The Cotton Corporation Of India ... vs The Alagappa Cotton Mills
2001 Latest Caselaw 193 Bom

JUDGMENT

J.A. Patil, J.

1. This is a suit for recovery of a sum of Rs. 15,43,633,84/- with future interest thereon, the plaintiffs case in brief is as follows :-

2. The plaintiffs are a Company registered under the Companies Act and are also a Government of India undertaking. The main business of the plaintiffs is to act as canalising agents for the Import and supply of foreign cotton to Indian textile mills. The defendants are a partnership firm and

they owned a textile mill at Nagamrnainagar in Tamil Nadu. In February, 1977 the plaintiffs had Issued a circular to all the textile mills including the defendants, inviting offers for purchase of cotton proposed to be imported by the plaintiffs. The defendants thereafter by their letter dated 26.2.1977 requested the plaintiffs to register their demand for 500 bales of Brazilian Cotton at the rate of Rs. 4,975 per candy for June/July Shipment. The defendants also stated that they would be arranging for the subsidiary import licence as well as for the bank guarantees. In view of the said letter the plaintiffs sent to the defendants a contract in standard form dated 18th March, 1977 in duplicate to enable the defendant's to return one copy thereof duly signed by them. The defendants, however, did not return the copy duly signed nor did they inform the plaintiffs immediately that they were not interested in buying the said cotton. In the absence of such a letter from the defendants the plaintiffs assumed that the defendants had accepted the said contract. According to the plaintiffs even though the defendants did not return the standard form of contract there was a valid contract since the defendants had agreed to purchase 500 bales of Brazilian cotton at the rate of Rs. 4, 975 per candy on the terms and conditions mentioned in the said circular. The plaintiffs thereafter, issued shipment instructions to the foreign suppliers for Brazilian cotton and by their letter dated 22.8.1977, the plaintiffs informed the defendants that 527 bales of Brazilian cotton were shipped by the foreign suppliers per "S.S. Jalayamuna" from Santos to Kochin under the plaintiff's import licence. Thereafter, by a telegram dated 25.8.1977, the plaintiff's informed the defendants that they had received documents in respect of the consignments and requested the defendants to inform about the mode of the payment and clearing arrangement. The defendants, however, by their letter dated 2.9.1977 stated that they did not accept the contract and that they had not confirmed the same nor they had subsidiary licence to import. The plaintiffs by their letter dated 13.9.1977 informed the defendants that they could not cancel the contract and requested them to accept the documents against the payments. However, the defendants by their letter dated 1.10.1977 repeated their previous contention.

3. The plaintiffs further averred that after the goods arrived at Kochin port the defendants failed to take delivery thereof, with the result that the plaintiffs had no alternative but to clear the goods and store them in their godown. On 31.10.1977 the plaintiffs called upon the defendants to take delivery of the said cotton bales within 15 days and further informed that otherwise the same would be sold at the risk and cost of the defendants. The defendants by their letter dated 8.11.1977 denied their liability to take delivery of the goods and denied that they had entered into any contract with the plaintiffs. Since the defendants did not take delivery of the said cotton, the plaintiffs were required to sell the same to M/s. Bunge A. G. Zurich at a rate of US $ 57.25 per bale and they realised a sum of Rs. 9,61,811.96 ps. The invoice value of the said cotton Including clearance charges, demurrages, interest, carrying charges and C/F charges etc. were Rs. 22,13,998.63/-. Thus according to the plaintiffs they have suffered a loss of Rs. 12,52,186.68/-. It appears that the plaintiffs called upon the defendants to pay the said amount. But since no response was

given by the defendants, the plaintiffs were constrained to file this suit on 28.8.1980 to recover the amount of Rs. 12.52.186.68/- together with interest of Rs. 25,078.04/- at the rate of 17% from 1.8.1979 to 12.9.1979 with further interest of Rs. 2,66,369.12/- at the rate of 20% from 13.9.1979 till the date of the suit. The plaintiffs have totalled their claim at Rs. 15,43,633.84/-. They have further claimed interest at the rate of 20% from the date of the suit till the date of the judgment and further interest at the rate of 6% per annum from the date of the judgment till realisation.

4. The defendants resisted the suit by filing their written statement. The defendants contended that this Court has no jurisdiction to entertain and try this suit. They also contended that the suit is barred by limitation. The defendants further denied that they had entered into a contract with the plaintiffs for purchase of the bales. They pointed out that the plaintiffs did not at any time confirm the looking of 500 bales and therefore, nothing survived thereafter. It is pointed out that after the said confirmation a contract in writing would be entered into between the parties whereby the plaintiffs would agree to import and sell the cotton and the defendants would agree to purchase the same and that after such written contract was executed, there will be a binding contract of sale. The defendants contended that the alleged assumption on the part of the plaintiffs and the steps taken pursuant to such assumption were entirely wrong and not binding on the defendants. According to the defendants, on the contrary the plaintiffs should have assumed that the defendants were not interested in importing the said cotton and there was no contract since there was no confirmation by the plaintiffs about the defendant's requirement of 500 bales of cotton. Assuming that there was such a confirmation, the defendants had not within 10 days thereafter submitted to the plaintiffs an application for subsidiary import licence and bank guarantee. The defendants have pointed out that the cyclostyled agreement contain clause No. 33 to the effect that if the duplicate copy of the agreement was not returned by the Mill duly signed within 7 days from the receipt of the agreement, it will be deemed to have been accepted by the mill. However, this clause in the cyclostyled agreement was struck out. The defendants further denied other averments made by the plaintiffs regarding the sale of the cotton and the alleged loss sustained by the plaintiffs. On this grounds the defendants prayed for dismissal of the suit with cost.

5. On the basis of the pleadings of the parties the following issues came to be framed ;-

1. Whether the defendants prove that this Honourable Court has no jurisdiction to entertain and try this suit for the reasons alleged in paragraph 17 of the written statement?

2. Whether the defendants prove that the suit is barred by law of limitation as alleged in paragraph 2 of the written statement?

3. Whether the plaintiffs prove that there is a valid concluding contract between the plaintiffs and the defendants for import and supply of suit cotton?

4. Whether the plaintiffs prove that the defendants committed breach of the contract by not taking delivery of suit cotton?

5. Whether the plaintiffs prove that the plaintiffs suffered loss of Rs. 15,43,633.84 ps. or for any other amount on account of breach of the contract by the defendants and whether the plaintiffs are entitled to claim interest on the said loss as claimed in the suit?

6. What reliefs ?

My findings on these issues are as under :-

1. No.

2. No.

3. Yes.

4. Yes.

5. As per order for the reasons below.

6. As per order below.

REASONS

6. ISSUE NO. 1 :-

The defendants have contended that this Court has no jurisdiction to entertain and try the suit as according to them no cause of action has arisen in favour of the plaintiffs and against the defendants in Murnbai. It is true that the defendant mill is situated at Rajapalayam, Tamil Nadu and that the acceptance of the offer given by the plaintiffs took place at the same place. It is also true that the defendants were supposed to take delivery of the cotton at the Port of Cochin. However, that is not all. Some part of the cause of action has taken place in Mumbai. The acceptance of the offer was communicated by the defendants to the plaintiffs in Murnbai. The payments in respect of the cotton was to be made at Mumbai. Similarly, the alleged revocation of the contract has taken place at Mumbai. Therefore, this Court also has Jurisdiction to entertain the suit, since part of the cause of action has arisen within its territorial jurisdiction. Consequently, the contention raised by the defendants in this respect will have to be rejected.

7. ISSUE NO. 2 :-

Another contention raised by the defendants is that the suit is barred by law of limitation. However, there does not appear to be any substance in this contention for the simple reason that the consignment of cotton arrived in the Port of Cochin in October. 1977 and thereafter, on 31.10.1977. The plaintiffs called upon the defendants to take delivery of the bales of cotton within 15 days. The defendants by their letter dated 8.11.1977 denied their liability to take delivery of the goods. The present suit was filed on 28.8.1980 i.e., within a period of three years from the date of the breach of the contract. Therefore, it is perfectly within time. Consequently, finding on Issue No. 2 will have to be recorded in the negative.

8. ISSUE NO. 3 :-

At the time of the hearing, the defendants remained absent. It may be pointed out that by letter dated 13.6.2000 the office had informed the defendants to remain present in the Court on 26.6.2000 either in person or through their Advocate, failing which the matter would be proceeded ex parte. Inspite of this communication, the defendants did not care to remain present. In support of their claim, the plaintiffs have examined N. R. Krishnamurthi, who works as their Advisor (Legal). He has stated about the procedure of making a contract regarding sale and purchase of

foreign cotton. His evidence shows that the plaintiffs are the canalising agents for Import of cotton and that the plaintiffs had Issued a circular to various textile mills, asking them to inform about their requirement of cotton. A copy of the said circular is produced at Exh. P-1. It is further seen from his evidence that after the receipt of a copy of this circular, the defendants sent a telex message, informing the plaintiffs to register their order for 500 bales of Brazilian cotton at the rate of Rs. 4,975/- per candy for June/July Shipment. They also informed that they were arranging to send subsidiary import licence and bank guarantees with licence fee shortly. The telex message is produced at Exh. P-2. There is also a letter dated 26.2.1977 Exh. P-3, sent by the defendants which confirmed the telex message.

9. The evidence of P.W. 1 Krishnarnurthi further shows that the plaintiffs thereafter sent a standard form of contract to the defendants for their signature. According to him the defendants however, did not return the same duly filled in. P.W. 1 Krishnarnurthi has produced the copy of the standard form of contract Exh. P-4 to the defendants which contains all the terms and conditions of the contract.

10. Admittedly the defendants did not return the standard form of contract duly signed by them to the plaintiffs. The question which, therefore, arises is whether there was a concluded contract between the parties. The defendants have contended that the plaintiffs did not confirm the acceptance of the offer given by the defendants. Besides, the defendants did not sign and return the standard form of contract and therefore, there was no valid contract with the plaintiffs for purchasing 500 bales of Brazilian cotton. Shrl R. C. Shah, the learned Advocate for the plaintiffs further pointed out that the defendants have not disputed that standard form of ontract was sent to them by the plaintiffs for their signature. Although the defendants did not return the same duly signed, still according to Shri Shah, the contents of the said form clearly indicate that the plaintiffs had confirmed the acceptance of offer given by the defendants. This is evident from the contents of the standard form Exh. P-4. which states that the plaintiffs shall import and the defendants shall buy 500 bales of Brazilian cotton at the rate of Rs. 4,975/- per candy for June/July Shipment. There appears to be much substance in this submission of Shri Shah, because the defendants have not disputed the receipt of the standard form which clearly indicated that the plaintiffs had confirmed the acceptance of offer given by the defendants. It may be noted that the standard form of contract contained certain terms and conditions and Clause No. 33 therein is to the effect that if the duplicate copy of the agreement is not returned duly signed within 7 days from the receipt of the agreement, it will be deemed to have been accepted by the mill. Admittedly, this clause in the standard form sent to the defendants was struck out. The defendants have, therefore, contended that they cannot be deemed to have accepted the offer since they did not return back the standard form of contract duly signed within 7 days. It was, however, submitted on behalf of the plaintiffs that since the defendants had already accepted the plaintiffs offer to purchase the Brazilian cotton, by sending a telex message Exh. P-2 and letter dated 26.2.1977 Exh. P-3. all that the plaintiffs did, by sending the standard

form of contract to the defendants, was to confirm the contract. It is material to note that the defendants after the receipt of the standard form of contract did not inform the plaintiffs that they were withdrawing their earlier acceptance of the offer given by the plaintiffs and that they did not want to purchase the cotton. Therefore, merely because the contract form was not returned duly signed by the defendants, it cannot be said that there was no concluded contract between the plaintiffs. Hence my findings on issue No. 3 is in the affirmative.

11. ISSUE NO. 4 :-

Admittedly the defendants did not take delivery of the cotton which the plaintiffs had imported for them as per order given. The evidence of P.W. 1 Krishnamurthi shows that the plaintiffs had informed the defendants about the shipment of cotton as well as the arrival of consignment of cotton in Cochin port. But the defendants did not arrange to take delivery of the said cotton. It must, therefore, be said that the defendants committed breach of the contract which had already arrived at between them. It is true that by their letter dated 2.9.1977 Exh. P-8. the defendants informed the plaintiffs that they are not accepting the consignment. However, this was only after the plaintiffs had informed the defendants about the shipment of the consignment of cotton which ultimately arrived in the port of Cochin some time in October, 1977. Under the circumstances, it was obligatory on the part of the defendants to have honoured their commitment and accepted the delivery of the cotton bales after making payments and other compliance. Thus there was clearly a breach of contract on the part of the defendants. Hence, finding on the issue No. 4 is recorded in the affirmative.

12. ISSUE NO. 5 :-

It is the plaintiffs case that since the defendants did not accept delivery of the 500 bales of cotton which was imported as per their decision, the plaintiff had to clear the same on payment of certain charges to the port authorities and stored the same in godown. The evidence of P.W. 1 Krishnamurtht however, shows that even thereafter, the defendants were informed to arrange to take delivery but they did not arrange to take away the consignment. Consequently, the plaintiffs were required to take steps for re-saie of the said cotton and ultimately after obtaining necessary permission from the Government of India, the plaintiffs had to sell the said cotton to foreign purchaser. The evidence of P.W. 1, Krishnamurthi shows that in the transaction of re-sale of cotton, the plaintiffs suffered a loss. He submitted particulars of the plaintiffs claim at Exh. P-20 which showthat a total expenses including the invoice value, clearance charges, carrying charges and interest were Rs. 20,69,717.41/- whereas the amount released on re-sale of all the cotton was only Rs. 9,62,811.95/ Thus the plaintiffs were put to a loss of Rs. 11,06,905.46/-. As per the particulars of claim Exh. A, annexed to the plaint the total claim made by the plaintiffs including interest till the date of the suit is Rs. 15,43,633.84/-. However, the plaintiffs have now reduced their claim by charging interest at a lesser rate and that too the simple Interest. The reduced claim thus comes to Rs. 13,48,028.90/-. The plaintiffs will be entitled to get this amount from the defendants.

13. As regards the future interest from the date of the suit till the date of judgment, the plaintiffs will be entitled to claim contractual interest which is 20% per annum. However, the future interest from the date of the judgment till realisation can be claimed only at the rate of 6% per annum.

14. In the result, the suit is decreed with costs. The defendants to pay to the plaintiffs a sum of Rs. 13,48,028.90/- together with future interest at the rate of 20% p.a. from the date of the suit till the date of the judgment and at 6% per annum from the date of the judgment till realisation.

15. Decree be drawn up accordingly. Drawing of the decree is expedited.

Prothonotary and all concerned authorities to act on an ordinary copy of this order duly authenticated by the Associate of this Court. Certified copy expedited.