The
K.C.P. Ltd. Vs. State Trading Corporation of India & Anr [1995] INSC 366 (8 August 1995)
Manohar
Sujata V. (J) Manohar Sujata V. (J) Punchhi, M.M. Mrs. Sujata V. Manohar. J.
CITATION:
1995 SCC Supl. (3) 466 JT 1995 (6) 83 1995 SCALE (4)697
ACT:
HEAD NOTE:
These
appeals arise from a common judgment of the Andhra Pradesh High Court dated
3.2.1976 in O.S. Appeal Nos. 5, 7 and 9 of 1974. Some of the relevant facts for
the purposes of these appeals are as follows:- The appellant-K.C.P. Limited has
a cement factory situated at Macherla in Guntur District, Andhra Pradesh.
Prior
to 1956 the Government of the composite State of Madras was considering
establishment of a cement factory in Kurnool District of Rayalaseema, by a
private enterprise Mr. V. Ramakrishna, Chairman of the appellant-company
offered to start such a factory and applied for a licence to start the factory,
to the Government of India through the Government of Madras. At this time there
was a proposal to construct a dam over the River Krishna near Nandikonda. This
project which was intially named Nandikonda Dam Project later came to be known
as the Nagarjunasagar Project. It was proposed that the appellant would
establish a cement factory at Macherla near the project site and would supply
cement to the said project. The Chairman of the appellant-company offered to
supply cement to the Nagarjunasagar Project at the rate of Rs.48/- per ton
loose from the proposed factory site at macherla. This is recorded in the
letter dated 12th of April, 1955 from Mr. Ramakrishna to the Secretary to the
Government of India in which he has stated that he was enclosing the final
confirmation to supply cement for the said project at the rate of Rs.48/- per
ton loose ex- factory. On 31.10.1955 the Government of India wrote a letter to
the appellant saying that they proposed to issue a licence subject to the
condition inter alia that almost the entire production of the factory shall be
used locally by Nandikonda Dam Project (as it was then known) for the next 4 or
5 years. The Nandikonda Control Board, however, was desirious of getting the
price of cement further reduced.
It,
therefore, continued negotiations with the appellant for a further reduction in
the price of cement which was to be supplied for the said project. On 30th of
April, 1956 there was a meeting of the Negotiating Committee of the Nagarjunasagar
Control Board with the Chairman of K.C.P.
Limited
when it was agreed that the appellant-company would charge Rs.47.50 per ton of portland
cement plus excise duty and sales tax subject to variations upwards and
downwards due to new taxation. For the supply during the period from 1.10.56 to
31.3.1958, however, the rate charged would be the flat rate of Rs.47.50 per ton
plus excise duty and sales tax without any variation. Thereafter the Nagarjunasagar
Control Board desired that the draft agreement which was to be entered into
with the appellant-company should be scrutinised by the two concerned State
Governments. It seems that drafts were exchanged between the parties but no
concluded agreement was arrived at.
While
these negotations were going on the Cement Control Order, 1956 came into effect
from 1.7.1956. In view of the coming into force of the Cement Control Order of
1956, in the draft agreement a clause was added to the effect that it would be
subject to the sanction of the State Trading Corporation. This was because by
virtue of the Cement Control Order, 1956, the State Trading Corporation was
appointed as a canalising agency for the purchase of cement at a controlled
price fixed under the Cement Control Order of 1956.
When
the Cement Control Order, 1956 came into effect the appellant had not started
production of cement and hence the factory of the appellant was not mentioned
in the schedule to the Cement Control Order of 1956. The factory commenced
production in February, 1958. By this time the appellant was brought on the
schedule of the Cement Control Order on 25.1.1958. The appellant informed the
State Trading Corporation on 2nd of February, 1958 that it had entered into an
agreement with Nagarjunasagar Control Board for the supply of cement for the
said project at the concessional rate of Rs.47.50 per ton loose ex-factory insted
of the controlled price of Rs.54.50 fixed under the Cement Control Order. The
State Trading Corporation by its letter dated 5th of February, 1958 stated that
the rebate of Rs.7/- per ton, that is to say, the difference between the
ex-works price allowed to the appellant which was fixed by the Government of
India at Rs.54.50, and the concessional rate of Rs.47.50, would be allowed, and
the appellant would be paid by the State Trading Corporation the ex-works price
less rebate.
The
rebate would be passed on to the Nagarjunasagar Control Board, the purchaser.
The
appellant was appointed by the State Trading Corporation as their selling agent
for the purpose of supplying cement to the Nagarjunasagar Control Board. Hence
the appellant, as the selling agent of the State Trading Corporation started
supplying cement directly to the said project from 18.4.1958. As the producer
of cement, the appellant became entitled to receive the price of cement so
supplied from the State Trading Corporation. It recovered the price from the
purchaser as agent of the State Trading Corporation. In the bills drawn by the
appellant the sale price was being shown as fixed by the Cement Control Order
and a rebate of Rs.7/- was shown as being deducted from the ex-works price.
Thus the appellant as the selling agent of the State Trading Corporation
collected from the Nagarjunasagar Control Board/the State of Andhra Pradesh the price of Rs.47.50 per ton. As
the selling agent of the State Trading Corporation the appellant from time to
time submitted its accounts to the State Trading Corporation in respect of the
cement so supplied to the Nagarjunasagar Control Board retaining with itself
the price at the rate of Rs.47.50 per ton as the producer of cement.
The
notified price of cement was increased from Rs.54.50 to Rs.60.50 with effect
from 1.7.1958. The appellant, however, continued to give a rebate of Rs.7/- to
the Nagarjunasagar Board while supplying cement. In the bills which were drwan
by the appellant, the price was shown as the controlled price less rebate of
Rs.7/-.
From
1st of November, 1961, however, when the new Cement Control Order, 1961 came
into operation, the appellant did not show any rebate in the bills supplied to
the Nagarjunasagar Board and claimed the price as fixed under the Cement
Control Order. The Board (the State of Andhra Pradesh), however, paid to the appellant the controlled price less
a rebate of Rs.7/-. In the statements of accounts, however, which were
submitted by the appellant to the State Trading Corporation, the appellant did
not show any rebate and claimed the full amount of the controlled price from
the State Trading Corporation which it retained with itself by debiting the
full price to the State Trading Corporation in the statements of accounts. From
1.1.1966 cement was decontrolled.
It is
the contention of the State of Andhra Pradesh that the price which the
appellant had agreed to charge to the Control Board for supply of cement for
the said project was a fixed price of Rs.47.50 per ton, and that the appellant
had recovered excess amounts from the State of Andhra Pradesh by charging
controlled price less rebate of Rs.7/-. The State of Andhra Pradesh filed a
suit being C.S. No.2 of 1970 against the appellant and the State Trading
Corporation praying that a formal agreement embodying the term that cement
would be supplied by the appellant to the Control Board at a fixed price of
Rs.47.50, be directed to be executed. It also prayed that cement supplied by
the appellant to the Control Board should be paid for at the rate of Rs.47.50
per ton irrespective of the changes in the controlled price from time to time.
In the suit the State of Andhra
Pradesh also claimed
a refund of the excess amount recovered from them by the appellant. There was
also a prayer for reference to arbitration. The State Trading Corporation filed
a suit against the appellant being C.S. No.1 of 1970 for the recovery of the
rebate of Rs.7/- which the appellant had recovered from the State Trading
Corporation by reversal of entries in the accounts for the period after
1.11.1961. Both these suits were tried and decided by a common judgment. The
suit filed by the State of Andhra Pradesh against the appellant and the State
Trading Corporation was dismissed; while the suit filed by the State Trading
Corporation against the appellant was decreed.
Three
appeals were filed from this common judgment and order before the Andhra
Pradesh High Court under clause 15 of the Letters patent. O.S.A. No.7/1974 was
filed by the State of Andhra
Pradesh against the
judgment and order dismissing their suit. O.S.A. No.5/74 was filed by the appellant
against the decree which was passed against them in C.S. No.1/70 while O.S.A.
No.9/74 was filed by the State Trading Corporation in respect of the judgment
and order in C.S.No.1/70 in so far as it directed the State Trading Corporation
to pay court fee on its claims separately. The Andhra Pradesh High Court by the
impugned judgment and order which is a common judgment in the three appeals,
has dismissed these appeals and has awarded costs as set out in the impugment
and order. The present appeals are filed by appellant from this judgment and
order in so far as it upholds the claim of the State Trading Corporation
against the appellant.
The
Andhra Pradesh High Court has examined in detail the entire correspondence
which was exchanged between the appellant and/or its Chairman and the
Government of India as also the Government of the concerned States in
connection with the setting up of the factory of the appellant and the concessional
rate at which the appellant offered to supply cement for the nagarjunasagar
Project. The High Court has come to the conclusion that there was no concluded
contract between the parties for the supply of cement for the said project at a
fixed price of Rs.47.50. We do not see any reason to take a different view in
the light of the facts and circumstances which are set out at length in the
judgment of the Division Bench of the High Court of Andhra Pradesh. In view of
this finding the question of the alleged agreement being drawn up in accordance
with the provisions of Article 299 of the constitution of India, or its non-
enforceability on that count, does not arise.
The
High Court has, however,, held that in view of the facts and circumstances
which are set out in the judgment, the appellant had offered a rebate of Rs.7/-
on the Control Price of cement in respect of the cement supplied for the Nagarjunasagar
Project. It was in the light of this concessional rate offered by the appellant
that licences were issued from time to time to the appellant for the Cement
factory and for expansion of its capacity. The High Court has also pointed out
that in fact the appellant gave a rebate of Rs.7/- on the controlled price in
respect of the cement supplied for the said project and it continued to give
this rebate upto 1.11.1961. The appellant also wrote to the State Trading
Corporation informing it that the appellant had agreed to give a rebate of
Rs.7/- on the Control Price of Cement in respect of the cement which was to be
supplied by it for the Nagarjunsagar Project and the State Trading Corporation
accepted this arrangement. The appellant also showed this amount as rebate in
the bills which were drawn by it for the supply of cement upto 1.11.1961. It
was not entitled to withdraw this rebate after 1.11.1961. In fact, even after
1.11.1961 it continued to recover only the concessional price. It has not taken
any steps against the State of Andhra Pradesh
to recover the amount of rebate so granted by it although its bills after
1.11.1961 do not show the rebate.
In
view of the above the High Court has, in our view, rightly come to the
conclusion that the State of Andhra Pradesh was entitled to the supply of
cement from the appellant at control Price less a rebate of Rs.7/- during the
period when the Cement Control Orders were in operation.
As the
State of Andhra Pradesh has in fact paid this price, that is to say, Control
Price less rebate of Rs.7/-, no further relief is required to be granted as its
claim to recive cement at the fixed price of Rs.47.50 per ton has been negatived.
Although the appellant declined to give this rebate in its bills after 1.11.61
it has in fact not filed any suit for the recovery of this rebate of Rs.7/- as
against the State of Andhra
Pradesh. In these
circumstances the High Court has rightly come to the conclusion that the State
of Andhra Pradesh is liable to pay for the cement supplied, control price less
a rebate of Rs.7/-.
The
State Trading Corporation was only a canalising agency and it had agreed to
pass on a rebate of Rs.7/- to the State of Andhra Pradesh in view of the agreement which was entered into between the
appellant and the State of Andhra Pradesh.
The High Court has rightly observed that it is difficult to see how the
appellant can at all make a complaint against the State Trading Corporation for
the amount of rebate which was granted by the appellant to the State of Andhra Pradesh. It has, therefore, held that the
appellant was not entitled, to claim the amount of rebate from the State
Trading Corporation after 1.11.1961 as was done in the statements of accounts
submitted by it to the State Trading Corporation. It has, therefore, upheld the
claim of the State Trading Corporation for recovery of the excess amount for
which credit was thus taken by the appellant. It has held that as selling
agent, the appellant was receiving the full price minus Rs.7/- per ton given as
rebate. It is only that price which should have been paid to the appellant as
producer. The reversal of entries in the accounts made by the appellant as
selling agent of the State Trading Corporation is unwarranted and clearly
illegal. The State Trading Corporation was justified in filing the suit and
claiming the amount of rebate which had been wrongfully debited to their
account by the appellant by making reversal entries. The High Court has,
therefore, dismissed the appeal filed by the appellant being O.S.A. No.5 of
1974 with costs.
We
agree with the reasoning and conclusion of the Andhra Pradesh High Court for
reasons set out above.
No
order as to the appeals are dismissed with no order as to costs.
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