Food Corporation of India Vs. Surana Commercial Co. & Ors.
EmailAppeal: Civil Appeal No. 3353 of 1997
(From the Judgment and Order dated 21.3.96 of the Andhra Pradesh High Court in C.C.C.A. No. 41 of 1985)
(From the Judgment and Order dated 21.3.96 of the Andhra Pradesh High Court in C.C.C.A. No. 41 of 1985)
Petitioner: Food Corporation of India
Respondent: Surana Commercial Co. & Ors.
Apeal: Civil Appeal No. 3353 of 1997
(From the Judgment and Order dated 21.3.96 of the Andhra Pradesh High Court in C.C.C.A. No. 41 of 1985)
(From the Judgment and Order dated 21.3.96 of the Andhra Pradesh High Court in C.C.C.A. No. 41 of 1985)
Judges: S.N. Variava & H.K. Sema, JJ.
Date of Judgment: Sep 19, 2003
Appearances:
Mrs. Indra Sawhney, Advocate for the Appellant.
Head Note:
CONTRACT LAWS
Indian Contract Act, 1871
Section 2(d) – Contract – Enforceability – Meaning of consideration – Appellant agreeing to supply certain quantity of dal to Army – Appellant in turn entering into an agreement with respondent for supply of the required quantity of dal – Dal supplied by the respondent to appellant however refused by the Army as being of inferior quality – Supplemental agreement between appellant and respondent whereby respondent agreed to take back the supplies made by it and upgrade the quality – Respondent accordingly taking back only part of the dal and replacing with upgraded dal – Appellant disposing of the balance quantity in auction and suing the respondent for damages – Trial court decreeing the suit partly in so far as it related to the original agreement but rejecting the claims arising under the supplemental agreement on the ground that the same was entered into under duress and there was no consideration – High Court while dismissing the appeal holding that there was no duress or coercion but the supplemental agreement was without consideration. Dismissing the appeal held that the respondent having supplied the dal to the appellant and the latter having accepted the same the obligation under the original agreement came to an end and therefore the supplemental agreement could not be considered to be part and parcel of the original agreement. High Court correct in holding the supplemental agreement to be one without consideration.
Held:
The original agreements were for converting arhar whole into dal, whereas supplemental agreement was for upgrading dal which has already been supplied and accepted by the appellant. Once the appellant accepted the dal, the obligation under the original agreements came to an end. Thus it could not be said that the supplemental agreement was part and parcel of the original agreement. (Para 4)
In the supplemental agreement there is no mention that the consideration is non-enforcement of bank guarantees. Further the respondents had delivered the dal. The appellant had accepted the dal. Thus the respondents could not be said to be in breach of the original agreement. If the respondents were not in breach of the original agreement, then the bank guarantees could not have been enforced by the appellant. Lastly and most importantly in the suit it is not claimed that the consideration for the supplemental agreement was not the enforcement of the bank guarantees. (Para 7)
In the supplemental agreement there is no mention that the consideration is non-enforcement of bank guarantees. Further the respondents had delivered the dal. The appellant had accepted the dal. Thus the respondents could not be said to be in breach of the original agreement. If the respondents were not in breach of the original agreement, then the bank guarantees could not have been enforced by the appellant. Lastly and most importantly in the suit it is not claimed that the consideration for the supplemental agreement was not the enforcement of the bank guarantees. (Para 7)
For all these reasons, we are in agreement with the reasoning given in the impugned judgment that the supplemental agreement was without consideration. (Para 8)
JUDGEMENT:
Variava, J.
1. This appeal is against a judgment of the Andhra Pradesh High Court dated 21st March, 1996
2. Briefly stated the facts are as follows:
2.1 The appellant had agreed to supply arhar dal to the Army Purchase Organisation, reserve grain depot, Lucknow. They therefore invited tenders for milling arhar whole into dal. The respondents submitted two tenders; one for conversion of 1,500 metric tonnes of arhar whole into dal and the second for converting 2,000 metric tonnes. These tenders were submitted on 10th May, 1977 and 1st August, 1977. Both these tenders were accepted by the appellant and two agreements were entered into between the parties.
2.2 The respondents delivered 1607.495 tonnes of arhar dal, which was accepted by the appellant. The appellant then sent the same to the army, but the army rejected 786.505 tonnes of dal on the ground that the same did not conform to specifications. The appellant asked the respondents to take back the rejected dal and to upgrade it. A supplemental agreement was then entered into to upgrade and replace the rejected dal. The respondents took back 208.245 tonnes of dal and replaced 23.945 tonnes. The respondents thereafter delivered 47.388 tonnes on 5.6.1978; 23.750 tonnes on 8.6.1978 and 23.655 on 9.6.78 after duly upgrading the same. Thus, out of 184.400 tonnes of rejected dal, the respondents were still having 89.607 tonnes in their custody. Thereafter the respondents did not replace any further dal. The appellant tried to get the dal upgraded from some other contractor but nobody agreed to upgrade the dal. Ultimately the appellant sold off the dal in an auction sale for a sum of Rs. 9,60,111/-
2.3 The appellant then filed a suit for damages for non delivery of 89.607 tonnes at the rate of Rs. 600 per quintal amounting to Rs. 5,37,642/-. They also claimed damages of Rs. 25,09,449/- and Rs. 16,46,463.37/- towards interest. The suit was decreed for a sum of Rs. 537642/- being price for non-delivery of 89.607 tonnes of dal. However, the remaining claim was rejected on the ground that they arose only under the supplemental agreement and the supplemental agreement had been entered into by the respondents under duress and coercion and that there was no consideration for the same.
2.4 The appeal of the appellant has been dismissed by the impugned judgment. In the impugned judgment it has been held that there was no duress or coercion but the finding that there was no consideration for the supplemental agreement has been upheld.
3. The respondents have remained absent even though served.
4. On behalf of the appellant it has been submitted that the supplemental agreement was part and parcel of the original agreement and that therefore no further consideration was required. We are unable to accept this submission. The original agreements were for converting arhar whole into dal, whereas supplemental agreement was for upgrading dal which has already been supplied and accepted by the appellant. Once the appellant accepted the dal, the obligation under the original agreements came to an end. Thus it could not be said that the supplemental agreement was part and parcel of the original agreement.
5. It was next submitted that the respondents had failed to supply the full quantity under the original agreement. It was submitted that the respondents had committed a breach of the original agreement and for this reason the appellants are entitled to recover damages. We however find that this is not the claim in the suit. There is no claim in the suit for non-supply under the original agreements. The claim in the suit is based only on the supplemental agreement.
6. It was next submitted that under the original agreement the respondents had given bank guarantee. It was submitted that the consideration for the supplemental agreement was the forbearance on the part of the appellant’s agreement not to enforce those bank guarantees. In this behalf reliance was placed on the definition of the term “consideration” in section 2(d) of the Contract Act, which reads as follows:
“When, at the desire of the promisor, promises or any other person has done or abstained from doing, or does not abstains from doing or promises to do or to abstain from doing, something, such act or abstinence or promise is called consideration for the promise.”
7. Undoubtedly, if the promisor abstains from doing something that could be consideration for the contract. However, in the supplemental agreement there is no mention that the consideration is non-enforcement of bank guarantees. Further the respondents had delivered the dal. The appellant had accepted the dal. Thus the respondents could not be said to be in breach of the original agreement. If the respondents were not in breach of the original agreement, then the bank guarantees could not have been enforced by the appellant. Lastly and most importantly in the suit it is not claimed that the consideration for the supplemental agreement was not the enforcement of the bank guarantees.
8. For all these reasons, we are in agreement with the reasoning given in the impugned judgment that the supplemental agreement was without consideration.
9. We therefore see no reason to interfere. Accordingly the appeal stands dismissed. There shall be no order as to costs.
1. This appeal is against a judgment of the Andhra Pradesh High Court dated 21st March, 1996
2. Briefly stated the facts are as follows:
2.1 The appellant had agreed to supply arhar dal to the Army Purchase Organisation, reserve grain depot, Lucknow. They therefore invited tenders for milling arhar whole into dal. The respondents submitted two tenders; one for conversion of 1,500 metric tonnes of arhar whole into dal and the second for converting 2,000 metric tonnes. These tenders were submitted on 10th May, 1977 and 1st August, 1977. Both these tenders were accepted by the appellant and two agreements were entered into between the parties.
2.2 The respondents delivered 1607.495 tonnes of arhar dal, which was accepted by the appellant. The appellant then sent the same to the army, but the army rejected 786.505 tonnes of dal on the ground that the same did not conform to specifications. The appellant asked the respondents to take back the rejected dal and to upgrade it. A supplemental agreement was then entered into to upgrade and replace the rejected dal. The respondents took back 208.245 tonnes of dal and replaced 23.945 tonnes. The respondents thereafter delivered 47.388 tonnes on 5.6.1978; 23.750 tonnes on 8.6.1978 and 23.655 on 9.6.78 after duly upgrading the same. Thus, out of 184.400 tonnes of rejected dal, the respondents were still having 89.607 tonnes in their custody. Thereafter the respondents did not replace any further dal. The appellant tried to get the dal upgraded from some other contractor but nobody agreed to upgrade the dal. Ultimately the appellant sold off the dal in an auction sale for a sum of Rs. 9,60,111/-
2.3 The appellant then filed a suit for damages for non delivery of 89.607 tonnes at the rate of Rs. 600 per quintal amounting to Rs. 5,37,642/-. They also claimed damages of Rs. 25,09,449/- and Rs. 16,46,463.37/- towards interest. The suit was decreed for a sum of Rs. 537642/- being price for non-delivery of 89.607 tonnes of dal. However, the remaining claim was rejected on the ground that they arose only under the supplemental agreement and the supplemental agreement had been entered into by the respondents under duress and coercion and that there was no consideration for the same.
2.4 The appeal of the appellant has been dismissed by the impugned judgment. In the impugned judgment it has been held that there was no duress or coercion but the finding that there was no consideration for the supplemental agreement has been upheld.
3. The respondents have remained absent even though served.
4. On behalf of the appellant it has been submitted that the supplemental agreement was part and parcel of the original agreement and that therefore no further consideration was required. We are unable to accept this submission. The original agreements were for converting arhar whole into dal, whereas supplemental agreement was for upgrading dal which has already been supplied and accepted by the appellant. Once the appellant accepted the dal, the obligation under the original agreements came to an end. Thus it could not be said that the supplemental agreement was part and parcel of the original agreement.
5. It was next submitted that the respondents had failed to supply the full quantity under the original agreement. It was submitted that the respondents had committed a breach of the original agreement and for this reason the appellants are entitled to recover damages. We however find that this is not the claim in the suit. There is no claim in the suit for non-supply under the original agreements. The claim in the suit is based only on the supplemental agreement.
6. It was next submitted that under the original agreement the respondents had given bank guarantee. It was submitted that the consideration for the supplemental agreement was the forbearance on the part of the appellant’s agreement not to enforce those bank guarantees. In this behalf reliance was placed on the definition of the term “consideration” in section 2(d) of the Contract Act, which reads as follows:
“When, at the desire of the promisor, promises or any other person has done or abstained from doing, or does not abstains from doing or promises to do or to abstain from doing, something, such act or abstinence or promise is called consideration for the promise.”
7. Undoubtedly, if the promisor abstains from doing something that could be consideration for the contract. However, in the supplemental agreement there is no mention that the consideration is non-enforcement of bank guarantees. Further the respondents had delivered the dal. The appellant had accepted the dal. Thus the respondents could not be said to be in breach of the original agreement. If the respondents were not in breach of the original agreement, then the bank guarantees could not have been enforced by the appellant. Lastly and most importantly in the suit it is not claimed that the consideration for the supplemental agreement was not the enforcement of the bank guarantees.
8. For all these reasons, we are in agreement with the reasoning given in the impugned judgment that the supplemental agreement was without consideration.
9. We therefore see no reason to interfere. Accordingly the appeal stands dismissed. There shall be no order as to costs.
