S S INTERNATIONAL Vs. UNION OF INDIA

JUDGEMENT

(1.) These are two cross suits. First suit is by M/s. S.S. International as the plaintiff against the Union of India for recovery of Rs.5412341.85p. along with interest. Second suit is in the nature of counter claim filed by the Union of India against M/s. S.S. International. The respective claims arise out of same transaction and both the parties are alleging breach of contract on the part of other. Facts of both the suits may be noted to understand the controversy involved.

(2.) Suit No. 587/1982 Plaintiff, S.S. International, (hereinafter referred to as the 'SSI' for short) is a duly registered partnership firm with Sh. Sudhir Kumar Gupta as one of the registered partners who has signed and verified the pleadings on behalf of the firm. It is stated that on or about 25th November, 1980 the plaintiff entered into a contract of sale with the Union of India (hereinafter referred to as the 'UOI' for short). UOI had floated tenders for sale and supply of 96 MT of Kishmish and SSI had also submitted its bid, which was accepted vide acceptance letter dated 25th November, 1980. The contract was governed by (a) the special conditions of contract as forwarded by the defendant (b) the General Conditions of Contract (Form DGS8D-68 Revised) except clause 14(8) and clause 24 thereof as contained in the pamphlet 'Conditions of Contract by Government of India' as amended from time to time (c) the terms and conditions stated in the said acceptance of Tender dated 25th November, 1980. The SSI deposited bank guarantee dated 11th December, 1980 in the sum of Rs.3,66,260/- (Rs.3,41,840/- representing 10% of the security towards this contract and Rs.24,400/ - in respect of some other contract which is not relevant for our purposes). According to the SSI, the quantity of 85 MT of Kishmish was duly delivered and the balance quantity of 11 MT could not be supplied as the UOI prevented the SSI from supplying the same by repudiating and/or refusing to perform its obligation under the contract. The goods supplied were to conform and in fact, conformed to ASC specification No.67 except that no warranty as required by the said specification was given by the SSI. The SSI, on the other hand, was required to give warranty in accordance with the standard warranty clause, Appendix J to the said specifications at the time of delivery of the material to the UOI. The SSI, however, never save any warranty either in accordance with the said warranty clause or otherwise but only indicated the warranty period in challans for being conformed during the pre-delivery inspection by the UOI. The material was duly offered for inspection. Thereafter the inspecting officer of the UOI marked the said material with different indent marks and issued sample of each sample mark. The said samples were sent by the inspecting officer to the Composite Food Laboratory, Delhi for testing and the bulk corresponding to said sample was cordoned and sealed by the said officer. Thus, after drawing of the samples, the SSI had no access to the bulk corresponding thereto and had no occasion to interfere with the same. The Laboratory, where the samples were sent for inspecting, conducted all the physical and chemical tests to satisfy the requirement of the prescribed ASC specification No.67. One of such tests conducted by the laboratory was to verify the shelf life of the Kishmish, according to which the warranty period was to be ascertained. In any case, the said Laboratory had every opportunity to conduct such a test with regard to the warranty period. In so far as SSI is concerned, it was only to await the receipt of instructions from the defehdant after the samples were drawn. It is also mentioned that after drawing of the samples, the SSI was only to await the receipt of the despatch instructions from the defendant. On the samples passing all the tests ,the defendant would issue instructions to the SSI to deliver the material to its local representative at the Railway Station at Delhi. After the aforesaid delivery, the SSI ceased to have any liability in respect of the material so delivered and the said local representative made his own arrangements for further despatch of the material. Even the delivery of the material from the godowns of the SSI to the Railway Station was in the presence and under the strict control of the representatives of the UOI. The SSI was never informed of the test results of the samples and upon receiving the despatch instructions, it was presumed that the material had passed the inspection. In the alternative and without prejudice to the aforesaid, the SSI states that the warranty as given by it in the said challans was duly accepted and acted upon by the UOI and became final and binding as the UOI never insisted upon the SSI to give the warranty in accordance with the said standard warranty clause.

(3.) However, vide its letter dated 4th April, 1981 and thereafter from time to time by its various letter the UOI informed the SSI that it had been reported by the QMG Branch, ST 7, Army Headquarters, New Delhi, that the quantity mentioned in the said letters and supplied under the inspection note and indent marks mentioned therein had gone bad and declared unfit for human consumption with the warranty period. Total quantity so mentioned in those letters was 48.770.948 MT The UOI thus sought to recover from SSI the entire cost of the aforesaid material along with freight/handling and incidental charges. Total amount sought to be recovered was Rs.16,27,906.50p. out of which the SSI deposited under protest a sum of Rs.3,57,566.20p. The UOI, however, later on withdrew the rejection in respect of 5.107 MT out of total quantity rejected earlier i.e. 48.770.948 MT The SSI alleges that rejection of the quantity was illegal and not binding on it and some of the quantity rejected was even after the expiry of the warranty period. It is maintained that the material supplied by the SSI remained fit and wholesome during the warranty period even if there was any such warranty period. The rejection is also challenged on the following grounds:-