Delhi High Court
Continental And Eastern Agencies vs Coal India Limited And Ors. on 20 May, 2003
Equivalent citations: 2004IAD(DELHI)294, AIR2003DELHI387, 106(2003)DLT340, AIR 2003 DELHI 387, (2003) 106 DLT 340
Author: J.D. Kapoor
Bench: J.D.Kapoor
JUDGMENT J.D. Kapoor, J.
1. This is a suit for recovery of Rs. 5,89,434/- towards agency commission. Plaintiff is agent of defendant No. 3, an Italian company, in India. Defendant No. 1 is a Public Sector Undertaking and is a unit of defendant No. 2. Brief resume of facts pleaded by the plaintiff in respect of its claim is like this:-
2. Defendant No. 1 floated a global tender for purchase of two Hydraulic Crankshaft Grinding Machines on 24.9.1986. Plaintiff gave an offer dated 22.9.1986 for two machines. Earlier plaintiff had supplied four similar machines to defendant No. 1 vide their order dated 5.2.1985. Later defendant No. 1 sought some clarifications and also the amendment in terms if four machines were purchased instead of two.
3. In original offer the plaintiff had offered that agency commission would be 15% of FOB value of order. By letter dated 7.3.1987, plaintiff offered discount of 5% on commission if entire order was placed on plaintiff and 100% commission was paid on receipt of shipping documents. By letter dated 10.8.1987, defendant No. 1 wrote to plaintiff that requirement was raised to four Grinder Machines, and the plaintiff should submit reduced price bid accordingly. By letter dated 14.8.1987 plaintiff did the needful and informed defendant No. 1 that price of machine will be same and be multiplied by four in place of two and discount of 5% on agency commission of 15% would be valid if (i) entire order is placed on plaintiff and (ii) 100% agency commission released on presentation of shipping documents. By letter dated 9.11.1987, defendant No. 3 informed defendant No. 1 that plaintiff would not accept any amount less than already offered by them, as their work involved lot of expenditure. Defendant No. 1 thereupon placed order dated 25.4.1988 addressed to defendant No. 3 on plaintiff at Delhi who in turn forwarded it to defendant No. 3 at Italy only for two machines. An amendment dated 6.5.1988 was issued by defendant No. 1 to this order. Clause 2 of amendment was as follows:-
"B. Installation:- Indian Agent of the supplier will install and demonstrate the equipment at site free of cost after foundation are laid, equipment placed on foundation electricals and air liners brought to the site by the consignee. The consignee however will ensure readiness of the infrastructure well in advance so that the machine can be commissioned within 60 days from the date of the arrival at project site.
4. In the order placed, defendant No. 1 unilaterally reduced the commission payable to plaintiff from 15% to 10% of FOB value, even though discount of 5% was offered only as quantity discount on four machines and was not applicable to two machines only. Plaintiff protested against this unilateral action of defendant No. 1. Plaintiff never consented to 5% discount for only two machines. By letter dated 17.5.1988 plaintiff accepted the order at Delhi with the exception of the discount clause.
5. The defendant did not issue any amendment but acted on the plaintiff's letter allowing 5% discount and established Letter of Credit in favor of defendant No. 3. Two machines were shipped on 9.1.1989 by the foreign seller. The complete machinery was received by defendant nos.1 & 2 at site on or before 30.8.1989 and in this respect they issued acknowledgments. Thereafter plaintiff repeatedly wrote to defendant Nos. 1 & 2 asking for readiness of site to enable plaintiff to commission the machines. Since there was no response, plaintiff served legal notice dated 8.4.1989 on defendant Nos. 1 and 2 demanding 15% commission. It was also pointed out in the notice that the site was not made ready even though two years had passed since the receipt of the machines. No reply was sent by the defendants but telegram was received from them to defer the legal action as matter was being looked into. Plaintiff deferred legal action and again sent letter dated 3.8.1991 to defendant Nos. 1 and 2 pointing out that site was not made ready nor plaintiff's commission was being released.
6. Defendant No. 1 in letter dated 8/9.8.1991 wrote to defendant No. 2 that if the sites do not get ready for number of years, the plaintiff cannot suffer for non-payment of agency commission. In response defendant No. 2 wrote on 29/30.8.1991 to plaintiff that balance 10% had been already released to the principal and agency commission will be released on receipt of certificate from Excavation Department. By letter dated 29.11.1991 plaintiff again sought confirmation that the site had been made ready or not. Thereafter, on verbal message of defendants, plaintiff again visited site on 2.12.1992 to install the machines and found that site was still not ready. In February 1992 plaintiff again visited the site and found the site was not ready and machines had become useless due to exposure to nature. This was confirmed by plaintiff from site camp itself by detailed letter dated 4.2.1992.
7. Besides challenging the territorial jurisdiction of this court on the premise that contract between the parties was entered into and communicated at Calcutta, defendant Nos. 1 and 2 have in their common written statement taken the following defense:-
"The plaintiff by letter dated 22.9.1986, had offered to allow discount of 5% on the FOB price on placement of order for two machines. After correspondence between the parties, the defendant No. 1 in the order dated 25.4.1988 had specifically stated the term of the discount. Even otherwise, there was no such condition that the said discount would be payable only if four machines are purchased. In the purchase order dated 25.4.1988 issued by defendant No. 1, it was specifically mentioned that the Agency Commission shall be payable after commissioning is completed by the plaintiff and hence there was no question of release of 100% Agency Commission to the plaintiff just on receipt of the shipping documents. There was delay in the preparation of the site because of the non-cooperation on the part of the plaintiff especially in supplying the Drawings of the site, which if supplied in time would have helped the defendant Nos. 1 and 2 in preparation of the foundation work and which ultimately resulted in the spoiling of the machines. In fact the defendant Nos. 1 and 2 have been put to heavy losses because of the non-commissioning of the machines. The plaintiff is not entitled to any agency commission because the part of the contract regarding the commissioning of the machines has not been performed by them. The commissioning of the machines by the plaintiff was a condition precedent for the payment of the agency commission to the Plaintiff. As per the terms of the order dated 25.4.1988 agency commission is payable after commissioning of the equipment is completed by the plaintiff. Thus, no commission is due and payable to the plaintiff and such demand is totally devoid of any substance."
8. In the replication, the averments made in the plaint were reiterated by the plaintiff.
9. Vide order dated 7.2.1996 following issues were framed:-
1. Whether this Court has the territorial jurisdiction to try and entertain the suit? OPP
2. Whether the plaint has been instituted, signed and verified by a duly authorized person? OPP
3. Whether the plaintiff is entitled to receive Rs. 4,39,466.20 being 15% agency commission or any lesser amount? OPP
4. Whether the plaintiff is entitled to interest on Rs. 4,39,466.20 or any lesser amount and if so at what rate and period thereof? OPP
5. Whether the plaintiff agreed to give discount of 5% and charge 10% commission payable after commissioning of machine? OPD
6. Whether the discount of 5% was available only on conditions set out in the plaintiff's letter 7.3.1987 and 14.8.1987 being fulfillled? OPP
7. Whether the plaintiff is not entitled to any commission due to its breaches and failure to perform its obligations as set out in para 3(c) of the preliminary objection and 23 and 24 of the written statement on merits? OPD
8. Whether the defendant Nos. 1 and 2 had the site ready for installation of the equipment/machinery in terms of amendment to the contract dated 6-5-1988? OPD
9. Relief
10. Both the parties filed affidavits by way of evidence. Plaintiff examined the solitary witness who was the partner of the plaintiff and has been visiting the site. Similarly both the defendants examined one witness who is their Commercial Manager is acquainted with the commercial side of the transaction.
11. PW 1 at the outset denied that contract was executed at Calcutta as according to him defendant No. 1 after signing the said contract at Calcutta had forwarded the same at Delhi and he transmitted the same to defendant No. 3 for signatures to Italy and after receiving back the same duly signed by defendant -3 again sent it back to defendant Nos. 1 and 2. According to him, letter of credit was opened in the name of defendant No. 3 by him and he had never informed defendant No. 3 about the non-acceptance of the terms by defendant Nos. 1 and 2 regarding discount on agency commission. However, he could not recollect whether he had seen the letter dated 23.9.1987 regarding change in condition relating to agency commission payable to the plaintiff, though he volunteered that this letter was prior to the execution of contract (Exhibit P-2) as he had entered into agency commission with defendant No. 3 much prior to the said contract. However, he failed to produce any agreement entered into with defendant No. 3. He denied the suggestion whether plaintiff was called upon by defendant Nos. 1 and 2 to install and machinery at the project site .Rather sites were not made ready by defendant Nos. 1 and 2 so as to facilitate the plaintiff to install and commission the machinery. He also denied the suggestion that he never visited the site. According to him he had informed defendant Nos. 1 and 2 in writing about not making the sites available. He also denied that he never gave measurement of basement in writing for construction of foundation for installing the machines.
12. Various documents and letters exchanged between the parties were proved by this witness which are as under:-
(i) Exhibit P-1 is the letter dated 10.8.1987 whereby defendant No. 1 wrote to plaintiff that their requirements of machines had been enhanced to 4 nos and further requested the plaintiff to submit its bid for reduced price.
(ii) Exhibit P-2 is the formal order dated 25.4.1988 placed by defendant No. 1 to defendant No. 3 for two machines.
(iii) Exhibit P-3 is the letter/amendment dated 6.5.1988 to the purchase order in which it was stated that the plaintiff shall install the equipments at site free of cost after foundations were laid, equipment placed etc and that consignee will ensure readiness of the infrastructure well in advance so that machines could be commissioned within 60 days from the date of its arrival at project site.
(iv) Exhibit P-5 is the letter dated 3.8.1991 sent by defendant No. 1 to defendant No. 2 to the effect that site for erection of the machinery had not been made ready. Copy of this letter was sent to the plaintiff also.
(v) Exhibit P-5 is the letter dated 29/30.8.1991 written by defendant No. 2 to the plaintiff that balance 10% had already been released but agency commission of the plaintiff would be payable on receipt of certificate from excavation department.
(vi) Exhibit P-6 is the certified copy of registration of the plaintiff firm.
(vii) Exhibit P-7 is the letter dated 26.2.1987 wherein defendant No. 3 had certified that agency commission of 15% was payable to the plaintiff.
(viii) Exhibit P-8 is the plaintiff's letter dated 7.3.1987 to defendant No. 1 stating the terms of agency commission payable to commission.
(ix) Exhibit P-9 is the letter dated 14.8.1987 written by plaintiff to defendant No. 1 wherein plaintiff again reiterated discount on agency commission.
(x) Exhibit P-10 is the plaintiff's letter dated 3.5.1988 to defendant No. 1 again acknowledging receipt of letter including proforma invoice for issue of separate order for additional machines. This document is the document of defendant No. 1 which was initially marked as D-4.
(xi) Exhibit P-11 is again plaintiff's letter dated 17.5.1988 regarding 15% agency commission.
(xii) Exhibit P-12 is the letter dated 10.1.1989 regarding shipment of machines.
(xiii) Exhibit P-13 is the plaintiff's letter dated 5.6.1989 seeking confirmation and readiness of site to enable commission of machines.
(xiv) Exhibit P-14 is the acknowledgment by defendant No. 2 on receipt of machines dated 6.9.1989.
(xv) Exhibit P-15 is again acknowledgment on receipt of machines by defendant No. 2 dated 27/29.10.1990.
(xvi) Exhibit P-16 is another receipt dated 19.11.1990 by defendant No. 2 on receipt of machines.
(xvii) Exhibit P-17 is the confirmation dated 29.11.1990 issued by defendant No. 2.
(xviii) Exhibit P-18 is the letter dated 21/22.12.1990 by defendant No. 1 to defendant No. 2 regarding receipt of machine at site.
(xix) Exhibit P-19 is plaintiff's letter dated 22.3.1990 to defendant No. 2 including receipt of machines issued.
(xx) Exhibit P-20 is the legal notice dated 8.4.1991 served on defendant Nos. 1 and 2 for remaining 15% commission and interest @ 24%.
(xxi) Exhibit P-21 is the copy of reminder notice.
(xxii) Exhibit P-22 is plaintiff's registered letter dated 3.8.1991 to defendant No. 1 for release of agency commission pointing out that site was not made ready.
(xxiii) Exhibit P-23 is the letter dated 29.11.1991 thereby plaintiff again sought confirmation whether suit had been ready or not.
(xxiv) Exhibit P-24 is plaintiff letter dated 4.2.1992 to defendant No. 2 that site was not ready.
(xxv) Exhibit P-25 is the letter dated 8.12.1992 from plaintiff to defendant No. 2 after again inspecting the machines and giving inspection report pointing out that machines have become defective due to exposure to nature.
(xxvi) Exhibit P-26 is the telax from defendant No. 3 to defendant No. 1 with copy to plaintiff pointing out that for repair of machines, machines have to be sent to Italy.
(xxvii) Exhibit P-27 is the letter from defendant No. 2 dated 12/16.4.1994 to plaintiff inviting plaintiff to settle the matter without prejudice to the rights and contentions of the parties in the present suit.
(xxviii) Exhibit P-28 is the letter of defendant No. 1 to plaintiff alleging that machines were not being installed.
(xxix) Exhibit P-29 is the plaintiff's letter to defendants in reply to above letter.
(xxx) Exhibit P-30 is the letter dated 20.4.1993 from plaintiff to defendant No. 3 with copy to defendant No. 1 pointing out the state of machinery and that it was not possible to commission the machines at that stage without visit of Engineers from Italy.
(xxxi) Exhibit P-31 is the notice served by plaintiff on the defendants along with postal receipts exhibits P-32 & P-33.
13. Defendants witness produced and proved the following documents:-
i) Exhibit DW 1/A is the original copy of letter dated 22.9.1986.
ii) Exhibit DW 1/B is the original formal order dated 25.4.1988 from defendant No. 1.
iii) Exhibit DW 1/C is the original letter dated 6.5.1988 from defendant No. 1 to defendant No. 3 which is the amendment of the original order.
iv) Exhibit DW 1/D is the letter dated 17.5.1988 from plaintiff to defendant No. 1 wherein plaintiff stated that the amendment carried out by defendant No. 1 was acceptable to the plaintiff.
v) Exhibit DW 1/E is the original telex dated 19.5.1998 from defendant No. 3 to defendant No. 1.
vi) Exhibit DW 1/F is the original letter dated 9-14/.6.1988 whereby defendant No. 1 informed defendant No. 3 about the amendment carried in the order and that other terms and conditions of the above order would remain unaltered.
vii) Exhibit DW 1/G is the original telex copy of the letter dated 30-31.1.1989 from defendant No. 1 to plaintiff,
viii) Exhibit DW 1/I is the carbon copy of letter dated 7.1.1992 by defendant No. 1 to plaintiff with regard to commission of machines.
ix) Exhibit DW 1/J is the carbon copy of letter dated 9.2.1993 from defendant No. 1 to plaintiff regarding commission of machines.
x) Exhibit DW 1/K is the telex dated 16.3.1993.
xi) Exhibit DW 1/L is the carbon copy of letter dated 2.4.1993 from defendant No. 1 to plaintiff for commission of machines.
xii) Exhibit DW 1/M is the carbon copy of letter dated 12.4.1993 from defendant No. 1 to the plaintiff.
xiii) Exhibit DW 1/N is the carbon copy of the letter dated 16-19.4.1993 from defendant No. 2 to defendant No. 1.
xiv) Exhibit DW 1/O is the original copy of letter dated 9.6.1993 from defendant No. 1 to defendant No. 3 complaining about the non commissioning of the machines by the plaintiff.
14. Besides the aforesaid documents, the defendant has also produced the copies of letters sent by the defendant to the plaintiff regarding non commissioning of the machinery. These are letters dated 23.6.88, 24.10.88, 29.6.89, 1.3.93 and 28.5.94. These letters have been filed by separate list and could not be exhibited. However, these are the receipt of communications which have not been denied by the plaintiff and thus the same shall be read in evidence as Ex. DX 1 to DX 5.
ISSUE NO. 115. The contention of the learned counsel for the defendant that the contract between the parties was entered into and communicated at Calcutta and the defendants No. 1 and 2 have their registered office at Calcutta and the whole transaction relates to Material and Management Division of Defendant No. 1 and 2 which is situated at Calcutta and therefore, this court has no territorial jurisdiction, is completely devoid of merit. Section 20 of the Code of Civil Procedure relates to territorial jurisdiction of courts and relevant clause/sub section reads as under:-
"That further suit shall be instituted in court within the local limits of whose jurisdiction the cause of action wholly or in part arises".
16. Admittedly, the contract was communicated to the plaintiff at Delhi and payment of the commission to the plaintiff was to be made at Delhi. To expect the plaintiff to go to Calcutta to claim his commission is not the intention of the provisions of Section 20 of the Code of Civil Procedure. It would be too much and highly jeopardic to ask the plaintiff to file the suit at Calcutta as Section 20(C) entitles a person to sue when part of cause of action arises. In the instant case the part of cause of action has arisen in Delhi in as much as the contract was communicated at Delhi and payment of commission was also payable at Delhi. As such the issue is decided in favor of the plaintiff and against the defendants.
ISSUE NO. 217. The only objection raised by the defendant in this regard is that the plaintiff is a registered partnership firm and the person who has signed, verified and instituted the suit was not the partner of the firm at the relevant time nor was he authorised by the patnership firm to sign, verify and institute the suit. In support of the proposition that only partner has an authority to sign, verify and institute the suit, learned counsel has placed reliance upon Gandhi and Company Vs. Krishna Glass Private Limited AIR 1987 Bombay 348 wherein it has been held that Section 69 of the Partnership Act debars filing of the suit on behalf of the firm by the person who is neither one of its partners nor the duly authorized person. As Ex. P 6 itself shows that Mr. V.P. Verma in his individual capacity was not shown partner of the firm but as Karta of Hindu Undivided Family he was partner of the firm and therefore duly authorized person to institute the suit. Moreover, the entire communication between defendants No. 1 and 2 was exchanged between and directed to V. P. Verma and it was through him that all negotiations took place and now to say that he is not duly authorized person on behalf of the plaintiff firm is not correct and is like taking a somersault. Mr. V. P. Verma has the authority to sign, verify and institute the suit and as a consequence issue is decided in favor of the plaintiff and against the defendant.
ISSUES NO. 3,6,7 & 818. The main plank of the contention of the learned counsel for the defendant is that there was no privity of contract between the plaintiff and defendants No. 1 and 2 regarding the payment of commission as the plaintiff has admitted in cross-examination that for payment of commission he has independent contract with defendant No. 3. In support of its contention the learned counsel has relied upon Mohana Krishnan Vs. Chiman Lal and Company wherein it was held:-
"That for the personal liability which is the question of fact in each case whether the contract is between the principal and the foreign principal directly or whether the home agent of the foreign principal have entered in the contract and if he has, is personally liable, is exempted under the general principal, unless there is a specific term of the contract stipulating such a liability."
19. However, I am afraid the ratio of the aforesaid authority does not attract in the given facts of the case. Since the order was placed for supply of machines vide 10% of the FOB price of the machines was deducted by defendant No. 1 from the price of machines given to defendant No. 3 and in that order defendant no. 1 was required to pay directly to Indian agent and, therefore, the privity of contract between the plaintiff and defendant no. 1and 2 flows from the term of the order itself coupled with the actual deduction of 10% of F.O.B from the price of machines by defendants no. 1 and 2 while forwarding the price thereof to defendant no. 3.
20. The next contention of the learned counsel is with regard to commissioning of the machines as the payment of the commission under the contract was subject to the commissioning of the machines and since in the instant case, the machines were not commissioned, the plaintiff was not entitled for the commission even in the face of amendment under the contract by way of Clause 2. In this regard, the learned counsel has placed reliance upon series of letters sent by defendants no. 1 and 2 referred above calling upon the plaintiff to commission the machines but to no avail.
21. Learned counsel for the plaintiff has met the aforesaid contention successfully by contending that if the contract is read with amendment then the site for inspection of machines was to be kept ready by the consignee i.e. defendant no. 2 in advance along with the infrastructure etc. and in this regard the plaintiff had sent large number of letters to defendant no. 2 for making the site ready but defendant no. 2 did not pay any heed and last such communication was dated 8/9-8-91 (Ex. P 4) wherein defendant no. 1 admitted that if the sites were not ready for number of years, the Indian Agent cannot suffer for non-payment of agency commission. This document proved to be proverbial last straw on the back of the camel showing that the blame for not keeping the site ready lay at the door of defendant no. 2 alone and as such the plaintiff cannot be saddled with the liability of non-commissioning of the machines. Even otherwise, the onus to prove that the sites were made available and kept ready to facilitate the plaintiff to commission the machines was heavily upon defendant no. 2 but the evidence in this regard is utterly wanting.
22. The plaintiff has successfully proved that on account of the fact that the sites were not kept ready in advance, the machines could not be commissioned and has therefore made himself entitled for the commission at the rate of 10% with effect from 9.8.91 t ill 2.4.93, the date of the filing of the suit as even service of legal notice for keeping the site ready so as to facilitate the plaintiff to commission the machines did not cut ice. By way of calculation the commission comes to Rs. 2,92,977.46. Issues are decided accordingly.
RELIEF
23. The suit of the plaintiff is decreed for the sum of Rs. 2,92,977.46 together with pendentelite and future interest at the rate of 9% with effect from 1.4.93 till its realization. Decree Sheet be drawn accordingly.