Case: Marwar Tent Factory Vs. Union Of India And Ors

1. Special leave granted. Arguments heard.2. This is an appeal against the judgment land order passed in R.F.A. (OS) 3 of 1983 on March 14, 1983 by the High Court of Delhithe Writ Petition in limini against the judgment and decree rendered by Chawla, J in Suit No. 50. of 1972 on February 12, 1982.3. The matrix of this case is stated hereunder: —The appellant M/s. Marwar Tent Factory is a firm having its registered office at Jodhpur (Rajasthan) and dealing in the manufacture and sale of tents and tarpaulins. The firm is a regular supplier of these goods to the defence services of India.4. On March 13, 1986 tenders were invited for the supply of tents by the Directorate General of Supplies and Disposals, the respondent No. 2. Accordingly, the appellant submitted a tender which was accepted by the officer of the Directorate General of Supplies and Disposals on behalf of the President of India. The said contract was of two kinds of tents ‘FliesThe agreed rate for the ‘Flieswas Rs. 225 per tent and the quantity was 19,100. In accordance with the said terms of the contract the goods were to be inspected at the premises of the firm at Jodhpur and after the same being passed by the Inspector, the goods had to be dispatched to the Commandant, C.O.D., Kanpur. It was further argeed between the parties that 95% of the price was payable on proof of despatch and production of the inspection note. The balance 5% was to be paid after receipt of the goods in good condition by the C.O.D., Kanpur.5 On October 14, 1968, one consignment of 1500 tents was despatched the C.O.D., Kanpur by the appellant-under Railway receipt No. 502671 dated 1495% of the price was paid by demand drafts dated 17.10.1968 and 19.5.1969. The Commandant. C.O.D., Kanpur reported that 224 tents out of a sale consignment had not been received at Kanpur and consequently a sum of Rs. 51,912. (being the full price of those 224 tents inclusive of sales tax) was deducted from the amounts due to the appellant udder another contract.6. The appellant made repeated requests and sent repeated reminders for payment of the said sum of Rs. 51,912 from the respondent but without any effect. As such, the appellant filed a suit being Suit No. 50 of 1972 in the High Court at Delhi for recovery of the said principal sum as well as interest on the principal. The appellant further claimed interest on two other consignments as the price of the said consignments was paid after a great delay. The two consignments were of 700 and 1400 tents dispatched on August 10, 1968 and August 27, 1968 respectively. Though 95% of the price was paid, the balance 5% amounting to Rs. 24,357 was not paid till December 1, 1971 despite repeated requests and reminders. The said payment of Rs. 24,357 was wrongfully delayed by about three years and a sum of Rs. 8, 525 was, therefore, claimed as interest on 12% per annum from 1.1.1969 to 1.12.1971 on the said amount, The total claim of the appellant was of Rs. 74, 972 i.e. Rs. 51.912 principal sum and Rs. 14,535 as interest on this and Rs. 8,525 as interest on the sum of Rs. 24,357 wrongfullyheld for three years.7. A joint statement was filed by the respondent Nos. 1, 2 and 5 as their interests were identical. The defence was that 224 tents were received short under railway receipt No. 502671 and the sum of Rs. 51,912 was rightly deducted from the payment due to the appellant under other contracts.8. The respondent Nos. 3 and 4 also filed a joint written statement stating inter alia that only 11 tents were delivered short under railway receipt No. 502671 for which the admitted liability was to the tune of Rs. 2.475. This sum had been paid to the C.O.D., Kanpur by debit adjustment.9. T.P.S. Chawla, J. by his judgment and order dated February 12, 1982 though dismissed the claim of the appellant substantially but in so far as the amount of Rs. 2,475 regarding the shortage of 11 tents admitted by respondent Nos. 3 and 4 was concerned, decreed the said sum in favour of the appellant with interest @ 12% per annum from 1.4.1972 till the date of judgment and further interest @ 6% from the date of judgment till the realisation of the amount. Against the said judgment and decree the appellant preferred an appeal being R.F.A. (OS) No. 3 of 1983 before the Division Bench of the said High Court. The said appeal was. however, dismissed by the High Court of Delhi by order dated March 14, 1983. The instant appeal on special leave has been preferred by the appellant against the aforesaid judgment and decree.

Reasoning:
It has been held by the Trial Court i.e. learned single Judge High Court, Delhi that the tents were carried in 3 wagons upto Agra. The railway line from Jodhpur to Agra was a, meter gauge. Thereafter, from Agra to Kanpur which is a broad gauge line the tents were put into four broad gauge wagons at Agra for onward transmission to Kanpur, as evident from the transmission register, It has been found that the railways could not establish the delivery of 224 tents under railway receipt No. 502671 for the Commandant, C.O.D., Kanpur from the unloading register. The shortage certificate issued by the railways corroborates the entries in the unloading register. The particulars of the consignment are set out in the heading of this document. The railway receipt is No. 502671 and the names of the sendor and consignee are also mentioned. The Traffic Officer,C.O.D., Kanpur filed a claim with the railways on February 10, 1969 for 224 packages received short and this claim was made under railway receipt No. 50267!. The plea of the railways was that the shortage was of 11 tents and not of 224 tents. It has been found by the Trial Court that this plea is falsified by the unloading register, the shortage certificate and the reconciliation statement as also the report made by their Traffic Inspector on December 9, 1970. Accordingly, it was held that under railway receipt No. 502671 the appellant delivered the full quantity of 1500 tents to the railways but the latter failed to deliver 224 tents out of (this consignment to the Commandant. C.O.D., Kanpur and as such the railways are estopped from contending that it was under some other railway receipt. The Trial Court, however, held that no decree could be passed against the railways because the plaint did not contain any claim for loss or non-delivery against the railways. Secondly, the suit against the railways was barred by time and thirdly since no notice under Section 78-B of tile Indian Railways Act was served on the railways by or on behalf of the appellant. The appellant, however, submitted that the title of the goods passed on to the respondent No. 5, Commandant, C.O.D. Kanpur, the moment the tents were lodged on rail head, Jodhpur as the term of delivery under the contract was P.O.R. Jodhpur. For any short delivery of the goods made by the railways at Kanpur, the appellant was not responsible and the respondent No. 5, Under the terms of the contract is not entitled to deduct the price of the short delivery of tents i.e. 224 tents. It was for the Commandant, C.O.D., Kanpur to claim damages from the railways and the Commandant had actually made a claim as stated hereinbefore to the railways in respect of the short delivery. The learned single Judge, however, found that the abbreviation. F.O.R. meant Free on Rail meaning simply that the east of the carriage of the goods upto the railway wagon is included in the price and must be borne by the seller and the cost of carriage thereafter is to be borne by the buyer. It has also been held that the risk in live goods would not pass at Jodhpur as expressly stipulated in the general conditions of contract contained in Form DOS and D-68. These were made applicable by clause 7 in the Schedule of acceptance of tender. Special emphasis was laid to the condition No. 4 entitledof contractor for executing theThe learned Judge has with reference to sub-clause (10) of this condition held that the goods shall remain in every respect at the risk of the contractor until theirdeli very to the consignee at the stipulated place and as such the risk of the appellant remains until the goods were actually delivered to the Commandant, C.O.D. Kanpur. The argument as regards condition No. 14 of the general conditions of contract as well as its sub-clause (2) entitledwas negatived on the ground that the risk was governed by condition 4(1) of the general conditions of contract. The claim before the railways being time barred and also no notice under Section 78-B of the Indian Railways Act having been served on the Railways within the stipulated period, the appellant could not claim for damages for breach of contract and for the price of the tent not delivered. However, in respect of the price of all tents the shortage of which wasby the railways and for which a sum of Rs. 2,475 was paid to the respondent No. 5 by the appellant was decreed with interest @ 12% per annum from 1.4.1972 till the date of passing of the decree and also further allowed interest on the said sum @ 6% per annum thereafter till the date of payment. The respondents, however, did not question the finding of the Trial Court regarding the short delivery of 224 tents at the railway-station at Kanpur. Admittedly, there has been a short delivery of 2.24 tents out of the consignment of 1500 tents loaded at Jodhpur railway station in the railway wagon under the said receipt No. 502671.11. In order to decide and fix the responsibility for passing of the decree in respect of the sum of Rs. 51,912 being the full price of 224 tents inclusive of sales tax deducted from the amount due to the appellant under another contract by the respondent No. 5, it is pertinent to consider the question when the property in goods passed from the seller to the buyer at Jodhpur when the goods were loaded in railway wagons for delivery to the consignee at Kanpur. The learned counsel for the appellant drew our attention to the condition No. 11 of the Schedule of acceptance of tender dated February 29, 1968. It has been mentioned therein that the terms of delivery was F.O.R. Jodhpur i.e. free on rail at Jodhpur railway station. It has also been mentioned that before the goods are loaded on railway wagons for delivery to the respondent No.5 at Kanpur, the Inspector, I.G.S. North India will inspect the same atpremises at Jodhpur and after approval the said goods will be despatched to its destination by placing them in the railway wagons at Jodhpur railway station and the railway receipt has to be sent to the consignee under registered cover immediately after despatch of the stores with full details. It is also stipulated that 95% of the price of the goods will be paid by the respondent No. 5 on receipt of the railway receipt and the inspection note and the balance 5% will be paid after the same reached at the destination in good condition. Referring to this term for delivery under clause 11 of the Schedule of acceptance of tender, it has been urged by the learned counsel for the appellant that the delivery was complete at Jodhpur when the goods were loaded in the goods train for delivery to the respondent No. 5 at Kanpur and property in the goods passed to the buyer as soon as the goods were despatched by railway at Jodhpur. Thereafter, the risk in respect of the goods despatched remained with the consignee. The appellant, the consignor is entitled to get the entire price of the 224 tents which were short delivered by the respondent Nos. 3 and 4 to respondent No. 5 at Kanpur in view of the clear finding by the Trial Court that though the entire consignment of 1500 tents was actually loaded in the railway wagons for despatch to the consignee, the respondent No. 5. The respondent No. 5 duly filed a claim to the railways, the respondent Nos. 3 and 4 for the short delivery to the tune of 224 tents immediately after taking delivery of the goods. In order to decide the question. as to whether the rights in the goods passed from the seller to the buyer i.e. from the appellant to the respondent No. 5 as soon as the goods were loaded in railway wagons at Jodhpur and the railway receipt was sent to the consignee, it is pertinent to refer to the meaning of the words F.O.R. Jodhpur. InLaw of England, 4th Edition (Volume 41) at page 800, para 940 it has been mentioneda free on rail contract (F.O.R.) the seller undertakes to deliver the goods into railway wagons or at the station (depending on practice of the railway) at his own expense, and (commonly) to make such contract with the railway on behalf of the buyer as is reasonable in the circumstances. Prima facie the time of delivery f.o.r. fixes the point on which property and risk pass to the buyer and, the price becomes payable.In the instant case, undoubtedly, it has been found by the Courts below that the short delivery of 224 tents occurred during the transmit of the said goods by the railways. It is also an admitted fact that the respondent No. 5, the Commandant, C.O.D. Kanpur deducted the price of the said 224 tents from the other bills of the contractor i.e. the appellant and did not pay the same. The appellant has claimed interest in respect of the price of the said goods being not paid to the appellant within a reasonable time from the date of delivery of the goods i.e. for the period from 1.1.1969 to 1.12.1971. The respondent No. 5 did not dispute the claim of the appellant in this regard. His only plea was that in the notices under Section 80 of theCode of Civil Procedure served on the respondents the claim of interest was not made and as such the claim ofcould not Be allowed. In the case of B.B. Bose v. National Coal Trading Company. AIR 1966 (Patna) 346 the plaintiff filed a suit for recovery of price of goods sold to the defendant. Before filing the suit the plaintiff served a demand notice on the defendant. In the demand notice Ex. 2, no claim for interest was put by the plaintiff. It was urged on behalf of the defendant that there was no stipulation for payment of interest in case the price remained unpaid in the contract and as such the plaintiff could not claim any interest on the unpaid amount. This was negatived by the High Court, Patna and it wasis, no doubt, true, but the demand clearly was for the outstanding balance price of coal which the plaintiff had supplied to the defendant. The supplies had been effected upto the 26th June, 1954, and in the normal course, the price ought to have been paid by the defendant within a reasonable time of the deliveries, but the payment had been delayed for nearly three years and plaintiff was obliged to institute the present suit for recovery of the price. In such circumstances, it was within the discretion of the court to award interest to the plaintiff at a reasonable rate on the amount of the price under S. 61(2) of the Sale of Goods Act. The price was undoubtedly payable when the notice of demand, (Ex. 2) was served by the plaintiff upon the defendant and there can be no doubt that the rate of 6 per cent per annumSimilar question cropped up decision in the case of M/s. M.K.M. Moosa Bhai Amin, Kota v. Rajasthan Textile Mills, Bhawanimandi. In this case the plaintiff filed the suit for price of the goods delivered as well as for interest on the unpaid price. The claim regarding interest was disallowed by the District Judge on the ground that there, was no stipulation for payment of interest in case the pries of the goods supplied remained unpaid. It was contended on behalf of the plaintiff that even in the absence of the contract, the plaintiff was entitled to reasonable interest under Section 61(2) of the Sale of Goods Act. 1930. The supply had been effected upto September 18, 1962 and in normal case price of goods ought to have been paid by thewithin a reasonable time of the deliveries but the payment had been delayed for nearly a years which compelled the plaintiff to bring the suit for recovery of the price. It has been held that in such circumstances, the lower courts should have exercised discretion in favour of the plaintiff and awarded interest on the amount of the price of the goods under Section 61(2) of the Sale of the Goods Act. High Court of Rajasthan allowed interest @ 6% per annum which was considered to be a reasonable rate of interest.20. On a conspectus of the decisions referred to before as well as the provisions of Section 61(2) of the Sale of Goods Act. We are constrained to hold that-the plaintiff is entitled to get a decree of interest on the unpaid price from 1.1.1969 to 1.12.1971 @ 6% per annum which is considered to be a reasonable rate of interest, as claimed by the plaintiff-appellant.