BRF ASSIGNMENT

Sales of Goods Act 1930

EXECUTIVE SUMMARY

Goods include every kind of movable property other than actionable claim or money. Things like goodwill, copyright, trade mark, patents, water, gas, electricity and ships are all goods and may be the subject of the contract of sale. Human organs and tissues have become an object of sale subject to statutory restrictions.The Goods which form the subject-matter of any contract of sale can be classified into various categories. This classification help in determining as to when does the property in the goods pass from the seller to the buyer. The goods may be either existing goods or future goods. Existing goods may be further classified into specific goods and unascertained goods. Specific goods are those goods which have been identified and agreed upon at the time of the contract of sale. If the goods are not identified and agreed upon at the time of making of the contract, they are known as ascertained goods. In case of specific goods, there is a possibility of the property in the goods passing to the buyer at the time of making of the contract, whereas in the case of unascertained goods, the property in the goods does not pass to the buyer unless and until the goods are ascertained.

The effect of perishing of specific goods can be understood under the following heads in order to have a clear understanding of the effect of such destruction on the contract and its effect on the burden of liability.

Goods perishing before making of Contract Goods perishing before sale but after agreement to sale

In cases of destruction of unascertained goods, as the goods have not been identified at the time of formation of the contract of sale, the seller would not be discharged on the grounds of impossibility of performance. In such cases, the contract is subsisting and the seller needs to perform the contract or pay damages for the breach in case if he fails to perform the same.

If the future goods are specific, the destruction of such goods will amount to supervening impossibility and the contract shall be void. In all the cases where the goods are unascertained goods at the time of destruction, the contract shall remain unaffected and will have to be performed by the seller.

In case sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods. If the goods can turn out to be defective he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer. The seller is not bound to disclose the defects in the goods which he is selling. It is the duty of the buyer to satisfy himself before buying the goods that the goods will serve the purpose for which they are being brought. If the goods turn out to be defective or do not serve his purpose or if he depends on his own skill or judgement, the buyer cannot hold the seller responsible.

The price in a contract of sale means the money consideration for sales of goods. It forms an essential part of the contract. It must be expressed in money. It is the consideration for the transfer or agreement to transfer the property in goods from the seller to the buyer. It is not

essential that the price should be fixed at the time of sale. It must , however, be payable, though it may not have been fixed.

ASCERTAINMENT OF PRICE:

The price may be fixed:

(i) at the time of contract by the parties themselves, or

(ii) may be left to be determined by the course the of dealings between the

parties , or

(iii) may be left to be fixed in an agreed manner , or

AGREEMENT TO SELL AT VALUATION :

The parties may agree to sell and buy goods on the terms that price is to be fixed by the

valuation of a third party. if such third party cannot or does not make such valuation

,the agreement becomes void. But if the goods or any part thereof have been delivered to and

appropriated by the buyer ,he shall pay a reasonable price therefor. If the third party is

prevented from making the valuation by the fault of the seller or buyer, the party not in fault

may maintain a suit for the damages against the party in fault.

In case of JCL International Limited vs. Bharat Petroleum Corporation Limited considering

the provisions of Sale of Goods Act and the Contract Act, the fixation of provisional price

cannot be stated to be impermissible and creates no rights in favour of JCL’s claims.

Subject Matter Of Sales Of Goods

The subject-matter of the contract must be goods. ‘Goods’ means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of that land which are agreed to be severed before sale or under the contract of sale.

This part of contract includes basically 3 sections:

Section 6: Existing or future goods Section 7: Goods perishing before making of contract Section 8: Goods perishing before sale but after agreement to sell

Goods include every kind of movable property other than actionable claim or money. Things like goodwill, copyright, trade mark, patents, water, gas, electricity and ships are all goods and may be the subject of the contract of sale. Human organs and tissues have become an object of sale subject to statutory restrictions.The Goods which form the subject-matter of any contract of sale can be classified into various categories. This classification help in determining as to when does the property in the goods pass from the seller to the buyer. The goods may be either existing goods or future goods. Existing goods may be further classified into specific goods and unascertained goods. Specific goods are those goods which have been identified and agreed upon at the time of the contract of sale. If the goods are not identified and agreed upon at the time of making of the contract, they are known as ascertained goods. In case of specific goods, there is a possibility of the property in the goods passing to the buyer at the time of making of the contract, whereas in the case of unascertained goods, the property in the goods does not pass to the buyer unless and until the goods are ascertained.

Money cannot be sold because money means legal tender and not the old coins which can be sold and purchased as goods. Actionable claims are things that a person cannot make use of, but which can be claimed by him by means of legal action such as a debt.

Sale of immovable property is not covered under this Act. As per Section 3 of the Transfer of Property Act, 1882, ‘immovable property’ does not include standing timber, growing crops or grass. They are considered movable property and thus goods. Standing timber is taken as movable property while trees are immovable property.

Things like goodwill, copyright, trademark, patents, water, gas, electricity are all goods. In the case of Commissioner of Sales Tax vs. Madhya Pradesh Electricity Board [AIR 1970 SC 732], the Supreme Court observed – “…electricity…can be transmitted, transferred, delivered, stored, possessed, etc., in the same way as any other movable property…If there can be sale and purchase of electric energy like any other movable object, we see no difficulty in holding that electric energy was intended to be covered by the definition of “goods”.

In the case of H. Anraj vs. Government of Tamil Nadu [AIR 1986 SC 63], it was held that lottery tickets are goods and not actionable claims. Thus, sale of lottery tickets is sale of

goods. Sugarcane supplied to a sugar factory is goods within the meaning of Section 2(7) of the Act as held in the case of UP Cooperative Cane Unions Federation vs. West UP Sugar Mills Assn. [AIR 2004 SC 3697]

Section 7 of sales of goods act 1930,states where there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract.

And Section 8 ofsales of goods act 1930, states Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided.

Santosh Kumar Chopda Vs State of MP, 2003(2) CivilLJ 378 (MP): A bidder cannot question the validity of an auction sale after making a bid on the ground that the goods sold at auction were damaged, as it is the responsibility of the bidder to inspect such goods before making the bid.

THIS RULE APPLY TO ASCERTAINED GOODS NOT TO UNASCERTAINED GOODS.

When goods destroy in parts ,the performance of contract depends on:

• WHETHER CONTRACT IS DIVISIBLE – the contract is not void.• WHETHER CONTRACT IS INDIVISIBLE- the contract is void.

EFFECTS OF DESTRUCTION OF GOODS

If the goods are damaged or lost after their property was passed on to the buyer, the contract will remain unaffected and the buyer will bear the loss. Where the goods are yet to become the buyer’s goods, any damage or loss will have an effect on the contract. The destruction of goods may take place in various situations as under the following heads:

EFFECT OF PERISHING OF SPECIFIC GOODS

The effect of perishing of specific goods can be understood under the following heads in order to have a clear understanding of the effect of such destruction on the contract and its effect on the burden of liability.

Goods perishing before making of Contract:

According to the Section 7, of The Sale of Goods Act 1930, when in case of sale or agreement to sell, the perishing of specific goods at or before the time of making the contract would render the contract void.

The term ‘perishing of goods’ does not only mean physical destruction but also includes the cases in which the goods have lost their commercial value e.g. when sugar has been converted into liquid by mixing of water, etc. As the transfer of property has not taken place the risk remains with the seller. When only a part of the goods have perished, the contract as a whole will be void if it was an indivisible contract requiring total performance by the seller. If the contract can be seen as a divisible contract, the contract for the goods which are intact shall remain valid.

However, if the seller has knowledge about the destruction of the goods, and in spite of it, he enters into a Contract of Sale with the buyer, then the seller is bound to compensate the buyer.

Example: A sold specific goods to B which were lying in A’s godown. Unknown to both the parties the goods got destroyed due to fire. Such contract is void.

Goods perishing before sale but after agreement to sale:

According to Section 8, “Where there is an agreement to sell specific goods and the goods subsequently without any fault of seller or buyer perish or suffer such damages as not to answer to description in an agreement before the risk passes to the buyer, the agreement becomes void.”

The Contract of Sale becomes void on the ground of supervising impossibility of performance. However, the following conditions must be satisfied:

1. The contract of sale must be an ‘agreement to sell’ and not ‘actual sale’2. The agreement to sell must be for the sale of specific goods

3. The goods must have perished before the agreement to sell becomes sale i.e. before the buyer becomes the owner of goods

4. The goods must have perished without the fault of the buyer or the seller.

Example: John delivered a horse to Johny for a trial for 8 days. It was agreed that the sale would be complete if the horse was found suitable for Johny’s purpose. The horse died on the 3rd day without any fault of either party. The Contract was void and John could not recover the price from Johny.

EFFECT OF PERISHING OF UNASCERTAINED GOODS

Sec 7 & 8 do not voice the consequences in case of Destruction of Unascertained Goods.

In cases of destruction of unascertained goods, as the goods have not been identified at the time of formation of the contract of sale, the seller would not be discharged on the grounds of impossibility of performance. In such cases, the contract is subsisting and the seller needs to perform the contract or pay damages for the breach in case if he fails to perform the same.

However, in case of unascertained goods, the contract will not be void.

Example: X agreed to sell to Y 10 bales of Egyptian cotton out of 100 bales lying in his godown. The goods were already destroyed by fire before the Contract of Sale. But both X and Y did not know about the fire. In this case, the contract is not void as it was not for the sale of specified goods, but for the sale of certain quantity of unascertained goods. And thus, X is liable to supply 10 bales of Egyptian cotton to Y, or to pay him the damages for breach of contract.

EFFECT OF DESTRUCTION OF FUTURE GOODS

If the future goods are specific, the destruction of such goods will amount to supervening impossibility and the contract shall be void. In all the cases where the goods are unascertained goods at the time of destruction, the contract shall remain unaffected and will have to be performed by the seller.

Example: Mohan agreed to sell 200 tons of potatoes, to be grown on his land, to Sohan. The crop was almost totally damaged because of a disease. The contract was said to have become void because it was a case of destruction of specific future goods identified as the crop from a particular land.

CAVEAT EMPTORIn case sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods. If the goods can turn out to be defective he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer. The seller is not bound to disclose the defects in the goods which he is selling. It is the duty of the buyer to satisfy himself before buying the goods that the goods will serve the purpose for which they are being brought. If the goods turn out to be defective or do not serve his purpose or if he depends on his own skill or judgement, the buyer cannot hold the seller responsible.

The rule of caveat emptor is laid down in the Section16, which states that ,”subject to provisions of this act or any other law for time being in force there is no implied warranty or condition as to quality or fitness for any other particular purpose of goods supplied under a contract of sale”.

Example: A sold pigs to B. These pigs being infected , caused typhoid to the other healthy pigs of the buyer. It was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of law being “caveat emptor”.

Exceptions: The doctrine of Caveat Emptor is however subjected to following exceptions:

1. Where the buyer makes known to the seller the particular purpose for which the goods are required, so as to show that he relies on the seller’s skill or judgement and goods are of a description which is in the course of seller’s business to supply, it is the duty of the seller to supply such goods as are reasonably fit for that purpose [Section 16(1)].Example:An order was placed for some trucks to be used for heavy traffic in a hilly country. The trucks supplied by the seller were unfit for this purpose and broke down. There is a breach of condition as to fitness.

2. In case where the goods are purchased under its patent name or brand name there is no implied condition that the goods shall be fit for any particular purpose [Section 16(1)].Example: In the sale of a refrigerator, the name of the article itself implies that the seller warrants that the machine is fit for the particular purpose.

3. When goods are sold by description there is an implied condition that the goods shall correspond with the description[Section 15].

4. Where the goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality. The rule of caveat emptor is not applicable. But where the buyer has examined the goods the rule shall apply if the defects were such which ought to have not been revealed by ordinary examination [Section 16(2)].

Example:A bought a black velvet cloth from C and found it to be damaged by white ants. Held the condition as to merchantability was broken.

5. Where the goods are bought by sample, this rule of Caveat Emptor does not apply if the bulk does not correspond with the sample [Section 17].

6. Where the goods are bought by the sample as well as description, the rule of caveat emptor is not applicable in case the goods do not correspond with both the sample and description or either of the condition [Section 15].

7. An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, this rule of caveat emptor is not applicable.

8. Where the seller sells the goods by making some misrepresentation or fraud and the buyer relies on it or when the seller actively conceals some defect in goods so that the same could not be discovered by the buyer on a reasonable examination, then the rule of caveat emptor will not apply. In such case the buyer has the right to avoid the contract and claim for damages.

MEANING OF GOODS

In economics, a good is a material that satisfies human wants and provides utility, for example, to a consumer making a purchase while getting an enough-satisfying Product.

A common distinction is made between 'goods' that are tangible property and services, which are non-physical.

Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products.

CLASSIFICATION OF GOODS

Goods may be classified into

1. Existing goods;

2. Future goods; and

3. Contingent goods

1. Existing goods: At the time of sales if the goods are physically in existence and are in possession of the seller the goods are called ‘Existing Goods’. Existing goods can be classified into ‘specific or unascertained.’

(a) Specific goods. Goods identified and agreed upon at the time of the making of the contract of sale are called ‘specific goods’ [Sec. 2(14)]. It may be noted that in actual practice the term ‘ascertained goods’ is used in the same sense as ‘specific goods,’ For example, where A agrees to sell to B a particular radio bearing a distinctive number, there is a contract of sale of specific or ascertained goods

(b)Unascertained goods. The goods, which are not separately identified or ascertained at the time of the making of the contract, are known as ‘unascertained goods.’ They are indicated or defined only by description. For example, if A agrees to sell to B one bag of sugar out of the lot of one hundred bags lying in his godown; it is a sale of unascertained goods because it is not known which bag is to be delivered. As soon as a particular bag is separated from the lot for delivery, it becomes ascertained or specific goods.

(c ) ascertained goods. Ascertained goods are a seller's stockholding of particular goods from which a buyer's order has already been picked or put to one side. That is, the goods have been identified and selected for sale. See also unascertained goods.

The distinction between ‘specific’ or ‘ascertained’ and ‘unascertained’ goods is important in connection with the rules regarding ‘transfer of property’ from the seller to the buyer.

MEANING OF GOODS

In economics, a good is a material that satisfies human wants and provides utility, for example, to a consumer making a purchase while getting an enough-satisfying Product.

A common distinction is made between 'goods' that are tangible property and services, which are non-physical.

Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products.

CLASSIFICATION OF GOODS

Goods may be classified into

1. Existing goods;

2. Future goods; and

3. Contingent goods

2. Future goods: Future goods are goods to be manufactured or produced or yet to be acquired by seller. There cannot be present sale in respect future goods because the property cannot pass.

Example

(a) A agrees to sell to B all the milk that his cow may yield during the coming year. This is a contract for the sale of future goods.

(b)X agrees to sell to Y all the mangoes, which will be produced in his garden next year. It is contract of sale of future goods, amounting to ‘an agreement to sell.’

3. Contingent Goods: Though a type of future goods, these are the goods the acquisition of which by the seller depends upon a contingency, which may or may not happen [Sec. 6 (2)].

Example

A agrees to sell specific goods in a particular ship to B to be delivered on the arrival of the ship. If the ship arrives but with no such goods on board, the seller is not liable, for the contract is to deliver the goods should they arrive.

Do you know what would happen if the goods are perished?

Effect of Pershing of Goods

The first we must know what we mean by perishing of goods.

‘pershing’ means not only physically destruction of goods but it also covers:

(a) Damage to goods so that the goods have ceased to exist in the commercial sense, i.e., their merchantable character as such has been lost (although they are not physically destroyed), e.g., where cement is spoiled by water and becomes almost stone or where sugar becomes sharbat and thus are unsaleable as cement or sugar;

(b) Loss of goods by theft (Barrow Ltd. Vs Phillips Ltd. );

(c) Where the goods have been lawfully requisitioned by the government (Re Shipton, Anderson & Co.).

You must note that it is only the perishing of specific and ascertained goods that affect the sales. In the case of unascertained goods, their perishing does not affect the contract. Where A agrees to sell to B ten bales of Egyptian cotton out of 100 bales lying in his godown and the bales in the godown are completely destroyed by fire, the contract does not become void. A must supply ten bales of cotton after purchasing them from the market or pay damages for the breach.

ELEMENT OF PRICE

PriceThe price in a contract of sale means the money consideration for sales of goods. It forms an essential part of the contract. It must be expressed in money. It is the consideration for the transfer or agreement to transfer the property in goods from the seller to the buyer. It is not essential that the price should be fixed at the time of sale. It must , however, be payable, though it may not have been fixed.

ASCERTAINMENT OF PRICE:

The price may be fixed:(iii) at the time of contract by the parties themselves, or(iv) may be left to be determined by the course the of dealings between the

parties , or(iii) may be left to be fixed in an agreed manner , or

AGREEMENT TO SELL AT VALUATION :The parties may agree to sell and buy goods on the terms that price is to be fixed by the valuation of a third party. if such third party cannot or does not make such valuation,the agreement becomes void. But if the goods or any part thereof have been delivered to and appropriated by the buyer ,he shall pay a reasonable price therefor. If the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for the damages against the party in fault

Where nothing is said by the parties regarding price, the buyer must pay a reasonable price, and the market price would be a reasonable price.

EXAMPLE:A AGREES TO SELL CERTAIN GOODS TO B AT APRICE TO BE FIXE BY C.IF C REFUSES TO VALUE THE GOODS ANF FIX THE PRICE ,THE AGREEMENT IS AVOIDED.IF HOWEVER ,C IS WILLING TO VALUE THE GOODS,BUT IS PREVENTED FROM MAKING THE VALUATION BY THE WRONGFUL ACT OR FAULT OF A OR B ,THE PARTY IN FAULT IS LIABLE FOR DAMAGES TO THE PARTY NOT IN FAULT

CASE STUDYM/S JCL International v/s Bharat Petroleum Corporation Ltd. (BPCL)PETITIONER : M/S JCL International JCL provides solution for supply and distribution of LPG as domestic, industrial and automotive fuel. They carry out LPG bottling for Shell, Bharat Petroleum Corporation Ltd. and Hindustan Petroleum.

RESPONDENT - Bharat Petroleum Corporation Ltd.Bharat Petroleum Corporation Ltd. (BPCL) is one of the largest public sector oil marketing company in India. BPCL is an Indian state-controlled oil and gas company headquartered in Mumbai, Maharashtra. The Corporation operates two large refineries of the country located at Mumbai and Kochi. The company is ranked 358th on the Fortune Global 500 list of the world's biggest corporations as of 2016.

APPEAL – October 2006

JUDGEMENT – September 2009

SEQUENCE OF EVENTS In May 1999, JCL entered into a contract with BPCL for supply of LPG cylinders at

RS. 679.67 In July 1999, BPCL issued amendment to the purchase order which was signed by

both parties fixing the price of cylinder at RS. 702.98 the cylinders were delivered and contract ended.

In March 2000, both the parties enter into a fresh contract for supply of cylinders during the financial year 2000-2001 at RS. 702.98.

In October 2000, BPCL communicates the revised price of the cylinder supplied during the previous year, from RS. 702.98 to the provisional price RS. 645.

BPCL alleged to have unlawfully deducted about RS. 28.69 Lakhs from the amount payable.

In June 2001, petitioner asks to appoint an arbitrator under ‘arbitration clause‘arbitrator was appointed.

In October 2006, the arbitrator dismissed the claim of the petitioner (JCL). Petitioner challenged the decision, petition allowed and new arbitrator was appointed.

“A letter dated 30th July by respondent clearly mentioned to the petitioner that the price of cylinder was provisional and will be revised on the basis of the pricing set by MOP &NG”- contents of this letter are not in dispute and are crucial to the case.

THE JUDGEMENT Section 9 of the 1930 act allows the parties not to fix the price at the time of the

transfer and to leave the determination of the amount of consideration to a later date. Also re-fixing or revising of the price was done with the due notice and /or in breach

of terms and condition of the contract and/or statutory provision Thus, considering the provisions of sales of goods act and the contract act, the fixation

of provisional price cannot be stated to be impermissible and creates no rights in favour of JCL’s claims.

SECTION 9 IN THE SALE OF GOODS ACT, 1930

9. Ascertainment of price.—(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties.(2) Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

Case Study - II

C.N.Anantharam vs. M/S Fiat India Ltd.

On 31st October, 2002, the Petitioner (C. N Anantharam) herein purchased a Fiat Siena Weekender diesel vehicle from M/s Sundaram Automobiles, Bangalore, the common Respondent in all these three Special Leave Petitions and agent of M/s Fiat India Ltd., the manufacturer of the said vehicle. The Petitioner paid a sum of Rs.7,69,187/- towards the Ex-showroom price of the vehicle, together with a sum of Rs.56,537/- towards lifetime road tax and Rs.28,964/- as insurance. The vehicle was duly registered in the name of the Petitioner on 25th November, 2002, when the vehicle was delivered.

According to the Petitioner, immediately after registration of the vehicle, it was taken out for a drive when certain defects, particularly in the engine, began to manifest themselves. The same day, the Petitioner left the vehicle with the dealer for removing the defects. On the very same day, the Respondent No.2, M/s Sundaram Automobiles, wrote back to the Petitioner stating that the vehicle was in good condition and the noise was on account of the operational characteristics of the engine. Thereafter, on several occasions, the Petitioner left the vehicle with the agent and various parts, including the engine itself, were completely replaced. The Petitioner, however, was not satisfied with the performance of the vehicle and came to the conclusion that the vehicle had inherent defects and could not be repaired. He, accordingly, insisted that the vehicle be replaced with a new vehicle or the amount paid by him as sale price be refunded, together with expenses incurred in trying to rectify the defects in the vehicle.

Not getting any response, the Petitioner filed Complaint No.474 of 2003 before the IVth Additional District Consumer Disputes Redressal Forum, Bangalore Urban, on 17th April, 2003. The complaint was heard by the District Forum, which allowed the same by its order dated 20th February, 2004, and directed the Respondents 1 and 2 to refund a sum of Rs.9,15,536/-, as claimed by the Petitioner, together with interest at the rate of 12% per annum and a further sum of Rs.5,000/- towards cost of the legal proceedings. The claim against Respondent No.3, M/s Fiat Sundaram Auto Finance Ltd. was rejected.

Aggrieved by the said order, the Respondents 1 and 2 herein filed two separate appeals, being Nos.513 of 2004 and 397 of 2004, respectively, before the Karnataka State Consumer Disputes Redressal Commission, Bangalore. On 15th June, 2006, the State Commission disposed of the said Appeals modifying the order of the District Forum by directing the Appellants (Respondents 1 and 2 herein) to replace the Petitioner's vehicle with a brand new

vehicle or on their failure to do so to refund Rs.7,69,187/-, along with life time tax paid and the monthly instalments which had been paid by the Petitioner, to M/s Sundaram Automobiles, together with interest @ 12% per annum from the date of the order and also the cost of Rs.5,000/-.

The matter was, thereafter, taken to the National Consumer Disputes Redressal Commission, New Delhi, hereinafter referred to as "the National Commission", by the Respondent No.1 in Revision Petition No.2431 of 2006. The Respondent No.2 (agent) filed Revision Petition No.1585 of 2006. The Petitioner, in his turn, filed Revision Petition No.1713 of 2006, before the National Commission. The National Commission, while admitting the Revision Petition No.1585 of 2006 on 25th July, 2006, only on the point of the monthly instalments (EMI) paid and the quantum of interest, directed the Revision Petitioner to deposit its share with interest at the rate of 9%. Aggrieved by the said order, the Respondent No.2 filed Special Leave Petition (Civil) No.13201 of 2006 before this Court on 4th August, 2006, and the same was dismissed on 22nd February, 2008. Revision Petition Nos. 2431 of 2006, 1585 of 2006 and 1713 of 2006 were finally disposed of by the National Commission through a common order dated 17th April, 2009. In the said order, the National Commission held as follows:

"....Therefore, while we hold that the complainant has not been able to prove any manufacturing defect, all the same, the dealer and the manufacturer are directed to remove the defect, if any, in the vehicle make it roadworthy, if necessary by reconditioning the vehicle and deliver it to the complainant in the presence of an independent technical expert mutually agreed upon by the complainant and opposite parties and for this purpose any of the party may apply to the District Forum for appointing such expert if it is not mutually agreed upon by the parties. The expert shall certify that the vehicle is free from any defect which shall be final for all purposes. This should be done within a period of three months. The Ops, thereafter, to provide a warranty for one year from the date of delivery. The revision petitions are accordingly disposed of in these terms. Under the peculiar facts of the case, there would be no order as to costs."

Thereafter, the Petitioner filed the instant Special Leave Petitions challenging the order of the National Commission.

The issues which fall for decision in these Petitions are:-

(i)Whether it can be said that the manufacturing defect of thevehicle wassuch that it warranted replacement, andwhether the refund of Rs.7,69,186/- and 12% interest as ordered by the State Commission was justified?, and

(ii) Whether both the dealer and the manufacturer are jointly and severally liable in regard to deficiency of service?

Appearing for the Petitioner in all the three Special Leave Petitions, Ms. Kiran Suri, learned Advocate, urged that from the very day on which the vehicle was delivered to the Petitioner, it was obvious that there were several manufacturing defects in the vehicle, which could not be removed. The said position was duly appreciated both by the District Forum as well as the State Commission which directed the Respondents to replace the vehicle or to refund the amounts which had been expended by the Petitioner for purchase and to make the vehicle operational and roadworthy. The National Commission struck a different note upon holding that there was no worthwhile evidence to indicate that the vehicle had suffered from any serious manufacturing defect and that in any case the allegation of noise emanating from the engine even after its replacement with a new engine, could not be believed. Ms. Suri also questioned the view of the National Commission that the obligation of the manufacturer/dealer is only to repair/replace any part of the vehicle found to be defective, even during the warranty period, free of charge, but that the question of replacing the vehicle with a new vehicle was not justified.

Ms. Suri lastly submitted that the finding of the National Commission that the Complainant/ Petitioner had not been able to prove any manufacturing defect, was perverse and contrary to the evidence adduced by the parties and the materials on record. Ms. Suri also questioned the finding that the refund of the cost of the vehicle would also not be justified, since the Petitioner had not taken the vehicle from the dealer despite their letter certifying that the vehicle had no defect. Ms. Suri submitted that further direction given by the National Commission to remove any defects and to make the vehicle roadworthy, if necessary, by reconditioning the vehicle and to deliver the same to the Petitioner in the presence of an independent technical expert mutually agreed upon, was wholly misconceived and could not be sustained.

In support of her submissions, Ms. Suri referred to a decision of this Court in Indochem Electronic vs. Addl. Collector of Customs [(2006) 3 SCC 721], wherein while considering the provisions of Sections 3 and 14 of the Consumer Protection Act, 1986, this Court was of the view that when the deficiency began to manifest themselves it was the duty of the suppliers to attend to such deficiencies immediately and if the supplier was unable to attend to the deficiencies and malfunctioning of the system soon after installation, it would amount to "deficiency of service". Furthermore, when the deficiencies in the system continued to persist during the warranty period, including the extended period, the suppliers were rightly held to be liable for deficiency in service by the State and National Commission. It was also held that in the light of the specific power conferred under Section 14(1) (c) of the aforesaid Act,

damages equivalent to price of goods could be awarded, despite the provisions of Section 12(3) of the Sale of Goods Act, 1930, as the provisions of the 1986 Act are in addition to and not in derogation of any other provision of law.

Mr. Vijay Kumar, learned Advocate, who appeared for M/s Fiat India Ltd., urged that the complaint made by the Petitioner herein was without any basis as the vehicle was fully roadworthy and it was the Petitioner who made continuous complaints which, the Respondent attended to for the sake of maintaining good business relations. It was submitted that the manufacturer company went to the extent of even replacing the engine and parts of the gear box to give the Petitioner complete satisfaction. However, there was absolutely no justification for the Petitioner to demand that the vehicle be replaced or that the value thereof, together with the expenses incurred be refunded. It was also urged that the vehicle had been duly certified to be completely roadworthy and it was the Petitioner who was at fault for not having taken delivery of the same, despite the same being ready. It was submitted that the decision of the National Commission did not call for any interference and the Petition was liable to be dismissed.

On behalf of the Respondents it was contended that everything possible was done to meet the repeated complaints made by the Petitioner, which even involved the replacement of the engine and other parts. However, instead of taking delivery of the vehicle, the Petitioner continued to insist on replacement of the vehicle which was not contemplated under the warranty given by themanufacturing company when the vehicle was delivered to the Petitioner.

It was also submitted that, in any event, the agent of a vehicle manufacturer would not be made liable for the defects, if any, in the vehicle and the relief paid for against Respondent No.2 was entirely misconceived.

In support of the aforesaid submissions, reference was made to the decision of this Court inMaruti Udyog Ltd. vs. Susheel Kumar Gabgotra [(2006) 4 SCC 644], in which it was, inter alia, held that if the manufacturing defect was established, then replacement of the entire item or the replacement of the defective parts, is only called for. In fact, reference was made to the warranty condition which referred only to replacement of only the defective parts and not the car itself. This Court held that from the various documents exhibited it would appear that the manufacturer had indicated that it was necessary to download the engine to trace the problem which has been complained of, but there was no agreement to replace the engine. Moreover, when the manufacturer asked for the vehicle to be brought in for the purpose of downloading the engine, the Respondent did not do so and, accordingly, to infer that there was any manufacturing defect in the said background was without any foundation. However,

the relief was moulded so that the defective part could be replaced without requiring the purchaser to pay any charge.

Reference was then made to the decision of this Court in Hindustan Motors Ltd. vs. N. Siva Kumar [(2000) 10 SCC 654], in which it was held that when it became impossible to comply with the National Commission's order directing replacement of the Respondent's defective vehicle, since the manufacturer had stopped manufacturing the said model, this Court directed that the money along with interest, compensation and costs were to be paid to the purchaser.

Having considered the various submissions made on behalf of respective parties, what emerges is the question as to whether the manufacturing company and by extension the dealer/agent was under any compulsion to replace the vehicle itself when the engine of the vehicle from which certain noises were allegedly emanating had been replaced. It has been explained that an engine operating on diesel makes a rattling noise which does not occur in petrol driven engines and that there was really no manufacturing defect in the vehicle as complained of by the purchaser.

In such circumstances, the order passed by the National Commission, impugned in these Special Leave Petitions, does not appear to be unreasonable. For whatever reason, except for a mere 800 kilometers the Petitioner has not used the vehicle after it was delivered and has, on the other hand, made several complaints in an attempt to prove that there were manufacturing defects in the vehicle. The National Commission has taken all these matters into consideration in giving the impugned directions regarding delivery of the vehicle to the Petitioner after having the same properly checked by an independent technical expert who would have to certify that the vehicle was free from any defect when it is delivered.

From the facts as disclosed, it appears that apart from the complaint relating to noise from the engine and the gear box, there was no other major defect which made the vehicle incapable of operation, particularly when the engine was replaced with a new one. However, in addition to the directions given by the National Commission, if the independent technical expert is of the opinion that there are inherent manufacturing defects in the vehicle, the petitioner will be entitled to refund of the price of the vehicle and the lifetime tax and EMI along with interest @ 12% per annum and costs, as directed by the State Commission.