1.      This consumer complaint has been filed under Section 21 (a) (i) & 2(1) (c) of the Consumer Protection Act, 1986 (in short, ‘the Act’) against opposite party who is sole distributor of Sugarcane Harvesters manufactured by M/s Guangxi Yunma Hansheng Machinery Manufacture Co. Ltd. (in short, ‘M/s Hansheng’) alleging that the harvesters supplied by the opposite party against a tender failed to perform after field trials as per specifications and as per the standard of performance assured by the opposite party.  Deficiency in service and unfair trade practice is alleged by the complainant through this complaint.

2.     The facts of the case, in brief, are that the complainant had implemented a scheme of agricultural mechanization as per Government Order of Government of Tamil Nadu dated 03.03.2008 under which purchase of Sugar Harvesters to introduce such machines on farmers lands was proposed. In response to the tender advertisement dated 06.01.2010, the Purchase Committee of the complainant awarded the tender to the opposite party for a Whole Sugarcane Harvester model LCT-HSZ-2600 with cane box including taxes, inland transportation, insurance and incidental costs for Rs.141 lakhs.  The opposite party provided a Performance Guarantee dated 22.03.2010 and an amount of Rs.70.5 lakhs (50% of the cost) was paid as first instalment on 03.05.2010 followed by Rs.56.4 lakhs (40%) towards the next installment.  The opposite party supplied a harvester on 13.08.2010. Field trials were conducted between 14.08.2010 to 19.08.2010 based on which the complainant suggested change of cutting blades and to suitably modify the crop divider to a lower level.  These modifications were done and the machine was again subjected to trials on 05.09.2010.  During this demonstration, defects in the hydraulic system in the front and rear, electrical system, cabin indicators, heating of hydraulic pumps, top blower guide, oil leaks in gear box and other places etc. were noticed and reported to the opposite party on 06.09.2010.  On 13.09.2010, opposite party assured that the defects would be rectified.  However, this was not done despite 11 reminders. On 12.04.2011 opposite party agreed to replace the harvester with a new improved version for which the complainant conveyed approval subject to the condition that the specifications of the replacement harvester be at par or above that of the original harvester.  The upgraded harvester was received on 24.06.2011. 

3.     In the meanwhile, the complainant approved the purchase of four more Whole Cane Harvesters at a cost of Rs.600 lakhs.  The consent of the opposite party to supply the additional harvesters at the same price and on the same terms & conditions including the condition of a Bank Guarantee was obtained on 29.09.2010.  An advance of Rs.282 lakhs was paid on 06.10.2020 followed by Rs.225 lakhs as second instalment on 04.11.2010. However, the opposite party failed to supply the harvesters within the stipulated 120 days and, therefore, a notice was issued on 04.02.2011 in response to which vague reasons for the delay were provided in reply dated 10.02.2011.  One harvester was delivered on 23.05.2011 and the balance three on 04.06.2011.  However, the harvesters failed to clear the field trial conducted on 01.08.2011 at Erankattore.  Subsequent trials were held on 10.08.2011 and a team of technicians from the manufacturer undertook installation and adjustments between 23.08.2011 and 05.09.2011. Field trial on 24.08.2011 could not be undertaken due to wet soil conditions and subsequently the Sugarcane Mill was closed in September, 2011. The complainant sought the replacement of the harvesters vide letters dated 13.09.2011, 04.10.2011 and 28.10.2011. Resumption of field trials 23.11.2011 once again indicated unsatisfactory performance of the machines on 23.11.2011. The opposite party informed that technicians from China were expected by end of December, 2011 and since that did not happen, another notice dated 02.01.2012 was issued to the opposite party. It was conveyed to the opposite party that the harvesters were lying idle since June, 2011 and could not succeed in demonstrating trials. The Chinese technicians conducted trials from 15.02.2012 which were not satisfactory since the level of breakage of cane and trash content were 12.5 to 10% respectively which was on the higher side making its performance not acceptable to the complainant or the farmers or the Mill.  The opposite party in its reply dated 27.02.2012 ascribed the blame to the crop variety and requested for suitable fields for long duration field trials with all the four machines.  These trials were arranged at fields under Sakthi Sugars Ltd., Appakudal at Nanjaipulaimpatti on 12.03.2012 and 13.3.2012.  However, the trials were not successful with very high spillage and broken cane which was objected to by the farmers who refused further operations since there was huge loss of crops.  A legal notice was issued by complainant on 13.06.2012 asking for refund of Rs.6,34,50,000/- along with damages of Rs.25 lakhs.  In view of the fact that the opposite party had failed to demonstrate the satisfactory operation of the harvester or replace the same or refund the money paid, the complainant has alleged deficiency in service and is before this Commission with the following prayer:

a)     To refund to the Complainant the sum of Rs.6,34,50,000/- (Rupees Six Crores Thirty Four Lakhs and Fifty Thousand only), which is the amount paid by the Complainant for the supply of five harvesters, along with interest at the rate of 18% per annum.

b)       to pay a sum of Rs.25,00,000/- (Rupees Twenty Five Lakhs only) to the Complainant towards the mental agony caused in such supply of the said faulty harvesters, along with interest at the rate of 18% per annum.

c)       to pay cost of this complaint.

d)       and to pass such order or orders as this Hon’ble Forum deems fit and proper under the circumstances of the case.

4.     The complaint was resisted by the opposite party by way of reply.  The opposite party contends that the Whole Cane Harvester was identified by officials of the Tamil Nadu Government accompanied by experts from the complainant and sugarcane industry following visits to China during October, 2007 and May, 2008 after evaluating the technical details of the machine, adaptability to Indian conditions, cropping and cultivating patterns, etc.  It is contended that the Government Order dated 03.03.2008 clearly states that the machines were proposed for distribution at 50% subsidy to small and marginal farmers with custom hiring options and therefore the intent behind the purchase was to put it purely for commercial use.  M/s Hansheng, the manufacturer of the harvester authorized the opposite party as its sole distributor and the opposite party processed the submission of bids to the tender and related paper work. It is admitted that trial run between 14.08.2010 and 19.08.2010 required mechanical adjustments and that during subsequent trials also further improvements were requested for, which were also done.  The opposite party vide letter dated 29.09.2010 offered to supply four more upgraded machines at the earlier price and executed the contract on the same payment terms.  The furnishing of Performance Guarantee was dispensed with by the complainant.  It is submitted that based on trial M/s Hansheng offered to replace the hydraulics and to supply an upgraded machine as a replacement of the first machine.  It is alleged that the complainant was not willing to take the onus of mechanization through education of farmers and its insistence on trials in very wet conditions, which was unsuitable for running the mechanical harvester, resulted in damaging the machine during subsequent trials.  It is contended that the machine was designed to work based upon the cane variety and proper spacing between the sugarcane planted and that the machine which had been supplied elsewhere in India had worked satisfactorily. The opposite party submits that even after the first machine was replaced by a new machine, neither the previous machine was returned nor its value of Rs.1,41,00,000/- refunded. The balance 10% of the invoice of the price for the subsequent five machines was also not paid and the outstanding aggregated to Rs.70,50,000/-.

5.     The opposite party submits that the Tamil Nadu Government initiated proceedings through its Vigilance Department on 09.05.2012 which resulted in F.I.R. No. 2/2012/AC/CB dated 08.05.2012.  The original documents relating to the transactions have been seized and the opposite party is seriously contesting the charges.  In the instant matter, the opposite party filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 in view of the arbitration clause in the Agreement which was dismissed by this Commission on 30.04.2013.  The appeal of the opposite party before the Hon’ble Supreme Court to file reply to the complaint was allowed on 11.01.2019 subject to a cost of Rs.2 lakhs to the complainant.  The Hon’ble High Court of Madras appointed an Arbitrator (Mr. Justice R. Balasubramanian) who passed an award on 16.08.2018 stating that he was not inclined to prejudice the rights of other parties before the NCDRC by passing any order. 

6.     Preliminary objections are raised by the opposite party that (i) the complainant is not a ‘consumer’ since it had intended to hire the machine to small and marginal farmers for the purpose of sugarcane harvesting; (ii) that the opposite party is only an agent for and on behalf of the manufacturer i.e. M/s Guangxi Yunma Hansheng Machinery Manufacture Co. Ltd. and is only authorized to submit and negotiate a bid and sign the contract and therefore cannot be held liable for the fault, if any, of the principal; (iii) that the alleged deficiency in service is incorrectly urged since it is not the case of the complainant that the goods supplied were defective and an Annual Maintenance Contract under Clause 16 of the Contract had not been implemented; (iv) that since complicated issues of law were involved this Commission lacked jurisdiction and (v) that only one order was placed by the complainant and the other four orders were placed independently by the Engineering Department who had not been impleaded in the present complaint thereby rendering the complaint as not maintainable.  On merits, it was submitted that the harvesters were delivered as per specifications issued by the complainant and its proper functioning was demonstrated.  The complainant failed to engage the farmers and teach them appropriate farming practices and could not demonstrate the machine in proper fields.  Therefore, it is prayed that the complaint be dismissed with costs.

7.     Parties led their evidences way of affidavit and filed their written statements, rejoinder and written synopsis.

8.     I have heard the learned counsel for both the parties and given thoughtful consideration to the material on record.

9.     Learned counsel for the complainant submitted as per the complaint on the facts and relied on Section 2(1) (g) of the Act which defines “deficiency” as “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.”  It was argued that the opposite party supplied faulty and defective machines and failed to make the machines operational within the stipulated time and thereby failed to discharge the contractual obligation between the parties which clearly amounts to “deficiency” under Section 2 (1) (g) of the Act.  It was argued that the authorized representative of the opposite party acknowledged several instances of mechanical failure during field trials.  It is, therefore, argued that the harvesters that were demonstrated during visits to China were far different from the harvesters that were supplied by the opposite party.  The contention of the opposite party that the fields provided for the trials were not suitable or that the crop variety or the spacing or the crop density was not suitable is contested by the complainant since the row spacing between the crops was 1.5 mtrs. (5 feet), as compared to the required spacing of 1.2 mtrs. (4 feet).  It is argued that the tender condition under Clause 14 stipulates that warranty for the product was to be given by the supplier / manufacturer which has not been adhered to since they have failed to repair or replace the defective machinery within the specified period of time.  It is also submitted that Clause 5 & 6 of Section 5 of the Schedule of requirement in the two documents clearly requires that the system should be operated and demonstrated by the supplier’s personnel before the supply is accepted on a 5 hectare plot.  Therefore, the opposite party cannot invoke the warranty clause without having successfully demonstrated the effective functioning of the harvesters.  It is contested that ordering of four more cane harvesters was a proof of satisfactory performance of the first harvester, on the ground that the decision for four more harvesters was much prior in time of the mechanical defects observed during field trials in August, 2010.

10.   Learned counsel for the opposite party argued as per the written statement and submitted that the cane harvester was found to be successful by the complainant since it had placed repeat orders for four more such machines.  According to the counsel for the opposite party only minor problems in the radiator and hydraulic lines emerged during field trials which were duly corrected by technicians deputed by M/s Elseetee Agro Machines India Pvt. Ltd. Education and training of farmers was reiterated as a necessary pre-requisite for the successful mechanization of agriculture which was not done by the complainant.  It was argued that the opposite party was (M/s Elseetee Agro Machines India Pvt. Ltd.) indeed an agent of the principal (M/s Hansheng) and that it was not responsible for the mechanical shortcomings as its responsibility was only to bid for and to execute the tender.

11.   From the submissions of the parties, it is evident that the Whole Cane Harvesters supplied against an order through a tendering process by the opposite party failed to clear field trials despite the presence of its own technicians and various rectifications/installations undertaken by its technical personnel.  The contention of the opposite party that the procurement was done for a commercial purpose cannot be accepted as it was done as per a Government initiative and was with the objective of introducing mechanization of agriculture among farmers and not for a commercial purpose. The provision of mechanized equipment to farmers for use on subsidy as per a Government scheme cannot be taken as a commercial activity. The contention that the opposite party was an agent of M/s Hansheng, the principal, and therefore not liable for deficiency in service cannot be accepted as it was its sole distributor and dealer and had represented it in all financial dealings in the procurement of the harvesters and its subsequent rectification and follow up orders.  The contention that the subsequent orders of four more Harvester machines was evidence of the satisfactory performance of the first machine supplied also cannot be accepted since the approval of the order for the second lot of four harvesters is dated 08.03.2010 which clearly predates the second round of trials which commenced in November, 2011.  The placing of the orders by the Engineering Department of the complainant is not of consequence as it was only the executing wing of the complainant.

12.   It is manifest from the record that the Whole Cane Harvesters failed to clear the field trials which was a stipulated condition of the purchase.  The terms and conditions of the second order incorporated the original conditions, except the waiver of the condition relating to Performance Guarantee.  On behalf of the complainant it has clearly been stated that the crop of sugarcane and its spacing were within the norms required for the harvesters in terms of spacing and variety.  The argument of the opposite party that the complainant failed to disseminate technical education regarding agricultural practices pertaining to sugarcane cultivation to the farmers does not merit consideration as this was never made a condition for the supply of the harvesters by the opposite party.  This contention, at this stage, when the equipment failed to meet the bar of field trials successfully, cannot be considered to be valid.

13.   The contention of the opposite party that the purchase of the Whole Cane Harvesters by the complainant was under investigation by the Vigilance Department of the State Government is not germane to the present complaint which relates to deficiency in service under the Consumer Protection Act, 1986.

14.   Admittedly, the Cane Harvesters failed to clear the mandated field trials as per the terms & conditions of the purchase order placed on the opposite party.  Opposite party has admitted to this although it has advanced reasons which, as discussed in the preceding paragraphs above, cannot be considered valid.  The contentions in the complaint are, therefore, valid and liable to succeed.

15.   Accordingly, the complaint is allowed in part.  In the facts and circumstances of the case, the complaint is disposed of with the following directions to the opposite party to:

(i)     Repay Rs.6,34,50,000/- to the complainant with 6% simple interest p.a. from the date of payment till the filing of complaint;

(ii)    Comply with this order within eight weeks failing which the applicable rate of interest will be 9%.

        There shall be no order as to costs.  All pending IAs, if any, stand disposed of with this order.