ENFIELD INDIA LIMITED v. UNION OF INDIA — 1994 DIGILAW 592 (DEL)

Mr. P. K. Bahri, J. ( 1 ) PLAINTIFF in this suit has sought a decree for recovery of Rs. 7,88,247. 00 as price of the motorcycles supplied to the Union of India with interest@ 18% per annum and pendente lite and future interest. It has a lso soughtdeclaration to the effect that no valid and binding contract came into existencebetween the parties and in the alternative to declare that the contract, if any, stoodfrustrated and the plaintiff stood discharged of its obligations and the demand ofthe defendant for alleged general damages and/or risk purchase damages is illegal,not maintainable and for injunction restraining the Union of India from enforcingany such alleged demand of damages. ( 2 ) THE facts averred in the plaint leading to the filing of the present suit, inbrief, are that in response to invitation to tender issued by the Director General ofsupplies and Disposals, New Delhi, the plaintiff submitted its tender dated July 19,1976, which was purported to be accepted vide advance acceptance of tender letterno. October 8,1976 and the formal acceptance letter dated October 12, 1976, wasissued. The plaintiff made supplies of motorcycles, in pursuance to the saidacceptance of tender, of the value of Rs. 7,88,24 7/- in between the period December9,1977 to February 27,1979. It is pleaded by the plaintiff that the defendant had notpaid the price of the said motorcycles supplied by the plaintiff. Plaintf had thenaverred that tender of the defendant was vague and the contract had not come intoexistence as contemplated by provisions of Articles 298 and 299 of the Constitutionof India and one of the conditions of the contract being that same is subject togeneral conditions of the contract as contained in Form DGSandd-68 (Revised) makesthe term arbitrary and hit by Article 14 of the Constitution. It is averred thatplaintiff is entitled to have the price of the vehicles already supplied because thatsupply was not made gratuitously and defendant is legally bound to reimburse theplaintiff with regard to the price of the said vehicles in terms of Section 70 of the Contract Act. ( 3 ) IT is alleged that defendant had raised a claim to the tune of Rs. 35,51,283/20p claiming the same as general damages for breach of contract on the part of theplaintiff in not supplying the remaining quantity of the motorcycles contemplatedby the alleged contract. This demand has been raised vide letter dated August 8,1980. ( 3 ) IT is alleged that defendant had raised a claim to the tune of Rs. 35,51,283/20p claiming the same as general damages for breach of contract on the part of theplaintiff in not supplying the remaining quantity of the motorcycles contemplatedby the alleged contract. This demand has been raised vide letter dated August 8,1980. It is pleaded that the defendant had later on claimed damages to the tune ofrs. 59,36,051 /21p. It is averred that the alleged contract provided for risk purchaseand thus, the defendant is not entitled to have any general damages and defendanthas not shown that the defendant had suffered any damages on effecting any riskpurchase. It is further pleaded that defendant had required the supply of thesemotorcycles for its own consumption and had not taken the said supply for resaleand thus, the defendant was not entitled to have damages on account of anyvariation occurring in the price of the motorcycles agreed upon and the increase inprice taking place due to market fluctuations. So, after serving the notice undersection 80 of the Code of Civil Procedure the plaintiff instituted the present suit. ( 4 ) DEFENDANT initially, before filing the written statement, moved an application under Section 34 of the Arbitration Act seeking stay of the suit invoking thearbitration clause existing under the contract but that application came to bedismissed on May 13,1985. It is averred in the written statement that according tothe terms of the contract the plaintiff was to commence the supply of the goodswithin one month i. e. November 5,1976 and complete the supply of all the vehiclesby May 5, 1978 with average monthly delivery of 500 vehicles. It is averred thatplaintiff failed to adhere to the schedule of the supply and wanted vide its letterdated August 23, 1977, extension of time for making the balance supply claimingthat there had taken place some lock-out in its factory. Upto August 19, 1977, theplaintiff had supplied 2,780 vehicles and 4531 vehicles were yet to be supplied. Theplaintiff sought extension of time upto September 30,1978 for making the balancesupply and by subsequent letter dated November 7, 1978, the supply period wasrequired to be extended upto March 31, 1979. Realising the difficulties of theplaintiff, defendant, however, extended the period for delivery at first uptonovember 30, 1978 and thereafter upto March 31, 1979. Theplaintiff sought extension of time upto September 30,1978 for making the balancesupply and by subsequent letter dated November 7, 1978, the supply period wasrequired to be extended upto March 31, 1979. Realising the difficulties of theplaintiff, defendant, however, extended the period for delivery at first uptonovember 30, 1978 and thereafter upto March 31, 1979. Later on the plaintiffinstead of supplying the vehicles requested for increase in the price of the vehicleswhich the defendant did not accept and the plaintiff then refused to supply theremaining vehicles and in all plaintiff supplied 4751 vehicles leaving the balancequantity of 2560 vehicles. Defendant vide letter dated August 21, 1979, cancelledthe contract at the risk and cost of the plaintiff and the defendant floated a tenderfor risk purchasing the remaining supply of the vehicles but the plaintiff did notrespond to the said tender and thus, no risk purchase could be made for theremaining quantity of the vehicles. ( 5 ) IT is pleaded further in the written statement that subsequently thedefendant purchased more vehicles from the plaintiff at the higher prices whichresulted in loss of about Rs. 53,24,672/- to the defendant and the defendantultimately found that on breach of the contract by the plaintiff the defendant isentitled to recover general damages on the basis of difference between the acceptedprice of the contract and the market rate on the date of the breach i. e. March 31,1979which amount came to Rs. 35,51,283/20p. It is pleaded by the defendant that as thecontract contained an arbitration clause the defendant appointed an Arbitratorwith regard to the claim of the defendant of the said amount of damages. A pleawas taken that the only Arbitrator already appointed according to the term of thearbitration clause is the sole authority to look into the damages claimed by thedefendant and the suit in this respect is not maintainable. ( 6 ) ON merits the defendant further contended that the contract has beenentered into between the parties and the same meets with the requirements ofarticle 299 of the Constitution of India as Mr. Suri, Assistant Director (Supply) hadbeen duly authorised to sign the contract documents on behalf of the President ofindia and it is Mr. Suri who had accepted the tender of the plaintiff. It wascontroverted that any term of the contract is hit by Article 14 of the Constitution. Suri, Assistant Director (Supply) hadbeen duly authorised to sign the contract documents on behalf of the President ofindia and it is Mr. Suri who had accepted the tender of the plaintiff. It wascontroverted that any term of the contract is hit by Article 14 of the Constitution. So, it was averred that the plaintiff is not entitled to have any relief in this suit andrather the defendant is entitled to have the damages from the plaintiff for breach ofthe contract. Following issues were framed: 1. Whether the plaint in the suit has been signed and verified and the suithas been instituted by a duly authorised person?2. Whether the suit is within time?3. Whether the suit is not maintainable?4. Whether the plaintiff is entitled to claim damages from the defendant?if so, to what extent? 5. Relief. ( 7 ) ISSUE No. 1: Plaint has been signed and verified by one Mr. P. R. Sundaram,secretary of the plaintiff. PWI- Sh. R. Raghvan,the only witness examined by theplaintiff in support of its case, deposed that he is familiar with the signatures of Mr. Sundaram as he has been seeing his signatures during the course of his duties andthus, he identified the signatures of Mr. Sundaram on the plaint. He also identifiedthe signatures of Mr. S. Vishwanathan, Chairman-cum-Managing Director and Mr. Prabhakar, Director of the company, appearing on the original power of attorney,copy of which is Ex. P4. The power of attorney is duly registered. No evidence hasbeen led by the plaintiff to show that Chairman-cum-Managing Director and thedirector had the authority on behalf of the plaintiff-company to execute the powerof attorney in favour of Mr. Sundaram to enable him to institute the present suit. No resolution of the Board of Directors of the plaintiff-company has been proved. The power of attorney is not attested and authenticated by any Notary so that apresumption could be drawn under Section 85 of the Indian Evidence Act that theexecutants of the Power of Attorney had the due power from the company forexecuting and signing the power of attorney in favour of Mr. Sundaram. Section 85of the Indian Evidence Act does not allow raising of such a presumption by thecourt in respect of power of attorney which is registered under the Indianregistration Act. Sundaram. Section 85of the Indian Evidence Act does not allow raising of such a presumption by thecourt in respect of power of attorney which is registered under the Indianregistration Act. ( 8 ) THE only presumption which can be drawn, if the power of attorney isregistered, is that the executants who had executed the power of attorney wereproperly identified persons and it can be presumed that in the present casechairman-cum-Managing Director and the Director of the plaintiff-company haveexecuted the power of attorney in favour of Mr. Sundaram, but unlike Section 85of the Indian Evidence Act which allows drawing of a presumption that in case thepower of attorney is duly attested and authenticated by a Notary Public or anycourt, Judge, Magistrate, Counsel or Vice Counsel or representative of the Centralgovernment, then it can be said that the persons, who had so executed the powerof attorney, had the authority to do so but mere registration of the power ofattorney does not bring about any such presumption that the Chairman-cum-Managing Director and the Director of the company had the authority on behalf ofthe company to execute the power of attorney in favour of Mr. Sundaram. In view of the abovediscussion, I hold that the plaintiff has failed to prove thatthe plaint has been signed and verified and the suit has been instituted by a dulyauthorised person on behalf of the plaintiff-company. Issue is decided against theplaintiff. ( 9 ) ISSUE No. 2: The main relief of the plaintiff is for recovery of Rs. 7,88,247/- as the price and other incidental charges like sales-tax due to the plaintiff onaccount of supply of the motorcycles to the defendant. It is, indeed, not in disputethat the vehicles were supplied in between the period December 9,1977 to February27,1979. This suit had been filed in this Court after serving notice under Section 80of the Code of Civil Procedure on April 4,1983 i. e. after much expiry of period ofthree years and two months of notice period. Under Article 14 in Part I of theschedule to the Limitation Act, three years period has been prescribed for filing asuit for recovery of the price of the goods supplied and the limitation commencesfrom the date of the supply of the goods. It is evident that the claim of the plaintiffin this regard stands barred by limitation. Under Article 14 in Part I of theschedule to the Limitation Act, three years period has been prescribed for filing asuit for recovery of the price of the goods supplied and the limitation commencesfrom the date of the supply of the goods. It is evident that the claim of the plaintiffin this regard stands barred by limitation. ( 10 ) AS far as the relief of declaration and injunction are concerned that theyappear to be not barred by limitation because Article 58 of Part III of the Scheduleto the Limitation Act would govern which prescribes period of three years from thedate the right to sue first accrues. The defendant had raised its claim against theplaintiff vide letter dated August 8,1980, demanding Rs. 35,51,283/20p as generaldamages. So, the reliefs of declaration and injunction with regard to this particularmatter is within time. The relief of injunction would be covered by residuaryarticle 113 of Part X of the Schedule to the Limitation Act which also prescribes aperiod of three years when the right to sue accrues. So, this issue is partly decidedin favour of the plaintiff and partly against the plaintiff. ( 11 ) ISSUE No. 3: The learned Counsel for the defendant has contended that thesuit is not maintainable as the defendant has already invoked arbitration clause andhad appointed an Arbitrator under the contract for deciding the claim of thedefendant with regard to general damages due to the defendant from the plaintiffon account of the breach of the contract by the plaintiff. ( 12 ) THE learned Counsel for the plaintiff has, on the other hand, contendedthat there is no evidence led by the defendant to prove that in fact, there has comeabout a valid subsisting contract between the parties inasmuch as it is not shownthat the officer who had signed the letter of acceptance of tender of the plaintiff wasa duly competent officer to sign such letter for bringing about a contract betweenthe parties in accordance with the provisions of Article 299 of the Constitution ofindia. ( 13 ) ALTHOUGH in the written statement a plea was taken that Mr. Suri, Assistantdirector (Supply) was fully competent to sign the contract on behalf of thepresident of India yet no notification or any other document had been producedand proved in this case to show that any such authority had been vested in Mr. ( 13 ) ALTHOUGH in the written statement a plea was taken that Mr. Suri, Assistantdirector (Supply) was fully competent to sign the contract on behalf of thepresident of India yet no notification or any other document had been producedand proved in this case to show that any such authority had been vested in Mr. Surito execute the contract on behalf of the President of India. It is not disputed that thepresent contract is purported to have been made in the exercise of the executivepower of the Union. Article 299 of the Constitution of India says that if that is so,then contract must expressly to be made in name of the President and all suchcontracts and all assurance of property shall be executed on behalf of the Presidentby such person and in such manner as he may direct or authorise. No order of thepresident has been produced to show that he had authorised Mr. Suri to execute thepresent contract. ( 14 ) IN Union of India v. M/s. Hanuman Oil Mills Ltd. and Ors. . AIR 1987 (Suppl)SCC 84, the Supreme Court held that where the competency of the person to act forand on behalf of the President in terms of Article 299 had been expressly questionedthe Government must lead evidence to show that contract had been made incompliance with the provisions of Article 299 and mere averment in the pleadingswould not suffice. In the said case a plea was taken that a notification No. SRO-3442dated November 2,1955, had been issued authorising Deputy Director to acceptthe tender for and on behalf of the President of India but no such notification wasproduced. The Supreme Court held that no valid contract had come into existencebetween the parties. ( 15 ) IN view of the above, I hold that in the present case also it must be held thatno valid and binding contract has come into existence between the parties and thus,the arbitration clause existing in such invalid contract could not have been invokedand the present suit is maintainable. Issue is decided in favour of the plaintiff. ( 15 ) IN view of the above, I hold that in the present case also it must be held thatno valid and binding contract has come into existence between the parties and thus,the arbitration clause existing in such invalid contract could not have been invokedand the present suit is maintainable. Issue is decided in favour of the plaintiff. ( 16 ) ISSUE No. 4 : It is, indeed, not in dispute that the defendant had not paidthe price of the motorcycles which were supplied by the plaintiff to the defendantbut even though there was no binding contract between the parties even then inview of Section 70 of the Contract Act the plaintiff would have been entitled to bereimbursed in respect of the price of the such vehicles taken by the defendant. However, unfortunately for the plaintiff, the claim of the plaintiff for recovering theprice of the said vehicles stands barred by time. Counsel for the plaintiff has arguedthat even if the main claim of the plaintiff for price of the vehicles is barred by timeeven then the plaintiff is entitled to have the sales-tax amount calculated at 4% inview of the provisions of the Tamil Nadu Sales Tax Act whereas in the bills thesales-tax amount mentioned was calculated at 3%. The learned Counsel for theplaintiff forgets that if the plaintiff s claim with regard to the price of the goodsstands time barred, any incidental charges linked with the price of the goods likeexcise duty and sales-tax are also not recoverable. So, the plaintiff is not entitled tothe relief of recovery of any amount as the same is barred by time. Issue is decidedagainst the plaintiff. ( 17 ) ISSUE No. 5: In view of the fact that there has not come about any bindingcontract between the parties, the defendant obviously is not entitled to recover anygeneral damages as claimed by the defendant from the plaintiff on account of anybreach of the contract by the plaintiff. The fact that the plaintiff had committed thebreach of the contract is not in dispute but in view of the fact that the contract wasnot valid, the breach of such invalid contract does not give any right to thedefendant to have any general damages from the plaintiff. The fact that the plaintiff had committed thebreach of the contract is not in dispute but in view of the fact that the contract wasnot valid, the breach of such invalid contract does not give any right to thedefendant to have any general damages from the plaintiff. Even otherwise noevidence has been led by the defendant to show that the defendant had effected anyrisk purchase of the quantity of the vehicles which were not supplied by theplaintiff. So, the plaintiff is entitled to have the reliefs of declaration and injunctionin this case, but in view of the decision in issue No. 1, the suit has to be dismissedas having been not instituted by a duly authorised person on behalf of the plaintiff. The suit is dismissed but in view of the peculiar facts, I leave the parties to beartheir own costs.