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2022 (6) TMI 1477 - HC - Companies LawSuit for recovery of money - excess order supplied which was not initially placed in the order - the demand of excess bags were on urgent basis - demand of difference price due to changes in the rates as well - levy of liquidated damages for late supply. Whether the trial Court erred in awarding price difference for 33,000 and 9,000 bags in favour of the plaintiff? - HELD THAT - There are no illegality in the observation of the trial court that evidence of DW. 2 would show that the defendant used to orally place orders even beyond the quantity specified in the accepted tender and later on regularized such oral orders through its purchase orders. When once the defendant accepted the two supplies and regularized them in accordance with the earlier tender documents, the defendant had to pay the price quoted in the said tenders. Hence, the claim of the plaintiff for 33,000 bags @ Rs. 10.25 ps per each bag and Rs. 9.45 ps. per bag for 9,000 bags is valid and he is entitled to the difference of price from Rs. 8.75 ps., to Rs. 10.25 ps. amounting to Rs. 49,500/- and Rs. 6,210/- towards price difference for 9,000 bags from Rs. 8.75 ps., to Rs. 9.45 ps., for a total amount of Rs. 55,710/- - answered in favour of the plaintiff as against the defendants. Whether the claim of the plaintiffs for Rs. 1,18,000/- towards loss incurred on 25,000 bags for selling it as scrap @ 50% price on account of not taking delivery by defendants is proper? - HELD THAT - The evidence of DW. 1 would disclose that without any contract, they accepted the supply of bags for 1,00,000 and issued a telegram to stop supply on 11.12.1993. This would support the evidence of PW. 1 that their company supplied 1,09,000 bags by 05.12.1993 and on 7.12.1993 the defendant company released formal order No. 40893 for 1,00,000 bags only and during the said period the defendant company telephoned the plaintiff company from Ramagundem Unit as well as from their Delhi office to supply bags without waiting for formal order. The plaintiff company further printed 25,000 bags on 6/7.12.1993, but the order was placed for 1,00,000 bags only on 07.12.1993. The said order was received by the plaintiff company on 08.12.1993. The defendant company had not taken delivery of 25,000 bags which were printed on 06/07.12.1993 i.e. before getting the formal order - legal notice issued by the plaintiff to the defendant marked under Ex. A39 dated 25.09.1995 also supports the said contention of the plaintiff - in view of the oral and documentary evidence of PW. 1, DW. 1 and Ex. A39, the plaintiff is entitled to claim 50% value of the 25,000 bags @ Rs. 9.45 ps. (the rate agreed by the defendants for supply of 1,00,000 bags on 07.12.1993) for Rs. 1,18,000/- as claimed by the plaintiff. Accordingly, this question is also answered in favour of the plaintiff as against the defendant and the judgment of the trial Court in this regard is upheld. Whether awarding of liquidated damages of Rs. 1,63,471/- in favour of the defendants is proper? - HELD THAT - The observations of the trial Court and the relief granted were contradictory to each other. The trial Court while stating that it was accepting Ex. A42, which accepted the liquidated damages only for an amount of Rs. 62,653/-, stated in the last sentence that the defendant was entitled to claim liquidated damages of Rs. 1,63,471/- as per Ex. A42, which was erroneous - the plaintiffs failed to confront DW. 3 with Ex. A42 relied by them and failed to question the witness with regard to the said discrepancies pointed out by them and admitted about the delays in the supplies which was liable for damages to be paid as per the contract, this point is answered in favour of the defendants as against the plaintiff. The defendants are entitled to claim liquidated damages for Rs. 1,63,471/-, as such the plaintiff is not entitled to claim the said amount and interest on it. Whether deducting Rs. 4,89,919/- as penalty by the defendants is in accordance with the terms and conditions of the contract? - HELD THAT - The document marked under Ex. B1 would disclose that the defendants had issued a memo on 05.04.1994 i.e. after the entire supplies of the bags was completed and a punitive penalty was also imposed on them. The evidence of DW. 5 also would disclose that they imposed higher penalty of 62% of the normal penalty without consulting the plaintiff. When the terms of the contract would not call for imposing punitive penalty, imposing the same after using the bags is also considered as improper - But, when punitive penalty is imposed, there must be evidence of damage suffered by the defendants. In the absence of the same and when the goods were utilized without rejection, imposing penalty on the plaintiff is considered not in accordance with law and terms and conditions of the contract. Hence, this point is answered in favour of the plaintiff as against the defendants and the observations of the trial Court on this aspect is considered not proper and as such, the same is liable to be set aside. Whether the plaintiffs are entitled to claim interest @24% per annum? - HELD THAT - As per Section 4 of the said Act, which was existing as then, buyer should be liable to pay interest to the supplies on outstanding dues beyond the appointed day at a rate which was 5% points above the floor rate - As the trial Court had not granted interest at the said rate and granted only 12% interest, the same is also considered as not proper. As Section 5 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 also specifies that notwithstanding anything contained in any agreement between the supplier and a buyer, the buyer shall be liable to pay compound interest (with monthly interest) at the rate mentioned in Section 4 of the of the Act on the amount due to the supplier, this point is also answered in favour of the plaintiff holding that the plaintiff is entitled to claim compound interest @ 24% per annum. Whether the judgment of the trial Court is in accordance with law or needs any interference by this Court in these appeals? - HELD THAT - The judgment of the trial Court is upheld on the aspects of awarding price difference of Rs. 55,710/- on 42,000 bags, awarding Rs. 1,18,000/- towards 50% value of the 25,000 bags, but is set aside on the aspect of entitlement of the plaintiff for the amount towards liquidated damages and imposing penalty of Rs. 4,89,919/- in favour of the defendants and awarding interest only at the rate of 12% per annum on the amount due to the plaintiff. Appellants are entitled to deduct an amount of Rs. 1,63,471/- towards liquidated damages - Appeal allowed in part.
Issues involved:
1. Price difference for 33,000 and 9,000 bags. 2. Claim for Rs. 1,18,000/- towards loss on 25,000 bags. 3. Awarding of liquidated damages of Rs. 1,63,471/-. 4. Deduction of Rs. 4,89,919/- as penalty. 5. Entitlement to interest @ 24% per annum. Detailed Analysis: 1. Price difference for 33,000 and 9,000 bags: The plaintiff, a small-scale industry manufacturing HDPE sacks, supplied bags to the defendant, a fertilizer manufacturing unit. The plaintiff contended that they supplied 33,000 bags under clause 8 of the tender document and 9,000 bags based on oral agreements with the defendant. The defendant regularized the supply at Rs. 8.75 per bag, which the plaintiff disputed, claiming the agreed rates were Rs. 10.25 and Rs. 9.45 per bag respectively. The court found the plaintiff's claim valid, awarding the price difference of Rs. 55,710/-. 2. Claim for Rs. 1,18,000/- towards loss on 25,000 bags: The plaintiff claimed they printed 25,000 bags based on the defendant's instructions but the defendant refused to take delivery after receiving a consignment from another supplier. The plaintiff sold these bags as scrap at 50% of the cost, incurring a loss of Rs. 1,18,000/-. The court upheld the plaintiff's claim based on oral and documentary evidence, awarding Rs. 1,18,000/-. 3. Awarding of liquidated damages of Rs. 1,63,471/-: The defendant deducted Rs. 1,63,471/- as liquidated damages for delayed supplies. The plaintiff admitted to some delays but disputed the amount. The court found that the plaintiff failed to confront the defendant's evidence effectively and upheld the defendant's claim for liquidated damages. 4. Deduction of Rs. 4,89,919/- as penalty: The defendant imposed a penalty for deficiencies in the quality of bags supplied. The plaintiff argued that the bags met the average breaking load strength as per the tender specifications and that the penalties were imposed without proper notice. The court agreed with the plaintiff, noting that the defendants used the bags without rejecting them and imposed penalties without proving actual damage. The court set aside the penalty deduction. 5. Entitlement to interest @ 24% per annum: The plaintiff, covered under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, claimed interest for delayed payments. The court found the plaintiff entitled to compound interest at 24% per annum from 16.07.1994 till realization, modifying the trial court's award of 12% interest. Conclusion: The appeals were allowed in part. The court upheld the deduction of Rs. 1,63,471/- towards liquidated damages but awarded the plaintiff the price difference for 42,000 bags, loss on 25,000 bags, and set aside the penalty of Rs. 4,89,919/-. The plaintiff was entitled to compound interest at 24% per annum from 16.07.1994 till realization.
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