Jagdish Gupta vs The State Trading Corporation Of ...
2012 Latest Caselaw 3804 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           CS(OS) No.2098/1990

%                                                          2nd July, 2012

JAGDISH GUPTA                                                ..... Plaintiff
                                   Through: Mr. Jayant Nath, Sr. Adv. with
                                   Mr. Udit Gupta, Adv.


                            VERSUS

THE STATE TRADING CORPORATION OF INDIA LTD .....Defendant
                      Through: Mr. C.S.Parasher, Adv.


CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

    To be referred to the Reporter or not?     Yes


VALMIKI J. MEHTA, J (ORAL)

1.             Plaintiff is the owner of tanks which store oil. These tanks are

located at Shakur Basti, Delhi. Two of these tanks being tank nos. 4 and 5

were licenced to the defendant under an agreement dated 1.7.1983

(Ex.PW1/1) for a period of 3 years. As per Clause 24 in the agreement dated

1.7.1983 the three years term could be extended for another period of two

years. The defendant exercised an option for renewal for the first time on

29/31.7.1986 i.e. after the expiry of the original period. Even during the so
CS(OS) No.2098/1990                                                Page 1 of 13
 called extended period fresh tenders were called for by the defendant for

storing of oil. The plaintiff participated in the tender process by offering the

tanks at `40/- per metric ton per month inclusive of handling charges, and

which charges were subsequently reduced to `32/- per metric ton per month

by the plaintiff. The letter by which the plaintiff reduced his tender quote

from `40/- per metric ton per month to `32/- per metric ton per month is the

letter dated 3.3.1988 (Ex.PW1/9). The communications between the parties

in this regard are contained in the correspondences dated 28.8.1987,

29.8.1987 and 2.11.1987. The defendant was not satisfied with the original

rate of ` 40/- offered by the plaintiff and therefore again fresh advertisement

was issued in the Times of India on 31.10.1987. The rate of ` 32/- which

was mentioned by the plaintiff in his letter dated 3.3.1988 (Ex.PW1/9) is

pursuant to the extension of the validity period of original tender of July,

1987 by the Times of India's advertisement dated 31.10.1987. The plaintiff

from 1.9.1987 sent to the defendant bills claiming charges at `40/- per

metric ton per month for the storage charges and the handling charges. I

may note that even in the original agreement, the defendant paid charges

both towards storing and handling of the oil in the tanks inasmuch as the

plaintiff besides storing and handling of the oil in the tanks also provided the
CS(OS) No.2098/1990                                                 Page 2 of 13
 handling facility for pumping the oil into the tanks and then later pumping

out the oil from the tanks to the vehicles/wagons of the defendant when so

asked by the defendant. The defendant by its letter dated 25.3.1988 (Ex.D5)

contested the claim of the plaintiff made from September, 1987 at the

higher rate and which rate was different from that as contained in the

agreement dated 1.7.1983 (Ex.PW1/1). The plaintiff by its letter dated

11.4.1988 (Ex.PW1/10) mentioned to the defendant that the option for

renewal was not exercised as per law because the same was not exercised

during the currency of the original period of 1.7.1983 to 30.6.1986 and

which became clear from the fact that tenders were invited by the defendant

for storage of oil during the so-called extended term. The defendant by its

letter dated 14.4.1988 (Ex.D6) disputed the claim of the plaintiff for higher

storage charges, however in the same breath, it said that for the interim

period they will pay negotiated fresh rates after entering into the fresh

agreement thereby indicating that the defendant was aware that for the

period post 1.7.1986 it was liable to pay rates higher than the contractual

rates contained in the agreement dated 1.7.1983. Correspondence between

the parties continued and the defendant kept on using the storage tank nos. 4


CS(OS) No.2098/1990                                              Page 3 of 13
 and 5 till 31.3.1989 and the tank no. 5 till 30.6.1989. The plaintiff in the suit

therefore has crystallized the amount due to him as under:-

         a)   Storage and handling charged
              at the flat rate of `32/- per mt.
              ton the storage capacity of
              7895 M/s as per bills issued
              from 1.9.87 to 31.3.1989 for
              both the tanks (19 months)                     `48,00,160/-
         b)   Flat rate for tank No.5 for 3
              mnths from 1.4.89 to 30.6.89
              @ `32/- per M/T                                ` 5,65,920/-
         c)   Less charges received from
              1.9.1987 to 30.6.89 at the
              provisional rates for storage
              and quantity handled as per
              details.
                  i) For 7895 M/Ts @ 7.75
                      for 19 months.            11,62,538.75

                  ii) For 585 M/Ts @ 7.75     1,37,058.75
                      for 3 months.

                 iii) Quantity         handled
                      30435.10+29.300
                      33270.069+ 2005.393
                      1421.275
                      1007.318                 6,81,684.85_ 18,81,282.35
                               --------------- 19,81,282.35
                             68168.485 M/T
              Balance recoverable                           33,847,97.65
              Interest on the above amount
              @ 12% per annum from
              1.7.89 to 30.6.90 by way of
              damages and under statute
                                                            4,06,175.71__
                                               Grand Total: `37,90,973.36

CS(OS) No.2098/1990                                                  Page 4 of 13
 2.            The defendant contested the suit and denied its liability. The

defendant claimed that the agreement was extended for a period of two years

with effect from 1.7.1986 pursuant to the defendant's letter dated

29/31.7.1986 (Ex.D1). The defendant also disputed the claim of damages

filed by the plaintiff.


3.            The disputes in the present case thus pertain to the claim of the

plaintiff for storage and handling charges for the tank nos. 4 and 5 from

1.9.1987 to 31.3.1989 (19 months) and additionally from 1.4.1989 to

30.6.1989 (3 months) for tank no.5.


4.            The following issues were framed by this Court on 6.12.1995:-

       "1.    Whether the respondent is liable to pay the storage

charges at the rate of `32 per M.T. for the period of 1.9.1987? If so, to what effect?

2. To what amount, if any, is the petitioner entitled?

3. Relief."

Issues no.1 and 2 can be dealt with together and are therefore

being dealt with together hereinafter.

5. The law with respect to exercising of an option for renewal of a

lease is now well settled and contained in the judgment of the Supreme

Court in the case of Caltex(India) Ltd., Vs. Bhagwan Devi Marodia AIR

1969 SC 405. The relevant paras of this judgment are paras 3 and 6 which

read as under:-

"3. At common law stipulations as to time in a contract giving an option for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulations to time as not of the essence of the bargain. As stated in Halsbury's Laws of England, 3rd ed., Vol: 3, Article 281, p.165: "An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse." This passage was quoted with approval by Danckworts L.J. in Hare v.Nicoll, 1966-2 QB 130, 145. A similar statement of law is to be found in Foa's General Law of Landlord and Tenant, 8th ed., Art. 453 p.310, and in Hill and Redman's Law of Landlord and Tenant 14th ed., p.54. The reasons is that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose.

6. We may add that where no time is fixed for the purpose, an application of renewal for the lease may be made within a reasonable time before the expiry of the term (see Foa's General Law of Landlord and Tenant, 8 th ed., article 455, pp.311-12, Ram Lal Dubey v. Secretary of State of India, 29 Cal LJ 314=(AIR 1918 Cal 59), Hemanta Kumari Devi v. Safatulla Biswas, 37 Cal WN 9=(AIR 1933 Cal 477). In the present case, the lease fixes a time within which the application for renewal is to be made. The time so fixed is of the essence of the

bargain. The tenant loses his right unless he makes the application within the stipulated time. Equity will not relieve the tenant from the consequences of his own neglect which could well be avoided with reasonable diligence." (emphasis added)

6. A reference to the ratio of Caltex (India) Limited (supra)

shows that unless the option for renewal is exercised before the expiry of the

lease period, the option cannot be said to have been validly exercised and

therefore the lessee (licensee in this case) will not be entitled to renewal

even if there was a clause of renewal in the lease deed. In the present case, it

is not disputed that the option of the renewal was not exercised at any time

prior to 30.6.1986 when the lease expired and was exercised only for the

first time on 29/31.7.1986 (Ex.D-1) by the defendant. Applying the ratio of

Caltex (India) Limited (supra), I hold that no valid agreement from

1.7.1986 to 30.6.1988 could have been created inasmuch as the option for

renewal was not validly exercised.

7. In the present case, admittedly no fresh deed has been entered

into pursuant to the Clause 24 of the agreement dated 1.7.1983. Possibly,

even on this ground it can thus be said that there did not come into existence

a fixed period contract. There had to be a specific license agreement for a

fixed period failing which, the defendant will only be a month to month

licensee and not a licensee for a fixed term.

8. I therefore, hold that the defendant after the expiry of the

original period/term on 30.6.1986, continued only as a month to month

licensee.

9. The issue now to be addressed is whether the month-to-month

license was an agreed month-to-month license at the original rates between

the parties. If the defendant was a licensee similar to a tenant holding over

after expiry of the lease period, then possibly the defendant will not be liable

to pay license charges at market rates for the storage tank and would only be

liable to pay the contractual monthly license charges which were otherwise

paid for the period from 1.7.1986 to 30.6.1988 i.e. if the plaintiff would not

have questioned payment of monthly license charges at the contractual rate

as contained in agreement dated 1.7.1983 only then the plaintiff would not

have a case to claim higher charges. The moot point however is if that is so.

In my opinion, it cannot be said that the plaintiff and the defendant agreed

that the defendant should be taken as a monthly licensee with respect to the

storage tanks after the expiry of the original term inasmuch as admittedly the

plaintiff has been sending bills for the storage tanks to the defendant with

effect from 1.9.1987 at the rate of `40/- per metric ton per month and not at

the contractual rate. This action of the plaintiff in my opinion clearly shows

that he had not accepted that the defendant will continue to be the monthly

licensee by holding over, liable to pay license fee only as per the terms and

conditions contained in the agreement dated 1.7.1983. In my opinion

therefore the defendant will be liable to pay market rate of monthly license

fee charges with respect to tank nos. 4 and 5 for the period as stated in para

25 of the plaint as reproduced above. I note that the plaintiff has not claimed

higher charges from 1.7.1986 but only from 1.9.1987 inasmuch as the bills

for higher charges were raised only from September 1987.

10. The issue now to be addressed is what is the rate at which

defendant will be liable to pay license fee charges for the storage tanks no. 4

and 5 for the period from 1.9.87 to 31.3.89 (19 months) and additionally

from 1.4.89 to 30.6.89 (3 months) so far as the tank no. 5 is concerned. Be it

noted that the tank no.4 was emptied out by the defendant by 31.3.1989 i.e.

the same was not used after 31.3.1989 and tank no.5 was emptied out on

30.6.1989, and consequently the plaintiff is entitled for license fee charges

so far as the tank nos. 4 and 5 are concerned only till 31.3.1989 and for one

tank no.5 for three more months i.e till 30.6.1989.

11. Learned senior counsel for the plaintiff very passionately

sought to argue that the plaintiff has offered charges at `32/- per metric ton

per month pursuant to the negotiations entered into with the defendant in

accordance with the tenders of July/October 1987, and hence, plaintiff

should be awarded license fee charges for storage and handling at `32/- per

metric ton per month. Counsel for the defendant however countered that

since no agreement was entered into for this rate of `32/- per metric ton per

month it cannot be said that the market rate of license fee charges should be

taken at `32/- per metric ton per month inasmuch as `32/- per metric ton per

month could be taken as market rate only if there was a concluded

agreement.

I agree with the argument as urged on behalf of the defendant

inasmuch as once there is no concluded agreement at `32/- per metric ton

per month, it cannot be argued by the plaintiff that this rate of `32/- per

metric ton per month is the market rate for the relevant period.

12. I have thus to consider if there is any other evidence on record

for deciding that what should be charges which would be payable by the

defendant for user of tank Nos. 4 and 5 from 1.9.1987 to 31.3.1989 and of

tank no. 5 additionally from 1.4.1989 to 30.6.1989. In this regard I have to

say that where the plaintiff failed, unfortunately the defendant seems to have

made up for the default of the plaintiff. The defendant itself has filed letters

of various storage tank owners which show the rates which were offered by

these storage tank owners for the relevant period of 1.9.1987 to 30.6.1989.

Though these letters are not proved, but since the defendant itself has filed

them, they can be taken as evidence against the defendant. First of all,

reference can be made to a letter dated 1.3.1988 issued by Modi Industries

Ltd., Modinagar, UP showing that this company was claiming charges for

storage tanks at `15.50 per metric ton per month plus additional handling

charges of `6/- per metric ton per month i.e. `21.50 per metric ton per month

in total. Then there is a letter dated 3.3.1988 of one M/s. Supreme Traders

claiming consolidated rates of `22/- per metric ton per month with respect to

the storage tanks on long term basis. The storage tanks of M/s Supreme

Traders are at Dhulkot in Haryana. Finally, there is an agreement dated

7.11.1989 entered into between the defendant and M/s. National Trading

Corporation wherein the defendant was paying a total of `22/- per metric ton

per month with respect to storage charges and handling charges. These

tanks of M/s National Trading Corporation are situated at Karnal in

Haryana. It is therefore clear that approximately consolidated charges of

`22/- per metric ton per month were being paid by the defendant for storage

facilities outside Delhi in the year 1988/1989. Delhi being the capital, and a

city having many more facilities than facilities existing at Dhulkot in

Haryana or Karnal in Haryana or Modi Nagar in UP, surely, the charges

would definitely be higher than the charges which are payable in the

aforesaid small towns. Since some amount of honest guesswork is always

involved in deciding the amount of damages, and considering the

imponderables of the period, location etc etc I would hold that instead of

`32/- per metric ton per month as claimed by the plaintiff and the rate of

`22/- per metric ton per month which is otherwise proved on record for

satellite towns around Delhi, I would fix the monthly license fee charges at a

mean/average figure of `25/- per metric ton per month consolidated i.e. both

for storage and handling for the period from 1.9.1987 to 30.6.1989.

13. I also hold that the plaintiff will be entitled to pendente lite and

future interest at the rate of 9% per annum simple on the amount which is

decreed for the storage and handling charges payable.

14. On the amounts so calculated, the plaintiff shall be liable to

give credit adjustment for a sum of `19,81,282.35, being the amount

received by the plaintiff from the defendant for this period towards storage

and handling charges.

15. In view of the above, suit of the plaintiff shall stand decreed

against the defendant for license fee charges at `25/- per metric ton per

month with respect to storage tank Nos. 4 and 5 from 1.9.1987 to 31.3.1989

and additionally at the rate of `25/- per metric ton per month for storage tank

no. 5 from 1.4.1989 to 30.6.1989 i.e. for ` 37,50,125 plus ` 4,42,125 less `

19,81,282/- i.e. ` 22,10,968/-. The plaintiff will also be entitled to pendente

lite and future interest at the rate of 9% per annum simple on this aforesaid

amount of ` 22,10,968/-. Plaintiff is also awarded costs of the suit in terms

of the Rules as applicable to this Court. Suit is decreed and disposed of

accordingly.

JULY 02, 2012                                 VALMIKI J. MEHTA, J.
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