Delhi High Court
Kerala State Mktg.Fed.Ltd. vs Union Of India on 25 August, 2010
Author: S.Ravindra Bhat
* IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON: 19.08.2010
PRONOUNCED ON: 25th August, 2010
+ CS (OS) 2873/1988
KERALA STATE MKTG.FED.LTD. ..... Plaintiff
Through: Mr. Pradeep Jain with
Mr. Shubhankar Jain and Mr. Afhas Mishra,
Advocates.
versus
UNION OF INDIA AF+ ..... Defendant
Through: Mr. Anuj Aggarwal with
Mr. Gaurav Khanna, Advocates for UOI.
CORAM:
MR. JUSTICE S. RAVINDRA BHAT
1.
Whether the Reporters of local papers YES
may be allowed to see the judgment?
2. To be referred to Reporter or not? YES
3. Whether the judgment should be YES
reported in the Digest?
MR. JUSTICE S.RAVINDRA BHAT
%
1. In this suit, a decree for declaration that no binding contract existed between the parties
for supply of 5000 MT of Gramwhole and permanent injunction to restrain the defendant from
proceeding with the risk purchase tender enquiry dated 28.10.1988; and an order permitting the
plaintiff to institute a recovery suit against the defendants, are sought.
2. The plaintiff responded to a tender enquiry dated 29.01.1988 issued by the defendant.
The conditions for supply of the goods, i.e. 5000 MT Gram whole were outlined in the tender
CS (OS) 2873/1988 Page 1
enquiry form, produced in the trial and marked as Ex.P-1. The relevant condition, which is
subject matter of the controversy in this suit, i.e. clause-4 (a) reads as follows: -
"4. PRICE: - (a) The price shall be quoted per quintal inclusive of the cost
of Gramwhole, the cost of gunnies, railway freight at Military Credit Notes
rates, siding charges, handling and transport charges at station of dispatch,
octroi, terminal Tax, export duty, and all other expenses incurred or payable
upto the arrival of the supplies at the Reserve Supply Depot, Lucknow. In
addition, unloading charges, storage charges and weighment charges of RSD,
Lucknow after arrival of stocks at RSD are to be borne by the contractor as
detailed in clause 6 and 13 within the quoted price Gramwhole dispatched
from the station located in N. Rly. are not generally brought to the Reserve
Supply Depot, Siding, Lucknow but are unladed at Railway Station Aishbagh.
IN such cases, the handling and transport charges from the Railway Station to
the Reserve Supply Depot, Lucknow shall be borne by the suppliers. The
suppliers on arrival at the Depot shall be unloaded by the labour provided by
the Commandant of the Depot."
3. The plaintiff - a State Cooperative Marketing Federation of the Government of Kerala
responded to the enquiry and furnished its tender in the prescribed form offering to supply the
goods at different rates depending on the place(s) of dispatch and delivery. The offer was
embodied in a tender form - marked as Ex.P-2 (which had also been furnished by the defendant,
in standard form, along with the tender enquiry). The relevant part of that offer according to the
defendant's format (i.e. the relevant extract of Ex.P-2) is as follows: -
"SCHEDULE TO TENDER NO.J.12015/1/88 PUR.III DATED 29.01.88
GOVERNMENT OF INDIA MINISTRY OF DEFENCE DEPTT OF DEFENCE
(ARMY PURCHASE ORGANISATION, KRISHI BHAWAN, NEW DELHI-1)
Time & Date of opening of Tender 3.00 PM on 19.2.88
Date up to which the tender shall remain open for
acceptance up to & including 30.3.88
I/We hereby offer to sell to the President of India the following stores atthe price shown
against each and subject to the terms and conditions governing such purchase as
stipulated in the Department of Defence dated: 29.01.1988 Tender No. J.12015/1/88-
Pur.III, which I/We have read and understood and agree to abide by.
______________________________________________________________________________
Description Quantity Delivery Quantity Accounting FOR Rate per
of Stores Required Period offered Unit Rs. Station quintal
(MT) (MT) of Dispatch (words &
figures
_____________________________________________________________________________
CS (OS) 2873/1988 Page 2
Gram Whole 4000 Apr, 88 Full per quintal Delhi April 487.50
Conforming to 1000 May, 88 Full U.P. May 487.50
ASC 1275 July, 88 Full M.P. July 527.50
Specification 1275 Aug, 88 Full Rajasthan Aug 537.50
No.27 ______ Haryana
7550 Punjab
______
_____________________________________________________________________________
4. The plaintiff contends having received acceptance of its tender on 28.03.1988; the same
is marked as Ex.P-3. After referring to the offer and stating that contract between the parties
would be governed by general conditions of contract, the acceptance letter (Ex.P-3) inter alia
stated as follows: -
"PARTICULARS OF ARTICLES
Description of Accounti Quantity Terms delivery Price per Total Cost
stores ng Unit in tones F.O.R. Quintal Rs.
GRAM Per 4000 (in Delhi/UP/MP/Ra Rs.487.50 Rs.1,95,00,000/-
WHOLE as Quintal Apr.,88 jasthan/Haryana (1st delivery) Rs. 48,75,000/-
per ASC 1000 in & Punjab Rs.487.50
Specification May,88) (2nd delivery) Rs.2,43,75,000/-
No.27 5000
(*Rupees two crores forty three lakhs seventy five thousand only).
Note : i) the rate is inclusive of all taxes, packing and incidental charges
ii) S/T will be borne by the seller and `D‟ form will be issued by the purchaser."
5. The plaintiff submits that the acceptance letter had mentioned about the telegram, which
was unclear. The plaintiff took the position that the contract was void and not binding upon it as
it was uncertain. The said letter (Ex.P-4) in its relevant particulars states as follows: -
"In any event and without prejudice to aforesaid, we have to inform you that
the alleged contract is void and not binding upon us as the same is vague and
uncertain and there is no consensus ad idem between us.
As you will observe from the terms and conditions governing the alleged
contract there is no provision for inspection of supplies to be dispatched by
rail. It is not clear as to whether inspection will take place or not in respect of
the said supplies. It is also not clear how and where inspection, if any, will
CS (OS) 2873/1988 Page 3
take place. It is also not clear as to who will inspect the supplies and what
procedure will be adopted.
It is also not clear as to what price shall be paid for the goods. On one hand
as per the terms and conditions sent with the tender enquiry the price is to
include various items as mentioned in clause 4 thereof but on the other hand
in the alleged acceptance it is stated that the price is payable on F.O.R. basis
meaning thereby that the freight and other post dispatch expenses are to be
borne by you. Further there is no mention of `all taxes‟, `packing and
incidental charges‟ in the terms and contentions sent with the tender enquiry
but as per alleged acceptance the price includes the same. It becomes
absolutely confusing to find out as to which basis will be adopted for
ascertainment and payment of price which constitutes a fundamental
condition of contract.
Further, under the terms and conditions the supplies can be delivered locally
at R.S.D. Lucknow by road. However, no procedure for payment in respect of
such supplies has been provided in the terms and conditions."
6. The defendant responded to the plaintiff's letter and stated as follows: -
5. You have further stated in your letter that "it is also not clear as to
what price shall be paid for the goods. On the one hand as per the terms and
conditions sent with the T/E, price is to include various items as mentioned in
clause 4 thereof but on the other hand in the alleged acceptance it is stated
that the price is payable on F.O.R. basis meaning thereby that the freight and
other post-dispatch expenses are to be borne by you. Further, there is no
mention of "All taxes", "packing and incidental charges". In the terms and
conditions sent with the tender enquiry but as per alleged acceptance the
price includes the same". In this connection please refer to clause 4 of the
terms and conditions, in which there is no doubt left that the price will be
quoted per quintal inclusive of cost of Gram (whole), the cost of gunnies,
railway freight on M.C. Notes rate, siding charges, handling and transport
charges at stations of dispatch, Octroi, terminal taxes, export duty and all
other expenses incurred or payable upto arrival of supplies at the Reserve
Supply Depot, Lucknow. In addition, unloading charges, storages charges
and weighment charges at Reserve Supply Depot, Lucknow are to be borne
by the contractor as detailed in clause 6 and 13 within the quoted price.
Therefore, there is no doubt about the price and all that it will include.
However, the inadvertent typing error committed in the A/T mentioning
"F.O.R." stations of dispatch has since been rectified by issue of a
corrigendum to the A/T and all concerned have been intimated, as desired by
you."
7. On 17.05.1988, the defendant issued, what is termed as, a Corrigendum in respect of
CS (OS) 2873/1988 Page 4
acceptance letter of the contract; the effect of this document was to delete the reference to
"FOR". The said letter was produced as Ex.P-5; it reads as follows: -
"No.J.13015/4/78/88-Pur.III
Government of India
Ministry of Defence
Department of Defence
(Army Purchase Organization)
Room No.391, Krishi Bhavan, New Delhi,
dated 17th May, 88
To,
M/s. The Kerala State Coop. Marketing Fedn. Ltd.
73, Gadodia Market, (1st Floor), Khari Baoli, Delhi - 6
Sub: Supply of 5000 MT Gram Whole against A/T of even number dt. 28.3.88 for
Defence Services.
Ref: - Your letter No.DLH/26/G.W-1/88/566, dt. 30/4/88.
Dear Sirs,
I am directed to say that as per clause 5 of the conditions of contract governing
the subject contract, the contracted stores are required to be dispatched under clear
Railway Receipt showing the Commandant, Reserve Supply Depot, Lucknow as the
consignee. As per clause 4, the contracted price is inclusive of the cost of Gram-Whole,
the of the gunnies, railway freight at military Credit Notes rates, siding charges, handling
and transport charges at station of dispatch, Octroi, terminal tax, export duty and all
other expenses incurred or payable upto the arrival of the supplier at the Reserve Supply
Depot, Lucknow. Therefore, you are requested to incorporate corrigendum in the
Telegram No.J.12015/1/88-Pur.III, dt.28/3/88 for deleting the word "F.O.R." appearing
in the ninth line in between the words „STOP‟ and "STATIONS". You are requested to
effect a corrigendum in the A/T No.J.13015/4/78/88-PUR.III, dt.__/3/88 also as detailed
below: -
________________________________________________________________________
FOR READ
TERMS OF DELIVERY F.O.R. STATIONS OF DESPATCH
Delhi/UP/MP/Rajasthan/Haryana and Punjab Delhi/UP/MP/Rajasthan/Haryana and
Punjab__________________________________________________________________
2. The delivery period for 4000 M.T. due in April, 88 is refixed in May, 88."
8. The plaintiff responded to this letter contending that it never wished for a unilateral
deletion of the condition pertaining to "FOR" (Free on Rail) dispatch, by its letter dated
CS (OS) 2873/1988 Page 5
28.05.1988. That letter has been produced as Ex.P-6; it inter alia reads as follows: -
"...Your contention that there is no ambiguity in the agreement as to the price is
not acceptable to us. You have not stated as to how you resolved the ambiguity
between Clause 4 of the terms and conditions and stipulation in the purported
acceptance of tender that the price includes taxes, packing and incidental
charges. You cannot delete the expression `F.O.R.‟ unilaterally. We never
desired to issue a Corrigendum deleting the expression `F.O.R. „In any case by
issuing the alleged corrigendum, you have admitted beyond any doubt that the
agreement was vague. The unilateral amendment issued by you is not
acceptable to us. We still maintain that there is no procedure for payment in
respect of supplies delivered locally at RSD Lucknow by road. Under Clause
15 of the terms and conditions relied upon you, it is clear that the payment can
be made only after submitting the bill in the prescribed form stipulated by the
certificate regarding submission of Railway receipt issued by the Chief Director
of Purchase and counter foils of M.C. Notes. We are unable to apprehend as to
how we can furnish the aforesaid supporting documents in case the supplies are
to be delivered locally at RSD Lucknow by road. You are requested to enlighten
us in this respect."
9. On 03.06.1988, the plaintiff addressed a legal notice to the defendant complaining that
the latter was seeking to unilaterally alter the terms and conditions of the contract. It was
submitted that ascertainment and payment of price constituted a fundamental condition of the
contract. It was stated that Clause-4 of the terms and conditions issued along with the tender
enquiry as read together with the acceptance letter clearly shows that there was ambiguity in
ascertainment of price, which could not be resolved. It was stressed that this led to confusion. It
was asserted that the amendment proposed, i.e. deletion of the reference to FOR was
unacceptable and could not bind the plaintiff. Apparently, some supplies were made to the
defendant, after which due to lack of any clarity, the plaintiff did not pursue with the contract.
While so, the defendant issued a letter on 17.10.1988 threatening to resort to risk purchase and
stating further that the difference between the contract price with the plaintiff and the risk
purchase price would be recovered (from the plaintiff). With this background of circumstances,
the plaintiff filed the present suit seeking the declaration that there was no consensus ad idem
between the parties, in view of the changes brought by the defendant after acceptance of the
contract and that there was no valid and binding bargain.
10. The defendant resists the suit and contends that an overall reading of the contract,
particularly, Clauses-4, 5 & 14 would indicate that the entire freight and the costs, up to the
Reserve Supply Depot (RSD) were to be borne by the supplier. It is submitted, therefore, that the
CS (OS) 2873/1988 Page 6
term FOR had crept in by mistake instead of "Station of Dispatch" and did not have any
relevance.
11. The defendant denies that there was alteration in any material or fundamental conditions
relating to the contract. It also denies that there was any ambiguity or vagueness, which required
clarification. It refers to another contract between the parties whereby the plaintiff had supplied
4700 MT Gram whole and 1600 MT Barley at RSD, Lucknow on identical terms, partly by rail
by obtaining MC Notes and partly directly at the RSD Lucknow, through road delivery. It is
submitted that the clarification or amendment with regard to "FOR, Station of Dispatch" was
sought by the plaintiff, which insisted deletion of the term "FOR". The defendant alleges that in
the entire episode, the plaintiff's objective was to somehow wriggle out of its obligations in the
performance of the contract. It is further submitted that the plaintiff's non-compliance or default
in honoring the contractual terms led to hardship and, therefore, the risk purchase clause had to
be invoked.
12. The defendant alleges that subsequent to the filing of the suit, another proceeding, i.e. CS
(OS) 31/1992 had been filed for recovery of ` 3,41,323.23 and that the same was subsequently
dismissed for non-prosecution. It is urged that for these reasons, the plaintiff's contention about
there being no obligation upon it to supply the goods or that there was no binding contract, does
not arise.
13. On 31.8.2009, the Court framed the following issues: -
1. Whether no complete and concluded contract dated 28.03.1988 came into existence?
OPP
2. Whether the alleged contract dated 28.03.1988 did not comply with the requirements
of the Article 299 of the Constitution of India? OPP
3. Whether the alleged contract dated 28.03.1988 is void, as being vague and uncertain?
OPP
4. Does the defendant prove that the plaintiff is estopped from contending that there was
no concluded contract dated 28.03.1988, in view of the alleged part supply of the
goods by the plaintiff to the defendant? OPD
5. Whether the plaintiff is entitled to a declaration that there is no valid and binding
contract between the plaintiff and the defendant for supply of 5,000 M.T. of gram
whole? OPP
CS (OS) 2873/1988 Page 7
6. Whether the alleged risk purchase by the defendant is illegal, contrary to contract,
improper or oppressive as alleged in the plaint? OPP
7. Relief."
The Court proposes to first deal with Issue Nos. 2 & 4, as there was no serious dispute.
14. This issue, i.e. regarding the contract not binding the parties on account of non-
compliance with the provisions of Article-299 of the Constitution was not urged. As this Court
perceives the matter, this issue is rather academic. As this Court perceives the question, Article
299 prescribes a safeguard to ensure that unauthorized bargains should not bind the State or the
Union as the case may be. However, that question does not arise here because Union is not
taking a position about the contract being unauthorized; on the contrary, it is the plaintiff who is
doing so, after having submitted the tender form. In these circumstances, the plaintiff should
have established that the contract was not binding upon it on account of non-compliance with
Article-299. There is no such material or evidence. Therefore, this issue is answered against the
plaintiff.
Issue No.4
15. This issue was framed at the behest of the defendant who contended that the plaintiff had
partly supplied the goods to it and, therefore, is estopped from contending that there was no
contract. It relies upon the subsequent suit, i.e. CS (OS) 331/1992 filed by the plaintiff for
recovery of price to the extent of ` 3.41 Lakhs.
16. The Court notices that the averments in the suit clearly are to the effect that the plaintiff,
acting under a mistake, as to the validity of the agreement, had supplied 17.015 MT of Gram
whole at RSD, Lucknow on 14.4.1988. It further contends that even though the contract was
void, yet the defendant was bound to restore the advantage received by it or pay compensation.
Although, that relief was not claimed in the present suit, concededly, leave was sought later and
in view of the provisions of Order II, Rule 2 CPC, the suit is filed. It is another matter that the
said suit was dismissed for non-prosecution. Now a careful reading of the subsequent suit - a
certified copy of which has been placed on record by the defendant - would reveal that the
plaintiff invoked Sections-65 and 70 of the Contract Act, contending that the defendants had
CS (OS) 2873/1988 Page 8
secured an unfair advantage and that it (the plaintiff) did not supply the goods gratuitously.
Estoppel, as a principle bars one from resiling a position taken earlier if the same has led to
certain legal consequences. For instance, if as a result of the representation, and based upon it,
the other party alters its position irrevocably, the Court would not allow the party holding out the
representation to go back upon it. One important exception to estoppel is that it does not bar the
applicability of a statute or prevent someone from asserting his statutory rights. In this case, the
plaintiff is asserting its right to recover the damages for price of the goods. It is not the
defendant's case that the goods received were supplied gratuitously by the plaintiff, or for no
consideration. In these circumstances, the issue is answered against the defendant.
Issue nos. 1, 3, 5 & 6
17. These three issues go to the heart of the dispute, i.e. whether there was consensus ad idem
about the condition pertaining to price of the goods. For deciding the question, it would be
necessary to consider the contract, as a whole. In this context, it would be useful to recollect that
the tender enquiry form (Ex. P-1) nowhere mentions, in the body, that the goods were to be
loaded FOR. It is only in the tender form, Ex. P-2, that the supplier, indicated, while quoting the
price, about the condition pertaining to FOR. The purchase order issued by the defendant also
mentioned FOR. At the same time, the acceptance form talks of the parties being bound by the
tender conditions (of which Clause 4(a) forms a part). Before proceeding further, it would be
necessary to extract other conditions of contract, which bound the parties:
"....5. DESPATCH OF SUPPLIES:- Supplies shall be dispatched by the suppliers
only from the stations from which supplies were offered by them and agreed to by
the Chief Director of Purchase. The quantity dispatched from each station shall be
as specified in the contract. The supplies shall be dispatched under clear Railway
Receipt showing the Commandant, Reserve Supply Depot, Lucknow as consignor.
The Railway Receipt shall be delivered at the office of the Chief Director of
Purchase and a certificate, that the Railway Receipt has been delivered, obtained.
The provisional payment of 75% of the value of the goods on submission of a bill
on prescribed form supported by the certificate. The contractors have the option to
deliver supplies locally free at Reserve Supply Depot, each supply may be
transported by road and should be delivered at Reserve Supply Depot, Lucknow
only on surrendering unused M.C. Notes to the Commandant, Reserve Supply
Depot, Lucknow at the time of local delivery.
--------- ------ ------
CS (OS) 2873/1988 Page 9
"14. MILITARY CREDIT NOTE: - (a) The Chief Director of Purchase shall issue
to the suppliers one Military Credit Note in respect of each complete wagonload
sold (or a smaller consignment sold, if specially authorized). Each Military Credit
Note shall be used by the supplier only for the booking of consignment under the
acceptance of tender to which it relates. The freight paid by Government on
Military Credit Notes will be recovered from the suppliers. The suppliers shall be
responsible for the safe custody and proper use of Military Credit Notes issued to
them and shall be liable for any loss which Government may suffer as result of loss
or misuse of the Military Credit Notes in original or the counter foils together with
the relative Railway Receipt are returned to the Chief Director of Purchase.
Military Credit Notes shall not be issued in respect of any consignments
desptached in replacement of rejected consignments.
(b) The sellers will be entirely responsible for any shortage due to pilferage or
loss to the consignment in part or whole for any reasons whatever during the
transit and up to/the time of acceptance. The seller may in their own interest if they
so desire, get the consignments insured at their own expense through some
insurance company. Govt. will, under no circumstances, assume any responsibility
for the shortage or loss to the consignment before the consignment or any part
thereof is accepted irrespective of the goods having been moved on Military Credit
Notes or on Public Traffic Rates. Claims preferred by Govt. as consignee, on the
Railways, in respect of shortage or losses in transit will be entirely on sellers
behalf and responsibility."
18. It is undisputed that Clause 4 (a), which talks of the price, says, in its material part, the
consideration payable by the defendant, would include the following:
"siding charges, handling and transport charges at station of dispatch, octroi, terminal
Tax, export duty, and all other expenses incurred or payable upto the arrival of the
supplies at the Reserve Supply Depot, Lucknow. In addition, unloading charges, storage
charges and weighment charges of RSD, Lucknow after arrival of stocks at RSD are to be
borne by the contractor as detailed in clause 6 and 13 within the quoted price
Gramwhole dispatched from the station located in N. Rly. are not generally brought to
the Reserve Supply Depot, Siding, Lucknow but are unladed at Railway Station Aishbagh.
In such cases, the handling and transport charges from the Railway Station to the
Reserve Supply Depot, Lucknow shall be borne by the suppliers. The suppliers on arrival
at the Depot shall be unloaded by the labour provided by the Commandant of the Depot."
No doubt, the standard form acceptance - filled in by the plaintiff mentioned FOR, as did the
purchase order (Ex. P-3). The question is the effect of the latter. The plaintiff contends that
acceptance of its form, had the effect of incorporating the FOR condition; it emphasizes the
terms of the purchase order/letter. However, the defendant relies on Clause 4 (a) and also
CS (OS) 2873/1988 Page 10
submits that the other terms of the contract clarify that the cost payable was all inclusive, and not
FOR costs.
19. The plaintiff had relied on Marwar Tent Factory v. Union of India, (1990) 1 SCC 71 to
contend that its obligation ended the moment it delivered the goods, in the condition agreed, and
loaded them for dispatch, in the railways. The Supreme Court had discussed the true meaning of
an FOR condition, in a commercial contract for the supply of goods, in the following terms:
"...In Halsbury‟s Laws of England, 4th Edition (Volume 41) at page 800, para 940 it has
been mentioned that:
"Under a free on rail contract (f.o.r.) the seller undertakes to deliver the goods into
railway wagons or at the station (depending on the practice of the railway) at his own
expense, and (commonly) to make such contract with the railway on behalf of the buyer
as is reasonable in the circumstances. Prima facie the time of delivery f.o.r. fixes the
point at which property and risk pass to the buyer and the price becomes payable."
............ ................... ........
12. In Benjamin‟s Sale of Goods (2nd edn.), at para 1799 it is stated as under:
"Stipulations as to time of "delivery". Provisions as to the time of delivery in an
f.o.b. contract are taken to refer to the time of shipment and not to the time of arrival of
the goods; and this may be so even though the provision in question contemplates the
arrival of the goods by a certain time. Thus in Frebold and Sturznickel (Trading as
Panda O.H.D.) v. Circle Products Ltd. German sellers sold toys to English buyers f.o.b.
Continental port on the terms that the goods were to be delivered in time to catch the
Christmas trade. The goods were shipped from Rotterdam and reached London on
November 13; but because of an oversight for which the sellers were not responsible the
buyers were not notified of the arrival of the goods until the following January 17. It was
held that the sellers were not in breach as they had delivered the goods in accordance
with the requirements of the contract by shipping them in such a way as would normally
have resulted in their arrival in time for the Christmas trade."
13. The question as to the meaning of f.o.r. contract fell for consideration in the case of
Girija Proshad Pal v. National Coal Co. Ltd. AIR 1949 Cal 472, P.B. Mukharji, J. as His
Lordship then was observed in para 11 as follows :
"The words f.o.r. are well known words in commercial contracts. In my judgment
they mean when used to qualify the place of delivery, that the seller‟s liability is to place
the goods free on the rail as the place of delivery. Once that is done the risk belongs to
the buyer."
............ ................... ........
16. In the instant case, in view of the terms and conditions of the contract embodied in
clause 11 of the schedule of acceptance of tender regarding the place of delivery „f.o.r.
Jodhpur‟, the property in the goods passed immediately on from the seller after
delivering the goods and loading the same in the railway wagons at Jodhpur for
transmission to the buyer, the consignee, without reserving any right of disposal. The
CS (OS) 2873/1988 Page 11
seller is deemed to have unconditionally appropriated the goods to the contract only
under Section 26 of the said Act, the goods remained at seller‟s risk until the property
therein is transferred to the buyer. As stated earlier that the property in goods has been
transferred to the buyer by the seller by delivery of the goods and loading the same at
Jodhpur in railway wagons. In this connection reference may be made to Section 39(1) of
the said Act. Considering the aforesaid provisions of the Sale of Goods Act, 1930 as well
as the terms and conditions of delivery i.e. „f.o.r. Jodhpur‟ the irresistible conclusion that
follows is that the property in the goods together with the risk passed from the seller to
the buyer i.e. from consignor to the consignee as soon as the goods were loaded in the
railway wagons at Jodhpur as per the terms of delivery i.e. f.o.r. Jodhpur. Therefore, the
finding of the trial court that the risk throughout remained with the appellant until the
goods were actually delivered to the Commandant, COD, Kanpur is wholly wrong and
illegal. The further finding of the trial court that the risk was governed with the condition
No. 4(1) of the schedule of acceptance of tender and the property in the goods i.e. the
tents did not pass until the same were actually delivered to the Commandant, COD,
Kanpur and the Commandant, COD, Kanpur was not liable for loss of the tents during
the period of transit by the railways is also illegal and bad. As stated hereinbefore on
consideration of the place of delivery as well as the terms of delivery embodied in clause
11 of the schedule of acceptance of tender, the property in the goods along with the risk
in the goods passed from the appellant to respondent 5 when the goods were delivered
and despatched by railway wagons at Jodhpur i.e. FOR, Jodhpur. The consignee,
Commandant, COD, Kanpur is therefore, liable for the price of 224 tents which was
deducted by him from the other bills of the appellant. The findings of the trial court which
were confirmed by the Division Bench of the High Court are, therefore, liable to be set
aside and the claim of the plaintiff-appellant should be decreed."
20. In this case, the distinctive feature is that the plaintiff submitted its bid, with an express
tender condition, that the price (for the goods) would be inclusive of the dispatch, and delivery at
the defendant's depots. The bid was submitted with differential price structures (deliveries at
Madhya Pradesh and Rajasthan being for higher price than other places). No doubt, the tender
acceptance conditions included a reference to FOR, as did the purchase order. Yet, the Court
cannot be oblivious of the other conditions in the contract - and not merely clause 4 (a). Clause
14 (b) says that the sellers (i.e. the plaintiff) was to be "entirely responsible" for any shortage due
to pilferage or loss to the consignment in part or whole for "any reasons whatever during the
transit and up to/the time of acceptance". It further clarifies that the plaintiff may, in its interest,
"...get the consignments insured at their own expense through some insurance company.
Govt. will, under no circumstances, assume any responsibility for the shortage or loss to
the consignment before the consignment or any part thereof is accepted..."
CS (OS) 2873/1988 Page 12
A cardinal principle of interpretation of contract is that every document should be read as a
whole, having regard to the import of the words used, and not upon what the parties say later. In
other words, the Court's inquiry is limited to seeing the express terms of the bargain, and not the
subsequent conduct, which may not be reflective of what they had agreed upon. This was
underlined in a recent decision, Bank of India v. K. Mohandas, (2009) 5 SCC 313 by the
Supreme Court, in the following manner:
"The true construction of a contract must depend upon the import of the words used and
not upon what the parties choose to say afterwards. Nor does subsequent conduct of the
parties in the performance of the contract affect the true effect of the clear and
unambiguous words used in the contract. The intention of the parties must be ascertained
from the language they have used, considered in the light of the surrounding
circumstances and the object of the contract. The nature and purpose of the contract is
an important guide in ascertaining the intention of the parties."
Earlier, in Bihar State Electricity Board v. Green Rubber Industries, (1990) 1 SCC 731, it was
held that:
"It is true that the agreement is in a standard form of contract. The standard clauses of
this contract have been settled over the years and have been widely adopted because
experience shows that they facilitate the supply of electric energy. Lord Diplock has
observed: "If fairness or reasonableness were relevant to their enforceability the fact
that they are widely used by parties whose bargaining power is fairly matched would
raise a strong presumption that their terms are fair and reasonable." Schroeder (A.)
Music Publishing Co. Ltd. v. Macaulay. In such contracts a standard form enables the
supplier to say: "If you want these goods or services at all, these are the only terms on
which they are available. Take it or leave it." It is a type of contract on which the
conditions are fixed by one of the parties in advance and are open to acceptance by
anyone. The contract, which frequently contains many conditions is presented for
acceptance and is not open to discussion. It is settled law that a person who signs a
document which contains contractual terms is normally bound by them even though he
has not read them, even though he is ignorant of the precise legal effect. In view of clause
4 having formed one of the stipulations in the contract along with others it cannot be said
to be nudum pactum and the maxim nudum pactum ex quo non oritur actio does not
apply. Considered by the test of reasonableness it cannot be said to be unreasonable
inasmuch as the supply of electricity to a consumer involves incurring of overhead
installation expenses by the Board which do not vary with the quantity of electricity
consumed and the installation has to be continued irrespective of whether the energy is
consumed or not until the agreement comes to an end. Every contract is to be considered
with reference to its object and the whole of its terms and accordingly the whole context
must be considered in endeavouring to collect the intention of the parties, even though
the immediate object of enquiry is the meaning of an isolated clause.
(emphasis supplied)
CS (OS) 2873/1988 Page 13
21. If the contract, which includes the tender conditions, (and the form relied on by the
plaintiff), are considered as a whole, there can be no doubt that the defendant had prescribed that
the entire responsibility of ensuring delivery at its depots, including the losses occurring during
transit, pilferage, etc, were to be borne by the seller. This clearly militates against the plaintiff's
argument, which is based on use of the term FOR in the acceptance form, and the purchase order.
Though it is doubtful that a condition in the acceptance form would constitute the bargain, or the
promise, even an assumption of that premise, in this court's opinion, is of no use to the plaintiff,
in this case. The plaintiff has been unable to establish that such forms constitute bargains which
supersede express contractual terms such as Clauses 4 (a) and 14 (b). These apart, there is yet
another consideration. It has been commented (Ref The Interpretation of Contracts by Kim
Lewison, published by Sweet and Maxwell) that if a clause in a contract is followed by a later
clause, which destroys the effect of the first clause, the later clause is to be rejected as repugnant
and the earlier clause prevails. If, however, the later clause can be read as qualifying rather than
destroying the effect of the earlier clause, then the two are to be read together, and effect given to
both. The rule was explained in Walker v. Giles, 1848 6 CB 662:
"...And as the different parts of the deed are inconsistent with each other, the question is,
to which part effect ought to be given. There is no doubt, that, applying the approved
tests of construction to this instrument, effect ought to be given to that part which is
calculated to carry into effect the real intention, and that part which would defeat it
should be rejected..."
This rule has been subsequently followed in Forbes v. Git, 1922 (1) AC 256; Joyce v, Barker
Bros (Builders) Ltd., 1980 (40) P & CR 512; Re Tewkesbury Gas Co., 1911 (2) Ch. 279.
22. On a consideration of the authorities, it is clear that when a contractual condition,
embodied in the express terms, if sought to be read down, as is urged by the plaintiff, the Court
has to consider the terms of the agreement, as a whole. The attempt should be first to ensure that
there is no conflict, and the Court should not consider only one condition in isolation. If there is
indeed a conflict between two conditions, the later clause having the effect of destroying or
obliterating the effect of an earlier condition, the later condition should be rejected. In this case,
the "later" condition incorporating the FOR clause is not part of the main contractual term; it is
in a standard form acceptance letter, as is the standard form purchase order, issued by the
defendant. The effect of the FOR stipulation is clearly to destroy, or negate the intention
CS (OS) 2873/1988 Page 14
underlying clause 4 (a) and clause 14 (b) prescribing the seller's responsibility to deliver the
goods at the purchaser's depot. There is, however, no clear manifestation that the FOR condition
is to prevail over the express contractual terms. In these circumstances, it is held that the
plaintiff's argument that what had been agreed was that goods were to be loaded FOR, cannot be
accepted.
23. The above observations would have concluded the findings on the issue. However, the
Court is constrained to notice another aspect, which goes into the root of maintainability of suits,
pertaining to contacts and contractual obligations. The plaintiff's main relief is a decree for
declaration. Section 34 of the Specific Relief Act, 1963, which enables courts to grant
declarations, reads as follows:
"34 DISCRETION OF COURT AS TO DECLARATION OF STATUS OR RIGHT.
Any person entitled to any legal character, or to any right as to any property, may
institute a suit against any person denying, or interested to deny, his title to such
character or right, and the court may in its discretion make therein a declaration that he
is so entitled and the plaintiff need not in such suit ask for any further relief :
PROVIDED that no court shall make any such declaration where the plaintiff being able
to seek further relief than a mere declaration of title, omits to do so.
Explanation : A trustee of property is a "person interested to deny" a title adverse to the
title of some-one who is not in existence and for whom, if in existence, he would be a
trustee."
In Ramakrishna Pattar v. Narayana Pattar, AIR 1915 Mad 584, a declaration was sought that a
personal contract subsisted; it related to some tax. Accepting that such declaration of contractual
rights could not be claimed under the then Section 42 of the Specific Relief Act, as such
declarations could not be held to relate to any person's legal character, it was held:
"We think that the contention must be upheld, to this extent, namely, that Section 42 of the
Specific Relief Act does not contemplate a suit like the present. We take it that a man's
"legal character" is the same thing as a man's status. "A man's status or 'legal character'
is constituted by the attributes which the law attaches to him in his individual and
personal capacity, the distinctive mark or dress, as it were, with which the law clothes
him apart from the attributes which may be said to belong to normal humanity in
general.."
CS (OS) 2873/1988 Page 15
In Tian Sahu v. Mulchand Sahu, AIR 1922 Pat 432 the plaintiff had sought declaration that he
was entitled to contribution from the defendant if and when the occasion arose; the Court held
that such a suit was not maintainable. An identical view was taken in Sripat Rao v. Shankar Rao,
AIR 1930 Bom 331. Following these two later cases it was held, by the Lahore High Court, in
Nathu Ram v. Mula, AIR 1937 Lah 25 that:
"A suit for a declaration that the defendant would be liable to contribute to the plaintiff
all moneys which the plaintiff as the defendant's surety would be liable to pay does not
come under Section 42 as it affects only the pecuniary relationship between the parties to
the contract."
This reasoning was applied in Firm Gopal Das Parmanand v. Mul Raj, AIR 1937 Lah 389 where
a declaration that certain sum deposited by the plaintiff with the defendant (as margin money)
was accountable by the defendant -to the plaintiff- was refused. The Court held that such a
declaration could not be granted under Section 42 of the Specific Relief Act as it affected only
the pecuniary relationship between the parties to the contract. In Madanlal v. State of Madhya
Bharat, (S) AIR 1955 Madh B 111 a declaration had been sought that under a contract the
plaintiff was not responsible for payment of any amount due on account of the sale and
distribution of food-grains; the Court held that as the declaration did not relate to any legal
character or right to property it could not be claimed under Section 42 of the Specific Relief Act.
These views were affirmed and applied by the Allahabad High Court, in Mahabir Jute Mills v.
Firm Kedar Nath Ram Bharose, AIR 1960 All 254, and also by the Bombay High Court, in
Shanta Shamsher Jung Bahadur v. Kamani Brothers Private Ltd., AIR 1959 Bom 201.
24. To this Court, it appears that in the present suit too, the plaintiff is asking for a
declaration, which does not relate to any legal character or right to property; all that is sought is
that obligations under a contract, do not arise, as that was not the intention of the parties.
Therefore, applying the logic and rationale contained in the above decisions, it has to be
concluded that the present suit is similarly not maintainable, as it does not seek declarations in
relation to legal right or character, or right to property.
25. In view of the above discussion, issues no. 1, 3 and 5 are held against the plaintiff, and in
favour of the defendant.
26. As far as issue no. 6 is concerned, the same is directly connected with the relief of
CS (OS) 2873/1988 Page 16
declaration sought from the Court. Therefore, it cannot be granted for the same reasons and
considerations that weighed with the Court while holding that the relief of declaration cannot be
granted. That apart, the plaintiff has not led any evidence to establish how the relief of a
direction, that the risk purchase conditions were onerous, or oppressive.
27. In view of the above findings, the suit cannot succeed. It is accordingly dismissed, with
costs. The plaintiff is directed to, in addition, pay legal costs to the defendant, quantified at `
55,000/-.
S. RAVINDRA BHAT
(JUDGE)
AUGUST 25th 2010
CS (OS) 2873/1988 Page 17
