M/s. S.M.S. Tradersrep. by its ProprietorS.M. Mohamed SaitNo.9 v. The Official Liquidator ofthe High Court

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 25.02.2008CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE M.VENUGOPALO.S.A. NO. 309 OF 2007M/s. S.M.S. Tradersrep. by its ProprietorS.M. Mohamed SaitNo.9, Alagar StreetBegampur, Dindigul 642 002... Appellant- Vs -The Official Liquidator ofthe High Court, Madrasas the Official Liquidator inSouth India Viscose IndustriesLtd. (SIVIL), (In Liquidation)Kuralagam, Chennai 600 104... Respondent Appeal filed against the order dated 2nd Aug., 2007, passed bylearned single Judge in C.A. No.1721/06 in C.P. No. 17/04.For Appellant: Mr. B.Kumar, SC, for Mr.M.ShantharamanFor Respondent: Mr. P.Gangadharan, Official LiquidatorJUDGMENTS.J.MUKHOPADHAYA, J.This appeal has been preferred by the appellant, S.M.S. Traders,against order dated 2nd Aug., 2007, passed by learned Judge in C.A.No.1721/06 in C.P. No.17/04. By the said order, learned Judge rejectedthe application preferred by the appellant to direct the respondents togrant permission to remove/lift the pulpwood to an extent of 4,500 MT aswas lying in the premises of the South India Viscose Limited (SIVIL –hereinafter referred to as the 'Company').2. According to the appellant, it supplied pulpwood to the companyin liquidation on 6th April, 2000; they entered into a contract forsupply of 200 MT of pulpwood and one of the conditions of the contractwas that the cost of the pulpwood should be paid within 60 to 70 daysfrom the date of supply. On 6th April, 2002, the applicant wrote aletter to the company to return the pulpwood supplied, as the pulpwood https://hcservices.ecourts.gov.in/hcservices/ supplied was not accepted. However, learned Judge rejected the saidprayer on the ground that the quantity of pulpwood supplied is valued atRs.49,20,061.19, which is reflected in the balance sheet of the companyand the Vice President of the company informed that the payment for thepulpwood supplied would be made shortly. It was observed that only oncoming to know about the pending proceeding before BIFR, the applicantfiled application in the case filed by the company seeking permission toremove the pulpwood supplied by it.3. Official Liquidator appeared in person and submitted that thepulpwood supplied by the appellant was accepted by the company.According to him, the pulpwood having accepted by the company, theappellant cannot be permitted to lift the pulpwood, though he may claimfor the amount, if any, due to the appellant.4. Learned senior counsel appearing on behalf of the appellantreferred to the enclosure attached to the typed set to suggest error ofrecord committed by learned Judge for coming to the conclusion that thepulpwood supplied was accepted by the company.5. We have heard the parties, noticed the rival contentions and thedocuments as available on record.6. Learned Judge, giving reference to certain letter issued by thethen Vice President (Finance) of the company gave the finding, asevident from para-10 of the order and quoted hereunder :-"10. By letter dt. 6.4.2002, the applicant in C.A.No.1721 of 2006 asked the company to permit them to takeback the pulpwood to an extent of 4500 M.T., lying inthe factory premises as the pulpwood supplied has notbeen accepted and payments have not been made. But intheir reply dt. 16.04.2002, the then Vice President,Finance, of the company informed the applicant that ason 31.03.2002 a sum of Rs.42,42,264.09 is the creditbalance towards the applicant in C.A. No.1721 of 2006.similarly, a sum of Rs.6,73,812.88 is the credit balancetowards the Proprietor of the applicant in C.A. No.1721of 2006. The applicant in C.A. No.1722 of 2006 has alsostated in his affidavit that the Secretary of thecompany in liquidation by letter dt. 17.12.2003 informedthe applicant that the payment for the pulpwood suppliedto the tune of Rs.45,52,809.88 and Rs.5,80,891.14 is dueand the payment would be made shortly."From the record it will be evident that the Vice President (Finance)never gave any such assurance vide letter dated 16th April, 2002; henever informed the appellant that payment of the pulpwood supplied willbe made shortly. It was never informed to the appellant that the 4500MT of pulpwood supplied by the appellant has been accepted by thecompany. That is error of record as apparent on the face of the orderpassed by learned Judge and evident from the evidence on record. https://hcservices.ecourts.gov.in/hcservices/

7. A copy of the purchase order dated 6th April, 2000 is on record,wherein at clause 16, the following provision was made by the company :-"The company reserves the right to reject part/fullload of the pulpwood supplied, if the same is found tobe not in accordance with the specification mentionedabove. Penalty is liable to be levied for such suppliedas considered fit. On such rejection the rejected goodsshall be taken back by the supplied at his risk andcost. The company shall not be responsible for anydamage or deterioration in quality when once the goodsare rejected.In case the rejections is within 1% of the totalquantity of Pulpwood, settlement will be without anydeduction in cost of Pulpwood and for any such smallerdiameter billets more than the 1% in quantity, thatexcess quantity will be treated as firewood and billswill be settled at Rs.1,000/= (Rupees one thousand only)per MT including – cost of wood, conversion, transport,etc., subject to the suppliers written request to acceptsuch rejections."What has been communicated by the Vice President (Finance) by twoletters, both dated 16th April, 2002, is as to what is the balance in theaccount of the appellant as per company's books. It did not disclose asto such balance maintained in the books relates to the supply ofpulpwood in question. It appears that the appellant by its letter dated14th June, 2002, made certain intimation with regard tounsuitable/rejected goods. In reply to the said letter, the company,vide its letter dated 15th July, 2002, Ref : 2/01/1/2001-2002/Forests,sent the following information :-"R.HariharanManager (Forests)Ref : 2/01/1/2001-2002/ForestsDated : 15.7.2002ToM/s.S.M.S. TradersNo.9, Alagar StreetBegampurDindigul 641 002.Dear Sir,Sub : Disposal of unsuitable/rejected wood (Blue gum, Wattle and E Grandis) – Regd.Ref : Your letter dated 14.6.2002. https://hcservices.ecourts.gov.in/hcservices/ We invite kind attention to your offer to life theunsuitable/rejected wood (Blue gum, Wattle and E Grandis)received by this company as they were found to beunsuitable and not in accordance with the specifications.Your will be permitted to life the materials, subjectto the followings :-1. You can remove the entire stock of 4500 M.T. ofunsuitable/rejected wood, as they are unsuitable andrejected.2. There is no question of payment on either sideor adjustment of any bills in this transaction asthe entire 4500 M.T. is rejected.3. In view of foregoing there is no necessity forassessing the moisture for the exit weight of woodby our Company's Forest Department and wood yardofficials.4. You have to engage your coolies for the loading,etc., of the material under the supervision by ourwood yard officials.5. The transportation and other formalities are tobe arranged by you.6. Forest permit if any required may be arranged tobe got from the Authority concerned at your risk andresponsibility.7. Tax, if any, shall be exclusively borne by you.8. Company will not be responsible for anyaccident, etc., occurred to your workmen during thetime of removal. Hence, you are advised to arrangefor necessary insurance cover.9. The weight of unsuitable/rejected wood recordedat the Companies Weigh Bridge will be final forremoval.10. We reserve the right to modify or add anycondition during the course of removal subject tomutual agreement.11. Disputes, if any, arising out of the removals,decision of the General Manager (Pulp Production),Sivil, Sirumugai will be final and binding.12. You are aware that we have stopped ouroperation in the plants since 3rd week of October,2001. In view of situation presently prevailing,you are advised to take all precautions to avoidunpleasant incidents and secure the safety ofpersons employed by you at your risk and cost. https://hcservices.ecourts.gov.in/hcservices/ Please arrange to return the duplicate copy of thisletter duly signed as a token of acceptance.Thanking youYours Truly,R.HariharanManager (Forests)"From the aforesaid letter it will be evident that the supply ofpulpwood, as claimed by appellant was not accepted by the company and bytheir letter dated 15th July, 2002, they have specifically rejected thesame. There is nothing on the record to suggest that the companyassured the appellant to pay the amount of supply of such pulpwood northere is anything on record to show that the amount was accounted for.In view of our finding, the order passed by learned Judge cannot beupheld. We accordingly, set aside the order dated 2nd Aug., 2007, passedby learned Judge in C.A. No.1721/06 in C.P. No. 17/04.So far as prayer for lifting of pulpwood is concerned, as thepulpwood in question has already been auction sold, we reject suchprayer as made by the appellant. However, it will be open to theappellant to seek for appropriate relief in the pending case. Theappeal stands disposed of with the aforesaid observation, but thereshall be no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarGLNTo1. The Official Liquidator of the High Court, Madras as the Official Liquidator in South India Viscose Industries Ltd. (SIVIL), (In Liquidation) Kuralagam, Chennai 600 104.2. The Sub Assistant Registrar, Original Side, High Court, Madras.1 cc To Mr.M.Santhanaraman, Advocate, SR.10033. O.S.A. NO. 309 OF 2007AKR(CO)RVL 07.03.2008