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Surya Investment Company Vs. State Trading Corporation of India Ltd. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberSuit No. 287 of 1984
Judge
Reported inAIR1987Cal46
ActsContract Act, 1872 - Sections 158, 170 and 171; ;Code of Civil Procedure (CPC) , 1908 - Section 151 - Order 39, Rule 10
AppellantSurya Investment Company
RespondentState Trading Corporation of India Ltd.
Appellant AdvocateAmindya Mitra, Adv.
Respondent AdvocateBiswaroop Gupta, Adv.
Cases ReferredSomes v. British Empire Shipping Co.
Excerpt:
- .....the hirer utilises whole of the storage tank or not is rs. 3,85,000/- per month. in the storage tank goods of one particular party can only be kept. the petitioner has claimed the sum of rs. 5,00,000/- lying with the receiver as also rent from the month of may, 1984 @ rs. 1,10,000/- per month. it is also claimed that stc should be directed to go on paying @ rs. 1,10,000/- until the stc emptied the said storage tank. it is also claimed that from sept. 1983 to december, 1984 a sum of rs. 10,14,736.75 has become due on account of staff salary, rent of the tank, contractors bill etc. it is also alleged that the petitioner had also let out another storage tank to the stc and stc has not been paying the rent of that tank either.11. it has been stated in the affidavit affirmed on 29th jan......
Judgment:
ORDER

Ajit Kumar Sengupta, J.

1. In this application made by the plaintiff on 19th Jan., 1985 the plaintiff has asked for the following reliefs :

a) The Receiver Mr. Sunil K. Mitra be directed and empowered to hand over Rs. 5 lakhs deposited with him by the defendant together with all accretions thereon to the petitioner and the petitioner be given liberty to accept the same in pro tanto satisfaction of its claim in this suit.

b) Receiver be empowered to encash the fixed deposit receipt for the purpose of making payment to the petitioner.

c) The defendant be directed to pay Rs. 80,000/- to the petitioner within fortnight from the date of the order on account of charges for the storage tank from May 1984 to Dec. 1984 and the petitioner be allowed to receive the same without prejudice to its claim in the suit.

d) The defendant be directed to pay monthly storage charges in respect of such storage tank namely GEM-8 at the present market rent of Rs. 3,85,000/- or alternatively at the rate or Rs. 1,10,000/- per month until the said storage tank is emptied and all materials stored therein are removed by the defendant and the petitioner be allowed to receive the same without prejudice to its claim in the suit.

2. The case of the plaintiff-petitioner is that in or about July 1983 the petitioner and the State Trading Corporation of India Limited the defendant -- respondent (hereinafter referred to as STC) entered into an agreement whereby the petitioner offered to store and the STC agreed to engage the Storage Tank bearing No. GEM-8 at a monthly rental of Rs. 20/- per M.T. which was to be charged on the minimum guarantee capacity of 3000 MT. That is to say, at the monthly minimum rent of Rs. 60,000/- and storage of more than 3000 M.T. would be charged extra for excess oil @ Rs. 20/- per M.T. per month. The said agreement is contained in and7or evidenced by the letter D/- 6th July, 1983 issued by the STC to the petitioner and the letter D/- 16th July, 1983 written by and on behalf of the petitioner to the STC. The letter D/- 16th July, 1983 was duly signed by the petitioner as a token of acceptance and returned the same to the petitioner on July 16, 1983.

3. By the said letter of 16th July, 1983 STC had proposed that a formal agreement for a period of 3 months would be entered into. STC had subsequently sent to the petitioner a formal agreement as per their pro forma which was signed by the petitioner and returned to STC but STC did not thereafter send to the petitioner any copy of the formal signed by the STC or at all. STC has not communicated to the petitioner execution of such formal agreement by the defendant. No binding formal agreement was ultimately entered into by and between the parties herein and the terms and conditions on which the petitioner stored and/or allowed storage of oil in the said Storage Tank bearing No. GEM-8 and rendered service to STC in connection therewith are contained in several letters D/- July 6, 1983 and July 16, 1983.

4. The aforesaid agreement/arrangement was for a period of 3 months as specifically mentioned in the letter of 16th July 1983. The said arrangement expired on 16th Oct., 1983. Thereafter the petitioner by a letter of 28th Oct. 1983 asked STC either to arrange to vacate the said tank by 31st Oct. 1983 or to renew the said agreement for a further period of at least one year effective from 1st Nov., 1983 at the revised rate of Rs. 1,10,000/- per month calculated @ Rs. 20/- per M.T. per month on the full capacity of 5500 M.T. did not give any reply to the said letter of Oct. 28, 1983 and did not remove the oil lying stored in the said Storage Tank and did not vacate the said storage tank. On and from Nov. 1, 1983 the petitioner raised bills @ Rs. 1,10,000/- per month in respect of the said storage tank from month to month which STC duly received and did not raise any objection. STC has by its conduct accepted the bill for storage charges at the enhanced rate of rent of Rs. 1,10,000/- per month with effect from Nov. 1, 1983. Alternative case made out is that the STC by its silence induced the petitioner to believe that STC was agreeable to pay storage charges @ Rs. 1,10,000/- per month in respect of the said storage tank with effect from Nov. 1, 1983 and being induced thereby the petitioner allowed STC to keep oil stored in the said storage tank and thereby acted to its detriment. The defendant is now estopped and precluded from disputing its liability to pay storage charges @ Rs. 1,10,000/- per month in respect of the said storage tank with effect from Nov. 1, 1983. Even after Nov. 1, 1983 STC continued to issue delivery orders in favour of the allottees for taking delivery of oil from the said storage tank. Pursuant to the delivery orders issued by STC from time to time the petitioner allowed the allottees of the defendant to take delivery of oil from the said storage bank till 19th Jan. 1983. Thereafter no allottee of STC came forward to take delivery of any quantity of oil from the said storage tank nor did the defendant issue any further delivery order.

5. Under the aforesaid circumstances the plaintiff-petitioner instituted the above suit on 18th April, 1984, inter alia, praying for :

a) Decree for Rs. 9,79,939.79 as claimed in para 13 hereof;

d) Declaration that the defendant is liable to pay storage charges @ Rs. 1,10,000/- per month in respect of storage tank bearing No. GEM-8 until removal of entire quantity of oil lying stored therein and leaving the same in the same condition as it was on 17th July, 1983 upon payment of plaintiff's dues and storage charges;

e) Declaration that the plaintiff has got a lien over the stock of goods lying stored in the storage Tank bearing No. GEM-8 and right to retain the same until the plaintiffs dues up to the date of removal is fully paid off by the defendant.

6. It may be mentioned that the said sum of Rs. 9,79,939.79 includes storage charges for Sept. and Oct. 1983 as well as storage charges for Nov. 1983 till 15th April 1984 @ 1,10,000/-per month.

7. In the said suit an application was also made by the petitioner, inter alia, praying for :

'a) Defendant be directed to go on paying storage charges to the petitioner @ Rs. 1,10,000/-per month until removal of the stock lying in the storage tank bearing No. GEM-8 upon payment of full dues of the petitioner.

b) Injunction do issue restraining the defendant and its servants, agents allottees and nominees from removing or causing to remove any portion of the stock now lying at and/or stored in the said Storage Tank bearing No. GEM-8 without paying the aforesaid dues of the petitioner and interest due thereon.'

8. Upon the said application from time to time various orders were passed. On 18th April, 1984 R.N. Pyne, J. passed amorder in terms of prayer (b). By order D/- 24fh April, 1984 a Special Officer was appointed to supervise the delivery of oil lying in the said storage tank to STC and STC was directed to pay a sum of Rs. 5,00,000/- to Mr. Sunil Mitra, Advocate of M/s. Mukherjee & Biswas who was to hold the same as Receiver without security and without remuneration. On 7th May, 1984, R.N. Pyne, J. directed STC to pay to the petitioner a sum of Rs. 60,000/- as storage charts for the month of April 1984 without prejudice to the rights and contentions of the parties. The interim order which was passed on 24th April, 1984 was confirmed by T.K. Basu, J.

9. An application was also made by STC for providing police help to the Special Officer for removal of the oil. In the said application STC asked for a direction upon the Special Officer to deliver to STC and/or its nominees and/or allottees the balance quantity of REDPO lying in the said tank. STC also asked for a direction upon the Officer-in-charge, Budge Budge Police Station and the Superintendent of Police, 24 Parganas for rendering all police help to enable the Special Officer to implement the order passed on 24th April, 1984. The said application was disposed of on 31st July, 1984 by T.K. Basu, J. The learned Judge directed that in the event - the Special Officer being obstructed or being unable to give delivery of the oil, the police help should be provided to the Special Officer. The petitioner preferred an appeal against the said order D/- 31st July, 1984. The Appeal Court by the Order D/- 12th Sept. 1984 confirmed the said order under appeal. The petitioner thereafter moved a Special leave petition before the Supreme Court. The Supreme Court dismissed the said petition and observed as follows :

'The petitioner has claimed the release of Rs. 5,00,000/- deposited by the respondent and also in addition to the storage charges ever since April, 1984. It is open to the learned Judge to consider the claim subject to the objections that may be raised by the respondent.'

10. This application has been made by the plaintiff alleging that the STC is not interested in the speedy removal of REDPO lying in the said Storage Tank. STC is not paying any amount for engaging the storage tank and enjoying the free-facility for storage of REDPO and is not interested in removing the oil. The said storage tank is a very valuable asset of the petitioner. The storage tank has got a storing capacity of 5500 M.T. The petitioner has recently received a verbal offer from Oswal Agro Industries for hiring out the said storage tank at a rent of Rs. 3,50,000/- per month. Since the petitioner is not in a position to handover possession of such storage tank the offer was not given in writing by Oswald Agro Industries. In view of nonavailability of the said storage tank of the petitioner Oswald Agro Industries took the storage tank of the capacity of 5000 M.T. from S.K. Oil, which is located at the adjacent premises, at a monthly rent of Rs. 3,50,000/-. The petitioner has also alleged that the present market rent for storage tank of the said type and in the said locality is Rs. 70/- per M.T. (per month). The rent of the storage tank calculated on the basis of total capacity irrespective of whether the hirer utilises whole of the storage tank or not is Rs. 3,85,000/- per month. In the storage tank goods of one particular party can only be kept. The petitioner has claimed the sum of Rs. 5,00,000/- lying with the Receiver as also rent from the month of May, 1984 @ Rs. 1,10,000/- per month. It is also claimed that STC should be directed to go on paying @ Rs. 1,10,000/- until the STC emptied the said storage tank. It is also claimed that from Sept. 1983 to December, 1984 a sum of Rs. 10,14,736.75 has become due on account of staff salary, rent of the tank, contractors bill etc. It is also alleged that the petitioner had also let out another storage tank to the STC and STC has not been paying the rent of that tank either.

11. It has been stated in the affidavit affirmed on 29th Jan. 1985, by the State Trading Corporation of India Limited that the offer of the petitioner for another tank being No.GEM-8 for storage contained in the letter D/- 6th July, 1983 was accepted by the respondent by a letter D/- 16th July, 1983. The said Jetter of acceptance specifically mentioned that the terms and conditions, apart from hire charges mentioned in the letter would be as in the earlier agreement for tank No. 8. However, because of a typographical error the date of the earlier agreement was wrongly given as 15th July '82 instead of 12th July 1982. But the tank number and other particulars were correctly given for correct indentification. Apart from the said contract D/- 12th July, 1982 in respect of Tank No. 8 no other subsisting contract or agreement on 16th July, 1983 between the petitioner and the STC was there. The said contract as evidenced by the correspondence was initially for a period of 3 months. In or about 3rd Oct., 1983 the petitioner under cover of a letter sent four copies of an agreement for storage in respect of the said GEM No. 8 for execution by STC. From the said agreement the clause stipulating that the petitioner would be disentitled to storage charges in the event of default by the petitioner in respect of delivery and other obligation was omitted. Accordingly STC did not execute the said agreement. The storage of REDPO took place about a month of July, 1983 i.e. first initial period of three months and the parties did not go for any other fresh agreement excepting what contained in the letters D/- 6th July 1983 and 16th July, 1983. It is also stated that the petitioner started defaulting from Oct. 1983 in respect of supplies both from the Tank No. 8 and GEM 8 and committed gross default by not operating the boiler and thereby allowing the oil stored therein to become hard and solid. There were numerous complaints from the allottees for non-delivery and harassment by the petitioner. It is alleged that due to gross negligence for not maintaining the required temperature in the tank, the said oil is unfit for human consumption. According to STC under the agreement the petitioner was not entitled to any storage charges in the event of default which was made clear to the petitioner by various letters written by the STC between Oct. 1983 and Feb. 1984. It is also stated that there has been much shortage in the stock of oil held in the said tank. The oil was in the custody of the petitioner and is very valuable and the sealing arrangement at the out-let point cannot be of necessity fool proof. Many of the complaints of the allottees are with regard to unusual presence of water in the oil delivered from the storage tanks. It is also stated that STC never agreed to pay monthly hire charges at Rs. 1,10,000/-. Since the oil were essential commodities and valuable foreign exchange had been spent for acquiring the same. The endeavour of STC was to obtain the delivery since all persuasion failed STC terminated the contract and immediately called for delivery of whatever was lying in the tank. After the termination STC appointed 19th April, 1984 as the date when the representative of STC along with Surveyor would call on the petitioner for such delivery. Although nominees and/or allottees went to take delivery of REDPO from Tank GEM-8 the petitioner refused to deliver any quantity. It is also alleged that STC has suffered loss and damages and STC is entitled to claim Rs. 42,96 lakhs for deterioration of quality of REDPO lying in the said tank.

12. Written statement has been filed on 25th Jan. 1985 by the State Trading Corporation of India Limited. In paragraph 35 STC has claimed a set off and counterclaim on account of shortage of at least 203 MT. REDPO in Tank GEM-8 valued at Rs. 24.36 lakhs on the landed costs thereof; a sum of Rs. 42.36 lakhs for deterioration of quality of REDPO presently lying in the said tank no GEM-8 and Rs. 13.54 lakhs by way of loss of interest for blocked capital calculated on the lending rate of nationalised bank on the value of 561 M.T. REDPO aggregating to Rs. 80.86 lakhs.

13. Mr. Biswarup Gupta, learned counsel appearing for the State Trading Corporation of India has submitted that this application has no merits and the petitioner is not entitled to claim either the sum of Rs. 5,00,000/- lying deposited with the Receiver or the rent after termination of the agreement. He has submitted that in the plaint one of the reliefs asked for is that the plaintiff has got a lien over the stock of goods lying and/or stored in the storage tank bearing No. GEM-8 and right to retain the sum (same) until the plaintiff's dues up to the date of removal is fully paid off by the defendant. It is his submission that in view of the said prayer made by the plaintiff the plaintiff cannot ask for any charge for the tank as 'a bailee who keeps a chattel to enforce his lien on it cannot charge for keeping it.' (see para 1549 at p. 719 of Vol. 2 Halsbury's Laws of England (Fourth Edition).) The view expressed by Halsbury is based on the decision of the House of Lords is in the case of Somes and others v. British Empire Shipping Co. reported in (1843-1860) All ER Rep 844. There the respondents, who were shipowners, sent a ship to the appellants, a firm of shipwrights and dock owners, to be repaired on the terms of paying a certain rate for materials used and from 120 to 150 guineas for the cost of graving dock for the job. When the ship was repaired the respondents delayed to pay the cost, and the appellants sent notice that they would claim 21 per day for the use of the dock until the money was paid and the ship removed. In an action by the respondents to recover the sum of 567, being the dock charges after the repairs were completed, the House of Lords held that no person had a right to add to his lien on a chattel a charge for keeping it until the debt was paid, and, therefore, the appellants had no right at common law, nor was it a term to be implied in the contract, to be paid a sum per day while the ship was detained by them until the price of repairs was paid.

14. He has also referred to a decision of the House of Lords in the case of China Pacific S.A. and Food Corporation of India reported in (1981) 3 WLR 860. There Lord Diplock held 'the only reason why the cargo owner upon the failure of its main propositions sought by this subsidiary proposition, to reach some tabula in manfragio juridiciabile was in order to avail itself of the principle, which it contended was laid down by this House in Somes v. British Empire Shipping Co., (1860) 8 HL Cas 338. to the effect that, where a person entitled to a possessory lien over goods incurs expenses in maintaining possession of them in the exercise of his right of lien and preserving in the meantime their value as security for the owner's indebtedness to him, he cannot recover such expenses from the owner. That case is, in my view, authority for the proposition that, where a lienee remains in possession of goods in the exercise of his right of lien only (i.e., one who has refused a demand by the lienor for redelivery of the goods with which, in the absence of the lien, the lienee would be under a legal obligation to comply), he cannot recover from the lienor loss or expenses incurred by him exclusively for his own benefit in maintaining his security as lienee and from which the lienor derives no benefit as owner of the goods. I would not seek to suggest that this authority has become outdated for the proposition that was then laid down that it is authority for anything more and, in particular, for the further proposition that expenditure necessary for the preservation of the goods from deterioration from which the owner does derive benefit is irrecoverable, where such expendilure is made by a bailee at a time before possession of the goods has been demanded of him by the owner and his only right to retain lawful possession of them thereafter rests upon his own election to continue in possession, after such demand, in the exercise of the rights of lienee.'

15. Mr. Gupta has further submitted that in view of the set off claimed and counterclaim made by STC the plaintiff is not entitled to lay its claim on the said sum of Rs. 5,00,000/-at this stage.

16. Mr. Anindya Mitra, learned counsel appearing for the petitioner has submitted that the authorities cited by Mr. Gupta have no relevance at all. In this case Special Officer appointed by the Court has been entrusted with the delivery of the oils and if the delivery is not taken for months together the plaintiff cannot suffer therefor. He has also submitted that the counter-claim of the defendant is for damages and there is no debt due which can be set off or adjusted against the claim of the plaintiff. Accordingly, the plaintiff is entitled to the orders asked for.

17. I have given anxious consideration to the rival contentions. In this case the petitioner has not retained the oils in the tank. By reason of the appointment of Special Officer and by reason of the delivery being effected by the Special Officer the possession of the oils bailed is abandoned and thus the lien is lost. If the petitioner to enforce its lien had kept the goods bailed it may or may not have claimed the charges for keeping the goods until delivery. Whether the petitioner would be entitled to claim any charges on this account would depend on the terms of the contract. If the bailee has to incur any expenditure for the preservation of the goods from deterioration not provided for in the contract of bailment, the bailee will be entitled to recover such expenditure from the owner inasmuch as the owner will derive benefit therefrom if ultimately the goods are delivered to the owner. A bailee cannot lose the possession as well as charges for bailment. It is not a case where the bailee has retained the goods as well as asked for charges for keeping it. As soon as the Special Officer started effecting delivery of oils to STC or its allottees or nominees, the right of lien is lost to the petitioner. A bailee's right of lien arises out of its possession and is lost with the loss of possession. STC after taking delivery of the goods cannot contend that the petitioner is not entitled to claim rent or storage charges for the tank where goods were kept. On April 24, 1984 the Special Officer was appointed to supervise the delivery of the oil kept in the tank, GEM-8. The petitioner, as a matter of fact, never exercised the right of lien. Otherwise the question of effecting delivery would not have arisen at all. In any event from the date of appointment of the Special Officer, the right of lien, if any, must be deemed to have been abandoned. The petitioner cannot be denied its claim for storage charges solely on the ground that the petitioner has claimed or exercised the right of lien and, therefore, it is not entitled to get any charge for keeping the goods bailed.

18. The question, however, is having regard to the nature of the set off and counterclaim pleaded in the Written Statement whether the petitioner is entitled to get any relief in this application. A sum of Rs. 5 lakhs is being held by the Receiver in respect of the claim for the storage charges made in the suil. It may be that the counter-claim of STC is for damages allegedly suffered by STC. One of the claims is for the alleged shortage which STC has valued at Rs. 24.36 lakhs. Having regard to this claim which undoubtedly would be decided in the suit, I am not inclined at this stage to direct payment of the said sum of Rs. 5 lakhs lying with the Receiver to the petitioner.

19. The next question is with regard to the payment of storage charges for May, 1984 onwards. By the order D/- May 7, 1984 of R.N. Pyne, J. rent for the month of April 1984 has been paid. It is stated before me that the Special Officer has since completed delivery of the oils sometime in June, 1985. At this stage the dispute about rate of rent or storage charges cannot be adjudicated. The rent or storage charges, if at all to be paid to the petitioner must be at the rate of Rs. 60,000/-per month from May 1984. It is also not possible to decide at this stage whether the delay in delivery of the goods is attributable to the petitioner or to the defendant or to both. The petitioner has given a statement of its outstanding dues as regards the staff salary and others. This statement may not be accurate and to some extent may have been inflated. But there are undoubtedly certain expenditures which the plaintiff has to incur so long as the oils are not fully delivered to the STC. The expenditures for payment of rent to the GEM Refineries Ltd. for the tank in question and also for payment of the labourers cannot be altogether overlooked. The fact that the STC is not also paying the rent of the other tank which is not the subject matter of suit, is also a relevant consideration. At the same time the counter claim of the petitioner cannot be also lost sight of.

20. Having regard to the facts and circumstances of this case, I am of the view that ends of justice will be met if the petitioner is paid on ad hoc basis a sum of Rs. 4,80,000/-being the storage charges for the months from May, 1984 to Dec. 1984. Such payment of Rs. 4,80,000/- shall be made to the petitioner or its advocate on record by STC within a week from date and will be without prejudice to the rights and contentions of the parties. This order will not, however, prevent the petitioner from making an application for payment of further storage charges in the event the suit is not disposed of within a reasonable time.

21. The suit is expedited. Written Statement has already been filed. Let the affidavit of documents be filed within four weeks from date. Inspection to be completed three weeks thereafter. Let the suit appear in my list 8 weeks hence.

22. Costs will be costs in the cause.

23. All parties will act on the signed copy of the operative portion of this judgment.


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