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1984 Supreme(Cal) 169
High Court Of Calcutta
M. M. Dutt, Ajit Kumar Sengupta
C.V.ENTERPRISES - Appellant
Versus
BRAITHWAITE AND CO.LTD. - Respondent
Matter 1045 Of 1983
Decided On : 05/04/1984
ASHOK SEN, Bhaskar Gupta, GOUTAM MITRA, MILAN BANERJI
The principle of promissory estoppel is not applicable to a concluded contract.
Headnote:
CONTRACT - MISTAKE - PROMISSORY ESTOPPEL - REP LICENCES - TRANSFER - ENTITLEMENT - CIF VALUES - EQUITABLE PRINCIPLES: 1. A contract entered into under a mistake as to a matter of fact essential to the contract is of no effect and the parties have no obligation to perform the contract. 2. The doctrine of promissory estoppel applies only where there is no concluded contract, but a promise has been made by one party intending to create legal relations or affect a legal relationship to arise in the future and the other party has acted upon and changed its position. 3. Where the contractual relationships between the parties have been established under a completed contract, there is no scope for the application of the principle of promissory estoppel. 4. In the instant case, the contract between the appellant and respondent 1 for the transfer of REP licences was a concluded contract and the principle of promissory estoppel was not applicable. 5. However, as the appellant had acted upon and performed its part of the contract by liaison works and by payment and got the two valuable licences issued to respondent 1, the court directed that if the appellant pays to respondent 1 88% of the CIF values of the REP licences for Vietnam exports and 75% of the CIF values of REP licences for Bahrain exports, respondent 1 shall transfer the said REP licences to the appellant.
Fact of the Case:
The appellant, M/s. C. V. Enterprises, a Partnership firm, entered into a contract with respondent 1, Braithwaite and Co. Ltd., a Government company, for the purchase of REP licences that would be issued to respondent 1 against the exports of structural to Bahrain and exports of wagons to Vietnam. The appellant paid a sum of Rs. 40,00,000/- and Rs. 2,25,000/- as consideration for the transfer of the licences. However, after the appellant started liaison work for securing the licences, it came to know that the value of the REP licences was much higher than that mentioned in the tender notice. Respondent 1 also came to know of its mistaken belief as to the value of the REP licences. Respondent 1, therefore, rescinded the contract on the ground of mistake as to a matter of fact essential to the contract.
Finding of the Court:
The court held that the contract between the appellant and respondent 1 was a concluded contract and the principle of promissory estoppel was not applicable. However, as the appellant had acted upon and performed its part of the contract, the court directed that if the appellant pays to respondent 1 88% of the CIF values of the REP licences for Vietnam exports and 75% of the CIF values of REP licences for Bahrain exports, respondent 1 shall transfer the said REP licences to the appellant.
Issues: 1. Whether the contract between the appellant and respondent 1 was a concluded contract? 2. Whether the principle of promissory estoppel was applicable to the instant case? 3. Whether the appellant was entitled to compel respondent 1 to transfer the REP licences at the consideration agreed upon?
Ratio Decidendi: 1. A contract entered into under a mistake as to a matter of fact essential to the contract is of no effect and the parties have no obligation to perform the contract. 2. The doctrine of promissory estoppel applies only where there is no concluded contract, but a promise has been made by one party intending to create legal relations or affect a legal relationship to arise in the future and the other party has acted upon and changed its position. 3. Where the contractual relationships between the parties have been established under a completed contract, there is no scope for the application of the principle of promissory estoppel.
Final Decision: The court directed that if the appellant pays to respondent 1 88% of the CIF values of the REP licences for Vietnam exports and 75% of the CIF values of REP licences for Bahrain exports, respondent 1 shall transfer the said REP licences to the appellant.
( 1 ) IN this appeal, the appellant, M/s. C. V. Enterprises, a Partnership firm, has challenged the propriety of the judgment and order dated March 21, 1984 of D. K. Sen, J. dismissing the writ petition of the appellant.
( 2 ) ON September 2, 1982, respondent 1 Braithwaite and Co. Ltd. , which is a Government company, issued a notice in the Statesman, Calcutta inviting tenders for the purchase of REP licences that would be issued to respondent 1, inter alia, against the exports of structural to Bahrain and exports of wagons to Vietnam under export contracts registered in 1966-67 and 1978-79. The enclosure to the tender notice was a chart containing particulars of the exports for which the REP licences were applied for. The particulars included the value of REP licences against the exports of wagons to Vietnam as Rs. 45,52,843/- and the exports of structural to Bahrain as Rs. 3,03,988/ -. In response to the said notice, the appellant submitted his offer for the purchase of REP licences of respondent 1. After the submission of the offer by the appellant, there were some discussions and correspondence between the appellant and respondent 1. Ultimately, respondent 1 by its letter dated February 19, 1983 accepted the order of the appellant. The terms and conditions of the contract are contained in the said letter, which is set out below:"m/s. C. V. Enterprises, 18, Raja Woodmunt street, calcutta 700001. Dear Sirs. Transfer of REP Licences we refer to your revised offer bearing Ref. No. CVZ/50/82-83 dated 31-1-1983 submitted in response to our invitation to Tender reference DCP/376/82 dated 12-12-1982 as amended by our letter Corp (Pur/re) Tender dated 15-1-1983. 2. We are pleased to confirm acceptance of your offer to the extent described below: (a) We accept your offer to pay to us a lump sum amount of Rs. 40,00,000/- (Rupees Forty lakhs only) irrespective of the value of the Licences to be issued to us against export of Railway wagons to Vietnam as consideration payable to us for transfer of the corresponding licences to you. (b) We accept your offer to pay to us a lump sum amount of Rs. 2,25,000/- Rupees Two lakhs and twenty-five thousand only) irrespective of the value of the licences to be issued to us against export of P. S. Tanks (Structurals) on Bahrain as consideration payable to us for transfer of the corresponding licences to you. (c) We note that necessary and effective liaisons with the licensing authorities and customs for expeditious issue of the licences will be done by you for which we accept your charge of 1/2% (one half of one per cent) of the value of licences. These charges will become due to you upon receipt of the licences by us and will be adjusted from the amounts payable to us against (a) and (b) above respectively. 3. We stipulated that having accepted your offers on a lump sum basis irrespective of the face value of the licences to be issued no claim shall be entertained for any charge and/or review of the lump sum amounts payable by you as consideration for transfer of the licences. 4. The amount of Rs. 1,00,000/- (Rupees one lakh only) paid to us along with your offer as earnest money is being retained by us as initial security deposit in terms of para 5 (a) of our Invitation to Tender. 5. In accordance with para 5 (a) of our invitation to Tender, you are requested to pay to us an additional sum of Rupees 4,85,683,10 (Rupees Four lakhs eighty five thousand six hundred eighty three and paise Ten only) being 10% of the expected value of licences against the contracts mentioned in Para 2 above. This amount should be paid to us by a Crossed Demand Draft favouring Braithwaite Co. Ltd. " and payable at State Bank of India, Hide Road Branch, Calcutta 43, within 7 days from the date of this acceptance failing which you shall render yourselves liable for forfeiture of the initial security deposit and treatment of this acceptance of your offer as lapsed. 6. Kindly note that this acceptance lette
