Century Aluminium Manufactring Co Ltd. vs Goodpal Industry Limited and Others

V.K. Jain, J.—This is a suit for recovery of damages and injunctions. It is alleged in the plaint that Defendant No. 1, which is a Chinese company, is carrying business in India through Defendant No. 2, who is its Indian agent. It is further alleged that Defendant No. 2, on behalf of Defendant No. 1 sent an Indent of the contract for and on behalf of Defendant No. 1, followed by the sales confirmation issued by Defendant No. 1. It is also alleged that on receipt of the offer, the Plaintiff placed a purchase contract on Defendants No. 1 and 2. On taking delivery of the material sent in three containers of 24 MT each, the Plaintiff discovered that the goods were defective and were not as per specifications. The Plaintiff informed Defendants No. 1 and 2 in this regard and their representatives visited the factory of the Plaintiff to verify the complaint and assured their full co-operation. The sample was sent to an independent lab M/s Sunbeam Auto Ltd., which submitted its report confirming that the goods were not of the agreed specifications and were defective. The iron content in the material was 0.71% instead of the maximum of 0.50%, agreed under the contract. The Plaintiff made a claim of US$ 87520 which comes to Rs. 38,50,880/-, for the losses/damages suffered by it on account of defective goods supplied to it. It is also claimed that the Defendants failed to take back the defective goods and compensate the Plaintiff, which has led to the Plaintiff claiming the aforesaid amount of Rs. 38,50,880/-as damages from them.

Another contract was executed between the parties on 09th July, 2010 for supply of 48 MT Silicon. Since the goods supplied earlier to the Plaintiff were found to be of poor quality, the Plaintiff requested the Defendants that the sample of the material be sent to an independent agency. This request, however, was not accepted by the Defendants. The Plaintiff in this suit besides seeking recovery of Rs. 38,50,880/-has also sought injunction, restraining the Defendants from selling the goods which have been sent to it and are at present lying with Assistant Commissioner, Customs (Defendant No. 3). It has also sought injunction directing Defendants No. 1 and 2 to have a joint inspection of the goods lying with Defendant No. 3 and sale of those goods by public auction in case they are not found to be of agreed specifications.

IA No. 17068/2010 has been filed by Defendant No. 2 seeking rejection of the plaint on the ground that it discloses no cause of action against it and is also barred by law.

A perusal of the Indent dated 26th May, 2010 would show that the name of the buyer is shown as Century NF Castings, a unit of the Plaintiff-company M/s Century Aluminium Manufactring Co. Ltd., which is also the consignee as per this Indent. The Principal & L/C Beneficiary is shown as Goodpal Industry Ltd., i.e., Defendant No. 1. The terms and conditions, annexed to the Indent, make it quite clear that offer was made by Defendant No. 2 on behalf of Defendant No. 1 and it was to become a contract only after confirmation in writing by Defendant No.

Clause 4 of the terms and conditions is important and reads as under:

The transaction as contained in this indent is to be executed on Principal to Principal Basis between the buyer and seller. KPL is acting only as a facilitator in the business. In any case KPL shall not liable for any claim of any kind of loss or damage arising out of this transaction to any party of whatsoever nature.

The sale confirmation dated 26th May, 2010 would also show that Defendant No. 1-company was the seller, whereas the Plaintiff-company was the buyer of the goods in question.

The aforesaid documents filed by the Plaintiff-company clearly show that the transaction for purchase of the goods was between the Plaintiff and Defendant No. 1, the applicant/Defendant No. 2 having acted only as an facilitator. The parties had agreed, as would be evident from Clause 4 of the terms and conditions, annexed to the Indent that the transaction was to be executed between Defendant No. 1 and the Plaintiff on a Principal to Principal Basis and in no case Defendant No. 2 was to be liable for any claim of any kind of loss or damage arising out of the transaction either to the Plaintiff-company or to Defendant No. 1-company. The fact that Defendant No. 2 was acting only as a facilitator is also evident from the e-mails filed by the Plaintiff. Vide e-mail dated 1st October, 2010, Mr Mohit Jain of Defendant No. 2 wrote to the Plaintiff stating therein that Defendant No. 2 was an Indenter/facilitator which would put its full efforts with the supplier on their complaint, but they would have to wait for feedback from the supplier. Vide another e-mail dated 22nd September, 2010, Mr Sanjay Kaushik of Defendant No. 2 had written to Mr Mohit Jain of Plaintiff stating therein that Defendant No. 2 had merely facilitated and hence would not be party to the deal.

It would thus be seen that as far as Defendant No. 2 is concerned, the parties had agreed it would not be liable for the loss/damage alleged to have been suffered by the Plaintiff-company.

Section 230 of Contract Act, 1872, to the extent it is relevant, provides that in the absence of any contract to that effect, an agent is not personally liable by the contracts entered into by him on behalf of his principal. It further provides that such a contract shall be presumed to exist, where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad.

In the case before this Court, the contract has been entered by Defendant No. 1 and not by Defendant No. 2 on behalf of Defendant No. 1, as is evident from the sales confirmation which purports to be signed by an authorized signatory on behalf of Defendant No. 1 Goodpal Industry Ltd. This is not the case of the Plaintiff that the sale confirmation is signed by Defendant No. 2 on behalf of Defendant No. 1. As noted earlier, it is Defendant No. 1 which is named as the seller in the sale confirmation as well as in the purchase contract, both of which have been relied upon and filed by the Plaintiff. The Plaintiff has also filed the invoice dated 11th June, 2010, issued by Defendant No. 3. 1. This document also purports to be signed by the authorized signatory of Defendant No. 1. Since the contract was not made by Defendant No. 2 on behalf of Defendant No. 1, the presumption u/s 230 of Contract Act cannot be drawn in this case. In any case, even if such a presumption is raised, it stands fully rebutted from Clause 4 of the terms and conditions, annexed to the Indent.

In Midland Overseas Vs. m.v. "CMBT Tana" and others, Defendant No. 3 was impleaded because it was acting as shipping agent for and on behalf of second Defendant. It was alleged in the plaint that the third Defendant was doing business as shipping agents at Bombay for and on behalf of second Defendant. It was also alleged that the goods were entrusted to the third Defendant which accepted them on behalf of the second Defendant. It was also alleged that the second Defendant was transacting business at Bombay through Defendant No. 3, which was its local agent. Relying upon Section 230 of Contract Act, the suit was dismissed against Defendant No. 3

The learned Counsel for the Plaintiff has pointed out that the Indent was accepted by the Plaintiff subject to the terms and conditions of the purchase contract dated 26th May, 2010. A perusal of the purchase contract would show that no such term was stipulated by the Plaintiff, which can be construed to make Defendant No. 2 liable to the Plaintiff-company for the damages, alleged to have been suffered by it on account of the goods being defective or not being in accordance with the agreed specifications. Rather Clause 7 of the Special Note stipulates that any loss due to less stuffing will have to be compensated by seller, which is yet another indicator that Defendant No. 2 was acting only as a facilitator.

Since no term stipulated in the purchase contract is contrary to the terms and conditions of the Indent dated 26th May, 2010, it cannot be said that Clause 4 of the terms and conditions of the Indent is not binding on the parties. Since the parties have specifically agreed that Defendant No. 2 will not be liable for the damages, if any, suffered by the Plaintiff, out of this transaction, the Plaintiff-company cannot have any cause of action against Defendant No. 2 and in any case, the suit is in such a case would be hit by Section 230 of Contract Act, thereby attracting Order VII Rule 11(d) of the Code of Civil Procedure, besides being bad for misjoinder of Defendant No. 2 which is neither a necessary nor a property party to the suit.

The learned Counsel for the Plaintiff has relied upon the decision of the Calcutta High Court in Alliance Mills (Lessees) Pvt. Ltd. Vs. India Cements Ltd. and Another, . In the case before Calcutta High Court, the contract indicated that the name of Defendant No. 2, who had filed application under Order 7 Rule 11 of CPC for rejecting the plaint, had been shown as purchaser. It was specifically stated on behalf of the Plaintiff that Defendant No. 2 had entered into the said contracts in the name of its firm as the purchaser and the Plaintiff had agreed to sell and deliver to Defendant No. 2 and Defendant No. 2 had agreed to purchase the goods from the Plaintiff at the rates mentioned in the contracts. This was also the case of the Plaintiff that Defendant No. 2 was in any event personally entitled to enforce the contract and was personally bound by it. However, in the present case, there is not an iota of allegation that Defendant No. 2 had agreed to be personally bound by the contract. To the contrary, the documents filed by the Plaintiff clearly show that it was Defendant No. 1 alone, which was the seller of the goods and under Clause 4 of the terms and conditions, annexed to the Indent, Defendant No. 2 was not to be personally bound for any loss/damage to the Plaintiff arising out of the transaction in question by the Plaintiff. As discussed earlier, the contract was between the Plaintiff and Defendant No. 2, where Plaintiff is the purchaser and Defendant No. 1 is the seller. There is no dispute that even the Letter of Credit was issued by the Plaintiff in the name of Defendant No. 1 alone.

From whatever angle I may take, Defendant No. 2 is not liable to the Plaintiff-company to make good the loss suffered by it on account of the goods supplied by Defendant No. 1 being defective or being not in accordance with the agreed specifications.

Coming to the relief of injunctions, since the goods have been sent by Defendant No. 1 to the Plaintiff, the ownership in the goods vests only in Defendant No. 1 and Defendant No. 2 does not claim any right or interest in these goods, the Plaintiff can seek injunctions only against Defendant No. 1 if it is otherwise made out on the strength of the case setup by it. But, neither the plaint discloses any cause of action qua Defendant No. 2 in respect of the goods which are lying with Defendant No. 3 nor can be said that Defendant No. 2 is a necessary or a property party with respect to these reliefs.

In the facts of the case, the Court has the options to reject the plaint qua Defendant No. 2 or to delete the name of Defendant No. 2 from the array of Defendants and dismiss the suit against Defendant No. 2. The learned Counsel for the Plaintiff states that rejection of the plaint qua one of Defendants may not be a correct course of action and if the Court is of the view that Defendant No. 2 is neither a necessary nor a property party to the suit, it may have to delete its name from the array of Defendants. Hence, the suit against Defendant No. 2 is dismissed and its name is deleted from the array of Defendants. The Plaintiff is directed to file an amended memo of parties after excluding the name of Defendant No. 2 from the array of parties.

The application stands disposed of.

CS(OS) 2151/2010 and IA No. 14172/2010 (O. 39 R. 1&2CPC)

The service report with respect to Defendant No. 1 is not on record. Mr Sanghi states that he will track the delivery report on the website of the courier and file the same along with the affidavit within two weeks.

Renotify on 29th September, 2011.

In case if it transpires that Defendant No. 1 has not been served, fresh summon be issued to it through DHL courier for the date fixed above.