E.I.D. Parry (India) Ltd. vs S.A.E. (India) Ltd.

Ramalingam, J.—The plaintiff M/s. E.I.D. Parry (India) Ltd., Madras, has filed the suit against the defendant M/s. S.A.E. (India) Ltd., New

Delhi, to recover a sum of Rs. 7,50,000 towards principal and Rs. 2,36,250 towards interest at 12 per cent per annum from 3.12.1978 till date of

plaint, and thereafter at 12 per cent interest per annum on the principal amount from the date of plaint till date of realisation, and for costs, under

the following circumstances: The plaintiffs had entered into an agreement dated 29.6.1977 marked as Ex. P1 under which the defendants were

bound to pay the plaintiffs a sum of a Rs. 4,50,000 per annum for services rendered by the plaintiffs for a period of two years from 1.7.1975 to

30.6.1977. In pursuance of the services rendered by the plaintiffs the defendants have made payment, on 29.6.1977 a sum of Rs. 4,50,000 less

income tax representing the remuneration for the period 1.7.1975 to 30.6.1976. The balance amount due for the services rendered by the plaintiffs

for the period beginning from 1.7.1976 to 30.6.1977 is a sum of Rs. 4,50,000. This has not been paid. Later on, the plaintiffs were requested to

renew the terms of the agreement upto 31.12.1978 for a sum of Rs. 3 lakhs from 1.7.1977 to 31.12.1978, since the defendant''s Central Office

has been shifted to New Delhi from Madras and as such the scope of the plaintiffs'' assistance, according to the defendants, had been reduced.

The said sum of Rs. 3,00,000 also has not been paid by the defendants to the plaintiffs.

The plaintiffs made several demands on the defendants for payment of the aforesaid two sets of sums. The defendants by their letter dated

29.12.1979, (Ex. P3) not only denied their liability but also contended that the agreement is void and is opposed to public policy. Thereafter, the

plaintiffs sent a notice dt. 11.4.1980 Ex. P4 through their Advocate. The defendants reiterated in their reply their earlier stand. The defendants

according to the plaintiffs acknowledged their liability in a sum of Rs. 7,50,000 in their letter Ex. P5. As such the defendants are due to the plaintiff

a sum of Rs. 7,50,000 with interest thereon at 12 per cent per annum from 31.12.1978 till date of plaint, and thereafter at the same rate of interest

till the date of realisation on the principal amount.

The defendants in their written statement have contended that the agreement Ex. P1 dated 29.6.1977 is bad in law, since the terms are not only

vague but also opposed to public policy; and that the plaintiffs had not rendered any service to them under the agreement. According to the

defendants, the plaintiffs could not have rendered any service for the period from 1.7.1976 to 30.6.1977, since the agreement has been entered

into only on 29.6.1977. Their further case is that the plaintiffs are liable to refund a sum of Rs. 4,50,000 along with interest to the defendants as the

amount had been paid without consideration. According to the defendants, Exs. P1 and P2 are both invalid and they are not supported by

consideration and they are also opposed to public policy.

Issues were recast and the following issues have been framed by consent of the parties, on 29.1.1987:

(1) Whether Ex. P1 agreement dated 29.6.1977 is true, valid and supported by consideration and as such binding on the defendants?

(2) Whether Ex. P1 is opposed to public policy?

(3) Whether there is any acknowledgement of liability on the part of the defendants to pay the plaintiff a sum of Rs. 7,50,000?

(4) Whether Ex. P2 dated 11.8.1978 creates an agreement so as to extend the period from 1.7.1977 to 31.12.1978?

(5) Whether the defendant is estopped from denying the suit claim?

(6) To what other reliefs, the parties are entitled?

The plaintiff has examined A.S. Parasuraman, Assistant Manager, E.I.D., Secretarial Legal Section, as P. W. 1 and marked Exs. P1 to P6 and

Exs. D1 to D.4. The defendants have not examined anyone on their side.

Issue No. 1: The parties are under the impression that Ex. P1 is an agreement intended for future conduct. Ex. P1 also begins as if it is an

agreement for future course of action Taking into consideration the entire documentary evidence and the conduct of the defendants as a whole, I

find that Ex. P1 is a document entered into between the parties recording their past transactions as well as for future transactions up to 30.6.1977.

The various obligations that are expected from the plaintiffs ought to have been completed by 30.6.1977, the next day on which the parties

executed Ex. P1. If one construes Ex. P1 as an agreement for future conduct, the obligations which the plaintiff could fulfil are not possible on a

day. It is on that ground, the parties have stated in Paragraph 1 of Ex. P1 as follows:

This Agreement shall be deemed to have come into force from the 1st July, 1975 and unless terminated earlier as hereinafter provided in Clause

18, shall remain in force for a period of two years from that date.(1.7.1975)

The payment of Rs. 4,50,000 which the defendants had paid in pursuance of the bill dated 21.1.1977 and which had been accounted for by the

defendants for the year ending 30th June 1976, prove that the defendants had enjoyed the various services which the plaintiffs had rendered from

1.7.1975. As such, it cannot be said that Ex. P1 is not supported by consideration. As per S. 2(d) of the Indian Contract Act, past consideration

is good consideration. Hence, past services rendered by the plaintiffs had been accepted by the defendants and in order to prove, the services

rendered, Ex. P1 was executed and a sum of Rs. 4,50,000 had been paid, for the services rendered by the plaintiffs till 30.6.1976. Ex. P2 letter

dated 11.8.1978 written by the defendants proves that Ex. P1 is a record of past transactions. The parties are not minors nor illiterates. They are

noted for their worldly knowledge. The defendants are a multinational company and is managed by Directors known for their ability, skill and

worldly knowledge. Ex. P2 shows that the Directors of the defendants in their Board meeting held on 10.8.1978 discussed the letter regarding

accounts dated 3/7.2.1978 sent by plaintiffs as well as the letter of the plaintiffs dated 15/18.7.1977, and decided to pay a sum of Rs. 4,50,000

for the services rendered by the plaintiffs up to the end of 30.6.1976 and that the defendants asked for another bill for the period ending

30.6.1977. The penultimate paragraph in Ex. P2 reads as follows:

Earlier to the above, we only received your bill dated 25.1.77 for Rs. 4,50,000 and this was accounted for towards your fees for the year ended

30th June 1976. Your bill for Rs. 4,50,000 towards your fees for the year ended 30th June 1977 under the Assistance Agreement does not

appear to have been received by us.

These wordings in Ex. P2 confirm the various services rendered by the plaintiffs as enumerated in Ex. P1 and the payment of Rs. 4,50,000 for the

period beginning from 1.5 1975 to 30 6.1976. The payment seems to have been made on 29.6.1977. As such, the claim of the plaintiffs for

services rendered as evidenced by Ex. P1 cannot be doubted. Hence, I find under Issue No. l that Ex. P1 is an agreement entered into between

the parties recording nor only their past transactions and is supported by consideration, in as much as past consideration is good consideration

under S. 2(d) of the Contract Act.

Issue Nos. 2 and 3: The learned counsel for the defendants brought to my notice that the various obligations attributed to the plaintiffs are

opposed to public policy and also the terms of Ex. P1 are vague and as such cannot be enforced. He has cross-examined P.W.1 in that direction.

P.W.1, is only the Assistant Manager of the Secretariat Legal Section of the Plaintiffs and he may not be in a position to know the type of services

rendered by the top executives of the plaintiffs. The main obligations which are expected from the plaintiffs as per Ex. P1 agreement are as follows:

Parrys shall make available to the Company as from the date of commencement to use furnished office accommodation at Madras, Bombay,

Calcutta and New Delhi wherever needed together with the right of using in common with Parrys and others, Parrys strong room, for safe custody

of documents, papers, etc., the store room for storing Company''s accounts books, Papers and records, a lift (if any), staircase, passages,

corridors and toilets.

The aforesaid furnished accommodation shall include the use of Parrys office furniture, fittings, fixtures, electric light fittings, air-conditioners and

fans.

Parrys shall at the request of the Company on that behalf contact, negotiate and follow up with the offices of the Government of India, State

Governments, Government and Quasi Government authorities, statutory and other bodies corporate, on any matters pertaining to the applications

submitted by the Company to the Governmental authorities in connection with the obtaining of approvals from such authorities and also for the

collection of outstandings on behalf of the Company, from its customers including Governmental authorities entrusted to them by the Company

from time to time and for that purpose make available the services of their offices throughout India including their executive directors, special

directors and other senior executives,

Parrys shall at its discretion maintain an adequate number of qualified persons to enable them promptly and efficiently to carry out the obligations

undertaken by them in Clause 4 supra.

Parrys shall maintain a constant supervision on all the matters covered by this Agreement and shall from time to time submit reports and

statements as may be required by the Company.

It is further mutually agreed between the parties:

The Company shall not commit any waste or cause any damage to Parrys property including furniture, fittings, fans and air-conditioners and in

the event of Parrys property being damaged or destroyed or lost (reasonable wear and tear expected) while in the Company''s custody, the

Company agrees to pay a fair and reasonable sum for the repair and replacement of such damaged, destroyed or lost property.

The Company absolves Parrys absolutely for all liability in respect of any loss or damage to the Company''s property or injuries suffered by its

employees, agents, invitees, licensees and trespassers who may use and occupy or frequent the scheduled premises or any part thereof.

Parrys will not utilise such reports, statements or papers for purposes other than those of the Company.

Parrys shall not during the continuance of this Agreement or thereafter, either directly or indirectly, or for any reason whatsoever, divulge,

disclose or make public any of the affairs and secrets of the Company whatsoever which may come to their knowledge during or as a result of their

appointment under this Agreement and whether concerning the business, property, contracts, methods, transactions, dealings, affairs or members

of the Company or otherwise, save in pursuance of the performance of their duties hereunder.

Except as may be authorised by the Company for the purpose of Clause 4 hereof Parrys shall not make any representations or enter into any

commitments on behalf of the Company.

In consideration of the services rendered by Parrys to the Company under this Agreement, the Company shall pay to Parrys a sum of Rs.

4,50,000 (Rupees four lakhs and fifty thousand only) per annum. The aforesaid remuneration shall be paid in twelve equal monthly instalments

payable on the last working day of each month or in such other instalments as may be mutually agreed. ""Year"" in this Agreement shall mean 1st

January to 31st December. Actual out-of-pocket expenses incurred by Parrys'' representatives in rendering the services under this Agreement shall

be reimbursed by the Company against vouchers.

If Parrys are required to perform duties in addition to the duties undertaken by them under this Agreement, Parrys shall be entitled to such

further remuneration as may be determined between the parties.

Parrys shall discharge the obligations undertaken by them under this Agreement with due care and diligence and shall (a) duly and properly

perform in accordance with, conform to and observe such instructions as may from time to time be communicated by the Company to them in that

behalf.

15(a). Parrys being an incorporated. Company, shall be entitled to perform and exercise its duties or functions under this Agreement through its

Directors or Director, Officers or Officer or other employees or employee, Attorneys or Attorney duly authorised in that behalf and accordingly all

deeds and documents required to be signed by Parrys shall be deemed to be sufficiently so signed if signed by any Director of Parrys, or signed by

any Officer or employee duly authorised by Parrys in that behalf or any Attorney to whom Parrys may have delegated its powers in that behalf.

(b) The Company being an incorporated Company shall be entitled to perform and exercise its duties or functions under this Agreement through its

Directors or Director, Officers or Officer or other employees or employee, Attorneys or Attorney duly authorised in that behalf and accordingly all

deeds and documents required to be signed by the Company shall be deemed to be sufficiently so signed if signed by any Director of the

Company, or signed by any Officer or employee duly authorised by the Company in that behalf or any Attorney to whom the Company may have

delegated its power in that behalf.

16(i) This agreement may be terminated by either party giving to the other six months'' notice in writing. Such notice be sent by registered post to

the last known address of the other party and shall be deemed to have given on the date on which it has been posted.

(ii) Notwithstanding anything to the contrary contained herein this agreement shall determine forthwith in the event of either party entering into any

arrangement for compensation with their creditors or going into liquidation whether voluntary or compulsory except for the purpose of

reconstruction or amalgamation.

(iii) Should, the purpose of this agreement be frustrated or obstructed by the act of God, interference by Government, strikes, lock-outs, rioting or

civil commotion or any act beyond the reasonable control of either party then it is agreed that the obligations under this Agreement shall be

suspended for as long and as often as such interference may occur.

It is true that in Ex. P1, the parties could have recorded the services rendered by the plaintiffs; but with all the power and money that the parties

could command, the purport of Ex. P1 and Ex. P2 seem to be that the plaintiffs and the defendants wanted to prove the payments to the plaintiffs

on the type of services rendered by the plaintiffs for the purpose of audit. None of the clauses mentioned in Ex. P1 can be said to be opposed to

public policy. In a developing country like India, the services contemplated in the agreement are not unnatural. The court should take judicial notice

of the services that are expected in clause 4 of Ex. P1. Without follow-up action, nothing turns out; it is a universal secret. What is the type of

follow-up action and what is the type of service that the plaintiffs have rendered to the defendants are in the peculiar knowledge of the parties and

the defendants, which are a multinational company, in having elected to pay Rs. 4,50,000 in pursuance of Ex. P1 ought to have been satisfied with

the services rendered by the plaintiffs. Otherwise, there is no need for them to pay the amount contemplated in Paragraph 12 of Ex. P1. The type

of services rendered by the plaintiffs may not be in the knowledge of P.W.1. The top executives of both the companies are satisfied about the

services rendered by the plaintiffs and that is why in the Board meeting held by the defendants on 10.8.1978, the defendants approved the services

rendered by the plaintiffs up to 11.8.1978 and confirmed the services rendered by the plaintiffs beyond 1.7.1977. Ex. P2 is also a record of the

past transactions, as otherwise there is no need for the plaintiffs to send a bill for Rs. 3 lakhs under cover letter dated 3/7.2.1978. This shows that

the plaintiffs and defendants have agreed to extend the assistance period from 1.7.1977 to 1.12.1978 and also agreed to pay a sum of Rs. 3 lakhs

for one-and-a half years. Even though Ex. P2 says that the Board meeting of the defendants on 10.8.1978 decided to extend the period of the

assistance agreement up to 31.12.1978, the receipt of the bill dated 3/7.2.1978 from the plaintiffs for a sum of Rs. 3 lakhs shows that what was

orally agreed was confirmed under Ex P2, as otherwise there is no need for the plaintiffs to send a bill for Rs. 3 lakhs earlier to 10.8.1978. The

defendants while writing have stated that they are treating the bill towards the services of the plaintiffs for the period 1.7.1977 to 31.12.1978. This

conduct confirms the earlier oral agreement between the plaintiffs and the defendants for extension of period. In fact, there is a note on the margin

of Ex. P2 that the terms had been agreed by the plaintiffs in the Board meeting held on 10.8.1978 at Delhi. A perusal of Ex. P5 shows that the

defendants wanted the consent of the plaintiffs for altering their Memorandum of Association consequent upon the proposed shifting of the

registered office of the defendants company, from the State of Tamil Nadu to the Union Territory of Delhi. The defendants accepted liability to an

extent of Rs. 7,50,000 i.e. for the second year contemplated under Ex. P1 and the extended period under Ex. P2 dated 11.8.1978. In fact, there

are entries at the bottom of Ex. P2 referring to Ex. P1 agreement, the commencement of the period of the agreement Ex. P1 from 1.7.1975, the

amount payable for services rendered for the period commencing from 1.7.1975, payment received for the period beginning from 1.7.1975 to

30.6.1978, etc. Ex. P2 letter dated 11.8.1978, shifts the burden of proof on the defendants, with reference to the various allegations made in the

written statement and the questions put in the cross-examination to P.W.1. It is for the Board of Directors of the defendant Company to come to

the witness box and state the circumstances under which Exs. P2 and P5 were witness by them. I find the defendants, by avoiding the witness box,

have failed to prove that the plaintiffs claim is not supported by consideration. The defendants by their conduct not only elected to pay a part of the

consideration but also confirmed their liability under Exs. P2 and P5 and it is too late in the day for the defendants to go back from the contents of

Exs. P2 and P5. Under those circumstances, I find under Issues Nos. 2 and 3 that Ex. P1 is not opposed to public policy and that the defendants

acknowledged their liability under Exs. P2 and P5.

Issue No. 4: Ex. P2 also stands in the same position as that of Ex. P1. The parties agreed to extend the period from 1.7.1977 to 31.12.1978

long prior to 10.8.1978 and that is why the plaintiffs have sent a bill for Rs. 3,00,000 dated 3/7.2.1978 and the same has been confirmed by the

defendants under Ex. P2. Ex. P2, far from creating a fresh agreement, confirms the extension and as such, it is also a record of past transactions

and this issue is answered in the affirmative.

Issue No. 5: Simply because the parties treated Exs. P1 and P2 as agreements, it will not prevent the Court from stating the true purport of the

documents. As such, in view of my findings on Issue Nos. l to 4, I find the defendants are estopped from denying the suit claim.

The decision in Tilak Ram v. Nathu, referred to by the learned counsel for the defendants will not apply to the facts of this case. In the result,

the suit is decreed as prayed for with costs.