Case Note & Summary
The litigation arose out of a dispute concerning the supply of cement by the appellant, a cement manufacturer, to the Nagarjunasagar Project and the State of Andhra Pradesh through the State Trading Corporation, which acted as a canalising agency under the Cement Control Orders. The appellant had offered a concessional rate of Rs.47.50 per ton for cement supplied to the project, which was lower than the controlled price fixed under the Cement Control Order, 1956. The State Trading Corporation agreed to pass on a rebate of Rs.7 per ton to the purchaser. From 1958 to 1.11.1961, the appellant consistently allowed this rebate, but after the new Cement Control Order, 1961 came into force, it stopped showing the rebate in its bills to the State of Andhra Pradesh while continuing to collect only the concessional price. In its accounts with the State Trading Corporation, however, the appellant debited the full controlled price, thereby claiming the rebate amount from the corporation. The State of Andhra Pradesh filed a suit seeking execution of a formal agreement for a fixed price of Rs.47.50 and refund of excess amounts, while the State Trading Corporation filed a separate suit for recovery of the rebate amount reversed by the appellant after 1.11.1961. The trial court dismissed the State's suit and decreed the State Trading Corporation's suit. On appeal, the High Court dismissed all three appeals, holding that there was no concluded contract for a fixed price, but that the appellant had offered and was bound by the rebate arrangement. The Supreme Court upheld this view. The Court noted that the High Court had examined the entire correspondence and found no concluded contract, a finding with which it agreed. Consequently, the question of drawing up an agreement under Article 299 of the Constitution did not arise. The Court observed that the appellant's offer of a rebate of Rs.7 on the controlled price was the basis on which licences were issued for the cement factory and its expansion. The appellant had in fact granted this rebate until 1.11.1961 and continued to recover only the concessional price from the State of Andhra Pradesh thereafter, without taking any steps to recover the difference. The State Trading Corporation, as a canalising agency, had merely agreed to pass on the rebate to the purchaser and was not liable to absorb it. Therefore, the appellant was not entitled to claim the rebate amount from the State Trading Corporation after 1.11.1961. The appeals were dismissed.
Headnote
A) Constitutional Law - Government Contracts - Formal Requirements - Constitution of India, Article 299 - Since no concluded contract between appellant and State of Andhra Pradesh for fixed price of Rs.47.50, question of drawing up agreement under Article 299 or non-enforceability did not arise; Supreme Court upheld High Court's finding that no concluded contract existed. B) Commercial Law - Rebate and Price Concession - Unilateral Withdrawal - Cement Control Order, 1956 and 1961 - Appellant offered and consistently gave rebate of Rs.7 per ton on controlled price for cement supplied to Nagarjunasagar Project, which formed basis for issuance of licenses; appellant could not withdraw rebate after 1.11.1961, especially since it continued to collect concessional price from State of Andhra Pradesh and took no steps to recover the difference; Held appellant not entitled to claim rebate amount from State Trading Corporation. C) Commercial Law - Canalising Agency - Liability for Rebate - Cement Control Order, 1956 - State Trading Corporation acted as canalising agency and agreed to pass on rebate to State of Andhra Pradesh; it was not liable to reimburse appellant for the rebate amount after 1.11.1961 because appellant itself had granted the rebate to the State; Held State Trading Corporation's claim for recovery of rebate amount was rightly decreed.
Issue of Consideration
Whether there was a concluded contract for supply of cement at fixed price of Rs.47.50 per ton; whether appellant was entitled to withdraw rebate of Rs.7 after 1.11.1961; whether State Trading Corporation was liable to pay the rebate amount to appellant.
Final Decision
Supreme Court dismissed the appeals, upholding High Court judgment that State of Andhra Pradesh entitled to cement at controlled price less rebate of Rs.7, and appellant not entitled to claim rebate from State Trading Corporation after 1.11.1961.
Law Points
- No concluded contract for fixed price existed between parties
- rebate of Rs.7 on controlled price was an offer that could not be unilaterally withdrawn
- State Trading Corporation as canalising agency was not liable to reimburse rebate
- Article 299 Constitution not applicable in absence of concluded contract.
