Delhi District Court
Shaw Wallace Gelatines Limited vs Union Of India on 26 July, 2010
IN THE COURT OF SH. AJAY GOEL LD. SCJ CUM RC(CENTRAL)
DELHI
S834/06/81
In the Matter of:
Shaw Wallace Gelatines Limited
4 Bankshall Street,
Calcutta.
Now
M/s Narmada Gelatines Limited
Caravs, Room No. 27,
15, Civil Lines, Jabalpur. ...........Plaintiff
VERSUS
Union of India
through
(i)The Director General
of Supplies and Disposals
Jeewan Tara Buildings
Sansad Marg, New Delhi
(ii)The Secretary
Ministry of Supply
Government of India
Nirwan Bhavan, New Delhi. ...........Defendants.
Date of Institution: 30.5.1981
Date of Assignment to this court: 06.4.2009
Date of Arguments: 26.7.10
Date of Decision: 26.7.10
Suit No.834/06/81 Page No.1/20
JUDGMENT
1. This is a suit for declaration, recovery of money and for permanent injunction filed by the plaintiff and against the defendant. It was submitted that plaintiff is a public limited company incorporated under the provisions of the Indian Companies Act having its registered office at 4 Bankshall street, Calcutta700001. As stated Sh. A.K. Kapur the Factory Manager is a principal officer of the plaintiff company and being conversant with the facts is competent to act on behalf of the plaintiff and sign and institute and prosecute proceedings. As stated plaintiff was carrying on its business under the name of Shaw Leiner Limited and the name of the plaintiff was changed to " Shaw Wallace Gelatine Limite"
w.e.f. 26.9.79 and constitution of the plaintiff, assets, rights and obligation were not changed. As stated the plaintiff is engaged in the business of manufacturing and selling " Technical Gelatine" which is a glutinous material obtained from animal bones, hides, skins, tissues, sinews and other collagenous substances and thereafter processed Suit No.834/06/81 Page No.2/20 scientifically. As stated the plaintiff has been for several years regularly supplying technical gelatine to the security paper mill, a Government of India undertaking which manufactures currency paper at Hoshangabad, M.P. It was also stated that the Directorate General of Supplies and Disposals is the Central Purchase Organisation of the Govt. of India. As stated on or about 03.3.1978 the defendant floated a tender being tender No. P/CD/TEC/222/141/14.10.1977/51 dated 03.3.1978 inviting quotations for the supply of 450 metric tonnes of technical gelatine in accordance with the terms and conditions contained in the tender documents supplied by the defendant and the delivery of technical gelatine was sought at the rate of 45 metric tonnes p.m. i.e. the entire material to be supplied over a period of 10 months. As stated on or about 11.4.1978 the plaintiff submitted its tender in the form prescribed offering to supply the said 450 metric tonnes of technical gelatine under the subject tender at a price of Rs. 17,500 per metric tonne. The subject tender was opened on 14.4.1978 and the tenders submitted by the Suit No.834/06/81 Page No.3/20 plaintiff as also by other supplies were considered by the defendant and other tenderers were thereafter sent to the Indentor the said Security paper mills for approval and the said security paper mill vide its letter dated 23.5.1978 approved the samples submitted by the plaintiff to be in accordance with the specification contained in the subject tender. It was stated that under the terms and conditions of the subject tender the defendant was required to accept or reject the tender submitted by the plaintiff and others on or before 14.6.1978 and the defendant vide its letter dated 13.6.1978 asked the plaintiff to keep the offer for supply of technical gelatine under the subject tender open until 14.7.1978 and defendant again vide its letter dated 14.7.1978 asked the plaintiff to extend the time for acceptance of the tender until 16.8.1978. As stated vide its letter dated 2.8.1978 the defendant called upon the plaintiff to withdraw the price escalation clause contained in the tender submitted by the plaintiff. As stated on or about 11.8.1978 the plaintiff's representative had discussions with the defendant's representative at the defendant's Suit No.834/06/81 Page No.4/20 office in Delhi during which the defendant also sought a rebate on offer price and further extension of time. As stated the plaintiff was asked to and again agreed to keep the said offer open till 16.9.1978 for the defendant's acceptance and in spite of earlier assurances the defendant, vide its letter dated 16.9.1978 requested the plaintiff yet again to extend the time for acceptance of the tender until 16.10.1978. It was further submitted that six months after the plaintiff's tender was submitted, the defendant, vide its letter dated 16.10.1978 titled "Advance Acceptance of Tender" advised the plaintiff that the tender submitted by the plaintiff had been accepted subject to the plaintiff furnishing a security deposit of Rs. 75000/ i.e. for ensuring the due performance of the agreement by the plaintiff and the delivery of the material was sought at the rate of 40 metric tonnes p.m. Thereafter the defendant vide its letter dated 3.11.1978 confirmed to the plaintiff that its tender for supply of 450 metric tonnes of technical gelatine had been finally accepted by the defendant. As stated the defendant vide the said letters of acceptance Suit No.834/06/81 Page No.5/20 dated 3.11.78 and 16.10.78 specified that the purchase of technical gelatine was for and on behalf of the Indentor, the said security paper mills that the samples of technical gelatine should conform to those approved by the said security paper mills vide their letter dated 23.5.1978 that the delivery should be at the rate of 40 metric tonnes p.m. and should be completed on or before 30.9.1979 and that the acceptance of the tender was subject to the plaintiff furnishing a security deposit of Rs. 75000/ for the due performance of the agreement. It was stated that there was a mistake as to the identity of the subject matter of the contract in the minds of the parties caused by reason of incorrect specification, subsequently noticed which was contained in the subject tender floated by the defendant. As stated the plaintiff arranged a bank guarantee being Guarantee No. 19/13 dated 20.11.1978 to be furnished in favour of the defendant by the plaintiff's banker, Allahbad Bank for the said sum of Rs. 75,000/ as security deposit for ensuring the performance of the above purposed contract. As stated under the terms and conditions of the Suit No.834/06/81 Page No.6/20 subject tender all batches of technical gelatine to be supplied were required to be placed for inspection and approval of the defendant's Director of Inspection, Northern India Circle, New Delhi and the plaintiff vide letter dated 20.11.78 requested the defendant to arrange for the inspection of the sample of batches of technical gelatine lying ready with it for supply immediately upon approval of the inspecting officer. As stated the Inspecting Officer of the defendant visited the plaintiff's factory premises and inspected the technical gelatine offered for supply in batches 162 to 167 and 170 from 2nd to 5th December, 1978 and in batches 6, 7 and 8 from 17th to 20th February, 1978 and samples were forwarded to the Indentor, the Security Paper Mills for approval. The defendant vide its letter dated 20.2.79 requested the Security Paper Mills to test on priority basis whether the above batches were of the contract specification and report to the defendant as quick as possible on the test results. It was submitted that Security Paper Mill vide its letter dated 02/06.3.1979 advised the defendant as to the specification, characteristics Suit No.834/06/81 Page No.7/20 and qualities of the above samples of technical gelatine tested by them, including the foaming characteristics which stated the foam to be stable for about 2 minutes. However in the meanwhile the defendant informed the plaintiff that the technical gelatine offered in the above batches had been rejected by its inspecting officer for the reason that the material was not in accordance with the specifications as to foaming characteristics contained in the subject tender in as much as the foam were found stable only for about 2 minutes. It was also stated that the defendant also on 6th February, 1980 wrongly and illegally encashed the bank guarantee furnished on behalf of the plaintiff by the Allahbad bank for the sum of Rs. 75,000/ and thereafter the defendant vide its letter dated 30.12.1980 allegedly claimed an amount of Rs. 46, 75, 165.80 as due and payable by the plaintiff to the defendant as general damages for breach of the contract entered into between the parties. As stated the plaintiff vide its letter dated 5th February, 1981 reiterated that the alleged contract entered into between the parties for the supply of technical gelatine was vitiated Suit No.834/06/81 Page No.8/20 for the payment by mistake and as such the plaintiff was not liable for the payment of the said sum of Rs. 46,75,165.80 claimed by the defendant or any other sum. It was also submitted that vide its letter dated 12th May, 1980 and 5th February, 1981 duly served notice upon the defendant as required under section 80 of CPC, 1908 specifying the cause of action and other particulars in respect of the subject mater of the present suit. Hence prayer was made to grant the reliefs as mentioned in the plaint for declaration, injunction and recovery.
2. Written Statement was filed by the defendant in which the contents of plaint were denied and it was stated that under the terms and condition of the tender inquiry it is not binding on the defendants either to accept the tenders or to reject the tenders on or before 14.6.78 which was also done by the plaintiff. It was also submitted that sample of technical gelatine submitted by the plaintiff was approved by indentor S.P.M. Hoshangabad vide letter dated 21.5.78 and under the foaming characteristics column it was stated by the indentor that the sample test passes in respect of foam Suit No.834/06/81 Page No.9/20 of 50 ml stable for 8 minutes. As stated the firm in its revised quotation kept their validity of offer open till 16.9.78 and the defendant on 13.9.78 asked the plaintiff to extend validity of their offer till 16.10.78 and the plaintiff accordingly vide letter dated 16.9.78 confirmed acceptance this offer till 16.10.78. As stated while extending the offer by plaintiff, it is open for him also either to extend the validity of their offer or withdraw his quotation keeping in view the circumstances but the same was not done by the firm and with open mind, they kept on extending the validity of their offer as per terms and conditions of their revised quotation furnished to defendants on 14/22.8.78. It was also submitted that plaintiff was very much aware of the contract specification which clearly stipulated that the foaming characteristics of 50 ml stable for 8 minutes but the material tested was 50 ml stable for 2 minutes only. However, it is submitted that the contention of the plaintiff was totally misconceived as under the letter the defendants had become entitled to the amount of Rs. 40,72,165.80/ and in view of this there could be no question of the Suit No.834/06/81 Page No.10/20 refund of the amount of Rs. 75000 already forfeited by the defendants.
3. Replication was filed by the plaintiff to the WS filed by the defendants in which contents of the plaint were reaffirmed and reiterated and those of WS were denied.
4. Vide order dated 17.2.1986, on the pleadings of parties, the following issues were framed:
1).Whether the alleged agreement between the plaintiff and the defendant was void on account of mistake as to the identity of the subject matter? If so to what effect.
2).Whether the defendant committed a breach of the agreement in rejecting the material offered for supply by the plaintiff? If so, to what effect.
3). Whether the plaintiff is entitled to recover the sum of Rs. 75,000/ being the amount deposited as performance security with the defendant?
4) Whether the plaintiff is entitled to interest on the amount, if any due to it, from the defendant and if so, the rate of interest and the period. Suit No.834/06/81 Page No.11/20
5) Relief.
5. In view of the amended pleadings, the following issues was framed vide order dated 13.3.96 as Issue No. 1A 1A. Whether the plaintiff proves that the indentor i.e Security Paper Mills, accepted from the plaintiff under separate and independent agreements, the case of the specifications as understood by the plaintiff?
If yes, what is the effect
6. In evidence plaintiff examined two witnesses in support of the case. In evidence of PW2, copy of resolution dated 29.4.1981 was Ex. PW2/1, copy of resolution dated 24.7.1989 was Ex. PW2/2, copy of certificate of incorporation was Ex. PW2/3, copies of letter dated 14.8.1978 and 16.9.1978 were Ex. PW2/4 and Ex. PW2/5, copy of letter dated 16.10.1978 was Ex. PW11, letter dated 25.10.1978 was Ex. PW2/6, copy of letter dated 20.11.1978 was Ex. PW2/7, letter dated 2/6.3.1979 was Ex. PW2/8, copy of letter dated 14.5.1979 was Ex. PW2/9, letter dated 12.5.80 alongwith postal receipt were Ex. PW2/10 and PW2/11, Suit No.834/06/81 Page No.12/20 copy of letter dated 05.2.1981 alongwith postal receipt and acknowledgment dated 06.2.1981 were Ex. PW2/12 to PW2/14 and copy of letter dated 30.12.80 was Ex. PW2/15.
7. In defence defendant examined one witness namely Ms. Sabitri Bhagat, in support of their case.
8. I have gone through the record and have heard the arguments. My issue wise findings are given below:
9. Issue No. 1) Whether the alleged agreement between the plaintiff and the defendant was void on account of mistake as to the identity of the subject matter? If so to what effect and Issue No. 1A. Whether the plaintiff proves that the indentor i.e Security Paper Mills, accepted from the plaintiff under separate and independent agreements, the case of the specifications as understood by the plaintiff? If yes, what is the effect: For the sake of convenience, issue No. 1 and 1A are being decided together as they are interlinked also. The plaintiff has admitted that the notice inviting tender which is Ex. P1 was accepted by the Suit No.834/06/81 Page No.13/20 plaintiff and plaintiff made offer on or about 11.4.78 which was accepted by the defendant vide their letter dated 16.10.78 on 03.11.78. The letter dated 16.10.78 which is Ex. P11 from the Director General of Supply and Disposal to plaintiff shows that tender was accepted in advance and order was place subject to security deposited of Rs. 75,000/ and that the samples submitted by the plaintiff alongwith the offer was found acceptable by the indentor i.e. Security Papers Mill. Ex. P12 which is a letter dated 03.11.1979 is actually a acceptance of the offer made by the plaintiff. Though the letter is dated 03.11.1979 but alongwith other documents and averments in the plaint and WS it appears that arithmetical mistake in mentioning of the date and it should be 03.11.1978. It is the submission of the plaintiff that though the contract was formed basis on the offer and its acceptance but the contract was void because there was a mistake as to nature of the subject matter involved and that there was no consensus adidem. According to the plaintiff, the defendants were working on behalf of the security paper Suit No.834/06/81 Page No.14/20 mill, indentor but they have not produced any documents not any letter as to what was the specification required by the indentor. The averments of the plaintiff that they have been supplying the technical gelatine of specified standard specification i.e. of foamless type where the foam is required to be stable for less then 8 minutes has not been specifically denied by the defendants. Though the defendants accepted, the plaintiff has been supplying the technical gelatine to Security Paper Mill factory, Hoshangabad. The plaintiff contends that Security Paper Mil, Hoshangabad was the beneficiary of the contract i.e. supplies were to be made by the plaintiff to Security Paper Mill and that intention of the Security Paper Mill regarding the technical characteristics of the material be supplied should be taken to decide whether the plaintiff and the defendant were in consensus adidem as to subject matter of the contract. Since the Security Paper Mill was accepting the technical gelatine of foamless type and that plaintiff were suppliers of the same for the past period. The technical specification of the subject matter should be the Suit No.834/06/81 Page No.15/20 same but nowhere the plaintiff has been able to prove that the indentor i.e. Security Paper Mill was the party to the contract. The contract was entered into by the plaintiff and defendant and whatever was the intention of the beneficiary cannot be read into terms of the contract. Thus, specifications mentioned in the tender are also very clear and there is no ambiguity regarding characteristics of the technical gelatine which can be read in favour of the plaintiff. Also the plaintiff has taken steps in furtherence of the performance of provisions of the contract which can be seen in Ex. PW2/7 which is a letter by the plaintiff to the defendant declaring the enclosures of the bank guarantee as required by the defendant and also that their readiness to dispatch the technical gelatine to Security Paper Mill and asking the defendant to advice the inspector for inspection of the material. In the light of the above discussion, it is proved that there was valid contract between the plaintiff and defendant and that there was no voidness on account of the mistake as to identity of the subject matter. Both these issues are decided in favour of the Suit No.834/06/81 Page No.16/20 defendant and against the plaintiff.
10. Issue No. 2) Whether the defendant committed a breach of the agreement in rejecting the material offered for supply by the plaintiff? If so, to what effect: Under this issue, plaintiff contends that the inspecting officer of the defendant visited the plaintiff's factory and samples in to batches were taken. One of them was sent to Security Paper Mill and other was inspected by the department at Northern Inspection Circle, Kanpur. While samples tested by the Security Paper Mill they were found good and Security Paper Mill subsequently made request to the department arranging supply on point of period basis at Northern Inspection Circle, Kanpur and rejected the samples and as having failed in respect of foam characteristics but the documents Ex. DW1/1 to DW 1/14 show the intention of both the parties to amend the provisions of contract regarding the foam characteristics of the subject matter i.e. technical gelatine. It has come out in the crossexamination of PW2 that plaintiff company request for issue of amended letter to change the Suit No.834/06/81 Page No.17/20 specifications of the foam. Ex. DW1/9 which is a letter from D.G. S & D to the plaintiff dated 22.5.1979 shows that amendment was made as required by the plaintiff vide letter and telegram which are Ex. DW 1/5,1/6 and 1/8. Ex. DW1/10 is a letter dated 23.6.1979 from the plaintiff to the D.G. S & D showing that due to lapse of the time taken for the amendment of the specification, the contract had become onerous on the plaintiff and they had asked for price escalation which was rejected by the defendant. In the same letter the plaintiff also expressed their inability to commit themselves for supply against accepted tender against undelivered quantity after 23.9.79. Ex. DW1/8 is a letter from the defendant to the plaintiff declaring the cancellation of the contract due to nonsupply of the subject matter by the plaintiff but Ex. DW1/11 show that nonsupply was because the plaintiff was not offered reasonable facility in terms of the timely amendment of specification and for performance of the contract. The provision of contract act states that if the reasonable facility is not provided for the performance of the contract Suit No.834/06/81 Page No.18/20 the promissory excuse by such neglect as to any such nonperformance caused thereby. In the present case it appears that the defendant did not provide the reasonable opportunity even when both the parties intended to go forward with the contract for the supply of technical gelatine different in specification from one mentioned in the tender document. In such circumstances the refusal of the defendant in accepting the supply of technical gelatine by the plaintiff has made contract impossible of performance and subsequently void. It is also because the contract was for the supply of technical gelatine for the period of 10 months which period had elapsed during the acceptance of the subsequent modification in the agreement and specification details. In the light of above discussion this issue is decided in favour of the plaintiff and against the defendant and it is held that defendant committed a breach of contract.
11. Issue No. 3. Whether the plaintiff is entitled to recover the sum of Rs. 75,000/ being the amount deposited as performance security with the defendant? and Issue No. 4. Whether the plaintiff is entitled to interest Suit No.834/06/81 Page No.19/20 on the amount, if any due to it, from the defendant and if so, the rate of interest and the period: In the light of section 65 of Indian Contract Act since the contract became void and defendant had received advantage in the form of bank guarantee, the defendants are liable to pay the restoration of bank guarantee to the plaintiff and thus the plaintiff is entitled to recover sum of Rs. 75,000/ deposited with the defendant. The plaintiff is also entitled to simple interest on the said amount i.e.e Rs. 75,000/ @ 8 % for the period of starting from institution of the suit till realisation.
12. Relief: In the light of above discussion, the suit stands partly decreed with costs. No relief regarding declaration and permanent injunction can be granted. However, suit in respect of recovery of Rs. 75,000/ is allowed alongwith interest @ 8 % from institution of the suit till realisation. Decree sheet be prepared. File be consigned to record room.
Announced in the open court on AJAY GOEL
26.7.10 SCJ CUM RC(CENTRAL)DELHI
Suit No.834/06/81 Page No.20/20