Binani Metals Ltd. vs Union Of India (Uoi)
2004 Latest Caselaw 842 Del

JUDGMENT

Gita Mittal, J.

1. This appeal has been filed by M/s. Binani Metals Works Ltd., defendant in Suit No. 77/1979 filed by the Union of India against it for the recovery of Rs. 49,500/-. The appellant and respondent are hereinafter described as defendant & plaintiff respectively for the purposes of convenience. The suit was filed by the Union of India, respondent herein against M/s. Binani Metals Ltd., appellant herein. It was contended that the Government had required zinc based alloy ingots for die casting conforming to "BSS/1004/ Alloy 'A' or I.S. 713/1966/Alloy-I sizes as per drawing attached" and it issued a notice inviting tender by advertisement. The plaintiff had contended that the defendant M/s. Binani Metal Works Ltd. had submitted its tender dated 17th January, 1969 followed by letter dated 6th February, 1969. The defendant's tender being lowest was accepted by advance acceptance of letter dated 17th February, 1969 followed by formal acceptance letter dated 29th February, 1969. The plaintiff contended that a concluded contract came into existence for the supply of 90 metric tonnes of material at the rate of Rs. 3,700/-. As the defendant failed to supply the stores within a stipulated time, it was alleged that the defendant committed breach of contract which was cancelled vide letter dated 1st November, 1969 at the risk and cost of defendant. The plaintiff contended that during the period the price of the store had gone up and the rate of zinc based alloy ingots had risen as high as Rs. 4,250/- per metric tonne; that there is an increase in price of material by Rs. 150/- per metric tonne. The plaintiff further contended that it had placed an order for similar stores at the rate of Rs. 4,250/- with the defendant firm against tender opened on 2nd July, 1969. Thu as claim of general damages amounting to Rs. 49,500/- was made in the plaint on account of the value of the stores going up.

2. The defendant repudiated the claim of the plaintiff on the ground that there was no concluded contract between the parties. It was contended that the offer of the defendant was conditional; that there were proposals and negotiations between the parties but the defendant never undertook to supply 90 metric tonne of zinc based alloy ingots at the rate of Rs. 3,700/- or Rs. 4,000/- per metric tonne. It was alleged that the plaintiff never accepted the conditions set down by the defendant and, therefore, no contract came into existence. As such, there was no question of making supplies within any date or within 31st May, 1969. The defendant further pleaded that in view of the fact that it was under no obligation to supply the zinc based alloy and ingots, the cancellation of the alleged contract by the plaintiff by letter dated 1st November, 1969 was meaningless and was to no effect. A contract which did not exist could not be cancelled.

3. The defendant further submitted that even otherwise, the factory of the defendant remained closed due to strike between the period from 15th April, 1969 to 17th January, 1970 due notice whereof was given to the plaintiff vide general circular dated 22nd April, 1969. The strike continued beyond 60 days and as such a force majeure clause automatically came into action and the defendant stood exonerated from any liability from the contract in question.

4. The claim of damages on account of price increase was also repudiated by the defendant and it was specifically contended that the order made by the plaintiff in respect of other stores at the rate of Rs. 4,250/- per metric tonne had no relation to the suit claim. The defendant contended that the plaintiff had suffered no damages at all and if it had suffered damages, the same had to be strictly proved by it. It was also stated that since no risk purchase had been made by the plaintiff, its claim for damages was wholly incompetent. Similarly, the claim of general damages was without basis and the suit was without cause of action.

5. The plaintiff repudiated the contentions of the defendant in its replication insisting that there was a valid and concluded contract and that the same had to be cancelled at the risk and cost of the contract.

6. On the pleadings of the parties, the following issues were framed on 6th September, 1976:

  

"(1) Whether the suit is not maintainable for the reasons stated in the preliminary objections? OPD
 

(2)    Whether the contract in question came into existence between the parties? OPD
 

(3)   Whether defendant did not commit breach of the contract?
 

(4)   To what damages, if any, is the petitioner entitled?
 

(5)   To what amount of interest and at what rate and for what period the plaintiff is entitled?
 

(6)   Relief,"
 

7. On the request of the defendant, an additional issue was framed on the 19th April, 1978 to the following effect:
 "Whether the contract has become unenforceable because of the force majeure Clause as is alleged in the written statement? O.P.C.
 

8. The plaintiff examined Shri E.C. Dastur, Assistant Director, DGS & Das PW-I in support of its case. The defendant examined Shri B.E. Mundra, the then Assistant Manager as its sole witness. Upon consideration of the material on record, vide judgment and decree dated 22nd December, 1979, the learned Trial Judge was pleased to decree the suit of the plaintiff for Rs. 49,500/-.

9. The judgment and decree dated 22nd December, 1979 has been impugned before us on three main contentions which may be set out as hereunder:

I. That there was no concluded contract between the parties and as such there was no question of a breach of a contract on the part of the appellant. Hence, there was no liability to pay damages of any kind to the respondent.

II. The respondent did not effect any purchases pursuant to the contract, that there is no co-relation between the two tenders on record. Hence, the respondent suffered no damages and, consequently, the question of award of damages in favor of the respondent did not arise.

III. Assuming that a valid contract between the parties had come into existence, the same had become unenforceable because of the force majeure clause in the contract for the reasons pleaded and established before the learned Trial Court.

10. With regard to the first submission, it is necessary to set out the facts established on record. The Union of India had issued a notice inviting tenders (hereinafter referred to as the 'NIT' for convenience) on 13th September, 1968 (Exh. P-3) whereby it had invited tenders for supply of zinc based alloy ingots of 19 metric tonnes. The details of the item, for which tenders were invited, were set out in the schedule to the tender which was proved on record as Exh. P-3. The items specified in this schedule were as hereunder:

  

"C.O.Section SECTION G-2 
No. 08 4110 0000
 

Zinc Based Alloy Ingot BSS:1004 Tonne 90
 for Die Casting                                         Alloy 'A' or
Approx. Size -                                          IS:713:1966
9" x 3" x 1-1/2"                                         Alloy-1."
 

11. Pursuant to the NIT, the defendant submitted its tender. Additionally, a letter dated 17th January, 1969 (Exh. P-2 and also exhibited as Exh. D-27) was also sent whereby the defendant notified the plaintiff that the terms and conditions mentioned in this communication would govern the required supply. The specifications of the terms and conditions set out by the defendant in this communication read as hereunder:

"90 M/T ZINC BASE ALLOY INGOTS FOR DIE CASTING CONFORMING TO BSS 1004 ALLOY 'A' OR ISS 713/1996 ALLOY 'I'

'@ Rs. 3700/- (Rupees three thousand seven hundred only) per Metric Tonne.'

(In our standard moulds as supplied against your A/T No. SMH-6/107/46/ 171/PAOC/112 dt. 5.9.67).

The above rate is F.O.R. Calcutta, Sales Tax and/or Central Sales Tax extra.

In case of any excise duty on the finished product, the same will be on buyer's account. At present there is no excise duty.

MAKE & BRAND: Our own make 'Zamak No. 3' Brand. Ingots will be supplied in our stand moulds. Only heat numbers will be stamped on each ingot for easy identification.

DELIVERY: We shall offer material as required in the tender i.e. in July 1969 or to be supplied in suitable Installments within 2/3 months on receipt of the A/T subject to your force majeure Clause.

INSPECTION: At our works prior to dispatch and at your cost.

RISK IN TRANSIT: On buyer's account. Seller's responsibility ceased as soon as goods are delivered to the carrier under clear receipt and our bills should not be retrenched or delayed due to damage, loss or delay in receipt of stores or non-delivery.

PACKING: Loose.

VALIDITY: Our offer is valid for your acceptance reaching us on or before 30.1.1969 subject to our confirmation thereafter.

GENERAL CONDITION: In case of any control on the purchase, sale and /or consumption of nonferrous metals by the required raw materials to consume and manufacture the undelivered stores."

12. It appears that on the request of the plaintiff, the defendant extended the validity of its tender vide letter dated 6th February, 1969 (Exh. P-9) contents whereof read as hereunder:

"THE BINANI METAL WORKS LIMITED OF NON-FERROUS ALLOYS & CASTINGS Phones: 618144-5 4D, Nizamuddin West, New Delhi-13.

BINANI BUILDING 38, STRAND ROAD, CALCUTTA-1.

 Ref. BS/Z                                             February 6, 1969
 

The Director General of Supplies & Disposals, 
N.I. Building, 
Parliament Street, 
New Delhi,
 

Dear Sir,
 

Sub: Tender No. P/107/45/584/2.12.68/PL for 90 M/Tons Zinc Die Bush Alloy Ingots opened on 23.1.69.
 

We refer to your letter No. SMH5/107/45/584 dated 28.1.69 addressed to our Calcutta Office and hereby extend validity of our offer dated 17.1.69 for your acceptance reaching us by 11.2.69 and subject to our final confirmation thereafter. All other terms and conditions of our offer remain unaltered.

We are still awaiting clarification about the inspection clause from our Calcutta Office and we shall let you know about it shortly.

We are enclosing 3 sketches of Zamak Ingots, as desired by you. Thanking you,

Yours faithfully, for The Binani Metal Works Ltd.

Sd/-

Encl: 3 (H.C. Sharma)"

13. Thus it is to be noticed that in addition to the other terms set out in the letter dated 17th January, 1969, the defendant had enclosed three sketches of its Zamak ingots offered by it and was awaiting acceptance of final confirmation from the plaintiff.

14. On 11th February, 1969, the plaintiff notified the defendant of acceptance of the tender submitted by the defendant. In respect of the details of the item numbers and specifications, it was stated as hereunder:

"Zinc Base Alloy Ingot for Die Casting Approx Size-9" x 3" x 1 1/2"

Conforming to BSS 1004 Alloy 'A' or IS 713/1966 Alloy.1."

15. However, the delivery period was set out as stipulated by the defendant in his letter of 17th January, 1969 which reads as hereunder:

"Delivery period: By July 1969 or in suitable Installments within 2/3 months after receipt of A/T subject to this F.M. Clause."

16. Thereby the plaintiff conveyed its partial acceptance of the offer made by the defendants.

17. Instead of confirming that it would effect the supply other than in terms of the advance acceptance communicated above, the defendant addressed a letter dated 20th February, 1969 (Exh. D-25) to the plaintiff stating that it would supply the ingots only in their standard size as per the sketches forwarded vide letter No. HS/Z dated 6th February, 1969 and not in the size mentioned by the plaintiff in his letter of 11th February, 1969. The defendant specifically requested the plaintiff to confirm the same and issue formal acceptance of the tender confirming all the terms and condition of the defendant's offer dated 17th January, 1969, read with its letters dated 6th February, 1969 and 7th February, 1969 in order to enable it to accept the above order. The defendant clearly stipulated that the delivery date would be reckoned from the date of receipt of the formal order confirming all the terms and conditions mentioned by it.

18. It appears that no attention was paid to the conditions set out by the defendant. Instead the plaintiff issued a letter dated 24th February, 1969 (Exh. P-5) informing the defendant that its tender for stores specified in the schedule annexed to the tender, has been accepted by the purchaser on terms and conditions specified in the schedule. It was clearly stated that the acceptance of the tender and the schedule annexed shall be the sole repository of the transaction and that the letter was being issued in continuation of the office advance acceptance letter dated 2nd December, 1968. The schedule referred to herein appears to be the schedule to the NIT.

19. Obdurately, the defendant replied vide letter dated 7th March, 1969 (Exh. P-6) that his acceptance was only in terms of its letters dated 17th January, 1969 and 6th February, 1969. No acceptance of these terms by the plaintiff is on record.

20. On these facts, it has been contended by the defendant that the plaintiff had failed to accept the offer made by the defendant to supply the goods stated in the letter dated 17th January, 1969 and 6th February, 1969 and as such there was no concluded contract between the parties and no liability of any breach of contract could be fastened to the defendant.

21. We have given our considered thought to the submissions made to the rival contentions and have been taken through the pleadings and the relevant records. In the instant case, the plaintiff issued the NIT on 17th January, 1969. The defendant made its offer by submission of the tender. It is to be noticed that in addition to the tender form, the defendant has qualified the same and has clearly set out its additional conditions for supply of the material by its communications dated 17th January, 1969 & 6th February, 1969. It was insisting on supplying the ingots in its make 'Zamak' as well as in the nature as detailed in its communications. The letter dated 7th March, 1969 (Exh. P-6) also reiterated that it would effect supplies of the items in terms of its letter dated 17th January, 1969 read with letter dated 6th February, 1969. It was apparent that there was no meeting of minds with regard to the nature of the ingots which were to be supplied. The conditions set down by the defendant in its letters have escaped the attention of the trial Court. Even as late as on 20th December, 1969 (Exh. D-25) the defendants had made it clear that it would supply ingots only in their standard size manufactured by it as per sketches forwarded by their letter dated 6th February, 1969. The defendants' offer as contained in its tender was clearly a conditional offer and was subject to the conditions set down by it in its letters dated 17th January, 1969, 6th February, 1969 & 20th February, 1969 which were never accepted by the plaintiff.

22. It is a settled position in law that a notice inviting tenders merely indicate a readiness to receive offers. The offer comes from a person who submits the tender and there is no contract until the person asking for the tender accepts one of them. In this regard, we may refer to a judgment of the learned Single Bench of this Court with whom we are in respectful agreement in the case entitled as Delhi Development Authority v. Bhasin Associates, holding that the tender notice is merely an invitation to contractors for making an offer and does not amount to an offer or a proposal. Notice inviting tender issued by way of an advertisement is not a proposal within the meaning of Contract Law but merely which invites a proposal. It is the bid that constitutes an offer. Therefore, unless the bid is accepted and the acceptance communicated to the bidder, there is no binding contract between the parties. We are also in respectful agreement with the judgment entitled as Moolji Jaitha and Co. v. Seth Kirodimal, whereby it was held that the offeree must unreservedly assent to the exact terms of the offer to bring about a concluded contract. If, while purporting to accept the offer as a whole, he introduces a new term which the offeror has had no opportunity of examining, he is in fact merely making a counter-offer.

23. A valid, binding and concluded contract would come into existence only if the offer made by the tenderer is accepted. As acceptance of an offer is a final and unequivocal expression of an assent to the terms of an offer. The objective test of an agreement applies to an acceptance no less than to an offer. Where the offer is made in alternative terms, the acceptance must make it clear as to which set of terms the assent is directed. A communication may fail to take effect as an acceptance because it tends to vary the terms of the offer. Such a reply is not an acceptance, but it may, on the contrary, be a counter offer which the original offer can then accept or reject.

24. There was no acceptance of the defendants' offer in the instant case as discussed above. Therefore, in our view, no concluded contract had come into existence between the present parties and the trial Court had fallen into error in holding to the contrary and in deciding issue No. 2 in favor of the plaintiff and against the defendant.

25. In view of such finding, the defendant could not be held liable for breach of contract and for this reason, the findings of the Trial Court on Issue No. 3 also deserves to be set aside and quashed.

26. Coming to the second contention with regard to damages, it is necessary to advert to the conduct of the plaintiff in the instant case. It had not received any supply of ingots as stipulated by it in the schedule to the NIT or in terms of the schedule set down by the defendant in its various communications. Admittedly, not a single notice was written by the plaintiff to the defendant in this behalf.

27. It has been contended before the us that the plaintiff effected risk purchase of the contracted goods by issuing a fresh notice inviting tender on the 2nd July, 1969 (Exh. P-11). It has been also contended that the defendant had submitted a tender pursuant to this NIT as well. The tender of the defendant dated 19th July, 1969 (Exh. P-16) was accepted at a higher rate of Rs. 4,250/- per metric tonne whereas the earlier tender offered the supply at the rate of Rs. 3,700/- per metric tonne. Perusal of the plaint itself shows that there is not a whisper of an assertion that any purchases were effected of the contracted items. It has merely been averred that the contract had to be cancelled vide letter dated 1st November, 1969 on the risk and cost of the defendant and that it has further been contended that during the period the price of the store went up as high as Rs. 2,050/- per metric tonne and for this reason it has been contended that by breach of contract, the Government has suffered general damages amounting to Rs. 49,500/- on account of value of the stores going up by such amount. There is no pleading that the defendant actually suffered any damages other than a vague averment that prices during the period had gone up entitling the plaintiff to general damages equivalent to the difference in price.

28. We have carefully considered the rival submissions as well as perused the evidence on record. Vide the earlier NIT dated 17th January, 1969, the plaintiff had invited tender offers for supply of 90 metric tonne zinc ingots. The NIT issued on 2nd July, 1969 invited tenders for supply of 139 metric tonnes of Zinc based alloy ingots. There is no correlation between the two tenders. There is nothing in the evidence led by the plaintiff to connect the two tenders or their subject matters.

29. The plaintiff has claimed to have cancelled its contract with the defendant only vide letter dated 1st November, 1969 (Exh. P-13). Therefore, the contention of the plaintiff that it effected risk purchase at the instance of the defendant by inviting a fresh tender on 2nd July, 1969 is wholly misconceived and un-sustainable in view the facts proved on record.

30. General damages are such damages as the law presumes to result from the infringement of a legal right or duty. The damage must necessarily be proved by leading cogent and conclusive evidence of damages suffered by a party.

31. In the instant case, there was no concluded contract between the parties in as much as the offer of the defendant was conditional and there was no acceptance of such offer made by the defendant and hence no breach of a legal duty or right. No liability can be fastened upon the defendant for breach of something which did not exist. In any case, the plaintiff has failed to prove that it suffered any damages for which the defendant was liable to compensate it. Mere price variation by itself cannot establish a claim for damages till such time a plaintiff establishes that it has suffered a loss on account of such variation. The plaintiff has taken contradictory and vague pleas in the plaint which have not been supported by clear documentary or oral evidence. There is no pleading to the effect that the ingots which were the subject matter of the NIT dated January, 1969 were offered and actually purchased at a higher price. Whereas on the one hand, the plaintiff claims to have effected risk purchase of the ingots, the plaint does not contend any such averments and a vague and untenable claim of general damages amounting to Rs. 49,500/- has been made without any basis.

32. For all these reasons, the learned trial Judge was not justified in decreeing the suit of the plaintiff for the amount of Rs. 49,500/- with costs. The plaintiff also could not have withheld the amount of Rs. 49,500/- from the bills of the defendant.

33. With regard to the third contention, it has been contended on behalf of the defendant that there was a strike in its premises from 15th April, 1969 till 17th January, 1970. In this behalf, it was contended by the defendant that it had issued a circular dated 22nd April, 1969, which was sent to the plaintiff on its behalf.

34. The plaintiff had vehemently contended that it had no intimation regarding such strike till it was informed of the same vide letter dated 6th November, 1969. It is contended that copy of a circular dated 22nd April, 1969 was enclosed with this communication dated 6th November, 1969 for the first time.

35. The defendant had examined one Shri Sohan Lal Mundhra, its Assistant Manager (Exh. D.W.1). In his testimony on oath (DW-1), he has stated as hereunder:

"Our factory remained closed due to strike by the workmen from 15.4.69 to 17.1.70. We gave the intimation about the strike to the authorities concerned by a circular letter dated 22.4.1969, copy whereof is Exhibit DW1/1. The factory closed on 15.4.69 whereas we issued the letter on 22.4.69. The said strike continued for more than 60 days, We therefore exercised our option to terminate the contract under D.G.S.&D. force majeure Clause. Our company is not liable to pay any compensation or damage."

36. In his cross-examination, he however stated as hereunder:

"It is true that we sent a copy of the circular Exhibit DW1/1 with our letter dated 6.12.69. This letter is actually dated 6.11.69. By typographical mistake, the letter is mentioned as December. I have not brought any acknowledgement of Exhibit D.W. 1/1 having been received by the D.G.S.&D. New Delhi in April, 1969. We did not write any other letter in the month of April except D.W. 1/1. Thereafter we informed them only on 6.11.69 regarding this contract."

37. It has been pointed out to us from the record that at the time the statement of PW-1 Shri P.C. Dastur was being recorded on 18th November, 1977, Counsel for the plaintiff has stated that copy of the letter dated 22nd April, 1969 was not available on his file or the file of the office and, therefore, as and when the same is produced by the defendant, the same would be admitted by him.

38. It is further on record that the Public Accounts Committee had submitted a report for the year 1974-75 to the Fifth Lok Sabha. This report was tendered in Court by the Counsel for the defendant in evidence on 17th July, 1978 and was marked as Exh. PX.

39. Para 3.34 of this report, which is relied upon by the defendant-appellant, reads as hereunder:

"3.34 The Committee note that the factory of Binani Metal Works Ltd., on which orders had been placed by the Director General, Supplies and Disposals, on 24th February, 1969, for the supply of 90 tonnes of zinc ingots, at the rate of Rs. 3,700 per tonne, by May, 1969, was closed because of a strike which began in April. It was not until July, 1969 that the Director General, Supplies and Disposal came to know of the closure of the factory, after the receipt of intimation in this regard from the General Manager, Ordinance Factory, Katni. The Committee, however, find that Binani Metal Works Ltd., had also informed the their letter dated the 22nd April, 1969, of the strike in their factory since the 15th April, 1969. The Department of Supply have also informed the Committee that this letter of the firm had been duly received and had been passed on to the concerned Directorate of the DGS&D but the actual movement of the letter within the Directorate could not be traced. Evidence of tampering with the diary register has also been found and the vigilance and disciplinary aspects of this case are stated to be under examination. In the absence of this letter, the Directorate took cognizance of the strike in the factory only in July, on being informed by the indentor. In the opinion of the Committee, unless there had been collusion between the firm and the officials of the DGS&D, an important letter from the firm could not have been lost. The committee, therefore, desire that this should be investigated in detail expeditiously with a view to fixing responsibility and taking appropriate disciplinary action."

40. The only contention on behalf of the plaintiff before us was that in view of the fact that no intimation had been given regarding strike in his factory till 5th November, 1969, the defendant could not take advantage of the force majeure clause and cannot be permitted to contend that the contract has become unenforceable.

41. In our considered view, M/s. Binani Metal Works Ltd. has stated that it had sent the letter dated 22nd April, 1969 to the plaintiff notifying the plaintiff about the strike. In view of the Report of the Public Accounts Committee and the statement of the plaintiff that the letter dated 22nd April, 1969 was not found in their records and would be admitted when produced coupled with the report made in the Public Accounts Committee, it has to be held that the defendant had informed the plaintiff about the strike in its premises on 22nd April; 1969 and due notice of the strike within the period of performance of the contract as stipulated for invocation of the force majeure clause was given. The submission on behalf of the plaintiff that it had learnt of the strike only on receipt of the letter dated 6th November, 1969 has to be disbelieved in view of the clear observations of the Public Accounts Committee that the communication was sent and that the Directorate has taken cognizance of the strike in factory in the month of July itself. Therefore, the finding of the Trial Court that the plaintiff had learnt strike for the first time upon receipt of the letter dated 6th November, 1969 is not sustainable. However, in view of our findings recorded on the first and second contentions, we do not think it necessary to go into the claim of entitlement of the defendant to avoid a contract on account of the force majeure clause.

Accordingly, the appeal of the defendant is accepted and the judgment and decree dated 22nd December, 1979 is set aside. As a result, the suit of the plaintiff stands dismissed.

The appellant shall be entitled to costs of the appeal.