Calcutta High Court
Veekay General Industries vs Eastern Railways on 17 October, 2023
IN THE HIGH COURT AT CALCUTTA
(Ordinary Original Civil Jurisdiction)
COMMERCIAL DIVISION
Present:
The Hon'ble Justice Krishna Rao
CS 159 of 2019
Veekay General Industries
Versus
Eastern Railways, Through its General Manager
Mr. Sourojit Dasgupta
Mr. Vishwarup Acharyya
... for the plaintiff.
Mr. Avinash Kankani
Mr. Suman Majumder
... for the defendant.
Hearing Concluded On : 04.10.2023
Judgment on : 17.10.2023
Krishna Rao, J.:
1. The plaintiff has filed the suit for a decree of sum of Rs. 1,74,40,566/-
along with interest against the defendant.
2. The defendant had issued a tender Notice dated 4th June, 2013 for
procurement of jointless grooved copper contact wire made out of
continuous cast copper wire rods. The plaintiff has participated in the
2
said tender process. At the time of submission of the tender document,
the plaintiff had reserved its price variation clause which contained in
the tender notice and the plaintiff had also enclosed a separate price
variation clause along with the bid. On 24th October, 2013, the
defendant had issued letter of acceptance to the plaintiff for the supply
of 186.184 MT for supply of jointless grooved copper contact wire 107
sq. mtr.
3. On receipt of the offer letter, the plaintiff has submitted its
representation on 29th October, 2013, intimating the defendant that as
per tender document, the delivery schedule was 50% within 04 months
and the balance within 04 months thereafter. The plaintiff has
proposed for changing the Clause as follows : "Delivery to commence
within 45 days at the rate of 63 MT per month and to be completed
within three months thereafter." The plaintiff has also informed the
defendant about the price variation clause and mentioned that: "We
had in our offer very clearly recorded that the Custom Duty factor shall
be as 'one' and also Custom Duty factor CD2 shall be 'one'." In reply to
the request of the plaintiff, the defendant by a letter dated 19th
November, 2013, accepted the delivery period as proposed by the
plaintiff but with regard to the Custom Duty factor, the defendant had
informed that :
"Your attention is further invited to Part G.
(12) of the Tabulation Statement of Financial BID
of the said tender which has been digitally signed
by the tenderer where acceptance of PVC clause
has been confirmed as per annexed PVC formula
3
as per based rate/exchange rate etc. indicated
therein has been confirmed by saying 'yes' in the
complied column XX in the remarks column. In Pt.
E & F technical & commercial statement, no
technical and commercial deviation has been
offered (copy enclosed)"
In the said reply, the defendant had further requested the
plaintiff to confirm unconditional acceptance of the Advance
Acceptance letter so that formal order can be issued.
4. In reply to the letter dated 19th November, 2013, the plaintiff had sent a
reply to the defendant informing the defendant :
"We had assumed that there was a typographical
omission in the PVC formula given in the tender
documents. That is the reason we attached the
standardized PVC formula in our offer as
annexure wherein we had predetermined factor
CD1 as 1 and did not consider this as a case of
commercial deviation.
Hence, to summarize the above, please note that
the rates offered by us are neither in deviation of
PVC formula and nor is there any commercial
deviation as the same are based on the
standardized PVC formula wherein both CD1 and
CD2 are taken as 1. We would now request you
kindly to reconsider this case in the light of the
above and hope for a favourable response on the
same from you."
Instead of confirming the unconditional acceptance of Advance
Acceptance letter of the plaintiff, the defendant had issued two work
orders dated 17.12.2013 for supply of 19.664 MT and 165.416 MT of
HDGC Contact Wire respectively. On receipt of the work orders, the
plaintiff vide its letter dated 06.01.2014 informed the defendant that :
4
"Kindly refer to our letter No.
VKGI/COMM/ER/341 dt. 17.12.2013 wherein we
had explained our position regarding factor CD1
being taken as 'One'. You have not accepted our
clarification and placed a Purchase Order
No.16.12.6025.1.41371 dated 17.12.2013 &
P.O.No.16.11.5028.1.04978 dt. 17.12.2013 for
supply of 185.080 MT. ofjointless Grooved Copper
Contact wire (107 Sq.mm.) made out of
Continuous Cast Copper Wire Rod with factor
CD1 as 1.054. As explained in our earlier letters,
we shall incur heavy losses on account of wrong
interpretation of factor CD1.
However, in view of our very long association
with Railways, we are going to execute this order
under protest. We may take up this issue at
suitable time through arbitration."
5. On 17th February, 2014, the plaintiff sent a letter to the defendant
informing the defendant that :
"We propose to supply 50% quantity of Contact
Wire 107 Sq.mm. against the Purchase Order
No.16.12.6025.1.41371 dt. 17.12.2013 &
P.O.No.16.11.5028.1.04978 dt. 17.12.2013
valued at approx. Rs.5,00,00,000.00 (Rupees Five
Crores Only) in March/April 2014.
We have already advised you that these orders
are placed on us not in conformity with our offer
and we shall suffer heavy losses in these orders.
We would therefore like to execute these orders if
our payments are not delayed.
In view of the above please confirm that funds
shall be available for payments against proposed
supply in March/April 2014 so that we can go
ahead with procurement of raw
material/manufacture of Contact wire 107
Sq.mm."
On 3rd March, 2014, the plaintiff has again sent a letter to the
defendant informing the defendant as follows:
5
"As desired, we shall be offering 50% of the
ordered quantity of Contact Wire for inspection to
RITES in the first week of April. The material shall
be delivered by mid April 2014.
In this connection kindly refer to our letter
No.VKGI/COMM/ER/413 dt. 17.02.2014. we
request you to kindly arrange the required funds
so that our payment are not delayed."
On receipt of the letters dated 06.01.2014, 17.02.2014 and
03.03.2014, the defendant has not sent any reply to the plaintiff and
accordingly, the plaintiff had again sent a letter on 24.03.2014 stating
that :
"1. We have explained to you vide our letter No.
VKGI/COMM/ER/341 dt. 17.02.2013 and No.
VKGI/COMM/ER/360 dt. 06.01.2014 that our
offer in the said tender was with factors CD1 and
CD2 as 'One'. You have not accepted our offer as
given but placed order on us with factor CD1 as
1.054.
2. We had explained to you that we shall be
incurring very heavy losses if we agree to supply
the Contact Wire with factor CD1 as 1.054 instead
of 'One'. However, in view of our long association
we had agreed to execute the order subject to
timely payments. Accordingly, we had agreed to
executed the order and requested you to confirm
availability of funds so that we supply the
material. However, you have failed to confirm
availability of funds. As such we have not been
able to execute the order.
In view of the above, we regret out inability to
execute the above order. You may consider
cancelling the same."
No response were received from the defendant, the plaintiff had
again sent a letter dated 07.04.2014 stating that :
6
"Ref: Your Letter No. CEE/CON/ER/Store/Contact
Wire/917 dt. 27.03.2014
Dear Sir,
Order placed on us for supply of Contact Wire is not
as per our offer with deviation. Further, there is no
confirmation about availability of funds for payment,
if supplies are made. We have, therefore, requested
Controller of Stores vide letter No.
VKGI/COMM/ER462 dt.24.03.2014 to cancel this
order."
6. The defendant had sent a letter to the plaintiff on 17.04.2014 but the
said letter was not placed either by the plaintiff or by the defendant
but on receipt of the said letter, the plaintiff has sent a reply to the
defendant on 21.04.2014 which reads as follows :
"Ref: Your Letter No. 16/11/5028 dt. 17.04.2014
Dear Sir,
Para-wise comments on your letter under reference dt.
17.04.2013 is given under :
1.0. In this connection kindly refer to our letter No.
VKGI/COMM/ER/3055 dt. 29.10.2013 wherein
we have clarified that our offer is based on use
of indigenous CCC Rod and thus both Factors
CD1 & CD2 shall be "One". This is in line with
what is being followed by CORE/ALD and our
offer.
However, you have placed Purchase Order No.
16.12.6025.1.41371 dt. 17.12.2013 & P.O. No.
16.11.5028.1.04978 dt. 17.12.2013 without
incorporating changes as per our offer.
In view of our long association with Railways,
we had agreed as a very special case to execute
this order vide our letter No.
VKGI/COMM/ER/360 dt.06.01.2014 under
protest. We had organized the manufacture of
Contact Wire to supply 50% of the ordered
quantity by March/April and had accordingly
7
requested you to kindly confirm availability of
funds for timely payment. Despite our repeated
request to you to confirm availability of funds
vide our letter No. 06.01.2014, 03.03.2014 and
07.04.2014, we did not receive any confirmation
to the effect and as such we had no option but to
seek cancellation of the order.
2.0. The clarification given by you regarding PVC vide
your letter No. 16/11/5028 dt. 19.11.2013 has
not been accepted by us. We have already
clarified this vide our letter No.
VKGI/COMM/ER/341 dt. 17.12.2013. The
Purchase Order has been issued without
considering contents of our offer and
clarifications.
4.0. We still can execute this order and arrange
supply of the material to enable you to execute
target work provide the orders are as per our offer
i.e. both Factors CD1 & CD2 are accepted as
'One' for purpose of PVC.
5.0. Noted."
7. The defendant by a letter dated 01.05.2014 in reference to the letters
dated 03.03.2014, 24.03.2014, 17.04.2014 and 21.04.2014 informed
the plaintiff as follows:
"1.0. This office has already clarified/confirmed
the contents of your letter dated 29.10.2013 vide
letter no. 16/11/5028 dated 19.11.2013 and you
have promised vide your letter under ref(1) that,
you will be offering 50% of the ordered quantity in
the 1st Week of April and material shall be
delivered by mid April'2014.
2.0. As far as provision of fund is concerned it is
well known to you that, unless and until clear
fund provision is ensured, Railway do not issue
any formal Purchase Order and thus seeking
clarification in regard to availability of fund is not
understood by this office. This is however, to
mention that fund is available for the P.O. placed
on you.
8
3.0. It is re-iterated that, many project works of
this Railway are stuck-up for want of the above
item.
4.0. You are therefore requested to confirm within
seven days from the date of receipt of this letter
that, P.O.s will be executed as per its terms and
conditions failing which no further reference will
be made and this office will be compelled to
initiate Risk Purchase action at the risk and cost
of your concern.
5.0. This is for your information and necessary
action please. This letter is issued without
prejudice to the Railways right for initiating Risk
Purchase Action including other legal
proceedings."
8. On 13.06.2014, the defendant had sent a letter to the plaintiff which
reads as follows:
"Office of the
Controller of Stores
17, Netaji Subhas Road, Kolkata - 700 001
No: 16.115028 Date 13.06.2014
To
M/S. Veekay General Industries,
B-46, JhilmilTahirpur Industrial Area,
G.T. Road,
Shahdara, FAX NO. 01122589469
New Delhi-110 095.
Dear Sir,
Sub : Risk purchase action against
1) P.O. No. 16/11/5028/1/04978 dated
17.12.2013 and
2) P.O. No. 16/12/6025/1/41371 dated
17.12.2013 for supply of joint less grooved
copper contract wire, 107 sq mm made out of
continuous cast copper wire rods as per
RDSO SPEC No. ETI/OHE/76(6/97) with A &
C slip no. - 1,3,4,5 & 6 against E.Rly's
9
Tender No. 16/11/5028 Opened on
24.06.2013.
Ref : 1) This office's letters of even no. dated
17.04.2014 & 01.05.2014.
2) Your letter no. VKGI/COM/ER/201 dated
21.04.2014.
With reference to the above, you are informed that
Eastern Railway had placed above Purchase orders as
mentioned in the subject column for supply of joint less
grooved copper contact wire, 107 sq mm made out of
continuous cast copper wire rods as per RDSO SPEC
NO. ETI/OHE/76 (6/97) with A & C slip no. 1, 3, 4, 5 &
6 on you.
Despite this office's letter under reference you did
not agree to supply the material as per the terms and
conditions of the contract and rather you have asked for
change in the terms and conditions of the contract vide
letter under reference-2 which is not acceptable at post
contract stage. Hence, having no other way, final
reminder was issued vide this office letter of even no.
dated 01.05.2014 in regard to initiation of Risk
Purchase action against above two P.Os.
In this connection one Risk Purchase Tender has
been issued/floated against the above P.Os Vide tender
No. 16/11/5028 (since the PO was placed against the
same tender batch) for total quantity of 185.080 MT and
the Risk Purchase Tender is due on 17.07.2014 and
closing at 1:30 PM through IREPS Website (E.Tender).
You are, therefore, informed that in case you are
interested to quote in the aforesaid Risk Purchase
Tender then as per extant rule, you must submit your
offer along with Security Deposit Money for10% of the
total value of the offer failing which your offer will be
summarily rejected without making any back reference
to you. The copy of instrument of the S.D. Money must
be uploaded along with your offer and original hard
copy of the same should be sent/deposited to
COS/ER/FP/Kolkata office well before the scheduled
tender opening date and time failing which your offer
will be summarily rejected without making any back
reference to you.
This is without any prejudice to rights of Eastern
Railway as a Purchaser. A copy of Risk Purchase
Tender Schedule is enclosed herewith.
10
(S. Kundu)
Dy. Chief Materials Manager/Con-II
For & on behalf of the President of India."
9. The defendant had cancelled both the purchase orders on 12.08.2014
and 25.08.2014 on the ground that the plaintiff has failed to supply the
materials as per the purchase orders. After cancellation of the purchase
orders, the defendant had sent two letters dated 27.11.2014 informing
the plaintiff that the defendant is entitled to claim of Rs. 18,65,569/-
and Rs. 1,55,74,996.85/- towards the expenditure incurred in risk and
purchase in terms of Clauses 2401, 2402 and 2403 of the IRS
Conditions of Contract.
10. The Controller of Stores, Eastern Railway by his letter dated
16.02.2015 informed the plaintiff that if the plaintiff fails to comply
with the terms of the purchase order dated 17.12.2013, the amount of
Rs. 1,74,40,566/- shall be deducted as risk purchase loss from the
pending bills of the petitioner. Being aggrieved with the letter dated
16.2.2015, the plaintiff has filed a Writ application being W.P No.
10789 (W) of 2015. The Hon'ble Court dismissed the writ petition on
23.06.2015 by passing the following order :
"Despite the existence of an arbitration
agreement between the parties, this Court was
minded to entertain the writ petition provided the
petitioners secured the said amount of Rs.
1,74,40,566/- by depositing the same with the
Registrar General of this Court for investment
thereof in a fixed deposit account of Nationalized
Bank. However, the petitioners having declined to
secure such amount, there is no good reason as to
why they should not be relegated to the forum for
11
resolution of dispute by arbitration, which they
intended by the letter dated 06.01.2014.
This Court is of the clear view that this writ
petition ought not to be entertained. The same
stands dismissed, without costs.
The petitioners are granted liberty to
pursue their remedy before the arbitral tribunal in
accordance with law.
Needless to observe, the observation made
above are for the purpose of disposal of this writ
petition and shall not influence the relevant Court
or the arbitral tribunal, as the case may be, if at
all approached by the petitioner.
Urgent Photostat certified copy of this order,
if applied for, be furnished to the parties as early
as possible."
11. The plaintiff being aggrieved with the order dated 23.06.2015, the
plaintiff had preferred an appeal being FMA No. 3040 of 2015 and the
Hon'ble Appellate Court had disposed of the appeal on 05.10.2015 by
passing the following order :
"Having heard the learned senior counsel
appearing for the appellants and the learned
advocates for the respondents and in view of
nature of the dispute which includes various
factual aspects including the issue whether
there was concluded contract between the
parties we are of the opinion that it was just on
the part of the learned Judge not to entertain the
issue in a writ proceeding. We asked the parties
as to their willingness to submit themselves to
arbitration in respect of the dispute and the
parties agreed to such suggestion.
Accordingly, we give liberty to the parties to
refer the matter for arbitration in accordance
with law. We also make it clear that the
appellants are at liberty to seek necessary
interim relief in contemplation or during the
procedure of the arbitration proceeding in
accordance with law with regard to their claim of
alleged illegal deduction towards risk purchase
loss, if so advised.
With the aforesaid observations the appeal is
disposed of.
All issues are kept open."
12. As per the order passed by the Hon'ble Appellate Court, the plaintiff by
a letter dated 14.12.2015 requested the defendant for appointment of
Arbitrator but in the said communication, the plaintiff has made clear
that it is the stand of the plaintiff that there is no concluded contract
between the parties and the plaintiff will take up the issue before the
Learned Arbitrator. On receipt of the said letter, the defendant by a
communication dated 29.12.2015, informed the plaintiff that the
Controller of Stores is not the competent authority to appoint the
Arbitrator and directed the plaintiff to approach the General Manager of
Eastern Railway for appointment of Arbitrator. The plaintiff had
approached the General Manager of the Eastern Railway for
appointment of Arbitrator. The General Manager of the Eastern
Railway had appointed one Shri Sidharth Sharma, Chief Material
Manager as sole Arbitrator. The plaintiff by a letter dated 30.09.2015
informed the defendant that the appointment of the Arbitrator is
contrary to the Arbitration and Conciliation Act,1996 as amended in
2015 as the Arbitrator appointed by the defendant is one of the
employees of the defendant and requested for appointment of another
arbitrator and the plaintiff has also suggested the name of three
arbitrators.
13. As the defendant has not appointed another Arbitrator, the plaintiff has
filed an Arbitration Petition No. 43 of 2017 for appointment of
Arbitrator and during the hearing, the counsel for the defendant
assured the Court, that they will appoint an arbitrator within 30 days
as per the fifth schedule of the Arbitration and Conciliation Act, 1996
failing which the defendant shall forfeit its right to make any
appointment and it would be open for the petitioner to apply afresh for
appointment of arbitrator. In the meantime, the plaintiff has also filed
an application under Section 9 of the Arbitration and Conciliation Act,
1996 being AP No. 54 of 2017 and the Hon'ble Court had disposed of
the said application on 22nd February, 2017. Being aggrieved with the
order dated 22.2.2017, the plaintiff has filed an appeal being APO No.
92 of 2017 and the said appeal was disposed of on 5th April, 2017 by
passing the following order :
"Accordingly, the merits of the order
impugned need not be gone into. The tenure of
the order dated February 22, 2017 is limited to a
period of a fortnight from date, whereupon it will
lapse automatically and without reference to
any Court. It will be open to the appellants
herein to institute a suit before an appropriate
forum and apply for interlocutory orders therein
in accordance with law. Upon any interlocutory
application being filed by the appellants herein
in the proposed suit, the forum in seisin of the
suit will be entitled to consider the same in
accordance with law, not limited or constrained
in any manner by the order impugned herein or
influenced by the continuation of such order by
the present order.
APO No. 92 of 2017 and GA No 1115 of
2017 are disposed of without any order as to
costs."
14. The plaintiff being aggrieved with the order dated 05.04.2017 had
preferred an SLP but the same was dismissed on 11.08.2017.
thereafter, the plaintiff has filed the present suit.
15. The defendant has filed written statement and on the basis of the
pleadings and suggested issues, this Court has framed the following
issues :
"1. Whether the suit is maintainable in law?
2. Whether the plaintiff accepted the price
variation clause in the tender document?
3. Whether the tender was in the teeth of the govt.
policy to allow indigenous copper?
4. Whether the money deducted by Eastern
Railway from the plaintiff company was for
unjust financial enrichment?
5. Whether the plaintiff is entitled to a decree for
Rs.1,74.40.566/- against the defendant?
6. Whether the plaintiff is entitled to interest as
claimed on the decretal amount?
7. Whether the claim of the plaintiff is barred by
limitation?
8. Whether there was a concluded contract
between the parties?
9. Whether the plaintiff acted in breach of the
terms of the contract by failing to supply the
material?"
The plaintiff has examined one witness on his behalf and during
the examination of the plaintiff's witness altogether 31 documents were
exhibited being "Exhibit A to Exhibit EE".
16. The issue No. 1 is whether the suit is maintainable in law.
As per the case of the defendant, the plaintiff has filed the instant
suit against the defendant who is the Railways Authority but before
filing of the suit, the plaintiff has not issued notice under Section 80 of
the Code of Civil Procedure, 1908 nor the plaintiff has obtained leave to
file the suit dispensing notice under Section 80 of the Code of Civil
Procedure, 1908. The plaintiff relied upon the notice dated 24.12.2014
"Exhibit W". The Plaintiff submits that in the said notice, the defendant
was called upon to retract the letter under reply failing which the
plaintiff will be compelled to avail the appropriate recourse as
permissible under law and equity. The said notice is with reference to
the notice dated 27.11.2014 wherein the defendant has informed the
plaintiff that the defendant is entitled to a claim from the plaintiff for a
sum of Rs. 18,65,559/- and Rs. 1,55,74,996/- towards extra
expenditure incurred in risk purchase in terms of Clauses 2401, 2402
and 2403 of the IRS Conditions of the Contract. After issuance of the
notice dated 24th December, 2014, the Controller of Stores, Eastern
Railway has intimated the plaintiff for deduction an amount of Rs.
1,74,40,566/- on 16th February, 2015. Being aggrieved with the said
notice, the plaintiff had also filed a writ petition against the claim. The
Hon'ble Court had dismissed the said writ application by giving liberty
to the plaintiff to pursue their remedy before the Arbitral Tribunal in
accordance with law. The plaintiff had challenged the said order before
the Hon'ble Division Bench and the Hon'ble Division Bench by an order
dated 5th October, 2015 has given liberty to the parties to refer the
matter for arbitration in accordance with law. The defendant had
appointed the Chief Material Manager of Eastern Railway as Sole
Arbitrator but the plaintiff has raised objection on the ground that the
Arbitrator appointed by the Railway is the employee of the Railway and
is contrary to the Section 12(5) of the Arbitration and the Conciliation
Act, 1996 as amended in the year 2015. The plaintiff had filed an
arbitration petition before the High Court being AP No. 54 of 2017 for
appointment of Arbitrator and by an order dated 15th February, 2017,
the Hon'ble Court had directed the defendant to appoint the Arbitrator
within 30 days failing which the Appointing Authority shall forfeit its
right for appointment of Arbitrator and it would be opened for the
petitioner to apply afresh for appointment of Arbitrator. In the
meantime, the plaintiff had also filed another application being AP No.
54 of 2017 under Section 9 of the Arbitration and Conciliation Act,
1996 and the same was disposed of on 22nd February, 2017. Being
aggrieved with the said order, the plaintiff has preferred an appeal
being APO No. 92 of 2017 and in the appeal, the Hon'ble Division
Bench of the High Court by an order dated 5th April, 2017 given liberty
to the plaintiff to institute a suit before an appropriate forum and apply
for interlocutory orders in accordance with law. The plaintiff has
preferred an SLP but the same was dismissed and thereafter the
plaintiff has filed the instant suit.
Though the plaintiff has issued notice on 24th December, 2014
calling upon the defendant for recalling of the letters dated 27th
November, 2014, wherein the defendant had informed about their claim
against the plaintiff for payment of Rs. 18,65,569/- and Rs.
1,55,74,996.85/- being extra expenditure incurred in risk purchase in
terms of Clauses 2401, 2402 and 2403 of the IRS conditions of
contract.
The plaintiff had relied upon the Judgment reported in (2019)
13 SCC 142 (Y. Savarimuthu -vs- State of Tamil Nadu &Ors.), the
Hon'ble Supreme Court has held that :
"14. On a perusal of the notice dated 14-1-2000,
it is clear that this is a legal notice sent by a lawyer
of the appellant to the authorities concerned. It is not
disputed that it was by registered AD and served
upon the authorities. There is also no dispute that
the cause of action is sufficiently set out in the said
notice, which is the illegality of the partial
termination of the contract on 16-12-1999. It was
also made clear that though a writ appeal at that
point of time was going to be filed against the writ
petition dismissal, yet this would be a notice to take
"appropriate legal action" against the State. There is
no doubt, whatsoever, that more than two months
have elapsed from the date of this notice, after which
the suit has been filed. In fact, the suit was filed long
after, on 12-9-2002. Quite apart from this, on 29-1-
2000 also, the letter of the appellant made it clear to
the Divisional Engineer that not only is the partial
termination bad in law but that the payments due for
work would have to be made.
15. It is clear, therefore, that there is sufficient
compliance with the provisions of Section 80 CPC as
has been introduced by the Amendment Act
introducing Section 80(3) into the statute book. The
respondents' argument that Section 80 is not
expressly referred to and that the legal notice and
letters were written prior to the disposal of the writ
appeal have no legs to stand on. This is for the
reason that a notice does not have to state the
section under which it is made so long as the
ingredients of sub-section (3) of Section 80 are met. It
is admitted that there was no need for any legal
notice before filing the writ appeal. The notice,
therefore, that was sent on 14-1-2000, was only
under Section 80 CPC in the event the writ appeal
failed and a suit would have to be filed.
16. We are, therefore, of the view that the
learned Additional District Judge's judgment was
correct. In this view of the matter, we set aside the
impugned judgment of the High Court and remit the
matter to the High Court to dispose of the two
appeals on merits. Further, considering this is a suit
of the year 2002, we request the High Court to take
up these appeals and dispose of the same at the
earliest."
Notices dated 27th November, 2014 issued by the defendant
wherein the defendant has informed about their claim against the
plaintiff for payment of Rs. 18,65,569/- and Rs. 1,55,74,996.85/-
total amounting to Rs. 1,74,40,566/- are marked as Exhibits U and V
and the notice issued by the plaintiff is marked as Exhibit W. After
issuance of the said notice, the defendant had issued an intimation by
a letter dated 16th February, 2015 for recovery of the said amount and
thereafter the plaintiff has filed writ application and several
applications before the Hon'ble Court and subsequently by an order
dated 5th April, 2017, the Hon'ble Division Bench had given liberty to
the plaintiff to institute suit and accordingly the plaintiff has
instituted the suit, thus issue no. 1 is decided in favour of the plaintiff
and against the defendant.
17. Issue No. 7 is whether the claim of the plaintiff is barred by limitation?
As per the case of the defendant, an amount of Rs. 63,77,229/-
was adjusted on 25th August, 2015 and the plaintiff has filed the suit in
the year 2019, thus the suit filed by the plaintiff is barred by limitation.
The defendant has issued two notices to the plaintiff on 27th November,
2014, out of which, in one notice the defendant has claimed an amount
of Rs. 18,65,569/- and in another notice, the defendant had claimed
Rs. 1,55,74,996.89/- being the extra expenditure incurred towards risk
purchase in terms of Clauses 2401,2402 and 2403 of the IRS condition
of contract. Immediately after receipt of the said notices, the plaintiff
had issued a notice dated 24th December, 2014 calling upon the
defendant to recall the said notices failing which, the plaintiff will avail
appropriate recourses as permissible under law. Inspite of receipt of the
notice, the defendant had issued notice on 16th February, 2015, for
deducting an amount of Rs. 1,74,40,566/-. Being aggrieved with the
notice dated 16th February, 2015, the plaintiff has filed writ application
and the said writ application was disposed on 23rd June, 2015 but till
date no amount was deducted/recovered from the plaintiff. Being
aggrieved with the order dated 23rd June, 2015, the plaintiff has
preferred an appeal being FMA No. 3040 of 2015 but during the
pendency of the appeal, the defendant had recovered an amount of Rs.
63,77,229/- from the plaintiff. On 5th October, 2015, the said appeal
was disposed of by giving liberty to the parties to refer the matter to the
arbitration and all issues were kept open. Thereafter also the plaintiff
has initiated several proceedings before the Hon'ble High Court and
finally by an order dated 5th April, 2017, the Hon'ble Division Bench
has granted liberty to the plaintiff to institute suit accordingly the
plaintiff has instituted the present suit. During the pendency of appeal,
the defendant had again recovered an amount of Rs. 1,10,63,335/-
from the plaintiff. Since after the issuance of notices dated 27th
November, 2014, the plaintiff has initiated several legal proceedings
and during the pendency of the proceedings before the Hon'ble Court
against the said recovery, the defendant has recovered the amount on
two occasions. Thus, this Court finds that the suit filed by the plaintiff
is not barred by limitation.
Issue No.7 is decided in favour of the plaintiff and against the
defendant.
18. Issue No. 8 whether there was a concluded contract between the
plaintiff and defendant.
The defendant had issued a tender Notice dated 4th June, 2013 for
procurement of jointless grooved copper contact wire made out of
continuous cast copper wire rods. The plaintiff has participated in the
said tender process. At the time of submission of the tender document,
the plaintiff had reserved its price variation clause which contained in
the tender Notice and the plaintiff had also enclosed a separate price
variation clause along with bid. On 24th October, 2013, the defendant
had issued Letter of Acceptance to the plaintiff for supply of 186.184
MT for supply of jointless grooved copper contract wire 107 sq.mtr. In
the Letter of Acceptance, it is mentioned that "Contract is concluded by
this acceptance. A formal purchase order showing all details is under
issue. Please convey your unqualified acceptance to this offer by return
fax No. (033) 22302553".
On receipt of the offer letter, the plaintiff has submitted its
representation on 29th October, 2013 intimating the defendant that as
per tender document the delivery schedule was 50% within 04 months
and balance within 04 months thereafter. The plaintiff has proposed for
changing the Clause as follows : "Delivery to commence within 45 days
at the rate of 63 MT per month and to be completed within three months
thereafter." The plaintiff has also inform the defendant about the price
variation clause and mentioned that: "We had in our offer very clearly
recorded that the Custom Duty factor shall be 'one' as also Custom Duty
factor CD2 shall be 'one'." In reply to the request of the plaintiff, the
defendant by a letter dated 19th November, 2013, accepted the delivery
period as proposed by the plaintiff but with regard to the Custom Duty
factor, the defendant accepted the request made by the plaintiff which
are marked as Exhibits E & F.
Instead of confirming the unconditional acceptance of Advance
Acceptance letter of the plaintiff, the defendant had issued two work
orders dated 17.12.2013 for supply of 19.664 MT 165.416 MT of HDGC
Contact wire respectively. On receipt of the work orders, the plaintiff
vide its letter dated 06.01.2014 informed the defendant that "However,
in view of our very long association with Railways, we are going to
execute this order under protest. We may take up this issue at suitable
time through arbitration." The said letter is marked as Exhibit 'J'.
On 17th February, 2014, the plaintiff sent a letter to the defendant
informing the defendant that "the plaintiff already advised the
defendant that these orders are placed on plaintiff not in conformity
with the offer and the plaintiff shall suffer heavy losses in these orders.
We would therefore like to execute these orders if our payments are not
delayed".
On 3rd March, 2014, the plaintiff has again sent a letter to the
defendant informing the defendant. Both letters are marked as Exhibits
"K & L".
On receipt of the letters dated 06.01.2014, 17.02.2014 and
03.03.2014, the defendant has not sent any reply to the plaintiff and
accordingly, the plaintiff had again sent a letter on 24.03.2014 stating
that "the plaintiff in its offer in the said tender explained that the factors
CD1 and CD2 as one but the defendant did not accept the offer, placed
order with factor CD1 as 1.054. The plaintiff explained to the defendant
that the plaintiff will suffer heavy losses if the plaintiff agree to supply
with factor CD1 as 1.054 instead of one. The plaintiff further informed
that due to long association with the defendant, the plaintiff agreed to
supply subject to confirmation of funds but the defendant has not
confirmed the availability of fund and thus, the plaintiff is not able to
execute the order and informed the defendant to treat the same as
cancel. The Letters are marked as Exhibits "M & N".
The defendant had sent a letter to the plaintiff on 17.04.2014 but
the said letter was not placed either by the plaintiff or by the defendant
but on receipt of the said letter, the plaintiff has sent a reply to the
defendant on 21.04.2014 which states that "The order can be executed
and supply of material can be arranged to enable the defendant to
execute target work, provided that orders are as per the plaintiff's offer
i.e. both Factors CD1 & CD2 are accepted as 'One' for purpose of PVC."
Thereafter the defendant by a letter dated 01.05.2014 in reference
to the letters dated 03.03.2014, 24.03.2014, 17.04.2014 and
21.04.2014 informed the plaintiff as follows:
"The defendant had mentioned that as far as
the provision of fund is concerned it is well known
to the plaintiff that unless and until clear fund
provision is ensured, Railways do not issue any
formal Purchase Order and thus seeking
clarification in regard to availability of fund is not
understood by the office of the defendant.
Therefore the plaintiff was requested to confirm
within seven days from the date of the receipt of
this letter, failing which no further reference will
be made and the defendant will be compelled to
initiate Risk Purchase Action at the risk and cost
of your concern including other legal
proceedings."
On 13.06.2014, the defendant had sent another letter to the
plaintiff which states that "in connection to letters sent by the
defendant to the plaintiff, and various purchase orders made by the
defendant, the defendant had issued/floated against the plaintiff one
Risk Purchase Tender in regards with tender No. 16/11/5028 for total
quantity of 185.080 MT and the Risk Purchase Tender is said to be due
on 17.07.2014. The plaintiff was asked that is case the plaintiff is
interested to quote in the aforesaid Risk Purchase Tender then as per
extant rule, the plaintiff must submit its offer along with Security
Deposit Money for 10% of the total value of the offer failing which your
offer will be summarily rejected without making any back reference to
the plaintiff."
As per the contention of the defendant, the plaintiff has invoked
the provisions of arbitration clause and the plaintiff has also agreed to
supply of materials as per the work orders and thus the act of the
plaintiff proves that there is a concluded contract between the parties.
In the letter dated 6th January, 2014, Exhibit-J, it was the specific
contention that the due to the long association with Railways, the
plaintiff is going to execute the order under protest and the plaintiff
will take up the issue at a suitable time through arbitration. The
plaintiff has also requested the defendant to confirm that fund shall
be available for payment against proposed supply. The defendant has
not given any reply to the said requests and again on 21st April, 2014,
the plaintiff informed the defendant that the plaintiff is still ready to
arrange supply of materials provided the orders are placed by treating
both factors CD1 and CD2 are accepted as 'one' which is marked as
Exhibit O.
Section 10 of the Contract Act, 1872 postulates that all
agreements are contracts if they are made by free consent of parties
competent to contract, for a lawful consideration and with a lawful
object, which are not expressly declared to be void and as such a
transaction to constitute a contract must be preceded by offer of an
proposal by one party and acceptance of the same by the other party.
A valid contract cannot be constituted by the act of one party
and that there must be a valid offer and valid acceptance by the
parties. On analysing the provisions of Sections 7, 8 and 9 of the
Contract Act, 1872, it can be said that if a party to contract makes an
offer and the same is accepted in an absolutely unqualified manner by
the other party then the contract becomes a valid and complete
contract. In a written contract containing signatures of both the
parties is not sine quo non to constitute a valid contract and
executable contract. All those are essential that there should be a
valid offer, unqualified acceptance and agreement of the parties to
abide by the terms and conditions and perform their respective part of
contract.
In this case as per tender notice published by the defendant, the
plaintiff has participated in the said tender. The defendant has issued
letter of acceptance in favour of the plaintiff which is marked as
Exhibit -D. In the said letter of Acceptance, it is mentioned that
"Contract is concluded by this acceptance. A formal purchase order
showing all details is under issue. Please convey your unqualified
acceptance to this offer by return Fax."
The plaintiff has not submitted its unqualified acceptance and
on the other hand, the plaintiff has submitted its request intimating
that the changes made in the letter of Acceptance is not acceptable
and requested the defendant to accept the delivery schedule given in
the tender document and price variation Clause be accepted as given
in their offer. The defendant has accepted the request of the plaintiff
with respect of delivery period but has not accepted the price variation
clause. The plaintiff has not accepted the price variation clause but
the defendant had issued two purchase orders to the plaintiff. By a
letter dated 6th January, 2014, Exhibit-J, the plaintiff has agreed to
execute purchase order "under protest" and also made clear in the
said letter that the plaintiff will take up the issue at a suitable time
through arbitration.
It is found from record, the plaintiff has time to time change its
decisions through various letters being Exhibits -J, K, L, M, N and O
but had never submitted its unqualified acceptance as required by the
defendant in its letter of acceptance.
In the case reported in AIR 2021 SC 341 (Padia Timber
Company (P) Ltd. -vs- The Board of Trustees of Visakhapatnam
Port Trust), the Hon'ble Supreme Court held that :
"56. It is a cardinal principle of the law of
contract that the offer and acceptance of an offer
must be absolute. It can give no room for doubt. The
offer and acceptance must be based or founded on
three components, that is, certainty, commitment and
communication. However, when the acceptor puts in
a new condition while accepting the contract already
signed by the proposer, the contract is not complete
until the proposer accepts that condition, as held by
this Court in Haridwar Singh v. Bagun Sumbrui &
Ors. AIR 1972 SC 1242. An acceptance with a
variation is no acceptance. It is, in effect and
substance, simply a counter-proposal which must be
accepted fully by the original proposer, before a
contract is made.
57. In Union of India v. Bhim Sen Walaiti Ram
(1969) 3 SCC 146, a three-Judge Bench of this Court
held that acceptance of an offer may be either
absolute or conditional. If the acceptance is
conditional, offer can be withdrawn at any moment
until absolute acceptance has taken place.
58. In Jawahar Lal Burman v. Union of
India (supra), referred to by the High Court, this
Court held that under Section 7 of the Contract Act
acceptance of the offer must be absolute and
unqualified and it cannot be conditional. However, in
the facts and circumstances of that case, on a
reading of the letter of acceptance as a whole, the
appellant's argument that the letter was intended to
make a substantial variation in the contract, by
making the deposit of security a condition precedent
instead of a condition subsequent, was not accepted.
In the present case also the plaintiff has not communicated its
unqualified acceptance and in all communications, the plaintiff has
put one or the other conditions which the defendant has not accepted,
thus there is no concluded contract between the plaintiff and the
defendant.
In view of the above, issue No. 8 is decided in favour of the
plaintiff and against the defendant.
19. Issue No. 2 whether the plaintiff accepted the price variation clause in
the tender document.
The plaintiff had submitted its bid on 22nd June, 2013. At the time
of submission of tender documents, the plaintiff has indicated the
reservations and non-acceptance of the Clause. The plaintiff has also
enclosed a separate price variation clause along with the tender
documents which is marked as Exhibit-C without any objection and the
defendant has admitted the said document. The plaintiff has
categorically mentioned in the said document with regard to delivery
period and price variation clause but the defendant had considered the
delivery period but had not considered the price variation Clause
though the plaintiff time and again requested the defendant and in
none of the request, the plaintiff has accepted the price variation
Clause, thus issue No. 2 is decided in favour of the plaintiff and against
the defendant.
20. Issues Nos. 3, 4, 5 and 6 are taken up together.
Issue No. 3 whether the tender was in the teeth of the Govt. policy
to allow indigenous copper.
Issue No. 4 is whether the money deducted by Eastern Railway
from the plaintiff company was for unjust financial enrichment.
Issue No. 5 is whether then plaintiff is entitled to a decree for Rs.
1,74,40,566/-.
Issue No. 6 is whether plaintiff is entitled to interest on the
decretal amount.
The defendant by way of two letters dated 27th November, 2014
informed the plaintiff that the defendant is entitled to claim from the
plaintiff for a sum of Rs. 18,65,569/- and Rs. 1,55,74,996.85/-
respectively towards extra expenditure incurred in risk purchase in
terms of Clauses 2401, 2402 and 2403 of the IRS Conditions of
Contract governing the said contract. Subsequently, by an notice
dated 16th February, 2015, the Controller of Stores, Eastern Railway
informed the plaintiff for deducting an amount of Rs. 1,74,40,566/- as
risk purchase loss and during the pendency of the proceeding before
the Hon'ble Court, the defendant had deducted/recovered the said
amount from the plaintiff.
The defendant had recovered the said amount in terms of
Clause 2401, 2402 and 2403 of IRS Conditions of Contract. Clauses
2401, 2402 and 2403 reads as follows :
"2401. Whenever am claim or claims for payment
of a sum of money arises out of or under the
contract against the Contractor, the Purchaser
shall be entitled to withhold and also have a lien
to retain such sum or sums in whole or in part
from the security if any, deposited by the
Contractor and for the purpose aforesaid, the
Purchaser shall be entitled to withhold the said
cash security deposit or the security, if any,
furnished as the case may be and also have a
lien over the same pending finalisation or
adjudication of any such claim. In the event of the
security being insufficient to cover the claimed
amount or amounts or if no security has been
taken from the Contractor, the Purchaser shall be
entitled to withhold and have lien to retain to the
extent of the such claimed amount or amounts
referred to supra, from any sum or sums found
payable or which at any time thereafter may
become payable to the Contractor under the same
contract or any other contract with the Purchaser
or the Government pending finalization or
adjudication of any such claim.
It is an agreed term of the contract that the sum of
money or moneys so withheld or retained under
the lien referred to above, by the Purchaser will
be kept withheld or retained as such by the
Purchaser till the claim arising out of or under the
contract is determined by the Arbitrator (if the
contract is governed by the arbitration clause) or
by the competent court as prescribed under
Clause 2703 hereinafter provided, as the case
may be, and that the Contractor will have no
claim for interest or damages whatsoever on any
account in respect of such withholding or
retention under the lien referred to supra and
duly notified as such to the otherwise.
2402. For the purpose of Clause 2401, where the
Contractor is a partnership firm or a limited
company, the purchaser shall be entitled to
withhold and also have a lien to retain towards
such claimed amount or amounts, in whole or in
part from any sum found payable to any
partner/limited company, as the case may be,
whether in his individual capacity or otherwise.
2403. Lieu in respect of Claims in other
Contracts - Any sum of money due and payable,
to the Contractor (including the security deposit,
returnable to him) under the contract may
withhold or retain by way of lien by the purchase
or Government against any claim of the Purchaser
or Government in respect of payment of a sum of
money arising out of or under any other contract
made by the Contract with the Purchaser or
Government.
It is an agreed term of the contract that the sum of
money so withheld are retained under this clause
by the Purchaser or Government will be kept
withheld or retained as such by the Purchaser or
Government till his claim arising out of in the
same contract or any other contract is either
mutually competent Court under Clause 2703
hereinafter provided, as the case may be, and
that the Contractor shall have no claim for interest
or damages whatsoever on this account or on any
other ground in respect of any sum of money
withheld or retained under this clause and duly
notified as such to the Contractor."
The issue with regard to whether there was a concluded
contract between the plaintiff and the defendant is decided in favour
of the plaintiff being issue No. 8 and this Court has come to the
conclusion that there was no concluded contract between the plaintiff
and the defendant. As there was no concluded contract between the
plaintiff and the defendant thus the amount recovered by the
defendant in terms of Clauses 2401, 2402 and 2403 of IRS Conditions
of Contract is not applicable in the case of the plaintiff, thus the
amount recovered by the defendant is illegal and is liable to be
returned to the plaintiff.
Accordingly, issue Nos. 3, 4, 5 and 6 are decided in favour of
plaintiff and against the defendant.
In view of the above, the defendant is directed to return the
amount of Rs. 1,74,40,566/-. The amount of Rs. 63,77,229/- shall
carry interest @18% per annum with effect from 25th August, 2015
and Rs. 1,10,63,335/- shall carry interest @ 18% per annum with
effect from 23rd March, 2017 till the realization of the said amount.
21. CS 159 of 2019 is thus disposed of. Decree will be drawn accordingly.
(Krishna Rao, J.)
