Full Judgment Text
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.7155-7156 OF 2009
(@ S.L.P.(C)Nos.27776-27777 of 2009
(CC 13433-13434)/2009)
JAI BALAJI INDUSTRIES LTD. … Appellants
Vs.
PEC LTD. & ORS. … Respondents
O R D E R
1. Permission is granted to file the special leave
petitions.
2. Leave granted.
3. We have heard learned counsel for the parties
at the very initial stage for issuance of notice
since the Respondent No.1 was duly represented on
caveat.
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4. These appeals are directed against the judgment
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and order dated 1 September, 2009 passed by the
Division Bench of the Calcutta High Court in APOT
No.235 of 2009 and APOT No.249 of 2009 and
connected applications allowing the appeals in
terms of 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
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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 handover the sale 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.”
5. From the materials on record it appears that
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the appellant entered into an agreement on 28
July, 2008 with, a foreign seller for purchase of
7100 metric tonnes of Manganese Ore which was to be
sold by the said foreign party under a CIF contract
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and discharged at Paradeep Port. In terms of the
said agreement, the quality and quantity of goods
were to be inspected by the buyer at the Port of
Loading. Thereafter, the appellant and the
Respondent No.1, a Government Company, entered into
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a High Seas Sale Agreement on 25 September, 2008,
wherein the Respondent No.1 has been described as
“seller” of the goods and the appellant is
described as the “buyer”. Under the terms of the
said Agreement, the appellant was to pay to the
Respondent No.1 a sum of US$ 48,25,188.40 as 100%
value of the documents plus 1.5% trading margin of
documents, as payment for the documents. It was
also agreed that the Respondent No.1 would endorse
the Bill of Lading in favour of the appellant. A
Deed of Pledge was also executed whereby the entire
consignment was pledged to the Respondent No.1-
Company.
6. The vessel carrying the consignment of
Manganese Ore arrived at Paradeep Port and the
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goods were discharged on or about 8 October, 2008,
and, thereafter, transferred to a warehouse. It
appears that the goods were dispatched to the
appellant’s factory premises at Durgapur and
Ranigunj in West Bengal and were allegedly unloaded
on plots within the appellant’s factory premises
purportedly leased to the Respondent No.1-Company.
It is also the case of the appellant that out of
the said consignment of 7100 metric tonnes of
Manganese Ore, the appellant purchased 100 metric
tonnes from the Respondent No.1 with the intention
of testing the quality of the said ore.
7. Allegedly, the said ore did not meet the tests
relating to its quality and, consequently, the
appellant rejected the entire consignment and
refused to take delivery thereof from the
Respondent No.1-Company. That is the genesis of
the dispute which arose between the parties.
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8. The appellant filed a suit, being C.S.No.137 of
2009, in the Calcutta High Court in its Ordinary
Original Civil Jurisdiction claiming return of an
advance amount of Rs.2,85,28,926/- and
Rs.35,30,000/-, being the price of 100 metric
tonnes, aggregating a sum of Rs.3,20,58,926/- and
Rs.2,52,08,526/- paid towards various duties,
charges and freight etc. The appellant also prayed
for an injunction to restrain the Respondent No.1-
Company from encashing the security which had been
given by the appellant to the extent of
Rs.20,31,25,956/- and for damages. In the suit an
application for interim orders was also made for
the following reliefs :
“(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;
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(b) Injunction restraining the respondent No.1
from depositing and/or encashing the said
cheque dated December 14, 2008, 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.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.1’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;
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(h) Such further orders be made and/or
directions be given as this Hon’ble Court
may deem fit and proper.”
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9. On 18 May, 2009, the learned Single Judge
passed an interim order, as prayed for, in regard
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to encashment of the security deposit till 22 May,
2009. Thereafter, the interim order was extended
and the appellant herein was directed to revalidate
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the cheque dated 14 December, 2008, which was
purported to have been given by way of security to
the Respondent No.1, by another six months from the
date of receipt of the order. Thereafter, the
Respondent No.1-Company filed an application for
vacating the interim order while the appellant
sought continuance thereof.
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10. After hearing the parties at length on 12
June, 2009, the learned Single Judge rejected the
prayer made on behalf of the respondent-Company to
vacate the interim order, and, instead, passed the
following order :
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“To ascertain the quality of the
balance goods lying in the leased plots of
the respondent no.1 Mr. Amit Gupta, Adv.,
st
1 Floor, Bar Library Club is appointed
Receiver at an initial remuneration of 500
GMs. For purposes of drawing samples and
getting the same analysed through the
National Test House, Alipore, Calcutta.
Report be filed by the said agency on the
next date of hearing.
This order is passed as from the
report if it appears that the goods are as
per specifications there will be no reason
for the petitioner to refuse lifting of
the goods.
Accordingly, the interim order granted
will continue till ten weeks. Directions
are given for filing affidavits:
Affidavit-in-opposition be filed
within four weeks from date; affidavit-in-
reply thereto, if any, be filed within two
weeks thereafter. Matter to appear in the
list seven weeks hence.”
11. Aggrieved thereby, the Respondent No.1 herein
preferred APOT No.235 of 2009 and APOT No.249 of
2009 before the Division Bench of the Calcutta High
Court and the same were disposed of finally by the
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Appeal Court by its order dated 1 September, 2009,
extracted hereinabove, whereby the order of the
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learned Single Judge was set aside and replaced by
the said order.
12. As mentioned hereinbefore, these appeals are
directed against the said order of the Division
Bench of the Calcutta High Court.
13. On behalf of the appellants it has been
contended that under the High Seas Sale Agreement,
the Respondent No.1 was to endorse the Bill of
Lading in favour of the appellant, but that the
same was never done and the consignment of
Manganese Ore was never made over to the appellant
and has remained in the custody of the Respondent
No.1 ever since it was discharged at Paradeep Port.
It was also submitted that after having purchased
100 metric tonnes of the said ore for the purpose
of testing, when it was found that the same was
sub-standard material, the appellant had expressed
its inability to accept the consignment. It was
also submitted that without delivering the
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consignment, the Respondent No.1 was not entitled
to encash the cheques, which had been made over to
it by way of security deposit.
15. It was lastly contended that the appellant had
no obligation to take delivery of the entire goods
since the Agreement provided that the goods were to
be delivered part-by-part.
16. The case made on behalf of the appellant was
vehemently opposed on behalf of the Respondent No.1
on the ground that the High Seas Sale Agreement was
merely a means of import of the said ore into India
by the appellant and the Respondent No.1 was merely
a facilitator for the said purpose. In fact, the
role of the Respondent No.1 was to import the goods
and, thereafter, to make over the same to the
Appellant as it had no use for the Manganese Ore.
In fact, the same would be evidenced by the Deed of
Pledge, whereby the goods continued to be in the
control and possession of the Respondent No.1 till
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the same were delivered to the appellant. It was
also the case of the Respondent No.1 that the
consignment of Manganese Ore had always been with
the appellant in its own godown and that the Bill
of Lading had also been endorsed in favour of the
appellant, whereupon the title to the goods had
passed to the appellant.
17. From the submissions made on behalf of the
parties, it will appear that the appellant is
aggrieved by the fact that besides having paid a
sum of Rs.20,31,25,856/- by a postdated cheque to
the Respondent No.1, the appellant had also been
deprived of the goods, the value whereof had
greatly diminished since it was received at
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Paradeep Port on or about 8 October, 2008. On the
other hand, not only would the Respondent No.1
retain control over the consignment but it would
also have unjustly enriched itself to the extent of
the security provided by the appellant in terms of
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the order of the High Court impugned in these
appeals.
18. In deciding these appeals, we have to keep in
mind the fact that the suit is still pending before
the Calcutta High Court and the rights and
liabilities of the parties are yet to be worked out
in the suit. The question whether the Bill of
Lading had been endorsed in favour of the appellant
or not by the Respondent No.1 is also a matter to
be decided in the suit on evidence. Furthermore,
the appellant has itself indicated that it was not
willing to accept the consignment since it was of
sub-standard quality and had deteriorated further
since it was discharged at Paradeep Port. As has
been pointed out by the learned Single Judge in her
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order of 12 June, 2009, the appellant in its
undertaking had agreed to pay the balance amount in
respect of the imported goods on their first demand
without demur and protest and to honour the cheques
issued in favour of the Respondent No.1 on their
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presentation on the dates indicated. Furthermore,
a further undertaking was given not to intimate the
bankers to stop the payment of the cheques
delivered to the Respondent No.1 and also not to
close the account without the permission of the
Respondent No.1.
19. On a prima facie assessment of the terms and
conditions of the Agreement entered into between
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the appellant and the Respondent No.1 on 7 August,
2008, the responsibility relating to the quantity
and quality of the cargo was to be that of the
appellant and Clause 8 of the said Agreement
indicates that the Respondent No.1 would not be
responsible for any shortage in the quantity and
quality of the cargo at the loading point as well
as at the delivery point. Nothing has come to our
notice whereby the Respondent No.1 was prevented
from encashing the cheques alleged to have been
given by way of security.
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20. In our view, it would not be proper for us to
delve into the details of the matter at this stage
since the order of the Division Bench in appeal
protects the appellant, while granting liberty to
the Respondent No.1 to encash the cheques and
appropriate the amount upon furnishing a Bank
Guarantee of the like amount which was to be kept
renewed till the disposal of the suit. Furthermore,
the goods in question are to be sold by the
Receiver appointed by the Court and the sale
proceeds have been directed to be handed over to
the appellant herein. Balance claims, if any,
will have to be decided in the suit filed by the
appellant. Apart from the above, it has also to be
kept in mind that the Respondent No.1 has already
paid for the goods to the foreign buyer.
21. We, therefore, see no reason to interfere with
the judgment and order passed by the Appeal Court
of the Calcutta High Court in APOT No.235 of 2009
and APOT No.249 of 2009. The appeals are,
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accordingly, dismissed. We make it clear that the
observations made in this order are only for the
disposal of the appeals which have been directed
against the interim orders and the Trial Court will
be at liberty to proceed in the suit uninfluenced
by any of the said observations.
22. There will be no order as to costs.
…………………………………………J.
(ALTAMAS KABIR)
……………………………………………J.
(CYRIAC JOSEPH)
New Delhi
Dated: 27.10.2009