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2013 Supreme(Mad) 3958
HIGH COURT OF JUDICATURE AT MADRAS
R.S. RAMANATHAN, J.
M/s. Adithyaa rep. by Prop. N. Santhanam & Another
Versus
Food Corporation of India & Another
A.S. Nos. 167, 206 & 207 of 2002 & CMP. Nos. 13770 & 13771 of 2012
Decided on: 27-11-2013
M.S. Sundarajan, A.S. Thambuswamy, M. Kamalanathan, Advocates.
A party claiming damages must provide evidence of the actual loss suffered, and a bank guarantee can only be invoked if there is a breach of contract and the liability of the party providing the guarantee has been established.
Headnote:
The court case revolves around two appeals (A.S.No.206 of 2002 and A.S.No.207 of 2002) arising from a common judgment and decree passed in O.S.Nos.1 and 8 of 2002. The primary subject matter of the dispute is the recovery of a sum of Rs.9,29,715.82 by the Food Corporation of India (FCI) from M/s.Adithyaa Traders (Adithyaa) for alleged losses incurred due to delayed discharge of cargo from two vessels, M.V.Lok Pratima and M.V.Jag Rahul, by Adithyaa. Adithyaa, in turn, filed a suit seeking a permanent injunction restraining FCI from enforcing a bank guarantee and claiming a sum of Rs.1,76,807.98 for expenses incurred during the contract period.
Fact of the Case:
FCI entered into a contract with Adithyaa for stevedoring, clearing, handling, and transporting food grains arriving at Cuddalore Port. Adithyaa was required to furnish a bank guarantee for Rs.5,00,000/- as security. FCI alleged that Adithyaa caused delays in discharging the cargo, resulting in demurrage charges and other losses. Adithyaa denied liability, claiming that the delays were due to factors beyond their control, such as restrictions on boat operations and inclement weather. FCI invoked the bank guarantee and adjusted the amount towards the alleged losses. Adithyaa filed a suit seeking an injunction against the invocation of the bank guarantee and claimed reimbursement of the amount.
Finding of the Court:
The court held that FCI failed to prove that it had paid demurrage charges to the Port Trust Authorities. The court also found that FCI was liable to pay for the jute twine used for stitching bags, as per the terms of the contract. The court further held that FCI failed to provide sufficient evidence to support its claims for damages related to gunny bags, thread costs, and transit loss. The court concluded that FCI was not entitled to invoke the bank guarantee since it had not established any liability on the part of Adithyaa. The court also held that Adithyaa was entitled to claim the amount it had spent on trimming charges and refund of the security deposit, as admitted by FCI in its pleadings. However, the court rejected Adithyaa's claim for expenses incurred in stitching Padutha due to lack of sufficient proof.
Issues: 1. Whether FCI proved that it paid demurrage charges due to delays caused by Adithyaa? 2. Whether FCI is entitled to claim damages for gunny bags, jute twine, customs OTA, and transit loss from Adithyaa? 3. Whether FCI was justified in invoking the bank guarantee? 4. Whether Adithyaa is entitled to reimbursement of the bank guarantee amount with interest? 5. Whether Adithyaa is entitled to claim the amount claimed in O.S.No.8 of 2002? 6. Whether Adithyaa is liable to pay Rs.1,29,195.74 as decreed in O.S.No.8 of 2002?
Ratio Decidendi: The court applied the following principles in reaching its decision: 1. A party claiming damages must provide evidence of the actual loss suffered. 2. A bank guarantee can only be invoked if there is a breach of contract and the liability of the party providing the guarantee has been established. 3. A party cannot claim reimbursement for expenses without providing sufficient proof of the expenses incurred.
Final Decision: The court dismissed both appeals. The common judgment and decrees of the Trial Court rendered in O.S.Nos.1 and 8 of 2002 were confirmed. There was no order as to costs.
1. As these Appeals are arising out of the common judgment and decree, dated 29.04.2002, passed in O.S.Nos.1 & 8 of 2002, on the file of the Additional District Judge, Fast Track Court, Cuddalore, they were heard together, and disposed of, vide this common judgment.
2. The plaintiffs in O.S.No.1 of 2002, are the appellants in A.S.No.206 of 2002, the first defendant in O.S.No.8 of 2002, is the appellant in A.S.No.207 of 2002, and, the plaintiff in O.S.No.8 of 2002, is the appellant in A.S.No.167 of 2002.
3. The plaintiffs in O.S.No.1 of 2002, filed the suit for recovery of a sum of Rs.9,29,715.82 from the defendant. The suit was dismissed. Aggrieved by the same, A.S.No.206 of 2002 was filed. The first defendant in O.S.No.8 of 2002, filed A.S.No.207 of 2002 against the grant of decree for a sum of Rs.1,29,195.74. In O.S.No.1 of 2002, counter claim was made by the defendant for a sum of Rs.6,04,597/- with future interest at the rate of 12% p.a. and that was allowed and the same was challenged in A.S.No.206 of 2002.
4. The plaintiffs allegation in O.S.No.1 of 2002, is as follows:-
i) For the year 1992-93, the plaintiff-Corporation decided to award stevedoring contract. For the said purpose, they floated tenders dated 17.08.1992, and the tender was called for submission of rates by interested persons for stevedoring, clearing, handling and transport of food grains arriving in bulk at Cuddalore Port. The tender was opened on 21.08.1992. The rate quoted by the defendant-Contractor was accepted by the plaintiffs, and an appointment order was given to the defendant and the defendant was asked to undertake the work at Cuddalore Port. The defendant furnished a bank guarantee, for a sum of Rs.5,00,000/-. The Tamil Nadu Mercantile Bank, Madras, guaranteed the said amount (i.e., Rs.5,00,000/-). The period of contract was for one year, i.e., from 30.09.1992 to 29.09.1993. As per clause xx Part-1 and xx Part-II (ii) of the tender agreement, the contractor is responsible for taking necessary steps to ensure prompt discharge of the goods from the Vessels and removal of the same from the sheds, without causing any damage. The contractor is also liable to make good the loss that may be caused to the plaintiffs, on account of lack of care in handling the Vessels on the part of the defendant.
ii) The defendant handled two Vessels, viz., i) M.V.Lok Pratima and ii) M.V.Jag Rahul, which arrived at Cuddalore Port on 1.10.1992 and 5.3.1993, respectively. The Vessel-M.V.Lok Pratima arrived at Cuddalore Port with the Bill of Lading, weighing 23,240.455 metric tonne of wheat from Canada at 09.06 hours on 1.10.1992 for lightening. The said Vessel commenced her discharge work at 11.15 hours on 7.10.1992, and completed her lightening at 14.30 hours on 2.11.1992. The rate of discharge to be maintained, as per the Charter Party agreement between the Shipping Corporation of India and Food Corporation of India, in respect of the Vessel-M.V.Lok Pratima, dated 22.7.1992, is 1,500 metric tonne, per weather working day (six hatches 5 hooks). The lay time allowed for discharging 6194 m.t. of goods, was four Days 03 Hours 06 Minutes ('D.H.M.'4.03.06), as per the above said Charter Party agreement, whereas, the defendant has taken D.H.M.20-19, for lightening purpose. As a result, the plaintiffs had to pay the overall demurrage of 6 days 11 hours 07, as per clause xx Part-1(i) of the tender agreement.
iii) In the case of the Vessel-M.V.Lok Pratima, there has been ship demurrage, due to slow discharge operation by the defendant. Hence, the plaintiff incurred loss towards the cost of gunny bags, transit loss in road movement and payment of customs overtime, thread costs, totalling a sum of Rs.8,40,215.27, as demurrage, and the said amount has been paid by the plaintiffs to the steamer owners. As per the tender agreement, the defendant is liable to make good the loss caused to the plaintiffs.
iv) Insofar as the Vessel-M.V.Jag Rahul is concerned, the same arrived at Cuddal
