In the High Court of Andhra Pradesh Case 530 of 1975 Citation: 1980 (1) Andh WR 350 Appellants: Barium Chemicals Limited Respondents: Andhra Pradesh Mining Corporation Decided on: Oct 26, 1979 Bench: Mr. Justice Madhava Redddy and Mr. Justice P. Ramachandra Raju
Facts of the case:
- The case was an appeal by the defendant, Barium Chemicals Limited against the decree and judgment dated 30th march, 1974 of the additional Chief Judge, of the Secundrabad Civil Court. The suit before the Civil Court was filed by P. Mining Corporation Limited, Hyderabad for a sum of Rs. 93778 with interest on Rs. 82102 at 6% per annum.
- The corporation had agreed to supply to the company 10,000 long tons of barites ore per year for a period of 5 years with an option to renew for a further period of 5 years by mutual agreement.
- The said ore had to be delivered at the factory at a place called Kothagudem. Article 6 stipulated that minimum delivery of 1000 dry long tons per month from October 1962 to September 1967 at the rate of 10,000 long tons per annum should be made.
- Article no. 7 of the agreement provided for general conditions and its clauses 6 and 7 read as under:
Clause (vi): in the event of any default in the delivery schedule or non – performance of this contract by the sellers, the buyer’s reserve to themselves the right to purchase at the risk and expense of the sellers the quantity involved, from the market in which event the contract shall be deemed to have been discharged to the extent of such quantities bought, at sellers risk. The excess price, if any in the risk purchase and all incidental expenses shall be paid by the sellers to the buyers promptly in the manner required by the buyers.
Clause (vii): all matters, questions, disputes differences and/or claims arising out of and/or concerning and/or touching and/or in connection with and/or in consequence of and/or relating to this agreement whether or not the obligation of either or both parties under this agreement be subsisting at the time of such dispute and whether or not this agreement has been terminated or purported to be terminated or completed shall be decided under the provisions of the Indian Arbitration Act, 1910, with all statutory amendments. Cost of arbitration to be borne by the leasing party.
- Though the contract was made, no ore was supplied by the corporation to the company during the periods of October 1962 to September 1963 and October 1966 to September 1967.
- While in two of those years no ore was at all supplied, in the balance three years, the ore supplied was below the minimum quantity of 10,000 long tons which the corporation had agreed to deliver to the company during that year.
- It was contended by the company that the corporation had caused them a total damage of Rs. 16,65,806 on account of the breach of the contract and they called upon the corporation to pay the balance amount of Rs. 16,00,539 after giving credit of ore supplied.
- Legal notices were sent by the corporation to the company, claiming the amount as due to it.
- The company filed its written statement stating that by terms of the agreement, the disputes between the parties should be referred to arbitration.
- The company filed before the additional Chief Judge of the City Civil Court, Hyderabad under Section 8 of the arbitration act to appoint a sole arbitrator to adjudicate on all the outstanding disputes between the company and the corporation.
- Dr. Mir Siadat Ali Khan was appointed the sole arbitrator to decide all the disputes.
- Before the arbitrator, the company filed its claim for Rs 16,00,539.
- The company’s claim for damages for breach of the contract was rejected in full by the sole arbitrator.
- On filing to the Chief Judge of the Civil Court to aside the award, under section 33 of the Arbitration Act, the same was dismissed default.
- Section 12 of the Sale of Goods Act:
(1) a stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.
(2) 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.
(3) 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.
(4) 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”
It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with terms of the contract of sale.
- Section 37 of the Sale of Goods Act:
Where the seller delivers to the buyer a number of goods less than he contracted to sell the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate.
- Section 38 (2) of the Sale of Goods Act:
“where there is a contract for the sale of goods to be delivered by stated installment which is to be separately paid for, and the seller makes no delivery or defective delivery in respect of one or more installments, or the buyer neglects or refuses to take delivery of or pay for one or more installments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to claim for compensation but not to a right to treat the whole contract as repudiated”
- Section 55 (1) of the Sale of Goods Act:
“where under a contract of sale the property in the goods has passed to the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.”
- Section 57 of the Sale of Goods Act: provides for the right of the buyer to sue the seller for damages for non-delivery.
- Section 59 of the Sale of Goods Act:
“(1) where there is a breach of warranty by the seller or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty the buyer is not by reason only of such breach of warranty entitled to reject the goods, but he may –
(a) set up against the seller the breach no warranty in diminution or extinction of the price, or
(b) sue the seller for damages for breach of warranty.
(2) the fact that a buyer has set up a breach of the warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage”
On the question of the Civil Judge not allowing the appeal, the appellants contended that the Chief Judge had based their plea upon section 59 of the Sale of Goods Act, and as the company had lost before the arbitrator, it was no longer open to the company to defend their case in the present suit. The appellants contended that the subject matter of the case of 1968 was not referred to the arbitrator. All the disputed questions of fact and law which were raised in the pleadings of the parties in the suit were not referred to the arbitrator appointed. The decision of the arbitrator negating the claim for damages made by the company did not, therefore, preclude the company from putting forward its defense based upon section 59 of the sale of goods act.
Dealing with the question of supplying less amount of ore, the counsel for the appellants argued that the contract did not provide that the corporation should supply the ore only if it was available in the mines that were being exploited by the corporation or that the corporation had no obligation to procure the ore else. Being so, the corporation has committed a breach of contract in not supplying the quantities of ore that it had undertaken to supply to the company.
Apart from the few documents which were filed in the case, the oral evidence left no doubt that the corporation had begun to insist on the payment of a higher rate per long ton, and though it had exploited some extra ore from the mines, it sold away that ore to other parties at a more favorable rate.
The corporation made an effort to have the contract canceled by agreement, but as the company insisted on the performance of the contract, the contract could not be canceled by mutual agreement. Another explanation offered for non – performance was that sufficient ore was not available in the mines belonging to the corporation. Even if it was not available in the mines exploited by the corporation, the ore was available in the open market. Again, the terms did not indicate that the corporation had to supply only such ore as it got from the mines belonging to it. The corporation tried to get a higher price for the ore even during the contract period, but the company did not agree to pay any higher rate, though the quantity of 4,000 long tons was available with the corporation, the corporation, instead of supplying it, chose to sell it to Messer’s Sadhana Enterprises of Delhi at rates varying from Rs. 50 to Rs. 100.
Few documents that were filed in the case also indicated that the corporation had addressed the company about the difficulties it was experiencing in not being able to win a sufficient quantity of the ore with a view to making a supply to the company in terms of the agreement. It also appeared that the company addressed the state government in 1964, to take over another mining lease in favor of one m/s. Viswabharathi Mining Corporation and supply the ore to the company and that in such efforts, the corporation supported the company’s request. The corporation was seeking the concurrence of the company to terminate the contract by mutual agreement but the company did not agree.
The Corporation had supplied only a small portion of the ore and was trying to recover the price of the quantity of ore that was accepted by the company. But the stipulation regarding the delivery of a minimum quantity of ore either per month or per year was a stipulation essential to the main purpose of the contract and could therefore be a condition. Section 59 of the Sale of Goods Act gives the right to the company to elect and treat the breach of condition as a breach of warranty. The company, therefore, had the right to sue the corporation for damages for the non-delivery of the goods.
It was contended by the corporation that the payments were not completely made for the portion of goods delivered. But according to the contract, delays beyond the specified period in the payment of the amounts would entail payment of interest to the corporation at 9% per annum on the outstanding amounts. The stipulation regarding the payment of interest on the amounts outstanding to the corporation indicated that the corporation could not withhold supply even if for earlier supplies made by them the price had not been paid by the company. It was therefore clear that the Corporation had breached the contract.
The learned Judge contended that the amount of Rs. 16,835 was the subject matter of the suit, and it was excluded from the purview of the arbitrator. In the claim made before the arbitrator, the company had not deducted this amount also from damages claimed by it against the corporation. When the subject matter of the suit which included the defense raised by the company was excluded from the reference made to the arbitrator, the arbitrator could not have exercised any jurisdiction on the matter not referred to him.
Therefore the award could have no legal validity. Consequently, the judgment and decree of the additional chief judge were set aside and the appeal was allowed.
Edited by: Purnima Ojha