H.M.T. LIMITED Vs. P.J. MATHEW

JUDGEMENT

(1.) DEFENDANT in O.S. 137/1981 before the Sub Judge, Ernakulam is the appellant. The suit was for determination of reasonable/fair prices for certain articles manufactured by plaintiff and supplied to the defendant as per an agreement of the year 1976. The claim is for the period from 1 -9 -1977 to 15 -2, -1980. Deducting the amount already paid, plaintiff claimed Rs. 2,55,253,86 with interest and costs. The lower court decreed the suit as prayed for reducing interest to 6% from the date of the suit Defendant appeals, The need for setting up small scale ancillary industries way emphasised by the Government of India. Comprehensive guidelines were issued in 1971 to all public sector enterprises spelling out the steps to be taken to accelerate the growth of ancillary industries. To accelerate matters in public sector enterprises, the programme was entrusted to the Bureau of Public Enterprises. Additional guidelines were issued by the Bureau in 1978. The Hindustan Machine Tools Ltd. (for short HMT) Bangalore set up industrial estates and in Kerala the Kalamassery Unit of HMT established its own ancillary units numbering 12 initially invitations were called for by HMT for allotment of ancillary industrial units (for short AIU) and plaintiff, applied for one such unit. He obtained allotment and entered into an agreement with HMT on 29 -4 -1976. The document is styled as a licence agreement wherein the licensee had undertaken to give first priority for the manufacture of products required by the HMT and not to do outside job before completing and fulfilling order/orders placed by HMT. The licensor agreed to place orders at its discretion for such production as required by HMT on the licensee and buy the same subject to inspection and rejection of products not conforming to HMT's standards and specifications at prices to be mutually agreed upon.

(2.) THE AIU sanctioned to the plaintiff was originally conducted as a jobbing shop which was subsequently converted into a product shop. In the case of a jobbing shop the raw materials are to be supplied by the public sector enterprises and is entitled to the jobbing charges for the work done. In the case of a product shop necessary raw materials are to be provided by the AIU itself and they will be entitled to get the prices of the products manufactured. In case raw materials are supplied by the public sector enterprises (PSE for short), the AIU is liable to pay the price thereof. The materials are to be manufactured as per the drawings and specifications supplied by the PSE.

(3.) THE suit was resisted by the defendant who contended that there was mutually agreed price for the items manufactured and supplied by plaintiff and that the amounts had been paid by defendant. The transaction, according to defendant, falls under S. 9 (1) of the Sale of Goods Act and as such the question of determining reasonable price does not arise according to them.