Prem Wire Industries vs National Thermal Power Corp. Ltd. and Others

Valmiki J Mehta, J.—The Plaintiff/Appellant by means of the present appeal u/s 96 of the Code of Civil Procedure, 1908 (CPC) challenges the impugned judgment and decree dated 30.8.1997 whereby its suit for recovery of Rs. 3,42,790/- along with interest was dismissed by the trial court holding that the Plaintiff was guilty of breach of contract and not the Defendants/Respondents.

The facts of the case are that the Respondents No. 1 and 2/Defendants No. 1 and 2 who for the sake of convenience are referred to as seller/NTPC because both the Respondents are in fact National Thermal Power of Corporation (NTPC). NTPC conducted an auction of its scrap material/goods namely ACSR Moose Conductors in bits on 2.5.1986. Auction was conducted by the agent of NTPC M/s Metal Scrap Trade Corporation Ltd., Respondent No. 3/Defendant No. 3. The Appellant was the successful auction purchaser for 40 Metric Tons (M Ts) of material. The scrap was to be lifted by the Appellant from the depot of the NTPC at Rampur, Bareilly, U.P at the rate of Rs. 16.80 per Kg. The Appellant had already deposited Rs. 1 lac for the auctioned goods. The total value of the auctioned goods was Rs. 7,35,200/- inclusive of taxes. The Appellant further deposited Rs. 3,50,000/- vide a demand draft dated 26.6.1980. The Appellant had therefore deposited a sum of Rs. 4,50,000/- which was the approximate value for more than 20 M Ts of material.

The contention of the Appellant/Plaintiff was that the Defendants No. 1 and 2 only supplied 15.515 M Ts and failed to supply the remaining. The Plaintiff therefore alleged breach of contract and sought the difference of value of the goods because in the mean while, the prices of the scrap had increased to Rs. 31 per Kg. Damages were therefore claimed at Rs. 14 per Kg being the difference between the market value being Rs. 31 per Kg and the contracted value of Rs. 16.80 per Kg. The Defendants/Respondents appeared and contested the case. NTPC being the Defendants No. 1 and 2 filed its written statement and the Respondent No. 3/Defendant No. 3 filed a separate written statement. The defence of NTPC was that first of all the Plaintiff failed to make the balance payment within 15 days from the date of auction in terms of the terms of auction and hence committed a breach of contract. NTPC then further alleged that even after extension of time was granted upto 1.7.1986 the Appellant again failed to deposit the balance amount. Finally, the NTPC pleaded that as per the novated contract, the Appellant had to take delivery in two installments of 20 M Ts and the balance payment of 20 M Ts was to be made within 7 days of lifting of the first installment of 20 M Ts.

After the pleadings were completed, the trial court framed the issues which read as under:

Issues:

Whether there is breach of contract by Defendant No. 1 and 2 as alleged by the Plaintiff in paras 8 and 9 of the plaint? If so, its effect? OPP.

Whether the Plaintiff committed breach of contract as alleged by the Defendants. If so, to what effect? OPD (1 to 3)

Whether the contract has been unilaterally cancelled by Defendants No. 1 and 2 as alleged by the Plaintiff in para 8 of the plaint? If so, its effect? OPP.

Whether the Plaintiff has suffered any damages. If so, to what extent? OPP.

To what amount of damages if any is Plaintiff entitled from the Defendants and from whom? OPP.

Whether the suit of the Plaintiff for alternative relief of delivery of the balance scrap material to the extent of 24.485 MT is within time? OPP.

Whether the Plaintiff is the receive the balance quantity of scrap material from Defendants No. 1 and 2 at the original rates after determination of the contract as alleged by the Plaintiff? OPP.

Whether the Plaintiff is entitled to any interest. If so, at what rate and for which period.

Whether the present suit is not maintainable against Defendant No. 3 as alleged by Defendant No. 3? OPD.

Relief.

All the issues were taken and decided together by the trial court. The trial court held that it was the Appellant who was guilty of breach of contract as it failed to pay the balance amount within seven days of lifting of the first installment of 20 MTs.

Before this Court, the counsel for the Appellant has very ably argued the appeal and pointed out that it was in fact NTPC who committed breach of the contract. The counsel has placed reliance upon the replication filed by the Appellant as also the testimony of PW1 read with documents Ex.PW1//D-6 dated 9.7.1986 of the Respondent No. 3 and Ex.DW1/P2 dated 8.6.1988 of NTPC to show conclusively that NTPC was guilty of breach of contract because it never had the material to supply to the Appellant. I completely agree with the submissions of the learned Counsel for the Appellant for the following reasons:

(i) The Appellant had already deposited more than the value of 20 MTs with the NTPC, however, only 15.515 MTs was supplied to the Appellant. The partner of the Appellant as PW-1 had stepped into witness box and proved the fact that inspite of repeated reminders and talks with the NTPC, NTPC failed to supply the further of material of approximately 25 MTs. Even the material supplied of 15.515 MTs was got, after the lot of difficulty and from different depots of NTPC.

(ii) The letter terminating the contract Ex.DW1/P2 dated 8.6.1988 clearly admits that it was NTPC which was unable to deliver the balance material. It is necessary to reproduce this letter which reads as under:

XXXXX

Dear Sirs,

With reference to above, this is to inform you that due to the causes beyond our control, we are unable to deliver the balance material. The contract may be treated as cancelled in terms of General Terms and Conditions of Tender/Auction No. MSTC-D/02/86-87 as contained in auction catalogue No. MSTC-D/02/86-87 of M/s Metal Scrap Trade Corporation Ltd. New Delhi.

The Balance amount of Rs. 20,000/- (Rupees Twenty thousand only) pending with us will be returned to you shortly. Thanking you,

Yours faithfully,

(B.K. Gupta)

Manager (C&M)

This letter clearly shows that it was not the Appellant which was guilty of contract for non-payment but it was NTPC which failed to deliver the material because of causes beyond its control.

(iii) If the Appellant was guilty of breach of contract then there would have been no reason for the NTPC to have refunded any amount to the Appellant much less the amount of Rs. 20,000/-. NTPC would have in fact sought to appropriate this amount on account of breach of contract by the Appellant.

In any case, even if, there was no need to appropriate/forfeit the entire amount of the Appellant lying with the NTPC, if the Appellant was really guilty of breach of contract, the letter Ex.DW1/P2 of NTPC dated 8.6.1988 (and as reproduced above) would not have mentioned about refund of the amount of Rs. 20,000/- and admitted non-supply for the reasons beyond its control. The counsel for the Appellant has rightly pointed out that the auction was of May 1986 and this termination letter is of June 1988 i.e., more than two years later clearly indicating the inability of NTPC to supply the balance material and hence being guilty of breach of contract.

(iv) Once NTPC failed to supply 20 MTs of scrap in the first installment, there did not arise any question of making of the balance payment of second installment of 20 MTs and which was to be payable only after completion of the entire supply of the first installment of 20 MTs, because admittedly, only 15.515 MT were supplied and that too after lot of running around and efforts of the Appellant.

A reading of the impugned judgment and decree shows that all the aforesaid vital aspects as pointed out by the learned Counsel for the Appellant are conspicuous by their absence in the impugned judgment and decree. The impugned judgment and decree fails to discuss the important documents being Ex.PW1/D6 dated 9.7.1986 which clearly provides that balance payment was to be made only after supply of 20 MTs was completed and the fact that Ex.DW1/P-2 dated 8.6.1988 lays no blame on the Appellant, and on the contrary its language is apologetic in nature for failing to deliver the material for reasons which are stated to be beyond control of NTPC. The impugned judgment and decree is therefore clearly illegal and perverse. The facts of the present case clearly show that it was NTPC and not the Appellant which was guilty of breach of contract. The counsel for the Appellant has also rightly pointed out that PW1 in his testimony has proved the rate of scrap of Rs. 31 and also the fact that Mr. B.K. Gupta, the witness of the NTPC who appeared as DW1 admitted that the price of the scrap was approximately Rs. 24 in the year 1988.

In view of the above, the impugned judgment and decree is set aside. I may however, note that the decree has to be passed only against NTPC i.e., Defendants No. 1 and 2/Respondents No. 1 and 2 because the Defendant No. 3/Respondent No. 3 was only an agent of the disclosed principal NTPC. As per Section 230 of the Contract Act, 1872, no liability can be fastened on the agent if it acts for a disclosed principal.

Accordingly, the suit of the Appellant/Plaintiff is decreed against Respondents No. 1 and 2 for a sum of Rs. 3,42,790/- along with pendente lite and future interest at 12% per annum till realization with costs of the present appeal and also of the suit. Let a decree sheet be drawn up accordingly. The appeal is accordingly disposed of as allowed. Trial court record be sent back.