2014 C L D 625

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk, Gulzar Ahmed and Iqbal Hameedur Rahman, JJ

Messrs ESSA ENGINEERING COMPANY PVT. LTD.and another---Appellants

Versus

PAKISTAN TELECOMMUNICATION COMPANYLIMITED and another---Respondents

Civil Appeals Nos.371 and 717 of 2005, decided on 22nd January, 2014.

(On appeal against the Judgment dated 16-3-2005 passed by the Lahore High Court, Lahore, in
R.F.A. No.335 of 2000)

(a) Sale of Goods Act (III of 1930)---

----S. 59--- Remedy for breach of warranty--- Scope---Section 59 of Sale of Goods Act, 1930
provided for a situation where in a contract of warranty between seller and the buyer, the seller
made a breach of such warranty, then the buyer was not only entitled to reject the goods but was
also entitled to set up against the seller the breach of warranty in diminution or extinction of the
price or sue the seller for damages for breach of warranty---Situation of setting up against the
seller the breach of warranty in diminution or extinction of price, arose where the seller brought
a suit against the buyer either for damages or for price of the goods---Buyer at such stage was
entitled to set up a claim against the seller i.e. breach of warranty and as a consequence ask for
diminution or extinction of price.
(b) Sale of Goods Act (III of 1930)---

----S. 59---Remedy for breach of warranty---Contract for supply of items---Items found to be

substandard---Buyer refusing to take delivery and invoking warranty clause---Supplier agreeing
to replace items---Applicability of S.59 of Sale of Goods Act, 1930---Buyer setting up against
the supplier the breach of warranty in diminution or extinction of the price---Scope---As per
contract plaintiff-supplier supplied 3100 tubes to the defendant-company (buyer)---Initially 106
tubes were found to be defective and plaintiff did not raise any dispute regarding it---Further
defendant-company rejected another lot of 1359 tubes as substandard upon which a warranty
clause of the contract was invoked by the defendant-company---Plaintiff did not contest or object
to the invoking of warranty clause by the defendant-company but agreed to replace 1359
substandard tubes and in doing so went on to prepare 1400 tubes as a replacement and informed
the defendant-company to inspect the 1400 tubes---Such facts were admitted and also pleaded by
the plaintiff in its plaint, therefore apparently there did not arise an occasion for the defendant-
company to set up against the supplier for breach of warranty either a claim of diminution or
extinction of price---By making 1400 tubes as replacement on account of invocation of warranty
clause by the defendant-company, the plaintiff accepted the fact that it was not entitled to the
price of 1359 tubes which stood rejected by the defendant-company as substandard---Plaintiff
itself gave in to the breach of warranty and agreed to replace 1359 tubes and in doing so admitted
that it was not entitled to claim the price of 1359 tubes and thus, there was hardly any reason or
justification with the defendant-company to set up claim against the plaintiff in the plaintiff's suit
as provided in S. 59 of Sale of Goods Act, 1930---Facts of present case were quite different from
the remedy postulated in S. 59 of the said Act---Illustration.

Commissioner of Sales Tax v. Prem Nath Motors (P) Ltd. ILR 1978 Delhi 273; G. N. Behera v.
Messrs Nanagran Bhikamchand Rice Mills Firm and another AIR 1966 Assam and Nagaland 95;
Syed Niamat Ali and another v. Dewan Jairam Dass and another PLD 1983 SC 5 and Maple
Flock Company Limited v. Universal Furniture Products (Wembley) Limited The Law Times
Volume 150, p.69 distinguished.

(c) Sale of Goods Act (III of 1930)---

----S. 44---Civil Procedure Code (V of 1908), O. VI, Rr. 2 & 4 & O. VII, R. 1---Pleadings---
Scope--- Claim to be contained in the plaint---Scope---Contract between plaintiff-supplier and
defendant-company for supply of tubes---Plaintiff initially supplied 3100 tubes to the defendant
and on inspection some of the tubes were found to be defective and substandard---Defendant
invoked the warranty clause in the conditions of contract for replacement of the substandard
tubes---Plaintiff agreed for the replacement and in that connection prepared 1400 and 1260
replacement tubes respectively and requested defendant to inspect them---Defendant refused to
take delivery of replacement tubes and did not make payment for them---Plaintiff filed a suit
against defendant which was decreed by Trial Court for the amount of 1400 and 1260
replacement tubes prepared by the plaintiff---High Court found that there was no claim in the
plaint in respect of 1260 replacement tubes, therefore decree of Trial Court in respect of said
1260 tubes was not sustainable---Plea of plaintiff that the claim of 1260 tubes was very much
contained in the plaint---Validity---Plaintiff in a paragraph of its plaint had specifically claimed
that it had prepared 1260 tubes for supplying them to the defendant and in such regard it also
referred to the inspection call made by it to the defendant---Defendant in its reply to said
paragraph of the plaint had made a general denial without specifically denying the plaintiff's
letter in which details in respect of inspection calls were very much mentioned which included
the inspection call of 1260 tubes---Letter from a director of defendant-company addressed to one
of its engineers was also available on record, wherein it was specifically mentioned that the
plaintiff had offered a quantity of 1400 and 1260 replacement tubes respectively for
inspection/testing, but the testing had not so far been conducted and a request was made that the
testing be conducted---On the basis of pleadings and the documentary evidence available on
record, it was abundantly clear that the plaintiff did in fact prepare 1260 replacement tubes for
supplying to the defendant and had also requested them to be inspected by a representative of the
defendant---Defendant did not inspect them nor took delivery of the 1260 tubes---High Court
had discarded claim of the plaintiff in respect of 1260 tubes on mere, assertion that such claim of
the plaintiff was not contained in the plaint---No justification or basis existed to deny claim of
the plaintiff with respect to the 1260 tubes---Supreme Court decreed claim of plaintiff for the
additional price of 1260 tubes with interest @ 16% per annum---Appeal was disposed of
accordingly.

(d) Sale of Goods Act (III of 1930)---

----S. 44---Civil Procedure Code (V of 1908), O. VI, Rr. 2 & 4, O. VII, R. 1 & O. XIV, R. 1---
Claim/relief sought not specifically contained in the plaint---Claim/relief based on a plea on
which no issue framed---Effect---Contract for supply of items--- Items found to be
substandard---Defendant-buyer refusing to take delivery---Plaintiff-supplier agreeing to replace
items and incurring costs in the process---Defendant-buyer refusing to take delivery of
replacement items and not paying for them---Plaintiff instituted suit against defendant, which
was decreed and plaintiff was also awarded costs of acquiring machinery and raw material for
making replacement items despite not mentioning such claim in the plaint---Validity---Plaint of
plaintiff did not mention the facts that it had acquired machinery or raw material and as to what
treatment the plaintiff had given to such two items after the contract was revoked---Perusal of
claims made in the plaint and the issues framed on the pleadings of parties clearly demonstrated
that the plaintiff did not at all make any claim in the suit with regard to the raw material and
machinery nor any issue on such plea was struck in the suit---Subject matter of machinery and
raw material was never an issue nor it could be said that it was the ground which both parties
understood to be in issue in the case---Claim of plaintiff towards raw material and machinery
was wrongly allowed and was set aside accordingly--- Appeal was disposed of accordingly.

Bhagwati Prasad v. Chandramaul AIR 1966 SC 735 distinguished.

(e) Civil Procedure Code (V of 1908)---

----O. VI, R. 2 & O. XIV, R. 1---Pleadings, significance of---Framing of issues---Scope---

Pleadings of the parties were the benchmark of their respective claims on which issues were
drawn and evidence was led---Evidence was restricted to the issues struck between the parties
alone and not beyond them---When any evidence beyond the purview of issues did come on
record, no party could on basis of such evidence set up altogether a new case and press the same
for getting relief merely on basis of an out of context evidence.

(f) Sale of Goods Act (III of 1930)---

----S. 55---Suit for price---Contract for supply of items---Items found to be substandard---

Plaintiff-supplier agreeing to replace items and preparing replacement items---Defendant-buyer
refusing to take delivery of replacement items and not paying for them---Replacement items
having no market except for defendant---Remedy---Scope---Items/tubes prepared by the plaintiff
had no other market except that of the defendant and the plaintiff was in no position to sell said
tubes as it has no buyer in the market---Plaintiff could not make any salvage out of the tubes,
more so for the reason that the tubes had been affixed with the monogram of the defendant-
company---Plaintiff could not fetch any other market for the tubes as they could only be used by
the defendant thus their resale value could not be ascertained---In such a situation, where the
tubes were lying with the plaintiff and their price as per the contract had not been paid, the
provision of S. 55 of the Sale of Goods Act, 1930 would be applicable---Plaintiff had given
notice to the defendant to inspect the replacement tubes but neither such tubes were inspected
nor their delivery was taken by the defendant and such act of the defendant was a unilateral one
without finding any fault in the said replacement tubes---Plaintiff was required to make supplies
of tubes within a specified period and after it had supplied the tubes to the satisfaction of the
defendant, the payment was to be made---Burden was on the defendant to satisfy as to why the
tubes were not inspected by it and their delivery not taken---No explanation was provided by the
defendant for non-inspection and non-taking of delivery of the replacement tubes except that
there was an enquiry pending in the matter---Supreme Court ordered that plaintiff was entitled to
the price of all the replacement tubes with interest that defendant had the option to take delivery
from the plaintiff of the replacement tubes in whatever shape they were in now, and that the
plaintiff was also free to lift from the store of the defendant the rejected tubes---Appeal was
disposed of accordingly.

(g) Sale of Goods Act (III of 1930)---

----S. 55---Suit for price---Scope---Under the provision of S.55 of the Sale of Goods Act, 1930,
where the property in goods had passed to the buyer or where the property in goods had not
passed to the buyer but the price was payable on a day certain irrespective of delivery, the seller
would be entitled to sue for the price of the goods.

Salman Aslam Butt, Advocate Supreme Court for Appellant (in C.A. 371 of 2005).

Hafiz S.A. Rehman, Senior Advocate Supreme Court for Appellant (in C.A. 717 of 2005).

Hafiz S.A. Rehman, Senior Advocate Supreme Court for Respondent (in C.A. 371 of 2005).

Salman Aslam Butt, Advocate Supreme Court for Respondent (in C.A. 717 of 2005).

Date of hearing: 20th November, 2013.

JUDGMENT

GULZAR AHMED, J.---By this common Judgment we intend to dispose of two Civil Appeals
i.e. C.A. No. 371 of 2005 Messrs Essa Engineering Company Private Limited v. Pakistan
Telecommunication Company Limited, etc. and C.A. No. 717 of 2005 Pakistan
Telecommunication Company Limited, etc. v. Messrs Essa Engineering Company Private
Limited, which have arisen out of Judgment dated 16-3-2005 of the learned Division Bench of
the Lahore High Court, Lahore, passed in R.F.A. No.335 of 2000, by which the appeal filed by
Pakistan Telecommunication Company Limited was partly accepted.

2. Brief facts of the matter are that Pakistan Telecommunication Company Limited (PTCL)
sought bids for purchase of 9700 tubes. The offer made by Messrs Essa Engineering Company
Pvt. Limited (Contractor) being the lowest was accepted. The letter of acceptance dated 11-4-
1996 with conditions of contract was issued by the PTCL. The specification of goods to be
supplied by the Contractor to PTCL was provided as Hot Rolled conforming to specification
No.ASTM/A/569/66-T Latest Revision/ Equivalent to BSS-1449/En-2. The Contractor initially
supplied 3100 tubes and on inspection of these tubes 106 tubes were rejected by the PTCL as
defective and on further standardized checking 1359 tubes out of the remaining 2994 tubes were
also found to be substandard and underweight. The PTCL invoked the warranty clause 16 in the
conditions of contract for replacement of the substandard tubes by the Contractor. The
Contractor agreed for the replacement and in that connection prepared 1400 tubes and requested
PTCL through its letter dated 10-10-1996 to inspect them. In the meanwhile the Contractor had
also prepared 1260 tubes under the contract for supplying to PTCL and requested the PTCL to
inspect them vide its letter dated 5-9-1996. The contractor made request for payment of the
delivered tubes but it seems that no payment whatsoever was made to the Contractor. The two
letters of the Contractor for inspection of 1260 and 1400 tubes were also acknowledged by the
PTCL through its letter dated 12-1-1997 wherein Director (Stores) PTCL asked the Divisional
Engineer Testing, Telegraph, PTCL for conducting inspection and testing of the said two
quantity of tubes. No inspection or testing was conducted by the PTCL rather it appears that the
matter was referred to FIA for enquiry regarding supply of substandard tubes by the Contractor.
It seems that the FIA enquiry did not bore any fruit and ultimately the case was closed. The
Contractor pressed for payment but such request went unheeded by the PTCL and ultimately
through letter dated 10-4-1998 PTCL approved payment in respect of 1634 tubes and through a
further letter dated 31-8-1998 cancelled the contract for supply of the remaining tubes. The
PTCL through its letter dated 2-11-1998 asked the Contractor to collect 1359 substandard tubes
from its Mughalpura Store Depot. Being dissatisfied with the events and non-payment of its dues
by the PTCL, the Contractor filed a suit against PTCL for recovery of Rs.3,49,93,356.82. Here
on we will refer the Contractor as the (plaintiff) and the PTCL as the (defendant). The suit was
contested by the defendant who filed its written statement. Issues were framed, evidence of the
parties was recorded and thereafter vide judgment and decree dated 7-7-2000 the learned Civil
Judge 1st Class, Lahore, decreed the suit in the sum of Rs.2,25,05,871.52. This judgment and
decree of the trial Court was challenged by the defendant by filing R.F.A. No.335 of 2000. After
hearing the learned counsel for the parties, the learned Division Bench of Lahore High Court,
Lahore, through its judgment dated 16-3-2005 partly accepted the appeal and modified the
judgment and decree of the trial Court and reduced the amount of decree to Rs.82,42,770.78.
Both the plaintiff as well as the defendant being aggrieved by the impugned judgment and decree
of the High Court have filed the two appeals noted above.
3. The learned counsel for the plaintiff after taking us through the facts and record of the matter
contended that the defendant has neither made any counter claim nor had claimed setoff in its
written statement in respect of 1359 tubes and that in terms of section 59 of the Sale of Goods
Act, 1930 (the Act) the High Court was not justified in reducing the plaintiff's claim from 2994
tubes to that of 1634 tubes. He further contended that although the learned High Court has
allowed payment of 1400 tubes to the plaintiff but has denied its claim in respect of 1260 tubes,
which were duly prepared by the plaintiff but for no fault of it's own the same were not accepted
by the defendant. He contended that the plaintiff is also entitled to payment in respect of 1260
tubes and its denial was unjustified. The learned counsel further contended that the plaintiff's
claim towards the loss suffered on account of purchase and sale of raw material and the wastage
of machinery was decreed by the trial Court but the learned High Court without any reason has
disallowed this claim of the plaintiff. In support of his submissions, he has relied upon the cases
of "Commissioner of Sales Tax v. Prem Nath Motors (P) Ltd." (ILR 1978 Delhi 273); "G.N.
Behera v. Messrs Nanagran Bhikamchand Rice Mills Firm and another" (AIR 1966 Assam and
Nagaland 95); "Syed Niamat Ali and another v. Dewan Jairam Dass and another" (PLD 1983 SC
5); and "Maple Flock Company Limited v. Universal Furniture Products (Wembley) Limited"
(The Law Times Volume 150 P. 69).

4. On the other hand, learned counsel appearing for the defendant at the very outset has
contended that the Act has no application to the case in hand inasmuch as the plaintiff has
admitted the supply of 1359 substandard tubes and has agreed to replace them and in pursuance
thereof has prepared 1400 tubes. He admitted as a fact that the plaintiff had asked the defendant
for inspection of 1400 and 1260 tubes but such inspection was not undertaken by the defendant
on account of the fact that the FIA was conducting an enquiry against the plaintiff for supplying
of substandard tubes and thus making of such an exercise was considered by the defendant to be
of no avail. He contended that the defendant has asked the plaintiff to lift 1359 substandard tubes
but the plaintiff itself has avoided doing so for which the defendant cannot be made liable and
that the plaintiff is still free to lift the said 1359 substandard tubes from the store of the
defendant. The learned counsel further contended that the claim for loss on account of selling of
raw material and machinery was not pleaded in the plaint and the defendant had no occasion to
meet such claim of the plaintiff and no issue on these claims was struck between the parties and
such claim cannot be considered or allowed by the Court. In rebuttal, the learned counsel for the
plaintiff has contended that although there is no specific pleading and prayer in the plaint for the
loss on account of raw material and wastage of machinery but the evidence and substance on
record show that such claim of the plaintiff was very much there and it was also established. In
support of his such argument, the learned counsel has relied upon the case of "Bhagwati Prasad
v. Chandramaul" (AIR 1966 SC 735).

5. We have minutely considered the submissions of learned counsel for the parties and the
relevant law relied upon by them and have gone through the record of the case.
6. The case has certain feature which on record does not appear to be much in dispute i.e. that
there was a contract for supply of 9700 specified tubes made between the plaintiff and the
defendant. The plaintiff made initial supply of 3100 tubes out of which 106 tubes on initial
testing were rejected and from the remaining 2994 tubes on standardized testing 1359 tubes were
further found to be substandard. The warranty clause in the contract was invoked by the
defendant. The plaintiff agreed to replace 1359 substandard tubes and in doing so has prepared
1400 tubes. The plaintiff under the contract has further prepared 1260 tubes for supplying to the
defendant. The plaintiff requested the defendant to inspect 1400 tubes and 1260 tubes but the
defendant neither inspected nor took delivery of these tubes.

7. The learned trial Court in its judgment and decree has allowed the claim of the plaintiff in
respect of 2994 tubes, 2600 tubes with interest @ 16% per annum and also for loss of raw
material and of machinery and decreed the suit in the sum of Rs.2,25,05,871.52. The claim for
general damages was not allowed by the learned trial Court. On the other hand, in appeal by the
defendant, the learned High Court discarded the claim of the plaintiff in respect of 1359
substandard tubes and from the initial supply allowed claim of the plaintiff only to the extent of
1634 tubes. As regards 1400 tubes, the learned High Court observed that the claim in respect of
such tubes is contained in para 7 of the plaint but there is no mention of the claim in respect of
1260 tubes in the plaint and came to the conclusion that the decree of the learned trial Court in
respect of 1260 tubes was not sustainable. As regard the loss on raw material and machinery, the
learned High Court concluded that there is no mention of these two claims in the plaint and
therefore did not allow them. Finally the learned High Court by modifying the decree of the
learned trial Court allowed the claims of the plaintiff as follows:--

(i)

Price of 1634 tubes @ Rs.1698 per tube

Rs.27,74,532.00

(ii)

Interest @ 16% from 14-10-1996 to 7-7-2000

Rs.16,64,718.75

(iii)

Price of 1400 tubes @ Rs.1698 per tube

Rs.23,77,200.00

(iv)

Interest @ Rs.16% from 10-10-1996 to 7-7-2000

Rs.14,26,320.00

Total

Rs.82,42,770.78

8. As regards the submission of learned counsel for the plaintiff that the claim of 1359 tubes
could not have been disallowed for that no counter claim was made nor setoff was claimed by
the defendant in its written statement and in this respect has relied upon section 59 of the Act and
cited the cases of Prem Nath Motors (P) Ltd. and that of Syed Niamat Ali, supra. Section 59 of
the Act reads as under:--

"59. Remedy for breach of warranty.---(1) Where there is breach of warranty by the seller, or
where the buyer elects or is compelled to treat any breach of a condition on the part of the seller
as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to
reject the goods; but he may-

(a) set up against the seller the breach of warranty in diminution or extinction of the price; or

(b) sue the seller for damages for breach of warranty.

(2) the fact that a buyer has set up a breach of warranty in diminution or extinction of the price
does not prevent him from suing for the same breach of warranty if he has suffered further
damage."
This provision as it reads provides for a situation where in a contract of warranty between seller
and the buyer, the seller makes a breach of such warranty, the buyer not only is entitled to reject
the goods but is also entitled to set up against the seller the breach of warranty in diminution or
extinction of the price or sue the seller for damages for breach of warranty. Setting up against the
seller the breach of warranty in diminution or extinction of price, this situation arise where the
seller brings a suit against the buyer either for damages or for price of the goods. The buyer as a
defendant at this stage is entitled to set up a claim against the seller i.e. breach of warranty and as
a consequence ask for diminution or extinction of price. In the present case, the facts appear to
be quite different from the one as are postulated in section 59 of the Act in that upon supply of
3100 tubes by the plaintiff to the defendant no dispute was raised by the plaintiff of initial
rejection of 106 tubes by the defendant. Further, on standardized testing the defendant has
rejected another lot of 1359 tubes as substandard upon which warranty clause 16 of the contract
was invoked by the defendant through its telegram dated 14-9-1996 and letter dated 15-9-1996.
The plaintiff did not contest or object to the invoking of warranty clause by the defendant but
agreed to replace 1359 substandard tubes and in doing so went on to prepare 1400 tubes as a
replacement and informed the defendant through its letters dated 10-10-1996 and 14-10-1996 to
inspect 1400 tubes. This being the admitted fact on the record, and such fact being also pleaded
by the plaintiff in its plaint, apparently there did not arise an occasion to the defendant to set up
against the seller for breach of warranty either a claim of diminution or extinction of price for
that in making of 1400 tubes as replacement on account of invocation of warranty clause in the
contract the plaintiff accepted the fact that it is not entitled to the price of 1359 tubes which stood
rejected by the defendant as substandard. In the face of these facts and circumstances where the
plaintiff itself gave in to the breach of warranty and agreed to replace 1359 tubes with those of
1400 tubes, it itself in doing so admitted that it is not entitled to claim the price of 1359 tubes and
thus in our view, there was hardly any reason or justification with the defendant to set up claim
against the plaintiff in the plaintiff's suit as provided in section 59 of the Act. For the same
reason, we find that case-law relied upon by the learned counsel for the plaintiff is
distinguishable from the facts and circumstances of the present case.

9. As regards the submission in respect of 1260 tubes, the learned counsel for the plaintiff has
contended that the claim of these tubes was very much contained in para 8 of the plaint wherein
the plaintiff has requested for inspection of the remaining quantity of tubes for delivery and has
specifically referred to a letter dated 24-12-1996. Such letter of the plaintiff is available at page
130 of C.M.A. No.3695 of 2010 which has been marked as Exh.P.41 and this letter refers to
inspection calls dated 5-9-1996 and 14-9-1996. The inspection call of 5-9-1996 is available at
page 27 of the same C.M.A. and has been marked as Exh.P.12 and it specifically states that 1260
tubes have been completed and the Divisional Engineer Testing, Telegraph Stores, Lahore, was
requested to depute his representative for inspection.

10. As the learned counsel for the plaintiff has specifically relied upon para 8 of the plaint for
substantiating the plaintiff's claim in respect of 1260 tubes, the same is reproduced as follows:--
"(8) That plaintiff never avoided the performance of the contract and has always showed its
willingness to perform the part of the contract. The plaintiff made several requests to defendants
verbally as well as through letters for the inspection of the remaining quantity of C-8 tubes for
onward delivery. The defendants were asked vide letter No.ESSA/040197-01 dated 20-12-1996
for inspection but the defendants failed to carry out inspection of finished tubes and did not make
any payments towards the supplied tubes which was contrary to the terms and condition of the
contract and purchase order.

The defendants vide letter No. LH/TL/EEC/94-95/43 dated 24-12-1997 that avoided the payment
on the frivolous and sham ground that the defendant No.1 authorities were conducting an
inquiry, therefore, the replacement and balance delivery of goods will be done after the
completion of the said inquiry."

11. Letter (erroneously mentioned as dated 20-12-1996) actually is dated 24-12-1996 has been
produced as Exh.P.41 which is available at page 130 of C.M.A. No.3695 of 2010. The plaintiff
has addressed this letter to the Director (Stores) PTCL, Lahore, where it has requested that the
inspection be carried out for the two calls, one dated 5-9-1996 and the other dated 14-9-1996.
The inspection call dated 5-9-1996 of the plaintiff has been produced as Exh.P.12 and is
available at page 27 of this very C.M.A. and it specifically mentions that the plaintiff has
completed 1260 tubes and has requested the Division Engineer Testing, Telegraph Stores,
Lahore, to depute his representative for inspection. The defendant in para 8 of its written
statement has submitted its reply to para 8 of the plaint, which is as follows:--

"Para 8 is not admitted hence denied as stated above that the plaintiff has played fraud and
misrepresentation while replacing the sub-standard tubes with the collusion of staff of the PTCL,
therefore, he has not performed the contract as agreed."

12. In the first place, what we note is that the plaintiff in para 8 of the plaint has specifically
claimed that it has prepared 1260 tubes for supplying them to the defendant and in this regard
has also referred to the inspection call made by it to the defendant. The defendant in its reply to
para 8 of the plaint has made a general denial without specifically denying the plaintiff's letter
dated 24-12-1996 in which details in respect of inspection calls are very much mentioned which
includes the inspection call of 1260 tubes. We were also shown letter dated 12-1-1997 of the
Director (Stores) PTCL, Lahore, addressed to the Divisional Engineer Testing, Telegraph Stores,
PTCL, Lahore, where it is specifically mentioned that the plaintiff has offered a quantity of 1260
tubes on 5-9-1996 and a quantity of 1400 tubes on 14-10-1996 for inspection/testing but the
testing has not so far been conducted and the request was made that the testing be conducted if
the offer made by the plaintiff is within the valid dates. Although this letter of defendant has
been filed at page 34 of the same C.M.A. but it is not clear whether it was produced in evidence
or not because there is no exhibit number on it. Nevertheless, the learned counsel for the
defendant did not dispute or raise objection regarding authenticity and correctness of this letter
nor did he object to its reading.

13. On the basis of the above pleadings and the documentary evidence referred to above which
has come on the record, it is abundantly clear that the plaintiff did in fact prepared 1260 tubes for
supplying to the defendant and had also requested them to be inspected by a representative of the
defendant. But as it appears from the record, the defendant did not inspect them nor took delivery
of these 1260 tubes. The learned High Court has altogether discarded the claim of the plaintiff in
respect of 1260 tubes on mere assertion that this claim of the plaintiff is not contained in the
plaint. This assertion of the learned High Court, in our view, was not correct. The above
discussion amply shows that the plaintiff has not only made a claim in its plaint in respect of
1260 tubes but through evidence has also established this fact as mentioned in the letters
produced as Exh.P.41 and Exh.P.12. Such evidence of the plaintiff is further fortified by letter
dated 12-1-1997 of defendant. Thus, in the face of pleadings of the parties and documentary
evidence available on record, there was hardly any real basis or justification to discard the claim
of the plaintiff in respect of 1260 tubes.

14. Learned counsel for the plaintiff has also argued that the plaintiff is entitled to claim damages
on account of loss suffered on raw material and of wastage of machinery. The learned counsel
for the plaintiff while making this submission was confronted with the fact that this very claim of
the plaintiff is not contained in the plaint and how such claim of the plaintiff can validly be
considered or dealt with on mere oral submission. The learned counsel for the plaintiff in this
regard has urged that despite such claim being not specifically contained in the plaint but while
producing evidence, the plaintiff has made out a case for granting relief in respect of these two
claims and has referred to the case of Bhagwati Prasad, supra. The facts in the cited case were
that the plaintiff, an owner of a house, has filed a suit for ejectment and for payment of arrears of
rent against the defendant. The defendant in his written statement while admitting the ownership
of land beneath the house of the plaintiff took the plea that the construction of the house so raised
on the land was made by him at his own cost and that the defendant was to remain in possession
of the house until the amount spent by him on the construction was repaid. On framing of issues
and recording of evidence of the parties, the trial Court did not believe the version of the
defendant with regard to construction of the house. The trial Court on the basis of admission of
the defendant that of ownership of the plaintiff came to the conclusion that the relationship of the
landlord and tenant was proved and thus passed a decree for ejectment as well as for rent. The
defendant appealed to the Allahabad High Court who agreed with the trial Court but gave finding
that the defendant was in possession of the house as a licensee and the plea of tenancy was not
accepted on account of statutory bar prevailing in the area. The learned High Court in its decree
set aside the decree of the trial Court to the extent of payment of rent. Both the plaintiff and
defendant filed appeals before the Indian Supreme Court against the decree passed by the High
Court. A plea was raised from the side of the defendant that the plaintiff's claim was based
squarely on tenancy and once such case of the plaintiff was rejected by the High Court the claim
for ejectment should also have been negatived. It was under these circumstances, their lordships
in the Indian Supreme Court have dealt with such argument in the following paras as follows:--

"(9) There can be no doubt that if a party asks for a relief on a clear and specific ground, and in
the issues or at the trial, no other ground is covered either directly or by necessary implication, it
would not be open to the said party to attempt to sustain the same claim on a ground which is
entirely new. The same principle was laid down by this Court in Sheodhari Rai v. Suraj Prasad
Singh, AIR 1954 SC 758. In that case, it was held that where the defendant in his written
statement sets up a title to the disputed lands as the nearest reversioner, the Court cannot, on his
failure to prove the said case, permit him to make out a new case which is not only not made in
the written statement, but which is wholly inconsistent with the title set up by the defendant in
the written statement. The new plea on which the defendant sought to rely in that case was that
he was holding the suit property under a shikmi settlement from the nearest reversioner. It would
be noticed that this new plea was in fact not made in the written statement, had not been included
in any issue and, therefore, no evidence was or could have been led about it. In such a case
clearly a party cannot be permitted to justify its claim on a ground which is entirely new and
which is inconsistent with the ground made by it in its pleadings.

(10) But in considering the application of this doctrine to the facts of the present case, it is
necessary to bear in mind the other principle that considerations of form cannot over-ride the
legitimate considerations of substance. If a plea is not specifically made and yet it is covered by
an issue by implication, and the parties knew that the said plea was involved in the trial, then the
mere fact that the plea was not expressly taken in the pleadings would not necessarily disentitle a
party from relying upon it if it is satisfactorily proved by evidence. The general rule no doubt is
that the relief should be founded on pleadings made by the parties. But where the substantial
matters relating to the title of both parties to the suit are touched, though indirectly or even
obscurely, in the issues, an evidence has been led about them, then the argument that a particular
matter was not expressly taken in the leadings would be purely formal and technical and cannot
succeed in every case. What the Court has to consider in dealing with such an objection is: did
the parties know that the matter in question was involved in the trial, and did they lead evidence
about it? If it appears that the parties did not know that the matter was in issue at the trial and one
of them has had no opportunity to lead evidence in respect of it, that undoubtedly would be a
different matter. To allow one party to rely upon a matter in respect of which the other party did
not lead evidence and has had no opportunity to lead evidence, would introduce consideration of
prejudice, and in doing justice to one party, the Court cannot do injustice to another.
(11) Therefore, in dealing with Mr. Setalvad's argument, our enquiry should not be so much
about the form of the pleadings as their substance; we must find out whether the ground of
licence on which the plaintiff's claim for ejectment has been confirmed by the High court was in
substance the subject matter of the trial or not; did the defendant know that alternatively, the
plaintiff would rely upon the plea of licence and has evidence been given about the said plea by
both the parties or not? If the answers to these questions are in favour of the plaintiff, then the
technical objection that the plaint did not specifically make out a case for licence, would not
avail the defendant.

(15) It is hardly necessary to emphasis that in a matter of this kind, it is undesirable and
inexpedient to lay down any general rule. The importance of the pleadings cannot, of course, be
ignored, because it is the pleadings that lead to the framing of issues and a trial in every civil
case has inevitably to be confined to the issues framed in the suit. The whole object of framing
the issues would be defeated if parties are allowed to travel beyond them and claim or oppose
reliefs on grounds not made in the pleadings and not covered by the issues. But cases may occur
in which though a particular plea is not specifically included in the issues, parties might know
that in substance the said plea is being tried and might lead evidence about it. It is only in such a
case where the Court is satisfied that the ground on which reliance is placed by one or the other
of the parties, was in substance, at issue between them and that both of them have had
opportunity to lead evidence about it at the trial that the formal requirement of pleadings can be
relaxed. In the present case, having regard to all the facts, we are unable to hold that the High
Court erred in confirming the decree for ejectment passed by the trial Court on the ground that
the defendant was in possession of the suit premises as a licensee. In this case, the High Court
was obviously impressed by the thought that once the defendant was shown to be in possession
of the suit premises as a licensee, it would be futile to require the plaintiff to file another suit
against the defendant for ejectment on that basis. We are not prepared to hold that in adopting
this approach in the circumstances of this case, the High Court can be said to have gone wrong in
law".

15. In the above cited judgment of the Hon'ble Supreme Court of India, the simple case was that
plaintiff has filed a suit for ejectment and has also prayed for payment of arrears of rent on which
the defendant has taken a plea that the land belonged to the plaintiff but the house built on it was
constructed by him from his own funds and he has a right to remain in possession until such
funds are exhausted. The learned High Court has not accepted the plea of tenancy on the ground
that it was not permissible in law for there being restriction and found the defendant to be a
licensee and thus maintained the order of the trial Court of ejectment of the defendant from the
house in question. The objection taken by the defendant in the Hon'ble Supreme Court of India
was that the High Court could not change the relationship from that of a tenant to a licensee, as it
was not pleaded it could not have ordered ejectment of the defendant on the basis that he was a
licensee. The Hon'ble Supreme Court of India has ultimately dealt with this matter, which is
reflected in the above quoted portion of its judgment where the main thrust was that though a
particular plea is not specifically included in the issues, parties might know that in substance the
said plea is being tried and might lead evidence about it and it is only in such a case where the
Court is satisfied that the ground on which reliance is placed by one or the other of the parties,
was in substance, at issue between them and both of them have had opportunity to lead evidence
about it at the trial that the formal requirement of pleadings can be relaxed. The Hon'ble Supreme
Court of India, however, kept in view and did not detract from the age old established principle
and importance of pleadings and emphasized that it is the pleadings that led to the framing of
issues and a trial in every civil case has inevitably to be confined to the issues framed in the suit
and further put a note of caution that the whole object of framing of issues would be defeated, if
the parties are allowed to travel beyond them and claim or oppose relief on the grounds not made
in the pleadings and not covered by the issues. The Court further observed on the merit of the
case that where the High Court was obviously impressed that once the defendant was shown to
be in possession of the suit premises as a licensee, it would be futile to require the plaintiff to file
another suit against the defendant for ejectment on that basis and thus maintained the decision of
the High Court.

16. In the present case, the situation however is altogether different in that in the plaint of
plaintiff there is no mention whatsoever of the fact of the plaintiff having acquired machinery or
had raw material lying with it and as to what treatment the plaintiff has given to such two items
after the contract was revoked. The plaintiff in the plaint has confined his claim to five items
only, which are mentioned in para 18 and are reproduced as follows:--

(a)

For the supply of tubes mentioned in para 6 hereinabove.

Rs.50,83,842

(b)

As interest of on Rs,50,83,842 @ 21%

Rs.106,7606/82

(c)

2600 tubes as mentioned in para(sic.)

Rs.44,14,800

(d)

Interest on Rs.44,14,800 @ 21%

Rs.92,7108

(e)

Damages as mentioned in para 15 hereinabove

Rs.2,35,00,000

Grand Total:

Rs.3,49,93,356.82

Damages claimed in para 15 of the plaint are as follows:--

(i)

Loss caused due to delay Rs.25 lacs

25 Lacs

(ii)

Expenses incurred at FIA inquiry Rs.10. lacs

10 Lac

(iii)

Mental torture Rs.1 crore

1 Crore

(iv)

Good will injured Rs.1 crore

1 Crore
On the pleadings of the parties following issues were framed in the suit:--

"(1) Whether the plaintiff is entitled to obtain a decree for recovery of Rs.3,49,93,356.82 on the
basis of facts mentioned in the plaint as prayed? OPP

(2) Whether the suit is not signed and verified by the competent person, therefore, the same is
liable to be rejected? OPD

(3) Whether the suit is not maintainable as the plaint does not disclose any malice towards the
defendants and therefore, the same is liable to be rejected? OPD

(4) Relief."

17. The perusal of above claim made in the plaint and the issues framed on the pleadings of
parties clearly demonstrate that the plaintiff did not at all make any claim in the suit with regard
to the raw material and machinery nor any issue on such plea was struck in the suit. As noted
above pleadings of the parties are the benchmark of their respective claims on which issues are
drawn and evidence is led which is restricted to the issues struck between the parties alone and
not beyond them. If any evidence beyond the purview of issues does come on record, no party
can on such evidence set up altogether a new case and press the same for getting relief merely on
basis of an out of context evidence. The rule enunciated by the Indian Supreme Court in the
above cited case has no relevance to the case of plaintiff as the subject matter of machinery and
raw material was never an issue nor it could be said that it was the ground which both parties
understood to be in issue in the case. Going on such premises will be highly detrimental and to
the grave prejudice of the defendant as it cannot be taken by surprise. We, therefore, are not
persuaded to accept this argument of the learned counsel for the plaintiff.

18. Having dealt with the submissions of the learned counsel for the parties, we now come to
consider as to what relief, if any, the plaintiff is entitled to. The learned trial Court has allowed to
the plaintiff the price of 2994 and 2600 tubes with interest and loss on raw material and loss of
machinery installed. The learned High Court, in the impugned judgment, has modified the decree
of the trial Court by allowing price of 1634 and 1400 tubes with interest and disallowed the
claim of raw material and machinery. The learned counsel for the defendant has contended that
the price of 1400 tubes could not have been allowed by the learned High Court for the reason
that these tubes were not supplied by the plaintiff to the defendant and are still in custody of the
plaintiff and that the defendant has repeatedly asked the plaintiff to lift from its store 1359
substandard tubes, which the plaintiff has still not done. To this, it may be added that the plaintiff
has also prepared 1260 tubes which on account of their non-inspection by the defendant could
not be delivered to it until the contract was revoked. It was also contended before us by the
learned counsel for the plaintiff that the tubes prepared by the plaintiff has no other market
except that of the defendant and the plaintiff was in no position to sell these tubes as it has no
buyer in the market and thus the plaintiff has to be paid the whole price of the tubes as they are
of no use whatsoever to the plaintiff nor the plaintiff can make any salvage out of them, more so
for the reason that the tubes have been affixed with the monogram of the defendant. This
contention of the learned counsel for the plaintiff was not disputed by the learned counsel for the
defendant rather he candidly admitted that these tubes have no market except that of the
defendant. In the face of these facts, it is to be considered now as to how the matter with regard
to these two items i.e. 1400 tubes and 1260 tubes are to be dealt with. We may also note here that
the learned trial Court as well as the learned High Court has allowed to the plaintiff the price of
tubes @ Rs.1,698 per tube and before us neither the counsel for the plaintiff has raised any
objection on such pricing of the tubes nor the counsel for the defendant made any submission in
this regard. We, therefore, assume that both the parties are agreeable on the point of price of the
tubes to be the acceptable compensation.

19. We find upon record that 1400 tubes and 1260 tubes prepared by the plaintiff (1400 tubes
against warranty and 1260 tubes for making further supplies under the contract) are lying with
the plaintiff as their delivery has not been taken by the defendant and for this, as noted above, the
plaintiff is not to be blamed and in the face of the admitted fact that the plaintiff cannot fetch any
other market for these tubes as these tubes can only be used by the defendant and no other, the
result of which will be obvious, that resale value of these tubes cannot be ascertained. In this
situation, where the tubes are lying with the plaintiff and their price as per the contract has not
been paid, the provision of section 55 of Act apparently will become applicable which runs as
follows:--

"55. Suit for price.---(1) Where under a contract of sale the property in the goods has passed to
the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the
terms of the contract, the seller may sue him for the price of the goods.

(2) Where under a contract of sale the price is payable on a day certain irrespective of delivery
and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the
price although the property in the goods has not passed and the goods have not been appropriated
to the contract."
In the case of "Messrs Kalka Prasad Ram Charan v. Haris Chandra" (AIR 1957 Allahabad 25) a
learned Division Bench of that Court has observed as follows:--

"11. It is next contended by the learned counsel for the respondent that he had two rights, viz., a
right of re-sale under S.54(2) and an independent right under S.55 to sue for the price of the
goods. This contention is perfectly correct. It was open to him not to sell the goods and to sue for
the price leaving it to the purchaser to take delivery of the goods lying with him (the seller) at his
own convenience."

20. Thus, in the wake of provision of section 55 of the Act where the property in goods has
passed to the buyer and where the property in goods has not passed to the buyer but the price is
payable on a day certain irrespective of delivery the seller will be entitled to sue for the price of
the goods. The plaintiff has prepared 1400 tubes towards satisfaction of warranty on or before
10-10-1996 and another 1260 tubes in making further supply under the contract on or before 5-9-
1996, which are the dates on which the plaintiff has given notice to the defendant to inspect such
tubes but neither these tubes were inspected nor their delivery was taken by the defendant and
this act of the defendant was a unilateral one without finding any fault in the said 1400 and 1260
tubes. Clause 18 of the contract between the plaintiff and defendant, inter alia, provides that the
payment will be allowed according to delivery schedule and on receipt of certificate by A.E.
Stores MGP-LHR to the effect that the stores have been received in good condition. Clause 13 of
the contract provides for a delivery period and it states that the supply of stores should be
completed within six months period from the issue of A/T which includes three weeks of
mobilization and preparation. Perusal of these two clauses in the contract amply shows that the
plaintiff was required to make supplies of tubes within a specified period and after it had
supplied the tubes to the satisfaction of the defendant, the payment was to be made. It is not the
case of the defendant before us that 1400 and 1260 tubes were not prepared by the plaintiff
within the delivery period and thus, once the plaintiff has prepared these tubes and had intimated
the defendant that the tubes are ready for inspection and delivery, the burden will be on the
defendant to satisfy as to why the tubes were not inspected by it and their delivery not taken. As
is apparent from the record no explanation from the defendant has come forward for non-
inspection and non-taking of delivery of these tubes except that there was an enquiry pending
with the FIA. The FIA enquiry also terminated without any finding against the plaintiff but still
the defendant did not inspect or took delivery of these tubes. The 1400 and 1260 tubes are still
stated to be lying with the plaintiff and according to the period of delivery in the contract the
same has matured long before and as per term of the contract, it can validly be said that the
plaintiff has become entitled to the price of the said tubes even though the tubes are lying in its
custody. Thus, the plaintiff stood in a position akin to the one provided in section 55 of the Act
and as observed by the Allahabad High Court, which observation appears to us to be reasonable,
the plaintiff will be entitled to the price of these tubes leaving the defendant to take the delivery
of these tubes at its convenience. In the wake of this legal position, there is no escape from the
conclusion that the plaintiff has to be paid by the defendant the price of 1400 and 1260 tubes.
The learned High Court has already allowed to the plaintiff the price of 1400 tubes, which in our
view, is just and fair. Further we also find that the plaintiff is entitled to the price of 1260 tubes.
We, therefore, additionally decree the claim of the plaintiff for the price of 1260 tubes with
interest @ 16% per annum from 5-9-1996 to 7-7-2000. It is further ordered that it will be open
for the defendant to take delivery from the plaintiff of 1400 tubes and 1260 tubes in whatever
shape they are now and the plaintiff will also be free to lift from the store of the defendant the
rejected 1359 tubes. The claim of the plaintiff towards raw material and the machinery, in the
facts and circumstances of the case was wrongly allowed by the learned trial Court and the
learned High Court has rightly not allowed the said two claims of the plaintiff. We also for the
reasons already discussed above, find no merit in the arguments of the learned counsel for the
plaintiff with regard to the claim of raw material and machinery and reject the same.

21. For the foregoing reasons, appeal of the plaintiff (C.A. No. 371 of 2005) is partially allowed
to the extent as noted above while appeal of the defendant (C.A. No.717 of 2005) is dismissed
with no order as to costs.

MWA/E-1/SC Order accordingly.