Delhi High Court
Rajghria Paper Mills Ltd. vs The General Manager, Indian Security ... on 31 January, 2000
Equivalent citations: 2000IIAD(DELHI)863, AIR2000DELHI239, 84(2000)DLT804, 2000(56)DRJ764, AIR 2000 DELHI 239, 2000 CLC 1438 (DEL) (2000) 84 DLT 804, (2000) 84 DLT 804
Author: K.S. Gupta
Bench: K.S. Gupta
ORDER K.S. Gupta, J.
1. Suit was filed on 11th August, 1976 claiming the reliefs: (a) that the defendants be restrained by means of permanent injunction from enforcing the bank guarantee dated 18th January, 1975 for Rs. 2,92,430/- issued by the Canara Bank or from receiving any amount thereunder and (b) that decree be passed in favour of the plaintiff and against defendants for Rs. 9,34,036.83 with costs and interest pendente lite and future at the rate of 6 % p.a. Alongwith the plaint I.A. No. 1722/76 was also filed by the plaintiff seeking ad interim injunction restraining the defendants, their servants, agents and subordinates from enforcing the said bank guarantee pending suit. Said I.A. after notice was dismissed by the order dated 23rd December 1976. In the beginning of arguments Sh. J. Lal appearing for the plaintiff stated that the plaintiff does not now press the relief as (a) above in view of the order dated 23rd December 1976 in I.A. No. 1722/76.
2. In regard to the relief as at (b), it is alleged in the amended plaint that the plaintiff is a private company registered under the Companies Act, 1956 having its registered office at 15, India Exchange Place, Calcutta and principal office at 701, Akashdeep Building, Barakhamba Road, New Delhi. The plaintiff company amongst others owns a paper mill known as Rajendra Paper Mills at Faridabad (for short 'the Mills'). K.L. Rajgaria who has instituted the suit and signed and verified the plaint, is a director of the plaintiff company and has been authorised to institute the suit by virtue of a resolution dated 26th July, 1976 passed by the Board of Directors of the plaintiff company.
3. It is further alleged that defendant No. 1 is the General Manager of India Security Press which is wholly owned by Union of India, defendant No. 2. He invited tenders for purchase of waste paper cuttings of the Press for a period commencing from 1st October, 1974 to 30th September, 1975. By the letter dated 21st September, 1974 the Mills sent the tender together with a demand draft for Rs. 22,000/- by way of earnest money as required. Defendant No. 1 conveyed the acceptance of tender given by the Mills through a letter bearing No. 12694/DIX-I (74-75) dated 16th October, 1974. Thereafter an agreement dated 6th February, 1975 also containing the terms and conditions, was reduced into writing between the parties which was signed on behalf of the Mills at New Delhi. Mills was required to give security deposit of Rs. 3,14,430/- under the said agreement. By letter No. 19149/DIS-IA dated February, 1975 defendant No. 1 agreed to transfer the amount of Rs. 22,000/- deposited as earnest money towards the security deposit and to accept the bank guarantee for the balance amount of Rs. 2,92,430/-.
4. It is pleaded that the Mills contracted to purchase different varieties of waste paper cuttings with a view to use them in the manufacture of different qualities of paper under the aforesaid agreement. However, since the beginning the defendants adopted uncooperative attitude and inspite of repeated requests and reminders by the Mills to despatch one variety of paper cuttings in one wagon they went on sending different varieties of paper cuttings in one wagon with the result the paper cuttings received were mixed up. It is further stated that defendant No. 1 got a lawyer's notice dated 29th November, 1975 issued to the Mills calling upon it to pay certain sums as stated therein. The Mills through its advocate on 9th February, 1976 sent a reply as well as notice under section 80 CPC calling upon the defendants to refund Rs. 11,39,484.89 paid by it in excess. Due to breach of the contract by the defendants in not supplying the contracted paper cuttings regularly in proper instalments and despatching different varieties of the paper cuttings in one wagon the defendants have caused the Mills to suffer damages to the extent of Rs. 9,34,036.83 p. It is this amount to which aforesaid relief at (b) relates.
5. Defendants have contested the suit by filing a joint written statement. By way of preliminary objections it is alleged that the tender in question was floated from Nasik, the offer made by the Mills was accepted at Nasik and the payments for the goods to be supplied were also to be made at Nasik. Therefore, no part of cause of action arose within the local jurisdiction of this Court and it has thus no territorial jurisdiction to entertain the present suit. There is also no private of contract between the plaintiff and the defendants in as much as the contract was arrived at with Rajendra Paper Mills Pvt. Ltd.
6. On merits, it is denied that K.L. Rajgharia is competent to institute the suit on behalf of the plaintiff company and to sign and verify the plaint. However, it is not disputed that defendant No. 1 is the General Manager of Indian Security Press which is wholly owned by defendant No. 2; that defendant No. 1 invited tenders for the purchase of waste paper cuttings for the period from 1st October, 1974 to 30th September, 1975, that the tender submitted by Rajendra Paper Mills was accepted and an agreement containing the terms and conditions was reduced into writing on 6th February, 1975 as alleged. It is further not disputed that after allowing adjustment for Rs. 22,000/- deposited towards earnest money, for the balance amount of Rs. 2,92,430/- bank guarantee was accepted in lieu of cash deposit as required under the said agreement. It is pleaded that it is nowhere provided in the agreement nor was it administratively possible for the defendants to supply one variety of paper cuttings at one time. It is denied that each variety of paper cuttings was to be loaded in separate wagons. It is alleged that the defendants used to prepare bales for each variety separately and the same were stacked. At the time of loading whichever bales were available, were loaded in one wagon. It is asserted that the Mills for the first time raised the issue of loading each variety of paper cuttings separately vide its letter dated 9th May, 1975 after the expiry of 7 months of start of supplies. Immediately thereafter the defendants vide their letter No. 3790/DSS/1/A - dated 12th June, 1975 informed the Mills that it was not possible for them to load the wagons variety-wise and it could take delivery of the bales from the defendants at Nasik and get them loaded in wagons according to its requirements but it did not care to take the delivery as suggested. It is alleged that the suit is an afterthought and filed with the object to forestall the recovery of Rs. 19,37,607.94 which is due from the Mills to the defendants. It is emphatically denied that the defendants adopted uncooperative attitude or made irregular despatches as alleged. In fact the Mills had no funds to pay for the goods and it even asked the defendants to suspend the supplies. It is pleaded that during 11 months period of the performance of contract the Mills took delivery of only 615 MTs as against the contracted quantity of 1316 MTs. It is emphatically denied that the defendants caused any loss to the plaintiff much less to the extent of Rs. 9,34,036.85 as alleged. It is admitted that a notice dated 29th November, 1975 was sent to the Mills and reply thereto dated 9th November, 1976 was received from the Mills through an Advocate.
7. On the pleadings of the parties the following issues were framed :-
"1. Whether this court has territorial jurisdiction to try this suit?
2. Whether the plaintiff has no locus standi to institute the present suit against the defendant?
3. Whether the plaint has been signed, verified and presented by a duly authorised person? If not its effect?
4. Whether the plaint does not disclose any cause of action? If so, its effect?
5. Whether there was an agreement between the parties by which defendant No. 1 was required to supply particular quality of waste paper cuttings in separate wagons?
6. Whether the defendant had committed breach of contract as alleged in the plaint? If so, to what effect?
7. Whether the plaintiff was ready and willing to perform his part of the contract? If not, its effect?
8. Whether the plaintiff is entitled to claim any damages from the defendants? If so, to what amount?
9. Whether the plaintiff is entitled to claim any damages without giving details? If not, its effect?
10. Is the plaintiff entitled to any interest? If so, far what period and at what rate?
11. Relief?ISSUES NO. 1, 5, 6, 8 & 9
8. These issues may be conveniently taken up for discussion together.
9. On issue No. 1 considerable argument supported by case law was advanced by Sh. D.N. Goburdhun appearing for the defendants but without going into the merits thereof I propose to decide the suit, it being more than 23 years old on the assumption that this court has the territorial jurisdiction to try it.
10. It is admitted case of the parties that the tender for purchase of waste paper cuttings submitted by Rajendra Paper Mills was accepted by defendant No. 1 and an agreement Ex. PW 2/D 8 dated 6th February, 1974 also containing the terms and conditions was executed in between the Mills and the defendants. In short, the case set up by the plaintiff is that despite repeated requests made by the Mills defendant No. 1 went on despatching different varieties of contracted waste paper cuttings in one wagon with the result those were received in mixed condition and their end use was got affected. Plaintiff thus suffered losses and is entitled to the refund of Rs. 11,39,484.89 out of the amount of Rs. 14,53,811.89 paid by it to the defendants. The claim has, however, been restricted to Rs. 9,34,036.83. In the written statement plea taken by the defendants is that the aforesaid agreement nowhere provides that one variety of waste paper cuttings was to be loaded separately in wagons and it was only through the letter dated 9th May, 1975 that the Mills for the first time raised the issue of loading of different varieties of paper cuttings separately after expiry of 7 months of the start of supplies. On the issues on hand reference to the schedule appended to the said agreement and the correspondence exchanged between the parties had become necessary. In the schedule details of the material, tendered, the agreed rates per MT and the quantities have been shown thus :-
"Description of material Qty Agreed rate per MT tendered Approx. (i) White unprinted paper cutting 70 MT Rs. 2900.00 (ii) Post card Board cutting 100 MT Rs. 2150.00 (unprinted) (iii) White printed paper 30 MT Rs. 1700.00 cuttings. (iv) Brown & Other coloured 450 MT Rs. 2000.00 printed & unprinted paper cuttings. (v) Wrapping and Cartridge 10 MT Rs. 2000.00 paper cuttings. (vi) Confetti 6 MT Rs. 300.00 (vii)Trimmings & Punchings in 300 MT Rs. 2500.00 ivory & pink shades of Angle cut paper viii)Trimmings & Punchings of 350 MT Rs. 2850.00 blue 25% rag paper"
11. Omitting the immaterial portion, para No. 2 of the letter Ex. PW2/D9 dated 9th May, 1975 sent by the Mills to defendant No. 1 which is material reads as under :-
"We find that all the varieties of waste papers have been mixed up and as a result thereof we are finding it extremely difficult to use them for the proper purpose. You are also aware that white unprinted cuttings are to be used for a superior paper than wrapping ant cortege or brown and other coloured papers. It has become, therefore, extremely necessary that cuttings is despatched to us in wagon loads containing only one variety of waste paper so that they are not mixed and we are able to be used it for the correct purpose. The bales when unloaded at the station was lose and different quantities of waste papers are completely mixed up when they arrived at the place. It is, therefore, suggested in our interest as well as in the interest of proper utilisation of the industrial resources that waste paper of one variety should be loaded in one wagon i.e. wagon load of different varieties should be loaded separately. However, in case of necessity you may put the following variety in a wagon :-
(i) Brown and other colours printed and unprinted.
(ii) Wrapping and cartridge.
(iii) Confetti
12. Except the above varieties which would be loaded in the same wagon the rest of the varieties i.e. white printed light iron set paper and white printed and post card board should be loaded separately in separate wagons."
13. In response to the said letter B.S. Lalchandani, DGM sent the letter Ex. PW/D10 dated 12th June, 1975 to the Mills informing that it was not at all possible nor practicable for defendant No. 1 to load the wagons variety wise and in case the Mills so desired the defendant No. 1 could issue the bales from the railway siding to it and the Mills may arrange to load the wagons as required. In the letters Ex. PW2/D11 dated 16th June, 1975 and Ex. PW1/D12 dated 19th June, 1975 sent by the Mills to defendant No. 1 request as made in the said letter Ex. PW 2/D9 was reiterated. Again in the letter Ex. PW 2/D dated 24th June, 1975 sent by the Mills to said B.S. Lalchandani with reference to the said letter Ex. PW 2/D10 it was stated that in view of defendant No. 1 being not in position to load variety-wise, the Mills agree that two varieties i.e. items 1 & 8 can be loaded together while items 2, 3, 4 and 6 could also be loaded together. Items 2 & 7, however, be loaded separately. Omitting para No. 2, in the letter Ex. PW 2/D 13 dated 8th July, 1975 sent by N.P. Sarnnaik, D.G.M. with reference to said letter dated 24th June, 1975 to the Mills, it was stated :-
"With reference to your letter No. RPM/2793 dated 24th June, 1975, on the above subject, I have to inform you that we have already explained our difficulties to load wagons variety wise in our letter No. 3790/Dis-1-A dated 12.6.75. However, we can issue the bales to you and you may load the wagons, from our siding according to your choice. According to clause 4 of the agreement it is your exclusive responsibility to arrange for lifting of the paper bales from our siding either by Railway or by a Road transport.
Also we cannot accept any complaint regarding mix up of bales. No complaints can, therefore, be entertained in this respect vide clause 3 of the conditions of contract. We are despatching paper cuttings since past several years to various contractors but no such objections were raised by any of them. We are unable to do any thing more than the established practice of past several years."
14. Despite the said stand taken by defendant No. 1, in the letters Ex. PW2/D10 and Ex. PW 2/D13, the Mills continued to press its demand for loading the wagons variety-wise in the letters Ex. PW2/D14 dated 14th July, 1975 & Ex. PW.2/D24 dated 11th September, 1975.
15. In the meantime defendants got a notice dated 29th November 1975 (copy Ex. PW2/D17) issued to the Mills. Ex. PW2/D18 dated 9th February 1976 is the notice/reply sent by the Mills through an advocate to the pleader who issued the notice Ex. PW2/D17. In Para No. 5 of the said reply/notice the details of the quantity of the materials received together with bill numbers and dates which are relevant have been given as under :-
Bill Date Quantity No. Kg.
12526 12.10.74 21662 12590 15.10.74 11508 12859 19.10.74 9717 12999 22.10.74 10551 13091 24.10.74 10485 13396 30.10.74 24603 13511 01.11.74 11488 13591 04.11.74 11377 13792 08.11.74 12408 13945 11.11.74 10415 14466 21.11.74 11380 18766 30.01.75 16624 18990 04.02.75 14114 19224 07.02.75 17519 19268 08.02.75 16759 19313 10.02.75 17481 19666 14.02.75 16233 19862 17.02.75 34652 20131 20.02.75 8719 20223 21.02.75 8013 20314 22.02.75. 18629 20406 24.02.75 8318 20583 27.02.75 34162 20663 28.02.75 16544 20807 03.03.75 7917 21135 06.03.75 8355 21139 06.03.75 16727 21696 13.03.75 2417 834/1981 16.04.75 17637 930 18.04.75 11073 1092 21.04.75 8449 1424 26.04.75 17975 1560 28.04.75 26460 3702 11.06.75 56645 4378 20.06.75 7855 4831 27.06.75 18103 4879 27.06.75 17270 6056 03.07.75 8636 9380 26.07.75 17455 12049 29.08.75 16095 13001 10.09.75 33931 14217 29.09.75 16927
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16. Statement of Pratap Singh Kothari, PW-1 and part examination-in-chief of K.L. Rajgarhia, PW-2 had been recorded on 22nd April, 1985. As is manifest from the order dated 10th March, 1995 it was agreed amongst the parties that the remaining examination-in-chief of PW-2 will be tendered on affidavit together with the affidavits of the remaining PWs and PW-2 and the other PWs whose affidavits may be tendered in evidence, will remain present for cross-examination by the defendants on 18th September, 1995. Pursuant to this order the plaintiff company filed the affidavits of K.L. Rajgarhia, Sant Lal Gupta and Mohd. Yusuf. After close of the plaintiff's evidence, defendants filed the affidavit of B.S. Lalchandani, D.G.M. on 13th August 1996 and closed the evidence. Cross with B.S. Lalchandani (DW - 1) was concluded on 24th February, 1998.
17. Said K.L. Rajgarhia, PW-2 in his cross-examination conducted on 21st March 1996 admitted that the aforesaid agreement Ex. PW 2/D8 did not specify that different varieties of paper cuttings would be separately despatched (Vol :- the agreement was silent and it was not even the term of the agreement that more than one quality of paper cuttings would be despatched together). He denied the suggestion that it was only after 7 months of the start of supplies that the Mills made a complaint that the bales sent in wagons were found mixed up at the time of taking deliveries at Faridabad. During the course of arguments it was conceded by Sh. J. Lal that the said agreement Ex. PW 2/D8 did not provide that each variety of paper cuttings was to be loaded in separate wagons. However, the submission made by him was that such a condition was implicit in the said agreement. In my view, no such implict condition can be read as having been incorporated in the said agreement. As regards the said later part of statement, Ex. PW2/D 9 dated 9th May, 1975 is the letter sent by the Mills to defendant No. 1 requesting the later to load the wagons variety-wise. Conspicuously, this letter is silent about the matter having been discussed by PW-2 either with DW-1 or any officer of defendant No. 1 before issue of that letter. Had there been any discussion for loading the wagons variety-wise, the Mills may not have omitted to state so in the said letter Ex. PW2/D9. Needless to repeat that immediately after receipt of said letter after expiry of about 7 months of the start of supplies, the defendants intimated the Mills through the aforementioned letters Ex. PW2/D10 and PW2/D13 that it was neither possible nor practicable for them to load the wagons variety-wise. Since variety-wise loading of the paper cuttings was not stipulated in the aforesaid agreement Ex. PW2/D8 it is not open to the plaintiff company to claim damages on the ground of the defendants having loaded different varieties of paper cuttings in one wagon which allegedly resulted in mixing up of papers during transit.
18. Other aspects touching the claim for damages also deserve to be noticed. It is not in dispute that the suit amount of Rs. 9,34,036.83 is the difference of the total amount paid and the value of the supplies received by the plaintiff calculated at the rate of Rs. 300/- per MT. In the schedule referred to above, appended to the agreement Ex. PW2/D8 the rates for different varieties of contracted waste paper cuttings have been disclosed and Rs. 300/- per MT rate is in respect of confetti as noted at item No. 6 therein. Out of the contracted total quantity of 1316 MTs the quantity of confetti was approximately 6 MTs only. It is pertinent to note that in the reply/notice Ex. XW2/D18 the total quantity of the paper cuttings despatched to the Mills upto 28th April, 1975 has been shown as 500359 Kgs. 1,92,917 Kgs. of the paper cuttings have been shown to have been received between the period 11th June, 1975 to 29th September, 1975. Since the issue of loading paper cuttings quality-wise was raised for the first time through the letter Ex. PW2/D9 dated 9th May, 1975 the plaintiff cannot legally claim damages, if any, in respect of the supplies made upto 28th April, 1975 by the defendants. Further, there was absolutely no justification for calculation by the plaintiff of the value of the supplies of paper cuttings at the rate of Rs. 300/- per MT which was the approved rate for confetti, the quantity to be supplied whereof was approximately 6 MTs out of the contracted total quantity of 1316 Mts. As reflected in the schedule appended to the agreement Ex. PW2/D8 the rates of paper cuttings except confetti ranged from Rs. 2,900 to Rs. 1,700/- per MT. That apart, the plaintiff has not produced the account books to support the claim for the damages in question.
19. For the foregoing discussion issue Nos. 5, 6, 8 & 9 are decided against the plaintiff.
ISSUE NO. 3.
20. Plaint is signed and verified and suit instituted by K.L. Rajgarhia, PW-2. In Para 1 of the plaint it is alleged that K.L. Rajgarhia was authorised to institute suit by virtue of a resolution dated 26th July 1976 passed by the Board of Directors of the plaintiff company. In paras 2 and 3 of the affidavit filed by said K.L. Rajgarhia it is averred that he had been duly authorised under the Memorandum and Articles of Association of the company as also by a resolution passed by the Board of Directors on 26th July 1976, to institute the suit. In Para 3 of the affidavit it is further averred that there was an enquiry by the Directorate of Revenue Intelligence in respect of M/s. Venus Paper Mills Ltd. and the minute book of the plaintiff company was taken away by the said agency in the year 1980 and the same is still lying with them. Letter for return of the papers was written on 25th March, 1985 to the said agency but there has been no response from them. During the course of arguments Sh. D.N. Goburdhun seriously disputed the authority of said K.L. Rajgarhia to institute the suit. It was not brought to my notice that any step was taken by the plaintiff company to have the minute book for the year 1976 summoned from the Directorate of Revenue Intelligence nor a copy of the Memorandum and Articles of Associations was proved by the plaintiff. Faced with this situation, it was contended by Sh. J. Lal that said K.L. Rajgarhia had the authority to file the suit he being one of the directors of the company. In support of the submission he invited my attention to the provisions contained in Order 29, Rule 1 CPC and also the decision in United Bank of India Vs. Naresh Kumar and Others, AIR 1997 SC 3. Rule 1 of the said Order 29 deals with signing and, verification of the plaint and not the institution of the suit by or against the Corporation. In Union Bank of India's case (supra) out of the many issues framed in the suit filed for recovery of Rs. 14,0,553.91 by the bank, issue No. 1 was to the effect - whether the plaint is duly signed and verified by a competent person ? Issue No. 2 was whether the defendant No. 1 raised a loan of Rs. 50,000/- from the plaintiff bank on 12.4.84 and executed a demand promissory note, hypothecation of goods agreement, letter of loan and other documents in favour of the plaintiff bank ? Trial Judge returned the finding on said issue No. 1 against the bank. On issue No. 2 it was found that defendant No. 2 was liable to pay only a sum of Rs. 55,699.20 as the principal amount plus interest. In appeal, Additional District Judge reversed the finding of the trial court on issue No. 2 and he came to the conclusion that the bank had been able to prove that defendant No. 1 had taken a loan of Rs. 50,000/-. However, upholding the finding of the trial court on issue No. 1 the appeal was dismissed. Regular Second Appeal taken out against the decision of the Additional District Judge by the bank was, however, dismissed in limine by the Punjab & Haryana High Court on 30th August, 1993. As is manifest from Para No. 8 of the report the only question which arose for consideration before the Supreme Court in the S.L.P. filed by the bank was whether the plaint was duly signed and verified by a competent person. It was in the said background that S.L.P. was allowed holding that L.K. Rohatgi must have been authorised to sign the plaint and in any case the bank had ratified the action of L.K. Rohatgi in signing the plaint and thereafter he had continued with the suit. In my view, in the facts and circumstances of this case, the plaintiff cannot derive any advantage from the above decision in the matter of said K.L. Rajgaria being authorised to file the present suit on behalf of the plaintiff company. In the decision in M/s. Nibro Limited Vs. National Insurance Co. Ltd. after taking note of a series of decisions on the subject the view taken by this Court was that unless a power to institute suit is specifically conferred on a particular director he has no authority to institute suit on behalf of the company. It must, therefore, follow that although the plaint was signed and verified properly but the suit was not instituted by a duly authorised person on behalf of the plaintiff. Issue is answered accordingly.
ISSUE NO. 221. Case pleaded in Para 1 of the plaint is that the plaintiff company, amongst others, owns a paper mill known as Rajendra Paper Mills at Faridabad. Agreement Ex. PW2/D8 was executed in between Rajendra Paper Mills and defendant No. 1 acting on behalf of the President of India. Affidavit filed by K.L. Rajgaria also supports the said plea taken in Para 1 of the plaint. Plaintiff company by virtue of its being owner of the said mill, had the locus standi to institute the suit in its name. Issue is answered in the affirmative.
ISSUE NO. 422. This issue seems to have been framed taking note of the pleas raised in the written statement by way of preliminary objection No. 1 and Para 24 on merits. In both these paras of the written statement objection was taken in regard to this court having no territorial jurisdiction to try the suit on which specific issue No. 1 has been framed. That being so, no specific finding need be recorded on this issue.
ISSUE NO. 723. In fact this issue does not specifically arise from the pleadings of the parties. Therefore, no finding need be recorded on it.
ISSUE NO. 1024. Onus of proof of this issue was on the plaintiff. It has failed to lead any evidence that the company is entitled to claim any interest from the defendants. Moreover, in view of the findings recorded on issues No. 5, 6, 8 and 9 no question of payment of interest by the defendants to the plaintiff, arises.
ISSUE NO. 1125. Affidavit of B.S. Lalchandani, DW-1 notices that the defendants filed a suit for recovery of 19,37,607.94 against the plaintiff in the civil courts at Nasik and by the order dated 20th July, 1979 proceedings in the suit have been stayed till the disposal of the present suit. ubmission advanced by Sh. Goburdhun that this suit was instituted by the plaintiff to pre-empt the claim for which suit is pending before a civil court at Nasik, is not without merit.
26. In view of my findings on the said issues the suit deserves to be dismissed with costs.
27. Accordingly, the suit is dismissed with costs.