Indochem
Electronic & Anr Vs. Addl. Collector of Customs, A.P [2006] Insc 96 (24 February 2006)
S.B.
Sinha & P.K. Balasubramanyan
(Arising
out of SLP (Civil) No. 24699 of 2003) S.B. SINHA, J :
Leave
granted.
The
appellants supplied EPABX telephone system to the respondent in the month of
March, 1990. The said system was installed in the office of the respondent on
18th March, 1990 at a cost of Rs. 1,87,599/-. In terms of the contract of sale
entered into by and between the parties, a warranty for a period of 1 year was
issued for the said equipments. The appellants during negotiations agreed that
a service centre at Vishakhapatnam would be opened for convenience of
the said office and other customers. The said assurance was categorically given
in the offer of the respondent dated 14.2.1990. At the relevant time
furthermore approval of the Telecommunication Department for installation of
the EPABX system in the respondent's office had not been given. The respondent
was informed, on a query made in that behalf by the Chief General Manager of
the Telecommunication Department, that the EPABX system supplied by the
appellants was not in department's approved list. Such approval was, however,
granted only on 25.3.1991.
On or
about 13.9.1990 a letter of complaint was issued by the complainant to the
appellants herein inter alia stating that:
"It
is registered (sic) to note that the 32 instruments supplied by you in the
month of March, 1990 are not working properly. Main drawbacks are as under:
-
Getting wrong
numbers is a frequent complaint.
-
The
conversations are being interrupted and we hear some music and the
conversations stop.
-
Instruments with
key pad lock system supplied are not at all working with the result that
instruments of the Telecom Department has been fixed removing the instruments
supplied by you.
You
may recall that at the time of submitting the tender, it was assured that you
will supply fault-less EPABX and intercom facilities. However, EPABX and
intercom facilities supplied by you are not working properly and not upto the
mark.
You
may also recall that you have promised to keep a permanent resident engineer at
Visakhapatnam to avoid such defects. However, no
such arrangements has been made.
You
are, therefore, requested to immediately send your engineer to inspect all the
instruments and EPABX and rectify all the defects immediately. You are also
requested to post a permanent resident engineer at Visakhapatnam." Allegedly, on receipt of the
said complaint, the defects pointed out in the system were rectified. According
to the respondent the system was found to have several defects. Locking
arrangement did not work with the result that the respondent had to pay excess
amount for two telephone instruments, without getting any utility out of them.
The
appellants did not attend to the requirements for giving maintenance and
service of the said system. When the warranty period was about to come to an
end, the respondent categorically stated that the system had not been
functioning for the past 6 months and requested the appellant to extend the
warranty period for another 3 to 6 months. Later on, it was further noticed
that the night service system had not been functioning properly insofar as
outside calls during the closure of the office on holidays, after office hours
and on working days were not being received at the reception. Despite night
switch having been put on by the telephone operator while leaving his office,
calls were not being received in the reception, resulting in snapping/cutting
of the communication. Allegedly, the respondent had to seek help of another
firm for keeping the system operational. The appellants, however, were
insisting on 'annual maintenance services' for attending to the said complaints
of the respondent to which the latter did not agree.
On the
aforementioned allegations a complaint petition was filed before the State
Consumer Disputes Redressal Commission, Hyderabad.
The
said complaint petition was marked as CD 86/92 wherein it was prayed that a
direction be issued for repayment of full cost of EPABX system amounting to Rs.
1,87,559/-.
In the
said proceedings the contention of the appellants, on the other hand, was that
during the period of warranty and even thereafter all the complaints had been
attended to. The appellants could not maintain a separate service centre at Vizag
as the proposal became highly uneconomical and disproportionate to the
installations in the region and, thus, they had to cater to the service
requirements from their Hyderabad Office with prior intimation to the
appellants. The said services had been rendered even on 14.5.91, 14.7.91,
19.8.91 and 18.9.91 without any service charges and although, the respondent
did not agree to have an annual maintenance contract for service thereof after
the period of warranty expired. As during the period of warranty, the
respondent got the system attended to by the local mechanic, the same
constituted breach of the contract of warranty.
The
parties filed affidavits before the State Commission in support of their
respective cases. By a judgment and order dated 23.2.2001 the State Commission
arrived at the following findings:
"We
shall now consider whether the system installed in the office of the
complainant in the month of March, 1990 was working as expected. A reading of Exs.
A-1 to A-3 show that the system was giving poor performance and the complainant
was trying frantically requesting for the assistance of a mechanic. Ex. A-2
letter dated 16.4.1991 shows even within a month after its installation there
is breakdown of the system. In that letter the complainant stated that the
system is not at all working and the instruments are often going out of order.
The fuse is often blown out. The stand by battery installed by the opposite
party proved to be worthless. As and when there is break down automatic
switching on to the battery is not working.
Hence
its performance is disappointing. This letter gives an indication that from the
beginning the system is giving poor show. It continued so as seen by telex
message dated 6.5.1991 marked Ex. A-3. In view of this correspondence we have
no hesitation to come to a conclusion that the system is a failure. The
opposite party no doubt made some effort to set it right as seen from Exs. B-4
to B-10.
Though
some repairs were attended to during the month of April and May, it is clear
that the performance was not satisfactory. It is clearly indicated in Ex. B-7
dated 15.5.91 that repairs were made subject to further observation. In contra
distinction to this the attitude of the opposite party is one of perseverance
for entering into a service contract under letters dated 9.10.1991 and
22.10.1991 marked Ex. B-11 and Ex. B-3. therefore, the record clearly depicts
that the system was not functioning from the beginning, complaints were made
continuously and although the technician was deputed and made some repairs
still it could not be rectified satisfactorily and on the top of it, the
opposite party was more anxious to enter into a service contract rather than to
see that the system sold and supplied by it works satisfactorily." The
appellants, in term of the said findings, were directed to refund a sum of
Rs.1,87,559/- with interest @ 12% from the date of the filing of the complaint
till the date of payment after taking back the system supplied by it.
An
appeal preferred by the appellants herein before the National Commission was
dismissed by reason of the impugned judgment.
Mr.
K.V. Mohan, learned counsel appearing on behalf of the appellants in assailing
the said orders of the State Commission and the National Commission submitted
that in terms of the contract of warranty the appellants were required to
maintain the system free of cost only for a period of one year and it was not
at all necessary for them to provide free services and/or to maintain the
system thereafter. As the liability of the appellants was to maintain the
system only during the period of warranty, it was argued, the State Commission
acted illegally in directing the appellants to pay the prices thereof with
interest. It was, furthermore, submitted that the breach of contract of
warranty would not enable the appellants to reject the entire contract and
claim the price of goods supplied, particularly, when in the instant case the
period of warranty had expired.
Mr. Gopal
Subramanium, learned Addl. Solicitor General, on the other hand, would support
the judgment urging that such a relief could be granted in terms of Section 14
(1) (c) of the Consumer Protection Act, 1986.
The
learned counsel drew our attention to the statements made in paragraph 7 of the
written statement wherein the appellants had categorically admitted that in
terms of the contract of supply, no service centre was opened. Such service
centre came to be opened only on 21st September, 1990 i.e. after the complaint was made by the respondent and
that too was discontinued.
Before
adverting to the rival contentions raised herein we may notice certain admitted
facts. The parties entered into a contract of supply of EPABX system subject to
the conditions mentioned therein. The appellants received the entire price for
installation of the said system.
At the
relevant time the said system was not approved by the Department of
Telecommunication. No service centre was opened and only upon receipt of the
complaint, the same was opened in September, 1990.
The
said service centre was later on discontinued. In September, 1990 the
respondent admittedly complained about the working/functioning of the said
system as early as possible on 13.9.1990. Just before the expiry of the period
of contract of warranty the respondent complained that as the said system had
not been functioning properly for the past 6 months, the warranty period should
be extended, which request was not accepted by the appellants.
The
Consumer Protection Act, 1986 (herein after referred to as 'the Act') was
enacted inter alia to provide for better protection of the interests of the
consumers. The applicability of the said Act in the instant case is not in
dispute. The dispute between the parties, is admittedly a 'consumer dispute'
within the meaning of Section 2 (e) of the Act. It has further not been
disputed that there has been a 'deficiency of services'. 'Deficiency' has been
defined in Section 2 (g) of the Act to mean:- " 'deficiency' means any fault,
imperfection, shortcoming or inadequacy in the quality, nature and manner of
performance which is required to be maintained by or under any law for the time
being in force or has been undertaken to be performed by a person in pursuance
of a contract or otherwise in relation to any service." The provisions of
the said Act are in addition to and not in derogation of the provisions of any
other law.
Section
14 of the Act provides for powers of the Forum to issue an order to the
opposite party directing him to do one or more of the things satisfied therein
including:
-
" to
replace the goods with new goods of similar description which shall be free
from any defect;
-
to return to the
complainant the price, or, as the case may be, the charges paid by the complainant."
The State Commission as well as the National Commission which are created under
the said Act exercise special jurisdiction.
The
defects in the system pointed out by the respondent in the instant case started
within the period of warranty. As noticed hereinbefore, certain breaches of
contract of supply are admitted.
Telephone
is a means of communication. The communication system was required to be run
effectively and efficiently by the appellants having regard to the statutory
duties they were required to perform.
The
deficiencies in EPABX system supplied by the appellants were such as were
required to be attended to immediately. If the appellants had not been able to
attend thereto immediately, there would be a 'deficiency of services' on the part
of the appellants as immediate attention to such complaints was a part of the
contract.
The
State Commission as well as the National Commission have arrived at findings of
fact as regard nature of deficiencies of service complained of by the respondent
in terms of the provisions of the contract.
If
such breaches of conditions of warranty admittedly had taken place during the
period of warranty, no exception can be taken to the judgment and order passed
by the State Commission as also the National Commission.
The
Appellant had all along been aware that the system installed by it had not been
functioning properly. On its own showing, it had been attending to the
complaints made by the Respondent relating to the functioning of the system. It
has categorically been stated by the Appellant itself that despite expiry of
the period of warranty it had been attending to the complaints as and when made
by the respondent which were of serious nature From the aforementioned conduct
of the Appellant itself, it may be inferred that it voluntarily undertook to
meet the requirements of the Respondent relating to mal-functioning etc. of the
said system despite expiry of the period of warranty. For all intent and
purport, the period of warranty, thus, stood extended. As the defects in the
system including manufacturing defects, if any, were found not only during the
period of warranty but also during the extended period, and as the Appellant
itself undertook to attend to the complaints received in that behalf, in our opinion,
it is too late for it now to contend that in view of the fact that the period
of contract or warranty expired, it had no liability therefor.
By
reason of its own conduct, the Appellant made representation to the Respondent
that despite expiry of period of warranty, maintenance of the system to the
Respondent's satisfaction was its contractual obligation. The contract in view
of such representation on the part of the Respondent does not come to an end.
The contract, if looked in the light of the surrounding circumstances evidently
pointed to the intention of the parties and as gathered from the contract
itself that the representation of the Appellant should have been treated as
warranty for an expended period. Even in a case where the goods are accepted,
it is well known, the buyer will have a remedy for damages for the breach of
it.
Section
12 of the Sale of Goods Act, reads as under:
"Section
12 - Condition and warranty
-
A stipulation in
a contract of sale with reference to goods which are the subject thereof may be
a condition or a warranty.
-
A condition is a
stipulation essential to the main purpose of the contract, the breach of which
gives rise to a right to treat the contract as repudiated.
-
A warranty is a
stipulation collateral to the main purpose of the contract, the breach of which
gives rise to a claim for damages but not to a right to reject the goods and
treat the contract as repudiated.
-
Whether a
stipulation in a contract of sale is a condition or a warranty depends in each
case on the construction of the contract. A stipulation may be a condition,
though called a warranty in the contract." Although in terms of
sub-section (3) of Section 12 no right accrues to a purchaser to reject the
goods on breach of stipulation of warranty, the same would not mean that the
extent of damages cannot be equivalent to the price of the goods inasmuch as
such a power has specifically been conferred upon the Commission.
It is
true, where a stipulation in a contract of sale is a warranty, its breach may
give rise to a claim for damages but not to a right to reject the goods and
treat the contract as repudiated; but, where a stipulation in a contract of
sale is a condition, its breach may give rise not only to a claim for damages
but also generally to a right to treat the contract as repudiated. [See Halsbury's
Laws of England, Fourth Edition Reissue (41) Para 64] SCC 65] this Court opined that under the law,
the Consumer Protection Act, 1986 has a wide reach and the Commission has
jurisdiction even in cases of service rendered by statutory and public
authorities, holding:- ".The word compensation is of a very wide
connotation. It may constitute actual loss or expected loss and may extend to
compensation for physical, mental or even emotional suffering, insult or injury
or loss. The provisions of the Consumer Protection Act enable a consumer to
claim and empower the Commission to redress any injustice done. The Commission
or the Forum is entitled to award not only value of goods or services but also
to compensate a consumer for injustice suffered by him. The Commission/Forum
must determine that such sufferance is due to mala fide or capricious or
oppressive act. It can then determine amount for which the authority is liable
to compensate the consumer for his sufferance due to misfeasance in public
office by the officers. Such compensation is for vindicating the strength of
law.." In view of our findings aforementioned and keeping in view the fact
that the State Commission and National Commission cannot be said to have acted
without jurisdiction, we are of the opinion that no case has been made out for
interference with the impugned judgment. The appeal is accordingly dismissed.
However,
in the facts and circumstances of the case, there shall be no order as to costs.
