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2024 DIGILAW 1773 (GUJ)

Food Corporation of India v. Jamnadas Ramji

2024-08-28

BIREN VAISHNAV, NISHA M.THAKORE

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JUDGMENT : Biren Vaishnav, J. 1. First Appeal No. 2531 of 2003 has been filed by the appellant, Food Corporation of India, who was the original defendant in Special Civil Suit No. 162 of 1990. The respondent – plaintiff had filed a suit inter alia stating that it was a partnership firm carrying on the business of clearing and handling cargo. The Food Corporation of India had issued an advertisement on 19.01.1987 offering coastal movement of food grains from Rozi-port i.e. Port of Bedi, also known as Port of Okha and also for the services which included transportation of grains from godowns to loading ports etc. 1.1 On the respondent – plaintiff being the lowest tenderer, the tender was accepted and a Work Order was issued on 02.03.1987. A Contract was awarded to transfer approximately 49,200 mts of food grains from Rozi-port to Calcutta and 39,200 mts from Rozi-port to Madras, in all total 88,400 mts. 1.2 The case of the plaintiff was that the rates for transportation from Rozi-port to Madras was fixed at Rs.367/- per ton. On payment of earnest money, the Food Corporation Of India, only provided 15,615 mts for transportation from Rozi to Madras against the work order of 39,200 mts. While not a single grain of 49,200 mts from Rozi-port to Calcutta. According to the Plaintiff, it therefore, suffered a loss at 10% being an amount of Rs.31,73,600/- for which a suit for recovery was filed. 1.3 The Trial Court, by the judgement and order dated 09.05.2003, decreed the suit in favour of the plaintiff. Hence, the first appeal by the appellant – Food Corporation of India. 2. Mr.Shakeel Qureshi, learned counsel appearing for the appellant – Food Corporation of India, made the following submissions: 2.1 He would submit that there was no loss and damages given in the plaint and the Trial Court, therefore, failed to consider that without any basis for claiming damages at the rate of Rs.31,73,600/- the decree was passed against the appellant. 2.2 He would submit that the Trial Court failed to consider the fact that as per the tender contract, rate was fixed per ton. Relying on the admission by the respondent No.1, Mr.Qureshi, learned counsel, would submit that the quantum of damages was not proved. In fact, from the evidence of the plaintiff, PW-1, it was clearly established that the shipping company M/s. Atlas did not remain idle. Relying on the admission by the respondent No.1, Mr.Qureshi, learned counsel, would submit that the quantum of damages was not proved. In fact, from the evidence of the plaintiff, PW-1, it was clearly established that the shipping company M/s. Atlas did not remain idle. 2.3 Mr.Qureshi, learned counsel, would submit that there was no stipulation in the work order and Clause 15 which defined the volume of work was wrongly interpreted by the Trial Court to award damages when there was no proof of the loss of profit. 2.4 Mr.Qureshi, learned counsel, would further submit that the Trial Court failed to consider the relevant clauses, namely, Clauses (c), (d), (e), (f) & (g) of the Tender Agreement. Mr.Qureshi, would submit that the work order at Exh.41 and the Contract at Exh. 59 only mentioned approximate quantity which by no stretch of imagination can be termed as actual quantity. He, further submitted that the Trial Court committed an error of awarding 12% interest. He would rely on the following decisions : (1) In the case of Fatehchand Vs. Balkishan Dass, reported in AIR 1963 SC 1405 . (2) In the case of Mohd. Dalilkhan Vs. State of Andhra Pradesh, reported in AIR 1963 A.P. 216 . (3) In the case of Karshandas vs. Saran Engineering Company, reported in AIR 1965 SC 1981 . (4) In the case of Food Corporation of India Vs. Lakshmi Cattle Feed Industries, reported in 2006 (2) SCC 699 . (5) In the case of Kailashnath Associates Vs. Delhi Development Authority, reported in 2015 (4) SCC 136 . (6) In the case of Svati Lat Utpadak Auduyogic Sahkari Mandali Ltd Vs. Gujarat Housing Board, rendered by a Division Bench of this Hon’ble Court and reported in AIR 2014 Guj. 107 . (7) In the case of B.D. Sorathia Vs. State of Gujarat, reported in 2014 (2) GLH 254 . 3. Mr. D. M. Thakkar, learned counsel appearing for the respondent – original plaintiff, would submit that reading the tender notice dated 19.01.1987 it is clear that the respondent – plaintiff was offering transportation of food grains from Rozi to Madras and Calcutta respectively. That, in accordance with the work order, the acquired quantity and quantum of food grains was stipulated in the work order. That, in accordance with the work order, the acquired quantity and quantum of food grains was stipulated in the work order. There was no reasonable explanation from the Food Corporation of India for only awarding the limited stock of 15,615 mts of food grains against the agreed total transportation of 88,400 mts. Bills were raised at Exhs. 105 to 108 totaling Rs.57,30,520.25/- against which the defendant only paid Rs.48,96,854.35/-. 3.1 Mr.Thakkar, learned counsel, would further submit that a Demand Notice was issued by the plaintiff to the defendant. The suit was filed for recovery of damages for loss in the profit at 10% of food grains. As per the work order, the calculations of which is explained by Mr.Thakkar, would be as under: Rs.86,61,200: Being total amount payable for Rs.23,600/- MT to be delivered for transporting from Rozi Port to Madras @ Rs.367/- PMT but not delivered. Rs.2,30,74,800: Being total payable for Rs.49,200/- MT to be delivered for transporting from Rozi Port to Calcutta @ Rs.469/- PMT but not delivered. Rs.3,17,36,000: Total 10% of Total comes to Rs.31,73,600. Amount wrongly deducted is Rs.8,33,565.90. Amount wrongly deducted for loss of gunny bags at sea is Rs.22.628. Thus, plaintiff is entitled to recover Rs.40,30,065. 3.2 Mr.Thakkar, learned counsel, would submit that on the cross-examination of the plaintiff’s witness, namely, Haresh Trikamdas and Kanakrai, Managing Director of M/s.Atlas Shipping Company and the documentary evidence, the Trial Court had rightly proved that the defendant had committed breach of the contract by not supplying the food grains as per the work order Exhs. 41 and 77. He would submit that the plaintiff – respondent herein had proved loss in profit to the extent of 10% by filing Income Tax Returns and Assessment Order at Exh.130. He relied on the following decisions : (1) In the case of Dwarkadas Vs. State of Madhya Pradesh., reported in AIR 1999 SC 1031 . (2) In the case of A.T. Brij Paul Singh Vs. State of Gujarat., reported in AIR 1984 SC 1703 . 3.3 Mr.Thakkar, learned counsel, would further submit that by leading oral evidence at Exh.113 and 160 which indicated that the respondent had made all necessary arrangements of chartering the ship and hiring labourers for transportation, the Trial Court had rightly come to the conclusion that the respondent was entitled to the damages and recovery of Rs.31,73,600/- was rightly ordered. 4. 3.3 Mr.Thakkar, learned counsel, would further submit that by leading oral evidence at Exh.113 and 160 which indicated that the respondent had made all necessary arrangements of chartering the ship and hiring labourers for transportation, the Trial Court had rightly come to the conclusion that the respondent was entitled to the damages and recovery of Rs.31,73,600/- was rightly ordered. 4. Having considered the submissions made by the learned counsels for the respective parties, what is apparent on reading the judgement of the Trial Court is that based on the Tender Agreement, Exh.40, the Survey Report and the evidence of the witnesses on behalf of the plaintiffs, the Trial Court on the assessment of the evidence came to the conclusion that despite an agreed quantity of food grains that was necessary to be supplied as per the work order, the Food Corporation of India did not honour its contract without any just and proper reasons. 4.1 Admittedly, at Exh.39, a tender notice was issued inviting tenders for transportation of food grains. Reading the tender notice would indicate that such tender notice included transport of food grains from Rozi to Madras and Calcutta. Upon such tender being floated, the respondent was awarded the contract based on it being the lowest bidder. Reliance placed on Clause (c) to (g) by the learned counsel for the appellant of the tender notice of the contract agreement cannot be of any help to the appellant because they are in connection with the breach that a contractor would commit and not the Food Corporation of India. 4.2 Though the tender contract did include Clause 15 which stipulated that the Corporation does not guarantee any volume of work, the work order at Exh.49 indicated that a stipulated quantity of food grain had to be transported. The cross-examination of the witness, Haresh Trikamdas when read together with the Work Order would indicate that the work order was issued to the respondent for transportation of food grains. That work order is at Exh.41 and Exh.77. Reading of the order would indicate that pursuant to the tender opened on 30.01.1987, the respondent was awarded a contract for transportation from Rozi to Madras at Rs.367 per metric ton and Rozi to Calcutta at Rs.469 per metric ton. The total shipment from Rozi to Calcutta was 49,200 and from Rozi to Madras was 39,200, the total dispatch being 88,400. The total shipment from Rozi to Calcutta was 49,200 and from Rozi to Madras was 39,200, the total dispatch being 88,400. 4.3 Therefore, from the evidence produced on record, what is evident is that a stipulated amount of food grain for transportation at the respective ports was ordered to be given to the respondent. The shipping company was engaged by the respondent for transportation by the respondent. At Exh.68 is the letter of the shipping company addressed to the respondent – plaintiff, which indicates that the company was engaged for transportation of the stipulated amount of food grains. Reading para 3 of the testimony of the original plaintiff would also indicate that the plaintiff had engaged a chartered ship from M/s. Atlas Shipping Company. At Exh.129 and 130 are the letters of the shipping company. Reading of these letters would indicate that on 23.10.1987, they addressed a letter to the respondent – plaintiff lodging a claim for cancellation of the Food Corporation of India contract. Reading the letter would indicate as under : “Dear Sirs : Re: Claim for cancellation of FCI Contract Fixture Note/Addendum dated 19.3.1987. We refer to above and are extremely perturbed to note that FCI have informed you that they do not wish to ship out the balance quantity of Contracted cargo of wheat from Rozi to Madras – about 30,000 tons and Calcutta about 45,000 tons. Consequently, our claim amount in terms of our above Fixture Note and Addendum dated 19.3.1987 works out as under: Shipment Port Discharge Port Qty Contracted Qty Shipped Qty short shipped Freight rate Freight lost Rozi Madras 45,000 tons 15494 29506 T Rs.231/- 68,15,886 Rozi Calcutta 45,000 tons - 45000 T Rs.340/- 53,00,000 Total 2,21,15,886 Amount of claim : 10% of Freight Lost _ Rs.22,11,588.60 We request you to kindly take up with FCI and recover above amount of our claim and remit the same to us.” 4.4 Perusal of the above would indicate that the shipping company had lodged a claim for 10% of freight loss that occurred as a result of short supply of food grains. This fact was not challenged by the Food Corporation of India in the cross-examination. This fact was not challenged by the Food Corporation of India in the cross-examination. Exh.86 was a letter of insurance policy which also indicated that the total insured food grains was for an amount of Rs.4,86,00,000/- The contention of the learned counsel for the appellant that when the volume of work was not guaranteed and the tender notice only used the word “approximately”, which is even relied upon by reading the deposition at Exh.165, what is clear and what is also observed by the Trial Court is that merely by using the word “approximately”, when compared to the actual quantity of 15,615 metric tons of cargo which was shipped would indicate that there was a huge short supply of cargo, and therefore, the total loss of business of the respondent herein was Rs.3,17,66,000, and therefore, 10% loss was claimed and assessed at Rs.31,76,600/-. 4.5 Reading para 9 of the decision in the case of Dwarkadas (supra), it is clear that the Trial Court committed no error in awarding damages to the loss of 10% of the total volume. Para 9 of the decision reads as under : “(9.) The claim of the petitioner for payment of Rs. 20,000 as damages on account of breach of contract committed by the respondent- State was disallowed by the High Court as the appellant was found to have not placed the material on record to show that he had actually suffered any loss on account of the breach of contract. In this regard the appellate court observed: "It is not his case that for due compliance of the contract he had advanced money to the labourers or that he had purchased materials or that he had incurred any obligations and on account of breach of contract by the defendants he had to suffer loss on the above and other heads. Even in regard to the percentage of profit he did not place any material on record but relied upon assessment of the profits by the Income Tax Officer while assessing the income of the contractors from building contracts." such a finding of the appellate court appears to be based on wrong assumptions. The appellant had never claimed Rs. 20,000 on account of alleged actual loss suffered by him. He had preferred his claim on the ground that had he carried out the contract he would have earned profit of 10% on Rs. The appellant had never claimed Rs. 20,000 on account of alleged actual loss suffered by him. He had preferred his claim on the ground that had he carried out the contract he would have earned profit of 10% on Rs. 2 lacs which was the value of the contract. This Court in A.T. Brij Pal Singh and Ors. v. State or Gujarat, [1984] 4 SCC 59) while interpreting the provisions of Section 73 of the Contract Act, has held that damages can be claimed by a contractor where the government is proved to have committed breach by improperly rescinding the contract and for estimating the amount of damages court should make a broad evaluation instead of going into minute details. It was specifically held that where in the works con-tract, the party entrusting the work committed breach of contract, the contractor is entitled to claim the damages for loss of profit which he expected to earn by undertaking the works contract. Claim of expected profits is legally admissible on proof of the breach of contract by the erring party. It was observed : "What would be the measure of profit would depend upon facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract cannot be gainsaid. In this case we have the additional reason for rejecting the con-tention that for the same type of work, the work site being in the vicinity of each other and for identical type of work between the same parties, a Division Bench of the same High Court has accepted 15 per cent of the value of the balance of the works contract would not be an unreasonable measure of damages for loss of profit. ........ Now if it is well-established that the respondent was guilty of breach of contract inasmuch as the rescission of contract by the respondent is held to be unjustified, and the plaintiff- contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. ........ Now if it is well-established that the respondent was guilty of breach of contract inasmuch as the rescission of contract by the respondent is held to be unjustified, and the plaintiff- contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15 per cent of the value of the remaining parts of the work contract, the damages for loss of profit can be measured." To the same effect is the judgment in Mohd. Salamatullah and Ors. v. Government of Andhra Pradesh, AIR (1977) SC 1481. After approving the grant of damages in case of breach of contract, the court further held that the appellate court was not justified to interfere with finding of fact given by the trial court regarding quantification of the damages even if it was based upon guess work. In both the cases referred to hereinabove. 15% of the contract price was granted as damages to the contractor. In the instant case however the trial court had granted only 10% of the contract price which we feel was reasonable and permissible, particularly when the High Court had concurred with the finding of the trial court regarding breach of contract by specially holding that "we therefore see no reason to interfere with the finding recorded by the trial court that the defendants by rescinding the agreement committed breach of contract." It follows there- fore as and when the breach of contract is held to have been proved being contrary to law and terms of the agreement, the erring party is legally bound to compensate the other party to the agreement. The appellate court was, therefore, not justified in disallowing the claim of the appellant for Rs. 20,000 on account of damages as expected profit out of the contract which was found to have been illegally rescinded.” 4.6 Having therefore perused the record and having assessed the evidence independently, we find that the Trial Court committed no error in passing the decree in question. The appeal therefore deserves to be dismissed. FIRST APPEAL NO. 2272 of 2001. 5. The appeal therefore deserves to be dismissed. FIRST APPEAL NO. 2272 of 2001. 5. First Appeal No. 2272 of 2001 has been filed by the Food Corporation of India challenging the judgement and decree of the Trial Court dated 31.01.2000 in Special Civil Suit No. 78 of 1990. By this judgement and decree, the suit of the Food Corporation of India for recovery of Rs.6,07,411 from the defendant respondent – herein was dismissed. It was the case of the Corporation that for the contract as awarded, the details of which we have discussed in the earlier part of the decision, the defendant had obtained an insurance policy and a cover note was signed on 29.04.1987. It was the case of the plaintiff that during the coastal movement while loading the wheat vessel MV “Jai Ambika” at Rozi, one dumb barge namely “Neelgagan” was capsized in sea on 06.05.1987 and hence there was a loss of 2469 bags of wheat. The insurance company had admitted the cover note of the Insurance Policy and disputed the claim of Rs.1,07,092/- as against the claim of Rs.6,07,411.66/- 5.1 Essentially, the suit was against the insurance company. The case of the insurance company was that in accordance with the clause in the insurance policy, the company was not liable to reimburse the entire claim but only to the extent of Rs.1,07,791/- in light of the clause in the policy. The Trial Court, on perusal of the relevant clause in the policy agreed with the stand raised by the defendant and only awarded an amount of Rs.1,07,092/- instead of Rs.6,07,411.66/- 5.2 Mr.Shakeel Qureshi, learned counsel for the appellant, would submit that the Trial Court did not consider that as per the terms and conditions of the contract, the Contractor was required to arrange for a comprehensive insurance policy. The contractor was to be held responsible. The Trial Court failed in considering clause No.(a) of the Marine Insurance Policy. It failed to consider Exh.37 the Insurance Policy which indicated that the plaintiff was entitled to claim damages from defendant Nos. 1 and 2 jointly. The Trial Court wrongly relied upon the clause which concerned Public Selection Business Committee. 5.3 Mr.Rushang Mehta, learned counsel appearing for the respondent Insurance Company would support the order and submit that no interference is called for. 6. 1 and 2 jointly. The Trial Court wrongly relied upon the clause which concerned Public Selection Business Committee. 5.3 Mr.Rushang Mehta, learned counsel appearing for the respondent Insurance Company would support the order and submit that no interference is called for. 6. Having considered the learned counsels appearing for the respective parties and reading the insurance policy which was produced before the Trial Court, reading Exhs. 85, 86 and 88, what is evident is that as per the directions of the Public Selection Business Committee of the Insurance Company, it was decided to apply “Excess” of 1% from all consignment if the loading was to be redone in midstream and 1% excess is to be deducted from the amount of the insurance claim. The clause at Exh.37 reads as under : “Clause-A : Institute Cargo Clause (A) As per annexed where with subject to 1% excess on whole.” Thus from the bear reading of this clause, it is clear that 1% excess from the entire amount of Insurance Policy of Rs.4,61,99,000/- i.e. Rs.4,61,990/- is to be deducted from the amount of insurance claim under “Excess”. It is respectfully submitted that this is the policy matter decided by Public Sector Business Committee of Insurance Companies which is binding to all the Insurance Companies and the terms and conditions of Insurance Policies are framed accordingly. 4. It is respectfully submitted that the Insurance Policy is a contract and all the terms and conditions of the Insurance Policy are binding to both the parties i.e. insured and Insurance Company. It is respectfully submitted that it is settled principle of law that Court cannot rewrite the terms and conditions of the Insurance Policy even though it appears to have the same on equity. 5. It is respectfully submitted that in the aforesaid matter, Insurance Company has paid the amount of compensation as per the assessment of the Surveyor as follows: Sr. No. Particulars Amount 1. Amount of loss because of loss of 2469 bags of wheat into mid-sea. 6,40,652.77 Less : Excess 1% as per the terms and conditions of Insurance Policy 4,61,000.00 Admissible amount 1,79,652.77 2. Plus interest @ 12% from 04/05/1990 to 19/04/2000 2,14,731.79 3. Total 3,94,384.56 6. No. Particulars Amount 1. Amount of loss because of loss of 2469 bags of wheat into mid-sea. 6,40,652.77 Less : Excess 1% as per the terms and conditions of Insurance Policy 4,61,000.00 Admissible amount 1,79,652.77 2. Plus interest @ 12% from 04/05/1990 to 19/04/2000 2,14,731.79 3. Total 3,94,384.56 6. It is respectfully submitted that the insurance Company has already made the payment of Rs.3,94,385/- on 07/05/1987.” 6.1 Thus, reading the clause it is clear that from the entire amount of the insurance policy of Rs.4,61,99,000/-, an amount of Rs.4,61,990/- has to be deducted from the amount of insurance claims as “Excess”. The insurance policy is a contract and terms and conditions of the policy therefore bind both the parties. Reading the assessment of the Surveyor, what is evident is that the loss so assessed is as under : “5. It is respectfully submitted that in the aforesaid matter, Insurance Company has paid the amount of compensation as per the assessment of the Surveyor as follows : Sr. No. Particulars Amount 1. Amount of loss because of loss of 2469 bags of wheat into mid-sea. 6,40,652.77 Less : Excess 1% as per the terms and conditions of Insurance Policy 4,61,000.00 Admissible amount 1,79,652.77 2. Plus interest @ 12% from 04/05/1990 to 19/04/2000 2,14,731.79 3. Total 3,94,384.56 6. It is respectfully submitted that the insurance Company has already made the payment of Rs.3,94,385/- on 07/05/1987.” 7. Accordingly, we find no fault in the judgement of the Trial Court. Accordingly, both the appeals are dismissed. We note that in appeal FA 2531 of 2003, by an order passed by this Court while admitting the appeal on 02.12.2023, this Court permitted to withdraw the amount after furnishing solvent surety to the satisfaction of the Trial Court. In light of the appeal being dismissed, the respondent shall now be relieved of the solvent surety which it has provided to the Trial Court.