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Petitioner: Messrs ESSA ENGINEERING COMPANY PVT. LTD. and another VS Respondent: PAKISTAN JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Nasir-ul-Mulk, Gulzar Ahmed, Iqbal Hameed-ur-Rehman Title:Messrs ESSA ENGINEERING COMPANY PVT. LTD. and another vs PAKISTAN
JUDGMENT
Reported As: 2014 CLD 625 Result: Order accordingly Judgment JUDGMENT ' GULZAR AHMED, J.---By this common Judgment we intend to dispose of two Civil Appeals i,e, C.A. No, 371 of 2005 Messrs Essa Engineering Company Private Limited v. Pakistan Telecommunication Company Limited, etc. And C.A. No, 717 of 2005 Pakistan Telecommunication Company Limited, etc. v. Messrs Essa Engineering Company Private Limited, which have arisen out of Judgment dated 16- 3-2005 of the learned Division Bench of the Lahore High Court, Lahore, passed in R.F.A. No,335 of 2000, by which the appeal filed by Pakistan Telecommunication Company Limited was partly accepted. 2. Brief facts of the matter are that Pakistan Telecommunication Company Limited (PTCL) sought bids for purchase of 9700 tubes. The offer made by Messrs Essa Engineering Company Pvt. Limited (Contractor) being the lowest was accepted. The letter of acceptance dated 11-4-1996 with conditions of contract was issued by the PTCL. The specification of goods to be supplied by the Contractor to PTCL was provided as Hot Rolled conforming to specification No,ASTM/A/569/66-T Latest Revision/ Equivalent to BSS-1449/En-2. The Contractor initially supplied 3100 tubes and on inspection of these tubes 106 tubes were rejected by the PTCL as defective and on further standardized checking 1359 tubes out of the remaining 2994 tubes were also found to be substandard and underweight. The PTCL invoked the warranty clause 16 in the conditions of contract for replacement of the substandard tubes by the Contractor. The Contractor agreed for the replacement and in that connection prepared 1400 tubes and requested PTCL through its letter dated 10-10-1996 to inspect them. In the meanwhile the Contractor had also prepared 1260 tubes under the contract for supplying to PTCL and requested the PTCL to inspect them vide its letter
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dated 5-9-1996. The contractor made request for payment of the delivered tubes but it seems that no payment whatsoever was made to the Contractor. The two letters of the Contractor for inspection of 1260 and 1400 tubes were also acknowledged by the PTCL through its letter dated 12- 1-1997 wherein Director (Stores) PTCL asked the Divisional Engineer Testing, Telegraph, PTCL for conducting inspection and testing of the said two quantity of tubes. No inspection or testing was conducted by the PTCL rather it appears that the matter was referred to FIA for enquiry regarding supply of substandard tubes by the Contractor. It seems that the FIA enquiry did not bore any fruit and ultimately the case was closed. The Contractor pressed for payment but such request went unheeded by the PTCL and ultimately through letter dated 10-4-1998 PTCL approved payment in respect of 1634 tubes and through a further letter dated 31-8-1998 cancelled the contract for supply of the remaining tubes. The PTCL through its letter dated 2-11-1998 asked the Contractor to collect 1359 substandard tubes from its Mughalpura Store Depot. Being dissatisfied with the events and non-payment of its dues by the PTCL, the Contractor filed a suit against PTCL for recovery of Rs,3,49,93,356.82. Here on we will refer the Contractor as the (plaintiff) and the PTCL as the (defendant). The suit was contested by the defendant who filed its written statement. Issues were framed, evidence of the parties was recorded and thereafter vide judgment and decree dated 7- 7-2000 the learned Civil Judge 1st Class, Lahore, decreed the suit in the sum of Rs,2,25,05,871.52. This judgment and decree of the trial Court was challenged by the defendant by filing R.F.A. No,335 of 2000. After hearing the learned counsel for the parties, the learned Division Bench of Lahore High Court, Lahore, through its judgment dated 16-3-2005 partly accepted the appeal and modified the judgment and decree of the trial Court and reduced the amount of decree to Rs,82,42,770.78. Both the plaintiff as well as the defendant being aggrieved by the impugned judgment and decree of the High Court have filed the two appeals noted above. 3. The learned counsel for the plaintiff after taking us through the facts and record of the matter contended that the defendant has neither made any counter claim nor had claimed setoff in its written statement in respect of 1359 tubes and that in terms of section 59 of the Sale of Goods Act, 1930 (the Act) the High Court was not justified in reducing the plaintiffs claim from 2994 tubes to that of 1634 tubes. He further contended that although the learned High Court has allowed payment of 1400 tubes to the plaintiff but has denied its claim in respect of 1260 tubes, which were duly prepared by the plaintiff but for no fault of it's own the same were not accepted by the defendant. He contended that the plaintiff is also entitled to payment in respect of 1260 tubes and its denial was unjustified. The learned counsel further contended that the plaintiffs claim towards the loss suffered on account of purchase and sale of raw material and the wastage of machinery was decreed by the trial Court but the learned High Court without any reason has disallowed this claim of the plaintiff. In support of his submissions, he has relied upon the cases of "Commissioner of Sales Tax v. Prem Nath Motors (P) Ltd." (ILR 1978 Delhi 273); "G.N. Behera v. Messrs Nancy:Iran Bhikamc hand Rice Mills Firm and another" (AIR 1966 Assam and Nagaland 95); "Sued Niamat All and another v. Dewan Jairam Dass and another" (PLD 1983 SC 5); and "Maple Flock Companu Limited v. Universal Furniture Products (Wembleu) Limited" (The Law Times Volume 150 P. 69). 4. On the other hand, learned counsel appearing for the defendant at the very outset has contended that the Act has no application to the case in hand inasmuch as the plaintiff has admitted the supply of 1359 substandard tubes and has agreed to replace them and in pursuance thereof has prepared 1400 tubes. He admitted as a fact that the plaintiff had asked the defendant for inspection of 1400 and 1260 tubes but such inspection was not undertaken by the defendant on account of the fact that the FIA was conducting an enquiry against the plaintiff for supplying of substandard tubes and thus making of such an exercise was considered by the defendant to be of no avail. He contended that the defendant has asked the plaintiff to lift 1359 substandard tubes but the plaintiff itself has avoided doing so for which the defendant cannot be made liable and that
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the plaintiff is still free to lift the said 1359 substandard tubes from the store of the defendant. The learned counsel further contended that the claim for loss on account of selling of raw material and machinery was not pleaded in the plaint and the defendant had no occasion to meet such claim of the plaintiff and no issue on these claims was struck between the parties and such claim cannot be considered or allowed by the Court. In rebuttal, the learned counsel for the plaintiff has contended that although there is no specific pleading and prayer in the plaint for the loss on account of raw material and wastage of machinery but the evidence and substance on record show that such claim of the plaintiff was very much there and it was also established. - In support of his such argument, the learned counsel has relied upon the case of "Bhaqwah Prasad v. Chandramaul" (AIR 1966 SC 735). 5. We have minutely considered the submissions of learned counsel for the parties and the relevant law relied upon by them and have gone through the record of the case. 6. The case has certain feature which on record does not appear to be much in dispute i,e, that there was a contract for supply of 9700 specified tubes made between the plaintiff and the defendant. The plaintiff made initial supply of 3100 tubes out of which 106 tubes on initial testing were rejected and from the remaining 2994 tubes on standardized testing 1359 tubes were further found to be substandard. The warranty clause in the contract was invoked by the defendant. The plaintiff agreed to replace 1359 substandard tubes and in doing so ha$ prepared 1400 tubes. The plaintiff under the contract has further prepared 1260 tubes for supplying to the defendant. The plaintiff requested the defendant to inspect 1400 tubes and 1260 tubes but the defendant neither inspected nor took delivery of these tubes. 7. The learned trial Court in its judgment and decree has allowed the claim of the plaintiff in respect of 2994 tubes, 2600 tubes with interest @ 16% per annum and also for loss of raw material and of machinery and decreed the suit in the sum of Rs,2,25,05,871.52. The claim for general damages was not allowed by the learned trial Court. On the other hand, in appeal by the defendant, the learned High Court discarded the claim of the plaintiff in respect of 1359 substandard tubes and from the initial supply allowed claim of the plaintiff only to the extent of 1634 tubes. As regards 1400 tubes, the learned High Court observed that the claim in respect of such tubes is contained in para 7 of the plaint but there is no mention of the claim in respect of 1260 tubes in the plaint and came to the conclusion that the decree of the learned trial Court in respect of 1260 tubes was not sustainable. As regard the loss on raw material and machinery, the learned High Court concluded that there is no mention of these two claims in the plaint and therefore did not allow them. Finally the learned High Court by modifying the decree of the learned trial Court allowed the claims of the plaintiff as follows:-- (i)Price of 1634 tubes @ Rs.1698 per tube Rs.27,74,532.00 (ii)Interest @ 16% from 14-10-1996 to 7-7-2000 Rs.16,64,718.75 (iii)Price of 1400 tubes @ Rs.1698 per tube Rs.23,77,200.00 (iv)Interest @ Rs.16% from 10-10-1996 to 7-7-2000Rs.14,26,320.00 Total Rs.82,42,770.78 8. As regards the submission of learned counsel for the plaintiff that the claim of 1359 tubes could not have been disallowed for that no counter claim was made nor setoff was claimed by the defendant in its written statement and in this respect has relied upon section 59 of the Act and cited the cases of Prem Nath Motors (P) Ltd. And that of Sued Niamat Ali, supra. Section 59 of the Act reads as under:- "59. Remedu for breach of warraniu.---(1) Where there is breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller
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as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may- (a) set up against the seller the breach of warranty in diminution or extinction of the price; or (b) sue the seller for damages for breach of warranty. (2) the fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage." 'This provision as it reads provides for a situation where in a contract of warranty between seller and the buyer, the seller makes a breach of such warranty, the buyer not only is entitled to reject the goods but is also entitled to set up against the seller the breach of warranty in diminution or extinction of the price or sue the seller for damages for breach of warranty. Setting up against the seller the breach of warranty in diminution or extinction of price, this situation arise where the seller brings a suit against the buyer either for damages or for price of the goods. The buyer as a defendant at this stage is entitled to set up a claim against the seller i,e, breach of warranty and as a consequence ask for diminution or extinction of price. In the present case, the facts appear to be quite different from the one as are postulated in section 59 of the Act in that upon supply of 3100 tubes by the plaintiff to the defendant no dispute was raised by the plaintiff of initial rejection of 106 tubes by the defendant. Further, on standardized testing the defendant has rejected another lot of 1359 tubes as substandard upon which warranty clause 16 of the contract was invoked by the defendant through its telegram dated 14-9-1996 and letter dated 15-9-1996. The plaintiff did not contest or object to the invoking of warranty clause by the defendant but agreed to replace 1359 substandard tubes and in doing so went on to prepare 1400 tubes as a replacement and informed the defendant through its letters dated 10-10-1996 and 14-10-1996 to inspect 1400 tubes. This being the admitted fact on the record, and such fact being also pleaded by `the plaintiff in its plaint, apparently there did not arise an occasion to the defendant to set up against the seller for breach of warranty either a claim of diminution or extinction of price for that in making of 1400 tubes as replacement on account of invocation of warranty clause in the contract the plaintiff accepted the fact that it is not entitled to the price of 1359 tubes which stood rejected by the defendant as substandard. In the face of these facts and circumstances where the plaintiff itself gave in to the breach of warranty and agreed to replace 1359 tubes with those of 1400 tubes, it itself in doing so admitted that it is not entitled to claim the price of 1359 tubes and thus in our view, there was hardly any reason or justification with the defendant to set up claim against the plaintiff in the plaintiffs suit as provided in section 59 of the Act. For the same reason, we find that case-law relied upon by the learned counsel for the plaintiff is distinguishable from the facts and circumstances of the present case. 9. As regards the submission in respect of 1260 tubes, the learned counsel for the plaintiff has contended that the claim of these tubes was very much contained in para 8 of the plaint wherein the plaintiff has requested for inspection of the remaining quantity of tubes for delivery and has specifically referred to a letter dated 24-12-1996. Such letter of the plaintiff is available at page 130 of C.M.A. No,3695 of 2010 which has been marked as Exh.P.41 and this letter refers to inspection calls dated 5-9-1996 and 14-9-1996. The inspection call of 5-9-1996 is available at page 27 of the same C.M.A. And has been marked as Exh.P.12 and it specifically states that 1260 tubes have been completed and the Divisional Engineer Testing, Telegraph Stores, Lahore, was requested to depute his representative for inspection. 10. As the learned counsel for the plaintiff has specifically relied upon para 8 of the plaint for substantiating the plaintiffs claim in respect of 1260 tubes, the same is reproduced as follows:-- "(8) That plaintiff never avoided the performance of the contract and has always showed its willingness to perform the part of the contract. The plaintiff made several requests to defendants
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verbally as well as through letters for the inspection of the remaining quantity of C-8 tubes for onward delivery. The defendants were asked vide letter No, ESSA/040197-01 dated 20-12-1996 for inspection but the defendants failed to carry out inspection of finished tubes and did not make any payments towards the supplied tubes which was contrary to the terms and condition of the contract and purchase order. ' The defendants vide letter No, LH/TL/ EEC,/ 94- 95 / 43 dated 24-12-1997 that avoided the payment on the frivolous and sham ground that the defendant No,1 authorities were conducting an inquiry, therefore, the replacement and balance delivery of goods will be done after the completion of the said inquiry." 11. Letter (erroneouslu mentioned as dated 20-12-1996) actually is dated 24-12-1996 has been produced as Exh.P.41 which is available at page 130 of C.M.A. No,3695 of 2010. The plaintiff has addressed this letter to the Director (Stores) PTCL, Lahore, where it has requested that the inspection be carried out for the two calls, one dated 5-9-1996 and the other dated 14-9-1996. The inspection call dated 5-9-1996 of the plaintiff has been produced as Exh.P.12 and is available at page 27 of this very C.M.A. And it specifically mentions that the plaintiff has completed 1260 tubes and has requested the Division Engineer Vesting, Telegraph Stores, Lahore, to depute his represent 'live for inspection. The defendant in para 8 of its written statement has submitted its reply to para 8 of the plaint, which is as follows:- "Para 8 is not admitted hence denied as stated above that the plaintiff has played fraud and misrepresentation while replacing the sub-standard tubes with the collusion of staff of the PTCL, therefore, he has not performed the contract as agreed." 12. In the first place, what we note is that the plaintiff in para 8 of the plaint has specifically claimed that it has prepared 1260 tubes for supplying them to the defendant and in this regard has also referred to the inspection call made by it to the defendant. The defendant in its reply to para 8 of the plaint has made a general denial without specifically denying the plaintiffs letter dated 24-12- 1996 in which details in respect of inspection calls are very much mentioned which includes the inspection call of 1260 tubes. We were also shown letter dated 12-1-1997 of the Director (Stores) PTCL, Lahore, addressed to the Divisional Engineer Testing, Telegraph Stores, PTCL, Lahore, where it is specifically mentioned that the plaintiff has offered a quantity of 1260 tubes on 5-9-1996 and a quantity of 1400 tubes on 14-10-1996 for inspection/testing but the testing has not so far been conducted and the request was made that the testing be conducted if the offer made by the plaintiff is within the valid dates. Although this letter of defendant has been filed at page 34 of the same C.M.A. But it is not clear whether it was produced in evidence or not because there is no exhibit number on it. Nevertheless, the learned counsel for the defendant did not dispute or raise objection regarding authenticity and correctness of this letter nor did he object to its reading. 13. On the basis of the above pleadings and the documentary evidence referred to above which has come on the record, it is abundantly clear that the plaintiff did in fact prepared 1260 tubes for supplying to the defendant and had also requested them to be inspected by a representative of the defendant. But as it appears from the record, the defendant did not inspect them nor took delivery of these 1260 tubes. The learned High Court has altogether discarded the claim of the plaintiff in respect of 1260 tubes on mere assertion that this claim of the plaintiff is not contained in the plaint. This assertion of the learned High Court, in our view, was not correct. The above discussion amply shows that the plaintiff has not only made a claim in its plaint in respect of 1260 tubes but through evidence has also established this fact as mentioned in the letters produced as Exh.P.41 and Exh.P.12. Such evidence of the plaintiff is further fortified by letter dated 12-1-1997 of defendant. Thus, in the face of pleadings of the parties and documentary evidence available on record, there was hardly any real basis or justification to discard the claim of the plaintiff in respect of 1260 tubes.
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14. Learned counsel for the plaintiff has also argued that the plaintiff is entitled to claim damages on account of loss suffered on raw material and of wastage of machinery. The learned counsel for the plaintiff while making this submission was confronted with the fact that this very claim of the plaintiff is not contained in the plaint and how such claim of the plaintiff can validly be considered or dealt with on mere oral submission. The learned counsel for the plaintiff in this regard has urged that despite such claim being not specifically contained in the plaint but while producing evidence, the plaintiff has made out a case for granting relief in respect of these two claims and has referred to the case of BhaQwati Prasad, supra. The facts in the cited case were that the plaintiff, an owner of a house, has filed a suit for ejectment and for payment of arrears of rent against the defendant. The defendant in his written statement while admitting the ownership of land beneath the house of the plaintiff took the plea that the construction of the house so raised on the land was made by him at his own cost and that the defendant was to remain in possession of the house until the amount spent by him on the construction was repaid. On framing of issues and recording of evidence of the parties, the trial Court did not believe the version of the defendant with regard to construction of the house. The trial Court on the basis of admission of the defendant that of ownership of the plaintiff came to the conclusion that the relationship of the landlord and tenant was proved and thus passed a decree for ejectment as well as for rent. The defendant appealed to the Allahabad High Court who agreed with the trial Court but gave finding that the defendant was in possession of the house as a licensee and the plea of tenancy was not accepted on account of statutory bar prevailing in the area. The learned High Court in its decree set aside the decree of the trial Court to the extent of payment of rent. Both the plaintiff and defendant filed appeals before the Indian Supreme Court against the decree passed by the High Court. A plea was raised from the side of the defendant that the plaintiffs claim was based squarely on tenancy and once such case of the plaintiff was rejected by the High Court the claim for ejectment should also have been negatived. It was under these circumstances, their lordships in the Indian Supreme Court have dealt with such argument in the following paras as follows:-- "(9) There can be no doubt that if a party asks for a relief on a clear and specific ground, and in the issues or at the trial, no other ground is covered either directly or by necessary implication, it would not be open to the said party to attempt to sustain the same claim on a ground which is entirely new. The same principle was laid down by this Court in Sheodhari Rai v. Suraj Prasacl Singh, AIR 1954 SC 758. In that case, it was held that where the defendant in his written statement sets up a title to the disputed lands as the nearest reversioner, the Court cannot, on his failure to prove the said case, permit him to make out a new case which is not only not made in the written statement, but which is wholly inconsistent with the title set up by the defendant in the written statement. The new plea on which the defendant sought to rely in that case was that he was holding the suit property under a shikmi settlement from the nearest reversioner. It would be noticed that this new plea was in fact not made in the written statement, had not been included in any issue and, therefore, no evidence was or could have been led about it. In such a case clearly a party cannot be permitted to justify its claim on a ground which is entirely new and which is inconsistent with the ground made by it in its pleadings. (10)But in considering the application of this doctrine to the facts of the present case, it is necessary to bear in mind the other principle that considerations of form cannot over-ride the legitimate considerations of substance. If a plea is not specifically made and yet it is covered by an issue by implication, and the parties knew that the said plea was involved in the trial, then the mere fact that the plea was not expressly taken in the pleadings would not necessarily disentitle a party from relying upon it if it is satisfactorily proved by evidence. The general rule no doubt is that the relief should be founded on pleadings made by the parties. But where the substantial matters relating to the title of both parties to the suit are touched, though indirectly or even obscurely, in the
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issues, an evidence has been led about them, then the argument that a particular matter was not expressly taken in the leadings would be purely formal and technical and cannot succeed in every case. What the Court has to consider in dealing with such an objection is: did the parties know that the matter in question was involved in the trial, and did they lead evidence about it? If it appears that the parties did not know that the matter was in issue at the trial and one of them has had no opportunity to lead evidence in respect of it, that undoubtedly would be a different matter. To allow one party to rely upon a matter in respect of which the other party did not lead evidence and has had no opportunity to lead evidence, would introduce consideration of prejudice, and in doing justice to one party, the Court cannot do injustice to another. (11) Therefore, in dealing with Mr.…
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