M/S Prem Wire Industries vs M/S National Thermal Power Corp. ...
2010 Latest Caselaw 5712 Del

 *             IN THE HIGH COURT OF DELHI AT NEW DELHI
 +                      RFA No.170/1998
 %                                             15th December, 2010


 M/S PREM WIRE INDUSTRIES                       ...... Appellant
                        Through:         Mr. Gagan Gupta, Adv.

               VERSUS

 M/S NATIONAL THERMAL POWER CORP. LTD. & ORS
                                           ....Respondents

Through: None.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in the Digest?

VALMIKI J. MEHTA, J (ORAL)

1. The plaintiff/appellant by means of the present appeal under

Section 96 of the Code of Civil Procedure, 1908 (CPC) challenges

the impugned judgment and decree dated 30.8.1997 whereby its

suit for recovery of Rs.3,42,790/- along with interest was dismissed

by the trial court holding that the plaintiff was guilty of breach of

contract and not the defendants/respondents.

2. The facts of the case are that the respondents no.1 and

2/defendants no.1 and 2 who for the sake of convenience are

referred to as seller/NTPC because both the respondents are in fact

National Thermal Power of Corporation (NTPC). NTPC conducted an

auction of its scrap material/goods namely ACSR Moose Conductors

in bits on 2.5.1986. Auction was conducted by the agent of NTPC

M/s Metal Scrap Trade Corporation Ltd., respondent no.3/defendant

no.3. The appellant was the successful auction purchaser for 40

Metric Tons (MTs) of material. The scrap was to be lifted by the

appellant from the depot of the NTPC at Rampur, Bareilly, U.P at

the rate of Rs.16.80 per Kg. The appellant had already deposited

Rs.1 lac for the auctioned goods. The total value of the auctioned

goods was Rs.7,35,200/- inclusive of taxes. The appellant further

deposited Rs.3,50,000/- vide a demand draft dated 26.6.1980. The

appellant had therefore deposited a sum of Rs.4,50,000/- which

was the approximate value for more than 20 MTs of material.

3. The contention of the appellant/plaintiff was that the

defendants no.1 and 2 only supplied 15.515 MTs and failed to

supply the remaining. The plaintiff therefore alleged breach of

contract and sought the difference of value of the goods because in

the mean while, the prices of the scrap had increased to Rs.31 per

Kg. Damages were therefore claimed at Rs.14 per Kg being the

difference between the market value being Rs.31 per Kg and the

contracted value of Rs.16.80 per Kg. The defendants/respondents

appeared and contested the case. NTPC being the defendants no.1

and 2 filed its written statement and the respondent

no.3/defendant no.3 filed a separate written statement. The

defence of NTPC was that first of all the plaintiff failed to make the

balance payment within 15 days from the date of auction in terms

of the terms of auction and hence committed a breach of contract.

NTPC then further alleged that even after extension of time was

granted upto 1.7.1986 the appellant again failed to deposit the

balance amount. Finally, the NTPC pleaded that as per the novated

contract, the appellant had to take delivery in two installments of

20 MTs and the balance payment of 20 MTs was to be made within

7 days of lifting of the first installment of 20 MTs.

4. After the pleadings were completed, the trial court framed

the issues which read as under:-

"Issues:

1.Whether there is breach of contract by defendant no.1 and 2 as alleged by the plaintiff in paras 8 and 9 of the plaint? If so, its effect? OPP.

2. Whether the plaintiff committed breach of contract as alleged by the defendants. If so, to what effect? OPD (1 to 3)

3. Whether the contract has been unilaterally concelled by defendants no.1 and 2 as alleged by the plaintiff in para 8 of the plaint? If so, its effect? OPP.

4. Whether the plaintiff has suffered any damages. If

so, to what extent? OPP.

5. To what amount of damages if any is plaintiff entitled from the defendants and from whom? OPP.

6. Whether the suit of the plaintiff for alternative relief of delivery of the balance scrap material to the extent of 24.485 MT is within time? OPP.

7.Whether the plaintiff is the receive the balance quantity of scrap material from defendants no.1 and 2 at the original rates after determination of the contract as alleged by the plaintiff? OPP.

8. Whether the plaintiff is entitled to any interest. If so, at what rate and for which period.

9. Whether the present suit is not maintainable against defendant no.3 as alleged by defendant no.3? OPD.3.

10.Relief."

5. All the issues were taken and decided together by the trial

court. The trial court held that it was the appellant who was guilty

of breach of contract as it failed to pay the balance amount within

seven days of lifting of the first installment of 20 MTs.

6. Before this court, the counsel for the appellant has very ably

argued the appeal and pointed out that it was in fact NTPC who

committed breach of the contract. The counsel has placed reliance

upon the replication filed by the appellant as also the testimony of

PW1 read with documents Ex.PW1//D-6 dated 9.7.1986 of the

respondent no.3 and Ex.DW1/P2 dated 8.6.1988 of NTPC to show

conclusively that NTPC was guilty of breach of contract because it

never had the material to supply to the appellant. I completely

agree with the submissions of the learned counsel for the appellant

for the following reasons:-

(i) The appellant had already deposited more than the value of

20 MTs with the NTPC, however, only 15.515 MTs was supplied to

the appellant. The partner of the appellant as PW-1 had stepped

into witness box and proved the fact that inspite of repeated

reminders and talks with the NTPC, NTPC failed to supply the

further of material of approximately 25 MTs. Even the material

supplied of 15.515 MTs was got, after the lot of difficulty and from

different depots of NTPC.

(ii) The letter terminating the contract Ex.DW1/P2 dated 8.6.1988

clearly admits that it was NTPC which was unable to deliver the

balance material. It is necessary to reproduce this letter which

reads as under:-

"XXXXX Dear Sirs, With reference to above, this is to inform you that due to the causes beyond our control, we are unable to deliver the balance material. The contract may be treated as cancelled in terms of General Terms and Conditions of Tender/Auction No. MSTC- D/02/86-87 as contained in auction catalogue No.MSTC-D/02/86-87 of M/s Metal Scrap Trade Corporation Ltd. New Delhi.

The Balance amount of Rs.20,000/- (Rupees

Twenty thousand only) pending with us will be returned to you shortly.

Thanking you, Yours faithfully,

(B.K.Gupta) Manager (C&M)"

This letter clearly shows that it was not the appellant

which was guilty of contract for non-payment but it was NTPC

which failed to deliver the material because of causes beyond its

control.

(iii) If the appellant was guilty of breach of contract then there

would have been no reason for the NTPC to have refunded any

amount to the appellant much less the amount of Rs.20,000/-.

NTPC would have in fact sought to appropriate this amount on

account of breach of contract by the appellant.

In any case, even if, there was no need to

appropriate/forfeit the entire amount of the appellant lying with the

NTPC, if the appellant was really guilty of breach of contract, the

letter Ex.DW1/P2 of NTPC dated 8.6.1988 (and as reproduced

above) would not have mentioned about refund of the amount of

Rs.20,000/- and admitted non-supply for the reasons beyond its

control. The counsel for the appellant has rightly pointed out that

the auction was of May 1986 and this termination letter is of June

1988 i.e., more than two years later clearly indicating the inability

of NTPC to supply the balance material and hence being guilty of

breach of contract.

(iv) Once NTPC failed to supply 20 MTs of scrap in the first

installment, there did not arise any question of making of the

balance payment of second installment of 20 MTs and which was

to be payable only after completion of the entire supply of the first

installment of 20 MTs, because admittedly, only 15.515 MT were

supplied and that too after lot of running around and efforts of the

appellant.

7. A reading of the impugned judgment and decree shows that

all the aforesaid vital aspects as pointed out by the learned counsel

for the appellant are conspicuous by their absence in the impugned

judgment and decree. The impugned judgment and decree fails to

discuss the important documents being Ex.PW1/D6 dated 9.7.1986

which clearly provides that balance payment was to be made only

after supply of 20 MTs was completed and the fact that Ex.DW1/P-2

dated 8.6.1988 lays no blame on the appellant, and on the contrary

its language is apologetic in nature for failing to deliver the

material for reasons which are stated to be beyond control of NTPC.

The impugned judgment and decree is therefore clearly illegal and

perverse. The facts of the present case clearly show that it was

NTPC and not the appellant which was guilty of breach of contract.

The counsel for the appellant has also rightly pointed out that PW1

in his testimony has proved the rate of scrap of Rs.31 and also the

fact that Mr. B.K.Gupta, the witness of the NTPC who appeared as

DW1 admitted that the price of the scrap was approximately Rs.24

in the year 1988.

8. In view of the above, the impugned judgment and decree is

set aside. I may however, note that the decree has to be passed

only against NTPC i.e., defendants no.1 and 2/respondents no.1 and

2 because the defendant no.3/respondent no.3 was only an agent

of the disclosed principal NTPC. As per Section 230 of the Contract

Act, 1872, no liability can be fastened on the agent if it acts for a

disclosed principal.

9. Accordingly, the suit of the appellant/plaintiff is decreed

against respondents no.1 and 2 for a sum of Rs.3,42,790/- along

with pendente lite and future interest at 12% per annum till

realization with costs of the present appeal and also of the suit. Let

a decree sheet be drawn up accordingly. The appeal is accordingly

disposed of as allowed. Trial court record be sent back.

DECEMBER 15, 2010                              VALMIKI J. MEHTA, J.
ib