M/S Sun Pharmaceutical Industries Ltd vs MANAGING DIRECTOR

THE Original Petition pertains to the year 1995. It is being decided after it was remanded back to this Commission by order passed by the Hon ''ble Apex Court. The long and short of the Complainant ''s case is this. M/s. Sun Pharmaceutical Industries, formerly known as M/s. Gujarat Lyka Organics Limited, Complainant in this case, transacts the business of production and sale of life saving drugs and is having global market. The Complainant entered into a contract with one, Condea Chemical Trading Company, Hong Kong for sale of two M.T. Cephalexin Monohydrate BP/USP at US $ 140 per kg. The buyer agreed to pay the price by means of a Letter of Credit (90 days sight), which was opened on 30.09.1994 by the Hong Kong and Shanghai Banking Corporation Limited (to be referred as ''HSBC '', now onwards), Hong Kong, in favour of the Complainant. It was also agreed as per Letter of Credit that the said goods must be forwarded to the Consignee, through the Managing Director, Exfin Shipping (India Private Limited), OP1 and one of the documents to be negotiated under the said Letter of Credit was the Airway Bill to be issued by OP1. As per the terms of the Letter of Credit, the consignee copy of the Airway Bill was required to be sent to the HSBC and a not-negotiable photocopy was required to be sent to the Condea Chemical Trading Company. Consequently, the goods were thus to be delivered only on production of the consignee copy of the Airway Bill by the consignee i.e. Foshan Feedmill Limited at Foshan in China and the opposite party no. 1 and Managing Director, Bright States Company Limited, opposite party no. 2 were prohibited from delivering the goods, without production of the consignee copy of the Airway Bill dated 21.10.1994.

THE Complainant thus engaged the services of OP 1 for sending one consignment of 1000 kgs of Cephalexin Monohydrate, packed in 40 fibre drums, from Bombay to Foshan, in China. OP 1, acting as an agent of OP 2, issued Airway Bill, dated 21.10.1994, in the name of OP 2. OPs 1 and 2 were to deliver the consignment to the consignee in Foshan, against the production of original documents routed through the Bank. The complainant negotiated the documents with their Bankers, State Bank of India, Shiv Sagar Estate Branch, Worli, Bombay, under the Letter of Credit issued by HSBC, Hong Kong. Some discrepancies were pointed out and the above said documents, including original Airway Bill, dated 21.10.1994 were returned to the complainant by the above said Bank. Consequently, the goods could not reach the destination. The Letter of Credit was neither encashed nor honoured. The complainant was concerned about the re-booking of the consignment back to Bombay. The complainant made inquiries, orally as well as in writing, in order to know the whereabouts of the consignment, but the OPs failed to do the needful. The letters written by the complainant could not evoke response. When they were pressed further, OP 2 informed the complainant, on 11.02.1995, that the consignment had been delivered to the consignee, on 31.10.1994. The complainant was surprised to note that the consignment had been delivered without the production of consignee copy of the airway bill, which was at that time, in possession of the negotiating Bank.

THE main allegation of the complainant is that OPs 1 and 2 delivered the goods negligently and with malafide intention, without production of the consignee copy of the airway bill, which remained in possession of the HSBC. Their main prayer is that both the opponents, jointly and severally, be saddled with the liability to pay Rs.44,47,140/-, with interest, from 28.10.1994 and Rs.2,00,000/- as costs.

THE instant case was contested by the OP 1 only. OP 1 has enumerated the following defences. OP1 is a Clearing and Forwarding Agent. It provides cargo related services to its clients, such as, preparing the shipping documents, custom clearance and handing over the shipments to the carriers for onward delivery to the consignee as per the Airway Bill or Bill of Lading, as the case may be. OP1 is not a party to the main contract entered into between the consigner and the consignee. Again, it is not aware of any of the terms of the said contract. As a matter of fact, OP2 appointed OP1, on their behalf. It prepared documents as per instructions given by OP2, which were to be confirmed by the complainant. The documents prepared by it were in order and the same were handed over to the Carrier. Thus, OP1 stands absolved of all his responsibilities. He had prepared the documents as per instructions of OP2, which were duly confirmed by the complainant. The complainant did not point out any discrepancy in the said document. It is averred that the shipment has been handed over by it to the Carrier and the Carrier is responsible to deliver the shipment, as per the Airway Bill, and it has no role to play in the delivery of the shipment. The said shipment was a Multi-mode Shipment i.e., first of all, to be carried by Air, to Hong Kong, and from Hong Kong to Foshan, China by Sea. OP1 was, therefore, liable to ship the goods to Hong Kong, by Air and Airway Bill was prepared accordingly. From Hong Kong to Foshan, China, the shipment was handled by OP 2, who issued Bill of Lading, for the same. OP1 never undertook to deliver the shipment to the consignee, as it was the responsibility of the Carrier or OP 2. It is denied that the complainant was engaged by OP1, as alleged. All the other allegations have been denied. It is not out of the place to mention here that, previously, this case was heard finally by this Commission, by the Bench presided over by Hon ''ble Mr. Justice M. B. Shah, President. The said Bench had decreed the case against both the OPs. They were held liable, jointly and severally, and were directed to pay a sum of Rs.44,47,140/- with interest at the rate of 21% p.a. from 28.10.1994, till its payment. However, the said case was heard and decided, in the absence of OP 1, because none had appeared to advance arguments before the above said Bench.

AGGRIEVED by the order passed by the said Bench, the Hon''ble Supreme Court was approached. The Hon''ble Supreme Court set aside the order passed by the said Bench, and remanded the case to this Commission, for deciding afresh, the case of OP 1, on merits, after hearing counsel for both the parties, subject to payment of Rs.5,00,000/- , to be paid to the complainant , by OP1. The said order pertains to 28th day of February, 2012.

WE have heard both the counsel at length, and perused their synopsis. The argument raised by the counsel for OP 1, has five following prongs. Subission ONE : BARRED UNDER SECTION 230 OF THE CONTRACT ACT. Learned counsel for the opposite party vehemently argued that section 230 of the Contract Act prohibits suits and other action against an agent. It was argued that the OP 1 was engaged by the complainant in its capacity as an agent of OP 2. Section 230 of Contract Act runs as follows: "230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal. - In the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them. "

OUR attention was invited towards the fact that in para no. 2, the complainant has himself admitted that, "2. The Complainants has engaged the services of Opponent No. 1 for sending one consignment of 1000 kg of Cephalexin Monohydrate packed in 40 Fiber drums from Bombay to Foshan in China. The Opp. Party No. 1 acting as an agent of Opposite Party No. 2 issued an House Air Way Bill dated 21.10.94 in the name of Opposite Party No. 2. " Again, in his affidavit, dated 25.10.2005, the complainant has further admitted that, "4. I say that the OP 1 has issued a Non-Negotiable Airway Bill dated 21.10.94, in the name of the OP 2, correctly describing the names of the Consignor and the Consignee. Herewith annexed and marked as Annexure- ''B '', is a true Photostat copy of the said Airway Bill."

MOREOVER , the opposite party no. 2 is only a freight forwarding agent. Opposite party no. 1 got in touch with its principal opposite party, for the purpose of issuance of shipping documents. OP1 sent a telex to opposite party no. 2, on 14.10.1994, requesting OP2 to issue a House Airway Bill and inform OP 1 of the rates of shipment from Hong Kong to Foshan. OP 1 issued the House Airway Bill as an agent of OP 2, on 21.10.1994, clearly disclosing that it was issued by Bright State Company Limited. The goods were shipped on 21.10.1994 from India and delivered to the consignee nominated by the buyer on 31.101994 in Foshan, China. The goods were received in Hong Kong by opposite party no. 2 and were then consigned by sea from Hong Kong to China through Skyplanet Shipping Limited whose bill of lading dated 27.10.1994 was filed. In order to buttress his argument, learned counsel has cited few authorities. The first is reported in Midland Overseas Vs. CMBT Tana AIR 1999 Bombay 401, where it was held :- "6b. It is apparent that the principal is disclosed and has been impleaded as 2nd defendant. It is further admitted case in the plaint that the 3rd defendant acted as an agent of the 2nd defendant and the container was accepted by the 3rd defendant on behalf of the 2nd defendant. In the circumstances, where the principal is disclosed and has been impleaded as defendant No. 2, no action would lie against the defendant No. 3 who are only agent of defendant No. 2. There is not even a whisper in the entire plaint that the 3rd defendants acted independent of 2nd defendant or that the container was accepted by the 3rd defendants in the capacity of their own or the 3rd defendants while contracting undertook any personal liability under the said contract. 7. The plaintiffs claim is founded on non-delivery of the container containing plaintiffs cargo to the consignees at Durban allegedly attributable to negligence and breach of contract of carriage. Under Section 230 of the Act before the Agent can be sued it must be pleaded and shown that the principal is undisclosed and the contract, the breach of which is sued on was entered into by the Agent as having contracted personally. Where the contract is entered into by agent contracting on behalf of a foreign principal who is named and disclosed, the agent cannot be sued personally nor made personally liable. From the pleaded facts in the plaint it is amply clear therefore, that no cause of action has arisen against the 3rd defendants and plaint is liable to be rejected under Order 7 Rule 11 CPC as against 3rd defendants. "

IN Marine Container Services South Private Limited Vs. Go-Go Garments, 1998 3 Supreme Court Cases 247, it was held that Section 230 of the Contract Act, is applicable to the cases under the Consumer Protection Act, 1986.

IN Prem Nath Motors Limited Vs. Anurag Mittal 2009 16 Supreme Court Cases 274, it was held that Section 230 of the Contract Act categorically makes it clear that an agent is not liable for the acts of a disclosed principal, subject to a contract to the contrary. Learned counsel for the opposite party cited another authority which is reported as M/s. Vivek Automobiles Ltd. Vs. M/s. Indian Inc., Civil Appeal No(s). 2333-2334/2004, decided by the Supreme Court on 28.10.2005, wherein the same view was taken.

WE do not pick up a conflict with law cited by the learned counsel for the opposite party. The main point is whether these authorities fit into the facts of this case? It has not bolstered its case with documentary evidence. There is no agreement between OP 2 and OP1. Now, the so called instructions given by the OP 2 to OP1 saw the light of the day. In the agreement entered into between the seller and buyer, the name of OP 2 does not appear. The so-called submissions carry exiguous value. There is no evidence that OP1 was engaged by OP2, as its Agent. The relationship regarding Principal and Agent between OP1 and OP 2, does not stand established. Section 230 of Contract Act has got no application to this case. The skimble scamble explanations put forward by both the parties is of no help to the adjudication of this case. The documents reveal that Principal is the OP1, who had engaged OP2 . The complainant stated in no uncertain terms that it engaged OP1 as its Clearing Agent, i.e., the Principal and Agent, if any, is the OP2, or both the independent agencies and none can be termed as Principal or Agent. There is not even an iota of evidence that OP2 was ever appointed by the Complainant. The Complainant, at one place stated that OP1 was working as Agent of OP2. It is a confusing statement which is not borne out of any document. On the other hand, OP1 also took a but and ben stance. Sometime, it stated that it was appointed by OP2 and sometime by the Complainant. The duty cast upon the Commission is to winnow truth from falsehood.

OP 1 has exceeded its powers. It appears that it was involved in a conspiracy, hatched under a rose. We have perused the Purchase Contract, dated 12.08.1994. The said contract is made between above said seller and buyer. We have gone through Letter of Credit dated 29.09.1994. It clearly specifically mentions "Forwarder Airway Bill issued by Exfin Shipping (India) Private Limited, India, consigned and notify Foshan Feedmill Ltd, 6 Flat, 19 DA FU Road, Foshan, China, Tel: 359 50 marked freight prepaid and showing details of flight no. and flight date. " This document further stipulates: "Documents must be received by the issuing bank from the negotiable bank within 10 days '' after the date of shipment, but within the validity of the credit. All documents other than drafts and invoice must not show this credit number, invoice no., unit price, total invoice value, contract no. and trade term nor any other reference requested to this credit unless otherwise stipulated. At the time of negotiation, the negotiating bank will pay you the amount of the draft less USD25.00 being reimbursing bank ''s charges. "

Hsbc sent a telex to State Bank of India, Bombay, where it was mentioned "Documents received and found to contain the following discrepancies:- +Invoice not showing packing details as per DC stipulation +CERT of analysis not signed by the issuer +HAWB showing telephone no. of Foshan Feedmill Ltd as 359750 I/O 359760 and measurement differ from P/List +Insurance policy not showing number of original policy issued + BENEF. CERT. Not certifying that the non-neg. docs are the same as the neg. docs with the bank. + P/LIST/SHOWING goods cephalex in monohydrate powder BP/USP not called by DC. Invoice showing benef. Address differ. Applicant has refused to accept the above discrepancies and requested us to return documents to your bank. "

STATE Bank of India, vide telex, dated 17.12.1994, replied that the above said discrepancies were not material. They gave the clarification, "We would like to clarify about the discrepancies pointed out in your Telex dated 8.11.94. There was no stipulation in the Letter of Credit about packing details. Certificate of Analysis not required to be signed as per Letter of Credit terms. Telephone No. of Foshan Feedmill Ltd. In our copy has been defaced and cannot be taken as a serious discrepancy for the rejection of documents since full address of the final buyer viz. Foshan Feedmill Ltd, 6 Flat, 19 Da Fu Road, Foshan, China, does appear on the Airway Bill. Insurance Policy does shows the S. No. as 23431 can be verified from the enclosed documents. "

THE HSBC Bank vide telex dated 27.12.1994 still insisted that above said flaws persisted: "We insist that the flwg discrepancies found in the above bill still valid. 1.The measurement on the AWB differs from packing. List (AWB 19 X 19 X 22 Inch. P/L 18 1/2 '' '' X 22 '' '') 2.Bene cert did not certify that the non-neg docs are the same kas the neg doc with the bank 3.The incorrect telephone no. of Foshan Feedmill appeared twice in the AWB and there were no other docs which we could identify the correct telephone no. of Foshan. We have advised discrepancies by TLX on 8 Nov 94 but rec ''d no rejection or response from yr bank. We sent to you another TLX on 15 Nov 94 advising that we shall return doc if no disposal instruction are rec ''d from you latest 16 nov 94. However, we did not rec ''d any reply from yr bank after deadline. So we have assumed that you have accepted the discrepancies and agreed to return the relevant docs which we send to you by DHL on 16 Nov 94 and have closed our file accordingly. Regarding yr docs for ISD141,000.00 your ref. N/BE/94/601465 dated 6 Dec 94 pls confirm that it is sent on collection basis under D/A term and docs are not drawn under our L/C No. DVW113238. Upon receipt of yr tested TLX confirming the above we shall present the docs to drawee for acceptance as instructed, regards. Above all, the OPs have not produced any evidence that the goods reached the destination. The most pertinent question is "Where the goods have vanished? ". As a matter of fact, the airway bill sent through Cathay Pacific mentions "consignee name Gujarat Lyka Organics Ltd., Plot No. 4708, G.I.D.O. IND ESTATE, ________ 393002, DIST. BHAHUGH GUJARAT, (INDIA) AND THE and the consigner name BRIGHT STATE CO. LTD. BANKOK BANK BLDG. 14-20, BOHHOAH, TRANSD 4887, BHHUSG WAH, HONGKONG, TEL NO. 541 8880, FAX NO. 8513658, 8513581. CONTACT PERSON Mr. ERIC IEUG, WBV____ AIR SERVICE PVT. LTD. BOMBAY ".

IT is admitted and signed by the opposite party no. 1 Exfin Shipping Company. It is apparent that the consignment was misappropriated by Bright State Company Limited, in connivance with Exfin Shipping Company. The goods did not reach the destination. The goods were bunked away in between, by OP2, in connivance with OP 1. Both PW OP1 and OP2 are liable. Consequently, Section 230 is not applicable in this case. SUBMISSION TWO : LIMITATION.

LEARNED counsel for the opposite party no. 1 argued that the present complaint is barred by the limitation. He invited our attention towards Sections 24, 25 and 29 of the Multimodel Transportation of Goods Act, 1993, which are reproduced as follows: "24. Limitation on action. -The multimodal transport operator shall not be liable under any of the provisions of this Act unless action against him is brought, within nine months of - [Emphasis supplied] (a) the date of delivery of the goods, or (b) the date when the goods should have been delivered, or (c) the date on and from which the party entitled to received deliver of the goods has the right to treat the goods as lost under sub-section (2) of section 13. " "25.Jurisdiction for institute action. - ... ..... It deals with Jurisdiction only, and has no relevance in this case. "29. Act to override other enactments. - The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. "

All these arguments have left no impression upon this Commission. This application has not been filed under the Multimodal Transportation of Goods Act, 1993. Consequently, that Act is not applicable. The complainant has filed the complaint under Consumer Protection Act, 1986, where the limitation has been prescribed as two years. The learned counsel for the complainant admitted that the instant complaint was filed within two years.

SUBMISSION THREE : NO DEFICIENCY: It was argued that the entire complaint is based on a legal fallacy that the goods should not be delivered to the consignee unless the consignee produces the original copy of the airway bill dated 21.10.1994, issued by the OP1. It is contended that this contention raised by the complainant is contrary to law. The airway bill dated 21.10.1994, issued by OP 2 through OP 1, represents the complete contract between the parties and undertakes to deliver the goods to the consignee, named by the complainant. The Airway Bill in question has two distinct features. It is made out in favour of a named consignee i.e., Foshan Feedmill, China and not issued to the order of the Consignor or the Consignee. Secondly the Airway bill is made "not negotiable ". It was also argued that where the shipment is through a Sea Voyage, the Bill of Lading, issued by the Carrier would be negotiable, the Consignee may not be named. In that event, the cargo would have to be delivered to the order of the Consigner. The said Bill of Lading becomes a document of title and is endorsable and negotiable, in the hands of the Final Endorsee, who then, acquires the legal right over the goods and the right to take delivery from the Carrier. In such a case, the person who produced the original Bill of Lading can demand delivery and the Carrier is duty bound to deliver, only against production of the original document. The Carrier in such case, cannot handover the delivery, unless it receives the original Bill of Lading, from the Endorsee. When the bill is marked ''not negotiable '', it means that the Consignee is already pre-determined and the Airway Bill cannot be negotiated. In such a case, the duty of the Carrier is to deliver the cargo to the named Consignee only. The Consignee must produce identification that, he is the person named as Consignee. The Carrier is not required to ask that the original document be produced or surrendered. This is a practice followed in International Trade Practice. In the instance case, the goods were delivered to the Consignee, on 31.10.1994. There is admission of the complainant in this context. The Complainant raised the issue of wrongful delivery of the goods with the OP 1 for the first time, only on 02.12.1994, because it failed to receive the payment under the Letter of Credit. OPs. 1 and 2 could not have been expected to retain the goods with them at their own risk and cost, till such time as the original Airway Bill was negotiated by the complainant through the HSBC Bank, and arrived in the hands of the Consignee in China, before giving delivery to the Consignee.

WE are unable to locate substance in these arguments. As a matter of fact, the OP 1 is caught in the pincer of its own making. In the written arguments, it has admitted in so many words, "all that is required is that the consignee who produces identification that he is the person named as the consignee ". The opposite party have failed to discharge their duty in this context. They must prove and show to the Commission that the goods were handed over to the consignee and nobody else. Here lies the catch problem. The Consignee, time and again, stated that it has not received the goods. It is the OP1 and nobody else, who is to carry the ball in proving that it had handed over the goods to the Consignee and nobody else. Evidence in this context is lacking. Let us now advert to the so-called admission made by the complainant, regarding the fact that the goods were received by the consignee. The record reveals that this admission was made from the letters written to him by OPs 1 and 2. The complainant was not personally aware to whom the goods had been handed over. It came to know through the letters of OPs that goods had reached the Consignee. It was misled and wrongly informed. In the written submission, OP itself admitted that for the first time the complainant informed it on 02.12.1994, after it had failed to receive the payment. It was specifically mentioned "Admittedly, however, the complainant raised the issue of wrongful delivery of the goods with opposite party no. 1, for the first time, only on 2nd December 1994, after it had failed to receive the payment under the Letter of Credit ". The crux of the problem is to whom the goods were delivered from the Cathy Pacific Airways Limited, Airway Bill duly signed by Exfin Shipping, on 24.10.1994. Moreover, the name of consignee is mentioned as Bright State Company Limited. It appears that Bright State Company took away the goods and delivered the same to somebody else. There is Skyplanet Shipping Limited Bill, where the shipper is shown as Bright State Company and the Consignee is shown as Foshan Feedmill Ltd., 6 Flat, 19 DA FU Road, Foshan, China, but there is not even an iota of evidence that the goods were delivered to the Consignee. The opposite party has failed to prove this. Consequently both the opposite parties no. 1 and 2 are liable for the above said goods, jointly and severally.

SUBMISSION 4: SUPPRESSION OF MATERIAL HEAD It was submitted by the counsel for the opposite party that, as a matter of fact, the complainant had filed a suit dated 26.07.2006 before the Bombay High Court against (1) Buyer, (2) HSBC Bank, (3) Opposite Party no. 1 and (4) Opposite Party no. 2, in respect of the same transaction. The said suit was subsequently withdrawn. It also transpired that the complainant had filed a consumer complaint against State Bank of India.

THIS argument is of no assistance to the opposite party. Subsequently, it transpired that HSBC Bank and State Bank of India had no role to play in this case. The buyer was also not responsible to pay the price because he had never received the goods. Consequently the suit was withdrawn, because the complainant had also filed a consumer complaint, against the opposite parties. In the light of above discussion, the case of the complainant stands proved. We therefore order that OPs 1 and 2 are jointly and severely liable to pay a sum of Rs. 44,47,140/- with interest at the rate of 9% p.a., from 14.10.1994, till its payment. We also award the costs of Rs. 2,00,000/-, in favour of the Complainant and against the opposite parties.