IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 25.02.2008 CORAM THE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYA AND THE HONOURABLE MR. JUSTICE M.VENUGOPAL O.S.A. NO. 309 OF 2007 M/s. S.M.S. Traders rep. by its Proprietor S.M. Mohamed Sait No.9, Alagar Street Begampur, Dindigul 642 002. .. Appellant - Vs - The Official Liquidator of the High Court, Madras as the Official Liquidator in South India Viscose Industries Ltd. (SIVIL), (In Liquidation) Kuralagam, Chennai 600 104. .. Respondent Appeal filed against the order dated 2nd Aug., 2007, passed by learned single Judge in C.A. No.1721/06 in C.P. No. 17/04. For Appellant : Mr. B.Kumar, SC, for Mr.M.Shantharaman For Respondent : Mr. P.Gangadharan, Official Liquidator JUDGMENT S.J.MUKHOPADHAYA, J. This appeal has been preferred by the appellant, S.M.S. Traders, against order dated 2nd Aug., 2007, passed by learned Judge in C.A. No.1721/06 in C.P. No.17/04. By the said order, learned Judge rejected the application preferred by the appellant to direct the respondents to grant permission to remove/lift the pulpwood to an extent of 4,500 MT as was lying in the premises of the South India Viscose Limited (SIVIL – hereinafter referred to as the 'Company'). 2. According to the appellant, it supplied pulpwood to the company in liquidation on 6th April, 2000; they entered into a contract for supply of 200 MT of pulpwood and one of the conditions of the contract was that the cost of the pulpwood should be paid within 60 to 70 days from the date of supply. On 6th April, 2002, the applicant wrote a letter to the company to return the pulpwood supplied, as the pulpwood https://hcservices.ecourts.gov.in/hcservices/ supplied was not accepted. However, learned Judge rejected the said prayer on the ground that the quantity of pulpwood supplied is valued at Rs.49,20,061.19, which is reflected in the balance sheet of the company and the Vice President of the company informed that the payment for the pulpwood supplied would be made shortly. It was observed that only on coming to know about the pending proceeding before BIFR, the applicant filed application in the case filed by the company seeking permission to remove the pulpwood supplied by it. 3. Official Liquidator appeared in person and submitted that the pulpwood supplied by the appellant was accepted by the company. According to him, the pulpwood having accepted by the company, the appellant cannot be permitted to lift the pulpwood, though he may claim for the amount, if any, due to the appellant. 4. Learned senior counsel appearing on behalf of the appellant referred to the enclosure attached to the typed set to suggest error of record committed by learned Judge for coming to the conclusion that the pulpwood supplied was accepted by the company. 5. We have heard the parties, noticed the rival contentions and the documents as available on record. 6. Learned Judge, giving reference to certain letter issued by the then Vice President (Finance) of the company gave the finding, as evident from para-10 of the order and quoted hereunder :- "10. By letter dt. 6.4.2002, the applicant in C.A. No.1721 of 2006 asked the company to permit them to take back the pulpwood to an extent of 4500 M.T., lying in the factory premises as the pulpwood supplied has not been accepted and payments have not been made. But in their reply dt. 16.04.2002, the then Vice President, Finance, of the company informed the applicant that as on 31.03.2002 a sum of Rs.42,42,264.09 is the credit balance towards the applicant in C.A. No.1721 of 2006. similarly, a sum of Rs.6,73,812.88 is the credit balance towards the Proprietor of the applicant in C.A. No.1721 of 2006. The applicant in C.A. No.1722 of 2006 has also stated in his affidavit that the Secretary of the company in liquidation by letter dt. 17.12.2003 informed the applicant that the payment for the pulpwood supplied to the tune of Rs.45,52,809.88 and Rs.5,80,891.14 is due and the payment would be made shortly." From the record it will be evident that the Vice President (Finance) never gave any such assurance vide letter dated 16th April, 2002; he never informed the appellant that payment of the pulpwood supplied will be made shortly. It was never informed to the appellant that the 4500 MT of pulpwood supplied by the appellant has been accepted by the company. That is error of record as apparent on the face of the order passed by learned Judge and evident from the evidence on record. https://hcservices.ecourts.gov.in/hcservices/ 7. A copy of the purchase order dated 6th April, 2000 is on record, wherein at clause 16, the following provision was made by the company :- "The company reserves the right to reject part/full load of the pulpwood supplied, if the same is found to be not in accordance with the specification mentioned above. Penalty is liable to be levied for such supplied as considered fit. On such rejection the rejected goods shall be taken back by the supplied at his risk and cost. The company shall not be responsible for any damage or deterioration in quality when once the goods are rejected. In case the rejections is within 1% of the total quantity of Pulpwood, settlement will be without any deduction in cost of Pulpwood and for any such smaller diameter billets more than the 1% in quantity, that excess quantity will be treated as firewood and bills will be settled at Rs.1,000/= (Rupees one thousand only) per MT including – cost of wood, conversion, transport, etc., subject to the suppliers written request to accept such rejections." What has been communicated by the Vice President (Finance) by two letters, both dated 16th April, 2002, is as to what is the balance in the account of the appellant as per company's books. It did not disclose as to such balance maintained in the books relates to the supply of pulpwood in question. It appears that the appellant by its letter dated 14th June, 2002, made certain intimation with regard to unsuitable/rejected goods. In reply to the said letter, the company, vide its letter dated 15th July, 2002, Ref : 2/01/1/2001-2002/Forests, sent the following information :- "R.Hariharan Manager (Forests) Ref : 2/01/1/2001-2002/Forests Dated : 15.7.2002 To M/s.S.M.S. Traders No.9, Alagar Street Begampur Dindigul 641 002. Dear Sir, Sub : Disposal of unsuitable/rejected wood (Blue gum, Wattle and E Grandis) – Regd. Ref : Your letter dated 14.6.2002. https://hcservices.ecourts.gov.in/hcservices/ We invite kind attention to your offer to life the unsuitable/rejected wood (Blue gum, Wattle and E Grandis) received by this company as they were found to be unsuitable and not in accordance with the specifications. Your will be permitted to life the materials, subject to the followings :- 1. You can remove the entire stock of 4500 M.T. of unsuitable/rejected wood, as they are unsuitable and rejected. 2. There is no question of payment on either side or adjustment of any bills in this transaction as the entire 4500 M.T. is rejected. 3. In view of foregoing there is no necessity for assessing the moisture for the exit weight of wood by our Company's Forest Department and wood yard officials. 4. You have to engage your coolies for the loading, etc., of the material under the supervision by our wood yard officials. 5. The transportation and other formalities are to be arranged by you. 6. Forest permit if any required may be arranged to be got from the Authority concerned at your risk and responsibility. 7. Tax, if any, shall be exclusively borne by you. 8. Company will not be responsible for any accident, etc., occurred to your workmen during the time of removal. Hence, you are advised to arrange for necessary insurance cover. 9. The weight of unsuitable/rejected wood recorded at the Companies Weigh Bridge will be final for removal. 10. We reserve the right to modify or add any condition during the course of removal subject to mutual agreement. 11. Disputes, if any, arising out of the removals, decision of the General Manager (Pulp Production), Sivil, Sirumugai will be final and binding. 12. You are aware that we have stopped our operation in the plants since 3rd week of October, 2001. In view of situation presently prevailing, you are advised to take all precautions to avoid unpleasant incidents and secure the safety of persons employed by you at your risk and cost. https://hcservices.ecourts.gov.in/hcservices/ Please arrange to return the duplicate copy of this letter duly signed as a token of acceptance. Thanking you Yours Truly, R.Hariharan Manager (Forests)" From the aforesaid letter it will be evident that the supply of pulpwood, as claimed by appellant was not accepted by the company and by their letter dated 15th July, 2002, they have specifically rejected the same. There is nothing on the record to suggest that the company assured the appellant to pay the amount of supply of such pulpwood nor there is anything on record to show that the amount was accounted for. In view of our finding, the order passed by learned Judge cannot be upheld. We accordingly, set aside the order dated 2nd Aug., 2007, passed by learned Judge in C.A. No.1721/06 in C.P. No. 17/04. So far as prayer for lifting of pulpwood is concerned, as the pulpwood in question has already been auction sold, we reject such prayer as made by the appellant. However, it will be open to the appellant to seek for appropriate relief in the pending case. The appeal stands disposed of with the aforesaid observation, but there shall be no order as to costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar GLN To 1. The Official Liquidator of the High Court, Madras as the Official Liquidator in South India Viscose Industries Ltd. (SIVIL), (In Liquidation) Kuralagam, Chennai 600 104. 2. The Sub Assistant Registrar, Original Side, High Court, Madras. 1 cc To Mr.M.Santhanaraman, Advocate, SR.10033. O.S.A. NO. 309 OF 2007 AKR(CO) RVL 07.03.2008 https://hcservices.ecourts.gov.in/hcservices/