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IN THE HIGH COURT AT CALCUTTA
KRISHNA RAO, J.
Orissa Metaliks Private Limited - Plaintiff
Versus
Shenyang Casting and Forging Industries Company Limited. - Defendant
CS 279 of 2019
Decided On : 18-08-2023
CONTRACT - BREACH OF CONTRACT - PAYMENT - DELIVERY - DAMAGES - Plaintiff sued to recover an amount for breach of contract - Held, plaintiff entitled to recover the amount paid with interest and damages.
Fact of the Case:
Plaintiff engaged in manufacturing iron and steel entered into two agreements with the defendant for design, manufacturing, and supply of major equipment for pellet plants - Plaintiff paid token advance and opened Letter of Credit as per the contract - Defendant failed to supply materials or refund the amount despite notice - Plaintiff filed suit for recovery of the amount paid with interest and damages.
Finding of the Court:
Court found that the plaintiff had complied with the terms of the contract by paying token advance and opening Letter of Credit - Defendant failed to perform its obligations under the contract and did not refund the amount - Plaintiff entitled to recover the amount paid with interest and damages.
Issues: Whether the plaintiff was entitled to recover the amount paid with interest and damages for breach of contract?
Ratio Decidendi: The court relied on the terms of the contract, the plaintiff's compliance with the contract, and the defendant's failure to perform its obligations - Court held that the plaintiff was entitled to recover the amount paid with interest and damages as the defendant had breached the contract.
Final Decision: The court decreed in favor of the plaintiff for Rs. 2,20,46,576.27/- with interest at the rate of 18% per annum from the date of filing of the suit till the realization of the decretal amount.
JUDGMENT :
(Krishna Rao, J.) :
1. Plaintiff has filed the present suit against the defendant for recovery of an amount of Rs. 2,20,46,576.27/- with interest.
2. The plaintiff is engaged in the business of manufacturing of iron and an amount of Rs. 2,20,46,576.27/-with interest. steel and has a manufacturing unit at Kharagpur, Midnapore, West Bengal. The defendant is engaged in the business of design, manufacturing and supply of major equipment for pellet plant.
3. After discussion and negotiation between the parties two agreements were entered on 19th February 2017 and 17th March, 2017 for design, manufacturing and supply of major equipments for a 6,00,000 TPA Grade Kiln Pellet Plant Line – 4 and 6,00,000 TPA Grade Kiln Pellet Plant Line -5. The total value of the contract is USD 3.00 Million of each contract. As per Clause 3.10 of the contract, the plaintiff is required to pay USD 50,000 as advance by way of Letter of Credit and 10% of the total value is to be paid by way of bank guarantee. As per clause 5.00 of the contract, the defendant is required to supply the parts and accessories within a maximum period of 180 days from the date of token advance.
4. The defendant raised two invoices of each agreement dated 12th March 2017 and 17th March 2017. The plaintiff has paid the token advance of USD 50,000 each to the defendant on 20th March, 2017 and 22nd March, 2017. The payment made by the plaintiff on 20th March, 2017 which was equivalent to Rs. 32,72,240.58/-and payment made on 22nd March, 2017 was equivalent to Rs. 32,74,740.95/-due to the foreign exchange fluctuation.
5. The plaintiff and the defendant have agreed that the zero date from which the 180 days within which delivery had to be effected would be counted from 30th March, 2017. By e-mails dated 31st March, 2017, 3rd April, 2017 and 7th April 2017, the terms of payments were modified. In the meeting held on 10th April, 2017, it was mutually agreed between the parties that the second contract would be cancelled and the payment made thereunder shall be adjusted in the first contract. In the meeting held on 21st September, 2017 and 22nd September, 2017, the zero date was again modified to 10th July 2017.
6. The first Letter of Credit was opened on 10th July, 2017 with HDFC Bank for a value of USD 12,07,000 by incurring cost of Rs. 1,01,824.74/-in favour of the defendant. Due to the difficulties expressed by the defendant, the plaintiff has closed the Letter of Credit by a letter dated 23rd November, 2017 and a fresh Letter of Credit was issued by the plaintiff through the State Bank of India on 29th November, 2017. Various meetings between the parties were held and it transpired that defendant was not in a position to perform the contract.
7. On 22nd February, 2018, the plaintiff had sent a notice though the learned Advocate calling upon the defendant for immediate performance and also indicated that the plaintiff will also claim damages for non-performance of contract. The notice issued by the plaintiff was duly delivered to the defendant but inspite of receipt of the notice, the defendant failed to perform the contract.
8. It transpired from the records that after filing of the suit, writ of summons were served upon the defendant but inspite of receipt of writ of summons of this case, the defendant has not entered in the suit and accordingly on receipt of report from the department, by an order dated 25th November 2022 the present suit was placed in the list of “undefended suit”.
9. The plaintiff has examined one witness in support of his case by filing examination-in-chief on affidavit along with all documents and the same was marked as Exhibit A collectively.
10. Clause 3.10 d of the agreement provides payments terms which reads as follows:
Payment will be released as per the terms specified herein, Billing schedule document No: OMPL-II/16-17/P71
A party who breaches a contract is liable to the other party for damages resulting from the breach.
A plaintiff must prove the total cost of goods and payments made to succeed in a recovery suit; failure to do so can lead to dismissal due to limitation.
Admissions made by a party can serve as substantive evidence, allowing the court to grant a decree in the absence of a defense.
The court's decision emphasized the importance of honoring contractual obligations and the legal right to recover outstanding payments for goods supplied.
The main legal point established in the judgment is the requirement for written and mutually agreed amendments to a contract, and the recognition of mitigation of loss by the plaintiff.
The main legal point established in the judgment is the liability of the defendants to pay interest on delayed payment as per the terms of UCP-600, specifically citing Article 14(6) and Article 16(ii....
The delay in construction and its attribution influenced the court's decision, leading to the invalidity of the lease termination and dismissal of the counter-claim for refund of advance money.
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