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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. 5448-5449 OF 2017 (Arising out of S.L.P.(C)Nos.34084-34085 of 2015)

M/s. Vedanta Limited (Formerly known as Sesa Sterlite Limited and successor in interest of  erstwhile Sterlite Industries (India) Ltd.) ..........APPELLANT(s)

Versus

M/s. Emirates Trading Agency LLC         ......RESPONDENT(s)

JUDGMENT

NAVIN SINHA, J.

Leave granted.   

2. The Respondent's Suit for breach of contract and damages was

decreed on 16.04.2013 by the Principal District Court, Thoothukudi in

Original  Suit  No.  73  of  2009  for  a  sum of  Rs.5,25,55,460/-  with

interest @ 8% from the date of the plaint till realisation.  First Appeal

by the Appellant was dismissed by the High Court on 04.02.2014. In

Special  Leave  Petition  (Civil)  Nos.12687–12688  of  2014  preferred

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against the same, liberty was granted on 12.5.2014 to approach the

High  Court  in  the  review  jurisdiction,  on  the  issue  whether  the

agreement  dated  26.10.2007  between  the  parties  constituted  a

concluded contract or matters rested at the stage of a proposal and a

counter proposal only. Liberty was further granted to approach this

Court again, if  aggrieved. Review application No. 160 of 2014 was

dismissed  by  the  High  Court  on  09.07.2015.  Thus,  the  present

appeal.

3. Sri C.A. Sundaram, learned Senior Counsel appearing for the

Appellant,  submitted  that  the  agreement  dated 26.10.2007 was  a

draft proposal from the Respondent regarding supply of phosphoric

acid by the Appellant in a specified duration. The Appellant made a

counter proposal to the Respondent; both with regard to the quantity

of supplies and the duration of supply.  No concluded contract had

arisen between the parties in absence of any final agreement having

been executed. The draft agreement was never signed, stamped and

returned  by  the  Appellant,  in  confirmation,  as  asked  for  by  the

Respondent.  The  defence  was  taken  specifically  in  the  written

statement.  The  Trial  Court  and  the  First  Appellate  Court,  without

proper appreciation of the draft agreement, arrived at a presumptive

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conclusion based on the exchange of correspondence preceding the

same that it reflected a concluded contract between the parties.  

4. This Court on 12.05.2014, after perusal of the agreement dated

26.10.2007,  having  been  satisfied  with  regard  to  lack  of  proper

consideration  of  the  issue,  granted  liberty  to  the  Appellant  for

preferring a review application before the High Court. In the review

application,  objections  were  specifically  raised  that  the  draft

agreement dated 26.10.2007 did not constitute a concluded contract,

but  was  merely  a  communication  of  a  proposal  and  a  counter

proposal. It was also urged that alterations had been made by the

Appellant;  both  with  regard  to  the  quantity  and  period of  supply.

There  was  no  material  on  record  to  demonstrate  that  any  final

agreement was arrived at between the parties thereafter. In absence

of a valid acceptance, no concluded contract had come into being.  

5. Unfortunately, the High Court relying on its earlier order dated

04.10.2014 that the correspondence preceding the agreement dated

26.10.2007  reflected  that  the  latter  was  a  concluded  contract,

dismissed the review petition without examining the corrections made

in the draft proposal with regard to the quantity of supply and period

of  supply, the effect  on the same, coupled with the Appellant not

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having signed, stamped and returned the same to the Respondent so

as to evince a concluded contract between the parties.  

6. Sri  Vijay Hansaria,  learned Senior Counsel  appearing for  the

Respondent, submitted that three Courts having returned concurrent

findings from the exchange of correspondence between the parties

that  the  agreement  dated  26.10.2007  constituted  a  concluded

contract, interference is not called for.  It was on the assurance of the

Appellant  to  deliver  supplies  of  phosphoric  acid,  coupled  with  its

promised back up support in writing, that the Respondent had bid in

response  to  the  international  tender  published  by  Bangladesh

Chemical  Industries  Corporation  (hereinafter  referred  to  as  'the

BCIC').

7. The breach of promise by the Appellant to make the promised

supplies had resulted in BCIC forfeiting the performance guarantee of

the Respondent in addition to other pecuniary liabilities imposed. The

Suit was then instituted by the Respondent claiming damages with

interest.  In  a  commercial  contract,  the  course  of  conduct  of  the

parties,  the  exchange  of  correspondences,  are  all  important

considerations for the conclusion whether there existed a concluded

contract  or  not.  Isolated  examination  of  the  agreement  dated

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26.10.2007  shall,  therefore,  not  be  appropriate  so  as  to  warrant

interference with the concurrent findings.

8. The respective submissions on behalf of the parties have been

considered by us.  Briefly  stated,  the BCIC floated an international

tender for supply of phosphoric acid. The Respondent submitted its

bid  and  was  awarded  an  order  for  supply  of  30,000  MT.   The

Appellant  had  signed  a  backup  support  agreement  with  the

Respondent for supplies in case the tender was awarded to the latter,

and which was furnished by the Respondent to the BCIC in support of

its  capacity  to  deliver  supplies.  The  correspondence  between  the

Appellant and the Respondent culminated in the latter forwarding a

draft  agreement  dated  26.10.2007,  to  the  Appellant  for

Sale/Purchase contract for 3 x 10,000 MT phosphoric acid for supply

to  the  BCIC during  November  and  December, 2007.  The covering

letter, appended to the draft agreement, required the Appellant to

sign, stamp and return the same to the Respondent in confirmation.

The Appellant, in response, made a counter proposal for supply of 3 x

9500 MT (max) and between the period January to March, 2008 by

incorporating necessary corrections in hand in the draft agreement.

Resultantly, while  there  was  a proposal  from the Respondent,  the

Appellant made a counter proposal both with regard to the quantity

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and the period of supply.  There is no material or evidence placed by

the Respondent that the draft agreement ever assumed the form of a

concluded contract by a meeting of minds both with regard to the

quantity of supplies and the duration for the same, much less was the

agreement  signed,  stamped and returned  by the  Appellant  to  the

Respondent in confirmation.

9. The contract between the Respondent and the Appellant was

independent of the contract between the Respondent and the BCIC.

The Appellant had only offered a backup support to supply phosphoric

acid to the Respondent in case the contract was awarded to the latter.

In the written statement, the Appellant had taken a specific defence

regarding  absence  of  any  concluded  contract  between  it  and  the

Respondent.  The Trial Court as well as the First Appellate Court did

not  specifically  deal  with  the  issue  of  the  draft  agreement,  the

corrections in the same, existence of a proposal and counter proposal

with regard to quantity and time period for supplies, the absence of

any  executed  contract  by  virtue  of  the  Appellant  having  signed,

stamped  and  returned  the  agreement  to  the  Respondent,  in

confirmation. On a presumptive reasoning, based on the exchange of

correspondence preceding the draft  agreement,  the First  Appellate

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Court affirmed the finding in the Suit of a concluded contract between

the parties.

10. The Appellant challenged the First Appellate Court’s order dated

04.10.2014 earlier in a special  leave petition. On 12.05.2014, this

Court considering the plea for absence of a concluded contract and

after  perusal  of  the  draft  agreement  dated  26.10.2007 containing

corrections,  in  hand,  had  observed  "that  these  aspects  are  not

specifically dealt with by the High Court. In this view of the matter, it

would be more appropriate for the petitioner to approach the High

Court by filing a review petition". Observing that the High Court shall

deal with the aspect on merits, liberty was also granted to challenge

any fresh order along with the impugned orders, if aggrieved.  

11. In the review petition, a specific plea was taken that the draft

agreement  dated  26.10.2007,  Exhibit  8-A,  did  not  constitute  a

concluded  contract  in  view  of  the  counter  proposal  made  by  the

Appellant, both with regard to the quantity of supply and the period

for the same. Reliance on the correspondence preceding the same

was not sufficient in absence of acceptance by the Appellant of the

proposal  made by  the Respondent  coupled  with  signing,  stamping

and returning of the agreement in confirmation of the same.  

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12. The  High  Court,  despite  noticing  the  specific  plea  of  the

Appellant with regard to the absence of a concluded contract between

the  parties  in  view  of  a  counter  proposal,  much  less  that  the

agreement was never signed, stamped and returned, reiterated the

earlier  observations  of  the  First  Appellate  Court  of  a  concluded

contract between the parties based on exchange of correspondence

preceding  the draft  agreement,  and also  on  the premise  that  the

Respondent had submitted its offer to BCIC on the assurance of the

Appellant  for  backup  support  if  the  contract  was  awarded  to  the

former. The High Court declined to delve further into the agreement

dated  26.10.2017,  holding  it  to  be  impermissible  in  the  review

jurisdiction and concluding that the grounds urged were superficial in

nature without any material proof, designed to avoid payment, and

dismissed the review application.  The High Court failed to notice that

as  recent  as  28.01.2008,  the  Respondent  was  still  awaiting

confirmation of its proposal from the Appellant, and soon thereafter

the  performance  guarantee  was  invoked  by  the  BCIC  against  the

Respondent on 13.04.2008.     

13. Section 7 of the Indian Contract Act, 1872 (hereinafter referred

to as 'the Act') provides that in order to convert a proposal into a

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contract,  the  acceptance  must  be  absolute  and  unqualified.  The

existence of a concluded contract is a  sine qua non in a claim for

compensation  for  loss  and  damages  under  Section  73  of  the  Act

arising out  of  a  breach  of  contract.  If  instead  of  acceptance of  a

proposal, a counter proposal is made, no concluded contract comes

into existence.  

14. U.P.  Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., (1996)

2 SCC 667, also related to a proposal and counter proposal. Holding

that no concluded contract had come into existence, the Apex Court

observed as follows :-

"9...As  seen,  the  material  alterations  in  the contract make a world of difference to draw an inference of concluded contract...."  

15. The fulcrum of the entire controversy is the draft agreement

dated 26.10.2007 marked Exhibit 8-A, for supply of phosphoric acid

by the Appellant to the Respondent.  The proposal of the Respondent,

led to a counter proposal by the appellant.  There was no acceptance

of the proposal by the Appellant giving rise to a concluded contract.

The quantity and duration of supply, therefore, remained in the realm

of uncertainty and was never agreed upon so as to give rise to a

concluded contract.   

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16. In absence of a concluded contract between the parties having

been established by the Respondent, the claim under Section 73 of

the Act was not maintainable. The impugned orders are, therefore,

held to be unsustainable and are set aside.

17. The appeals are accordingly allowed.

………………………………….J.    (Ranjan Gogoi)   

……….………………………..J.    (Navin Sinha)   

New Delhi, April 21, 2017

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