STATE OF GUJARAT v. EXCELSIOR MOTOR & ELECTRIC MACHINE WORKERS

CORAM : MR.JUSTICE A.M.KAPADIA Date of decision: 27/11/2002 ORAL JUDGEMENT

1.(cid:9)In this appeal which is filed under Section 96 of the Code of Civil Procedure ('the Code' for short), the judgment and decree dated 20.10.1980 rendered by the learned Judge (Court No.14) of City Civil Court, Ahmedabad, in Civil Suit No. 3202 of 1975 is the subject matter of challenge. By the impugned judgment and decree, the suit filed by respondent No.1 against the appellants as well as respondent Nos.2 and 3 herein for the relief of declaration came to be allowed by passing the decree by granting declaration that the suit Order No.2 at Ex.51 together with the Recovery certificate at Ex.52 and suit Order No.3 at Ex.62 are illegal and invalid and permanent injunction restraining the appellants and respondent Nos.2 and 3 from enforcing the suit Order Nos.2 and 3 against respondent No.1 has been ordered to be issued with a clarification that issuance of the injunction would disentitle the appellants and respondent Nos.2 and 3 herein from recovering the amount of respondent No.1 as claimed in the suit Order No.2 at Ex.51 or suit Order No.3 at Ex.62.

2.(cid:9)Appellants were defendant Nos.1 and 2, respondent No.1 was the plaintiff whereas respondent Nos.2 and 3 were defendant Nos.3 and 4 in the suit. They are therefore hereinafter referred to in this judgment as "plaintiff" and "defendants".

3.(cid:9)The facts in nutshell are these:

3.1.(cid:9)The plaintiff firm is a registered partnership firm under the Indian Partnership Act, 1932. It deals in supplying and erecting lifts in buildings for going up and down on various floors.

3.2.(cid:9)The plaintiff firm received a letter dated

24.4.1975 signed by the then Deputy Director of Industries of defendant No.1 to the effect that the plaintiff failed to supply and erect a two speed lift in terms of the contract and as such the contract for supplying and erection of the said lift was made on risk purchase basis with some other firm. The plaintiff was under the said letter called upon to pay an amount of Rs.33,640/- by way of damages in accordance with the stipulated conditions in the contract in that regard failing which a threat of action under another condition of the contract for this purpose was given.

3.3.(cid:9)According to the case of the plaintiff, no such contract was entered into between the parties and therefore it was not liable to damages. The plaintiff has however admitted that negotiations were going on between the plaintiff and the Department of Industries under defendant No.1 regarding supply and erection of one passenger lift in the Telecommunication Building at Surat. However, no concluded and completed contract between the plaintiff and defendant Nos.1 and 2 came into existence between the parties in that regard. The plaintiff had claimed that it was entitled to recover Rs.1,900/- from defendant Nos.1 and 2 which it had paid to them by way of earnest money. The aforesaid letter dated 24.4.1975 was replied by the plaintiff by its letter dated 13.5.1975 under which it claimed the refund of its earnest money deposit. Instead of agreeing to refund the earnest money to the plaintiff, the plaintiff received the first suit order followed by the second suit order and finally followed by the third suit order.

3.4.(cid:9)The plaintiff had disputed its liability to pay the amount of RS.31,740/- claimed under the suit orders. The plaintiff therefore filed Civil Suit No. 1978 of 1975 in the City Civil Court for claiming an interim injunction against the implementation of the suit order Nos.1 and 2. Before defendant No.4 served the plaintiff with suit order No.3, the said suit was withdrawn on

12.8.1975 with a permission to file a fresh suit on the same cause of action. Prior to that the plaintiff had served a statutory notice dated 3.7.1975 under Section 80 of the Code to defendant Nos.1 and 2 and the Collector of Ahmedabad. The plaintiff thereafter apprehended enforcement of the suit orders and hence it filed one more suit being Civil Suit No.2552 of 1975 in the City Civil Court for a permanent injunction against the implementation of the suit orders against it. Since the said suit was also likely to be failed on technical ground for want of the required statutory notice under section 80 of he Code it was withdrawn on 17.10.1975 with a permission to file a fresh suit on the same cause of action.

3.5.(cid:9)Thereafter the plaintiff filed the present suit seeking declaration that the suit Order No.SP-B-337/Guj/53/72-73/4634 dated 9.6.1975 and No.SP-B-337/Guj/53/72-73/6160 dated 25.6.1975 passed by the Joint Industries Commissioner and Industries Commissioner of the Gujarat State respectively and the order No.2 RB-MOF-REV-40 75-76 dated 1.8.1975 passed by defendant No.4, referred as suit order Nos.1, 2 and 3 respectively, at the instance of defendant Nos.1 and 2 and the Collector of Ahmedabad are illegal and invalid and also sought permanent injunction against the suit orders and also from recovering the alleged amount of damages as arrears of land revenue or otherwise by way of any coercive measures at any time from the plaintiff.

4.(cid:9)The suit was contested by defendant Nos.1 and 2 by filing written statement at Ex.9 wherein inter alia it was contended that the plaintiff had no right to file the suit; the suit was prima facie bad in law; that the statutory notice was neither legal nor valid and that no cause of action had arisen in favour of the plaintiff for filing the suit. Defendant Nos.1 and 2 tried to justify the suit orders under the terms of the contract and claimed that the plaintiff would be liable to pay the amount claimed therein. They, therefore, prayed to dismiss the suit with costs.

5.(cid:9)On the pleadings of the parties, the learned trial Judge framed issues at Ex.13. Since no oral evidence was adduced by either of the parties, the learned trial judge, considering the documents produced by the parties and submissions advanced by the learned advocates appearing for the parties, came to the conclusion that suit order No.2 at Ex.51 and suit order No.3 at Ex.62 are illegal and invalid. On the aforesaid finding recorded by the learned trial judge, decree came to be passed in favour of the plaintiff and resultantly permanent injunction restraining the defendants from enforcing the suit order Nos.2 and 3 came to be passed with a clarification that issuance of the injunction would disentitle the defendants from recovering the amount from the plaintiff as claimed in both the suit orders, that is, Ex.51 and 62.

6.(cid:9)It is this finding and the resultant decree passed by the learned trial Judge which is on the anvil of scrutiny before this Court at the instance of defendant Nos.1 and 2.

7.(cid:9)Mr. Dabhi, learned AGP for defendant No.1 and 2 (appellants herein) contended that the learned trial judge has misread the ratio laid down by the Supreme Court in the case of Union of India v. Raman Iron Foundry reported in AIR 1974 SC 1265 which has resulted into misreading of the suit contract Ex.55 by the learned trial Judge. It is also asserted by him that the learned trial Judge has erred in holding that it was not necessary to decide issue Nos.3 and 4 which were relating to contract between the parties in respect of the proposed installation of two speed lift in the Telecommunication Building at Surat and breach of the contract in installation of the contract committed by the plaintiff. He therefore urged that the impugned decree is recorded in favour of the plaintiff without any evidence and therefore same deserves to be quashed and set aside by allowing the appeal and thereby to dismiss the suit filed by the plaintiff.

8.(cid:9)Mr. Aspi M. Kapadia, learned advocate for the plaintiff (respondent No.1 herein) has supported the impugned judgment and decree throughout and according to him the learned trial judge has very rightly appreciated the ratio laid down by the Supreme Court in Union of India's case (supra) which has been exhaustively dealt with by him in his judgment. He further contended that the learned trial judge has also categorically recorded the finding that clause 23 in contract at Ex.55 is similar to clause 18 of the reported decision in Union of India's case (supra) wherein the Supreme Court has interpreted the clause 18 of the contract in the said case. According to the learned advocate, no illegality is committed by the learned trial judge in recording the decree which is impugned in this appeal and therefore contended there is no scope for interference with the impugned judgment and decree in exercise of powers under section 96 of the Code by this court. He therefore urged to dismiss the appeal with cost and thereby to confirm the judgment and decree passed by the learned trial Judge in favour of the plainiff.

9.(cid:9)At the outset be it noted that since there was no oral evidence adduced by either of the parties, the trial court has relied upon only the documentary evidence to decide the issues raised by him. So far as the suit Order No.1 dated 9.6.1975 was concerned, the same was produced at Ex.49. On having perusal of the same it is seen that it does not specify any specific levy of any penalty for a specified sum. The learned trial judge therefore did not think it fit to examine the legality and validity of the said order produced at Ex.49. However, copy of the suit order No.2 dated 25.6.1975 which was produced on record at Ex.51 mentioned that the claim of damages for the specific sum of Rs.33,640/-. The the amount of Rs.1900/- had been set off from the claim of Rs.33,640/- by way of adjustment against the earnest money deposit paid by the plaintiff in respect of the contract in question. The said suit order No.2 had been passed under clause 23 of the contract at Ex.55. On having perusal of the copy of the suit order No.3 dated

1.8.1975 which was produced at Ex.62 it was admittedly passed pursuant to the recovery certificate at Ex.52. Therefore, suit order Nos.2 and 3 were challenged on the ground that clause 23 of the contract at Ex.55 did not authorise the defendants or any one of them to recover as arrears of land revenue any claim of damages unless the damages were first of all ascertained in accordance with the law.

10.(cid:9)In the case of Union of India's (supra) in para 2 of the said judgment, clause 18 of the contract was in following terms: "18. Recovery of Sums due: Whenever any claim for the payment of a sum of money arises out of or under the contract against the contractor, the purchaser shall be entitled to recover such sum by appropriating in whole or in part, the security, if any, deposited by the contractor, and for the purpose aforesaid, shall be entitled to sell and/or, realise securities forming the whole or part of any such security deposit. In the event of the security being insufficient, the balance and if no security has been taken from the contractor, the entire sum recoverable shall be recovered by appropriating any sum then due or which at any time thereafter may become due to the contractor under the contract or any other contract with the purchaser or the Government or any person, contracting through the Secretary, if such sum even be not sufficient to cover the full amount recoverable, the contractor shall on demand pay to the purchaser the balance remaining due".

11.(cid:9)On an interpretation of clause 18 of the contract in the said judgment the Supreme Court held that it was applicable only when the purchaser had a claim for a sum presently due and payable by the contractor. It was further held that a claim for damages for breach of contract is not a claim for a sum presently due and payable and the purchaser is not entitled to exercise any of the right conferred upon it under clause 18 to recover the amount of such a claim by appropriating other sums due to the contractor.

12.(cid:9)Now it would be appropriate to refer to clause 23 of the contract in the instant case which reads as under: "Whenever under this contract any sum of money is recoverable from and payable by you, the Industries Commissioner and Central Purchasing Officer shall be entitled to recover such sum by appropriating in part or whole the security deposited by you, if a security is taken against the contract. In the event of the security being insufficient or if no security has been taken from you then the balance or the total sum recovered from any sum case may be, shall be deducted from any sum then due to you under this or any other contract with the Industries Commissioner and Central Purchasing Officer or Government or any other person or persons contracting through Industries Commissioner and Central Purchasing Officer. Should this sum be not sufficient to cover the full amount recoverable, you shall pay to the Industries Commissioner and Central Purchasing Officer demand the remaining balance be as arrears of land revenue dues."

13.(cid:9)On a comparative analysis of the contract at Ex.55 there is no manner of doubt that the contents of the said contract is similar to clause 18 in the case of Union of India (supra) and therefore it is not open for the defendants to recover as arrears of land revenue any amount of damages from the plaintiff pursuant to contract Ex.55 unless damages are first ascertained in accordance with law.

14.(cid:9)It may be appreciated that there was no dispute that the damages sought to be recovered from the plaintiff as arrears of land revenue under clause 23 of the contract are not ascertained or determined in accordance with law. There is no finding or determination in this regard by any court of law or in any arbitration proceedings.

15.(cid:9)In view of the aforesaid fact situation and the documentary evidence, I am of the opinion that suit order Nos.2 and 3 at Exhs.51 and 62 are illegal and invalid.

16.(cid:9)Seen in the above context, the learned trial Judge has very rightly declared that the suit order Nos.2 and 3 are illegal and invalid and resultantly has granted decree as prayed for and consequential injunction.

17.(cid:9)In above view of the matter, I find myself in complete agreement with the reasoning adopted by learned trial judge and the ultimate findings reached by him and consequential decree of declaration and injunction recorded by him. There is no valid reason or justifiable ground to interfere with the impugned judgment and decree in exercise of powers under section 96 of the Code and hence the appeal deserves to be dismissed.

18.(cid:9)For the foregoing reasons, the appeal fails and accordingly it is dismissed with no order as to costs. (cid:9) (cid:9)(A. M. Kapadia, J.) (cid:9) (cid:9) (cid:9) (cid:9)--- (karan)