Mansingka Industries Ltd. vs Union Of India
1995 Latest Caselaw 1011 Del

JUDGMENT

Jaspal Singh, J.

(1) The plaintiff company is engaged in the manufacture to Vanusputi. To do so, it is required to use 80% of the vegetable oils allocated by the Union of India (Defendani No.1) and imported and canalised through the Stale Trading Corporation (Defendant No.2). It is claimed by the plaintiff company that on having been allocated 300 metric tonnes of oil at the issue price of Rs.6100.00 per metric tonne. it deposited the entire price with defendant No.2, consequent upon which though defendant No.2 did issue two delivery letters dated February 5, 1979 and March 3. 1979, it supplied in all 119.980 metric tonnes of oil till up to 10th March. 1979 and did not make further supplies till March 16. 1979. This however, was not the and of the mailer. The real trouble started later. It so happened, that as the plaintiff Company had been further allocated 108 metric tonnes of Soyabean oil by the Central Government in the month of August, 1979 il paid Rs-7,80,116.40 to defendant No.2 towards its price. The defendant No.2, however, issued delivery orders for 83.980 metric lone of Soyabean oil only and deducted Rs-1,73,449.14 on the "pretext" that when 179.420 metric lone of oil out of the earlier two delivery orders was delivered after March 14. 1979 the price of oil had been revised to Rs-7038.84 from Rs.6100.00 per metric tonne. The case of the plaintiff company is that after the issue of the two aforesaid delivery orders, the goods had passed on to the plaintiff making it the owner thereof and as such the defendant No.2 was not entitled to claim price of 179.420 metric lone at the rate enhanced with effect from March 14, 1979 or to deduct the amount from the subsequent independent transaction. Hence its suit for the recovery of Rs.1,73.499.14 paisa besides interest at the rale of 21% per annum making a total of Rs.2,72.177.00 and costs.

(2) As per defendant No.2, the title of the goods did not pass over to the plaintiff company on the issuance of the delivery orders and that as the price payable was that as prevailing on the date of delivery, the plaintiff company was liable to pay the price of 179.420 metric tonnes at Rs-7250.00 per metric tonne refixed by defendant No. 1 with effect from March 14, 1979. It is alleged that as the plaintiff company did not pay the price difference despite demand, the same was adjusted out of Rs.7,80,116.40 received with regard to the allocation made in the month of August, 1979. In the alternative it is claimed that if the adjustment so made be held to be unjustified, it may be allowed to set off Rs-1,73,499.14 paise with interest thereon at the rate of 21%.

(3) As regards defendant No. 1, its stand is similar to that of defendant No.2. However, what needs to be stated is that after filing of the written statement, the Union of India took no interest in the proceedings and none was present on its behalf even during final arguments.

(4) The pleadings of the parties led to the framing of the following issues:

"1. Whether the plaintiffs suit is instituted and plaint signed and verified by a person competent to do so?

2.Whether the price of oil supplied by the defendants was to be determined with reference to the date of the delivery order by Stc or controlled by the actual date on which delivery of oil is taken?

3.Whether the defendant No.2 failed to make delivery of oil in respect of which delivery order had been issued by the defendant No.2, before 14th March, 1979, to the plaintiff, as alleged? If so, to what effect.

4.In view of the finding on issue No.3, was defendant No.2 entitled to adjust the amount from subsequent payments made by the plaintiff?

5.Is the defendant No.2 entitled to set off, the amount of Rs.Rs-1,73,499.14 against the claim of the plaintiff?

6.Whether any of the parties are entitled to claim interest?

7.Relief."

ISSUENo.1

(5) It was not disputed, and rightly so, that issue No.1 stands proved. Even otherwise, the statement of Public Witness -1 Mr.Harbans Lal Verma proves that the plaint has been signed and verified and the suit has been instituted by a duly authorised person. The issue thus stands decided in favor of the plaintiff company.

(6) Issues No.2 to 6 being interconnected, I am inclined to deal with them together.

(7) As we know by now, there were two delivery orders. The relevant portions of the delivery orders need to be reproduced. They are as under: .lm2.5"

"PLEASE deliver/dispatch ___MT of ____to the party or his agent as per instructions given below:- "THE party or his agent will inspect the quality and witness the weighment. The delivery challan showing the quantity actually delivered/dispatched duly signed by the party/agent and the Surveyor may be sent to us immediately. This delivery order issued subject to (1) change in quantity and rate as per instructions received from Ministry from time to time (2) availability of stocks (3) and other general sales terms of S.T.C. (circulated/ to be circulated from time to time."

(8) These delivery orders also contain "General Instructions" which are as follows:

"GENERALInstructions:

1.Buyer should depute representative to supervise the Weighment and to satisfy about the quality/quantity at the time of delivery/dispatch of the goods ex-tank/jetty, ex-godown. No claim for quality/quantity for any reason whatsoever, will be entertained by the Corporation once goods leave storage tank and Corporation's Surveyors' weight and quality report shall be binding and acceptable to the buyer.

2.Before sending Tank lorries, please obtain delivery programme from our tank installation. We are not responsible for delay detention of lorries for circumstances beyond our control."

(9) It was contended on behalf of the plaintiff company that as price prevalent at the time of the issuance of the Delivery Orders had been paid by the Company, the transaction stood completed and that consequently the subsequent refixation of the price at the enhanced rate could have no effect on the rights of the plaintiff Company. In support reliance was placed on Section 20 of the Sale of Goods Act, 1930 which runs as under: "20.Specific goods in a deliverable state. - Where there is an un-conditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of delivery of goods, or both, is postponed.

(10) The crucial test is the passing of the property. If the property in the goods does not pass, the goods remain the property of the seller. In the case before us, the quality was yet to be inspected and the weighment was yet to be done and for purposes of weighment the quantity to be supplied was yet to be taken out of a tank or tanks containing much more than the quantity to be supplied. What is to be the position in such a case? It is stated in Williston on Sales (Vol. Ii page 77) as under: "IF100 barrels of flour are ordered from a distance, the seller must first segregate 100 barrels, in which he will carry the goods cither in his own trucks, or others, hired for the purpose, to the station of the carrier, from which they are to be shipped to the buyer. It must also be assumed that the buyer knows that this procedure will be followed. Why should not the property pass when the barrels arc first segregated, or when they are put into the trucks, rather than when they are delivered to the carrier? The reason is sometimes given that they are still in the seller's control prior to delivery to the carrier. This is doubtless so, but, as has been seen, effective appropriation may be made even though the goods are still in the exclusive possession and control of the seller. The true answer seems rather to be this, that where several things are to be done by the seller to the goods, it is to be assumed that the parties intend the appropriation to be deferred until the last of these acts has been done."

(11) I find it difficult to hold that a contract to sell oil out of a big tanker containing much larger quantity, the required quantity not being separated, would be a contract of sale within the meaning of section 26 of the Sale of Goods Act. When section 20 uses the expression "Specific goods", it necessarily means goods capable of being ascertained with certainty or goods whose delivery can be demanded in specie - cortum est quod Corium reddi potest. If that be so, how can sale of specified quantity of oil out of a tanker or tankers be capable of ascertainment unless it is separated and weighed? Consequently section 20 can be of no assistance to the plaintiff.

(12) Section 18 of the Sale of Goods Act provides that where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. The Supreme Court tells us in P.S.N.S. A.C. & Co. v. Express Newspapers that the condition is not fulfillled where there is a contract for sale of a portion of a specified larger stock. Till that portion is identified and appropriated to the contract, no properly passes to the buyer. In the said case the respondent was to originally -sell and deliver to the appellants 415 tons of newsprint which was later reduced to 3(M) tons. The Division Bench of the High Court held that the property in the entire 415 tons passed to the appellants who were subsequently relieved from their liability to take 115 tons and that the respondent could resale any 300 tons out of the larger stock of 415 tons. Disagreeing with the appellate court, the Supreme Court observed: .ls1 "WE are unable to accept this line of reasoning. It is true that originally the property in the entire 415 tons had passed to the appellants. But the result of the variation of the contract was to annul the passing of properly in the goods. The effect of the bargain on November 26, 1951 was that the respondent would sell and deliver to the appellants any 3(M) tons out of the larger stock of 415 tons. As from November 26, 1951, the properly in the entire stock of 415 tons belonged to the respondent. The parties did not intend that as from November 26, 1951 the property in any individual portion of the stock of 415 tons would remain vested in the appellants."

(13) In Jute & Gunny Brokers Ltd. v. Union of India , the Union of India had requisitioned the specified hessian with a direction to the persons in possession of the same to deliver it to the Director of Supplies, Calcutta. The schedule to the order indicated the mill from which the requisition was made, the quantity, the description of the hessian and the name of the registered stock-holders. When the Government tried to take possession of the hessian requisitioned and acquired, the mills and the holders of delivery orders resisted the Government's attempts. One of the contentions of the holders of the delivery orders was that they were the owners of the goods specified in the delivery orders. It was not in dispute that the goods covered by the puce delivery orders were not ascertained at the time when such orders were issued and that ascertainment was to take place in the shape of appropriation only at the time of actual delivery in compliance therewith. Taking a note of these facts and section 18 of the Sale of Goods Act, the Supreme Court observed: 'THEREFORE,till appropriation takes place and goods are actually delivered, they arc not ascertained. The contract therefore represented by the puce delivery orders is a contract for the sale of unascertained goods and no property in the goods is transferred to the buyer in view of section 18 of the Indian Sale of Goods Act till the goods are ascertained by appropriation....." (P.1222)

(14) This being the law and the position in the case before me being as already noticed above, I do not find any force in the contention of the learned counsel for the plaintiff company that with the issuance of the delivery orders the property in the goods stood transferred to the buyer. And, with this the entire edifice raised by the plaintiff company falls to the ground.

(15) The delivery orders were issued subject to change in rate as per instructions from the Ministry from time to time. The rate was refixed with effect from March 14, 1979 and as delivery of 179.420 metric tonnes was taken after March 14, 1979, the plaintiff Company was required to pay the difference in price which it did not pay.

(16) The plaintiff company alleges that the defendant No.2 had deliberately stopped the delivery. Though we do have the statement of Public Witness 1 to that effect, I am not inclined to place any reliance on his statement as no documentary evidence has been led in support. The plaintiff Company could make a complaint regarding no delivery. There is nothing to prove the lodging of any such complaint. Rather, the defendant No.2 has led evidence to prove that at the relevant time there was no stoppage of deliveries (See DW-2).

(17) For what has been recorded by me above, the finding on Issues No.2 and 3 goes against the plaintiff Company.

(18) Coming to Issues No.4 and 5, due to escalation in the price, the plaintiff company was obliged to pay the difference in price which it failed to despite demand. The defendant No.2, therefore, could legitimately make deductions from the amounts received by it, though in connection with a different transaction. In any casc, in view of Order 8 rule 6 of the Code of Civil Procedure, the defendant can claim set-off.

(19) It was contended on behalf of the plaintiff Company that there being two separate transactions, one relating to the two delivery orders and the other with regard to the allocation made in August, 1979 and thus relating to two separate accounts, the plea of set-off was not available to defendant No.2.

(20) True, there were two separate accounts relating to two separate transactions but then, the parties arc the same. They fill the same charaeter. There exist mutual demands between the plaintiff company on the one hand and defendant No.2 on the other and it cannot be said that these demands do not exist between the parties in the same right. Under the circumstances, I fail to see as to how the claim for set off is not maintainable.

(21) In short. Issues No.4 and 5 stand decided against the plaintiff company and in favor of defendant No.2.

(22) Coming to the point of interest, no arguments were addressed by either side. In any case, since I am dismissing the suit of the plaintiff and have held the adjustment made by defendant No.2 as perfectly justified, the question of awarding of interest pales into insignificance.

(23) For what has been discussed above, the suit is dismissed with costs.