Overseas Trading Corporation vs Handlooms & Handicrafts Export ...
2013 Latest Caselaw 3511 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                      DECIDED ON 08th August, 2013
+      RFA(OS) 105/2012
       OVERSEAS TRADING CORPORATION
                                                         ..... Appellant
                          Through :     Mr. Vibhor Garg, Adv.
                          versus

       HANDLOOMS & HANDICRAFTS EXPORT
       CORPORATION OF INDIA LTD.          ..... Respondent

Through : Mr. Vivek Singh and Ms.Madhu Sharan, Advs.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI

% MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)

1. The appellant is an unsuccessful plaintiff. It appealed against

the judgment and order of the learned Single Judge dated 9 th July,

2012 by which its suit had been dismissed. Simultaneously, the sole

defendant's/respondent's (hereafter referred to as "HHEC'') suit

preferred against M/s. Unisilk Limited, Hong Kong (hereafter referred

to as "the exporter") was decreed in full with interest awarded at 18%

per annum till date of execution.

Rfaos105.12 Page 1

2. The brief facts are that the plaintiff entered into an Agreement

on 27th October, 1998 with HHEC. In terms of their arrangement, the

plaintiff agreed to purchase 500 bales of silk during the period of the

contract, i.e. one year. Apparently, in furtherance of this Agreement,

HHEC, the sole canalising agency for goods such as silk, entered into

a separate contract with M/s. Unisilk Limited Hong Kong for purchase

of 311 bales of raw silk on 27th October, 1998. The latter purporting

to act in terms of the Agreement with HHEC shipped the goods. It

was discovered that instead of the contracted quantity, i.e. 311 bales,

actually a consignment of 235 bales were received. HHEC

immediately initiated proceedings and sought for recovery of the price

of goods, i.e. the price of the goods short delivered (76 bales). This

was in the form of a suit, i.e. CS(OS) No.2340/2001. In that suit,

HHEC impleaded the exporter, i.e. i) M/s. Unisilk Limited, (ii) the

insurer as well as (iii) the carrier. About a decade after the aforesaid

transaction, i.e. sometime in 2008, the present appellant filed an

independent proceeding CS(OS) No.480/2008, impleading only

HHEC, contending therein (i) that its arrangement on 27th October,

1998 with HHEC was an independent contract and that the latter was

Rfaos105.12 Page 2 not its agent; (ii) that the arrangement was in the nature of one

between a principal to principal and; (iii) that HHEC defaulted in

insuring the supply of full contracted bales, i.e. 235 bales. The

plaintiff/appellant claimed the price of goods, in turn, from HHEC

alone.

3. HHEC's contention in the suit is that the arrangement with the

appellant/plaintiff was not an independent one or based on a principal

to principal transaction but was really by way of an agency. The

plaintiff/appellant filed the suit in 2008; consequently, the HHEC took

the defence that the claim was time barred. The appellant, however,

sought to rely upon certain alleged admissions in the form of letters

and endorsements made by HHEC in 2001 & 2002 and also certain

letters dated 7th August, 2005 and 4th April, 2006. In addition, the

plaintiff/appellant also relied upon certain averments made in the suit

instituted by HHEC (CS(OS) 2340/2001).

4. By her common judgment, the learned Single Judge had

dismissed the appellant's suit - as noticed in an earlier part of this

judgment. At the same time, HHEC's suit was decreed in full as

against the insurer, exporter and the carrier with 18% interest per

Rfaos105.12 Page 3 annum from the date of institution till date of recovery of the amount.

The appellant contends that the impugned judgment is erroneous

insofar as the findings recorded, vis-a-vis the existence of an agency

between itself and HHEC are concerned. For this purpose, Mr.Garg,

the learned counsel for the appellant relied upon the terms of the

Agreement dated 27th October, 1998 as well as the order placed on the

same day. He further contended that upon a proper application of the

test indicated in K. Gopinathan Nair and Ors. v. State of Kerala, 1997

(10) SCC 1, which, in turn, had relied upon the judgment of the

Constitution Bench K.G. Khosla & Co. v. Deputy Commissioner of

Commercial Taxes, AIR 1966 SC 1216, HHEC was not merely an

agency acting as a canalising institution but an independent contractor

which agreed to procure the quantity of goods in question by

application of its expertise and independent choice. Learned counsel

stressed upon the fact that both the Agreement as well as the order

placed upon the HHEC are silent as to whether it is an agency

agreement. He stressed that there is no reference to the exporter at all

and that the HHEC, as an independent contractor was free to choose

the supplier, the terms of the contract entered into with the supplier

Rfaos105.12 Page 4 and other essential details. Contending that the learned Single Judge

fell into error in holding that the appellant's suit was time barred,

learned counsel relied upon the various notices issued to HHEC and

the replies made to them. He also relied upon the

acknowledgment/endorsement of HHEC upon the letter requiring it to

confirm the credit balance for the year ending 31st March, 2001.

Counsel lastly relied upon paras 1, 11, 12 & 14 of the suit filed by the

HHEC against the exporter and submitted all these constituted

acknowledgment of debt within the ambit of Section 18 of the

Limitation Act, 1963. Learned counsel relied upon the judgment

reported as Khan Bahadur Shapoor Fredoom Mazda v. Durga Prosad

Chamaria & Ors., 1962 (1) SCR 140 and M/s. Lakshmirattan Cotton

Mills Co. Ltd. v. The Aluminium Corporation of India Ltd., 1971 (1)

SCC 67 to contend that so long as the existence of jural relationship

emerges upon reading of the document of the defendant, the Court

would infer that it is acknowledgement.

5. This Court has considered the submissions. Before analysing

the rival contentions, it would be appropriate to peruse the terms of the

Agreement and the order placed concurrently on 27th October, 1998.

Rfaos105.12 Page 5 The conditions of the relevant stipulations of the Agreement are as

follows:-

"1. The buyer will place order on HHEC for import of silk in India.

2. The HHEC will not be responsible for delay in import or clearance of any consignment caused by circumstances beyond the control of HHEC.

3. The buyer agrees to the terms and conditions annexed with this Agreement as Annexure „Á‟ which shall form an integral part of the Agreement and the buyer undertakes to be bound by the same.

4. The HHEC reserves the right to accept or reject the order without assigning any reason.

5. This agreement is valid for a period of one year in the first instance and may be renewed for another year by mutual consent of the parties hereto. HHEC reserves the right to terminate the agreement at any time without assigning any reason.

6. The buyer undertakes to transact business of 500 bales (30 M.T.) by 28.2.1999.

6. The purchase order placed in terms of the stipulations contained

in the Agreement - which was to be enforced for one year, pertinently

states as follows:-

"3. The particulars of quality as indicated on the import invoice, buyer shall furnish certificate at the time of taking delivery that silk imported is to the satisfaction of the buyers with regard to quality and quantity. It is hereby expressly agreed and understood that HHEC will neither be liable nor entertain any claim in respect of the quality and quantity of the consignment imported.

Rfaos105.12 Page 6

11. The buyer agrees and undertakes to keep the HHEC indemnified and harmless against all claims, costs, expenses and risks.

13. The buyer agrees and assures that the HHEC will not be liable or responsible in any manner for any act of fraud, deceit, misrepresentation etc. inter alia as regards the quality of the silk as also in the event the consignment is discovered to be other than that for which the order was placed and the buyer undertakes to keep HHEC indemnified and harmless against all claims, offences, penalties, levies etc."

7. Upon an analysis of the above conditions, the learned Single

Judge held that the HHEC was acting as an agent of the appellant and

not as an independent contractor and that the transaction with the

exporter was on a principal to principal basis. The impugned

judgment gives primacy to clause 3 which expressly disclaimed the

HHEC's responsibility with regard to the quality or quantity of goods

supplied.

8. There can be no dispute that the label or appellation of a

document is not conclusive of its true intent. In order to discern

whether a relationship is based upon agency or one between

principals, the Court has to necessarily deal into the substance of the

Rfaos105.12 Page 7 matter and look at its contents. An overall analysis of clauses 3, 11

and 13 - as well as clause 8 in the opinion of this Court leads to only

one conclusion, that the HHEC had not acted as an independent

contractor but as the appellant's agent. As held by the learned Single

Judge, clause 3 is decisive enough as in that it disclaims any

responsibility or obligation on the part of the HHEC vis-a-vis the

quality or quantity supplied. Furthermore, this Court is of the opinion

in the facts of the case HHEC cannot be held liable for any delivery

contracted or goods supplied to the buyer in this case, i.e. to the

plaintiff/appellant. The latter relied upon the HHEC's expertise who

apparently used to import such goods as well as other goods and was

in a position to locate a seller. That does not detract from the fact that

as regards the transaction in question, HHEC acted as the

plaintiff/appellant's agent. The contract does not assure or hold out

any promise as to the quality or quantity of the goods, nor does HHEC

take up any responsibility in such regard. Clause 11 even goes to the

extent of the appellant indemnifying the HHEC against all claims or

expenses and risks.

9. Having regard to these facts which the Court has independently

Rfaos105.12 Page 8 examined, no fault can be found with the Single Judge's reasoning by

this Court. The appellant's contentions are consequently rejected. As

for the plaintiff's contention of the suit being within time, it is facially

evident that the cause of action arose when the invoice was presented

for 235 bales, i.e. sometime in 1999. The plaintiff sought to explain

the delay of more than six years in filing the suit by contending that in

the year 2002, the defendant/ the HHEC had acknowledged - through

an endorsement that there was a balance in its books shown as payable

on account of the transaction vis-a-vis the shortfall of the goods. The

plaintiff has also placed reliance upon notice issued to the HHEC and

the letter's reply thereto. Particular reliance is placed upon the

decision of Khan Bahadur Shapoor Fredoom Mazda (supra) and M/s.

Lakshmirattan Cotton Mills Co. Ltd.(supra). While there cannot be a

dispute on the law on point, an overall reading of the documents in

question particularly the reply to the notice would show that HHEC's

consistent position has been that it acted as an agent to the

plaintiff/appellant and that in the event of its being successful in

receiving the so indicated balance amount from the foreign exporter, it

would be remitted to the plaintiff/appellant. The learned Single Judge

Rfaos105.12 Page 9 found that this did not amount to its acknowledgment. This Court has

also considered the rulings in Khan Bahadur Shapoor Fredoom

(supra) and M/s. Lakshmirattan Cotton Mills Co. Ltd. (supra). Having

regard to the law declared, this Court is satisfied that the letters relied

upon by the plaintiff do not constitute an acknowledgement as to

enlarge the time under Section 18 of the Limitation Act. No further

point is urged on behalf of the appellant.

10. In view of the above discussions, the Court observes that the

appeal lacks on merit and is hereby dismissed without any order as to

costs.

S. RAVINDRA BHAT, J (JUDGE)

NAJMI WAZIRI, J (JUDGE) AUGUST 08, 2013 'sn'

Rfaos105.12 Page 10