2006 Supreme(SC) 183

2006(2) Supreme 331
Supreme Court of India
(From National Consumer Disputes Redressal Commission, New Delhi)
S.B. Sinha & P.K. Balasubramanyan, JJ.
Indochem Electronic & Anr. —Appellants
versus
Addl. Collector of Customs, A.P. —Respondent
Civil Appeal No. 1273 of 2006
(Arising out of SLP (Civil) No. 24699 of 2003)
Decided on 24-2-2006
Counsel for the Parties :
For the Appellants : K.V. Mohan, Advocate.
For the Respondent : P. Parmeswaran, Advocate.

Important PointWhere a stipulation in a contract of sale is a warranty, its breach may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated but where stipulation is a condition its breach may give rise not only to a claim for damages but also to a right to treat the contract as repudiated.

Headnote:Consumer Protection Act, 1986—Sections 2(e), (g) & 14—"Deficiency in service"—Sale of Goods Act—Section 12—Condition and warranty—EPABX system got installed by respondent in its office at a cost Rs. 1,87,599 with a warranty for One year, developed defects—Appellant did not attend to requirements for giving maintenance and service of system—Complaint for refund of price of system—Defence plea that during period of warranty and even thereafter all complaints were attended to and that respondent did not agree to have an annual maintenance contract for service after period of warranty expired—State Commission allowed complaint directing appellant to refund the price of system with interest at 12% p.a.—National Commission upheld order—Appeal—Defects in system pointed out by respondent had started within period of warranty—If appellant had not been able to attend thereto immediately, it would be a "deficiency of service"—Appellant had all along been aware that system installed had not been functioning well and despite expiry of warranty period it had been attending to complaints—Period of warranty stood extended and appellant could not contend that since period of warranty expired, it had no liability—Circumstances pointed to intention of parties that representations of appellants should have been treated as warranty for extended period—Where a stipulation in a contract of sale was a condition, its breach could give rise not only a claim for damages but also to a right to treat contract as repudiated—No case made out for interference.

       Held : The defects in the system pointed out by the respondent in the instant case started within the period of warranty. As noticed hereinbefore, certain breaches of contract of supply are admitted. Telephone is a means of communication. The communication system was required to be run effectively and efficiently by the appellants having regard to the statutory duties they were required to perform. The deficiencies in EPABX system supplied by the appellants were such as were required to be attended to immediately. If the appellants had not been able to attend thereto immediately, there would be a ‘deficiency of services’ on the part of the appellants as immediate attention to such complaints was a part of the contract. The State Commission as well as the National Commission have arrived at findings of fact as regard nature of deficiencies of service complained of by the respondent in terms of the provisions of the contract. If such breaches of conditions of warranty admittedly had taken place during the period of warranty, no exception can be taken to the judgment and order passed by the State Commission as also the National Commission. The Appellant had all along been aware that the system installed by it had not been functioning properly. On its own showing, it had been attending to the complaints made by the Respondent relating to the functioning of the system. It has categorically been stated by the Appellant itself that despite expiry of the period of warranty it had been attending to the complaints as and when made by the respondent which were of serious nature. From the aforementioned conduct of the Appellant itself, it may be inferred that it voluntarily undertook to meet the requirements of the Respondent relating to mal-functioning etc. of the said system despite expiry of the period of warranty. For all intent and purport, the period of warranty, thus, stood extended. As the defects in the system including manufacturing defects, if any, were found not only during the period of warranty but also during the extended period, and as the Appellant itself undertook to attend to the complaints received in that behalf, in our opinion, it is too late for it now to contend that in view of the fact that the period of contract or warranty expired, it had no liability therefor. By reason of its own conduct, the Appellant made representation to the Respondent that despite expiry of period of warranty, maintenance of the system to the Respondent’s satisfaction was its contractual obligation. The contract in view of such representation on the part of the Respondent does not come to an end. The contract, if looked in the light of the surrounding circumstances evidently pointed to the intention of the parties and as gathered from the contract itself that the representation of the Appellant should have been treated as warranty for an expended period. Even in a case where the goods are accepted, it is well known, the buyer will have a remedy for damages for the breach of it. (Paras 20 to 26)

       It is true, where a stipulation in a contract of sale is a warranty, its breach may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, but, where a stipulation in a contract of sale is a condition, its breach may give rise not only to a claim for damages but also generally to a right to treat the contract as repudiated. [See Halsbury’s Laws of England, Fourth Edition Reissue (41) Para 64]. (Para 29)