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2009 DIGILAW 693 (CAL)

Pec Ltd. v. Jai Balaji Industries Ltd.

2009-09-01

I.P.Mukerji, Pinaki Chandra Ghose

body2009
JUDGMENT: Pinaki Chandra Ghose, J. 1. THIS appeal is directed against an ad interim order dated 12th June 2009 passed by the Hon'ble First Court in an interim application being G.A. No. 1329 of 2009 filed by the respondent/plaintiff. By that order, His Lordship was pleased to grant an order restraining the appellant/defendant from operating its accounts was confirmed and a receiver was appointed for drawing samples of the goods and getting the same analysed through National Test House, Alipore, Kolkata. 2. SINCE affidavits had not been filed before the Trial Court, we were of the opinion that the prima facie case of the parties could be best understood by inviting affidavits. By consent of the parties the above interim application was heard out together with the appeal, after filing of the affidavits by the parties. Facts revealed that the respondent/plaintiff entered into an agreement on 28th July 2008 with a foreign seller for purchase of 7100MT of Manganese Ore. The goods were to be sold by the foreign seller under a CIF contract and to be discharged at Paradeep Port. It was a term of this agreement that the quality and quantity of the goods were to be inspected by the buyer before they were landed at the port of loading. 3. THE appellant is a Government company. Be that as it may, it appears from the records that on 25th September 2008 a High Sea sale agreement of these goods was entered into between the appellant/defendant and respondent/plaintiff. It appears that there must have been another agreement between the appellant and foreign seller, which is not disclosed so far in these proceedings. 4. IN that agreement dated 25th September 2008, appellant/defendant is described as the seller of the goods and the respondent/plaintiff is described as the buyer, with almost common material terms. Two clauses of that agreement are important: (a) The respondent/plaintiff would deposit US $ 48,25,188.40 as security for payment. (b) Appellant/defendant would endorse the bill of lading where it was describe as a notified party in favour of the respondent/plaintiff. 5. FURTHER, a deed of pledge was executed where the entire goods were pledge to the appellant/defendant. 6. THE vessel carrying the goods arrived at Paradeep Port and the goods were discharged by or about 8th October, 2008. THEreafter, it appears that the goods have been transferred to a warehouse. 5. FURTHER, a deed of pledge was executed where the entire goods were pledge to the appellant/defendant. 6. THE vessel carrying the goods arrived at Paradeep Port and the goods were discharged by or about 8th October, 2008. THEreafter, it appears that the goods have been transferred to a warehouse. One consignment of the goods was delivered to the respondent/plaintiff but according to them they have rejected the goods, which was not accepted by the respondent/plaintiff. 7. AT this point of time the dispute started between the parties. 8. IN the circumstances the respondent/plaintiff instituted the aforesaid suit and affirmed an interim application on 16th May, 2009. IN the said suit the respondent/plaintiff claims for return of an advance amount of Rs. 2,85,28,926/- and Rs. 35,30,000/- price of 100 WMT paid by it aggregating to Rs. 3,20,58,926/- and Rs. 252,08,526/- paid towards various duties, charges and freight etc. and an injunction restraining encashment of the security by cheque of Rs. 20,31,25,956/- and further damages. In the interim application the following reliefs had been sought: (a) Commissioner/Special Officer be appointed to make inventory of the manganese ores lying at the respondent No- 1's leased plots in the factories of the petitioner at Durgapur and Ranigunj and thereafter to take steps for drawing of samples and get the same analysed through and/or by such agency as this Hon'ble Court may deem fit and proper including National Test House, Alipore, Calcutta; (b) Injunction restraining the respondent No. 1 from depositing and/or encashing the said cheque dated December 14, 1008, bearing No. 242474 for Rs. 20,31,25,956/- drawn on Allahabad Bank, Calcutta Main Branch; (c) Direction upon the respondent No. 1 to cancel and return the said cheque bearing No. 242474, dated December, 2008 for Rs. 20,31,25,956/- drawn on Allahabad Bank, Calcutta Main Branch; (c) Direction upon the respondent No. 1 to cancel and return the said cheque bearing No. 242474, dated December, 2008 for Rs. 30,31,25,956/-, drawn on Allahabad Bank, Calcutta Main Branch; (d) Appropriate direction upon the respondent No. 1 to remove the manganese ore lying at the respondent No. l's leased plots being portions of the factory premises of the petitioner at Ranigunj and Durgapur within such time as may be fixed by this Hon'ble Court; (e) In default of the respondent No. 1 removing the manganese ore from the said leased plots in the factory premises of your petitioner, Receiver be appointed by this Hon'ble Court with all powers under order 40 of the Code of Civil Procedure including sale of manganese ore lying at the leased plots of the respondent No. 1 in the factory premises of the petitioner at Durgapur at Ranigunj, either by public auction or by private treaty and to deposit the sale proceeds thereof with the Registrar, Original Side; (f) Ad interim order in terms of above prayers; (g) Costs and incidental to this application be borne by the respondent No.1; (h) Such further orders be made and/or directions be given as this Hon'ble Court may deem fit and proper. 9. IT has contended by the respondent/plaintiff as follows: (a) The first consignment of goods was rejected by them because they were defective. (b) They decline to take delivery of the balance goods because they are inferior in quality. (c) The property in the goods never passed to them because the bill of lading was endorsed in favour of the appellant/defendant. (d) The appellant/defendant by virtue of the deed of pledge always the control of the goods. (e) They have no obligation to take the whole goods as the agreement provided that the goods were to be delivered part by part. 10. ON the other hand it was submitted on behalf of the appellant/defendant as follows: (a) Although in the agreement of sale it is described as the seller it was in reality an intermediary in the sale of these goods. (b) This security taken by the appellant/defendant was for the purpose of honouring the letter of credit which it had given in favour of the foreign seller for their ultimate purchase by the respondent/plaintiff. (c) The goods were always in the possession of the respondent/plaintiff. (b) This security taken by the appellant/defendant was for the purpose of honouring the letter of credit which it had given in favour of the foreign seller for their ultimate purchase by the respondent/plaintiff. (c) The goods were always in the possession of the respondent/plaintiff. (d) The bill of lading had been properly endorsed in favour of the respondent/plaintiff. (e) By endorsement of the bill of lading the property in the goods, passed in favour of the respondent/plaintiff. (f) The respondent/plaintiff had inspected and satisfied themselves about the quality of the goods before they were loaded on to the vessel at the port of loading and therefore they cannot dispute the quality of the goods. (g) The appellant/defendant should be permitted to enforce the security by encashing the cheques which have been deposited with them by the respondent/plaintiff. Various authorities had been cited at the Bar before us which we briefly discuss herein-below: 11. LEARNED Counsel for the respondent/plaintiff has relied on the case of Maheswari and Co. Pvt. Ltd. and Anr. vs. Corporation of Calcutta, reported in AIR 1975 Cal 165 , for the proposition that a contract of sale cannot be specifically enforced. 12. HE has also contended that when one mode of payment has been agreed upon, a different mode of payment cannot be insisted upon, citing Shamsher Jute vs. Sethia, reported in 1987(1) Lloyd's Law Reports, 388. Learned Counsel for the appellant/defendant has relied on Sundaram Finance Ltd. vs. State of Kerala and Anr., reported in AIR 1966 SC 1178 and Gujarat Bottling Co. Ltd. vs. Coca Cola Company and Ors., reported in AIR 1995 SC 2372 for the submission the contract was not a sale agreement and to emphasize upon the law of novation of contract to say that the initial agreement between the respondent plaintiff and the foreign seller was not wiped out by subsequent agreement with the appellant defendant. 13. HE has also relied upon Haridas Mundra vs. National and Grindlays Bank Ltd., reported in AIR 1963 Cal 132 to contend that he could enforce the security by way of deposit of cheques. 14. WE are prima facie of the view that the property in the goods had passed in favour of the respondent/plaintiff because the bill of lading had been endorsed in their favour. 14. WE are prima facie of the view that the property in the goods had passed in favour of the respondent/plaintiff because the bill of lading had been endorsed in their favour. Prima facie the record suggests that the took delivery of the goods at the port of discharge and thereafter had custody and control of the goods, although the goods are theoretically pledged in favour of the appellant/defendant. The cheques which were deposited in favour of the respondent/piaintiff were as security. 15. AN English decision in the case of Shamsher Jute vs. Sethia, reported in 1987(1) Lloyd's Law Reports 388 was cited by the respondent/piaintiff in support of the contention that a bill of exchange was a conditional mode of payment, condition being that it had to be presented on the due date, if not presented on the due date, the bill of exchange was incapable of being honoured at a later due date. If the buyer caused the bill of exchange to be dishonoured, by not presenting it on the date, he could not demand a further mode of payment. Here it was submitted that the appeilant/piaintiff did not present the cheque on the date mentioned therein. Hence, they cannot do so now. We are unable to accept this contention. First for the reason that the date mentioned in the cheque is certainly not the due date for the cheque because a cheque can be encashed through out the period of its validity. The date only signifies that this Bill of Exchange cannot be presented before that date. Further creation of security by pledge of goods that is security in another form does not destroy another security that is deposit of cheques. Neither does it supersede if both securities can exist together. Neither is there any need at this stage for testing of the goods. 16. THE appellant/plaintiff has always the option or availing whatever security its likes. However, in the interests of justice, a part of the claim of the respondent/plaintiff which at this stage appears to the Court to be probable should be secured. 17. UNDER those circumstances, we are prima facie of the opinion that the order under appeal was not properly passed. 18. However, in the interests of justice, a part of the claim of the respondent/plaintiff which at this stage appears to the Court to be probable should be secured. 17. UNDER those circumstances, we are prima facie of the opinion that the order under appeal was not properly passed. 18. WE set aside the order under appeal and pass the following order: (a) The appellant/defendant will be at liberty to encash the cheques and appropriate the amount subject to furnishing a Bank Guarantee of like amount to be furnished in favour of the Registrar. Original Side. WE also grant liberty to the appellant to furnish a letter of undertaking to furnish Bank Guarantee for like amount from a Nationalised Bank in favour of Registrar, Original Side. Registrar, Original Side until the formal Bank Guarantee is furnished as directed and upon doing so, the cheques may be encashed. The appellant shall keep the Bank Guarantee renew till the disposal of the suit. The Bank Guarantee should be kept to the credit of this suit. (b) The Receiver already appointed shall sell the goods after issuing an advertisement in the Newspapers, once in "Statesman" once in "Ajkal" and once in Hindi in "Sanmarg", either by way of public auction or by private party subject to confirmation by the Court. The cost charges and expenses of sale will be borne by the appellants at the first instance. Further, ad hoc remuneration of 500 GMs should be paid to the Receiver. (c) WE also grant liberty to the parties to bring the intending buyers. (d) The Receiver after confirmation of sale shall hand over the sell proceeds to the respondent/plaintiff. The appellant is directed to renew the said Bank Guarantee till the disposal of the suit. (e) The suit is expedited. Plaint to be served forthwith, if not already served, upon Advocates-on-Record for the defendant in the suit, by the Advocate-on-Record for the plaintiff. Written statement within 3 weeks from the date the certified copy of this judgment is made available, cross order for discovery two weeks thereafter, inspection two weeks thereafter and the suit is directed to appear in the prospective list. 19. URGENT certified photocopy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities. LP. Mukerji, J.: I agree. LATER: 20. MR. 19. URGENT certified photocopy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities. LP. Mukerji, J.: I agree. LATER: 20. MR. Abhrojit Mitra, learned Advocate appearing on behalf of the respondent prays stay of the operation of this order for a week which is granted.