Delhi High Court
Tinna Overseas Limited vs Food Corporation Of India & Anr. on 10 August, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA (OS) 21/2013
Date of decision: 10th August, 2017
TINNA OVERSEAS LIMITED ..... Appellant
Through: Mr. Rajat Singh, Adv.
versus
FOOD CORPORATION OF INDIA & ANR. ..... Respondents
Through: Mr. R.K.Dhawan, Ms. Richa
Dhawan, Mr. V.K.Teng, Advs. for
R-1/FCI
Mr. Dileep Poolakkot, Adv. for R-2
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE NAVIN CHAWLA
SANJIV KHANNA, J. (Oral)
The appellant is the plaintiff/Tinna Overseas Ltd., in the suit
CS(OS) No.1086/1999. The respondents are defendants, Food
Corporation of India (FCI for short) and Project & Equipment
Corporation of India Ltd. (PEC for short).
2. The impugned judgment and decree dismisses the suit filed
by the appellant for recovery of Rs.1, 31,77,460/- with an interest
@12% p.a.
3. The impugned judgment holds that there was no privity of
contract between the appellant and FCI. Interpreting Associateship
Agreement dated 29th December, 1995 (Ex.PW1/D1) and the letter
RFA(OS) 21/2013 Page 1
dated 6th February, 1996 (Ex.DW2/4) written by the Government of
India, Ministry of Food to PEC, it has been held that PEC was not
liable to ensure that FCI would not increase or change the price of
wheat from US Dollar 141.58 or 137.46 per metric ton. Even
otherwise the letter dated 6th February, 1996, (Ex. DW2/4) makes
reference to the price fixation mentioned in the attached Press Note
dated 2nd February, 1996 (Ex. DW1/2), which states that price
declared by the FCI would be variable and not a fixed price.
4. FCI, a Public Sector Undertaking, pursuant to assurance
given by the Government of India to the Islamic Republic of Iran,
was permitted to sell 1 lakh metric tons wheat from the Central Pool
to Iran.
5. Pursuant to the said understanding, PEC which is an agency
of Government of India had entered into an agreement with
Government Trading Corporation of Iran (GTC for short) on 23rd
November, 1995 (Ex. DW2/2) for sale or export of wheat at the rate
of US Dollar 180 per metric ton. The wheat was to be procured by
PEC from FCI.
6. The appellant had entered into Associateship Agreement
dated 29th December, 1995 (Ex. PW1/D1) with the PEC. FCI is not
a party and a signatory to this agreement (Ex. PW1/D1). To this
extent, that there is no dispute or lis between the appellant and the
respondents.
RFA(OS) 21/2013 Page 2
7. The contention of the appellant, which has been rejected in
the impugned judgment, is that it was agreed that wheat for export
from the Central pool would be supplied to them at the rate of US
Dollar 137.46/141.58 per metric ton. Contrary to the agreed terms,
the FCI had demanded and the appellant was forced to pay to FCI,
US Dollar 154.50 per metric ton. The appellant had made over
payment of Rs.1,31,77,460/- for 40,595 metric tons of wheat
procured from FCI, and exported to Iran.
8. The appellant has in appeal restricted their claim to the
difference between US Dollar 141.58 and US Dollar 154.50 per
metric ton of wheat.
9. The primary question and issue is whether the respondents
had agreed on the price of US Dollar 141.50 per metric ton and,
therefore, are liable to refund the difference between US Dollar
141.50 and 154.50 per metric ton for 40,595 metric tons of wheat
sold by FCI.
10. As stated above, it is an accepted and admitted position that
there was no written contract between the appellant and FCI.
Further, FCI had never written to the appellant confirming or
accepting that wheat for export to Iran would be sold at the rate of
US Dollar 141.58 per metric ton. The Associateship Agreement
(Ex. PW1/D1) did not specify and stipulate the price at which FCI
would sell wheat for export to Iran. The question is whether this
rate was an implied and accepted term agreed by PEC and FCI.
RFA(OS) 21/2013 Page 3
11. The Government of India vide letter dated 6th February, 1996
(Ex. DW2/4) had informed PEC as under:-
"No.4-63/95-Impex
Government of India
Ministry of Food
Deptt. of Food Procurement
and Distribution
*****
New Delhi, February
6, 1996
To
Shri S M Diwan
Chairman-cum-Managing Director
Projects & Equipments Corporation of India Limited,
Hansalaya‟, 15, Barakhamba Road
New Delhi-110 001.
Sub: Export of Wheat to Iran.
Sir,
I am directed to refer to your D.O. letter No.CMD/PEC/95
dated 22.12.1995 on the subject cited above and to say that
the request of the Projects and Equipments Corporation of
India Limited (PEC) for allotment of one lakh tones of wheat
from Central Pool for export to Iran by it to fulfil the
contract signed with the Government Trading Corporation
(GTC) of Iran on 23.11.1995 during the visit to India of an
Iranian delegation headed by Dr. H N Shirazi, Senior Deputy
Minister of Commerce, Government of the Islamic Republic
of Iran, has been considered. In view of the position
explained in your letter under reference and considering the
friendly relations between India and Iran, it has been decided
to supply one lakh tones of wheat from Central Pool on
priority basis as a special case without insisting on payment
of requisite EMD, at the existing open sale rate of wheat for
RFA(OS) 21/2013 Page 4
export i.e. US $ 141.58 per MT ex-FCI port godown
chargeable in Indian Rupees as per the terms and conditions
specified in the Press Note dated 2.2.1996 (copy enclosed).
Accordingly, you are requested to get in touch with the FCI
for purchase of wheat and finalization of delivery schedule
etc.
2. This issues with the concurrence of the Ministry of
Finance.
Yours faithfully,
(D SUDHAKARAN)
Under Secretary to Govt. of India Tel.No.338 2504
Fax No.378 2213"
12. The aforesaid letter states that PEC was entitled to export one
lakh metric tons wheat from Central Pool to Iran to fulfill the
Government's obligation under the contract signed with the GTC of
Iran. The Government had decided to honor the said contract
considering friendly relations between the two countries on priority
basis as a special case without payment of EMD (Earnest Money
Deposit). The price, it was stated, shall be the existing open sale
rate of wheat for export i.e. US Dollar 141.58 per metric ton ex-FCI
godown as per the terms and conditions specified in the Press Note
dated 2nd February, 1996 (Ex. DW1/2). The price was to be
charged in Indian rupee.
13. The aforesaid press note, Ex. DW1/2, reads as under:-
" PRESS NOTE
Government had authorized the FCI to export/sell for the
purpose of export upto 2.5 million tonnes of wheat from its
stocks during 1995-96 under its Open Market Sales Scheme
RFA(OS) 21/2013 Page 5
for export purposes at rates fixed from time to time.
Government has since revised the open sale rates of wheat
for the purpose of export in respect of various States with
immediate effect until further orders as under subject to
terms and conditions indicated in note below:
S.No. Name of the State Price in
------------------------
(US $) Rupees
-------------------------
1. Punjab, Haryana, Uttar Pradesh &
Delhi (122.89) 4458.45
2. Madhya Pradesh & Rajasthan (125.77) 4562.95
3. Bihar (130.08) 4719.30
4. Andhra Pradesh )-Sale within (141.58) 5136.50
)50 Kms. Of
5. Karnataka )port towns
6. Kerala ) Sale in places (135.84) 4928.30
) other than port
7. Gujarat ) town
8. Maharashtra )
9. Orissa )
10. Tamil Nadu )
11. West Bengal )
Note:
1. The aforesaid rates will be valid till further orders
subject to the provision in para 2 as under.
2. The price will be charged in Indian Rupees. In order to
give stability in export transaction, the FCI headquarters
will communicate changes, if any, arising out of changes in
the dollar-rupee fluctuations subject to the condition that the
prices so fixed are not lower than the rates applicable for
domestic sales. While doing so, the FCI shall revise the
prices in terms of rupees with every change of 1% with
reference to the dollar-rupee parity existing on the date of
notification which has been taken at US dollar buying (bill)
RFA(OS) 21/2013 Page 6
rate at Rs. 36.28, while day to day fluctuations upto of 1%
would be ignored." (emphasis supplied).
14. The press note refers to authorization given to FCI to export
of wheat from their stock for the years 1995-96 under open market
sale scheme (OMSS) for export purposes. The Government had
revised the open sale rates of wheat, which varied from State to
State. Rate of US Dollar 141.58 per metric ton was fixed for the
State of Andhra Pradesh. On conversion in Indian Rupee, the price
payable was Rs. 5136.50/- per metric ton.
15. We have referred to the aforesaid figures both in US Dollar
and in Indian Rupee as the letter dated 6th February, 1996 (Ex.
DW2/4) refers to the rate of wheat for export as US Dollar 141.58
per metric ton, but the price charged was to be in Indian Rupees,
and terms as per Press Note (Ex. DW1/2) would apply. The press
note (Ex. DW1/2) states that the FCI could revise the prices in
Indian Rupee (Ex. DW1/2) with every change or fluctuation of 1%
in the Dollar - Rupee exchange rate. This adjustment was to be
computed by taking the Dollar buying rate at Rs.36.28/-. Day to
day fluctuations below 1% were to be ignored.
16. However, the most significant and important stipulation in
the Press Note dated 2nd February, 1996, Ex. DW1/2, was the
stipulation that the sale price would not be lower than the price
applicable to domestic sales. In other words, the sale price for
RFA(OS) 21/2013 Page 7
supply of wheat for export would not be lower than the price so
fixed and applicable for the domestic sales made by the FCI.
17. Associateship Agreement (Ex. PW1/D1) is dated 29th
December, 1995, whereas the letter of the Government of India and
the Press Note (Ex. DW2/4 and DW1/2, respectively) were issued
subsequently on 6th February, 1996 and 2nd February, 1996. The
appellant has not disputed or challenged the letter (Ex. DW2/4) or
the Press Note (Ex. DW1/2). The purchases from FCI have been
after 2nd February, 1996. The appellant and the respondents
including FCI were bound by the letter of the Government of India
(Ex. DW2/4) and Press Note (Ex. DW1/2).
18. We would however, also examine the terms of Associateship
Agreement (Ex. PW1/D1) to ascertain, whether any purchase price
was fixed.
19. The Associateship Agreement dated 29th December, 1995,
(Ex. PW1/D1), does not have any specific stipulation or clause
relating to or specifying the price at which the wheat was to be
procured from or sold by FCI for export to Iran. The Associateship
Agreement dated 29th December, 1995 is silent.
20. The clauses of the Associateship Agreement (Ex. PW1/D1)
relied upon by the appellant and PEC read as under:-
"WHEREAS Tinna is interested in exporting Indian wheat
from India and have approached PEC to assist them in their
marketing efforts and have entered into an MOU dated
9.11.95 for export of agro products to Iran.
RFA(OS) 21/2013 Page 8
AND WHEREAS PEC has agreed to assist Tinna for export
of wheat to Iran, PEC shall in association with Tinna take up
the issue with MOU/FCI for allocation of the entire quantity
of 100.00 MT of wheat from FCI stock and the freezing of
applicable price of wheat as on dated of signing of the
contract between PEC and GTC of Iran.
1. Tinna will arrange to supply 100,000 M/tones of Indian
wheat at a price of US$ 180.00 per MT on the basis of FOA
stowed and trimmed one safe barth Vizag (India), as per
specifications agreed in the Export contract - a copy of
which is attached at Annexure-I and forms an integral and
inseparable part of this Associateship Agreement.
XXXX
3. PEC service charges would be 1.5% (one and a half
percent) of FOH Value i.e. US$ 270 per MT.
4(a). PEC will negotiate documents against the L/C to be
opened by Foreign Buyer for which Tinna shall provide
documents as per terms and conditions of the L/C to PEC to
prompt negotiation. In the event PEC receives payments
under reserve from the negotiating bank due to discrepancy
in the documents, PEC will release the payment to Tinna
after the reserve has been lifted PEC shall, within 16 days of
realization of export proceeds, transfer the amount after
rating PEC's service charges to Tinna. All cost incurred by
PEC towards bank charges against the contract/ L/C
including confirmation and negotiation charges, transit
period overall interest etc., shall be to Tinna's account.
(b). If there is a delay of more than 15 days in receiving the
payment by PEC from the Iranian Bank, Tinna shall make
suitable/necessary efforts in ensuring that the payment
received by PEC expeditiously.
XXXX
12. Procurement of wheat shall be entirely the responsibility
of Tinna. PEC may, however, without being liable or
RFA(OS) 21/2013 Page 9
responsible in any manner assist Tinna in arranging licenses,
shipping space etc., at the request of Tinna.
XXXX
14. Tinna shall be responsible for arranging dedicated
berthing an bulk loading facilities of Vishakhapatnam Port
for vessels nominated by the foreign buyer to ensure timely
shipments. Tinna shall also ensure contractual loading rate
of 2500 MT per day Demurage/Dispatch, if any, however,
shall be to Tinna's account.
XXXX
18. Tinna agrees to indemnify and shall always keep the
PEC fully indemnified against all claims proceedings,
demands, including but not restricted to those for any penalty
and/or compensation, damages, losses, costs, taxes, duties,
levies, cesses, charges and expenses and risk purchase in
respect of or in connection with or in relation to or arising
out of any matter under the Associateship Agreement and/or
the Export Contract due to Tinna's failure to perform any of
its obligations under the Export contract. Notwithstanding,
anything contained in the Associateship Agreement, if for any
reasons PEC is disabled or prevented from performing any of
its obligations under the Export Contract it shall inform
Tinna, who shall have no right to claim any payment
whatsoever from PEC either by way or price, compensation,
damages or otherwise, in respect of the wheat yet to be
supplied in terms of the Associateship Agreement. Tinna
shall keep PEC fully indemnified for the conduct of the
employees in and outside India.
XXXX"
21. The aforesaid clauses would indicate that the appellant and
PEC had reached an agreement under which the appellant was to
export wheat to GTC of Iran at US Dollar 180 per metric ton i.e. as
per the contract between PEC and GTC of Iran. This price payable
RFA(OS) 21/2013 Page 10
in US Dollar was fixed. The appellant had agreed to abide by the
terms and conditions of export contract between PEC and GTC of
Iran. PEC was to be paid services charge of 1.5% of FOH value
i.e.US Dollar 2.70 per metric ton. There were certain obligations on
PEC regarding negotiation of documents etc.
22. Clause 12 had stipulated that procurement of wheat by the
appellant would be the responsibility of the appellant. PEC without
being liable or responsible, would assist the appellant in arranging
license, shipping spaces etc. at the request of the appellant.
Appellant was responsible for arranging dedicated berth and bulk
load facilities of port etc. Under Clause 9, the appellant had agreed
to fully indemnify PEC against all claims, proceedings, demands,
including but not restricted to those of any penalty and
compensation, damages, losses, costs, taxes, etc. This clause has
been relied upon in the impugned judgment to negate and repel the
claim of the appellant against PEC.
23. We would repeat with emphasis that the Associateship
Agreement, Ex. PW1/D1, did not specify or state the purchase price
i.e. the price which the appellant was to pay for procuring or
purchasing wheat from FCI. What was specified and stated was that
GTC of Iran would pay US Dollar 180 per metric ton and that PEC
would be paid service charges at 1.5 % of FOH Value i.e.US Dollar
2.70 per metric ton. The appellant had agreed to abide by the said
contract and signed the contract with the open eyes. It is not the
RFA(OS) 21/2013 Page 11
case of the appellant that they were compelled and forced to sign
this contract.
24. FCI and PEC subsequently entered into a written contract Ex.
DW1/3 on 6th March, 1996. As per the contract, (Ex. DW1/3), FCI
had agreed to sell wheat at the prices mentioned therein. The prices
mentioned were state-wise. The price applicable to the State of
Andhra Pradesh was US Dollar 141.58 or Rs.5136.50 in Indian
Rupee. The contract (Ex. DW1/3) had stipulated that the price
would be charged in Indian Rupee. It was also stipulated that the
price payable shall not be lower than the rates applicable to
domestic sales. Further, FCI shall revise the price in India Rupee
with exchange rate fluctuation of more than 1% with reference to
Dollar-Rupee rates. For this purpose, the Dollar rate was taken as
Rs.36.28. The fluctuations to the extent 1% were to be ignored. In
other words, the stipulations in the Press Note dated 2nd February,
1996 (Ex. DW1/2) was specifically incorporated in the agreement
between FCI and PEC, marked Ex. DW1/3.
25. Paragraph 20 of the plaint, gives breakup of the procurement
/sales made by FCI to the appellant and the price paid by the
appellant to FCI. The paragraph reads:-
RFA(OS) 21/2013 Page 12
"
Mont Qty.( Rate to Avera Amt. Rat Amt. Excess
h. MT) be ge ex- to be e paid Amt.
charged chang paid cha paid
USD e rate. rge
d
April 13,5 137.46 34.0 5322 507 68622
27 9327. 3 471
May 20,6 137.46 34.77 9880 507 10487
73 6276. 3 4129
June 3,60 137.46 34.74 1719 507 18262
0 1297. 3 800
July 2,79 137.46 35.25 1354 507 14179 63596
5 3074. 3 035 1
"
26. The aforesaid table indicates that FCI had charged Rs.5073
per metric ton of wheat from the appellant. The said price is lower
than the price of Rs.5136.50 stipulated in the Press Note dated 2nd
February, 1996 (Ex. DW1/2) and the agreement between FCI and
PEC dated 6th March, 1996 (Ex. DW1/3). It has been explained by
FCI that Rs.5073 was the domestic sale price. This statement made
in the written statement was affirmed in the oral evidence. The
appellant has not contested that the domestic sale price of wheat
RFA(OS) 21/2013 Page 13
during the period when purchases were made was Rs.5073/- per
metric ton.
27. We agree with respondents that regardless of fluctuation in the
Rupee-Dollar exchange rates, the appellant was liable to pay
minimum price or rate applicable to domestic sales. The appellant
has not disputed or denied, that the minimum domestic sale price
was Rs.5073/- per metric ton. This was the price at which the wheat
was sold to the appellant.
28. Reliance is placed by the learned counsel for the appellant on
the letter dated 27th February, 1996, Mark X, and letter dated 11th
June, 1999 marked AP-I written by PEC to the appellant. The letter
dated 11th June, 1999 marked AP-I was taken on record in this
appeal vide order dated 24th March, 2015 disposing of CM
No.2156/2013, with the observation that the same would be read
against PEC if the same is proved in accordance with law. The said
letter cannot be read in evidence against FCI. The letter dated 11th
June, 1999 marked AP-I is somewhat ambiguous. It refers to the
purported understanding with the Ministry of Finance that the price
of wheat prevailing on the date when the contract was signed with
GTC, Iran i.e. US Dollar 137.46 per metric ton was to be frozen for
the entire contract. It also states that the price was increased to US
Dollar 141.58 per metric ton which was accepted by PEC. At the
same time, it is recorded that as per the contract between PEC and
the appellant for execution of the contract for export of wheat to
GTC of Iran, the appellant was responsible to deal with FCI and
RFA(OS) 21/2013 Page 14
had made direct payments to FCI against deliveries and hence, PEC
was not responsible. We agree with the FCI that these documents
would not tilt the balance and settle the issue in favour of the
appellant. The letters were not written by FCI, the seller. The letter
marked AP-I, written in 1999, long after the appellant had made
payment @ Rs.5136/- per metric ton.
29. The letter dated 27th February, 1996 (Mark X) refers to the
notification issued by the Government of India dated 6th February
1996 (Ex. DW2/4) for fulfillment of contract signed by PEC with
GTC of Iran. We have reproduced the notification dated 6th
February, 1996 (Ex. DW2/4) and interpreted the same.
30. The letter mark X was written by the Chairman, PEC to the
Secretary of Ministry of Food with the request that the price of US
$ 141.58 should be kept firm and should not be subject to any
upward revision. This was not accepted as the PEC and FCI had
subsequently entered into contract dated 6th March, 1996 marked
Ex. DW1/3. The terms between PEC and FCI were mutually settled
and agreed. The said contract, as already noticed, incorporated the
terms and conditions mentioned in the letter dated 6th February,
1996 marked Ex. DW2/4 and the Press Note dated 2nd February,
1996 marked Ex. DW1/2. The appellant was fully aware of the
letter dated 6th February, 1996 (Ex. DW2/4) and the Press Note
dated 2nd February, 1996 (Ex. DW1/2) and the terms and conditions
mentioned therein, which were clear and categoric. There was
specific stipulation that the price would not be less than domestic
RFA(OS) 21/2013 Page 15
sale price. Further, the price applicable to the State of Andhra
Pradesh was fixed at US Dollar 141.58 or Rs.5136.50 in Indian
Rupee. In fact the price charged and paid from the appellant is
Rs.5073 which is lower than Rs.5136.50 stipulated in the Press
Note dated 2nd February, 1996 (Ex. DW1/2).
31. We would observe that the FCI cannot be held liable on the
basis of the said letters. The agreement dated 6th March, 1996 (Ex.
DW1/3), binds them and PEC. FCI cannot be held liable to the
appellant on the basis of these letters.
32. There is another factum which is to be noted. The appellant,
while making payment and taking deliveries did not protest or raise
any objection regarding the price charged. The appellant has not
placed on record any communication or letter written by them to
FCI or PEC that the price of Rs.5073 charged and paid by them to
FCI was exorbitant/higher, and not the contracted price.
Noticeably, the appellant was fully aware of the price charged, once
the notification dated 6th February, 1996 (Ex. DW2/4) and the Press
Note dated 2nd February, 1996 (Ex. DW1/2) were published and had
become public documents. Deliveries were made by FCI to the
appellant between April to July, 1996. The total quantity lifted was
40,355.98 metric ton.
33. The aforesaid view we have taken is also supported by the
oral evidence and statement of witnesses.
RFA(OS) 21/2013 Page 16
34. Mr. Vijay, PW1, witness of the appellant, in his cross
examination on 20th March, 2007 had accepted that FCI had rightly
charged the price of wheat as per document D-1 and D-2 i.e. letter
dated 6th February 1996 which has been also marked Ex. DW2/4
and Press Note dated 2nd February, 1996 which has been also
marked Ex. DW1/2. PW1 in his cross examination on 25th July,
2007 had accepted that FCI had not made any offer to supply wheat
at US Dollar 137.46 per metric ton to the appellant or any other
exporter. On being asked to state the basis of the statement that the
price of wheat was fixed and could not be unsettled, PW1 had
stated that this was as per term no.4 of the Associateship Agreement
dated 29th December, 1995 (Ex. PW1/D1). Reliance was not placed
upon any other document or statement. We have already referred to
the different clauses of Associateship Agreement dated 29th
December, 1995 (Ex. PW1/D1) and find that there is nothing in the
said document to support the said contention. The Associateship
Agreement dated 29th December, 1995 (Ex. PW1/D1) did not fix
the price. In response to another question, PW-1 has accepted that
the final price of wheat was fixed only on 6th February, 1996.
However, it was stated that PEC had re-negotiated the price with
FCI without their consent.
35. In view of the aforesaid discussions, we are clearly of the
view that the price of the wheat as fixed vide letter /communication
dated 6th February, 1996 (Ex. DW2/4) read with Press Note dated
2nd February, 1996 (Ex. DW1/2) was applicable. The appellant has
RFA(OS) 21/2013 Page 17
paid the said price which was charged and payable in Indian Rupee
of Rs.5073 per metric ton.
36. The appellant has not been able to make out a case for refund
of the price paid by it on the ground that the FCI could not have
charged more than US Dollar 141.58 per metric ton.
37. The appellant did not lead evidence to show the conversion
rates prevailing on the date when the sales were affected. In the
plaint, there is no specific averment as to the exchange rates of
Dollar -Rupee between April to July, 1996.
38. In view of the aforesaid discussion, we would dismiss the
present appeal and affirm the judgment of the learned Single Judge.
The respondents would be entitled to costs as per Rules.
SANJIV KHANNA, J.
NAVIN CHAWLA, J.
AUGUST 10, 2017
RN
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