Bombay High Court
Maharashtra State Electricity Board ... vs National Transport Company And Anr. on 12 December, 1991
Equivalent citations: 1991(4)BOMCR556, (1992)94BOMLR433
JUDGMENT V.A. Mohta, J.
1. This judgment will govern disposal of First Appeal No. 170 of 1983 and 172 of 1983.
Maharashtra State Electricity Board and its Senior Power Station Superintendent, Paras, (original defendant Nos. 1 and 2 respectively,) have filed First Appeal No. 170 of 1983 against the judgment and decree for recovery of a sum of R. 5,78,250/- alongwith interest @ 6% P.A. as damages on account of breach of contract passed in favour of M/s. National Transport company, a registered partnership firm (Original plaintiff). First Appeal No. 172/1983 is plaintiff's appeal against reduction of claim for damages.
2. The substance of the case of the plaintiff is:
The plaintiff is a dealer in coal as and had dealings in the said goods with the defendants in 1975. In pursuance if invitation of tenders on behalf of the defendants for purchase of wet coal ash for the subsequent period between 29-5-1976 and 28-5-1977, the plaintiff and 16 others submitted tenders which were opened on 25-3-1976. The plaintiffs tender at the rate of Rs. 4.95 per Cmt. was accepted and work order was issued on 26-5-1976, according to which the plaintiff lifted 151 trucks of coal on 29-5-1976 and paid the price thereof. By letter dated 30-5-1976 the defendant No. 2 suspended the work order dated 26-5-1976; asked the plaintiff to continue to lift the goods on the basis of the 1975 work order and informed it that final decision about continuation or cancellation of the 1976 work order would be taken at the higher level. By letter dated 2-7-1976 the defendant No. 2 extended the period of work under the 1975 work order by one month or till the finalisation of the fresh contract. On 30-7-1976 the plaintiff had filed a Regular Civil Suit No. 344 of 1976 in the Court of Civil Judge, Senior Division, Akola, for permanent injunction, restraining the defendants from cancelling the work order and for other ancillary reliefs. The defendants filed written statement taking inter alia a stand that M.S.E.B. had taken a decision to revoke the agreement since it was obtained by fraud incollusion with the M.S.E.B.'s employees and the cancellation was orally communicated by the Chairman of the M.S.E.B. in a meeting on 27-7-1976 and by defendant No. 2 on 28-7-1976 in writing. On 15-7-1977 issues were framed in that suit and on 29-9-1978 it was allowed to be dismissed in default. In the said civil suit, for sometime temporary injunction operated against the defendant and after vacation of the said order, the defendants invited fresh tenders by a public notice dated 19-8-1976 which were opened on 15-9-1976. Tender was awarded to M/s. Ambica Sales Corporation at the highest rate of Rs. 11.91 per Cmt. for the period commencing from 8-11-1976 to 7-11-1977. In the present suit the plaintiff had claimed damages to the tune of Rs. 8,02,000/- for breach of contract in wrongfully the contract and cancelling the 1976 work order.
3. Substance of the stand of the defendants is :
When M.S.E.B. learnt about wrongful acceptance by defendant No. 2 of conditional tender of the plaintiff (which was contrary to tender notice) and that too at a very low rate of Rs. 4.95 per cent. as against the other higher offers ranging from Rs. 7.891 per Cmt, it suspended the work order and after examining all the papers took the final decision of revocation since it came to the conclusion that a fraud was practised upon the M.S.E.B. by the plaintiff in collusion with the members of supervisory and other staff. The plaintiff's managing partner had seen the Chairman M.S.E.B. at Bombay on 27-7-1976 when the final decision was communicated followed by a letter dated 28-7-1976 by defendant No. 2 which the plaintiff avoided to receive. Enquiry revealed that in all 18 tenders were received out of which 9 were of higher rates ranging between Rs. 7.68 and Rs. 5.82. Only unconditional tenders were eligible for consideration and no official had authority to waive the eligibility. The plaintiff was allowed to withdraw the condition surreptitiously after two days of the opening of the tenders without letting others tender know about the same or without giving similar opportunity to them. The staff of M.S.E.B. practised discrimination illegally and mala fide. The agreement, which put the M.S.E.B. to heavy loss, was void being fraudulently obtained and opposed to public policy. The suit was not maintainable also because (i) there was no completed contract between the parties as no written agreement as contemplated under the work order was executed, (ii) it was barred under Order 2, Rule 2 C.P.C. and/or Order 9, Rule 9 C.P.C. in view of Civil Suit No. 344 of 1976 and its dismissal in default; (iii) damages were not proved.
4. At the trial oral as well as documentary evidence was led. The plaintiff examined in all 4 witnesses including its Managing Partner Hemant Shah (P.W. 5). The defendants examined two witness-Parthasarthi (D.W. 1) Senior Power Station Superintendent and Devidas Deshpande (D.W. 2) Power Station Superintendent. The trial Court held that (i) there existed a concluded agreement between the parties, (ii) causes of action in the two suits were different and hence neither Order 2, Rule 2 C.P.C. nor Order 9, Rule 9 C.P.C. were attracted, (iii) the defendants had failed to prove that the suit agreement was void having been vitiated by fraud and or being against public policy, (iv) the defendants were guilty of breach of contract and hence they were liable to pay damages for breach on the basis of the difference between the contracted rate of Rs. .4.95 per CMT and Rs. 15/- per CMT (minus Rs. 75000/- as expenses incurred). Consequently decree for Rs. 5,78,250/- (as against the claim for Rs. 8,02,800/-) came to be passed.
5. Aggrieved by the part decree passed against them the defendants have preferred First Appeal No. 170 of 1983 and aggrieved by the rejection of part of claim for damages, the plaintiff has preferred First Appeal No. 172 of 1983.
6. Crucial point involved in this litigation pertains to the ground of fraud put forth in defence by the defendants. The substance of the pleadings in the written statement is that after opening of the tenders, the plaintiff fraudulently and in collusion with the staff of the M.S.E.B. at Paras, managed to get its ineligible and low bid tender approved resulting in a loss of Rs. 213120/- to the M.S.E.B. Plaintiff's tender was conditional and hence as per tender notice it could not be considered. Out of 17 tenders had quoted rates higher than the plaintiff ranging between Rs. 7.91 and Rs. 5.8 per CMT. The plaintiff had filed various tenders in different names and intentionally suppressed this fact. The officials of the M.S.E.B. clandestinely allowed the plaintiff to convert the conditional tender into non-conditional tender at the scrutiny stage without either informing the other tenders about this conversion or giving them similar opportunity. Thus, according to the defendants, the agreement was fraudulent, against public interest and policy, unconscionable and hence void.
7. Vigilance Report given by the Shri Ghorpade, Dy. Chief Security and Vigilance Officer dated 8-7-1976 (Ex. 98), Office note of the Director of Management Accounts dated 3-8-1978 (Ex. 99), report of the Enquiry Officer in an inquiry against Shri Chatterjee then Senior Power superintendent dated 7-11-1980 (Ex. 100), show cause notice issued to Shri Chatterjee dated 12-11-1980 (Ex. 101) and the final order issued by the Chairman, dated 29-11-1980 (Ex. 102) all indicate that on the basis of report Ex. 98 and office note Ex. 99 in the matter of acceptance of plaintiff's tender departmental enquiry was made against Shri Chatterjee and Enquiry Officer found Shri Chatterjee guilty, of favouritism in awarding the contract to the plaintiff. The Chairman of M.S.E.B. however, did not take any disciplinary action against him on the ground that Shri Chatterjee had retired on the very date of final order. D.W. 1 Parthasarthi and D.W. 2 Devidas Deshpande also gave evidence in support of the fraudulent nature of the whole transaction.
From the evidence and pleadings the following undisputed positions emerge :
(a) The plaintiff had old association with the staff of the M.S.E.B. at Paras Thermal Power Station due to previous similar contract;
(b) The invitation for tenders clearly mentioned that conditional tender would not be considered;
(c) The tender submitted by the plaintiff was conditional;
(d) The plaintiff was allowed to withdraw the conditions few days after opening of the tenders;
(e) Other tenderers were neither informed about this nor were given opportunity of withdrawing the conditions;
(f) Some of the higher tenders were by experienced person;
(g) The agreement was of sale of wet coal-ash, where experience was not so material;
(h) There was no particular urgency;
(i) There were in all 18 tenders out of whom 9 were of much higher rate (ranging from Rs. 7.91 to Rs. 5.82 per CMT) than that of the plaintiff and some of them were even unconditional;
(j) The difference between the higher tenders and the tender submitted by the plaintiff involved Lakhs of rupees;
(k) Bank guarantee was insisted upon only in the case of highest tender M/s. Friends Club and that too for the whole sum.
8. Now, ex facie the transaction was abnormal, highly beneficial to the plaintiff and detrimental to the M.S.E.B. It was finalized by Shri Chatterjee, the then Senior Power Superintendent at Paras. Conditional tenders were ineligible for consideration, yet plaintiff's conditional tender was only not rejected but was allowed to be converted clandestinely into non-conditional subsequent to opening of all tenders. No notice of such conversion was given to other tenders. The plaintiff's tender was nearly at 1/2 rate quoted by the highest tender M/s. Friends Club and yet it was accepted, on the ground that the plaintiff had previous experience. The nature of the transaction was such that previous experience was not so material. Some of the other higher tenders had previous transactions with the defendants and hence were experienced and yet their tenders were not accepted. There was no justification for insisting upon the bank guarantee and that too for the full amount only in case of the highest tenders. This could not be bona fide. It is clear that attempt was made to create evidence for justifying rejection. Non-acceptance of higher tenders and acceptance of the plaintiff's tender was to put the M.S.E.B. to heavy loss. After realizing that coal ash could be sold at higher rates, Shri Chatterjee should have at least invited fresh tenders. He did not do so and went out of the way to finalize the agreement with the plaintiff. All this indicated clearly that Shri Chatterjee and some members of the staff of M.S.E.B. deliberately created circumstances to oust the higher tenders with a view to clear the ground to accept the plaintiff's low tender. Plaintiff was the direct beneficiary of this agreement. From all the above circumstances, the only possible inference to be drawn is that the plaintiff in collusion with Shri Chatterjee and other members of the staff practised fraud upon the M.S.E.B. in getting plaintiff's tender accepted and in entering into agreement on that basis.
9. By the very nature of things, fraud is secret in its origin. Means adopted for its success and fradulent motive or design cannot always be proved to the very hilt and they have to be inferred from the circumstances. Each circumstance by itself may not mean much, but taking all of them together, they may reveal a fradulent or dishonest plan. Undoubtedly, the heavy burden of proving fraud lies upon the person alleging it. Suspicious and surmises are poor substitutes for the proof of fraud, but it does not mean that every puzzling artifice or contrivance resorted to by parties to the fraud must necessarily be completely exposed. It this was so, many a clever and dexterous knave would escape from the consequences of fraud. In this context, we may notice the following observations of the Supreme Court in the case of Maharashtra State Board of Secondary and Higher Secondary Education v. K.S. Gandhi, :
"In grave cases like forgery, fraud, conspiracy, misappropriation, etc. seldom direct evidence would be available. Only the circumstantial evidence would furnish the proof. In our considered view inference from the evidence and circumstances must be carefully distinguished from conjectures or speculation. The mind is prone to take pleasure to adapt circumstances to one another and even in straining them a little to force them to form parts of one connected whole. There must be evidence direct or circumstantial to deduce necessary inferences in proof of the facts in issue. There can be no inferences unless there are objective facts, direct or circumstantial from which to inter the other fact which it is sought to establish. In some cases the other facts can be inferred, as much as is practical, as if they had been actually observed. In other case the inference do not go beyond reasonable probability. If there are no positive proved facts, oral, documentary or circumstantial from which the inferences can be made the method of inference fails and what is felt is mere speculation or conjecture. Therefore, when an inference of proof that a fact in dispute has been held established there must be some material facts or circumstances on record from which such an inference could be drawn. The standard of proof is not proof beyond reasonable doubt "but" the preponderance of probabilities tending to draw an inference that the fact must be more probable. Standard of proof cannot be put in a strait-jacket formula. No mathematical formula could be laid on degree of proof. The probative value could be gauged from facts and circumstances in a given case. The standard of proof is the same both in civil and domestic enquires."
10. The trial Court has rejected the story of fraud firstly on the ground that the defendants pleadings on the point are ambiguous, without making it clear "in what manner the plaintiff effected the fraud and got his tender accepted; as to with whom out of the subordinate staff, he made a collusion and what sort of collusion; and how that collusion resulted in deceiving the authority accepting the tenders". We find it extremely difficult to sustain the above view which seems to have vitiated the whole approach of the trial Court to the question of fraud. This is not a case where in the pleading mere word 'fraud' is used without stating anything more. Written statement clearly mentions that the plaintiff, in collusion with the supervisory as well as subordinate staff, managed to get his tender approved, thought it was conditional, contrary to the tender notice and was of a very low bid. The details of the higher tenders are also given. The defendants had disclosed the defence about fraud even in the written statement filed in the earlier suit. The plaintiff was thus not taken by any surprise. The plaintiff never applied for particulars as required under Order 6, Rule 5 C.P.C.. Therefore, this is also not a case where particulars were demanded and not supplied. The plaintiff did not object to the defendants leading evidence in support of plea of fraud on the ground of absence of material particulars in the pleadings. The function of the particulars to be given as required under Order 6, Rule 4 C.P.C. is to present reasonably correct picture of the case which the opposite party has to meet and thus to prevent prejudice due to 'surprise' at the trial. As the Supreme Court has observed in the case of Bhagwati Prasad v. Chandramaul, .
"What the Court has to consider in dealing with such an objections is: did the parties know that the matter in question was involved in the trial, and did they lead evidence about it? If it appears that the parties did not know that the matter was in issue a the trial and one of them has had no opportunity to lead evidence in respect of it, that undoubtedly would be a different matter."
Law does not and cannot prescribed the exact degree and nature of particulars to be supplied. All depends upon facts and circumstances of each case. This is not a case where fraud was based upon direct evidence. Several basic circumstances are pleaded. There is a reference to the collusion with the officials and subordinate staff and acceptance of invalid tender of a lower bid. Only because name of Shri Chatterjee and other members of staff and other details were not mentioned in the pleadings in cannot be said that pleadings were vague. Moreover, the trial Court has proceeded on the wrong assumption that allegations of fraud are made only against the members of subordinate staff and not officials.
11. Trial Court has held that Ex. 98 to Ex. 102 were not duly proved. We find that objection to exhibit the documents was taken only in the case of Ex. 101 show cause notice dated 12-11-1980 and not in case of other documents. Under the circumstances, there was no justification to hold so. In this connection two decisions may be noted: (1) Bhagat Ram v. Khetu Ram and another, A.I.R. 1929 Privy Council 110 wherein it is held that where no objection is taken to the admissibility of documents, it was unnecessary to consider whether the document was admissible under the Evidence Act or not. (2) P.C. Purushottama Reddier v. Perural, , wherein objection to the admissibility of the police reports on the ground of their maker not having been examined was overruled on the ground that those reports were exhibited without any objection.
12. It is true that Shri Chatterjee was neither suspended during enquiry nor was punished as a result thereof. He was found guilty by the Enquiry Officer but was let off because he had retired on completion of enquiry. That reason may not be justified but that circumstance is not conclusive of the matter in the face of other weighty circumstances leading to inference of fraud. To hold as the trial Court has done that plaintiff cannot be punished for the wrong decision of Shri Chatterjee in the absence of direct evidence of part played by the plaintiff is to take a too unrealistic view of facts of life. In such cases the basic question to ask oneself is who is really benefited by the transaction. There is only one answer to this question. There can never be direct and detailed evidence of the collusion of the staff and the part played by each member. This is a matter of inference to be drawn from proved circumstances, as noticed earlier. In the whole background the fact that even an auditor of the tenders had put fact that even an auditor of the tenders had put the plaintiff at Serial No. 2 makes no difference.
13. The trial Court's view that there was nothing wrong in permitting the plaintiff to withdraw the condition subsequently, cannot be supported. D.W. 2 Devidas Deshpande is correct when he says that this was impermissible and was done clandestinely with a view to favour the plaintiff. The trial Court has further observed that other tenders were also free to follow that course. We are unable to see the logic behind this reasoning. Tender notice was clear. The tenders could not know that this non relaxable condition about conditional tender being not eligible could be relaxed by the Senior Power Station Superintendent. In this background the condition could not be allowed to be withdrawn without intimating all other competitors and also affording them similar opportunity. In this context it cannot be forgotten that the MSEB is an instrumentality of the State under Article 12 of the Constitution. It performs public duties and deals with public money. It or its agent cannot practice discrimination between the tenders. Such an action would be violative of Article 14 and in appropriate case could be a good ground for cancellation of agreement.
14. We have been called upon the draw adverse inference against the MSEB for not examining Shri Chatterjee as a witness. We see no justification to do so. It would have been an imprudent decision on the part of the MSEB to examine him as its witness under the circumstances and specially when he had retired.
15. It is pertinent to notice that the trial Court has not even made a whisper about the circumstances that Shri Chatterjee insisted upon production of Bank guarantee and that too for the whole amount only in the case of the highest tenderer M/s. Friends Club. This was clearly with a sole view to prepare a background to keep it out of the race and to justify the agreement in favour of a low bid tenderer.
16. This takes us to the question as to whether the contract was concluded even before the formal document was executed. This will depend upon the totality of the circumstances. The trial Court has rightly held under the circumstances that there was concluded contract between the parties.
17. This takes us to the question of application of bar of Order 2, Rule 2 C.P.C. to the claim for damages for breach of contract in this suit in view of Civil Suit No. 344 of 1976 instituted by the plaintiff for permanent injunction restraining the defendants from cancelling the contract. The cause of action for the earlier suit was the communication dated 30-5-1976 from the defendant No. 2 for suspending the work until final decision in the matter is taken. In the present suit damages are claimed for terminating the contract, on the basis of communication dated 28-7-1976. Both the suits undoubtedly arise out of the same transaction, but there can arise more than one causes of action out of the same transaction. Transaction and cause of action need not be always identical. The law on the point is well settled. One and the same cause of action cannot be allowed to be split up. What is 'cause of action'? The phrase is not defined anywhere. But its meaning has been crystalised by judicial pronouncements made from time to time. The leading case on the point, Mohammad Khalil Khan and others v. Mahbub Ali Mian and others , summarises the principles thus:
(1) The correct test in cases falling under Order 2, Rule 2, is 'whether the claim in the new suit is in fact founded upon a cause of action distinct from that which was the foundation for the former suit'. Moonshee Buzloor Rusheem v. Shumsunnisa Begum, 1867(11) M.I.A. 551: 2 Sar. 259 P.C. (supra).
(2) The cause of action means every fact which will be necessary for the plaintiff to prove if traversed in order to support his right to the judgment. Read v. Brown, 1889(22) Q.B.D. 128: 58 L.J.Q. 120 (supra).
(3) If the evidence to support the two claims is different then the causes of action are also different Brusden v. Hymphrey, 1884(14) Q.B.D. 14: 53 L.J.1.B. 476 (supra).
(4) The cause of action in the two suits may be considered to be the same if in substance they are identical Brussden v. Humphrey, 1884(14) Q.B. 141: 53 L.J.Q.B. 476 (supra).
(5) The cause of action has no relation whatever to the defence that may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff. It refers...to the media upon which the plaintiff asks the Court to arrive at a conclusion in his favour. Muss. Chandkour v. Partab Singh, 15 I.A. 156 : 16 Cal. 98 P.C. (supra). This observation was made by Lord Watson in a case under section 43 of the Act of 1882 (corresponding to Order 2, Rule 2), where plaintiff made various claims in the same suit."
Having regard to the above principles, it cannot be said that both suits were based on identical causes of action. In the former suit cause of action was the threat to cancel the agreement and in the later the cause of action was the actual cancellation. Evidence in support of the two was also different.
18. In this connection our attention was also invited on behalf of the defendants to sections 21 and 24 of the Specific Relief Act. The submission is that in a suit for specific performance of contract the plaintiff may also claim compensation for its breach either in addition to or in substitution of such a performance and that if the plaintiff has not claimed any such compensation, the Court shall at any stage of the proceedings allows the plaintiff to amend the plaint for including such a claim. Section 24 creates a bar against maintainability of a suit for compensation for breach after dismissal of a suit for specific performance. We do not think these two provisions are attracted here since the earlier suit was not for specific performance of the contract and the two causes of action are different.
19. Several other authorities on Order 2, Rule 2 C.P.C. are brought to our notice by both parties, but it is unnecessary to refer to them. Bar under Order 9, Rule 9 C.P.C. against maintainability of the suit in view of the dismissal of the earlier suit would also not operate since essential feature to attract the above provision is the same-identify of causes of action.
20. In view of our finding that the agreement was vitiated by fraud and there was justification for its cancellation, the suit must fail and, therefore, it is unnecessary to dwell at length upon the question of damages. The basic for conclusion of damages is generally the difference between the agreed and the market price prevailing on the date of breach of the contract. The breach is between 30-5-1976 and 28-7-1976. The plaintiff has adduced no evidence of rates prevailing during the period. The rate at which the tender of M/s. Ambika Sales Corporation was accepted in November 1976 or the rate at which M/s. Ambika Sales Corporation sold the goods could provide no basis for ascertaining quantum of compensation. Under the circumstances, the plaintiff has failed to prove the quantum of damages.
21. In the result, First Appeal No. 170 of 1983 filed by the MSEB is allowed and the suit is dismissed. As a necessary consequence First Appeal No. 172 of 1983 filed by the plaintiff must fail and is dismissed. The plaintiff-respondent to bear the cost of the suit as well as these appeals.