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2007 DIGILAW 463 (GAU)

Food Corporation of India v. Trade Wings and Ors.

2007-07-11

B.D.AGARWAL, M.B.K.SINGH

body2007
B. D. Agarwal J:- 1. The suit under consideration has ended with a unique result. The suit was filed by the Food Corporation of India, ('the FCD for recovery of Rs. 35,42,326.50 with interest jointly and/or severally against the defendants. The suit was once decided ex parte on 29.6.2002 decreeing the same in favour of the plaintiff and against the three defendants jointly or severally as prayed for. Thereafter, the suit was re-opened on an application by the defendants under order IX, rule 13 of the Code of Civil Procedure. The second judgment was pronounced on 29.8.2003 In this judgment, the suit was decreed only against the defendant No. 3, exonerating the defendant Nos. 1 and 2. This judgment was again reviewed on an application by the defendant No. 3. The third judgment was delivered on 28.9.2004, exonerating all the three defendants, although there was no dispute from the defendants' side that they had failed to transport the entire quantity of food grains to the plaintiff as per the contract. In this way, the claim of the plaintiff for a sum of Rs. 35 lakhs disappeared in thin air. This is how this first appeal has been filed by the FCI praying for an appropriate decree setting aside the third judgment. 2. We have heard Shri Kh. Babulindro, learned counsel to the appellant use respondent Nos. 1 and 2 were represented by Shri Ch. Bimolchandra, learned counsel whereas the respondent No. 3 was represented by Shri A. Nilamani, learned senior counsel assisted by Mr. A. Bimol Singh, advocate. 3. For convenience, the appellant will hereinafter be referred to as the "FCI", the respondent Nos. 1 and 2 as the "contractor" and the respondent No. 3 as the "third party". 4. Brief facts of the case are that the appellant entered into a contract with the respondent No. 1 for transportation of food grains from their Guwahati depot to Imphal in Manipur. The respondent No. 2 is the proprietor of his firm i.e. the respondent No. 1. In terms of the contract, the FCI delivered 1,14,215 quintals of rice and 3,472.83 quintals of sugar to its contractor during the period from 6.1.1987 to 5.7.1987. The contractor, i.e., the respondent Nos. 1 and 2 partly delivered the food grains at Imphal. According to the plaintiff, the contractor failed to deliver 14,278.26 quintals of rice and 24.31 quintals of sugar. The contractor, i.e., the respondent Nos. 1 and 2 partly delivered the food grains at Imphal. According to the plaintiff, the contractor failed to deliver 14,278.26 quintals of rice and 24.31 quintals of sugar. The value of this un-delivered food grains was Rs. 48 lakhs and odd. After deduction of transportation costs, the net value of the undelivered goods was Rs. 35,42,326.50p. Hence, the suit was filed for recovery of the said amount with interest and costs of litigation. 5. When the contractor failed to deliver the entire quantity of food grains lifted by him within the stipulated period, the FCI reminded the contractor to complete the delivery of lifted food grains In reply to the reminders the contractor informed the FCJ vide their letter dated 26.8,1987 (Ext. A/5) that they will finish the transportation by September, 1987. Similarly, vide letter dated 18.9.1989 (Ext.A/7), the contractor admitted the fact of non-delivery of the entire quantity of food grains. However/in this letter, a request was made to the FCI to release the arrear transportation charges of Rs. 40 lakhs. The contractor again assured the FCI to complete the work by 15th November, 1987 vide its letter dated 30.10.1987, which has been numbered as Ext. A/8 In the month of December, the FCI was informed that the respondent No. 3, Shri Sanjoy Kumar Patni was entrusted with the job of completing transportation of goods and requested the FCI to make further correspondence with this third party. This information was given under Ext. A/9. In pursuance to this letter, the third party appeared before the FCI and gave an undertaking on 29.12.1987 in the following words : "I'll complete the balance share of mine, 78 Trucks (seventy eight) of rice by 15th January, 1988". (Ext. A/10) 6. On the basis of the aforesaid document, the third party was arrayed as defendant No. 3 in the suit. We would like to mention here that even after this undertaking of the third party, executed on 29.12.1987. the contractor was informed by the FCI vide letter dated 12.2.1988 to complete the delivery of goods. In response to this letter, the contractor again assured the FCI that delivery of goods will be completed within March 1988. We would like to mention here that even after this undertaking of the third party, executed on 29.12.1987. the contractor was informed by the FCI vide letter dated 12.2.1988 to complete the delivery of goods. In response to this letter, the contractor again assured the FCI that delivery of goods will be completed within March 1988. The contents of contractor's letter dated 18.2.1988 (Ext.A/12) are necessary to be reproduced since under this letter the contractor had admitted his liability and the fact of short-supply alleged by the FCI. The admissions have been made in these words : - "With reference to your letter No. 2(ii)86-87/HTC dated 12.2.88, we beg to inform you that the total quantity of stocks lifted from Gauhati during the above period and the quantity delivered by us to Imphal depots as shown in your above letter are correct. We also assure you that we are completing the delivery within the month of March 1988. We are extremely sorry that due to our difficulties intimated to you our earlier letters, we are not able to complete in time. Kindly accept our request for extension of time for completion." 7. When the defendants failed to deliver the remaining quantity of food grains, the suit was instituted in the month of November 1989. It was registered as Original (Money) Suit No. 3G of 1989. The suit was subsequently re-numbered as 1 of 2003, when it was decided by the learned Addl. District Judge (ETC), Manipur East, Imphal. The suit was contested by all the three defendants by way of riling written statements and adducing evidence. Two witnesses were examined on behalf of the FCI whereas the contractor also produced two witnesses, who were examined as DW Nos. 1 and 2. As noted earlier, the suit was decided thrice. In tbe first judgment, the suit was decreed against all the three defendants jointly and severally; in the second judgment, the contractor was exonerated and liability was fastened upon the third party. Finally, in the third judgment, all the defendants have been exonerated. 8. We find from the record that issues to be decided in the suit were framed as back as on 27.4.1992. The first witness on behalf of the plaintiff was examined in the year 1996. He was thoroughly cross-examined separately by the contractor and the third party. After many hurdles, the cross-examination ended on 7.5.2003. 8. We find from the record that issues to be decided in the suit were framed as back as on 27.4.1992. The first witness on behalf of the plaintiff was examined in the year 1996. He was thoroughly cross-examined separately by the contractor and the third party. After many hurdles, the cross-examination ended on 7.5.2003. In between, PW No. 2 was also examined and cross-examined. The defendant's oral evidence was also tendered in the year 2003. Despite such tooth and nail contest and extensive trial, the second judgment, which was passed on merit deciding all the issues, was again reviewed on a flimsy ground, at the instance of the defendant No. 3. 9. The review application was filed by the third party on the ground that the second judgment suffered from various defects as many documents were not properly appreciated. This application was numbered as Civil Review No. 1 of 2003. We have also perused the record of this review application and found that the review prayer was allowed without satisfactory proof of service of notice upon the plaintiff. After restoration of the suit, the following two additional issues were also framed on 15.12.2003. "2(A) Whether plaintiff (FCI) had flouted all norms and procedures in awarding the initial contract dated 2.1.1987 vide order No. F.33/NEFR/HTC/86 Ad-hoc-1 and the subsequent extensions vide order No. F.33/NEFR/HTC/86 ad hoc 1, dated 1st June, 1987 and vide order No. F.33/NEFR/HTC/86 ad hoc 1, dated 1st June, 1987. If so what are the consequences ? (2B) Whether any contract agreement exists between the plaintiff (FCI) and defendant No. 1 through defendant No. 2 and whether they had performed their respective parts of the contract agreements in terms of the agreement signed between them." 10. As mentioned earlier, the review application was filed by the defendant No. 3 whereas both the additional issues were framed to protect the interest of the main respondent, i.e., the contractor. If the third party was aggrieved by the second judgment for non-production of any important evidence, any such additional evidence could have been tendered by the third party to exonerate him, on the basis of his previous pleading only. Be that as it may, the additional issues were framed without any fresh pleading. If the third party was aggrieved by the second judgment for non-production of any important evidence, any such additional evidence could have been tendered by the third party to exonerate him, on the basis of his previous pleading only. Be that as it may, the additional issues were framed without any fresh pleading. After framing of additional issues, the defendant No. 3 was re-examined on 8.1.2004 wherein the said third party spoke about the procedures of contract of transportation, which were not at all relevant for the purpose of review of the earlier judgment. DW No. 3 went on deposing about the payments made by the FCI to the contractor and also about the balance payment despite making a suo motu statement that he was not at all connected with the work. In this way, it appears to us that the third party was allowed to give proxy evidence on behalf of the contractor. After going through the review application and the additional oral evidence given by DW No. 3, we find no hesitation to hold that there was no cause for review, of the second judgment and the entire exercise of review was totally against the pre-conditions laid down under order 47, rule 1 of the Code of Civil Procedure. It appears to us that the learned trial judge framed the additional issues with a pre-conceived mind to exonerate all the defendants. On this count alone, the impugned third judgment is liable to be set aside. 11. As could be gathered from the second judgment the contractor has been exonerated from the liability on the ground that the defendants 1 and 2 had entrusted the execution of the remaining transportation work to the defendant No. 3 and on the basis of execution of an undertaking given by the third party under Ext. A/10. In the words of the learned trial judge, liability of the original contractor with the FCI stood shifted upon the third party on the basis of the undertaking given by the third party. Strangely, in the third judgment, the same trial judge has held suit Ext A/10, i.e., the undertaking of defendant No. 3 is ultra vires and the same cannot be acted and relied upon by the plaintiff. 12. Strangely, in the third judgment, the same trial judge has held suit Ext A/10, i.e., the undertaking of defendant No. 3 is ultra vires and the same cannot be acted and relied upon by the plaintiff. 12. The learned trial judge has finally exonerated the contractor also on the ground that the plaintiff ought not to have filed the suit against the contractor and the third party making them jointly and severally liable. The other ground to exonerate the contractor is that the contract period was only for three months and the extension of the contract period was illegal. The learned trial judge has also taken into consideration the fact that the FCI failed to pay the transportation charges to the contractor as per clause IX(15) of the agreement and as such, the plaintiff was stopped from enforcing the contract. 13. In the impugned judgment, the learned trial judge himself has noted that under section 58 of the Indian Evidence Act, 1872, admitted facts need not be proved. In the case at hand, the contactor had admitted the fact of non-delivery of the entire quantity of the food grains lifted by them in a series of letter. In the letter dated 12.2.1988 ( Ext. A/11), the FCI had specifically described the balance quantity of food grains to be delivered by the contractor. This claim was unequivocally admitted by the contractor in his letter dated 18.2.1988 (Ext. A/12), contents of which have been extensively reproduced in this judgment. At no stage, of the trial, the contractor disputed the fact of non-delivery of goods and value thereof mentioned in Schedules 3 and 4 of the plaint. The contractor also did no take any plea that the FCI is not entitled to any decree for recovery of value of the goods due to illegal extension of the contract period or for non-payment of arrear transportation charges, the grounds of exoneration by the trial court. No issue in this regard was also framed initially. Only after the second judgment, two additional issues were framed to find out fault in the extension of the contract period without any pleading. The only defence of the contractor i.e. the respondent Nos. 1 and 2 was that they had entrusted the work to respondent No. 3 and they had no knowledge if the said respondent did not deliver 78 trucks of rice to FCI. The only defence of the contractor i.e. the respondent Nos. 1 and 2 was that they had entrusted the work to respondent No. 3 and they had no knowledge if the said respondent did not deliver 78 trucks of rice to FCI. The oral evidence was also led by the contractor in the same tune. Hence, the grounds of exoneration of the contractor, i.e., respondent Nos. 1 and 2 are de-hors the pleading and evidence. 14. Coming to the question whether the respondent No. 3 has any liability towards the FCI in terms of his undertaking given under Ext. A/10, we can only say that this undertaking cannot create any legal liability. Section 10 of the Indian Contract Act, 1872 defines contract in this way : - "All agreements are contracts ii they arc made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void............." 15. A bare reading of the definition of the contract shows that "lawful consideration" and "lawful object", inter alia, are essential components of enforceable agreements. In the present case, the unilateral undertaking given by the third party did not spell out the consideration for giving the undertaking and motive/objective behind giving the assurance on behalf of the contractor. Hence, this undertaking cannot be termed as a concluded contract in between the FCI and the third party. It is the established principle of contract law that there should be an aggregatio mentium between the contracting parties to convert the agreement into an enforceable contract. In the case of Dresser Rand S.A. v. Bindal Agro Chem Ltd., (2006) 1 SCC 751 , it has been held that a prelude to a contract should not be confused with a concluded contract. 16. The meaning of the word "undertaking" has been extensively dealt with by the learned Trial Judge referring to Black's Law and Osborn's Concise Law Dictionaries. None of these dictionaries have defined that an undertaking would also amount to contract and enforceable in law. Besides this, under clause (VI) of the agreement, any arrangement between the contractor and his agent would not be a part of the contract between the FCI and the contractor. None of these dictionaries have defined that an undertaking would also amount to contract and enforceable in law. Besides this, under clause (VI) of the agreement, any arrangement between the contractor and his agent would not be a part of the contract between the FCI and the contractor. Clause (VI) of the agreement runs as follows : - "Relationship with third parties: All transaction between the contractors and third parties shall be carried out as between two principles without reference in any event to the corporation. The contractors shall also undertake to make the third parties duly aware of the position aforesaid." 17. In view of clause (VI) of the agreement, the court cannot take into consideration an unilateral promise given by the third party to the FCI, Neither it was a contract between the FCI and the third party nor is the undertaking enforceable in law. Above all, the so-called undertaking of the third party is conspicuously silent about the remaining quantity of food grains to be delivered to the FCI. The contractor could not clarify as to why the respondent No. 3 confined his liability to deliver only 78 trucks (nearly 7,800 quintals of rice) against un-delivered quantity of 14,278.26 quintals of rice and 24.31 quintals of sugar. Under such situation, the respondent No. 3 has been rightly exonerated from the liability. 18. In the result, we allow the appeal. The impugned judgment and decree dated 29.8.2003 are hereby set aside, 'it is ordered and decreed that the appellant is entitled to recover the sum of Rs. 35,42,326.50 p. from respondent Nos. 1 and 2 jointly or severally. This amount shall carry simple interest @ 6% per annum from 17,11.1999, i.e., the date of filing of the suit. It is further ordered that the appellant shall be entitled to the costs of the litigation throughout.