1. This is a suit for damages for breach of contract. The plaintiffs are a company registered under the Companies Act, 1956 and are a Government of India undertaking. The principal business of the plaintiffs is to act as Canalizing Agent for import and supply of foreign cotton to Indian Textile Mills. A Circular dated 12th March 1977 was issued by the plaintiffs to all textile mills in India including the defendants, inviting offers for purchase of Global Cotton proposed to be imported by the plaintiffs of the varieties and at the rate mentioned in the said Circular. In response to the said circular, the defendants-a company registered under the Companies Act who owns Textile Mill at Rajaji Nagar, Bangalore, by its letter dated 22nd March 1977 furnished their requirement of global cotton of 300 bales of Orleans/Texas Cotton and 300 bales of Sudan Acala Cotton R.G. Besides sending the said letter, the defendants had sent Telex dated 22nd March 1977 requesting the plaintiffs to register their aforesaid requirement of cotton. The defendants by the said letter requested the plaintiffs to confirm the said booking. It is the case of the plaintiffs that pursuant to the said request, the plaintiffs, as per their usual practice and by way of confirmation of the said offer, sent to the defendants a contract in standard form being Contract No.G/527 dated 28th March 1977 duly signed by the plaintiffs. This contract was signed in duplicate to enable the defendants to return one copy thereof duly signed by them to the plaintiffs. It is the case of the plaintiffs that although the defendants did not sign the said Contract No.G/527, the same was accepted and confirmed by the defendants, which constituted valid and binding contract between the plaintiffs and defendants. Accordingly, the plaintiffs agreed to import and supply the requisite quantity of cotton at specified rate to the defendants as per their request. It is the case of the plaintiffs that the price agreed upon was C.I.F. Mumbai, Cochin and Bhavnagar excluding L/C Bank charges and plaintiffs? service charges. According to the plaintiffs, the defendants agreed that the plaintiffs contract with the foreign suppliers for import of the cotton would be integral part of the contract between the plaintiffs and the defendants. In short, it is the case of the plaintiffs that relying upon the defendants commitment to purchase the requisite quantity of the cotton at the specified price, the plaintiffs imported the goods on clear understanding that if the defendants fail to pay the price, the plaintiffs would clear the same and take delivery of the said goods at the costs and risk of the defendants and if the defendants fail to take delivery of the said goods from the plaintiffs, the plaintiffs would be entitled to sell the goods to any other party by private sale or by auction and loss suffered by the plaintiffs would be borne by the defendants and the defendants would be liable to pay the same on demand by the plaintiffs. It is the case of the plaintiffs that the plaintiffs imported the required 200 bales of both, Orlens/Texas Cotton and Sudan Acala Cotton Rg. The goods arrived at Mumbai. It is the case of the plaintiffs that the plaintiffs had to take delivery of 175 bales of Orleans/Texas Cotton and 193 bales of Sudan Cotton, which were equal to the contracted quantity of bales of each variety. That, in spite of intimation given by the plaintiffs, the defendants failed to pay the price, which compelled the plaintiffs to clear the said goods and take delivery thereof. Even after taking delivery when the plaintiffs called upon the defendants to pay the consideration and take delivery, the defendants failed and neglected to do so which necessitated sale of the said goods to third party. The plaintiffs sold 117 bales out of said 175 bales of Orleans/Texas Cotton to M/s. Sonal Enterprises and realized @ US $ 51 per lb. and realized a sum of Rs.2,48,110=29, as against the total invoice price together with clearing charges, demurrage, interest and carrying charges for the said 117 bales of Rs.5,56,574=27, thereby suffered loss of Rs.3,08,463=98. Similarly, the remaining quantity of 58 bales of Orleans/Texas Cotton were sold to M/s. Sonal Enterprises, Hongkong @ U.S. Cents 50 per ib. and realized a sum of Rs.1,12,149=96 as against the invoice price thereof together with clearance charges, demurrage, interest and carrying charges of Rs.3,47,050=53, thereby suffered loss of Rs.2,34,900=57. Insofar as 193 bales of Sudan Cotton, quantity of 100 bales was sold to M/s. Sonal Enterprises, Hongkong @ US Cents 62 per lb. Realizing price of Rs.2,16,629=30, as against the invoice price thereof together with other charges of Rs.6,18,235=50, thereby suffered loss of Rs.4,01,600=20. Thereafter another quantity of 52 bales of Sudan Cototn was also sold to M/s. Sonal Enterprises at the same rate realizing price of Rs.1,16,434=63, as against invoice price together with other charges of Rs.3,16,664=81, thereby suffered loss of Rs.2,00,230=18. It is the case of the plaintiffs that the remaining bales of the Sudan Cotton could not be sold for want of customers in spite of best efforts. The total invoice price together with other charges thereof was Rs.2,76,038=48 and the plaintiffs assessed loss in respect thereof @ 1,88,824=19. According to the plaintiffs, the plaintiffs suffered loss aggregating to Rs.13,34,029=12 on account of resale of the goods imported for defendants and the defendants were liable to pay the said amount along with interest @ 20% p.a. from the date of sale till the date of suit and for further interest @ 6% p.a. till payment.
2. The defendants have resisted the claim of the plaintiffs. The defendants have raised issue of jurisdiction of this Court to try and entertain this suit. According to the defendants, the whole of the cause of action has arisen outside Mumbai; and even assuming part of cause of action has arisen in Mumbai, it was incumbent upon the plaintiffs to have obtained leave of this Court under Clause-XII of the Letters Patent prior to institution of the suit. It is then asserted that Law of Limitation bars the suit. According to the defendants, no concluded contract arrived at between the parties. For, they did not return the contract form dated 28th March 1977, which was unilaterally signed by the plaintiffs. That Clause-33 of the said contract form sent by the plaintiffs was struck off, which clearly indicated that the contract could not come into existence unless it was signed by the defendants. Alternatively, the defendants assert that the provisions for automatic acceptance of the contract was void, illegal and has no effect whatsoever. In short, the stand taken by the defendants is that there was no valid and concluded contract between the parties. Without prejudice to the said contention the defendants assert that the plaintiffs being the canalizing agency, all the mills in the India had no option but to agree to import cotton through the plaintiffs. Several terms in the contract form evolved by the plaintiffs are unilateral, one sided, illegal and unenforceable. The defendants have denied that the plaintiffs agreed to import or purchase the cotton or that the defendants agreed to purchase any cotton as alleged or otherwise. The defendants denied that any terms were agreed between the parties. The defendants assert that they had specifically made it clear that the Orleans/Texas Cotton and Sudan Cotton should be delivered by April-May 1977 Shipments. Time of delivery was essence of the contract and on that basis the defendants applied for a quota from the Textile Commissioner. The defendants assert that they were not bound or liable to take delivery of any cotton which was purportedly offered by the plaintiffs to them in June 1977 since it was beyond the time stipulated by the defendants of April-May 1977 shipments. The defendants, without prejudice to the above stand, assert that the plaintiffs failed and neglected to sell and supply the contracted quantity of cotton in time. The defendants assert that the defendants repudiated the said contract and refused to take delivery which they have rightly done in their letters dated 29th July 1977, 9th August 1977, 13th August 1977 and 26th/27th August 1977. The defendants denied that it was not possible to cancel the contract. The defendants have asserted that they were not aware of and do not admit that the goods arrived at Mumbai. The defendants denied that the plaintiffs have cleared the goods and stored in any godown, as alleged. The defendants denied that they were bound and/or liable to take delivery of the said goods. The defendants also denied that the plaintiffs suffered any loss and that they were liable to pay any amounts to the plaintiffs. It is the case of the defendants that in fact the plaintiffs did not perform in accordance with the terms of the purported contract and offered inferior quantity of goods than the purported contract, that too beyond the stipulated time. The defendants deny that the plaintiffs suffered any loss on account of resale of the goods or that the defendants were answerable for the said loss. The defendants assert that the conditions under which the alleged resale is stated to have taken place are not the same as those under which the plaintiffs allege to have contracted with the defendants and, therefore, the plaintiffs are themselves in breach.
3. On the basis of the pleadings, my predecessor has settled and framed four issues as follows:-
4. The plaintiffs examined two witnesses namely Mr. V. Munnikrishnan - PW-1 and Mr. Pranjal P. Joshi ? PW-2 in support of its case. The plaintiffs proved documents Exhibits P-1 to P-47. On the other hand, the defendants examined one witness Y.G. Vijay Kumar, DW-1 and insisted for exhibiting documents D-1 to D-7 in support of their case. The Examination-in-chief of the above witnesses was on affidavit-in-lieu of examination-in-chief. The witnesses were cross-examined on commission. The Commissioner without deciding the question of admissibility of documents exhibited the documents when produced by the respective witnesses. The question of admissibility of documents was decided in the first instance before proceeding with the hearing of the case vides order dated 28th September 2007. Insofar as documents at Exhibits P-1 to P-5, the parties admitted those documents. Insofar as document at Exhibit P-6 it was not in dispute that the plaintiffs duly proved the said document. The only controversy raised by the defendants was that it had not admitted the contents of the documents which issue was kept open to be answered at the appropriate stage. Insofar as documents at Exhibits P-7 to P-37, the defendants did not dispute the existence of the said documents as the plaintiffs had proved those documents. The same were allowed to be exhibited while making it clear that the issue regarding denial of the contents of the said documents by the defendants will be considered at the appropriate stage. Insofar as documents at Exhibits P-38, 42, 43 and 45 are concerned, the existence of even said the defendants did not dispute documents. Significantly, it has been held that the documents have been proved by the plaintiffs, however, the question whether the evidence of plaintiffs? witnesses who was not the author of the document, should be accepted or the contents of the documents discarded, was kept open to be decided at the appropriate stage. Insofar as documents at Exhibits P-46 and 47, the defendants consented for exhibiting the said documents. Insofar as the documents relied upon by the defendants D-1 to D-7, it has been held that the same cannot be exhibited as no reference has been made to the said documents in the pleadings either by the plaintiffs or of the defendants. It is held that having regard to provisions of Order VIII, Rule 1A(1) of the CPC, the defendants can be permitted to rely only on the documents on which their defense or claim was based. The defendants having failed to make reference to the subject documents in the pleadings, cannot be allowed to rely on the same in view of Sections 61, 62 and 67 of the Evidence Act. The order passed on 28th September 2007 on the issue of admissibility of the documents relied by the defendants has not been challenged. Accordingly, I shall now proceed to examine the points in issue on the basis of rival pleadings, oral evidence of the respective witnesses and documents at Exhibits P-1 to P-47.
5. ISSUE NO.1:- The question whether this Court has jurisdiction to try and entertain the suit as is well established, will have to be addressed on the basis of the averments in the plaint. The plaintiffs have asserted that they had issued Circular from Mumbai on 12th March 1977 inviting offers from the Textile Mills in India including from the defendants. The defendants by letter dated 22nd March 1977 as well as Telex Message indicated their desire to avail of the global cotton 300 bales of Orleans/Texas Cotton and 300 bales of Sudan Acala Cotton Rg; sent to the plaintiffs having their office in Mumbai. On the basis of the said confirmation the plaintiff?s forwarded contract No.G/527 signed in duplicate from Mumbai to enable the defendants to return one copy thereof signed by them to the plaintiffs at Mumbai. In other words, the contract was dispatched from Mumbai and duly signed contract was to be received in Mumbai. The plaintiffs have also asserted that the contract was to be performed in Mumbai as could be discerned from the said contract and the subsequent correspondence exchanged between the parties referred to in the plaint. The plaintiffs have also averred that the goods were imported and delivered at Mumbai. The plaintiffs cleared the said goods and took delivery at Mumbai. The plaintiffs called upon the defendants to take delivery from Mumbai. Since the defendants failed to take delivery, the plaintiffs after giving due notice to the defendants sent from Mumbai, decided to sell the said goods to third party in Mumbai. The plaintiffs thereafter called upon the defendants to make payment to be received by the plaintiffs in Mumbai.
6. The averments in the plaint leave no manner of doubt that the case of the plaintiffs is that breach of contract in not taking delivery and not making payment by the defendants occurred in Mumbai. Besides, the defendants sent intimation by way of letter addressed to the plaintiffs regarding revocation of contract and denying liability to take delivery or bear the loss suffered by the plaintiffs which communication was received by the plaintiffs in Mumbai. It is in this context, in paragraph 8 of the plaint, the plaintiffs have asserted that the contract was signed by the plaintiffs in Mumbai, goods were delivered in Mumbai and payment was also to be made in Mumbai, that the defendants letters accepting the said contract were also received by the plaintiffs in Mumbai. The plaintiffs have, therefore, asserted that the whole of the cause of action has arisen in Mumbai for which reason Civil Courts in Mumbai alone will have jurisdiction to try and entertain the suit.
7. The defendants in the written statement while raising the plea of jurisdiction has ?generally? denied the stand of the plaintiffs that the whole of the cause of action has arisen in Mumbai being false and incorrect. It is then stated that the alleged contract could never be said to have taken place in Mumbai and that the delivery under the alleged contract had to be effected outside Mumbai. It is on this vague and general assertion the defendants have raised plea of jurisdiction of this Court.
8. Having considered the pleadings on the point of jurisdiction, I have no hesitation in answering issue no.1 against the defendants for the simple reason that going by the averments in the plaint it is plainly asserted that the contract was signed by the plaintiffs in Mumbai, that the goods were delivered in Mumbai, that the payment was to be made in Mumbai and letters from defendants accepting the said contract were also received by the plaintiffs in Mumbai. Accordingly, on reading the plaint as a whole, it is obvious that making of the contract, its performance and its breach has occurred within the jurisdiction of this Court. Moreover, the defendants sent communication to the plaintiffs committing themselves to avail of the facility offered by the plaintiffs, was received by the plaintiffs in Mumbai. Intimation so sent resulted in a contract and hence the suit for breach of contract and damages can be filed in the Civil Court in Mumbai. Significantly, the contract was made in Mumbai, it was to be performed in Mumbai, the breach of performance by the defendants has occurred in Mumbai, and the plaintiffs in Mumbai received the alleged repudiation of contract by the defendant. In other words, the entire cause of action has occurred in Mumbai. Incidentally, Clause-32 of the Contract document also provides for exclusive jurisdiction of the Civil Courts in Greater Bombay. It will be useful to refer to the exposition of the Apex Court in the case of A.B.C. Laminart Pvt. Ltd. and another Vs. A.P. Agencies reported in AIR-1989-SC-1239. The Apex Court has held that in a suit for damages for breach of contract the cause of action consists of making of contract and or its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. It is further held that making of contract is part of cause of action, which can be the basis to file a suit at the place where the contract was made. It has further held that ordinarily acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a Court within whose jurisdiction acceptance was communicated. It then went on to observe that if the contract was to be performed at the place where it was made, the suit on the contract is to be filed there and no where else. It has also observed that in case of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. Applying exposition of the Apex Court, I find no difficulty in answering issue of jurisdiction against the defendants.
9. ISSUE NO.2:- For answering this issue, it will be appropriate to first refer to the respective stand. According to the plaintiffs, by Circular dated 12th March 1977, issued by the plaintiffs, which was also sent to the defendants, invited offers for purchase of global cotton proposed to be imported by the plaintiffs of the varieties and at the rates mentioned in the said Circular. PW-1 in his evidence has proved this circular and is marked as Exhibit-P-2. Insofar as Orleans/Texas Cotton and Sudan Cotton, the circular indicates the place of shipment as ?buyer?s option? and ?sellers? option? respectively. Besides, the price of the said goods per Candy to be purchased by the defendants on C.I.F. basis. The places of delivery indicated in this circular is Mumbai, Cochin and Bhavnagar. In response to the said circular the defendants, firstly, by their Telex message forwarded on 22nd March 1977, showed their willingness to arrange for the shipment of Orleans/Texas Cotton 300 bales and Sudan Cotton 300 bales. They indicated shipment in two lots of 100 bales in April 1997 and 200 bales in May 1977 for both the items. They also informed the plaintiffs that all the 600 bales are to be shipped to Cochin. Insofar as Orleans/Texas Cotton, the circular dated 12th March 1977 indicates that the place of shipment will be at ?Buyers Option? but in respect of Sudan Cotton it will be at ?Sellers Option?. Nevertheless, the defendants gave their choice of place of shipment for Cochin for both the goods. Besides sending Telex message, the defendants sent communication in writing to the plaintiffs on their letterhead dated 22nd March 1977 (Exhibit-P-4) reiterating the same position. On the basis of requisition given by the defendants, the Government of India, Ministry of Commerce issued letter of allocation (Exhibit-P-5) of Global and Russian Cotton to the defendants on 28th March 1977 for quantity of 300 bales of 175 kgs. each of both the categories. The plaintiffs then forwarded contract No.G/527 purported to be dated 28th March 1977 for quantity of 600 quota bales with variation of 3% in weight difference accepted. The break-up of 600 bales has been mentioned in the contract as 300 bales of Orleans/Texas Cotton @ 4,550/- and 300 bales of Sudan Cotton @ 5,000/-. The contract also reproduces the supply period as April-May for both the items and shipment at buyers option. Clause-2 of the contract, however, provides that although the Mill (defendant) indicated its choice of port, the said goods will be delivered to the said mill at the port where the ship carrying the goods will arrive and unloaded and the difference in freight, if any, will be borne by the mills. The contract duly signed by the plaintiffs in duplicate was sent to the defendants so that one copy was to be returned to the plaintiffs duly signed by the defendants. The fact that the said contract was duly received by the defendants is reinforced from the Telex message sent by the defendants to the plaintiffs dated 16th April 1977 (Exhibit P-7) wherein the defendants have referred to the quota letter dated 28th March 1977 and contract No.G/527 dated 28th March 1977 in respect of two items (Orleans/Texas Cotton and Sudan Cotton). The defendants informed the plaintiffs that they wish to contract for 200 bales Orleans/Texas Cotton at specified rate per Candy CIF and 200 bales of Sudan Acala Roller Ginned Grade-I at the specified rate per candy CIF.. The defendants requested the plaintiffs to send revised contract on the said terms. The defendants also assured the plaintiffs that they were arranging for necessary bank guarantee in due course. On receipt of this communication, the plaintiffs, by letter dated 2nd May 1977 (Exhibit P-8), informed the defendants that they have confirmed having amended the contract by reducing the quantity of goods as requested by the defendants to 200 bales of each category of cotton.
10. On conjoint reading of all these documents the inescapable conclusion is that there was a concluded contract between the parties, even though the defendants may not have signed the formal contract agreement forwarded by the plaintiffs. The concluded contract between the parties was for supply of 200 bales of Orleans/Texas Cotton and 200 bales of Sudan Acala Roller Ginned Grade-I at the specified rates on C.I.F. basis. From the pleadings and the evidence produced by the plaintiffs it is also seen that acting upon the commitment of the defendants the plaintiffs arranged for shipment of the concerned goods. Further, as the goods were shipped from Sudan to Mumbai, the plaintiffs sent shipment advice to the defendants on 1st June 1977 (Exhibit P-9) and called upon the defendants to arrange for payment and clear the 193 bales of Sudan Cotton. Similar communication was sent in respect of Orleans/Texas Cotton of 175 bales shipped from Galvestan to Mumbai vide letter dated 1st July 1977 (Exhibit P-10).
11. The fact that it was a case of concluded contract is also reinforced from the communication sent by the defendants on 17th July 1977 (Exhibit P-11) acknowledging receipt of letter of shipment advice sent by the plaintiffs calling upon the defendants to arrange for payment and clearance of the goods. The defendants by its communication, however, expressed inability to arrange for funds as there was great difficulty in getting the bank facilities due to the credit restrictions imposed by the bank. The defendants have conceded in this communication that the credit facilities enjoyed by the defendants with the bankers at the relevant time, was not adequate to meet the requirements and that the defendants were facing additional burden of stocks due to sluggishness in the market of textile products. The defendants, therefore, informed the plaintiffs that it was very difficult for them to take delivery of the goods. Significantly, the defendants in this communication called upon the plaintiffs offer some credit facility for the time being. It is a different matter that in the subsequent communication sent by the defendants on 25th July 1977 (Exhibit- P-12 and P-13) the defendants have raised issue of quality of goods offered to the defendants for which reason expressed unwillingness to take the delivery of the goods and instead treat the contract as cancelled. I shall deal with the efficacy of this communication a little latter. Obviously, the stand taken for the first time in this communication is after thought and only to resale from the commitment already made by the defendants. Besides, the defendants acknowledged the communications of the plaintiffs from time to time between July to August 1977, but at no point of time, in any of their communications, raised the issue that there was no concluded contract. On the other hand, the defendants proceeded on the premise that there was a concluded contract and that they were not in a position to discharge their obligation for reasons beyond their control; and later on even questioned the quality of the goods offered to them as a reason for not taking the delivery. It is for the first time in the communication-dated 26th/27th August 1977 (Exhibit P-20), the defendants asserted that there was no contract between the parties as they had not signed any contract. In this communication it is the case of the defendants that as clause-34 of the contract was deleted unless the contract was duly signed and returned to the plaintiffs, there could be no contract at all between the parties. The defendants also asserted in this communication that even under the so called contract the goods were required to be delivered between April-May 1977 shipment. Instead, they were offered to the defendants in July-August 1977 after unusual long delay of more than two to three months. The defendants also asserted that the quality of the goods offered was inferior. According to the defendants, the circumstances have completely altered the scope of the contract even if any contract can be said to have came into existence. I shall deal with the efficacy of the issues raised in this communication Exhibit P-20 by the defendants at appropriate stage.
12. Suffice it to observe that from the averments in the plaint and the oral evidence of plaintiffs witness PW-1 (in particular paragraphs 11 to 14, 17, 18 and 21) and considering the documents referred to above the inescapable conclusion is that the plaintiffs have proved that there was a concluded contract for sale of cotton with the defendants.
13. I shall now deal with the stand taken by the defendants. In the first place, I think it apposite to refer to the averments in the written statement. Insofar as issue whether there has been a concluded contract, the defendants have ?generally? denied that there was any concluded contract between the parties. Indeed, the defendants have asserted that they did not return the contract form dated 28th March 1977 which was unilaterally signed by the plaintiffs. It is the case of the defendants that clause-33 of the contract form was struck off. To make it a case of concluded contract, it was imperative that the defendants should have signed the contract and returned the same to the plaintiffs. It is on this premises the defendants assert that there was no concluded contract.
14. The stand taken on behalf of the defendants merely deserves to be stated to be rejected. As aforesaid, it is seen from the contemporaneous record that after the plaintiffs issued circular on 12th March 1977 (Exhibit P-1), the defendants sent communication showing express willingness for procurement of 600 bales of cotton (Orleans/Texas Cotton 300 bales and Sudan Cotton 300 bales) as is stated in Exhibits P-4 and P-3. On receiving this commitment from the defendants, the plaintiffs forwarded contract dated 28th March 1977 (Exhibit P-6)-after the allocation of quota to the defendants for the like quantity of cotton. Significantly, the defendants sent communication dated 16th April 1977 (Exhibit P-7) committed themselves for the reduced quantity of cotton and asked the plaintiffs to send the revised contract for reduced quantity of cotton (200 bales of Orleans/Texas Cotton and 200 bales of Sudan Cotton). The plaintiffs on receiving such communication, confirmed having amended the contract. Indeed, the defendants did not forward the signed copy of the contract received by them but on receiving the letter of shipment advice, the defendants did not raise any issue of non-existence of concluded contract as such. Instead, the defendants expressed inability to discharge their obligation on account of financial difficulty. The defendants went to the extent of requesting the plaintiffs to provide financial assistance for the present to facilitate the defendants to make payment and take delivery of the goods, as can be discerned from letter sent by the defendants dated 7th July 1977. This is the contemporaneous record coming from the defendants, contents whereof are not disputed. Indeed, the defendants subsequently by another communication (Exhibits P-12, 13, 14, 15, 16, 17 and 18) raised issue of quality of goods. Once again no issue is raised about non-existence of concluded contract. In fact, the defendants informed the plaintiffs that the contract may be treated as cancelled which presupposes the existence of a concluded contract. It is for the first time, in the communication Exhibit P-20 dated 26th ?27th August 1977, the defendants took up an after thought plea that there was no concluded contract between the parties on account of the fact that they had not signed the contract. Suffice it to observe that the stand taken by the defendants in this behalf merely deserves to be stated to be rejected. Accordingly, issue no.2 will have to be answered in favour of the plaintiffs.
15. That takes me to the next argument of the defendants that because the defendants did not furnish any bank guarantee within ten days from the date of agreement, in view of clause-34 of the contract, the agreement stood cancelled. As is mentioned earlier, in the present case, clause-33 of the contract, which provided that duplicate copy of the agreement duly signed is required to be submitted within seven days from the receipt of agreement failing which it will be deemed to have been accepted by the defendants, has been scored off. That would make no difference, having regard to the contemporaneous record and the conduct of the parties subsequent to the forwarding of copy of the agreement to the defendants which has been extensively dealt with hitherto. The question, whether on account of clause-34 of the contract, it is possible to take the view that the contract has not come into existence, can be answered by referring to clause-34. Clause-34 of the contract reads thus :-
?(34). This agreement is subject to the condition that Mills produces necessary bank guarantee within ten days from the date of this agreement failing which the agreement would liable to cancel?.
From the plain language of this clause it is obvious that it is only an enabling provision permitting the ?plaintiffs? to treat the contract as cancelled. Non submission of bank guarantee by the defendants cannot come to the aid of the defendants to assert that the contract never came into existence. The provision to furnish bank guarantee is not a pre-condition for entering or finalizing the contract, but is only an option available to the ?plaintiffs?- which could be waived by the plaintiffs. In the present case, the plaintiffs did call upon the defendants to furnish bank guarantee, but the defendants did not comply with that requirement. That by itself does not result in a situation of non existence of contract between the parties inter se. As is mentioned earlier, from the contemporaneous record and the conduct of the parties, it is amply clear that the parties proceeded on the clear understanding that there was a concluded contract between them. In fact, it is the defendants who claim to have terminated the contract at their instance for reasons recorded in their communication sent to the plaintiffs. There is no iota of evidence that the plaintiffs cancelled the contract by invoking clause-34 of the contract muchless due to failure to furnish the bank guarantee. Thus understood, this argument does not take the matter any further for the defendants.
16. The counsel for the defendants would, however, rely on the decision of the Apex Court in case of State of Madhya Pradesh and another Vs. Firm Gobardhan Dass Kailash Nath reported in AIR-1973-SC-1164. Having carefully considered the said authority, I have no hesitation in taking the view that the observations in the said decision are in the fact situation of that case and will be of no avail to the defendants. In that case the Court proceeded to hold that initial deposit of 25% of the purchase price was required to be made on the spot, in absence of which the tenders could neither be validly accepted nor sanctioned by the Chief Conservator. The Court proceeded to hold that there was no authority to waive the said condition for which reason there was no valid acceptance or sanction of the tenders. It is on this premise the Apex Court proceeded to hold that offering of tenders by the respondent firm and their purported acceptance by the Forest Authorities never ripened into a concluded contract. That observation will have no bearing on the present case. As already observed earlier, clause-34 is only an enabling provision authorizing the plaintiffs to cancel the contract on account of failure to furnish the bank guarantee. It is not as if the plaintiffs were bound to treat the contract cancelled, muchless to take the view that there was no concluded contract between the parties. Permitting the plaintiffs to cancel the agreement pre-supposes that there was a concluded contract.
17. My attention has been invited to two unreported decisions of Single Judge of this Court in the case of C.C.I.L. (Plaintiffs herein) Vs. Bilaspur Spinning Mills in Suit No.1109 of 1982 decided on 19th April 2000, and in the case of C.C.I.L. (plaintiff herein) Vs. Trimurti Mills Ltd. Passed in Suit No.1180 of 1980 decided on 11th August 2000, where similar argument has been noted and answered against the defendants in the said suits. Indeed, the defendants would rely on two other decisions of our High Court between the C.C.I.L. (plaintiff herein) Vs. Rajasthan Spinning and Weaving Mills Ltd. Reported in 2005 (Supp.)-Bom.C.R.-192 and in case of C.C.I.L. (plaintiffs herein) Vs. Bombay Dyeing and Manufacturing Co. Ltd. Reported in 2006(9)- L.J. Soft. (URC)-93.
18. Insofar as case of Rajasthan Spinning and Weaving Mills Ltd. (supra), the Court found as of fact that the defendants in that case did not accept the quota issued by the Textile Commissioner. The defendants did not forward any communication indicating acceptance of the quota released by the Textile Commissioner. The Court, therefore, proceeded to hold that neither there was an offer nor acceptance of any offer by either party. The contract document, however, at best was a counter offer by the plaintiff to the defendants, which was accepted by the defendants by executing the same. Suffice it to observe that the fact situation in the said case was entirely different than the present case. In the present case, the defendants not only accepted the quota released by the Textile Commissioner but also confirmed in writing that they intend to contract for 200 bales of Orleans/Texas Cotton and 200 bales of Sudan Cotton and called upon the plaintiffs to send the revised contract. In turn the plaintiffs informed the defendants that they have confirmed having amended the contract by reducing the quantity of bales allocated to the plaintiffs by the Textile Commissioner in terms of the quota release order.
19. Insofar as the case of Bombay Dyeing and Manufacturing Co. Ltd. (supra), even in that case, the Court found as of fact that the defendants had informed the plaintiffs that they would send their response in respect of the allotted bales of cotton by specified date. It is further found that there was no such communication from the defendants to the plaintiffs. In this context, the Court proceeded to hold that the defendants were not obliged to take delivery of the bales of cotton imported by the plaintiffs for and on their behalf. In substance, the finding of fact recorded is that there was no acceptance of the proposal and no action could be proceeded against the defendants on the basis that the Textile Commissioner has already released the quota in favour of defendants.
20. Taking any view of the matter, the issue under consideration will have to be answered in favour of the plaintiffs and against the defendants. For, there is ample material on record to establish the claim of the plaintiffs that there was a concluded contract between the parties.
21. ISSUE NO.3 :- In the foregoing paragraphs I have already dealt with the factual matrix as to whether there was a concluded contract. I have also referred to the documents which would indicate that acting on the commitment made by the defendants the plaintiffs placed order for importing requisite quantity of bales, to be delivered to the defendants, for and on behalf of the defendants, as their canalizing agents for import and supply of foreign cotton in terms of the extant policy at the relevant time. In para 3 of the plaint, after referring to the background in which contract No.G/527 dated 28th March 1977 was duly signed by the plaintiffs and forwarded to the defendants to be duly signed by them and returned to the plaintiffs, the plaintiffs have asserted that as there was valid and binding contract between the parties they agreed to import and supply and the defendants agreed to buy the goods on specified terms. The price determined was C.I.F. price at Mumbai, Cochin and Bhavnagar excluding L/C bank charges and service charges of the plaintiffs. In para 4 it is asserted that the plaintiffs received Telex message from the defendants requesting to reduce the quantity from 300 to 200 bales of each category of cotton. In paragraph 5 of the plaint it is asserted that the plaintiffs by their letter dated 1st June 1977 informed the defendants that 193 bales of Sudan Cotton were shipped by the foreign shippers per S.S. State of Kutch from Sudan to Mumbai. By another letter dated 1st July 1977 the plaintiffs communicated the defendants that 175 bales of Orleans/Texas Cotton were shipped by foreign shippers per S.S. Jalatarang from Galveston to Mumbai. The fact that the goods were duly imported by the plaintiffs has not been disputed by the defendants. In fact, in paragraph 5 of the written statement, after asserting that there is no concluded contract, the defendants have stated that the plaintiffs being the canalizing agency, all the Mills in India had no option but to agree to import the cotton through the plaintiffs. It is then mentioned that several terms in the contract form evolved by the plaintiffs unilaterally, were illegal and unenforceable. Here it may be relevant to mention that no such argument was canvassed at the time of oral arguments. Significantly, no such issue has been framed nor the defendants insisted for framing of any additional issue as is seen from the record.
22. Be that as it may, in para 7 of the written statement it is mentioned that the defendants were not bound and/or liable to take delivery of any cotton which was purported to be offered by the plaintiffs to the defendants in June 1977 or July 1977 as the case may be, as it was beyond the stipulated period for which reason the defendants repudiated the contract and refused to take the delivery. Implicit in this stand is admission of the fact that the goods were duly imported and were available for delivery at Mumbai as was offered by the plaintiffs. Indeed, in para 8 of the written statement, the defendants have stated that they were not aware nor do they admit that the goods arrived at Mumbai. The defendants have also denied the claim of the plaintiffs that they had cleared the goods or stored them in any godown. The plaintiffs, on the other hand, besides categorically asserting in the plaint that the goods were duly imported and offered for delivery to the defendants, have established that fact by examining PW-1 who has restated the claim of the plaintiffs. The plaintiffs also have relied on the invoice Exhibit P-21, Clearing Agents Bill Exhibit P-27 and plaintiffs sale invoice Exhibit P-28, Import invoice Exhibit P-29, Bill of Entry which are shippers documents to establish the fact that the goods had arrived at Mumbai. The plaintiffs have also established that position from the Bill of Entry dated 12th July 1977 (Exhibits P-22 and 30), which indicates that the stated goods were cleared by the plaintiffs. The plaintiffs have also relied on Exhibits P-26 and P-31 which are receipts regarding payment made by the plaintiffs to port authorities. From the above said evidence on record I have no hesitation in taking the view that the plaintiffs discharged their obligation of importing stated goods as per the requisition of the defendants and that the goods had arrived at Mumbai.
23. The plaintiffs have also substantiated the fact that on arrival of the goods the defendants were called upon to take delivery of the goods, however, as the defendants failed to clear the goods from the port trust, the plaintiffs were required to discharge that obligation. After clearing of the goods, the plaintiffs once again called upon the defendants to take delivery by making payment. The defendants, on the other hand, expressed inability to take delivery initially by citing reason of financial difficulty as mentioned in their communication Exhibit P-11. In fact, the defendants requested the plaintiffs to provide credit facility to them for the time being. Later on, the defendants raised the bogie of quality of goods offered to them by the plaintiffs, as can be noticed from Exhibits P-12 to 15. In response to this stand of the defendants, the plaintiffs called upon the defendants to raise the dispute about quality of goods in Arbitration proceedings if they so desired. The plaintiffs additionally called upon the defendants to retire the documents as noted in Exhibit P-16. Notwithstanding the said communication, the defendants reiterated their plea of inferior quality of goods offered to them in their communication Exhibits P-17 and 18. The plaintiffs, therefore, once again in writing called upon the defendants to make payment and discharge their obligation and if they so desire to take up the issue regarding inferior quality of goods in Arbitration proceedings. After prolonged deliberation, the defendants by letter Exhibit P-20 for the first time also raised another bogie of no liability to take delivery of goods, which were offered to them beyond the stipulated schedule of April-May 1977 shipment.
24. As aforesaid, after clearance of the goods from the port trust, the plaintiffs called upon the defendants to arrange for payment and take delivery thereof. As the defendants failed to do so, the plaintiffs gave legal notice placing on record that the plaintiffs were forced to clear the goods and stored them in the godown on behalf of the defendants to avoid mounting demurrage and other charges. The plaintiffs by this legal notice (Exhibit P-34) offered final chance to the defendants to take delivery of the stated goods within fifteen days from the receipt of notice, failing which the plaintiffs were free to sell the goods in open market and in case of any deficit, the defendants would be liable to make good the same good in addition to the port trust and other charges. In spite of the legal notice, the defendants chose to maintain their stand that they were not liable to take the delivery of such goods as mentioned in their communication Exhibit P-35. Consequently, the plaintiffs had no option but to sell the goods to third party in which plaintiffs had to suffer loss.
25. Suffice it to observe that the plaintiffs have established that the goods in fact arrived in Mumbai and the plaintiffs were compelled to take delivery thereof. Moreover, in spite of repeated demands the defendants failed to take delivery which forced the plaintiffs to sell the goods in the open market. As a necessary corollary, it would follow that the plaintiffs have proved that the defendants committed breach of contract.
26. To get over this position it was the case of the defendants that breach of contract was in fact committed by the plaintiffs. Inasmuch as, the goods offered to them by the plaintiffs were of inferior quality and more so the same were offered beyond the stipulated period of April-May 2007. Insofar as the assertion of the defendants that the goods imported were offered to the defendants were of inferior quality, except their bare words, no other evidence has been brought on record by the defendants. In the written statement also a general and vague assertion has been made without elaborating any further. That plea as observed earlier was raised by the defendants only to confuse the issue. The real reason for the inability of the defendants for taking delivery has been revealed by the defendants in their letter Exhibit P-11 dated 7th November 1977. The defendants have conceded that they were in great financial difficulty and were unable to procure any bank facility. The defendants requested the plaintiffs to provide credit facility for the time being. However, later on, on 25th July 1977, for the first time, in their communication Exhibits P-12 and 13 the defendants without giving any specific details raised the issue of quality of goods and cited that as a ground for not taking delivery thereof. Taking over all view of the matter and having regard to the materials on record, there can be no difficulty in rejecting the claim of the defendants about inferior quality of goods. That is neither a bona fide defence nor has been substantiated. Indeed, it is not the case of the defendants, even remotely suggested that the third party purchased the goods in resale at a lower price on account of inferior quality of goods. In fact, it is common ground that resale of goods in such a situation in open market would always get lesser price being a depressed sale. Suffice it to observe that there is no merits in the stand taken by the defendants that the plaintiffs had committed any breach of contract on this count.
27. Insofar as the defense taken by the defendants that they were not liable to take delivery of the goods as the same was offered beyond the stipulated price, also deserves to be stated to be rejected. Indeed, in the confirmation sent by the defendants Exhibit P-2, the period of delivery of goods is mentioned as April-May 1977 shipment. That has been reiterated in the Telex message Exhibit P-3 and also in the subsequent communication Exhibit P-4. Even the contract sent by the plaintiffs refers to the same period. However, what has been overlooked is provision made in clause-12 of the contract which reads thus:-
Shipment will be made from the foreign ports subject to the following:-
(a) The Corporation will not be responsible for any consequences arising from delay in effecting shipment by the shippers. However, the mills have to take delivery in pursuance of their Indent placed with the Corporation as and when such indented cotton arrives.
(b) In case of delayed shipments occasioned either at the instance of the mills or due to non-compliance by mills of the formalities required to be completed, or delay occasioned by the shippers for any reason, inclusive of force majeure the mills will be responsible to pay carrying charges as stipulated by the Shippers, besides being liable fully for any loss or damages whatsoever incurred by this shipper on account of failure or neglect on the part of the mills.?
Besides the above provision, what is significant to notice is that even though the original confirmation letter sent by the defendants refers to the period for delivery of goods as April-May 1977, however, as late as till 16th April 1977 the defendants engaged themselves in communication with the plaintiffs and lastly by Telex message (Exhibit P-7) dated 16th April 1977 confirmed the position that they intend to contract for reduced quantity of bales and requested the plaintiffs to send the revised contract. The plaintiffs in turn confirmed of having amended the contract by reducing the quantity of bales in their communication dated 2nd May 1977, Exhibit P-8. If time was the essence of contract, as stated by the defendants, there is no reason why the defendants continued to correspond with the plaintiffs as late as May 1977. It will also have to be borne in mind that when the plaintiffs called upon the defendants to send payment in June-July 1977 the defendants did not raise the issue of time of delivery being essence of contract. Instead, in their communication dated 7th July 1977 (Exhibit P-12), they expressed their inability to take delivery of the goods on account of financial difficulty and not because of delayed delivery. The subsequent bogie raised by the defendants in communication Exhibit P-12 dated 25th July 1977 and which stand was reiterated almost till August 1977 in their communication Exhibit P-18 amongst couple of other communications was only about inferior quality of the goods. It is for the first time the defendants in their letter dated 26th-27th August 1977 has raised the issue of delayed delivery of goods beyond stipulated time and that time was the essence of contract. Obviously, it is an after thought plea to confuse the matter so as to resile from the commitment already made.
28. Taking any view of the matter I have no hesitation in concluding that not only the plaintiffs have proved that the defendants committed breach of contract, but I am also of the view that the defendants have taken bogus and false defence that the breach of contract was at the instance of the plaintiffs and not the defendants.
29. The next question is whether the plaintiffs have proved that on account of breach of contract by the defendants the plaintiffs suffered loss of Rs.14,56,720=94 as claimed. The plaintiffs have given particulars of claim in Exhibit-A to the plaint. The foundation for the said claim is found in paragraph 6 of the plaint. The plaintiffs have disclosed that the plaintiffs were required to sell the goods in the open market. During such sale the plaintiffs have suffered loss. In that plaintiffs sold 117 bales out of 175 bales of Orleans/Texas Cotton. The rate at which the said goods were sold to Sonal Enterprises is also mentioned @ US $ 51 per lb. and realized sum of Rs.2,48,110.29 as against the amount of Rs.5,56,574.27 being the total invoice value together with clearing and other charges, thereby suffering loss of Rs.3,08,463.98. The plaintiffs have also given similar details with regard to sale of remaining 58 bales of Orleans/Texas Cotton That quantity was sold to Sonal Enterprises, Hongkong @ US Cents 50 per lb. realizing a sum of Rs.1,12,149.96 whereas the invoice price together with the clearance and demurrage charges and other charges was Rs.3,47,050.53. In other words, the plaintiffs suffered loss to the extent of Rs.2,34,900.57.
30. Insofar as 193 bales of Sudan Cotton, 100 bales were sold to Sonal Enterprises @ US Cents 62 per lb realizing a price of Rs.2,16,629.30 as against invoice price together with clearance and other charges of Rs.6,18,235=50 thereby the plaintiffs suffered loss of Rs.4,01,606.20 in this sale. Out of the remaining quantity of Sudan Cotton, 52 bales were sold to the said Sonal Enterprises at the same rate (US Cents 62 per lb.) realizing price of Rs. 1,16,434.63 as against the invoice price together with clearance and other charges of Rs.3,16,664.81. That means the plaintiffs suffered loss of Rs.2,00,230.18 for this sale. Insofar as remaining 41 bales of Sudan Cotton, it is the case of the plaintiffs that the same could not be sold in spite of best efforts as no customer was found. The total invoice value together with clearance and other charges thereof was Rs.2,76,038.48. In this regard the plaintiffs have, however assessed the loss to the extent of Rs.1,88,824.19.
31. The plaintiffs have established the loss suffered by them on the basis of invoice value of the goods, which is also reflected in the contract. The plaintiffs have produced documents to establish their claim of having incurred clearance charges and other charges. As against that, the plaintiffs recovered lesser price from the purchaser of the goods which price has been indicated not only in the pleadings but substantiated by contemporaneous record. In fact, the defendants in their written statement have not pleaded any specific case in the context of the assertions made by the plaintiffs in para 6 of the plaint. The defendants have generally denied the case made out by the plaintiffs. On fair reading of paragraph 8 or for that matter paragraphs 11 (c) and 11(d) of the written statement or for that matter reading the entire written statement as a whole, the case made out by the plaintiffs about loss suffered by the plaintiffs as specified in the plaint, it is seen that the denial is a bald denial. On the contrary, from the averments in the relevant paras of the written statement, it is clear admission of the fact that the plaintiffs resold the goods to third party at the stated price. The assertion in the written statement is only one of general denial of liability to reimburse the loss suffered by the plaintiffs. That plea is of no avail to the defendants as it is a case of breach of contract.
32. Besides, what is significant to note is that the plaintiffs not only forwarded the invoice under which the goods were sold to the third party, Exhibits P-38 and 39 but also sent communication to the defendants on 5th January 1980 Exhibit P-40. In response, the defendants by letter dated 16th-17th January 1980 conceded that price in a negotiated sale cannot reflect correct market rate. While accepting that position the defendants have proceed to assert that for that reason they were not liable to pay any such claim. As observed earlier, the defendants have not specifically denied the fact of resale of the stated goods and more particularly the fact asserted by the plaintiffs that such sale resulted in stated loss to the plaintiffs. In fact, on the basis of the pleadings it will have to be held that the plaintiffs have succeeded in their claim regarding loss to the extent of Rs.14,56,720.94 which is inclusive of invoice value of the goods, clearance charges, carrying charges, gain in weight and interest for the period during the date of storage.
33. Independent of pleadings
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the plaintiffs have discharged their burden by producing relevant invoices which would support the claim of the plaintiffs. The plaintiffs have also established that they have given suitable adjustment to the defendants in respect of 41 bales of Sudan Cotton which could not be sold in the open market in spite of best efforts. I am in agreement with the submission canvassed on behalf of the plaintiffs that if the argument of the defendants were to be accepted, in that case, the defendants would be liable to pay the entire amount, which will not be of any help to the defendants. 34. Indeed, it was argued on behalf of the defendants that the plaintiffs have not established as to which goods arrived at the port, which pertain to the defendants and whether the same goods were in fact sold at a lesser price. It was argued that the factum of sale at a lesser price could be established by the plaintiffs only on examining the official from the Sales Department who could have explained the procedure adopted by the sales department for making of lots and the line of action before conducting the sale. According to the defendants, the evidence of PW-1 was of no avail to the plaintiffs as he was not the author of the concerned invoices nor was he able to establish the factum of sale and loss. According to the defendants, the plaintiffs ought to have produced relevant books of accounts to corroborate the version of the plaintiffs witnesses and the entries in the concerned invoices. The argument though attractive at the first blush is devoid of any merits. As has been observed earlier, the defendants have not specifically denied the factum of loss suffered by the plaintiffs as asserted by them in the plaint. The plaintiffs have brought on record that the author of the invoice was not available for examination (para 37 of evidence of PW-1). That position has remained unchallenged. Moreover, it is not in dispute that the plaintiffs witness was one of the official involved in the transaction in question. He has identified the noting made in his handwriting on the concerned invoices. He has given that evidence on the basis of his personal knowledge. Suffice it to observe that the evidence no way affect the credibility of the plaintiffs claim that it had suffered loss on account of resale as stated in the plaint and break-up whereof has been furnished in the particulars of Claim Exhibit-A. 35. In other words, there is substance in the argument of the plaintiffs that the averments in paragraph 6 of the plaint gives graphic description as to the circumstances in which loss has been suffered by the plaintiffs and the extent of such loss. The averments not only give the details of the quantity of goods sold but also the price at which the same are sold including the conversion rate thereof. The aggregate amount is mentioned in Indian Currency. The plaintiffs witnesses has deposed during the evidence (in para 32) that that was the prevailing exchange rate at the relevant time. This version has not been challenged as there is no cross examination in that behalf. There is intrinsic material on record which provides necessary details to accept the claim of the plaintiffs that it had suffered loss as quantified by the plaintiffs. The plaintiffs have also relied on the conversion rate notified on the website which indicates that the prevailing conversion rate in June 1979 was Indian Rs.8.12=2.04% of U.S. Foreign Exchange rate. In March 1980 the prevailing rate was 8.15=2.11% and in April 1980 it was 8.07=1.92%. Suffice it to observe that there is intrinsic material on record to accept the claim of the plaintiffs that the plaintiffs suffered loss of Rs.14,56,720=94 on account of subject transaction. Accordingly, issue no.3 is answered in favour of the plaintiffs and against the defendants even on this count. 36. ISSUE NO.4 :- Insofar as plaintiffs claim regarding interest is concerned, the plaintiffs assert that the defendants are liable to pay interest @ 20% p.a.. The claim of interest is essentially founded on condition no.17 in the contract, which provides that if for any reason whatsoever the said mills fail to take delivery of shipping documents or delivery order of the Shipping Company immediately on presentation and fail to effect payment, all charges and expenses including insurance, demurrage incurred as a consequence of such defaults, taxes, Central or State (including sales/purchase tax, if applicable) as well as interest charges at 20% p.a. on monthly rest basis will be borne by the Mills. It further provides that if the receipt of documents from the foreign suppliers is delayed, the Corporation will not be responsible for any consequences arising there from including payment of demurrage and for additional duties etc.. The defendants have computed the total loss suffered by the plaintiffs on account of resale of the stated goods to Rs.13,34,025.12. The plaintiffs have claimed interest on the said amount from the defendants @ 20% p.a. from the date of sale till the date of suit and for further interest @ 6% p.a. till payment. Although defendants have disputed the liability to pay interest as it is a case of breach of contract and having found that there was concluded contract between the parties, which makes the defendants liable to pay interest @ 20% p.a.. The plaintiffs are, therefore, not only justified but entitled to claim interest at that specified rate. There can be no two opinions that the transaction in question is a commercial transaction. The plaintiffs, therefore, would succeed to the claim of interest @ 20% p.a. from the date of suit till the date of judgment as prayed. The plaintiffs are also entitled for future interest @ 6% p.a. till payment, as prayed. Hence, issue no.4 is also answered in favour of the plaintiffs. 37. For the aforesaid reasons the suit is decreed. The defendants do pay to the plaintiffs a sum of Rs.14,56,720=94 with interest @ 20% p.a. from the date of filing of the suit till the judgment and further interest @ 6% p.a. till payment. The defendants do pay costs of the suit to the plaintiffs and bear their own costs.