,268/- to the defendant firm?
2) Whether the plaintiff proves that the defendant is liable to pay Rs.53,21,060/-
inclusive of interest charged upto date as claimed?
3) What order or decree?
Additional issues :-
1) Whether the defendant proves that there is no privity of contract between the plaintiff and the defendant and the defendant is only a subcontractor towards the plaintiff?
2) Whether the suit is bad for non-joinder of necessary parties as contended in para-23 of the written statement?
OS.No.8479/2015 21
13. In order to prove the case of the plaintiff, the director of the plaintiff company examined himself as P.W.1 and got marked the documents at Ex.P1 to P18. On the other hand, the defendant has not adduced any evidence nor produced any any documents.
14. Heard the arguments of the counsel for the plaintiff and perused the written argument submitted by the counsel for the plaintiff.
15. My findings on the above issues are as under:-
Issue No.1: In the affirmative Issue No.2: Partly in the affirmative Addl. Issue No.1: In the negative Addl. Issue No.2: In the negative Issue No.3: As per final order, for the following:
REASONS
16. Issue No.1 and 2 and additional issue No.1:-
Since these issues are inter-related each other then they are hereby discussed commonly in order to avoid repetition of facts.
17. In order to prove the case of the plaintiff, the Director of the plaintiff company namely Boris Mathews has OS.No.8479/2015 22 filed an affidavit in lieu of his examination-in-chief as PW.1 by reiterating the contents of the pleadings and he has relied upon the documents i.e., copy of the purchase order dated 4.10.2013 marked at Ex.P1, Fax letter of Indian Navy dated 19.4.2014 marked at Ex.P2, plaintiff's e-mail dated 19.3.2014 marked at Ex.P3, plaintiff's e-mail dated 28.4.2014 marked at Ex.P4, Letters issued by the plaintiff to the defendant on 3.7.2014 and 12.9.2014 requesting the documents marked at Ex.P5 and P6, Fax letters of Indian Navy marked at Ex.P7 to P9, Letter dated 6.11.2014 issued by the plaintiff to the defendant marked at Ex.P10, reply letter dated 7.11.2014 issued by the defendant to the plaintiff marked at Ex.P11, e- mail dated 25.9.2014 marked at Ex.P12, Fax letter of Indian Navy dated 17.12.2014 marked at Ex.P13, legal notice issued by the plaintiff to the defendant marked at Ex.P14, postal acknowledgement is marked at Ex.P15, reply notice issued by the defendant marked at Ex.P16, Memorandum and Articles of Association of the plaintiff company is marked at Ex.P17 and Tax invoice is marked at Ex.P18.
18. Whereas in the cross-examination of PW.1, the defendant's counsel elicited that the plaintiff company OS.No.8479/2015 23 established in the year 2000. Further PW.1 has deposed that they are having business with Indian Navy from 1998. Prior to it, they have transacted in the name of Melcolam Engineering Company. He admits that since from 5 years they have not at all supplied any materials to the Indian Navy. He admits that they have not made the Indian Navy as party to the proceedings. He admits that there was an agreement between the plaintiff and the Indian Navy for supply of goods. He admits that he has no documents to show that the plaintiff company is having sub-contract with Indian Navy as well as the defendant company. He admits that they called tenders to supply the goods to the Indian Navy. The witness volunteers that 50% advance amount has to be paid prior to supply of goods and remaining 50% amount has to be paid only after supply of entire materials. However, PW.1 admits that they have paid the amount under Ex.P1 only after supplying of materials as per the purchase order dated 4.10.2013. He admits that he has paid the amount only after supply of materials by the defendants. He admits that they have requested the defendants to supply the materials on behalf of their company to the Indian Navy. He denies that none of OS.No.8479/2015 24 them were present when the defendants company supplied the materials to the Indian Navy. The witness volunteers that their company representatives were present. He admits that they used to make payment to the defendants only after getting the acknowledgement from the Indian Navy regarding supply of material by the defendant company.
19. The very contention of the defendants that they are not party to the understanding agreement between the plaintiff and the Indian Navy and the defendants are not aware of any audit having been conducted by the Indian Navy. The defendants only given a purchase order by the plaintiff and the defendants supplied the gods in accordance with the purchase order and upon successful completion of the purchase order, the plaintiff made full payment against the goods. The defendant is not a party to the agreement which has been entered into between the plaintiff and the Indian Navy and therefore, any action of the Indian Navy of issuing a communication on audits is not directly related to the defendants. The defendants are not aware about any communication which has been issued by the Indian Navy asking about the genuineness of the supplies made and OS.No.8479/2015 25 calling for an explanation from the plaintiff on the relevance of Certificate of Conformity issued by M/s AVIA Exports since the Indian Navy has not served the copy of communication being a privilege communication between the plaintiff and the Indian Navy, the defendant does not have any knowledge about the same. It is further contended that the founder director of the plaintiff company Mathew Paul had handed over an authorisation letter dated 15.10.2010 pertaining to the supply of items through M/s Avia Exports and M/s Avia Exports has mandated that the plaintiff through its director was to represent the interest of the firm for the supply of Russian aircraft space in India. It is further contended that the defendant is not aware of the plaintiff supplying the goods to any 3rd party. At the time of receiving the goods as per the order, the plaintiff had taken the delivery of the goods in the month of December itself and the entire payment of the defendant towards the said goods were released by the plaintiff, as the plaintiff was satisfied with the documents as well as the goods supplied by the defendant. The issue of Indian Navy making observations with regards to Certificate of Conformity and Original Equipment Manufacturers OS.No.8479/2015 26 Traceability are concerned, the same is a matter which is to be taken up by the plaintiff and the Indian Navy amongst themselves, and that the defendant has no role to play therein. The defendant has not supplied goods to the Indian Navy. Hence, the defendants have no relationship whatsoever to any goods which might have been supplied by the defendants to the Indian Navy.
20. Though the defendants have taken such contentions, but they admits that they are having agreement regarding supply of goods to the plaintiff as per the purchase order. Though the defendants have contended that they have supplied the goods as per the purchase order placed by the plaintiff, but the defendants failed to prove that they have supplied the goods originated in Russia. On the other hand, from the documents relied by the plaintiff, it indicates that the goods supplied by the defendants are not of Russian origin. The fundamental term of the purchase order in Ex.P1, which was breached by the defendant. The plaintiff has provided the defendant with several opportunities to prove the origin of the goods with genuine documents as evident from Ex.P3 to P6 and P10. But the defendants failed to produce any documents OS.No.8479/2015 27 before the court to prove that the goods originated from Russia. The audit report revealed that the defendants have failed to provide genuine documents proving that the goods originated in Rusia. On the other hand, the defendants supplied the fabricated certificate of conformity issued by M/s Avia Exports dated 2.12.2013 which had no relevance to prove that the goods were of Russian origin, because M/s Avia Exports through whom the defendant appears to have sourced the goods is not a manufacturer of such aviation products and it does not have a license to export or import military goods. However, the plaintiff approached the defendants to resolve the issue by asking the defendants to produce genuine documents as required under the Purchase order Ex.P1 through e-mails which evident from Ex.P3 and P4 and called upon the defendants to provide the appropriate Certificate of Conformity and documents establishing the traceability of the original equipment manufacturers to Russia as required under the contract. The defendants did not provide any such documents and did not explain how the goods were procured from Russia when the entity whose OS.No.8479/2015 28 certificates they had provided did not even have a license to export military goods into India.
21. It is pertinent to note here that through letter dated 3.7.2014 i.e., Ex.P5 reiterated to the defendant that the documents it had submitted while delivering the goods were found irrelevant to establish that the goods were of Russian original and asked for genuine documents to trace the origin of the goods, such as Airway Bill letter, Proof of customs clearance and Correspondence of the Air Way Bill No. in the shipment. The Defendant did not produce any of these documents and has not proved that the goods were of Russian origin. The Defendant has breached its contract and caused irreparable loss to the Plaintiff. On 12.09.2014, the Plaintiff once again reminded the Defendant that the documents it had supplied were not genuine and raised apprehensions and suspicion that the goods were not sourced from Russia. In Exhibit P6, the Plaintiff mentioned that the end user as Indian Navy had even contacted the Defendant's supplier in Russia, who denied ever having made any supplies to the Defendant. The Defendant was informed in Exhibit P6, that in case it did not arrange for genuine OS.No.8479/2015 29 documents within 30 days, the payment for the goods would have to be refunded, which apparently shows that the defendants materially breached the contract and the defendant is liable to refund the amount paid for goods as required under purchase order Ex.P1. The goods delivered by the defendants were subject to extensive user trial by the Indian Navy on its equipments. It was conclusively found during flight trials by the Indian Navy that goods supplied by the Defendants under its contract with the Plaintiff were unserviceable, and therefore, not fit for purpose, for which the plaintiff relied upon the document Ex.P7/letter dated 2.9.2014. The Indian Navy requested the Plaintiff to collect the unserviceable parts for replacement with serviceable items in lieu along with relevant traceable documents. The Indian Navy's letter dated 31.10.2014 which is marked at Ex.P8 evidences that the goods supplied by the Defendant were rejected. The Defendants have breached a specific term of the contract, which required it to supply goods which were of new condition as per Ex.P1. The Defendants did not establish the Russian origin of the goods, did not provide goods of serviceable quality, did not replace the unserviceable goods, OS.No.8479/2015 30 and did not provide appropriate documentation as per the Purchase Order, the Indian Navy, through letter dated 29.10.2014 which is marked at Ex.P9, cancelled the Plaintiff's registration with them, despite the Plaintiff's best efforts to resolve the situation. The Defendants have therefore caused the Plaintiff severe loss on account of its breach of contract and negligence. The Defendants are liable to refund the amounts paid under the contract. Accordingly, the plaintiff has issued a letter dated 06.11.2014 which is marked at Ex.P10, and intimated the Defendants and requested to refund the payment made for the goods. However, as per Ex.P11, the Defendants provided an untenable response and refused to remedy its breach of contract. In addition, in Ex.P11, in para- 3(b), the Defendants contended that where the COC Certificate of Conformity has not been provided, items can be inspection cleared based on user/functional trials. The statement implies that the Defendants is admitting that it has not supplied the Certificate of Conformity as required under the Purchase Order Ex.P1. The terms of the Purchase Order which require the Defendant to submit an appropriate Certificate of Conformity and three other documents must be OS.No.8479/2015 31 strictly complied with as these documents are collectively used to establish the point of origin of the goods. The Plaintiff got issued a legal notice dated 11.04.2015 as per Ex.14 to recover the payment it had made to the Defendants for the supply of the goods.
However, the defendants replied as per Ex.P16 contending that it was in the position of a sub-contractor of the Plaintiff and therefore not liable to answer queries raised by the Indian Navy. An enforceable contract exists between the Plaintiff and the Defendants as per Ex.P1 and the Defendants have willfully breached the terms of the contract. The Defendants are not being made answerable to the Indian Navy, but is instead answerable to the Plaintiff for not adhering to the terms of the Purchase Order.
From the evidence of PW.1 and the documents relied by the plaintiff, it established that the defendants have breached the terms of contract which require that the goods to be serviceable quality to the plaintiff. What are the goods supplied by the defendants were unserviceable and they are not fit for the purpose, the same has been established by the plaintiff.
OS.No.8479/2015 32
22. In support of his argument, the learned counsel for the plaintiff has relied upon the decision of the Hon'ble Supreme Court reported in (2000) 6 SCC 113 - Ghaziabad Development Authority Vs. Union of India and another, wherein their lordship held that, "Contract Act, 1872 - S.73
-Breach of contract - Mental agony, damage for - Held, not payable in case of breach of ordinary commercial contract - Purpose of awarding damages is to put complainant monetarily in the same position he would have been in if contract had been performed - Therefore, rule as to remoteness of damages would come into play - Complainant filing petition before MRTP Commission against appellant Development Authority on grounds of excessive delay and failure to hand over possession of plot - Commission awarding, inter alia, Rs.50,000/- as damages for mental agony suffered by complainant - Held, Commission erred in awarding damages for mental agony."
23. The learned counsel for the plaintiff further argued that, Section 16 deals with implied condition as to quality or fitness. Section 16 : Subject to the provisions of this Act and of any other law for the time being in force, there Is no implied OS.No.8479/2015 33 warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows :-- (1) Where the buyer, expressly or by implication makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose; Provided : (2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed." Under Sub-section (1) the requirements which must be satisfied to import a condition that the floods shall be reasonably fit for any particular purpose are that the buyer must make known to the seller the particular purpose for which the goods are required, in the circumstances showing, OS.No.8479/2015 34 the seller realised or ought to have realised that the buyer was relying on the seller's skill or judgment and the goods shall be of a description which it is in the course of the seller's business to supply. In such a case, there is an implied condition that the goods shall be reasonably fit for such purpose. Sub-Section (2) relates to all sales by description. Under this Sub-section to import a condition that the goods are of merchantable quality, the goods must be bought by description and seller must deal in goods of that description. The goods of that description implies goods of the same kind as those bought, The words "that description" refer to and mean the actual description by which the goods which are the subject matter of the contract were bought.
24. However, the defendants did not establish the Russian origin of the goods and did not provide goods of serviceable quality and did not replace the unserviceable goods and did not provide appropriate documentation as per the purchaser order Ex.P1. The Indian Navy through letter dated 29.2014 cancelled the plaintiff's registration wit them. The defendants cause the plaintiff severe loss on account of its breach of contract and negligence. As such, the OS.No.8479/2015 35 defendants are liable to refund the payment made for the goods by the plaintiffs. The plaintiff established the case by producing oral and documentary evidence.
25. However, the defendants have contended that they had supplied OCC called as Passport in Russia issued by the OEM along with the consignment of goods and they are not liable for refund of the amount since the defendants are no way connected with the sub-contract made between the plaintiff and the Indian Navy. In order to establish the said, the defendants have not stepped into witness box. The evidence of PW.1 and the documents produced by the plaintiff are remained unchallenged by the defendants. When the defendants did not enter into witness box to give evidence an adverse inference can be drawn against them. In this aspect there is a decision of the Hon'ble Supreme Court reported in 1999 (3) SCC 573 Vidhyadhar Vs. Manik Rao, wherein their lordship has held that, "Evidence Act, 114, 111(g) - Presumption - If party abstain from entering the witness box an adverse inference would arise against him". As such an adverse inference can be drawn that the plaintiff has proved that it is entitled for recovery of the amount of Rs.53,16,060/-
OS.No.8479/2015 36 including legal notice charges of Rs.5,000/- from the defendants.
26. So far as future interest is concerned, the plaintiff has claimed future interest at the rate of 15% p.a. from the date of suit till realisation. Since there is no contractual agreement between the parties in respect of interest is concerned, however the plaintiff is paid a sum of Rs.50,00,000/- to the defendants for supply of materials which require as per the contract between the plaintiff and the defendants and since the defendants have not supplied the goods as per the purchase order of the plaintiff, as such, the defendants have to pay the future interest at the rate of 6% p.a. on Rs.50,16,268/- from the date of suit till realization. In the light of the above decision and discussion, I hold point No.1 in the affirmative and point No.2 in the partly affirmative and additional issue No.1 in the negative.
27. Additional Issue No.2:- The defendants have contended that the suit is bad for non-joinder of necessary parties. In order to prove the said aspect, the defendants neither adduced their evidence nor produced any documents. Hence, I hold additional issue No.2 in the negative.
OS.No.8479/2015 37
28. Issue No.3:- In view of the above discussions, I proceed to pass the following order:-
ORDER Suit of the plaintiff is hereby partly decreed with cost.
The plaintiff is entitled to recover the amount of Rs.53,16,060/- from the defendants along with future interest at the rate of 6% p.a. from the date of suit till realisation on Rs.50,16,268/-.
Draw a decree accordingly.
(Dictated to the Judgment Writer, typed by him, the transcript thereof corrected and then pronounced by me, in open court, on this the 10th day of January, 2023).
(Kengabalaiah), XLII Addl. City Civil & Sessions Judge, Bengaluru.
ANNEXURE List of witnesses examined for plaintiff:
P.W.1 Boris Mathews List of documents exhibited for plaintiff:
Ex.P1 Purchase order
Ex.P2 Fax letter of Indian Navy
Ex.P3 E-mail dated 19.3.2014
Ex.P4 E-mail dated 28.4.2014
Ex.P5 Letter dated 3.7.2014
OS.No.8479/2015
38
Ex.P6 Letter dated 12.9.2014
Ex.P7 to 9 3 Fax messages of Indian Navy
Ex.P10 Letter dated 6.11.2014
Ex.P11 Reply letter dated 7.11.2014
Ex.P12 E-mail dated 25.9.2014
Ex.P13 Fax message dated 17.12.2014
Ex.P14 Legal notice
Ex.P15 Postal acknowledgement
Ex.P16 Reply notice
Ex.P17 Memorandum & Articles of Association
Ex.P18 Tax invoice
List of witnesses examined for defendant:
Nil
List of documents exhibited for defendant:
Nil XLII Addl. City Civil & Sessions Judge, Bengaluru.