Delhi District Court
Minda Industries Ltd vs Nextfirst Engineering Techonologies ... on 30 January, 2025
-:: 1 ::- Date: 30.01.2025
IN THE COURT OF MS. SHIVALI BANSAL
DISTRICT JUDGE-03 (NORTH)
ROHINI COURTS, DELHI
CNR No. DLNT010139612016
CS No. 60118/16
In the matter of :-
M/s Minda Industries Ltd.
B-64/1, Wazirpur Industrial Area,
Delhi-110052.
Through its authorized representative
Mr. Rakesh Rustagi. ...... Plaintiff
Versus
1. Nextfirst Engineering Techonologies Pvt. Ltd.
Having its registered office at:-
355, 7th Cross, Wilson Gardens,
Bangalore-560027, Karnataka.
2. Mr. Jayendran Bala Subramaniam
Director, Nextfirst Engineering
Techonologies Pvt. Ltd.
355, 7th Cross, Wilson Gardens,
Bangalore-560027, Karnataka.
3. Mr. Bala Subamaniam Mahadevan
Director, Nextfirst Engineering
Techonologies Pvt. Ltd.
355, 7th Cross, Wilson Gardens,
Bangalore-560027, Karnataka .......Defendants.
Date of Institution : 16.12.2016
Date of Final Arguments Heard : 23.12.2024
Date of pronouncement of judgment : 30.01.2025
CS No. 60118/16 Minda Industries Ltd. Page: 1 of 59
Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 2 ::- Date: 30.01.2025
SUIT FOR RECOVERY OF A SUM OF RS. 65,19,915/- ALONGWITH
PENDENTELITE AND FUTURE INTEREST.
JUDGMENT
1 The present suit is filed for possession and mesne profits / damages on behalf of the plaintiff.
2 The brief facts of the case as stated by the plaintiff in the plaint are:
2.1 It is stated that the plaintiff is a company registered under the provisions of Companies Act, 1956, having its registered office at B-64/1, Wazirpur Industrial Area, Delhi- 110052 and is engaged in the manufacturing and supply of auto electrical parts to Original Equipment Manufacturers (OEM) and in the aftermarket from its plant/ factory situated at Village Naharpur Kasan, P.O. Nakhrola, Gurgaon-122050, Haryana. The present suit is being filed, signed and verified through Sh. Rakesh Rustagi, who is duly authorized vide Resolution of Board of Directors dated 21.05.2016.
2.2 It is stated that the defendant No. 1 is a company registered under the provisions of Companies Act, 1956, having its registered office at 355, 7th Cross, Wilson Gardens Bangalore-560027, Karnataka. The defendant no. 1 is engaged in providing engineering solutions and development and production of customized assembly lines and special purpose machines. The defendant nos. 2 and 3 are the directors of the defendant no. 1.
2.3 It is stated that the defendant no. 1 through defendant no. 2 approached the plaintiff company at plaintiff's registered office and represented that they have sufficient means and expertise in conceptualizing, designing and building semi-automatic assembly line for production of various products interalia automotive lightings, etc. CS No. 60118/16 Minda Industries Ltd. Page: 2 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 3 ::- Date: 30.01.2025 which the plaintiff Company intended to produce from the said assembly line at the plaintiff company's factory. That the defendants further assured the plaintiff company that they will design and develop a world-class customized assembly line as per the needs and specifications of the plaintiff company in order to improve production/ output and vide its E-mail dated 26.06.2012 sent an Commercial Offer/ Proposal for developing an assembly line being HM- 7626/A to the plaintiff company stating the scope of the project and proposed layout of the machine alongwith the tentative cost of the project at Rs.
39,00,000/-. It is stated that the defendants in their Proposal/ Offer dated 26.06.2012 further assured that the plaintiff company will not be requiring an additional shift for producing 2000 units per shift per day in-return escalating the productivity by / upto 142%.
2.4 That in pursuance thereof, the defendants vide their E-mail dated 07.07.2012 explained that the proposed assembly line would help in increasing the production and reduce the manual labour thereby generating savings / profit to the tune of Rs. 35,00,000/-.
2.5 It is stated that the plaintiff vide Purchase Order bearing No. 4200004298 dated 29.08.2012 placed order with the defendant no. 1 for designing, developing and delivering automatic line for HM-7626 as per the specifications/ requirements of the plaintiff company. The total estimated cost of the project stated in the said purchase order was Rs. 33,33,927/-. Thereafter, upon certain alterations, suggested by the plaintiff company, total cost of the project was revised to Rs. 40,01,087.50/- and a revised purchase order dated 29.08.2012 was prepared.
2.6 That the defendant no. 2 vide its e-mail dated 20.09.2012 informed the CS No. 60118/16 Minda Industries Ltd. Page: 3 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 4 ::- Date: 30.01.2025 plaintiff that an engineer from the defendant company shall require to visit the plaintiff's site for understanding the assembly process and in response, the plaintiff company vide its e-mail dated 21.09.2012 informed the defendants that the engineer could visit the site anytime in the coming week.
2.7 It is stated that plaintiff vide its e-mail dated 21.09.2012 requested the defendant no. 2, for arranging a meeting between the teams of the plaintiff and defendant company in order to reach one agreement regarding the duties of both the teams/ companies in respect of developing the proposed assembly line. The plaintiff further informed the defendant no. 2 that the cheque qua 1st installment shall be ready by 22.09.2012. The defendant no. 2 vide its e-mail dated 21.09.2012 requested to have a telephonic conversation on the subject, next morning.
2.8 It is stated that plaintiff company made the 50% advance / part payment of Rs. 14,75,000/ - vide Cheque bearing No. 241781 dated 24.09.2012 drawn on Canara Bank, Alwar Road Branch, Gurgaon, to the defendants and informed the defendants vide its E-mail dated 22.09.2012 and further requested the defendants to give an updated plan every week in order to avoid any delay in the project.
2.9 That on 27.09.2012 a project "kick-off" meeting was held at the office of the plaintiff company between the representatives of the plaintiff company and the representatives of the defendant no. 1 i.e. the defendant No. 2 and Mr. Senthil and 10.12.2012 was fixed as the date for Machine Qualification-01 (MQ-01) to be conducted at the office of the defendant No. 1.
2.10 That in pursuance of the meeting held on 27.09.2012, the defendants CS No. 60118/16 Minda Industries Ltd. Page: 4 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 5 ::- Date: 30.01.2025 vide its e-mail dated 03.11.2012, sent a 340-HMSL Assembly Line DAP-V1 (Development Action Plan Version-01) alongwith cycle time analysis sheet to the plaintiff and requested plaintiff company to go through the same and revert. This was again forwarded to the plaintiff company vide e-mail dated 07.11.2012. That the plaintiff company raised certain queries over telephone in respect of the DAP received from the defendants. The defendants vide their e-mail dated 12.11.2012 clarified the same. That the plaintiff vide its e-mail dated 26.11.2012 requested the defendants to provide requisite data so that further payment could be made at the earliest and the defendant no. 2 vide e-mail dated 27.11.2012 provided the data as required by the plaintiff company.
2.11 That thereafter, the defendant no. 2 vide its e-mail dated 04.12.2012 reminded the plaintiff company about payment of the next installment towards the project and further intimated that the manufacturing and testing of the assembly line shall be done by 15.01.2013. The plaintiff company was taken by surprise on gaining knowledge about delay of more than a month for MQ-01 which was fixed for 10.12.2012 in the meeting held on 27.09.2012. The plaintiff replied to the defendants that MQ-01 could not be postponed any further from 23.12.2012 as the existing production line had to be shut down for the installation and testing of the new assembly line by 30.12.2012.
2.12 That the plaintiff company in conformity with the fixed schedule i.e. on completion of the design of the assembly line, paid the second installment of Rs. 5,90,000/- vide cheque bearing no. 242368 dated 06.12.2012 drawn on Canara Bank, Alwar Road Branch, Gurgaon, towards the project cost to the defendants.
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-:: 6 ::- Date: 30.01.2025 2.13 That meanwhile, the plaintiff company had entered into an arrangement with the defendants in respect of sale of a Hot Plate Welding Machine for Rs. 5,24,056.62/- to the defendants and the aforesaid amount was to be adjusted in the total cost of the assembly line. On 19.12.2012, the said transaction was completed and the amount of Rs. 5,24,056.62 / - was adjusted in the total payable amount in respect of the project. Therefore, as on 19.12.2012, a total sum of Rs. 25,89,056.62/- stood paid to the defendants by the plaintiff company.
2.14 That the defendants failed to deliver the assembly line even by 15.01.2013. The plaintiff company vide e-mail dated 16.01.2013 and 28.01.2013 requested the defendants for sending an updated time plan. The defendant no. 2 vide e-mail dated 19.02.2013 informed the plaintiff that 95% of the machinery / parts of the assembly line have been received by them and assembling of the parts will be started by 29.02.2013 and the assembly line shall be ready after conducting preliminary trials.
2.15 The defendant no. 2 vide e-mail dated 22.02.2013 gave a schedule, highlighting different milestones towards the completion and final installation of the machine by 14.03.2013 and further commissioning of the same by 16.03.2013. The defendant no. 2 vide another e-mail on the same day admitted the delay in completion of the project.
2.16 That the defendant no. 2 vide e-mail dated 01.03.2013 reiterated that machine will be ready for MQ-01 on 08.03.2013 and dispatched for the plaintiff's factory by 09.03.2013. That the plaintiff company vide e-mail dated 12.03.2013 informed the defendants about plaintiff company's representatives visit to the defendants factory/ site on CS No. 60118/16 Minda Industries Ltd. Page: 6 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 7 ::- Date: 30.01.2025 15.03.2013 for final trials of the machine. The plaintiff further reminded the defendants about the delay of 2 months in completion of the project and penalty clause on the delays decided between the parties in the "kick-off" meeting held on 27.09.2012. The defendant in response to the e-mail dated 12.03.2013 informed the plaintiff company vide e-mail dated 15.03.2013 that the MQ-01 for the machine which was postponed from the earlier date of 08.03.2013 to 15.03.2013 will have to be further postponed to 22.03.2013.
2.17 That finally, after a delay of around 6 months, the machine was delivered and installed at the factory of the plaintiff on 23.06.2013. It is stated that the assembly line designed by the defendants could not achieve the desired output as claimed by the defendants in their offer dated 26.06.2012 and had several defects in the operation of the same which resulted in poor output/ production. Thereafter, the plaintiff company paid a sum of Rs. 4,30,915/- as Sales Tax Amount vide Cheque bearing No. 244547 dated 08.08.2013 drawn on Canara Bank, Alwar Road Branch, Gurgaon, to the defendant Company.
2.18 That the plaintiff company apprised the defendants about the poor performance of the new machine and its failure to achieve the desired outputs or even increase the productivity by 142% as assured by the defendants. In pursuance thereof, a meeting was scheduled between the representatives of the plaintiff and defendant company on 26.12.2013 wherein, defendants assured of rectifying all the issues.
2.19 That with a view to resolve the pending issues another meeting was scheduled between the representatives of both the companies on 26.03.2014 and as per the Minutes of Meeting prepared for 26.03.2014, it is categorically stated that the "cycle time is 23 seconds CS No. 60118/16 Minda Industries Ltd. Page: 7 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 8 ::- Date: 30.01.2025 approx.", which should have been 13 seconds per cycle as per the offer of the defendant company.
2.20 That despite repeated requests by the plaintiff company to the defendants, defendant No. 2 in particular, about arranging a meeting to discuss the miserable performance/output given by the machine installed by the defendants, the defendants vide e-mail dated 14.01.2015 requested the plaintiff company to provide Ledger/ Statement of account for settlement of payment in complete disregard to the requests of the plaintiff. The plaintiff vide e-mail dated 14.01.2015 again requested the defendant no. 2 to arrange for a meeting between the parties to deliberate upon the issues of non- performance of the machine and further to settle the final payment. That the defendants vide e-mails dated 16.01.2015 and 19.01.2015 again persisted on sending the statement of account before any meeting is scheduled between the parties. The plaintiff vide e- mail dated 19.01.2015 reiterated about the fact of non-working of the machine. That after lot of persuasion from the plaintiff company, the defendants agreed to schedule a meeting between the parties on 29.01.2015. The said meeting was attended by the representatives of the plaintiff and the defendant no. 2 and one Mr. Sundaresan on behalf of the defendants on 29.01.2015, wherein it was agreed that both the companies will exchange a list of issues in respect of the working of the machine and that by 31.03.2015 all the problems shall be rectified. Subsequently, list of issues in respect of the machine were sent by the plaintiff vide email dated 02.02.2015. The defendants vide e-mail dated 04.02.2015 acknowledged the issues shared by the plaintiff and further suggested pointers for the working/productivity of the CS No. 60118/16 Minda Industries Ltd. Page: 8 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 9 ::- Date: 30.01.2025 machine. The plaintiff vide e-mail dated 04.02.2015 further requested the defendants to arrange for a trial of the machine and same was agreed by the defendants vide e-mail dated 04.02.2015.
2.21 It is stated that thereafter, e-mails dated 10.02.2015 and 09.03.2015 were exchanged between the parties for scheduling a meeting to discuss and resolve the pending issues in respect of the working of the machine. That however, no further meeting could be scheduled between the parties despite repeated requests from the plaintiff company to the defendants. It is stated that the issues in the machine still subsists and have not been resolved till date and the machine continues to under-perform and have miserably failed to give the desired results as claimed by the defendant company in its offer/proposal dated 26.06.2012.
2.22 That it is submitted that since the assembly line installed by the defendants is defective and not in consonance with the specifications and requirements of the plaintiff company, the plaintiff is suffering as the same is not suiting the plaintiff's requirements and is of no use. Therefore, the plaintiff company through their counsel served the defendant company with a legal notice dated 25.07.2015 demanding the defendants to refund the entire amount paid towards the machine alongwith interest @ 18% p.a. and further to pay a sum of Rs. 35,00,000/- as loss suffered in lieu of the savings assured by the defendants. However, the defendants replied to the said notice vide their Legal Notice dated 14.08.2015 and further claimed an amount of Rs. 12,04,000/-(including interests 18%) from the plaintiff company in respect of the outstanding dues.
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-:: 10 ::- Date: 30.01.2025 2.23 That the details of the payments made by the plaintiff company are as under:-
Sr. Date Description Amount
No.
1 24.09.2012 Cheque bearing no. 241781. 14,75,000/- 2 06.12.2012 Cheque bearing no. 242368. 5,90,000/ - 3 19.12.2012 Old Hot Plate Machine sold 5,24,000/-
to Defendants.
4 08.08.2013 Sales tax amount vide 4,30,915/-
Cheque bearing No. 244547.
TOTAL 30,19,915/-
2.24 It is stated that in addition to the above stated payments, the plaintiff company has suffered a monetary loss in respect of proposed savings that ought to have been generated as claimed by the defendant company vide their E-mail dated 07.07.2012. The cost savings and Operator Affordability Calculations presented by the defendants vide the same E-mail is presented herein below:-
Savings Per day operator savings 14 Cost saving per operator Rs. 2,50,000/-
Total cost saving due to operator savings Rs. 2,50,000/- x 14
Total Savings Rs. 35,00,000/-
2.25 The total amount which the defendants are liable to refund to the plaintiff company is as under:-
Sr. Description Amount (in
No. Rs.)
CS No. 60118/16 Minda Industries Ltd. Page: 10 of 59
Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 11 ::- Date: 30.01.2025
1. Total amount paid on account of sale 30,19,915/-
consideration of the project.
2. Prospective Savings 35,00,000/-
Total 65,19,915/-
2.26 Hence, the present suit is filed with following prayers:-
i Pass a decree for a sum of Rs. 65,19,915/- along with pendentelite and future interest @ 18% per annum till realization in favour of the plaintiff and against the defendants.
ii Pass any other order (s) which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.
3 The defence stated by the defendants in his WS are as under:
3.1 It is stated that by resolution dated 27.10.2017, the defendant no. 2 has been authorized to represent on behalf of all other defendants. It is stated that the very averments in the plaint show that no contractual or legal right of the plaintiff has been infringed and the suit is also barred by limitation, as the machine was admittedly delivered to the plaintiff and installed at their premises on 23.06.2013. The period of limitation therefore expired on 23.06.2016 whereas the suit has been filed on 21.12.2016 (six months after the expiry of the period of limitation).
3.2 It is stated that defendants have their place of business and residence in Bangalore. It was agreed between the parties that all suits and proceedings relating to the agreement that is the subject matter of the present suit will be exclusively filed in courts at Bangalore and as such this Honble Court has no territorial jurisdiction over the present suit.
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-:: 12 ::- Date: 30.01.2025 3.3 The defendant no. 1 is a company registered under the provisions of Companies Act 1956 and is engaged in providing engineering solutions, manufacture and supply of special purpose machines and development of customized assembly lines. It is stated that the defendants offered to develop a customized assembly line as per needs and specifications of the plaintiff in order to improve their production and output and sent a proposal for development of assembly line viz., HM 7626/A vide e-mail dated 26.06.2012 setting out the proposed lay out of the machine with a tentative cost.
3.4 The plaintiff vide purchase order dated 29.08.2012 placed order with the 1st Defendant for designing/ development and delivery of HM 7626 for a cost of Rs.33,33,927/- (inclusive of tax). It is stated that as certain alterations were suggested by the plaintiff, the cost was revised to Rs.40,01,087.50/- (inclusive of tax) and the revised purchase order dated 29.08.2012 was issued. It is stated that the Assembly Line was to be used for production of High Mount Stop Lights (HMS) installed on the rear wind-shields of automobiles, which the plaintiffs were manufacturing exclusively for Maruthi Suzuki.
3.5 It is stated that on 20.09.2012, the defendant no. 2 sent a mail to the plaintiff seeking to visit their unit to understand the assembly process before they commence design work. Mr. Kaushik, the then Business Unit Head of the plaintiff replied by mail dated 21.09.2012 stating that Mr. Bharat Bajaj would be the person responsible for the project at their end and would coordinate with the defendants' team. On 22.09.2012, Mr. Bharat Bajaj sent a mail to the defendant stating that cheque no.241781 for Rs. 14,75,000/- being 50% of the total amount was dispatched to the defendant no. 1. The said cheque was received CS No. 60118/16 Minda Industries Ltd. Page: 12 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 13 ::- Date: 30.01.2025 by the defendant no. 1 on 24.09.2012. It was agreed that a "kick off"
meeting between the plaintiff and the defendants would be held on 27.09.2012 and accordingly the defendant no. 2 visited the premises of the plaintiff at Delhi and held discussions with Mr. Bharat Bajaj and his team.
3.6 It is stated that on 03.11.2012, re-forwarded on 07.11.2012, a mail was sent on behalf of the defendants to Mr. Bharat Bajaj attaching 340 HMSL Assembly Line DAP-VI for their feedback along with cycle time analysis sheet. The cycle time analysis sheet is as under:
Machine Operator Station Cycle time
(Sec.)
Leak Test Airfilling 4 2
Leak Test Holding time 4 5
Leak Test Result 4 1
Assemble the gasket into the leak test 5 26
passed reflector
Assemble the gasket into the leak test 6 26
passed reflector
Loads and tightens the 2 studs. 7 3.5
Unload the mounting plate assay from 7 2
fixture 7A and load it on the reflector
(7C)
Loads and tightens 2 screws 7 3.5
3.7 It is stated that in terms of the DAP, 7 operators working at the above
pace would be required. If the above cycle time is correctly observed by the operators, 13.5 seconds of overall cycle time can be achieved. Mr. Bharat Bajaj sent mail dated 23.11.2012 to the defendant no. 2 approving the design. On 27.11.2012, the defendant no. 1 provided the information required by the plaintiff for payment of 20% of the sum required to be paid upon approval of the design as agreed. It is stated CS No. 60118/16 Minda Industries Ltd. Page: 13 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 14 ::- Date: 30.01.2025 that on 06.12.2012, the Plaintiff paid Rs.5,90,000/- vide cheque no.242368 and on 19.02.2013, the defendant no. 2 sent mail to the plaintiff attaching pictorial update of the parts received and enlisting the parts which are in transit. On 22.02.2013, the defendant sent a mail to Mr. Bharat Bajaj informing him that the frame assembly is completed and rotary table would also be received shortly. On the same day Mr. Kaushik on behalf of the plaintiff sent a mail to the defendant no. 2 expressing his dissatisfaction over the delay. The defendant no. 2 responded on the same day stating that the frame has been fabricated over 8 weeks ago. However, the delay was on account of the delay in supply of rotator table by their vendor which had now reached Bangalore. On 01.03.2013, defendant no. 2 sent a mail to the plaintiff attaching updated pictures. On 12.03.2013, Mr. Bharat Bajaj sent a mail to the defendant no. 2 stating that they would visit the defendant's site on 15.03.2013 to certain final trails.
3.8 On 31.03.2013, an invoice was raised by the defendant for HM 7626 for Rs.29,50,000/- in the Principal Project Engineering of the defendant no. 1. The defendant no. 1 sent a mail dated 26.04.2013 to Mr. Bharat Bajaj updating the defendant's action taken to decrease cycle time and also attaching 340 HMSL assembly line video for cycle time matching and closure. Mr. Bharat Bajaj by mail of the same day conveyed his approval for shifting the machine to their site stating that the defendants are responsible for ensuring cycle time and sought deployment of good trained personnel at their site. On 28.04.2013, the machine was dispatched by the defendants and was delivered to the plaintiff on 30.04.2013. On 22.06.2013, the machine was installed and commissioned.
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-:: 15 ::- Date: 30.01.2025 3.9 It is stated that on 19.07.2013, Mr. Velmurugan sent a mail to the plaintiff attaching HMSL assembly line production report for 19.07.2013 morning shift. The average production per hour was 133.6; on 20.07.2013, it was 126.83; on 22.07.2013, it was 136.901 and in June-July, 2013 the defendants' team trained the plaintiff's personnel, ran trial and arrested leaks. On 09.07.2013, an Engineer from Maruti Suzuki, the plaintiff's client visited to inspect the machines, saw the trial and expressed satisfaction. Between 15.07.2013 and 20.07.2013 production commenced and the machine ran continuously for day shift fully.
3.10 It is stated that on 08.08.2013, the plaintiff paid Rs.4,30,915/- towards sales tax amount. On 10.08.2013, Mr. Velmurugan sent a production report along with downtime and its summary showing average production per hour of 199.36.
3.11 On 17.09.2013, Mr. Kaushik addressed a mail to the defendant no. 2 stating that some open points remain in station 2. The defendant no. 2 replied on the same day providing documentation and informing that all open points had been addressed and closed before discharge. He also elaborated on plaintiff's primary concern in getting output of the machine (The machine was being used exclusively for manufacturing light bulbs for Maruthi Wagon R cars) to more than 200 per hour.
3.12 It is stated that on 23.12.2013, the defendant no. 2 sent a mail to Mr. Kaushik stating that all open points have been closed and that his team can be sent back by Wednesday (i.e., 25.12.2013). On 24.12.2013, Mr. Kaushik replied "Thank you, sir". Thereafter, on 12.01.2014, Mr. Kaushik sent a mail to the defendant no. 2 alleging that machine was not running continuously. The defendant pointed out that it was not CS No. 60118/16 Minda Industries Ltd. Page: 15 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 16 ::- Date: 30.01.2025 inadequacy of the machine but inefficiency and unwillingness of the operators to adopt automation.
3.13 At the request of the plaintiff, a team from the defendants led by Mr. Velmurugan visited Plaintiff's site again on 01.02.2014. Mr. Velurugan pointed out that there was an ultrasonic welding issue in the plaintiff's unit, apart from man-power shortage and inefficiency of the operators which was causing the problem. On 05.05.2014, Mr. Velmurugan sent a mail to Mr. Amarjith attaching production and downtime summary for the past 3 days which show that there was no break-down on 30.04.2014 and 02.05.2014. On 03.05.2014, bulb checking did not happen which was corrected by Mr. Chandran. On 5th and 6th May 2014, the machine did not run due to man power shortage. On 08.05.2014, Mr. Velmurugan sent a mail to Mr. Bharat Bajaj stating that cycle time of 13.5 seconds can be achieved only through continuous monitoring of operators and that as per the cycle time analysis operators were doing within 9 seconds when Mr. Amarjith was standing nearby and data to this effect was also collected.
3.14 On 21.01.2015, the defendant no. 2 sent a mail to Mr. Kaushik suggesting meeting on 29.01.2015 pointing out that the defendant's staff had visited the plaintiff's unit, rectified all issues and asked the staff of the plaintiff to give required feedback and contact Mr. Velmurugan for any required support. But no such feedback or request was forthcoming. On 21.01.2015, Mr. Kaushik replied "it is ok sir - we can meet on 29th." On 29.01.2015, the plaintiff and the defendant met. It was agreed that they would prepare a list of issues and resolve them after fixing responsibilities by February 2015. On 02.02.2015, Mr. Kaushik sent a mail raising certain points related to the said machine.
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-:: 17 ::- Date: 30.01.2025 On 04.02.2015, the defendant no. 2 replied to Mr.Kaushik with comments on the points raised by the plaintiff and added a sheet indicating their suggestion on the working of the machine and improvement of the productivity and sought for a phone call on 05.02.2015. On 23.03.2015, the defendant no. 2 sent a mail to Mr. Kaushik enclosing a copy of the note on their call capturing issues raised by the plaintiff, suggestions given by defendants for addressing them and scheduled another call on 24.03.2015 at 11 am. Surprisingly, there was no response to this mail from the plaintiff. The defendant's request for payment of balance of consideration was also not honoured.
3.15 Thereafter, the plaintiff issued a notice on 25.07.2015 alleging that the assembly line was not giving desired results that there was operational problems and frequent breakdowns relating to cycle time and seeking refund of a sum of Rs.24.96 lakhs with interest at 18% amounting to Rs.10.73 lakhs and compensation of Rs.35,000/- towards alleged loss suffered by them and also demanded Rs. 11,000/- towards the charges for the notice. The Defendants sent reply dated 14.08.2015 pointing out interalia that the plaintiff had avoided the payment of bill in full despite completion of work and the defendants had clearly indicated man power and machine time required to achieve cycle time of 13.5 seconds that the desired output was achieved as per work report dated 28.04.2010 of Mr. Velmurugan. That minutes dated 29.01.2015 would reveal that the defendants were ready and willing to complete pending issues and sought payment of Rs. 12,04,000/- towards overdue amount from the plaintiff with interest at 18% per annum.
3.16 It needs to be stated that the base value of the order was CS No. 60118/16 Minda Industries Ltd. Page: 17 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 18 ::- Date: 30.01.2025 Rs.29,50,000/- and all milestone payments were on this basis. It is stated that the revised cost of the assembly line including the tax is Rs.40,01,087.50/-. The Plaintiff chose to clear some of the old inventory i.e., hot plate welder that was shipped to the defendants in May 2012. It is stated that the plaintiff was always kept aware of the design approach being followed. It is submitted that the design process itself was stretched as the defendants had to incur certain feedback and suggestions made by the plaintiff.
3.17 It is true that there was some delay in completion of the project as the defendants were developing and customized assembly line for the plaintiff and had to incorporate their needs and feedback, in continuous communication and interaction with the Plaintiff. It is stated that they also had to procure appropriate materials and parts from third parties.
3.18 It is stated that the defendants shared Production Report, Cycle time and Work Done Report on continuous basis with the plaintiff. It was only in September 2013 that the plaintiff raised an issue about fixture, which was addressed. In December 2013, fixtures were supplied and all open points were closed which was duly acknowledged by Mr. Kaushik thanking the defendant no. 2 by mail dated 24.12.2013 referred to above. It is incorrect to state that the desired output could not be achieved and that there were several defects in operation of the assembly line designed by the defendants. In fact, the machines did not run bulk production of HMSL assembly line due to some operational and capacity problems in the plaintiff's unit, including the non-working of plaintiff's ultrasonic welding machine which is a feeder to the assembly line. Defendant further denied the contents as CS No. 60118/16 Minda Industries Ltd. Page: 18 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 19 ::- Date: 30.01.2025 stated by the plaintiff in his plaint.
4 Replications were filed on behalf of the plaintiff to the WS of defendant no. 1 and WS of defendant no. 2 and 3. Plaintiff denied that objections of defendant no. 1 and defendant no. 2 and 3 stated in their WS and has reiterated the facts as stated in the plaint.
5 On the basis of pleadings, following issues were framed vide order dated 09.12.2019:-
i Whether suit is barred by limitation? OPD.
ii Whether this court has no territorial jurisdiction to try the present suit? OPD.
iii Whether plaintiff is entitled for recovery of Rs. 65,19,915/- if so, interest at what rate and for what period? OPP.
iv Relief?
6 Plaintiff in order to prove his case has examined following witnesses:
6.1 PW-1 is Sh. Rakesh Rustagi, S/o R. S. Rustagi, Authorised representative of plaintiff. He tendered his evidence by way of affidavit which was Ex. PW 1/A bearing his signatures at points A and B. He relied upon the following documents:-
i Resolution of Board of Directors dated 21.05.2016 is exhibited as PW-1/1.
ii E-mail dated 26.06.2012 running in 18 pages along with commercial offer/proposal for developing an assembly line being HM-7626/A sent by Defendants is Exhibited as PW-1/2. iii E-mail dated 07.07.2012running in 2 pages sent by Defendants is Exhibited as PW-1/3.
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-:: 20 ::- Date: 30.01.2025 iv Purchase order bearing No. 4200004298 dated 29.08.2012 running in 2 pages is Exhibited as PW-1/4.
v E-mail dated 20.09.2012 from Point A to B is Exhibited as PW-1/5.
vi E-mail dated 21.09.2012 from Point C to D is Exhibited as PW-1/6.
vii E-mail dated 22.09.2012 from Point E to F is Exhibited as PW-1/7.
viii E-mail dated 24.09.2012 from Point G to H is Exhibited as PW-1/8.
ix Revised Purchase order dated 29.08.2012 running in 2 pages is Exhibited as PW-1/9.
x Minutes of Meeting dated 27.09.2012 running in 2 pages is Exhibited as PW- 1/10.
xi E-mail dated 03.11.2012 running in 28 pages from Point I to J is Exhibited as PW-1/11.
xii E-mail dated 07.11.2012 from Point K to L is Exhibited as PW-1/12.
xiii E-mail dated 12.11.2012 running in 4 pages is Exhibited as PW-1/13.
xiv E-mail dated 26.11.2012 is Exhibited as PW-1/14. xv E-mail dated 27.11.2012 is Exhibited as PW-1/15. xvi E-mail dated 04.12.2012 from Point M to N is Exhibited as PW-1/16.
xvii E-mail dated 07.12.2012 from Point O to P is Exhibited as PW-1/17.
xviii E-mail dated 16.01.2013 from Point Q to R is Exhibited as PW-1/18.
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-:: 21 ::- Date: 30.01.2025 xix E-mail dated 28.01.2013 from Point S to T is Exhibited as PW-1/19.
xx E-mail dated 30.01.2013 running in 2 pages from Point U to V is Exhibited as PW-1/20.
xxi E-mail dated 05.02.2013 from Point W to X is Exhibited as PW-1/21.
xxii E-mail dated 19.02.2013 running in 2 pages from Point Y to Z is Exhibited as PW-1/22.
xxiii E-mail dated 22.02.2013 from Point Al to A2 is Exhibited as PW-1/23.
xxiv E-mail dated 01.03.2013 is Exhibited as PW-1/24. xxv E-mail dated 12.03.2013 is Exhibited as PW-1/25. xxvi E-mail dated 14.03.2013running in 2 pages from Point B1 to B2 is Exhibited as PW-1/26.
xxvii E-mail dated 15.03.2013 from Point C1 to C2 is Exhibited as PW-1/27.
xxviii E-mail dated 22.03.2013 running in 7 pages is Exhibited as PW-1/28.
xxix Minutes of Meeting dated 26.03.2014 is Exhibited as PW-1/29. xxx E-mail dated 14.01.2015 running in 2 pages from Point D1 to D2 is Exhibited as PW-1/30.
xxxi E-mail dated 16.01.2015 from Point E1 to E2 is Exhibited as PW-1/31.
xxxii E-mail dated 19.01.2015 from Point F1 to F2 is Exhibited as PW-1/32.
xxxiii Minutes of Meeting dated 29.01.2015 is Exhibited as PW-1/33. xxxiv E-mail dated 02.02.2015 from Point G1 to G2 is Exhibited as PW-1/34.
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-:: 22 ::- Date: 30.01.2025 xxxv E-mail dated 04.02.2015 from Point H1 to H2 is Exhibited as PW-1/35.
xxxvi E-mail dated 10.02.2015 running in 2 pages from Point I1 to I2 is Exhibited as PW -1/36.
xxxvii E-mail dated 09.03.2015 from Point J1 to J2 is Exhibited as PW-1/37.
xxxviii Legal Notice dated 25.07.2015 running in 3 pages sent by Plaintiff is Exhibited as PW-1/38.
xxxix Three Postal Receipts dated 28.07.2015 are collectively Exhibited as PW- 1/39 (colly).
xl Reply of Legal Notice dated 14.08.2015 running in 2 pages is Exhibited as PW-1/40.
xli Certificate u/s 65 B of Indian evidence Act, 1872 dated 14.12.2016 running in 4 pages is Exhibited as PW-1/41.
6.2 PW-2 is Sh. Narender Kaushik, S/o Ram Chander, R/o Flat No. 302, Wings Apartment, Sector-9, Gurgaon, Haryana. He tendered his evidence by way of affidavit which was Ex. PW 2/A bearing his signatures at points A and B. He relied upon the documents already exhibited in the testimony of PW1.
7 Defendants in order to prove their case have examined the following witnesses:-
7.1 DW-1 is Sh. Jayendran Balasubramanian, S/o Sh. M. Balasubramanian having office at 355, 7th Cross, Wilson Gardens, Bengaluru-560027, authorized representative of defendant. He tendered his evidence by way of affidavit which was Ex. DW1/A bearing his signatures at points A and B. He relied upon the following documents:-
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-:: 23 ::- Date: 30.01.2025 Sr. Date Particulars of the documents Ex. No. No 1 30.08.2012 Mail sent by Plaintiff to Defendant Ex-DW1/1 (running into 2 attaching Purchase order placed for pages) Automatic Line for HM-7626 for Rs.
30,09,000/- inclusive of Central Sales Tax.
2 23.11.2012 Plaintiff's mail approving the design. Ex-DW1/2 (Running into 2 pages) 3 31.03.2013 Invoice raised by the Defendants. Ex-DW1/3 in affidavit and now Marked as Mark DW1/A 4 28.05.2012 Invoice raised by Plaintiff for Hot Ex-DW1/4 in affidavit and Plate Welding Machine. now marked as Mark DW1/B 5 26.04.2013 Mail sent by Defendants attaching p- Ex-DW1/5 in affidavit and 340 HMSL assembly line video for now exhibited as Ex. DW1/4 cycle time matching. (From portion B to B1) 6 26.04.2013 Reply sent by the Plaintiff approving Ex-DW1/6 in affidavit and the machine and shifting the same to now exhibit as Ex. DW1/3 their site for installation. (Portion A to A1).
7 18.07.2013 Mail sent by Defendant's technician Ex-DW1/7 in affidavit and to Defendant marking copy to now exhibit as Ex. DW1/5 Plaintiff informing the steps taken to decrease the cycle time.
8 19.07.2013 Mail sent by Defendant to Plaintiff Ex-DW1/8 in affidavit and attaching production report of now exhibit as Ex. DW1/6 19.07.2013. (running into 3 pages) 9 20.07.2013 Mails sent by Defendant to Plaintiff Ex-DW1/9 in affidavit and attaching production report of now exhibit as Ex. DW1/7 20.07.2013. (running into 6 pages) 10 22.07.2013 Mail sent by Defendant to Plaintiff Ex. DW1/10 in affidavit and attaching production report of now exhibit as Ex. DW1/8 22.07.2013, morning shift. (running into 3 pages) 11 22.07.2013 Mail sent by Defendant to Plaintiff Ex-DW1/11 in affidavit and attaching production report of now exhibit as Ex. DW1/9 22.07.2013. (running into 3 pages) 12 22.07.2013 12. 22.07.2013 Mail sent by Ex-DW1/12 in affidavit and Defendant to Plaintiff attaching now exhibit as Ex. DW1/10 production report of the entire week (running into 18 pages) and the work done summary.
13 09.08.2013 Mail sent to Plaintiff attaching Ex-DW1/13 in affidavit and production report of 08.08.2013 & now exhibit as Ex. DW1/11 09.08.2013. (running into 5 pages) 14 10.08.2013 Mail sent by Defendant to Plaintiff Ex-DW1/14 in affidavit and attaching production report of now exhibit as Ex. DW1/12 CS No. 60118/16 Minda Industries Ltd. Page: 23 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 24 ::- Date: 30.01.2025 10.08.2013. (running into 5 pages) 15 16.10.2013, Mail exchanged between Plaintiff Ex-DW1/15 in affidavit and 19.10.2013, and Defendants regarding supply of now exhibit as Ex. DW1/13 31.10.2013 fixtures. (running into 2 pages) and 08.11.2013 16 21.12.2013, Mails exchanged between Ex-DW1/16 in affidavit and 23.12.2013 Defendants and Plaintiff regarding now exhibit as Ex. DW1/14 and closure of all the issues with the 24.12.2013 machine and acknowledging of the same by Plaintiff.
17 12.01.2014 Mail sent by Plaintiff to Defendants Ex-DW 1/17 in affidavit and alleging that the machine is not in now exhibit as Ex. DW1/15. working condition and indicating that their finance department is demanding refund of advance given by them to Defendants.
18 12.01.2014 Mail sent by Defendants to Plaintiff Ex-DW 1/18 in affidavit and pointing out that all the issues were now exhibit as Ex. DW1/16 sorted out and demo was given to (running into 2 pages) Plaintiff's team & plaintiff seeking to meet immediately.
19 12.01.2014 Mail sent by Plaintiff to Defendants Ex-DW1/19 in affidavit and attaching MOM dated 23.12.2013 now exhibit as Ex. DW1/17 and seeking to meet them to conclude (running into 2 pages) the handing over of the machine.
20 24.01.2014, Mails exchanged between Defendant Ex-DW1/20 in affidavit and 27.01.2014 and Plaintiff pointing out the defects now exhibit as Ex. DW1/18 and at Plaintiff's end which delayed 29.01.2014 starting of production and confirming Defendant's their date of visit.
21 28.04.2014 Work done report prepared by Ex-DW1/21 in affidavit and Defendant and signed by Plaintiff. now marked as Mark DW1/C (running into 2 pages) 22 05.05.2014 Mail sent by Defendant to Plaintiff Ex-DW1/22 in affidavit and attaching the HMSL Assembly line now exhibit as Ex. DW1/19 production & down time summary for the past three days which shows that production was less due to man power shortage.
23 06.05.2014 Mail sent by Defendant to Plaintiff Ex-DW1/23 in affidavit and attaching the HMSL Assembly line now exhibit as Ex. DW1/20 production & down time summary (running into 2 pages) for 06.05.2014 which shows that production was less due to man power shortage.
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-:: 25 ::- Date: 30.01.2025 24 06.05.2014 Mail sent by Plaintiff to Defendant Ex-DW1/24 in affidavit and stating that their concern is regarding now exhibit as Ex. DW1/21 achieving cycle time of 13.5 seconds. (running into 3 pages) 25 07.05.2014 Mail sent by Defendant to Plaintiff Ex-DW1/25 in affidavit and stating that cycle time of 13.5 secs now exhibit as Ex. DW1/22 can be achieved by continuously (running into 3 pages) monitoring the operators.
26 08.05.2014 Mail sent by Defendant to Plaintiff Ex-DW1/26 in affidavit and stating that cycle time of 13.5 secs now exhibit as Ex. DW1/23 can be achieved by continuously (running into 2 pages) monitoring the operators and that automated stations are able to achieve the said cycle time.
27 08.05.2014 Mail sent by Plaintiff to Defendants Ex-DW1/27 in affidavit and stating that machine is not able to now exhibit as Ex. DW1/24 produce 1200 pieces in 8 hours. (running into 2 pages) 28 13.05.2014 Mail sent by Defendant to Plaintiff Ex-DW1/28 in affidavit and suggesting lay out changes and now exhibit as Ex. DW1/25 stating that automated stations are able to achieve cycle time of 13.5 seconds as per the advise of their technician vide mail dated 08.05.2014.
29 15.12.2014, Mail communications exchanged Ex-DW1/29 in affidavit and 19.12.2014, between the Defendants and the now exhibit as Ex. DW1/26 14.01.2015, Plaintiff seeking ledger statement for (running into 5 pages) 16.01.2015, reconciliation purpose and settlement 19.01.2015, of accounts and confirming their date 20.01.2015 of into 5 pages) visit to Plaintiff's & site.
21.01.2015 30 30.01.2015 Mail sent by Mr. Velmurugan, Ex-DW1/30 in affidavit and Defendant's technician to Defendant now exhibit as Ex. DW1/27 attaching suggestions for Plaintiff to (running into 5 pages) achieve target production.
31 02.02.2015 Mail sent by Plaintiff to Defendant Ex-DW1/31 in affidavit and attaching some important points now exhibit as Ex. DW1/28 relating to HM 7626. (running into 2 pages) 32 02.02.2015 Mail sent by Mr. Sundaresan to Ex-DW 1/32 in affidavit and Defendants advising them to make now exhibit as Ex. DW1/29 interim payment of Rs. 2,00,000/-.
33 04.02.2015 Mail sent by Defendants to Plaintiff Ex-DW 1/33 in affidavit and giving their comments and now exhibit as Ex. DW1/30 suggestions to issues raised by (running into 4 pages) Plaintiff regarding the machine.
34 23.03.2015 Mail sent by Defendants to Plaintiff Ex-DW 1/34 in affidavit and CS No. 60118/16 Minda Industries Ltd. Page: 25 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 26 ::- Date: 30.01.2025 enclosing copy of notes prepared now exhibit as Ex. DW1/32 during their conference call capturing (running into 3 pages) issues raised by Plaintiff and the suggestions given by Defendants and scheduling next call on 24.03.2015.
35 24.03.2015 Mail dated 23.03.2015 forwarded by Ex-DW 1/35 in affidavit and Mr. Velmurugan, Defendant's now exhibit as Ex. DW1/31 Technician to Mr. Amarjith working (From C to C1) under the Plaintiff 36 Section 65B Affidavit dated Ex. DW1/36 in affidavit and 07.11.2017 now exhibit as Ex. DW1/33 (running into 3 pages).
8 I have heard the final arguments and perused the record.
9 My issue-wise findings are as follows:-
10 Issue no. (i) Whether suit is barred by limitation? OPD.
10.1 The onus to prove this issue was upon the defendants. The defendants in their preliminary objections has averred that the present suit is barred by limitation. The defendants in their written submissions at para 7(ii) has averred that the machine was delivered on 23.06.2013 and that it was commissioned for operation immediately thereafter, but "could not achieve the desired output" due to "several defects". It is stated that the plaint was presented on 29.11.2016, after the expiration of the period of limitation on 22.06.2016 (or upon discovery of defects a few days). To substantiate the said averment the defendants relied upon the judgment of Hon'ble Madras High Court in "Tamil Nadu Civil Supplies Corporation limited vs M/s Food Fats Fertilizers Limited, 2005(2) CTC 516" , wherein it was held that:
"16. A bare reading of the above article reveals that for compensation due to the breach of any contract, the period of limitation is three years, which runs from the date of contract is broken or in the event of breach is a continuing one, when it ceases."
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-:: 27 ::- Date: 30.01.2025 10.2 To the contrary, the plaintiff stated that the contract between the parties was for machinery, installation and commissioning. The plaintiff further stated that the essential condition of the contract was to give 13.5 "cycle time" / productivity increase upto 142%. After the supply and installation, the step of commissioning started which interalia includes achieving 13.5 "cycle time" / productivity increase upto 142%, proper functioning of the machines. The plaintiff stated that kick of meeting took place between the representative of the plaintiff and the defendants at Delhi office of the plaintiff and minutes were recorded on 27.09.2012 as Ex. PW1/10 at Page 61-62, wherein cycle time is provided as "3. Acceptance- On Cycle time, Nextfirst will demonstrate the 226 parts in one hour (13.5 sec cycle time & 85% OLE) during MQ1 with 3 Operators". Further, Ex.PW1/10 minutes dated 27.09.2012 also specified the penalty clause for delay delivery at serial no. 5 i.e. "5. Commercial Points:- If Minda agrees to pay 20% on design approval then there will be penalty clause on NextFirst for any delay in timing plan." Subsequently, second meeting took place on 26.03.2014 as Ex. PW1/29 Page 116. The third meeting took place on 29.01.2015 as Ex. PW1/33 Page 120. The plaintiff averred that even after minutes dated 29.01.2015 as Ex. PW1/33, emails dated 02.02.2015, 04.02.2015, 10.02.2015, 09.03.2015 as Ex. PW1/34 to PW1/37 were sent by the plaintiff pointing out defects and asking for the removal. Further, the defendants vide email dated 23.03.2015 as Ex. DW1/32 Pages 113-115, the defendant referred to the con-call and also attached sheet stating about problems and their remarks. The cause of action arose when the defendants failed to rectify the defects and therefore, legal notice dated 25.07.2015 was sent. Therefore, the limitation would begin w.e.f. 25.07.2015 when the defendants refused CS No. 60118/16 Minda Industries Ltd. Page: 27 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 28 ::- Date: 30.01.2025 to rectify the defects, the cause of action would begin from that date and therefore, the suit is within limitation. The plaintiff relied upon the following judgments:
(a) Fortune Builders Pvt. Ltd. Ltd. vs Blue Star Ltd. 290 (2022) DLT 514;
(b) Inflow Technologies Pvt. Ltd. vs Gramtech (India) Pvt. Ltd. 2018 (169) DRJ 351.
10.3 Upon perusal of the above referred judgment "Fortune Builders Pvt.
Ltd. Ltd. vs Blue Star Ltd. 290 (2022) DLT 514", it is found that:-
".....16. The following salient facts emerge from a reading of the counter claim and the material placed along with it. Upon a careful consideration of the offer document and the LOI, it becomes apparent that the contract awarded to the respondent was clearly not one for supply of goods alone. This is evident from a perusal of the offer letter which described it to be as one for "Supply, Installation, Testing and Commissioning of HVAC System.". It was thus a composite contract which envisaged the supply of equipment, its installation, testing and its final commissioning. A perusal of the LOI bears out that the payment schedule was staggered and moneys liable to be released dependent upon a particular stage of the work or contract milestone being completed or achieved. In view of the above, it is manifest that Article 14 would clearly not be attracted since the contract was clearly not one for supply of goods per se.
17. Turning then to Article 18, there are two facets of that provision which would merit articulation. The Article firstly relates to suits which may be instituted in relation to a contract for "work done". The use of the phrase "work done" as employed in the provision is an apparent and evident iteration of the legislative intent of it being distinct from a claim which may stem from a mere supply of goods. It is this aspect of Article 18 which has led to the precedents rendered on the subject recognizing its applicability to works contracts and turnkey projects. Article 18 would thus apply to contracts which do not merely entail the supply of goods and machinery but also contemplate erection, installation and successful commissioning. The view expressed above is fortified from a reading of the plain language of the provision which uses the phrase "For the price of work done." as distinct from a claim arising from or relating to price of goods alone. It is thus CS No. 60118/16 Minda Industries Ltd. Page: 28 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 29 ::- Date: 30.01.2025 apparent that it does not apply to a contract which may entail a mere supply of goods. Undisputedly, in terms of its language the period of limitation would commence once the work is done or completed or when a final bill is raised. The second facet of Article 18 which merits enunciation is that its application is dependent upon the suit being for the price of work done "where no time has been fixed for payment" It is these two distinct facets of Article 18 which must be borne in mind while adjudging the rival submissions which have been addressed.
18. This Court has already held that the offer letter and the LOI indubitably establish that the contract was not confined to a mere supply of goods. The contract clearly envisaged the installation of the HVAC system as well as its successful commissioning. It was clearly not a contract for the supply of the system alone. This was thus evidently a composite contract which required the respondent to source, install and commission the equipment. The counter claim as presented would thus fall within the ambit of a claim for the price for work that had been performed. However, while that satisfies a part of Article 18, the difficulty in accepting its application to the facts of the present case arises when one gleans the terms of the contract in order to ascertain whether or not a stipulation for payment existed. It is here that the argument based on Article 18 falters. As is evident from a reading of the LOI, the release of moneys under the contract was linked to different milestones being achieved in the course of implementation of the contract. The LOI in unambiguous terms set out the percentage of the total contract value which was to be released at different stages. This was therefore not a case where no time frame for payment was fixed. Article 18 in stricto sensu thus could not be said to apply for the purposes of computing and answering the question of limitation.
22. The legal position that follows from the above case law is that normally for work done by a plaintiff for the defendant it is article 18 of the Limitation Act that would apply for the purpose of computing the period of limitation. The period of limitation would normally commence when the work is completed. However, the accrual of cause of action would necessarily vary as per facts and circumstances of each case....."
10.4 Similar view regarding the limitation was taken by the Hon'ble Delhi High in the judgment "Inflow Technologies Pvt. Ltd. vs Gramtech (India) Pvt. Ltd. 2018 (169) DRJ-351".
10.5 In the facts and circumstances of the present case, admittedly the defendant vide email dated 26.06.2012 had sent the attached proposal CS No. 60118/16 Minda Industries Ltd. Page: 29 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 30 ::- Date: 30.01.2025 for development of assembly line viz. HM 7626/A (Ex. PW1/2) to the plaintiff. Pertinently, the scope of the said work was mentioned at page 39 of Ex.PW1/2 i.e. "7. Prepare site for installation and commissioning."
Further at Page 43 of Ex. PW1/2 conditions categorically mentioned that:
"System Unit Price is inclusive of installation and commissioning at UNO Minda Ltd., Manesar."
Therefore, it is apparent that the undertaken work includes installation and commissioning also.
10.6 Further the Delivery Schedule as per Ex. PW1/2 at Page 44 clearly mentioned as:
"Shipment- 16 to 18 weeks from the date of PO or Advance, Whichever is later. Installation and Commissioning - 1 to weeks post machine delivery and unpacking at UNO Minda contingent to readiness of site of installation and the line facilities."
Thereafter, the Ex. PW1/9 i.e revised Purchase order dated 29.08.2012 for a total amount of Rs. 40,01,087/- alongwith specified terms and conditions thereon was sent to the defendant Company, the express conditions of contract and delivery are as follows:
"1. CONDITIONS OF CONTRACT AND DELIVERY TERMS:
The goods shall be in strict conformity with the description, the sample the drawings and the specifications. The seller will not change any specifications without the prior consent in writing of the buyer. The goods shall be delivered within the stipulated time, the time of delivery being the essence of the contract. In the event of breach of any of these two conditions, the buyer shall have the right to reject the goods and purchase such goods from other sources on the seller's account and risk in which case the seller shall be liable to pay the buyer and difference between the price at the which such good have been purchased and the price calculated at the rates set out in this order, and also claim other damages arising there from, CS No. 60118/16 Minda Industries Ltd. Page: 30 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 31 ::- Date: 30.01.2025 including damages for loss of production and profits, loss on account of consequential breach of other contracts, if any in alternative the buyer may retain such goods. In part or in whole, and claim from the seller such reasonable amount as to compensate the buyer for non-conformity of goods with the description, specifications drawings and samples and or late delivery thereof. The buyer may at any time postpone delivery of any of the articles ordered herein for a reasonable time."
10.7 Admittedly, the plaintiff vide Ex. PW1/7 i.e. email dated 22.09.2012 intimated the defendants that a Cheque number 241781 as 50% advance amount was dispatched through courier. The defendant in its pleading admitted that the said cheque amounting to Rs. 14,75,000/- was received by the defendant on 24.09.2012. Therefore, as per Ex. PW1/2 at Page 44, the time period for delivery specified by the plaintiff as per their proposal commenced from the actual receipt of the said 50% advance amount. As per Ex. PW1/13 and DW-1/2 the email dated 12.11.2012 was sent by the defendant to the plaintiff regarding approval of Project HMSL, so that the manufacturing of SPM could start. Thereafter, the plaintiff vide DW1/2 approved the design and intimated the defendant to go through with the design. The defendant vide email dated 04.12.2012 as Ex. PW1/16 referred their discussion and requested the plaintiff to release the payment against design completion, based on the payment, the defendant will be able to complete the manufacturing, assembly and testing in the next 5-6 weeks. The plaintiff in response vide email dated 04.12.2012 as Ex. PW1/17 intimated the defendant that this is not acceptable at all and wrote that MQ1 can only be deferred from 10.12.2012 to 23.12.2012. The plaintiff vide emails dated 16.01.2013, 28.01.2013 and 28.01.2013 as Ex. PW1/18 and PW1/19 asked the defendant about the status of the machine and also asked the updated time plan of the SPM. The defendant in its reply stated that the plaintiff paid Rs. 5,90,000/- vide CS No. 60118/16 Minda Industries Ltd. Page: 31 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 32 ::- Date: 30.01.2025 cheque no. 242368 on 06.12.2012 and the plaintiff had also paid Rs. 5,24,056.62/- towards Hot Plate Welding Machine, thereby the plaintiff had paid a total sum of Rs. 25,89,056.62/ to the defendant. The defendant vide email dated 30.01.2013 as Ex. PW1/20 asked for approval of 340 Final Assembly OK Bin Rack sent on 10.12.2012, which the plaintiff approved vide Ex.PW1/21.
10.8 The defendant vide emails dated 19.02.2013, 22.02.2013 as Ex.
PW1/22 and PW1/23 intimated the plaintiff regarding revised time schedule of preliminary trial and readiness of machine. The relevant extract of the PW1/22 is "In my opinion, preliminary trials will start on 25th and machine will be ready by end of next week 29th. I will call you today to discuss visit plan."
Further as per Ex. PW1/23 i.e. email dated 22.02.2013 the defendant had given the milestones towards completion, which reads as:
"1. 1st and 2nd March pre MQ1- first visit to see the machine, review against all requirements and give any improvement feedback.
2. We will finish complete testing and incorporate the inputs from pre MQ1 and do MQ1 on 7th and 8th March
3. Dispatch 9th March.
4. Receipt at Minda 14 March
5. NextFirst team reaches Minda 14th March
6. Commissioning 15th and 16th March."
Pertinently, during communication between the parties through email on 22.02.2013 at page 103 of plaintiff documents, the plaintiff categorically wrote that:
"Thanks for the updation.
Considering the present situation I don t think the machine will be delivered as per time you have given.
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-:: 33 ::- Date: 30.01.2025 ................................... So if you see nothing is as per the original plan and agreement we had made while finalization.
This is big concern, also please tell when we should send Bharat to inspect the machine and verify it."
Therefore, it is apparent from the communications that the plaintiff had not categorically disapproved the revised schedule of defendant as per PW1/22 and PW1/23. Hence, the revised schedule for delivery and commissioning was agreed between the parties.
10.9 The defendant again vide email Ex.PW1/24 intimated the plaintiff that the machine assembly was 80% complete and MQ1 target as 8th March and dispatch on 9th March. The plaintiff vide email dated 12.03.2013 as Ex.PW1/25 categorically wrote that:
"2. The next milestone was coming of 14-03-2013 for readiness of the machine. We are planning for the 15-03-2013 to coming to your site to witness the final trials as per the project is almost two months delay now. I supposed that you are aware on the penalty clause which we mutually minutes at the time of kick off meetings."
10.10 The plaintiff again on email dated 15.03.2013 as Ex.PW1/27 asked the defendant about the final date of dispatch and wrote to the defendant that work had been already delayed by two months till date which not good at its level. In response, the defendant vide Ex.PW1/28 on 22.03.2013 intimated the plaintiff that the defendant had planned MQ1 on the first half of next week. Eventually, the machine was admittedly delivered on 22.06.2013.
10.11 Therefore, after considering the pleadings and relied upon documents, the court is of the opinion that the cause of action for delay in delivery and commissioning arose when after revised delivery and commissioning schedule of machine was not achieved by the defendant despite undertaken date 14.03.2013 as per Ex.PW1/25 and CS No. 60118/16 Minda Industries Ltd. Page: 33 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 34 ::- Date: 30.01.2025 the plaintiff despite referring to the penalty clause had not initiated the recovery of penalty amount from the defendant within three years from the date of cause of action, and had filed the instant suit was on 15.12.2016. The plaintiff's right to sue commenced form the date of breach of agreed terms. Hence, the recovery on the basis of delayed delivery as submitted by the plaintiff in its written submissions in (vi) of para 1 is barred under the limitation.
10.12 Now, the averment regarding limitation period for non-achievement of desired out of 142%/ 13.5 second cycle by Semi-Automatic Assembly Line. The plaintiff in its plaint precisely at para no. 27 stated that the machine was delivered and installed at the factory of the plaintiff on 23.04.2013. The defendant in its reply at para 8 categorically stated that machine was dispatched on 28.04.2013 and delivered on 30.04.2013. And on 22.06.2013 the machine was installed and commissioned to which the defendant failed to revert.
10.13 Pertinently, as per the Minutes of Minutes dated 26.03.2013 as Ex.PW1/29, it was recorded at serial no. 7 that:
"07. Still M/c cycle time is 23 sec approx."
Therefore, despite the above extract minutes of meeting dated 26.03.2013 the plaintiff accepted the machine with 23 sec cycle time without protest. However, the email dated 26.04.2013 as Ex.DW-1/4 sent by the defendant having an attachment of p-340 HMSL assembly line video for cycle time and closure. The plaintiff in response had categorically wrote that:
"Dear Mr. Velu, I had gone thru the videos sent by you for matching the cycle time & found that the cycle time is coming on and around 15 sec. Where we had our CS No. 60118/16 Minda Industries Ltd. Page: 34 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 35 ::- Date: 30.01.2025 DAP on 13.5 sec. Anyhow this mail is for approval of the machine shifting, but the cycle time ensuring responsibility is still on nextfirst. You guys have to work hard and deeply the best training possible to our people herein Minda."
10.14 Therefore, from the above email Ex.DW-1/4 of plaintiff it is apparent that after deliberation, the plaintiff approved the machine to be shifted to its factory. Further, the email dated 18.07.2013 as Ex.DW-1/5, the defendant categorically informed the plaintiff that after twisted plate from station-3 & loaded the already assembled buld for every cycle, then the cycle time had improved a lot. The defendant vide email dated 19.07.2013 as Ex.DW-1/6 had sent the production report of 19.07.2013 morning shift to the plaintiff. Similarly, the production report of 20.07.2013 morning shift, 20.07.2013, 22.07.2013 morning shift, 22.07.2013, entire week production were also sent vide emails Ex.DW-1/7 to DW-1/10 respectively. Pertinently, as per Ex.DW-1/10 attachment at page 45 it was also mentioned that on 09.07.2013 from Maruti Suzuki one person visited to see the machine and condition trail has been taken. The defendant again on 09.08.2013 and 10.08.2013 as Ex.DW-1/11 and DW-1/12 sent production report of 08.08.2013 and 09.08.2013.
10.15 The plaintiff sent a detailed email dated 17.09.2013 at page no. 69 of defendant documents mentioning delay of 4 months in dispatch of machine, 3 months delay in installation the points raised by the plaintiff were as below:
"1. P.O. for the machine was given to NEXTFIRST 30th August 2012.
2. The target date for the completion installation of the machine was to be done on 31st December, but in actual we received the machine on 29th April 2013.
3. The commitment made from you side for the handover of the machine CS No. 60118/16 Minda Industries Ltd. Page: 35 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 36 ::- Date: 30.01.2025 was 1st January as you had told us one week maximum for installation and commissioning.
4. Your two persons kept coming to our plant to install the machine for 3 months starting from May to July 2013, but they were not able to handover the machine as per desired output
5. We then called a you to have a final meeting for the handover and we again met on 3rd August in which you requested to release payment of duties levied on the invoice, we requested our management and considering the situation we released the payment.
6. In 3rd August meeting you had committed to complete all the activities within 15 days but still the major points are pending. There is no response on this after that meeting, please see the attached MOM for the same.
7. Station number 2 there is 100% falling of contact plate assembly even after placing of spring support.
8. Limit switch arrangement for safety (like hot plate welding machine shown to you) yet to be done.
9. Station wise trouble shooting manual/ guide along with alarm list is still pending.
10. We have asked for many safety poka yoke from you and you also took initiatives from that but still the work is pending. We never asked you to remove any of the safety poka yoke.
11. As we discussed the machine is in very bad condition and fit, finish, aesthetics to be improved, as it doesn't seem a new machine worth 34 lacs.
12. All the new fixtures which you were to dispatch upto 15th August still pending........................................................... You are once again requested to come personally and handover the machine with the agreed specifications and output. Our customer MSIL is not going to approve this machine if we are not getting any benefit......"
10.16 The defendant vide emails dated 21.12.2013 and 24.12.2013 as Ex.DW-1/14 categorically wrote to the plaintiff that the leak test fixture which the defendant provided were found ok and also stated that the defendant had closed all the open points in the machine. Further, the plaintiff can start production trials from today i.e. 23.12.2013. The plaintiff vide email dated 12.01.2014 as Ex.DW-1/15 categorically mentioned that:
CS No. 60118/16 Minda Industries Ltd. Page: 36 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 37 ::- Date: 30.01.2025 "Dear Mr. Jay, As you know that you have not been able to handover the machine to us since last almost one year. The target date for SOP was 1st April as per our mutual agreement in the schedule which we had jointly signed. But in spite of many effort from our side and your side also machine is not working, your persons stayed for 2-3 month and they also tried hard to set the machine but were not able to make the machine in working condition as we had specified.
In December 3rd week also your two persons visited and worked to take the machine operational, now the machine have to be run in continuous production for which your team is required. Now we are not in a position to suffer more in this regard so please plan your visit immediately to sort out the matter and close the issue. Our finance department from the corporate side is following us badly and demanding the advance given by us to you.
Please come immediately along with your team to handover the machine and conclude the complete handover of machine." Similarly, the plaintiff vide its emails dated 14.01.2015 and 19.01.2015 as Ex.DW1-/26 at page 98 also wrote that the machine is not running since its installation and also wrote that not even a single day the machine had run.
10.17 Therefore, from the above mentioned email dated 12.01.2014, it is clear that the plaintiff told the defendant till the specified time i.e. 01.04.2013 as mutually agreed between them had not complied to the completion of undertaken work. Hence, the court is of the considered view that limitation period had commenced from the date of breach of agreed terms. The plaintiff's right to sue commenced form the date of breach of agreed terms. Therefore, the averments of the plaintiff in para 1 of its written submissions is barred under the provisions of limitation act.
10.18 Similarly, the averments regarding the alleged non-production on specified time cycle is also barred under limitation, as its was rightly CS No. 60118/16 Minda Industries Ltd. Page: 37 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 38 ::- Date: 30.01.2025 pleaded by the defendant in para 7(ii) of its written submission the machine was delivered on 23.06.2012 and the suit was instituted on 15.12.2016. The plaintiff's right to sue the defendant arose when the machine was delivered and target production was not achieved within the stipulated time period as discussed in the foregoing paras.
10.19 On careful perusal of the judgment Fortune Builder (supra) referred by plaintiff, in the said judgment the counter claim filed by the Petitioner was dismissed by the Ld. Trial Court on the pretext that the same barred under limitation act. The referred judgment prescribed the time period for recovery of claim by the supplier. Similarly, the other judgment Inflow Technologies (supra) the Hon'ble Delhi High Court took the same view as that case was also regarding computing limitation period for recovery of claim on account of work done for the respondent. Therefore, both the judgment are not applicable on the facts and circumstances of the present case in hand. Further the judgment referred by the defendant Tamil Nadu Civil Supplies Corporation limited (supra) is applicable on the present case.
10.20 Accordingly, the present issue is decided against the plaintiff and in the favour of the defendants, hence the suit is barred under limitation.
11 Issue no. (ii) Whether this court has no territorial jurisdiction to try the present suit? OPD.
11.1 The onus to prove this issue was upon the defendants. The plaintiff in the suit stated that plaintiff is company registered under provisions of Companies Act, 1956 having its registered office at B-64/1, Wazirpur Industrial Area, Delhi-110052. The plaintiff in its para no.3 of the suit further stated that the defendants approached the plaintiff company at plaintiff's registered office. On careful perusal of the Purchase Order CS No. 60118/16 Minda Industries Ltd. Page: 38 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 39 ::- Date: 30.01.2025 and revised Purchase Order dated 29.08.2012 as Ex. PW1/4 and PW1/9, it is found as under:
"14. Disputes:
All disputes relating to this order or relating to the price of the goods supplied there under or otherwise arising therefrom between the seller and the buyer shall be subject to and be referred to the court of competent jurisdiction situated within the limits of DELHI. Neither the seller not the buyer shall take or adopt any legal proceedings to enforce any claim against the other relating to this or arising there from adopt any in any court other than he court of competent jurisdiction located within the limits of DELHI."
11.2 Pertinently, the defendant in its written statement precisely at para 18 categorically agreed that the averments in para 3 and 4 of the suit are correct. However, the defendant in its written submissions at para 7(iii) submitted that machine was manufactured and tested at Bengaluru pursuant to the Purchase Order accepted by the defendants at Bengaluru and the machine was delivered and installed at the factory of the plaintiff at Gurgaon, Haryana. He submitted that no part of cause of action arose at Delhi. Further mere reference to courts in Delhi as having jurisdiction in PO cannot confer jurisdiction, if the provisions of Section 20 CPC are not satisfied.
11.3 The defendant to buttress its submissions referred Hon'ble Supreme Court judgment "Hakam Singh vs M/s Gammon (India) Ltd." 1971 (1) SCC 286, wherein it was held that the court mentioned in the agreement has the jurisdiction and the respondent therein had their Head Office when they carry on business at Bombay, the agreement between the parties that the courts in Bombay alone shall have jurisdiction to try the proceedings.
11.4 The plaintiff submitted that this court has territorial jurisdiction under CS No. 60118/16 Minda Industries Ltd. Page: 39 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 40 ::- Date: 30.01.2025 Section 20(c) of CPC as part cause of action arose within jurisdiction of this court. The plaintiff referred its para 3 and 7 of the suit wherein it was stated that the defendant and its representatives met at the office of the plaintiff company which the defendant in its reply had admitted. The plaintiff relied upon the following judgments:
a) A.B.C. Laminart Pvt. Ltd. & Ors. vs A.P. Agencies, Salem MANU/SC/0001/1989, which reads as:
"11. The jurisdiction of the Court in matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors.
12. A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.
13. Under Section 20(c) of the CPC subject to the limitation stated theretofore, every suit shall be instituted in a court within the local limits of whose jurisdiction the cause of action, wholly or in part arises. It may be remembered that earlier Section 7 of Act 7 of 1888 added Explanation III as under:
Explanation III. In suits arising out of contract the cause of action arises within the meaning of this section at any of the following places, namely:
1. the place where the contract was made ;
2. the place where the contract was to be performed or performance thereof completed ;
3. the place where in performance of the contract any money to which the CS No. 60118/16 Minda Industries Ltd. Page: 40 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 41 ::- Date: 30.01.2025 suit relates was expressly or impliedly payable.
15. In the matter of a contract there may arise causes of action of various kinds. In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else In suits for agency actions the cause of action arises at the place where the contract of agency was made or the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the Court where the suit is filed and that contract is found to be invalid, such part of cause of the action disappears. The above are some of the connecting factors."
b) Maharaji Educational Trust & Ors Punjab & Sindh Bank MANU/DE/8170/2006;
c) Supreme Telecommunication Ltd. vs RPG Transmission Ltd. 2006 LAWPACK (Del) 29951 wherein it was also held that:
"8. The confirmed purchase order placed by the appellant on the respondent has also been duly proved. It was for the defendants to show on record and prove that the respondents have failed to discharge their obligation in terms of the contract entered into between the parties. Issue in regard to territorial jurisdiction was also framed by the Trial Court and has correctly been answered. The onus to prove this issue was upon the appellant but they failed to lead any such evidence despite grant of opportunities. Furthermore, the purchase order dated 24.8.2000 clearly CS No. 60118/16 Minda Industries Ltd. Page: 41 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 42 ::- Date: 30.01.2025 shows that the order was placed upon the respondent at Delhi at its office at Basantlok, Basant Vihar, New Delhi. Thereafter, various correspondence has been exchanged between the parties and their meetings were held at Delhi. In absence of any evidence to the contrary there is no reason why the judgment of the Trial Court be not sustained by this Court."
11.5 Therefore, considering the above facts that e-mail meetings were held between the parties at the office of the plaintiff and the law laid down by the Hon'ble Supreme Court and Hon'ble High Courts, this court is of the considered view that this court has the territorial jurisdiction to try, entertain and decide the present suit.
11.6 Accordingly, the present issue is decided against the defendants and in favour of the plaintiff, hence, the suit was filed well within the territorial jurisdiction.
12 Issue no. (iii) Whether plaintiff is entitled for recovery of Rs.
65,19,915/- if so, interest at what rate and for what period? OPP.
12.1 The onus to prove this issue is upon the plaintiff. This issue is sub-
divided under the following heads:-
A. Liability of defendant no. 2 and 3.
B. Absence of Board Resolution.
C. Claim of plaintiff for refund of price.
D. Non-achieving of cycle time - entitlement of plaintiff to damages.
E. Claim for Breach of Warranty.
A. Liability of defendant no. 2 and 3.
12.2 The plaintiff impleaded the directors of defendant no.1 company as defendant no.2 and 3. So as far as liability of the defendant no. 2 and 3 are concerned, court in reliance upon the judgment of the Hon'ble CS No. 60118/16 Minda Industries Ltd. Page: 42 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 43 ::- Date: 30.01.2025 Supreme Court ruling in the case "New Horizons Ltd. v. Union of India: (1995)1 SCC 478" held as under:
"27. The conclusion would not be different even if the matter is approached purely from the legal standpoint. It cannot be disputed that, in law, a company is a legal entity distinct from its members. It was so laid down by the House of Lords in 1897 in the leading case of Salomon v. Salomon & Co. Ever since this decision has been followed by the courts in England as well as in this country. But there have been inroads in the doctrine of corporate personality propounded in the said decision by statutory provisions as well as by judicial pronouncements. By the process, commonly described as "lifting the veil", the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favor of the economic entity constituted by a group of associated companies. This course is adopted when it is found that the principle of corporate personality is too flagrantly opposed to justice, convenience or the interest of the Revenue. (See: Gower's Principles of Modern Company Law, 4th Edn., p.112.) This concept, which is described as "piercing the veil" in the United States, has been thus put by Sanborn, J. in US v. Milwaukee Refrigerator Transit Co.4: 'When the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.' The court relied on the Hon'ble Delhi High court judgment in case Tristar Consultants vs. Customer Services India Pvt. Ltd. And Anr., 139 (2007) DLT 688, the relevant paras of the judgment which are apposite, read as under:-
"28. To interpret the law as is sought to be projected by the petitioner would mean negation of the concept of a company being limited by its liability as per the memorandum and articles of association of the company. Other than where directors have made themselves personally liable i.e. by way of guarantee, indemnity, etc. liabilities of directors of a company, under common law, are confined to cases of malfeasance and misfeasance i.e. where they have been guilty of tort towards those to whom they owe a duty of care i.e. discharge fiduciary obligations. Additionally, qua third parties, where directors have committed tort. To the third party, they may be personally liable.
29. For example by making false representations about a company, a CS No. 60118/16 Minda Industries Ltd. Page: 43 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 44 ::- Date: 30.01.2025 director induces a third party to advance a loan to the company. On proof of fraudulent misrepresentation, a director may be personally liable to the third party.
30. But this liability would not flow from a contract but would flow in an action at tort. The tort being of misrepresentation of inducement and causing injury to the third party having induced the third party to part with money."
12.3 In the present suit, there is admittedly no assertion in the plaint that the Defendant no.2 and 3 had extended any contract of guarantee or had even undertaken to make payment to the plaintiff of the material supply amount on behalf of the defendant no.1 company, M/s. Next First Engineering Technologies Pvt. Ltd.. Ltd. No case of joint and several liability is, therefore, made out and the liability, if any, is the sole liability of the defendant no.1 company. The defendant no.2 and 3 are not even alleged to be guarantors or indemnifiers for breach of any term and any interest or penalty due from the defendant Company nor it is pleaded in the plaint that the defendant no.2 and 3 had undertaken to make payment on behalf of the defendant no.1 company. Since there is no cause of action against defendant No. 2 and 3, the suit is liable to be dismissed so far as defendant No. 2 and 3 are concerned.
B. Absence of Board Resolution.
12.4 The plaintiff submitted that the written statement on behalf of the defendant no.1 has not been signed, verified and filed by duly authorized person, as no Board Resolution has been filed in support of the written statement. Further, DW1 during its cross examination on 21.07.2023 was specifically put that he is not authorize to appear and give evidence on behalf of defendant no.1 and to sign written statement as there is no resolution of board of directors. To which the witness replied that "I assume that as I am Director of Defendant No.1, CS No. 60118/16 Minda Industries Ltd. Page: 44 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 45 ::- Date: 30.01.2025 I can give evidence on its behalf."
12.5 The plaintiff further submitted that defendant no.1 is a juristic person which can sue and can be sued in its own name and under the Companies Act, 2013, a company acts through its directors/ officers duly authorized by the Board of Directors, therefore, the written statement cannot be taken into consideration on behalf of the defendant company. The plaintiff relied upon a judgment titled "Ferruccio Sias & Anr. vs Shri Jai Manga Ram Mukhi & Ors." 1994 (28) DRJ.
12.6 The plaintiff also submitted that the defendant's referred judgment title "United Bank of India vs Naresh Kumar & Ors." (1996) 6 SCC 660 in this regard is not applicable in the facts of the case. The Hon'ble Supreme Court in the said judgment of United Bank of India vs Naresh Kumar had categorically held that:
"10. In cannot be disputed that a company like the appellant can sue and be sued in its in its own name. Under Order 6 Rule 14 of the CPC a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the CPC, therefore, provides that in a suit by or against a corporation the secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the CPC it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto an de hors Order 29 Rule 1 of the CPC, as a company is a juristic entity, it can duly authorize any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the CPC. A person may be expressly authorized to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour CS No. 60118/16 Minda Industries Ltd. Page: 45 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 46 ::- Date: 30.01.2025 of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can. on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer."
12.7 Further, the Hon'ble Delhi High Court in its judgment while considering the judgment "United Bank of India (supra)" had categorically held that:
"13. On 04.05.2018 when the written statement duly signed and verified by the Office Secretary of the petitioner was filed, the ld. POLC could not have refused to accept and make it a part of the record. Similarly, the vakalatnama duly signed by the Office Secretary of the petitioner in favour of Sh. Pramod Gupta should have been taken on record. There was no question to proceed the petitioner ex-parte by observing that there was no authorization. In view of the provision contained in Order XXIX Rule 1 CPC and judgment of Hon'ble Supreme Court in United Bank of India (supra), there was no requirement of any Board Resolution when vakalatnama was signed by Office Secretary of the petitioner. Even if there was no Board Resolution or authorization in favour of Shri Mahesh, the Office Secretary of the petitioner/Management, the petitioner could have ratified the action of Shri Mahesh, Office Secretary expressly or impliedly at any subsequent point of time during the course of proceedings." 12.8 On careful perusal of the record, it is noted that the written statement was signed by the Director of the defendant no.1 who is also impleaded as defendant no.2 in the present suit. Further, the written statement was supported with affidavit duly signed by defendant no.1 stating to be Director of the defendant no.1 and he is fully conversant with the facts and circumstances of the case. Further, the Vakalatnama also bears the signature and stamp of both the directors of the defendant company. Pertinently, all three defendants had filed a common written statement against the suit. Therefore, the court is of CS No. 60118/16 Minda Industries Ltd. Page: 46 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 47 ::- Date: 30.01.2025 the considered view that the suit has been signed, verified and filed by the proper / appropriate defendants.
C. Claim of plaintiff for refund of price.
12.9 The plaintiff has contended that the machine had not provided the desired output 13.5 seconds cycle time of operation, as per the proposal sent by the defendant vide email dated PW1/2 at page 31-48 of the suit. The said proposal contains detailed description of the machine including its specifications and at page 35 the plaintiff's scope has been mentioned. The plaintiff further pointed out that as per PW1/2 page 42 it was mentioned by the defendant about the benefits of the proposed system that no additional shift (OT)- UNO Minda will be required for producing 2000 units/ shift, due to productivity increase of upto 142%. The plaintiff also referred to the warranty clause at page 45 of PW1/2 which mentioned herein below for the sake convenience:
"Warranty-
We offer a warranty of 12 months from the date of dispatch against any manufacturing defects in the equipments. However, NextFirst in not liable for loss-of-production damages arising due to defective equipment. The warranty on bought-outs will be as per the actual warranty conditions of the company from which the parts are purchased."
12.10 The plaintiff also referred terms and conditions clause 1, which reads as:
"1. CONDITIONS OF CONTRACT AND DELIVERY TERMS:
The goods shall be in strict conformity with the description, the sample the drawings and the specifications. The seller will not change any specifications without the prior consent in writing of the buyer. The goods shall be delivered within the stipulated time, the time of delivery being the essence of the contract. In the event of breach of any of these two conditions, the buyer shall have the right to reject the goods and purchase CS No. 60118/16 Minda Industries Ltd. Page: 47 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 48 ::- Date: 30.01.2025 such goods from other sources on the seller's account and risk in which case the seller shall be liable to pay the buyer and difference between the price at the which such good have been purchased and the price calculated at the rates set out in this order, and also claim other damages arising there from, including damages for loss of production and profits, loss on account of consequential breach of other contracts, if any in alternative the buyer may retain such goods. In part or in whole, and claim from the seller such reasonable amount as to compensate the buyer for non-conformity of goods with the description, specifications drawings and samples and or late delivery thereof. The buyer may at any time postpone delivery of any of the articles ordered herein for a reasonable time."
12.11 The plaintiff also referred to PW1/4 clause 7 regarding rejection of goods and clause 9 which provides removal of defective goods, and clause 12 provides the warranty clause. The relevant provision of clause 9 which the court deems appropriate as the suit of the plaintiff is regarding recovery of paid amount against sale consideration of the machine on account of rejected goods i.e. Clause 9 and Removal of Goods. For the sake of convenience Clause 7 and 9 had been reproduced which reads as:
"7. Rejections:
In the event of the goods any being found if any stage, including the production stage to be in accordance with the description sample specifications, specified quality being unmatchable, or being damaged to broken being otherwise unit for the purpose intended/ specified by the buyer, the buyer shall in its sole discretion the entitled to (a) reject the same and cancel the contractor (b) to accept the goods partly, or (c) rectify himself or get rectified by an outside agency the defects in the goods in any of the aforesaid events, the seller shall be liable for damages caused to the buyer, including expenses incurred for specification, extra inspection charges and all other cost and charges incidential thereto. The buyer shall have a lien on all deposits, goods of the other property of the seller which may come in its hand.
9. Removal of Goods:
Within 7 days from the receipt of the intimation from the buyer seller shall remove the rejected goods at his own cost, or the buyer may at his option dispatch the said goods in the seller's last known address at seller's cost.
CS No. 60118/16 Minda Industries Ltd. Page: 48 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 49 ::- Date: 30.01.2025 The buyer shall not be responsible for damages, loss or deterioration of the goods. In the event of the non removal of the goods of a period of 15 days the buyer shall also have the option, without further notice to sell the goods by private treaty or public auction and appropriate the amount towards he claim, if any due the buyer from the seller, and or the seller shall pay to the buyer responsible storage charges for such rejected goods for the period exceeding 15 days as aforesaid."
12.12 From the bare perusal of the clause 9 i.e. removal of goods, it is clear that the goods first had to be rejected. On careful perusal of the documents and pleadings of the plaintiff, it is found that that the plaintiff had not rejected the goods i.e. Assembly Line machine. From clause 7 of PW1/4, it is apparent that the plaintiff could have rejected the goods and cancel the contract and could have held the defendant liable for the damages on account of the rejection of goods and cancellation of contract. Had the plaintiff rejected the goods, the subsequent clause removal of goods should have come in force, regarding removal of rejected goods. The suit of the plaintiff is for recovery of paid amount against sale consideration of the machine and the non-achievement of the time cycle of the machine. Pertinently, the plaintiff in para 38 at Page 19 of the suit categorically stated that "..... the issues in the machine still subsists and have not been resolved till date and the machine continues to under-perform and have miserably failed to give the desired results ...." It is apparent that the plaintiff still continuously using the machine. It noted that the plaintiff had deliberately not rejected the machine and not returned the machine to the defendants but the plaintiff is continuously using the same on one hand. On the other hand the plaintiff had filed the present suit for recovery of the amount Rs. 30,19,915/- paid against sale of the Assembly Line Machine.
CS No. 60118/16 Minda Industries Ltd. Page: 49 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 50 ::- Date: 30.01.2025 12.13 In this regards, this courts relies on the Hon'ble Madras High Court judgment "Sha Thilokchand Poosaji vs Crystal & Co." MANU/TN/0192/1955 wherein it was held that:
"14. The right of a buyer to sue for damages for a breach of warranty proceeds upon the basis that he has accepted the goods delivered to him, the goods becoming his property by reason of his acceptance of these goods. The right of rejection of a buyer and his right to sue for damages for a breach of warranty are alternative remedies and can never be cumulative for they proceed upon contrary state of facts. A question may arise as to whether a buyer who has once exercised an election to reject and the seller has accepted the rejection can revoke that election and proceed to accept the goods as in performance of a contract reserving his light to claim damages -as for a breach of a warranty........When a buyer accepts the delivery or deals with the goods as his own, he is not thereafter entitled to reject the goods and sue the seller for damages for non delivery (Vide Section 42). Section 59(1) of the Act deals with the right of buyer in such a contingency. Where however the buyer rejects the goods there is no question of his suing for any other relief -than damages for non-delivery."
12.14 Therefore, after considering the facts and circumstances the prayer clause regarding recovery of the amount paid towards the sale consideration of the Assembly Line is not tenable and without any basis.
D. Non-achieving of cycle time - entitlement of plaintiff to damages.
12.15 The plaintiff further submitted that the defendant despite emails (Ex.
PW1/14, PW1/15, PW1/17, PW1/19, PW1/23, PW1/22 and PW1/24 dated 01.03.2013) the machine was not supplied by the defendant. On careful perusal of the email communication between the parties, the defendant provided the revised delivery schedule to the plaintiff vide emails dated 19.02.2013, 22.02.2013 (Ex. PW1/22 and PW1/23) and had intimated the plaintiff regarding revised time schedule. The plaintiff vide email dated 12.03.2013 (Ex.PW1/25) accepted the revised delivery schedule provided by the defendant.
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-:: 51 ::- Date: 30.01.2025 12.16 The plaintiff submitted that the machine was not providing production at 13.5 second cycle time of operation, due to technical reasons for which plaintiff had sent several emails to the defendant and during the second meeting held on 26.03.2014 (Ex.PW1/29) the delay time was noted to be 23 sec approx. Further, the plaintiff vide email dated 06.05.2014 categorically mentioned that the plaintiff concern remain the same that the plaintiff could not achieve the cycle time of 13.5 seconds from the machine. The defendant in response email dated 07.06.2014 Ex.DW-1/22 categorically wrote that:
"Dear Sir, we can able to achieve the cycle time of 13.5 sec of machine only through the continuous monitoring of operators. As per our cycle time analysis, the operators are doing their within 9 sec(i.e. they are finishing before auto station finishing the process) when u or Mr. Amarjit standing nearby the m/c. I have given the data's to Mr. Amarjit also. Only way to achieve the cycle is we need to allot a guy to monitor the operator performance atleast half an hour once."
12.17 The defendant vide email dated 08.05.2014 Ex.DW-1/23 again wrote the similar email to the plaintiff stating the reason for non- achievement of the target cycle time period of 13.5 sec cycle i.e. due to lack of monitoring by the plaintiff on the operators of the machine. The plaintiff again vide email dated 08.05.2014 (Ex. DW-1/24) mentioned the defendant that:
"This is not only indexing the rotary cylinders. We had not considered many things like, picking and placement of bins, removing packets of stud in bins, how to move the fg bin into the stand etc. How can you say that the machine is capable of doing all the desired output."
12.18 The defendant in response vide email dated 08.05.2014 (Ex. DW-1/25) wrote to the plaintiff that:
"Dear Sir, We also noticed that material movement issue is there. For that CS No. 60118/16 Minda Industries Ltd. Page: 51 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 52 ::- Date: 30.01.2025 only I already discussed with Mr. Amarjit at the time of making MOM. As per discussion we need to change the layout of machine that time and we need to provide an extra operator(anyway now there is no operator in station 6) to bring the welded reflector from welding room to M/s 1 hour once, we can utilize the same operator for providing the holders, bulbs & for moving the OK samples.
In meantime we have to provide rack (with 2 racks one for empty & one for ok components) or trolley for loading the OK samples & NG samples. If we provide like that for putting the OK bin & for taking the new bin it may take 10 seconds......"
12.19 Pertinently, the defendant on 1305.2014 (Ex.DW-1/25) vide email wrote to the plaintiff that:
"Dear Bharat, Do you have any updates on the layout changes that you wanted to make to improve output.
The auto stations are within 13.5 seconds and some operators seem to be able to run at 13.5 seconds. The average operator seems to be running the machine at 150/hour. Also data from the time our team return shows negligible machine down time and hence the productivity is is now driven mainly by operator......"
The defendant regularly stated that the reason for non-achievement of the target cycle time of the machine was due to the incompetence of operators. The plaintiff had not denied these specific reasons of incompetence of operators and lack of monitoring given by the defendant to the plaintiff in any communication. Further, vide Ex.DW-1/26, DW-1/29 are the emails wherein the defendant had asked for pending payment but the plaintiff was reluctant to release the same of the reason that machine not working.
12.20 The defendant submitted that the defendant had supplied a semi-
automated assembly line with 3 automated stations and 5 manuals stations and the cycle time could be achieved only if the operators functioned efficiently and performed their tasks within cycle time CS No. 60118/16 Minda Industries Ltd. Page: 52 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 53 ::- Date: 30.01.2025 pertaining to their respective stations. The defendant also referred to the email dated 24.023.2015 and email dated 23.12.2013 as Ex. DW-1/14 wherein the defendant categorically stated that the defendant had closed all the open points in the machine. The defendant submitted that vide email dated 08.05.2014, the antipathy and incompetence of the operators to automation resulted in the slowing of cycle times in terms of data collected. The defendant also submitted that one of the two vendors was not supplying holders to correct specification and this was slowing down the process at station 2. The defendant pointed out that the defendants had cooperated with the plaintiff beyond the call of contractual duty, to help their personnel adapt to the machine, and addressed all issues. The defendant submitted that here was no defect in the machine as alleged, but the operators who were hitherto used to manual operations, needed to be trained and upskilled when there is technology is introduced into a manual process.
12.21 During the cross examination of PW-2 a Mechanical Engineer, PW-2 deposed that the machine was Semi-Automatic machine having Eight Stations out of which three stations were automatic and five were manual. PW-2 further on asking about the delay by an operator in loading a component, what happens, to which PW-2 answered that "The machine moves automatically at a constant speed. If any operator failed to load a component in time, the machine will go further. That particular cycle will get missed. Then the machine will stop in terms of the POKA YOKE and it will have to be started again."
Further, PW-2 was asked about the Rejection POKA YOKE section at Page 86 of Ex. PW-1/12, PW2 stated that POKA YOKE is Japanese word for mistake-proofing. If any rejection happened that will go into CS No. 60118/16 Minda Industries Ltd. Page: 53 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 54 ::- Date: 30.01.2025 rejected bin. Rejection bin at the last station.
12.22 Further during the cross-examination PW-2 was asked a specific question i.e.:
"Q Do you have Daily Log Book of the Cycle time of the machine with you?
Ans. Yes. Our Production engineering department maintains the Daily Log Book for the machines. Mr. Bharat Bajaj and Mr. Amarjeet Singh were responsible for maintaining the Daily Log Book."
Pertinently, the PW-2 revealed that the plaintiff company maintains Daily Log Book of cycle time of the machine with its Production engineering department, however the plaintiff had deliberately failed to place on record the said Daily Log Book which plaintiff maintains in its daily course of production. Further, the plaintiff during its communications with the defendants through email had not provided the said Daily Log Book of cycle time of machine to the defendants.
12.23 Considering the averments and documents of the parties, it is apparent that the reason for non-achievement of the specified cycle time of machine as mentioned in Ex.DW-1/22 and DW-1/25, is incompetence and lack of monitoring of operators on part of the plaintiff. Therefore, the court is of the considered view that the plaintiff had deliberately concealed the material fact and deliberately failed to place on record the relevant piece of evidence. Hence, the plaintiff had failed to prove that the machine delivered and installed by the defendants had functioned inefficiently.
12.24 The defendant submitted that the plaintiff witness PW-1 is not as technical person and not involved in the technical part of the transactions, therefore, his evidence has no value is so far as the alleged defect in the machine is concerned as alleged breach of CS No. 60118/16 Minda Industries Ltd. Page: 54 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 55 ::- Date: 30.01.2025 warranty. The defendant submitted that PW1 is aware of the financial transactions and his depositions can be screened for financial aspects of computation of damages for alleged breach, however, the plaintiff had not furnished any data as to the expenditure on operators over the relevant period or the sales or profit to this account for contesting his prayer. On careful perusal of the records, it is observed that the plaintiff had not filed any statement/ document pertaining to alleged loss or damage to substantiate its claim. It is further observed that the plaintiff had also not filed any data as to the expenditure on operators over the relevant period. Therefore, the plaintiff failed to prove its alleged claim on account of number of operator savings and cost saving per operator as prayed in the suit.
E. Claim for Breach of Warranty.
12.25 The defendant during the course of arguments, submitted that at best the case of plaintiff is for remedy from breach of warranty under Section 59 of Sales of Goods Act. The plaintiff in its written submissions at para 11(a.) categorically submitted that Section 59 deals with remedy for breach of warranty which is not the case in the present suit as the suit nowhere claims any breach of warranty having being done by the defendants. It was also submitted that the defendants have not pleaded anything in the written statement about whether the terms and conditions would amount to breach of warranty and no such issue was framed. The plaintiff submitted that this submissions which involves factual matrix has been taken for the first time during the final arguments. It is apparent that the Purchase order PW1/4 and revised Purchase order PW1/9 alongwith the specified terms and conditions forms the contract.
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-:: 56 ::- Date: 30.01.2025 12.26 The referred terms and conditions on the purchase order had categorically mentioned warranty clause at para no 12 of Pages 52 and 60, the said clause has been reproduced herein below for the sake of convenience:
"12. WARRANTY:
The Seller shall be responsible and be liable free of cost to replace or repair at the option of the buyer the goods supplied against this order or any part thereof that need replacement or repair by reason of any defect in the composition or substance material defect or workmanship of process of manufactured or in design of the goods brought to the notice of the seller within 12 months of this guarantee period being limited 20 months from the date of delivery."
12.27 Although, it is argued by the plaintiff that there is no case of breach of warranty, but still this court is inclined to evaluate the same as it is a legal issue. In this regards, this court relied upon the Hon'ble Madras High Court judgment "Sha Thilokchand Poosaji vs Crystal & Co." MANU/TN/0192/1955 had laid down that:
"17. Before concluding we might briefly summarise the position: 1. Where goods not answering to the description contracted for are delivered to a buyer he has a right to one of two alternative remedies, (a) reject the goods and obtain a refund of the price if paid in advance and sue for damages for non-delivery. In such an event the damages he would obtain would be the difference between the contract price and the market price of the goods on the date of the breach if the latter were higher; (b) waive condition and accept the goods and sue for damages for a breach of warranty."
12.28 This court further relies on the Hon'ble Supreme Court Judgment in case "Rajratan Babulal Agarwal vs Solartex India (P) Ltd." 2003 (1)SCC 115 has held that:
"36. An analysis of the provisions of the Act would reveal the following in a contract of sale of goods. A stipulation in regard to goods can be a condition or a warranty. A condition is put on a higher pedestal than a warranty. A condition is treated as essential to the main purpose of the contract. The CS No. 60118/16 Minda Industries Ltd. Page: 56 of 59 Vs. Next First Engineering Technologies Pvt. Ltd. & Ors
-:: 57 ::- Date: 30.01.2025 breach of a condition gives rise to the right with the party to treat the contract as repudiated. In the case of the breach of a warranty which is a stipulation in a contract collateral to the main purpose of the contract, the party (buyer) cannot reject the goods. He cannot repudiate the contract. Under Section 12(3), on the breach of the warranty, the buyer can sue for damages. As to whether a stipulation is a warranty or a condition is a matter to be decided on the facts of each case. The nomenclature 'warranty' cannot conclude the question as to whether in fact it is a 'condition'. Even though the breach of a condition entitles the buyer to repudiate the contract it is open to the buyer to treat the breach of the condition as a breach of warranty. [See Section 13(1)]. Section 13(2) then provides that the breach of any condition by the seller can be treated as only a breach of warranty and not a ground for repudiating the contract or rejecting the goods. This is in situations where the contract is not severable. Still further, for Section 13(2) to apply, the buyer must have accepted all or even part of the goods. This however is again made subject to an express or implied contract providing otherwise. Section 13(2) of the Act suffered an amendment by the Amending Act 33 of 1963. By the said amendment, the words "or where the contract is for specific goods the property in which has passed to the buyer"
came to be omitted. Going by the objects and reasons of the Amending Act, it is found that the said words gave rise to some difficulty. It is, inter alia, stated in the objects and reasons that Under Section 20 of the Act, property in specific goods in a deliverable state passes to the buyer when the contract is made. When there is a contract for sale of specific goods by sample, Section 17(2) of the Act provides for an implied condition that the bulk should correspond to the sample in quality. It is further indicated in the objects and reasons that when in such a case property is delivered subsequently which does not correspond with the sample, Section 13(2) obliged the buyer to treat the implied condition Under Section 17(2) as a warranty, thus, robbing the buyer of the right to reject the goods and entitling him to claim damages only. The Law Commission also made a recommendation that in the case of sale of specific goods by sample it should be taken out of Section 13(2). Thus, the omission in Section 13(2) by the Amending Act 33 of 1963 confines the compelled treatment of a breach of a condition as a breach of a warranty to only cases where the contract is not severable and the buyer has accepted the goods or part thereof. No doubt, all of this is subject to a contract either expressly or impliedly otherwise.
43. It is clear that a breach of warranty does not entitle the buyer to reject the goods. The remedies which he can seek Under Section 59 are as follows. He can seek the reduction (diminution) of the price. He may also seek to be freed from the liability to pay the price (extinction of the price).
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-:: 58 ::- Date: 30.01.2025 In other words, relying upon the breach of the warranty, he can refuse to pay the price or canvas for the reduction of the price. Section 59 further proclaims that the buyer may sue the seller for damages for breach of warranty. Section 59(2) declares that with respect to the same breach of warranty which is projected as the foundation for seeking diminution or wiping out of the liability to pay the price, the buyer can also seek damages.
44. A question may arise as to whether after the delivery of the goods by the seller and what is more, even after acceptance of the goods by the buyer, whether the provisions of Section 59 can be invoked by the buyer? If the property has passed to the buyer within the meaning of Section 19 which on the one hand entitles the seller to sue for the price of the goods, in view of the word 'wrongfully' neglects or refuses to pay Under Section 55 read with Section 59, cannot the buyer in a suit for the price filed by the seller, 'set up' a breach of warranty within the meaning of Section 59 and persuade the court to either decree a reduction in the price or extinguish the liability of the buyer to even pay any part of the price. To put it differently, if the goods are delivered and accepted within the meaning of Section 42 of the Act, will the right of the buyer arising out of breach of warranty Under Section 59 be extinguished? If the mere acceptance of the goods results in depriving the right of the buyer to invoke Section 59 of the Act, then, undoubtedly, the buyer would be liable to pay the price. Let us assume that there is delivery and acceptance in a given case. If parties intended that the property in the goods would pass only after delivery is effected and acceptance is made and if the case falls Under Section 13(2) of the Act and the buyer sets up a compelled breach of warranty though in fact a condition was violated, it may not be legal to deny the benefit of the range of remedies open to a buyer Under Section 59. Acceptance of goods at any rate within the meaning of Section 13(2), if it does not constitute passing of property would not also deprive the buyer of the right Under Section 59 of the Act. As long as a condition is violated, be it implied or express, and it is not waived, then, present other elements of Section 13(2), Section 59 applies." 12.29 In view of the abovesaid judgments, the plaintiff could have sued the defendant for breach of warranty and not condition, but the same is not done in instant case. Accordingly, the present issue is decided against the plaintiff and in the favour of the defendants, hence the plaintiff is not entitled for the recovery of Rs. 65,19,915/- from the defendants.
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-:: 59 ::- Date: 30.01.2025 13 The plaintiff is not entitled to any relief and the present suit of the plaintiff is dismissed.
Digitally signedFile be consigned to record room. SHIVALI by SHIVALI BANSAL Announced in open BANSAL Date: 2025.01.30 16:12:47 +0530 Court on 30.01.2025 Shivali Bansal District Judge-03, North District Rohini Courts, Delhi CS No. 60118/16 Minda Industries Ltd. Page: 59 of 59
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