Punjab State Industrial ... vs Rail India Technical & Economic ...
2012 Latest Caselaw 835 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           RFA No. 358/2001

%                                                      7th February, 2012

       PUNJAB STATE INDUSTRIAL
       DEVELOPMENT CORPORATION LIMITED            ..... Appellant
                     Through: Mr. Dalip Mehra, Advocate.

                   versus

       RAIL INDIA TECHNICAL & ECONOMIC
       SERVICES & ANR.                          ..... Respondents

Through: Mr. R.K. Saini, Advocate.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

1. This is an unfortunate litigation between two Public Sector

Undertakings (PSUs) which never should have come to the Courts in the

first place, inasmuch as, the admitted fact is that the appellant/defendant

No.2 was making a joint venture project with defendant No.1 and for

which, project report was submitted by respondent No.1/plaintiff/Rail India

Technical & Economic Services, a PSU and for which report an amount

was agreed to be paid. There is no dispute that the project report was

prepared by respondent No.1/plaintiff and submitted. There is also no

dispute that the balance payment with respect to the project report was not

made. The suit has therefore been decreed for the balance amount payable.

The project report prepared by the respondent No.1/plaintiff was for a joint

venture project of Coil Spring Manufacturing plant which was to be set up

by the appellant/defendant No.2 with respondent No.2/defendant No.1.

2. The facts of the case are that the appellant/defendant No.2 sought to

set up a joint venture project of a Coil Spring Manufacturing plant with

defendant No.1/respondent No.2/M/s Bombay Motor Trading Company.

With respect to this project the plaintiff/respondent No.1 was called upon

to prepare a project report. The respondent No. 1/plaintiff gave a quotation

to the appellant/defendant No.2 for a sum of Rs.3.5 lakhs vide letter dated

26.6.1987, Ex.P1. The appellant/defendant No.2 requested for reduction

of charges vide letter dated 3.7.1987, Ex.P2, and therefore, the respondent

No.1/plaintiff vide its letter dated 24.7.1987, Ex.P3, reduced the price for

preparing of the project report from Rs.3.5 lakhs to Rs.2.5 lakhs.

3. As per the terms and conditions of the contract, first the draft final

report was to be submitted, and which was submitted by respondent

No.1/plaintiff on 27.3.1989 (Ex.P5). The respondent No.2/defendant No.1

had to give its comments to this draft final report within a fixed period of

time, but the same were not given and, therefore, the final bill was sent.

The respondent No.1/plaintiff hence became entitled to the balance

payment after `50,000/- was paid initially by the defendant

No.1/respondent No.2. The respondent No.1/plaintiff thereafter addressed

its letter dated 25.4.1989 (Ex.P6) asking for the balance payment due of

Rs.1.5 lakhs. Various reminders, thereafter, were sent which are dated

2.5.1989 (Ex.P7), 13.6.1989 (Ex.P9), 4.7.1989 (Ex.P10), 10.11.1989

(Ex.P11), 6.12.1989 (Ex.P12), 15.1.1990 (Ex.P13), and so on. Ultimately,

a legal notice was got served upon the defendants vide notice dated

11.2.1991 (Ex.P17).

4. Defendant No. 1/respondent No.2 remained ex-parte in the trial

Court and the suit was contested by the appellant/defendant No.2. There

were three basic contentions which were raised on behalf of the

appellant/defendant No.2. The first was that there was no privity of

contract between appellant/defendant No.2 and the plaintiff/respondent

No.1. The second defence was of the suit being barred by limitation. The

third defence was that the report was not sent within the period of three

months, as has been mentioned in the offer letter dated 26.6.1987 (Ex.P1).

5. The trial Court after completion of pleadings, framed the following

issues:-

i) Whether the plaintiff is entitled to claim the suit amount from the defendants? OPP

ii) Whether the plaintiff is entitled to claim interest?

If so, at what rate and for what period? OPP.

iii) Whether the suit is time barred? OPD

iv) Whether there is no cause of action in favour of the plaintiff and against the defendants? OPD

v) Whether there is no privity of contract between the parties? OPD

vi) Relief."

6. With respect to the issue of privity of contract, and which was the

subject matter of issue No.5, the trial Court has held that there was a privity

of contract inasmuch as firstly, because the project was to be made for a

joint venture project of both the defendants. Secondly, the letter dated

26.6.1987 (Ex.P1) to prepare the project report, was sent to the

appellant/defendant No.2. Thirdly, a request for reducing the fee for the

project report was also sent by the appellant vide its letter dated 3.7.1987

(Ex.P2) and to which reply was sent giving the necessary concession to the

appellant vide its letter dated 24.7.1987 (Ex.P3) by plaintiff/respondent

No.1. The trial Court in this regard has observed as under:-

"15) Defendant No.2 also wanted to install the plant as a joint venture with defendant No.1 and defendant No.1 had also requested the plaintiff to reduce the fees for the job entrusted to the plaintiff. There is privity of contract as the job done by the plaintiff was for a joint venture. In the letter dated 31.7.87 sent by defendant No.1 to the plaintiff, Ex.P4, there is a mention of project to be sent up in the joint sector with defendant No.1 and has a reference of personal meeting of the General Manager (Projects) of the plaintiff with Assistant General Manager of defendant No.2 and Project Manager of

Punjab Coil Springs Ltd., at the office of the plaintiff in New Delhi. Enquiry and request for reduction in fee by defendant No.2 was not on behalf of defendant No.1 but was made because defendant No.2 wanted to install the plant as a joint venture with defendant No.1 and as such it was on behalf of both the defendants. Defendant No.2 has never informed the plaintiff that defendant No.2 was not liable. There was no occasion for the plaintiff to believe that defendant No.2 has no concern nor defendant No.2 informed so to the plaintiff. Defendant No.2 in reply never stated that defendant No.2 was not liable to make payment.

16) In view of the facts and circumstances of the present suit and testimonies of PW1 and DW1 and DW2 on record and various documents placed and proved on record, I am of the considered opinion that there was privity of contract between the plaintiff and defendants. Issue is decided accordingly in favour of the plaintiff and against the defendants."

7. I completely agree with the findings of the trial Court on issue No.5

inasmuch the aforesaid documents, as also other exhibited documents,

before the trial Court show that the appellant was jointly liable to pay the

costs of the project report, and which were with respect to a joint venture

project which was to be set up by the appellant/defendant No.2 with

respondent No.2/defendant No.1. The trial Court has rightly referred to the

fact that appellant/defendant No.2 never informed respondent No.1/plaintiff

that it was not liable to make the payment because there is no

correspondence on record where such a stand was ever taken up by the

appellant/defendant No.2.

8. The issue with respect to the suit being time barred was issue No.3,

and with respect to which the trial Court has held that the suit is not barred

by time by giving the following observations:-

"20) Issue No.3:- Whether the suit is time barred?

Onus of proving this issue has been placed upon the defendants which they have failed to discharge. Defendants have failed to disclose as to how the suit is barred by time. Even otherwise plaint has been instituted on 6-4-1992. According to the plaintiff the bill were submitted vide letter dated 27-3-1989. Defendants did not sent its comments within 15 days as agreed not made the payment of Rs.1,50,000/-. According to the plaintiff no comments have been received from defendant No.1 even till the date of the filing of the suit. Thus there is a presumption that the report was accepted bY the defendants and plaintiff has been entitled to the final payment as well. It is held that the suit is not barred by time. Issue is decided accordingly."

9. To the aforesaid findings of the trial Court I may add that the final

draft report was given on 27.3.1989 to which comments were to be given

within 15 days, and only whereafter, the final of this draft final report was

to become the final report. It is only on the coming to existence of the final

report, would the entitlement come into being to claim the balance

payment. The 15 days period from 27.3.1987 expired on 12.4.1989, and

since the suit has been filed on 6.4.1992, the suit is very much within

limitation as it was filed within three years from 12.4.1989 i.e. on 6.4.1992.

The findings with respect to issue No.3 are, therefore affirmed with the

additional reasoning as stated above, and which I am entitled to do so in

view of Order 41 Rule 24 CPC.

10. So far as issue that the report was not submitted in time is concerned,

I find that there is no such issue which is framed by the trial Court as to the

claim for payment is disputed because there was breach of contract in not

submitting the report within time. In any case, even assuming if this aspect

is incorporated in the issues framed, however, learned counsel for the

appellant could not dispute that at no point of time, till the final report was

submitted by respondent No.1/plaintiff, was it ever challenged by any of

the defendants, much less the appellant, that the contract stood frustrated on

account of the project report not having been given within time.

11. In view of the aforesaid facts advisedly this issue seems not to have

been pressed before the trial Court.

12. There is, however, one aspect on which I am inclined to give relief to

the appellant/defendant No.2, though this aspect has not been argued before

me. This is with respect to the high rate of pendente lite and future interest

@ 18% per annum granted by the impugned judgment and decree. The

Supreme Court in the recent catena of judgments reported as Rajendra

Construction Co. v. Maharashtra Housing & Area Development

Authority and others, 2005 (6) SCC 678, McDermott International Inc. v.

Burn Standard Co. Ltd. and others, 2006 (11) SCC 181, Rajasthan State

Road Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700,

Krishna Bhagya Jala Nigam Ltd. v. G.Harischandra, 2007 (2) SCC 720

& State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd (2009) 3

Arb. LR 140 (SC) has held that in view of the changed economic scenario

where there has been consistent fall in the high rates of interest, Courts

must not grant high rates of interest, more so when the litigation remains

pending for a long time.

13. Accordingly, I hold that the respondent No.1/plaintiff will be entitled

to interest @9% per annum simple pendente lite and future till the decretal

amount is paid.

14. A civil case is decided on balance of probabilities. The balance of

probabilities show that liability was a joint liability of both the defendants

as the Coil Spring Manufacturing plant was proposed to be set up which

was a joint venture project of both the defendants i.e. inclusive of

defendant No.2/appellant. The offer was also given to the appellant who

had asked for reduction and concession, and which was given the said

concession. At no point of time any dispute was ever raised by writing

even a letter by the appellant that it was not liable to make payment of the

suit amount and which is the balance due for the project report submitted.

15. In view of the above, the present appeal is partially accepted, limited

to reducing the pendente lite and future interest to 9% per annum simple.

Parties are left to bear their own costs. Decree sheet be prepared. Trial

Court record be sent back

VALMIKI J. MEHTA, J.

FEBRUARY 07, 2012 AK