2003 (9) TMI 79 - SC - Customs

Whether under the terms of the agreement the defendant was obliged to seek second revalidation of the licences? Was the defendant liable to refund to the plaintiff proportionate amount of margin money received by it from the respondent? Held that - It is not the case of the plaintiff that in the first instance itself it had desired that revalidation of licence for a period longer than six months be sought. Moreover for making out such a case the plaintiff would have had to disclose special reasons because a case for hardship has to be made out for request for revalidation for a longer period and the plaintiff never spelled out any hardship either in the correspondence or even in the plaint. Thus we hold that defendant-appellant was not obliged to apply for second revalidation of the licence and its failure to do so does not amount to breach of agreement on its part. A reading of the entire agreement suggests that everything was left to the plaintiff and everything was to the account of plaintiff. How the licence was to be utilised was totally left to the plaintiff. When this was totally in the hands of the plaintiff how could the plaintiff ask the defendant to pay for failure on the part of the plaintiff? If the plaintiff failed to utilise the licence to its full extent the plaintiff has to blame itself for this. Therefore in our view the question of refund of proportionate amount of the margin money did not arise in any case. Appeal dismissed.

Summary

Issues Involved:
1. Whether the appellant was obliged to seek second revalidation of the licence.
2. Whether the defendant was liable to refund to the plaintiff the proportionate amount of margin money received.

Issue-wise Detailed Analysis:

Issue 1: Obligation to Seek Second Revalidation of the Licence

The primary question was whether the appellant was obliged to seek a second revalidation of the licence. This determination required an interpretation of condition No. 12 of the agreement, which stated that "GE hereby undertakes to give all necessary documents and papers for facilitating the operation of the licence."

The court clarified that "facilitating the operation of the licence" meant taking steps to ensure the licence was fully exploited, not necessarily extending its validity period. The appellant had already obtained a six-month extension once. According to the Export-Import Policy 1981-82 and the Handbook of Import and Export Procedures 1981-82, revalidation requests were generally not entertained, and any extension beyond six months required prior approval from the Chief Controller of Imports and Exports, New Delhi.

The court concluded that second revalidation was not permissible under the policy and handbook provisions. Thus, the appellant was not obliged to apply for a second revalidation, and its refusal to do so did not constitute a breach of contract. The trial court's and High Court's findings that the appellant was obliged to seek a second revalidation were set aside.

Issue 2: Liability to Refund Proportionate Margin Money

The agreement guaranteed a minimum margin of Rs. 7,65,135.28 as consideration for the transaction. The total amount was paid by the plaintiff to the defendant, and the defendant had no further obligations regarding the licence. The agreement did not contain any clause for piecemeal or pro-rata payment based on the licence's utilisation.

The court noted that the transaction was a composite one for the licence and not based on its extent of utilisation. The payment of margin money was not linked to the plaintiff's performance regarding the licence. Therefore, the question of refunding a proportionate amount of the margin money did not arise.

Even if the defendant had committed a breach of the agreement, the plaintiff's remedy would have been an action for damages, not a refund of the margin money. However, since the court found no breach of agreement by the defendant, the suit for recovery of Rs. 8,53,640/- was without merit.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgments of the trial court and High Court, and dismissed the suit filed by the respondent. Each party was ordered to bear its respective costs.