Delhi District Court
Daily Foods (India) vs Uoi Through Its Secretary on 23 April, 2013
IN THE COURT OF MS. SEEMA MAINI :
ADDITIONAL DISTRICT JUDGE-12 (CENTRAL) : DELHI
In re :
CS No. 52/2008
Unique Case ID No. 02401C5093952004
In the matter of:
Daily Foods (India)
Sole Proprietary concern through its
Sole Proprietor Rakesh Kumar,
217, Joshi Road, Karol Bagh,
New Delhi-110005. Plaintiff
VERSUS
1. UOI through its Secretary,
Ministry of Food Processing Industries,
Panchsheel Building,
Khel Gaon Marg, New Delhi-49
2. Chairman
Dairy Development Corporation
Lain Chaur, Kathmandu, Nepal.
3. Manager
State Bank of Bikaner and Jaipur
Branch Office at Faiz Road
Karol Bagh, New Delhi. Defendants
Date of filing of the suit : 20.05.1997
Date of judgment : 23.04.2013
SUIT FOR DECLARATION, PERMANENT INJUNCTION AND
MANDATORY INJUNCTION.
APPEARANCE:
Mr. Bakshi Siri Rang Singh, counsel for the plaintiff.
Defendant no. 1 and 2 are ex-parte.
Mr. J. Mohan, counsel for the defendant no. 3.
CS No. 52/2008 Page 1 of 26
JUDGMENT
1. The instant suit has been filed by the plaintiff Daily Foods (India) against the defendant no. 1 Union of India, defendant no. 2 Chairman Dairy Development Corporation, Lain Chaur, Kathmandu and defendant no. 3 State Bank of Bikaner and Jaipur for declaration, permanent injunction and mandatory injunction.
2. The brief facts as stated by the plaintiff in the plaint are that plaintiff is a sole proprietary concern of Sh. Rakesh Kumar and is based at New Delhi. The plaintiff is a small scale industrial unit and is registered as such with the Director of Industries, Ministry of Commerce, Government of India. The plaintiff is involved in the business of manufacturing various milk products, including skimmed milk powder, having its modern milk plants situated at Delhi and Sonipat, Haryana. The plaintiff is engaged in this business for the last ten years and is supplying skimmed milk powder to various governmental and cooperative agencies, all over the country. It is stated that the plaintiff is having all the necessary sanctions and permissions from the different governmental authorities for carrying on the said business and is also registered under the provisions of Milk & Milk Product Order, 1992 issued by the Government of India, while exercising powers under the Essential Commodities Act, 1955. The plaintiff is also entitled to use the ISI mark on its products under the permission of the Bureau of Indian Standards Certification.
3. It is stated that the defendant no. 1 is the Ministry of Food Processing Industries (hereinafter referred to as FPI) of Government of India and is a part of the Central Government and is responsible for checking the quality, hygiene conditions and standards etc of various processed foods, including the skimmed milk powder. It is stated that the CS No. 52/2008 Page 2 of 26 defendant no. 1, after inspection and verification of the industrial units and their products, issues certificates regarding the quality of the products, of which, testing is being got done from various government approved laboratories in the country.
4. It is stated that the defendant no. 2 is a company incorporated under the Corporation Act of Nepal and is having its office at Lain Chaur, Kathmandu, Nepal and it used to procure skimmed milk powder from different suppliers for the purpose of consumption in Nepal.
5. It is stated that the defendant no. 3 is the banker of the plaintiff and the plaintiff has been maintaining accounts with the defendant no. 3, who was providing banking facilities to the plaintiff for carrying on its business activities.
6. It is stated, that if the fat content is taken out from the fresh milk, what remains is known as skimmed milk and if the water content of the skimmed milk is dried up, then the skimmed milk gets converted into skimmed milk powder. The shelf life of the skimmed milk, is very short, whereas the shelf life of the skimmed milk powder is between three months to six months. It is also well known that vice versa, if the fat content is added in the skimmed milk powder and if thereafter it is homogenized after including the water content, the same gets converted into milk. During the summer seasons, when the liquid milk is not available, the preserved fats in the form of ghee and butter, the skimmed milk powder and water are mixed and homogenized for obtaining fresh milk.
7. It is stated that plaintiff is involved in the business of production of skimmed milk and selling the same to various governmental agencies, CS No. 52/2008 Page 3 of 26 cooperative federations, Mother Dairy, Daily Milk Scheme, Tamilnadu Cooperative Federation etc., for the last about ten years. The milk plants in India are required to maintain day to day laboratories in the milk plants itself for the purpose of continuous testing and maintenance of the required standards of milk products. The plaintiff is also, therefore having day to day laboratories at both the plants at New Delhi and Sonepat. The Bureau of Indian Standards, after due testing of the products of the plaintiff, had permitted the plaintiff to use the ISI Mark for its products. The FPI after due inspection, had also issued certificates of hygiene and confirmed the products to be up to the standards.
8. It is stated that Nepal had been importing skimmed milk powder from various developed countries including Denmark, Holland, New Zealand etc. The plaintiff also made efforts to compete with the European companies and succeeded in getting orders for supply of skimmed milk powder from Dairy Development Corporation, Nepal i.e. defendant no. 2. In the year 1996. The first order made by the defendant no. 2 was for supply of 100 metric tonnes of skimmed milk powder. It was stated further that all the exports of milk products from India are required to be channeled through the Agricultural Products Export Development Authority (APEDA). The quality of the consignment, before its shipment, is tested by the inspection agencies and if the milk powder is found to be conforming to the standards, a pre-shipment inspection certificate is issued by the inspecting agency, who in the present case, was defendant no. 1. The issuance of such a certificate after due testing of the product, is the basic requirement and a pre-condition for making any export.
9. It is also stated that samples from the consignment of 100 metric tonnes of the afore-mentioned order were taken and the requisite certificates were issued, after which the supply was successfully CS No. 52/2008 Page 4 of 26 completed and the payment was released, to the plaintiff, by defendant no. 2, on being satisfied with every aspect of the delivery of the products, including its quality. It is stated that, thereafter, the defendant no. 2 placed another order for supply of 160 metric tonnes of skimmed milk powder in the later part of the year 1996, which was also successfully completed by the plaintiff and the payment was also released by the defendant no. 1 to the plaintiff.
10. It is also stated that on 31.12.1996 defendant no. 2 signed an agreement with the plaintiff for supply of 415 metric tonnes of skimmed milk powder. The plaintiff in pursuance of the signing of the said agreement, got issued a performance bank guarantee for 5% of the amount of the contract i.e. 13,15,550/- through the defendant no. 3 in favour of defendant no. 2. It was stated that the agreement also included the pre-condition of a test certificate from the defendant no. 1 FPI, before sending the consignment. It was also provided in the agreement that the the defendant no. 2 shall also get the quality of the product tested after the supplies are made by the plaintiff at the Nepalese border or at the warehouse of the defendant no. 2, situated at Balaju, Kathmandu, at the time of delivery.
11. It is further stated that for ensuring the payment to the plaintiff for supply of 415 metric tonnes of skimmed milk powder, the defendant no. 2 had opened a Letter of Credit (LOC) of Rs. 2,63,11,000/- on 17.01.1997 and the payment against this LOC was to be released by Citi Bank, New Delhi, by crediting the amount in the account of plaintiff maintained with defendant no. 3. All the basic conditions of the supply agreement formed integral and mandatory conditions of the LOC also. The LOC also required the skimmed milk powder supplied by the plaintiff to match and conform to the standards, laid down therein and that the consignment CS No. 52/2008 Page 5 of 26 should be accompanied by the original certificate of non-contamination and fit for human consumption and also the quantity and quality inspection certificates of the goods at the time of shipment, issued by the Government or government authorized institution.
12. It is also stated that the samples of skimmed milk powder were taken by the officer of FPI and were tested in the laboratories at the milk plants etc. Another random sample was also taken by the defendant no. 1 for testing and analysis by Food Research & analysis Centre, sponsored by FICCI and CIFTI. The government approved testing centre tested the samples and gave its test report on 26.02.1997. The defendant no. 1 also issued the test certificate on 19.03.1997, certifying that the consignment of the skimmed milk powder had been found conforming to the buyer's specifications and the product is fit for direct human consumption. For testing the quality of the products at the Nepalese border, the plaintiff had agreed to stop and station the trucks carrying the above mentioned skimmed milk powder at the Indo-Nepalese Boarder for three extra days from 30.03.1997 to 02.04.1997 at its own additional costs, and the samples were taken by the officers of defendant no. 2 and by the Nepalese Customs Officers at the border itself on 30.03.1997. As per the agreement, after satisfaction with regard to the quality, the consignment was to be taken to the warehouse of the defendant no. 2 at Balaju, Kathmandu.
13. It is stated that skimmed milk powder is a perishable commodity with limited shelf life, which depends on the handling, storage and maintenance of the product. The seller can ensure the quality only up to the time of delivery and thereafter it is beyond the control of the seller. The consignment was required to be taken to the warehouse of the defendant no. 2 at Balaju, Kathmandu and the goods were to be off-loaded there. It CS No. 52/2008 Page 6 of 26 is stated that the said warehouse was a paper and / or a cement godown, where neither the conditions were conducive for storing the milk powder nor was there any handling or storage facility. In any case, the obligation of the seller / plaintiff with regard to the quality was completely discharged on the goods being delivered and accepted by the defendant no. 2. The contract nowhere envisaged the responsibility on the part of the seller to guarantee the quality for months after the supplies had been made.
14. It is stated that on being satisfied with every aspect of the matter and on acceptance of the documents, the defendant no. 2 had agreed to release the payment to the plaintiff against the LOC, which is conclusive evidence, that the milk powder supplied by the plaintiff was found to be in conformity with the standards and quality to be in order. It is stated, that as per the contract, 80% of the payment of the supplies was to be made through the LOC and the plaintiff was entitled to receive the remaining 20% of the contract amount, immediately on delivery of the goods. The defendant no. 2, however, failed to discharge its obligation and did not release the remaining payment as per the terms and conditions of the contract. The sole proprietor of the plaintiff had visited the defendant no. 2 and met its officers to enquire about the delay in release of the remaining 20% of the contract amount, which comes to be approx. Rs. 52 lacs, to which General Manager of defendant no. 2 had assured that the payment would be released within a day or two, as they were facing shortage of funds. There was no whisper with regard to the quality of the product which was supplied.
15. It is stated that under the mandatory terms of Uniform Customary Practices governing LOCs, if there is any deficiency or non-compliance of the terms and conditions of the LOC, the person who had opened the LOC is under an obligation to put the seller on notice of such deficiency or non-
CS No. 52/2008 Page 7 of 26compliance, within a period of seven days of the receipt of the document, failing which it would not be open to the buyer to make any grievance in that regard. On 05.05.1997, the plaintiff received a communication dated 04.05.1997 through FAX from the defendant no. 3, alleging that the skimmed milk powder supplied by the plaintiff was found to be 'blended with unwanted particles'. Thereafter on 07.05.1997, the plaintiff received another letter dated 07.05.1997 through FAX from the defendant no. 2, alleging that the skimmed milk powder supplied by the plaintiff had 'foreign element' in it. There was nothing wrong with the quality of the skimmed milk powder supplied by the plaintiff, as after testing and analysis, it was found to be in conformity with the standards of FPI, Government of India and the officers of defendant no. 2 and the payment against the LOC having been made to the plaintiff was a conclusive evidence of the quality of the product. It was not open to the defendant no. 2 to make any allegation against the quality of the products as vaguely made in the letters dated 04.05.1997 and 07.05.1997. The plaintiff sent a suitable reply the defendant no. 2 informing them the true facts and bringing to their notice that there was some mistake on the part of the defendant no. 2 in sending the said two letters and requesting the defendant no. 2 to pay the balance amount without any further delay.
16. It is stated that the contract was concluded on the supplies having been made by the plaintiff on 30.03.1997, when 415 metric tonnes of skimmed milk powder was supplied to the defendant no. 2 and the plaintiff had become entitled to receive the remaining 20% amount on 02.04.1997, by which time the skimmed milk powder was duly tested by the Nepalese Customs Officer and also the officers of defendant no. 2. It was obvious that the defendant no. 2 has developed an intention of committing a fraud upon the plaintiff by making a false allegation and depriving the plaintiff of its due entitlement to receive the balance amount of Rs. 52 lacs, as per CS No. 52/2008 Page 8 of 26 the contract.
17. It is stated that the performance bank guarantee dated 27.12.1996, which was got issued by the plaintiff, had to remain in full force until the close of banking hours on 23.06.1997 or on completion of the contract, whichever was earlier. The contract stood concluded on 04.04.1997, after which date the performance bank guarantee was no more alive and had come to an end. The defendant no. 2 was under an unequivocal and unambiguous obligation to release the said performance bank guarantee, which has otherwise come to an end on 04.04.1997. It is also stated that without prejudice to the above assertions, even if it is accepted for the sake of arguments, that the bank guarantee is still alive, in view of the fraud committed by the defendant no. 2, the amount against the said performance bank guarantee i.e. Rs. 13,15,550/- cannot be released in favour of the defendant no. 2 as the same shall cause an irretrievable injustice to the plaintiff, who has already suffered and has continuously been suffering losses on account of the fraudulent conduct of the defendant no. 2, in making the false allegation regarding the quality of the goods and on account of non-payment of the balance amount of Rs. 52 lacs. In continuation of its malafide intention and conduct, the defendant no. 2 not only, did not release the amount but also tried to invoke the performance bank guarantee, which had come to an end. On receipt of intimation, the defendant no. 3 by its telex message dated 05.05.1997 informed the Nepal SBI Bank Ltd that pursuant to the delivery of the goods made by the plaintiff and no deficiency being pointed out, in terms of the mandatory, uniform and customary practices and the payment against the LOC having been received, the contract stood concluded. The defendant no. 3 also brought to the notice of the Nepal SBI Bank Ltd, the condition that the guarantee shall remain in force until the close of banking hours on 23.06.1997 or completion of the contract, which ever was earlier.
CS No. 52/2008 Page 9 of 26Nepal SBI Bank Ltd was further requested to re-examine the validity of the claim of the defendant no. 2.
18. It is stated that the plaintiff has been continuously suffering losses at the hands of defendant no. 2, on account of the fraudulent conduct and had made a representation on 14.05.1997 to the Joint Secretary of the defendant no. 1, stating all the facts, and with request to take up the matter directly with defendant no. 2 or through the Indian High Commission at Kathmandu for providing necessary protection to the plaintiff, which is a small scale industrial unit. However, before any action could be taken, the defendant no. 2, in continuation of its fraudulent conduct, met the Nepal SBI Bank Ltd to invoke the performance bank guarantee and the defendant no. 3 received another letter dated 16.05.1997 on 19.05.1997 for release an amount of Rs. 13,15,550/-. The performance bank guarantee for an amount of Rs. 13,15,550/- has since expired on 04.04.1997.
19. It is also stated that in the contract there was an arbitration clause but since the defendant no. 2 had waived off the contract and was not bound by it, so also the arbitration clause stood waived. As per clause 7 of the contract, the plaintiff also insured the entire consignment of skimmed milk powder against all risks as per inland transit clause including war, TPND, SRCC, FPA, WPA,leakage, breakage, crackage, fire, road transit. The defendant no. 2 has not taken recourse of insurance even though there was full insurance cover in favour of the purchaser, the cover having been provided by National Insurance Co. and this fact clearly shows that the entire defence of the defendant no. 2 is sham and the main object being to shomehow harass and deprive the plaintiff of its entire dues.
CS No. 52/2008 Page 10 of 2620. It is stated that cause of action for filing of the suit arose in favour of the plaintiffs on 04.04.1997 when supply of 415 metric tonnes of skimmed milk powder was made to the defendant no. 2 and the performance of the bank guarantee expired on conclusion of the contract. It again arose on 05.05.1997, 19.05.1997 and is still continuing as the defendant no. 2 threatening to get the performance bank guarantee released. The suit has been valued for the pecuniary jurisdiction at Rs. 5,05,000/-, while the suit for the purposes of declaration has been valued at Rs. 200/-. It was prayed that a decree of declaration be passed, declaring that the agreement dated 31.12.1996 between the plaintiff and the defendant no. 2 stood concluded on 04.04.1997, when 415 metric tonnes skimmed milk powder was duly supplied by the plaintiff to the defendant no. 2 in strict compliance of the terms and conditions of the agreement. A decree of permanent injunction be passed against the defendant no. 3, restraining it from releasing the amount of Rs. 13,15,550/- against the performance bank guarantee dated 27.12.1996 in favour of defendant no. 2. A decree for permanent injunction be passed restraining the defendant no. 2 from proceeding with the arbitration.
21. The notice of the plaint was duly issued to all the defendants and defendant no. 1 put in an appearance through its counsel but did not file its Written Statement. Defendant no. 2 was also duly served but again did not file any Written Statement to the suit and the right to file the Written Statement of defendant no. 1 and 2 was closed vide order dated 16.05.2002. Both the defendants i.e. defendant no. 1 and 2 were subsequently proceeded ex-parte vide order dated 07.09.2007.
22. Written Statement has been filed on behalf of defendant no. 3, wherein the preliminary objections were taken about the non- maintainability fo the suit and that the plaintiff had suppressed the material CS No. 52/2008 Page 11 of 26 facts and had not approached the court with clean hands. It was stated that the suit of the plaintiff was bad for non-joinder of necessary parties, since as per the terms of the agreement the plaintiff had to submit a bank guarantee of a bank located in Nepal. The plaintiff being an account holder with the defendant no. 3, approached the answering defendant and requested to arrange for furnishing of a performance bond of 5% of the total delivery price of skimmed milk powder, which must be issued by a Nepalese bank, which comes to Rs. 13,15,550/- and further requested to advise the Nepal SBI Bank Ltd., Kathmandu for adding the confirmation, as is clear from the letter dated 24.12.1996 of the plaintiff. Accordingly, the defendant no. 3 requested Nepal SBI Bank Ltd., vide letter dated 24.12.1996 to issue a performance bond on behalf of the plaintiff. Thus at the request of the plaintiff and to fulfil one of the requirements of the contract, the defendant no. 3 for and on behalf of the plaintiff, approached the Nepal SBI Bank Ltd. for issuance of a performance bond. A performance bond was thus issued by Nepal SBI Bank Ltd. on behalf of the plaintiff on 27.12.1996 and therefore the Nepal SBI Bank Ltd. is necessary and appropriate party and in its absence the suit cannot be decided properly. It is stated that this court had no jurisdiction to adjudicate upon the instant case and that in the contract in clause no. 13 it had been stipulated that "this contract shall be governed by laws of Kingdom of Nepal" and that the clause 12 had provided that for settlement of all disputes, arbitration shall be at Kathmandu.
23. On merits, the assertions made by the plaintiff were denied either for want of knowledge or being incorrect, except for admitting that the plaintiff had an account with defendant no. 3 and that the plaintiff had got issued performance bank guarantee for 5% of the total amount of the contract through defendant no. 3 but that the plaintiff had intentionally concealed from this court that this performance bond, as per the terms of CS No. 52/2008 Page 12 of 26 the tender, was to be issued by a Nepalese Bank, for which at the request of the plaintiff, the defendant no. 3 got issued one performance bond issued by Nepal SBI Bank Ltd. It is stated that that the 80% of the amount was released to the plaintiff but the 20% amount of LOC was yet due and the plaintiff informed defendant no. 3 about the completion of delivery vide its letters dated 29.04.1997, 03.05.1997 and 07.05.1997 as well as telephonically and pressed upon the defendant no. 3 to get the remaining 20% of the LOC from Citi Bank. On receipt of the said letters from the plaintiff, the defendant no. 3 wrote various letters for release of the 20% amount, making it clear that the plaintiff had claimed complete delivery and the bank as per UC PDC ICC 500 deals in documents only and not in goods and as contract of supply and the contract of payments being separate and distinct and not inter-dependent, requested the bankers of defendant no. 2 to release the payment but the payment was not received. It is stated that in reply to the said letters, the defendant no. 3 received letters on 11.06.1997, 26.09.1997 and 12.12.1997 from Rashtriya Baniya Bank, Kathmandu, i.e. banker of defendant no. 1, disputing the claim and showing inability to make the payment. It is stated that an FIR was also lodged by the defendant no. 2 against the plaintiff and the courts at Nepal had passed an injunction order against the release of 20% payment by the bankers of defendant no. 2 i.e. Rashtriya Banijya Bank. The defendant no. 3 also came to know that the plaintiff has already filed a civil suit against the Citi Bank, etc for recovery of balance 20% amount, which is pending before the Hon'ble High Court. It is stated that the defendant no. 2 has disputed the successful delivery of the skimmed milk powder and had claimed the amount of performance bond from Nepal SBI Bank Ltd, which in turn lodged its claim on the defendant no. 3 but the said request could not be acceded to by the defendant no. 3 due to the operation of the stay order of the Hon'ble High Court in the present case. The defendant no. 3 has also been threatened by the Nepal SBI Bank Ltd. to be black listed CS No. 52/2008 Page 13 of 26 throughout Nepal and had again demanded the payment vide its FAX message dated 24.02.1998. It was denied that any cause of action has ever arisen in favour of the plaintiff and against the defendant no. 3. It was stated that the plaintiff was not entitled to any of the reliefs claimed and prayed that the suit of the plaintiff be dismissed.
24. Replication was filed by the plaintiff to the Written Statement of defendant no. 3, denying the contents of the Written Statement and reiterating the contents of the plaint.
25. On an application for interim injunction moved on behalf of the plaintiff vide IA No. 4643/97, the defendant no. 3 was restrained from releasing the amount of Rs. 13,15,550/- against the performance bank guarantee in favour of defendant no. 2, initially till the next date of hearing but eventually vide order dated 17.10.1997, the interim order dated 21.05.1997 was to continue till further orders.
26. From the pleadings of the parties, the following issues were framed in the instant suit on 16.07.2004 :
1. Whether the suit is maintainable?
2. Whether the suit is bad for non joinder of necessary parties?
3. Whether this Court has jurisdiction to try and decide the present suit?
4. Whether the plaintiff is entitled to declaration, as prayed for?
5. Whether the plaintiff is entitled to permanent injunction, as prayed for?
6. Whether the plaintiff is entitled to mandatory injunction, as prayed for?CS No. 52/2008 Page 14 of 26
7. Relief.
27. To substantiate his case, Sh. Rakesh Kumar, sole proprietor of the plaintiff firm, entered the witness box as PW 1 and deposed on an affidavit which he proved as Ex. PW 1/A and testified on oath all the averments made in the plaint.
28. PW 2 Sh. P.K. Khera from Citi Bank, Jeewan Vihar, 3 Sansad Marg, New Delhi produced the summoned record, comprising of a copy of Letter of Credit dated 16.01.1997 in favour of Delhi Foods, which was taken on record as Ex. PW 2/A. However, he did not produce the testing report dated 26.02.1997, the certificate dated 19.03.1997 and the insurance policy dated 21.03.1997, since it was stated that the copies of the same were in possession of the defendants and the copies had not been summoned. But he brought on record the letter dated 06.06.1997 issued by State Bank of Bikaner and Jaipur to Citi Bank, as Ex. PW 2/B.
29. After close of PE, Sh. H.N. Bhansali, AGM from State Bank of Bikaner and Jaipur, entered the witness box as DW 1 and deposed on an affidavit which he proved as Ex. DW 1/A and testified on oath all the averments made in the Written Statement of defendant no. 3. He brought on record the letter dated 29.04.1997 issued by the plaintiff to the defendant no. 3 to get the remaining 20% amount released, as Ex. DW 1/1 and the letters dated 11.06.1997, 26.09.1997 and 12.12.1997 received by the defendant no. 3 from Rashtriya Banijya Bank, Kathmandu, the banker of the defendant no. 1 and the same were taken on record as Ex. DW1/2 (colly).
30. I have heard Mr. Bakshi Siri Rang Singh, counsel for the plaintiff and Mr. J. Mohan, counsel for the defendant no. 3, and gone through the CS No. 52/2008 Page 15 of 26 written arguments filed on behalf of the plaintiff and defendant no. 3. I have also perused the record, scrutinized the evidence adduced and have gone through the relevant provisions of law. My issue-wise findings are as under :
Issue No. 6 :-
6. Whether the plaintiff is entitled to mandatory injunction, as prayed for?
31. It has been conceded, in the written arguments filed on behalf of the plaintiff dated 20.03.2013, that though it is mentioned on the opening page of the suit that the suit is for declaration, permanent and mandatory injunction, but in the prayer clause of the plaint, the relief of mandatory injunction has not been claimed, but only the relief of permanent injunction has been prayed for, against the defendant no. 3, and as such the issue no. 6 as framed be deleted. Accordingly, no further discussion on the said issue is required and the issue stands deleted.
Issue No. 1 :-
1. Whether the suit is maintainable?
32. At the time of framing of issues, the onus to prove the issues has not been mentioned, but since the objection regarding the suit not being maintainable, was taken by defendant no. 3 in its Written Statement, the onus obviously rested upon the defendant no. 3, to prove the said issue.
33. Mr. H.N. Bhansali, AGM of the defendant no. 3 bank entered the witness box as DW 1 and deposed on an affidavit, which was taken on record as Ex. DW 1/A, but nowhere did he depose as to how the suit was not maintainable. Counsel for the defendant no. 3 has also not addressed CS No. 52/2008 Page 16 of 26 the issue regarding the alleged non-maintainability of the suit, in the written arguments filed by him and therefore the defendant no. 3 has failed to discharge the primary onus placed upon it.
34. On the other hand, written arguments have been filed on behalf of the plaintiff and it has been stated that section 9 CPC confers the jurisdiction upon all the civil courts to try all the suits of civil nature unless barred and since the plaintiff is seeking a declaration u/s 34 of the Specific Relief Act and relief of permanent injunction u/s 36 of the Specific Relief Act, therefore the suit as framed by the plaintiff is maintainable. I have gone through the record and indeed, as submitted on behalf of the plaintiff, the suit has been filed for the relief of declaration and permanent injunction and this being a civil court, having jurisdiction to try all civil suits, does have the jurisdiction to adjudicate upon the instant matter.
35. No doubt, the contract between the plaintiff and the defendant no. 2, which is Ex. PW 1/1, contains an arbitration clause, detailed in clause 12 of the contract, but defendant no. 2, after the receipt of the consignment from the plaintiff, has already released the 80% of the contract amount to the plaintiff through the letter of credit with the Citi Bank, but despite having received the entire consignment of 415 metric tonnes of skimmed milk powder from the plaintiff, did not remit the balance 20% of the amount, due to which the plaintiff as well as the plaintiff's bank i.e. the defendant no. 3 had to resort to writing several request letters for the payment of the balance amount and eventually the plaintiff filed a suit against the Citi Bank, which was eventually decreed by the Hon'ble High Court vide judgment Ex. PA, and the balance 20% amount was also paid.
36. Once the performance of the contract was duly discharged by the plaintiff, and the defendant no. 2 on the other hand, duly received the CS No. 52/2008 Page 17 of 26 consignment of 415 metric tonnes of skimmed milk powder, a factum which is established by the acknowledgment of the receipt by defendant no. 2 on all the Goods Receipts (GRs) in relation to every truck, which have been brought on record as Ex. PW 1/5 (collectively), the certificate of the Nepalies authorities dated 02.04.1997 regarding the receipt of the same, which has been brought on record as Ex. PW 1/6, followed by written confirmation thereof by the letter dated 04.09.1997 written by the defendant no. 2 from its Baluju office and addressed to its central office at Kathmandu, which has been brought on record as Ex. PW 1/9. Once the contract is concluded by performance by both the sides, the contracts comes to an end, and so does the arbitration clause contained in it. Reference can be made, at this juncture to National Insurance Co. Pvt. Ltd. Vs. Boghara Polyfab Private Limited (2009) 1 SCC 267, wherein the Hon'ble Supreme Court has held as under :
" We may next examine some related and incidental issues. Firstly, we may refer to the consequences of discharge of a contract. When a contract has been fully performed, there is a discharge of the contract by performance, and the contract comes to an end. In regard to such a discharged contract, nothing remains- neither any right to seek performance nor any obligation to perform. In short, there cannot be any dispute. Consequently, there cannot obviously be reference to arbitration of any dispute arising from a discharged contract....
... Where both the parties to a contact confirm in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. Similarly, where one of the parties to the contract issues a full and final discharge voucher, (or no-CS No. 52/2008 Page 18 of 26
dues certificate, as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has no outstanding claim, that amounts to discharge of the contract by acceptance of performance and the party issuing the discharge voucher / certificate cannot thereafter make any fresh claim or revive any settled claim nor can it seek reference to arbitration in respect of any claim."
37. In the case in hand also, Ex. PW 1/6 and Ex. PW 1/9 categorically establish that the contract stood discharged by the plaintiff and the issuance of the said letters amounted to a confirmation by the defendant no. 2 regarding the discharge of the contract by the plaintiff, and therefore no claims subsisted which could be referred to the arbitrator, as the contract has come to an end and thereafter any subsequent dispute, obviously can be adjudicated upon by this court.
38. Since the cause of action has arisen in Delhi in favour of the plaintiff, the suit before this court is maintainable.
Accordingly, issue no. 1 is decided in favour of the plaintiff and against the defendants.
ISSUE No. :-
2. Whether the suit is bad for non joinder of necessary parties?
39. The said objection was also taken by the defendant no. 3 in its Written Statement, but once again neither any evidence has been adduced nor the arguments were extended on this issue, and hence the CS No. 52/2008 Page 19 of 26 onus which was necessarily upon defendant no. 3, has not been discharged by the defendant no. 3 From the perusal of the record, the factual matrix which emerges is that the plaintiff had approached the defendant no. 3 herein for furnishing the necessary performance bank guarantee on its behalf to Dairy Development Corporation, Nepal, through a bank in Nepal. Any steps which were taken subsequently by defendant no. 3 were at its own end, to which the plaintiff is neither privy nor a party. On request of the plaintiff, no doubt, the defendant no. 3 obtained the bank guarantee to be furnished to defendant no. 2 through SBI Bank Nepal, but any transaction between the defendant no. 3 and SBI Bank Nepal were confined only to the said two parties, and the plaintiff definitely did not have any concern with the same. Accordingly, in the instant suit, which has been filed by the plaintiff, against the defendants, for the relief of declaration and permanent injunction, SBI Bank Nepal is not a necessary party.
Accordingly, issue no. 2 is decided in favour of the plaintiff and against the defendants.
ISSUE No. 3 :-
3. Whether this Court has jurisdiction to try and decide the present suit?
40. The onus to prove the said issue was upon the plaintiff but this being a legal issue does not require any evidence to be led. The performance bank guarantee was executed by the plaintiff in Delhi through the defendant no. 3, since the plaintiff has a bank account with defendant no. 3, which has its branch office at Karol Bagh, Delhi and it was the defendant no. 3 who arranged for the performance bank guarantee, and cause of action did arise in Delhi. Further more 80% payment, through the letter of credit, was made to the plaintiff in Delhi and it was the balance CS No. 52/2008 Page 20 of 26 20% amount, which was not paid, also required to be paid in Delhi, the performance bank guarantee, as already mentioned above, was also executed in Delhi and the instant suit is for restraining the defendant no. 3 from releasing the said performance bank guarantee dated 27.12.1996 for a sum of Rs. 13,15,550/- to the defendant no. 2, therefore the cause of action has arisen in Delhi and this court has the territorial jurisdiction to adjudicate upon the instant matter.
Accordingly, issue no. 3 is decided in favour of the plaintiff and against the defendants.
ISSUE No. 4 :-
4. Whether the plaintiff is entitled to declaration, as prayed for?
41. The onus to prove the said issue was upon the plaintiff and to discharge the said onus, PW 1 Sh. Rakesh Kumar, Proprietor of M/s Daily Foods (India) entered the witness box and deposed on an affidavit which was taken on record as Ex. PW 1/A, regarding the execution of contract Ex. PW 1/1 between the plaintiff and defendant no. 2. As per the contract, the plaintiff was to supply 415 metric tonnes of skimmed milk powder to defendant no. 2, in Nepal. It was agreed that the plaintiff would get issued a performance bank guarantee for 5% of the contract amount in favour of the defendant i.e. for a sum of Rs. 13,15,550/-, a term which was complied with by the plaintiff by getting the said performance bank guarantee dated 27.12.1996 issued through the defendant no. 3 i.e. State Bank of Bikaner & Jaipur. The agreement also included the pre-condition of test quality certificate, certifying the quality of the skimmed milk powder to be as per the specifications and to be fit for human consumption. The samples of the consignment of 415 metric tonnes of skimmed milk powder were taken randomly by the Ministry of Food Processing Industries, Government of CS No. 52/2008 Page 21 of 26 India and after due testing, the certificate Ex. PW 1/2 was issued by the Government of India, certifying that the product is for for direct human consumption. A certificate was also issued by Food Research Analysis Center (FRAC), certifying that the samples were taken in sealed polythene packs and after conducting the test, found the samples conforming to the customer's specifications. After the said pre-conditions were fulfilled by the plaintiff, the said 80% of the amount was indeed released by the defendant no. 2 in favour of the plaintiff through a letter of credit, which has been furnished by defendant no. 2 in Citi Bank, New Delhi and this amount was admittedly credited by the banker of defendant no. 2 in the bank account of plaintiff, maintained at defendant no. 3.
42. Further more, it has been testified and emphatically established on record that the consignment of 415 metric tonnes of skimmed milk powder, accompanied with the original certificate of non-contamination and being fit for human consumption as well as the quality and quantity certificate issued by defendant no. 1, was successfully delivered to the personnels of defendant no. 2 at the Indo-Nepal Boarder and infact the samples were also taken at the office of defendant no. 2 and also by Nepalese Customs Office at the border itself, on 30.03.1997. The plaintiff's trucks, carrying the consignments, remained at the border for three extra days i.e. for the period 30.03.1997 to 02.04.1997, and thereafter the consignment was taken to a warehouse beyond Baluju, where the goods were offloaded. Once the personnels of defendant no. 2 as well as the Nepalese Customs Officers took the samples and presumably tested the same and thereafter took the delivery of the consignment, making the plaintiff to wait for three days, and stored the consignment in their warehouse, the duty of the plaintiff in respect of the performance of his part of the contract, came to an end and the contract stood discharged, as far as the plaintiff is concerned.
CS No. 52/2008 Page 22 of 2643. Reference in this regard can be made to the letters dated 27.12.2053 / 09.04.1997, 03.04.1997, which is Ex. PW 1/9, in Nepalies language, and its English translation annexed alongwith, which is not refuted. The scrutiny of the letter, which has been issued by the defendant no. 2 from its Baluju office and is addressed to its central office at Kathmandu, communicates that 415 metric tonnes of skimmed milk powder has been received through Khosla Goods Carriers Pvt. Ltd. on 21.12.2053 / 03.04.1997, and the same was as per the description and order and meets the specifications. The certificate Ex. PW 1/6 dated 02.04.1997 issued by the Customs Office, Government of Nepal, acknowledges the delivery of the consignment having been made at Nepal.
44. In National Insurance Co.'s case (supra), the Hon'ble Supreme Court has held that once the contract has been discharged by one party and the other party accepts the said discharge, the contract obviously stands concluded and no further act remains to be done by the parties, except for settling the dues. In the case in hand, once the delivery of the consignment was accepted and storage was done by the defendant no. 2 in its warehouse, the contract stood discharged and therefore the plaintiff was entitled to receive the balance 20% of the contract amount from the defendant no. 2, which the defendant no. 2 avoided to pay on one pretext or the other. As a subsequent development to the instant case, it is an admitted fact that the plaintiff herein had filed a suit against Citi Bank, the banker of the defendant no. 2, and vide the judgment delivered by the Hon'ble High Court dated 31.05.2007, certified copy of which is Ex. PA, the said 20% amount has been directed to be paid by the bankers of defendant no. 2 to plaintiff, and which, admittedly by the plaintiff, has since been received by the plaintiff. Therefore, the plaintiff is definitely entitled CS No. 52/2008 Page 23 of 26 to the relief of declaration, thereby declaring that the agreement dated 31.12.1996 between the plaintiff and the defendant no. 2 stood concluded on 04.04.1997, when the consignment of 415 metric tonnes of skimmed milk powder was duly supplied by the plaintiff in strict compliance of the terms and conditions of the agreement.
Accordingly, issue no. 4 is decided in favour of the plaintiff and against the defendants.
ISSUE No. 5 :-
5. Whether the plaintiff is entitled to permanent injunction, as prayed for?
45. It has already been held in my findings given on issue no. 4 above, that the plaintiff had delivered the consignment of 415 metric tonnes of skimmed milk powder to the defendant no. 2 in perfect condition at the designated place, and therefore as per the agreed terms, immediately on delivery of the goods, the performance bank guarantee dated 27.12.1996, which was got issued by the plaintiff, elapsed. It is to be noted that the said performance bank guarantee was to come to an end, on completion of the contract, and the contract stood concluded on 30.03.1997, when the consignment was delivered at the Indo-Nepal Boarder, to the officers of the defendant no. 2 and Customs Office of Nepal, or at the most it stood concluded on 04.04.1997, when the consignment, after testing and acknowledging its receipt, was taken and offloaded in the warehouse of the defendant no. 2 beyond Baluju at Nepal.
46. Since the successful delivery of the consignment has been made by the plaintiff and the same has been accepted by the defendant no. 2, there stood nothing outstanding in the contract, to be performed by the parties, except for the payment of the balance 20% of the contract amount CS No. 52/2008 Page 24 of 26 by defendant no. 2 to the plaintiff. The performance bank guarantee obviously came to an end latest by 04.04.1997, after the contract had been performed by the plaintiff, and therefore the defendant no. 2 cannot subsequently invoke the performance bank guarantee and demand the payment of the same, when it has elapsed. It is to be noted that the seller can only be held liable for the goods only till he hands over the delivery to the buyer and thereafter it is the buyer's responsibility and duty to handle the same. What was the condition of the warehouse, where the consignment was offloaded and preserved, is best known to the defendant no. 2, but if something went haywire after the acceptance of the delivery and receipt of consignment, remains the problem of the defendant no. 3, and burden thereof can definitely not be shifted to the plaintiff, who had performed his part of the contract to the hilt. Infact, had it been so, vide the order of the Hon'ble High Court dated 31.05.2007 Ex. PA, the Citi Bank would not have been directed to pay the balance 20% of the contract amount to the plaintiff, on behalf of the defendant no. 2, and an order which has since been complied with. Since the plaintiff has already performed his part of the contract, the performance bank guarantee cannot be invoked by defendant no. 2, which in any case has elapsed, as already stated above, much prior in time. Accordingly, the defendant no. 3 is restrained from paying the amount of the performance bank guarantee to the tune of Rs. 13,15,550/- to the defendant no. 2, through the bank concerned in Nepal.
Accordingly, issue no. 5 is decided in favour of the plaintiff and against the defendants.
Relief :-
47. In view of my above discussion on foregoing issues, the suit of the plaintiff is decreed as follows :CS No. 52/2008 Page 25 of 26
(i) a decree of declaration is passed in favour of the plaintiff and against the defendants, thereby declaring that agreement dated 31.12.1996 between the plaintiff and the defendant no. 2 stood concluded on 04.04.1997, when 415 metric tonnes of skimmed milk powder was duly supplied by the plaintiff to the defendant no. 2 in strict compliance of the terms and conditions of the agreement.
(ii) a decree of permanent injunction is passed in favour of the plaintiff and against the defendant no. 3, thereby restraining the defendant no. 3 from releasing the amount of Rs. 13,15,550/- against the performance bank guarantee dated 27.12.1996, in favour of the defendant no. 2.
The parties are left to bear their own costs. Decree Sheet be prepared accordingly.
File be consigned to Record Room.
Announced in open Court (SEEMA MAINI) today i.e. on 23.04.2013. ADJ-12(Central)Delhi CS No. 52/2008 Page 26 of 26 Suit No. 52/2008 23.04.2013 Present: Sh. Bakshi Siri Rang Singh, counsel for the plaintiff.
Defendant no. 1 and 2 are already ex-parte.
Mr. J. Mohan, counsel for the defendant no. 3.
Vide my separate judgment announced today in the open court, the suit of the plaintiff is decreed as follows :
(i) a decree of declaration is passed in favour of the plaintiff and against the defendants, thereby declaring that agreement dated 31.12.1996 between the plaintiff and the defendant no. 2 stood concluded on 04.04.1997, when 415 metric tonnes of skimmed milk powder was duly supplied by the plaintiff to the defendant no. 2 in strict compliance of the terms and conditions of the agreement.
(ii) a decree of permanent injunction is passed in favour of the plaintiff and against the defendant no. 3, thereby restraining the defendant no. 3 from releasing the amount of Rs. 13,15,550/- against the performance bank guarantee dated 27.12.1996, in favour of the defendant no. 2.
The parties are left to bear their own costs. Decree Sheet be prepared accordingly.
File be consigned to Record Room.
(SEEMA MAINI) ADJ-12 (Central)Delhi 23.04.2013 CS No. 52/2008 Page 27 of 26