Titagarh Steels Ltd v. Voltas Ltd — 1993 DIGILAW 202 (CAL)

JUDGMENT 1. THIS appeal is directed against the order dated may 7, 1992 of a Learned Single Judge of this Court refusing to pass a decree on an application made by the plaintiff-appellant, inter alia, for a judgment upon admission for Rs. 14,12,996. 90. 2. SHORTLY stated the facts are that on or about 27th February, 1988 the plaintiff-appellant entered into an agreement with the first defendant- respondent, whereby and whereunder the appellant agreed to purchase from the first respondent and the first respondent agreed to deliver and commission, two Wester Work moulding Machines at and for a price of Rs. 7,45,000/- each. It was also agreed that the respondents would depute their Engineers for supervision and for commissioning of the said machines and undertook to conduct trial runs for demonstrating the vertical and horizontal face hardness as agreed. Delivery of the said two machines was to be effected by the first respondent within 30th July, 1988. It was also provided that 10% of the price should be paid in advance by the appellant against furnishing of an Indemnity Bond by the first respondent and 90% being the balance should be paid by the appellant against Proforma Invoice before despatch of the said machines on submission of a Bank Guarantee by the first respondent for 10% of the total value of the order. Pursuant to and in terms of the aforesaid agreement the appellant duly paid a sum of Rs. 1. 49 lakhs to the first respondent and the first respondent also executed an Indemnity Bond dated March 31, 1988. 3. IN or about 1st week of May, 1989 the two machines were installed and erected at the factory premises of the appellant. However, when attempts were made to commission the said machines it was found that the said machines were not up to the standard and totally unfit for use. In the meantime the appellant had duly paid the balance 90% of the price of the said machines against Proforma Invoice, as agreed and the first defendant also furnished a performance bank guarantee for 10% of the price of the machines, that is Rs. 1.49 lakhs. 4. THE respondents accepted that the machines were incapable of performing the contractual specifications and in fact there were numerous defects in the said machines. 1.49 lakhs. 4. THE respondents accepted that the machines were incapable of performing the contractual specifications and in fact there were numerous defects in the said machines. The second respondent accepted that the commissioning of the said machines would not be possible and that they should be sent back to their factory at Bombay for rectification/modification of the same at the cost of the first respondent. The respondents accepted that the performance of the said machines was such as was wholly unacceptable and the same was unsuitable for use on work. Ultimately after holding various discussions it was decided in a meeting of the parties held on 12th June, 1989 that the first respondent would refund 90% of the cost of the machines paid by the appellant and would take back the machines for required modification/rectification. Such modification/rectification would be carried out within 3 months and once that is completed then the machines would be tested and tried with the moulded box to be supplied by the appellant for the aforesaid purpose. After successful trial runs those machines would be offered to the appellant for acceptance. 5. BY a letter dated 24th July, 1989 the first respondent agreed to take back the machines for necessary investigation/rectification after refunding to the appellant the 90% of the price of the machines. By the said letter the first respondent requested the appellant to issue a letter confirming that immediately after receipt of the cheque the first appellant would hand over to them the machines and that the appellant shall issue necessary certificate which may be required for transportation of the said machines from Calcutta to Bombay. It was also stated in the said letter that the appellant would return to the first respondent the performance bank Guarantee which had been furnished to the appellant. 6. BY a letter dated 24th July, 1989 the appellant confirmed that clearance for returning of the machines would be given after receipt of 90% payment from the first respondent and that the necessary certificate would be issued for transportation of the machines. Along with the said letter performance Bank Grantee dated 2nd February, 1989 was also returned to the first respondent. By a letter dated 28th July, 1989 the first respondent made over to the appellant a cheque for Rs. 14,12,990. Along with the said letter performance Bank Grantee dated 2nd February, 1989 was also returned to the first respondent. By a letter dated 28th July, 1989 the first respondent made over to the appellant a cheque for Rs. 14,12,990. 80 drawn on bank of America covering the 90% price of the 2 machines in terms of the invoices and Rs. 15,216. 20 which was received by the first respondent from the appellant as excess payment. The first respondent asked for clearance for lifting and transporting the said machines. 7. ON 31st July, 1989, however, the first respondent allegedly instructed the manager, Bank of America to stop payment of the said cheque. It may be mentioned criminal proceeding had been initiated by the appellant against the first respondent under Section 138 of the Negotiable Instruments Act, 1881. 8. THE first respondent by a telex message informed the appellant that on 29th July, 1989 they made arrangement of manpower and tools for lifting the machines after handing over the cheque, but since the appellant did not issue the clearance, the first respondent could not make use of the arrangement. The first respondent agreed that 90% payment would the released to the appellant after lifting the machines. Between the 1st August, 1989 and 3rd August, 1989, three telex messages were sent by the first respondent to the appellant referring to the telephonic discussions with the appellant and requesting the appellant to issue delivery order for lifting of the said two machines. 9. BY a notice dated 9th August, 1989, Advocate-on-record of the appellant intimated the first respondent that unless the sums of Rs. 14,12,996.80 and Rs. 1,49,000/- were paid to the appellant within seven days from date of issue of the said notice, appropriate legal proceedings, Civil or Criminal, or both, would be initiated against the first respondent. 10. THE Advocate-on-record of the first respondent by a letter dated 23rd august, 1989 replied to the said notice, inter alia stating that upon the issuance of the delivery challans for the said two machines along with certificates, the first respondent would make over cheque being 90% price of the machines simultaneously. In July 1990, the present suit was instituted by the appellant and in July 1991, an application was made by the appellant for final judgment under Chapter XIIIa of the Original Side Rules of this Court. In July 1990, the present suit was instituted by the appellant and in July 1991, an application was made by the appellant for final judgment under Chapter XIIIa of the Original Side Rules of this Court. By the order dated 27th August, 1991, the said application was rejected and directions were given for expeditious hearing of the said suit. It appears no appeal was preferred by the appellant against the said judgment. 11. ON 12th February, 1992, an application was made by the appellant, inter alia, for judgment on admission for the sum of Rs. 14,12,996.80 and also for appointment of a Receiver over the said machines. 12. THE learned Judge by his order dated 7th May, 1992, held that the Court was not satisfied with the case made out in the petition for final judgement inasmuch as from the various annexures to the Affidavit-in- Opposition relied upon by the first respondent such admission for payment was not unconditional and unequivocal, but this was dependent on the condition of the return of the machinery. However, the learned Judge appointed a Receiver to make valuation of the machinery and direction was given to remove the said two machines to the factory premises of the first respondent. A valuer was also appointed by the learned judge. The first respondent was directed to furnish security to the satisfaction of the Registrar, Original Side, for a sum of Rs. 14 lacs within 6 weeks to be held to the credit of the said until further orders. 13. THIS appeal has been preferred against the said judgment. 14. IN this appeal, a stay application was filed by the appellant. After hearing the parties the following order was passed on February 1, 1993 : "the Court : Mr. Ajit K. Ghosh, an Advocate of this court is appointed Receiver. The respondent No. 1 shall deposit a sum of Rs. 14,50,000/- with the receiver by Pay Order or by Cheque within two weeks from the date of service of the minutes of this order upon the Advocate-on-Record of the respondents. The Receiver thereupon, shall deposit the said sum in a nationalised bank initially for 3 months renewable thereafter every three months subject to further order of this court. 14,50,000/- with the receiver by Pay Order or by Cheque within two weeks from the date of service of the minutes of this order upon the Advocate-on-Record of the respondents. The Receiver thereupon, shall deposit the said sum in a nationalised bank initially for 3 months renewable thereafter every three months subject to further order of this court. Immediately, after the receipt of the said sum by Cheque or by Pay Order the receiver shall make an inventory of the machines in question lying at the factory premises of the appellant after giving one week's notice to the Advocate-on-Record of each of the parties. The Receiver will take assistance of any approved Valuer of the Income-tax Department for the purpose of making inventory as well as for the purpose of valuing the said machines. All costs, charges and expenses of such inventory and valuation shall be shared equally by the parties as the first instance. Let the Receiver complete the said inventory and valuation and submit the report to this court with the valuation report within a month from the date of service of the minutes of this order upon him. The Receiver will be entitled to an initial remuneration of 300 Gms. to be paid by Voltas Limited at the first instance which shall be ultimately shared equally by the parties. Let this mater appear in the list on 5. 3. 1993. Receiver, Valuer and all parties are to act a on a singed copy of the minutes of this order upon usual undertaking." Thereafter, on February 16, 1993 the matter was mentioned at the instance of the first respondent for compliance with the direction contained in the said order dated February 1, 1993. 15. AT the hearing, Mr. Hiranmoy Dutta, learned Advocate appearing for the respondents has submitted that there was no unconditional admission in this case. In any event, unless the machines were delivered to the respondents, the question of refund of 90% of the consideration does not arise at all. He has taken us to the different letters and correspondence referred to hereinbefore to emphasise that there was no admission at all. He has also highlighted the fact that previously an application was made in July 1991 for final judgment under Chapter XII1a of the Rules of this Court. He has taken us to the different letters and correspondence referred to hereinbefore to emphasise that there was no admission at all. He has also highlighted the fact that previously an application was made in July 1991 for final judgment under Chapter XII1a of the Rules of this Court. The said application was rejected and directions were given for expeditious hearing of the suit, but no appeal has been preferred against the said order. Accordingly he submits that the appellant is estopped from claiming any judgment on admission. He also submits that his client was and is ready and willing to furnish a bank guarantee in the sum of Rs. 14 lakhs. 16. MR. Nag, Learned Sr. Advocate appearing for the appellant has contended that the rejection of the application made under Chapter XIIIA is not a bar in entertaining an application for judgment on admission. He has submitted that the correspondence passed by and between the appellant and the first respondent would unmistakably point out that upon fund of 90% of the consideration received by the first respondent in respect of the machines, the machines should be delivered to them. He has also submitted that when the cheque was earlier issued, which was dishonoured for non-payment, it would show that the first respondent was in involved circumstances. It is a fit case where the judgment upon admission should be made and the first respondent be directed to make the payment. He has also submitted that the furnishing of the bank guarantee is not a solution. There is no defence to the claim and the only object of the first respondent is to delay the payment as long as it can. We have considered the rival contentions. It is now well settled that a final judgment ought not to be passed on admission unless such admission is clear, unambiguous and unconditional. Where admission of fact has been made either in the pleading or otherwise, the Court may, without waiting for determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admission. This power vested with the Court is discretionary. Where admission of fact has been made either in the pleading or otherwise, the Court may, without waiting for determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admission. This power vested with the Court is discretionary. Where there is no defence to the suit and there is express admission to the claim made by the plaintiff the Court should exercise the discretion in favour of the plaintiff to put an end to the proceedings. If admission in pleading or otherwise is subject to any condition, it must be accepted subject to it or not at all. It is, therefore, necessary in this case to analyse the letters and/or other documents relied on by the parties. It is not in dispute that the appellant paid the entire consideration between 13th March, 1988 and May 1989 and it is also not in dispute that two machines were installed in the first week of May, 1989 and erected at the factory premises of the appellant, but when attempts were made to commission the machines it was found that the machines were of non-standard or totally unfit for use. In the joint minutes of the meeting on the performance trial between Titagarh Steel, Voltas Ltd. and West Work Ltd. held on 26th May, 1989, it was agreed by the parties that "in view of the above performance of the Moulding machines were totally unacceptable and the some were unsuitable for use." 17. ON 12th July, 1989 a meeting took place between the representatives of the appellant and the first respondent. In the said meeting it was agreed that:- (1) Voltas will refund 90% of the cost of the machines paid by TSL and will take back the machine for required modification/rectification; (2) The modification/rectification will be carried out speedily within 3 months and once that is completed these machines will be tried with the mould boxes to be supplied by TSL for the purposes. After successful trials, these machines will be offered to TSL for acceptance; (3) TSL may accept these machines if they have not already entered into a purchase contract with an alternative manufacturer; (4) The eventuality of TSL having already entered into a purchase contract and are no longer interested in the Westerwork machine, Voltas will refund the balance 10% value of the machine to TSL immediately; (5) Irrespective of the fact whether TSL buys these machines or they will extend the required co-operation to Voltas for. . . . of these machines at the cost of Voltas." 18. THE aforesaid discussions held on 12th July, 1989 would unmistakably point out that Voltas, the first respondent, should refund 90% of the cost paid by the appellant and would take back the machines for modification or rectification and if the appellant was no longer interested in the Westerwork machines, the first respondent would refund the balance 10% of the cost of the machines to the appellant. The admission is clear, unambiguous and unconditional. In the letter dated 24th July, 1989, the first respondent wrote to the appellant inter alia, as follows:- "we are now ready to take back the subject machines for necessary investigation/ rectification after refunding to you the 90% of the value of the machines. " 19. THIS letter also points out that after the refund of 90% of the value of the machines, the machines would be taken back for modification/rectification. 20. BY the said letter, the first respondent requested the appellant to confirm that immediately after the receipt of the Cheque by the appellant, the machines would be handed over to the first respondent with necessary certificates and the performance bank guarantee would also be returned. The appellant by a letter dated 24th July, 1989 confirmed as follows:- "we will give you our clearance for returning the machines after receipt of 90% payment from you. Please note that all expenses for lifting and sending back the machines to your works will be borne by you." The appellant also recorded in the said letter that the necessary certificate would be issued for transfer of the machines. The performance bank guarantee was returned along with the said letter. 21. THEREAFTER, under cover of a letter of the first respondent dated 28th July, 1989 a cheque was issued for Rs. 14,12,996. The performance bank guarantee was returned along with the said letter. 21. THEREAFTER, under cover of a letter of the first respondent dated 28th July, 1989 a cheque was issued for Rs. 14,12,996. 80 by the first respondent, which covers the following:- (i) 90% value of our above referred invoice (ii) Rs. 15,216.20 which was received from you as excess payment." 22. BUT the said cheque was, however, dishonoured by non-payment. It appears from the Memorandum of the Bank of America sent along with the dishonoured cheque that the payment was not stopped by the drawer as claimed by the first respondent. It was referred to drawer. If the payment would have been stopped by the drawer this would have been mentioned in the accompanying memorandum but, as we indicated, it was returned after dishonour with the endorsement 'refer to drawer'. The expression 'refer to drawer' indicate that the drawer does not have funds which may lead to the inference that the drawer is in involved circumstances. The words 'refer to drawer' import the clear intimation that the maker of the cheque has defaulted as to time for performance of the legal and ethical obligation to provide for payment by the bank on presentation of a cheque issued for immediate payment. (See Baker v. Australia and Newzealand Bank, reported in 1958 NZLR 907). 23. THIS suit was instituted on 15th July, 1990. Prior to that a reference was made by the appellant to the Merchant Chambers of Commerce with regard to the interpretation of the words "refer to drawer". The Merchant Chambers of commerce in turn wrote to the Allahabad Bank and Allahabad Bank in its letter dated February 9, 1990, inter alia, intimated as follows :-"refer to Drawer, as per banker's custom necessarily means that the cheque has been returned for want of funds in the account of the drawer of the cheque. " 24. SUBSEQUENT to issuance of the cheque, the first respondent sent a telex on 31st July, 1989 recording that Voltas had made all arrangements to lift machines from appellant's factory after handing over the cheque and the appellant was requested to wait for a week 'to re-arrange man-power, tools, etc. for lifting machines' from appellant's factory and thereafter 90% payment would be released. . . . . immediately. This telex is silent about any alleged stop payment instruction. for lifting machines' from appellant's factory and thereafter 90% payment would be released. . . . . immediately. This telex is silent about any alleged stop payment instruction. In other words, it shows that the after making the arrangement for lifting of the machines the cheque would be handed over. In the subsequent telex messages dated 1st, 2nd and 3rd August, 1989, the first respondent was conspicuously silent about payment and stop payment instruction. By a telex message dated 10th August, 1989, the first respondent agreed to abide by the agreement of 12th July, 1989. It has been stated therein as follows:-"we had always been ready and willing to deliver the machines in terms of our agreement recorded in minutes of 12th July, 1989. " 25. IT is only, after the cheque had been dishonoured that the first respondent for the fist time came with the plea that the cheque was not dishonoured but instruction had been issued to stop payment for failure to comply with the letter dated 4th July, 1989. During the course of hearing before the Court of the first instance the first respondent relied on the letters of its Banker, the payee bank, Bank of america dated 31st July, 1989 and 10th August, 1989 in support of its plea that the cheque was dishonoured by reason of disputed stop payment instruction. The endorsement by the payee bank in refusing to honour the cheque "refer to drawer" in respect of payment stopped by the drawer was in accordance with the usual banking practice. In the said letter the Bank of America wrote to the first respondent confirming that the bank did not honour the cheque for Rs. 14,12,996. 80 drawn in favour of the appellant pursuant to the instruction contained in the letter of the first respondent dated July 31st, 1989. IN the letter dated 31st July, 1989 of the fist respondent addressed to the Bank it was mentioned as follows :-"with reference to our telephonic talk today on 31. 7. 89 morning to confirm having instructed you to stop payment of the above referred cheque with the reason "refer to Drawer". Please confirm necessary action has been taken." 26. BUT the Bank's letter dated 31st July, 1989 does not confirm telephonic stop payment instruction of 31. 7. 7. 89 morning to confirm having instructed you to stop payment of the above referred cheque with the reason "refer to Drawer". Please confirm necessary action has been taken." 26. BUT the Bank's letter dated 31st July, 1989 does not confirm telephonic stop payment instruction of 31. 7. 89, the cheque having been presented in the first hour and it being improbable that stop payment instruction by disputed letter of the first the hour on 31. 7. 89 when the cheque was dishonoured. The despatch register had not been annexed nor even referred to. If the Bank had sufficient funds at the material time as alleged in he letter of 10th August, 1989, Bank could not have dishonoured the cheque by endorsement 'refer to drawer' which in banking parlance means want of funds. This alleged stop payment instruction appears to be an after-thought. A plea was also taken that the refund would be made only after the machines were despatched from the factory of the appellant. This cannot be read in isolation. The object was to give a twist even in the said agreement dated 12th july, 1989. In the said minutes, it was clearly recorded that the machines would be delivered after payment. Subsequent stand taken by the first respondent was intended to cover up the default and criminal liability for dishonoured cheque in terms of Sections 138 and 142 of the Negotiable Instruments Act, 1881. Admittedly two machines could not commissioned. These were found to be unsuitable. The first respondent agreed to take back the machines for rectification or modification. Even the first respondent was prepared to refund the balance 10% of the consideration, if the appellant decided not to take the machines after rectification. But after the cheque was dishonoured, attitude changed and the first respondent tried to shift its stand and put gloss on the agreement dated 12th July, 1989. The first respondent made no efforts to take delivery of the machines. Even after the cheque was dishonoured and notice of demand was made by the appellant's solicitor, first respondent through its solicitor's letter dated 23rd August, 1989 stated that if the appellant issues the delivery challans of the said machines along with the Certificates, first respondent agreed to make over the cheque being 90% of the value of he machines simultaneously. Even after the cheque was dishonoured and notice of demand was made by the appellant's solicitor, first respondent through its solicitor's letter dated 23rd August, 1989 stated that if the appellant issues the delivery challans of the said machines along with the Certificates, first respondent agreed to make over the cheque being 90% of the value of he machines simultaneously. The first respondent referred to the letter dated 24th July, 1989 but it did not contain the agreement, agreement was contained in the minutes dated 12th July, 1989. Where the machines are admittedly unworkable, unsuitable for the use they remained idle since their installation and the commissioning of which could not be made unless properly rectified, the question of payment after delivery of such machines in view of the agreement dated 12th July, 1989 cannot arise. Every commercial transaction must be based not only on legal obligation but also on commercial ethics and business moral. A party to a contract cannot be allowed to take advantage of its own wrong. 27. HAVING regard to the facts and circumstances of this case and taking into consideration the entire correspondence passed by and between the parties and their conduct we have no hesitation in holding the first respondent made clear, unambiguous and unconditional admission that 90% of the consideration would be refunded before delivery of machines for rectification and/or modification at Bombay. As indicated earlier, payment was made by the appellant before installation of the machines in 1989. We are, therefore, of the view that the learned Judge was not right in refusing to pass a judgment on admission. 28. FOR the reasons aforesaid the appeal is allowed. There will be decree in favour of the plaintiff/appellant as against the first respondent in the sum of Rs. 14,12,996.80 with interim interest and interest on judgment @ 12% p.a. Upon payment of the decretal dues, the Receiver already appointed will make over the machines to the first respondent with necessary certificates as may be required, for removal of the machines to the first respondent at Bombay. The other claims in the suit will stand to trial. 29. THE Receiver will be entitled to a further remuneration of Rs. 5,000/- to be paid by the appellant. The balance remuneration of the Receiver not yet paid by the first respondent shall be paid within one week from date. 30. LIBERTY to mention. The other claims in the suit will stand to trial. 29. THE Receiver will be entitled to a further remuneration of Rs. 5,000/- to be paid by the appellant. The balance remuneration of the Receiver not yet paid by the first respondent shall be paid within one week from date. 30. LIBERTY to mention. Having regard to the facts and circumstances of this case and having regard to the conduct of the first respondent, the stay asked for is refused. Receiver and all parties concerned to act on a signed copy of the operative portion of this judgment and decree on the usual undertaking. Appeal allowed.