National Fertilizers Limited vs Indo Gulf Industries Limited
2018 Latest Caselaw 623 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   CS (COMM) No. 143/2016

%                                                      29th January, 2018

NATIONAL FERTILIZERS LIMITED                  .... Plaintiff
                  Through: Mr. P.K. Mittal, Advocate.

                          Versus

INDO GULF INDUSTRIES LIMITED             ..... Defendant
                  Through: Mr. Samrat Nigam and Mr.
                           Abhimanyu Walia, Advocates.

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

To be referred to the Reporter or not?       YES

VALMIKI J. MEHTA, J (ORAL)

1.

(i) The Plaintiff/National Fertilizers Limited is a

Government owned company. It is engaged in the business of

manufacturing of Urea, Ammonium Nitrate (Lumps) and Ammonium

Nitrate (Melt). Plaintiff has one of its units at Naya Nangal at Ropar

in Punjab.

(ii) The defendant company is engaged in the manufacture of

explosives. The name of the defendant originally was Indo Gulf

Explosives Limited and thereafter it was changed to Indo Gulf

Industries Limited. For the manufacture of explosives Ammonium

Nitrate is used as a major raw material and hence this was purchased

by the defendant from the plaintiff. Defendant purchased both

Ammonium Nitrate (Lumps) and Ammonium Nitrate (Melts) from the

plaintiff.

2. The period in question of the supply by the plaintiff to the

defendant of Ammonium Nitrate spreads from February, 1989 till

March, 1996 though actual supply has only been till April, 1995. The

first contract was entered into between the parties for the period from

February, 1989 to January, 1990. This contract was for supply of

6000 Metric Tonnes („MT‟) of which defendant lifted 1630 MT

approximately. This contract was dissolved by the defendant in

between the contractual period and a fresh contract was entered into

being the second contract from 20.9.1989 to 19.9.1990. For the second

contract the period of supply was from 20.9.1989 to 19.9.1990 for a

quantity of 8000 MT and the defendant lifted a quantity of 7642.88

MT under the second contract. The third contract was for the period

20.9.1990 to 19.9.1991 extended to 31.10.1991 which was for the

supply of 10,000 MT revised to 8000 MT and under which contract

the defendant received 8548 MT. The fourth contract period was from

1.11.1991 to 30.6.1992 for 6500 MT and with respect to which a

quantity of 8621.05 MT was lifted by the defendant. The next contract

period was from 1.7.1992 to 30.6.1993 for 10,000 MT and the

defendant lifted 2029.60 MT under this contract. The last contract

period was from April, 1995 to March, 1996 for 1200 MT per month

and of which the defendant lifted 1118.224 MT for the one month of

April, 1995. For the first three periods, and which covered the period

from February, 1989 to 31.10.1991 there were written contracts but

with respect to next three periods commencing from 1.11.1991 and

ending on March, 1996 there were no written contacts and supply by

plaintiff was in terms of correspondence sent by the plaintiff to the

defendant with respect to the quantity to be supplied and the rates.

3. There is no dispute between the parties with respect to the

quantity lifted by the defendant and the disputes have arisen on

account of the claim of the defendant that plaintiff has charged a

higher rate than what the plaintiff ought to have charged.

4. For the first contract from February 1989 to January,

1990, plaintiff charged a basic price of Rs.3518 Per Metric Ton

(„PMT‟), and this price was subject to lifting of minimum 500 MT per

month. The defendant claimed that for this period the rate which

should have been charged by the plaintiff should have been only at the

rate of Rs.3268 PMT i.e defendant was claiming a rate reduced by

Rs.250 and which was claimed as a rebate on account of another

contract which the plaintiff had given to a third party namely, M/s IBP

at the rate of Rs. 3518 less Rs. 250 PMT. There is also an issue of the

increase of the rate during the first contract period from Rs.3518 PMT

to Rs.3600 PMT and thereafter to Rs.4100 PMT, and which rates had

increased on account of input costs increasing for the plaintiff and

which aspect was inbuilt in the contract entered into between the

parties providing for variation of rates on such counts.

5. So far as the first contract is concerned plaintiff has also

pleaded that even the rate of Rs.3518 PMT was not applicable to the

defendant, and that defendant was liable to pay a higher rate on

account of the defendant not lifting the minimum prescribed quantity

of 500 MT per month.

6. With respect to the second contract disputes came into

existence as the defendant claimed that plaintiff wrongly charged

Rs.3850 PMT instead of Rs.3600 PMT as agreed. Defendant has

claimed a refund on account of excess payment.

7. Defendant has also contended as per its written statement

that plaintiff with respect to the second contractual period charged a

higher rate by exercising undue influence upon the defendant and

plaintiff illegally extracted various promises from the defendant which

were contrary to the agreed terms, and consequently the minutes of the

meeting dated 7.3.1990 have been challenged by the defendant.

8. I need not set out in detail disputes of different rates

between the parties for the different periods, because as will be seen

from the subsequent discussion in this judgment, the issue with respect

to the claim of the plaintiff will be decided in terms of the

acknowledgements of liability made by the defendant.

9. After pleadings were complete the following issues were

framed on 30.7.2004:-

"1. Whether Shri Arun Kumar Maitra has the authority to sign verify, institute and present the plaint? OPP

2. Whether the plaintiff is entitled a declaration to the effect that the letter dated 28th July, 1997 is null and void on account of the fraud, coercion, undue influence, false representation practiced by the plaintiff over the defendant? OPD

3. Whether the plaintiff is entitled to a decree for a sum of Rs.1,24,56,150/-? OPD

4. Whether the plaintiff is entitled to interest from 11th April, 1997 till the realization of the decretal amount, if so at what rate? OPP

5. Whether the claims of plaintiff are not barred by limitation as pleaded in para 1 of the written statement? OPD

6. Whether the plaintiff had violated the mutually agreed supply of Ammonium Nitrate by taking advantage of its dominating position as the

supplier of the said chemical which was the basic ingredient for the manufacturing of industrial explosives by the defendant? OPD

7. Whether the plaintiff did not willfully suppress information regarding price of Ammonium Nitrate supplied in bulk to IPP and other Bulk Purchaser? OPD

8. Whether the transactions forming subject matter of suit are not tainted with exercise of undue influences, fraud and misrepresentation practiced by the plaintiff on the defendant? OPD

9. Whether the defendant is not entitled to a decree in a sum of Rs.2,50,00,000.00 (Rupee Two Crore and fifty lacs only) payable by the plaintiff to the defendant as claimed in the counter claim? OPD

10. Whether the plaintiff and/or defendant are entitled to the interest on the amount due and payable and if so, at what rate? OPD

11. Relief."

10. In my opinion this issue has to be decided in favour of

the plaintiff in view of the fact that plaintiff has proved on record the

Board Resolution as Ex.P-20 with respect to the Board of Directors

meeting held on 2.4.2013 authorizing Sh. Arun Kumar Maitra for

filing the subject suit. In any case it is now a settled law in view of the

judgment of the Supreme Court in the case of United Bank of India

Vs. Naresh Kumar and Others (1996) 6 SCC 660 that a suit filed by a

company should not be dismissed on technical grounds once the

company contests a suit to the hilt and in such circumstances the suit

must deemed to have been properly instituted and filed. Issue no. 1 is

therefore decided in favour of the plaintiff.

11. Issue nos. 2, 6, 7 and 8 can be disposed of together as

they pertain to the case of the defendant that the plaintiff got an

agreement from the defendant to pay at higher different rates in

different periods by exercising undue influence, fraud etc. In my

opinion, this issue has to be decided against the defendant because

self-serving averments in an affidavit by way of evidence filed by the

defendant cannot amount to discharge of onus of proof of plaintiff

having exercised any undue influence, fraud etc, and that this is all the

more so because the relationship between the parties is contractual and

commercial in nature and if the defendant was forced, as contended on

behalf of the defendant, to enter into the transaction on account of

undue influence, fraud, etc then the defendant should not have

lifted/purchased/taken delivery of the material from the plaintiff.

Defendant having taken delivery of the material from the plaintiff in

terms of specific rates specified by the plaintiff in its correspondence

during the different periods commencing from February, 1989 and

ending on March, 1996, hence in my opinion these issues have to be

and are decided in favour of the plaintiff and against the defendant.

In view of the aforesaid discussion and the subsequent discussion with

respect to the decision on issue no. 5 of limitation along with deciding

of issue nos. 3 and 9 as to the entitlement of the plaintiff to succeed in

the suit, hence the counter-claim of the defendant will stand dismissed

and the suit is decreed as stated hereinafter.

12. These issues are inter-related in the facts of the present

case because no doubt plaintiff is not correct in contending that

statement of accounts between the parties is an open, mutual and

current account because it is seen that neither there are any shifting

balances nor independent obligations, and once that is not so, the

account maintained by the plaintiff in its books of account is not an

open, mutual and current account in view of the ratio of the judgment

of the Supreme Court in the cases of Hindustan Forest Company Vs.

Lal Chand & Others, AIR 1959 SC 1349 and Kesharichand

Jaisukhal Vs. Shillong Banking Corporation AIR 1965 SC 1711.

Ordinarily, therefore the subject suit which is filed in May, 1999 for

recovery of dues for contract commencing from February, 1989 and

ending on April, 1995 would be barred by limitation as suit filed on

4.5.1999 is beyond three years of the last admitted supply by the

plaintiff to the defendant in April, 1995. Suit is however within

limitation and also a fresh cause of action has accrued in favour of the

plaintiff and against the defendant on account of the acknowledgments

of liability by the defendant in favour of the plaintiff in terms of the

letters dated 30.6.1997/Ex.D-91, 8.7.1997/Ex.D-93 and

30.7.1997/Ex.P-18 and these letters show clear cut acknowledgment

of liability by the defendant in favour of the plaintiff. To complete

narration with respect to the letters it will also be required to refer to

the plaintiff‟s letter dated 28.7.1997/Ex.P-17. These four letters read

as under:-

1. Letter dated 30.6.1997, Ex.D-91 June 30, 1997 Mr. N.D. Nigam, Dy. General Manager (IP), National Fertilizers Limited, Community Centre, East of Kailash, NEW DELHI Dear Sir, Sub: Settlement of Outstanding.

We refer to your letter dated 13th June, 1997 addressed to our Chairman and Managing Director in response to our letter of June 3, 1997. We have had several meetings with NFL with the objective of an amicable and mutually agreed upon settlement of outstanding. Finally a Joint Meeting with NFL Executives including Heads of the various Departments were held on 18.2.97 where upon all the required parameters for calculation of the outstandings from both sides were finalised. During this meeting, it was decided that IGIL as well as NFL officials will jointly meet at Chandigarh to reconcile the final outstanding of the principal as well as interest thereon based on these agreed parameters. The reconciled outstandings upto Feb. 28,1997 worked out to Rs.63,33,271.07 lacs. Consequently vide your letter dated 26th March, 1997, you have informed us that we should submit a Bank Guarantee of Rs.73 lacs against the old

outstanding before entering into a fresh formal agreement for resumption of supplies of AN.

Hence the outstandings of Rs.63,33,271.07 lacs have already been reconciled upto a particular date, we would request you to tentatively accept this amount of Rs.63,33,271.07 lacs and we are prepared to hold joint discussion with you at your convenience so that the difference of Rs.9,66,729.93 lacs between the reconciled figures and the figure mentioned in your above letter is also mutually settled. If it is agreeable to you, we are prepared to pay immediately the principal amount of Rs. 23,43,818.19 lacs as lumpsum and the balance amount of interest of Rs. 39,89,452.88 in five equal monthly installments through post-dated cheques for resumption of supplies of AN, IGIL and NFL shall enter into fresh formal agreement based on mutually acceptable terms and conditions.

Thanking You, Yours faithfully For Indo Gulf Industries Limited sd/-

(B.R.THUKRAL) Vice-President "

2. Letter dated 8.7.1997, Ex.D-93 July 08 1997 DY. GENERAL MANAGER (IP) NATIONAL FERTILIZERS LIMITED CENTRAL MARKETING OFFICE (INDUSTRIAL PRODUCT DIVISION) 28 COMMUNITY CENTRE, EAST OF KAILASH NEW DELHI - 110 065.

Dear Sir, We acknowledge receipt of your letter dated 4th July, 1997 in which you have mentioned the outstanding amount of Rs. 74.25 Lacs based on the rates, terms and conditions as applicable to IBP. In this connection a joint meeting of Indo Gulf Industries Limited with various Departmental Heads of National Fertilizer Limited was held on February 18th, 1997 where it was jointly decided that based on similar terms as applicable to IBP, the reconciliation of outstanding should be done by both the parties. Accordingly a joint meeting was held on Chandigarh and the reconciliation of outstanding payments based on the agreed parameter were finalized and thus the outstanding amount of Rs. 63.3 Lacs was arrived at, a copy of the reconciliation statement is enclosed herewith for your ready reference. This includes the principle amount of Rs. 23.44 Lacs and Interest thereon of Rs. 39.89 Lacs as at, February 28 th , 1997. We had written a letter to NFL to this effect on June 30th, 1997, a copy of which is enclosed herewith.

We have proposed to immediately pay the principle amount of Rs. 23.44 Lacs. We would request you to accept the payment of interest amount to Rs. 39.89 Lacs in five equal installments through post dated cheques. This will help us immensely in our cashflow. We assure you that we are very keen to sort out this matter as quickly as possible so that we can restart our normal commercial relations with NFL.

We will request your to kindly look into the matter and if there still remains any differences we are prepared to sit down and resolve them amicably.

Thanking you, Your faithfully, for INDO GULF INDUSTRIES LIMITED sd/-

     (B.R. THUKRAL)
     VICE PRESIDENT

     3.      Letter dated 28.7.1997, Ex.P-17
     No. NFL/DGM(IP)/10/3495                                         28.07.1997
     The Managing Director,
     M/s Indo Gulf Industries Limited,
     11, Aradhane Colony, R.K. Puram,
     New Delhi - 110066.

SUB: OUTSTANDING DUES AGAINST YOUR COMPANY AND PAYABLE TO NFL Dear Sir, Apropos to our letter No. NFL/DGM(IP)/10 dated 4th July, 1997, we reiterate that we have asked you to pay Rs. 74.25 lacs as a package, against outstanding amount of Rs. 120 lacs plus interest, latest by 31st July, 1997, keeping in view our business relations and without prejudice to NFL‟s legal rights. It is clarified that the offer dated 4th July, 1997 is valid upto 31.7.1997 only. In case, the payments are not received within the stipulated period i.e. by 31.7.97, our letter dated 4th July, 97 shall be treated as null and void and shall not be made evidence in any form for the legal proceedings.

It is further informed that in case M/s IGIL do not comply with our letter dated 4.7.97 within the stipulated period of 31.7.97, M/s IGIL shall be considered as a defaulted party for any future business dealings and NFL shall proceed with legal action for recovery of entire outstanding without any further reference to M/s IGIL.

Thanking you, Yours faithfully, For National Fertilizers Limited sd/-

( B.R. MITTAL) Dy. General Manager (IP)

4. Letter dated 30.7.1997, Ex.P-18 July 30 1997 Dy. General Manager (IP) M/s. National Fertilizers Limited, Central Marketing Office, (Industrial Product Division), 28, Community Centre, East of Kailash, NEW DELHI 110 065.

Dear Sir, We acknowledge receipt of your letter No. NFL/DGM(IP)/10/3495 dated 28th July, 1997, asking us to pay Rs. 74.25 Lacs against the outstandings. In this connection, we refer to the meetings held in your office on 21st and 22nd July, 1997, when this matter was discussed once again in detail. As per the discussions the difference in the amount which was jointly reconciled at Chandigarh during February, 1997 and the amount now demanded by you is because you are not offering the full terms as given to IBP though you have confirmed in your letter of 4th July, 1997, that the amount indicated by you is by equating the terms given to IGIL with those given to IBP and also you are not honouring the terms of the written offer made to us for 1200 MT of Ammonium Nitrate, during 1995. Since the amount payable has already been reconciled by the executives of NFL and IGIL based on the terms offered to IBP and also as per the written offer of NFL to IGIL as Rs. 23.44 Lacs as principle amount and Rs. 39.89 Lacs as interest as on 28th February, 1997, we repeat our offer as submitted through our letter of 8th July, 1997 as full and final settlement. We would therefore, once again request you to kindly look at this issue in the right perspective and confirm that the amount as reconciled and offered by us can be paid as full and final settlement. Thanking you, Yours faithfully, for INDO GULF INDUSTRIES LIMITED, sd/-

(B.R. THUKRAL) VICE PRESIDENT"

13. In view of the aforesaid acknowledgments of liability by

the defendant not only the suit has to be taken as within limitation and

not time barred but also that the aforesaid acknowledgments of the

defendant towards its liability as stated in exhibits being Ex.D-91,

EX.D-93 and Ex.P-18 will amount to a fresh cause of action in favour

of the plaintiff and for this purpose reference at this stage is necessary

to the ratio of the judgment of the Supreme Court in the case of

Syndicate Bank Vs. R. Veeranna and Others (2003) 2 SCC 15. In

this judgment Supreme Court has held that an acknowledgment of

debt also results in arising of a fresh cause of action for a suit for

recovery being filed. Para 8 of this judgment so holding reads as

under:-

"We may add that in the light of the acknowledgement of their liability by the defendants in 1978, it is not open to them now to deny to make payment of the amount due to the Bank on the ground that higher rate of interest could not be charged. It is clear from the judgment of this Court in Hiralal v. Badkulal, that an unqualified acknowledgement of liability as in the present case by a party not only saves the period of limitation but also gives a cause of action to the plaintiff to base its claim."

14. Therefore, applying the ratio of the judgment of the

Supreme Court in the case of Syndicate Bank (supra), and when read

with the acknowledgments of the defendant in Ex.D-91, Ex.D-93 and

Ex.P-18 clearly the defendant has acknowledged the liability and

hence is liable to pay the suit amount. In fact the letter dated 8.7.1997

is clearly a promise to pay a time-barred debt and thus vide Section

25(3) of the Indian Contract Act, 1872 the same is a valid contract

enforceable against the defendant. It is also seen in these letters that

the balance due on account of interest was an agreed aspect as shown

from the acknowledgements. Accordingly, these issues are decided in

favour of the plaintiff and against the defendant and the suit will be

decreed holding that the suit is not time barred and the plaintiff is

entitled to the amount decreed in view of the acknowledgments of

such amount by the defendant as contained in Ex.D-91, Ex.D-93 and

Ex.P-18. Suit is decreed for the amounts stated in the last

acknowledgment of the defendant dated 30.7.1997 Ex.P-18 wherein

an amount of Rs.23.44 lacs has been acknowledged as the principal

amount and Rs.39.89 lacs as interest payable. Total amount therefore

due as acknowledged by the defendant is Rs.63,33,000/- and for this

amount the suit is decreed. The counter-claim of the defendant will

stand dismissed.

15. In the facts of the present case, in my opinion, and

considering the long pendency of the suit, plaintiff is held entitled to

pendente lite and future rate of interest till payment at 7 ½ % per

annum simple. These issues are accordingly decided in favour of the

plaintiff and against the defendant by granting pendente lite and future

interest at 7 ½ % per annum simple.

RELIEF

16. In view of the aforesaid discussion the suit of the plaintiff

is decreed against the defendant for an amount of Rs.63.33 lacs along

with pendente lite and future interest till payment at 7 ½ % per annum

simple. Plaintiff will also be entitled to costs of the suit. Decree sheet

be drawn accordingly.

C.C. No. 912/2000

Since the main suit itself stands disposed of, the present

counter-claim is also disposed of accordingly.

JANUARY 29, 2018                             VALMIKI J. MEHTA, J
AK