1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1342 OF 1980 The Cotton Corporation of India Limited Plaintiffs Versus M/s.Ramkumar Mills Pvt.Ltd. Defendants Rajesh Shah a/w U.M.Mahajan i/by Divekar & Co. for plaintiffs. Bommy Patel i/by Mulla & Mulla for defendants. CORAM : A.M.KHANWILKAR, J. DATE OF RESERVING THE JUDGEMENT : 15th APRIL 2008 DATE OF PRONOUNCING THE JUDGEMENT : 02nd JUNE 2008 JUDGEMENT :- 1. This is a suit for damages for breach of contract. The plaintiffs is a company registered under the Companies Act, 1956 and is a Government of India undertaking. The principal business of the plaintiffs is to act as Canalising Agent for import and supply of foreign cotton to Indian Textile Mills. A Circular dated 12th March 1977 was 2 issued by the plaintiffs to all textile mills in India including the defendants, inviting offers for purchase of Global Cotton proposed to be imported by the plaintiffs of the varieties and at the rate mentioned in the said Circular. In response to the said circular, the defendants-a company registered under the Companies Act who owns Textile Mill at Rajaji Nagar, Bangalore, by its letter dated 22nd March 1977 furnished their requirement of global cotton of 300 bales of Orleans/Texas Cotton and 300 bales of Sudan Acala Cotton R.G.. Besides sending the said letter, the defendants had sent Telex dated 22nd March 1977 requesting the plaintiffs to register their aforesaid requirement of cotton. The defendants by the said letter requested the plaintiffs to confirm the said booking. It is the case of the plaintiffs that pursuant to the said request, the plaintiffs, as per their usual practice and by way of confirmation of the said offer, sent to the defendants a contract in standard form being Contract No.G/527 dated 28th March 1977 duly signed by the plaintiffs. This contract was signed in duplicate to enable the defendants to return one copy thereof duly signed by them to the plaintiffs. It is the case of the plaintiffs that although the said Contract No.G/527 was not signed by the defendants, the same was accepted and confirmed by the 3 defendants, which constituted valid and binding contract between the plaintiffs and defendants. Accordingly, the plaintiffs agreed to import and supply the requisite quantity of cotton at specified rate to the defendants as per their request. It is the case of the plaintiffs that the price agreed upon was C.I.F. Mumbai, Cochin and Bhavnagar excluding L/C Bank charges and plaintiffs’ service charges. According to the plaintiffs, the defendants agreed that the plaintiffs contract with the foreign suppliers for import of the cotton would be integral part of the contract between the plaintiffs and the defendants. In short, it is the case of the plaintiffs that relying upon the defendants commitment to purchase the requisite quantity of the cotton at the specified price, the plaintiffs imported the goods on clear understanding that if the defendants fail to pay the price, the plaintiffs would clear the same and take delivery of the said goods at the costs and risk of the defendants and if the defendants fail to take delivery of the said goods from the plaintiffs, the plaintiffs would be entitled to sell the goods to any other party by private sale or by auction and loss suffered by the plaintiffs would be borne by the defendants and the defendants would be liable to pay the same on demand by the plaintiffs. It is the case of the plaintiffs that the plaintiffs imported the 4 required 200 bales of both, Orlens/Texas Cotton and Sudan Acala Cotton Rg.. The goods arrived at Mumbai. It is the case of the plaintiffs that the plaintiffs had to take delivery of 175 bales of Orleans/Texas Cotton and 193 bales of Sudan Cotton which were equal to the contracted quantity of bales of each variety. That, in spite of intimation given by the plaintiffs, the defendants failed to pay the price which compelled the plaintiffs to clear the said goods and take delivery thereof. Even after taking delivery when the plaintiffs called upon the defendants to pay the consideration and take delivery, the defendants failed and neglected to do so which necessitated sale of the said goods to third party. The plaintiffs sold 117 bales out of said 175 bales of Orleans/Texas Cotton to M/s.Sonal Enterprises and realized @ US $ 51 per lb. and realized a sum of Rs.2,48,110=29, as against the total invoice price together with clearing charges, demurrage, interest and carrying charges for the said 117 bales of Rs.5,56,574=27, thereby suffered loss of Rs.3,08,463=98. Similarly, the remaining quantity of 58 bales of Orleans/Texas Cotton were sold to M/s.Sonal Enterprises, Hongkong @ U.S.Cents 50 per ib. and realized a sum of Rs.1,12,149=96 as against the invoice price thereof together with clearance charges, demurrage, interest and carrying 5 charges of Rs.3,47,050=53, thereby suffered loss of Rs.2,34,900=57. Insofar as 193 bales of Sudan Cotton, quantity of 100 bales was sold to M/s.Sonal Enterprises, Hongkong @ US Cents 62 per lb. realizing price of Rs.2,16,629=30, as against the invoice price thereof together with other charges of Rs.6,18,235=50, thereby suffered loss of Rs.4,01,600=20. Thereafter another quantity of 52 bales of Sudan Cototn was also sold to M/s.Sonal Enterprises at the same rate realizing price of Rs.1,16,434=63, as against invoice price together with other charges of Rs.3,16,664=81, thereby suffered loss of Rs.2,00,230=18. It is the case of the plaintiffs that the remaining bales of the Sudan Cotton could not be sold for want of customers in spite of best efforts. The total invoice price together with other charges thereof was Rs.2,76,038=48 and the plaintiffs assessed loss in respect thereof @ 1,88,824=19. According to the plaintiffs, the plaintiffs suffered loss aggregating to Rs.13,34,029=12 on account of resale of the goods imported for defendants and the defendants were liable to pay the said amount along with interest @ 20% p.a. from the date of sale till the date of suit and for further interest @ 6% p.a. till payment. 6 2. The defendants have resisted the claim of the plaintiffs. The defendants have raised issue of jurisdiction of this Court to try and entertain this suit. According to the defendants, the whole of the cause of action has arisen outside Mumbai; and even assuming part of cause of action has arisen in Mumbai, it was incumbent upon the plaintiffs to have obtained leave of this Court under Clause-XII of the Letters Patent prior to institution of the suit. It is then asserted that the suit is barred by Law of Limitation. According to the defendants, no concluded contract arrived at between the parties. For, they did not return the contract form dated 28th March 1977 which was unilaterally signed by the plaintiffs. That Clause-33 of the said contract form sent by the plaintiffs was struck off, which clearly indicated that the contract could not come into existence unless it was signed by the defendants. Alternatively, the defendants assert that the provisions for automatic acceptance of the contract was void, illegal and has no effect whatsoever. In short, the stand taken by the defendants is that there was no valid and concluded contract between the parties. Without prejudice to the said contention the defendants assert that the plaintiffs being the canalizing agency, all the mills in the India had no option but to agree to import cotton through the 7 plaintiffs. Several terms in the contract form evolved by the plaintiffs are unilateral, one sided, illegal and unenforceable. The defendants have denied that the plaintiffs agreed to import or purchase the cotton or that the defendants agreed to purchase any cotton as alleged or otherwise. The defendants denied that any terms were agreed between the parties. The defendants assert that they had specifically made it clear that the Orleans/Texas Cotton and Sudan Cotton should be delivered by April-May 1977 Shipments. Time of delivery was essence of the contract and on that basis the defendants applied for a quota from the Textile Commissioner. The defendants assert that they were not bound or liable to take delivery of any cotton which was purportedly offered by the plaintiffs to them in June 1977 since it was beyond the time stipulated by the defendants of April-May 1977 shipments. The defendants, without prejudice to the above stand, assert that the plaintiffs failed and neglected to sell and supply the contracted quantity of cottonin time. The defendants assert that the defendants repudiated the said contract and refused to take delivery which they have rightly done in their letters dated 29th July1977, 9th August 1977, 13th August 1977 and 26th/27th August 1977. The defendants denied that it was not possible to cancel the 8 contract. The defendants have asserted that they were not aware of and do not admit that the goods arrived at Mumbai. The defendants denied that the plaintiffs have cleared the goods and stored in any godown, as alleged. The defendants denied that they were bound and/or liable to take delivery of the said goods. The defendants also denied that the plaintiffs suffered any loss and that they were liable to pay any amounts to the plaintiffs. It is the case of the defendants that in fact the plaintiffs did not perform in accordance with the terms of the purported contract and offered inferior quantity of goods than the purported contract, that too beyond the stipulated time. The defendants deny that the plaintiffs suffered any loss on account of resale of the goods or that the defendants were answerable for the said loss. The defendants assert that the conditions under which the alleged resale is stated to have taken place are not the same as those under which the plaintiffs allege to have contracted with the defendants and, therefore, the plaintiffs are themselves in breach. 3. On the basis of the pleadings, my predecessor has settled and framed four issues as follows :- 9 ISSUES Sr. Nos. Issues Findings I. Whether this Court has jurisdiction to entertain and try the suit? Yes II. Whether the Plaintiffs prove that there was a contract for sale of the cotton with the defendants? Yes III. Whether the Plaintiffs prove that the defendants committed breach of contract and thereby causing loss of Rs.14,56,720=94 to the plaintiffs? Yes IV. Are the plaintiffs entitled to claim interest, if yes, at what rate? Yes. As claimed. 4. The plaintiffs examined two witnesses namely Mr.V.Munnikrishnan - PW-1 and Mr.Pranjal P. Joshi – PW-2 in support of its case. The plaintiffs proved documents Exhibits P-1 to P-47. On the other hand, the defendants examined one witness Y.G.Vijay Kumar, DW-1 and insisted for exhibiting documents D-1 to D-7 in support of their case. The Examination-in-chief of the above 10 witnesses was on affidavit-in-lieu of examination-in-chief. The witnesses were cross examined on commission. The Commissioner without deciding the question of admissibility of documents exhibited the documents when produced by the respective witnesses. The question of admissibility of documents was decided in the first instance before proceeding with the hearing of the case vide order dated 28th September 2007. Insofar as documents at Exhibits P-1 to P-5, those documents were admitted by the parties. Insofar as document at Exhibit P-6 it was not in dispute that the said document was duly proved by the plaintiffs. The only controversy raised by the defendants was that it had not admitted the contents of the documents which issue was kept open to be answered at the appropriate stage. Insofar as documents at Exhibits P-7 to P-37, the existence of the said documents was not disputed by the defendants as the plaintiffs had proved those documents. The same were allowed to be exhibited while making it clear that the issue regarding denial of the contents of the said documents by the defendants will be considered at the appropriate stage. Insofar as documents at Exhibits P-38, 42, 43 and 45 are concerned, the existence of even said documents was not disputed by the defendants. Significantly, it has 11 been held that the documents have been proved by the plaintiffs, however, the question whether the evidence of plaintiffs’ witnesses who was not the author of the document, should be accepted or the contents of the documents discarded, was kept open to be decided at the appropriate stage. Insofar as documents at Exhibits P-46 and 47, the defendants consented for exhibiting the said documents. Insofar as the documents relied upon by the defendants D-1 to D-7, it has been held that the same cannot be exhibited as no reference has been made to the said documents in the pleadings either by the plaintiffs or of the defendants. It is held that having regard to provisions of Order VIII, Rule 1A(1) of the CPC, the defendants can be permitted to rely only on the documents on which their defense or claim was based. The defendants having failed to make reference to the subject documents in the pleadings, cannot be allowed to rely on the same in view of Sections 61, 62 and 67 of the Evidence Act. The order passed on 28th September 2007 on the issue of admissibility of the documents relied by the defendants has not been challenged. Accordingly, I shall now proceed to examine the points in issue on the basis of rival pleadings, oral evidence of the respective witnesses and documents at Exhibits P-1 to P-47. 12 REASONS 5. ISSUE NO.1 :- The question whether this Court has jurisdiction to try and entertain the suit as is well established, will have to be addressed on the basis of the averments in the plaint. The plaintiffs have asserted that they had issued Circular from Mumbai on 12th March 1977 inviting offers from the Textile Mills in India including from the defendants. The defendants by letter dated 22nd March 1977 as well as Telex Message indicated their desire to avail of the global cotton 300 bales of Orleans/Texas Cotton and 300 bales of Sudan Acala Cotton Rg; sent to the plaintiffs having their office in Mumbai. On the basis of the said confirmation the plaintiffs forwarded contract No.G/527 signed in duplicate from Mumbai to enable the defendants to return one copy thereof signed by them to the plaintiffs at Mumbai. In other words, the contract was dispatched from Mumbai and duly signed contract was to be received in Mumbai. The plaintiffs have also asserted that the contract was to be performed in Mumbai as can be discerned from the said contract and the subsequent correspondence exchanged between the parties referred to in the plaint. The plaintiffs have also averred that the goods were imported and delivered at Mumbai. The plaintiffs cleared the said goods and 13 took delivery at Mumbai. The plaintiffs called upon the defendants to take delivery from Mumbai. Since the defendants failed to take delivery, the plaintiffs after giving due notice to the defendants sent from Mumbai, decided to sell the said goods to third party in Mumbai. The plaintiffs thereafter called upon the defendants to make payment to be received by the plaintiffs in Mumbai. 6. The averments in the plaint leave no manner of doubt that the case of the plaintiffs is that breach of contract in not taking delivery and not making payment by the defendants occurred in Mumbai. Besides, the defendants sent intimation by way of letter addressed to the plaintiffs regarding revocation of contract and denying liability to take delivery or bear the loss suffered by the plaintiffs which communication was received by the plaintiffs in Mumbai. It is in this context, in paragraph 8 of the plaint, the plaintiffs have asserted that the contract was signed by the plaintiffs in Mumbai, goods were delivered in Mumbai and payment was also to be made in Mumbai, that the defendants letters accepting the said contract were also received by the plaintiffs in Mumbai. The plaintiffs have, therefore, asserted that the whole of the cause of action has arisen in Mumbai 14 for which reason Civil Courts in Mumbai alone will have jurisdiction to try and entertain the suit. 7. The defendants in the written statement while raising the plea of jurisdiction has “generally” denied the stand of the plaintiffs that the whole of the cause of action has arisen in Mumbai being false and incorrect. It is then stated that the alleged contract could never be said to have taken place in Mumbai and that the delivery under the alleged contract had to be effected outside Mumbai. It is on this vague and general assertion the defendants have raised plea of jurisdiction of this Court. 8. Having considered the pleadings on the point of jurisdiction, I have no hesitation in answering issue no.1 against the defendants for the simple reason that going by the averments in the plaint it is plainly asserted that the contract was signed by the plaintiffs in Mumbai, that the goods were delivered in Mumbai, that the payment was to be made in Mumbai and letters from defendants accepting the said contract were also received by the plaintiffs in Mumbai. Accordingly, on reading the plaint as a whole, it is obvious that making of the 15 contract, its performance and its breach has occurred within the jurisdiction of this Court. Moreover, the defendants sent communication to the plaintiffs committing themselves to avail of the facility offered by the plaintiffs, was received by the plaintiffs in Mumbai. Intimation so sent resulted in a contract and hence the suit for breach of contract and damages can be filed in the Civil Court in Mumbai. Significantly, the contract was made in Mumbai, it was to be performed in Mumbai, the breach of performance by the defendants has occurrted in Mumbai, and the alleged repudiation of contract by the defendant was received by the plaintiffs in Mumbai. In other words, the entire cause of action have occurred in Mumbai. Incidentally, Clause-32 of the Contract document also provides for exclusive jurisdiction of the Civil Courts in Greater Bombay. It will be useful to refer to the exposition of the Apex Court in the case of A.B.C.Laminart Pvt.Ltd. and another Vs. A.P.Agencies reported in AIR-1989-SC-1239. The Apex Court has held that in a suit for damages for breach of contract the cause of action consists of making of contract and or its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. It is further held that 16 making of contract is part of cause of action which can be the basis to file a suit at the place where the contract was made. It has further held that ordinarily acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a Court within whose jurisdiction acceptance was communicated. It then went on to observe that if the contract was to be performed at the place where it was made, the suit on the contract is to be filed there and no where else. It has also observed that in case of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. Applying exposition of the Apex Court, I find no difficulty in answering issue of jurisdiction against the defendants. 9. ISSUE NO.2 :- For answering this issue, it will be appropriate to first refer to the respective stand. According to the plaintiffs, by Circular dated 12th March 1977, issued by the plaintiffs, which was also sent to the defendants, invited offers for purchase of global cotton proposed to be imported by the plaintiffs of the varieties and at the rates mentioned in the said Circular. PW-1 in his evidence has proved this circular and is marked as Exhibit-P-2. Insofar as Orleans/Texas Cotton and Sudan Cotton, the circular indicates the 17 place of shipment as “buyer’s option” and “sellers’ option” respectively. Besides, the price of the said goods per Candy to be purchased by the defendants on C.I.F. basis. The places of delivery indicated in this circular is Mumbai, Cochin and Bhavnagar. In response to the said circular the defendants, firstly, by their Telex message forwarded on 22nd March 1977, showed their willingness to arrange for the shipment of Orleans/Texas Cotton 300 bales and Sudan Cotton 300 bales. They indicated shipment in two lots of 100 bales in April 1997 and 200 bales in May 1977 for both the items. They also informed the plaintiffs that all the 600 bales are to be shipped to Cochin. Insofar as Orleans/Texas Cotton, the circular dated 12th March 1977 indicates that the place of shipment will be at “Buyers Option” but in respect of Sudan Cotton it will be at “Sellers Option”. Nevertheless, the defendants gave their choice of place of shipment for Cochin for both the goods. Besides sending Telex message, the defendants sent communication in writing to the plaintiffs on their letter head dated 22nd March 1977 (Exhibit-P-4) reiterating the same position. On the basis of requisition given by the defendants, the Government of India, Ministry of Commerce issued letter of allocation (Exhibit-P-5) of Global and Russian Cotton to the 18 defendants on 28th March 1977 for quantity of 300 bales of 175 kgs. each of both the categories. The plaintiffs then forwarded contract No.G/527 purported to be dated 28th March 1977 for quantity of 600 quota bales with variation of 3% in weight difference accepted. The break-up of 600 bales has been mentioned in the contract as 300 bales of Orleans/Texas Cotton @ 4,550/- and 300 bales of Sudan Cotton @ 5,000/-. The contract also reproduces the supply period as April-May for both the items and shipment at buyers option. Clause-2 of the contract, however, provides that although the Mill (defendant) indicated its choice of port, the said goods will be delivered to the said mill at the port where the ship carrying the goods will arrive and unloaded and the difference in freight, if any, will be borne by the mills. The contract duly signed by the plaintiffs in duplicate was sent to the defendants so that one copy was to be returned to the plaintiffs duly signed by the defendants. The fact that the said contract was duly received by the defendants is reinforced from the Telex message sent by the defendants to the plaintiffs dated 16th April 1977 (Exhibit P-7) wherein the defendants have referred to the quota letter dated 28th March 1977 and contract No.G/527 dated 28th March 1977 in respect of two items (Orleans/Texas Cotton and Sudan Cotton). The 19 defendants informed the plaintiffs that they wish to contract for 200 bales Orleans/Texas Cotton at specified rate per Candy CIF and 200 bales of Sudan Acala Roller Ginned Grade-I at the specified rate per candy CIF.. The defendants requested the plaintiffs to send revised contract on the said terms. The defendants also assured the plaintiffs that they were arranging for necessary bank guarantee in due course. On receipt of this communication, the plaintiffs, by letter dated 2nd May 1977 (Exhibit P-8), informed the defendants that they have confirmed having amended the contract by reducing the quantity of goods as requested by the defendants to 200 bales of each category of cotton. 10. On conjoint reading of all these documents the inescapable conclusion is that there was a concluded contract between the parties, even though the defendants may not have signed the formal contract agreement forwarded by the plaintiffs. The concluded contract between the parties was for supply of 200 bales of Orleans/Texas Cotton and 200 bales of Sudan Acala Roller Ginned Grade-I at the specified rates on C.I.F.basis. From the pleadings and the evidence produced by the plaintiffs it is also seen that acting upon the commitment of the defendants the plaintiffs arranged for shipment 20 of the concerned goods. Further, as the goods were shipped from Sudan to Mumbai, the plaintiffs sent shipment advice to the defendants on 1st June