IN THE HIGH COURT OF JUDICATURE AT MADRAS Date : 06-11-2009 Coram: The Honble Mr. Justice S.TAMILVANAN C.S.No.109 of 2001 Unique Industrial Hanlders Pvt., Ltd., Rep. by its Regional Director J.Ramachandran 206, Nahar & Seth Ind. Estate Chakala, Andheri (East) Mumbai  400 099.  Plaintiff Vs. 1. The Chairman Tamil Nadu Electricity Board, 6th Floor, Eastern Wing, N.P.K.R.R. Maaligai, 800, Anna Salai, Chennai  600 002. 2. The Manager Canara Bank, 348/352, Abdul Rahman Street, Mumbai  400 003.  Defendants Suit filed under Order VII Rule 1 CPC read with Order IV Rule 1 of High Court Original Side Rules. For plaintiff :: Mr.S.Rajasekar For defendant :: Mr.N. Muthuswami for D1 for TNEB Mr.K.R.A.Muthukrishnan for D2 J U D G M E N T The suit has been filed by the plaintiff seeking a money decree against the first defendant for a sum of Rs.20,02,847/- to be paid with interest at 18% p.a., from the date of the plaint till the date of realisation and for other consequential reliefs. 2. The brief plaint averments : (i) The plaintiff, a private limited company, incorporated under the Indian Companies Act, 1956 is a leading manufacturer of Electrically Operated Overhead Traveling (EOT) Cranes in India and abroad. The first defendant herein invited sealed tenders for manufacture, supply, erection, testing and commissioning of one number 125/25T EOT crane for underground Pykara Ultimate Stage Hydro Electric Project at Masinagudi in the Nilgris District. The plaintiff submitted its offer on 13.09.1996 together with the Earnest Money Deposit of Rs.2,00,000/-. The first defendant accepted the offer and issued purchase order, dated 25/31.03.1997. As per the terms of the purchase order, the plaintiff has to manufacture the EOT crane, as per the specification, deliver the equipment and complete the erection, testing and commissioning of the crane at the project site. The delivery schedule as contained in Clause 7 of the purchase order is as follows : "7.Delivery : The delivery of equipments covered by the purchase order shall be completed within 8 months from the date of receipt of purchase order. The EOT crane is required for erection of the generating machinery. Hence, the delivery may be advanced so as to make in 4 months from the date of approval of drawings. However, for the purpose of levy of liquidated damages the delivery period of 8 months quoted in the tender will be applicable." (ii) According to the plaintiff, the general arrangement drawing / calculations was required for the manufacture of the capital equipment vide its letter, dated 29.04.1997 for the approval of the first defendant and in the said letter, a request was also made to forward the gantry girder details, column with spacing details etc., so as to enable the plaintiff to design the gantry rails and down shop leads system. A reminder to the said letter was also sent on 29.05.1997. The plaintiff carried out the necessary revisions in the general agreement drawing vide its letter, dated 30.07.1997 for the approval of the first defendant and the same was followed by a reminder through fax only on 16.09.1997. Accordingly, the first defendant took nearly five months to approve the general arrangement drawings, which ultimately delayed the production of EOT cranes. (iii) The project involved in transportation of heavy over dimensional consignments through hilly areas having maximum hairpin curves. The plaintiff, as early as on 14.08.1997 sought for clearance from the first defendant to provide joints in girders and trolleys, in order to facilitate smooth transportation. The first defendant gave the clearance only on 03.10.1997. The plaintiff commenced with the fabrication work of the structural parts, namely girders and trolley frame and the EOT crane was placed in the test bay at the plaintiff's factory in Nasik on 30.01.1998 and immediately intimation was sent to the first defendant to facilitate inspection and witness load test as required under the terms of the purchase order. After a delay of one month, the Executive Engineer of the first defendant Board inspected the plaintiff's factory on 26.02.1998 and confirmed that the performance of the subject crane is in order. The first defendant vide its letter, dated 14.03.1998 informed the plaintiff about the acceptance of the inspection report of the Assistant Executive Engineer and requested the plaintiff to despatch the EOT crane to Masinagudi. The plaintiff, after dismantling the crane consisting of the girders, platform support, "I" Beam, Trolley, Electricals etc., despatched the same on 27.03.1998 in knocked-down condition by road through M/s. Nasik Transport Corporation & Hariyana Freight Carriers. The consignment reached the destination on 27.04.1998 and as per the instructions of the first defendant, the EOT crane was unloaded at the project stores in Masinagudi, since the site / building in which the EOT crane has to be erected was not ready. (iv) The plaintiff after effecting the supply of cranes raised Invoice No.138, dated 27.03.1998 for a sum of Rs.90,83,121/-, inclusive of 13% excise duty amounting to Rs.10,04,770/- and C.S.T at 4% amounting to Rs.3,49,351/-. The plaintiff also raised another invoice bearing No.004, dated 17.04.1998 for a sum of Rs.3,25,000/- towards transportation and insurance. Though the first defendant was responsible for the delay in effecting the supply of the crane, it treated the delivery of the crane as beyond the period of contract and released only 90% of the Ex-works price of the crane and a portion of the excise duty and CST, apart from the cost of transportation and insurance, amounting to Rs.83,70,166/-, vide its Cheque, dated 02.06.1998 and retained a sum of Rs.10,37,995/- payable under the said invoices. (v) According to the plaintiff, the cause of action for the suit arose at Chennai, when the first defendant invited tenders, on 13.09.1996 when the plaintiff submitted its offer with the Earnest Money Deposit, on 25/31.03.1997 when the first defendant issued a purchase order, dated 29.04.1997 when the plaintiff submitted its general arrangement drawing, on 30.07.1997 when the first defendant forwarded a revised general arrangement drawing, on 19.07.1997 when the first defendant approved the revised general arrangement drawing, on 03.10.1997 when the first defendant gave its clearance, on 14.03.1998 when the first defendant accepted the Inspection Report, on 26.03.1998 when the plaintiff furnished a Guarantee Certificate, on 27.03.1998 when the plaintiff despatched the equipment, on 27.03.1998 and 17.04.1998 when the plaintiff raised Invoices, on 27.04.1998 when the consignment reached the project site at Masinagudi, on 02.06.1998 when the first defendant made part payment of the amount payable under the Invoices, by way of cheque. According to the plaintiff, the delay was caused only by the first defendant and as per the contract entered into between the plaintiff and the defendants, an amount of Rs.20,02,847/- with interest was payable by the first defendant to the plaintiff and the first defendant bank has to return the bank guarantee given by the second defendant bank to the plaintiff, after having duly cancelled, hence, the second defendant is added as necessary party in the suit. With the above pleadings, the plaintiff has filed the suit, seeking the relief stated above. 3. The brief averments of the written statement filed by the first defendant : (i) According to the first defendant, Tamil Nadu Electricity Board had invited sealed tenders for the manufacture, supply, erection, testing and commission of one Electrically Operated Traveling (EOT) crane (No.125/25T) for underground Pykara Ultimate Stage Hydro Electric Project at Masinagudi in Nilgris District. Since the lowest offer was made by the plaintiff, order was placed on them for supply, erection, testing and commissioning of one number 125/25T Indoor Electricaly Operated Traveling (EOT) Crane of Span 13.75 metre at the prices stated below : 1. EOT Crane inclusive of cost of main tools : Rs.84,94,304.00 2. Spares : Rs. 6,67,368.00 3. Erection, testing and commission of cranes : Rs. 4,53,000.00 ------------------------ Total : Rs.96,14,672.00 ----------------------- The purchase order indicating the above price with the first defendant's terms and conditions was issued to the plaintiff by letter, dated 25/31.03.1997. (ii) Clause 7 of the purchase order states that the delivery of equipment covered by the purchase order shall be completed within 8 months from the date of receipt of purchaser order. The Electrically Operated Traveling (EOT) Crane is required for erection of the generating machinery. As per the clause, the plaintiff company has to supply the equipments before 30.11.1997, 8 months from the date of purchase order, dated 31.03.1997. The plaintiff company by letter, dated 29.04.1997 sent General Arrangement Drawings for approval of the first defendant. After getting the reports from the field and Central Water Commission (CWC), Govt. of India (GOI), New Delhi, who is the consultant for this project, the first defendant informed the plaintiff company by letter, dated 19.07.1997 that the General Arrangement Drawing was generally in order and with other remarks. It was also informed that it is the supplier's responsibility to supply materials as per the specification of the first defendant. The plaintiff company complied with the remarks of the first defendant contained in the letter dated 19.07.1997 and resubmitted the General Arrangement Drawing on 30.07.1997. After getting the fields report for the revised drawings, the approval of General Arrangements Drawing was communicated on 18.09.1997. The plaintiff company by its letter dated 14.08.1997 requested suggestion of any other alternate route to the site for transporting the crane, for which the first defendant replied the plaintiff company on 25.09.1997 to inspect the route and the bridge at Theppakadu, Nilgris District before despatching the materials. The plaintiff company issued inspection report dated 20.01.1998 to the first defendant stating that the crane will be fully ready by 24.07.1998. Accordingly, it took 4 months time to give inspection call. AS per the purchase order, the plaintiff company have to deliver the Electrically Operated Traveling (EOT) Crane at least by 18.01.1998 within 4 months from the date of approval of drawing, dated 18.09.1997. (iii) The first defendant immediately made arrangement to depute their field official to the plaintiff's factory at Nasik. Meanwhile the plaintiff company sent a letter, dated 11.02.1998 to the first defendant requesting the exact date of Board's representative visit for inspection. After getting necessary clearance for inspection from competent authorities, the officer of the Board inspected the equipment at plaintiff company premises at Nasik on 26.02.1998. After the inspection, the first defendant by letter, dated 14.03.1998 issued despatch clearance to the plaintiff company for Electrically Operated Traveling (EOT) Crane with pendent control to Masinagudi. After despatching the EOT Crane, the plaintiff company enclosed Excise duty Gate pass cum invoice bearing No.138, dated 27.03.1998 for full value amount Rs.90,83,121/- by letter, dated 30.03.1998. In the above letter, the plaintiff informed that 90%, being claimed with full taxes and duties amounts to Rs.83.10 lakhs. Before delivering the materials, the plaintiff company by letter, dated 16.04.1998 addressed the first defendant, TNEB requesting to extend the delivery period without imposing liquidated damages and that the plaintiff has accepted that the materials are being delivered belatedly. The equipments were delivered on 21.04.1998, subsequently, the plaintiff issued guarantee certificate for the 125/25T capacity indoor crane supplied for the first defendant for PUSHEP against purchase order, dated 31.03.1997 for manufacture, delivery and unload at TNEB Central Stores, Masinagudi. (iv) According to the first defendant, the plaintiff company had taken seven months time to manufacture, transport and supply the equipments from the date of approval of the General Arrangement Drawings, dated 18.09.1997 with the pending supply of under Bridge Bulb and gear oil. The plaintiff company had failed to supply and comply with the delivery schedule, even after the approval of the General Arrangement Drawings. According to the first defendant, as per Clause 13 of the purchase order, it is the responsibility of the contractor to inform the transport condition by rail and road and arrange for the size and weight of the heaviest package of the materials. However, the plaintiff company had failed to comply with the condition of the delivery as contained in the purchase order. The plaintiff company had not taken any steps to plan transport of package. Accordingly, the plaintiff company delivered the Electrically Operated Traveling (EOT) Crane beyond the contractual date of delivery. According to the first defendant, the delay was caused only by the plaintiff and hence, the plaintiff is not entitled to claim any amount from the plaintiff. Even 90% of the value of the contract was paid by the first defendant, the balance 10% of the said amount would be released only on completion of all formalities and after deducting liquidated damages, if any for delay in supply. The first defendant has also disputed that 10% amount is at Rs.10,37,955/-. (v) According to the first defendant, the plaintiff company has to arrange security deposit of 10% of the value of contract inclusive of the Earnest Money Deposit paid at 2% of the value of the contract in cash and the balance 8% by Bank Guarantee and the Bank Guarantee is to be kept valid for the guarantee period. As per Clause 22 of the purchase order, a sum of Rs.2 lakhs was collected from the plaintiff company towards Earnest Money Deposit as part of security deposit in cash and the balance 8% of the contract value for Rs.7,61,500/- in the form of Bank Guarantee furnished by the plaintiff company, dated 26.11.1999. According to the first defendant, the plaintiff is not entitled to the suit claim as prayed for and requested the Court to dismiss the suit with costs. 4. Based on the pleadings of both the parties, the following issues are framed to decide the suit: "1. Whether the first defendant was responsible for the delay in approving the General Arrangement Drawing ? 2. Whether the ownership of the E.O.T Crane effectively got transferred in favour of the first defendant on 27.04.1998 when the same was delivered in good condition duly accepted by the first defendant ? 3. Whether the first defendant was justified in retaining a sum of Rs.10,37,955/- payable by it under Invoice No.138, dated 27.03.1998 ? 4. Whether the conduct of the first defendant in not handing over the Erection Front to the plaintiff in order to commission the E.O.T. Crane, would dis-entitle it from claiming liquidated damages ? 5. Whether the first defendant has suffered any loss on account of the overall delay of four months in effecting the supply of Crane ? 6. Whether the guarantee for satisfactory performance of equipments given by the plaintiff expired on 27.04.2000 as per the terms of the purchase order ? 7. Whether the plaintiff is entitled for a sum of Rs.20,02,847/- with interest at 18% per annum from the date of claim ? 8. Whether the plaintiff is entitled for a direction from this Court to the defendant for return of the Bank Guarantee No.98/IBG-138, dated 26.11.1998 duly cancelled by the defendant bank? 9. To what other reliefs are the parties are entitled for? " 5. Issue Nos. 1 & 2 : It is an admitted fact that the plaintiff company entered into an agreement with the first respondent for manufacture, supply, erection, testing and commissioning of EOT crane for underground Pycara Ultimate Stage Hydro Electric Project at Masinagudi in Nilgris District. The offer was submitted on 13.09.1996 together with the Earnest Money Deposit of Rs.2,00,000/-. Having accepted the offer, the first defendant issued purchase order, dated 25/31.03.1997. As per Clause 7 of the purchase order, the delivery of equipments covered by the purchase order shall be completed within 8 months from the date of receipt of the purchase order, that is on or before the end of November 1997. The EOT crane was required for erection of generating machinery. According to the plaintiff, the General Arrangement Drawing / Calculations required for the manufacture of the capital equipment was submitted vide its letter, dated 29.04.1997 for the approval of the first defendant. In the plaint, the plaintiff has admitted that there was a delay and that was not caused by the plaintiff, on the other hand, the first defendant has stated that the delay was caused only by the plaintiff herein. Though the plaintiff company had to supply the equipments before 30.11.1997 within 8 months from the date of purchase order, dated 31.03.1997, the plaintiff by letter, dated 29.04.1997 sent General Arrangement Drawing for approval of the first defendant. The plaintiff by its letter, dated 14.08.1997 requested suggestion in other alternate route for transporting the crane, for which the first defendant replied on 25.09.1997 to inspect the route and the bridge at Theppakadu, Nilgris District before discharging the materials. 6. The plaintiff, by Inspection Report, dated 20.02.1998, informed the first defendant informed that the crane would be fully ready by 24.07.1998 and accordingly, took 4 months time to give inspection call. The first defendant immediately made arrangement to depute their field official to the plaintiff factory at Nazik. By letter, dated 11.02.1998, the plaintiff company requested the first defendant, the exact date of the visit of the representative of the first defendant Board, accordingly, the representative of the first defendant inspected the equipment at the premises of the plaintiff's company at Nazik on 26.02.1998. After the inspection, by letter, dated 14.03.1998, the first defendant issued despatch clearance to the plaintiff company for the Electrically Operated Travelling (EOT) crane with pendent control to Masinagudi. 7. As per the Invoice No.138, dated 27.03.1998, enclosed by the plaintiff, the total value was Rs.90,83,121/-. The plaintiff company had taken 7 months time to manufacture, transport and supply the equipments from the date of approval of General Arrangement Drawing, dated 18.09.1997. Accordingly, the plaintiff company had failed to supply and comply with the delivery schedule, as per Clause 13 of the purchase order and it is only the responsibility of the plaintiff / contractor to inform the transport condition by rail or road. According to the first defendant, the delay was caused only due to the plaintiff and hence, the plaintiff is not entitled to claim any amount from the first defendant, however, 90% of the value of the contract was already paid by the first defendant, the balance of 10% of the said amount would be released only after completion of all formalities and after deducting liquidated damages, if any, for the delay in supply. 8. Learned counsel appearing for the plaintiff has not disputed the fact that the plaintiff is entitled to claim balance of 10% only on completion of all formalities, after the erection and installation of the crane. In the absence of complying with the work within the time limit, even after the extension of time, and without completing the entire work, the plaintiff cannot claim the balance amount of 10%, as per the terms of agreement between the parties. There is no positive evidence on the side of the plaintiff to show that the delay was caused by the first defendant and the first defendant was responsible for the delay in approving the General Arrangement Drawing. 9. It is not in dispute that the equipments of the EOT crane was properly transported, but that was not delivered on the fixed date, as per the accepted tender called for by the first defendant. The first defendant has not disputed the proper condition of the equipment of the crane and therefore, considering the oral and documentary evidence available on record, I am of the view that the plaintiff has not established that the first defendant is responsible for the delay in approving the General Arrangement Drawing, similarly, it cannot be held that the ownership of the EOT crane was effectively got transferred in favour of the first defendant on 27.04.1998, in the absence of any direct evidence, however, the equipment was subsequently delivered only nearby the site. However, the plaintiff has got 90% of the contract amount, accordingly, I answer issue numbers 1 & 2. 10. Issue Nos. 3 to 5 : According to the plaintiff, the first defendant had not handed over the erection site to the plaintiff, in order to commission the EOT Crane, which would not dis-entitle the plaintiff from claiming liquidated damages. As per letter, dated 29.04.1997, marked as Ex.P.2, the Manager- Marketing of the plaintiff company had addressed the Chief Engineer / Hydro, Chennai requesting him to return one set of drawing / calculations duly approved at the earliest, enabling the plaintiff to proceed further. Another letter, dated 29.05.1997 sent by Fax was marked as Ex.P.3. As per letter, dated 19.07.1997, marked as Ex.P.4, the Superintending Engineer / Hydro (Electrical) of the defendant addressed the plaintiff informing the plaintiff that as per Clause 22 of the POH 354, the supplier has to furnish security deposit of 10% of the value of the contract within 15 days from the date of receipt of the purchase order and informed that the plaintiff had not furnished security deposit and requested to furnish the same. Under Ex.P.6, the plaintiff informed the first defendant, the details of transportation limitations and the dimension of the largest consignment. Under Ex.P.8, dated 18.09.1997, the Superintending Engineer of the first defendant had informed that the plaintiff had to furnish bank guarantee towards security deposit before 30.09.1997 and also informed that non-compliance of the same would end in cancellation of the agreement and forfeiture of Earnest Money Deposit. Ex.P.9 is another letter sent by the first defendant, dated 14.03.1998. However, the bank guarantee was given for a sum of Rs.7,61,50/- only on 26.11.1998, as per Ex.P.12. As per Ex.P.13, the first defendant has informed regarding the averment of the guarantee clause. Under Ex.P.17, the defendant, Tamil Nadu Electricity Board, by letter, dated 22.05.2000, informed the plaintiff that the proposal towards realising of balance payment for the supply of EOT crane equipments can be finalised only on receipt of the extension of security of bank guarantee for a sum of Rs.7,61,500/- as already informed by their earlier letter. Ex.P.19 is the letter sent by the plaintiff to the defendant for payment of Rs.10,45,955/-. Ex.P.21 is the copy of the letter, dated 26.05.1999, whereby an amount of Rs.9.58 lakhs was requested to be sent by the plaintiff. 11. It is seen that under Ex.D.8, dated 23.06.1999, the first defendant informed the plaintiff that as per the terms of the Purchase Order, P.O., for materials supplied beyond the contractual delivery period, the balance payment will be realised on completion of all formalities, which means that the balance amount be released only after erection, testing and commissioning of crane. Under Ex.D.9, the plaintiff requested the defendant to extend the bank guarantee along with banker's covering letter. As per Clause 11 of the purchase order, regarding liquidated damages, if the contractor fails to deliver the equipments / materials within the time specified in the contract or any extension thereof, the purchaser shall recover the amount from the contractor, as liquidated damages, which is a sum of 0.5% of the contract price of the undelivered equipments / materials, for each calender week of the delay. It was also made clear that such damages shall not exceed 5% of the contract price of the units / materials so delayed. 12. According to the first defendant, if certain components are not delivered in time, the equipments and materials shall be considered as delayed, till the missing parts are also delivered. By way of proof affidavit, D.W.1 has stated that the total amount of damages for the delay, as per the contract shall be subject to a maximum of 10% of the total price inclusive of supervisor charges. Though 10% Ex-works price of Rs.7,69,900/- of the equipment was deducted from payment as per Clause 6.3 of purchase order, the first defendant / TNEB was preferred to release the amount due to be paid to the plaintiff company, deducting the amount towards liquidated damages to 5% of compensation and compliance of other formalities of purchase order, after getting approval of the competent authority, if the plaintiff company comes forward to extend Bank Guarantee. The first defendant has further stated that the second defendant, Canara Bank, Mumbai, in their letter, dated 23.10.2000 marked as Ex.D.17 addressed to First Defendant /