IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :24.10.2009 CORAM THE HONOURABLE MR.JUSTICE M.VENUGOPAL A.S.NO.18 OF 2001 M/s. Mazagon Dock Ltd., rep. By its Managing Director at Dock Yard Road, Mazagon, Bombay 400 010. ... Appellant(Defendant) Vs. M/s. Sree Power Agencies, rep. By its Proprietor P.R. Balamurugesh, S/o.M.P Kolandaivel Mudaliar, No.4F/705, Continental Plaza, Anna Salai, Chennai – 6. ... Respondent(Plaintiff) PRAYER:Appeal suit filed under Section 96 of the Civil Procedure Code, against the judgment and decree dated made in O.S. No.6945 of 1996, dated 11.08.1997 on the file of the Court of V Additional Judge, City Civil Court at Chennai. For appellant : Mr. Ela Murugan For respondent : Mr. S. Annamalai. J U D G M E N T The appellant/defendant has projected this appeal as against the judgment and decree made in O.S.No.6945 of 1996 dated 11.08.1997 on the file of V Additional Court, City Civil Court, Chennai. 2.The necessary summation of respondent/plaintiff's case are as follows: The appellant/defendant has called for Tender No.OP/HING/CAP/M 13 Portable DG set for the supply of 15 Nos. of 125 KVA Diesel Generating sets. The respondent/plaintiff has filed their Quotation https://hcservices.ecourts.gov.in/hcservices/ No. SPA/MDS/7637/83 dated 30.12.1983, for the supply of 10 Nos. 60 KVA and 110/125 KVA New Diesel Generator sets. The appellant/defendant has decided to accept the quotation put forward by the respondent/plaintiff and called for discussions. After discussions with the officers of the appellant/defendant, the respondent/plaintiff by its letter dated 15.03.1984 has confirmed the decisions and acceptances taken at the discussions. As per the said confirmation letter it has been agreed that five sets will be delivered after three weeks from the date of issue of order in writing and that subsequently five sets will be delivered every week. In regard to the payment of 90% of the invoice claims should be made against the discharge documents/proforma invoices, through bank and the balance of 10% against commissioning. The appellant/defendant has agreed to pay for trollies to be delivered separately. 3. The respondent/plaintiff started supplying the generators as per the orders placed by the appellant/defendant periodically. But the appellant/defendant has made payment as per the terms of purchase orders. All the payments from the beginning have been delayed and the respondent/plaintiff has incurred heavy loss and interest, bank charges, traveling and other expenses. 4. The respondent/plaintiff has supplied 8 Nos. of 125 KVA- Generators as per purchase order dated 04.04.1984. The said supplies have been made and installed at the Mangalore Yard of the Appellant/Defendant as per their directions. The Respondent/Plaintiff has also attended to the defects through their engineers as pointed out by the appellant/defendant. The appellant/defendant by its letter dated 08.07.1986 has acknowledged the supply of 8 Nos. of 125 KVA Generators and also acknowledged that 6 Nos. have been supplied with trollies and Anti Vibrational Mounting and 2 Nos. have been supplied with trollies only. For the balance of seven sets the appellant/defendant has canceled the order stating that the respondent/plaintiff has failed to supply the materials. As per the letter, 90% of the invoice amount has been directed to be realised to the respondent/plaintiff against proforma invoices and the balance 10% on submission of performance bank guarantee of 10%, valid for 12 months from commissioning of DG sets. By letter dated 18.07.1986 the respondent/plaintiff has informed the appellant/defendant that there have been no complaints about the mounting and the performance guarantee is only for the manufacturing defects and that whatever complaints received by them have been attended to all and all the defects pointed out were rectified and that no complaints have been received for one year and that no deduction of any amount be made and demanded payments of the amount has claimed by the respondent/plaintiff. Thereafter, the respondent/plaintiff by means of an letter dated 25.07.1986 has demanded the payments due to them. In regard to the supplies made by the respondent/plaintiff, the appellant/defendant has to furnish 'C' Forms for the purpose of Sales Tax Assessment of the https://hcservices.ecourts.gov.in/hcservices/ respondent/plaintiff. The appellant/defendant has furnished the 'C' forms to the respondent/plaintiff and the same has been acknowledged by the respondent/plaintiff by its letter dated 24.10.1986. The appellant/defendant has sent their cheques for Rs.41,273.78 only after several reminders. 5. By letter dated 23.01.1987, the respondent/plaintiff has demanded payment of 10% towards the supplies made against the purchase orders pending and also pointed out to the appellant/defendant that only one number Anti Vibrational Mounting per trolly instead of 10 Nos. per trolly have been included. It has been pointed out to the appellant/defendant that 10 Nos. of Anti Vibrational Mounting have been acquired per trolly at Rs.745/- each and the differences for 9 Nos. of trolly has to be paid by appellant/defendant and hence claimed a sum of Rs.1,93,934.60ps. With interest at 18% per annum for all the delayed payments made by the appellant/defendant. In this regard, a letter dated 07.02.1996 has been sent to the appellant/defendant demanding the payments due. By letter dated 14.07.1987 the respondent/plaintiff has reiterated its claim and demanded the pending payment by 30.07.1987. It has been pointed out that the bank guarantee dated 19.08.1985 has been submitted at appellant/defendants Bombay Office during the third week of August, 1985 and had refused to accept the same. 6. The respondent/plaintiff has issued an Advocate's notice dated 16.11.1987 to the appellant/defendant and a reminder notice has also been sent by a letter dated 24.05.1988 through the respondent/plaintiff's Advocate. The appellant/defendant by its letter dated 27.05.1988 has requested the respondent/plaintiff to issue them copies of purchase orders, invoices for verification of the claim and the same have been furnished to the appellant/defendant. The appellant/defendant by its letter dated 04.09.1988 has denied the claim made by the respondent/plaintiffs stating that no amount is due by them and enclosed a statement of accounts putting forth improper deductions and not calculating the supplies of 9 Nos. of Anti Vibrational Mounting per trolly and Central Sales Tax and the interest claimed for late payments. 7. The appellant owes a sum of Rs.4,27,995.42 as per the statement of account filed by the respondent/plaintiff. The respondent/plaintiff claims 18% interest per annum towards the delayed payments. 8. Hence, the suit is laid for recovery of a sum if Rs.4,27,995.42 with interest at 18% per annum from the date of plaint till the date of payment from the appellant/defendant and with costs. The appellant/defendant's written statement pleas; https://hcservices.ecourts.gov.in/hcservices/ 9. The appellant/defendant has called for Tender No.OP/HING/CAP/M 13 Portable DG set for the supply of 15 Nos. of 125 KVA Diesel Generating sets and that the respondent/plaintiff has filed its quotation dated 30.12.1983 towards supply of 10 Nos. of Diesel Generator sets quoting their comparative rate and terms and conditions for the supply. It is clarified on the receipt of the quotation from the respondent/plaintiff the appellant/defendant has called upon the respondent/plaintiff's to clarify certain discrepancies observed in its quotation and subsequently as per letter dated 15.03.1984 the respondent/plaintiff has clarified/confirmed such points as requested by the appellant/defendant. It is to be noted that as against X-stock delivered originally quoted by the plaintiff after discussions the respondent/plaintiff has confirmed that five sets will be delivered after three weeks from the date of the order and next five sets each shall be delivered every week thereafter. The appellant/defendant has issued an order dated 04.04.1984 which has been personally received and accepted by the respondent/plaintiff on 24.04.1984. 10. The respondent/plaintiff has failed to comply with the terms and conditions and scope of supply and has thus put the appellant/defendant into enormous difficulties. The factum of delay were time and again communicated to the respondent/plaintiff by means of telegrams/telexes:- TelegramXLN2/5.6.85 TLX.74/OP dt. 5.7.1984 Tlx. 594/Op. Dt 16.6.84 286/OP. dt.11.7.84, 207./OP dt. 10.7.84, 584/OP dt. 19.7.84 471/OP. dt. 10.7.84, 946/Op. dt. 27.7.84, 8947/Op 1.8.84, 142/OP. dt. 2.8.84, 397/Op/ dt. 18.8.84, 1160/Op dt. 23.8.84, 750/OP. dt. 22.9.1984. 11. By means of delay and subsequent delay in commissioning of the DG sets the appellant/defendant has incurred heavy production loss. In addition, even on the DG sets commissioned by the respondent/plaintiff a number of defects have been encountered due to substandard base structures of the sets which resulted in frequent failure of the sets. Only in the aforesaid circumstances the appellant/defendant has constrained to take proper measures to encash the Performance Bank Guarantee/Security Deposit as per the provisions of the contract. In the contract, the respondent/plaintiff has failed to submit the Performance Bank Guarantee towards the value of 5% of the contract price as per the terms and conditions of the contract and therefore the appellant/defendant has forfeited a sum of Rs.73,867.80 from the amount payable to the respondent/plaintiff. 12. The respondent/plaintiff in their quotation dated 15.03.1984 has agreed to deliver Anti Vibrational Mountings along with the https://hcservices.ecourts.gov.in/hcservices/ Generator sets at a nominal price of Rs.745/- each. The said purchase order dated 04.04.1984 has been issued for a lumpsum cost and the appellant/defendant by its letter dated 20.05.1985 has clarified that the demand of cost of Nine Anti Vibrational Mounting has not been accepted for the reasons mentioned therein. 13. The claim of the respondent/plaintiff is barred by Law of Limitation as the appellant/defendant has made the last payment on 08.09.1986 and that the respondent/plaintiff ought to have filed the suit on or before 07.08.1989. The respondent/plaintiff's should have filed the suit in the High Court of Bombay as High Court of Madras does not have jurisdiction to entertain the same. The appellant/defendant is not aware of Application No.4053/1989 whereby the respondent/plaintiff has obtained leave to sue the appellant/defendant at Madras and the appellant/defendant reserves its right to file a separate application in this regard. 14. Before the trial Court, on the side of the respondent/plaintiff witness PW.1 has been examined and Ex.A1 to A13 have been marked and on the side of appellant DW.1 has been examined and Ex.B1 to B10 have been marked. 15. The trial Court, on an appreciation of oral and documentary evidence available on record has passed a judgment holding that the respondent/plaintiff is entitled to a sum of Rs.4,27,995.42 with interest at 18% per annum from the date of suit till the date of realisation with costs. 16. The points that arise for rumination in this appeal are:- 1.Whether the suit filed by the respondent/plaintiff on the basis of cause of action is maintainable in Law? 2.Whether the suit is barred by Law of Limitation? 3.Whether the respondent/plaintiff is entitled to claim a sum of Rs.4,27,995.42 with 18% interest per annum together with costs? 17. Point No.1 – The respondent/plaintiff in para 9 of the plaint has averred that cause of action for the suit has arisen when the appellant/defendant has called for the tender in regard to supply of 15 Nos. of 125 KVA Diesel Generators sets and on 30.12.1983 when the respondent/plaintiff filed its tender and subsequently when the same has been accepted and confirmed by the respondent/plaintiff in its letter dated 15.03.1984 accepting the decisions and acceptances taken at the meeting between the parties and on various dates when the supplies have been made by the respondent/plaintiff which has been duly acknowledged by the appellant/defendant and on 30.08.1985 when payments have been made by the appellant/defendant to the respondent/plaintiff by cheques and moreover, on 04.02.1986 when further cheque has been sent by the appellant/defendant to https://hcservices.ecourts.gov.in/hcservices/ respondent/plaintiff and on 08.09.1986 when the payment has been made by the appellant/defendant by cheque and on 04.09.1988 when the appellant/defendant has denied further claim made by the respondent/plaintiff's and that cause of action further has arisen at Bombay where the appellant/defendant has its office and also at Madras where the payments have been made by the appellant/defendant to the respondent/plaintiff which have been credited in he respondent/plaintiff's bank at Madras and also agreed to between the parties that the jurisdiction in regard to the contract is put at Madras. 18. Per Contra, the appellant/defendant in para 9 of its written statement has taken a plea that the suit ought to have been filed in the High Court of Bombay as the High Court at Madras does not have the jurisdiction to entertain the suit and that the appellant/defendant is not aware about the Application No.4053 of 1989 whereby the respondent/plaintiff has obtained leave to sue the appellant/defendant at Madras. 19. The term 'cause of action' has a settled meaning in Law. In a limited sense, it means the circumstances forming the infraction of the right or the immediate occasion for the action. In a wider sense, it means the essential conditions for the maintenance of the suit, including not only the infraction of the right, but the infraction coupled with the right itself in the considered opinion of this Court. However, the term 'cause of action' refers to every fact by which it will be necessary for the plaintiff to establish, if traversed, in order to support his claim to the judgment of a Court of Law. It is to be noted that every fact which has to be proved as distinguished from every piece of evidence which is necessary to prove each fact comprises 'cause of action'. In short, the cause of action speaks of the circumstances forming the infraction of the right or immediate occasion for the action. Significantly, a cause of action in a suit has no reference to the defence taken in the suit nor the same is related to the evidence by which the cause of action has been established. Furthermore, the jurisdiction of a Court of Law relating to a contract matter will depend on the situs of the contract and the cause of action arising through other related factors. A cause of action will also include some act done by a defendant inasmuch as in the absence of an act, no cause of action will possibly accrue. Added further, it is not confined the actual infringement of right sued on, but will include all the material facts on which it rests. Ordinarily, acceptance of an offer and its intimation results in a contract and therefore a suit can be laid in a Court within whose jurisdiction the acceptance has been communicated. The performance of a contract is part of cause of action an a suit in respect of breach can always be filed at the place where the contract would have been performed or its performance has been completed. In case of repudiation of a contract, a suit can be filed where the repudiation is received and it is a place where https://hcservices.ecourts.gov.in/hcservices/ the suit will lie. In the present case on hand the respondent/plaintiff has filed Application No.4053/1989 before the High Court of Madras and has obtained leave to sue the appellant/defendant at Madras, and this has become final. Continuing further, this Court is of the considered view that the part of the cause of action has arisen at Madras, where the payments have been made to the respondent/plaintiff by the appellant/defendant and the said payments have been credited into the respondent/plaintiff's bank at Madras and therefore, the suit filed by the respondent/plaintiff's on the basis of cause of action is perfectly maintainable in the eye of law and the same is answered accordingly. 20. Point No.2 - The appellant/defendant in para 9 of the written statement has categorically stated that the last payment has been made on 08.09.1986 and that the respondent/plaintiff should have filed the present suit on or before 07.09.1989. At this stage, this Court on perusal of the plaint filed earlier on the original side of this Court comes to the clear conclusion that the suit has been filed on 05.09.1989 (as seen from the round seal of this Court affixed on the plaint wherein the date of receipt of the plaint is mentioned as 5th September 1989) and inasmuch as the suit has been filed within 3 years from the last date of payment viz., on 08.09.1986, and the same is not barred by the Law of Limitation and the point is answered accordingly. 21. Point No.3 – The learned counsel for the appellant/defendant urges before this Court that the trial Court has not seen that the appellant/defendant is entitled to deduct the penalty suffered on account of delayed supply made by the respondent/plaintiff and further it has failed to appreciate the evidence of witness DW.1 and as a matter of fact the trial Court has committed an error in accepting the total amount of Rs.15,17,739.83 and in any event the claim of interest of 18% per annum ought to have been rejected by the trial Court and therefore prays for allowing the appeal to promote substantial cause of justice. 22. It is apt to refer to the evidence of PW.1 that he is the proprietor of the respondent/plaintiff's and that the appellant/defendant has requested them to supply Generator machines and in this regard the appellant/defendant has advertised for the tender and they have given their Application on 30.12.1983 and moreover, his company has agreed to supply 15 KVA Diesel Generators and the letter issued by his company is Ex.A1 dated 30.12.1983 and after discussing with the appellant/defendant an agreement, Ex.A2 dated 15.03.1984 has been entered into between them and as agreed the respondent/plaintiff has supplied 8 KVA Generators, but the appellant/defendant has not paid the money towards the said machines and since the appellant/defendant has paid the money belatedly the respondent/plaintiff has incurred bank expense, interest payment and transport expense and as per letter dated 04.04.1984 Ex.B1 agreement https://hcservices.ecourts.gov.in/hcservices/ the respondent/plaintiff company has supplied 8 KVA Generators and the said Generators has been delivered at Mangalore Yard and the respondent/plaintiff has rectified the defects as pointed out by the engineer of the appellant/defendant and as per Ex.A3 letter dated 10.07.1986 the appellant/defendant has accepted the 8 Generators sets supplied by the appellant/defendant. But in regard to the supply of 7 Generator sets the appellant/defendant has canceled the agreement and as per Ex.A6 letter dated 17.10.1986 the appellant/defendant has enclosed a Cheque No.712674 dated 08.09.1986 for Rs.41,273.78 issued infavour of the respondent/plaintiff and the appellant/defendant has written a letter, Ex.A13 dated 08.09.1988 to the respondent/plaintiff and as per suit the appellant is due to sum of Rs.4,27,995.42. 23. PW.1 in his cross-examination has deposed that from the date 24.04.1984 within 3 weeks the respondent/plaintiff has to supply the generator sets and the first 5 sets as per Ex.B1 agreement has to be supplied before 25.06.1984 and that the respondent/plaintiff has not supplied the same and that the appellant/defendant through telegram has informed about the money details and that the respondent/plaintiff has rectified two defects in the generator sets supplied by it. 24. DW.1 (Additional General Manager, Legal) of the appellant/defendant in his evidence has deposed that as per Ex.B1 agreement dated 04.04.1984 the respondent/plaintiff has not supplied the goods properly and therefore Ex.B2 telegram has been issued by the appellant/defendant to the respondent/plaintiff and Ex.B3 is the cancelation of agreement send by the appellant/defendant to the respondent/plaintiff and the appellant/defendant is not liable to pay any amount to the respondent/plaintiff. DW.1 in his cross- examination has specifically stated that he is not aware about the non-functioning of the generator sets supplied by the respondent/plaintiff and that totally there is a balance of Rs.13,87,916.63 and there is a balance of Rs.1,93,934.60 and the appellant/defendant has to pay interest at 18% and it is incorrect to state that as per respondent/plaintiff's account there is a balance of Rs.4,27,995.42 and that the said amount has to be paid by the appellant/defendant. 25. In Ex.A1 letter dated 30.12.1983 the respondent/plaintiff has addressed the appellant/defendant inter-alia stating that they are glad to quote their rate for the supply of Diesel generator set as per the General terms and conditions, technical specification, price schedule, previous experience, pamphlet, annexure-A etc. It is relevant to point out that in Ex.A1 letter dated 30.12.1983 in annexure – A, under the caption earnest money deposit, the respondent/plaintiff has mentioned as follows; "Due to the year ending our bankers are not able to release the bank guarantee immediately, since time is very short. https://hcservices.ecourts.gov.in/hcservices/ We assure you that we can produce the bank guarantee in the middle of the January or whenever you want after 10th January. Please accept our offer." 26. In Ex.A2 letter dated 15.03.1984 of the respondent/plaintiff addressed to the Commercial Manager of the appellant/defendant it is inter-alia mentioned that the respondent/plaintiff has been pleased to confirm the tender as under; 1.Delivery Schedule: Five sets will be delivered after 3weeks from the date of receipt of your technically and commercially clear Order in writing. Subsequently five sets shall be delivered every week. As a very special case we agree to dispatch the material to Mangalore on FREIGHT PAID basis in the event of the complete order being placed on us. 2.Penalty Clause: We agree to your standard penalty clause subject to force majeure conditions and other unforeseen circumstances beyond our control and a grace period of one week from the above delivery schedule confirmed by us. 3.Payment: We are agreeable to the following special terms of payment: a) Advance is not required. b) 90% against dispatch documents/Proforma Invoice and the balance 10% against commissioning. c) In case the Trolleys are delivered separately payment for the same shall be claimed subsequently. 4.Performance Guarantee: We confirm that the Original test certificate and the Guarantee Certificate from the Original Manufacturers shall be submitted by us. We are also agreeable to issue a performance guarantee for 2 ½% of the total value of the order. 5.Testing & Commissioning: We shall depute our Engineer for testing and commissioning at your Mangalore Yard freeof cost. However, the necessary arrangements to provide water, power, gate passes, diesel, power and cable connections shall be made available by your goodselves. Inspection shall be carried out by your Authorised Representatives in the presence of our Engineers immediately on arrival/commissioning of the material at site. 6.Taxes: Deliveries to Mangalore shall be covered under E-1 Transactions. Hence 4% C.S.T only shall be applicable. However, in case of deliveries are required at any other Yard/Sites in and around Bombay, Octroi Duty shall be charged at actuals. 7.Anti-Vibration Mounting: As advised by the Engine Manufacturers, M/s. Kirloskar Cummins Ltd., Dunlop make Anti-Vibration Mounts/Pads https://hcservices.ecourts.gov.in/hcservices/ are recommended for use in between Gen Sets & Trolley. These Anti- Vibration Mountings could facilitate in floor mounting also. We could arrange to deliver these optional extra mounts alongwith the Gen sets at a nominal price of Rs.745/1 each in ready to use condition duly fabricated as per recommended specifications. 8.Trolley: a) Delivery: Since the Trolley Design and Structure has to be approved by the Manufacturers, we could arrange to manufacture and supply the said trolleys as under: i) 5 Nos. within 6 weeks. ii)5 Nos. every week subsequently. This shall however not affect the Performance or Commissioning of the Gen sets. b) Pnematic Trolley: In case required by your goodselves, we can arrange to supply the Pnematic Trolley with DUNLOP make Pnematic Type Tyres and Axles complete of ADV Type with Tow Bar arrangements and Canopy. The cost shall be Rs.26,970/- per trolley. 27. In Ex.A3 letter dated 10.07.1986 the appellant/defendant's Assistant Manager (OPS) addressed to the Deputy General Manager, Mangalore Yard, Division of Mazagon Dock Ltd., New Mangalore Port Trust, Penambur has inter-alia stated that the party hasapplied altogether 8 Nos. sets on different times and out of 8 sets, six sets were supplied with trolley and subsequently antivibrational mounting were also provided for these six sets only. Next two sets from party were supplied with trolley but without antivibration mountings and that they have canceled the order for balance 7 Nos. sets in view of partys failure to supply the material etc., and that the number of problems were developed during warranty period of DG sets and the anti vibrational mounting provided for 6 sets were not useful and since none of the trolleys was working satisfactorily and in regard to the payment to the party, 90% amount was to be released against proforma invoice and balance 10% on