Positive Point Graphic Process Limited Versus Vs Bharat Sanchar Nigam Limited

Sanjeev J.Thaker, J

1.1 By way of the captioned Appeal the appellant herein – who is the original plaintiff before the trial Court, has assailed the judgment and decree dated 27.09.2010 of the learned Auxiliary Chamber Judge, Court No.9, City Civil Court, Ahmedabad passed in Civil Suit No.2339 of 2007 whereby the trial Court has dismissed the suit filed by the plaintiff for recovery of Rs.28,64,110/- with interest @ 12% p.a. from the date of the suit till realization from the defendant – respondent herein.

1.2 For the sake of convenience, the parties are hereby referred to as per their original status in the suit filed before the trial Court.

2. The brief facts, in nutshell, are as under:

2.1 The plaintiff had filed Civil Suit No.2339 of 2007 before the City Civil Court at Ahmedabad against the defendant and by judgment and decree dated 27.09.2010, learned Auxiliary Chamber Judge, Court No.9 had dismissed the suit.

2.2 The issue involved in the suit was that the plaintiff filed suit for recovery of Rs.28,64,110/- with interest @ 12% p.a. from the date of the suit till realization from the defendant and it was the case of the plaintiff that pursuant to the Public Advertisement of the defendant in daily news-paper i.e. ‘Divya Bhaskar’ dated 15.02.2006 and after due procedure the plaintiff was invited and thereafter discussion and negotiation took place and accordingly meeting was held on 05.05.2006. Before the issuance of Purchase Order, advance Purchase Order was issued dated 23.06.2006. The unit price of the items was agreed to be Rs.1,46,72,500/- and it was specifically mentioned that total composite price are inclusive of all levies and taxes. After the Advance Purchase Order, the Final Purchase Order was sent by the defendant on 31.07.2006 wherein it has been specifically stated regarding the price and payment. The said final Purchase Order has been produced vide Exh.31 before the trial Court.

2.3 The defendant has filed written statement at Exh.25 contending that no notice under Section 80 of the Code of Civil Procedure, 1908 (herein after referred to as ‘the Code, 1908’) has been served on the defendant and, therefore, the suit is not maintainable. In the written statement, the defendant has also taken a contention that bid and the tender document contain terms and conditions and after the plaintiff was called for negotiation, the plaintiff was found to be eligible as per financial bid annexed to the tender document. It is the case of the defendant in the written statement that plaintiff had to abide by the tender and Bid document and neither of the same provides that Octroi and VAT were to be paid by the defendant.

2.4 It is the case of the defendant that though they received communication on 05.05.2006, the said letter can never be considered to be a concluded document as both the parties had not put up signatures to the said communication. In the written statement, defendant vide Exh.25 had taken the contention that the plaintiff has raised false bills contrary to the agreed terms and conditions and hence defendant is not liable to make any excess payment to the plaintiff.

2.5 The issues are framed by the trial Court vide Exh.26, which read as under:

1. Whether the plaintiff proves that they are entitled to the amount as prayed for?

2. Whether the plaintiff is entitled to recover the amount which is paid towards the Octroi and VAT ?

3. Whether the plaintiff is entitled to claim interest at the rate of 12% on the suit amount from the defendant ?

4. Whether the defendants prove that VAT and Octroi are to be paid by the plaintiff ?

5. Whether the plaintiff is entitled to the reliefs as sought for ?

6. What order and decree?

3. The plaintiff had examined one Kiritbhai Faldubhai at Exh.41, who is the Managing Director of plaintiff company. The defendant had examined Mr.C.A.Patel, Assistant General Manager (Marketing) in defendant company at Exh.53 and one Navinchandra Hiralal Bhavsar at Exh.56 and it is the case of the defendant that the plaintiff is not entitled for any amount much less the amount claimed in the plaint.

4. The learned trial Court, after hearing both the parties and perusing the documentary evidence on record, vide judgment and decree dated 27.09.2010, dismissed the suit. Hence, the plaintiff filed the captioned appeal.

5. Heard Mr.Yuvraj Thakore learned advocate, for the plaintiff and Mr.Manish Patel learned advocate, for the respondent herein – original defendant.

5.1 Mr.Thakore, learned advocate for the plaintiff submitted that the trial Court has erred in dismissing the suit. The Purchase Order is a contract and it has been specifically mentioned in the Purchase Order produced vide Exh.31 that the amount decided is inclusive of all except VAT and Octroi. Besides, there was specific condition that the amount of VAT and Octroi will be paid extra as per actual on production of documentary evidence. When the tender was issued VAT was not in force. Therefore, it is the case of the plaintiff that the said amount of VAT and Octroi will have to be paid by the defendant.

5.2 Learned advocate for the plaintiff has drawn our attention to the documentary evidence produced vide Exhs.60, 61 and 62, which are the invoices that have been sent by the plaintiff to the defendant which also includes the VAT charges @ 12.5% and Octroi expenses. Therefore, the plaintiff has generated the invoices with respect to VAT charges and Octroi expenses that have been incurred by the plaintiff vide Exhs.46, 47 and 48 which are the receipts of the payment, which have been paid by the plaintiff to the concerned department for the payment of VAT and Octroi. There is no dispute that the said amount has not been paid by the plaintiff and the only dispute that the defendant has taken is that the same is not part of tender document.

5.3 Learned advocate for the plaintiff has submitted that having accepted the Purchase Order and it having been issued by the defendant, all the terms of the Purchase Order specifically mention that the amount of VAT will be paid by the defendant extra on production of documents and the plaintiff having paid the said amount, the defendant can not deny the said fact and back out from the said understanding.

5.4 Learned advocate for the plaintiff has relied on the following judgments:-

(i) Bharat Sanchar Nigam Limited vs. Telephone Cables Limited reported in (2010) 5 SCC 213 and

(ii) a decision of the Division Bench in the case of IMC Limited vs. Board of Trustees of Deendayal Port Trust rendered in Letters Patent Appeal No. 1059 of 2018.

6.1 Mr.Manish Patel, learned advocate appearing for the defendant, on the other hand, submitted that looking at the tender document, no amount is due and payable by the defendant to the plaintiff. The defendant has never agreed for payment of VAT and Clause 9.1 of the Bid document states that only Octroi and entry taxes to be paid extra and, therefore, the present defendant is not liable to pay any amount towards VAT.

6.2 Learned advocate for the defendant has drawn our attention to Exh.41 document and submitted that plaintiff has not proved the fact that receipts of payment towards VAT were ever supplied to the defendant. Further, attention is drawn to the evidence of the witnesses of the defendant examined at Exhs.53 and 56 and submitted that it is proved beyond doubt that the defendant is not liable to pay amount of VAT to the plaintiff as per the contract.

6.3 Learned advocate for the defendant has relied upon the tender document produced at Exh.49 which specifically talks about other taxes and there is no mention about VAT and, therefore, no such amount is due and payable by the respondent-defendant to the appellant-plaintiff.

7. Having heard both the learned advocates for the respective parties and having perused the evidence on record so also the judgment and decree of the trial Court, the following points arise for determination:

(i) Whether the plaintiff has established the facts that they have paid an amount of Rs.28,64,110/- towards VAT / Octroi to the authority ?

(ii) Whether the plaintiff is entitled to an amount of Rs.28,64,110/- towards the VAT and Octroi charges from the defendant as per the Purchase Order ?

(iii) Whether the plaintiff proves that the impugned judgment and decree passed in Civil Suit No.2339 of 2007 dated 27.09.2010 is bad in facts and law against the provisions of law and requires to be quashed and set aside?

(iv) What order ?

7.1 It is the case of the plaintiff that on 05.05.2006 a meeting was held between the representatives of plaintiff and defendant and plaintiff had specifically stated that the price that has been agreed are exclusive of Octroi and VAT @ 12.5% p.a. There is no dispute between the plaintiff and the respondent that VAT was not applicable in the State of Gujarat and is effected from 01.04.2006.

7.2 One of the terms of the price and payment shown in Purchase Order at Exh.31 is as follows:

Moreover, the other terms and conditions more particularly condition no.1 of Exh.31 [Purchase Order] also state that ‘the Bidder shall give the total composite price inclusive of all levies & taxes i.e. service tax Sales Tax & Excise, packing, forwarding, freight and insurance etc. but excluding Octroi / Entry Tax / Vat which will be paid extra as per actual, wherever applicable on production of documentary evidence as per tender condition’.

Moreover, it is the case of the plaintiff that plaintiff has sent invoices to the defendant and the said invoices are produced vide Exhs.60, 61 and 62 as follow:

Moreover, vide Exhs.46, 47 and 48, the details of payment made with respect to VAT is also produced. The plaintiff has also produced documentary proof to show that they had also issued a notice to the defendant, which is produced vide Exh.33 stating that the amount of Rs.23,85,394/- is due and payable with respect to the Octroi and VAT and as the defendant failed to pay the said amount, the plaintiff was constrained to file Civil Suit No.2339 of 2007 for recovery of an amount of Rs.28,64,110/- (Rupees Twenty Eight Lakhs Sixty Four Thousand and One Hundred and Ten) with interest @ 12% p.a. from the date of the suit till realization.

7.3 The defendant has also agreed that there is no dispute with respect to Purchase Order dated 31.07.2006 and it was the case of the defendant before trial Court that the full and final payment of Rs.1,24,59,818/- has been paid and no further amount is due and payable by the defendant to the plaintiff.

8.1 This Court has perused the evidence of Kiritbhai Faldubhai who is examined at Exh.41 before the trial Court. In the cross examination, he has stated that he is the Director of the plaintiff Company and has the authority to file the present suit. He has submitted that an amount of Rs.23,85,394/- was due and payable and interest @ 12% from 11.12.2006 to 05.02.2007 is also to be paid by the defendant – respondent to the tune of Rs.2,73,314/-and further interest @ 12% to the tune of Rs.2,03,902/- from 06.02.2007 to 31.10.2007 is due and payable by the defendant to the plaintiff. He also categorically stated that it is not true that receipt of payment of VAT is not supplied to the defendant.

8.2 The defendant had examined Mr.C.A.Patel, Assistant General Manager (Marketing) of defendant company at Exh.53. He has categorically stated that it is true that he was not the Member of the Tender Committee when the tender was issued. He has also specifically stated that he is not aware as to what terms and conditions were there at the time when the tender was issued and he was not present when the proceedings of tender took place nor was he part of any meeting with the plaintiff. However, he has admitted that a meeting had taken place on 05.05.2006. The said witness has also admitted that plaintiff had sent the bills for the period from October to November, 2006 for payment of VAT charges to the defendant but at the same time he also stated that he was not the part of the meeting that took place on 05.05.2006.

8.3 The defendant herein has also examined Navinchandra Hiralal Bhavsar at Exh.56 who was holding the post of Assistant General Manager (Marketing) during the year 2005-2007. He has also stated that he is not aware whether a meeting was held on 05.05.2006 and is not in position to produce the record with respect to the tender proceedings. He has admitted that the plaintiff herein had sent the bills for the period from the months of October to December, 2006 to the defendant wherein separate amount for Octroi and VAT had been mentioned.

8.4 On perusing the documentary evidence, it is very clear that parties to the proceedings have entered into contract by way of Purchase Order on 31.07.2006 vide Exh.31 wherein the plaintiff has placed orders with respect to bid and financial bid wherein it has been specifically mentioned that the amount to be paid by defendant to plaintiff does not include the price of Octroi / Entry Tax / Vat and the terms and conditions also specifically mention that the said amount of VAT and Octroi charges will be paid extra as per the actual, which will have to be supported by documentary proof for the same.

8.5 The trial Court, while passing the judgment and decree, has categorically relied upon the receipts of VAT, which are produced vide Exhs.46 to 48 so also on Bid documents which is produced vide Exh.49. Agreement was entered into on 14.02.2006 and in Clause 9.1 of the said agreement, which reads as under, only the word ‘octroi and tax’ has been mentioned.

“Clause:9.1 – The Bidder shall give the total composite price inclusive of all levies & taxes i.e. service tax, Sales Tax Excise, packing, forwarding, erection, mounting, dismounting, freight and insurance etc. but excluding Octroi / Entry Tax, which will be paid extra as per actual, wherever applicable on production of documentary evidence. The basic unit price and all other components of the price need to be indicated individually against the goods it proposes to supply under the contract as per the Price Schedule given in Section III (Vol.II). Price of incidental services, if any, should also be quoted. The offer shall be firm in Indian Rupees. No foreign exchange will be made available by the Purchaser.”

However, the fact remains that on the date of the invitation of tender, i.e. 14.02.2006, VAT Act was not in force and was made applicable with effect from 01.04.2006. The fact also remains that a letter dated 05.05.2006 was addressed by the plaintiff. The note attached to the tabulated form reads thus:

“Note -

Above price are exclusive Octroi & VAT @ 12.5%.

(The Time when we have submitted the Tender at at time the VAT was not Applicable in gujarat state and The VAT is Effected from 1st April 2006 that’s why we have added the VAT)”

The relevant excerpts of the tabulated form, so also condition no.1 of the terms and conditions read thus:

 “PURCHASE ORDER (No: 1)

: Terms and Conditions:

1. The Bidder shall give the total composite price inclusive of all levies & taxes i.e. service tax Sales Tax & Excise, packing, forwarding, freight and insurance etc. but excluding Octroi/Entry Tax/Vat which shall be paid extra as per actual, wherever applicable on production of documentary evidence as per tender condition.”

8.6 The fact also remains that the plaintiff has categorically written a letter dated 05.05.2006 stating that the agreed amount shall not include the Octori and VAT and the defendant herein will have to pay extra and after receiving the said letter dated 05.05.2006, the defendant has issued Purchase Order dated 31.07.2006, which is produced at Exh.31, wherein the respondent itself had agreed to pay the amount of VAT and Octroi over and above the payment to be made to the appellant-plaintiff.

8.7 The terms and conditions of the said Purchase Order, more particularly no.1, specifically states that the said amount will include all Service Tax, Sales Tax and Excise packing, forwarding, erection, mounting, dismounting, freight and insurance etc. but shall not include Octroi / Entry Tax / Vat, which will be paid extra as per actual on production of documentary evidence as per tender condition. Therefore, the defendant itself added clause of ‘paying ocotri and VAT extra, over and above the other amount on the actual on production of documentary evidence’.

8.8 The plaintiff, vide Exhs.60, 61 and 62, has produced the invoices which were sent to the defendant and has also produced a letter dated 08.02.2007 vide Exh.33 requesting the defendant to pay the said amount. Moreover, vide Exhs.46, 47 and 48, the actual payments made to the department are also produced by the plaintiff which clearly shows that the said amount has been paid by the plaintiff. The trial Court, while deciding the suit, has taken into consideration the fact that though the said amount is paid, the plaintiff is not entitled to the said amount as there is no liability of defendant to pay Octori and VAT. The trial Court has held that plaintiff has failed to prove that he has produced receipts regarding payment of VAT being paid to the authority but the fact remains that the said documents are already on record vide Exhs.46, 47 and

48. Besides on 08.02.2007 the plaintiff vide Exh.33 had written a letter to the defendant for reimbursing the said amount giving the details of bill numbers. There is no documentary proof coming forward from the defendant that they have not received the said letter nor there is any documentary proof stating that they have called the plaintiff to supply the copies of the proof of payment of VAT. The trial Court has also held that defendant has succeeded in proving that VAT and Octroi are to be paid by the plaintiff disregarding the documentary evidence i.e. Purchase Order [Exh.31] which clearly states that VAT and Octroi charges will be paid extra. Therefore, there is condition / agreement between the plaintiff and the defendant that on the payment of VAT and Octroi by the plaintiff, the same will be repaid by defendant to the plaintiff on production of documentary proof. Therefore, it cannot be said that plaintiff is not entitled for any amount much less the amount mentioned in the suit.

8.9 In the cross-examination of the respondent, the respondent has admitted that there was meeting held on 05.05.2006, more particularly the cross-examination of Navinchandra Hiralal Bhavsar at Exh.56 wherein it was stated that the meeting was held on 05.05.2006 but he specifically states that the said meeting was held with respect to rate and not for liability of VAT and octroi. Undisputedly the plaintiff has written a letter Exh.33 to the defendant which is produced before the trial Court wherein the plaintiff has specifically stated that he agrees to the order subject to payment of extra Octroi and VAT charges @ 12% p.a. and thereafter Purchase Order has been issued agreeing to pay extra Octroi and VAT. Therefore, looking at the said facts, it is clear that the appellant-plaintiff is entitled for amount towards Octroi and VAT as claimed by the appellant.

8.10. The Hon’ble Apex Court in the case of Bharat Sanchar Nigam Limited vs. Telephone Cables Limited reported in (2010) 5 SCC 213 has held that some sections of the bid documents governed the tender process which preceded the placing of Purchase Order. Therefore, the bid document cannot constitute a contract or an agreement or agreement to enter into a contract but it is merely an invitation to make an offer and, therefore, the parties to the present proceedings have to be governed by the Purchase Order. Relevant para:12 reads thus:

“12. …. … Bid documents did not constitute a contract, or an agreement or an an agreement to enter into a contract. It was merely an invitation to make an offer. It informed the prospective bidders, how they should make their bids; how the bids would be processed by BSNL; how contracts would be entered by placing purchase orders; and what terms would govern the contracts, if purchase orders were placed. Some sections of the bid documents governed the tender process which preceded the placing of purchase orders. Some sections contained the forms in which the bid should be made by the bidder. Other sections of bid documents contained provisions which would govern the contracts, when purchase orders were placed by BSNL by accepting the bid. For example, Section I (Notice Inviting Tenders) and Section II (Instructions to bidders) had nothing to do with the performance of the contract. They relate to the pre-contract process of bidding, that is who would be eligible to make bids and how the bids should be made. On the other hand, Section III had nothing to do with the bidding process or selection of suppliers, but contained provisions which would govern the performance that is the terms and conditions of the contract – if and when contracts were entered by placing purchase orders. The arbitration Clause (Clause 20) is a part of Section III of the Bid documents.”

8.11 It is well settled that the bid documents do not constitute a contract or an agreement or an agreement to enter into a contract. It is merely the invitation to make an offer. Contracts are entered into by placing purchase order governing the terms of the contract. Therefore, the purchase order is a contract between the parties and binding.

8.12 The trial Court has only taken into consideration the bid document produced at Exh.49 which does not mention about payment of VAT and Octroi and therefore arrived at a finding that the defendant is not liable to pay the said amount. However the trial Court failed to consider the Purchase Order produced vide Exh.31 which clearly state that the amount of Octroi / VAT will be paid extra and that is excluded from the amount that has to be paid. The trial Court has erroneously held that there is no document produced on evidence to show that the plaintiff has paid the VAT charges but as against that Exhs.46, 47 and 48 are the receipts which are on record before the trial Court wherein it has been specifically stated that the amount of VAT has been paid by the plaintiff. Moreover, the defendant has also not denied the letter dated 08.02.2007 produced vide Exh.33 whereby the defendant was requested by the plaintiff to pay the said amount of VAT and details of invoices and receipts were also mentioned in the said letter. The defendant has neither replied to the said letter nor there is any contention coming from the respondent that they have not received any such letter sent by the plaintiff more particularly produced vide Exh.33.

8.13 The trial Court relied upon the evidence of witness Mr.Navinchandra Hiralal Bhavsar, who has been examined vide Exh.56 who has categorically stated and admitted that the plaintiff has sent the bill during the period of October to December, 2006 and, therefore, the question that defendant was not aware of the payment having been made by the plaintiff to the concerned department for VAT does not arise. The trial Court has dismissed the suit on the ground that the plaintiff has failed to prove that he has produced the receipts regarding VAT paid by him to the defendant authority wherein the trial Court, in judgment itself, has stated that witness Navinchandra Hiralal Bhavsar, in his evidence at Exh.56, has admitted before the trial Court that the plaintiff has sent the bill during period of October-December, 2006. Therefore, the question of plaintiff having failed to prove the receipts regarding VAT paid by him to the authority does not arise. Moreover, the trial Court has come to erroneous conclusion that the defendant has succeeded to prove that the VAT and Octroi are to be paid by the appellant-plaintiff. If that was the view taken by the trial Court then there was no question of coming to the conclusion that the plaintiff-appellant herein has failed to prove that he has produced receipts regarding VAT paid by him to the defendant authority.

8.14 Therefore, it is clearly established that the plaintiff has paid an amount of Rs.28,64,110/- towards VAT and therefore, is entitled to the said amount from the defendants as per the purchase order. Looking to the totality of the facts, oral evidence and documents produced on record, more particularly the Purchase Order at Exh.31, the receipts produced at Exhs.46 to 48 and the letter dated 08.02.2007 at Exh.33 written by the plaintiff, it clearly appears that the trial Court has erroneously decided all the issues against the plaintiff.

9. For the discussion and reasons recorded above, the present appeal succeeds and is accordingly allowed. The judgment and decree dated 27.09.2010 of the learned Auxiliary Chamber Judge, Court No.9, City Civil Court, Ahmedabad passed in Civil Suit No.2339 of 2007 is hereby quashed and set aside. The defendant– respondent is hereby directed to pay an amount of Rs.28,64,110/-to the plaintiff–appellant herein with interest @ 6% p.a. from the date of filing of the present appeal till its realisation. Record and Proceedings be sent back to the concerned trial Court. No order as to costs. Decree be drawn accordingly.