Anand Carbo Private Limited Vs Amrit Cement Limited (Calcutta High Court)
Summary: The defendant contested the application, alleging that the coal supplied did not meet the agreed specifications concerning gross calorific value, ash content and other quality parameters. Relying on an inspection report issued by SGS, the defendant submitted that it had rejected the consignment within ten days of receiving the goods. It acknowledged consuming 1,014.69 metric tonnes but explained that the consumption was necessitated by operational requirements and that approximately 2,951.31 metric tonnes remained rejected. The defendant further contended that the advance payment already made exceeded the contractual value of the coal consumed and that substantial disputes concerning quality, rejection and payment required adjudication.
After examining the submissions and supporting documents, the High Court held that the defendant had established a prima facie defence. The rejection was communicated within a reasonable period and was supported by an inspection report that could not be disregarded at the interim stage. The Court also found no sufficient material indicating that the defendant was attempting to dispose of, conceal or remove its assets to defeat a possible decree. Referring to Rahul S. Shah v. Jinendra Kumar Gandhi and Raman Tech & Process Engineering Co. v. Solanki Traders, the Court held that the circumstances did not justify an order for security or injunction under Order XXXVIII Rule 5 or Order XXXIX Rule 1(b) of the Code of Civil Procedure, 1908.
The Court further observed that the alleged defects in verification of the plaintiff’s application were curable procedural irregularities rather than grounds for rejecting the proceedings, applying the principles in Vidyawati Gupta v. Bhakti Hari Nayak. Consequently, the Court refused the interim injunction and security sought by the plaintiff. It directed the defendant to file its affidavit-in-opposition by 6 October 2023 and permitted a reply by 17 October 2023, listing the matter for further hearing on 20 November 2023. The Court did not finally determine the recovery claim or the competing allegations concerning coal quality and contractual liability.
The Court held that the defendant had established a prima facie defence based on the contemporaneous rejection and inspection report. It found no prima facie evidence that the defendant was attempting to remove or sequester assets to defeat any decree. Applying Raman Tech & Process Engineering Co. v. Solanki Traders, it declined to direct security or grant an interim injunction under Order XXXIX Rule 1(b) or Order XXXVIII Rule 5 CPC. The Court also treated the alleged defects in verification of the plaintiff’s application as curable irregularities, referring to Vidyawati Gupta v. Bhakti Hari Nayak. It refused interim relief while directing the exchange of affidavits and listing the matter for 20 November 2023. The order does not finally decide the underlying recovery claim or the parties’ competing allegations concerning coal quality.
Cases Discussed
Rahul S. Shah v. Jinendra Kumar Gandhi & Others — (2021) 6 SCC 418; Vidyawati Gupta v. Bhakti Hari Nayak & Others — (2006) 2 SCC 777; Raman Tech & Process Engg. Co. & Anr. v. Solanki Traders — (2008) 2 SCC 302.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The plaintiff says that the defendant placed a purchase order on 3rd basis for an aggregate quantity of 4000 MT+/-10% i.e. 01 Rake. The purchase order which is annexed at page 26 of the application provides for the price per MT (PMT) on loaded into rake basis at Rs.10,300/- excluding the Goods and Service Tax (GST) and the cess. The coal should have the Gross Calorific Value (GCV) of 5000 kilocal/per kg +/-100 kilocal/per kg. The ash contents, the volumetric measure (VM), the sulphur and IM content are also provided in the purchase order.
The plaintiff further says that the purchase order on being accepted becomes a contract between the parties there, on the terms and conditions provided therein. The purchase order having been accepted brought in operation a contract of guarantee. The said guarantee is on pro-rata basis on GCV and Total Mass (TM) i.e. on prorata basis if the coal did not fulfill the specification the buyer (defendant) was only entitled to impose penalty and not reject the goods. The plaintiff further says that the terms and conditions of the contract in unequivocal language provide for a guarantee as stipulated therein.
The plaintiff also says that in view of the provisions of Sections 11, 12 and 13 of the Sale of Goods Act, 1930 (hereinafter referred to as ‘the said Act’), the provision of rejection of goods as provided under Section 41 of the said Act is not applicable in this case for such guarantee. The defendant in case of inferior quality of the goods would at the highest pay less by imposing penalty and deducting the same on pro-rata basis from the price of the goods.
The plaintiff also says that there is no dispute as to the receipt of the total quantity of the material on 16th November, 2022. The railway receipt annexed at page 40, according to the plaintiff, will show that the goods were loaded on 13th November, 2022 and the invoice was raised on 14th November, 2022 (at page-45 of the application). The defendant has paid a sum of Rs.2,81,19,000/- in advance and was, therefore, liable to pay the balance amount immediately upon the receipt of the goods.
The plaintiff further says that on 26th November, 2022, the defendant for the first time alleged that the goods were of inferior quality. Although, the agreement provided for drawing of samples by an independent agency in the presence of the representatives of the plaintiff and the defendant at the railway siding no such sample was done by the defendant in the presence of the plaintiff. The report, which is annexed to electronic mail dated 26th November, 2022, according to the plaintiff, is dated 22nd November, 2022, but the samples were drawn on 6th November, 2022 when the materials were not even placed for being loaded in the rake and as such samples could not have been drawn on that date. The plaintiff, therefore, says that the report relied upon by the defendant is a unilateral report, when samples may have been collected not in the presence of the representative of the plaintiff, but only with the defendant’s representative around.
The plaintiff also says that attempt to reject the goods is impermissible under the contract between the parties and the defendant could not have done so. The plaintiff further says that by a subsequent letter caused to be written by the defendant through its advocate, which is at page 52 of the application, the defendant has given incorrect facts and figures to defy making payment of the price of the goods, sold and delivered by the plaintiff. In the said letter, the plaintiff says that the defendant has after initially rejecting the goods which it could not have otherwise done, however, admitted to have consumed 1014.69 MT. The defendant having partly consumed the goods have given a go by to the rejection and cannot now turn around and say that the balance quantity is rejected. The plaintiff also says that assuming without admitting that there is a dispute as to the quality of goods, then also, by acting contrary to the ownership of the goods, the defendant has waived its initial decision for rejection and have accepted the goods. The defendant cannot, therefore, reject the balance part and claim damages from the plaintiff. The plaintiff also says that from the letters issued by the defendant, it is crystal- clear that the defendant is not keeping good financial health and had to close down the unit intermittently, though the defendant alleged that the same has occurred due to off-grain materials supplied by the plaintiff which is, however, incorrect. The plaintiff further says that the conduct of the defendant attracts the provisions of Order XXXIX Rule 1(b) read with the provisions of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908. It is, therefore, an appropriate case to direct security by exercising the powers under Section 151 of CPC as laid down by the Hon’ble Supreme Court in the judgment reported in (2021) 6 SCC 418 (Rahul S. Shah-Versus- Jinendra Kumar Gandhi & Others).
Responding to the submission made by the plaintiff, the defendant says that there was an initial delay on the part of the plaintiff in supplying the goods. Initially, the goods were asked to be supplied from Bermo Siding, but later on, it was loaded from Nimpura Siding near Kharagpur, West Bengal as the plaintiff could not supply from the initially decided point which caused delay resulting in breaking the chain of continuous supply at the defendants’ factory. The defendant was forced to go ahead with the contract as it was not possible to arrange the goods from alternative sources. The defendant says assuming without admitting that there was no delay and 16th November 2022 being the date on which the goods were supplied according to the original scheme even then the defendant, within a reasonable period of time, in writing, had rejected the goods as required under Section 41 of the said Act. The ten days time period, according to the defendant, from the date of receipt of the material should be reckoned to be a reasonable period of time, particularly when the report from SGS, an independent inspecting agency, was received only on or after 22nd November, 2022.
The defendant also says that from the report of SGS, it will be clear that the materials supplied by plaintiff were not in accordance with the specification as laid down in the purchase order. The GCV was much less than 4900 kcal/PMT. The ash content and other compounds contained in the coal so supplied by the plaintiff as per the report of the SGS was also not as per the specification. The defendant further says that after having rejected the goods, it was the obligation of the plaintiff to take back the same, but the plaintiff did not lift it. Under compelling circumstances as there was no coal available to keep the factory operative which solely occurred due to delayed supply by the plaintiff, the defendant consumed the off-grade material by mixing it with high- grade materials to achieve a standard. In this process, the defendant has rejected the balance quantity between 3966 MT being supplied by the plaintiff and 1014.69 MT consumed by the defendant, equivalent to 2951.31 MT and is also entitled to refund of price already paid and damages. The defendant has paid a sum of Rs.2,81,19,000/- and says that even if the aggregate value of the coal measuring 1014.69 MT is calculated at the rate of 10,300 PMT without even price deduction for inferior quality, then also, the defendant has money lying with the plaintiff in excess of Rs.1.76 crores. The plaintiff, therefore, is adequately secured as the issues regarding the specification, which have led to rejection of the goods, are required to be gone into after affidavits, no order of security can be made.
The defendant further says that no case has been made out either as required under Order XXXIX Rule 1(b) of CPC or under Order XXXVIII Rule 5 of CPC. The allegations are bald and do not warrant consideration. The defendant also says that the case in hand cannot be an appropriate case as indicated in the judgment of Rahul S. Shah (supra) as there are more than one triable issues. There are contemporaneous documents complaining about the quality backed with a report of an independent inspecting agency. Taking all these facts into consideration, no security can be directed to be paid nor can the defendant be injuncted in a manner as prayed for to provide the security.
Last but not the least, the defendant has also taken a point that the application has not been properly verified. The statements made in paragraph 16 onwards are at the highest statement of facts making allegation against the defendant. The same cannot be submission on behalf of the plaintiff as indicated in the jurat. The affidavit is not conforming to the provisions of Order XIX of CPC and as such should not be taken into consideration.
After hearing the parties and considering the materials on record, I find that the defendant has been able to make out a prima facie defence to come out of an appropriate case as indicated in Rahul S. Shah, particularly, in view of the letter of rejection being issued within ten days from the date of receipt of the materials backed by a report. The rejection was also made within four days from the date of receipt of the report from SGS. The defendant also has admittedly paid a sum of Rs. 2,81,19,000/- which is much in excess of the price of the goods as per the contract admitted to have been consumed by the defendant. The defendant has raised quality dispute which is, prima facie, substantiated by a report. The said report cannot, at this stage, be shorn away. The pleadings and supporting materials also do not reflect at this stage that the defendant is trying to sequester its assets or trying to remove the assets and itself from the jurisdiction of this Court.
The defects alleged as to the affirmation of the petition by the defendant are curable defects. These are not illegalities, but at the highest irregularities as held in (2006) 2 SCC 777 (Vidyawati Gupta-Versus-Bhakti Hari Nayak & Others). Neither the plaint nor an application can be rejected in view of such irregularities. Although, the judgment in Vidyawati Gupta (supra) was rendered in respect of a suit filed in the ordinary original civil jurisdiction of this Court, yet I am willing to extend the same ratio to a suit like the instant one filed in the Commercial Division of this Court.
Going by the facts of the case the principles as laid down in Raman Tech & Process Engg. CO. & Anr. –Versus- Solanki Traders reported in (2008) 2 SCC 302 are applicable. No case as required under Order XXXIX Rule 1(b) of CPC has also been prima facie made out.
In the aforesaid facts and circumstances, the ad interim order of injunction and/or security prayed by the plaintiff is refused. The matter requires further scrutiny, which is possible only after affording the defendant to file affidavits.
Affidavit-in-opposition be filed by 6th October, 2023. Affidavit in Reply thereto, if any, be filed by 17th October, 2023.
Let this matter appear under the heading “Adjourned Motion” on 20th November, 2023.
Source: uploaded eight-page court order. Original substantive text retained; PDF page numbers and signature notation omitted. No unverified internal links added.
