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The Indian Contract Act, 1872
Section 230 in The Indian Contract Act, 1872
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Telecom Disputes Settlement Tribunal
Scod 18 Networking Pvt. Ltd, ... vs Sahara Sanchar Ltd, Noida And Anr on 4 February, 2011

TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

NEW DELHI

 

DATED 04th February, 2011

 

Petition No.205(C) of 2009

 

SCOD 18 Networking Pvt. Ltd. Petitioner

Vs.

Sahara Sanchar Ltd. and Anr. Respondent

BEFORE:

HONBLE MR.JUSTICE S.B. SINHA, CHAIRPERSON

HONBL E MR. G.D. GAIHA, MEMBER

HONBL E MR. P.K.RASTOGI,

MEMBER

 

For Petitioner

:

Mr. Arun Kathpalia, Advocate

Mr. Tejveer Singh Bhatia, Advocate

 

 

 

For Respondent No. 1

:

Mr. Manish Minglani, Advocate

Mr. Indrajeet Das, Advocate

 

For Respondent No. 2

:

Mr. Navin Chawla, Advocate

Mr.Sharath Sampath,Advocate

 

 

JUDGEMENT

S.

B. Sinha

Introduction

:

The

petitioner has filed this petition inter alia for recovery of a sum of Rs. 92,70,400/- against the respondents herein jointly and severally said to be due from them as on 28th January 2009 for carriage of signals of the TV Channels of the respondent No. 1 on the petitioners Cable TV network at the desired frequencies.

Factual Background :

The

first respondent is a broadcaster of various channels including Sahara Samay and Sahara Samay Regional.

It purported to

have entered into a distributorship agreement with the respondent No. 2.

The petitioner in

its capacity as a Multi Service Operator is admittedly engaged in the business of distribution of signals of various broadcasters.

It had been placing

the channels of the first respondent to its cable operators and other consumers.

The second

respondent purported to be acting as representing the first respondent entered into a Memorandum of Understanding on or about 27.07.2008 for carrying the signals of the aforementioned channels of the Respondent No. 1 on S Band (S-20) and on UHF Band (E-40).

 

The

first respondent however, admittedly is not a party to the aforementioned Memorandum of Understanding.

It is also not in

dispute that although the said Memorandum of Understanding was received by Shri Atul Saraf, on behalf of the Respondent No. 2, he is also not a signatory thereto.

Inter alia on the

premise that the said MoU contains the terms and conditions of the contract between the parties, this petition has been filed contending that the respondents have not made the due payments to it in violation thereof.

 

We

may notice some the its terms of the said MoU:-

5. In lieu of

the appropriates carriage of Samay & Sahara Samay Regional channel on its network by MSO, Sahara shall pay through ABS Media Reach Pvt. Ltd. the total amount of Rs. 18,000,000/- (Rs. One Crore and Eighty Lacs only), excluding Service Tax and other taxes, per annum in 4 equal advance installments / payments against invoices raised.

8. Sahara is in no manner will be liable to make any payments to the MSO. All payments shall be made directly by ABS media reach Pvt. Ltd. to the MSO.

9. The MSO is currently operating in the area of Borivali, Dahisar, Chembur, Goregaon, Bhandup and Vashi. I hereby attaching my current area list as per our present connectivity.

 

It

is not in dispute that the petitioner raised three bills relying on or on the basis of the said MoU, the first of which was raised on 31st July, 2008 for the period 27.07.2008 to 26.10.2008, the second being dated 15th October 2008 for the period 27.10.2008 to 26.1.2009 and the third being dated 29th December 2008 for the period 27.1.2009 to 26.4.2009. Service and other taxes were charged in addition to the stipulated amount of subscription charges.

 

Each

of the aforementioned invoices was for a sum of Rs. 50,56,200/- drawn in the name of respondent No.2. Receipt of the said invoices is not in dispute.

Admittedly, the

respondent No. 2 made payments of a sum of Rs. 25,28,100/- by a cheque dated 28th August, 2008 and again for the same amount by a cheque dated 27th September 2008. It also made payment of a sum of Rs. 8,42,000/- by a cheque dated 28th December 2008.

 

In support of its

case that the respondents have failed and/or neglected to pay the stipulated amount of Rs. 1.8 crores to the petitioner, it raised demands for the balance sum by various letters/E-mails.

 

We

shall notice the same at an appropriate stage.

 

We

may however, notice that the respondent No. 2, by a letter dated 30th March, 2009 promised to pay the amount on receipt thereof for Respondent No. 1.

 

Defence

:

The

contentions of the first respondent in this proceeding are that:-

1.   

it had no privity of contract with the petitioner;

2.   

there having been no understanding, far less any agreement with the petitioner, its claim is frivolous, mischievous, baseless and moon-shine;

3.   

the invoices having been raised only on respondent No. 2, the first respondent is not liable therefor;

4.   

although the petitioner wrote the letter dated 8.4.2009 to it, no assurance thereby was given that any payment towards carriage fee would be made;

5.   

it had outsourced its affairs in regard to placement and carriage of its channels to the respondent No. 2 on a principal to principal basis and, thus, it has no liability to make any payment to the petitioner as claimed or otherwise.

 

The

second respondent, on the other hand, in its reply contended that :-

i) it by reason

of the distributorship agreement entered into by and between the respondents inter se was the agent of the first respondent and, thus, is not individually liable therefor;

ii) the first

respondent itself having admitted a credit balance to the tune of Rs. 27,23,623/- for the financial year 2008-2009 i.e. upto 31.03.2009 and sought for its confirmation thereabout, no liability can be fastened upon it;

iii) the invoices

raised by the petitioner being placement of channels of the first respondent, it has no liability in relation thereto;

iv) the first

respondent, having enjoyed the benefit under the agreement and understanding with regard to placement, is estopped and precluded from challenging the same as the parties had admittedly acted thereupon;

v) although the

petitioner had made an offer of Rs. 1,80,00,000/-, the second respondent having made a counter offer for a sum of Rs. 20 lakhs, the parties ultimately agreed that the amount of consideration for placement of channels would be Rs. 90 lakhs;

vi) the period of

agreement being for 8 months and not one year and the second respondent having made payments of about Rs. 60,00,000/- for the period August 2008 and March, 2009, no other or further sum is payable.

vii) the payment made

on 20th December 2008 for a sum of Rs. 8,42,000/- was by way of full and final settlement.

viii)         

the invoices having been received subject to checking, no reliance can be placed thereupon for any purpose whatsoever.

 

Issues :

By

an order dated 20th January, 2010 a large number of issues were framed, which are as under :-

(i)        

Whether the petitioner is entitled to the amounts claimed in the petition towards placement fee i.e. Rs.92,70,400/-?

(ii)       

Whether the petitioner is entitled for interest on Rs.92,70,400/- @ 18%?

(iii)      

Whether there exists any agreement between the parties and the respondents for carriage fee and placement charges for the period 27.7.2008 to 26.4.2009?

(iv)      

Whether respondent No. 2 was authorized to act as an Agent for and on behalf of the respondent No.1?

(v)       

Whether respondent No.1 enjoyed the benefit of the carriage fee and the placement agreement and if so, is respondent No.1 estopped from impugning the same?

(vi)      

Whether the respondents are liable, jointly and /or severally to pay carriage fee and placement charges to the petitioner?

(vii)     

If so, whether any amount is outstanding and payable to the petitioner as carriage fee and placement charges for the period 27.7.2008 to 26.4.2009?

(viii)    

What relief, if any, the petitioner is entitled to?

 

Witnesses :

In support of their respective cases, each of the parties has examined one witness each.

The petitioner has

examined Shri N. K. Rao, Head (Content) who principally had sent the e-mails to the respondent No. 2; whereas the respondent No. 1 examined one Shri Ramit Kundu.

The respondent No.

2 examined Shri Atul Sarraf.

The witnesses

examined on behalf of the respondents have been cross examined by the counsel for the other respondents also.

Submissions :

Mr. Arun

Kathpalia, the learned counsel appearing on behalf of the petitioner, urged:-

1)   

Shri Atul Sarraf representing the respondent No. 2 having received the MoU dated 27th July, 2008 on 11th August 2008 and having not issued any letter denying and/or disputing the contents thereof and/or having not made any counter offer in writing cannot now be permitted to raise a contention that the consideration for placement of the two channels of the first respondent was only Rs. 90,00,000/- and not 1,80,00,000/-.

2)   

The period of the agreement must be held to be nine months and not 8 months as the petitioner had raised 3 bills of Rs. 45,00,000/- each and payments in respect of the first invoice having been made by way of two cheques before the 2nd payment became due.

3)   

The 3rd payment having been made on account, the respondent cannot be heard to say that they had made payment of Rs. 60,00,000 by way of full and final settlement.

4)   

No response having been made to the notices of demand made by the petitioner, the respondents must be held to have accepted the contents thereof by their conduct.

5)   

The respondent No. 2 only in its letter dated 30th March, 2009, with reference to the invoices issued, having for the first time raised a contention with regard to the correctness of the invoices on the premise that the same did not reflect the interruptions of channels as well as the negotiated amount for the period in question, the same must be held to have been issued by way of an after thought, and even therein no reference was made that the agreement had already come to an end or was not upto 31st March, 2009 and/or as to what was the exact amount specified under the contract.

6)   

The first respondent having requested the petitioner to keep its channel on and having agreed to make all payments is now estopped and precluded from contending that it was not bound to make any payment, particularly in view of the fact that in its balance confirmation account it had already shown a credit balance of Rs. 27,23,623/- and, thus, must be held to have admitted its liability (although the amount mentioned therein was not correct being a sum of Rs.92,00,000/-).

7)   

The letters of the respondent No. 2 being dated 11th September, 2008 and 28th February, 2009 (Exhibit-C) having been issued admitting the dues of the petitioner, it is estopped and precluded from raising a plea contrary thereto and inconsistent therewith.

8)   

The conduct of the 2nd respondent will clearly lead to the conclusion that entire payment against the first respondent having been made before the 2nd payment became due namely 27th October to 26th January and, thus, it cannot now be heard to say that the amount of consideration fixed under the contract was only Rs. 90,00,000/-.

9)   

The respondent No. 2 in fact sought to take recourse to reverse engineering as it having made payment of Rs. 58,00,000/- and odd, sought to bring the amount of consideration as also the period within the limits thereof.

10)          

The contention of the respondent No. 2 that it was not a service provider is not correct as it admittedly acted as an agent of the first respondent and thus would come within the purview of the definition of the the term broadcaster as defined in Regulation 2(e) of the Telecommunication (Broadcasting and Cable Services) Interconnection Regulations, 2004.

Mr. Minglani, the

learned counsel appearing on behalf of the 1st respondent inter alia submitted :-

1)   

An agreement having been entered into only between the respondent No. 1 and the respondent No. 2 for distribution of channels, the consideration wherefor was Rs. 42 crores, this petition is not maintainable.

2)   

The respondent No. 2 only having entered into a MoU with the petitioner, there did not exist any privity of contract by and between it and the respondent No. 1.

3)   

The petitioner having raised bills only on the respondent No. 2 wherefor payments were made by it, the respondent No. 1 has no liability therefor.

4)   

The respondent No. 2 only having been making correspondences with the petitioner, the respondent No. 1 could not have been impleaded as a party either on the basis that the respondent No. 2 is its agent or otherwise.

5)   

The respondent No. 1 was not even aware of the existence of any agreement as has been accepted by PW1 NK Rao in his cross examination.

6)   

So far as the balance confirmation account which has been filed by the petitioner in its rejoinder dated 15.10.2009 is concerned, the same was issued only by way of a goodwill gesture and in fact the respondent No. 1 was not aware that the amount of consideration has been fixed only at Rs. 90 lakhs and not 1.80 crores as also the fact that the respondent No.2 had made all payments.

7)   

The respondent No. 2 being not authorized to act as an agent in the agreement entered into by and between it and the petitioner, the same is not binding on the Respondent No. 1.

Mr. Navin Chawla,

the learned counsel appearing on behalf of the respondent No. 2, submitted :-

a)   

Having regard to the provisions contained in Section 230 of the Indian Contract Act, an Agent cannot be sued in his individual capacity.

b)  

The respondent No. 2 being not a service provider as it does not retransmit any signal for the purpose of placement of channels, this Tribunal has no jurisdiction to pass an order against it.

c)   

Having regard to the fact that the MoU has not been signed by the respondent No. 2, the entire contract must be held to be on the basis of an oral understanding.

d)  

The contents of the MoU must be held to be an offer, to which the respondent No 2 had made a counter offer and in that view of the matter, the agreement between the parties so far as the terms and conditions thereof are concerned are required to be determined only on the basis of the conduct of the parties.

e)   

The case of the petitioner being that the MoU was per se a concluded contract and as no reliance is to be placed thereupon in view of the materials bought on record, the entire edifice on which it had based its case must be held to be non-existent.

f)     

In the facts and circumstances of this case, Section 65 of the Indian Contract Act cannot be said to have any application, as the respondent No. 2 did not execute any agreement.

g)  

The term of the contract, which according to the petitioner itself was originally for a period of one year and which was reduced to 9 months, it must be held to have made out a new case, and in fact the period of contract was 8 months only.

h)  

The invoices raised by the petitioner being subject to checking, no reliance can be placed thereupon.

i)      

If the petitioner had already entered into a contract by reason of the MoU, there was absolutely no reason as to why another MoU was sent.

 

A Brief Comment :

Before,

however, we take into consideration the respective submissions made by the learned counsel for the parties, we would like to make one comment.

Mr.

Minglani was permitted to file a written submission within a couple of days of completion of oral submissions.

He, however,

instead of placing the submissions made by him orally has filed written submissions annexing therewith a large number of decisions.

The contents of

the said written submissions are also not even paginated.

We enquired from

the learned counsel appearing on behalf of the petitioner as also the respondent No. 2 as to whether they have received copies of the said written submission or not, whereto it was stated at the bar that the same has not been done. From the written submissions filed by Mr. Minglani, it appears that the same had been filed purported to be in addition to and supplemental to the oral arguments. We strongly deprecate such a practice.

It cannot be the

practice of any court of law that arguments not raised before the Tribunal orally shall be by passed and other and further arguments would be advanced so as to deprive the other side from meeting the points raised by the party. We, therefore, intend to confine ourselves only to the oral submissions made by Mr. Minglani which we have noticed heretobefore in extenso.

Principal Questions :

 

The

principal questions which arise for our consideration are :-

a)   

Whether the Respondent No. 2 acted as an agent of the Respondent No. 1,

b)  

Whether both the respondent are jointly and severally liable to make payments, if any, to the petitioner; and

c)   

What were the terms of contract, if any, between the parties?

 

Agency Issue :

Agency

is dealt with in Chapter X of the Indian Contract Act 1872, being Sections 211 to 238.

An agent has

certain duties towards its principal.

It has a duty in

regard to the conduct of the principals business. It has to show its skill and diligence. It has a duty to communicate with the principal. The agent has a duty to pay sums received from principal. It can take an action only when its remuneration falls due (See Sections 211 to 221).

The principal has

also some duties towards its agent.

It has to be

indemnified against the consequences of all lawful acts and done in good faith.

The agent is

entitled to compensation for injury caused by reason of principals neglect. Sections 226 to 238 provide for the effect of agency on contracts with third parties.

 

We may notice

Section 230 of the Indian Contract Act whereupon reliance has been placed by Mr. Chawla, but before we do so, it may also be noticed that in terms of Section 226 of the Act, a contract entered into through an agent and obligations arising from its acts may be enforced in the same manner and would have the same legal consequences as if the contract was entered into and the acts done by the principal in person.

 

Was the respondent No. 2, the agent of the respondent No. 1 is the question.

There is a dispute

between the respondents inter se. They are said to have entered into an agreement for distributionship on or about 27.07.2008, which was valid till 31st March, 2009.

What were the actual

terms of the contract are, however, not known.

 

The

respondents for reasons best known to them failed and/or neglected to bring on record the said document.

They have, thus,

withheld the best evidence available with them. Both the petitioner and the respondent No. 2 contend that the later was the agent of respondent No. 1; its contention, however, is that the agreement entered into by and between the respondents inter se was on a principal to principal basis.

Was the said fact

known to the petitioner ? The answer thereto must be rendered in the negative. It was not.

The petitioners position

is peculiar. Both the respondents say that they are not liable for the amount due.

The respondent No.

1 has not produced any proof of payment of the amount of consideration payable to the Respondent No. 2. If the proof of payment and/or the terms of the agreement had not been produced, it is difficult for us to arrive at the conclusion that the respondent No. 2 was not the agent of the respondent No. 1.

An adverse inference, therefore, should be raised against the respondents.

Non-production

of a vital document has been frowned upon by this Tribunal in Indus India Media Vs. Polycable. It has also been done in Mona Cable Network Vs. ESPN Software India Private Ltd., New Delhi being Petition No. 145(C) of 2009 dated 20.11.2009.

 

The conduct of the respondent No. 1 in this behalf must also be noticed. If it was not liable for making any payment to the petitioner in terms of any contact entered into by and between the petitioner and the respondent No.2, there was absolutely no reason as to why it acknowledged its liability by sending the balance confirmation.

The statements of Shri

Kundu in his deposition before this Tribunal are absolutely vague. Moreover, if according to the respondent No. 1, the respondent No. 2 has committed acts of default in performing its duties either as a contracting party or as its agent, there was absolutely no reason why no action was taken against it. Why even the contract was not terminated earlier has not been explained.

 

So

far as the respondent No. 2 is concerned, it, apart from its plea of being the agent of the respondent No. 1, raised a contention that no binding contract had been entered into and in that view of the matter, why despite the fact that there was no jural relationship and why any payment at all was made to the petitioner as per the invoices or otherwise has not been explained (according to it full and final payment had been made).

In the

aforementioned factual background, we may notice the provisions of Section 230 of the Indian Contract Act. It provides for the rule that an agent contracting in the name of the principal only, is not liable to be sued nor can sue on such contracts.

It is, not the case

of either of the respondents that the respondent No. 2 was entitled only to enter into negotiations on behalf of the respondent No. 1, but not to enter into a contract with the petitioner or other MSOs with regard to carriage and placement of the channels of the respondent No.1.

We have noticed

heretobefore the contentions raised by both the respondents in their respective pleadings. Nowhere any of them and in particular the respondent No. 2 stated that while making a counter offer or negotiating the terms and conditions on behalf of the respondent No. 1, the matter had been referred to it for its approval.

In a case of this

nature, having regard to the peculiarity of the situation, we cannot say that both the respondents were not liable and/or the respondent No. 2 cannot be sued having regard to the provisions contained in Section 230 of the Indian Contract Act.

So far as the

petitioner is concerned, the situation was uncertain. It did not know the internal arrangements between the respondents inter se. Although it entered into a MoU with respondent No. 2 and raised invoices on it, but when it made complaints to the respondent No. 1 relating to non-receipt of its dues, the respondent No. 1 responded favourably thereto.

 

It

not only gave an assurance of payment, but also acknowledged its liability by way of balance confirmation. In a situation of this nature, therefore, we are of the opinion that the petition cannot be thrown out on that ground alone.

 

Reliance has been

placed by Mr. Chawla on Midland Overseas v. M.V. `CMBT Tana` & others`   reported in AIR 1999 Bombay page 401, which in our opinion, does not lay down any law. Section 230 was invoked having regard to the admitted fact involved as the third defendant therein was merely a shipping agent for and on behalf of the second defendant, and was admitted in paragraphs 3 and paragraph 11 of the plaint.

Such is not the position here.

Service Provider Issue :

Whether the

Respondent No. 2 is a service provider or not within the meaning of the provisions of the 2004 Regulations, in our opinion, is not very significant in this case for more than one reason.

Firstly

because the petitioner has not raised the said question in its pleadings. No issue has been framed nor evidence has been adduced by any of the parties on the said question.

It was sought to

be raised for the first time in the oral arguments without any factual foundation having been laid down therefor.

If the respondent

No. 2 intended to have claimed an exemption from the purview of the operation of the Regulations, specific pleading to that effect was necessary. It indisputably is otherwise a Service Provider. It transmits its own channel. It provides signals.

Moreover, the

respondent No. 2 in our opinion is a broadcaster within the meaning of Clause 2(e) of the said Regulations being the authorized distribution agencies of the Respondent No.1.

Broadcasting

services would not only involve transmission of signals alone but other services as well.

If placement of a channel

which earns the MSOs some amount from the broadcasters, so as to help them grow their business, it will come within purview of the definition of a broadcaster.

 

Agreement Issue :

This takes us to

the question as to whether an agreement had been entered into by and between the petitioner and the second respondent. The petitioner alleges that the agreement had been entered into by and between the parties hereto by reason of the MoU dated 27th July 2008.

Paragraphs 5 and 7

of the MoU read as under :-

5. In lieu of the appropriates carriage of Samay & Sahara Samay Regional channel on its network by MSO, Sahara shall pay through ABS Media Reach Pvt. Ltd. the total amount of Rs. 18,000,000/- (Rs. One Crore and Eighty Lacs only), excluding Service Tax and other taxes, per annum in 4 equal advance installments / payments against invoices raised.

7. This MoU will be read in consonance with the agreement between Sahara and ABS Media reach Pvt. Ltd.

 

Indisputably,

a format of the said MoU was sent to the petitioner by respondent No. 2. All parties for one reason or the other has referred to therein. Respondent No. 2 however, rightly contends that it had not signed the same. It has merely received a copy thereof.

The counter offer,

according to it, was made by reason of an E-mail.

Our attention has

been drawn to various E-mails exchanged between the parties in this behalf.

The first of such E-mail

was from one Shri Raos end to Shri Atul Sarraf.

It reads as under

:-

From: Rouse N [Mailto: rouse.n@youtelecom.com]

Sent:

Wednesday, July 23, 2008 5:13 PM

To: atul@careworldtv.com

Subject: Channel Placements

 

Dear Atul,

Refer to our various discussions we had with rgds to your requirement of placing Channels in SCOD18 Networking Pvt. Ltd.,:-

Our final offer for the belowsaid Freq is Rs. 18 Cr.

1.    S Band (S1 105.25)

2.    UHF (U38 -607.25)

3.    UHF (U68-847.25)

Terms

     Contract for One

year

     Qtly Review

     No change of

Channels or Freq once agreed and placed

     Qtrly Advance

Payment

     Validity: Till 24th

July 2008

Would request you to revert asap if the above terms are accepatable

Thanks and rgds,

--

Atul B Saraf

CMD

 

Admittedly,

the UHF channel belongs to respondent No. 2.

The petitioner furthermore by its E-mail dated 25th July 2008, stated:-

 

Dear Atul,

Further to the discussion we had on 25th July the terms agreed is as below:-

 

1.    Sahara Samay S. Band (S20)

2.    Sahara Mumbai UHF (U40)

3.    Careworld UHF (U55)

 

With regard to Care world, we will try our best to upgrade the freq by 31st Aug 08

In

response to the said E-mail, the respondent No. 2 by its E-mail dated 2nd August, 2008, stated as under :-

Dear Rouse,

Please find

enclosed MOU for your reference and perusal.

 

 

In

the said E-mail there is no reference to any counter offer.

Only a copy of another

MoU was sent.

The said MoU

contains similar terms. However, clauses 5 and 6 thereof read as under :-

5. In lieu of the

appropriates carriage of Samay & Sahara Samay Regional channel on its network by Operator Sahara shall pay through ABS Media Reach Pvt. Ltd. the total amount of Rs. 2000000/- (Rs. Twenty Lakhs Only) per annum in 8 installments against invoices raised.

6.            

The term of this

MOU is for a period of one year from the date hereof or termination of this agreement by Sahara or ABS , which ever is earlier.

 

 

Only because a sum of Rs. 20 lakh has been mentioned in the said purported MoU, the respondent No.2 contends that the same constituted a counter offer.

Mr. Atul Sarraf

who has examined himself as a witness on behalf of the respondent No. 2, however, in his deposition stated that ultimately an agreement had been entered into even in respect of two channels of the respondent No. 1 for a consideration of Rs. 90 lakhs.

It is in the

aforementioned fact situation, the parties hereto had relied upon the conduct of each other to support its own case.

For determining

the amount of consideration, the first important document which must be noticed is the invoice dated 31st July 2008.

A bill for a sum of

Rs. 45 lakhs was raised for carriage of two channels. It was for the period 27.07.2008 to 26th October, 2008 i.e. for a period of 3 months. Atul Sarraf received the same along with the MoU on 11th August, 2008. Why no protest was made thereagainst is difficult to comprehend.

The second

important document is the invoice dated 15th October, 2008, which was for the period 27.10.2008 to 26.01.2009. This invoice was also for a sum of Rs. 45 lakhs besides the amount of taxes. In this invoice only, an endorsement was made by Mr. Atul Sarraf which was received by him on 17.10.2008 subject to check. No such endorsement was made in the first invoice. The second invoice was also not refunded subsequently. Nothing has been bought on record to show as to whether any checking was done or what was the result thereof.

 

Yet

again except making the said endorsement no other protest or contention was raised. The third invoice is dated 29th December, 2008 for the period 27.1.2009 to 26th April, 2009.

The petitioner received

payment of Rs.25,28,100 on 28th August, 2008 and another sum of Rs. 25,28,100 on 27th September, 2008 and an odd sum of Rs. 8,42,000 on 20th December, 2008.

There is a little controversy with regard to the numbers of the cheques mentioned in the statement of accounts filed by the petitioner representing the aforementioned payments.

 

Mr.

Naveen Chawla would contend that from the records it would appear that a cheque bearing No. 23958 was issued on 26.08.2008. However, Annexure P-III annexed to the petition shows that the cheque No. under which the payment was received was 23959 dated 28th August, 2008. Our attention has further been drawn to the fact that on or about 15.9.2008 another cheque was issued bearing No. 23964 but in the said Annexure P-III, however, receipt thereof was shown to have been made through Cheque No. 020491 (Again to see page 1734).

Admittedly, the

cheques issued on 26.08.2009 and 15.09.2008 on the request of the respondent No. 2 had not been deposited. For one reason or the other, the respondent No. 2 had issued two other cheques receipt whereof, as noticed hereinbefore, stands admitted.

Is it of some

significance ? In our opinion, it is not, as by reason thereof only a confusion is sought to be created. It has no bearing on the real controversy between the parties. If the same was necessary to be gone into, the respondent could have produced the relevant documents or asked the petitioners witness for any clarification in relation thereto. It has also not raised any such contention in its reply.

The

fact that two payments were received, one in August and another in September is not in dispute. Both the payments have been made before the 2nd invoice was issued namely before 27th October 2009.

The amount according

to Mr. Chawla was paid well in advance.

 

If

that be so, for the period in question, being 27th July to 26th October, 2008, payments could be made only before the first bill fell due. Payments have been made before the period in question began namely 27th October to 26th December, 2008. Why such payment was made on 27th September has not been explained. More significantly, the respondent No. 2 in his cross examination was confronted with a document being dated 11th September, 2008.

He accepted the

same to have been issued by him. It reads as under:-

The witness is confronted with letters dated 20.02.2009 and 11.09.2008

Q: Do these letters bear your signatures?

A: Yes

(Marked as Ex. C & C-1)

Attention of the witness is drawn to page 12 of the petition.

Q: Was this invoice drawn on the basis of Rs. 1.8 Crore per annum?

A: Yes

Q: If you state that this is not the correct amount, how do you explain letter dated 11.09.2008 (Ex. C1)?

A: The letter is as good as withdrawn and it is not in the Petition.

 

Such type of confrontation

of a witness is not unknown.

A party is entitled

to do so having regard to the specific stand taken by the other. For the aforementioned purpose it is not necessary for the parties to comply with the provisions of Order VII Rule 14, Order VIII Rule 1, Order VIII Rule 8A or Order XIII Rule 2 of the Code of Civil Procedure, 1908.

The right to confront

a witness with a document, in our opinion, cannot be taken away only on the ground that the said document had not been filed earlier. Only by way of fairness, the witness should be given sufficient time to go through the document in its entirety. The aforementioned document issued by Mr. Atul Sarraf constitutes an admission. Two payments which were made, therefore, were made half and half in respect of the first invoice, which exactly is the contention of the petitioner.

The Madras High

Court in T. M. Mohanna Vs. Kannan reported in AIR 1984 Madras page 14 held as under :-

10. The scope and effect of Order 7, Rules 14 and 18 (1) and (2) C. P. C. came to be considered in Lakhpat Pathak v. Chiran Pathak

MANU/UP/0025/1936 : AIR1937All55 , wherein it has been held that the penalty for the non-production of a document under Order 7, Rule 14 is provided for in O. 7, Rule 18 (1) C. P. C. and that Order 7, Rule 18 (2) C. P. C. is an exception to order 7, Rule 18 (1), C. P. C. and further that it is open to a plaintiff to tender in evidence the previous statement in writing by the defendant in the cross-examination of the defendant for the purpose of contradicting him, even though such a document was not produced by the plaintiff under Order 7, Rule 14 C. P. C. No doubt, this decision has been rendered with reference to a converse case wherein the document had been produced by the plaintiff in the course of the cross-examination of the defendant. But in view of the provisions of the Civil P. C., referred to earlier, the principle that would be applicable would be the same, irrespective of whether it is the plaintiff or the defendant or their witness who is confronted with the document produced by the other side, especially when the scope and ambit of the exception carved out under Order 7, Rule 18 (1), Order 8, Rule 1 (6), Order 8, Rule 8-A (3) and Order 13 Rule 2 (2) (a) P. C. are the same.

 

It,

therefore, in our opinion cannot be said that the petitioner was not entitled to do so.

Term of Contract :

It is in the

aforementioned situation, a question arises as to whether the contract was for 8 months or 9 months.

According to the

petitioner, the period of contract was to be for a period of 3 quarters. Three invoices were sent and they have been received. Except in one, no endorsement thereon was also made. Nothing has been stated as to on what basis, the respondent No. 2 raised any contention with regard to either bad quality or otherwise.

Our attention has

been drawn to a letter dated 30th March, 2009.

In that letter

only, the respondent No. 2 for the 1st time contended as under:-

Subject: Invoice

Dear Sir,

This is with reference to your invoice Not Carriage/026/08-09, dated 15/10/2008 for Rs.50,56,200 Invoice No. Carriage/040/08-09,dated 29/12/2008 for Rs.50,56,200

ABS Media Reach is the Distributor of Sahara Samay & Regional News Channels.

In respect to the aforesaid Invoice, we intend to inform you and place on record that the amount raised by you in the said Invoice is incorrect as the same does not reflect the interruptions of channel as well as the negotiated amount for the said period.

Hence we are returning the invoice for necessary corrections and in the event of any clarification if required, feet free to contract us.

And furthermore, all outstanding payments if any will be disbursed, as soon as Sahara Sanchar Ltd will disburse payments to ABS Media Reach Pvt. Ltd., which presently has been withheld by them.

 

This

letter deserves some discussions.

The subject of the

said letter was the invoices. Three invoices had been mentioned therein. The respondent No. 2 described itself as the distributor of two channels. The only protest made therein was that the amount mentioned in the bill in question was incorrect.

It did not say

that payment in relation thereto had already been made. It did not say that the bill raised for the period January to April 2009 could not have been raised beyond the period of contract. Even the quantum thereof was not questioned.

The correctness of

the bill was questioned only on the ground of alleged interruption of the channels as well as the purported negotiated amount for the said period. The respondent No. 2 did not say what was the amount agreed to by the parties as an outcome of negotiation. It did not say that its agreement with the respondent No. 1 being upto 31st March, 2009, it did not have any authority to enter into the said agreement.

Why it had to shift

the blame on respondent No. 1 is difficult to comprehend if it had in fact paid the entire amount agreed to by and between the parties.

Apart from the

aforementioned document there are some other letters, the correctness whereof is not in dispute, which may now be noticed.

Admittedly, the petitioner

did not receive any payment after December, 2008. It therefore, sent an E-mail to Shri Parimal Das, an employee of the respondent No. 1.

It reads as under

:-

Dear Mr.

Parimal Das,

This has reference to the Placement Agreement signed between Sahara Sanchar Ltd. SCOD18 Networking Pvt. Ltd. and ABS Media Reach Pvt. Ltd., as per the term of the Agreement ( clause 5), the parties (Sahara Sanchar Ltd & ABS Media Reach Pvt. Ltd.) have agreed for advance payments every qtr.

We had been regularly following up with your distributor Mr. Atul Sharaf but have got no response, there had been regular default and we have been told that payments are not coming forth from Sahara Sanchar Ltd. kindly note that the quoted rate is discounted rates as your company & Distributors had agreed for advance payments. Having taken the discount and defaulting in clear breach of trust and violates the Agreement signed between us.

We would appreciate a quick response from Sahara Sanchar Ltd. as our payments are due from 27th Oct 2008.

 

Mr.

Rao again sent an E-mail on 12th December, 2008, contending:-

Dear Mr. Parimal Das,

The deal is for Rs. 1.8Cr and the terms for payments are as below:

Period Due Date Amt.

27th July 2008 to 26th Oct2008 Immediate 4500000.00(Taxes extra)

27th Oct 2008 to 26th Jan 2009 26th Oct 2008 4500000.00(Taxes extra)

27th Jan 2008 to 26th Apr 2009 26th Jan 2009 4500000.00(Taxes extra)

27th Apr 2009 to 26th July 2009 26th Apr 2009 4500000.00(Taxes extra)

 

What we have received is as below:-

For the period 27th

July 2008 to 26th Oct 2008,

Cheque no.023959

Rs. 2528100.00(bounced)

Cheque no. 023959

Rs. 2528100.00

Cheque no.024091

Rs. 2528100.00

 

My last discussion with Mr. Shashi and with Mr. Atul Sharaf has given us conflicting messages and it seems some blame game is on. We request you to clear our dues at the earliest and as agreed and signed by your Distributor M/S ABS Media Reach Pvt. Ltd.

 

It

also served a notice on the respondent No. 1 on 28th January, 2009 wherein it was stated :-

Dear sir,

This is with reference to the Memorandum of understanding for Channel Placement dated 27th July 2008 executed between Sahara Sanchar Ltd. and SCOD18 Networking Pvt. Ltd. and ABS Media Reach Pvt. Ltd., the parties in terms of which we are obliged to retransmit/re-distribute your Channels ( Sahara Samay and Sahara Samay Regional) in the agreed frequency through our network more specifically mentioned in the MOU.

We would like to draw your attention to Clause 5 of the MOU in terms of which you are obliged to make the payment of carriage fees of the channels as specifically mentioned in the MOU.

It is agreed Between the Parties in terms of clause 5 of the MOU that Sahara Sanchar Ltd shall pay Carriage fees of Rs.18000000/-(Rupess one crore and eighty lacks only) plus service tax and subject to TDS as applicable to MSO during the term starting from 27th July 2008 to 26th July 2009 for placement of the Channels. It was agreed as per the terms of the MOU that the aforesaid amount shall be paid in advance in four equal installments in favour M/s SCOD18 Networking Pvt. Ltd. immediately on the receipt of the invoices.

Considering our relationship we have not raised any objection on your payment pattern, which were made on bi-monthly basis against the quarterly advance payments as agreed between the parties and as mentioned in the terms of the MOU. However, even in such relaxation you have defaulted making the payment of placement charges for the period starting 27th Oct 2008 despite the receipt of invoices for the said period totaling the outstanding to the tune of Rs.92,70,400/-(Rupees Ninety Two Lacks Seventy Thousand and four Hundred Only)

The non-payment of Rs.92,70,400/-(Rupees Ninety Two Lacks Seventy Thousand and Four Hundred Only) is an utter breach of the MOU for Channel Placement executed between the parties despite we have issued invoice for the said period duly received by you.

Needless to say, delay in making payment of carriage fees in not only the breach on the MOU but also reflects unprofessional approach of your company in meeting its obligations.

We request you to kindly make the payment of carriage fees without further delay in terms of the agreement executed between the parties failing which we shall be left with no option but to displace your Channels from the existing frequencies in our Digital and Analogue network.

 

In

reply to the said notice, the 1st respondent by its letter dated 17th February, 2009 stated :-

Dear Sir,

On behalf of

team Sahara Samay Network, we extend you warm Greetings. We takes this opportunity to thank you immensely for being a responsible business partner and ensuring a proper visibility of our channels through out your networks. We do hope that we continue to grow together from strength to strength for the days to come.

As you are aware Sahara Samay News Channel had outsourced its complete distribution activity to m/s ABS Media Reach Pvt. Ltd. from 1st April, 2008 to31st March, 2009 in turn, for which you had entered into an agreement with the above firm.

Off late it has been brought to our notice that few of our business associates/operators have not been paid by M/s Abs Media Reach Pvt. Ltd. under the pretext of non payment from Sahara. As a responsible Media house we would like to clarify and inform you that all the dues of M/s ABS Media Reach Pvt. Ltd. have been paid by us as 31st December 08, therefore we request you to kindly follow up with M/s Media Reach Pvt. Ltd. to collect your dues (if any). While you are following up M/s ABS Media Reach Pvt. Ltd. for your dues, a copy of such communication may be marked to us so that we can also take appropriate steps. Further, our distribution team shall be approaching you within 7 days to discuss the carriage deals for the remaining 3 months i.e. January to March 09 including the deals for next year. Meanwhile, we seek your support to ensure the visibility of our channels across the network.

Once again, we thank you in anticipation of your support for the days to come.

 

The

respondent No. 2 evidently came to learn of the contents of the said letter. It also issued a general letter to all the MSOs and operators including the petitioner herein on or about 20th February, 2009, stating :-

Dear Friends,

This is to inform you and place on record that we have not received the payments up to 31/12/2008 as alleged by the Sahara Distribution team to all the MSO/Cable operators through correspondence.

As soon as we got the information from few MSO about the said correspondence, we have approached the Senior Management to clarify the said issue on priority basis and are expecting the sane issue will be resolved soon.

In the mean time on behalf of Sahara, we request you to run the Sahara News Channels on your network, as the Senior Management had verbally assured us that they will honour their commitment towards MSO/Cable operators.

We will endeavor to resolve your issue with Sahara, Once Sahara pays us their respective Outstanding Dues. We were also surprised seeing the misleading letter issued by Distribution team to tarnish our image with operators.

Your kind cooperation will be highly appreciated by us and would request you not to enter into any dialogue with their Distribution team till 31st March 09.

 

Why

such a request was made, if the respondent No. 2 was merely an agent of the respondent No. 1 and had been acting under its specific authorization is really a matter of surmise.

The respondent No.

1, despite making a general statement that it had outsourced placement of channels to respondent No. 2, did not raise any issue that it was not bound to make any payment, to the MSOs.

It did not say

that the respondent No. 2 was not its distributing agent.

The

petitioner, thereafter made a demand for the amount in question by a notice dated 3.4.2009 addressed to both the respondents herein.

It reads as under :-

Dear Sir,

This is with reference to the Memorandum of Understanding dated 27th July 2008 executed between Sahara Sanchar Ltd. and M/s SCOD18 Networking Pvt. Ltd. (hereinafter called the company) with ABS Media Reach Pvt. Ltd. in terms of which we have agreed to retransmit and carry the services of Samay & Sahara Samay Regional Channels as desired by Sahara, on the Companys headends on S band ( S-20) and on UHF Band (E-40) during the terms of this MOU.

It is agreed between the parties in terms of clause 5 of the MOU that Sahara Sanchar shall pay through ABS Media Reach Pvt. Ltd. a total amount of Rs.18000000/-(Rupees One Crore Eighty Lacks only) excluding service tax and other taxes, per annum in 4(four) equal installments/payments against invoices raised by the Company for the term starting from 27th July 2008 to 26th July 2009. Copy of the MOU dated 27th July 2008 is enclosed herewith and marked as ANEXURE-A.

In accordance with the terms of the MOU the Company has provided excellent quality broadcast of Samay & Sahara Samay Regional Channels over its cable TV Network and raised various invoices from time to time. Copies of the invoices raised by the Company are enclosed herewith and marked as ANNEXURE-B.

In terms of the agreement it was agreed by and between the parties that the aforesaid amount shall be said in advance in four equal installments in favour of the Company immediately on the receipt of the invoices. However, your pattern of payment was bi monthly basis against the quarterly advance agreed upon between the parties in terms of the MOU. Details of payments received from you is enclosed herewith and marked as ANNEXURE-C.

Needless to say we have not raised objection to the pattern of your payment considering our relationship. It is shocking that even after such relaxation granted to you have defaulted making the payment of carriage charges despite the receipt of the invoices.

As per the statement of accounts maintained by the company your total dues and outstanding towards carriage fees has mounted to Rs.9270400/-(Ninety Two Lack seventy Thousand Four Hundred Only). Copy of the statement of Accounts maintained by the company is enclosed herewith and marked as ANNEXURE-D.

The company has made the demand of the said amount of Rs92,70,400/-(Ninety Two Lack Seventy Thousand Four Hundred Only) vide its communication dated 28th January 2009, however you took no heed to the said communication and failed to make the payment of the aforesaid dues and outstanding. Copy of the communication dated 28th January 2009 is enclosed herewith and marked as ANNEXURE-E.

In view of the aforesaid, we call upon you to make the outstanding payment of carriage fees to the tune of Rs. 92,70,400/-(Ninety Two Lack Seventy Thousand four Hundred Only) within 3 days of the receipt of this communication.

Needless to say, in case you fail to make the payment of the aforesaid amount within the stipulated period, we shall be constrained to initiate appropriate legal proceeding before the appropriate forum (TDSAT) for the recovery of the said amount. The proceeding so initiated shall be at your risk, costs and consequences.

 

The first

respondent, however, by its letter dated 8th April, 2009 responded thereto, stating :-

Dear Shri. Rouse ji,

This is in continuation to our earlier communication in the month of February 2009 sent to you by our respective Regional Managers. While appreciating the cooperation extended by you in ensuring the visibility of our channels, we also understand the issue being faced by you vis-is the payments on account of the agency to whom we had outsourced the distribution for Financial year 2008-2009. Needless to mention that, we shall leave no stone unturned in our efforts to resolve all your pending issues.

As the above process takes places, and meanwhile, in view of the fact that, the month of April has already begun, in mutual interest of the business, our team will approach you directly to work on the deals which will be executed exclusively between Sahara and your firm, for the of financial year 2009-2010, with immediate effect.

While thanking you your valued support, we do extend our sincere apologies for the issue and would like to re-iterate that, not only as a responsible media house but also as a credible corporate, we are committed to safeguard the interests of our associates as we have done it in the past years since the inception of our business in the electronic media.

Meanwhile, we sincerely request you to keep our channels on the give me a personal audience at an earliest date convenient to you after 12th April 2009.

 

It

may also be placed on record that the first respondent by a letter dated 15th October, 2009 sought for balance confirmation as on 31st March, 2009, in the following terms :-

Dear Sir,

As

per our Book of Account for the financial year 2008-2009, your account shows a credit of balance of Rs. 2,723,623.00 as on 31.03.2009. You are requested to confirm the same. However in case of any differences please send our account statement as appears in your book of Account, so that reconciliation can be made.

If we do not receive any confirmation within 15 days of this correspondence the balance shown in our records shall be treated as correct.

The

1st respondent, therefore, was maintaining its separate books of accounts so far as the petitioner is concerned. If its contention was correct, that it had outsourced placement of channel matters with respondent No. 2 and the privity of contract was only by and between the petitioner and the respondent No. 2, it was not necessary for it to maintain any separate account MSO wise. It was not necessary for it to show that it has in its books of account a credit balance of Rs. 27,53,623 as on 31st March, 2009 or any other sum. The petitioner, of course did not agree with the figure. But this letter, in our opinion, is clearly a pointer to show that the respondent No. 1 has accepted and acknowledged its liability.

We

may also notice that the petitioner by its letter dated 27.10.2009 addressed to the respondents stated as under :-

 

We are in receipt of your communications dated 15th October 2009 in which you have sought our confirmation to the credit balance of Rs. 27,23,623/- reflected in our account maintained by you for the financial year 20008-2009.

At the outset, we deny that only a sum of Rs. 27, 23,623 is due and payable upon you. It is stated that your company is liable to make the payment of placement charges to the tune of 92, 70, 400 for retransmission of signals of your channels at an agreed frequency as per the MOU dated 27.07.2008 duly executed between the parties.

In fact, we have filed our petition being Petition No./ 205 of 2009 for the recovery of the said payment.

We request you to kindly make necessary amendments to the accounts maintained by you and release the payment of Rs. 92,70,400 with interest @ 18% Per annum.

 

We, therefore, are of the opinion that the parties are bound by their conduct. Existence of a contract between the parties can thus be inferred. We may refer to some decisions of the Supreme Court of India in this regard.

In Security Printing and Minting Corpn. of India Ltd. v. Gandhi Industrial Corpn. Reported in (2007) 13 SCC 236, it was held that:-

15. Learned counsel for the claimant also submitted that at the time when the tender was floated, there was no condition incorporated therein that MODVAT credit will be claimed by the appellant security press. Therefore, the view taken by the arbitrator as well as the learned Single Judge and the Division Bench of the High Court is correct.

16. After hearing learned counsel for the parties and perusing the record we are of opinion that the view taken by the arbitrator and affirmed by the learned Single Judge and the Division Bench of the High Court cannot be sustained. Firstly, when the terms and conditions have been reduced (sic to writing) in the supply order dated 31-5-1995, therein the condition of MODVAT credit was incorporated and it was accepted by the claimant. The contract had come into existence and the supply had been started on the basis of that supply order. Though the claimant had protested with regard to this clause but the appellant did not accede to the request of the respondent for deleting that clause and the appellant had informed the claimant on 30-12-1995 that there was no change in the conditions of the supply order still claimant continued to supply the goods as per the order. Therefore, on the face of this condition there is no going back from that. In case the claimant was not inclined to accept this clause he could have very well withdrawn from the contract. But it did not do so and continued with the contract. Therefore, on the basis of the clear terms of the contract, the claimant is bound by it and it has to restore whatever MODVAT credit received by it to the appellant security press. The view taken by the arbitrator that since it was not the condition when the tender was floated is not correct as after the complete

contract having come into existence, there is no purpose to refer to the terms of tender. What is binding is the completed contract and not the terms of offer of the advertisement. Whatever may be the offers in the advertisement, once the completed contract has come into existence, this is binding. There are no two opinions in the matter in the present case that the terms and conditions of the supply order dated 31-5-1995 were complete. Therefore, what is binding is the terms of the contract and not the terms in the offer of advertisement. Therefore, under these circumstances the view taken by the arbitrator as well as the learned Single Judge and the Division Bench of the High Court is ex facie illegal. It is true that normally the courts are very slow in interfering with the finding and interpretation given by the arbitrator. So far as the principle of law is concerned, there are no two opinions and it has to be accepted. But the fact remains that if any perverse order is passed, then the courts are not powerless to interfere with the matter. As pointed out above, once the concluded contract has come into existence, then in that case the offer of advertisement cannot override the terms and conditions of the completed contract. Therefore, in our opinion, the view taken by the arbitrator, as affirmed by learned Single Judge and the Division Bench of the High Court on the face of it is illegal and against the law.

 

In Trimex International FZE Ltd. v. Vedanta Aluminium Ltd., reported in (2010) 3 SCC 1, it was held that :

49. In the light of the details which have been extracted in the earlier paragraphs, I am unable to accept the stand of the respondent. It is clear that if the intention of the parties was to arbitrate any dispute which arose in relation to the offer of 15-10-2007 and the acceptance of 16-10-2007, the dispute is to be settled through arbitration. Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialled by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initialled.

50. The acceptance

conveyed by the respondent, which has already been extracted supra, satisfies the requirements of Section 4 of the Contract Act, 1872. Section 4 reads as under:

4. Communication

when complete. * * *

The communication of an acceptance is complete,

* * *

as against the acceptor, when it comes to the knowledge of the proposer.

51. As rightly pointed out by the learned Senior Counsel for the petitioner, when Mr Swaminathan of Trimex opened the e-mail of Mr Swayam Mishra of Vedanta at 3.06 p.m. on 16-10-2007, it came to his knowledge that an irrevocable contract was concluded. Apart from this, the mandate of Section 7 of the Contract Act which stipulated that an acceptance must be absolute and unconditional has also been fulfilled. It is true that the first acceptance conveyed by the respondent contained a rider, namely, cancellation after two shipments which made the acceptance conditional. However, taking note of the said condition, the petitioner requested the respondent to convey an unconditional acceptance which was readily done through his e-mail sent at 3.06 p.m. with the words we confirm the deal for five shipments, which is unconditional and unqualified. As rightly pointed out by the learned Senior Counsel for the petitioner, the respondent was wholly aware of the fact that its agreement with the petitioner was interconnected with the shipowner. In other words, once the offer of the petitioner was accepted following a very strict time schedule, the respondent could not escape from the obligations that flowed from such an action.

52. The Court of Appeal in Pagnan S.p.A. v. Feed Products Ltd. 1, Lloyds Law Reports at p.  619

observed as follows:

It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word essential in that context is ambiguous. If by essential one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by essential one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by essential one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, the masters of their contractual fate. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called heads of agreement.

The above principle has been consistently followed by the English courts in Mamidoil-Jetoil Greek Petroleum Co. SA v. Okta Crude Oil Refinery AD 2, Lloyds Law Reports at p.  89; Wilson Smithett & Cape (Sugar) Ltd. v. Bangladesh Sugar and Food Industries Corpn. 3, Lloyds Law Reports at p.  386.

In addition, Indian law has not evolved a contrary position. The celebrated judgment of Lord Du Parcq in Shankarlal Narayandas Mundade v. New

Mofussil Co. Ltd. 4makes

it clear that unless an inference can be drawn from the facts that the parties intended to be bound only when a formal agreement had been executed, the validity of the agreement would not be affected by its lack of formality.

  In State of U.P & Ors v. M/s Combined Chemicals Company Pvt. Ltd. reported in 2011 (1) SCALE 85 it was held that:

15.

We have given our serious thought to the respective arguments.

A reading of letter dated 16.11.1985 shows that the same was issued for and on behalf of the Governor of Uttar Pradesh. In the opening paragraph of the letter, appellant No.2 indicated that the bid given by the respondent was being accepted on behalf of the Governor of Uttar Pradesh. At the end of that letter and Schedule `A' appended thereto, it was clearly mentioned that the contract was being made for and on behalf of the Governor of Uttar Pradesh. The contents of paragraphs 4, 7, 12 and 14 show that the appellant Nos. 1 and 2 had awarded a contract to the respondent for supply of 200 metric tones Zinc Sulphate of Agriculture Grade for a total price of Rs.10,95,200/- and the terms and conditions mentioned in the acceptance letter, tender form and the agreement forms were treated as part of the contract. The schedule of supply was also indicated in the acceptance letter. Clause 10 of the 1 terms and conditions embodied in the acceptance letter did speak of formal agreement, but the same was to be executed only if required.

Undisputedly, the respondent completed all the formalities inasmuch as it deposited the security money and dispatched a duly signed agreement to the Directorate of Agriculture, which was to take the supply of Zinc Sulphate, and also sent letters for placing the supply order. Thus, a contract had come into existence between the parties and the fact that the Director of Agriculture did not sign the formal agreement sent by the respondent cannot lead to an inference that the contract had not been executed. This view is consistent with the plain language of Section 5 of the Sale of Goods Act, 1930, sub-section (1) whereof lays down that a contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. That sub-section further lays down that the contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. Sub-section (2) of Section 5 lays down that subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties.

.

18. Reverting to the present case, we find that the bid given by the respondent was unequivocally accepted by the competent authority and the letter of acceptance was issued for and on behalf of the Governor by treating it to be a contract. Thus, there was substantial compliance of Article 299 of the Constitution. The execution of formal agreement was optional and was not sine qua non for supply of the goods by the respondent. In our view, if the acceptance letter is read along with other documents in the light of the conduct of the parties, it becomes clear that an agreement was executed between the competent authority and the respondent.

 

Mr. Chawla would

contend that a contract must be, inferred on the basis of conduct of the parties.

Although the terms

of a contract must be spelt out when an agreement in writing is entered into, in the case of an oral contract, conduct of the parties would be relevant.

Infact, Mr. Chawla

himself has relied upon certain decisions, namely Abdul Hasan v. Mt. Wajih-un-nissa and Ors.  reported in AIR 1948 Patna 186, Mahesh Prasad Khatri v. Mr. T. Smith and Another reported in AIR 1933 Patna 130, a decision of a learned single judge of Madras High Court in Dr. Kumari Shantha Arogyadoss (deceased by L.Rs.) and Ors. v. Smt. G. C. Kamla and Others 2000 All India High Court Cases page 227 and Deep Chandra v. Ruknuddaula Shamshar Jang Nawab and Ors., AIR 1951 Allahabad page 93, to contend that signing of a document is not execution thereof.

 

There

cannot be any doubt or dispute to the said legal proposition. However, the said decisions are not applicable to the fact situation of the present case.

In Abdul Hassan

(Supra), the Patna High Court was considering the meaning of the term execution in relation to a written document. The document in question therein was a sale deed.

The ratio was laid

down therein having regard to the third proviso appended to Section 91 of the Indian Evidence Act.

In this case the

respondent No. 2 itself has raised a contention that no agreement in writing was entered into and the terms and conditions are to be found out from the conduct of the parties.

In Sunder

Chowdhary (Supra) the document in question was a mortgage bond which was in writing.

In Dr. Kumari

Shantha A Das (Supra), the learned single judge of the Madras High Court with reference to Section 67 of the Evidence Act stated that the term execution when applied to a document would be the last act or series of acts which complete the transaction.

In Deep Chandra

(Supra), yet again the subject matter of consideration was the third proviso appended to Section 92 of the Evidence Act, the document in question being a receipt. In that context it was held that the document was a record of the terms of a validly concluded contract for sale between the parties and that the fact that it was described and called as receipt was immaterial.

The said decision

is, therefore, an authority for the proposition that what matters is not the nomenclature of the documents but the contents thereof. Again there is no dispute on the proposition of law laid down therein.

 

However, herein

the respondent No. 2 has raised a contention that two MoUs was exchanged by way of an offer or counter offer.

Such a contention

on the part of the respondent No.2 stand belied as would be evident from the following :-

1)   

The alleged counter offer, if any, admittedly was not accepted.

2)   

The respondents do not say that the parties had entered into a concluded contract for a consideration of Rs. 90,00,000.

3)   

When the novation of contract took place, the same was not for a period of 9 months but for a period of 8 months.

4)   

No protest was made by the respondent No. 2 immediately upon receipt of the said MoU followed by an invoice.

5)   

Although, in the second invoice an endorsement was made subject to checking but what was the result thereof has not been stated.

6)   

During the currency of the agreement between the respondent No. 1 and respondent No. 2, the latter never raised any question with regard to variation of the offer made by the petitioner or with regard to any other term to which it has consistently been referring to in its letters both to respondent No. 1 and respondent No. 2.

7)   

The respondent No. 1 had been maintaining records with regard to payments to be made to the petitioner by the respondent No. 2.

8)   

The respondent No. 2 accepted that the payments was made half and half. So far as the first invoice is concerned, the evidence adduced on behalf of the respondent No. 2, in our opinion, cannot be accepted as it is contrary to its witnesses own admission in various documents.

9)   

The witness examined on behalf of the respondent No. 1 is not a witness to execution of any of the documents.

10)          

The letters and the E-mails sent by the respondent No. 1 clearly go to show that it had made itself liable.

11)          

An appeal was made to the petitioner to continue to show its channels. Even such an appeal was made by the respondent No. 2 on behalf of the respondent No. 1 which also shows that it was acting on its behalf.

The

number of channels :

One of the

questions raised by Mr. Chawla in our opinion must be answered. It was in a relation to 3 channels Vs. 2 channels. The third channel according to the petitioner was to be placed free of cost.

Why did it do so

is not known.

The respondent No.

2 itself stated that it had not agreed thereto or the same must have not worked out.

However, parties,

in view of their conduct must be held to be bound to pay the contracted amount to the petitioner.

 

The said dispute,

it must be placed on record was not even put in issue.

Conclusion :

 

For the reasons

aforementioned this petition must succeed.

It is allowed.

However, the facts

and circumstances of this case, we are of the opinion that the rate of interest on the balance amount should be confined to 9% per annum.

The petitioner shall

also be entitled to costs. The respondent No. 1 and 2 will share the costs of this petition in equal proportion. Advocate fee assessed at Rs. 25,000/-.

 

......J

(S.B. Sinha)

Chairperson

 

 

......

(G. D. Gaiha)

Member

 

 

......

(P.K. Rastogi)

Member

 

 

 

 

#MKS#