1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. Suit No.1510 of 1980 The Cotton Corporation of India Ltd. ... Plaintiffs Versus M/s.G.T.N. Textiles Limited ... Defendants Mr.Uday Bhanu Singh i/by M/s.Bhaishankar Kanga for Plaintiffs. Mr.Dipen Merchant with Mr.G. Kinkhabwalla with Ms.K.R. Daiverwala and Mr.Sandeep Goyal i/by M/s.Mulla & Mulla for Defendants. ------ CORAM : SMT.ROSHAN DALVI, J. Dated : 12 th January 2009 JUDGMENT : 1. The Plaintiffs are the canalising agents of the Government of India for import and supply of foreign cotton to several Indian Textile Mills. The Defendants carry on business of a Textile Mill. The Plaintiffs issued a circular showing the availability of certain varieties of cotton for allocation and called upon the Mills to give their offers. The Defendants' written offer of purchase of any of those varieties of cotton is not shown. It has been the Plaintiffs' case that the Defendants made the oral offer. 2. Thereafter the Plaintiffs allocated certain specified bales of 2 cotton showing the terms on which the allocation would be made. One of the terms was the acceptance of the allocation to be intimated to the Plaintiffs telephonically within 15 days of the issuance of that letter. 3. Thereafter the Plaintiffs allocated specific bills of cotton of specified type to the Defendants under a further letter. The Plaintiffs called upon the Defendants to confirm their acceptance by returning the duplicate copy of that letter duly signed by the Defendants within 2 days of the letter. The Plaintiffs have relied upon the duplicate copy of the letter. 4. Thereafter the Plaintiffs prepared a written contract to be executed by the parties. The contract was signed by the Plaintiffs and sent to the Defendants. The Defendants have produced the duplicate copy of the contract only signed by the Plaintiffs' Deputy Manager. 5. The goods were imported as per the contract. They have been shipped to India. The Plaintiffs have paid for the goods to the foreign supplier. The Plaintiffs issued their shipment advice to the Defendants and called upon the Defendants to take delivery of the goods. 6. The Defendants required the Plaintiffs to arrange for a 3 sample of the goods. The said request is in writing. The request itself shows that the sample was given. 7. The goods arrived in India. The Plaintiffs sent a telegram to the Defendants to inform the mode of payment, the name of their clearing agent, to obtain their sub- licence and forward the documents for clearance of the goods. 8. The Defendants have written to the Plaintiffs expressing surprise at the contract. They have stated that they have not entered into any firm contract with the Plaintiffs and have not applied for import licence. They have also mentioned about certain labour disputes and that they would not be able to consume that cotton as they dealt with fine and super fine cotton. By a further letter, they informed the Plaintiffs that they had not requested the Plaintiffs to allot the cotton to them and that cotton imported would be of no use of them. 9. The Plaintiffs sent the Defendants their legal notice which the Defendants replied. Since the Defendants did not take delivery of the goods, the Plaintiffs arranged for taking delivery through their clearing agents. The Plaintiffs have paid their clearing agents for clearing the goods. The Plaintiffs have incurred various charges at the docks under 4 the shipping documents produced by the Plaintiffs. 10. It has been the Plaintiffs' case that there has been a firm contract between the parties and that the Defendants are bound by the contract. The contract was for import of 255 bales of Sudan cotton payable at the rate of Rs.5150/- per candy. 11. The Plaintiffs claim damages for the breach of the contract by the Defendants on the ground of non- acceptance of the goods delivered as per the contract. The Plaintiffs also claim the charges incurred upon clearance by the plaintiffs, the carrying charges incurred for the storage of the goods and the loss suffered by the Plaintiffs for the non- acceptance of the goods by the Defendants taking into account the mitigation of the damages upon the sale by the Plaintiffs of those bales of cotton to third parties. 12. The Plaintiffs have relied upon certain other contracts entered into by and between the parties which are also similarly signed by the Plaintiffs alone and not by the Defendants. 13. It is the Defendants' case that there was no firm contract between the parties. The Defendants contend that the 5 Defendants have neither orally nor in writing accepted the Plaintiffs' offer. They only asked for the sample of the goods stated to have been shipped to India on their account under the Plaintiffs' allotment letter though the contract between the parties was not signed by them. It is their case that they may have considered purchasing the cotton if it fitted their requirements to accommodate the Plaintiffs, but since it was not found suitable, they could not do so. They, therefore, claim that they are not liable in damages for the payment of the shipping charges, carrying charges or loss suffered by the Plaintiffs upon the non- acceptance of the goods by the Defendants. 14. Based upon these pleadings, Justice D.K. Deshmukh framed the following issues which are answered as follows:- ISSUES (1) Whether the present Suit is within limitation. - YES (2) Whether it is proved that there was no concluded contract between the Plaintiffs and the Defendants.- YES. (3) Whether the Defendants have breached the said contract. - DOES NOT COME UP FOR CONSIDERATION. 6 (4) Whether it is proved that the Plaintiffs have not suffered any losses due to breach of contract by the Defendants. - DOES NOT COME UP FOR CONSIDERATION. (5) Whether the Plaintiffs are entitled to adjust the sum of Rs.25,928.14 due to the Defendants against the present claim. - DOES NOT COME UP FOR CONSIDERATION. (6) What reliefs? - AS PER FINAL ORDER. 15. The parties have filed their Affidavit of documents. Certain documents are common being the written contract dated 12th May 1977, the letter of allocation of imported cotton dated 18 th May 1977, the shipment advice dated 19 th August 1977 and the correspondence that ensued between the parties thereafter. The Plaintiffs' witness has led evidence of their Legal Advisor who has been examined as P.W.1. Though the witness has been extensively cross- examined, a large chunk of the evidence may not be required to be considered in view of the consideration of the contract, if any, between the parties. 16. It would be material to first see whether there has been a firm contract between the parties for the breach of which damages are claimed by the Plaintiffs. Only if the contract is proved to have been executed by the Plaintiffs, the question 7 of breach would arise and the determination of damages would come up for consideration. If the contract between the parties is not proved, no further considerations would arise. 17. Issue No.(1) – The initial circular of the Plaintiffs is dated 5 th April 1977, Exhibit- A in evidence. Pursuant to the circular, the Defendants are stated to have made their offer orally. It is the Plaintiffs' case that the Defendants ordered 1000 bales of Sudan cotton orally. The Plaintiffs have allocated the cotton under their allocation letter dated 2nd June 1977, Exhibit- B in evidence. The parties are stated to have entered into a contract dated 12 th May 1977, Exhibit- D in evidence. The Plaintiffs' further letter showing 3 types of cotton was sent on 18 th May 1977, Exhibit- C in evidence. The goods having been shipped. The shipment advice has been sent by the Plaintiffs on 19 th August 1977, Exhibit- E in evidence. The Plaintiffs had acted upon the contract claimed to have been entered into by and between the parties under the said shipment advice. The Defendants asked for a sample of Sudan cotton on 23 rd August 1977 under their letter, Exhibit- F in evidence. The Plaintiffs asked the Defendants to clear the goods under their telegram dated 5th September 1977. The Defendants expressed surprise, refuted the contract itself and refused to take delivery under 8 their letters dated 29 th August 1977, Exhibits H and I in evidence. It is upon such refusal that a Suit was filed on 27 th August 1980. The Suit is filed within 3 years of the refusal by the Defendants to perform the contract claimed to have been entered into by the parties. The Suit is, therefore, within time. Issue No.(1) is, therefore, answered in the affirmative. 18. Issue No.(2) - Since the Defendants have disputed that there was any firm contract between the parties it is for the Plaintiffs to prove the contract. The contract may be oral, written or implied. It has to be offered by one party and accepted by the other. The acceptance may be oral, written or by performance. 19. The initial circular of the Plaintiffs dated 5th April 1977, Exhibit- A, is an invitation to offer. It is sent to all the Mills. The Mills are informed that limited quantity of imported cotton was available for allocation. 3 varieties of cotton are set out against their prices. The Mills were requested to approach the Plaintiffs before 20 th April 1977 for registering their demand. The allocation was to be communicated to the Mills on the basis of the supplies of cotton. The Mills were to give a Bank Guarantee calculated at the rate of Rs.600/- per bale and to send their application for subsidiary import 9 licence along with the Bank Guarantee to the Plaintiffs. The format of the Bank Guarantee was printed on the reverse of the circular. Of course, the Bank Guarantee would have to be executed only upon the specified bales allocated by the Plaintiffs and not upon the Defendants registering their demand. 20.The evidence of the Plaintiffs' witness is that the Defendants registered their demand orally. That was for 1000 bales of Sudan cotton. The Plaintiffs have relied upon and produced the written contract dated 12 th May 1977, Exhibit- D in evidence, upon it is proved by direct evidence. The contract is for 255 bales of Sudan cotton type BARON R.G. at the rate of Rs.5150/- per candy for the June and July shipment. The evidence of the witness shows that the original contract was duly signed and sent to the Defendants. The Plaintiffs had the carbon copy which is the duplicate contract. That has been marked Exhibit- D in evidence. It shows the signature of the Plaintiffs' Deputy Manager (IMP). It is on a cyclostyled paper. It shows the name of the Defendants. It bears No.G-640. It is dated 12 th May 1977. The Defendants have relied upon and produced as part of their compilation of original documents the original contract dated 12 th May 1977. The original contract has remained with the Defendants. It has not been marked in evidence since it has 10 not been executed by the Defendants and sent to the Plaintiffs. The direct evidence with regard to the execution of the contract has remained at that. The carbon copy of the agreement which is the duplicate contract is marked Exhibit- D showing the execution by only one of the contracting parties. Hence it is clear that there is no written contract between the parties. 21. After 12 th May 1977, the date shown in the contract, the Plaintiffs are shown to have sent their letter dated 18th May 1977 to the Defendants. That letter is stated to be the allocation of imported cotton against the Plaintiffs' circular dated 5 th April 1977. The Plaintiffs have produced the duplicate copy of that letter also. That letter is not for only 255 bales of cotton mentioned in the written contract but it is for 255 bales plus 153 bales plus 592 bales of two other types of cotton. It is not known how more than a month after the contract between the parties was sought to be executed, the Plaintiffs allocated not only the bales mentioned in the contract but also further bales of other types of contract. The Plaintiffs have sought to produce that letter also by direct evidence of P.W.1. The duplicate copy, which has been marked Exhibit- C in evidence, is shown to be signed by the Assistant Manager of the Plaintiffs one Mr.C.S . Thaker. It is marked Office Copy (O.C.). 11 22. P.W.1 has led evidence in paragraph 6 of the examination- in-chief about this letter. It is his evidence that despite the Defendants' initial information that they were desirous of purchasing 1000 bales of cotton, they later informed the Plaintiffs that they were in need of 255 bales and not 1000 bales as earlier communicated. The Plaintiffs had informed the Defendants in their letter dated 18 th May 1977 that they had booked 1000 bales of Sudan cotton for the Defendants. The Plaintiffs' witness tendered the copy of the letter dated 18 th May 1977 sent to the Defendants which came to be marked Exhibit- C. The letter dated 18 th May 1977 required the Defendants to confirm their acceptance of the 1000 bales mentioned in the letter by returning the duplicate copy of the letter duly signed by them to the Plaintiffs. The Plaintiffs have led no evidence to show how the duplicate copy has been confirmed and sent by the Defendants. There is an illegible signature on the duplicate copy of the letter dated 18 th May 1977, Exhibit- C in evidence. No evidence is led with regard to that signature. The confirmation of the Defendants is also, therefore, not seen. 23. It is the evidence of P.W.1 in paragraph 7 of the examination- in-chief that in response to the letter dated 18th May 1977, the Defendants informed the Plaintiffs that they 12 were in need of 255 bales of Sudan cotton over the telephone and after such “communication by the Defendants ” the Plaintiffs had sent the standard form of contract to the Defendants being Contract No.G-640 dated 12 th May 1977. It is inconceivable how after receiving the communication upon the letter dated 18 th May 1977 a contract dated 12 th May 1977 could have been sent by the Plaintiffs to the Defendants for execution. 24. It is also the evidence of the Plaintiffs that upon the circular the Defendants telephonically informed the Plaintiffs and placed their offer of 1000 bales of Sudan cotton which was communicated to the Textile Commissioner of Bombay by the Plaintiffs. The Textile Commissioner allotted 255 bales of Sudan cotton. (The averment in paragraph 9 of the Plaint is that the Plaintiffs allotted 255 bales of Sudan cotton to the Defendants as the Defendants were not interested in taking the other varieties of cotton.) The written contract itself sent by the Plaintiffs to the Defendants in the prescribed form is dated 12 th May 1977. Hence the Plaintiffs must be taken to have known by then that 255 bales of cotton were to be supplied to the Defendants. In that case, it is inconceivable how the Textile Commissioner could have allotted 255 bales as late as on 2 nd June 1977. Be that as it may, the initial allocation dated 18 th May 1977 is not shown to be confirmed 13 by the Defendants evidencing their acceptance of the contract. The written contract dated 12 th May 1977 is not even signed by the Defendants. 25. It may be mentioned that though there is no contract in writing, the Defendants could have accepted the contract by performance. The Plaintiffs must at- least show that there was implied contract between the parties accepted by performance. It has been the Plaintiffs' evidence that though the written contract was signed and sent to the Defendants, the Defendants, as per the usual practice, may not return the contract duly signed by them to the Plaintiffs. The oral evidence has set out the usual practice that prevailed between the parties. The practice appears to be of placing the offer telephonically as per the evidence in paragraph 5 of the examination- in-chief. The very acceptance is stated to be oral. That oral acceptance is, therefore, required to be substantiated. The Plaintiffs must, therefore, show at- least by circumstantial evidence, how the contract was entered into between the parties. The Plaintiffs have not shown absolutely anything to suggest that after the contract was accepted by the Defendants and the acceptance was communicated to the Plaintiffs, the Plaintiffs called upon the Defendants to honour the contract. 14 26. The goods were shipped purportedly upon the contract between the parties. In the shipment 231 bales arrived at the Cochin Port from Sudan. The Plaintiffs sent the shipment advice to the Defendants dated 19.8.1977. The Plaintiffs have produced the duplicate shipment advice. The Defendants have produced the original shipment advice. 27. The Plaintiffs have produced a letter dated 23 rd August 1977 sent by the Defendants to the Plaintiffs requesting the Plaintiffs to hand over to the bearer of the Defendants a sample of Sudan cotton Baron type. It is argued on behalf of the Plaintiffs that this was sent because there was a firm contract between the parties and so soon as the goods were shipped and the shipment advice was sent to the Defendants, the Defendants asked for the sample of the cotton. The sample was given on that date by the Plaintiffs. Aside from the said letter, there is nothing to show that the Defendants have entered into any contract with the Plaintiffs. It has been the case of the Defendants in paragraph 15 of their Written Statement as well as the case put to the Plaintiffs that they asked for the sample only to see the suitability of the cotton and if found suitable, they could have considered purchasing it purely to accommodate the Plaintiffs. Since the sample was found not suitable for use by the Defendants, the Defendants informed the 15 Plaintiffs that they would not take delivery of the cotton not specifically contracted for. 28. Reliance by the Plaintiffs upon the letter dated 23rd August 1977 by the Defendants by way of circumstantial evidence to show the execution of the contract between the parties does not carry the case of the Plaintiffs much further. A party may see the sample after execution of the contract only upon delivery of the goods if the sale of the goods was a sale by sample as contemplated in Section 17 of the Sale of Goods Act. Otherwise a businessman would require to see the sample before the execution of the contract. If the contract has been is for sale of goods by description as per Section 15 of the Sale of Goods Act, as the suit contract is, seeing the sample becomes immaterial. Had the contract been entered into between the parties, the Defendants would be enjoined to accept the delivery as per the terms of the contract. The Defendants would only be entitled to reject the delivery if the contract did not confirm to the terms. The written contract is not for delivery of the goods as per the sample. The contract, therefore, does not come within the purview of Section 17 of the Sale of Goods Act. The contract is only for “Sudan cotton type BARON R.G.” The suit contract is by description. It, therefore, does not entitle the buyer of the goods to accept or reject the contract based upon the sample 16 later. 29. The case of the Defendants, therefore, stands to reason. Since neither return of the duplicate allocation letter dated 18 th May 1977 showing acceptance of the contract by the Defendants is shown nor is the cyclostyled contract executed between the parties, there is nothing to show the firm contract between the parties, the letter dated 23rd August 1977 being sent by the Defendants notwithstanding. 30. Upon the arrival of the consignment, the Plaintiffs sent their telegram to the Defendants on 5th September 1977 requiring the Defendants to inform the mode of payment, the name of the clearing agent and to send the import application for obtaining the sub- licence. Upon receipt of the telegram, the Defendants informed the Plaintiffs on 29 th August 1977 that they had not entered into any firm contract and had not applied for any import licence. They also informed the Plaintiffs that they were spinning only fine and super fine quality of cotton and the Baron type cotton was not suitable for them. By another letter of the same date, they again informed the Plaintiffs that they had not requested the Plaintiffs to allot slide type cotton as that will also not be for use in their consumption. 17 31. No part of the Plaintiffs’ evidence shows that they got shipped the precise varieties of cotton contracted for and required by the Defendants. The letters dated 29 th August 1977 of the Defendants sent to the Plaintiffs are produced by the Plaintiffs themselves as Exhibits H and I. These letters show that the Defendants had no requirement for the type Baron of Sudan cotton which was shipped under the contract alleged to have taken place between the parties. Hence in the absence of absolutely anything on the part of the Defendants to show or suggest that they entered into such a contract, none can be imputed. 32. It may be mentioned that the Defendants have produced, interalia, a copy letter dated 16 th May 1977 addressed by them to the Plaintiffs registering their requirement of 1000 bales of Sudan contract of 3 varieties being GVS, XG2VS and G2V. The Plaintiffs have got exhibited the said letter as Exhibit- S in evidence. The circular dated 5th April 1977 requires the Mills to register their demand by 20th April 1977. There is no written demand shown on or before that date. It is the Plaintiffs’ case that the Defendants registered their demand for 1000 bales of Sudan cotton telephonically. The letter dated 16 th May 1977 is much after the period for making the offer passed. It shows 3 other specific varieties of Sudan cotton. It does not show the variety – BARON R.G. 18 of Sudan cotton. The letter 16 th May 1977 refers to a telegram and specifies “Please register our requirement of Sudan cotton as above ”. The aforesaid 3 varieties being GVS, XG2VS and G2V are specified. That letter also, therefore, does not show that it is with regard to the suit contract which is for type BERON R.G. of Sudan cotton. 33. The Plaintiffs have, therefore, not shown absolutely anything to substantiate their case of having entered into a contract specifically for Sudan cotton of BARON R.G. type with the Defendants. 34. The oral evidence of the Plaintiffs is that the Defendants, as also various other representatives of the Textile Mills, remain in the office of the Plaintiffs and make their offers orally. Under the usual practice, though the written contract is sent to the parties, it may not be signed by the parties. The Plaintiffs have relied upon several other contracts similarly sent to the Defendants but not signed by the Defendants as Exhibit- M (collectively) in evidence. The evidence in paragraph 13 of the examination- in-chief of the P.W.1 is that the Plaintiffs had maintained a running account of the Defendants. They had various transactions with the Defendants prior as well as subsequent to the suit contract. However there is no evidence that those contracts have been 19 honoured by the Defendants. In any event, the contracts, Exhibit- M (collectively), are for EGYPTIAN GIZA 70, TYPE BANCO CROP, 77/78 PILOT CROP etc. Those are, therefore, completely different varieties of cotton. There is no evidence with regard to whether those were fine or super fine variety which alone the Defendants were spinning. Hence that does not constitute such