THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Pronounced on: 16.08.2011
+ CS(OS) 2151/2010
M/S CENTURY ALUMINIUM MANUFACTRING CO LTD
..... Plaintiff
Through: Mr R.K. Sanghi, Adv.
versus
M/S GOODPAL INDUSTRY LIMITED & ORS .....
Defendants
Through: Mr Aaditya V.K., Adv.
Mr Satya Prakash Proxy Counsel for
Mr Dharamdev, Adv for D-4
CORAM:-
HON'BLE MR JUSTICE V.K. JAIN
1. Whether Reporters of local papers may
be allowed to see the judgment? No.
2. To be referred to the Reporter or not? No.
3. Whether the judgment should be reported No.
in Digest?
V.K. JAIN, J. (ORAL)
IA No. 17068/2010 (O. 7 R. 11 CPC)
1. This is a suit for recovery of damages and
injunctions. It is alleged in the plaint that defendant No. 1,
which is a Chinese company, is carrying business in India
CS(OS)No. 2151/2010 Page 1 of 12
through defendant No. 2, who is its Indian agent. It is
further alleged that defendant No.2, on behalf of defendant
No. 1 sent an Indent of the contract for and on behalf of
defendant No. 1, followed by the sales confirmation issued
by defendant No. 1. It is also alleged that on receipt of the
offer, the plaintiff placed a purchase contract on defendants
No. 1 and 2. On taking delivery of the material sent in three
containers of 24 MT each, the plaintiff discovered that the
goods were defective and were not as per specifications. The
plaintiff informed defendants No. 1 and 2 in this regard and
their representatives visited the factory of the plaintiff to
verify the complaint and assured their full co-operation. The
sample was sent to an independent lab M/s Sunbeam Auto
Ltd., which submitted its report confirming that the goods
were not of the agreed specifications and were defective. The
iron content in the material was 0.71% instead of the
maximum of 0.50%, agreed under the contract. The plaintiff
made a claim of US$ 87520 which comes to Rs 38,50,880/-,
for the losses/damages suffered by it on account of defective
goods supplied to it. It is also claimed that the defendants
failed to take back the defective goods and compensate the
plaintiff, which has led to the plaintiff claiming the aforesaid
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amount of Rs 38,50,880/- as damages from them.
2. Another contract was executed between the parties
on 09th July, 2010 for supply of 48 MT Silicon. Since the
goods supplied earlier to the plaintiff were found to be of
poor quality, the plaintiff requested the defendants that the
sample of the material be sent to an independent agency.
This request, however, was not accepted by the defendants.
The plaintiff in this suit besides seeking recovery of Rs
38,50,880/- has also sought injunction, restraining the
defendants from selling the goods which have been sent to it
and are at present lying with Assistant Commissioner,
Customs (defendant No. 3). It has also sought injunction
directing defendants No. 1 and 2 to have a joint inspection
of the goods lying with defendant No. 3 and sale of those
goods by public auction in case they are not found to be of
agreed specifications.
3. IA No. 17068/2010 has been filed by defendant No.
2 seeking rejection of the plaint on the ground that it
discloses no cause of action against it and is also barred by
law.
4. A perusal of the Indent dated 26th May, 2010
would show that the name of the buyer is shown as Century
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NF Castings, a unit of the plaintiff-company M/s Century
Aluminium Manufactring Co. Ltd., which is also the
consignee as per this Indent. The Principal & L/C
Beneficiary is shown as Goodpal Industry Ltd., i.e.,
defendant No. 1. The terms and conditions, annexed to the
Indent, make it quite clear that offer was made by defendant
No. 2 on behalf of defendant No. 1 and it was to become a
contract only after confirmation in writing by defendant No.
1. Clause 4 of the terms and conditions is important and
reads as under:
“The transaction as contained in this
indent is to be executed on Principal to
Principal Basis between the buyer and
seller. KPL is acting only as a facilitator
in the business. In any case KPL shall not
liable for any claim of any kind of loss or
damage arising out of this transaction to
any party of whatsoever nature.”
The sale confirmation dated 26th May, 2010 would
also show that defendant No. 1-company was the seller,
whereas the plaintiff-company was the buyer of the goods in
question.
The aforesaid documents filed by the plaintiff-
company clearly show that the transaction for purchase of
the goods was between the plaintiff and defendant No. 1, the
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applicant/defendant No. 2 having acted only as an
facilitator. The parties had agreed, as would be evident from
clause 4 of the terms and conditions, annexed to the Indent
that the transaction was to be executed between defendant
No. 1 and the plaintiff on a Principal to Principal Basis and
in no case defendant No. 2 was to be liable for any claim of
any kind of loss or damage arising out of the transaction
either to the plaintiff-company or to defendant No. 1-
company. The fact that defendant No. 2 was acting only as a
facilitator is also evident from the e-mails filed by the
plaintiff. Vide e-mail dated 1st October, 2010, Mr Mohit Jain
of defendant No. 2 wrote to the plaintiff stating therein that
defendant No. 2 was an Indenter/facilitator which would
put its full efforts with the supplier on their complaint, but
they would have to wait for feedback from the supplier. Vide
another e-mail dated 22nd September, 2010, Mr Sanjay
Kaushik of defendant No. 2 had written to Mr Mohit Jain of
plaintiff stating therein that defendant No. 2 had merely
facilitated and hence would not be party to the deal.
It would thus be seen that as far as defendant No.
2 is concerned, the parties had agreed it would not be liable
for the loss/damage alleged to have been suffered by the
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plaintiff-company.
5. Section 230 of Contract Act, 1872, to the extent it
is relevant, provides that in the absence of any contract to
that effect, an agent is not personally liable by the contracts
entered into by him on behalf of his principal. It further
provides that such a contract shall be presumed to exist,
where the contract is made by an agent for the sale or
purchase of goods for a merchant resident abroad.
In the case before this Court, the contract has
been entered by defendant No. 1 and not by defendant No. 2
on behalf of defendant No. 1, as is evident from the sales
confirmation which purports to be signed by an authorized
signatory on behalf of defendant No. 1 Goodpal Industry
Ltd. This is not the case of the plaintiff that the sale
confirmation is signed by defendant No. 2 on behalf of
defendant No. 1. As noted earlier, it is defendant No. 1
which is named as the seller in the sale confirmation as well
as in the purchase contract, both of which have been relied
upon and filed by the plaintiff. The plaintiff has also filed
the invoice dated 11th June, 2010, issued by defendant No.
1. This document also purports to be signed by the
authorized signatory of defendant No. 1. Since the contract
CS(OS)No. 2151/2010 Page 6 of 12
was not made by defendant No. 2 on behalf of defendant No.
1, the presumption under Section 230 of Contract Act
cannot be drawn in this case. In any case, even if such a
presumption is raised, it stands fully rebutted from clause 4
of the terms and conditions, annexed to the Indent.
In Midland Overseas vs. CMBT Tana & Others
AIR 1999 Bom 401, defendant No. 3 was impleaded because
it was acting as shipping agent for and on behalf of second
defendant. It was alleged in the plaint that the third
defendant was doing business as shipping agents at
Bombay for and on behalf of second defendant. It was also
alleged that the goods were entrusted to the third defendant
which accepted them on behalf of the second defendant. It
was also alleged that the second defendant was transacting
business at Bombay through defendant No. 3, which was its
local agent. Relying upon Section 230 of Contract Act, the
suit was dismissed against defendant No. 3
6. The learned counsel for the plaintiff has pointed
out that the Indent was accepted by the plaintiff subject to
the terms and conditions of the purchase contract dated
26th May, 2010. A perusal of the purchase contract would
show that no such term was stipulated by the plaintiff,
CS(OS)No. 2151/2010 Page 7 of 12
which can be construed to make defendant No. 2 liable to
the plaintiff-company for the damages, alleged to have been
suffered by it on account of the goods being defective or not
being in accordance with the agreed specifications. Rather
clause 7 of the Special Note stipulates that any loss due to
less stuffing will have to be compensated by seller, which is
yet another indicator that defendant No. 2 was acting only
as a facilitator.
Since no term stipulated in the purchase contract
is contrary to the terms and conditions of the Indent dated
26th May, 2010, it cannot be said that clause 4 of the terms
and conditions of the Indent is not binding on the parties.
Since the parties have specifically agreed that defendant No.
2 will not be liable for the damages, if any, suffered by the
plaintiff, out of this transaction, the plaintiff-company
cannot have any cause of action against defendant No. 2
and in any case, the suit is in such a case would be hit by
Section 230 of Contract Act, thereby attracting Order VII
Rule 11(d) of the Code of Civil Procedure, besides being bad
for misjoinder of defendant No. 2 which is neither a
necessary nor a property party to the suit.
7. The learned counsel for the plaintiff has relied
CS(OS)No. 2151/2010 Page 8 of 12
upon the decision of the Calcutta High Court in Alliance
Mills (Lessees) Pvt. Ltd. Vs. India Cements Ltd. and Anr.
AIR 1989 Calcutta 59. In the case before Calcutta High
Court, the contract indicated that the name of defendant
No. 2, who had filed application under Order 7 Rule 11 of
CPC for rejecting the plaint, had been shown as purchaser.
It was specifically stated on behalf of the plaintiff that
defendant No. 2 had entered into the said contracts in the
name of its firm as the purchaser and the plaintiff had
agreed to sell and deliver to defendant No. 2 and defendant
No. 2 had agreed to purchase the goods from the plaintiff at
the rates mentioned in the contracts. This was also the
case of the plaintiff that defendant No. 2 was in any event
personally entitled to enforce the contract and was
personally bound by it. However, in the present case, there
is not an iota of allegation that defendant No. 2 had agreed
to be personally bound by the contract. To the contrary, the
documents filed by the plaintiff clearly show that it was
defendant No. 1 alone, which was the seller of the goods and
under clause 4 of the terms and conditions, annexed to the
Indent, defendant No. 2 was not to be personally bound for
any loss/damage to the plaintiff arising out of the
CS(OS)No. 2151/2010 Page 9 of 12
transaction in question by the plaintiff. As discussed
earlier, the contract was between the plaintiff and defendant
No. 2, where plaintiff is the purchaser and defendant No. 1
is the seller. There is no dispute that even the Letter of
Credit was issued by the plaintiff in the name of defendant
No. 1 alone.
From whatever angle I may take, defendant No. 2
is not liable to the plaintiff-company to make good the loss
suffered by it on account of the goods supplied by defendant
No. 1 being defective or being not in accordance with the
agreed specifications.
8. Coming to the relief of injunctions, since the goods
have been sent by defendant No. 1 to the plaintiff, the
ownership in the goods vests only in defendant No. 1 and
defendant No. 2 does not claim any right or interest in these
goods, the plaintiff can seek injunctions only against
defendant No. 1 if it is otherwise made out on the strength
of the case setup by it. But, neither the plaint discloses any
cause of action qua defendant No. 2 in respect of the goods
which are lying with defendant No.3 nor can be said that
defendant No. 2 is a necessary or a property party with
respect to these reliefs.
CS(OS)No. 2151/2010 Page 10 of 12
9. In the facts of the case, the Court has the options
to reject the plaint qua defendant No. 2 or to delete the
name of defendant No.2 from the array of defendants and
dismiss the suit against defendant No.2. The learned
counsel for the plaintiff states that rejection of the plaint
qua one of defendants may not be a correct course of action
and if the Court is of the view that defendant No. 2 is
neither a necessary nor a property party to the suit, it may
have to delete its name from the array of defendants. Hence,
the suit against defendant No. 2 is dismissed and its name
is deleted from the array of defendants. The plaintiff is
directed to file an amended memo of parties after excluding
the name of defendant No. 2 from the array of parties.
The application stands disposed of.
CS(OS) 2151/2010 and IA No. 14172/2010 (O. 39 R.
1&2CPC)
The service report with respect to defendant No. 1
is not on record. Mr Sanghi states that he will track the
delivery report on the website of the courier and file the
same along with the affidavit within two weeks.
Renotify on 29th September, 2011.
CS(OS)No. 2151/2010 Page 11 of 12
In case if it transpires that defendant No. 1 has not
been served, fresh summon be issued to it through DHL
courier for the date fixed above.
(V.K. JAIN)
JUDGE
AUGUST 16, 2011
bg
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