1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY & ORIGINAL CIVIL JURISDICTION SUIT NO. 1506 OF 1980 The Cotton Corporation of India Ltd. ... Plaintiffs. V/s. Bangodaya Cotton Mills Ltd. ... Defendants. Mr. Shrinivas Deshmukh i/b. Bhaishankar Kanga & Girdharilal for the Plaintiffs. Mr. Pankaj Sawant a/w. Murlidharan i/b. Joy Legal Consultants for the Defendants. CORAM : S.C. DHARMADHIKARI,J. DATED : 01st OCTOBER 2009. ORAL JUDGMENT :- This is a Suit by the Cotton Corporation of India to recover from the Defendants a sum of Rs.5,24,702.14 as and by way of damages for breach of a contract. 2. The Plaintiff – Cotton Corporation of India Limited is a Company incorporated under the provisions of the Indian Companies Act, 1956. It is a Government of India undertaking acting as a Canalising Agent for the import of foreign cotton required by the Trade and Industry in India. 3. The Defendant is a Public Limited Company incorporated and registered under the same Companies Act, having its registered office in the State of West Bengal. It is carrying on business of weaving and spinning textile at their mills. 2 4. In the plaint it is set out that for the purposes of acting as a Canalising Agent, the Plaintiffs are advised by a Advisory Committee constituted by the Government of India. The Advisory Committee gives advice with regard to the import of cotton after the requisite formalities are completed. The Plaintiffs issued circulars from time to time to trade and industry inviting them to submit indents for the requirement of foreign cotton specifying inter-alia the quantity and quality of the cotton required. The circulars specified the rates and the procedure is that persons working in the trade and industry thereafter submit indent setting out the requirements. On receipt of the indents, the Plaintiffs apply for import licence in order to enable them to import cotton. The further procedure is set out in paragraphs 2 to 4 of the plaint. Thereafter, it is contended that in or about February 1977, the Plaintiffs issued certain circulars and called upon the members of the trade and industry to submit their indents for requirement of global cotton. In pursuance thereof, the Defendants’ Authorized Agents, by their letter dated 23rd February 1977, registered their requirements and applied for allotment of interalia, 300 bales of Nicaragua cotton and 200 bales of Gautemala cotton. By a further letter dated 7th March 1977, another authorized Agent of the Defendants registered the demand and applied for allotment of 600 bales of Central South American or Brazilian Cotton. The indents were processed by the Textile Commissioner, who by his letter dated 18th March 1977 intimated the Defendants for allotment 3 of the global cotton of quality and quantity therein. Copy of the letter was endorsed to the Plaintiffs and concerned Authorities. 5. In paragraphs 7 and 8 of the plaint, the Plaintiffs state thus :- “7. By the said letter of allotment, Exhibit ‘C’ hereto, the Textile Commissioner allotted to the Defendants cotton, the quality, quantity and value thereof is mentioned hereunder :- Quality No. of Bales Value in Rs. 1. Gautemala 40 1,28,000 2. Nicaragua 300 9,60,000 3. Brazilian 300 9,60,000 For the purpose of clarification, it was stated in the said letter of allotment that the quantity given therein was approximate and the value stated therein will be the sole criterion. The said letter of allotment also provided that the cotton allotted to the Defendants was for bonafide consumption in their mills and that no sale, loan or other type of transfer was permitted except in accordance with the authorisation of the Textile Commissioner. 4 8. The Plaintiffs applied for and obtained licences for import of different qualities and quantities of cotton including the cotton allotted to the Defendants as per letter of allotment, Exhibit ‘C’ hereto. The Plaintiffs also placed orders with their foreign suppliers for the purchase of cotton of the quantity and quality including the cotton allotted to the Defendants as aforesaid. The Plaintiffs arranged for shipment of the said cotton.” 6. The Plaintiffs then allege that they dispatched to the Defendants a contract in their cyclostyled standard form in respect of the aforementioned quantity and quality of cotton allotted to the Defendants as per the letter of allotment. The number of the Contract is G/406 dated 17th March 1977. It is the case of the Plaintiffs that the Defendants received and retained the said Contract. The Plaintiffs further state that by reason of the letter of allotment, they were bound to deliver the Defendants and the Defendants were bound to take delivery of the cotton allotted to them. In any event, by the Plaintiffs despatching to the Defendants the Contract, a concluded contract was arrived at between the Plaintiffs and the Defendants. In these circumstances, the Plaintiffs by a shipment advice dated 8th June 1977 informed the Defendants about the shipment of 252 Bales of Nicaragua cotton. By a further shipment advice dated 30th June 1977, the Plaintiffs informed the Defendants of the shipment of 33 Bales of 5 Gautemala cotton and by a further shipment advice dated 20th August 1977, the Plaintiffs informed the Defendants of the shipment of 280 Bales of Brazilian cotton. 7. However, it is alleged by the Plaintiffs that the Defendants, by their letter dated 5th July 1977 raised a false contention that they had not made any contract with the Plaintiffs for 252 bales of imported cotton. They contended that they have not signed the Contract No.G/406 and therefore, they cannot clear the goods. It is the case of the Plaintiffs that by forwarding this letter, the defendants committed a breach of the said contract and that is how the Plaintiffs can recover damages or compensation for loss suffered by the Plaintiffs. The response to the further shipment advice was identical and reference is made to the letter of 26th August 1977, addressed by the Defendants to the Plaintiffs. 8. Thereafter, the Plaintiffs’ Advocates letter is referred to and it is stated that by this letter, a last opportunity was given to the Defendants to take delivery of the said cotton. However, despite receipt of this letter, the Defendants, by their Advocates letter repeated their false contention that there was no contract arrived at between parties. 9. As far as 252 bales of Nicaragua cotton is concerned, the Plaintiffs themselves concede that it was received in a damaged condition. The matter was taken up with the insurer 6 and the Plaintiffs have recovered the price thereof from the insurer. In this case, therefore, no claim is made on the basis of 252 bales of Nicaragua cotton. As far as Guatemala cotton is concerned, it is stated that out of 33 Bales only 23 Bales were delivered to the Plaintiffs which too were found damaged. The Plaintiffs claimed price of 10 Bales shorlanded from the insurers and also claimed the loss on account of damage to 23 bales. It is stated that the Plaintiffs incurred a loss of Rs.5,995.80 as far as 33 bales of Guatemala cotton is concerned. As far as the Brazilian cotton is concerned, since the Defendants did not take the delivery of the same, the bales had to be stored and later on disposed off. The Plaintiffs incurred expenses as well as suffered loss in resale amounting to Rs.3,69,861.32. It is this sum together with the shortfall/loss with regard to Guatemala cotton which is claimed from the Defendants together with interest and that is how the present Suit. 10. The defence of the Defendants is firstly that the claim is barred by law of limitation. Secondly, they contended that no contract has been arrived at or concluded as alleged in the plaint or otherwise between the Plaintiffs and the Defendants. The Defendants’ case is that unless a copy of the standard cyclostyled contract is duly signed by the indentor and returned to the Plaintiffs, no concluded contract is arrived at between the parties. The Defendants further case is that in several instances, the Plaintiffs have made alteration in the standard cyclostyled contract before they are despatched to 7 the indentors. After a reference is made to several clauses of the contract, ultimately, in paragraph 11 of the Written Statement, it is contended that Clause 33 of the alleged Contract dated 17th March 1977 was deleted in ink by the Plaintiffs on both copies of the contract received by the Defendants. Further, there are several pre-conditions which are required to be fulfilled before the Contract is concluded. These pre-conditions have not been fulfilled. It is, in these circumstances, and denying that there was any contract that the Defendants urged that they are not liable to pay any sum much less as demanded by the Plaintiffs. 11. In the light of these pleadings, this Court framed the following Issues :- 1. Whether the Suit is within limitation ? 2. Whether the Plaintiffs prove that a concluded contract was arrived at between the Plaintiffs and the Defendants to import and sell the cotton mentioned in the allotment letter dated 18.03.1977 (Exhibit-C to the Plaint) ? 3. Whether the Plaintiffs prove that they had obtained licence for import of the cotton as mentioned in the allotment letter dated 18.03.1977 (Exhibit – C to the plaint) ? 4. Whether the Plaintiffs prove that they had placed order 8 with foreign suppliers for import of the cotton as mentioned in the allotment letter dated 18.03.1977 (Exhibit – C to the plaint) ? 5. Whether the Plaintiffs prove that the Defendants were bound to take delivery of the cotton mentioned in the allotment letter dated 18.03.1977 (Exhibit – C to the plaint ) ? 6. Whether the Plaintiffs prove that the Defendants committed breach of the contract by not taking delivery of the cotton mentioned in the allotment letter dated 18.03.1977 (Exhibit – C to the plaint) ? 7. Whether the Defendants prove that in view of the Defendants’ letter dated 5.07.1977, the Plaintiffs ought not to have allowed shipment of 280 bales of cotton as stated in para 14 of the written statement ? 8. Whether the Plaintiffs prove that they suffered a loss of Rs.5,24,702.14 due to the Defendants refusal to take delivery of the cotton imported ? 9. Whether the Defendants prove that the Plaintiffs were not ready and willing to perform the contract and therefore are not entitled to recover damages ? 9 10.Whether the Plaintiffs prove that the Defendants are liable to pay a sum of Rs.5,24,702.14 to the Plaintiffs as and by way of damages for breach of the contract ? 11.What order ? 12. As far as Issue No.1 is concerned, it is conceded that the Suit claim is within limitation and not barred. In any event, what I find from the averments in the plaint which are not controverted, that the Suit has been instituted within the period of limitation prescribed by law. The Suit, therefore, cannot be dismissed on the ground of limitation. 13. The crucial issue for determination are Issue Nos.2 and 5. 14. As far as this Issue is concerned, the Plaintiffs led evidence of V. Munikrishnan, who was at the relevant time working as Deputy Manager (Imports) of the Plaintiffs. He stated that he is personally aware of the facts and circumstances relating to the Suit transaction. After reiterating the plaint averments, he has, in paragraph 9 of his deposition in chief, referred to the Circular dated 21st May 1977 and produced a photocopy of the cyclostyled copy of the circular dated 21st February 1977 and stated that the contents of the circular are correct. In paragraph 10 he has referred to the letter dated 21st February 1977 of the Defendants Agents M/s. Kotkar and Company. He produced the original letter 10 dated 23rd February 1977. He has referred to the Defendants’ Agents letter dated 2nd March 1977 in paragraph 11 and produced the letter in original. Thereafter, the Plaintiffs’ witness referred to the letter of the Textile Commissioner allotting the quota and produced the original letter dated 18th March 1977. 15. In the subsequent paragraphs, PW-1 has produced the Contract No.G/406. He states that the originals have been despatched to the Defendants and therefore, the office copy from the records and files of the Plaintiffs, is being produced. The witness has stated that the office copy is the copy of the original contract which was forwarded to the Defendants. He has stated that the original contract was duly signed by him and sent to the Defendants in duplicate. He states that the contract was prepared in the Plaintiffs’ standard form. In these circumstances, the witness states that the contents of the copy are correct. Since he has prepared the original and forwarded to the Defendants, he states that he is aware of and can speak about the contents personally. 16. In subsequent paragraphs, the witness produced the shipment advice and the letters exchanged between parties. The witness has stated that the clearance of cotton has been done by clearing agents M/s. G. Ranganath, at Kolkata. The witness produced the relevant documents including the receipt of the amount paid to the Clearing Agent. The witness has also deposed about receipt of the sum from the insurer 11 and the tender notice issued for sale of the cotton which were lying with the Plaintiffs. The original invoices are also produced by him. The entities to which the cotton was sold, the amount recovered and the difference are the other details provided by the witness. 17. At various stages, the documents from the compilation tendered by the Plaintiffs have been marked as exhibits by consent of parties. 18. This witness was cross examined by the Defendants and in his cross-examination, he has admitted that the reference to Clause 33 in the letter dated 3rd July 1978 is a mistake as that Clause was cancelled from the Contract by the Plaintiffs. The witness once again stated that on the basis of shipment advice 252 bales of Nicaragua cotton, 33 bales of Gautemala cotton and 280 of Brazilian cotton were shipped as per the shipment advice referred to by the Plaintiffs. The stand of the Plaintiffs has been confirmed by the witness and he stated that once the shipment advice was issued, the shipment cannot be stopped. The witness has fairly stated that as far as the claim under the head Clearing and Demurrage Charges, except consignment of 280 bales of Brazilian cotton, there are no documents to support the Plaintiffs’ claim. There is no document on record to support the claim of carrying charges which form part of the Plaintiffs’ claims in this Suit. To the suggestion that there is no contract between the Plaintiffs and the Defendants, the same is denied by the witness and he 12 reiterates that there is a breach of contract by the Defendants. 19. The documents produced by the Plaintiffs were marked as Exhibits by consent. There is no other witness examined by the Plaintiffs. The Defendants did not lead any oral evidence. Consequently, the matter was placed for arguments. The crucial issue going to the root of the case is Issue No.2. The arguments cover this Issue only. Although, Issue Nos. 1 and 3 can be answered in the affirmative. Yet Answer to other Issues necessarily depends upon the existence of a contract. In other words, if there is no concluded contract, then, there is no obligation to take delivery and make payment. 20. Mr. Deshmukh, learned Counsel appearing on behalf of the Plaintiffs contended that a concluded contract was arrived at between parties. He submits that the concluded contract is evidenced by the fact that the circular letter dated 21st February 1977 has been duly received by the Defendants. If the same was not received, then, the Defendants would not have responded to the same. That they so responded is clear from their Agent’s letter dated 23rd February 1977. The Agent confirmed that the Defendants are interested in purchasing Foreign cotton as indicated in the letter (Exhibit P-27). Mr. Deshmukh also relied upon Exhibit P-28 and urged that the Defendants accepted the circular and placed an order/booked the material which is Brazilian cotton 600 bales. Mr. 13 Deshmukh submits that the contents of the letter are that necessary formalities will be completed soon. However, that cannot be of any assistance. He submits that Exhibit P-29 is the allotment letter dated 18th March 1977 allotting Gautemala cotton, Nicaragua Cotton and Brazilian cotton. Mr. Deshmukh submits that this allotment letter received from the Textile Commissioner is addressed to the Defendants and Clause 9 thereof is clear. Further, the Contract (Exhibit P-3) has been forwarded and it has been stipulated therein that the Contract or Agreement entered into by the Plaintiffs with the foreign suppliers shall form an integral part of this agreement. Further, there are clear stipulations with regard to the price, taking delivery, the foreign suppliers making a claim against the Plaintiffs, etc. He submits that the Clause pertaining to shipment in the contract is also clear. 21. In such circumstances, mere deletion of Clause 33 can, by no stretch of imagination be construed as ‘no’ contract having come into existence between parties. Further, Clause 34 which is speaking of a Bank Guarantee is nothing but an option given to the Plaintiffs. They can proceed to cancel the contract if the Bank Guarantee is not submitted/ furnished. This cannot have any bearing on the issue of a contract coming into existence. For all these reasons and the invoices being admitted and the liability thereunder being proved, this is a fit case where the Suit should be decreed as prayed. In any event, this Court can mould the reliefs and merely because there is no proof with regard to some of the claims 14 does not mean that no decree can be passed in favour of the Plaintiffs. 22. In support of his submissions, Mr. Deshmukh has relied upon the decision of the Supreme Court reported in AIR 1973 S.C. 559 (Dr. Jiwan Lal and Ors. V/s. Brij Mohan Mehra & Anr.) and a decision of a learned Single Judge of this Court reported in AIR 2001 Bombay 429 (The Cotton Corporation of India Ltd. V/s. M/s. Alagappa Cotton Mills). Mr. Deshmukh submits that the decision of the Single Judge is in case of the Plaintiffs themselves and in identical circumstances. The learned Judge has concluded that deletion of Clause 33 would not mean that no Contract has come into existence. 23. On the other hand, Mr. Sawant, learned Counsel appearing on behalf of the Defendants submitted that Issue No.2 has not been proved at all. He submits that the witness has admitted that deletion of Clause 33 would have some bearing on the matter. Clause 33 having been deleted, the Plaintiffs cannot rely upon any prior correspondence including that of the Agents. In any event, the letters of the Agents ought to be read completely. So read, it is apparent that the Plaintiffs were informed that the Defendants require specified number of bales of the quality of cotton offered. The quality as well as quantity is mentioned clearly in this letter. However, by Exhibit P-29, the Plaintiffs made a counter offer and the quantity indicated (number of bales) has undergone a 15 drastic change. In such circumstances, it cannot be urged that these documents evidence a concluded contract. Mr. Sawant submits that if these documents were enough to hold that a concluded contract has been arrived at, then, there was no occasion for the Plaintiffs to have forwarded Contract No.G/406 (Exhibit P-3) for confirmation and signature. That having been forwarded and the Defendants being called upon to sign the same by itself means that a concluded contract could be arrived at only upon due compliance with this requirements. Deletion of Clause 33 inasmuch and the duplicate copy not being signed by the Defendants, then there is no question of deemed acceptance as contemplated by this clause. Once there is no deemed acceptance as envisaged by Clause 33, then, there is no concluded contract. Further, the Defendants had not forwarded any Bank Guarantee which was also a necessary condition for the contract to come into existence. In these circumstances, reliance placed upon shipment advice is of no consequence. In any event, the response of the Defendants to the letter intimating shipment is also the same and at no stage did the Defendants accept that a concluded contract had been arrived at between parties. For all these reasons and when there is no concluded contract, the Suit must be dismissed. 24. Mr. Sawant submits that the controversy in the instant Suit is concluded by a decision of a learned Single Judge of this Court reported in 2006 (5) Bombay Case Reporter 105 (Cotton Corporation of India Limited V/s. Bombay 16 Dyeing & Manufacturing Company Limited). He submits that this decision is also rendered in the case of the Plaintiffs themselves and in identical facts and circumstances. 25. For properly appreciating the rival contentions, it would be necessary to refer to the plaint averments. The Plaintiffs refer to the circular, letter from the Agent of the Defendant and urge that they despatched to the Defendants a contract in their cyclostyled standard format in respect of the quantity and quality cotton allotted to the Defendants as per the letter of allotment and it is urged that pursuant to the letter of allotment, a concluded contract had been arrived at. The pleading is that in any event by dispatch of the contract bearing G/406 dated 17th March 1977, a concluded contract was arrived at between parties. There is no dispute that Clause 33 of the terms and conditions of the contract has been deleted. Clause 33 reads as under :- “33. If the duplicate copy of this agreement is not returned by the Mills duly signed within seven days from the receipt of this agreement, it will be deemed to have been accepted by the mill.” 26. A bare perusal of the same would indicate that the same contemplates forwarding of a duplicate copy of the agreement, it being returned duly signed within seven days of its receipt and in default, the deemed acceptance. The deemed acceptance is when the duplicate copy is not 17 returned duly signed within seven (7) days from the date of the receipt of the agreement. It is urged by Mr. Deshmukh that despite deletion of this clause, in a identical case this Court concluded that there was a contract between parties. In other words, deletion of Clause 33 has no bearing on this Issue and a conclusion can still be arrived at that the parties have entered into a contract for import of cotton. 27. In C.C.I. V/s. Alagappa Cotton Mills (Supra), the learned Single Judge (His Lordship J.A. Patil, as he then was) referred to the facts in paragraph 2 and the contents of the Written Statement in paragraph 4. Thereafter, on the basis of the oral and documentary evidence, in paragraph 10, the learned Judge concluded thus :- “10. Admittedly the Defendants did not return the standard form of contract duly signed by them to the Plaintiffs. The question which, therefore, arises is whether there was concluded contract between the parties. The Defendants have contended that the Plaintiffs did not confirm the acceptance of the offer given by the Defendants. Besides, the Defendants did not sign and return the standard form of contract and therefore, there was no valid contract with the Plaintiffs for purchasing 500 bales of Brazillian cotton. Shri R.C. Shah, the learned Advocate for the Plaintiffs further pointed out that the 18 Defendants have not disputed that standard form of contract was sent to them by the Plaintiffs for their signature. Although the Defendants did not return the same duly signed, still according to Shri Shah, the contents of the said form clearly indicate that the Plaintiffs had confirmed the acceptance of offer given by the Defendants. This is evident from the