IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1704 OF 1979 The Cotton Corporation of India Ltd., having registered office at Air India Building, Nariman Point, Bombay - 21 ...Plaintiffs Versus The Cooperative Textile Mills Ltd., having its registered Office at Sahkari Nagar, Bulandshahr, U.P. ...Defendants ....... Mr.U.M.Mahajan i/b Divekar & Co. for Plaintiffs. Mr.S.V.Shetty for Defendants. ...... CORAM: A.M.KHANWILKAR, J. CORAM: A.M.KHANWILKAR, J. CORAM: A.M.KHANWILKAR, J. DECEMBER 1, 2008. DECEMBER 1, 2008. DECEMBER 1, 2008. ORAL JUDGMENT : ORAL JUDGMENT : ORAL JUDGMENT : 1. The Plaintiffs have filed the Suit for recovery of sum of Rs.8,63,211/- (Rupees Eight Lakhs Sixty-three Thousand Two Hundred Eleven) with further interest at the rate of 17% per annum on Rs.7,72,068.41 (Rupees Seven Lakhs Seventy-two Thousand Sixty-eight & Paise Forty-one) from the date of the Suit till Judgment and thereafter at : 2 : the rate of 6% per annum till payment. 2. According to the Plaintiffs, the Plaintiffs are a company registered under the Companies Act, 1956 and a Government of India Undertaking. The Plaintiffs are carrying on business of importing and supplying the foreign cotton to Indian Mills and is acting as a Canalising Agent for the imports of foreign cotton for Indian Textile Mills. The Plaintiffs assert that the Defendants are also company registered under the Companies Act and own a Textile Mill at Bulandshahr in Uttar Pradesh. 3. It is the Plaintiffs’ case that by a circular letter No.CCI/IMP/Global/CIR.11 dated 5th April 1977, the Plaintiffs informed all the mills including the Defendants herein that certain foreign cotton referred to in the Circular was available for allotment. The Plaintiffs called upon the Mills including the Defendants to approach the Plaintiffs for placing the order. The Plaintiffs assert that by letter dated 11th April : 3 : 1977, the All India Federation of Cooperative Spinning Mills Ltd. for and on behalf of the Defendants herein requested the Plaintiffs to book for the Defendants 500 bales of Guatemala cotton and 500 bales of Sudan cotton. Later on, by letter dated 18th April 1977, the Defendants while referring to letter dated 11th April 1977 sent by the Federation reiterated the order placed by the Federation for and on behalf of the Defendants. It is only thereafter, the Plaintiffs forwarded the contract in duplicate by post to the Defendants bearing No.G/615 dated 12th May 1977 of 500 bales of Guatemala cotton for signature of the Defendants. According to the Plaintiffs Condition No.33 of the Contract clearly stipulates that if the Defendants failed to send the duplicate copy of the contract duly signed within seven days from the receipt thereof, it would be deemed to have been executed by the Defendants. The Plaintiffs assert that the Defendants did not return the duplicate copy of the Contract duly signed by them. As a result, have accepted or deemed to have accepted the contract and the terms and conditions thereof. The Plaintiffs then assert that in any case, : 4 : without prejudice to the earlier plea stated in the Plaint, the fact that there was a valid, binding and concluded contract between the Plaintiffs and Defendants, can be discerned on conjoint reading of circular dated 5th April 1977 r/w letters dated 11th April 1977 and 18th April 1977 whereby the Plaintiffs agreed to sell to the Defendants and Defendants agreed to purchase 500 bales of Guatemala cotton at the rate of Rs.5,100/- (Rupees Five Thousand One Hundred) per candy. It is the Plaintiffs’ case that by letter dated 19th July 1977, the Plaintiffs informed the Defendants that 431 bales of Guatemala cotton type FRITO were shipped per S.S.Kanishka and called upon the Defendants to inform the mode of payments and clearing arrangements. According to the Plaintiffs, no communication was received from the Defendants in response to the said letter. The Plaintiffs also assert that the said 431 bales were equivalent in value to 500 bales contracted to be sold. The Plaintiffs then assert that as per condition No.34 of the contract, the Defendants were obliged to furnish Bank Guarantee which however was not offered. The Plaintiffs also : 5 : assert that the Defendants failed to take delivery of the said 431 bales of Guatemala cotton inspite of being informed in that behalf. As a result, assert the Plaintiffs that they sent Advocate’s letter dated 2nd September 1977 calling upon the Defendants to take delivery of 431 bales of Guatemala cotton imported by the Plaintiffs on behalf of the Defendants and which the Defendants had agreed to purchase, within 15 days from the receipt of the said letter, failing which, the Plaintiffs would re-allot the said cotton bales to any other Mill or sell the same in open market on behalf of the Defendants and on their account and risk, for which, the Defendants would be held responsible for the loss and damages that the Plaintiffs would suffer. It is the Plaintiffs’ case that the Defendants failed to observe the terms and conditions of the contract between the parties and failed to take delivery of the goods in question. With the result, the Plaintiffs had no alternative but to clear the said bales and store the same in Plaintiffs’ godown at the cost and risk of the Defendants. It is further stated that inspite of intimation, since the Defendants failed : 6 : to take delivery of said 431 bales of Guatemala cotton, the Plaintiffs sold the same to the National Textile Corporation (N.M.) Ltd. at the price of Rs.4,150/- (Rupees Four Thousand One Hundred Fifty) per candy on or about 15th November 1978. It is stated that in the process, the Plaintiffs released sum of Rs.11,51,084.45 (Rupees Eleven Lakhs Fifty-one Thousand Eighty-four & Paise Forty-five). The Plaintiffs further assert that the total price of the said 431 bales including the clearing charges, demurrage, interest carrying charges, etc. amounted to Rs.19,23,152.86 (Rupees Nineteen Lakhs Twenty-three Thousand One Hundred Fifty-two & Paise Eighty-six). Taking that into account, the Plaintiffs suffered a loss of Rs.7,72,068.41 (Rupees Seven Lakhs Seventy-two Thousand Sixty-eight & Paise Forty-one) being the difference between the contract price and the sale price. The Plaintiffs state that the Plaintiffs through their Advocate’s letter dated 23rd May 1979 called upon the Defendants to make good the said deficit amount of Rs.7,72,068.41 with interest thereon at the rate of 17% per annum from 26th November 1978 till payment within two weeks from : 7 : the receipt of the said order. The Plaintiffs assert that inspite of this notice, the Defendants failed and neglected to pay the stated amount and by their Advocate’s letter dated 4th June 1979, falsely denied that there was concluded contract between the parties and disputed its liability to pay any amount to the Plaintiffs. 4. Significantly, the Plaintiffs have asserted that the contract provides that it shall be subject to exclusive jurisdiction of Civil Court in Greater Bombay. It is stated that goods were also supplied and paid for in Bombay. That material part of the cause of action has arisen in Bombay. It is further stated that although contract was sent to the Defendants for confirmation outside Bombay and the Defendants have their registered office outside Bombay, leave under Clause XII of the Letters Patent be granted in which case, this Court will have jurisdiction to entertain and try the present Suit. With this assertion, the Plaintiffs filed Suit for recovery of the principal amount of Rs.7,72,068.41 along with interest accrued thereon. : 8 : 5. It is not in dispute that the Plaintiffs took out Chamber Summons for granting leave under Clause XII of the Letters Patent which was granted by my predecessor. Admittedly, the Defendants took out Chamber Summons for recall of the said order granting leave under clause XII of the Letter Patent being Chamber Summons No.24 of 1980. However, the same was withdrawn by the Defendants unconditionally on 8th March 1980. With the withdrawal of the said Chamber Summons, the Defendants gave up the plea regarding jurisdiction of this Court. I have referred to this aspect as in the written statement filed on 19th October 1980, the Defendants have raised the said plea in Paragraph No.2 thereof. 6. Be that as it may, beside the said Chamber Summons, the Defendants took out Notice of Motion No.71/1980 praying for the following reliefs : "(a) That the Suit be stayed under Section 34 of Arbitration Act. (b) that the Plaintiffs be directed to refer the Disputes to Arbitration as : 9 : provided by Clause 27 of the Contract No.G/615 dated 12th May 1977. (c) for costs of and incidental to this Notice of Motion. (d) for such other and further orders as the nature and circumstances of the case may require." 7. The said Notice of Motion taken out on 17th January 1980 mentions that affidavit of Mr.R.S.Lal Shrivastava, Administrative Officer of the Defendant solemnly affirmed on 11th January 1980 will be used in support of Motion. The affidavit refers to the facts for considering the abovesaid prayers and proceeds on the assumption that there was a concluded contract between the parties, for which reason, the parties were bound to take recourse to remedy of arbitration. It is on that premiss, reliefs were prayed in Notice of Motion No.71 of 1980. Besides the said affidavit, it may be useful to refer to another affidavit of Shri R.S.Lal Shrivastava, Administrative Officer of the Defendants which was filed in support of the Chamber summons for recall of the order granting leave under clause XII. Even in this affidavit, after referring to the plea of the Plaintiffs, the Defendants have stated in Para 4 that it is clear : 10 : that acceptance of the contract took place within the territorial jurisdiction of the Court at Bulandshahr. This stand taken by the Defendants presupposes that they have conceded the factum of existence of a concluded contract between the parties. Indeed, this affidavit was filed in the context of issue of territorial jurisdiction of this Court. The contract, however, makes it clear that the same was entered between the parties at Bombay. It is not in dispute that the Notice of Motion No.71 of 1980 was however dismissed by this Court on 21st March 1980 which order has attained finality. I shall elaborate on this aspect while dealing with the relevant issue. 8. The Defendants filed their written statement on 19th October 1980. The first preliminary objection raised in the written statement was that the Suit was not maintainable for want of notice under Section 117 of the Uttar Pradesh Cooperative Societies Act, 1965 (hereinafter referred to as ‘the U.P.Act’), which is required to be given to the Registrar in relation to the proposed dispute. The said Section : 11 : 117 provides that no Suit shall be instituted against the concerned Cooperative Society or any of its officers in respect of any act relating to the constitution, management or the business of the society until the expiration of two months next after notice in writing has been delivered to the Registrar and the Defendants being a Society registered under the said Act. For that, it was incumbent upon the Defendants to give such notice. The Defendants have categorically denied that they are company registered under the Companies Act as alleged by the Plaintiffs. The Defendants have then raised plea of jurisdiction of this Court. According to the Defendants, no part of cause of action has arisen in Bombay. According to the Defendants, the Plaintiffs were to arrange the delivery of goods at Bulandshahr and payment of cost were to be made at Bulandshahr. Besides the above said two preliminary objections, the written statement generally denies the case made out by the Plaintiffs. One other issue raised by the Defendants by way of amendment of the written statement is that the letter dated 18th April 1977 relied by the Plaintiffs purportedly sent on behalf : 12 : of the Defendants was not binding on the Defendants, since the Authority to purchase the raw materials was exclusively vested in the Board of Directors by virtue of Bye Law No.36 (2) of the Bye Laws of the Society. 9. On the basis of these rival claims, eleven issues were framed on 16th December 1996. Today, at the outset, Counsel for the Defendants brought to my notice that additional issue will have to be framed in the context of the stand taken by the Defendants in Paragraph 5A of the written statement, which submission has been accepted and separate order passed, whereunder additional issue No.5A has been framed. Accordingly, I am now required to consider in all twelve issues which read thus: I S S U E S "1. Whether the suit is maintainable as no notice under Section 117 of the Uttar Pradesh Co-operative Societies Act 1965 was given to the Registrar, as alleged by the Defendants in paragraph 1 of the Written Statement ? 2. Whether this Hon’ble Court has no jurisdiction as alleged by the defendants : 13 : to entertain and try this suit in paragraph 2 of the written statement ? 3. Whether the plaintiffs prove that circular CCI/IMP/GLOBAL/CIR-II dated 5th April, 1977 was received by the defendants or that the defendants had no knowledge of the said Circular as alleged by the Defendants in paragraph 4 of the written statement ? 4. Whether the plaintiffs prove that the letter dated 19-7-1977 was received by Defendant as alleged in para 4 of the Plaint? 5. Whether the plaintiffs prove that the circular dated 5th April, 1977, letter dated 11th April, 1977 and 18th April, 1977 constitute valid, binding and concluded contract between the plaintiffs and the defendants as alleged in paragraph 3 of the plaint ? 5A. Whether the Defendants prove that the signatory of letter dated 18th April 1977 had no authority to issue the purchase order of the raw materials for and on behalf of the Defendant Society ? 6. Whether the defendants prove that the plaintiffs have committed breach of the Contract as alleged in paragraph 5 of the Written Statement ? 7. Whether the Plaintiffs prove that the defendants have committed breach of the Contract by not lifting the said suit cotton ? 8. Whether the plaintiffs prove that the suit cotton was sold and the plaintiffs suffered a loss upto Rs.7,72,068.41 ps. as alleged by the plaintiffs in paragraph 6 of the plaint ? : 14 : 9. Whether the plaintiffs are entitled to a decree for a sum of Rs.8,63,211.94 or for any other amounts with interest at the rate of 17% per annum on the sum of Rs.7,72,068.41 ? 10. What decree ? 11. What order ? 10. The Plaintiffs have examined Mr.V.Munnikrishnan of Chennai as PW 1. He was in service of the Plaintiffs at the relevant time from October 1970 and retired as General Manager. He has deposed that at the relevant time, he was Dy.Manager (Imports) of the Plaintiffs and was personally aware of the facts and circumstances relating to the suit transaction and has deposed on the basis of his personal knowledge. This witness has reiterated the stand taken by the Plaintiffs and has attempted to substantiate the same by producing contemporaneous record which have been marked as Exhibits ‘A’ to ‘U’. Besides this witness, Plaintiffs have examined one K.S.Seshadri who was the Office Manager (Legal) of the Plaintiffs. He had joined the Plaintiffs in October 1971 and was posted at Bombay since October 1971. He has deposed about the fact that the : 15 : Officers who had prepared the documents sought to be relied by the Plaintiffs were not available for deposing before the Court. Though this specific evidence has been given by PW 2, there is absolutely no challenge to that version of PW 2 in his cross-examination. The Plaintiffs have also examined one Pranjal Prabhakar Joshi who incidentally was Dy.Manager (Legal) of the Plaintiffs who has stated that best efforts were made to examine the person who acted for and on behalf of the Plaintiffs at the relevant time for clearing of the goods, however, the said person was not available for being examined in Court. Even this version has gone unchallenged, as there is no cross-examination of PW 3. With this pleadings and evidence, oral and documentary on record, I shall proceed to examine the issues that fall for consideration. Issue No.1: Issue No.1: Issue No.1: 11. According to the Defendants, the Plaintiffs Suit is not maintainable for want of notice under Section 117 of the U.P.Act. Insofar : 16 : as this issue is concerned, Counsel for the Plaintiffs would contend that the Plaintiffs’ case was that the Defendants is a Company registered under the provisions of the Companies Act, 1956 which fact is stated in Paragraph 1 of the Plaint. In response to the said case, the Defendants in the written statement have merely stated that it is not a Company registered under the Companies Act. According to the Plaintiffs it was for the Defendants to prove the fact that it was registered as a Cooperative Society and not as a Company. Significantly, the Plaintiffs’ witness, in particular, PW 1 has not spoken about the status of the Defendant Company in any manner in his examination-in-chief. My attention was, however, invited to question No.3 and question No.4 of the cross-examination. That evidence does not take the matter any further for the Plaintiffs. Suffice it to observe that the Defendants have asserted that it is a Society registered under the provisions of the U.P. Act. There is absolutely no challenge to this position by the Plaintiffs. In absence thereof, it necessarily follows that the plea of the Defendants that it is a Society registered : 17 : under the provisions of the U.P. Act is deemed to have been admitted by the Plaintiffs. 12. If it is so, the next question is: whether it was mandatory for the Plaintiffs to serve prior notice under Section 117 of the U.P. Act, in absence whereof, the Suit ought to fail. To get over this position, Counsel for the Plaintiffs contends that the provisions of Section 1(2) of the U.P.Act would plainly indicate that the said Act extends to the whole of the State of Uttar Pradesh.That being State Enactment, cannot govern the dispute which is brought before this Court being outside territorial jurisdiction of State of U.P. Besides, reliance is placed on the decision of the Apex Court in the case of Gwalior Dugdha Gwalior Dugdha Gwalior Dugdha Sangh Sahakari Ltd. vs. G.M., Govt. Milk Scheme, Sangh Sahakari Ltd. vs. G.M., Govt. Milk Scheme, Sangh Sahakari Ltd. vs. G.M., Govt. Milk Scheme, Nagpur & Ors. reported (2003) 7 SCC 529 Nagpur & Ors. reported (2003) 7 SCC 529 Nagpur & Ors. reported (2003) 7 SCC 529 to buttress this submission. The argument though looks attractive at the first blush, will have to be stated to be rejected. Inasmuch as, this very question between the same parties with which I am concerned, came up for consideration before this Court in Suit No.1652 of 1980. The same has been : 18 : answered against the Plaintiffs by a speaking Judgment dated 2nd August 2005 (Coram : S.U.Kamdar, J.). The decision of the Apex Court was relied even in that matter by the Plaintiffs which has been distinguished by the learned Single Judge of this Court for the reasons recorded therein. The said view would bind the Plaintiffs who incidentally were party to the said Judgment. 13. Following the reasons which weighed with the learned Single Judge of this Court, I have no hesitation in taking the view that the provision of Section 117 of the U.P.Act was attracted to the fact situation of the present case and which obligated the Plaintiffs to give prior notice before instituting the present Suit and compliance of requirements of that provision. In this view of the matter, the issue under consideration will have to be answered against the Plaintiffs and in favour of the Defendants. The fact that the contract specifically mentions that it is made at Bombay or the fact that the delivery of goods was required to be taken by the Defendants from Bombay would make no difference to that situation. The Plaintiffs : 19 : have proceeded on the clear understanding that only part of the cause of action has arisen within the jurisdiction of this Court. It is for that reason, the Plaintiffs were advised to seek leave under Clause XII of the Letters Patent. Taking overall view of the matter, therefore, I have no hesitation in concluding that the Suit filed by the Plaintiffs without issuance of prior notice and complying with the mandate of Section 117 of the U.P.Act is not maintainable. With this finding, the Suit will have to be dismissed. Indeed, my attention was invited to the fact that the view taken by the learned Single Judge of this Court in Suit No.1652 of 1980 is subject matter of challenge in Appeal No.1007 of 2005 which has been admitted and pending in this Court. That does not take the matter any further for the Plaintiffs. Accordingly, issue under consideration is answered in favour of the Defendants. Issue No.2 : Issue No.2 : Issue No.2 : 14. Insofar as Issue No.2 is concerned, the Plaintiffs in Paragraph 8 of the Plaint have : 20 : clearly stated that the contract provides that it shall be subject to the exclusive jurisdiction of the Civil Courts in Greater Bombay. That the goods were also to be supplied and paid for in Bombay. That the material part of the cause of action has arisen in Bombay. It is on that basis, Plaintiffs sought leave under Clause XII of the Letters Patent which was granted by this Court. The Defendants although have disputed the correctness of the stand of the Plaintiffs in written statement, in particular, Paragraph Nos.2 and 10 of the written statement, the fact remains that Defendants made attempt for recall of the order passed by this Court granting leave under Clause XII of the Letters Patent, which proceedings, however, later on was abandoned by the Defendants unconditionally. Thus, the Defendants gave up the plea of jurisdiction of this Court and then proceeded to contest the present Suit. Even before this Court, no serious argument has been made by the Defendants as to why this Court will have no jurisdiction, especially in the context of the finding to be recorded that the Contract itself indicates that it is made at Bombay coupled with the fact that the : 21 : goods imported on behalf of the Defendants arrived in Bombay and delivery thereof was to be taken by the Defendants from Bombay. Even if the Defendants are right in contending that they have not signed the contract and forwarded the duplicate copy to the Plaintiffs, even so, the contemporaneous circumstances would clearly indicate that substantial part of the cause of action arose in Bombay. If it is so, it was open to this Court to proceed with the Suit upon granting leave under Clause XII of the Letters Patent, which has already been granted at the outset. Accordingly, the issue of jurisdiction is answered against the Defendants and in favour of the Plaintiffs. Issue Nos.3, 5 & 5A : Issue Nos.3, 5 & 5A : Issue Nos.3, 5 & 5A : 15. I shall now proceed to answer issue Nos.3, 5 and 5A together, as the discussion for answering the same would be overlapping. Before that, I may place on record that the Counsel for the Plaintiffs during the arguments, in all fairness, pointed out that Issue No.4 is redundant and can be deleted. In the circumstances, I am not elaborating on the : 22 : pleadings or evidence in the context of Issue No.4 and instead, straightway proceed to address issue Nos.3, 5 and 5A together. 16. Substance of these three issues is to ascertain as to whether there was a