AS/2014/2001 of JAGADISH INDUSTRIES NIZAMABADAND4 OTHERS Vs FOOD COR.OF INDIA NIZAMABADAND2 OTHERS on 16 December 2002

1. Whether Sri P.B. Sajwal Dist. Manager has capacity to file suiton behalf of the plaintiff corporation?on behalf of the plaintiff corporation?

2. Whether under 1[st] agreement the short delivery of rice is only231.506 M.Ts. and not 231.825 MTs?231.506 M.Ts. and not 231.825 MTs?

3. Whether under 3[rd] agreement the short delivery of rice is only923.634 M.Ts. and not 962.865 MTs?923.634 M.Ts. and not 962.865 MTs?

4. Whether the liabilities of defendant to pay 2 ½ times for 1[st] and 3[rd] agreement costs of rice is illegal and cannot beendorsed?endorsed?

5. Whether defendants signed agreement under influence ofplaintiff?plaintiff?

6. Whether defendants are liable to pay at the rate of Rs.606-15 ps, Rs.280-50 ps & Rs.627-87 ps per quintal of shortRs.606-15 ps, Rs.280-50 ps & Rs.627-87 ps per quintal of short delivery of rice under 1[st], 2[nd] and 3[rd] agreements?

7. Whether the penalty of Rs.2/- per quintal for unlifted quantity ofpaddy is illegal and unenforceable?paddy is illegal and unenforceable?

8. Whether defendants failed to account for Rs.42,423/- gunnybags and liable to pay Rs.4,29,945/-?bags and liable to pay Rs.4,29,945/-?

9. Whether claim of interest by plaintiff is illegal in view of penaltyclauses in agreements?clauses in agreements?

10. Whether suit is barred by limitation?

11. Whether the letter dated 05-05-1981 of defendants amounts toadmission and acknowledgement of liability?admission and acknowledgement of liability?

12. To what relief the parties are entitled to?

--Additional Issue framed on 26091988:

1. Whether under second agreement dated 25-08-1980 there is a shortdelivery of rice 6.793 M.T by the defendants?delivery of rice 6.793 M.T by the defendants?

5. During the course of trial, on behalf of the plaintiff, PWs.1to 3 were examined and Exs.A-1 to A-18 were got marked. On behalfof the defendants, DW-1 was examined and Exs.B-1 to B-4 were gotmarked. After full-fledged trial, the trial Court decreed the suit in partthrough the judgment dated 31-07-1989. Being aggrieved, the plaintiff-corporation preferred thepresent A.S.No.1251 of 2000 and the defendants preferredA.S.No.2014 of 2001.

6. The learned counsel appearing for the plaintiff-corporation strenuously argued that the trial Court failed to appreciatethat Ex.A-10, statement of rice supplied date wise, is prepared as perthe accounts maintained by the plaintiff and that expressing doubtabout its correctness is not tenable. He further urged that the trialCourt ought to have held that there is short delivery of 231.825 metric tonnes, 6.783 metric tonnes and 962.865 metric tonnes under the first,second and third agreements respectively. He also urged that the trialCourt erred in holding that the interest and transit loss cannot beincluded while calculating the economic cost and also erred in holdingthat the plaintiff is entitled to Rs.1/- per quintal towards the penalty forthe unlifted paddy when the agreement specifically provides the sameat Rs.2/- per quintal. Therefore, the trial Court ought to have held thatthe defendants are bound by the terms of the agreements in Exs.A-2,A-4, A-6 and A-8. He further urged that the claim of the plaintiff is notbarred by limitation in view of Ex.A-15, acknowledgment, dated 05-05-1981 and placed reliance on the decisions reported inSHAPOOR FREDOOM MAZDA v. DURGA PROSAD CHAMARIA ANDOTHERS[[1]]and M/s. LAKSHMIRATAN COTTON MILLS CO. LTD v.ALLUMINIUM CORPORATION OF INDIA LTD[[2]].

7. The learned counsel appearing for the defendantsargued that the suit filed by the plaintiff is not maintainable and itstands as abated as one of the partners (Defendant No.2) diedsubsequent to its institution and the legal representatives of defendantNo.2 were not brought on record in time and that the suit is barred bylimitation and that the stipulation of liquidated damages at 2½ timesthe economic cost of rice is unconscionable, and unenforceable andthat fixing the damages @ Rs.627-87 per quintal for the undeliveredrice is absolutely unjustified and that levying penalty of Rs.1/- perquintal for the unlifted paddy is unsustainable and that the finding ofthe trial Court fixing the liability towards cost of gunny bags iserroneous as the plaintiff did not prove the same.

8. Basing on the pleadings, though the trial Court framed as many as 12 issues, now the points that arise for consideration are:

1. Whether the suit filed by PW-1 on behalf of the plaintiff-corporation is maintainable?plaintiff-corporation is maintainable?

2. Whether the suit is barred by limitation?

3. Whether there is shortage of delivery of resultant rice pursuant to the agreements entered into between the plaintiffand defendants?

4. Whether the plaintiff is entitled to 2 ½ times economic costfor the shortage of delivery of rice?for the shortage of delivery of rice?

5. Whether the plaintiff is entitled to the penalty of Rs.2/- perquintal for the unlifted quantity of paddy?quintal for the unlifted quantity of paddy?

6. Whether the plaintiff is entitled to claim Rs.4,29,945/-towards the cost of 43,423 gunny bags? andtowards the cost of 43,423 gunny bags? and

7. Whether the plaintiff is entitled to claim interest in view ofthe penalty clause in the agreements?the penalty clause in the agreements?

POINT No.1:

9. The plaintiff, in order to prove that the suit is maintainable,got examined PWs.1 to 3 and got marked Ex.A-16, certified copy of thedelegation of powers, Ex.A-17, letter addressed to the DistrictManager, and Ex.A-18, copy of the express telegram sent by HeadOffice.

10. The defendants have taken a specific plea that the saidP.B. Sajwal, who signed the pleadings of the plaint on behalf of theplaintiff-corporation, is not authorised to sign the pleadings and has nolegal capacity to file the suit. P.B. Sajwal was examined as PW-2. According to him, he worked as District Manager, FCI, Nizamabadduring July, 1982 to January, 1985 and he was delegated the powersand authorised to file the suit on behalf of the plaintiff-corporation. Accordingly, he signed on the plaint and marked the certified copy ofthe extract of delegation of powers as Ex.A-16. PW-3, another witnessby name Sanjeeva Rao, who was working as District Manager, FCI,Nizamabad, deposed that the manager of the plaintiff-corporation isauthorised to sign the plaint and accordingly, PW-2 was authorised through Ex.A-16 to file the suit on behalf of theplaintiff-corporation and he also produced Ex.A-17, letter authorisingthe District Manager to sign the pleadings on behalf of the plaintiff. Asseen from Ex.A-16, the powers are delegated effecting from 01-07-1980 as amended upto 06-12-1985 in which the appropriate officer notbelow the rank of District Manager obtaining necessary prior approval of the authority competent to sanction filing suit appeals etc., isauthorised to sign and execute vakalat, plaint and written statementand verify the pleadings. Ex.A-17 is the letter, dated 28-01-1984 underwhich the Deputy Manager has communicated to the District Manager,FCI, Nizamabad about the approval of the Managing Director, FCI,Head Quarter, New Delhi, authorising him to sign and verify the plaintetc. filed against M/s. Jagdish Industries and Radhakrishna Rice Mill,Nizamabad, on behalf of the FCI, Nizamabad. So, Exs.A-16 and A-17clearly show that there is an amendment and delegation of powersw.e.f. 01-07-1980 under which the District Manager, with the priorapproval of the competent authority, is empowered to sign thepleadings. Therefore, Exs.A-16 and A-17 are the crucial documentsbasing on which the suit was filed against the defendants.

11. Accordingly, PW-2, who was working as DistrictManager, FCI, Nizamabad, as on the date of filing of the suit, wasauthorised to sign the plaint and he has legal capacity to file the suit,and therefore, the suit is maintainable. Hence, we see no force in theargument advanced by the learned counsel for the defendants that thesuit filed by PW-2 on behalf of the plaintiff is not maintainable. The trialCourt also, after considering the contents of Exs.A-16 and A-17, heldthat the suit is maintainable. Therefore, the finding of the trial Court onthis point is sustainable.POINT No.2:

12. The defendants have taken a plea that the first threeagreements were executed on 25-08-1980 and 4[th] agreement wasexecuted on 05-01-1981, whereas the suit was filed on 31-01-1984 and as such, it was not filed within three years from thedate of agreement and therefore, it is barred by limitation.

13. The learned counsel for the plaintiff-corporation mainlyurged that Exs.A-2 and A-6, agreements, are dated 25-08-1980 and 05-01-1981, and under the agreements it is a running contract and the period can be extended and as such, the suit wasfiled within the period of limitation from the date of delivery of resultantrice. It is further argued that under Ex.A-15, dated 05-05-1981, one Satyanarayana Attal, one of thepartners of D-1 firm, has acknowledged the liability and as such, thelimitation starts from 05-05-1981.

14. The learned counsel for the defendants argued that Exs.A-2 and A-6, agreements, were tampered with and the dates werealtered to bring the suit within the period of limitation.

15. The trial Court observed that in Ex.A-15 there is analteration, but it was signed by one Rajkumar who is not a partner inthe firm. It is also noted that Satyanarayana Attal has signed at theplace of alteration. Admittedly the said Rajkumar was figured as awitness in Ex.A-2, wherein at page No.9, the date is mentioned as 25-03-1981 and though the month column is altered, it is signed bySatyanarayana Attal, who is a partner of D-1 firm. Though there arestrike outs and alterations in Ex.A-15, the trial Court discussed the evidence on record and came tothe conclusion that the corrections were attested by one of the partnersof the firm i.e., Satyanarayana Attal.

16. Though the learned counsel for the defendants citedseveral decisions in the trial Court, the trial Court did not place relianceon those decisions, as the facts and circumstances of those decisionsare entirely different from the facts and circumstances of the case onhand, and held that the suit is well within the period of limitation.

17. The learned counsel for the plaintiff placed reliance onthe decisions reported in SHAPOOR FREDOOM MAZDA’s case (1 supra)and M/s. LAKSHMIRATAN COTTON MILLS CO. LTD’s case(2 supra), and argued that the acknowledgement as prescribed underSection 19 of the Limitation Act merely renews the debt and it does notcreate a new right of action.

18. In SHAPOOR FREDOOM MAZDA’s case (1 supra), it was held:

“Acknowledgment as prescribed by S.19 merely renews debt; it doesnot create a new right of action. It is a mere acknowledgement of theliability in respect of the right in question; it need not be accompaniedby a promise to pay either expressly or even by implication.

The statement on which a plea of acknowledgement is basedmust relate to a present subsisting liability though the exact nature orthe specific character of the said liability may not be indicated inwords. Words used in the acknowledgment must, however, indicatethe existence of jural relationship between the parties such as that ofdebtor and creditor, and it must appear that the statement is madewith the intention to admit such jural relationship. Such intention canbe inferred by implication from the nature of the admission, and neednot be expressed in words.

In M/s. LAKSHMIRATAN COTTON MILLS CO. LTD’s case (2 supra), it was held:

“The statement on which the plea of acknowledgement is foundedneed not amount to promise and need not indicate the exact nature orthe specific character of the liability. It must, however, relate to apresent subsisting liability and indicate the existence of juralrelationship between the parties such as for instance, that of a debtorand a creditor and the intention to admit such jural relationship. Suchan intention need not be in express terms and can be inferred byimplication from the nature of the admission and the surroundingcircumstances.”

19. From the above decisions, it is clear that where there isan acknowledgement, it need not be in clear words, but it can beinferred by implication from the nature of the admission and thesurrounding circumstances. Admittedly in the case on hand, Ex.A-15,dated 05-05-1981 clearly goes to show that one of the partners of thefirm acknowledged the liability to the extent of 1155.140.443 metrictonnes of rice and thus under Ex.A-15, the defendants throughSatyanarayana Attal have admitted that they are due under the saidagreement of rice, and as such, in view of the aforesaid decisions,Ex.A-15 can be taken as an acknowledgement and admission about the relationship of the parties. It is rightly argued by the learnedcounsel for the plaintiff that as the liability is admitted under Ex.A-15,dated 05-05-1981 by Satyanarayana Attal, one of the partners of the firm, theagreement binds the liability of the firm and therefore, the limitationstarts from the date of Ex.A-15 i.e., 05-05-1981.

As Ex.A-15, dated 05-05-1981 is binding on the defendants, thepresent suit is within the period of limitation. Therefore, the finding ofthe trial Court that the suit is within the period of limitation issustainable.

POINT No.3:

20. On this point, the trial Court, after considering the evidenceon record, held that there is short delivery of 231.506 metric tonnes ofrice under the first agreement and 923.634 metric tonnes of rice underthe third agreement and there is no shortfall under the secondagreement.

21. According to the plaintiff, under the first agreement thedefendants have lifted 4140.376.00 metric tonnes of paddy anddelivered the resultant rice of only 2662.069 metric tonnes and thatthere is short delivery of 231.82.000 metric tonnes; under the secondagreement, the defendants have lifted 993.780 metric tonnes anddelivered resultant rice of 680.810 metric tonnes and thus there is shortdelivery of 6.793.000 metric tonnes; under the third agreement, theylifted 2916.576.000 metric tonnes of paddy and delivered resultant riceof 1085.005.000 metric tonnes and thus there is short delivery of962.865.000 metric tonnes. However, the defendants denied the sameand clearly stated that there is no short delivery under the agreements.In proof of the alleged short delivery, the plaintiff filed Ex.A-11 showingthe paddy lifted under the first three agreements and the ricedelivered. Ex.A-15 is the letter dated 05-05-1981 along with thestatement given in reply to the notice of the plaintiff in Ex.A-14. According to the defendants, they have lifted 2592.273.449 metric tonnes of Tella Hamsa and the short fall thereof, according to theplaintiff, is 227.379 metric tonnes, however according to the plaintiff, itis 227.035.365 metric tonnes against the shortfall claimed by theplaintiff. The claim of the plaintiff is mainly based on Exs.A-11 and A-15.

As per Ex.A-11, the short delivery is 1201.543.000 metric tonnes. Asper Ex.A-15, it is only 1155.140.000 metric tonnes. Thus as per thestatements of the plaintiff and defendants, there is a difference of46.403.000 metric tonnes of resultant rice.

As stated already, the plaintiff’s claim is based on Ex.A-11 documentthrough the evidence of PW-1. On plaintiff’s side, no document is filedevidencing the actual quantity of paddy lifted and the resultant ricedelivered by the defendants and the shortfall thereunder. However, asthe defendants admitted the shortfall in the written statement, it can besaid that there is short delivery of 231.506 metric tonnes of rice underthe first agreement and 923.634 metric tonnes of rice under the thirdagreement and there is no short delivery under the second agreement. Moreover, the claim of the plaintiff-corporation on the point of limitationis based on Ex.A-15. If that be the case, Ex.A-15 document and itscontents have vital bearing in the present suit on hand. If Ex.A-15 istaken into consideration, the finding of the trial Court that there is shortdelivery of rice is sustainable. Ex.A-15 is the acknowledgment givenby one of the partners of the firm which saved the limitation in filing thesuit. The allegation of short delivery is also based on Ex.A-15 crucialdocument.

22. In view of the above circumstances, the finding of thetrial Court with regard to the short delivery of rice is sustainable.POINT Nos.4 and 5:

23. As per the agreements in Exs.A-2 and A-6, the defendantsare liable to pay 2 ½ times economic cost as per clause O(iv). It isadmitted by the plaintiff that under the second agreement, the defendants are liable to pay only 50% of the government price, but asper Ex.A-4, second agreement, the defendants are not liable forpayment for the shortfall of rice as there is no shortfall of delivery of riceunder the second agreement.

24. The learned counsel appearing for the plaintiff argued thatthe paddy supplied by the plaintiff has to be milled by the agents andthe resultant rice will be sent to the public distribution system to bedistributed for the consumers and if there is any shortfall in the deliveryof rice by the millers, it will affect the public distribution system and assuch, certain penalties have been imposed in the agreement itself, sothat the millers will not avoid the delivery of the resultant rice or will notleave the paddy agreed to be lifted by them.

25. On the other hand, the learned counsel for thedefendants argued that the said penalty is not just and reasonable,and it is excessive.

26. In the trial Court, series of rulings were submitted, butthe trial Court disagreed with the observations in those rulings on theground that they are not applicable to the facts and circumstance of thesuit on hand. The trial Court also noted that all the decisions cited bythe learned counsel for the defendants go to show that under Section74 of the Contract Act, the party is entitled for compensation for breachof contract by other party, but the measure of damages must bereasonable and where the contract itself contained pre-estimateddamages, the said damages can be awarded in breach of contract andSection 74 of the Contract Act permits compensation though the extentof actual loss or damages is not proved.

27. At this juncture it is pertinent to note that as per Ex.A-2,agreement, there are no clauses regarding the imposition of penalty ordamages for the short delivery of rice, for which the plaintiff is entitled. Whereas in Ex.A-6, agreement, dated 05-01-1981, Clause ‘O’ (iv)indicates that in case the agent fails to supply the resultant rice, therecovery would be made from him for shortages of paddy and rice at 2

½ times economic costs of the rice according to the variety involved,and under cause ‘M’ (iii), damages shall be recovered from him atRs.2/- per quintal on the stock which remains unlifted by the stipulateddate. It is also clearly noted that the Senior RegionalManager/Regional Manager may, however, waive or reduce thedamages depending upon the specific circumstances. He may also,besides imposing the damages, cancel the contract without forfeitingthe security deposit and get the remaining quantity milled from someother miller.

28. Therefore, it is clearly asserted in the agreements itselfthat in case of non-delivery of resultant rice, 2 ½ times economic costof the rice, according to the variety involved, will be collected and incase of unlifted paddy, Rs.2/- per quintal will be collected, however,the said amount can be waived or reduced by the Regional Managerdepending upon the circumstances.

29. The trial Court, while exercising its discretion, which isvested to the Regional Manager under the agreements, rightly reducedthe penalty to Rs.1/- per quintal for the unlifted quantity of rice in thecircumstances of the case on hand, and held that 2 ½ times of the economic cost of rice at Rs.547.81 ps per quintal forthe undelivered rice of 1155.140.443 metric tonnes should becalculated and penalty of Rs.1/- per quintal for the unlifted quantity ofpaddy of 18,689.319.253 metric tonnes has to be calculated.

30. Therefore, the trial Court rightly answered the points andwe see no grounds to differ with the finding of the trial Court on thesepoints and the same is sustainable.POINT No.6:

31. The plaintiff claimed an amount of Rs.4,29,945/- towards42,423 gunny bags supplied to the defendants at the time of lifting thepaddy. The defendants denied that they have received any gunnybags. According to the evidence of PW-1, the defendants are due of 42,423 gunny bags under the four agreements i.e., Exs.A-2, A-4, A-6and A-8. During the course of evidence, DW-1 denied that he is liablefor payment of the value of gunny bags. The defendants, exceptdenying that they are not liable to pay for gunny bags, they did notstate that the gunny bags were not supplied to them at the time of liftingthe paddy. It is an admitted fact that as per Ex.A-13, statement ofgunny bags, the defendants have lifted 1,15,969 gunny bags in totaland returned only 73546 gunny bags and therefore, the balance gunnybags are 42,423. Admittedly the defendants received the gunny bagsas per Ex.A-13, and therefore, it is for them to discharge the burden onthat score. As there is no explanation from the defendants, they areliable to pay an amount of Rs.4,29,945/- for 42,423 gunny bags asclaimed by the plaintiff basing on the agreements.

32. The trial Court also came to the same conclusion andallowed the claim of the plaintiff for Rs.4,29,945/- towards the value of42,423 gunny bags. Therefore, the finding of the trial Court on thispoint is sustainable.

POINT No.7:

33. The plaintiff claimed interest @ 11% per annum underExs.A-2 and A-6. The defendants pleaded that they are not liable topay interest as claimed by the plaintiff. Admittedly there is a clause inthe agreement for imposing penalty for shortfall of rice and unliftedpaddy. As the agreement clearly postulates about the claim of interestbesides imposing of penalty on shortfall of rice and unlifted quantity ofpaddy, we see no justification in claiming interest again.

34. The trial Court also viewed in right perspective anddeclined to grant interest at 11% per annum, however awarded interest@ 12% per annum from the date of filing of the suit.

Though the said rate of interest at 12% per annum from the date of suitis excessive, in view of the circumstances of the case on hand muchless when the plaintiff made a claim for future interest at 18% perannum, the finding of the trial Court on that score is justified and the same is sustainable.

35. Therefore, on an overall scrutiny of the ocular evidenceof PWs.1 to 3 and DW-1 and the documentary evidence of Exs.A-1 toA-18, and Exs.B-1 to B-4, the findings of the trial Court are based onthe evidence on record and we see no grounds to differ with the same,and accordingly, the judgment of the trial Court is sustainable. Thereare no merits in these appeals and they are liable to be dismissed.

36. In the result, both the appeals are dismissed confirmingthe judgment of the trial Court in all respects. No order as to costs.

________________

A. GOPAL REDDY, J

Date: 20-09-2011YCR

_______________

K.S. APPA RAO, J

[1]AIR 1961 SC 1236(1)[2]AIR 1971 SC 1482(1)