Suchetan Exports P.Ltd vs Gupta Coal India Limited & Ors

Special Leave Petition filed by Suchetan Exports P. Ltd.,

which was the Defendant No.1 in Special Civil Suit No.187 of

2011 filed by Gupta Coal India Limited, the Respondent No.1

herein.

2. Some of the facts disclosed in the Plaint and the

Written Statement are not disputed. It is not disputed that

on 12.4.2010, the Plaintiff and the Defendant No.1 entered

into an Agreement for sale and purchase of South African

Coal measuring 16,943 metric tonnes. The Plaintiff agreed

to sell the said quantity of coal to the Defendant No.1 at

US $111.75 per metric tonne. On 22.4.2010, the Plaintiff,

i.e., the Respondent No.1 herein, entered into another High

Seas Sale Agreement with the Defendant No.1/Petitioner

herein. Clause 2 of the said Agreement provides that the

Plaintiff/Respondent No.1 herein had imported 16,943 metric

tonnes of Steaming Non Coking Coal in bulk of South African

origin and had shipped the same on MV Novios Meridian

arriving at Dharamtar Port, under Bill of Lading Numbers 2,

3 and 4, all dated 8.4.2010. Clause 3 of the Agreement

provides that the Plaintiff had agreed to sell and the

Defendant No.1 had agreed to purchase the consignment of the

coal on High Seas Sale basis, subject to the terms and

conditions specified thereunder. Clause 3(b) of the

Agreement provides that the quality determined and certified

by an independent inspecting agency at Disport would be

final and binding on both the parties.

3. On 22.4.2010, the aforesaid vessel containing coal

imported through the Respondent No.3, Venkatesh Karriers

Limited, reached the Dharamtar Port at Mumbai and according

to the case made out in the plaint, the coal was delivered

to the Respondent No.2, M/s United Shippers Limited, as the

stevedore agent. On the same day, the Respondent

No.1/Plaintiff raised and delivered a High Seas Sales

Invoice for an amount of 8,25,46,296/- upon the

Petitioner herein for sale of the said coal. Consequent

thereupon, the Respondent No.2 handed over the total

quantity of 9,542.920 metric tonnes to the Petitioner till

the date of filing of the suit. The balance quantity of coal

amounting to 7400.082 metric tonnes was lying with the

Respondent no.2 out of the total quantity of 16,943 metric

tonnes received by it from the Petitioner.

4. Since the Petitioner failed to pay the balance sum of

5,82,58,560/-, the Respondent No.1 filed Special Civil Suit

No.187 of 2011, inter alia, for a declaration that the

Petitioner had committed breach of contract and that the

Agreements dated 12.4.2010 and 22.4.2010 stood cancelled and

terminated. The Respondent No.1 also claimed return of the

balance quantity of coal, amounting to 7400.082 metric

tonnes, lying with the Respondent No.2 and for a decree

for an amount of 1,22,04,349/- against the

Petitioner towards the balance payment of the 9,542.920

metric tonnes of coal delivered to it by the Respondent

No.2. Certain other claims were also made regarding

interest and payment of demurrage charges incurred after the

date of filing of the suit, as also the L/C discounting

charges of 7,19,483/-. The Respondent No.1 also claimed

permanent injunction to restrain the Respondent Nos.2 and 3

from handing over the balance amount of coal measuring

7400.082 metric tonnes lying with the Respondent No.2 at

Dharamtar Port, Mumbai, either to the Petitioner or to any

other person. By an application under Order 39 Rules 1 and

2 of the Code of Civil Procedure, the Plaintiff/Respondent

No.1 also prayed for an interim order in the same terms and

also sought a direction in the form of a mandatory

injunction to the Respondent No.2 to hand over the balance

coal to the Respondent No.1.

5. The claim of the Respondent No.1 was opposed by the

Petitioner by filing a Written Statement. On 9.2.2011, the

trial court passed an ex-parte order of injunction

restraining the Respondent Nos.2 and 3 from handing over the

custody of the balance coal weighing 7400.082 metric tonnes

to any person and particularly to the Petitioner.

Subsequently, by its order dated 16.4.2011, the trial court

allowed the application of the Respondent No.1 for temporary

injunction and confirmed the ad-interim injunction granted

earlier on 9.2.2011. The trial court also passed an order

of injunction in mandatory form directing the Respondent

No.2 to hand over the balance coal of 7400.082 metric tonnes

in its possession to the Respondent No.1 on payment of rent,

if any, due from the said Respondent.

6. Aggrieved thereby, the Petitioner preferred an appeal

before the Nagpur Bench of the Bombay High Court, being

Appeal from Order No.53 of 2011.

7. From the submissions made on behalf of the respective

parties, the High Court noted that after taking into

consideration all the claims of the Respondent No.1, the

total amount due from the Petitioner in respect of the

transaction was 6,19,58,123/-. On the other hand, it

was the Petitioner's claim that the suit as filed by the

Respondent No.1 was not for recovery of money for the goods

supplied, but for cancellation/ termination of the

Agreements dated 12.4.2010 and 22.4.2010, which were

governed by the provisions of Section 46(1)(a) read with

Section 47(1) of the Sale of Goods Act, 1930. On behalf of

the Petitioners, it was also contended before the High Court

that the title and ownership of the goods had already passed

to the Petitioner. It was also urged that when the entire

quantity of coal was delivered to the Respondent No.2 for

the purpose of transmission of the same to the Petitioner

without reserving the right of disposal of the goods, the

lien on the goods stood terminated in view of the provisions

of Section 49(1)(a), (b) and (c) of the aforesaid Act. It

had also been urged that at best the Respondent No.1 herein

would be an "Unpaid Seller" as defined in Section 45(1)(a)

of the aforesaid Act, and would be entitled only to recovery

of cost of the goods supplied. It was also submitted that

since the Respondent No.1 had lost its possession over the

coal, even the question of exercise of the rights of an

unpaid seller and the seller's lien, did not arise.

8. Taking into consideration the submissions made on behalf

of the respective parties and the materials placed on

record, the High Court by the impugned order allowed the

appeal in part and modified the order of the trial court

passed on 16.4.2011 in Special Civil Suit No.187 of 2011, in

the following manner :-

"(a) The defendant no.1 is directed to deposit an

amount of Rs.6,19,58,123/- (Rupees Six Crores

Nineteen Lacs Fifty Eight Thousand One Hundred

Twenty Three Only) in the Trial Court, within a

period of six weeks from today.

(b) If such amount is deposited, within a

stipulated period by the defendant no.1, the

application Exh.5 for grant of temporary injunction

filed by the plaintiff, shall stand dismissed.

(c) If the defendant no.1 fails to deposit an

amount of Rs.6,19,58,123/- (Rupees Six Crores

Nineteen Lacs Fifty Eight Thousand One Hundred

Twenty Three Only), within a stipulated period, the

order of injunction passed by the Trial Court below

Exh.5 on 16.4.2011, shall continue to operate

pending the decision of the suit.

(d) The plaintiff shall be at liberty to file an

application for withdrawal of the said amount if

deposited by the defendant no.1 and the same shall

be decided by the Trial Court, within a period of

four weeks from the date of serving copy of the

application, upon the defendant no.1 or his

Counsels."

Mr. Biji Mathew, Adv.

9. Appearing for the Petitioner/Defendant No.1, Mr. Ranjit

KumaMr. Biji Mathew, Adv.r, learned Senior Advocate,

reiterated the submissions which had been made before the

High Court. In addition, learned senior counsel indicated

that since the Petitioner had already paid a total sum of

3,42,88,767/-, including payments made to the customs and

port authorities, to the Respondent No.1, the trial court as

also the High Court, erred in directing the Petitioner to

deposit a further sum of 6,19,58,123/- as against

the balance quantity of the coal, in order to lift the same.

Mr. Ranjit Kumar also urged that the High Court had also

erred in passing a conditional order that if the amount as

indicated hereinabove was deposited within the stipulated

period by the Petitioner, then the application for temporary

injunction filed by the Respondent No.1 would stand

dismissed. However, in default of deposit of the said

amount within the stipulated period, the order of injunction

passed by the trial court would continue to operate pending

the decision of the suit. Mr. Ranjit Kumar submitted that

having regard to the provisions of the Sale of Goods Act

referred to hereinabove and in particular Section 49(1)(a)

thereof, once the Respondent No.1 had lost possession over

the goods, it also lost its lien thereupon and is no longer

entitled to pray for recovery of the goods from the

Respondent No.2.

10. Mr. Ranjit Kumar submitted that the Petitioner was ready

and willing to deposit the balance price of the remaining

quantity of the coal measuring 7400.082 metric tonnes for

lifting the same and the other claims of the Respondent No.1

towards demurrage and port charges etc. could be decided by

the trial court in the pending suit.

11. Mr. Ranjit Kumar also urged that by allowing the

Respondent No.1's prayer for interim relief and passing a

mandatory order of injunction thereupon, both the trial

court as well as the High Court, had provided the Respondent

No.1 with the ultimate relief prayed for in the suit at the

interim stage and if the remaining quantity of coal was

allowed to be removed by the Respondent No.1, the suit of

the Respondent No.1 would stand decreed at the interim

stage.

12. Mr. Ranjit Kumar's submissions were opposed by Mr. P.S.

Patwalia, learned Senior Advocate appearing for the

Respondent No.1 Company. It was urged that on the failure

of the Petitioner to deposit the amounts in terms of the

orders passed by the trial court, as also the High Court,

the interim order staying the handing over of the balance

quantity of goods by the Respondent No.2 to the Respondent

No.1, stood vacated and thereafter different quantities of

coal had been lifted by the Respondent No.1 from the

Respondent No.2 in order to recover the amounts already paid

by it to the foreign seller. It was submitted that not only

was the Respondent No.1 out of pocket in respect of the sale

price already paid by it to the foreign seller, but even the

Petitioner had not paid the price of the coal which was

lying with the Respondent No.2, which had compelled the

Respondent No.1 to lift the balance coal lying with the

Respondent No.2 and to dispose of the same after the period

stipulated by the High Court for deposit of the outstanding

dues had expired.

13. We have carefully considered the submissions made on

behalf of the respective parties and we see no reason to

interfere with the orders passed by the trial court and the

High Court. Having entered into an Agreement to purchase

the coal in question it was upto the Petitioner to fulfil

its obligation towards the payment of the price of the coal

and to lift the same from the Stevedore/Respondent No.2,

having particular regard to the fact that the Agreement was

a High Seas Sales Agreement which entails clearance of the

goods from the vessel and its entrustment with the Stevedore

which involved heavy costs per diem. In this regard,

paragraph 3 of the aforesaid Agreement, inter alia, provides

that the Respondent No.1/seller would have a lien over the

cargo unless payment was made in full and the

Petitioner/purchaser subrogated its right of insurance claim

in favour of the Respondent No.1. It was also stipulated

that the quality was to be determined and certified by an

independent inspection agency of Disport and the same would

be final and binding on both the parties. It was further

stipulated that the seller would thereupon transfer the

rights in respect of the goods to the buyer by endorsing in

favour of the buyer a set of negotiable documents and hand

over the same to the latter.

14. Prima facie, the terms of the High Seas Sales Agreement

appear to indicate that till the entire sale price was paid

by the Petitioner to the Respondent No.1, the Respondent

No.1 would retain its lien over the coal in question and

title would also pass to the Petitioner on payment of the

full price of the goods.

15. It would not be proper for us at the interlocutory stage

to make any further observations regarding the rights of the

parties in respect of the balance quantity of coal which was

lying with the Respondent No.2 after delivery of 9,542.920

metric tonnes to the Petitioner out of the total consignment

of 16,943 metric tonnes. However, in view of Mr. Ranjit

Kumar's submissions and having regard to the fact that an

opportunity had been given to the Petitioner to lift the

said balance quantity of coal on deposit of

6,19,58,123/- within the stipulated period of six weeks, we

dispose of the Special Leave Petition by modifying the order

of the High Court to the extent that in the event the

Petitioner deposits the amount directed to be deposited by

the High Court, after deduction of the price of the coal

already lifted by the Respondent No.1 within a period of

four weeks, the Petitioner will be entitled to lift the

remaining quantity of coal lying in the custody of the

Respondent No.2. In default of such deposit, the order of

the High Court, subject to the above modification, will

continue in full force.

16. In the facts of the case, the parties will bear their

own costs.

...............................................................J.

(ALTAMAS KABIR)

...............................................................J.

(CYRIAC JOSEPH)

...............................................................J.

(SURINDER SINGH NIJJAR)

New Delhi

Dated: 02.08.2011.