IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY, THE 11th DAY OF OCTOBER, TWO THOUSAND AND ELEVEN PRESENT HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE K.S.APPA RAO APPEAL SUIT No.432 of 2001 and A.S.M.P.No.1083 of 2010 and CROSS – OBJECTIONS (SR).No.5278 of 2010 Between: The State of Haryana, rep. by Its Secretary and another … Appellants And M/s.Delta Tubes Private Limited, Rep. by its Managing Director … Respondent This Court made the following: HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE K.S.APPA RAO APPEAL SUIT No.432 of 2001 and A.S.M.P.No.1083 of 2010 and CROSS – OBJECTIONS (SR).No.5278 of 2010 ORDER: - (Per Hon’ble Sri Justice A.GOPAL REDDY) This appeal is filed by the appellants/defendants against the decree and judgment, dated 15.11.2000, passed in O.S.No.28 of 1998, on the file of II Additional District Judge, East Godavari at Rajahmundry, whereby the suit of the plaintiff for recovery of the amounts claimed under the plaint, has been partly decreed. Respondent/plaintiff also filed cross-objections (SR) No.5278 of 2010 for the rest of the claims disallowed by the Court below with an application viz., A.S.M.P.No.1083 of 2010 to condone the delay of 3313 days in filing the cross-objections. 2. Briefly stated the facts, which give rise to filing of this appeal, are as under:- The plaintiff company, incorporated under the Companies Act, 1956, established a factory at Rajangaram, East Godavari District for manufacture and sale of Butyle Rubber tubes. On defendant No.2 placing an order for supply of 30,000 Butyle Rubber tubes on 18.11.1993, accepting the said offer plaintiff furnished bank guarantee of Rs.10.00 lakhs and supplied the said tubes, which are not the subject matter in dispute. Later, defendant No.2 placed a supply order on 05.01.1994 under Ex.A1 with the plaintiff for supply of 17,000 tubes and accordingly, the plaintiff supplied the same to defendant No.2. As per Ex.B7-letter, the plaintiff supplied 15,580 tubes as per the supply order leaving a balance of 1,420 tubes. While so, another supply order was also placed for supply of 6,000 tubes on 24.05.1994 by defendant No.2 under Ex.A2 and as per the said supply order, the plaintiff has to supply 3000 tubes in June, 1994 and another 3000 tubes in November, 1994 @ Rs.335.61 ps. per tube. As per condition No.16 mentioned in Ex.A1 and A2, the bank guarantee of Rs.10.00 lakhs furnished earlier, which is valid upto 31.12.1994, was permitted to continue the same or to furnish another bank guarantee valid upto 31.12.1994 for an amount of Rs.5.00 lakhs from any nationalized bank as per the proforma enclosed. Under condition No.20, the invoices in duplicate should be sent in advance to the consignee to enable him to release the payment. One copy of invoice be also sent to defendant No.2 for record. Under Condition No.21, in case, the products which were tested at CIRT reveals that the material is sub-standard in quality, the test charges plus cost of material will be recovered from the supplier and the supplier will be responsible for the free replacement of unused tubes of that lot and liquidated damages @ 1/3rd price of the tubes (including Excise duty and all other taxes i.e., land cost) already used by the department of that lot. Defendant No.2 has a right to invoke the bank guarantee as well as to cancel the contract in case of such supply of sub-standard quality tubes. As per the plaint averments, plaintiff supplied the tubes to various depots of defendant No.2 on various dates as per annexure-III enclosed along with the plaint. But, in fact no such enclosure has been enclosed along with the plaint. Defendant No.2 informed the plaintiff through its letter, dated 19.09.1994, terminating the supply order given under Exs.A1 and A2 stating that the tubes supplied by the plaintiff are sub-standard. Thereafter, the plaintiff addressed a letter dated 21.09.1994 to defendant No.2 to have a joint inspection of the alleged joint leakage. When the defendant wrote a letter to the Bank for encashment of the bank guarantee, plaintiff filed suit O.S.No.1056 of 1994 on the file of I Additional District Munsif, Rajahmundry for permanent injunction restraining defendant No.2 from invoking the bank guarantee, dated 13.12.1992, and its extended guarantee, dated 19.01.1994, given by defendant No.2 to defendant No.1 therein. Meanwhile, the defendants also informed the plaintiff about the damages sustained by defendant No.2. Later both the parties arrived at an amicable settlement, whereunder the plaintiff issued a letter, dated 15.03.1996, under Ex.A9 setting out the terms and conditions of compromise and expressed its willingness to supply 400 number of tubes free of cost and Rs.1.5 lakhs as total penalty for complete settlement of the case to defendant No.2. Defendant No.2 accepted the offer of the plaintiff and informed the plaintiff that on supplying 400 number of tubes and paying the penalty of Rs.1.5 lakhs, the amounts due to the plaintiff and the bank guarantee will be released, on condition that the plaintiff withdraws the suit filed by him. Accordingly, the plaintiff supplied 400 number of tubes free of cost and paid Rs.1.5 lakhs as total damages to defendant No.2 and withdrawn the suit. In spite of withdrawing the suit, as defendant No.2 has not paid the balance of bills amount to a tune of Rs.7,01,189.12 ps. towards cost of the tubes supplied earlier, a notice has been served on defendant No.2 under Section 80 of CPC for institution of the suit claiming the amounts and the plaintiff filed the present suit for the balance of amounts due under various bills at Rs.7,01,189.12 ps towards cost of the tubes; interest at 18% per annum compounded with quarterly rests on such amount; loss of profits for the year 1994-95 to 1996-97 at Rs.19,87,500/-; for damages for loss of reputation claimed at Rs.1,00,000/-; loss for locking up of the bank guarantee at Rs.1,00,580/-; for cost of 400 tubes @ 500 per tube i.e., Rs.2,00,000/-; for recovery of Rs.1,50,000/- paid towards penalty with interest at 18% per annum; and expenditure incurred by the plaintiff at Rs.2,00,000/-. In all the plaintiff claimed a sum of Rs.42,16,938.04 ps. 3. Resisting the claim of the plaintiff, defendant Nos.1 and 2 filed a written statement raising a preliminary objection that the Courts at Rajahmundry will not have jurisdiction and there is no cause of action to file the suit. The suit is barred by limitation. The allegations in paras 7, 8 and 9 of the plaint about placing of supply orders and supply of the tubes are admitted by defendant Nos.1 and 2. It is further submitted that there were complaints from the Depots of sub-standard quality of tubes supplied by the plaintiff vide memo No.8197/SPO/HQ, dated 15.07.1994, Ex.B6 and when there are lot of complaints of leakage of joints in tubes supplied by the plaintiff, the plaintiff’s representative visited some of the Depots but the complaints remained the same, as no improvement was found in view of supplies as well as in quality on complaint of joint leakage of tubes. In response to the letter, dated 15.07.1994, addressed by defendant No.2, the plaintiff addressed a letter, dated 27.07.1994 under Ex.B7 agreeing to replace the entire lot of rejected tubes and promised to take all precautionary measures in their factory to improve the system. The joint inspection of defective tubes was not carried out by the representative of the firm in all the depots and no request from the firm was made for replacement of defective tubes. When the firm abandoned the joint inspection, the bank guarantee was invoked, for which the plaintiff came forward to supply 400 number of tubes free of cost and agreed to pay the penalty of Rs.1.5 lakhs and to withdraw the suit filed by them. In para 31 of the written statement, it is stated that the payments amounting to Rs.5.6 lakhs were pending but the claim amounting to Rs.29 lakhs which were also pointed out by A.G. (Audit) Haryana was pending to be settled by the plaintiff firm. During the agreement, no discussions were held between the Transport Commissioner and the firm representatives regarding release of pending payments. The plaintiff issued notice under Section 80 of CPC, dated 15.06.1997, for release of the pending payments, for which a suitable reply was also given on 22.08.1997 and no reply has been received by the defendants. Since there is no cause of action for filing the suit, defendants prayed for dismissal of the suit. 4. On the basis of the above pleadings, the following issues were settled for trial:- i) Whether this Court has jurisdiction to try the suit? ii) Whether the suit is barred by limitation? iii) Where and when the contract between the parties in respect of the suit subject matter is concluded? iv) Whether the plaintiff fulfilled all his contractual obligations casted upon them in supply of the material as per the terms and conditions of the supply order in question? v) Whether the plaintiff is entitled to the amount of Rs.7,10,983.21 ps. towards costs of the tubes supplied? vi) Whether the plaintiff is entitled for interest at 18% per annum? vii) Whether the defendants committed breach of agreement? viii) Whether the plaintiff is entitled for the lost profits, damages and also for refund of the costs of the tubes supplied to the defendants under the agreement and the amount paid with interest at 24% per annum and also the expenditure incurred for correspondence and visits? ix) To what relief? 5. To prove the case of the plaintiff, the Managing Director of the plaintiff firm was examined as P.W.1 and got marked Exs.A1 to A7. On behalf of defendants, the Deputy Transport Controller was examined as D.W1 and got marked Exs.B1 to B5. 6. Learned trial court by the impugned judgment held that the Courts at Rajahmundry will have jurisdiction to try the suit and that the suit is not barred by limitation and accordingly, answered issue Nos.1 and 2 in favour of the plaintiff. In view of discussion in issue No.1, issue No.3 was also answered in favour of the plaintiff. On issue Nos.5 and 6 without any discussion with regard to the oral and documentary evidence, it was answered in favour of the plaintiff. On issue No.9, it was held that the plaintiff is entitled to recover the cost of the tubes at Rs.7,01,189.12 ps; interest at 18% per annum on such amount which comes to Rs.6,67,769.92 ps.; plaintiff is also entitled to the cost of 400 number of tubes at Rs.500/- per tube at Rs.2,00,000/-; for return of Rs.1,50,000/- as claimed with interest at 18% per annum which works out to Rs.2,59,899/-; that the plaintiff is also entitled to the loss of profits at Rs.5,00,000/- only; and Rs.1,00,580/- towards loss sutained by the plaintiff for locking up of the bank guarantee. Accordingly, the trial court decreed the suit of the plaintiff partly to a tune of Rs.24,29,438/-. Aggrieved by the same, the present appeal by the defendants and the cross-objections with condone delay petition by the plaintiff. 7. Sri A.Veera Swamy, learned counsel for the appellants/defendants contends that once the suit filed by the plaintiff for permanent injunction to restrain the defendants from invoking the bank guarantee was dismissed as settled, the suit amount is to be adjusted outside the court and the present suit, in the absence of any leave granted under Order XXIII CPC, is not maintainable. When the supply orders are placed from Haryana and the tubes were supplied at Haryana, the Courts at Rajahmundry will not have jurisdiction to try the suit. When the proposal made by the plaintiff in response to the letter of the defendants, dated 25.03.1996, has been accepted and the plaintiff supplied 400 number of tubes free of cost and deposited Rs.1.5 lakhs towards penalty by bank drafts and withdrawn the suit unconditionally and the defendants released the bank guarantees as agreed for the proposal made by the defendants, unless the plaintiff submits the invoices for the amounts due as agreed to be released, the plaintiff is not entitled to the suit amount. The demand draft, which was lost in transit as per Ex.A27 letter, is nothing to do with the present purchase orders, which is not the subject matter of the suit, but the same relates to the earlier transactions and hence, the same cannot be included in the suit claim. Therefore, the finding of the trial court on issue Nos.5 and 6 is erroneous and the defendants never accepted about the entitlement of the plaintiff to a tune of Rs.7,01,189.12 ps. Even as per the letter of the plaintiff, dated 19.12.1996, under Ex.A20 the total amounts to be paid by the defendants is only Rs.6,01,198.59 ps. intimating about the dispatch of 400 number of tubes free of cost; sending of Rs.1.50 lakhs by way of demand draft and also about withdrawing of the civil suit viz., O.S.No.1056 of 1994 and requested to pay the suit amount. To the said notice, a reply has been made calling upon the plaintiff to supply the copy of the documents in support of the claim, but they were never supplied. Hence, the defendants are not liable for the amounts due under two supply orders. The suit filed by the plaintiff in March, 1998 with regard to the transaction for supply of the tubes relating to the year 1994, is barred by limitation and hence, the plaintiff is not entitled to the suit claim. 8. Per contra, Sri Dhanunjay, learned counsel for the respondent/plaintiff tried to sustain the judgment contending that under Exs.A10 and A11, the Transport Commissioner accepted to release the payments due to the plaintiff and issued instructions to the various depots for preparation of the drafts for the balance payments due. Therefore, the suit is well within the time from the date of acknowledgment of the dues payable to the plaintiff. Under Ex.A3, the amounts were specified with invoices and the same has not been contravened nor any rebuttal evidence has been adduced by the defendants to show that the amounts due under the said invoices were paid. In the absence of the same, the trial court rightly decreed the suit for the amounts claimed under Ex.A3. On supplying of 400 number of tubes and paying penalty of Rs.1.5 lakhs, the defendants failed to place the supply orders with the plaintiff. In the process, the plaintiff sustained business loss, which has to be compensated by the defendants. Due to the withholding of the bank guarantees, the bank charged interest for the plaintiff and the same has to be reimbursed by the defendants. In view of the same, the trial court is justified in decreeing the suit for the amounts claimed by the plaintiff, which needs no interference. 9. In the light of the above submissions, the points that arise for consideration in this appeal are: i) Whether the plaintiff established the amounts due by the defendants to a tune of Rs.7,01,189.12 ps. for the supply of the tubes made by it or not? ii) Whether the plaintiff is entitled to recover the cost of 400 number of tubes and the amount of Rs.1.5 lakhs towards penalty as agreed by the plaintiff? iii) Whether the plaintiff is entitled to loss of profit and other losses towards locking up of the bank guarantee or not? 10. Though it was strenuously contended that the Courts at Rajahmundry will not have jurisdiction to try the suit, the learned counsel for the appellants failed to substantiate the said plea. Further, it is not disputed that the orders were placed by defendant No.2 with the plaintiff’s office situated at Rajahmundry and the plaintiff also supplied the goods which were received by the defendants. When the contract is concluded at Rajahmundry and the supplies were made from Rajahmundry, a part of cause of action arose and in view of Section 20(c) of CPC, the Courts at Rajahmundry will have jurisdiction. The trial court on issue No.1 rightly held that the courts at Rajahmundry will have jurisdiction to try the suit. POINT No.1:- 11. Admittedly, the plaintiff claim the said amounts as per the supply order placed by the defendants and the supplies made by it under various invoices i.e., 17,000 tubes under Ex.A1 and 6000 tubes under Ex.A2 and supplies made by it to various depots at Haryana. It is specifically pleaded in the plaint at para 9 that the plaintiff supplied several thousands of tubes to various depots of defendant No.2 on various dates as per annexure-III, but curiously no such annexure has been enclosed along with the plaint to substantiate the said supplies made by it. Under Ex.B7, the plaintiff addressed a letter to defendant No.2 on 27.07.1994 stating that from annexure-I, the plaintiff supplied the entire quantity of 5,700 tubes and in addition they have supplied 280 tubes at concessional tariff. Under Ex.A1-supply order placed by the defendants on 05.01.1994, supplies have to be made upto June, 1994. In the said supply order, the plaintiff was called upon to supply 17,000 tubes at Rs.335.61 ps. per tube and out of the same, 5,700 number of tubes against concessional Excise duty at Rs.75/-each have to be supplied in the month of April and May, 1994. The balance 11,300 number of tubes should be supplied at full Excise duty i.e., Rs.150/- per tube. As per the delivery schedules and terms and conditions, condition No.6 stipulates supply of 5700 number of tubes. Accordingly, the plaintiff supplied entire quantity of 5700 number of tubes and in addition they have supplied 280 number of tubes at concessional tariff and thereby, the plaintiff has fulfilled its commitment by complying the same. Further, in Ex.B7 it is stated that so far they have supplied 15,580 number of tubes against the ordered quantity of 17,000, leaving balance of 1,420 tubes, which is being dispatched in a couple of days so as on 27.07.1994. But the said tubes have not been supplied. Further in the said letter it is stated that against the fresh order of 6,000 tubes, they are starting dispatches with no further delay within a week. It is also admitted in the said letter that some of the majority of the tubes are failing due to service abuse or wrong procedures followed at the time of fitment. Some of them of course are found to be manufacturing defects. However, the plaintiff decided to replace entire lot of rejected tubes in view of the fact that the Haryana Roadways has been a very important customer to their company. 12. The defendants served a notice on 25.08.1994 under Ex.B8 to the plaintiff, informing it that there are regular complaints for the products supplied by it and pointing out the defects, to be replied by 01.09.1994 as to why supplies against the pending orders should not be cancelled and invoke the bank guarantee lying with their office for the bad quality of Butyle tubes supplied to Haryana Road Ways. Thereby, the Plaintiff filed suit O.S.No.1054 of 1996 to restrain the defendants from invoking the bank guarantee in view of the service of notice under Ex.B8. Thereafter the plaintiff addressed a letter, dated 15.03.1996, to defendant No.2 for settlement of their dispute amicably to mutual satisfaction and offering to settle the dispute by supplying 400 number of tubes at free of cost and paying Rs.1.5 lakhs as total penalty. In response to the same, defendant No.2 addressed a letter, dated 25.03.1996, accepting the offer of the plaintiff and to withdraw the suit filed by the plaintiff. Even under Ex.B18, dated 06.04.1996, in response to the letter dated 25.03.1996, the plaintiff agreed to deposit Rs.1.5 lakhs by bank draft as total penalty but they have to take Rs.7,10,982.61 ps. towards their payments from the various depots of the defendants and enclosed a detailed statement of payment due under the depots with a request to instruct the concerned depots to release the payments, followed by another letter from the plaintiff on 03.04.1996. Further under the letter, dated 03.04.1996, it was mentioned that approximately an amount of Rs.7.5 lakhs is pending with defendants depots and called upon the defendants to deduct Rs.1.5 lakhs from the same and make the remaining payment to them, while agreeing to supply 400 number of tubes. In the said letter, it is stated that since the total outstanding pending to the plaintiff is above Rs.7.00 lakhs and total liability works out to total Rs.3.5 lakhs that is approximately Rs.2.00 lakhs for 400 number of tubes, the plaintiff requested to release its Bank guarantee. 12. Further, the pending bills of Haryana Roadways mentioned under Ex.A3 for Rs.7,10,983.21 ps. includes Rs.1,09,784.40 ps., which was due under the earlier supply made on 03.11.1993, the same cannot be included in the suit claim as the said amounts are nothing to do with the purchase orders made under Ex.A1 and A2, whereas P.W.1 in his evidence stated that they have supplied 17,000 tubes to defendant No.2, which is contrary to Ex.B7. Further, the plaintiff admitted that they have already received the price amount for 3,000 tubes supplied to defendant No.2 and defendant No.2 fell due a sum of Rs.7,10,983.21 ps. for the goods supplied under the order under Ex.A1 and A2. The plaintiff is under obligation to supply 3000 tubes before June, 1994 and the balance 3,000 only in November, 1994. Unless the plaintiff establishes that the said supplies were made in advance or after the contract is terminated, the plaintiff cannot claim the said amount for the future transaction or for the past transaction. Further, Ex.A3 was marked subject to proof and relevancy. P.W.1 in the cross-examination admitted that they maintain the company accounts during the regular course of their business transaction. On the basis of its account books transaction, it has claimed certain amounts as pleaded in the plaint against the defendants. Whereas under Ex.A3, it is stated that the original statement of account was hand written on a white paper without any signature and was dated 07.12.1994 and was in a dilapidated condition and hence, it typed the same as it is in that sheet. Therefore, Ex.A3, which was prepared on the basis of the account books transaction, claiming the said amounts is contrary to the admission made by P.W.1 in the cross-examination and hence, no credence can be given to Ex.A3 about the amounts due as claimed by the plaintiff. Even as per the own admission of P.W.1, he typed the same and submitted the same. P.W.1 further admitted that they have not filed the account books given to the authorities in the suit showing the transactions with the defendants. In the cross-examination he admitted that defendant No.2 placed purchase order on 08.12.1992 for 30,000 tubes, on 05.01.1994 for 17000 tubes, and on 24.05.1994 for 6000 tubes and the validity of the purchase order under Ex.A1 is upto the end of June, 1994. He admitted as per annexure under Ex.A2, plaintiff has to supply 3000 tubes by June, 1994 and another 3000 by November, 1994. The suit filed for recovery of the amounts against the defendants pertains to the supply orders made under Exs.A1 and A2. He admitted that Ex.A27 relates to the earlier order of supply of goods, but not to the suit transaction under Ex.A1 and A2 supply orders; that as per Ex.B18, the plaintiff claimed a sum of Rs.7,10,982.61 ps. towards due by the defendants, which is correct. Further, D.W.1 also in his evidence stated that prior to Ex.A1, the plaintiff has supplied 30,000 tubes to defendant No.2. P.W.1 further admitted that the amounts claimed by him under Ex.B25 and the amount shown under Ex.A27 are clubbed together and the amount claimed by him earlier to a tune of Rs.7,10,982.61/- are all correct inclusive of missing draft. When the plaintiff has not pleaded specifically about the amounts due under various invoices in its pleading nor the so called annexure-III, which does not bear the date, is enclosed to substantiate the supplies made on which the present claim of Rs.7,01,189.12 ps is made, the lower court fell in