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2007 DIGILAW 1593 (PAT)

Eastern Udyog v. East Central Railway Hajipur

2007-09-27

MRIDULA MISHRA

body2007
Judgment 1. This writ application was earlier heard and dismissed by order dated 8.8.2006 holding that the writ application is not maintainable. Against that order L.RA. No. 639 of 2006 was preferred and vide order dated 22.5.2007 the appeal was allowed and the writ application was restored for its hearing afresh. 2. The writ application has been filed for quashing the order communicated vide letter no. ECR/ENG/W-7A/623/02/6008/Cont dated 21.9.2004 passed by the Deputy Chief Engineer/TSP, East Central Railway, Hajipur directing the petitioner to deposit Rs. 40,44,250/- by 5th October on the ground that they have invoked risk and cost tender for un-supplied quantity of Combination Metal Liner which the respondents have purchased at higher rate from other supplier in view of non-supply of the same by the petitioner. Petitioners further prayer is for restraining the respondents from taking any steps whatsoever for realization of so-called difference amount in purchase by risk-cum-cost tender. 3. The respondent-Railway came out with tender notice for supply of 7,10,000 sets of combination Metal Liner. The petitioner submitted his tender on 14.2.2003. All terms and conditions were mentioned in the separate sheet and the column in the tender format referring terms and conditions were left blank. The format was signed. The petitioner in the separate sheet had offered for Railway Price Variation Clause and the validity period of the tender was 90 days as against 120 days mentioned in the tender notice. The respondents vide letter dated 7.5.2003 requested the petitioner to extend the validity period to 120 days taking note of the conditions mentioned in the separate sheet. The petitioner respond and vide letter dated 15.5.2003 extended the period for 120 days. The respondent- Railway faxed a letter of acceptance but the terms mentioned by the petitioner regarding the Railway Price variation clause was not accepted. In this letter of acceptance different terms was mentioned as against offer price of variation clause by the petitioner and a firm price was offered by the Railway. The petitioner on 19.6.2003 wrote to the respondents that the letter dated 17.6.2003 was not a letter of acceptance but counter offer which was not acceptable to the petitioner. The petitioner requested the respondents to accept the terms of the petitioner or otherwise petitioner will return the acceptance letter. The petitioner on 19.6.2003 wrote to the respondents that the letter dated 17.6.2003 was not a letter of acceptance but counter offer which was not acceptable to the petitioner. The petitioner requested the respondents to accept the terms of the petitioner or otherwise petitioner will return the acceptance letter. The respondents in reply vide letter dated 2.7.2003 informed the petitioner that since he had left the column of price variation in the schedule format of tender document, therefore, firm price has been mentioned by the Railway and that is binding on the petitioner. He will have to supply on that terms failing which they will invoke risk cost clause and would make fresh tender. In case the price for the purchase was made on higher side, the different amount will be recovered from the petitioner. Petitioner, in response, sent a letter on 5.7.2003 mentioning that the price variation clause was mentioned in the separate sheet and, therefore, in absence of any valid contract any terms of contract could not be invoked against the petitioner. The respondent-Railway on 11.8.2003 issued two purchase orders for supply which was returned by the petitioner on 15.10.2003. The respondent sent a letter dated 6.4.2004 stating to have cancelled the purchase order and invited fresh tender. This was again replied by the petitioner on 16.4.2004 stating that since no valid contract has come into existence the terms of contract cannot be invoked against him. The petitioner challenged the action of the respondents of issuing fresh tender by filing C.W.J.C. No. 6565 of 2004 but subsequently withdrew on 30.7.2004. A legal notice was sent by the petitioner to the respondents. Thereafter, the impugned order dated 21.9.2004 was issued by the respondents demanding Rs. 40,44,250/- as a result of invocation of risk purchase clause because they have to purchase Combination Metal Liner at higher price. The respondent claims the difference of price which they had to pay on account of non-supply of the articles by the petitioner. 4. Counter affidavit has been filed on behalf of respondents stating that they have to procure materials at the risk and cost of the petitioner. Therefore, the petitioner is legally bound to pay Rs. 40,44,250/ The acceptance letter and purchase letters were issued in favour of the petitioner by the respondents as per terms and conditions submitted by the petitioner and did not supply the material. Therefore, the petitioner is legally bound to pay Rs. 40,44,250/ The acceptance letter and purchase letters were issued in favour of the petitioner by the respondents as per terms and conditions submitted by the petitioner and did not supply the material. The respondents having no option to procure the material had to procure the material at the risk and cost of the petitioner as per provisions and conditions of contract. It has also been dated in the counter affidavit that though the petitioner quoted its terms and conditions in separate sheet attached with the tender, but he did not quote any rate for price variation clause on the separate sheet in the tender form. The space for quoting rate for price variation clause in the tender form was left blank by the petitioner which means that the petitioner was not interested in claiming price variation. The acceptance letter and purchase order was accordingly issued in favour of the petitioner and tender of the petitioner was accepted by the respondents as per terms and conditions mentioned by the petitioner on separate sheet. For claiming price variation clause, he should have quoted the rate for variation in the offer rate for every variation of Rs. 100/- per M.T. in the SAILs stockard price of billete. Since the rate was not quoted as such petitioner cannot claim price variation clause. The statement of the petitioner that there was no acceptance as such no contract acceded in between the parties. There is no specific denial but it has been stated that it is matter of record hence no comment. 5. Counsel appearing for the petitioner submits that the respondent on 17.6.2003 faxed a letter mentioned as letter of acceptance. In this letter terms offered by the petitioner was not accepted but some different terms were mentioned in that letter. Such letter cannot be deemed to be a letter of acceptance but it constituted a counter proposal. On the basis of this letter no valid contract had come into existence in absence of unconditional acceptance of offer of the petitioner by the respondents. In this circumstance the question of cancelling the purchase order and purchasing materials from elsewhere at the risk and cost and thereby fixing responsibility against the petitioner is baseless. On the basis of this letter no valid contract had come into existence in absence of unconditional acceptance of offer of the petitioner by the respondents. In this circumstance the question of cancelling the purchase order and purchasing materials from elsewhere at the risk and cost and thereby fixing responsibility against the petitioner is baseless. Further it has been submitted that as provided under Section 7 of the Indian Contract Act, 1872 in order to convert a proposal into a promise, the acceptance must be absolute and unqualified. The acceptance with variation is no acceptance. It is simply a counter proposal which must be accepted by the original promisor before a contract is made. In the present case, the letter dated 17.6.2003 was a counter offer which was not accepted by the petitioner and by letter dated 19.6.2003 it was informed that either they will have to accept the terms of the petitioner or otherwise the petitioner will have to return the acceptance letter. The terms of the petitioner regarding the price variation was not accepted as such no contract was made. 6. Reliance has been placed in the case of Badri Prasad vs. The State of Madhya Pradesh and Others (A.I.R. 1970 S.C. 706) wherein it has been held that in case of offer and acceptanceinvitation to other party to make offer if there is No unconditional acceptance, there is no contract. 7. Another decision which has been relied by the petitioner is in the case of Chhotey Lal Gupta vs. Union of India (A.I.R. 1987 Allahabad 329) where it has been held that acceptance with new condition is neither absolute nor unqualified hence no valid contract comes into existence. 8. Counsel appearing for the respondents on the other hand has submitted that the acceptance letter was sent by the Railway on 17.6.2003 accepting all terms and conditions of the petitioner except the clause relating to price variation. Petitioner was duly informed through this letter that the contract and supplies will be governed by the I.R.S. conditions of contract. The petitioner was requested to return the same duly signed and sealed in token of his acceptance within three days from the date of receipt of the letter of acceptance. The petitioner did not return the letter, as such it was deemed that there is acceptance. The petitioner was requested to return the same duly signed and sealed in token of his acceptance within three days from the date of receipt of the letter of acceptance. The petitioner did not return the letter, as such it was deemed that there is acceptance. Thereafter the purchase order was sent to the petitioner which was returned by the petitioner stating that the purchase order is being returned as the railway has not accepted the offer of the petitioner in totality. After the risk and cost was invoked and the petitioner was informed that the purchase order are being cancelled and purchase for the same quantity shall be made from elsewhere at the petitioners risk and cost on his responsibility. The petitioner sent a letter regarding cancellation and before that the contract was already finalized. The purchase order was already issued and the articles were purchased from other place at petitioners risk, cost and responsibility. The petitioner is liable to make payment of the difference amount in terms of the contract. He cannot raise this belated objections regarding the nonexistence of contract in between the petitioner and the respondents. 9. What I find that under Section 7 of the Indian Contract Act, the acceptance on behalf of respondent railway was not absolute and unqualified, it was conditional, and the conditions were not accepted by the petitioner. In this circumstance, there was no valid contract. The petitioner was ready to accept that variation and the respondent has also issued the letter of acceptance with some variation. Both the letter of acceptance of the Railway was counter proposal, and the same was not accepted by the petitioner. Its acceptance was must for existence of valid contract. When the contract itself was not valid, the terms and conditions mentioned under different clause of the contract is not enforceable. In such a invalid contract the terms and conditions under the contract cannot be enforced and the petitioner could not have been asked to make payment of difference of the amount due to nonupply of the articles and its purchase by the respondents at higher price from elsewhere. 10. In the aforesaid facts and circumstances of the case the impugned letter dated 21.9.2004 issued by respondent no. 5 the Deputy Chief Engineer, East Central Railway, Hajipur directing the petitioner to deposit Rs. 40,44,250/is illegal, arbitrary and must be quashed. 11. 10. In the aforesaid facts and circumstances of the case the impugned letter dated 21.9.2004 issued by respondent no. 5 the Deputy Chief Engineer, East Central Railway, Hajipur directing the petitioner to deposit Rs. 40,44,250/is illegal, arbitrary and must be quashed. 11. During the pendency of the writ application petitioner filed I.A. No. 4534 of 2007 for amendment of the main writ application. During the pendency of the writ application the respondent had issued a letter No. ECR/ENG/W-7A/6057/179/1099 dated 3.8.2006 to M/s Eastern Track Udyog Ltd. another company, in which one of the directors happen to be a proprietor of M/s Eastern Udyog. By this letter it was intimated that a sum of Rs. 40,44,250/which was demanded from the petitioner is being deducted from the bills of M/s Eastern Track Udyog Pvt. Ltd. from the bill dated 24.6.2006. The petitioner has challenged this letter dated 30.8.2006. Further prayer of the petitioner is for refunding the amount of Rs. 40,44,250/- which has been deducted from the bills of M/s Easter Track Udyog Ltd. This fact has not been denied by the respondentRailway that Rs. 40,44,250/- has not been deducted from the bills of M/s Eastern Track Udyog Ltd. 12. The I.A. application is allowed. The prayer of the petitioner regarding quashing of the letter dated 30.8.2006 issued by the respondent informing deduction of Rs. 40,44,250/- from the bills of M/s Eastern Track Udyog Ltd. is quashed. The respondents 2, 3, 4 and 5 are directed to release the deducted amount of Rs. 40,44,250/- in favour of the petitioner within two weeks from the date of receipt/production of a copy of this order.