Hindalco Industries Ltd. vs Midi Extrusions Ltd
2017 Latest Caselaw 6383 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI


                          RESERVED ON : AUGUST 24, 2017
                          DECIDED ON : NOVEMBER 13, 2017

+     CS(OS) 2058/2006, CC 273/07 & IA 10840/16

      HINDALCO INDUSTRIES LTD.                 ..... Plaintiff
              Through : Mr.Anil Shankar Mathur, Advocate,
                        with Ms.Nimita Kaul & Mr.Vivek
                        Mathur, Advocates.

                          Versus

      MIDI EXTRUSIONS LTD                      ..... Defendant
               Through : Mr.Subramonium Prasad, Sr.Advocate,
                         with Mr.Naveen Chawla & Mr.Mayank
                         Bughani, Advocates.

      CORAM:
      HON'BLE MR. JUSTICE S.P.GARG


S.P GARG, J.

1. The present suit for recovery of `37,28,533/- has been preferred by Hindalco Industries Ltd. (hereinafter 'the plaintiff') against Midi Extrusions Ltd. (hereinafter 'the defendant').

2. Briefly stated, the plaintiff's case as pleaded in the plaint is that the defendant approached the plaintiff company to effect sale of its products. The plaintiff agreed to sell the products to the defendant.

After effecting the sales, the plaintiff raised invoices amounting to `35,09,337/-. As per the agreement, the defendant was required to make the payment of the invoices within 45 days; it failed and neglected to pay the same. The defendant is liable to pay interest @ 12% p.a. on the outstanding dues to the plaintiff.

3. The suit is contested by the defendant. In the written statement it is averred that the business dealings with the plaintiff commenced in 1997. The plaintiff company used to supply billets to the defendant as per its requirements and specifications. The defendant also used to purchase other products of the plaintiff for the purpose of trading and manufacturing activity. On various occasions, the goods supplied by the plaintiff were either different from what was asked for by the defendant or failed to meet the quality standards specifically set forth, causing production and material loss to the defendant. The plaintiff failed to rectify its mistakes. In September, 2002 the defendant purchased billets from the plaintiff but the same were found to be defective. When it was brought to the plaintiff's notice, the plaintiff deputed Mr.Jagmohan Sharma to inspect the complaint and he assessed the total loss of about 12 MT of scrap. Since no action was taken by the plaintiff to compensate the defendant for the loss incurred, various letters on several dates were written to the plaintiff. On 18.10.2002, it was informed to the plaintiff that because of the delay from their side, the defendant had been compelled to melt the defective material supplied for extrusion. On 19.10.2002 and again on 22.10.2002, the plaintiff faxed to the defendant stating that their representative would visit the defendant. On 23.10.2002, a meeting took place and various issues and

problems were discussed. In 2004, the defendant embarked on a heat exchanger tube project for the purpose of manufacturing heat exchange tubes and required billets of alloy 3003 and 3103. The defendant indicated complete technical specifications for supply of billets in 3003 and 3103 alloy. The billets, however, were not in accordance with the specifications and it was duly intimated to the plaintiff on 4.3.2005. The entire consignments of 3003 and 3103 billets were subjected to quality checks and the defendant noticed major quality issues; and intimated to the plaintiff. The plaintiff telephonically assured the defendant that the supplied billets would meet the defendant's requirements and they would not face any quality issues in the finished products. On 24.09.2005, the plaintiff was informed that the prospective buyers of the defendant had rejected the sampled finished products due to poor quality of the billets. The defendant in continuation of the earlier conversation expressed its desire for conversion of the faulty 3003 and 3103 alloy billets supplied by the plaintiff. However, this was not responded to. In order to safeguard its interest, the defendant agreed to bear the cost of reprocessing, as the material in its present form was of no use. Again it was not agreed to by the plaintiff. The defendant faced several hardships like delay in implementation of the project; the interest factor enormously added to the overall cost of the project. The defendant was left with no alternative but to place fresh order and simultaneously carry out efforts to address quality issue related to earlier supply so that its project did not suffer. The plaintiff, thereafter, supplied fresh material but only in alloy 3003. The defendant in order to assure that the plaintiff would in future supply goods as per its

requirements, communicated vide letters dated 24.09.2005 and 30.09.2005 its exact requirements and specifications. The plaintiff, thereafter, supplied 3003 alloy billets vide invoice No.501108117 and 50108294 dated 13.10.2005 without a Test certificate. The defendant requested for the Test certificate specifying the chemical composition, grain structure and homogenizing practise for the goods supplied. The defendant carried out the tests and found that the composition of the goods supplied were out of specification. It failed to meet the minimum requirement and the material failed. On 24.10.2005, the plaintiff supplied the requisite test certificates to the defendant; it partially confirmed the tests of the defendant and indicated that silicon and copper were beyond the permissible limits.

4. It is further averred that on 6.1.2006, the defendant wrote to the plaintiff informing about the losses being incurred by it owing to delayed replacement of the faulty material supplied. On 13.01.2006, the plaintiff acknowledged the problems of the defendant and gave an option either to accept an interest of 9% for the value of unutilized material w.e.f. 24.09.2005 or in the alternative to give 45 MT of unused material back to the plaintiff for replacement. This was responded to by the defendant by a letter dated 20.01.2006. The plaintiff was requested to compensate the defendant. Instead of settling the dispute amicably, the plaintiff instituted the present suit.

5. In replication, the plaintiff denied the defendant's allegations in the written statement and reiterated its stand in the plaint.

6. The defendant also filed Counter Claim (CCP 273/2007) to claim `2,05,17,107/- under various heads for the losses suffered by it. The

claim raised by the defendant in the Counter Claim was denied by the plaintiff in the replication.

7. On the basis of the pleadings in the suit, Counter Claim and the documents on record, following issues were framed on 20.01.2009:

(i) Whether Mr.Rajesh Sharma through whom the present suit has been filed was duly authorized to sign, verify and institute the said suit and if not, to what effect? OPP

(ii) Whether the goods supplied by the plaintiff to the defendant were of sub-standard quality and not as per specifications as alleged in the Written Statement-cum Counter Claim? OPD

(iii) In case issue No.2 is decided in the affirmative, whether the defendant suffered any loss on account of goods being of sub-standard quality and not as per specifications and if so, to what extent? OPD

(iv) Whether the plaintiff is entitled to recover the sit amount from the defendant? OPP

(v) Whether the Counter Claim filed by the defendant against the plaintiff is barred by time? OPP

(vi) Whether the defendant is entitled to recover the amount claimed by it in its Counter Claim filed against the plaintiff and if so, what amount? OPD

(vii) Whether the plaintiff or the defendant is entitled to any interest and if so, at what rate, on what amount and for which period?

OP Parties

(viii) Relief.

8. The plaintiff was accorded several opportunities to produce evidence. The plaintiff filed evidence by way of affidavit of Mr.Rajesh

Sharma, Manager, Regional Accounts (North) and Constituted Attorney. Subsequently, the plaintiff opted to produce the affidavit of some other individual as Mr.Rajesh Sharma who was no more in the company. The plaintiff was unable to produce any evidence despite various opportunities and finally the evidence stood closed.

9. The defendant examined DW-1 (Ranjit Kumar Kapoor). The plaintiff was given numerous opportunities to cross examine him. However, the witness could not be cross-examined. Finally right of the plaintiff to cross-examine the witness was closed.

10. I have heard the learned counsel for the parties and have examined the file.

11. Issue-wise findings are as under:

Issue No.1

12. As noted above, the plaintiff did not produce any evidence despite various opportunities granted. No evidence has emerged to prove if the present suit has been filed by the duly authorized person. No document is on record to prove if Rajesh Sharma, by whom the present suit was filed, was duly authorized to sign, verify and institute the suit. No Board Resolution authorizing Rajesh Sharma to institute the present proceedings on behalf of the plaintiff has been proved. Specific objection was taken by the defendant in the written statement that the present suit was not properly instituted and Rajesh Sharma was not authorized to sign, verify and institute the present suit. Apparently, there is no valid suit instituted on behalf of the plaintiff.

13. This issue is decided in favour of the defendant and against the plaintiff.

Issue No.4

14. The burden to prove this issue was heavily upon the plaintiff. Learned counsel for the plaintiff urged that in para 3 of the plaint, it was specifically averred that goods worth `35,09,337/- were supplied to the defendant vide various invoices detailed therein. The defendant did not make the payment towards the invoices raised on 31.01.2006. In the written statement, there no specific denial of the averments made by the plaintiff in para 3 of the plaint and its contents stood admitted. The defendant failed to aver if any payment of the goods received vide invoices dated 31.01.2006 were ever paid to the plaintiff. Learned counsel for the defendant urged that no admission about the liability was ever made by the defendant in the written statement.

15. As observed above, the plaintiff did not examine any witness to prove the averments in the plaint. The plaintiff did not produce any credible document on record to establish if the defendant was liable to pay `35,09,337/- for the goods supplied to it. As per the invoices raised on 31.01.2006, in the written statement as stated above, the defendant denied its liability to make the said payment. It was specifically pleaded by the defendant in the written statement that the goods supplied by the plaintiff to the defendant were not in accordance with the specifications. It was further alleged that the defective material was supplied for extrusion and the defendant was compelled to melt it on its own costs. Various letters written to the plaintiff informing defective material/goods were not responded to; the defendant's grievance remained unsettled. Due to the plaintiff's unresponsive attitude, the

defendant suffered various losses for which Counter-Claim has been filed by it.

16. The defendant has proved on record various letters written to the plaintiff from time to time complaining about the defects in the goods supplied. In response to certain letters, the plaintiff acknowledged the problems of the defendant and gave an option either to accept interest @ 9% for the value of unuitilized material w.e.f. 24.09.2005 or in the alternative to give 45 MT of unused material back to the plaintiff for replacement; it however did not happen. The plaintiff in the plaint did not quantify as to what adjustment was given to the defendant for the defective material supplied to it. In fact, in the plaint or in the replication, the plaintiff did not claim if any defective material was ever supplied to the defendant. It was imperative for the plaintiff to produce clinching evidence to show that the defendant was liable to pay the entire amount claimed in the invoices raised on 31.01.2006, and the plaintiff was not accountable for the defective goods given to the defendant. Since no evidence has come on record that the goods supplied to the defendant were free from defects, the plaintiff has failed to prove beyond reasonable doubt that the defendant is liable to pay the amount claimed in the suit. Adverse inference is to be drawn against the plaintiff for not examining any witness and to cross-examine DW-1. It was entirely on the plaintiff to establish that the demand raised in the invoices was entirely in terms of the expressed agreement/contract entered into between the parties and there was no deviation to it. Various allegations in the written statement proved by DW-1 (Ranjit Kumar Kapoor) remain unchallenged and unrebutted. The plaintiff did

not furnish any explanation as to why the offer given in the letter (Ex.DW-1/7) was not adhered to. The grievances raised by the defendant from time to time were not addressed or responded to by the plaintiff.

17. From the contents of the documents proved on record by the defendant, it can be inferred that there was no unequivocal or clear admission of the liability raised by the plaintiff in regard to the invoices raised on 31.01.2006, as urged.

18. The settled position is that the admission should be clear, specific and unequivocal.

19. This issue is, thus, decided in favour of the defendant and against the plaintiff.

Issues No.2,3,5 and 6.

20. All these issues are taken together as they are interrelated.

21. The defendant has filed Counter-Claim to recover `2,05,17,107/- under various heads detailed in para 16 of the Counter-Claim. At the outset, it may be mentioned that during arguments, learned counsel for the Counter-Claimant gave up its claim appearing at Item No.5 i.e. Proportional Loss on Technological Fee of `22,15,000/- and Item No.6 i.e. Interest Loss owing to delayed implementation of project for a period of ten months of `1,32,34,850/-. Regarding other claims, the learned counsel for the Counter-Claimant urged that evidence of DW-1 (Ranjit Kumar Kapoor) has gone unrebutted and the defendant is entitled for the amount claimed. Various documents have been brought on record by the defendant to establish that the goods supplied by the plaintiff were defective and the defendant was not liable to make any

payment for the same. The defendant had incurred losses due to recycling cost of billets as well as cost of homogenizing billets. The defendant was entitled to interest on the total quantity of rejected billet till 20.05.2006.

22. Learned counsel for the plaintiff controverted the contentions and urged that no material evidence has been produced as to how the defendant suffered losses alleged in the written statement and how the plaintiff was liable to pay it. Due to inefficient and defective portion of the plant of the defendant, the defendant was not able to utilize the product and unnecessarily blamed the plaintiff. The defendant never objected to the material received by it; rather it placed repeated orders of the same products finding them to be satisfactory. The issues raised by the defendant in 2002 were sorted out and the defendant utilized the said material to manufacture its final product; material was never returned to the plaintiff.

23. On perusal of the testimony of DW-1 (Ranjit Kumar Kapoor) nothing has been proved if the defendant suffered any actual loss due to the alleged defective supply of the goods. It has not been clarified or elaborated as to how much was the quantity of the defective goods and what exact amount was liable to be adjusted or accounted for. Nothing has come on record to show as to for what consideration/value the alleged defective material was disposed of by the defendant. No evidence has emerged on record if at any time any defective material was returned to the plaintiff. Needless to say the material received by the defendant from the plaintiff, though described as defective, was utilizsed and appropriated. The defendant did not quantify the loss

incurred by it due to defective supply of certain goods. Moreover, for the supply of alleged defective goods, the plaintiff admittedly raised invoices dated 31.01.2006. No evidence has been produced by the defendant if any payment towards it was ever made to the plaintiff. Non-payments of the goods supplied by the plaintiff has apparently compensated the defendant more than the loss allegedly suffered by it due to the defective material. Since there was negligence on the part of the plaintiff to examine its witness, the plaintiff even did not get any amount for the used portion of the goods supplied to the defendant. The defendant's allegations are that the goods were not according to specification. It is relevant to note that despite all these grievances and complaints, the defendant continued to place various orders at the same time upon the plaintiff and there was no serious complaint about the other supplies except one raised vide invoices dated 31.01.2006. The claim raised by the defendant in the Counter-Claim is imaginary and no cogent and reliable evidence has come on record to prove if the loss claimed was suffered by the defendant. The damages claimed by the defendant are remote in nature and even under Section 73 of the Contract Act are not permissible; these cannot be awarded to the defendant. The defendant has raised issues for the defective supply of the goods in 2002 which admittedly stood resolved. At no stage prior to the filing of the present suit by the plaintiff to recover the amount raised in the invoices dated 31.01.2006, the defendant issued any legal notice upon the plaintiff or instituted any proceedings for recovery of damages. The defendant failed to prove the loss claimed by it in the Counter-Claim filed along with written statement. The burden was

heavily upon the defendant to prove that the amount claimed was liable to be payable by the plaintiff.

24. These issues are decided in favour of the plaintiff and against the defendant.

Issue No.7

25. In view of the findings on issues No.1 to 6, this issue has become redundant and is disposed of as such.

Relief

26. In the light of the above discussion, the suit filed by the plaintiff is dismissed with costs.

27. Counter-Claim filed by the defendant is also dismissed with costs.

28. Decree-sheet be prepared accordingly.

S.P.GARG (JUDGE) NOVEMBER 13, 2017/sa