UNION OF INDIA versus J. K. GAS PLANT

Citation: [1980] 3 S.C.R. 893 · Decided: 29-04-1980 · Supreme Court of India · Bench: S. MURTAZA FAZAL ALI · Disposal: Dismissed
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Judgment (excerpt)

... .( 
• 
UNION OF INDIA 
v. 
J. K. GAS PLANT 
April 29, 1980 
[S. MURTAZA FAZ.AL ALI AND A. D. KosHAL, JJ.J 
893 
Contract Act, Section 10, Scope of-Conditions to be applied-Government 
<Jf lndia Act, 1935, Section 175(3), applicability of-Defence of India Act, 
Section 17(2), scope of. 
B 
The appellant had supplied some steel to the respondent plaintiff Company 
for manufacturing gas plants at Rampur. Only a part of the steel so supplied 
C 
was utilised for the intended purpose and with regard to the rest, the Regional 
Deputy Iron & Steel Controiler, U.P. Circle, Kanpur directed the respondents 
through a letter dated 8th/10th of November, 1944 to deliver the same to 
the U.P. Registered Stock Holders Associations and to send to the Kanpur office, 
the bill of costs of the material, handling charges etc. made in the name of 
Iron & Steel Controller, Calcutta. Since the order contained in that letter could 
not be implemented on account of lack of transport facilities, the Kanpur Con-
D 
troller, directed the respondent .company to deliver the surplus steel to MfS 
G. Brothers Ltd., Rampur and to this extent the order dated 8th/10th November 
1944 stood modified. 
Though the surplns material was delivered to Govan Brothers between 11th 
April 
1945• and 30th of April, 1945, the price 
therefor to 
the 
tune of 
Rs. 43,728-6-6 remained unpaid inspite of repeated demands made by the 
E 
respondent. Ultimately, the Iron & Steel Controller informed the respondent to 
take up the matter with Govan Brothers. 
As the price of the steel remained unpaid by the Union of India as well as 
G. Brothers the plaintiff company filed its suit for Rs. 46,652-14-6 which was 
inclusive of interest on the principal price calculated at the rate of 6 per cent 
per annum from April, 1945, upto the date of the institution of the suit, after 
F 
Y' serving the defendant with the requisite notice under section 80 of the Code of 
' 
Civil Procedure. 
\ 
The trial Court decreed the claim of the plaintiff company in full and also 
directed that it would be entitled to the costs of the suit as also interest at the 
rate of 3 per cent per annum from the date of the institution of the suit to 
the date of payment. The trial Court held that the Kanpur Controller had 
undertaken the liability to pay the price of the goods to the plaintiff company 
even in respect of the delivery to G. Brothers and that the defendant could 
not escape liability by reason of the contents of section 65 of the Indian 
Contract Act even though the provisions of section 175(3) of the Government 
of India Act, 1935, had not been complied with. The contention raised by the 
defendant to the effect that section 17(2) of the Defence of India Act was a 
bar to the suit was negatived. 
In appeal, the High Court agreed that Se<:tion 17(2) of the Defence of 
India Act would be a complete bar to the suit if it was one for damages. or 
G 
H 
894 
SUPREME COURl' REPORTS 
[1980] 3 S.C.R. 
~ compensation but held that the suit was not of that nature and, on the other 
hand, it was for recovery of the price of the goods supplied to G. Brothers 
as was also found by the trial Court. 
It further held that even though the 
provisions of section 17 5 ( 3) of tbe Government of India Act were not complied 
with the agreement resulting from the correspondence which took place between 
the plaintiff company and the officers of the detendant '\Vas good. 
Relying on 
Section 70 of the Indian Contract Act and on the basis thereof, it held the 
B 
plaintiff company to be entitled to recover the price of the goods from the 
defendant even if it was assumed that the provisions of section 175(3) were 
a bar· to the recognition of the contract envisaged by the correspondence bt:tween 
the parties. The High Court dismissed the appeal, but granted a certificate 
under Article 133(1) (a) of the Constitution to the appellant. 
c 
D 
E 
F 
G 
Dismissing the appeal, the Court 
HELD : 1. The suit is not one for Compensation or damages etc. as contem-
plated by Section 17 (2) of the Defence of India Act and hence is not barred by 
.oat section [898 Al. 
2. The legality of the matter under which the respondent company transferred 
its stock to G. Brothers cannot be allowed to be questioned at the appellate stage. 
The question whether the requirements of clause (5) of the Indian Iron and 
Steel Control Order, 1941 which postulates only a written 
direction for 
disposal of surplus stocks were satisfied or n
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