Union of India Vs. J. K. Gas Plant
[1980] INSC 96 (29 April 1980)
KOSHAL, A.D.
KOSHAL, A.D.
FAZALALI, SYED MURTAZA
CITATION: 1980 AIR 1330 1980 SCR (3) 893 1980
SCC (3) 469
ACT:
Contract Act, Section 70, Scope of-Conditions
to be applied- Government of India Act, 1935, Section 175(3), applicability
of-Defence of India Act, Section 17(2), scope of.
HEADNOTE:
The appellant had supplied some steel to the
respondent plaintiff Company for manufacturing gas plants at Rampur.
Only a part of the steel so supplied was
utilized for the intended purpose and with regard to the rest, the Regional
Deputy Iron & Steel Controller, U.P. Circle, Kanpur directed the
respondents through a letter dated 8th /10th of November, 1944 to deliver the
same to the U.P. Registered Stock Holders Associations and to send to the
Kanpur office, the bill of costs of the material, handling charges etc.
made in the name of Iron & Steel
Controller, Calcutta. Since the order contained in that letter could not be
implemented on account of lack of transport facilities, the Kanpur Controller,
directed the respondent company to deliver the surplus steel to M/s G. Brothers
Ltd., Rampur and to this extent the order dated 8th/10th November 1944 stood
modified.
Though the surplus material was delivered to
Govan Brothers between 11th April 1945 and 30th of April, 1945, the price there
for to the tune of Rs. 43,728-6-6 remained unpaid in-spite of repeated demands
made by the respondent.
Ultimately, the Iron & Steel Controller
informed the respondent to take up the matter with Govan Brothers.
As the price of the steel remained unpaid by
the Union of India as well as G. Brothers the plaintiff company filed its suit
for Rs. 46,652-14-6 which was inclusive of interest on the principal price
calculated at the rate of 6 per cent per annum from April, 1945, up to the date
of the institution of the suit, after serving the defendant with the requisite
notice under section 80 of the Code of Civil Procedure.
The trial Court decreed the claim of the
plaintiff company in full and also directed that it would be entitled to the
costs of the suit as also interest at the rate of 3 per cent per annum from the
date of the institution of the suit to the date of payment. The trial Court
held that the Kanpur Controller had undertaken the liability to pay the price
of the goods to the plaintiff Company even in respect of the delivery to G.
Brothers and that the defendant could not escape liability by reason of the
contents of section 65 of the Indian Contract Act even though the provisions of
section 175(3) of the Government of India Act, 1935, had not been complied
with. The contention raised by the defendant to the effect that section 17(2)
of the Defence of India Act was a bar to the suit was negatived.
In appeal, the High Court agreed that Section
17(2) of the Defence of India Act would be a complete bar to the suit if it was
one for damages or 894 compensation but held that the suit was not of that
nature and, on the other hand, it was for recovery of the price of the goods
supplied to G. Brothers as was also found by the trial Court. It further held
that even though the provisions of section 175(3) of the Government of India
Act were not complied with the agreement resulting from the correspondence
which took place between the plaintiff company and the officers of the
defendant was good. Relying on Section 70 of the Indian Contract Act and on the
basis thereof, it held the plaintiff company to be entitled to recover the
price of the goods from the defendant even if it was assumed that the
provisions of section 175(3) were a bar to the recognition of the contract
envisaged by the correspondence between the parties. The High Court dismissed
the appeal, but granted a certificate under Article 133(1)(a) of the
Constitution to the appellant.
Dismissing the appeal, the Court
HELD: 1. The suit is not one for compensation
or damages etc. as contemplated by Section 17(2) of the Defence of India Act
and hence is not barred by Nat section [898 A].
2. The legality of the matter under which the
respondent company transferred its stock to G. Brothers cannot be allowed to be
questioned at the appellate stage.
The question whether the requirements of
clause (5) of the Indian Iron and Steel Control order, 1941 which postulates
only a written direction for disposal of surplus stocks were satisfied or not
is a mixed question of fact and law which was never raised in the Courts below.
Further the plea taken in paragraph (4) of the written statements filed by the
appellant was categorically to the effect that "the fresh instructions
issued to the plaintiff are contained in the letter in the possession of the
plaintiff" runs counter to the factual part of the argument. Besides
another question would arise whether the word "written" in clause (5)
aforesaid is directory or mandatory. [898 C-D]
3. Three conditions must be satisfied before
Section 70 of the Indian Contract Act can be invoked: first, a person should
lawfully do something for another person or deliver something to him; second,
in doing the said thing or delivering the said thing he must not intend to act
gratuitously; and third, the other person for whom something is done or to whom
something is delivered must enjoy the benefit thereof. [898 H, 899 A] In the
instant case, the appellant had enjoyed the full benefit of the delivery of the
goods to G. Bros. and not merely an indirect benefit thereof. [901 B] State of
West Bengal v. M/s. B. K. Mondal [1962] 2 Suppl. S.C.R. 876; reiterated.
S.I. Indian Rly. Co. v. Madura Municipality,
A.I.R. 1964 Madras 427; distinguished.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1273/70.
Appeal by Special leave from the Judgment and
Decree dated 28-1-1966 of the Allahabad High Court in First Appeal No. 431 of
1957.
895 P.P. Rao, Subodh Markendeya, R.
Venkataramani and Miss A. Subhashini for the Appellant.
Soli. J. Sorabjee and Rameshwar Nath for the
Respondent.
The Judgment of the Court was delivered by
KOSHAL, J. This appeal by certificate granted under article 133(1)(a) of the
Constitution of India by the Allahabad High Court is directed against its
judgment dated the 28th of January, 1966, confirming on appeal a decree passed
by the Civil Judge, Kanpur, for the recovery of Rs. 46,652-14-6 with interest
at the rate of 3 percent per annum from the date of the institution of the suit
till payment in favour of M/s. J.K. Gas Plant Manufacturing Company Limited
against the sole defendant, namely, the Union of India.
2. The case of the plaintiff company may be
briefly stated thus. The Government of India had supplied some steel to the
plaintiff company for manufacturing gas plants at Rampur. Only a part of the
steel so supplied was utilized for the intended purpose and with regard to the
rest the Regional Deputy Iron and Steel Controller, U.P. Circle, Kanpur (here
in after referred to as the Kanpur Controller) directed the plaintiff company
through a letter dated the 8th/10th of November, 1944 (exhibit 16) to deliver
the same to the U.P. Registered Stock Holders Association Kanpur (for short the
Association). In relation to the recovery of price of the material the letter
stated:
"Your bill for cost of the material
supported by original receipts from suppliers should be made out in the name of
loran and Steel Controller, Calcutta, and submitted to this office. Please make
out a separate bill for handling, storage expenses, etc., and send to this
office supported with original freight and payee's receipt.' The order
contained in letter exhibit 16 could not be implemented on account of lack of
transport facilities. The Kanpur Controller therefore directed the plaintiff
company to deliver the surplus steel to M/s. Govan Brothers Ltd., Rampur
(hereinafter referred to as G. Brothers) and to this extent the order contained
in letter exhibit 16 stood modified The plaintiff company delivered to G.
Brothers the surplus material lying with it between the 11th April, 1945 and
30th of April, 1945. The deliveries totalled 135 tons, 6 cwt., 1 quarter and 1
pound, the price whereof amounted to Rs. 43,728-6-6 which remained unpaid in
spite of repeated demands made by the plaintiff company through letters
addressed to the Kanpur Controller to whom the bills had been forwarded as
desired. Ultimately the plaintiff company was informed by the Accounts officer
attached to the Iron and Steel Controller, Calcutta, that it should take up the
matter with G. Brothers.
896 As the price of the steel remained unpaid
by the Union of India as well as G. Brothers the plaintiff company filed its
suit for Rs. 46,652-14-6 which was inclusive of interest on the principal price
calculated at the rate of 6 per cent per annum from April, 1945, up to the date
of the institution of the suit, after serving the defendant with the requisite
notice under section 80 of the Code of Civil Procedure.
3. In its written statement the Union of
India admitted the correctness of the order contained in letter exhibit 16.
It pleaded however that order was cancelled
in to and not merely in regard to the party to whom the plaintiff company had
to make over the surplus steel. It was specifically denied that the disputed
goods had been delivered to G.
Brothers at the risk and responsibility of
the defendant and that the defendant Was liable to pay the price thereof. It
was asserted that the defendant was merely controlling the supply and
distribution of iron and steel and that the liability to pay the price of any
goods dealt with by it in the exercise of its powers of control rested upon the
party receiving the goods. Another plea taken was that the suit was not
maintainable in view of the provisions of section 175(3) of the Government of
India Act, 1935, which enjoins that a contract between the Government of India
and a third party has to be in writing and in a particular form. It was
emphasized that G. Brothers alone were liable for the payment demanded by the
plaintiff company.
4. The trial court held that the Kanpur
Controller had undertaken the liability to pay the price of the goods to the
plaintiff company even in respect of the delivery to G. Brothers and that the
defendant could not escape liability by reason of the contents' of section 65
of the Indian Contract Act even though the provisions of section 175(3) of the
Government of India Act, 1935, had not been complied with. The contention
raised by the defendant to the effect that section 17(2) of the Defence of
India Act was a bar to the suit was negatived by the trial court. Some other
findings were also arrived at which are not relevant for the purposes of this
appeal. The trial court therefore decreed the claim of the plaintiff company in
full and also directed that it would be entitled to the costs of the suit as
also interest at the rate of 3 per cent per annum from the date of the
institution of the suit to the date of payment.
5. When the first appeal came up for hearing
before the High Court the contention based on the provisions of section 17(2)
of the Defence of India Act was reiterated on the ground that the suit was one
for damages or compensation.
Section 17(2) states:
"Save as otherwise expressly provided
under this Act, no suit or other legal proceeding shall lie against the Crown
for 897 any damage caused or likely to be caused by anything in good faith done
or intended to be done in pursuance of this Act or any rules made there under
or any order issued under any such rule." The High Court agreed with the
learned counsel for the defendant that this section would be a complete bar to
the suit if it was one for damages or compensation but held that the suit was
not of that nature and, on the other hand, it was for recovery of the price of
the goods supplied to G.
Brothers as was also found by the trial
court. The contention was therefore rejected as untenable. The High Court then
proceeded to examine the true nature of the transaction culminating in the
delivery of steel to G.
Brothers and held that the defendant had
failed to establish that the direction regarding preparation and submission of
bills contained in letter exhibit 16 had been cancelled when the plaintiff
company was required to deliver the goods to G. Brothers. It was further held
that even though the provisions of section 175(3) of the Government of India
Act were not complied with the agreement resulting from the correspondence
which took 1 place between the plaintiff company and the officers of the
defendant was good. In this connection reliance was placed on Debi Prasad
Srikrisna Prasad Ltd. v, Secretary of State (l). The sheet anchor of the
judgment of the High Court however was its reliance on section 70 of the Indian
Contract Act and on the basis thereof it held the plaintiff company to be
entitled to recover the price of the goods from the defendant even if it was
assumed that the provisions of section 175(3) were a bar to the recognition of
the contract envisaged by the correspondence between the parties. In this
connection reference was made to New Marine Coal Co. (Bengal) Private Ltd. v.
Union of India(2). It was argued before the High Court that the conditions
requisite for the applicability of section 70 of the Indian Contract Act were
not available in the present case in as much as the defendant had not been
shown to have enjoyed the benefit of the transaction which accrued only to G.
Brothers. The High Court however took a contrary view with the observation:
"The benefit or advantage that has been
derived by the defendants lies in the fact that it has been able to distribute
the stock to persons of its choice according to the rules and regulations
framed by it." It was in these premises that the High Court dismissed the
defendant's appeal with costs.
6. The argument based on section 17(2) of the
Defence of India Act has been reiterated before us but it has merely to be
noticed to be rejected. We are clearly of the opinion that the suit is not for
damages, etc., such as are contemplated by that section.
7. It was seriously argued on behalf of the
defendant that throughout the period during which the Kanpur Controller dealt
with the matter in dispute he was exercising the powers conferred on him under
the Iron and Steel Control order, 1941, that under clause of that order the
plaintiff company could dispose of its stock of steel only in pursuance of a
written direction from the Kanpur Controller and that the mandate issued by the
Kanpur Controller to the plaintiff company requiring the latter to deliver the
goods to G. Brothers having been found to be an oral one, the whole transaction
fell outside the ambit of the law so that the Union of India could not be bound
by it.
The argument as it stands does not lack plausibility
although it would be a question whether the word 'written' occurring in clause
(S) of the Indian Iron and Steel Control order is directory or mandatory.
However we refuse to allow the argument to be raised and that for two reasons.
Firstly, it is a mixed question of fact and law which was never raised in the
courts below. Secondly, the plea taken in paragraph 4 of the written statement
filed by the defendant was categorically to the effect that "the fresh
instructions issued to the plaintiff are contained in the letter in the
possession of the plaintiff", which plea runs counter to the factual part
of the argument. In this view of the matter the legality of the order under
which the plaintiff company transferred its stock to G. Brothers cannot be
allowed to be questioned at this a stage.
8. The only other ground put forward in
support of the appeal was that the provisions of section 70 of the Indian
Contract Act were not applicable to the facts of the present case. That section
reads:
"Where a person lawfully does anything
for another person or delivers anything to him, not intending to do so
gratuitously, and such other person enjoys the benefit thereof, the latter is
bound to make compensation to the former in respect of, or to restore, the thing
so done or delivered." As pointed out in State of West Bengal v. M/s. B.K
Mondal, three conditions must be satisfied before this section can be invoked:
"The first condition is that a person
should lawfully do something for another Person or deliver something to him.
The second condition is that in doing the said thing or 'delivering the said
899 thing he must not intend to act gratuitously; and the third is that the
other person for whom something is done or to whom something is delivered must
enjoy the benefit thereof. When these conditions are satisfied section 70
imposes upon the latter person, the liability to make compensation to the
former in respect of or to restore, the thing so done or delivered." On
behalf of the defendant the objection raised to the applicability of this
section to the transaction in dispute is two-fold. The first contention in this
behalf is that the delivery to G. Brothers was unlawful-a contention which we
have already turned down. Secondly it is said that no benefit at all was
derived from the transaction by the Union of India and that its sole
beneficiaries were G. Brothers.
This objection has not only been overruled by
the High Court but appears to us also to be without substance. In this
connection reference may be made to some documentary and oral evidence. To
begin with, letter exhibit 16 which directed the plaintiff company to deliver
the goods to the Association specifically required that the plaintiff company
would make the bills in the name of the Iron and Steel Controller, Calcutta,
and send them for payment to the Kanpur Controller, The inference which may
reasonably be drawn from the contents of the letter is that the Kanpur
Controller was dealing with the goods as if they belonged to the Government of
India whose duty it was to pay for them when they changed hands, and that the
identity of the party to whom the goods were to be delivered by the plaintiff
company under the orders of the Kanpur Controller was immaterial. Secondly, the
Kanpur Controller (Mr. R.R. Chari) in his deposition dated the 24th of June,
1946 made before the Second Special, Tribunal, Lahore (Camp Bombay) in Criminal
Case No. 3 of 1946, stated thus:
"In September, 1944, J.K. Gas Plant
Manufacturing Co., Rampur, Ltd., handed over 137 tons of iron and steel to
Messrs. Govan Brothers, Rampur, under instructions from our department. Messrs
Govan Brothers thus held the, materials on behalf of the Government." It
has been urged by learned counsel for the defendant that this statement is not
admissible in evidence as it was not made at the trial of the case in hand.
But' it is too late in the day for such an objection to be entertained. The
statement was admitted in evidence as exhibit 15 at the trial presumably,
without objection and cannot now be thrown out. According to it G. Brothers
held the supply of steel made to then by the plaintiff company not for
themselves but on behalf of the Government. Besides, a letter (exhibit 51)
which was issued by the 900 Kanpur Controller to Mr. Siddiq Ali Khan of the
Department of Industries and Commerce, Rampur, also states:
"In this, connection I may mention that
the steel is virtually the property of the Government of India, War Transport
Department and under no circumstances can the Government loose , money in the
bargain. I am obtaining the actual cost of the materials plus all incidental
charges and I will let you know the amount to be paid by each party along with
written orders re gularising the issue of these materials to the various
parties. I have to hold you and you in turn Messrs.
Govan Bros. (Rampur) Ltd., responsible for
the recovery of the cost of the materials when intimated to you." There is
no reason for us to hold, in view of this statement that the steel supplied by
the plaintiff company to G. Brothers was not being held by the latter on behalf
of the Government of India and if that be so, the Government must be held to
have reaped full benefit of the delivery to G. Brother's and it is immaterial
how the steel supplied to the latter was dealt with later on.
9. Learned counsel for the defendant cited S.
1.
Railway Co. v. Madura Municipality for the
proposition that the benefit to the defendant was in any case an indirect one
which would not fall within the ambit of the third condition; envisaged by the
provisions of section 70 of the Indian Contract Act. In that case the South
Indian Railway had, widened a culvert in compliance with an order passed by the
Provincial Government under certain provisions of the Railways Act, 1890. The
work was done primarily for the benefit of the private owners of property in
the neighborhood. The Railway Company however sued the Municipal Committee
within the territorial limits of whose jurisdiction the culvert lay for the
cost of widening it on the ground that the Municipal Committee received a
benefit because it recovered taxes from the owners or occupiers of the
property. In turning down the claim of the South Indian Railway Company Leach,
C. J., who delivered the judgment of the division Bench consisting of himself
and Lakshmana Rao.
J. stated:
"This is a very indirect benefit, and
section 70 can in our opinion only have application where there is direct
benefit to the person for whom the work is done.
The persons who are enjoying the benefit of
this work are the owners and occupiers of the buildings in the locality. It
would be doing violence to 901 the section to say that in these circumstances
the work was done for the benefit of the municipality." The judgment of
the Division Bench was upheld by their Lord ships of the Privy Council in
Governor-General In Council, Represented by the General Manager. South Indian
Railway v. Municipal Council, Madura, Through its Commissioner along with the
reasons on which it was based.
But then the case is of no help to the defendant
who had enjoyed the full benefit of the delivery of goods to G. Brothers and
not merely an indirect benefit thereof.
10. For the reasons stated the appeal fails
and is dismissed with costs.
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