The Kerala State Civil Supplies Corporation Ltd. v. Vasavi Enterprises

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN** **WEDNESDAY, THE 1[ST] DAY OF MARCH 2017/11TH PHALGUNA, 1938** **AS.NO. 334 OF 2000 (B)** **-----------------------** **AGAINST THE JUDGMENT IN OS.486/1993 OF PRINCIPAL SUB COURT,ERNAKULAM DATED 16-06-1999** **APPELLANT(S)/DEFENDANT:** **-----------------------** **THE KERALA STATE CIVIL SUPPLIES CORPORATION, REPRESENTED BY THE MANAGING DIRECTOR, MAVELI BHAVAN, GANDHI NAGAR, KOCHI - 20.** **BY ADV. SHRI N.D.PREMACHANDRAN,S C, SUPPLYCO** **RESPONDENT(S)/PLAINTIFF: ------------------------** **M/S.VASAVI ENTERPRISES, REPRESENTED BY PARTNER B.SUDHAKAR, 15-2-301/1, FIRST FLOOR, MAHARAJA GUNJ, HYDERABAD.** **BY ADVOCATE SHRI M.P. GOGINDAN NAIR, SHRI THOMAS T.VARGHESE SMT.ACHU SUBHA ABRAHAM** **THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 23.02.2017, THE COURT ON 01.03.2017 DELIVERED THE FOLLOWING:** # **V.CHITAMBARESH & SATHISH NINAN, JJ.** **==================== A.S. No.334 of 2000** **==================== Dated this the 01[st] day of March, 2017** ## **J U D G M E N T** ## **SATHISH NINAN, J.** Challenging a decree for money, the defendant in the suit has preferred this appeal. 2. Contracts were entered into between the plaintiff and the defendant-Kerala State Civil Supplies Corporation Ltd.(for short, “the Corporation”), for supply of Andhra Pradesh boiled rice to the Corporation. Exhibits B1 to B3 dated 26.04.1990, 08.06.1990 and 19.03.1991 are the three tenders which form the subject matter of the suit. The entire quantity of rice as required by the Corporation was supplied by the plaintiff, though belatedly. From out of the amounts due to the plaintiff, certain amounts were deducted by the Corporation under various heads, the recovery for which ## **A.S. No.334 of 2000** -: 2 :- the suit was filed. 3. The deductions made by the Corporation from the total amounts payable to the plaintiff were mainly under the following heads, viz., (a) quality cut, (b) delay cut, (c) gunny cut and (d) destination cut. The parties are bound by the terms of the contract and are guided by the same to find out as to whether the Corporation is entitled and justified in making the deductions under the aforesaid heads. 4. Firstly, coming to the claim under 'quality cut', under tender No.1(Ext.B1) an amount of Rs.5,15,625.13 has been deducted. Under tender No.2 (Ext.B2) an amount of Rs.3,22,952.32 has been deducted and no amount has been deducted under tender No.3 (Ext.B3). Under this head, the claim of the Corporation is that the quality of the rice supplied did not conform to the specification. It was contended that the allowable limit of moisture content is 14% whereas the rice supplied under Exts.B1 and B2 tenders had a moisture content of 15.4%. ## **A.S. No.334 of 2000** -: 3 :- 5. The learned counsel for the plaintiff would contend that quality of the goods was inspected at the time of despatch by an independent inspection agency appointed by the Corporation, in terms of the tender conditions, who were satisfied regarding the quality, and that the plaintiff could not thereafter be made liable for the excess content of moisture, if any. Clause (5) of the tender conditions states that stock will be inspected at the despatching station by an independent inspection agency approved by the Corporation who will inspect regarding the quality, weight, gunny used, fitness of wagons, etc. On such inspection, a certificate in a prescribed format is also required to be issued by the inspection agency. Clause (8) of the tender conditions provide that the stock should be loaded in water tight covered wagons and that husk bags dunnage should be provided inside the wagons. It is so required to prevent moisturisation. In the case of both Exts.B1 and B2 tenders, admittedly, inspection was conducted at the despatching station and the quality **A.S. No.334 of 2000** -: 4 :- has been certified. The tender conditions further provide that on arrival at the destination final inspection will be conducted by an independent inspection agency appointed by the Corporation. Clause (4) of the conditions further provide that “if the quality is acceptable, stock will be taken delivery from the goods shed. The supplier should keep the goods in the goods shed to facilitate inspection. Therefore, the goods on reaching the destination are to be kept in the goods shed where inspection will be conducted by an independent inspection agency appointed by the Corporation. Pertinently, the inspection of the goods was conducted only at the Corporation's godown and not at the goods shed. It is admitted by DW1 that the goods in question were transported from the railway station to the Corporation's godown by an independent contractor and not by the plaintiff. DW1 has admitted that the responsibility for transportation is on the transporting contractor and further that the transportation is done in open trucks and lorries. Increase in the moisture **A.S. No.334 of 2000** ## -: 5 :- content would have occurred only while transporting the goods from the railway station to the godown of the Corporation. The contention of the plaintiff cannot be brushed aside. At any rate, under the terms of the contract, the Corporation was bound to have the inspection conducted at the railway goods shed whereas it was admittedly done only at the Corporation's godown and that too after transporting it in open trucks through some other contractor. Therefore, the plaintiff could not be fastened with the liability for excess moisture content in the rice or that the rice as supplied by the plaintiff was not of the specified quality. This is especially so since the quality was certified at the transporting station. Here, it is also pertinent to note that as regards the quality of the rice transported under tender number 3 (Ext.B3 tender), the inspection was conducted at the goods shed itself and it was found that it conforms to the required standard. No quality cut was imposed by the Corporation regarding tender No.3. From the circumstances as noticed **A.S. No.334 of 2000** ## -: 6 :- above, it is to be found that the plaintiff cannot be faulted with for the excess moisture content if any in the rice supplied and that no amounts are liable to be deducted from the amounts payable under the said head. 6. The second head under which deduction is made is 'delay cut'. It is not in dispute that as regards tender Nos.1 and 3 (Exts.B1 and B3), there has been delay in supply of the quantity, though of a few days, which is less than a month. Clause 18(c) of the tender conditions deal with the said issue. The same reads as under: “18(c) In case the performance is delayed by any reason including force majeure reason, acceptance of the belated supply will be only at our discretion and at the price at which the contract is given or any subsequent prices accepted by the Corporation in subsequent tenders or any negotiated lower price with the same supplier whichever is lower.” Therefore, the said clause provides that acceptance of belated supply will be at the discretion of the Corporation and that too at a price not higher than the **A.S. No.334 of 2000** -: 7 :- contract price. So the plaintiff will not be put to any advantage on account of belated supply. It is in evidence that the so called delay in respect of Exts.B1 and B3 tenders are only a few days which does not even extend to a month. It is also in evidence that though the plaintiff had made request with the railway for booking wagons, there was unavailability of wagons. Exhibits A36, A37 and A38 Certificates issued by the station Superintendent of the respective stations prove that the plaintiff had booked for the necessary wagons with the railway, in time. It is also in evidence that the plaintiff had promptly intimated the Corporation regarding the delay and the same was accepted by it. It was only in respect of telex dated 28.06.1990 issued by the plaintiff to the Corporation that the plaintiff was intimated as per Ext.B15 telegram that extension is granted on a price cut at the rate of Rs.2/- per quintal. All the other supplies were accepted without any demur. In Ext.A7 letter dated 13.01.1992 issued by the plaintiff to the Corporation it was made clear that **A.S. No.334 of 2000** ## -: 8 :- the quantity supplied with reference to the consignment under the telegram was only 23426.92 quintals as per Bill Nos.21 and 22 and that the amount to be recovered under the said head is only Rs.46,854/- whereas the Corporation has recovered an amount of Rs.1,16,252.50 for the same. Therefore the plaintiff claims an amount of Rs.69,398.50 towards the excess amount recovered by the Corporation under the head quantity cut. In the circumstances as noticed above, we find that the plaintiff's claim under the said head is justified and liable to be granted. 7. Under the head 'gunny cut', it is not in dispute that as per the terms of the contact, plaintiff was required to have the rice transported in new gunny bags. This is essentially to secure the quality ad quantity of the rice transported. Clause (5) of the tender conditions provides that rice shall be packed in new, sound and strong jute gunny bags. The said clause further provide that “if the bags used are not new, price cut will be imposed and the quantum of the same **A.S. No.334 of 2000** -: 9 :- will be decided at the discretion of the Corporation. On inspection by the independent inspection agency at the despatching station, it was found that the gunny bags used were second hand and not new. Consequent to the same, damages has caused to the Corporation both on quantity as well as quality. The court below, solely relying on Exhibit B30(i) Goods Received Report (G.R.R) has concluded that the number of the second hand bags has not been mentioned therein and thereupon disallowed the defendants claim. However the other G.R.R's specify the number of bags. Therefore, the Corporation cannot be found fault with in recovering the amounts covered under the head of gunny cut as regards tender Nos.1 and 2 (Exts.B1 and B2 tenders). As regards tender No.3 (Ext.B3) no amount has been recovered under the head gunny cut. 8. The next ground on which recovery is effected by the Corporation is under the head 'destination cut'. Exts.B1 to B3 specify the destination at which the goods are to be delivered with definite instructions regarding ## **A.S. No.334 of 2000** ## -: 10 :- the quantity. Recovery under this head has been effected in respect of tender Nos.2 and 3 (Ext.B2 and B3) alleging supply of either excess quantity or deficit quantity at the place specified. Provision regarding quantity is contained in Exts.A1, A10 and A17 purchase orders placed by the Corporation relating to Exts.B1 to B3 tenders, respectively. Clause (2) therein refer to quantity. It is to be noted that the said clause provides for an addition or shortage of 5%. For eg., in Ext.A1 purchase order, the quantity stipulated is 6000 (Six thousand) Mts. plus or minus 5%. Therefore, the supply could vary upto 5%. It is not in dispute that the variation in the quantity supplied by the plaintiff is well within 5% limit. Hence the Corporation is not entitled to recover any amount from the plaintiff under the head destination cut. 9. Another head of deduction is 'inspection charges'. The tender conditions specifically provide that the final inspection will be conducted at the expense of the corporation. Therefore the defendant **A.S. No.334 of 2000** ## -: 11 :- cannot retain any amount under the said head. 10. There is a further contention for the defendant that accepting the the correctness of Exhibit B4 accounts and the amounts retained by the defendant, the plaintiff has made an endorsement on Ext.B4 final statement of accounts, which endorsement has been marked as Ext.B4(a), and that in view of the same the plaintiff is not entitled to raise the claim. It is seen that the plaintiff had raised written objections to the accounts even prior to Ext.B4(a). After making the endorsement also, the plaintiff demanded payment of the balance amount. In **Kalathia R.L & Co v. State of Gujarat** ([2011] 2 SCC 400), the Apex Court has held that mere signing of a no claim certificate by the contractor does not preclude him from raising genuine claims. The court below has found that in the circumstances available in the case, plaintiff though not willing, was under compelling circumstances to accept Ext.B4 statement. When it has been found that the claim of the plaintiff is true and genuine, as held by the Apex Court, Ext.B4 **A.S. No.334 of 2000** ## -: 12 :- ## (a) cannot stand in the way of granting a decree. 11. Plaintiff has claimed interest at the rate of 21% on the amounts claimed, up to the date of suit and thereafter. In the nature of the contentions and the circumstances, we feel that since the non-payment of the amounts were on account of a _bona fide_ dispute, the claim for interest till the date of suit could be disallowed. As regards interest from the date of suit till realisation we feel that interest at the rate of 6% per annum would meet the interests of justice. 12. The plaintiff is to be granted a decree for realisation of Rs.8,38,577.85 under the head quality cut, Rs.4,63,414.25 under the head delay cut, Rs.80,756.38 under the head destination cut and Rs.77,738.44 under the head inspection charges, thus totalling to Rs.14,60,486.92. The plaintiff is entitled to get interest on the said amount at the rate of 6% per annum from the date of suit till realisation. In the result, the Appeal Suit is allowed in part. The plaintiff is granted a decree for realisation of ## **A.S. No.334 of 2000** -: 13 :- Rs.14,60,486.92 with interest at the rate of 6% per annum from the date of suit till realisation and also the proportionate costs from the defendant-Corporation. Sd/- **V.CHITAMBARESH, JUDGE.** Sd/- **SATHISH NINAN, JUDGE.** vsv /true copy/ P.S. To Judge