Vishnu Sugar Mills Ltd. v. Food Corporation of India & Anr.

    This article is written by Shaily Garg, a Fourth year B.Com. LLB (Hons.) Student of University Institute of Legal Studies, Panjab University, Chandigarh.

    The present case deals with the performance of the Contract under the Sale of Goods Act, 1930. The parties to any contract are bound to perform their obligations under the contract. So far as a contract of sale of goods is concerned, it is the duty of the seller to deliver the goods and of buyers to accept and pay for them in accordance with the terms of the contract of sale. If the contract between the parties does not provide anything different, then according to Section 32 of the Sale of Goods Act, 1930, the delivery of the goods and the payment of the price are concurrent conditions, which mean that the seller shall be ready and willing to deliver the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for the delivery of the goods. This case was filed in 1986 in Patna High Court and judgment was pronounced by a former chief justice of India S.S Sandhawalia.

    Facts of the Case

    The petitioner, Vishnu Sugar Mills Limited was a registered company under the Companies Act, 1956 and owns a sugar factory for more than 30 years where sugar is produced through the vacuum pan process. The production and sale of the sugar are controlled by the provisions of the Sugar Control Order, 1966, issued under Section 3 of the Essential Commodities Act, 1955 according to which 65 percent of the total production of sugar by the producers, including that of the petitioner company is administered and controlled by Government and called as ‘levy sugar’, which the petitioner is bound to sell to the respondent Corporation i.e. Food Corporation of India who is the biggest buyer of sugar and having a monopoly to buy the levy sugar only from those producers requisitioned by the law. The remaining 35 percent of the production of sugar is called the ‘free sugar’ which is allowed to be sold in the open market by private negotiations.

    For this sale and purchase of sugar, a uniform procedure for payment has been decided by both the parties and duly communicated but later on the respondent unilaterally changed the procedure of payment for the sugar purchased. In that latest procedure, sugar has to be first delivered to the representatives of the respondent Corporation, thereafter a bill issued by such representative after delivery be presented to the District Manager of the Corporation who would prepare a cheque and send it to the producer of Sugar. This new procedure was causing a considerable delay in the payment after the delivery of sugar by the petitioner company. Hence, aggrieved by this a petition was filed by the petitioner in the Civil Court which was dismissed at the admission stage itself. Therefore, a writ petition was filed by the petitioner corporation before Patna High Court was heard by a full bench.

    Issues of the Case

    Whether the petitioner is entitled to the payment of the price for the delivery of sugar to the Respondent Corporation?

    Contentions of the Parties

    It was contended by the counsel on behalf of the petitioner that the respondent is not following the previous order of the Civil Court and withholding the payment of the price to the petitioner for three days or more. The petitioner is bound to deliver sugar to the Corporation irrespective of payment as a matter of right.

    On the contrary, it was contended by the counsel on behalf of the respondent that in the earlier direction of the High Court, the payment has to be made within three days from the date of the submission of the delivery or dispatch documents to the Corporation and petitioner cannot seek a review or revision of such direction. Also, the payment procedure is according to the instructions and circulars issued by the head office of the Corporation and the Government of India.

    Observations/ Decision of the Court

    It was observed by the Court that the payment of the price and the delivery of goods are the concurrent conditions. The law in the context of a compulsory sale envisages a great emphasis on the tender of price against delivery unless it has been otherwise agreed upon. The petitioner was always inconsistent upon the conditions laid down in the procedure of payment of price because once the delivery has been made, the payments should not be held up and deferred at the whims of the officials of the respondent Corporation, as it should be paid immediately once the delivery is completed. There had been no claim for advance payment but payment at the time of delivery of goods. Also, where there is a compulsory sale of sugar under a statute i.e. Sugar Control Order, 1966, and there is no agreement regarding the time of payment or delivery of sugar, then there should be concurrent tender of price against the delivery, as envisaged under Section 32 of the Sale of Goods Act, 1930 and hence, a different procedure adopted by the Food Corporation of India was bad in law and was quashed.

    Conclusion

    It was concluded that where there are practical difficulties in the concurrent payment to the sellers, then their delivery cannot be rejected on this mere ground of non-payment of price. This practical inconvenience should be resolved by the buyer himself because it is not one-way traffic. Such practical difficulties cannot override the statutory provisions with regard to sales either by a reciprocal arrangement or compulsory sale by the statute. In order to resolve all sorts of practical difficulties, in the ways of both buyers and sellers, such statutory provision as Section 32 of the Sale of Goods Act, 1930 has been inserted in the Statute books and mandates the concurrent tender of price against the delivery of goods.