Delta Rubber And Plastic Products vs Divya Exports Pvt.Ltd
2022 Latest Caselaw 8992 Guj

     C/FA/761/2002                                CAV JUDGMENT DATED: 11/10/2022




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                       R/FIRST APPEAL NO. 761 of 2002

FOR APPROVAL AND SIGNATURE:                 sd/-
HONOURABLE MR. JUSTICE A.S. SUPEHIA
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1 Whether Reporters of Local Papers may be allowed NO to see the judgment ?

2      To be referred to the Reporter or not ?                            NO

3      Whether their Lordships wish to see the fair copy                  NO
       of the judgment ?

4      Whether this case involves a substantial question                  NO

of law as to the interpretation of the Constitution of India or any order made thereunder ?

========================================================== DELTA RUBBER AND PLASTIC PRODUCTS Versus DIVYA EXPORTS PVT.LTD. & 1 other(s) ========================================================== Appearance:

MR MITUL K SHELAT(2419) for the Defendant(s) No. 2

==========================================================

CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA Date : 11/10/2022 CAV JUDGMENT

1. The appellant-original plaintiff has assailed the judgment and decree dated 26.07.2001 dismissing the Summery Suit No.7031 of 1991 passed by Court of City Civil Judge, (Court No.8) at Ahmedabad. It is the case of the appellant that the impugned judgment and decree is required to be quashed and set aside, since the same is passed without appreciation of the evidence.

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2. Learned advocate Mr.Bhatt appearing for the appellant has submitted that the Court below had already decreed the suit in favour of the defendant No.1, by the judgment and decree dated 28.08.1992 by allowing the claim of the plaintiff against the defendant No.1 for a sum of Rs.5,19,833.20, however, so far as the amount of 10%, which has been retained by defendant No.2-Andhra Pradesh State Financial Corporation, the suit was continued further and ultimately, the same is rejected.

3. Learned advocate Mr.Bhatt has submitted that the plaintiff is entitled to claim the remaining amount of Rs.1,50,815/- from the defendant No.2, in view of the contract between the plaintiff and defendant Nos.1 and 2. It is submitted that the Trial Court has not appreciated the communication / contract dated 20.04.1990, below Exh.35, wherein it is recorded that the amount of Rs.9,66,400/- would be paid to the plaintiff in view of supply of machinery. It is submitted that the Trial Court has also not appreciated the agreement between the plaintiff and defendant No.1 at Exh.58, which contains various clauses with regard to supply of machinery and the payment of amount.

3.1 Learned advocate Mr.Bhatt has invited the attention of this Court to the deposition recorded below Exh.55 i.e. the employee of defendant No.2-Corporation, and has submitted that he had admitted that an amount of 10% was retained in view of the contract between the plaintiff and defendant No.1. It is submitted that 10% amount has been retained by the

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defendant No.2 on the ground that there was a defect in the machinery, which was supplied by the plaintiff to the defendant No.1. It is submitted that there was no evidence adduced by the defendant No.2, which would indicate that the machinery, which was supplied by the plaintiff to the defendant No.1 was suffering with any defect. It is submitted that no technical expert was examined and hence, the amount of 10% could not have been retained by the defendant No.2 and the same was required to be paid.

3.2 Learned advocate Mr.Bhatt has further submitted that at the time of the contract, the employee / officer of the defendant No.2-Corporation, who has entered the contract, was not examined and some other person, who has been examined below Exh.55 and hence, his evidence is required to be discarded to the effect that there was defect in the machinery, which was supplied by the plaintiff to the defendant No.2. Learned advocate Mr.Bhatt has submitted that even if it is assumed that there was no privity of contract between the plaintiff and defendant No.2-Corporation, however, from the evidence on record, it can be assumed that there was a contract between the plaintiff and defendant No.2.

3.3 Learned advocate Mr.Bhatt has thus submitted that 10% amount could not have been retained by the defendant No.2 on the pretext that the machinery, which was supplied by the plaintiff to the defendant No.2, was having any defect or the plant was not erected and the commissioning of plant was not done. It is submitted that in absence of any evidence, which

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would prove that the plant was not in operation to the satisfaction of the defendant No.1, the defendant no.2 cannot retain the amount. Learned advocate Mr.Bhatt has further submitted that the decree of payment against the defendant No.1, is not executed and hence, the plaintiff is entitled to recover the amount of 10% of the total amount, which is retained i.e. Rs.1,50,815/- by the defendant No.2 and hence, the impugned judgment and decree is required to be quashed and set aside.

4. In response to the aforesaid submissions, learned advocate Mr.Shelat appearing for the defendant No.2 has submitted that the impugned judgment and decree should not be disturbed and is liable to be sustained, since there is no privity of contract between the plaintiff and the defendant No.2-Corporation. It is submitted that the defendant No.2 had not made any commitment to the plaintiff and had issued the commitment letter below Exh.35 for the payment of Rs.9,66,400/-.

4.1 Learned advocate Mr.Shelat, has further submitted that the aforesaid amount mentioned in the communication dated 20.04.1990 represents loan subject to retaining 10% of the cost of machinery for satisfactory performance of the plant. Learned advocate Mr.Shelat has further submitted that since there was defect with regard to the performance of the plant and machinery in the inspection and verification report dated 18.09.1991, 10% amount was retained by the defendant No.2. It is submitted that despite repeated requests made in this

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regard, the plaintiff did not attend such defects, hence such amount was retained, in view of the agreement between the plaintiff and defendant No.1 entered below Exh.58.

4.2 Learned advocate Mr.Shelat has submitted that the terms of the payment are mentioned in Article-II, which specifically says that after successful erection and commissioning of plant and fulfillment of the guarantee to the satisfaction of the buyers, 10% of such loan amount is to be paid. Learned advocate Mr.Shelat has submitted that since there was violation of the condition of the agreement between the plaintiff and defendant No.1, defendant No.2 is within its right to retain 10 % amount. Learned advocate Mr.Shelat has submitted that the suit has been decreed in favour of the defendant No.1 and the entire amount as prayed in the plaint, is ordered to be decreed in favour of the plaintiff against the defendant No.1 and in that case, the defendant No.2 cannot be asked to pay 10% of remaining amount. It is submitted that since there is no privity of contract between the plaintiff and defendant No.2, such contract, which is not in existence cannot be enforced upon the defendant No.2-Corporation. In support of his submissions, learned advocate Mr.Shelat, has placed reliance on the decision of the Apex Court in the case of M.C. Chacko Vs. The State of Bank Travancore Trivandram, [1969 (2) SCC 343]. Thus, it is submitted that the first appeal may not be entertained.

5. In rejoinder, to the aforesaid submissions advanced by learned advocate Mr.Shelat, learned advocate Mr.Bhatt has submitted that this Court cannot appreciate the evidence,

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which is already on record and if the evidence reveals that the amount of 10% is retained by the defendant No.2, then they are liable to pay the said amount to the plaintiff.

6. I have heard the learned advocates for the respective parties.

7. It is noticed by this Court that in paragraph No.1 of the judgment, it is incorrectly observed that the suit is instituted for recovery of Rs.23,22,571=20, as per paragraph No.6 of the memo of plaint. In fact paragraph No.6 of the plaint indicates that only part payment of Rs.4,53,986=20 remains out of the aforesaid amount.

8. The entire issue in the first appeal hinges on two documents i.e. Exh.58 - agreement between the plaintiff and defendant No.1 and Exh.35 - the commitment letter issued by the defendant No.2 in favour of the plaintiff for disbursing the loan amount of Rs.9,66,400/-. This Court has perused the plaint. The prayers made in the plaint indicate that the suit was instituted by the plaintiff for a decree to be drawn in his favour against the defendant Nos.1 and 2 jointly and severely for payment of amount of Rs.5,19,833=20, running interest @ 8%. By the decree dated 28.08.1992, the suit was decreed in favour of the plaintiff, directing the defendant No.1 to pay the entire sum of Rs.5,28,118.32/- as prayed in the plaint. Thus, as per the prayers made in the plaint seeking payment of amount of Rs.5,19,833=20 from the defendants, the suit is already decreed in favour of the plaintiff. It is the case of the plaintiff that he is unable to execute the decree. This Court, in the

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appeal proceedings, cannot delve into such aspect with regard to the failure of the plaintiff getting his decree executed in his favour qua the defendant No.1. It appears that when the decree was sought to be executed, the defendant no.2 has raised objection on the ground that it had first charge under section 29 of the State Financial Corporation Act.

9. From the facts recorded in the impugned judgment and order, it is revealed that on account of the price escalation on various raw materials, it was agreed that the defendant No.1 to pay further 10% of the original price and a total sum of Rs.19,80,000/- was determined for supplying of plant and machinery. The defendant No.1 obtained financial assistance from the defendant No.2-Corporation vide communication dated 20.04.1990 at Exh.35. The suit was decreed against the defendant No.1 under Order XXXVII Rule 3(b) of the CPC passed below Exh.26 dated 28.04.1992.

10. The issue, which falls for consideration, is that whether the plaintiff can pursue his suit against the defendant No.2, which has retained 10% amount of cost of machinery for the satisfactory performance of the plant, as per the agreement executed between the plaintiff and defendant No.2 below Exh.58.

11. On perusal of the agreement at Exh.58, Article-II of such agreement is required to be appreciated. The same reads as under:-

"Article - II Payment terms The payment is to be made by the buyers to the sellers shall be as follows.

            1. After assigning the agreement                      25%





   C/FA/761/2002                                CAV JUDGMENT DATED: 11/10/2022

2. After progressive dispatch of machinery as per schedule 'A' attached hereto 65%

3. After successful erection and commissioning of the plant and fulfillment of guarantees to the satisfaction of buyers 10%

OR Against Bank Gaurantee for amount which shall be valid till the completion of erection and commissioning and fulfillment of guarantees.

*The payment terms may vary from case to case depending upon case, the actual payment terms may be incorporation here."

12. The mode of payment stipulates that the payment is to made by the buyers to the seller and it indicates that an amount of 10% is to be paid after successful erection and commissioning of the plant and fulfillment of guarantee to the satisfaction of buyers or against the bank guarantee for amount, which shall be valid till completion of erection and commissioning and fulfillment of guarantees. The evidence reveals that out of the amount of Rs.9,66,400/-, an amount of Rs.8,15,585/- was already paid to the plaintiff and the dispute was confined to Rs.5,19,833/- against the defendant No.2. The plaintiff has asserted his claim on the document at Exh.35 against the defendant No.2 i.e. the commitment letter dated 20.04.1990.

13. I may refer to the issues framed by the Trial Court below Exh.34, which read as under:-

"1. Whether the plaintiff proves that defendant No.2 State Financial Corporation by letter dated 20.4.90 made commitment to plaintiff as well as defendant No.1 for payment of the entire consideration of the plant and machinery to be supplied to defendant No.1 as alleged?

2. Whether it is proved that the plaintiff had supplied the plant and machinery to defendant no.1 as order placed by the defendant no.1 on such assurance.

C/FA/761/2002 CAV JUDGMENT DATED: 11/10/2022

3. Whether it is proved by the plaintiff that the defendant No.2 failed to discharge their reciprocal obligation under the Agreement their plaintiff had discharged the obligation under Agreement by supplying the plant and machinery as alleged? Further whether it is proved that the defendant No.2 has made payment of Rs.8,15,585/-?

4. Whether it is proved by the defendant that the commitment made to the plaintiff was not for the entire amount of the consideration of the plant and machinery and it was for Rs.9,66,400/-? Further, it is proved that it was subject to retaining 10% of the machinery for performance verification to the satisfaction of the defendant No.2 as alleged ?

5. Whether the plaintiff is entitled to recover remaining amount of Rs.1,50,815/- from defendant No.2?

6. What order?"

14. The defendant No.2 is the State Financial Corporation, which has advanced financial assistance to defendant No.1, as per the agreement between the defendant No.1 buyer and defendant No.2-Andhra Pradesh State Financial Corporation. A total consideration for manufacturing the plaint was Rs.23,22,571=20 and the part payment to the extent of Rs.18,68,585/- has been made and the balance of Rs.4,53,986=20, which was outstanding at the time of filing the suit. The plaintiff had claimed the aforesaid amount along with the interest.

15. From the facts recorded in the impugned judgment and order, it reflects that the defendant No.2 has taken possession of the plant in machinery in exercise of the powers under Section 29 of the State Financial Corporation Act, as they claimed the first charge, since it was found that the plant was not in operation. As recorded by the Trial Court, it is admitted by the plaintiff that there is no privity of contract of the plaintiff with the defendant No.2, however in view of the agreement

C/FA/761/2002 CAV JUDGMENT DATED: 11/10/2022

between the plaintiff and the defendant No.1, the defendant No.2-Corporation is liable to pay the outstanding amount of Rs.1,50,815/-. The officer of the defendant No.2 was examined below Exh.55. A perusal of the evidence of Shri Manikiyam reveals that in the cross-examination, it is elicited that the defendant No.2 has made a commitment of Rs.9,66,400/- for supply of the plant and machinery to defendant No.1, however, it was clarified that the same was subject to supply of entire plant and machinery and against an amount of Rs.9,66,400/- amount of Rs.8,15,585/- was already made and claim was only restricted to the amount of Rs.1,50,815/-. The agreement at Exh.58 is between the plaintiff and defendant No.1 and the defendant No.2 is a stranger to this agreement. The defendant No.2 has given the commitment at Exh.35 with respect to supply of the plant and machinery, pursuant to the agreement between the plaintiff and defendant No.1. In other words, the defendant No.2 has agreed or has given assurance to make the payment for supply of plant and machinery to the extent of Rs.9,66,400/- and on perusal of such agreement at Exh.58, it lays down the different articles, which include Article-II hereinabove and the payment has to be made in a phased manner. 10% amount, which was to be paid to the plaintiff would be paid only after successful erection and commissioning of the plant and fulfillment of the guarantee to the satisfaction of the buyers. It also refers to the provisions that the aforesaid performance guarantee shall be demonstrated by the seller for uninterrupted operation of plant for 72 hours. The evidence below Exh.36 i.e. the deposition of the plaintiff would reveal that for making the plant operational

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necessary raw material was not produced by the defendant no.1 and whatever material considered had procured was of inferior quality therefore, the plant and machinery could not give the desired result as per agreement. In view of the aforesaid dispute between the plaintiff and defendant No.1, a technical report was prepared at Exh.65 showing the defect and his evidence reveals that the defendant No.1 did not carry out any modification to the satisfaction of the defendant No.2. The plaintiff has miserably failed to establish that he was successful in operating the plant and in fact, in his cross- examination, it is elicited that for the fault of defendant No.1, the production could not be commenced. The plaintiff has asserted that the plant was not made operational because of the raw material, which was defective in nature supplied by the defendant No.1, however, there is nothing to show that any effort was subsequently made by the plaintiff to make out the plant operational, so that his bona fide could have been tested. Thus, there appears to be clear breach of the agreement below Exh.58.

16. From the facts which emerge from the record, it shows that it is the dispute between the plaintiff and defendant no.1 which led retention of 10% amount by the defendant No.2. When the suit was decreed against defendant no.1 for the payment of entire amount as prayed in the plaint, the plaintiff did not point out any default of the defendant no.1 with regard to non-supply of the raw material resulting into the plant as non-operational. Thus, the payment of 10% amount, which the plaintiff, is claiming from the defendant No.2, was subject to

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the fulfillment of the agreement below Exh.58 entered into between the plaintiff and defendant No.1. The plaintiff has miserably failed to discharge his obligation, that under the said agreement, he has discharged his liability of making the plaint as fully operational. There was no privity of contract between the plaintiff and defendant No.2. It is interesting to note that on one hand, the plaintiff has asserted that the defendant No.2 was not a party to the contract between him and on the other hand, he is claiming the amount from the defendant No.2 on the basis of the commitment at Exh.35 given by the defendant No.2 on behalf of the defendant No.1. The plaintiff cannot demand or claim the amount on the basis of the commitment or assurance at Exh.35 entered into between the defendant No.2 on behalf of the defendant No.1 on the basis of the principle of estoppel. However, such assurance or the commitment at Exh.35 was given pursuant to the agreement between the plaintiff and defendant No.1 for supplying the plant and machinery by the plaintiff, subject to the fulfillment of the terms and conditions of the said agreement at Exh.58. Ultimately, the agreement and the letter of commitment, as mentioned hereinabove, would suggest that the plaintiff was only paid the amount by defendant No.2 in form of loan on the condition that only on the basis of agreement at Exh.58 and fulfillment of the obligation, as mentioned therein by the plaintiff. The 10% payment, as envisaged in the agreement at Exh.58, could only have been released to the plaintiff after the performance of the operation of the plant for 72 hours, which the plaintiff has miserably failed to prove. Thus, in absence of any privity of contract between the plaintiff and defendant

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No.2, the plaintiff cannot claim the amount of 10%, which is retained in view of the agreement between the plaintiff and the defendant No.1 on the failure of performance guarantee. The Trial Court, after appreciation of evidence - oral as well as documentary, has precisely rejected the suit.

17. This Court does not find any illegality or perversity in the impugned order. Hence, the appeal fails and the same is dismissed. No order as to costs.

18. Record and proceedings be sent back to the concerned Court forthwith.

sd/-

(A. S. SUPEHIA, J) MB/ 03