MAHESWARI METALS AND METAL REFINERY CARRYING ON BUSINESS IN METAL MINERALS AND ORES HAVING ITS REGISTERED OFFICE AT NO 10 ARCOT SRINIVASACHARI STREET BANGALORE Vs. TAMIL NADU SMALL INDUSTRIES CORPORATION LIMITED HAVING ITS REGISTERED OFFICE AT NO 3512 WOODS ROAD MADRAS 2

JUDGEMENT

(1.) THESE two appeals are at the instance of Maheswari Metals Refinery, a registered partnership firm, having its registered office in Bangalore and arise out of two suits, viz., O.S. No. 7679 of 1971 and O. S. No. 3216 of 1968, on the file of the Fifth Assistant Judge, City Civil Court, Madras, wherein the appellant figured as the defendant and as the plaintiff respectively. O.S. No. 3216 of 1968 was instituted by the appellant on 21st June, 1968 for the recovery of a sum of Rs. 5,000 with interest thereon at 6 per cent, per annum from the date of plaint till date of realisation and also for costs. O.S. No. 7679 of 1971 was instituted by the respondent herein on 10th June, 1971 against the appellant for the recovery of a sum of Rs. 34,291.58 stated to be the loss that has been sustained by the respondent as a result of breach committed by the appellant, of a contract entered into by the appellant with the respondent. The appellant as stated already is a registered partnership firm carrying on business at Bangalore, while the respondent is Tamil Nadu Small Industries Corporation Limited, which is a company wholly owned by the Government of Tamil Nadu and incorporated under the Companies Act, 1956. On or about 6th April, 1967, the respondent issued a tender notice inviting offers for the purchase of zinc dross and zinc ash available for sale with the respondent ex-Mettur Dam. Amongst others one of the terms of the tender notice was that the price to be offered by the intending purchaser should be on the basis of 1,000 kilograms ex-Mettur Dam, without packing, sales-tax and other taxes being extra. Yet another term was that the tender should be accompanied by a deposit of Rs. 5,000 as earnest money with the condition that the same would be refunded to the unsuccessful tenderer within reasonable time and that if the tenderer failed to adhere to the terms and conditions prescribed in the tender or backed out when his tender was accepted, the deposit was liable to be forfeited as per clause 9 of the tender conditions. A further term was to the effect that in the event of the contractor failing to take delivery then also the deposit amount was liable to be forfeited as a penalty and the material would be disposed of and the defaulting party will be held liable for the shortfall, if any. On 24th April, 1967, according to the appellant it made an offer for the purchase of zinc dross at Rs. 2,705 per metric tonne. There was according to the appellant on 9th May, 1967 a counten-offer made by the respondent for the entire zinc dross and zinc ash at Rs. 2,715 and Rs. 1,225 per metric tonne respectively for the period from 1st April, 1967 to 31st March, 1968, but there was no stipulation that the contract was likely to be split up or that the respondent waa at liberty to give it to any other person of its choice. The appellant complained that after the counter-offer made by the respondent was accepted by the appellant and confirmed, the respondent split up the contract and informed the appellant, by letter, dated 31st May, 1967, that the contract has to be shared by the appellant along with another party. Thereafter, the appellant wrote to the respondent pointing out that there was no stipulation or right reserved to the respondent to split up the contract and that the appellant would not share the contract with anyone else. By letter, dated 30th June, 1967, addressed to the appellant, the respondents stated that there was a breach of contract by the appellant and that the deposit amount of Rs. 5,000 stood forfeited and also called upon the appellant to show cause against the forfeiture. This was replied to by the appellant by its lawyer notice, dated 1st July, 1967 informing the respondent that the respondent had committed breach and that the sum of Rs. 5,000 could not be forfeited and demanded a refund of the sum of Rs. 5,000 from the respondent. A reply was sent by the respondent refusing to return the sum of Rs. 5,000. The appellant therefore, laid the suit for the recovery of a sum of Rs. 5,000 with interest at 6 per cent, per annum from the date of suit till the date of realisation on the ground that even if there was a breach, the respondent, had no right to forfeit the earnest deposit as the only remedy of the respondent is to sue for damages actually suffered by it.

(2.) BY its written statement, dated 17th September, 1968, the respondent, while admitting the issue of a tender notice, disputed the correctness of the terms and conditions of the said tender as mentioned in the plaint. According to the respondent under clause (4) of the tender terms the Managing Director of the respondent-Corporation had the right to reject any tender and also to split up the tender as he deemed fit. The counter-offer, reference to which was made by the appellant in the plaint, was admitted by the respondent and it was the further case of the respondent that the appellant accepted the offer made by the respondent by letter, dated 11th May, 1967. The counter-offer by the respondent and the splitting up of the tender was done, according to the respondent, under clause (4) of the tender terms which empowered the splitting up of the tender and therefore, the respondent informed the appellant by letter, dated 31st May, 1967, that the appellant will have to lift zinc dross and zinc ash along with Calcutta Industrial Corporation in equal proportion. Though by letter, dated 5th June, 1967, the appellant according to the respondent asked the respondent to take further action in the matter, yet subsequently, by letter, dated 21st June, 1967, the appellant went back on the contract and informed the respondent that it will he difficult for it to share the contract, with another party and that it can accept the contract for zinc dross only. On 21st June, 1967, the respondent informed the appellant that if the appellant should go back on the contract, its earnest money deposit will be forfeited as per the conditions of the tender terms and also a further claim for damages will be made against them. Alleging that the appellant has committed breach of contract the respondent claimed that the appellant is not entitled to a refund of the earnest deposit as it is liable to be forfeited affording to clause (9) of the tender terms. On these grounds the respondent prayed for the dismissal of the suit.

(3.) IN yet another additional written statement dated 30th November, 1972, the respondent herein merely repeated paragraphs 1 to 3 of the earlier first additional written statement dated 15th December, 1970. IN paragraph 4 of this additional written statement, the respondent claimed to have suffered a loss of Rs. 39,291-55 and stated that it was entitled to equitably set-off damages suffered by it to the extent of Rs. 5,000 as against the amount paid by the appellant as earnest money. IN addition it was also stated therein that the respondent had already filed a suit in O.S. No. 7679 of 1971, for the recovery of the balance of the damages suffered by it. Ultimately the respondent pleaded that it may be allowed to set-off against the amount claimed by the appellant a sum of Rs. 5,000 being the part of the damages and prayed for the dismissal of the suit. It may also be mentioned that the respondent had paid court-fee on the plea of set-off raised by it.