CALICUT ENGINEERING WORKS P LTD Vs. BATLIBOI LTD

JUDGEMENT

(1.) This is a suit for recovery of the price of machine together with interest amounting to Rs. 12,59,354.13 p. and loss of profit to the tune of Rs. 15,00,000/-.

(2.) A thumbnail sketch of the plaintiff's case is that in or about March, 1977 it was agreed between the plaintiff and defendant which sells the products of Strojimport of Czechoslovakia in India, that the defendant would sell and deliver to the plaintiff a Gear Hobbing Machine Model OF-16 manufactured by M/s. ZPS Gottwaldov, Praha, Czechoslovakia for a price of Rs. 8,24,474.67 p. on terms and conditions set forth in the Order dated 26.03.77 of the plaintiff and accepted by the defendant. At the time of entering into the said reagreement, the plaintiff duly intimated the defendant that the machine would be put to immediate use for meeting the ever-increasing demand of the plaintiff's products in the market thereby leading to higher profit. In terms of the agreement the plaintiff paid a sum of Rs. 8,24,474.67 p. by three cheques dated 02.03.77 for Rs.50,000/-, dated 29.03.77 for Rs.7,24,474.67 p, and dated 30.03.77 for Rs. 50,000/-, all drawn on Dena Bank, Park Street Branch which was duly encashed by the defendant. On 31.03.77 the defendant delivered to the plaintiff at its Works at 1/2B, Khagendra Chatterjee Road, Calcutta five boxes said to contain the machine including accessories thereof, out of which one was found to be in broken condition. On 01.04.77 after unpacking the boxes and preliminary examination of the same, the machine was found to be not of the Model OF-16 as agreed to be sold, the machine parts were soaked and cavities thereof filled with water and there were extensive rust on the body of the machine, on many vital parts of the accessories, electronic assemblies were loose and shaky and some parts missing, the machine including the accessories were not in the original packing of the manufacturer and without any packing list inside and the contents of the boxes were not packed in waterproof papers and that no literature or instruction manual of the manufacturer was there. Immediately the plaintiff brought the same to the notice of the defendant through its Manager over phone on 01.04.77 followed by a letter dated 02.04.77 to the defendant rejecting the machine and accessories with a request to replace the machine by a new one. The defendant failed and wrongfully refused to comply with the said requisition of the plaintiff. The machine which has since been lying at the plaintiff's Works was inspected and surveyed by a Chartered Engineer and a qualified Marine Surveyor who found the same badly damaged and not in accordance with the order placed. Instead of supplying a Gear Hobbing Machine OF-16, manufactured by ZPS Gottwaldov. Praha, Czechoslovakia, the defendant had supplied an old and used machine Model OF-16, manufactured by M/s. TOS Celakovice E. P. There was a sale of the said machine by description, but the defendant committed breach of contract by supplying a machine which did not correspond with the description, for which the plaintiff has suffered damages. There was thus a total failure of consideration and the plaintiff is entitled to refund of the amount of Rs. 8,24,474.67 p. together with interest @ 18% p.a. to the tune of Rs.4,34,879.46 p. under the provisions of the Indian Sale of Goods Act, 1930 and by way of damages. Installation, commission and utilization of the said machine would have enabled the plaintiff to earn a minimum profit of Rs. 5,00,000/- p.a. which for the last three years would have aggregated to Rs. 15,00,000/-, of which the defendant had and has due notice and/or knowledge. Hence the suit.

(3.) The suit is contested by the defendant by filing a written statement inter alia denying the material allegations made in the plaint. The defence case, in short, is that the plaintiff company made a formal enquiry in or about February, 1977 for purchase of one Czechoslovakian made Gear Robbing Machine from the defendant which submitted a quotation for the said machine, subsequently amended on 26.03.77, to the plaintiff. Thereafter, the plaintiff submitted its order on 26.03.77 for purchase of the said machine which was accepted by the defendant to sell the machine for Rs. 8,24,474.67 p. subject to the terms and conditions contained in the said order and in the said two quotations. The defendant made clear to the plaintiff that the machine was ready for immediate delivery from the incoming consignment already booked for Bombay Port. Pursuant to the said contract the plaintiff had paid to the defendant a sum of Rs. 8,24,474.67 p. and the defendant duly delivered a brand new machine of Czechoslovak origin contained in five boxes on 31.03.77 to the plaintiff which accepted the same. At the time of delivery it was noticed that one of the five packing boxes in which the machine was packed was in a slightly damaged condition. The said Czechoslovakian make Gear Hobbing Machine was marked with Model No. OF-16 which is also known as OF-16. "OF" in Czechoslovak language stands for "Odvalovaci Frezka" which in English language means "Gear Hobbing Machine", and the plaintiff at all material times was aware that there was no difference between OF-16 and FO-16 Model and it did not affect specification, capacity and character of the machine which was clarified by the manufacturer of the machine, in case of Czechoslovak machine, packing instructions are generally not inserted in the boxes of machine but the documents are supplied separately. It was made clear by the defendant to the plaintiff in the instructions note that the defendant company shall supply one set of literature and instructions, and it was not incumbent on the defendant to insert the literature and instructions manual inside the packing box of the machine. On 31.03.77 in the evening the plaintiff through its Managing Director informed Mr. S.C. Nagpal, Manager of Machine Tools Division of the defendant over phone about certain allegations of the machine which was duly attended to by the defendant's Service Engineers and the said Mr. Nagpal who found the machine absolutely in cruer except that some slight superfluous rust in the gear box and slides of column. The machine and the accessories thereof were otherwise found to be in perfect order and condition. During joint inspection of the machine and accessories by the Service Engineers of the defendant along with one Mr. Singh and Mr. Gupta representing the plaintiff, the same were found in correct condition except that one square handle was found missing, and accordingly a report was prepared taking inventory of the machine and accessories which was duly signed by the said Service Engineers, but Mr. Singh and Mr. Gupta refused to sign the same. A letter dated 02.04.77 was received by the defendant from the plaintiff intimating unilateral rejection of the said machine including the accessories thereof which being illegal and wrongful was never accepted by the defendant. In the instructions manual and in the inspection report issued by the firm, which inspected the machine and found the same in order, it was made clear that OF and OF marking are one and the same. The defendant by its letter dated 15.04.77 duly explained and clarified the position regarding the alleged complaint and made it clear that the machine supplied was a brand new machine and was in accordance with the specification as contained in the acceptance of the order made by the plaintiff and as per terms and conditions of the contract and that the defendant was ready and willing to perform its obligation to supervise the erection of the machine, commissioning the same and to make the trial runs of the machine under terms of guarantee given by the defendant which was turned down by the plaintiff. In such circumstances, the property in the machine having already passed to the plaintiff, the question of removal and replacement of the machine did not and does not arise. The alleged inspection and survey by Chartered Engineer and Marine Surveyor was conducted by the plaintiff unilaterally without any notice to the defendant which was absolutely irregular, illegal and not binding on the defendant. The defendant repeatedly called upon and requested the plaintiff to hold a joint survey of the machine and fixed up appointment for the purpose, but the plaintiff refused to produce the said machine for the purpose of further inspection and survey. There was no breach of agreement nor any failure of consideration nor the plaintiff suffered any damage, as alleged.