Partnership firm by its Partner S.Sankar, 5-A, Desilva Road, Mylapore, Madras-4.2. S.Sankar v. Tubes Investments of India Limited, Madras-1.2. S.Sridhar

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 20-4-2006 Coram: The Honourable Mr. Justice T.V. MASILAMANI A.S. No.60 of 19921. Precision Controls, Partnership firm by its Partner S.Sankar, 5-A, Desilva Road, Mylapore, Madras-4.2. S.Sankar .. Appellants vs. 1. Tubes Investments of India Limited, Madras-1.2. S.Sridhar .. Respondents Appeal Suit against the judgment and decree dated 30.3.1990 madein O.S. No.7246 of 1983 on the file of the VIII Assistant Judge, CityCivil Court, Chennai. For Appellants : Mr.Aravind For Respondent-1 : Mr.V.R.Janarthanam ... JUDGMENT The appellants are the defendants 1 and 2 and the 3rd defendantis the second respondent herein in the suit in O.S.No.7246 of 1983 onthe file of the VIII Assistant Judge, City Civil Court, Chennai. Theappellants have preferred this appeal as against the judgment anddecree of the court below dated 30.3.1990. https://hcservices.ecourts.gov.in/hcservices/

2. The first respondent/plaintiff filed the suit for recovery ofRs.40,205/- with interest thereon at 12% p.a. from the appellants andthe second respondent herein on the basis of the contract entered intobetween the first respondent on the one hand and the appellants aswell as the 3rd respondent on the other for the supply, erection andcommissioning of one Rotating and Tilting type Electrically Heatedcarbonitriding Furnace as per the specifications and description, onthe terms and conditions and other details set out in the purchaseorder of the first respondent/plaintiff bearing No.20/0504/2607 dated18.3.1982.3. The appellants resisted the suit by filing a written statementthrough the first appellant and adopted by the second appellant andthe second respondent herein. The court below having considered theoral and documentary evidence adduced on either side had ultimatelydecreed the suit as prayed for with costs. Hence, the appeal.4. The contentions of the first respondent/plaintiff in theplaint are briefly stated as follows:- (a) The first defendant is a partnership firm carrying onthe business of manufacturing and supply of precision controlmachinery. The second and third defendants are partners of the firstdefendant firm.(b) The first plaintiff is manufacturing cycles under thename and style "T.I. Cycles" and factory is situate at Ambattur. Thefirst defendant's factory is also situate at Industrial Estate,Ambattur. The plaintiff placed an order with the second defendant forthe supply, erection and commissioning of one Rotating and Tiltingtype Electrically Heated carbonitriding Furnace as per thespecifications and description on the terms and conditions in thepurchase order of the plaintiff bearing No.20/0504/2607 dated18.3.1982(c) It was agreed between the plaintiff and the defendantsamong other terms and conditions that (i) the Furnace should besupplied, erected and commissioned by the defendants by not later than9th July, 1982; (ii) the price payable was Rs.1,87,000/- Ex-works T.I.Cycles of India; (iii) 20% advance has to be paid by the plaintiffupon submission of guarantee from one of the Nationalised GeneralInsurance companies by the defendants; (iv) 80% of the price to bepaid against Industrial Development Bank of India Bill rediscountingScheme (5 years); (v) the defendants should repay 10% of the cost ofFurnace at the time of receiving the said Industrial Development Bankof India documents to the plaintiff as retention amount payable to thedefendants after six months on successful commissioning of thefurnace; (vi) a penalty amount calculated at 0.5% of the price will be https://hcservices.ecourts.gov.in/hcservices/ levied for each weeks delay in the supply of the furnace; (vii) it wasfurther agreed that any dispute between the parties arising out of thesaid agreement would be subject to the jurisdiction of the courts atMadras.(d) By letter dated 20.3.1982 the first defendant firm alsoconfirmed their acceptance of the said order as per the terms andconditions set out therein. The plaintiff also paid to the defendantsRs.37,400/- by cheque dated 23.3.1982 as advance and the defendantsacknowledged the same by their stamped receipt dated 23.3.1982. Inspite of repeated enquiries and reminders of the plaintiff, thedefendants failed to supply the said furnace as agreed on or before9.7.1982 pleading some excuse or other, but they supplied the furnaceon 15.12.1982 after a delay of 23 weeks thereby causing the plaintiffmuch loss and hardship in making alternative arrangements.(e) Further on the supply of the said furnace, when theplaintiff paid the balance of price payable and delivered the I.D.B.I.documents aforementioned, the defendants failed to pay the plaintiffas per the terms of the said agreement 10% of the said price, i.e.,Rs.18,700/- which the plaintiff was entitled as retention money.Further the defendants became liable to make good the loss and damagessuffered by the plaintiff, which was stipulated at 0.5% on the valueof sale price, for 23 weeks which is quantified at Rs.21,505/-. Thesecond and third defendants as partners of the first defendant arealso personally liable to pay the said amounts.(f) By notice dated 4.2.1983, the defendants were calledupon to pay the aforesaid mentioned amount totally a sum ofRs.40,205/- and the defendants having received the same, failed tocomply with the demand. However the defendant sent the letter dated14.2.1983 without any reference to the notice issued by the plaintiffand have denied their liability on the allegations which are nottenable. For that, the plaintiff has also sent a rejoinder to thesame repudiating their contention. Hence the suit.5. The averments in the written statement filed by the appellantsas well as the second respondent herein are briefly as follows:-(a) It is true that the plaintiff placed an order on18.3.1982 with the defendants agreed for the supply, erection andcommissioning of one Rotating and Tilting type Electrically Heatedcarbonitriding Furnace. It is admitted that by letter dated20.3.1982, the first defendant-firm confirmed their acceptance of theorder, but it is denied that the details set out in the purchase orderwere agreed to between the parties as alleged. Further, the insuranceguarantee was not agreed to and instead of which an indemnity bond wasgiven. https://hcservices.ecourts.gov.in/hcservices/ (b) In the defendant's letter No.PC:TN:82 dated 2.3.1982,the delivery period was given as 15 to 18 weeks from the date ofreceipt of order. Even in the plaintiff's purchase order, thedelivery period has been mentioned as under:-"complete plant and equipment will be supplied within 16weeks from the date of placement of the order, a period oftwo weeks will be allowed for erection and commissioning ofthe furnace."Hence the contention that the furnace should be supplied, erected andcommissioned by 9.7.1982 is incorrect.(c) The defendants supplied the furnace on 14.12.1982. butit is denied that the delay of 23 weeks was caused. In fact onlyaround 10 weeks' delay was caused due to circumstances beyond thecontrol of the defendants. The order had been accepted subject toForce Majeure Clause as per the general conditions of sales attachedalong with the defendant's offer. The labour unrest and strikesprevailed in the defendants' factory had been communicated to theplaintiff in letter No.PC:WO:3993:82 dated 16.4.1982 and was alsopersonally inspected by the representatives of the plaintiff when theycame to the factory during that period.(d) The plaintiff had also contributed to the delay by threeweeks as the drawing of the equipment sent by the defendants on16.4.1982 had been approved by the plaintiff only on 6.5.1982 and thesame is received by the defendants on 10.5.1982. Further thetechnical defects encountered by the defendants beyond their controlwere to be tackled so as to complete the furnace with specificreference to the position of the "Retort" forming part of thematerial. It was approved by the plaintiff only on 13.10.1982 andconfirmed later on 22.10.1982 as they have stated that they needed thefurnace along with the "Retort" and not otherwise. Therefore thedelay in delivery was acceptable to the plaintiff. Further, thevarious alterations were suggested by the technical personnel of theplaintiff as per their letter dated 2.11.1983 after the preliminaryinspection.(e) It is denied that 10% retention money has to be paid bythe defendants to the plaintiff since the Managing Director of thedefendants had a discussion with the General Manager of the plaintiffwho confirmed to waive the retention money in view of the explanationgiven for the delay in delivering the equipment. The equipment wasinspected by the senior officials of the plaintiff in the defendants'factory site and clearance was given without insisting on anyretention money. In the meeting held on 14.12.1982 both the partiesagreed the same and recorded minutes of the meeting. https://hcservices.ecourts.gov.in/hcservices/ (f) Therefore the defendants have not caused any wilfuldelay nor liable to pay any damages to the plaintiff. Hence, the suitmay be dismissed.6. On the above pleadings, the following issues were framed fortrial:-(1) Whether the plaintiff is entitled to the suit claimas prayed for?(2) Whether the defendant is liable to pay the amountas prayed for in the suit?(3) To what relief the plaintiff is entitled?7. The first respondent as plaintiff in the suit examined onewitness and produced the documents under Exs.A-1 to A-30. On the sideof the appellants/defndants, one witness was examined and one documentwas marked as Ex.B-1. After analysing the evidence on record and uponhearing the arguments advanced on either side, learned 18th AssistantJudge, City Civil Court, Chennai found on the said issues that thefirst respondent is entitled to the suit claim from the appellants andtherefore decreed the suit as prayed for with costs.8. Heard Mr.Aravind, learned counsel appearing for the appellantsand Mr.V.C.Janarthanam, learned counsel appearing for the firstrespondent.9. Learned counsel for the appellants has submitted the followingcontentions on behalf of the appellants:-(a) The court below erred in decreeing the suit as prayedfor without considering the full and final settlement of the claimbetween the parties under Ex.B-1 dated 14.12.1982. Similarly, thecourt below failed to note that after due inspection by the plaintiffand after delivery of the equipment to the plaintiff on 14.12.1982,the balance payment of 80% of the purchase money was made by theplaintiff and the I.D.B.I. documents were duly handed over to thedefendants, as per the minutes of the meeting held on 14.12.1982(vide) Ex.B-1. The reasoning of the learned Judge for not acceptingEx.B-1 is erroneous.(b) Similarly, several circumstances which would show thatthe delay in supplying the equipment was not due to the defendants'fault, but it is due to the alteration made by the plaintiff in thespecifications of the equipment, etc. In any event, the delay of 10weeks was condoned by making full payment and the claim was anafterthought. So also the claim for retention money is equally notsustainable as the same is due to the defendants towards saleconsideration. Therefore the court below erred in decreeing the suit https://hcservices.ecourts.gov.in/hcservices/ in respect of retention money also. There was no pleading andevidence that the plaintiff is not liable to return the said 10%retention money after the period of six months. There was nocomplaint from the plaintiff regarding the quality and performance ofthe equipment and therefore the claim itself is an afterthought and iswithout any legal basis. The court below also erred in awardinginterest at 12% p.a.10. In the above circumstances, the following points arise forconsideration:-(1) whether the appellants/defendants are liable torepay the 10% the equipment cost at the time of receivingI.D.B.I. documents from the first respondent/plaintiff asper the terms of the contract?(2) Whether the first respondent/plaintiff is entitledfor recovery of 10% of the equipment cost referred supraeven after six months from handing over and commissioning ofthe furnace as per the terms of the contract?(3) Whether the appellants/defendants are liable to paypenalty calculated at 0.5% of the equipment cost for thealleged delay of 23 weeks in supplying the equipment andliable to pay a sum of Rs.21,505/- as prayed by the firstrespondent/plaintiff?(4) To what relief the parties are entitled to in thisappeal?11. Admittedly, the first respondent (hereinafter referred to asthe plaintiff) placed an order with the appellants (hereinafterreferred to as the defendants) for the supply, erection andcommissioning of one Rotating and Tilting type Electrically Heatedcarbonitriding Furnace as per the terms and conditions in the purchaseorder, Ex.A-1 dated 18.3.1982 and the defendants accepted the sameunder Ex.A-2, letter of acceptance dated 20.3.1982. Hence the partiesto the proceedings are bound by the terms and conditions contained inEx.A-1 until the contrary is shown and proved.12. It is not in controversy that the defendants agreed to supplythe equipment at the cost of Rs.1,87,000/- Ex-factory of the plaintiffon or before 9.7.1982 and also received 20% of the said amount asadvance on furnishing necessary indemnity bond. The admitted case ofboth the parties is that the equipment was erected and commissioned bythe defendant on 15.12.1982 and that since then, the same isfunctioning to the satisfaction of the plaintiff's management. Inthis context, it is appropriate to extract the relevant clauses inEx.A-1 to dispose of the appeal as under:- https://hcservices.ecourts.gov.in/hcservices/ "6.1 Schedule of payment:(i) 20% advance upon submission of guarantee from oneof the nationalised general insurance companies.(ii) 80% against I.D.B.I. bill rediscounting scheme (5years). Suppliers shall repay 10% of the equipment cost atthe time of receiving IDBI documents from M/s.T.I. Cycles ofIndia.(iii) 10% six months after successful commissioning of thefurnace and handing over the same to T.I. Cycles of India.7.0 Delivery:Complete plant and equipment will be supplied within 16weeks from the date of placement of the order. A period of2 weeks will be allowed for erection and commissioning ofthe furnace.8.0 Penalty/Bonus:Penalty/Bonus amount calculated at 0.5% of order valuewill be levied/paid for each weeks delay/advance supply ofthe equipment."13. It is no doubt true that when 80% of the cost of theequipment was paid by the plaintiff to the defendants immediatelyafter commissioning of the furnace (vide) Ex.B-1 minutes of the jointmeeting held by both the plaintiff and the defendants on 14.12.1982,it is stated therein that the clearance was issued without insistingon any retention money and the I.D.B.I. documents have been deliveredto the defendants and therefore there is no dispute that on 18.4.1983when the suit was laid for recovery of the said 10% retention moneyfrom the defendants more than four months lapsed from the date ofcommissioning of the furnace. In the above circumstances, the learnedcounsel for the defendants has pointed out the evidence of P.W.1 whowas examined on 16.11.1989 to the effect that the furnace wasfunctioning satisfactorily till date and therefore he has pointed outclause 6(1)(iii) of Ex.A-1 in support of his contention that the saidretention money of 10% of the cost of the equipment even if retainedby the plaintiff, the same ought to have been paid to the defendantsafter expiry of six months from the successful commission of thefurnace. Hence, he has urged that in any view of the matter, whetherthe said 10% of the equipment cost paid by the plaintiff to thedefendants along with I.D.B.I. documents was handed over or not, thetime fixed for return of the amount to the defendants already lapsedand that it follows necessarily that the suit in respect of that claimof 10% of the equipment cost as of now is not maintainable even inaccordance with the terms of the contract. https://hcservices.ecourts.gov.in/hcservices/

14. Though the learned counsel for the plaintiff has interpretedthe said clause in Ex.A-1 relating to retention of 10% of the cost ofthe equipment as if the said amount had to be deducted by theplaintiff out of the total consideration for the supply of furnace bythe defendants, this Court is unable to read between the lines so asto accept his interpretation of the terms of the contract. In anyevent, total equipment cost of 100% must necessarily be paid by theplaintiff to the defendants and if the said clause under the caption"schedule of payment" referred supra are taken into consideration insuch perspective, one would come to the irresistible conclusion thatthe defendants rightly received the said 100% payment of cost of theequipment as per the terms of the contract. 15. Learned counsel for the plaintiff has placed reliance onSection 72 of the Indian Contract Act and the decision K.M.P.R. FIRMv. OFFICIAL ASSIGNEE OF MADRAS (1922 (16) L.W. 75) in support of hisfurther contention that since the said 10% retention money was notreceived by the plaintiff from the defendants by inadvertence, thedefendants are liable to pay the same to the plaintiff. However sinceon appreciation of the facts and circumstances of the case in thelight of the evidence adduced on either side, this Court has heldabove that the defendants are entitled to retain the said amount of10% of the equipment cost after six months from the date ofcommissioning the plant and equipment (i.e.,) 15.12.1982, the saidprovision of law and the ratio laid down in the decision referredsupra do not loom large in this case. 16. Hence, this Court finds no reason to accept theinterpretation put forth by the learned counsel for the plaintiff inthis regard. It is therefore under such circumstances that thefinding rendered by the court below in this context has to be setaside and the plaintiff is held not entitled to retain 10% of the costof the equipment beyond six months from the date of erection andcommissioning of the furnace.17. Though the learned counsel for the plaintiff has made afeeble attempt to convince this Court that the plaintiff incurred lossdue to the defect in the equipment supplied by the defendants and thaton account of rectification of such defect, the plaintiff had incurredloss of Rs.3,820/- (vide) Ex.A-24 letter dated 16.5.1983 written bythe plaintiff to the defendants, such contention also falls to theground in view of the fact that the said letter was issued by theplaintiff long after the filing of the suit on 18.4.1983. Thereforethis Court agrees with the argument put forth by the learned counselfor the defendants that since Ex.A-24 is an after-thought actioncontemplated by the plaintiff, the same is liable to be rejected.Furthermore, the plaintiff has not made any specific claim in theplaint with reference to any liquidated damages towards the alleged https://hcservices.ecourts.gov.in/hcservices/ loss caused to the plaintiff by reason of any defect in the furnacesupplied by the defendants and therefore such contention now put forthwithout any pleadings or evidence to that effect cannot be sustained.18. Regarding the claim of penalty towards the delay in thesupply of the equipment, learned counsel for the plaintiff has pointedout that even though it was specifically agreed by the defendants tosupply the equipment by not later than 9.7.1982 as per the deliveryschedule in Ex.A-1, purchase order and also accepted by them (vide)Ex.A-2 letter of acceptance, the equipment was supplied only on15.12.1982 and therefore he has urged that the court below was correctin rendering the finding that the plaintiff has proved the claim inthat regard. But on the contrary, learned counsel for the defendantshas drawn the attention of this Court to various correspondencebetween the parties under Exs.A-6 to A-15, and A-17 to A-23 in supportof his contention that the delay was caused on account of thesubsequent alteration made by the plaintiff in the manufacture of theequipment and that therefore the defendants are not liable for thesuit claim towards penalty for any delay in the supply of theequipment. 19. Per contra, learned counsel for the plaintiff has drawn theattention of this court to the specific terms of the contract underclauses 1 to 4 and contended that unless it is shown that such termsof contract had been varied by any subsequent agreement between theparties, the defendants are bound by the original terms under Ex.A-1.Further according to him if the correspondence between the parties areperused carefully, it would be seen that the plaintiff made repeatedrequests to expedite the supply of the equipment and nowhere the termsof the original contract had been varied so as to extend the time forsupply of the furnace on the part of the defendants.20. A careful perusal of the said communication between theparties would undoubtedly indicate that the plaintiff had not acceptedthe schedule regarding delivery of the equipment by the defendants.But, on the other hand, it is evident therefrom that the plaintiff hasbeen insisting upon supply of the equipment at the earliest as per theterms of the contract. It is relevant to note that D.W.1, partner ofthe first defendant-firm has candidly admitted in the cross-examination that the purchase order under Ex.A-1 has been accepted intoto and that nowhere 'Force Majeure' like labour unrest had beenmentioned in Ex.A-1 as a reasonable cause for the delayed supply ofthe equipment and that as per the terms of the contract the equipmentshould be supplied with 'Retort', a component attached to the furnace.He would further admit that the parties did not agree for supply ofthe equipment without 'Retort' and therefore on the basis of theevidence on record, learned counsel for the plaintiff has argued andin my opinion rightly that the time for the performance of thecontract under Ex.A-1 was not extended by mutual agreement between the https://hcservices.ecourts.gov.in/hcservices/ parties. In any view of the matter, the defendants have failed toconvince the court below that the delay had been caused on account ofthe lapse on the part of the plaintiff and that the same was not dueto the defendants.21. Since neither of the parties to the contract altered theterms of the same nor dispensed with the performance of the promise, Iam unable to concede with the contention put forth by the learnedcounsel for the defendants that under the provisions of Sections 62and 63 of the Indian Contract Act, they are not liable to pay thepenal amount as per Ex.A-1. In any view of the matter, this Court hasno option except to confirm the finding rendered by the court below onthis aspect of the matter.22. Further as has been rightly argued by the learned counsel forthe plaintiff, in view of the provision under Section 55 of the IndianContract Act, 1872, on account of the failure on the part of thedefendants to perform their part of the contract within the time fixedin the contract under Ex.A-1, they are liable to pay the penalty asreferred to above.23. In view of the factual aspects of the matter as discernedfrom the evidence of the case, this Court is of the considered viewthat the defendants are bound by the terms of the contract under Ex.A-1 that they should supply the equipment within 16 weeks from the dateof placement of the order under Ex.A-1 and that a period of two weekswould be allowed for erection and commission of the furnace. Sincethe said delay of 23 weeks had occurred in the supply, erection andcommission of the equipment, they are also bound to pay the penalty asper clause 8 under Ex.A-1 at the rate of 0.5% of the order value(i.e.) Rs.21,505/- with subsequent interest at 12% p.a. withproportionate costs of the suit. 24. For the reasons aforesaid, the appeal is partly allowed. Theimpugned judgment and decree are set aside with reference toRs.18,700/- with proportionate interest at the rate of 12% p.a. andcosts and in other respects, the same are sustained. However, theparties are directed to bear their respective costs in this appeal.dppSd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To1. The VII Assistant Judge, City Civil Court, Chennai 104.2. The Registrar, City Civil Court, Chennai.104.3. The Section Officer, V.R.Section, High Court, Madras.+ 1 cc to Mr.S. Thangasivan, Advocate SR No.20058 Judgment in A.S. No.60 of 1992SSV(CO)SR/23.5.2006