Balaji Industries Ltd. Vs. PEC Ltd. & Ors.  INSC 1679 (27 October
APPELLATE JURISDICTION CIVIL APPEAL NOS.7155-7156 OF 2009 (@
S.L.P.(C)Nos.27776-27777 of 2009 (CC 13433-13434)/2009) JAI BALAJI INDUSTRIES
LTD. ... Appellants PEC LTD. & ORS. ... Respondents
O R D E R
Permission is granted to file the special leave petitions.
We have heard learned counsel for the parties at the very initial
stage for issuance of notice since the Respondent No.1 was duly represented on
These appeals are directed against the judgment and order dated
1st September, 2009 passed by the Division Bench of the Calcutta High Court in
APOT No.235 of 2009 and APOT No.249 of 2009 and connected applications allowing
the appeals in terms of the following order :
The appellant/defendant will be at liberty to encash the cheques and
appropriate the amount subject to furnishing a Bank Guarantee of like amount to
be furnished in favour of the Registrar, Original Side. We also grant liberty
to the appellant to furnish a letter of undertaking to furnish Bank Guarantee
for like amount from a Nationalised Bank in favour of Registrar, Original side.
Registrar, Original Side until the formal Bank Guarantee is furnished as directed
and upon doing so, the cheques may be encashed. The appellant shall keep the
Bank Guarantee renew till the disposal of the suit. The Bank Guarantee should
be kept to the credit of this suit.
Receiver already appointed shall sell the goods after issuing an advertisement
in the Newspapers, once in "Statesman" once in "Ajkal" and
once in Hindi in "Sanmarg", either by way of public auction or by
private party subject to confirmation by the 3 Court. The cost charges and
expenses of sale will be borne by the appellants at the first instance.
ad hoc remuneration of 500 GMs should be paid to the Receiver.
also grant liberty to the parties to bring the intending buyers.
Receiver after confirmation of sale shall handover the sale proceeds to the
respondent/plaintiff. The appellant is directed to renew the said Bank
Guarantee till the disposal of the suit.
suit is expedited.
be served forthwith, if not already served, upon Advocates-on-Record for the
defendant in the suit, by the Advocate-on-Record for the plaintiff.
statement within 3 weeks from the date the certified copy of this judgment is
made available, cross order for discovery two weeks thereafter, inspection two
weeks thereafter and the suit is directed to appear in the prospective
From the materials on record it appears that the appellant entered
into an agreement on 28th July, 2008 with, a foreign seller for purchase of
7100 metric tonnes of Manganese Ore which was to be sold by the said foreign
party under a CIF contract 4 and discharged at Paradeep Port. In terms of the
said agreement, the quality and quantity of goods were to be inspected by the
buyer at the Port of Loading. Thereafter, the appellant and the Respondent
No.1, a Government Company, entered into a High Seas Sale Agreement on 25th
September, 2008, wherein the Respondent No.1 has been described as
"seller" of the goods and the appellant is described as the
"buyer". Under the terms of the said Agreement, the appellant was to
pay to the Respondent No.1 a sum of US$ 48,25,188.40 as 100% value of the
documents plus 1.5% trading margin of documents, as payment for the documents.
It was also agreed that the Respondent No.1 would endorse the Bill of Lading in
favour of the appellant. A Deed of Pledge was also executed whereby the entire
consignment was pledged to the Respondent No.1- Company.
The vessel carrying the consignment of Manganese Ore arrived at
Paradeep Port and the 5 goods were discharged on or about 8th October, 2008,
and, thereafter, transferred to a warehouse. It appears that the goods were
dispatched to the appellant's factory premises at Durgapur and Ranigunj in West
Bengal and were allegedly unloaded on plots within the appellant's factory
premises purportedly leased to the Respondent No.1-Company.
also the case of the appellant that out of the said consignment of 7100 metric
tonnes of Manganese Ore, the appellant purchased 100 metric tonnes from the
Respondent No.1 with the intention of testing the quality of the said ore.
Allegedly, the said or did not meet the tests relating to its
quality and, consequently, the appellant rejected the entire consignment and
refused to take delivery thereof from the Respondent No.1-Company. That is the
genesis of the dispute which arose between the parties.
The appellant filed a suit, being C.S.No.137 of 2009, in the
Calcutta High Court in its Ordinary Original Civil Jurisdiction claiming return
of an advance amount of Rs.2,85,28,926/- and Rs.35,30,000/-, being the price of
100 metric tonnes, aggregating a sum of Rs.3,20,58,926/- and Rs.2,52,08,526/-
paid towards various duties, charges and freight etc. The appellant also prayed
for an injunction to restrain the Respondent No.1- Company from encashing the
security which had been given by the appellant to the extent of
Rs.20,31,25,956/- and for damages. In the suit an application for interim
orders was also made for the following reliefs :
Commissioner/Special Officer be appointed to make inventory of the manganese
ores lying at the respondent No.1's leased plots in the factories of the
petitioner at Durgapur and Ranigunj and thereafter to take steps for drawing of
samples and get the same analysed through and/or by such agency as this Hon'ble
Court may deem fit and proper including National Test House, Alipore, Calcutta;
Injunction restraining the respondent No.1 from depositing and/or encashing the
said cheque dated December 14, 2008, bearing no.242474 for Rs.20,31,25,956/-
drawn on Allahabad Bank, Calcutta Main Branch;
Direction upon the respondent no.1 to cancel and return the said cheque bearing
no.242474, dated December, 2008 for Rs.30,31,25,956/-, drawn on Allahabad Bank,
Calcutta Main Branch;
Appropriate direction upon the respondent no.1 to remove the manganese ore
lying at the respondent no.1's leased plots being portions of the factory
premises of the petitioner at Ranigunj and Durgapur within such time as may be
fixed by this Hon'ble Court;
default of the respondent no.1 removing the manganese ore from the said leased
plots in the factory premises of your petitioner, Receiver be appointed by this
Hon'ble Court with all powers under order 40 of the Code of Civil Procedure
including sale of manganese ore lying at the leased plots of the respondent
no.1 in the factory premises of the petitioner at Durgapur at Ranigunj, either
by public auction or by private treaty and to deposit the sale proceeds thereof
with the Registrar, Original Side;
Ad-interim order in terms of above prayers;
and incidental to this application be borne by the respondent no.1;
further orders be made and/or directions be given as this Hon'ble Court may
deem fit and proper."
On 18th May, 2009, the learned Single Judge passed an interim
order, as prayed for, in regard to encashment of the security deposit till 22nd
May, 2009. Thereafter, the interim order was extended and the appellant herein
was directed to revalidate the cheque dated 14th December, 2008, which was
purported to have been given by way of security to the Respondent No.1, by
another six months from the date of receipt of the order. Thereafter, the
Respondent No.1-Company filed an application for vacating the interim order
while the appellant sought continuance thereof.
After hearing the parties at length on 12th June, 2009, the
learned Single Judge rejected the prayer made on behalf of the
respondent-Company to vacate the interim order, and, instead, passed the following
"To ascertain the quality of the balance goods lying in the leased plots
of the respondent no.1 Mr. Amit Gupta, Adv., 1st Floor, Bar Library Club is
appointed Receiver at an initial remuneration of 500 GMs. For purposes of
drawing samples and getting the same analysed through the National Test House,
filed by the said agency on the next date of hearing.
order is passed as from the report if it appears that the goods are as per
specifications there will be no reason for the petitioner to refuse lifting of
the interim order granted will continue till ten weeks. Directions are given
for filing affidavits:
be filed within four weeks from date; affidavit-in- reply thereto, if any, be
filed within two weeks thereafter. Matter to appear in the list seven weeks
Aggrieved thereby, the Respondent No.1 herein preferred APOT
No.235 of 2009 and APOT No.249 of 2009 before the Division Bench of the
Calcutta High Court and the same were disposed of finally by the Appeal Court
by its order dated 1st September, 2009, extracted hereinabove, whereby the
order of the 10 learned Single Judge was set aside and replaced by the said
As mentioned hereinbefore, these appeals are directed against the
said order of the Division Bench of the Calcutta High Court.
On behalf of the appellants it has been contended that under the
High Seas Sale Agreement, the Respondent No.1 was to endorse the Bill of Lading
in favour of the appellant, but that the same was never done and the
consignment of Manganese Ore was never made over to the appellant and has
remained in the custody of the Respondent No.1 ever since it was discharged at
It was also submitted that after having purchased 100 metric
tonnes of the said ore for the purpose of testing, when it was found that the
same was sub-standard material, the appellant had expressed its inability to
accept the consignment. It was also submitted that without delivering the 11
consignment, the Respondent No.1 was not entitled to encash the cheques, which
had been made over to it by way of security deposit.
It was lastly contended that the appellant had no obligation to
take delivery of the entire goods since the Agreement provided that the goods
were to be delivered part-by-part.
The case made on behalf of the appellant was vehemently opposed on
behalf of the Respondent No.1 on the ground that the High Seas Sale Agreement
was merely a means of import of the said ore into India by the appellant and
the Respondent No.1 was merely a facilitator for the said purpose. In fact, the
role of the Respondent No.1 was to import the goods and, thereafter, to make
over the same to the Appellant as it had no use for the Manganese Ore.
the same would be evidenced by the Deed of Pledge, whereby the goods continued
to be in the control and possession of the Respondent No.1 till 12 the same
were delivered to the appellant. It was also the case of the Respondent No.1 that
the consignment of Manganese Ore had always been with the appellant in its own
godown and that the Bill of Lading had also been endorsed in favour of the
appellant, whereupon the title to the goods had passed to the appellant.
From the submissions made on behalf of the parties, it will appear
that the appellant is aggrieved by the fact that besides having paid a sum of
Rs.20,31,25,856/- by a postdated cheque to the Respondent No.1, the appellant
had also been deprived of the goods, the value whereof had greatly diminished
since it was received at Paradeep Port on or about 8th October, 2008. On the
other hand, not only would the Respondent No.1 retain control over the
consignment but it would also have unjustly enriched itself to the extent of
the security provided by the appellant in terms of 13 the order of the High
Court impugned in these appeals.
In deciding these appeals, we have to keep in mind the fact that
the suit is still pending before the Calcutta High Court and the rights and
liabilities of the parties are yet to be worked out in the suit. The question
whether the Bill of Lading had been endorsed in favour of the appellant or not
by the Respondent No.1 is also a matter to be decided in the suit on evidence.
Furthermore, the appellant has itself indicated that it was not willing to
accept the consignment since it was of sub-standard quality and had
deteriorated further since it was discharged at Paradeep Port. As has been
pointed out by the learned Single Judge in her order of 12th June, 2009, the
appellant in its undertaking had agreed to pay the balance amount in respect of
the imported goods on their first demand without demur and protest and to
honour the cheques issued in favour of the Respondent No.1 on their 14
presentation on the dates indicated. Furthermore, a further undertaking was
given not to intimate the bankers to stop the payment of the cheques delivered
to the Respondent No.1 and also not to close the account without the permission
of the Respondent No.1.
On a prima facie assessment of the terms and conditions of the
Agreement entered into between the appellant and the Respondent No.1 on 7th
August, 2008, the responsibility relating to the quantity and quality of the
cargo was to be that of the appellant and Clause 8 of the said Agreement
indicates that the Respondent No.1 would not be responsible for any shortage in
the quantity and quality of the cargo at the loading point as well as at the
delivery point. Nothing has come to our notice whereby the Respondent No.1 was
prevented from encashing the cheques alleged to have been given by way of
In our view, it would not be proper for us to delve into the
details of the matter at this stage since the order of the Division Bench in
appeal protects the appellant, while granting liberty to the Respondent No.1 to
encash the cheques and appropriate the amount upon furnishing a Bank Guarantee
of the like amount which was to be kept renewed till the disposal of the suit.
Furthermore, the goods in question are to be sold by the Receiver appointed by
the Court and the sale proceeds have been directed to be handed over to the
appellant herein. Balance claims, if any, will have to be decided in the suit
filed by the appellant. Apart from the above, it has also to be kept in mind
that the Respondent No.1 has already paid for the goods to the foreign buyer.
We, therefore, see no reason to interfere with the judgment and
order passed by the Appeal Court of the Calcutta High Court in APOT No.235 of
2009 and APOT No.249 of 2009. The appeals are, 16 accordingly, dismissed. We
make it clear that the observations made in this order are only for the
disposal of the appeals which have been directed against the interim orders and
the Trial Court will be at liberty to proceed in the suit uninfluenced by any
of the said observations.
There will be no order as to costs.
................................................J. (ALTAMAS KABIR)