http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

CASE NO.: Appeal (civil)  1273 of 2006

PETITIONER: Indochem Electronic & Anr

RESPONDENT: Addl. Collector of Customs, A.P.

DATE OF JUDGMENT: 24/02/2006

BENCH: S.B. Sinha & P.K. Balasubramanyan

JUDGMENT: J U D G M E N T (Arising out of SLP  (Civil) No. 24699 of 2003)

S.B. SINHA,  J :

       Leave granted.

       The appellants supplied EPABX telephone system to the respondent  in the month of March, 1990. The said system was installed in the office of  the respondent on 18th March, 1990 at a cost of Rs. 1,87,599/-. In terms of  the contract of sale entered into by and between the parties, a warranty for a  period of 1 year was issued for the said equipments. The appellants during  negotiations agreed that a service centre at Vishakhapatnam  would be  opened for convenience of the said office  and other customers. The said  assurance was categorically  given in the offer of the respondent   dated  14.2.1990. At the relevant time furthermore approval of the  Telecommunication Department for installation of the EPABX system in the  respondent’s office had not been given.  The respondent was informed, on a  query made in that behalf by the Chief General Manager of the  Telecommunication Department, that the EPABX system supplied by the  appellants was not in department’s approved list.  Such approval was,  however, granted  only on 25.3.1991.   

On or about 13.9.1990 a letter of complaint was issued  by the  complainant to the appellants herein inter alia stating that:  

"It is registered (sic) to note that the 32 instruments  supplied by you in the month of March, 1990 are not  working properly.  Main drawbacks are as under:  

a.      Getting wrong numbers is a frequent complaint.  b.      The conversations are being interrupted and we  hear some music and the conversations stop.  c.      Instruments with key pad lock system supplied are  not at all working with the result that instruments  of the Telecom Department has been fixed  removing the instruments supplied by you.  

You may recall that at the time of submitting the tender,  it was assured that you will supply fault-less EPABX  and intercom facilities.  However, EPABX and intercom  facilities supplied by you are not working properly and  not upto the mark.  

You may also recall that you have promised to keep a  permanent resident engineer at Visakhapatnam to avoid  such defects.  However, no such arrangements has been  made.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

You are, therefore, requested to immediately send your  engineer to inspect all the instruments and EPABX and  rectify all the defects immediately.  You are also  requested to post a permanent resident engineer at  Visakhapatnam."

Allegedly, on receipt of the said complaint, the defects pointed out in  the system  were rectified.  According to the respondent the system was  found to have  several defects.  Locking arrangement did not work with the  result that the respondent had to pay excess amount for   two telephone  instruments, without getting any utility out of them.

 The appellants did not attend to the requirements for giving  maintenance and service of the said system. When the warranty period was  about to come to an end, the respondent categorically stated that the system  had not been functioning for the past 6 months and requested the  appellant  to extend the warranty period for another 3 to 6 months.  Later on, it was  further noticed that the night service system had not been functioning  properly insofar as outside calls during the closure of the office on holidays,  after office hours and on working days were not being received at the  reception. Despite night switch having been put on by the telephone  operator while leaving his office, calls were not being received in the  reception, resulting in snapping/cutting of the communication. Allegedly,  the respondent had to seek help of another firm for keeping the system  operational. The appellants, however, were insisting on ’annual maintenance  services’ for attending to the said complaints of the respondent to which the  latter did not agree.    

On the aforementioned allegations a complaint petition was filed  before the  State Consumer Disputes Redressal Commission, Hyderabad.   The said complaint petition was marked as CD 86/92 wherein it was prayed  that a direction be issued for repayment of full cost of EPABX system   amounting to Rs. 1,87,559/-.   

In the said proceedings the contention of the appellants, on the other  hand, was that during the period of warranty and even thereafter all the  complaints had been attended to.  The appellants could not maintain a  separate service centre at Vizag as the proposal became highly  uneconomical  and disproportionate to the installations in the region and,  thus, they had to cater to the service requirements from their Hyderabad  Office with prior intimation  to the appellants.   The said services had been  rendered even on 14.5.91, 14.7.91, 19.8.91 and 18.9.91 without any service  charges and although, the respondent did not agree to have an annual  maintenance contract for service thereof after the period of warranty  expired.  As during the period of warranty, the respondent got the system  attended to by the local mechanic, the same constituted breach of the  contract of warranty.   

The parties filed affidavits before the State Commission in support of  their respective cases.   By a judgment and order dated 23.2.2001 the State Commission  arrived at the following findings:  

"We shall now consider whether the system installed in  the office of the complainant in the month of March, 1990  was working as expected.  A reading of Exs. A-1 to A-3  show that the system was giving poor performance and the  complainant was trying frantically requesting for the  assistance of a mechanic.  Ex. A-2 letter dated 16.4.1991  shows even within a month after its installation there is  breakdown of the system.  In that letter the complainant  stated that the system is not at all working and the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

instruments are often going out of order.  The fuse is often  blown out.  The stand by battery installed by the opposite  party proved to be worthless.  As and when there is break  down automatic switching on to the battery is not working.   Hence its performance is disappointing.  This letter gives  an indication that from the beginning the system is giving  poor show.  It continued so as seen by telex message dated  6.5.1991 marked Ex. A-3.  In view of this correspondence  we have no hesitation to come to a conclusion that the  system is a failure.  The opposite party no doubt made  some effort to set it right as seen from Exs. B-4 to B-10.   Though some repairs were attended to during the month of  April and  May, it is  clear that the performance was not  satisfactory.  It is clearly indicated in Ex. B-7 dated  15.5.91 that repairs were made subject to further  observation.  In contra distinction to this the attitude of the  opposite party is one of perseverance for entering into a  service contract under letters dated 9.10.1991 and  22.10.1991 marked Ex. B-11 and Ex. B-3.  therefore, the  record clearly depicts that the system was not functioning  from the beginning, complaints were made continuously  and although the technician was deputed and made some  repairs still it could not be rectified satisfactorily and on  the top of it, the opposite party was more anxious to enter  into a service contract rather than to see that the system  sold and supplied by it works satisfactorily."

The appellants, in term of the said findings, were directed to refund a  sum of Rs.1,87,559/- with interest @ 12% from the date  of the filing of the  complaint till the date of payment after taking back the system supplied by  it.  

An appeal preferred by the appellants herein before the National  Commission was dismissed by reason of the impugned judgment.  

Mr. K.V. Mohan, learned counsel appearing on behalf of the  appellants in assailing  the said orders of the State Commission and the  National Commission submitted that in terms of the contract of warranty   the appellants were required  to maintain the system free of cost  only for a  period of one year and it was not at all necessary for them to provide free  services and/or  to maintain the system thereafter.  As the liability of the  appellants was to maintain the system only during the period of warranty, it  was argued, the State Commission acted illegally in directing the appellants  to pay the prices thereof with interest.  It was, furthermore, submitted that  the breach of contract of warranty would not enable the appellants to reject  the entire contract and claim the price of goods supplied, particularly, when  in the instant case the period of warranty had expired.  

Mr. Gopal Subramanium, learned Addl. Solicitor General, on the  other hand, would support the judgment urging that such a relief could be  granted in terms of Section 14 (1) (c) of the Consumer Protection Act, 1986.   The learned counsel drew our attention to the statements made in paragraph  7 of the written statement wherein the appellants had categorically admitted  that in terms of the contract  of supply, no service centre was  opened.  Such  service centre came to be opened only on 21st September, 1990 i.e. after the  complaint was made by the respondent and that too was discontinued.  

Before adverting to the rival contentions raised herein we may notice  certain admitted facts.  The parties entered into a contract of supply of  EPABX system subject to the conditions mentioned therein.  The appellants  received the entire price for installation of the said system.  

At the relevant time the said system was not approved by the  Department of Telecommunication.  No service centre was opened and only

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

upon receipt of the complaint, the same was opened in September, 1990.   The said service centre was later on discontinued. In September, 1990 the  respondent admittedly complained about the working/functioning of the said  system as early as possible on 13.9.1990.   Just before the expiry of the  period of contract of warranty the respondent complained that as the said  system had not been functioning properly for the past 6 months, the  warranty period should be extended, which request was not accepted by the  appellants.  

The Consumer Protection Act, 1986  (herein after referred to as ’the  Act’) was enacted inter alia to provide for better protection of the interests  of the consumers.  The applicability of the said Act in the instant case is not  in dispute.  The dispute between the parties, is admittedly a ’consumer  dispute’ within the meaning of Section 2 (e) of the Act.  It has further not  been disputed that there has been a ’deficiency of services’.  ’Deficiency’  has been defined in Section 2 (g) of the Act to mean:-  

" ’deficiency’ means  any fault, imperfection,  shortcoming or inadequacy in the quality, nature and  manner of performance which is required to be  maintained by or under any law for the time being in  force or has been undertaken to be performed by a person  in pursuance of a contract or otherwise in relation to any  service."

The provisions of the said Act are in addition to and not in  derogation of the provisions of any other law.  

Section 14 of the Act  provides for powers of the Forum to issue an  order to the opposite party directing him to do one or more of the things  satisfied therein including:  

"(b) to replace the goods with new goods  of similar  description which shall be free from any defect;  

(c) to return to the complainant the price, or, as the case  may be, the charges paid by the complainant\005."  

The State Commission as well as the National Commission which are  created  under the said Act exercise special jurisdiction.  

The defects in the system pointed out by the respondent in the instant  case started within the period of warranty.  As noticed hereinbefore, certain  breaches of contract of supply are admitted.  

Telephone is a means of communication.  The communication system  was required to be run effectively and efficiently by the appellants having  regard to the statutory duties they were required to perform.  

The deficiencies in EPABX system supplied by the appellants were  such as  were required to be attended to immediately.  If the appellants had  not been able to attend thereto immediately, there would be a ’deficiency of  services’ on the part of the appellants as immediate attention to such  complaints was a part of the contract.   

The State Commission as well as  the National Commission have  arrived at findings of fact as regard nature of deficiencies of  service  complained of by the respondent in terms of the provisions of the contract.   If such breaches of conditions of warranty admittedly had taken place  during the period of warranty, no exception can be taken to the judgment  and order passed by the State Commission as also the National Commission.   

The Appellant had all along been aware that the system installed by it  had not been functioning properly.  On its own showing,  it had been

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

attending to the complaints made by the Respondent relating to the  functioning of the system.  It has categorically been stated by the Appellant  itself that despite expiry of the period of warranty it had been attending to  the complaints as and when made by the respondent which were of serious  nature  

       From the aforementioned conduct of the Appellant itself, it may be  inferred that it voluntarily undertook to meet the requirements of the  Respondent relating to mal-functioning etc. of the said system despite expiry  of the period of warranty.   For all intent and purport, the period of warranty,  thus, stood extended.  As the defects in the system including manufacturing  defects, if any, were found not only during the period of warranty but also  during the extended period, and as the Appellant itself undertook to attend to  the complaints received in that behalf, in our opinion, it is too late for it now  to contend that in view of the fact that the period of contract or warranty  expired, it had no liability therefor.  

       By reason of its own conduct, the Appellant made representation to  the Respondent that despite expiry of period of warranty, maintenance of the  system to the Respondent’s satisfaction was its contractual obligation.  The  contract in view of such representation on the part of the Respondent does  not come to an end.  The contract, if looked in the light of the surrounding  circumstances evidently pointed to the intention of the parties and as  gathered from the contract itself that the representation of the Appellant  should have been treated as warranty for an expended period.  Even in a case  where the goods are accepted, it is well known, the buyer will have a remedy  for damages for the breach of it.   

Section 12 of the Sale of Goods Act,  reads as under:  "Section 12 -  Condition and warranty \026 (1) A  stipulation  in a contract of sale with reference to goods  which are the subject thereof may be a condition or a  warranty.  

(2) A condition is a stipulation essential to the main  purpose of the contract, the breach of which gives rise to  a right to treat the contract as repudiated.  

(3)  A warranty is a stipulation collateral to the main  purpose of the contract, the breach of which gives rise to  a claim for damages but not to a right to reject the goods  and treat the contract as repudiated.  

(4)   Whether a stipulation in a contract of sale is a  condition or a warranty depends in each case on the  construction of the contract.  A stipulation may be a  condition, though called a warranty in the contract."

Although in terms of sub-section (3) of Section 12 no right accrues to  a purchaser to reject the goods on breach of stipulation of warranty, the  same would not mean that  the extent of damages cannot be equivalent to  the price of the goods inasmuch as such a power has specifically been  conferred upon the Commission.   

       It is true, where a stipulation in a contract of sale is a warranty, its  breach may give rise to a claim for damages but not to a right to reject the  goods and treat the contract as repudiated;  but,  where a stipulation in a  contract of sale is a condition, its breach may give rise not only to a claim  for damages but also generally to a right to treat the contract as repudiated.   [See Halsbury’s Laws of England, Fourth Edition Reissue (41) Para 64]   

In Ghaziabad Development Authority Vs. Balabir Singh [ 2004 (5)  SCC 65] this Court opined that under the law, the Consumer Protection Act,  1986 has a wide reach and the Commission has jurisdiction even in cases  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

service rendered by statutory and public authorities, holding:-    

"\005.The word compensation is of a very wide  connotation.  It may constitute actual  loss or expected  loss and may extend to compensation for physical,  mental or even emotional suffering, insult or injury or  loss.  The provisions of the Consumer Protection Act  enable a  consumer to claim  and empower the  Commission to redress any injustice done.  The  Commission or the Forum is entitled to award not only  value of goods or services but also to compensate a  consumer for injustice suffered by him.  The  Commission/Forum must determine that such sufferance  is due to mala fide or capricious or oppressive act.  It can  then determine amount for which the authority is liable  to compensate the consumer for his sufferance due to  misfeasance in public office by the officers.  Such  compensation is for vindicating the strength of law\005.."

In view of our findings aforementioned and keeping in view  the fact  that the State Commission and National Commission cannot be said to have  acted without jurisdiction,  we are of the opinion that no case has been made  out  for interference with the impugned judgment.  The appeal is  accordingly dismissed.  

However, in the facts and circumstances of the case, there shall be no  order as to costs.