1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.802 OF 1981 Cotton Corporation of India .. Plaintiffs Versus Niranjan Piramal Textile Mills Ltd. and Anr. .. Defendants Mr.Rishabh Shah with G.Mahajan with G.V.Bhalekar i/b. M/s.Divekar & Co. for plaintiffs Mr.H.J.Thacker, Senior Advocate with Mr.Chande P. i/b. M.K.Ambalal for defendants. CORAM : S.C.DHARMADHIKARI, J. Reserved on : 4th December 2008 Pronounced on : 16th February 2009 ORAL JUDGEMENT:- . This is a suit by Cotton Corporation of India to recover from the defendants a sum of Rs.56,76,005.67 with interest at the rate of 21.5% p.a. from the date of the suit till Judgement and, thereafter at the rate of 6% p.a. on quarterly rest basis till payment and/or 2 realisation. 2. In this suit, pleadings were complete and issues were framed parties went for trial. Evidence was led and upon conclusion thereof, the matter was placed for Arguments. 3. However, at that stage, both sides stated before me that Issue No.2 is of Limitation and if this Court accepts the plea of the defendants that the suit claim is barred by limitation, then, there would be no occasion to deal with other issues and render any finding thereon. However, if finding on Issue No.2 is in favour of plaintiffs and against the defendants, then, the occasion would arise to answer other Issues on jurisdiction and merits. On this basis and by consent of parties, I have heard the oral arguments on the issue of limitation and I am rendering my findings thereon. 3 4. Learned Counsel appearing for both sides stated before me that for the purpose of rendering a finding on the issue of limitation, it is not necessary to go into the oral evidence and the Court must proceed on the basis that the plaint allegations and averments are true and correct. Assuming them to be true and correct and taking them as they are, the Court should decide the said issue. The arguments have proceeded on this basis. 5. Issue No.2 reads as under:- "2. Whether the suit claim is barred by law of limitation?" 6. For rendering any finding on this issue, it will be necessary to refer to the plaint. The plaintiff before me are a Government of India undertaking. They are registered as a company under the Companies Act, 1956 and there main 4 business is to act as Channelising Agent for the Import and Supply of Foreign Cotton toIndian Textile Mills. The defendants are also a company registered under the Companies Act, 1956. They carry on business as manufacturer of Textiles and own a textile mill at Surat in the State of Gujarat. 7. In para 2 of the plaint, the plaintiffs have given details about a circular issued to All Indian Textile Mills which included the defendants, inviting offers for Global cotton intended to be imported by the plaintiffs. It is stated that the defendants agreed to buy different varieties of cotton to be imported by the plaintiffs. Subsequently, several contracts were entered into. These contracts pertain to purchase of cotton by the plaintiffs. Thus, it is alleged that Contract No.G/471 dated 28th March 1977 was entered into for the import and supply of the materials mentioned therein. It is 5 stated that the shipment was for April/May 1977 (Seller’s Option). It is not necessary to refer to the correspondence with regard to the numbers of bales to be imported under the contract dated 28th March 1977. In para 3, details of contract No.G-664 dated 12th May 1977 are set out with the shipment period. In the same para details of the third contract being Contract No.G-402 are also set out including the shipment period. 8. Thereafter, it is alleged that by these contracts, it was agreed that the contracts entered into by the plaintiffs with the Foreign Suppliers shall be treated as integral part of the contract between the plaintiffs and defendants. It is alleged that it is agreed between the parties that the price of the goods comprised in the three contracts shall be paid by the defendants to the plaintiffs against tendering of documents such as Bills of Lading, Insurance Policy, Invoice etc. It was also 6 agreed that if the defendants fail to pay the price, then, the plaintiffs would be entitled to clear and take delivery of the bales imported, at the cost and risk of the defendants and if the defendants fail to take delivery thereafter, the plaintiffs would be entitled to sell the goods to any party by private sale or auction and any loss suffered by the plaintiffs by such sale shall be on account of defendants. The defendants would then be liable to pay the same on demand made by the plaintiffs. It was also agreed that plaintiffs would not be responsible for any consequences arising from delay in effecting the shipment by the foreign suppliers. The defendants also agreed that they shall pay carrying charges at the rate specified from the date of arrival of the Steamer, if the defendants fail to make payment and take delivery of the goods on arrival. Defendants also agreed to pay interest on the unpaid purchase price at the rate of 20% on monthly rests basis. By the said 7 contracts the defendants also agreed to furnish bank guarantees for an amount equal to 25% of the value of the goods for performance of the contract. They is also agreed to obtain sub-licences for the import of the goods. 9. In para 5 of the plaint, it is stated that insofar as the Contract G-471 is concerned, plaintiffs by their letter dated 9th June 1977 informed the defendants that 68 bales of Turkish cotton were shipped per S.S. Vishwa Usha by foreign suppliers from Turkastan to Mumbai under the import licence referred in the letter and obtained by the plaintiffs. The defendants were requested to advice as to the mode of payment and clearing arrangement. By another letter dated 8th July 1977, the defendants were informed by the plaintiffs that 57 bales of Argentine Cotton were shipped by the foreign suppliers per S.S. "Jal Mayur" to Mumbai and the same advice was sought with regard to this consignment/ supply. 8 By their letter dated 9th July 1977, 712 bales of the Orleans Texas cotton were shipped by the foreign supplier per "S.S.Jaltarang" from Guatemala to Mumbai and a similar advice was sought by the plaintiffs from the defendants. By the fourth letter dated 15th July 1977, the plaintiffs informed the defendants that 208 bales of Sudanese cotton were shipped by foreign suppliers per "S.S. Lok Vihar" from Sudan to Mumbai and advice in the aforesaid terms was sought with regard to this consignment/ supply as well. 10. Thereafter, the details of the contract G-664 are set out in the plaint (para 6) and the averments are on identical terms. As noted above, save and except the dates of letters/ communications, the details of the cotton bales, countries from where the same were imported and the names of the shippers carrying them other averments are were identical. 9 11. Although, plaint paragraphs are numbered wrongly for the purpose of present issue, both sides agree that plaint be taken as it is along with erroneous para numbers. It would be relevant and material to reproduce para 8, 9 and 11 of the plaint. They read thus:- "8. The plaintiffs say that pursuant to the said contracts the defendants had obtained sub-licence for import of various quantities mentioned above but they failed to furnish any bank guarantee as required by each of the said contracts. The plaintiffs say that the said goods mentioned above arrived at the port of Bombay on different dates in the month of September/ October 1977. The defendants were requested to clear the said goods but the defendants failed to do so and the plaintiffs had no 10 alternative but to clear the said goods and to store them in the plaintiffs’ godown at Bombay. Ultimately, the plaintiffs had no alternative but to serve legal notices on the defendants. By letter dated 22nd/ 27th March 1978 written by the plaintiffs’ Advocates to the defendants in respect of the said Contract No.GP 471, the plaintiffs’ Advocates after stating the facts regarding the import of the bales mentioned in the said contract, called upon the defendants to take delivery of the bales imported under the said contract as mentioned above within 15 days from the receipt of the said letter, failing which, they were informed that the goods would be sold and the defendants would be held liable for the loss that may be suffered by the plaintiffs. By another letter of the 11 same date written in respect of contract No.G/664 the plaintiffs’ Advocate after stating the facts regarding the import of the cotton comprised in the said contract, informed the defendants that if the goods imported under the said contract were not taken delivery of against payment within 15 days from the receipt of the said letter, failing which, the plaintiffs would have no alternative but to sell the goods and the defendants would be held liable for the loss that may be suffered by the plaintiffs. By another letter dated 12/6/1978 written in respect of Contract No.G/402, the plaintiffs’ Advocates after stating the facts regarding the import of the cotton comprised in the said contract, informed the defendants that if they failed to take delivery of the cotton imported under the said contract 12 within 15 days from the receipt of the said letter, the plaintiffs would sell the said goods and hold the defendants liable for the loss that may be suffered by the plaintiffs. The plaintiffs crave leave to refer to and rely upon the said three letters when produced. The defendants by their Advocate’s letter dated 10th May 1978 replied to the plaintiffs Advocate’s letter dated 22nd/27th March 1978 written in respect of Contract No.G/471 made several false allegations and contended that the plaintiffs were acting as the agents of the defendants and were not entitled to make any claim for damages and were not entitled to make any claim for damages against the defendants. The defendants also alleged in the said letter that there was no concluded contract and that thee was only a proposal to buy cotton. 13 The defendants also alleged that even otherwise there was no concluded contract between the plaintiffs and the defendants. The defendants also denied having received any documents for retirement against payment and contended that the goods were cleared by the plaintiffs at their own risk. In short the defendants by their Advocate’s letter dated 10th May 1978 repudiated the contracts. The defendants did not send separate replies to the plaintiffs’ Advocates three letters mentioned above." "9. The plaintiffs submit that the repudiation of the said contracts by the defendants is wrongful and illegal. The plaintiffs further submit that furnishing of bank guarantee by the defendants under the said contracts was not a condition precedent to the coming into existence of 14 the said contracts. The plaintiffs therefore submit that the defendants committed breach of the contracts and the plaintiffs had no alternative but to sell the said cotton which the plaintiff did as hereinafter mentioned. "11. The plaintiffs submit that the said three contracts were valid and binding contracts by and between the plaintiffs and the defendants and the defendants were bound to purchase and pay for the quantities of cotton imported under the said contracts. The plaintiffs say that furnishing of bank guarantee was not condition precedent to the coming into existence of the said contracts. The plaintiffs submit that the defendants committed breach of the said contracts by not taking delivery of the said goods and by repudiating the said contracts as 15 mentioned above. The plaintiffs submit that the defendants have wrongfully repudiated the said contracts. The defendants are therefore liable to pay to the plaintiffs the said amount as and by way of loss or damages suffered by the plaintiffs." 12. The claim arises in the light of above facts and the plaint averments proceed on the basis that the defendants committed breach of contract. According to the plaintiffs, the breach was committed by not taking delivery of the goods and by repudiating the same. The defendants have wrongfully repudiated the said contracts and, therefore, they are liable to pay to the plaintiffs the amount claimed as and by way of loss or damages suffered and sustained by the plaintiffs. Admittedly, the suit is filed on 14th April 1981. 16 13. The contention of Mr.Thacker, learned Senior Counsel appearing for defendants is that the nature of the relief claimed and the averments in the plaint so also the allegations made would reveal that Article 55 of the Limitation Act, 1963 (Act for short) would be attracted and is applicable. He contended that Article 55 falls in the Part II of the Schedule to the Act which is titled as "Suits relating to contracts". He submits that Article 55 deals with a suit for compensation for the breach of any contract, express or implied, not herein specifically provided for. He submits that the period of limitation is three years but the time begins to run when the contract is broken. Mr.Thacker submits that this is not a case of successive breach nor is it a case that the breach is continuing and when it ceases, that the suit can be filed. He submits that this is a case where the contract is broken, the moment 17 delivery is not taken by the defendants. He submits that the moment defendants have refused to take delivery the contract is broken and neither further correspondence nor the fact that the goods were taken delivery of by the plaintiffs and stored at the risk of the defendants and thereafter sold, would make any difference, insofar as the period of limitation is concerned. In other words, he submits that when the contract is broken by refusing to take delivery the suit ought to have been filed within three years from the date of such refusal or within a reasonable time from the date the communication with regard to taking delivery has been received by the defendants. Admittedly, the goods arrived in September/ October 1977. The suit should have been filed within a period of three years from this date but it is filed on 14th April 1981. Therefore, it is hopelessly time barred and must be dismissed. 18 14. Mr.Thacker has contended that the breach is of failing to lift the goods and that is committed in October 1977. Merely because the contract stipulates that the plaintiffs could have lifted the goods at their risk and stored them and subsequently given an opportunity to defendants to lift them, that is not something which will assist the plaintiffs in resisting the bar of Limitation. In other words, according to plaintiffs themselves, the breach is committed the moment the goods are not lifted by these defendants. Thereafter, merely because an option under the contract is exercised by the plaintiffs and they decide to wait till the damages and loss are quantified, does not mean that the period specified under Article 55 will not begin to run. The period commences to run from the date of the breach i.e. failure to lift the goods after the intimation of their arrival is received by these defendants. Therefore, subsequent of letters and the correspondence will not save the bar of 19 limitation. More so, when there is no pleading about limitation at all. 15. Mr.Thacker has finally contended that merely because the plaintiffs state in their plaint that the contract is repudiated by the defendants on 10th May 1978 and the claim for damages on account of this repudiation is within three years from 10th May 1978 will not take the matter out of the purview of Article 55. Assuming that the suit is not covered by Article 55 but by the Residuary Article 113, still the right to sue accrued from the date the breach was committed viz., the goods not being lifted by these defendants. Therefore, wrongful repudiation cannot be said to be the starting point of limitation. Therefore, even the alternate plea of the plaintiffs is of no assistance. The suit claim is hopelessly time barred and, therefore, the suit must be dismissed only on the ground of limitation. 20 16. Mr.Thacker was at pains to point out that the issue before me stands concluded in favour of defendants and against the plaintiffs. He relies upon a decision reported in A.I.R. 1995 Bom. 125 (Cotton Corporation of India Vs.M/s.Hindustan Cotton Company) which was rendered in the case of these very plaintiffs. 17. On the other hand, Mr.Rushabh Shah appearing for the plaintiffs contended before me that the arguments of defendants on limitation are totally misconceived and untenable. He submits that the suit claim is within limitation and not time barred as falsely contended. He submits that the contract must be read as a whole. It cannot be read in isolation. The contract sets out all obligations on the part of the parties thereto. Once the contract is worded widely and gives several rights and remedies to the plaintiffs, and when plaintiffs choose to 21 exercise them, they cannot be pinned down in the manner suggested by the defendants. In other words, plaintiffs’ claim cannot be thrown out by contending that the breach has occurred on the date of refusal to take delivery or failure to take delivery. If the contract gives several options and also remedies to exercise them, then, the plaintiffs cannot be faulted for exercising these options or exhausting them before deciding to file a suit. It is only after the goods are not collected or the defendants do not come forward to take delivery despite reasonable time having lapsed from the notice in that behalf, that the contract gives the plaintiffs the options as are stipulated in clauses 4 to 6, 9 and 24. He submits that once the contract stipulates all this and there are specific clauses, then, they cannot be ignored. More so, when there is no challenge to the contract, clauses and stipulations. Therefore, in this case, it cannot be said that the claim is barred 22 by limitation. He further submits that this is not a case which can be said to be fully covered by the decision of the learned Single Judge of this Court. He submits that in this case what the plaintiffs are seeking is to recover damages not only on account of failure of defendants to take delivery but also because of their repudiation of the contract for the first time in writing by letter dated 10th May 1978. Admittedly, the suit is filed within three years from such repudiation. In these circumstances, Article 55 is not applicable and the suit which is filed within three years from repudiation cannot be said to be barred by limitation. Mr.Shah was at pains to take me through the contract clauses and more particularly clause 7 thereof. He submits that this clause would fully support his contentions. Similarly, Indemnity being provided under the contract, it stands apart from the one considered by the learned Single Judge of this Court and the other 23 decisions relied upon by Mr.Thacker. Mr.Shah, therefore, prays that assuming Article 55 applies, the suit claim is not barred. 18. In support of his contentions Mr.Shah has relied upon a Division Bench decision of this Court reported in Vol.XLII BLR 175 (Shankar Nimbaji Shintre Vs. Laxman Supdu Shelke) and a Full Bench Decision of the Delhi High Court reported in A.I.R. 1967 Delhi 101 (Bhajan Singh Hardit Singh and Co. Vs. Karson Agency (India) and Ors.). 19. For properly appreciating these contentions, a reference will have to be made to Article 55 of the Limitation Act and to Article 113 as well. The Article read as under:- "55. For compensation for the breach of any contract, express or implied not herein specially provided for:- 24 Period of Limitation: Three years Time from which period begins to run: "When the contract is broken or (where there are successive breaches) when the breach in respect of which the suit is instituted occurs or (where the breach is continuing) when it ceases." "113. Any suit for which no period of limitation is provided elsewhere in this schedule:- Period of limitation is three years and the time from which period begins to run is "When the right to sue accrues"." 20. As early as in 1960, a Division Bench of Madras High Court (A.I.R. 1960 Madras 480 - Soundararajan and Co. Ltd. Vs. K.P.A.T. 25 Annamalai Nadar) had an occasion to consider an identical Article (115) in the old Limitation Act, i.e. Act of 1908 Before the Division Bench of the Madras High Court, the controversy was that the respondent plaintiff entered into contracts with defendant appellant for purchase of certain quantity of Australian self-raising flowers to be shipped by vessel which was expected to sail from Australia. The contract was subject to certain conditions. It is not necessary to refer to the subsequent acts of parties because was that the vessel was damaged by floods and could not sail as expected. The appellant defendant before the Madras High Court offered to deliver the goods by another ship at a later date but the respondent plaintiff rejected this offer. He refused to take delivery on the ground that the term of the contract was that goods have to be shipped by "A" vessel and that cannot be replaced and/or substituted and, therefore, the plaintiff was not bound to take 26 delivery of goods if they arrive by some other ship. Therefore, a suit was filed by respondent plaintiff before Madras High Court, claiming refund of the advance, which came to be decreed by the Trial Court and that decree was challenged before the Madras High Court. After holding that the respondent plaintiff was not justified in repudiating the contract on the ground that the shipment by a particular vessel was an integral part of the contract, the Division Bench further observed that even the cross suit/ appeal filed by the Defendant- Appellant before the Madras High Court cannot be allowed. That cross claim being out of time i.e. Time barred. In this context the Madras High Court has observed as under:- "12. The defendant firm has advanced a claim of further appeal upon which separate court-fee has been paid, and which is really in the nature of a 27 cross-suit. This relates to a sum of Rs.6390/-, representing the loss sustained by the defendant firm after re-sale of the goods, adjusting the advances already paid by the plaintiff. There is no doubt a condition in the contract by which the defendant firm could effect this resale at the buyer’s risk, in case the buyer rejected delivery. But we find, upon a scrutiny of the relevant dates, that this claim is definitely out of time. It ought to have been instituted within three years of the date of the breach of the contract, and it is no defence to this objection to urge that it was only the occasion of resale which enabled the defendant firm to ascertain exactly the decree of damages, or the precise amount which would represent the injury suffered by them. The occasion for ascertainment 28 will have to be distinguished from the date upon which the cause of action arose, and from which limitation began to run. Since this cross claim is out of time, the appeal is dismissed upon this point. Under the circumstances, we direct that the parties shall bear their own costs through out." 21. This decision of the Madras High Court came to be followed by the Full Bench of Delhi High Court and the facts are that the Appellants before the Delhi High Court had filed Suit No.718 of 1954 for recovery of certain monies