M/S. Siemens Limited vs M/S. Bhasin Associates Ltd.
2001 Latest Caselaw 445 Del

ORDER

J.D. Kapoor, J.

1. This is a suit for recovery of Rs. 22,01,591.60p. The plaintiff, a Public Limited Company has preferred the suit for recovery of Rs. 22,01,591.60 against the defendant which also is a Public Limited Company. The facts giving rise to the case are as under:

2. Vide letter dated 28.12.89 the defendant company invited the plaintiff company to submit their offer for the requirement of Programmable Logic Controller for WWTP Project in Uran (Maharashtra) for ONGC (i.e. Oil and Natural Gas Commission).

3. In pursuance of the aforesaid invitation the plaintiff company submitted its competitive offer on 12.1.90 but later on at the request of the defendant company the plaintiff company also submitted their revised offers dated 15.2.90. The defendant accepted the quotations of the plaintiff company and placed upon it the quotations of the plaintiff company and placed upon it the detailed purchase order dated 17.3.90 for engineering,supply, installation, testing and commissioning of complete PLC System for ETP (MINAS) ONGC, Uran.

4. The purchase order was duly confirmed by the plaintiff company vide their order dated 2.4.90.

5. The total contract value as per the terms and conditions agreed between the parties for the above job was Rs.18,73,800/- towards the price of the additional items viz-1 no. Hand-Held Programming Unit, complete as ordered and Rs.1,50,000/- towards charges for supervision of erection and commissioning work. The price of the hardware was also inclusive of Excise Duty @ 15.75 per cent and Central Sales Tax @ 4 per cent against Form 'C' wherever applicable. It was, however, expressly agreed that any variation in the rates of Excise Duty and Sales Tax at the time of supply as well as other new levies, duties etc. Shall be borne by the defendant company. It was further agreed expressly that the charges for erection and supervision work would be valid up to 1.12.90 and thereafter shall be subject to change on mutually agreed basis.

6. As per the agreed commercial terms and conditions the defendant company paid a sum of Rs. 1,87,380/- to the plaintiff company by way of 10 percent interest free advance against submission of Bank Guarantee No. 90 NDH 362 dated 22.3.90 issued by HongKong and Shanghai Banking Corporation 28, Kasturba Gandhi Marg, New Delhi in favor of the defendant company at the request of the plaintiff company. The said advance was liable to be adjusted proportionately against supply and erection work of various items.

7. As per the agreed terms of payment the balance 90 per cent payment against supply portion was payable to the plaintiff company against supply of hardware and software items through a letter of credit to be opened by the defendant company with the bankers of the plaintiff company. Further 45 per cent erection and supervision charges were payable to the plaintiff company after satisfactory completion of erection work, within one month from the date of submission of invoice while remaining 45 per cent of the said charges were agreed to be paid to the plaintiff company after successful commissioning of the system, within one month from the date of submission of invoice.

8. The defendant-company vide their amendment letter dated 5.3.91, made certain changes in the scope of supply and also increased the original contract price from Rs. 15,73,800/- to Rs.21,76,818/-. Further the charges for erection, commissioning and supervision were made valid up to September, 1991 as against the originally agreed validity period up to 1.12.90.

9. After the finalised drawings and specifications were received by the plaintiff company from the defendant company during September, 1990 the plaintiff company on priority basis got the ordered equipments manufactured and ready for supply to the site during the month of February, 1991. The plaintiff company vide their letter dated 14.2.91 called upon the defendant company to establish necessary letter of credit with the bankers of the plaintiff company, namely, HongKong and Shanghai Banking Corporation, 28, Kasturba Gandhi Marg, New Delhi as per the agreed terms, so as to enable the plaintiff company to effect dispatches. But unfortunately inspite of the repeated requests made thereafter by the plaintiff company the defendant company failed to do the needful.

10. However, later on the plaintiff company agreed to dispatch the major portion of the ordered equipments lying with them, upon the request and categorical assurance given to them by the defendant company that the defendant company would make the payment in respect of the same directly to the plaintiff company through cheque in exchange of the dispatch documents.

11. The plaintiff company effected the dispatch of aforesaid equipments vide Lorry Receipt No. 443942 dated 30.3.91 from Nasik to Uran on Door Delivery' basis and raised their invoice no. 1821/2001 dated 15.4.91 for Rs. 20,16,903.90p and called upon the defendant company vide their letter dated 16.4.91 to pay the balance sum of Rs. 18,52,723.90p by means of cheque as mutually agreed, after adjusting 10 per cent payment received in advance.

12. Since the ordered equipments were dispatched from Nasik to Uran, the transaction for the purposes of levy of sales tax took place within the state of Maharashtra, attracting local sales tax, the plaintiff company instead of charging Central Sales Tax @ 4 per cent against form 'C' charged vide their above mentioned invoice Maharashtra Sale Tax @ 10 per cent as applicable.

13. After submission of the aforesaid invoice the plaintiff company made several requests and demands for release of their balance payments but the defendant company on one pretext or other avoided that release of legitimate dues of the plaintiff company without any justifications and taking undue advantage of the leniency shown by the plaintiff.

14. The defendant company vide their letter dated 1.7.91 falsely represented to the plaintiff company that since their substantial payment has been witheld by M/s ONGC i.e. the ultimate client, it was not possible for the defendant company to release any payments to the plaintiff company until outstanding payment of the defendant company were received from M/s Oil and Natural Gas Commission.

15. The plaintiff company was not at all obliged to accommodate the defendant in the matter of payments for the aforesaid reasons but still as a gesture of goodwill the plaintiff company was good enough to accommodate the defendant company for some more time subject to payment ofinterest charges @18 per cent per annum on the outstanding amount from the due date up to the date of payment. In this connection, the plaintiff company vide their letter dated 6.8.91 also submitted their debit note No.P21/0061 dated 31.7.91 for Rs. 98,750/- towards interest charges payable by the defendant company from 15.4.91 up to 31.7.91.

16. Defendant company continued to falsely represent before the plaintiff company regarding their financial trouble due to non release of their large outstanding payments from M/s ONGC and the defendant company had not been paid for the material supplied by the plaintiff company to M/s ONGC on behalf of the defendant company. But later on, the plaintiff company was shocked to learn from M/s ONGC that the defendant company had already made payment in respect of the equipments supplied to M/s ONGC including the equipments supplied through the plaintiff company.

17. The plaintiff-company further came to know from M/s ONGC that the defendant company had also stopped work at site since 29.6.91 and in fact M/s ONGC was in the process of getting the balance work done through other agencies at the costs and risks of the defendant company.

18. At the request of the plaintiff company M/s ONGC vide their letter dated 25.10.91 also furnished the details of payments made by them to the defendant company against the aforesaid in April-May, 1991. The plaintiff company vide their letter dated 1.11.91 sent by registered A.D. post, forwarded a copy of the letter dated 25.10.91 received by them from M/s ONGC and requested the defendant company to release the outstanding payments of the plaintiff company together with interest charges received by the defendant company.

19. However, when the repeated request of the plaintiff company calling upon the defendant company to arrange for minimum release of their payments did not bear any fruit the plaintiff served the defendant with legal notice of the demand dated 24.12.91 but the defendant failed to make any payment of the outstanding sum. Hence this suit. Though the defendant was proceeded ex parte but it has filed the written statement wherein it was averred that due to the failure of the plaintiff to supply the PLC system in time as agreed by it, it has suffered huge losses because the ONGC with whom they had entered in to a turn key project contract for setting up of ETP (Minas) withheld huge amount due to the defendants and as a result their entire business was shattered and this disrupted their payment plan to the various contractor and manufacturers.

20. Since there was an arbitration clause under the contract between the defendant and the ONGC the disputes have been referred to the arbitrator. The defendant has preferred a claim of Rs.19 crores against ONGC. It was in view of these proceedings that the defendant pleaded that since on account of the acts of omissions on the part of the plaintiff he has suffered heavy losses, the plaintiff has to wait for settlement of the defendant's claim against ONGC by the arbitrator.

21. The plaintiff has proved the following documents by way of affidavit : (i) Exhibit P2 - letter of intent dated 9.3.90, (ii) Ex.P3 the detailed purchase order dated 17.3.90, (iii) Ex.P9 the order confirming the order received from the defendant, (iv) Ex.P4 the purchase order dated 5.3.99 issued by the defendant. Vide letter dated 25.9.91 i.e. Ex.P11 the plaintiff informed the defendant that the material was lying ready for dispatch after inspection and requested the defendant for establishing a letter of credit in favor of the plaintiff as per the agreed terms of the payment.

22. Since the defendant had failed to dispatch the necessary letter of credit and rather requested the plaintiff to dispatch the goods assuring that the payment shall be made by it directly in exchange of the dispatch documents, the plaintiff on this assurance dispatched the goods on 30.3.91 vide Lorry receipt (Ex.P21) from Nasik to Vran on door delivery basis.

23. Other relevant documents with regard to the aforesaid supply made in respect of increased supply vide amended purchase order dated 5.3.91 (Ex.P4) according to which contract value stood increased from Rs.18,00,000/- to Rs.21,03,018/- besides a sum of Rs.73,000/- towards additional items are as follows: (i) Ex P22 the invoice in respect of the good supplied for a sum of Rs.20,16,903.90p. (ii) Ex.P23 to P29, the reminders sent by the plaintiff from time to time demanding balance of payment.

(iii) Ex.P13, the letter sent by the defendant representing to the plaintiff that since there were large outstanding amount with the ONGC, it was not possible for the defendant to release to the plaintiff until their money was released from the ONGC. (iv) Ex.P32 the debit note dated 31.7.91 for Rs.98,750/- towards the interest that accrued on the outstanding amount. Ex.P31 is the covering letter.

24. In order to ensure whether the defendant had received some payment from the ONGC or not the plaintiff made inquiry from the ONGC or not the plaintiff made inquiry from the ONGC and received telex message (Ex P-35) confirming that they had already made payment to the defendant in respect of goods supplied by the defendant. However, the defendant also sent a telex message in the payment directly from the ONGC even by taking a legal action against them but this advice was not accepted by the plaintiff.

25. ONGC again confirmed to the plaintiff vide letter dated 25.10.91 (Ex. P-37) that defendant had already collected the money from them in respect of the supplied by the plaintiff in the aforesaid project. Ex. P-17 is the legal notice dispatched and served upon the defendant

26. As to the losses suffered by the defendant on account of delay on the part of the plaintiff that it did supply the goods in time and in terms of the agreement, it is contended that since the scope of supply was not clear at the initial stage itself and therefore the need for amendment of the scope arose and the plaintiff was not in a position to supply the goods in accordance with the original agreement, original stipulated period of 5-6 months to supply the goods was deemed to have been extended from the date of issue of the amendment letter.

27. However, as to the plea of the defendant that since they were not getting their payments from the ONGC, the ultimate buyer, so they were not in a position to make the payment to the plaintiff, it is contended that it was not the condition of the contract between the defendant and the plaintiff that the defendant shall make the payment to the plaintiff as and when their payment is recovered from the ONGC.

28. Thus the effect of the amendment was that the original scope of supply as well as the value of the contract stood increased and thereafter the plaintiff was supposed to make the supplies in terms of the amended order. Vide Exhibit PW-21 the supplies were made to the defendant on 31st March, 1991 on door delivery basis which meant that the material will straight-away go to site without any requirement of the defendant to wait for copy of the lorry receipt to take the delivery thereof.

29. The contract between the plaintiff and defendant No.1 was independent of the contract between the defendant and ONGC. Even if it is assumed for the sake of arguments that the payment by the defendant was to be made to the plaintiff on receipt on receipt of their payments from the ONGC still the fact remains that ONGC vide Telex Exhibit PW-35 had confirmed that the payments towards the supply made by the plaintiff and in return received by the ONGC have already been made to the defendant. In view of this Telex the excuse of the defendant in not making the payment to the plaintiff because of its not having received from the ONGC is merely an excuse to avoid the payment. Moreover neither was such a condition a part of the agreement nor had the defendant received payment from the ONGC.

30. Another fact that lends support to the above view is the Telex Exhibit PW-14 sent by the plaintiff to the defendant wherein the defendant had offered to help the plaintiff in realizing the payments from the ONGC by way of legal action. This shows that the defendant had received the goods from the plaintiff and also supplied the same to the ONGC but did not make the payment to the plaintiff in lieu thereof.

31. The aforesaid documents and the facts supported by way of affidavit by the plaintiff establish the clain of the plaintiff as ONGC was neither party to the contract between the plaintiff and defendant nor did any such condition form part of the agreement between the plaintion and the defendant that payment would only be made as and when would be received from the ONGC.

32. The dues to be paid to the plaintiff have been specified in para 25 of the affidavit and are as follows:-

Amount

I. Principal Sum (Balance Sum due as per Invoice No. 1821/001 dated 15.4.1991 Rs. 18,52,723.90 p.

II Interest charged @18% per annum on Rs.18,52,723.90 p.

w.e.f. 15.4.1991 up to 31.7.1991
(as per Debit Note No.P21/0061
dated 31.7.1991)          Rs.    98,750.00
 
III Interest Charges @ 18% per annum on
Rs.18,52,723.90 p. w.e.f. 1.8.1991
up to the date of filing of the suit
i.e. for 9 months approx.         Rs.  2,50,117.70 p.

     ............................    
     Total Rs. 22,01,591.60 p.
     ............................

 

33. The suit is decreed for Rs. 22,01,591.60 in favor of the plaintiff and against the defendant with pendente lite and future interest @18% per annum besides the courts of the suit. Decree sheet be prepared accordingly.