Bangalore District Court
M S Tata Motors Limited vs Bangalore Metropolitan Transport ... on 15 March, 2024
KABC170086542020
IN THE COURT OF LXXXIII ADDL. CITY CIVIL & SESSIONS JUDGE,
COMMERCIAL COURT, BENGALURU (CCH-84)
Present: Sri S. Sudindranath, LL.M., M.B.L.,
LXXXIII ADDL. CITY CIVIL & SESSIONS JUDGE
BENGALURU.
COM.OS.No.1905/2016
Dated on this 15th day of March 2024
Plaintiff M/s. Tata Motors Limited,
Having its Registered Office at:
Bombay House 24,
HomiMody Street,
Mumbai-400001.
Represented by its Manager(Legal),
Ms.Thinlay Chukki
D/o Mr.Tsering Wangdu,
Aged about 28 years.
(By Sri.Deepak Sabarwal, Advocate)
// versus //
Defendants 1. Bengaluru Metropolitan Transport
Corporation
Central Office,
K.H.Road, Shanthinagar,
Bengaluru-560027.
2. Bengaluru Metropolitan Transport
Corporation,
Through the Managing Director
Central Office, K.H.Road,
Shanthinagar,
Bengaluru-560027.
3. Bengaluru Metropolitan Transport
2 Com.OS 1905/2016 Judgment
KABC170086542020
Corporation
Through the Chief Mechanical
Engineer (P&TPT)
Central Office, K.H.Road,
Shanthinagar,
Bengaluru-560027.
(D1 to D3 by Sri.D.H.L, Advocate)
Date of Institution of suit : 04/03/2016
Nature of the suit : Recovery of Money
Date of commencement of : 18/03/2020
recording of the evidence
Date on which the : 15/03/2024
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
08 00 11
JUDGMENT
This is suit filed by the plaintiff company against defendant no.1 to 3 who are essentially BMTC represented by different officials, for recovery of sum of Rs. 2,42,54,245/= along with interest at 18% per annum, from date of suit till date of realization.
2. The plaint averments in brief are that, the plaintiff is a company engaged in manufacture and sale of motor vehicles. The defendants who are essentially BMTC [Bangalore Metropolitan Transport Corporation] represented by different 3 Com.OS 1905/2016 Judgment KABC170086542020 officials, floated tender dated 21-02-2009 for procuring buses. The plaintiff submitted bid for this tender and was awarded the contract for supply of 363 buses of one type and 98 buses of another type. The purchase order dated 31-03-2009 included KMPL guarantee clause stating that if the supplied buses do not achieve minimum average mileage of vehicles of similar wheelbase range and if the variation in the mileage is lesser by more than 2% compared to the corporation average during the warranty period, the defendant will have the right to invoke guarantee clause to recover difference in diesel consumption cost from the security deposit or any other pending amount with the defendant. Accordingly, the plaintiff supplied the buses to the defendant. Some issues were raised by the defendant regarding operational problem and problem of oil thickening in the supplied buses and there was some correspondence between the parties in this regard. The defendant also raised issues regarding the fuel consumption and the mileage of the buses by the letter dated 28-07-2011. Ultimately, by letter dated 27-11-2012, defendant informed the plaintiff that they had compared the KMPL mileage of the 98 buses supplied under the purchase order dated 31-03- 4 Com.OS 1905/2016 Judgment KABC170086542020 2009 with Volvo Mark III buses and the mileage of the Plaintiff's buses was found to be lesser than that of the Volvo Mark III buses. The said letter was appropriately replied to by the plaintiff. In the meanwhile, the defendant floated another tender for which plaintiff submitted bid and accordingly plaintiff was awarded the contract for supply of several other buses as per purchase orders dated 5-12-2011, 2-1-2012 and 29-1-2013. In respect of the payment to be made by defendant towards supply of the said buses of the purchase order of 2011 to 2013, the defendants deducted Rs.50 lakhs on 9-1-2013 and deducted Rs.10 lakhs on 4-3-2013 and Rs.90 lakhs on 7-3-2013 on the ground that, said deductions were under the head of difference in diesel consumption due to lesser mileage given by the Plaintiff's buses supplied under the purchase order dated 31-03-2009. Thereby, in respect of the payment for totally different tender, deduction was made for alleged lesser mileage of buses supplied under earlier tender. Contending that the said deduction made by the defendant is totally illegal and unwarranted and contrary to the terms of the contract and that initially the defendant had alleged that they were entitled to deduct Rs.3,54,10,483 5 Com.OS 1905/2016 Judgment KABC170086542020 towards diesel cost but subsequently they have deducted Rs.1,50,00,000 and thereby conceded that their claim is illegal and arbitrary and the defendant is not entitled to deduct any amount much less Rs.1,50,00,000 because there was no issue of lesser mileage / KMPL of the buses supplied by the plaintiff and for arriving at lesser mileage / KMPL, the defendant has compared the mileage of the plaintiff's buses with buses of totally different wheel base and contending that, viewed from any angle, the defendant is not entitled to make the deduction in payment for totally different tender, suit is filed for recovery of the principal amount of Rs.1,50,00,000 along with interest thereon at 18% per annum from due date, i.e., for recovery of total sum of Rs.2,42,54,245/= along with future interest.
3. The defendants entered appearance through Counsel and filed detailed written statement denying the plaint averments. The defendants took up the preliminary objection that before filing the present suit, the plaintiff had filed CMP before the Hon'ble High Court of Karnataka for appointment of arbitrator and Hon'ble High Court directed the plaintiff to approach Managing Director of Defendant Corporation and if 6 Com.OS 1905/2016 Judgment KABC170086542020 no resolution could be reached, to avail other remedies in accordance with law. It is contended that, the plaintiff has filed the suit without following the procedure as directed by the Hon'ble High Court and has not approached the MD of Defendant Corporation and therefore the suit itself is not maintainable.
4. It was further contended that the 98 buses supplied by the plaintiff under the Purchase Order dated 31-03-2009 were of such poor quality that they had to be scrapped prematurely by taking the permission of the government. Apart from this, it was contended that the said 98 buses were inefficient and were giving very low KMPL / mileage and therefore the defendant was forced to issue a letter dated 27- 11-2012 calculating the diesel cost for lesser mileage given by the buses at Rs 3,54,10,483. However, it is only a sum of Rs 50 lakhs which has been deducted by the defendant towards the said lesser mileage given by the said 98 buses. It was contended that the remaining Rs 1 crore was deducted for failure of the plaintiff to meet the KMPL Guarantee Clause in Purchase Order dated 21-01-2009 for supply of 433 chassis and in this regard, the BMTC has issued the letters dated 2- 7 Com.OS 1905/2016 Judgment KABC170086542020 6-2012 quantifying the diesel cost for difference in mileage at Rs 3,16,24,833 and the letter dated 25-09-2012 quantifying the diesel cost for difference in mileage as Rs 31,26,762 and therefore, for the 433 chassis supplied under purchase order dated 21-01-2009, the BMTC is entitled to deduct diesel cost for lesser mileage of total sum of Rs 3,47,51,595/= but in fact the defendant has only deducted Rs 1 crore. Thereby justifying the deduction of Rs 1.50 crores from payment to be made for subsequent tender, the defendants have prayed for dismissal of the suit.
5. On the basis of the rival pleadings, the following issues were framed;
1) Whether the plaintiff proves that defendants wrongly deducted Rs 1,50,00,000 from payment which was to be paid for the buses supplied under the Purchase Order No. BMTC-STR-LP-522-2011-12 of tender TE-74- 2011 as contended in Paragraph 20 and 21 of the plaint?
2) Whether the defendants prove that chassis supplied by the plaintiff were not according to quality standards and 98 buses of BS3- 1618TC-244WB-AC-RE-ACLF type supplied by the plaintiff encountered defects resulting in low fuel performance and as such BMTC invoked the fuel guarantee 8 Com.OS 1905/2016 Judgment KABC170086542020 clause and calculated financial losses and deducted Rs 1,50,00,000?
3) Whether the plaintiff is entitled for interest at 18% per annum on the deducted sum of Rs 1,50,000,000?
4) Whether the plaintiff is entitled to suit relief claimed?
5) What decree or order?
6. In the trial, the representative of the plaintiff was examined as PW1 and got marked Ex. P1 to P19. On behalf of the defendants, the authorised representative was examined as DW1 and got marked Ex. D1 to D18.
7. After closure of evidence of both sides, I have heard the arguments of both sides and perused the records of the case.
8. My answer to the issues are as follows;
Issue No. 1 : In the affirmative.
Issue No. 2 : In the negative.
Issue No. 3 and 4 : As per finding.
Issue No. 5 : As per final order for the following :-
REASONS Issue No. 1 and 2.
9. These issues require common discussion and hence considered together.
9 Com.OS 1905/2016 Judgment KABC170086542020
10. The case of the plaintiff is that, the plaintiff is a company engaged in manufacture and sale of motor vehicles. The defendants who are essentially BMTC [Bangalore Metropolitan Transport Corporation] represented by different officials, floated tender dated 21-02-2009 for procuring buses. The plaintiff submitted bid for this tender and was awarded the contract for supply of 363 buses of one type and 98 buses of another type. The purchase order dated 31-03-2009 included KMPL guarantee clause stating that if the supplied buses do not achieve minimum average mileage of vehicles of similar wheelbase range and if the variation in the mileage is lesser by more than 2% compared to the corporation average during the warranty period, the defendant will have the right to invoke guarantee clause to recover difference in diesel consumption cost from the security deposit or any other pending amount with the defendant. Accordingly, the plaintiff supplied the buses to the defendant. Some issues were raised by the defendant regarding operational problem and problem of oil thickening in the supplied buses and there was some correspondence between the parties in this regard. The defendant also raised issues regarding the fuel consumption 10 Com.OS 1905/2016 Judgment KABC170086542020 and the mileage of the buses by the letter dated 28-07-2011. Ultimately, by letter dated 27-11-2012, defendant informed the plaintiff that they had compared the KMPL mileage of the 98 buses supplied under the purchase order dated 31-03- 2009 with Volvo Mark III buses and the mileage of the Plaintiff's buses was found to be lesser than that of the Volvo Mark III buses. The said letter was appropriately replied to by the plaintiff. In the meanwhile, the defendant floated another tender for which plaintiff submitted bid and accordingly plaintiff was awarded the contract for supply of several other buses as per purchase orders dated 5-12-2011, 2-1-2012 and 29-1-2013. In respect of the payment to be made by defendant towards supply of the said buses of the purchase order of 2011 to 2013, the defendants deducted Rs.50 lakhs on 9-1-2013 and deducted Rs.10 lakhs on 4-3-2013 and Rs.90 lakhs on 7-3-2013 on the ground that, said deductions were towards cost of diesel price due to lesser mileage given by the Plaintiff's buses supplied under the purchase order dated 31-03-2009. Thereby, in respect of the payment for totally different tender, deduction was made for alleged lesser mileage of buses supplied under earlier tender. Contending 11 Com.OS 1905/2016 Judgment KABC170086542020 that the said deduction made by the defendant is totally illegal and unwarranted and contrary to the terms of the contract and that initially the defendant had alleged that they were entitled to deduct Rs.3,54,10,483 towards diesel cost but subsequently they have deducted Rs.1,50,00,000 and thereby conceded that their claim is illegal and arbitrary and the defendant is not entitled to deduct any amount much less Rs.1,50,00,000 because there was no issue of lesser mileage / KMPL of the buses supplied by the plaintiff and for arriving at the finding of lesser mileage / KMPL, the defendant has compared the mileage of the plaintiff's buses with buses of totally different wheel base and contending that, viewed from any angle, the defendant is not entitled to make the deduction in payment for totally different tender, suit is filed for recovery of the principal amount of Rs.1,50,00,000 along with interest thereon at 18% per annum from due date, i.e., for recovery of total sum of Rs.2,42,54,245/= along with future interest.
11. In support of its case, the plaintiff has examined its authorised representative as PW1 and got marked Ex. P1 to P19. Ex. P1 is the purchase order dated 31-03-2009 for 12 Com.OS 1905/2016 Judgment KABC170086542020 supply of 98 buses. Ex. P2 is a letter issued by defendant calling officials of plaintiff for a meeting to discuss operational problems in respect of the buses supplied. Ex. P3 is a letter issued by plaintiff to the defendant stating the expected minimal KMPL in respect of the supplied buses is 3.2 KMPL and 1.6 KMPL in respect of the two types of buses supplied under the tender. Ex. P4 is the letter dated 27-11-2012 under which the defendant has quantified the diesel cost for lesser KMPL at Rs. 3,54,10,483 in respect of the 98 buses supplied under the purchase order dated 31-03-2009 and it is on the basis of this letter that ultimately Rs. 50 Lakhs is deducted from payment to be made in respect of a subsequent tender. Ex. P5 is the reply of the plaintiff to the said letter. Ex. P6 is another letter issued by the plaintiff contending that for arriving at average expected KMPL, the BMTC has committed error in comparing the KMPL with buses of different wheelbase. Ex. P7 is the legal notice dated 16-02-2015 caused by the plaintiff to the defendant demanding payment of Rs. 1,50,00,000 along with interest on the ground that it has been wrongfully deducted by the defendant. Ex. P8 to 11 are the postal receipts and acknowledgement cards in respect 13 Com.OS 1905/2016 Judgment KABC170086542020 to the said legal notice. Ex. P12 is the reply caused by the defendant to the legal notice. Ex. P13 is Certificate of Incorporation of Plaintiff Company. Ex. P14 is the ledger extract maintained by the plaintiff which discloses the payments and deductions made by the defendant. Ex. P15 is the authorisation letter in favour of PW1. Ex. P16 is purchase order dated 31-03-2009 for supply of 363 buses. Ex. P17 are the Terms and Conditions for Procurement of the Buses. Ex. P18 is the purchase order dated 31-03-2009 for supply of 98 buses which is already marked as Ex.P 1. Ex.P 19 is the minutes of meeting dated 13-6-2012 between the officials of plaintiff and defendant.
12. Per contra, the defence raised by the defendants is that, before filing the present suit, the plaintiff had filed CMP before the Hon'ble High Court of Karnataka for appointment of arbitrator and Hon'ble High Court directed the plaintiff to approach Managing Director of Defendant Corporation and if no resolution could be reached, to avail other remedies in accordance with law. It is contended that, the plaintiff has filed the suit without following the procedure as directed by the Hon'ble High Court and has not approached the MD of 14 Com.OS 1905/2016 Judgment KABC170086542020 Defendant Corporation and therefore the suit itself is not maintainable. It is further contended that the 98 buses supplied by the plaintiff under the Purchase Order dated 31- 03-2009 were of such poor quality that they had to be scrapped prematurely by taking the permission of the government. Apart from this, it is contended that the said 98 buses were inefficient and were giving very low KMPL / mileage and therefore the defendant was forced to issue a letter dated 27-11-2012 calculating the diesel cost for lesser mileage given by the buses at Rs 3,54,10,483. However, it is only a sum of Rs 50 lakhs which has been deducted by the defendant towards the said lesser mileage given by the said 98 buses. It is contended that the remaining Rs 1 crore was deducted for failure of the plaintiff to meet the KMPL Guarantee Clause in Purchase Order dated 21-01-2009 for supply of 433 chassis and in this regard, the BMTC has issued the letters dated 2-6-2012 quantifying the diesel cost for difference in mileage at Rs 3,16,24,833 and the letter dated 25-09-2012 quantifying the diesel cost for difference in mileage as Rs 31,26,762 and therefore, for the 433 chassis supplied under purchase order dated 21-01-2009, the BMTC 15 Com.OS 1905/2016 Judgment KABC170086542020 is entitled to deduct diesel cost for lesser mileage of total sum of Rs 3,47,51,595/= but in fact the defendant has only deducted Rs 1 crore. Thereby justifying the deduction of Rs 1.50 crores from payment to be made for subsequent tender, the defendants have prayed for dismissal of the suit.
13. In support of its case, the defendant has examined its authorised representative as DW1 and got marked Ex. D1 to D18. Ex. D1 is a letter of authorisation in favour of DW1. Ex. D2 is the tender documents calling for supply of buses. Ex. D3 is the correspondence between the plaintiff and defendant in respect of various operational problems in respect of the 98 buses supplied under tender dated 31-03-2009. Ex. D4 is the letter of divisional controller of defendant along with calculations in respect of loss of vehicle days due to the operational problems in the buses supplied by the plaintiff. Ex. D5 is the purchase order dated 21-01-2009. Ex. D6 is the letter dated 2-6-2012 under which defendant has quantified the diesel cost for lesser KMPL given by said buses supplied under Ex. D5 purchase order at Rs 3,16,24,833. Ex. D7 is similar letter of defendant dated 25-09-2012 under which Defendant has quantified the diesel cost due to lesser KMPL 16 Com.OS 1905/2016 Judgment KABC170086542020 given by the buses at Rs 31,26,762. Ex. D8 is the technical report in respect of 98 buses supplied under the purchase order dated 31-03-2009. Ex. D9 is the board resolution of defendant for premature scrapping of the 98 buses. Ex. D10 is proposal by defendant to the state government for premature scrapping of 98 buses purchased under purchase order dated 31-03-2009. Ex. D11 is the letter issued by defendant to the plaintiff to buy back the said 98 buses due to premature operational failure. Ex.P 12 is the minutes of meeting dated 01-08-2011 and 17-08-2011 between the officials of plaintiff and defendant. Ex. D13 is letter by defendant to the plaintiff raising various complaints regarding operation and fuel consumption of buses supplied by the plaintiff and calling upon the plaintiff to indicate expected KMPL of the buses. Ex. D14 is table of warranty of the 98 buses supplied under the purchase order dated 31-03-2009. Ex. D-15 is certified copy of Orders dated 9-6-2017 in CMP- 277 of 2015 and connected matters filed by Petitioner for appointment of arbitrator to settle the dispute between the parties, which is dismissed with liberty to approach MD of defendant and if no resolution is reached, to avail remedies in 17 Com.OS 1905/2016 Judgment KABC170086542020 accordance with law before the Civil Court. Ex. D-16 is the order of the State Government for premature scrapping of the 98 buses. Ex. D-17 is the specifications of the supplied buses. Ex. D-18 is the 65B certificate.
14. Having considered the rival contentions and the oral and documentary evidence on record, at the outset, although no issue is framed in this regard, it is appropriate for this Court to consider the preliminary objection raised by the defendants that present suit is not maintainable in view of non-compliance with the directions of Hon'ble High Court to approach MD of defendants for resolution, and only if no such resolution is reached before the MD, to approach the Civil Court for appropriate remedy. In this regard, admittedly, before filing the present suit, the Plaintiff had approached Hon'ble High Court of Karnataka in C.M.P. 277 of 2015 for appointment of arbitrator for resolution of dispute between the parties, on the premise that the agreement between the parties contains arbitration clause. The orders passed by Hon'ble High Court of Karnataka is marked as Ex. D-15. The perusal of Ex. D-15 discloses that Hon'ble High Court has observed at paragraph 4 that the clause in the agreement 18 Com.OS 1905/2016 Judgment KABC170086542020 between the parties is not in the nature of an arbitration clause, but at best, it is in the nature of internal Conciliation mechanism wherein the Petitioner / Plaintiff herein, may raise his grievance to seek resolution before availing the remedy in accordance with law and ultimately, on basis of this finding, Hon'ble High Court has refused the prayer of the Petitioner / Plaintiff herein to appoint arbitrator, and disposed off the Petition in the following terms;
"The Petition is disposed off with liberty to approach the Managing Director, KSRTC with its grievance, and if no resolution is reached, the Petitioner may avail its remedies in accordance with law before the Civil Court."
15. Relying upon the above observation of Hon'ble High Court, it is contended by the Defendants in the written statement that, suit is not maintainable since Plaintiff has not approached MD of the Defendant with grievance and directly filed the suit. This contention has to be stated only to be rejected because Hon'ble High Court has clearly observed at paragraph 4 of the said Orders as follows;
"In so far as clause 20 (h) is concerned, it is not in the nature of an arbitration clause, but at best, an internal Conciliation mechanism wherein the Petitioner may raise his grievance to seek 19 Com.OS 1905/2016 Judgment KABC170086542020 resolution before availing remedy in accordance with law."
16. The use of the word "may" makes it clear that Hon'ble High Court has clearly held that, it is the option of the Plaintiff to approach the Managing Director to seek resolution before approaching the Civil Court and the Plaintiff is not bound to approach the MD before approaching Civil Court. Therefore, it cannot be said that, suit is not maintainable merely because Plaintiff has failed to approach the MD for resolution.
17. At this stage, it is appropriate for this Court to consider the question whether suit is filed within the period of limitation. This is because, although no contention is raised in the written statement and no issue is framed in this regard, under Section 3 of the Limitation Act, the Court is duty bound to consider the question of limitation even if it is not raised as a defense. The present suit is filed for recovery of principal sum of Rs 1,50,00,000 along with interest, on the ground that it has been wrongfully deducted by defendants. The said sum of Rs 1,50,00,000 has been deducted in three stages viz. Rs 50,00,000 has been deducted on 9-1-2013. Rs 20 Com.OS 1905/2016 Judgment KABC170086542020 10,00,000 has been deducted on 4-3-2013 & Rs 90,00,000 has been deducted on 7-3-2013. Therefore, the date of last deduction is 7-3-2013, which furnishes the cause of action to the Plaintiff to file the present suit and therefore, the suit having been filed within 3 years from 07-03-2013 is within the period of limitation.
18. Having disposed off the above preliminary contentions, let me now focus my attention on the main disputed fact between the parties.
19. The facts which are relevant to be stated for deciding these issues lie within a narrow compass and can be briefly stated as follows. Under Purchase Order dated 31-3-2009 at Ex. P-1, Plaintiff has supplied 98 buses to the defendant corporation. For the sake of convenience, these buses are referred to as Marcopolo buses. The said Purchase Order contained KMPL Guarantee Clause at Paragraph 19 as follows;
"M/s Tata Motors shall stand guarantee to achieve minimum average HSD KMPL of the vehicles of similar WB range of the corporation, if the variation in actual KMPL of similar vehicles 21 Com.OS 1905/2016 Judgment KABC170086542020 is lesser more than by 2% compared to the corporation average KMPL during warranty period, the corporation will have the right to invoke the Guarantee Clause to recover the difference in diesel consumption cost from the security deposit or any pending amount with the corporation. However, M/s Tata Motors may initiate suitable measures under mutual consent to monitor KMPL and for maintenance of the vehicles."
20. Under another Purchase Order marked as Ex. D-5 dated 21-1-2009, Plaintiff supplied another 433 chassis to the defendant corporation. The said Purchase Order also contained KMPL Guarantee Clause at Paragraph 16 in similar terms as in the purchase order of the Marcopolo buses.
21. On the ground that the 98 Marcopolo buses have not met the minimum KMPL guarantee, the defendant issued letter dated 27-11-2012 stating that the KMPL of the said 98 Marcopolo buses is very low and it is in the order of 1.73 to 1.93 which is far below the average fuel performance of comparable Volvo Mk3 vehicles having similar wheelbase. In the said letter, the total cost of difference in diesel consumption due to lower KMPL of the buses was calculated at Rs. 3,54,10,483.
22 Com.OS 1905/2016 Judgment KABC170086542020
22. Similarly, on the ground that the 433 chassis supplied under Purchase Order dated 21-1-2009 are giving lesser than the guaranteed KMPL, the defendant issued two letters dated 2-6-2012 and 25-9-2012 at Ex. D-6 and D-7 wherein it was stated that average fuel performance as per the Purchase Order should be in the order of 4.46 KMPL but the fuel performance of the vehicles is below the reference value and hence by invoking the KMPL guarantee clause in the Purchase Order, the defendant has quantified the excess consumption of diesel by the vehicles at Rs. 3,16,24,833 and Rs. 31,26,762. Therefore, on the ground of violation of the KMPL guarantee clause in the above two Purchase Orders, the defendant issued the letters claiming the excess diesel consumption at Rs. 3,54,10,483 towards the 98 Marcopolo buses and Rs. 3,47,51,595 in respect of the 433 chassis, supplied under the Purchase Order dated 21-01-2009.
23. In respect of payment which had to be made by Defendant to Plaintiff in respect of totally different subsequent tender of the year 2011 to 2013, the defendant has deducted Rs. 50 lakhs under head of excess diesel consumption claimed in respect of 98 Marcopolo buses and 23 Com.OS 1905/2016 Judgment KABC170086542020 also deducted Rs. 10 lakhs and Rs. 90 lakhs under head of excess diesel consumption claimed in respect of 433 chassis.
24. It is for recovery of the said deducted amount of Rs. 1,50,00,000 that present suit is filed.
25. Before considering the question whether, on facts, the defendant was right in deducting the said amount from the subsequent payment to be made to the plaintiff for totally different tenders, let me consider two legal contentions raised by the plaintiff against the said deduction. Firstly, it was contended that such deduction could not have been made in respect of payment relating to a totally different subsequent tender and deduction, if any, ought to have been made in respect of payment under the same tender, in respect of which the KMPL Guarantee Clause is invoked. This contention has to be rejected on the short ground that the plain language of the KMPL Guarantee Clause in the two purchase orders at Ex. P1 and Ex. D5 is crystal clear that difference in diesel consumption cost may be recovered from the security deposit or any pending amount with the corporation [Defendant]. It is trite that security deposit 24 Com.OS 1905/2016 Judgment KABC170086542020 amount will be released once the contract is completed and once security deposit amount is released, there will be normally no further payment in respect of the same tender available with the defendant corporation. Therefore, the specific words used in the KMPL Guarantee Clause that the difference amount can be recovered either from security deposit amount or any pending amount with the corporation makes it clear that any pending amount refers to not only the amount payable under the same tender but also in respect of any other subsequent tender. Therefore, having agreed to the said clause, it is now too late for the plaintiff to contend that the defendant cannot deduct the difference in diesel consumption cost from subsequent payment payable in respect of a different tender.
26. The second legal ground raised against the deduction is by placing reliance upon the ruling of Hon'ble Apex Court in Gangotri Enterprises Ltd. v. Union of India, (2016) 11 SCC 720 : (2016) 4 SCC (Civ) 480 : 2016 SCC OnLine SC 415 at page 730, as follows;
37. Their Lordships in Raman Iron Foundry case [Union of India v. Raman Iron Foundry, 25 Com.OS 1905/2016 Judgment KABC170086542020 (1974) 2 SCC 231] approved the view taken by Chagla, C.J. in Iron and Hardware (India) Co. v. Shamlal and Bros. [Iron and Hardware (India) Co. v. Shamlal and Bros., 1954 SCC OnLine Bom 5 : AIR 1954 Bom 423] by observing in para 11 as under: (Raman Iron Foundry case [Union of India v. Raman Iron Foundry, (1974) 2 SCC 231] , SCC pp. 244-45, paras 11-12) "11. ... The same view has also been taken consistently by different High Courts in India. We may mention only a few of the decisions, namely, Jabed Sheikh v. Taher Mallik [Jabed Sheikh v. Taher Mallik, 1941 SCC OnLine Cal 36 :
AIR 1941 Cal 639] , S. Milkha Singh v. N.K. Gopala Krishna Mudaliar [S. Milkha Singh v. N.K. Gopala Krishna Mudaliar, 1956 SCC OnLine P&H 76 : AIR 1956 P&H 174] and Iron and Hardware (India) Co. v. Shamlal and Bros. [Iron and Hardware (India) Co. v. Shamlal and Bros., 1954 SCC OnLine Bom 5 : AIR 1954 Bom 423] Chagla, C.J. in the last mentioned case, stated the law in these terms: (SCC OnLine Bom : AIR pp. 425-26) '... In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party.
As already stated, the only right which he has is the right to go to a court of law and recover damages. Now, damages are the compensation which a court of law gives to a party for the injury which he has sustained. But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the court. Therefore, no pecuniary liability arises till the court has determined that the party complaining of the breach is entitled to 26 Com.OS 1905/2016 Judgment KABC170086542020 damages. Therefore, when damages are assessed, it would not be true to say that what the court is doing is ascertaining a pecuniary liability which already existed. The court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant.' This statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause 18, to recover the amount of such claim by appropriating other sums due to the contractor. On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on a proper construction of Clause 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a court or other adjudicatory authority. We must, therefore, hold that the appellant had no right or authority under Clause 18 to appropriate the amounts of other pending bills of the respondent in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim injunction restraining the appellant from doing so.
12. We accordingly dismiss the appeals. The appellant in each appeal will pay the costs of the respondent all throughout."
27. In the light of above law laid down by Hon'ble Apex Court, Learned Counsel for Plaintiff contented that the claim for breach of contract is not a claim for sum presently due 27 Com.OS 1905/2016 Judgment KABC170086542020 and therefore unless the defendant corporation approaches the court of law and gets the damages for breach of contract, i.e., breach of KMPL guarantee Clause quantified by decree of court, the defendant cannot deduct any amount from the payments to be made to the plaintiff. In other words, the contention is that, even conceding that there is a breach of KMPL guarantee Clause, it is for the defendant corporation to first approach the court and get a decree quantifying the damages payable to the defendant for breach of the KMPL guarantee Clause and only after getting such a decree, the defendant may deduct any amount from the payment to be made to the plaintiff.
28. This contention cannot be accepted because, in the case on hand, the parties have themselves agreed upon a mechanism for quantifying the damages. The mechanism agreed upon by the parties is that the KMPL of the supplied vessel should be compared with KMPL of similar wheelbase and if the KMPL of vehicle supplied by Plaintiff is lesser by more than 2%, the difference in diesel consumption is the damages which can be deducted by the defendant corporation from any other payment to be made to the plaintiff. In view of 28 Com.OS 1905/2016 Judgment KABC170086542020 the said specific terms of understanding between the parties as forthcoming from the purchase order which is an admitted document, it cannot be accepted that, defendant is first expected to approach the court to get quantified the amount of damages payable under KMPL guarantee Clause and only then deduct the amount.
29. Having disposed off the above legal contentions, let me now consider, on facts, whether defendant was justified in claiming the difference in diesel cost in respect of the 98 Marcopolo Buses at Rs. 3,54,10,483 under Ex. P-4 letter and Rs. 3,47,51,595 under Ex. D-6 and 7 letters.
30. At this stage it is to be noted that defendant has produced voluminous documents in the form of correspondence between the parties and minutes of meetings between the parties in respect of operational issues in the buses. Documents are produced to show the loss of vehicle days due to operational issues. Documents are produced to show that due to the operational issues the 98 Marcopolo buses had to be prematurely scrapped after taking permission of the government and at that stage when plaintiff was called 29 Com.OS 1905/2016 Judgment KABC170086542020 upon to buy back the buses, plaintiff refused to do the same on the ground that it was not included in the contract. However, all these documents are irrelevant because, ultimately, the deduction is made not towards any damages for operational issues of the buses, but only for violation of the KMPL guarantee clause towards difference in diesel consumption charges.
31. Therefore let me focus my attention only on the question whether the deduction was valid under the KMPL clause agreed to between the parties. In this regard, the KMPL clause in the two purchase orders at Ex. P1 and Ex. D5 are verbatim the same and has already been extracted supra. What is important to note is that, under the said KMPL clause the guarantee is to achieve minimum average HSD KMPL of similar wheelbase range of the corporation. Therefore the KMPL of the supplied buses should be compared with average KMPL given by other vehicles of the defendant of similar wheelbase and thereafter if the variation is more than 2% i.e. if the KMPL of the supplied buses and chassis is lesser than the average KMPL given by buses of similar wheelbase by more than 2%, then, the KMPL guarantee clause gets 30 Com.OS 1905/2016 Judgment KABC170086542020 activated and defendant gets the right to recover the difference in diesel consumption cost from the plaintiff.
32. With respect to the 98 Marcopolo buses supplied under Ex. P1, the KMPL clause is invoked by the letter of the defendant at Ex. P4 dated 27-11-2012. Reading of the said letter at Ex. P4 discloses that the KMPL of 98 Marcopolo buses have been compared with KMPL of Volvo MK3 vehicles having 244-inch wheelbase. In the cross-examination of DW 1, at paragraph 4, page 8 of the deposition, he has admitted the suggestion that, wheelbase of Volvo MK3 bus is 10-inch lesser than that of Tata Bus. In the same paragraph, he has admitted the suggestion that BMTC was not having any similar buses to be compared and hence BMTC wrote letter as per Ex. D13 to the plaintiff seeking expected KMPL. Therefore, it is clear that the defendant has not compared the KMPL of supplied 98 Marcopolo buses with buses of similar wheelbase but has taken the KMPL of Volvo MK3 as the benchmark which has a different wheelbase. Even in the technical report produced at Ex. D8, no discussion is made to show that the Volvo MK3 bus with which the mileage of Marcopolo buses was compared is having similar wheelbase as that of 31 Com.OS 1905/2016 Judgment KABC170086542020 Marcopolo buses. On this short ground, the entire premise on which the calculation of excess diesel consumption is made falls to the ground.
33. No doubt it was vehemently argued by Learned Counsel for Defendant that, in fact, the Volvo bus has lesser wheelbase and has higher horsepower than compared to Marcopolo buses and therefore the comparison is actually to the advantage of the plaintiff because it is trite that buses with higher horsepower will give lesser mileage compared to buses with lesser horsepower. The contra-argument of the plaintiff is that, the Volvo buses cost in the range of Rs 80 lakhs whereas the Marcopolo buses supplied was in the range of Rs 30 lakhs and hence the comparison is unfair and to the disadvantage of the plaintiff. It is not necessary to enter into these arguments because the admitted clause of the contract between the parties was to compare supplied buses with buses of similar wheelbase. Admittedly, the wheelbase of Volvo bus which was taken as the benchmark for KMPL is 10 inches lesser than the wheelbase of supplied Marcopolo buses. It is admitted by DW1 that, the BMTC did not have any similar buses and therefore sought for expected KMPL 32 Com.OS 1905/2016 Judgment KABC170086542020 information from plaintiff. This makes it clear that, the comparison of KMPL of Marcopolo buses with that of Volvo MK3 buses is against the terms of the KMPL clause agreed to between the parties since it was not of similar wheelbase. No doubt, the word used in the KMPL clause is "similar wheelbase" and not "same wheelbase" but no evidence is led by defendant to show what is the range of wheelbase which can be considered as similar to that of the supplied Marcopolo buses. Such being the case, the defendant was not justified in taking the KMPL of Volvo MK3 as the benchmark and on that ground invoking the KMPL guarantee clause on the ground that mileage of supplied Marcopolo buses is lesser than expected KMPL. Therefore, towards the said claim, deduction of Rs 50 Lakhs from payment to be made to the plaintiff is also unacceptable.
34. Now turning to the deduction in respect of the 433 chassis supplied under Ex. D-5 purchase order is concerned, as already noted Supra, the said purchase order contained a similar KMPL guarantee clause. The two letters under which the said KMPL guarantee clause is invoked and excess diesel consumption is quantified is at Ex. D-6 and D-7. In the said 33 Com.OS 1905/2016 Judgment KABC170086542020 letters it is stated that on careful analysis the average fuel performance as per clause 16 should be in the order of 4.46 KMPL. Then it is stated that fuel performance of the supplied chassis is below the reference, hence, clause 16 of the purchase order is invoked and on that basis the charge towards the cost of excess diesel consumed is quantified at Rs. 3,16,24,833 in Ex. D-6 and Rs. 31,26,762 in Ex. D-7. Therefore, it is clear that in respect of the 433 chassis the benchmark KMPL is taken as 4.46 kmpl. There is absolutely no material produced by the defendant to show on what basis the said benchmark KMPL of 4.46 kmpl was taken. It is to be noted that while in respect of the 98 Marcopolo buses the technical report is produced at Ex. D-8, no such technical report is produced in respect of the 433 chassis supplied under Ex. D5 Purchase Order. On the perusal of the technical report, Chapter 3.2 regarding Fuel Efficiency Analysis at page 10 to 12 of the technical report at Ex. D8, it is clear that what has been compared is only the fuel efficiency of Volvo Bus with Marcopolo Bus and there is no comparison in respect of fuel efficiency of 433 chassis supplied under Ex. D5 in the said technical report. Therefore, it appears, without any 34 Com.OS 1905/2016 Judgment KABC170086542020 basis, the defendant corporation has taken the benchmark as 4.46 KMPL in respect of the 433 chassis. Even in the letters at Ex. D6 and D7, no attempt is made to show with which vehicle the KMPL of the 433 chassis was compared to arrive at the conclusion that the 433 chassis are giving lower KMPL than guaranteed. Needless to state, when Clause 16 of the Purchase Order, provides that the minimum average KMPL guaranteed is that of similar wheelbase range of the corporation, without bringing on record which is the vehicle of similar wheelbase with which KMPL of 433 chassis was compared, arbitrarily setting the benchmark KMPL at 4.46 kmpl is unacceptable and unjustified. Such being the case, it follows that the claim for excess diesel consumption as made in Ex. D6 and D7 is unacceptable. Such being the case, towards the said claim, a deduction of Rs 1 crore from payment to be made to the plaintiff is also unacceptable.
35. For the above reasons, I hold that the deduction of Rs 1.50 Crores made by the defendant from payment to be made to the plaintiff is against the terms of the contract between the parties and unacceptable and therefore the defendant is 35 Com.OS 1905/2016 Judgment KABC170086542020 liable to refund the said amount of Rs 1.50 Crores to the plaintiff. Accordingly, I answer Issue No. 1 and 2. Issue No. 3 :
36. Now turning to the interest component claimed by the plaintiff, the plaintiff is claiming interest at 18% per annum from the due dates and the interest component is quantified at Rs 52,96,439 at paragraph 15 of the legal notice at Ex. P7 by calculating interest at 18% per annum up to 31-01-2015. The interest component as on the date of filing of the suit is calculated at additional sum of Rs 39,57,806 at paragraph 26 of the plaint and on that basis the total suit claim made is Rs 2,42,54,245/=.
37. Under section 3 (1) of the Interest Act, 1978, it is laid down as follows;
3. Power of court to allow interest.--(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,--
(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, 36 Com.OS 1905/2016 Judgment KABC170086542020 then, from the date when the debt is payable to the date of institution of the proceedings;
(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings:
Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment
38. In the case on hand, there was no contract between the parties to pay interest on the sum due. Therefore, the liability to pay interest arises only from the date of the legal notice at Ex. P7, which is dated 16-02-2015.
39. So far as the rate of interest is concerned, the plaintiff is claiming interest at 18% per annum. However, it is to be noted that the defendant although raised claims in the range of more than Rs 3 crores each for difference in diesel consumption towards the 98 Marcopolo buses and 433 chassis, deducted only sum of Rs 50 lakhs in respect of excess diesel consumption of Marcopolo buses and Rs 1 crore in respect of excess diesel consumption of 433 chassis. The defendant corporation has deducted the said amounts under the bona fide belief that, it is entitled to deduct the said sums
37 Com.OS 1905/2016 Judgment KABC170086542020 under the KMPL clause agreed to between the parties. The conduct of the defendant in deducting only Rs 1.50 crores although the claim towards excess diesel consumption was more than Rs 6.50 crores for both the purchase orders shows that the conduct of the defendant has been reasonable and cannot be termed unreasonable, arbitrary or mala fide. Therefore in my view, the interest at the rate of 18% as claimed by the plaintiff is excessive and considering that it is a commercial transaction between the parties, I am of the view that the rate of interest to be awarded on the principal amount is 9% per annum. Accordingly, I answer Issue No. 3 holding that plaintiff is entitled to recover the principal amount of Rs 1 crore 50 lakhs from the defendants along with the interest at the rate of 9% per annum from the date of legal notice i.e., 16-02-2015 till date of realization. Issue No. 4 :-
40. Having answered Issue No. 1 to 3 as above, I hold that plaintiff is only entitled to part of the suit claim i.e. Plaintiff is entitled to recovery of principal sum of Rs 1.50 crores along with interest at the rate of 9% per annum from 16-02-2015 till date of realization. Accordingly, I answer Issue No. 4.
38 Com.OS 1905/2016 Judgment KABC170086542020 Issue No. 5 :
41. Having answered Issue No. 1 to 4 as above, I proceed to pass the following :-
ORDER The suit is partly decreed, with cost. It is held that plaintiff is entitled to recover principal sum of Rs. 1,50,00,000/= (Rs. One Crore Fifty Lakhs Only) along with interest on the principal sum of Rs. 1,50,00,000/= at the rate of 9% per annum from 16-02-2015 [date of legal notice] till date of realization, from the defendants.
Office to draw decree accordingly. Office to issue soft copy of this order to both sides, by email, if furnished. [Dictated using Dragon Professional Speech Recognition Software Version 15.3, transcript revised, corrected, signed and then pronounced by me in open court on this the 15th day of March, 2024] (Sri. S. Sudindranath) LXXXIII ADDL.CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT; BANGALORE.
39 Com.OS 1905/2016 Judgment KABC170086542020 ANNEXURE
1. List of witnesses examined on behalf of Plaintiff:
PW.1 : Mr.Ajay Gupta
2. List of witnesses examined on behalf of Defendants:
DW.1: Lankesh K.B
3. List of documents marked on behalf of Plaintiff:
Ex.P.1 : True copy of the purchase order dt.30/3/2009. Ex.P.2 : Copy of letter of procurement given by defendant.
Ex.P.3 : Letter dt.5/12/2011.
Ex.P.4 : Letter from the defendant dt.27/11/2012. Ex.P.5 : Letter dt.1/12/2012.
Ex.P.6 : Letter dt.20/12/2012.
Ex.P.7 : Copy of Legal Notice.
Ex.P.8 : Postal Receipts Ex.P.9to11 : 3 postal acknowledgements. Ex.P.12: Reply Notice.
Ex.P.13: Copy of fresh certificate. Ex.P.14: Statement of Accounts showing deduction. Ex.P.15: Copy of letter of authority. Ex.P.16: Purchase orders given by defendant on 31/3/2009.
Ex.P.17: Copy of tender issued by the defendants. Ex.P.18 : Copy of another purchase order dt.31/3/2009.
Ex.P.19: Copy of proceedings of meeting dt.4/6/2012.
4. List of documents marked on behalf of Defendants:
Ex.D.1 : Authorization letter.
Ex.D.2 : Copy of tender document.
Ex.D.3 : Copy of correspondence letters sent to the plaintiff.
Ex.D.4 : Letter of Division Controller along with calculations regarding vehicle days loss. Ex.D.5 : Copy of purchase order dt.21/1/2008. Ex.D.6 : Claim letter dt.2/7/2012. Ex.D.7 : Claim letter dt.25/9/2012.
40 Com.OS 1905/2016 Judgment KABC170086542020 Ex.D.8 : CISTUP, IISC Technical Report Ex.D.9 : Copy of BMTC Board Resolution dt.21/5/2014 Ex.D.10: Copy of proposal dt.8/8/2014 to Government of Karnataka.
Ex.D.11: Copy of letter dt.24/6/2015 for bus buy back. Ex.D.12: Minutes of Meeting dt.21/9/2011. Ex.D.13: Letter dt.30/11/2011.
Ex.D.14: Table of warranty of buses.
Ex.D.15 : C.C of order in CMP 277/2015 dt.8./6/2017 Ex.D.16 : Original Government order dt.1/1/2015. Ex.D.17 : Bus Specification in handwritten pages 76 to 82.
Ex.D.18 : Certificate U/S.65B of Indian Evidence Act.
(Sri. S. Sudindranath) LXXXIII ADDL.CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT; BANGALORE.