Calcutta High Court
S.P. Traders vs Hooghly Mills Co. Ltd on 20 June, 2013
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE Present :
The Hon'ble Justice Soumen Sen C.S. 317 of 1998 S.P. TRADERS VS.
HOOGHLY MILLS CO. LTD.
For the plaintiff : Mr. Dhruba Ghosh
Mr. R.L. Mitra
For the defendants : Mr. Ranjan Deb, Sr. Adv.
Ms. Ahana Sikder
Heard on : 06.03.2013, 07.03.2013, 08.03.2013,
22.03.2013, 17.06.2013, 19.06.2013
Judgment on : 20th June, 2013
Soumen Sen,J.:- The plaintiff has filed the suit for recovery of price of goods sold and delivered.
The plaintiff is a trader in jute. The plaintiff claims to have sold 4165 quintals (approximate) jute of different specifications and grades during August and September, 1997. The defendant had received the goods but did not pay the price. In spite of repeated demands, the plaintiff has failed and/or neglected to pay the aforesaid sum or any portion thereof. The plaintiff from time to time issued notices of demand. The defendant did not reply to any such notices. In view thereof, the plaintiff instituted the suit for recovery of the price of said goods sold and delivered to the defendant with interest.
The defendant duly contested the said suit by filing a written statement. The defendant, amongst others, has urged that the plaintiff is not the owner of the goods and there is no privity of contract between the plaintiff and the defendant. Accordingly, the plaintiff is not entitled to claim for the price of the goods alleged to have been sold and delivered by the plaintiff to the defendant. The suit is also not maintainable in absence of Ashoke Kumar Tatar who, according to the defendant, is the real owner of the goods and the plaintiff is a financier who used to give loan and provide finance to Ashoke Kumar Tatar to buy goods.
On the basis of the pleadings and documents disclosed, the only issue requires to be decided whether the plaintiff is entitled to claim a decree for a sum of Rs. 39,06,014.85 p. with 24 per cent interest for the price of the goods sold and delivered to the defendant.
The plaintiff in order to establish its claim examined Mr. Saraogi. Mr. Saraogi was also extensively cross-examined by the learned Counsel on behalf of the defendant. Mr. Saraogi in his evidence has said that since 1992, the plaintiff used to supply different grades of jute to the defendant and had received payments in respect of the past transactions save and except the transaction for the period August and September, 1997. In the transaction, Ashoke Kumar Tatar used to function as a broker. Mr. Ashoke Kumar Tatar would identify the cultivators from the funds provided by the plaintiff, such goods were purchased by Ashoke Kumar Tatar which were thereafter sold to the Hooghly Mill by the plaintiff. Mr. Tatar was a conduit between the plaintiff and defendant. Mr. Ashoke Kumar Tatar used to function as a broker between the plaintiff and defendant. This has been the practice since 1992. The goods were duly delivered to the Hooghly Mill by the plaintiff and the documents being Exhibit A, B, C and D would clearly establish that the goods were sold by the plaintiff to the defendant. The defendant had received the said goods but failed and/or neglected to make payment. In cross-examination in answer to the question Nos. 113, 130 to 143 the plaintiff explained the nature of the transactions.
Mr. Ghosh on behalf of the plaintiff submitted that the plaintiff is not concerned with the underlying agreement between the defendant and Tatar. Tatar was all throughout described as a broker by the defendant. The defendant has not been able to establish that in respect of the past transactions, payments were released on the basis of any letter of authorization issued by Ashoke Kumar Tatar. In fact, such letter of authorization was not proved. The defendant has also failed to establish that the plaintiff had received any such letter of authorization or produced any such letter when the payment was made by the defendant to the plaintiff excepting for the period under dispute. The witness of the defendant in answer to question 171-173 in cross-examination failed to correlate the letter of authorization with the mill receipts and challans on the basis of which payments have been received. The said witness also admitted that some payments were made even without any letter of authorization from Ashoke Kumar Tatar.
The defendant also did not dispute the receipt of the bills and mill receipts mentioned in Exhibit J that were submitted by the plaintiff. Mr. Ghosh further submitted that the case made out by the defendant that Ashoke Kumar Tatar was the seller and not the broker is on the face of the documents and evidence disclosed, is unsustainable. The said plea is contrary to the pleadings in the written statement and the evidence adduced on behalf of the defendant where the witness on behalf of the defendant that Mr. Ashoke Kumar Tatar had functioned as a broker.
It was argued that the claim of the defendant that since the property had passed in the goods to the defendant earlier to the documents on record, no property in the goods could have passed to the plaintiff on such later date. It is submitted that such argument is fallacious in view of the fact that the defendant himself has admitted that Ashoke Kumar Tatar was acting as a broker and a broker can never be considered as a seller in the said transaction. The oral evidence shows that the plaintiff purchased the goods from the mokkam through the broker. The PW1 has given evidence of the procedure that was adopted in procuring the said raw materials in answer to question No.13, 14 and 16 which are reproduced hereinbelow:-
"13. Can you tell My Lord very briefly the procedure followed in the jute trade relating to sale of raw jute to Mills in West Bengal? Jute trade is done through middleman. The brokers are getting offers from the mokams where the jute is produced from local agriculturists or traders, i.e. Chakda, Palasipara, Assan Nagar and such other places.
14. After procuring such jute through your brokers, how is it sold to the Mills?/ Jute is sold by the brokers to the Mills.
16. After the bills is submitted to the Mills, how does the acknowledgement of this receipt come and payment is made?/ We have got a receipt where signature is there showing that they have received the bill and the mill receipt."
The fact that the payment could be postponed as between the plaintiff and his vendor does not mean that the property never passed to the plaintiff. The property in the goods to the plaintiff passed as soon as the unconditional contract was concluded between the plaintiff and his vendor (through the broker). The defendant is deliberately avoiding to accept that a bill/invoice could only be prepared by and/or on behalf of the vendor submitted to the plaintiff after mill receipt is obtained in order to get the details of the quantum and quality of goods and rates when the broker after delivery prepared such documents with all such particulars and hand over the same to the plaintiff in order to enable the plaintiff to raise bills on the basis of such particulars which were submitted along with the mill receipts. It is not in dispute that mill had received the said goods as also the invoices raised by the plaintiff. The mere fact that the payment could be postponed between the plaintiff and his vendor, does not mean that property never passed to the plaintiff till then. As per the custom of the trade, the property had passed to the plaintiff when he instructed the broker unconditionally to buy the jute and sell it to the mill on its behalf. In this regard, he has relied upon Sections 19, 20 and 55 of the Sale of Goods Act which are reproduced hereinbelow:-
"19. Property passes when intended to pass. - (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
(3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.
20. Specific goods in a deliverable state. - Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed.
55. Suit for price. - (1) Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.
(2) Where under a contract of sale the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract."
Mr. Ranjan Deb, the learned Senior Counsel appearing on behalf of the defendants submits that the plaintiff has failed to establish that the plaintiff is the owner of the goods and there is no privity of contract between the plaintiff and the defendant. It is submitted that the documents disclosed by the defendant would clearly establish that it is Ashoke Kumar Tatar who is the real owner of the goods and the plaintiff used to finance Ashoke Kumar Tatar to procure such raw materials. In the past, payments were made to the plaintiff on the basis of letter of authorization issued by Tatar in favour of the plaintiff. The defendant on the basis of such letter of authorization made payments to the plaintiff. Ashoke Kumar Tatar did not issue any letter of authorization for the transactions for the period August and September, 1997. In fact, the defendant has a substantial claim against Ashoke Kumar Tatar for failure on the part of the said Ashoke Kumar Tatar to honour its past commitments. The defendant has a claim against Ashoke Kumar Tatar on account of short delivery and failure to deliver certain bales of jute in time as would be evident from the letter dated July 5, 1996 and August 22, 1997 being Exhibits 1 and 7 respectively. It is submitted that after adjustment of the accounts maintained between the Tatar and defendant, a sum of Rs.6 Lakhs and odd would be due and payable by the defendant to Tatar and the defendant is willing to deposit said amount in Court. It is further argued that the defendant is also willing to pay the amount to the plaintiff, in the event, plaintiff is able to produce same and/or similar authorization letters from Mr. Tatar as used to be done in the past and on that basis the plaintiff can make payment of the undisputed sum, namely, Rs.6 lakhs and odd. In referring to Exhibit 8 (collectively) and Question Nos.330-332 put in cross-examination to Mr. Saraogi, Mr. Deb argued that such entries along with the evidence of Mr. Saraogi would clearly establish that the plaintiff is not owner of the goods on 4th September, 1997. The goods were supplied by Tatar on 3rd September, 1997 whereas the entries made in the Registrar of Vendor and Customer would show that such quantities were produced by the plaintiff only on 4th September, 1997 and the price of such goods were paid on 21st October, 1997. Accordingly, the bales of jute supplied under the invoice of 3rd September, 1997 the plaintiff could not have claimed ownership since the plaintiff did not acquire any title to the goods on 3rd September, 1997. If the plaintiff is not the owner of the goods, cause of action based on ownership must fail. It is argued that the plaintiff is not claiming that the plaintiff is the holder in due course and does not require to sue on original consideration. The plaintiff having made a claim on account of ownership must of necessity to establish that the plaintiff was the owner of the goods when the sale according to the plaintiff took place on the teeth of challenge being thrown by the defendant that there is no privity of contract between the plaintiff and the defendant and the real and true owner of the said goods was Mr. Ashoke Kumar Tatar.
In deciding the objections raised by the defendant, the Court is required to ascertain the nature of the transaction and the conduct of the parties.
The evidence on record would show that the procedure for procurement and supply of raw jute to the various mills are more or less admitted. The witness on behalf of the plaintiff as well as on behalf of the defendant in their depositions described the procedure which are mentioned hereinafter. The original cultivators of the raw jute never directly sell their products to the jute mills. The general practice in the industry is to procure raw jute from brokers. The jute mills issue the purchase orders or rukkas as there popularly known in the jute industry as purchase order on the broker who in turn would go to the mokkam (market place where the cultivators assemble) and obtain the said raw jute from such cultivators directly be supplied to the jute mills. The only difference in the evidence and the witness on behalf of the plaintiff and the defendant seems to be that the brokers purchase the raw materials after obtaining finance from it financiers and thereafter directly to sell the raw jute to the mills against the rukkas. The defendant in the written statement alleged that it is a common practice for brokers to obtain finance for the purpose of executing contracts entered into by them with the jute mills for supply of raw jute and the plaintiff is one of the financiers with whom Tatar had such arrangement. Tatar purchased the said raw jute out of the funds provided by the plaintiff and thereafter sold the said raw jute to the defendant mill. It was alleged that such payment is usually obtained against mill receipts and challans issued by the jute mills to the brokers. The defendant contended that although the jute mills have no privity with the financier as a general practice, they have accepted the said bills raised by the said financiers when the same are accompanied by letters of authorization from the brokers and also make payments against the same to the financiers directly on account of broker subject, however, to the right to set off and/or adjustment at the end of the crop year. The claim of the plaintiff was denied on the ground that in respect of a transaction during the year 1995-96 as on 5th July, 1996, a sum of Rs.22,44,400/- became due and payable by the said Ashoke Kumar Tatar to the defendant on account of his failure to supply 16 lories raw jute against rukkas issued for the crop season 1995-96. The defendant alleged to have called upon Tatar by a letter dated 5th July, 1996 to communicate his decision with regard to payment and/or adjustment of the said sum when Tatar in response to such letter alleged to have requested the defendant not to make an immediate adjustment of the amounts due from him as it would be difficult for him to make payment to his financiers including the plaintiff and to finance the subsequent supplies. It was only after Ashoke Kumar Tatar agreed to such adjustment of the entire outstanding against the subsequent supplies made till the end of crop year 1998, the defendant alleged to have agreed to accept further supplies from him and on the basis of such assurance Ashoke Kumar Tatar claimed to have commenced further supply of raw jute on 31st August, 1997 against rukkas issued by the defendant. This claim is not substantiated and proved at the trial.
That the plaintiff was receiving payment on account of deliveries being made to the defendant for the last several years is not in dispute. The evidence on record would show that the payments were received by the plaintiff from the defendant without such authorization letters. The books of account produced showed that on 2nd September, 2005, the goods were obtained by Tatar for the plaintiff which the plaintiff sold to the defendant on 4th September, 2005 and entire consideration was paid on 21st October, 2005.
The plaintiff has explained the preparation of the bills in answer to Question No.15 in examination-in-chief which is reproduced hereinbelow:-
"15. Can you explain very briefly what documentation is there in support of each sale?/ Goods are delivered to the Mills. Mills give challans to the lorry drivers back after receipt of the goods. Then mill receipt is issued. That mill receipt comes to us and then along with the bill that mill receipt we submit to the Mills."
Identical procedures were followed for the last several years. In the past, no such dispute was raised by the defendant. Tatar was described as broker not only in respect of the transaction covered in the suit but also in respect of past transactions. The documents disclosed by the plaintiff would clearly show that Tatar was appointed as broker by the plaintiff to procure goods on behalf of the plaintiff. In the consignment note, Tatar was neither mentioned as a consignor nor a consignee and his name specifically appeared as broker. The consignee is the defendant or its unit. That Tatar was known to both the parties is not in dispute. If it were direct sale by Tatar then there would not have been any instance of direct payment to the plaintiff by the defendant nor there would be any necessity of acknowledgment of the goods by the defendant from the plaintiff as would be evident from Exhibit A,B,C, and D. The defendant also contemporaneously did not raise any dispute with regard to the entitlement of the plaintiff to receive the price of the goods delivered under those road challans.
The Exhibits A, B, C and D, namely, (A) Mill Receipt No.1312 issued by Hooghly Mill, acknowledging receipt of some goods from Arham Traders A/c. S.P. Traders, (B) Bill dated 15th September, 1997 issued by S.P. Traders upon Hooghly Mills in respect of goods covered under Mill Receipt No.1312, (C) Road-Challan dated 12th September, 1997 and (D) receipt issued by S.P. Traders as acknowledging receipt of the goods covered under Mill Receipt No.1312 would show that the defendant had received a consignment delivered by Arham Traders against bills raised by S.P. Traders. The receipt issued by the defendant also acknowledged the fact that the goods have been received by the defendant along with the bill raised by the plaintiff. The defendant did not dispute that the defendant had received the said documents along with the goods. The defendant also did not dispute the existence of the said documents including the receipt signed by the representatives of the defendant in acknowledgement of receipt of such documents accompanying the goods. The consignment note is the document of title. The defendant after receipt of the said documents consumed the entire goods supplied to the defendant under the said consignment. The defendant also prior to the institution of the suit did not raise any objection with regard to its liability towards the plaintiff on account of the price of such goods sold and delivered. The defendant also did not contemporaneously raise the issue that the goods were, in fact, received from Tatar on the basis of a principal to principal contract and the plaintiff is not the owner of the goods or could not claim the price of the goods on the basis of the bills raised by the plaintiff. The defendant did not even reply to the numerous letters of demands issued by the plaintiff claiming price of the goods sold and delivered to the defendant under such consignment. The documents disclosed by either parties would show that Ashoke Kumar Tatar has been described as broker. A broker is not the owner of the goods. He is a facilitator and a negotiator. Such nomenclature of the term "broker" would clearly suggest that he is trying to strike a deal between a willing and intending purchasers and a willing and intending seller. The term broker has been defined in Black's Law Dictionary for the purpose of ascertaining the meaning of the word "broker" which is reproduced hereinbelow:-
The description of Ashoke Kumar Tatar in all such consignment notes, as broker would establish that Ashoke Kumar Tatar was acting as a broker. Much emphasis was laid on the relevant register produced on behalf of the plaintiff showing that sale had taken place on 4th September, 1997 and the payment was made on 21st October, 1997 in order to show that plaintiff was not the owner of the goods at the relevant time. However, that by itself would not establish that the plaintiff is not the owner of the goods. The defendant cannot question the underlying arrangements that the plaintiff might have with Ashoke Kumar Tatar since the defendant was under no misconception or doubt that the goods were sold by the plaintiff to the defendant, otherwise the defendant would not have made payment for all these years during which goods were received and payments were made following the same procedure from where the said defendant now sought to depart in denying its liability. The witness on behalf of the defendant acknowledged Mr. Ashoke Tatar supplied the goods and was the principal broker for supply of raw jute to the defendant (Question No.296 in Cross-examination).
The defendant during his evidence has admitted and acknowledged that Mr. Ashoke Tatar supplied the goods and was acting as a principal broker for supply of raw jute to the defendant. There was no agreement with Mr. Tatar with regard to supply of raw jute. The defendant and Mr. Tatar did not maintain any running account. The defendant also did not maintain any separate ledger for Ashoke Tatar. However, liability towards plaintiff is denied on the basis of reconciliation of these accounts alleged to have been maintained between the defendant and Tatar. It was further deposed during Cross-examination that after filing of the plaint, the defendant reconciled the accounts and came to the conclusion that "this is a pending account of Ashoke Tatar" and, accordingly, refused to pay the plaintiff (Question Nos.166 and 167). These accounts were never produced. The defendant relied upon Exhibits 1 and 7 being letters dated July 5, 1996 and August 27, 1997 in order to establish that Ashoke Tatar had failed to deliver 16 lorries raw jute against rukhas for the crop season 1995-96 and requested the Jute Department, Hooghly Mills Co. Ltd., not to adjust his dues of Rs.22,44,400/- for non-supply of raw jute and allow him some more time to settle the dues of Hooghly Mills. The defendant, however, has failed to establish any nexus between such alleged admission of liability by Ashoke Tatar and its liability towards the plaintiff for the jute supplied for the month of August and September, 1997. The defendant has failed to establish that the said payment to Mr. Tatar is not independent of its obligation to pay to the plaintiff for the price of the goods sold and delivered. On the contrary, it is an admitted position that payment were made to the plaintiff even after 1995-96 and till July 1997 for the goods sold and delivered to the defendant through Ashoke Tatar acting as broker. The defendant never prior to the filing of the written statement sought to deny its liability and never alleged that plaintiff is not the owner of goods. The story of reconciliation is a clear afterthought. The defendant also did not disclose any ledger and/or accounts maintained between the defendant and Mr. Tatar.
In the facts and circumstances of the case on the basis of evidence on record and the findings arrived at by me, it is quite clear that the plaintiff cannot be denied the price of goods sold and delivered by the plaintiff to the defendant. The conduct of the parties would clearly show and establish that the defendant never considered Tatar to be the principal seller and the payments have been made to the plaintiff in respect of the earlier consignments for the goods sold and delivered. The course of dealings and transactions between the parties would show that the defendant always considered the plaintiff as seller and accordingly paid the price of the goods sold and delivered for all these years except for the month of August and September, 1997. The few letters of authorization produced in the evidence would not show that the payments were released to the plaintiff on production of such letter of authorization by the plaintiff to the defendant. Any internal arrangements between the defendant and Tatar cannot bind the plaintiff in respect of the present transaction. In any event, such arrangement has not been proved. Moreover, it is an admitted position that payments have been made by the defendant to the plaintiff irrespective of production of such letter of authorization. Any liability arising out of any transaction between the plaintiff and Mr. Tatar cannot be foisted upon the plaintiff inasmuch as the defendant has failed to establish that the plaintiff had agreed to any adjustment of its account with the defendant in view of any failure on the part of Tatar to honour its commitment. There is no material on record which could even remotely suggest that the conduct of the defendant to deny the claim of the plaintiff on a plea that certain amounts are due and payable by Mr. Tatar to the defendant. The right to claim a set off is either contractual or statutory. The defendant has failed to establish either. The defendant has also failed to establish any arrangement by which the plaintiff could be rope in such arrangement which the defendant claims to have with the plaintiff and Tatar in relation to supply of jute bales to the defendant. The burden of proof lies on the defendant to establish that the defendant is entitled to claim such set off from the bills of the plaintiff on account of any laibility of Tatar. The dues of Tatar has also not been proved in this proceeding as would be evident from the evidence adduced by Jyoti Sharma on behalf of the defendant. Considering such overwhelming facts and evidence in support a sale of such goods to the defendant by the plaintiff, the plaintiff is entitled to a decree for the price of goods sold and delivered. The plaintiff has been able to establish that the plaintiff has sold 4165 quintals of jute of different specifications and grades during August and September, 1997 and has not received the price of such goods.
Accordingly, there shall be a decree for a sum of Rs.32,19,459.85 In view of the commercial nature of the transaction and the fact that the goods were not delivered gratuitously, the plaintiff shall be entitled interest at the rate of 10 per cent per annum from the date of institution of the suit till realization.
The suit is decreed accordingly. The Department is directed to draw up the decree expeditiously.
Urgent xerox certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)