Karnataka High Court
M/S Rajesh Spices vs Spices Trading Corproration Limited on 25 November, 2020
Author: S.Sujatha
Bench: S.Sujatha
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF NOVEMBER, 2020
PRESENT
THE HON'BLE MRS.JUSTICE S.SUJATHA
AND
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
R.F.A.No.2141/2011
BETWEEN :
1. M/s RAJESH SPICES
NO.42, INDUSTRIAL AREA,
GAROBA MAIDAN,
NAGPUR-400008,
BY ITS MANAGING PARTNER
SHRI PRAKASH WADHWANI
2. SHRI PRAKASH WADHWANI
S/O UTTAMCHAND WADHWANI,
AGED ABOUT 55 YEARS,
MANAGING PARTNER:
M/s RAJESH SPICES
3. SHRI SURESH WADHWANI
S/O UTTAMCHAND WADHWANI,
AGED ABOUT 49 YEARS,
PARTNER: M/s RAJESH SPICES
4. SHRI RAJESH WADHWANI
S/O UTTAMCHAND WADHWANI,
AGED ABOUT 43 YEARS,
PARTNER: M/s RAJESH SPICES
APPELLANTS No.2 TO 4
C/O NO.42, INDUSTRIAL AREA
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GAROBA MAIDAN,
NAGPUR-400008 ...APPELLANTS
(BY SRI B.PRAMOD, ADV.)
AND :
SPICES TRADING CORPRORATION LIMITED
72, NANDIDURG ROAD EXTENSION,
BANGALORE-560046
BY ITS CHAIRMAN & MANAGING DIRECTOR ...RESPONDENT
(BY SRI KARAN JOSEPH, ADV.)
THIS R.F.A. IS FILED UNDER SECTION 96 OF CPC,
AGAINST THE JUDGMENT AND DECREE DATED 30.08.2011
PASSED IN O.S.NO.3685/1994 ON THE FILE OF THE III
ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BANGALORE,
PARTLY DECREEING THE SUIT FOR RECOVERY OF MONEY.
THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
19.11.2020, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT, THIS DAY, S. SUJATHA, J., DELIVERED THE
FOLLOWING:
JUDGMENT
This appeal is filed by the defendants against the order dated 30.8.2011 passed by the III Additional City Civil and Sessions Judge (CCH-25), Bengaluru City ('Trial Court' for short) in O.S.No.3685/1994 whereby the Trial Court has decreed the suit filed by the plaintiff in part against all the defendants jointly and severally with costs.
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2. It is ordered that defendants 1 to 4 are jointly and severally liable to pay to the plaintiff the suit claim of Rs.33,64,560/- with interest at 9% p.a. from the date of suit till the date of realization, failing which the plaintiff is at liberty to proceed against the properties of defendants 1 to 4 jointly and severally.
3. For the sake of convenience, the parties are referred to as per their status before the Trial Court.
4. The plaintiff has instituted the suit O.S.No.3685/1994 against the defendants 1 to 4 seeking the judgment and decree with a direction to the defendants 1 to 4 jointly and severally to pay a sum of Rs.33,64,560/- with interest at 24% per annum from the date of the suit till the date of realization and also seeking attachment of property of defendants 1 to 4 with costs.
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5. The plaint averments in brief are that the defendant No.1 is a partnership firm having its registered office at Nagpur, defendant No.2 is the Managing partner while defendants 3 and 4 are the other partners thereon. Defendant No.1 has been carrying on the business of trading in spices. The plaintiff appointed defendant No.1 as one of the business associate and supplier of spices by a letter dated 27.2.1991 under the terms and conditions enumerated therein. The defendant No.2 has acknowledged the receipt of letter and agreed to the terms and conditions. Clause 16 of the terms of the agreement was that in case of failure to supply the spices ordered and as per the qualities specified, the defendants would have to pay the penalty imposed by the plaintiff. The plaintiff has requested the defendants to quote their price for supply of 250 MTs of dry red chillies as per telex message No.286 dated 20.6.1991. In response, the defendants vide their letter dated -5- 1.7.1991 quoted the rate for supply of 250 MTs of dry red chillies @ Rs.32,500/- per MT inclusive of all taxes and for destinations anywhere in Kerala on a back to back contract for supply of 250 MTs of dry red chillies, thereby binding themselves to supply 250 MTs of chillies in accordance with the terms and conditions floated by the Kerala State Civil Supplies Corporation Limited, Kochi ('SUPPLYCO' for short). The plaintiff informed the defendants by their telex message No.305 dated 3.7.1991 that the tender for supply of 250 MTs of dry red chillies has been accepted by SUPPLYCO based on the prices quoted by the defendants as per the tender terms and conditions of SUPPLYCO on back to back contract basis. The plaintiff placed an order on the defendants vide letter dated 4.7.1991 for supply of 250 MTs of dry red chillies with certain terms and conditions wherein the defendants were required to furnish security deposit of Rs.83,500/- in the form of DD favouring STCL. The security deposit was liable to be -6- forfeited in the event of breach of contract of all the terms or any terms and conditions of the contract or due to non performance of the contract. The security deposit would be returned after satisfactory performance of the contract.
6. It was averred that the defendants agreed and accepted the terms and conditions stipulated in the purchase order dated 4.7.1991 and to supply red chilies on back to back contract terms. Several correspondences were made between the plaintiff and the defendants. Plaintiff's letter 25.9.91 to defendants asserted that based on the offer of defendants on back to back terms and at the prices quoted, KSCSC had awarded the tender to plaintiffs. Since the defendants failed to honour their commitments, SUPPLYCO had levied a penalty of Rs.23,37,500/- on the plaintiff and that the defendants were liable to pay the same as claimed by the SUPPLYCO within 15 days, since the -7- contract was on back to back contract terms as informed in various telex/letters to defendants to make supplies as per the agreement. Further, vide letter dated 30.10.1991 plaintiff called upon the defendants to pay the penalty of Rs.23,37,500/- imposed by SUPPLYCO for beach of contract and also informed about forfeiture of security deposit/earnest money deposit of Rs.1,32,040.40 standing to the credit of the defendants against the encashing of the bank guarantee of Rs.1,00,000/- furnished by SUPPLYCO.
7. The defendants replied vide letter dated 2.6.1992 thereby generally denying all the averments, including contract, besides stating that no EMD had been deposited by them. It was further averred that the SUPPLYCO has withheld a sum of Rs.24,10,921.25 from the amounts payable to the plaintiff in respect of a separate transaction. Hence, the plaintiff was -8- constrained to file the suit for recovery of penalty and other damages imposed by SUPPLYCO.
8. On issue of summons, the defendants appeared through their learned counsel and filed written statement denying the plaint averments. The defence taken was, at no point of time there has been any agreement in writing about the execution of any order, as had been done earlier under oral agreement and the defendants had supplied the goods on earlier occasions twice. The specific defence was that the plaintiff has failed to arrange for finance giving the reason that interest rates had gone up by 32% and their bankers expressed their inability to provide the finance for supply of chillies on account of which the defendants were unable to execute the order. The defendants tried for securing finance from their own bankers but on account of devaluation of the Rupee by the Government of India, the cost of the chillies and overhead expenses -9- had gone up considerably as the exporters who had booked export orders of the chillies were not able to pay more. In this connection the defendant also had requested the plaintiff to take extension of time for supply of chilies with SUPPLYCO but the plaintiff never took any steps in this behalf until the last date. The plaintiff cannot blame the defendants for its own lapses, inaction and indecisiveness. No EMD had been made by the defendants. By way of amending the written statement it was contended that Ex.P31, certified copy of the demand letter served on plaintiff on 25.1.1995 shows that SUPPLYCO demanded Rs.23,37,500/-. Another suit was filed by the plaintiff in O.S.No.906/1995 for recovery of the amount allegedly withheld by the SUPPLYCO before the Ernakulam Court and the same is pending. The plaint averments in the said suit would disclose that no damages can be claimed for the alleged breach which falls within force majeure. The appropriation of the amount due to the
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plaintiff under the coriander contract towards the alleged unliquidated damages is untenable. The ascertainment of damages can only be made through a civil court having proper jurisdiction. Referring to the said suit, it was contended that the plaintiff nowhere claimed in O.S.906/1995 about the correspondence with the defendants and it has pleaded force majeure as the reason for the non supply of chillies. The plaintiff did not disclose the material fact of filing another suit. Suppression of the material facts amounts to sheer fraud and misrepresentation on the part of the plaintiff. On this ground alone, the suit has to be dismissed summarily. The plaintiff is estopped from prosecuting two suits. Accordingly sought for dismissal of the present suit in O.S.No.3685/94 with exemplary costs.
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9. Based on the pleadings, the Trial Court has framed the following issues:
"1. Does plaintiff proves that 1st defendant was appointed as supplier and 2nd defendant agreed to the terms and conditions?
2. Does plaintiff prove that defendants agreed to pay penalty in failure of supply?
3. Does plaintiff prove that defendants agreed to supply 250 metric tons quintals dry chilly worth Rs.32,500/- on back to back contract as per para No.5 of the plaint?
4. Does plaintiff prove that is placed orders on 4.7.91 to defendant as per para No.7 of the plaint?
5. Does plaintiff prove that defendant agreed and accepted such conditions?
6. Does plaintiff prove that defendant failed to supply the materials inspite of letters and telexes?
7. Does plaintiff prove that the security deposit will be forfeited in contravention of the contract?
8. Does plaintiff prove that defendant agreed to supply as per para No.11 to 16 of the plaint?
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9. Does plaintiff prove that defendants recession for non-supply is not tenable?
10. Does plaintiff prove that tender awarded to defendant for supply is in violation of agreement?
11. Does plaintiff prove that they sustained a loss on defendants failure as per para No.23 of the plaint?
12. Whether defendant is liable to pay interest?
13. Does defendant prove that suit in present form is not tenable?
14. Whether plaintiff is entitled to the suit reliefs?
15. If so, under what order or decree?
For the sake of convenience, the Trial Court has re-casted the issues as follows:
1. Whether the plaintiff proves that he is entitled to recover the sum of Rs.33,64,560/- from the defendants jointly and severally with interest at 24% p.a. from the date of the suit till the date of realisation?
2. If so, whether plaintiff further proves that he is entitled for attachment of property of D-1 to D-4?
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3. Whether defendant proves that suit is not maintainable in view of O.S.No.906/95 having been filed at Ernakulam?
4. To what order or decree?"
10. The plaintiff has examined himself as PW1 and got marked Exs.P1 to P52. The defendant has examined himself as DW1 and another witness as DW2.
Exs.D1 to D4 were marked.
11. On appreciation of the material evidence, the Trial Court answered issue Nos.1 and 2 in the affirmative and issue No.3 in the negative, finally decreeing the suit in part against the defendants jointly and severally with costs as aforesaid.
12. Being aggrieved, the defendants have preferred the present appeal.
13. Learned counsel for the defendants argued that the Trial Court failed to appreciate the material evidence in a right perspective. The learned Trial Judge
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had not given due consideration and due weightage to the fact that the plaintiff has suppressed the material facts of filing O.S No.906/95 in the Court at Ernakulam during the pendency of the suit O.S.No.3685/94 relating to the same subject matter. The pleadings made by the respondent in the suit on hand has direct bearing in the present proceedings. As such, the learned Trial Judge could have taken serious note of withholding of the material evidence and an adverse inference would have been drawn. The learned Trial Judge has failed to consider the effect of admissions made in pleadings of O.S.No.906/95.
14. The admissions in pleadings being judicial admissions, they stand on a higher footing than admission in evidence. Ex.P1 the letter dated 27.2.1991 was superseded by Ex.P43 letter dated 7.3.1991.
However, the learned Trial Judge committed an error in assuming that the document Ex.P43 is not in dispute or
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its execution and contents. The testimony of PW-1 shows that there was no evidence that Ex.P43 was ever received or acknowledged by the defendants. The claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages are assessed in evidence so adduced. No liability can be fastened on the defendants until there is determination of damages by court. Admittedly damages allegedly suffered either by the plaintiff or by SUPPLYCO have not been ascertained by any of the courts, consequently no liability can be fastened on the defendants and no damages could be claimed merely for the reason that SUPPLYCO has withheld its amount or had recovered any amount towards alleged damages by appropriating defendants dues. The crucial issue whether the plaintiff has proved its entitlement to the damages claimed against the defendants, has not been adjudicated by the Trial Court.
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15. Further it was argued that no interest could be awarded in law on the transaction of this nature in claiming damages sans assessment made by the competent Authority/court.
16. Learned counsel for the defendants has filed a memo producing the copy of the judgment passed in O.S.No.906/1995 dated 30.1.2018 in the court of II Addl. Subordinate Judge at Ernakulam whereby the suit has been dismissed for default. Learned counsel agued that the plaintiff being a Central Government undertaking ought not to have suppressed the material facts. Accordingly, he sought for allowing the appeal by setting aside the impugned judgment.
17. Learned counsel has placed reliance on the following decisions in support of his case:
1. Thimmappa Basappa Doddayankannavar (deceased) by L.Rs. Vs. Krishnappa Gangadharappa Naikar reported in AIR 2001 KAR 57.
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2. Union of India Vs. Raman Iron Foundry AIR 1974 S.C. 1265
18. Learned counsel for the plaintiff has taken us through all the exhibits to establish the agreement entered into with the parties in writing and the same being accepted and acknowledged by the defendants as Ex.P1 as well as other correspondences marked as exhibits, argued that the contention of the defendants that there was no agreement in writing is wholly untenable.
19. Learned counsel for the plaintiff has submitted the copy of judgment dated 19.12.1997 rendered by the II Adll. Subordinate Judge at Ernakulam in O.S.No.906/95. It is submitted that on further challenge made by the SUPPLYCO the matter was remanded by the Hon'ble High Court of Kerala and the plaintiff was oblivious of the dismissal of the said suit for non prosecution on 30.01.2018.
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20. It was argued that the plaintiff is not estopped from claiming liquidated damages under different heads for the breach of contract and non supply of red chillies as agreed upon. Merely for filing O.S.No.906/95 before the court of Ernakulam, which indeed was instituted challenging the action of SUPPLYCO in appropriating the amount towards the damages for non supply of red chillies with the transaction relating to supply of coriander both being different and distinct, the law of force majeure being the defence available in law taken, could not absolve the defendants from making payment towards the damages as agreed upon. Learned counsel has referred to the following judgments:
1. Jagwant Singh & Ors. v. Silan Singh & Ors., 19 A.W.N. (1899) 66
2. Dungaria v. Nand Lal & Ors., (1906) 3 All LJ 534.
3. Banarsi Das & Ors. v. Kanshi Ram & Ors., AIR 1963 SC 1165
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4. In the matter of Mahabir Singh; Smt.Bishan Devi Khanna w/o D.C.Khanna v. Pirthi Singh Dhillon, AIR 1963 P&H 66
5. Sita Ram Bhau Patil v. Ramchandra Nago Patil & Anr., (1977) 2 SCC 49
6. Pandurang Kail Patil & Anr. v. State of Maharashtra, (2002) 2 SCC 490
7. Udham Singh v. Ram Singh & Anr., (2007) 15 SCC 529
8. Saygo Bai v. Chueeru Bajrangi (2010) 13 SCC 762
9. Raveen Kimar v. State of Himachal Pradesh, 2020 SCC online SC 869
21. We have given our thoughtful consideration to the arguments advanced by the learned counsel for the parties and perused the original records.
22. The points that arise for our consideration are:
1. Whether the plaintiff is estopped from claiming damages from the defendants in view of filing of O.S.No.906/95 by the plaintiff before the court of Ernakulam?
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2. Whether the admission made in the pleadings in O.S.No.906/95 inasmuch as force majeure would disentitle it to pursue the relief in the present proceedings?
3. Whether the judgment and decree passed by the Trial Court in decreeing the suit is justifiable?
23. The main arguments of the learned counsel for the defendants revolves around the suit filed in O.S.No.906/95 by the plaintiff in the Court of Ernakulam. The plaint averments in the said suit in a nutshell are, in response to the notice published by the SUPPLYCO inviting tenders to supply coriander, the plaintiff had submitted a tender which was accepted by SUPPLYCO and pursuant to the agreement, the plaintiff had supplied 491.285 Metric Tonnes of coriander to the SUPPLYCO to which a sum of Rs.83,00,155.43 was liable to be paid. But the SUPPLYCO paid only Rs.58,13,531.86 deducting the amount of
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Rs.23,37,500/- towards the loss said to have been suffered for the failure on the part of the plaintiff to supply red chillies as per an earlier contract. The unilateral decision of the SUPPLYCO in appropriating the amount towards damages in an altogether different transaction was called in question.
24. In the said proceedings, it was pleaded that non supply of red chillies in the stipulated time was due to force majeure to which no damages can be claimed. It is apparent that the said suit O.S.No.906/95 was instituted during the pendency of O.S.No.3685/94. Hence, suppression of filing of the said suit in the plaint does not arise. As could be seen from the plaint averments, in para.28 it has been stated that the SUPPLYCO has already withheld a sum of Rs.24,10,921.25 from the amount payable to the plaintiff in respect of a separate transaction; numerous
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requests by the plaintiff to SUPPLYCO to release the same has evoked consistent refusals therefrom.
25. The defendants by filing additional written statement have taken the defence that the plaintiff though filed its evidence and also examined its witness before the Trial Court, filing of O.S.No.906/95 has been willfully, deliberately and intentionally suppressed by plaintiff, obviously because plaintiff is aware about its effect on the suit rendering it infructuous and meaningless. So also the plaintiff is guilty of not disclosing the pendency of the present suit before the court at Ernakulam in O.S.No.906/95 which is nothing but sheer fraud and misrepresentation on the part of the plaintiff. In view of filing of O.S.No.906/95 relating to the same subject matter and considering the pleadings in O.S.No.906/95, the plaintiff is estopped from prosecuting the present suit.
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26. At this juncture, it would be beneficial to refer to the judgment of the Hon'ble Apex Court in Udham Singh, supra, whereby it has been held that no doubt admission is the best evidence against a person who is said to have made it, but it can always be explained. One whose previous statement is to be treated as an admission or it is sought to be used, he has to be confronted with such a statement. Admission has to be clear, unambiguous and proved conclusively. It is a question which needs to be considered as to what weight is to be attached to an admission and for that purpose it is necessary to find out as to whether it is clear, unambiguous and a relevant piece of evidence and further it is proved in accordance with the provisions of the Evidence Act. It would be appropriate that an opportunity is given to the person under cross examination to tender his explanation and clear the point on the question of admission.
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27. Admittedly, no statement was confronted to the plaintiff though in the cross examination confronting the documents exhibits D1 to D3 were marked. An opportunity to tender his explanation and clear the point regarding the admission of force majeure made in the plaint of O.S.No.906/95 was not made available. Moreover, further on the date of affidavit of chief examination filed on 3.10.2002 and further at the time of recording the evidence of PW-1 on 6.1.2003 while marking the documents, the judgment passed in O.S.No.906/95 dated 19.12.1997 was available. But for the reasons best known to the parties, the same was not made available before the Trial Court. It is subsequent to the order of the Hon'ble High Court of Kerala the matter was remanded though at the fist instance the suit filed by the plaintiff against the SUPPLYCO was decreed in part., as could be seen from the order dated 30.1.2018, O.S.No.906/95 has been dismissed. As such, filing of O.S.No.906/95 by the plaintiff
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challenging the appropriation of the damages claimed towards the transaction of red chillies in the transaction relating to the supply of coriander being the cause of action, the same would not disentitle the plaintiff to claim for the relief in the present proceedings.
28. In the case of Jagvant Singh and others, supra, it has been held an admission on a point of law is not an admission of a "thing" so as to make the admission matter of estoppel within the meaning of Section 115 of the Evidence Act. This judgment of the Privy Council has been upheld by the Hon'ble Apex Court in the case of Banarsi Das & others, supra, wherein it has been held that the admission made in the pleadings would bind the parties only insofar as the facts are concerned but not insofar as it relates to a question of law.
29. In the case of Sita Ram Bhau Patil, supra, the Hon'ble Apex Court has held that if admission is
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proved and if it is thereafter to be used against the party who has made it, the question comes within the provisions of Section 145 of the Evidence Act. The provisions in the Indian Evidence Act that 'admission is not conclusive proof' are to be considered in regard to two features of evidence. First, what weight is to be attached to an admission? In order to attach weight it has to be found out whether the admission is clear, unambiguous and is a relevant piece of evidence. Second, even if the admission is proved in accordance with the provisions of the Evidence Act and if it is to be used against the party who has made it, it is sound that if a witness is under cross examination on oath, he should be given an opportunity, if the documents are to be used against him, to tender his explanation and to clear up the point of ambiguity or dispute. This is a general salutary and intelligible rule. Reference has been made to Bal Gangadhar Tilk Vs. Shrinivas Pandit reported in 42 IA 135, 147.
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30. Therefore an admission made by the plaintiff in the pleadings of O.S.No.906/95 available in law does not unambiguously indicate that the non supply of red chillies by the defendants herein was due to force majeure.
31. In the present proceedings, no defence of force majeure has been taken by the defendants in the written statement. The evidence on record would disclose that the failure to finance by the plaintiff was the cause for non supply of red chilies. In view of the admission made by the plaintiff regarding the filing of the suit in O.S.No.906/95, it cannot be held that there was sinister object to make wrongful gain.
32. It is the contention of the defendants that at no point of time there has been any agreement in writing requires to be negated in view of the
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signature found on behalf of defendant in Ex.P1 dated 27.2.1991 for having received the letter agreeing to the terms therein. Ex.P43 though indicates that the agreement dated 27.2.1991 (Ex.P1) issued to the defendants has been superseded, no acceptance of the terms and conditions of Ex.P43 by the defendants is found in the records. It is the specific defence of the defendants that no acknowledgement has been produced by the plaintiff for having accepted the terms and conditions of Ex.P43. In the circumstances, Ex.P43 may not inspire any credential value. As could be seen from the terms and conditions, more or less Ex.P43 is replica of Ex.P1. In clause 16 of the said Ex.P1, it is stipulated as under:
" In case if you fail to supply the ordered quantity and as per quality specified in the tender terms, you have to pay the penalty imposed by us/our buyer"
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33. Ex.P2 is the tender called by the SUPPLYCO inviting the quotation for the supply of red chillies to which the defendants have quoted Rs.32,500/- per MT for supply of 250 MTs of red chillies as per Ex.P3 dated 1.7.91 signed by Sri.D.Fernando, Export Manager of the defendants Firm.
34. Ex.P4 is the acceptance letter forwarded through telex message by the plaintiff to the defendants for supply of 250 MTs of red chillies. SUPPLYCO vide letter dated 4.7.1991 has accepted the tender quotation for supply of 250 MTs of dry red chillies subject to the terms and conditions wherein Sri D.Fernando has acknowledged the receipt of the original copy on 4.7.1991 which is marked as Ex.P5(a) and the same extracted hereunder.
"Spices trading 72, Nandidurg Road, Corporation Ltd., Extension, (Govt. of India Bangalore-560046 Undertaking) India.
STCL:OS:23:90-91:472 4th July 1991
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M/s Rajesh Spices P.B.No.341, 42, Industrial Area Garoda Maidan, NAGPUR-440 008 Sir, Sub: Supply of 250 MTs of Dry Red Chillies -
reg.
Ref: Your quotation dated 1.9.91.
****** This has reference to your letter dtd. 1.7.91, quoting your competitive price and we are pleased to place orders on you for supplies of 250 MTs/minus 5% of Dry Red Chillies subject to the following terms and conditions.
Product: Dry Red Chillies Quality : As per samples given by you for the purpose of identification of varity and in accordance to specification of KCSC Tender form.
Price: Rs.32,500/- PMT (Rupees Thirty Two Thousand Five Hundred only). Inclusive of all taxes F.O.R. Kochi.
Quantity: 250 MTs (Two Hundred Fifty tons)
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Period & Place of Delivery: Delivery should be made to CWC/SWC/CSC Kochi as under.
On or before On or before
17.7.91 2.8.91
125 MTs 125 MTs
SECURITY DEPOSITS: Please furnish the security deposit of Rs.83,500/- in the form of DD favouring STCL immediately. The Security deposit will be returned after satisfactory performance of the contract. The security deposit is liable to be forfeited in the event of breach of contract of all the terms of any terms of the contract or due to non-
performance of the contract.
PAYMENT: Payment will be made soon after receipt of payment on your supplies from Kerala Civil Supplies Corp. Kochi and there will not be any delay from our side.
Kindly arrange to send the duplicate copy of the agreement duly singed at the earliest and arrange to supply 250 mts of dry red chillies
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as scheduled suiting to the tender quality specification of Kerala Civil Supplies Corp. Kochi.
Please note that all other terms and conditions are as per tender form of Kerala Civil Supplies Corp. Kochi.
Thanking you, Yours faithfully, For SPICES TRADING CORP. LTD., Sd/-
(K.C.PONNANA) CHIEF MARKETING MANAGER.
4/7/91 (Received original copy of the letter Sd/- 4/7/91 For Rajesh Spice Nagpur-8)"
35. Defendants have sent a telex message dated 12.7.1991 which reads under:
"CMDS Kind information Replied vide our TLX Msg.No.352 dt. 12/7/91. Informed the party to supply failing which the security deposit of Rs.83,500/- will
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be forfeited, in addition the party is liable to pay the penalty and other costs & damages to be claimed by KCSC Kochi.
Sd/-12/7/91"
36. Again as per Ex.P7 dated 12.7.1991 plaintiff has informed the defendants that if the defendants fail to supply for the reasons known to them, the security deposit of Rs.83,500/- would be forfeited and in addition penalty and any other costs and damages to be claimed by SUPPLYCO as per the tender terms and conditions of the SUPPLYCO has to be paid.
37. As per Ex.P9 again a reminder was sent vide telex message dated 18.7.1991. The defendants have informed the market price of red chilies have gone up suddenly due to the following reasons:
"Generally SUPPLYCO floats the tender for 750 MT and places order only for 250-300 MT. But this time they have given order for 1000 MT whereas the tender was for 750
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MT. Due to sudden devaluation of Indian currency by our Government, the exporters have exploited the market by paying more.
We do not want to be defaulters and as such we are trying our level best to complete the order. Please try to supply the 1st installment of 125 MT along with 2nd installment of 125 MT".
38. As per Ex.P13 dated 19.7.1991 the defendants have sought for extension of time. The defendants vide telex message dated 29.7.1991 have requested the plaintiff to refund the security deposit of Rs.83,500/- along with other amounts as the SUPPLYCO has further invited fresh tender dated 24.7.1991 which has further increased the price of chillies in the market and the time left for the last date of supply on 3.8.1991 is very short and hence it is not possible to effect the supplies. The said request of the
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defendants was rejected by the plaintiff vide telex message dated 29.7.1991. The SUPPLYCO has informed the plaintiff as per letter dated 26.7.1991 marked as Ex.P17 that the purchase order was issued on 3.7.1991 to supply 250 MTs of dry red chillies on or before 18.7.1991 and 3.9.1991. But the same having not delivered, for the default committed by the plaintiff, the Corporation will purchase the stock at the risk and cost of the plaintiff. Besides risk and cost purchase, the Corporation reserves the right to take other action for breach of contract. This was brought to the notice of the defendants further stating that as a special case SUPPLYCO has agreed to extend the date upto 10.8.1991 as per letter dated 2.8.1991 (Ex.P19). Reminders were issued in terms of Exs.P20, 21 and 22. SUPPLYCO had issued a letter dated 27.8.1991 demanding Rs.23,37,500/- due to the loss caused to the Corporation for the wilful breach of contract committed. Out of 250 MTs defaulted by the plaintiff,
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SUPPLYCO has purchased the same quantity at the rate of Rs.4,250/- per quintal through a subsequent tender incurring an extra expenditure of Rs.23,37,500/-. Notice dated 30.10.1991 was issued by the plaintiff to the defendants informing the forfeiture of Rs.1,32,040.40 the credit balance available in their records inclusive of security deposit/earnest money deposit by the SUPPLYCO. To the legal notice dated 18.3.1993 issued by the plaintiff, the reply was given by the defendants contending that no terms and conditions of tender of SUPPLYCO were disclosed to the defendants; at no point of time there has been any agreement in writing about the execution of any order as had been done earlier under oral agreement and the defendants had supplied the goods on earlier occasions twice. The specific defence was that the plaintiff failed to arrange for finance giving the reason that interest rates had gone up by 32% and their bankers expressed their inability to provide the finance for supply of
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chillies on account of which the defendants were unable to execute the order. The defendants tried for securing finance from their own bankers but on account of devaluation of the Rupee by the Government of India, the cost of the chillies and over head expenses had gone up considerably as the exporters who had booked export orders of the chillies were not able to pay more. It was also stated in para.8 of the reply notice that the defendants have requested the plaintiff to take extension of time for supply of chilies but so far no steps were taken.
39. SUPPLYCO vide letter dated 14.12.1994- Ex.P30 has informed the plaintiff that an amount of Rs.36,855/- furnished towards the security deposit in the contract has been adjusted against the liability of Rs.23,37,500/-. As per letter dated 25.1.1995-Ex.P31 it was informed that Rs.23,37,500/- due to them on account of the risk and cost liability for breach of
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contract relating to supply of red chillies has been appropriated.
40. DW1 in his evidence has fairly admitted they had full knowledge of the orders placed by SUPPLYCO. Similarly, DW2 in the cross-examination admitted that the agreement was oral, he cannot mention the date of the oral agreement and does not know who was representing the company of the plaintiff. The relevant portion of the cross-examination of DW1 is extracted hereunder:
"One Mr.Fernando was working with the defendants as a Clerk and now he is not working with the defendants. It is not true to suggest that the said Mr.Fernando was Export Manager in the defendant No.1 company. There were no terms with regard to said oral agreement taken place with the plaintiff. Witness adds that only current market rate was asked by the plaintiff and same was given by us. There was a term of contract with regard to said oral agreement
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taken place with the plaintiff, with regard to the payments. According to the said term with regard to payments, the plaintiff has stated that they will finance for purchase of the chillies in the market. It is true that same thing has been stated in Ex.P6.
I have no personal knowledge with regard to the inter-se relationship between the plaintiff and supply-co. I am not aware that plaintiff had agreed to supply chilies to the said supply-co. It is true that we were asked to supply chilies to the said supply-co. Witness adds that it was on assurance of the plaintiff of finance, we have agreed to supply chilies to the said supply-co. It is not true to suggest that there was no assurance of finance to us for supply of chilies to the said supply-co. One Mr.Narayanan, who was the Chairman and Managing Director of the plaintiff company and Marketing Manager Mr.Ponnanna PW.1 who assured with regard to said finance. I do not know in how many talks or phone conversations, the said oral agreement was finalized. The only reason for
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not supplying chilies to the plaintiff for non providing finance by the plaintiff. We have tried for finance from our bankers, but same was materialized later on. The quantity of chilies, which were to be supplied to the plaintiff was 200 tons. I am not sure that the defendants have agreed to supply 250 tons chilies to the plaintiff.
It is true that when this case was going on, I was in constant touch with our advocate. I have not seen the documents produced by the plaintiff, in this case. I have not seen all the documents produced by the plaintiff in this case and I have seen only few of them, from time to time.
Earlier we have supplied chilies to the plaintiff and the plaintiff in turn supplied chi lies to the supply-co.
Again witness on asking what was the total amount of the order, stated that it was Rs.85.00 lakhs. There was no finance advanced by the plaintiff for the supply made by the defendants, on earlier occasions. There
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was no agreement also for said finance on the said earlier occasions.
I am doing finance business at Bangalore. Between 1991 and beginning to 1992 and end of 1992, I might have gone to Nagpur for about 4-5 times. Once in the said visit, I was at Nagpur for about 15 days and on other occasions for about 4-5- days. I used to stay at Nagpur with my brother-in-law Suresh namely defendant No.3, Prakash, Suresh and Rajesh namely defendants No.2 to 4 used to stay in one house. I was not attending the office duties of the said defendants No.2 to 4.
The statement made by me in my affidavit evidence recorded as my Examination in Chief the meaning of plaintiff ought to have taken steps to mitigating is that the plaintiff could have purchased chilies in the market and supplied to the Supply-co. The main reason for losses was for non financing as promised with regard to said supply of chilies."
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41. The relevant portion of the cross- examination of DW2 is extracted hereunder:
"The plaintiff had not supplied the finance to the earlier supplies. There was oral contract between plaintiff and defendants and two terms were that the plaintiff had agreed to finance and we have agreed to supply the chilies. It is not true to suggest that there was no agreement to finance by the plaintiff to the defendants.
We were getting supply of chilies from Guntur and Nagpur. I do not know that the persons concerned who were supplying chilies to us were also importing. We have asked to the plaintiff to get extension of time since we had no finance."
42. The aforesaid testimony of DW1 and DW2 would indicate that the finance was the main reason for no supply of the red chilies as agreed and it is an admitted fact that though they had supplied chilies earlier, the plaintiff has not advanced any finance.
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Thus, the defendants have failed to establish that the plaintiff had agreed to finance for the supply of 250 MTs of red chilies. The oral and documentary evidence would clearly establish the breach of contract in not supplying the red chilies as agreed which resulted in the damages in the nature of penalty quantified by the supplier company at Rs.23,37,500/- as per Exs.30 to 32.
43. It is true that in terms of the judgment of the Hon'ble Apex Court in Union of India V/s. Raman Iron Foundry supra, the claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by the Court or order of adjudicative authority, the only right which the party agreed by the breach of contract is the right to sue for damages. Much emphasis was placed by the learned counsel for the defendants on this decision to contend that there was no adjudication upon the assessment of
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the damages by a decree or order of the court or other adjudicative authority.
44. In the light of Exs.P13 to P32 and the testimony of DW1 and DW2 it cannot be held that there was no assessment of damages. The defendants had admitted that they are bound by the terms and conditions of Ex.P1 and as per the purchase order dated 04.07.1991 and other exhibits it was specifically agreed by the defendants that losses to be fulfilled. Further DW 1 has admitted that quality, quantity, time of supply and place of supply were essence of the contract. Even though according to DW-1, it was oral contract, it has been admitted that they had full knowledge of the orders placed by SUPPLYCO. SUPPLYCO has determined the losses considering the subsequent tender for supply to purchase 250Mts of red chilies at Rs.4,075/- per quintal incurring an extra expenditure to the extent of Rs.23,37,500/- owing to the breach of
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contract committed by the plaintiff and this amount has been already appropriated as per Exs.P31 and 32 from the account of the plaintiff. Hence, the judgment referred to by the learned counsel for the defendants/appellant would not come to the assistance to contend that there was no adjudication regarding the assessment of damages claimed.
45. Defendants merely taking a defence that there was no written agreement and the plaintiff has failed to finance as agreed, would not be suffice to discard the documentary and oral evidence placed by the plaintiff.
46. For the aforesaid reasons and discussions, we do not find any perversity or infirmity in the findings of the Trial Court holding that defendants No.1 to 4 are jointly and severally liable to pay penalty of Rs.33,64,560/-.
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47. We are conscious that the liability has arisen due to the commercial transaction but having regard to the facts and circumstances of the case, we deem it appropriate to award interest at 6% p.a., on the aforesaid decretal amount of Rs.33,64,560/- from the date of the suit till the date of realization failing which the plaintiff is at liberty to proceed against the properties of the defendants No.1 to 4 jointly and severally.
In the result, appeal is partly allowed to the extent indicated above.
Draw modified decree accordingly.
Sd/-
JUDGE Sd/-
JUDGE Dvr/Nc