Hindustan Latex Ltd. vs NEOPLAST ENGINEERING PVT. LTD.

COMPLAINT for direction to refund the amount collected from the complainant towards cost of the machine supplied by the opposite party. The allegations in the complaint are :

THE complainant is a Government of India Company incorporated under the provisions of the Companies Act, 1956. This Company is represented by its Company Secretary who is authorised and empowered to represent the Company. THE Company deals with Proplylactic Contraceptive and Health Care Products made from Latex etc. THE complainant invited quotation for supply, erection and commissioning of High Speed Fluidizing Mixer and the opposite party submitted quotation on 18.5.1992. After negotiation revised the offer and placed an order to the opposite party for supply, erection and commissioning of High Speed Fluidizing Mixer for a total consideration of Rs. 13,20,738.72 and including the price of packing charges, Excise duty, erection and commissioning charges etc. Erection and commissioning had to be done within 14 weeks from the date of acceptance of the work order. THE work order was accepted on 4th July, 1993 and the equipments had to be guaranteed for 12 months from the date of erection and commissioning. THE opposite party supplied the machine at the site of the complainant on 28.3.1994 and 29.3.1994, and the machine was put into operation in manual mode from 31.12.1994. As the PVC resin conveying system and DOP transferring system was not working properly, after several rounds of discussion by the complainant with the opposite party decision was taken to send the PVC resin hopper and DOP piping to the opposite party for repair and modification. Accordingly that was despatched on 19.6.1995. Though the machine was received from the complainant on 6.12.1995 the opposite party sent their engineer for installation. Inspite of the efforts of the engineers no progress could be achieved. Later on 5.1.1996 a meeting was convened to solve the problems wherein the complainant informed the opposite party that the error in the material conveying system is between + 2.56% to - 3.24% against the tolerance of + 1% . Inspite of the efforts of the engineers the defects could not be rectified. THE complainant alleges that on 6.2.1997 after repeated requests two technicians of the opposite party conducted as many as 95 trials. Inspite of that they noticed, it could not be improved. THEy left assuring that they would return with necessary accessories to complete the work. Complainant eccuses that the opposite party committed breach as the machine did not perform as is required. THE PVC and DOP system could not be used; thereby the complainant is incurring loss. THE opposite party neither is inclined to replace the machine nor reimburse the loss incurred by the complainant. THE opposite party is guilty of unfair trade practice and also deficiency of service. Complainant sent notice dated 22.8.1997 to the opposite party demanding return of the amount received by them as cost of the defective machine. For this the opposite party sent a reply. THE complainant contended that since the opposite party is guilty of unfair trade practice as well as deficiency of service direction has to be issued to the opposite party to return the cost of the machine received by them from the complainant. The opposite party in their vision contended that the complaint is not maintainable as the Secretary is not competent to institute the complaint. The complaint is barred by limitation. This Commission has no jurisdiction to entertain this complaint, in view of the institution of the Summary Suit No. 4930/97 by the opposite party against the complainant in Ahmedabad City Civil Court on 15.10.1997 for recovery of a sum of Rs. 6,58,738/- with 24% interest. Summons has already been served on the complainant. The subject-matter in the said suit and in the complaint being the same the present complaint is required to be stayed till the final disposal of the said suit. There is no guarantee as alleged in the complaint. The Technical Officers of the complainant came to the factory of the opposite party and on inspection and trial they were fully satisfied of the performance of the machine. It was on account of the same the machine was sent to the complainant. The Technical Personnel of the opposite party installed and commissioned the machine and the Officers of the complainant were satisfied as to the performance of the machine. But they wanted the machine to run at a greater; capacity that what was agreed to and, therefore, suggested to provide P.V.C. resin hopper and D.O.P. piping, so that the capacity of the machine could be increased further. The allegation that the machine had only the telerance rate of + 2.50% - 3.24% is not correct, and neither was agreed for such a performance. The claim of the complainant that the machine should achieve the said ratio is neither practical nor feasible, whenever the complainant sought for rectification of defects the technicians of the opposite party visited and attended the same. There is no defect in any of the system. Allegation of unfair trade practice and deficiency of service is unfounded. The opposite party is ready to depute their technicians to work under the guidance of technocrat who can achieve the ratio. Therefore, they wanted dismissal of the complaint.

On the side of the complainant Exts. P1 to P18 were produced and P.Ws. 1 to 4 were examined, P.W. 4 the Expert Commission filed Ext. C1 report. On the side of the opposite party R.W. 1 was examined and they produced Exts. B1 to B8.

THE points that would arise for consideration are : (i) Whether the complaint is barred by limitation ? (ii) Whether the complaint is maintainable ? (iii) Whether the allegation of unfair trade practice and deficiency of service is proved ? (iv) Reliefs and costs ?

Point No. 1 : When it is said that a proceeding is barred by limitation initial burden is on the complainant to show that the complaint is within time. The complainant would maintain that though the machine was put into operation in the manual mode from 31.12.1994 there was recurring defects in the PVC resin conveying system and D.O.P. transferring system persuant to which several attempts were made by the technicians of the opposite party-complainant and there were meetings between the complainant and the opposite party. Exts. P4, P5, P8, P9 etc. are minutes of such meetings. Ext. P4 is dated 6.2.1997. It shows the points for discussion. Representatives of both the parties have signed the same. A reading of the points would show that they include the modification required for the DOP metering system assembly etc. and it states that opposite party''s people have visited even on 5.2.1997. Ext. P9 is dated 31.12.1994 i.e., minutes of the meeting dated 31.12.1994. Operational problems of the machine is seen to have been discussed. Ext. P5 is the minutes date 13.3.1996. It mentions that certain items were despatched to the opposite party and that after certain modifications it was sent back on 3.1.1996. The items were despatched on 19.6.1995. Ext. P8 is yet another minutes of the meeting dated 5.1.1996. There also shows there was discussion as to what had to be done with respect to the defective part. The defects since were recurring one cannot say that the cause of action arose only on the date of the work order or date of installation. It should be noted that the work order was inclusive of erection, and commissioning also. Even on the date of Ext. P4 on 6.2.1997 since discussion was going on for rectification and as according to the complainant, inspite of the efforts of the technicians of the opposite party to rectify the same it was not fruitful, there existed cause of action on the various dates mentioned above. Then, since the complaint is within two years of the last date mentioned above, the complaint is within time. It is necessary in this context to note that what the opposite party alleged in paragraph 2 of the version is that the complaint is not maintainable on account of the Indian Limitation Act. As Section 24-A was added to the Consumer Protection Act, 1986 (for short ''the Act'') on 18.6.1993 and the complaint having been instituted in 1997, the period of limitation in the context has to be governed by the said section, not as per the provisions of the Limitation Act. Section 24 prescribes a period of 2 years from accrual of the cause of action. As noticed the complaint having been filed within 2 years of the accrual of the cause of action the argument of the learned Counsel cannot be accepted. Point found in favour of the complainant.

POINT No. 2 : It was urged by the learned Counsel for the opposite party that the complaint cannot be entertained in view of the pendency of the Ext. B8 Summary Suit No. 4930/97 this complaint is not maintainable. It was also urged by the learned Counsel that the complaint is not properly instituted as the person who verified the complaint and signed the same had no authorisation to institute the complaint. Then it was urged that the complainant cannot be treated as a consumer as according to the learned Counsel the purchase of the machinery was for commercial purpose and on that ground itself the complaint is not maintainable; and that the transaction since only concerns breach of contract as well as sale of goods the complaint is not maintainable. The learned Counsel for the complainant on the other hand maintained that none of the aforesaid points raised is sustainable as according to the learned Counsel though the suit is claimed to have filed, the pendency of the same cannot affect this complaint on more than one ground. It was urged by the learned Counsel that suit was filed just to defeat the complainant''s genuine claim and the same is opposed even to Ext. P1 work order itself. It was also urged that the suit is not on the same cause of action or subject-matter. Further, according to the learned Counsel the said suit came to be filed only after notice was issued by the complainant and the reply thereof by the opposite party. It is urged that even summons from the suit was despatched only on 4.12.1997 whereas the complaint was filed on 24.11.1997. As regards the contention that the Secretary was not authorised to verify, sign, plead and institute the complaint, it was urged that he has got sufficient authorisation to do the same. It is urged by the learned Counsel that the claim that since the purchase was for commercial purpose the complainant is not a consumer cannot be sustained, as according to him, there is no such plea in the version; and apart from the same, the transaction is not purely for the purpose of supply of goods but it includes service of erection and commissioning and as a matter of fact the machine was commissioned only in part as the same is operated only in the manual form; thus it concerns service part also. Apart from the same there was guarantee for a period and, therefore, complainant is a consumer so far as service under the warranty is concerned. Learned Counsel for the opposite party relied on the decision of the National Commission reported in M/s. Oswal Fine Arts v. M/s. H.M.T., I (1991) CPJ 330 (NC)=1991 (3) CPR 386, in support of her argument that on account of the pendency of B8 suit the complaint is not maintainable. The decision itself states that the said complaint was barred by limitation and the complainant therein is not a consumer, and after holding so it is also held that the complainant himself had instituted a suit against the opposite party based on identical cause of action. The said decision is distinguishable as the pending case is not on the identical cause of action nor on identical subject-matter. Whereas the suit is for balance of consideration, this complaint is for return of the amount received by the opposite party on the ground of unfair trade practice and deficiency of service. The cause of action need not be identical. The contention raised in para 3 of the version is that the complaint is liable to be stayed till disposal of the suit Ext. B8, not that the complaint is liable to be dismissed. Apart from the same, the sequence of the events would also show that the said plea is not a valid ground. The complainant issued Ext. P10 notice on 22.8.1997 claiming refund of the amount already received by the opposite party. To this notice the opposite party sent their Ext. P11 reply on 18.9.1997. The suit was filed on 16.10.1997, that is after receiving the notice from the complainant and also after replying the same. The demand in the notice was that unless the amount is returned legal action would be taken against the opposite party. Learned Counsel produced a photocopy of the summons. The same is marked as Ext. P18 for reference. It is seen the summons is dated 28.11.1997 that the same was despatched only on 4.12.1997. Since the summons itself was despatched only on 4.12.1997 it cannot be assumed that the complainant had knowledge of the institution of the suit on 16.10.1997. On the other hand, the opposite party instituted the said suit after acceptance of Ext. P10 notice and after sending Ext. P11 reply. Yet, under law the status of the Secretary is that of an agent of the Company (see page 1073 of Company Law by Datta, 5th Edition). In that capacity itself he is entitled to institute the complaint. Section 2(b) of the Kerala Consumer Protection Rules defines agent and states that a person duly authorised by a party to present any complaint, appeal or reply on its behalf etc. is an agent. An agent too can institute a complaint on behalf of the principal. As already noticed, under law, Secretary is an agent of the Company and hence he will be competent to institute the proceedings for protecting the interest of the Company. This is particularly so as his status as the Secretary of the Company is not in dispute. Complainant''s learned Counsel relied on Ext. P12 concerning delegation of powers to argue that the complainant has got power to institute the complaint, as per Ext. P12 delegation of powers also. Learned Counsel for the opposite party sought to maintain that on a strict construction of Ext. P12 cannot lead to an inference that the Secretary is authorised to institute the complaint. As has already noted, with due regard to the Scheme of the Act and Rules an agent is also entitled to institute proceedings for protecting the interest of the principal. Further it has to be noted in this connection, even as per Order 29, Rule 1 of CPC subscription and verification of pleadings can be by the Secretary or by the Director as the principal officer of the Corporation. Apart from the same, substantive right should not be allowed to be defeated on technical grounds of procedural irregularity so as to ensure that no injustice is done to any party. Therefore, we are not satisfied that the complaint is not maintainable on the ground that the person who signed and instituted the complaint has no authority to institute the complaint.

THE next ground urged by the learned Counsel for the opposite party as to the maintainability is that, since the purchase was for commercial purpose the complainant is not a consumer. Reliance was made by the learned Counsel the decision of the Supreme Court reported in Laxmi Engineering Works v. P.S.G. Industrial Institute II (1995) CPJ 1 (SC) , wherein the Supreme Court observed that the Act provides for business to consumer disputes and not business to business disputes. According to the learned Counsel, the very reading of the complaint would show the purchase of the machinery was for large scale production and distribution, and thereby to make profit, consequently the same is a business to business transition. THErefore, according to her the complainant cannot be treated as a consumer. This argument too cannot be accepted because there is no plea in the version that the complainant is not a consumer or that the purchase is for commercial purpose. Even otherwise this argument cannot be sustained as there is a provision in Ext. P1 work order, Condition No. 7, which enjoins that the equipment should be guaranteed for 12 months from the date of completion of erection and commissioning. THE case of the opposite party is that he has commissioned the equipment. THEn it is his duty to issue guarantee for 12 months, and now having admitted in Ext. P1 as to the issuance of guarantee, he cannot urge that there is no guarantee on the technical ground that no separate guarantee was issued. THEn as per his own case, in view of Condition No. 7 in Ext. P1, he was bound under law to issue guarantee. A person who is guilty of breach cannot be permitted to take advantage of his breach. In such circumstances we are of the view that the opposite party cannot insist that this transaction is without any guarantee. THEn, even if the purchase was for commercial purpose, if there is guarantee or warranty, the complainant has to be treated as a consumer in relation to the service under the warranty. THErefore, the said argument also cannot be accepted. Learned Counsel for the opposite party also contended that the transaction being failure of the opposite party to erect and commission the machinery the complainant cannot be treated as a consumer. Learned Counsel relied on a decision of the National Commission reported in M/s. Jaipur Metals and Electricals Ltd. v. M/s. Laxmi Industries, II (1991) CPJ 602 (NC)=1991 (7) CPR 119. A reading of the decision itself would show, since the equipment was not erected and commissioned, there was occasion for performance; and deficiency since pertains to performance, failure to effect and commission the equipment would only be breach of contract. THE question, therefore, is whether as a matter of fact the machine was erected and commissioned. THE grievance of the complainant as could be seen from the allegations is that on commissioning of the machine the same could be operated only manual mode, not the machine was not erected at all. It is significant, in this connection to note that the very case of the opposite party in paragraph 8 of the version is, the machine was installed and commissioned to the satisfaction of the complainant and that the complainant wanted to run the machine at a greater capacity and for securing the same the opposite party suggested for PVC resin hopper and DOP pipings so that the machine could acquire more capacity. We do not consider that when the contentions are as aforesaid, the decision in Jaipur Metals'' case (supra), referred to earlier cannot have any application. Learned Counsel also made reliance on a decision of the National Commission reported in Mather and Platt (I) Ltd. v. Kaleeswari Industries, III (1995) CPJ 9 (NC). This decision concerns the question whether the complainant who purchased the machinery for commercial purpose will be a consumer. THE decision held that, that will depend upon whether there was warranty as part of a composite contract of supply and erection of the machinery and its maintenance for a period. Here, the work order itself provides for issue of guarantee for a period of 12 months. When there is warranty, he would be a consumer so far as service under the warranty is concerned. THE said contention, therefore, is liable to be overruled. In view of the said discussion this point is found against the opposite parties.

POINT No. 3 : Return of the amount received by the opposite party is claimed mainly on the allegation of unfair trade practice by the opposite party. The case of the complainant is that as per Ext. P1 work order though the opposite party agreed to supply, erect and commission the equipment he did not do that; instead he supplied a wholly defective machine which could not perform as was represented and agreed to by the opposite party. This case of the complainant is denied by the opposite party and maintaining that consistent with the work order the opposite party has supplied, erected and commissioned the equipment which is even now functioning. There is a case for the opposite party in para 18 of the version of the effect that, even though the machine was erected and commissioned to the satisfaction of the complainant they wanted to run the machine even at a greater capacity and for achieving the same the opposite party suggested to provide PVC resin hopper and DOP pipings and, thereafter the supply of the said equipment was made. The attempt was to maintain, the said two items are not taken in by the purchase order and that the opposite party sent the same on approval basis. It must immediately be stated, the said case is demonstrably opposed to Ext. P1 work order itself. Items 3 and 4 therein are PVC resin pneumatic conveying system and DOP transferring system respectively; and it shows that the total price of the whole machinery inclusive of the said items 3 and 4 is Rs. 13,20,738.72. Then it is idle for the opposite party to contend that the same was a later addition and not part of the same transaction. Complainant relied on Ext. P9 minutes dated 31.12.1994 and Exts. P5 and P8 in support of their case that the machine did not perform as was agreed to. On the other hand the learned Counsel for the opposite party relied on Ext. B5 Visit Report to maintain the equipment was programme properly. Page 9 of Ext. B5 shows that the continuous running of the machine could not be carried out. Then in page 10 it is stated that fresh trial was taken by reprogramming the cycle and they fixed certain quantity to be supplied to the machine. But that was not agreed to by the complainant. Learned Counsel relied on Ext. P7 dated 13.6.1995 to maintain that the machine was working except the mechanical work. But the last sentence therein would show that they agreed to carry out the balance mechanical work. Learned Counsel also made reliance on Ext. B3 to contend that on 8.11.1995 the complainant wanted the opposite party to send quotation for another machine. This conduct of the complainant, according to the learned Counsel for the opposite party, would show that they were satisfied with the performance of the equipment. But evidence to which advertance has already been made particularly the minutes would show that the machine did not perform as is required as per Ext. P1 work order. Ext. P9 dated 31.12.1994 the minutes would show that rectification was necessary. Adding to that Ext. P15 dated 21.2.1995, a communication by the opposite party states that they are arranging to depute their service engineer for improving the pneumatic conveying system. Performance of the equipment was far below expectation is demonstrated by the said document. In this connection it is necessary to advert to Ext. C1 report filed by P.W. 4 the Expert Commission. In Ext. C1 report the Commissioner who examined the equipment states as to the defects which has noticed. He notes that the motor supplied is NCEF 3 HP 1400 rpm. Instead of 5 HP Bharat Bijli Motor or 3000 rpm. Then the Commissioner notes that instead of 3 HP Motor they had supplied 2 Nos. 1.5 HP motors with pumps, and as to the query whether the machine is working as per specification he has stated that the machine is not working automatic mode but only in manual mode. He also states, since the machine is not operated in the automatic mode, the defects cannot be exactly checked. As P.W. 4 he also swears as to what actually he found at site. From Ext. C1 and the evidence of P.W. 4 would show that the machine particularly PVC resin hopper and DOP pipings are not working, the machine had recurring defects which inspite of attempts made by the technicians of the opposite party could not be rectified. The machine is working only in the manual mode. Therefore, the goods supplied were not of the standard quality.

As per Section 2(1)(r) unfair trade practice means a trade practice which adopts any unfair method or unfair or deceptive practice including false representation that the goods are of a particular standard, quality, quantity, grade, composition, style or model. As has already noticed, the goods supplied is not consistent with the work order and also not consistent with the representation made by the opposite party. To escape from the aforesaid conclusion, as noticed, in para 8 of the version a vain attempt is made to maintain that the systems viz., the PVC resin hopper and DOP pipings were not included in the work order and was supplied later on approval basis. The said stand cannot be accepted as the said two items are included as items 3 and 4 in the work order itself. Therefore, the whole machine had to be supplied inclusive of the said two items also. If the same is below standard and is not consistent with the representation made by the opposite party, the transaction as a whole would amount to unfair trade practice. Now the argument is that they are willing to rectify. That cannot be stated as a solution because inspite of their repeated attempts it could not be rectified and the defects are inherent; the whole equipment being a compact unit suggestion that only a part of it is defective cannot be accepted.

IN the decision reported in Maheshbhai Parikh v. Proprietor/Partner Chudasma Footwear, 1992 (1) CPR 105, by the State Commission, Gujarat, though the matter related to sandals, the principle laid down therein has got relevance as the Commission held that once it is proved that the goods were not of the standard quality and are defective, the complainant is entitled to the return of the whole price, and direction was issued to the opposite party to pay the full price on return of the defective goods. IN the decision reported in Dr. Mohanarao Maruthirao Charge v. M/s. Sipani Automobiles Ltd., II (1992) CPJ 613=1992 (1) CPR 357, the Karnataka State Commission held that persuant to the advertisement that the engine manufactured by M/s. V.S.T. Tillers and Tractors with joint collaboration of Mitsubshi, Japan, would be fitted in the Montana diesel car when the complainant purchased the car and the car supplied to the complainant was found to be not fitted with the said machine, the Commission found the same is unfair trade practice and the Commission directed the respondent to pay the costs of the car and the complainant to deliver the car to the respondent and execute necessary document on payment of the costs of the car. But no interest was awarded as the complainant therein had used the car till then. IN view of the aforesaid discussion we find that the opposite party has indulged in unfair trade practice consequently the complainant is entitled to the return of the cost paid by him. Since the complainant has not claimed interest on the said amount and also in view of the fact that the equipment is being operated in manual mode from 31.2.1994 we do not consider that interest can be awarded on the said amount till the date of this order. Point found in favour of the complainant. Point No. 4 : In view of the findings in the aforesaid points the complainant is entitled to the return of the cost paid by it and the opposite party on paying the said amount the complainant has to return the equipment to the opposite party.

IN the result, the complaint is allowed and the opposite party is directed to return the cost of the machine viz., Rs. 10,64,017.50 paid by the complainant within 3 months of the receipt of the copy of the order, the aforesaid amount will bear interest @ 18% from the date of expiry of the said three months till payment or recovery. On payment of the said amount as aforesaid the complainant shall return the machinery to the opposite party. The opposite party is directed to discontinue the unfair trade practice; and it shall not repeat the same. Since the complainant succeeds in this complaint, the complainant is entitled to its costs which we fix at Rs. 5,000/-. Complaint allowed with costs.