NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 5448-5449 OF 2017
(Arising out of S.L.P.(C)Nos.34084-34085 of 2015)
M/s. Vedanta Limited
(Formerly known as Sesa Sterlite Limited
and successor in interest of
erstwhile Sterlite Industries (India) Ltd.) ..........APPELLANT(s)
Versus
M/s. Emirates Trading Agency LLC ......RESPONDENT(s)
JUDGMENT
NAVIN SINHA, J.
Leave granted.
2. The Respondent's Suit for breach of contract and damages was decreed
on 16.04.2013 by the Principal District Court, Thoothukudi in Original Suit
No. 73 of 2009 for a sum of Rs.5,25,55,460/- with interest @ 8% from the
date of the plaint till realisation. First Appeal by the Appellant was
dismissed by the High Court on 04.02.2014. In Special Leave Petition
(Civil) Nos.12687–12688 of 2014 preferred against the same, liberty was
granted on 12.5.2014 to approach the High Court in the review jurisdiction,
on the issue whether the agreement dated 26.10.2007 between the parties
constituted a concluded contract or matters rested at the stage of a
proposal and a counter proposal only. Liberty was further granted to
approach this Court again, if aggrieved. Review application No. 160 of 2014
was dismissed by the High Court on 09.07.2015. Thus, the present appeal.
3. Sri C.A. Sundaram, learned Senior Counsel appearing for the
Appellant, submitted that the agreement dated 26.10.2007 was a draft
proposal from the Respondent regarding supply of phosphoric acid by the
Appellant in a specified duration. The Appellant made a counter proposal to
the Respondent; both with regard to the quantity of supplies and the
duration of supply. No concluded contract had arisen between the parties
in absence of any final agreement having been executed. The draft agreement
was never signed, stamped and returned by the Appellant, in confirmation,
as asked for by the Respondent. The defence was taken specifically in the
written statement. The Trial Court and the First Appellate Court, without
proper appreciation of the draft agreement, arrived at a presumptive
conclusion based on the exchange of correspondence preceding the same that
it reflected a concluded contract between the parties.
4. This Court on 12.05.2014, after perusal of the agreement dated
26.10.2007, having been satisfied with regard to lack of proper
consideration of the issue, granted liberty to the Appellant for preferring
a review application before the High Court. In the review application,
objections were specifically raised that the draft agreement dated
26.10.2007 did not constitute a concluded contract, but was merely a
communication of a proposal and a counter proposal. It was also urged that
alterations had been made by the Appellant; both with regard to the
quantity and period of supply. There was no material on record to
demonstrate that any final agreement was arrived at between the parties
thereafter. In absence of a valid acceptance, no concluded contract had
come into being.
5. Unfortunately, the High Court relying on its earlier order dated
04.10.2014 that the correspondence preceding the agreement dated 26.10.2007
reflected that the latter was a concluded contract, dismissed the review
petition without examining the corrections made in the draft proposal with
regard to the quantity of supply and period of supply, the effect on the
same, coupled with the Appellant not having signed, stamped and returned
the same to the Respondent so as to evince a concluded contract between the
parties.
6. Sri Vijay Hansaria, learned Senior Counsel appearing for the
Respondent, submitted that three Courts having returned concurrent findings
from the exchange of correspondence between the parties that the agreement
dated 26.10.2007 constituted a concluded contract, interference is not
called for. It was on the assurance of the Appellant to deliver supplies
of phosphoric acid, coupled with its promised back up support in writing,
that the Respondent had bid in response to the international tender
published by Bangladesh Chemical Industries Corporation (hereinafter
referred to as 'the BCIC').
7. The breach of promise by the Appellant to make the promised supplies
had resulted in BCIC forfeiting the performance guarantee of the Respondent
in addition to other pecuniary liabilities imposed. The Suit was then
instituted by the Respondent claiming damages with interest. In a
commercial contract, the course of conduct of the parties, the exchange of
correspondences, are all important considerations for the conclusion
whether there existed a concluded contract or not. Isolated examination of
the agreement dated 26.10.2007 shall, therefore, not be appropriate so as
to warrant interference with the concurrent findings.
8. The respective submissions on behalf of the parties have been
considered by us. Briefly stated, the BCIC floated an international tender
for supply of phosphoric acid. The Respondent submitted its bid and was
awarded an order for supply of 30,000 MT. The Appellant had signed a
backup support agreement with the Respondent for supplies in case the
tender was awarded to the latter, and which was furnished by the Respondent
to the BCIC in support of its capacity to deliver supplies. The
correspondence between the Appellant and the Respondent culminated in the
latter forwarding a draft agreement dated 26.10.2007, to the Appellant for
Sale/Purchase contract for 3 x 10,000 MT phosphoric acid for supply to the
BCIC during November and December, 2007. The covering letter, appended to
the draft agreement, required the Appellant to sign, stamp and return the
same to the Respondent in confirmation. The Appellant, in response, made a
counter proposal for supply of 3 x 9500 MT (max) and between the period
January to March, 2008 by incorporating necessary corrections in hand in
the draft agreement. Resultantly, while there was a proposal from the
Respondent, the Appellant made a counter proposal both with regard to the
quantity and the period of supply. There is no material or evidence placed
by the Respondent that the draft agreement ever assumed the form of a
concluded contract by a meeting of minds both with regard to the quantity
of supplies and the duration for the same, much less was the agreement
signed, stamped and returned by the Appellant to the Respondent in
confirmation.
9. The contract between the Respondent and the Appellant was independent
of the contract between the Respondent and the BCIC. The Appellant had only
offered a backup support to supply phosphoric acid to the Respondent in
case the contract was awarded to the latter. In the written statement, the
Appellant had taken a specific defence regarding absence of any concluded
contract between it and the Respondent. The Trial Court as well as the
First Appellate Court did not specifically deal with the issue of the draft
agreement, the corrections in the same, existence of a proposal and counter
proposal with regard to quantity and time period for supplies, the absence
of any executed contract by virtue of the Appellant having signed, stamped
and returned the agreement to the Respondent, in confirmation. On a
presumptive reasoning, based on the exchange of correspondence preceding
the draft agreement, the First Appellate Court affirmed the finding in the
Suit of a concluded contract between the parties.
10. The Appellant challenged the First Appellate Court’s order dated
04.10.2014 earlier in a special leave petition. On 12.05.2014, this Court
considering the plea for absence of a concluded contract and after perusal
of the draft agreement dated 26.10.2007 containing corrections, in hand,
had observed "that these aspects are not specifically dealt with by the
High Court. In this view of the matter, it would be more appropriate for
the petitioner to approach the High Court by filing a review petition".
Observing that the High Court shall deal with the aspect on merits, liberty
was also granted to challenge any fresh order along with the impugned
orders, if aggrieved.
11. In the review petition, a specific plea was taken that the draft
agreement dated 26.10.2007, Exhibit 8-A, did not constitute a concluded
contract in view of the counter proposal made by the Appellant, both with
regard to the quantity of supply and the period for the same. Reliance on
the correspondence preceding the same was not sufficient in absence of
acceptance by the Appellant of the proposal made by the Respondent coupled
with signing, stamping and returning of the agreement in confirmation of
the same.
12. The High Court, despite noticing the specific plea of the Appellant
with regard to the absence of a concluded contract between the parties in
view of a counter proposal, much less that the agreement was never signed,
stamped and returned, reiterated the earlier observations of the First
Appellate Court of a concluded contract between the parties based on
exchange of correspondence preceding the draft agreement, and also on the
premise that the Respondent had submitted its offer to BCIC on the
assurance of the Appellant for backup support if the contract was awarded
to the former. The High Court declined to delve further into the agreement
dated 26.10.2017, holding it to be impermissible in the review jurisdiction
and concluding that the grounds urged were superficial in nature without
any material proof, designed to avoid payment, and dismissed the review
application. The High Court failed to notice that as recent as 28.01.2008,
the Respondent was still awaiting confirmation of its proposal from the
Appellant, and soon thereafter the performance guarantee was invoked by the
BCIC against the Respondent on 13.04.2008.
13. Section 7 of the Indian Contract Act, 1872 (hereinafter referred to
as 'the Act') provides that in order to convert a proposal into a contract,
the acceptance must be absolute and unqualified. The existence of a
concluded contract is a sine qua non in a claim for compensation for loss
and damages under Section 73 of the Act arising out of a breach of
contract. If instead of acceptance of a proposal, a counter proposal is
made, no concluded contract comes into existence.
14. U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., (1996) 2 SCC 667,
also related to a proposal and counter proposal. Holding that no concluded
contract had come into existence, the Apex Court observed as follows :-
"9...As seen, the material alterations in the contract make a world of
difference to draw an inference of concluded contract...."
15. The fulcrum of the entire controversy is the draft agreement dated
26.10.2007 marked Exhibit 8-A, for supply of phosphoric acid by the
Appellant to the Respondent. The proposal of the Respondent, led to a
counter proposal by the appellant. There was no acceptance of the proposal
by the Appellant giving rise to a concluded contract. The quantity and
duration of supply, therefore, remained in the realm of uncertainty and was
never agreed upon so as to give rise to a concluded contract.
16. In absence of a concluded contract between the parties having been
established by the Respondent, the claim under Section 73 of the Act was
not maintainable. The impugned orders are, therefore, held to be
unsustainable and are set aside.
17. The appeals are accordingly allowed.
………………………………….J.
(Ranjan Gogoi)
……….………………………..J.
(Navin Sinha)
New Delhi,
April 21, 2017
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOs. 5448-5449 OF 2017
(Arising out of S.L.P.(C)Nos.34084-34085 of 2015)
M/s. Vedanta Limited
(Formerly known as Sesa Sterlite Limited
and successor in interest of
erstwhile Sterlite Industries (India) Ltd.) ..........APPELLANT(s)
Versus
M/s. Emirates Trading Agency LLC ......RESPONDENT(s)
JUDGMENT
NAVIN SINHA, J.
Leave granted.
2. The Respondent's Suit for breach of contract and damages was decreed
on 16.04.2013 by the Principal District Court, Thoothukudi in Original Suit
No. 73 of 2009 for a sum of Rs.5,25,55,460/- with interest @ 8% from the
date of the plaint till realisation. First Appeal by the Appellant was
dismissed by the High Court on 04.02.2014. In Special Leave Petition
(Civil) Nos.12687–12688 of 2014 preferred against the same, liberty was
granted on 12.5.2014 to approach the High Court in the review jurisdiction,
on the issue whether the agreement dated 26.10.2007 between the parties
constituted a concluded contract or matters rested at the stage of a
proposal and a counter proposal only. Liberty was further granted to
approach this Court again, if aggrieved. Review application No. 160 of 2014
was dismissed by the High Court on 09.07.2015. Thus, the present appeal.
3. Sri C.A. Sundaram, learned Senior Counsel appearing for the
Appellant, submitted that the agreement dated 26.10.2007 was a draft
proposal from the Respondent regarding supply of phosphoric acid by the
Appellant in a specified duration. The Appellant made a counter proposal to
the Respondent; both with regard to the quantity of supplies and the
duration of supply. No concluded contract had arisen between the parties
in absence of any final agreement having been executed. The draft agreement
was never signed, stamped and returned by the Appellant, in confirmation,
as asked for by the Respondent. The defence was taken specifically in the
written statement. The Trial Court and the First Appellate Court, without
proper appreciation of the draft agreement, arrived at a presumptive
conclusion based on the exchange of correspondence preceding the same that
it reflected a concluded contract between the parties.
4. This Court on 12.05.2014, after perusal of the agreement dated
26.10.2007, having been satisfied with regard to lack of proper
consideration of the issue, granted liberty to the Appellant for preferring
a review application before the High Court. In the review application,
objections were specifically raised that the draft agreement dated
26.10.2007 did not constitute a concluded contract, but was merely a
communication of a proposal and a counter proposal. It was also urged that
alterations had been made by the Appellant; both with regard to the
quantity and period of supply. There was no material on record to
demonstrate that any final agreement was arrived at between the parties
thereafter. In absence of a valid acceptance, no concluded contract had
come into being.
5. Unfortunately, the High Court relying on its earlier order dated
04.10.2014 that the correspondence preceding the agreement dated 26.10.2007
reflected that the latter was a concluded contract, dismissed the review
petition without examining the corrections made in the draft proposal with
regard to the quantity of supply and period of supply, the effect on the
same, coupled with the Appellant not having signed, stamped and returned
the same to the Respondent so as to evince a concluded contract between the
parties.
6. Sri Vijay Hansaria, learned Senior Counsel appearing for the
Respondent, submitted that three Courts having returned concurrent findings
from the exchange of correspondence between the parties that the agreement
dated 26.10.2007 constituted a concluded contract, interference is not
called for. It was on the assurance of the Appellant to deliver supplies
of phosphoric acid, coupled with its promised back up support in writing,
that the Respondent had bid in response to the international tender
published by Bangladesh Chemical Industries Corporation (hereinafter
referred to as 'the BCIC').
7. The breach of promise by the Appellant to make the promised supplies
had resulted in BCIC forfeiting the performance guarantee of the Respondent
in addition to other pecuniary liabilities imposed. The Suit was then
instituted by the Respondent claiming damages with interest. In a
commercial contract, the course of conduct of the parties, the exchange of
correspondences, are all important considerations for the conclusion
whether there existed a concluded contract or not. Isolated examination of
the agreement dated 26.10.2007 shall, therefore, not be appropriate so as
to warrant interference with the concurrent findings.
8. The respective submissions on behalf of the parties have been
considered by us. Briefly stated, the BCIC floated an international tender
for supply of phosphoric acid. The Respondent submitted its bid and was
awarded an order for supply of 30,000 MT. The Appellant had signed a
backup support agreement with the Respondent for supplies in case the
tender was awarded to the latter, and which was furnished by the Respondent
to the BCIC in support of its capacity to deliver supplies. The
correspondence between the Appellant and the Respondent culminated in the
latter forwarding a draft agreement dated 26.10.2007, to the Appellant for
Sale/Purchase contract for 3 x 10,000 MT phosphoric acid for supply to the
BCIC during November and December, 2007. The covering letter, appended to
the draft agreement, required the Appellant to sign, stamp and return the
same to the Respondent in confirmation. The Appellant, in response, made a
counter proposal for supply of 3 x 9500 MT (max) and between the period
January to March, 2008 by incorporating necessary corrections in hand in
the draft agreement. Resultantly, while there was a proposal from the
Respondent, the Appellant made a counter proposal both with regard to the
quantity and the period of supply. There is no material or evidence placed
by the Respondent that the draft agreement ever assumed the form of a
concluded contract by a meeting of minds both with regard to the quantity
of supplies and the duration for the same, much less was the agreement
signed, stamped and returned by the Appellant to the Respondent in
confirmation.
9. The contract between the Respondent and the Appellant was independent
of the contract between the Respondent and the BCIC. The Appellant had only
offered a backup support to supply phosphoric acid to the Respondent in
case the contract was awarded to the latter. In the written statement, the
Appellant had taken a specific defence regarding absence of any concluded
contract between it and the Respondent. The Trial Court as well as the
First Appellate Court did not specifically deal with the issue of the draft
agreement, the corrections in the same, existence of a proposal and counter
proposal with regard to quantity and time period for supplies, the absence
of any executed contract by virtue of the Appellant having signed, stamped
and returned the agreement to the Respondent, in confirmation. On a
presumptive reasoning, based on the exchange of correspondence preceding
the draft agreement, the First Appellate Court affirmed the finding in the
Suit of a concluded contract between the parties.
10. The Appellant challenged the First Appellate Court’s order dated
04.10.2014 earlier in a special leave petition. On 12.05.2014, this Court
considering the plea for absence of a concluded contract and after perusal
of the draft agreement dated 26.10.2007 containing corrections, in hand,
had observed "that these aspects are not specifically dealt with by the
High Court. In this view of the matter, it would be more appropriate for
the petitioner to approach the High Court by filing a review petition".
Observing that the High Court shall deal with the aspect on merits, liberty
was also granted to challenge any fresh order along with the impugned
orders, if aggrieved.
11. In the review petition, a specific plea was taken that the draft
agreement dated 26.10.2007, Exhibit 8-A, did not constitute a concluded
contract in view of the counter proposal made by the Appellant, both with
regard to the quantity of supply and the period for the same. Reliance on
the correspondence preceding the same was not sufficient in absence of
acceptance by the Appellant of the proposal made by the Respondent coupled
with signing, stamping and returning of the agreement in confirmation of
the same.
12. The High Court, despite noticing the specific plea of the Appellant
with regard to the absence of a concluded contract between the parties in
view of a counter proposal, much less that the agreement was never signed,
stamped and returned, reiterated the earlier observations of the First
Appellate Court of a concluded contract between the parties based on
exchange of correspondence preceding the draft agreement, and also on the
premise that the Respondent had submitted its offer to BCIC on the
assurance of the Appellant for backup support if the contract was awarded
to the former. The High Court declined to delve further into the agreement
dated 26.10.2017, holding it to be impermissible in the review jurisdiction
and concluding that the grounds urged were superficial in nature without
any material proof, designed to avoid payment, and dismissed the review
application. The High Court failed to notice that as recent as 28.01.2008,
the Respondent was still awaiting confirmation of its proposal from the
Appellant, and soon thereafter the performance guarantee was invoked by the
BCIC against the Respondent on 13.04.2008.
13. Section 7 of the Indian Contract Act, 1872 (hereinafter referred to
as 'the Act') provides that in order to convert a proposal into a contract,
the acceptance must be absolute and unqualified. The existence of a
concluded contract is a sine qua non in a claim for compensation for loss
and damages under Section 73 of the Act arising out of a breach of
contract. If instead of acceptance of a proposal, a counter proposal is
made, no concluded contract comes into existence.
14. U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., (1996) 2 SCC 667,
also related to a proposal and counter proposal. Holding that no concluded
contract had come into existence, the Apex Court observed as follows :-
"9...As seen, the material alterations in the contract make a world of
difference to draw an inference of concluded contract...."
15. The fulcrum of the entire controversy is the draft agreement dated
26.10.2007 marked Exhibit 8-A, for supply of phosphoric acid by the
Appellant to the Respondent. The proposal of the Respondent, led to a
counter proposal by the appellant. There was no acceptance of the proposal
by the Appellant giving rise to a concluded contract. The quantity and
duration of supply, therefore, remained in the realm of uncertainty and was
never agreed upon so as to give rise to a concluded contract.
16. In absence of a concluded contract between the parties having been
established by the Respondent, the claim under Section 73 of the Act was
not maintainable. The impugned orders are, therefore, held to be
unsustainable and are set aside.
17. The appeals are accordingly allowed.
………………………………….J.
(Ranjan Gogoi)
……….………………………..J.
(Navin Sinha)
New Delhi,
April 21, 2017
