Karnataka High Court
Texmaco Limited., vs Raitara Sahakari Noolina Girani Ltd., on 3 February, 2014
Bench: N.Kumar, C.R.Kumaraswamy
:1:
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
Dated this the 3rd day of February 2014
Present
THE HON'BLE MR.JUSTICE N.KUMAR
and
THE HON'BLE MR.JUSTICE C.R.KUMARASWAMY
Regular First Appeal No.3068/2011
Between:
TEXMACO LIMITED
A Company registered under
The Companies Act, 1956,
Having its Registered Office
At Belghoria, Calcutta 700056
and also carrying on business
at Birla Building, 9/1,
R.N.Mukherjee Road,
Calcutta 700001,
Through authorised Representative. ...Appellant
(By Sri. Sreevatsa, Sr. Counsel for Khaitan Co., Advocate)
And:
RAITARA SAHAKARI NOOLINA
GIRANI LTD.,
Taluk Ranibennur, Dist: Darwad,
Hanumanamatti-581135
Karnataka,
Represented by its Director. ...Respondent
(By Sri. S.S.Nagananda, Sr. Counsel, for K.L.Patil, Adv.,)
:2:
This appeal is filed under Order XLI Rule 1 read
with Section 96 of the Civil Procedure Code, 1908
against the judgment and decree dated 03.03.2011
passed in O.S.No.28/1999 on the file of the Additional
Senior Civil Judge at Ranebennur, dismissing the suit
filed for recovery of money.
This appeal coming on for final hearing this day,
N.Kumar, J, delivered the following:
JUDGMENT
This is a plaintiff's first appeal against the judgment and decree of the Trial Court dismissing the suit of the plaintiff for recovery of the money towards goods supplied.
2. For the sake of convenience, the parties are referred to as they are referred to in the original suit.
3. The plaintiff is a manufacturer and supplier of diverse types of textile spinning machinery, fire tube and water tube boilers, railway wagons and sugar mill. The defendant is a Co-operative Society carrying on the business of manufacture of yarn - a spinning mill. The :3: defendant being desirous of purchasing certain textile machinery invited tenders. In response thereto, the plaintiff submitted its offer in the form of bid for supply, delivery, erection and commissioning of 52 high speed model Texmaco-Toyoda RY-5 Ring Frames of 480 spindles and 8 Texmaco-Howa Model DFK-20D draw frames complete with motors, starters and control panels confirming to the conditions of specification contained in the defendant's invitation to tender. The plaintiff's tender was accepted. A contract in writing between the parties came to be executed on 03.12.1990. The consideration agreed upon is Rs.4,16,17,312/-. The contract was entered into at the Karnataka State Co- operative Spinning Mills Federation Limited at Bangalore. Accordingly, plaintiff supplied, delivered, erected and commissioned the machinery and performed all its obligations under the said contract. A certificate of comission was issued by the defendant on :4: or about 7th November 1994. The plaintiff received from the defendant the contract price agreed upon.
4. It was an express term of the said contract that the prices payable to the plaintiff shall be subject to adjustments during performance of the contract to reflect changes in the cost of labour and material components in accordance with the formula contained therein. Such price adjustment formula shall be invoked either by the plaintiff or the defendant but the total adjustment shall be subject to ceiling of plus or minus 15% of the contract price. It was an implied term of the contract that in the event of price adjustment, bills will be raised by either parties based on the formula described in the contract and subject to the conditions contained therein. In the event the defendant raises bills of price adjustment such bills will be paid by the plaintiff to the defendant at the defendant's office at Ranebennur, District Dharwad. In the event the plaintiff :5: raises bills for price adjustment such bills shall be payable by the defendant to the plaintiff at the plaintiff's office at Calcutta. During the execution of the contract unprecedented cost increase took place which amounted to more than 20% of the contract price. In terms of clause regarding price adjustment, the ceiling limit of 15% was fixed. Accordingly, the plaintiff submitted a bill for Rs.55,50,210/- on 18.10.1992. The said bill was accepted by the defendant without raising any objection thereto and acknowledged the same by a letter dated 11.01.1993. The said bill on price escalation was based on the RBI price index as per the formula incorporated in the contract. Copies of the R.B.I. Price Index Bulletin for the relevant period were also supplied to the defendant pursuant to its request contained in the defendant's aforesaid letter dated 11.01.1993. The case of the plaintiff is on or about 10.01.1994, the defendant by a letter admitted his liability to pay the plaintiff's price escalation dues and as a condition :6: therefor requested the plaintiff to furnish a bank guarantee in respect of ring frames and draw frames to the tune of Rs.47,00,000/- valid upto 31.08.1994. the plaintiff furnished bank guarantee. By the aforesaid letter, the defendant impliedly promised to pay the escalation dues raised by the plaintiff and admitted the jural relationship between the plaintiff and the defendant. However, in spite of repeated demands and request, the defendant did not pay the escalation dues amount to Rs.55,50,120/-. On or about 08.11.1995, the plaintiff raised a debit note on account of interest on the said escalation price amounting to Rs.37,27,118/-. The said debit note was also accepted by the defendant without any murmur. Thus, the defendant admitted the liability to pay an aggregate amount of Rs.92,77,238/-. Plaintiff is also entitled to claim interest at 18% per annum from 01.11.1995 till payment. Therefore, the plaintiff filed the suit for recovery of the said amount. :7:
5. Initially, the suit was filed in the High Court of Calcutta. After service of summons, the defendant entered appearance and contested the claim. They also contended that the Calcutta High Court has no territorial jurisdiction to entertain the suit as no part of the cause of action has arisen there and, in the contract, the parties have specifically agreed that the Courts at Ranebennur alone will have jurisdiction. Accordingly, the Calcutta High Court passed an order on 03.03.1999 ordering return of plaint to be represented before the Court at Ranebennur. The Court gave time to the plaintiff to present plaint on or before 31.03.1999. Accordingly, the plaint was presented on 16.03.1999.
6. Thereafter the defendant filed a written statement contesting the claim. It was a blanket denial. Though the defendant agreed that a contract was entered into between the parties, its grievance was in :8: terms of the contract the plaintiff did not supply the goods. On account of delay in supplying the goods, defendant incurred loss. They denied the claim of escalation putforth by the defendant. They contended that they have not agreed to the escalation of the price and in fact, there is no escalation at all. They also contended that the suit is barred by law of limitation. Apart from that, they have taken several other legal pleas.
7. On the aforesaid pleadings, the Trial Court framed the following issues:
"1. Whether the plaintiff proves, Om prakash Junjunvala, the Senior Vice President (Commercial) of the plaintiff company has been authorised to sign and verify the plaint as contended?
2. Does the plaintiff further prove, their tender for supply, delivery, erection and commissioning of 52 high speed model :9: taximo - Toyoda RY-5 Ring Frames of 480 spindles and 8 Teximaco - Howa Model DFK 20D draw frames complete with motors, starters and control pannels was accepted by the defendant for a total consideration of Rs.4,16,17,312/- and in that regard a written agreement was entered into between the plaintiff and defendant as contended?
3. Whether the plaintiff further proves, pursuant to the said terms of the contract it duly supplied, delivered, erected and commissioned the said goods and performed its obligation under the contract?
4. Whether the plff proves, as per the terms of contract, if there is any price escalation of machinery the defendant should pay the said escalation price in the office of plaintiff?
5. Whether the plff proves, during the execution of the contract un-
: 10 :
precedented cost increase took place
and the defts failed to pay the
escallation dues amounting to
Rs.55,50,120?
6. Whether the plff further proves, the deft agreed to pay interest on the said escalation price amounting to rs.37,27,118/0 and defendant executed said debit note as contended in para 12 of the plaint?
7. Whether plff is entitled to claim Rs.92,77,238? With interest at the rate of 18% p.a. from 10-11-1995 till realisation as prayed?
8. Whether deft proves, suit of the plff is barred by limitation?
9. Whether the deft further proves, because of non-supply of machinery within the July 1992 the deft sustained loss and as such deft is not liable to pay either escalation or interest thereon as : 11 : contended in para 23 of the written statement?
10. What decree or Order?
Addl. Issue No: L.J £ÀA: 2£ÀÄß CAzÀgÉ zÁªÉAiÀÄ£ÀÄß ¸À°è¸® À Ä PÁ® «¼ÀA§ DVgÀÄvÀÛzAÉ iÉÄÃ, D «¼ÀA§ªÀ£ÀÄß ªÀÄ£Áß ªÀiÁqÀ®Ä ¸ÁPÀµÀÄÖ PÁgÀtUÀ¼ÀÄ EzÉ JAzÀÄ ªÁ¢ °«ÄmɱÀ£ï PÁAiÉÄÝ 5 gÀ ¥ÀæPÁgÀ ¹zÀÞ ªÀiÁqÀÄvÁÛgÉAiÉÄ? "
The plaintiff, in order to substantiate his claim, examined three witnesses as P.Ws.1 to 3 and produced 46 documents, which are marked as Exs.P.1 to P.46. On behalf of the defendant, three witnesses were examined as D.Ws.1 to 3 and they have also produced 27 documents, which are marked as Exs.D.1 to D.27.
8. The Trial Court, on appreciation of the aforesaid oral and documentary evidence on record, held that the suit is barred by law of limitation. It also held the plaintiff has failed to prove that goods are : 12 : supplied in terms of the contract within the stipulated period. Further, it held that the plaintiff has failed to establish the escalation of the price for the goods supplied. It held that plaint is signed by a person who is not duly authorised. The cause shown under Section 14 of the Limitation Act did not constitute a sufficient cause much less the act of prosecuting the matter before the High Court of Calcutta is neither bona fide nor in good faith. It also held that the documents on which reliance was placed, in particular, Exs.P.45 and P.46 are not proved, they are not the originals; the originals of the documents is not properly accounted for; even otherwise, the said documents and acknowledgement of debit note do not save the limitation in order to prove the case of the plaintiff. Therefore, it dismissed the suit. Aggrieved by the said judgment and decree, the plaintiff has preferred this appeal.
: 13 :
9. Sri. Sreevatsa, learned Senior Counsel appearing for the appellant/plaintiff contended that the Calcutta High Court passed an order permitting the plaintiff to re-present the suit before the Court at Ranebennur and granted time upto 31.03.1999, and when the plaintiff presented the same on 16.03.1999 within the period granted, the suit was in time and the Trial Court committed a serious error in holding it as barred by time. Secondly, he contended that the contract is not disputed; series of correspondence produced and marked in this case show that there was an escalation price of 20%; in terms of the contract, plaintiff was entitled to only 15% and accordingly, the amount was calculated on the basis of RBI indices and the claim was putforth on 18.10.1992; having acknowledged the same, the defendant did not dispute the same at any point of time and, in fact, parent Co- operative Society which had arranged for the World Bank finance, on coming to know that the defendant : 14 : has not paid the escalation price called upon the defendant to pay price lest the World Bank would view it seriously and stop financing to the Indian Societies coupled with the fact that there is a clear acknowledgement of the reciept of the letter dated 18.10.1992 in Ex.P.45 whereby the defendant called upon the plaintiff to produce RBI indices as to whether the amount claimed is proper or not. Ex.P.46 is the letter written by the defendant requesting the plaintiff to furnish bank guarantee lest the escalation amount will not be paid. All these documents when read as a whole coupled with the evidence on record clearly establishes that the defendant admitted the liability, agreed to pay, but did not pay and, therefore, the Trial Court committed a serious error in holding that the claim is not established. Therefore, he contends that the judgment and decree of the Trial Court requires to be set aside.
: 15 :
10. Per contra, Shri S.S.Naganand, learned Senior counsel appearing for the defendant contended, the discussion of the Trial Court in respect of the scope of Section 14 of the Limitation Act is necessitated because the plaintiff filed the application under Section 14 of the Limitation Act, which has no application to this case. Therefore, the judgment of the trial Court cannot be found fault with. The defendant contended that the suit is barred by limitation. The suit was filed on 16.03.1999, the contract was entered into on 03.12.1990, the machinery had to be supplied from April 1992 and it should end by July 1992. The plaintiff is not entitled to any escalation for the supplies made subsequent to July 1992. Therefore, the claim was made on 18.10.1992 the day the starting point of cause of action for the suit to claim excess amount arises. The suit having been filed three years beyond the time, it is barred by Section 3 of the Limitation Act. Even if Ex.P.45, where the defendant is said to have called : 16 : upon the plaintiff to furnish the RBI indices is taken into consideration, even from that date, the suit is beyond three years. Insofar as Ex.P.46 is concerned, there is no acknowledgment of liability. Therefore, seen from any angle, the suit filed by the plaintiff is clearly barred by limitation and that is precisely what the Trial Judge has held even though the way the finding is recorded may not be satisfactory. Insofar as the claim is concerned none of the witnesses examined on behalf of the plaintiff have personal knowledge of transaction; how the claim is arrived at by applying the formula which is incorporated is not spoken to by any of the witnesses. Therefore, before the decree could be passed by the Court, the claim should be established. There is no evidence much less satisfactory evidence on record to substantiate the claim. That is precisely what the trial Judge has held and he is justified in dismissing the suit of the plaintiff. Therefore, he submits that no case for interference is made out.
: 17 :
11. In the light of the aforesaid facts and rival contentions, the points that arise for our consideration in this appeal are as under:
(i) Whether the suit of the plaintiff is barred by law of limitation?
(ii) Whether the plaintiff has proved his claim for escalation price?
12. The undisputed facts are the plaintiff and defendant entered into an agreement for supply, delivery, erection and commissioning of the machinery on 03.12.1990. The supply was to commence from April 1992 and end by the end of July 1992. Admittedly, supplies are made. However, even after the deadline fixed, some machineries are supplied. The supplied machinery had been erected and delivered to defendant by or about 7th November 1994. P.W.1 in his evidence has categorically admitted that money due under the contract had been paid and last such payment was on : 18 : 24.06.1993. In terms of clause in the agreement regarding escalation, the escalated price also has to be paid as and when there is escalation in the price of goods that are supplied. That is why, on 18.10.1992, a bill was prepared for the goods supplied up to the end of July 1992 claiming the excess amount. That is the starting point of limitation for recovery of this excess amount. It is the specific case of the defendant that it did not agree to pay any such escalation in the prices of goods supplied. Though Ex.P.45 a xerox copy of the original, which is marked in the case subject to objection, is taken as a letter written by the defendant to the plaintiff, all that it contains is, the defendant acknowledged the letter dated 18.10.1992 and as the plaintiff had submitted the bill based on RBI price indices as per the formula given in the contract, it wanted a photostat copy of the RBI price indices for the respective periods. Therefore, this letter would go to show that the demand made by the plaintiff was on : 19 : 18.10.1992. As it was based on RBI price indices they wanted to get a photostat copy of RBI price indices to find out whether the claim made is correct or not. It is on 11.01.1993. Even if that is taken as starting point of limitation or the cause of action, the suit ought to have been filed within three years, which admittedly is not done. Now, reliance is placed on Ex.P.46 another disputed document which refers to the bank guarantees which are issued by the plaintiff to the defendant in lieu of the defendant paying 10% of the value of the total supplies even before the guarantee period. In the last para it has been stated that the defendants requested the plaintiff to furnish bank guarantee for Rs.47 lakhs valid upto 31.08.1994. It was made clear that if the bank guarantee is not furnished, the escalation price will not be paid. This phrase is sought to be relied upon as an acknowledgement. It is difficult to accept the said contention. In fact, in the plaint, it was stated that the defendant called upon the plaint to issue bank : 20 : guarantee and only on such issue of bank guarantee they would make payment of such escalation price. The material on record discloses that payment of escalation price is made, execution of bank guarantee as incorporated in the agreement entered into between the parties in lieu of 10% of value of goods supplied even before 31.08.1994. Therefore, the escalation in the price, payment of the same and the bank guarantee are nothing to do with each other. In that background, the request made by the defendant to furnish bank guarantee lest they would not pay the escalation amount, cannot be considered as an acknowledgement of the liability to pay escalation price so as to save the limitation. Therefore, it is clear from the aforesaid undisputed facts that the suit filed by the plaintiff on 16.03.1999 is clearly barred by law of limitation as suit for supply of goods has to be filed within three years from the date of delivery of goods in terms of the contract. The plaintiff is entitled to escalation in price : 21 : for the goods supplied only upto July 1992. Therefore, 18.10.1992 is the demand made and that is the starting point of limitation. In that view of the matter, the suit is barred by limitation.
13. It was argued that it is Article 18 which is applicable which provides that a suit for the price of work done by the plaintiff for the defendant at his request, where no time has been fixed for payment, has to be three years from the date the work is done. In the instant case, the specific case of the plaintiff is they supplied machineries between April 1992 and July 1992, there was price escalation, in terms of the contract they are entitled to escalation price to the extent of 15%. The suit is filed for the price of good sold and not for work done. In that view of the matter, the plaintiff has failed to prove that the suit is within the period of limitation. The findings of the Trial Court on this aspect cannot be found fault with.
: 22 :
14. Point No.2 Insofar as the claim for Rs.55,50,120/- is concerned, the said amount is arrived at as per the formula which is incorporated in the agreement. It is stated that basis for arriving at the said amount is RBI price indices. Under the terms of the contract, the parties have agreed for price escalation/adjustment. Both, the plaintiff and defendant, are entitled to the said amount. If there is escalation the plaintiff is entitled and, if there is reduction, defendant is entitled, but the maximum amount to which they are entitled to is 15% of the total price of the contract. Three witnesses have been examined on behalf of the plaintiff. All of them have pleaded ignorance about the price which was prevailing on the date of agreement, the price prevailing on the date the goods were supplied. They are not the persons who have made calculation in terms of the formula. They have pleaded ignorance about the figures. Therefore, merely because there is an agreement for : 23 : price escalation and it was calculated on the basis of price indices published by the RBI, by itself is not sufficient to establish the claim of the plaintiff. Plaintiff, in order to succeed in the suit, should place before the Court the price which was agreed upon on the date of the agreement, the date on which the goods were supplied, the prevailing rate on the date the goods were supplied and that because of that escalation the plaintiff is entitled to the difference of the amount. Mere production of the RBI price indices and calculating it on the same basis would not be sufficient to substantiate the claim of the plaintiff. In fact, that also has not been done. Therefore, the Trial Court was of the view that the plaintiff has not established his claim and accordingly, on that ground also it dismissed the suit of the plaintiff.
15. However, while dismissing the suit of the plaintiff the Trial Court has imposed costs of Rs.10,000/-. To impose costs of Rs.10,000/-, no : 24 : reasons are given. On the contrary, when we look at the entire claim of the plaintiff, it is not based on a fabricated document or based on a false claim. May be the suit is not properly framed, while conducting the case they have not applied their mind. It is quite understandable because a Calcutta company is called upon to prove its case in a Court in Ranebennur, meeting the defence taken in written statement filed in Kannada. Moreover the original documents were lost. When the xerox copies of the said documents were sought to be produced, the admissibility of the same was kept open to be decided at the time of writing the judgment. The difficulty on the part of the plaintiff is understandable. They were adducing evidence nearly after two decades after the institution of the suit. Under these circumstances, we do not see any justification for the Trial Court imposing costs while dismissing the suit. Only to that extent the plaintiff succeeds. Hence, we pass the following:
: 25 :
ORDER
(i) Appeal is partly allowed.
(ii) Dismissal of the suit both on merits and on the ground of limitation is hereby affirmed.
(iii) The order of the trial Court to the extent of imposing costs is set aside.
(iv) Parties to bear their own costs.
SD/-
JUDGE
SD/-
JUDGE
Kms