Jaspal Singh, J.

1. The Partition of the country in the year 1947 brought in its wake one of the worst disasters that Homo sapiens have faced. It not only uprooted homes, the entire economic fiber too was affected. The suit which has led to the quibbling of these lines too has a history rooted in that period. It starts like this. M/s. Dalmia Cement Ltd., was having a cement producing factory at Dandot. The Partition saw Dandot in West Pakistan. The factory became the centre-storm of some pitched legal battles which, however, need not detain us. What is relevant for our purposes is that sometime in the year 1961 the Government of India authorised M/s. Dalmia Cement Company to import cement manufactured by them at their said factory at Dandot. The import licence was issued in the name of the defendant State Trading Corporation with a letter of authority in the name of M/s. Dalmia Cement Company who imported the cement into India and distributed the same. The entire operation was completed by April, 1962. However, the smoothness of the operation was disrupted by a notice dated February 11, 1966 issued by the Sales Tax Assessing Authority to M/s. Dalmia Cement Ltd. requiring it to show cause by February 19,1966 regarding proposal to levy Sales Tax on the imports. The notice itself was served on February 16,1966. I am mentioning these dates for the reason that, as would be revealed later, they are not without significance. The irony is that no Sales tax could be levied. Anyhow, to continue with the narrative, on February 16 itself a reply was sent by M/s. Dalmia Cement Ltd. to the Assessing Authority that since cement had been imported by the State Trading Corporation, all queries be raised to them. A copy of that letter along with the notice of the Assessing Authority was sent to the State Trading Corporation. It appears from the evidence that the said copy of the reply was received by the State Trading Corporation on February 19, 1966 at 4 p.m. The hearing before the Assessing Authority was fixed on that very day at 10 a.m. and as none put in appearance before it either on behalf of M/s. Dalmia Cement Ltd. or the State Trading Corporation, it led to an ex parte order which was actually made on March 9, 1966. However, the State Trading Corporation assuming obviously that the proceedings must still have been pending, wrote to the Authority that no tax was leviable. This was on March 15,1966. The copy of the letter was sent to M/s. Dalmia Cement Ltd. with a request to furnish all information and documents before the Authority. Two days later M/s. Dalmia Cement Ltd. too, oblivious of the ex parte order already made, wrote to the Assessing Authority (with copy to the State Trading Corporation) that they were prepared to produce the documents which might be required by the Authority. It was only thereafter that the passing of the ex parteorder came to be known and with it came to be drawn the battle lines between M/s. Dalmia Cement Ltd. and the State Trading Corporation. The first salvo was fired in the shape of a letter of March 18, 1966 (Ex.PW 6/1) written by M/s. Dalmia Cement Company with reference to State Trading Corporations letter dated March 15, 1966 complaining delay on the part of the State Trading Corporation. In reply State Trading Corporation attributed negligence to the Dalmia Cement Company. In fact what we find is that these allegations and counter-allegations continued to be levelled against each other. What is of further significance is that on April 25, 1966 M/s. Dalmia Cement Company filed a writ petition challenging its liability. The High Court stayed realisation of Sales-tax and penalty amount on furnishing a Bank guarantee. However, on March 9,1970 the Punjab and Haryana High Court disposed of the writ petition directing the Appellate Authority to entertain and hear appeals with the direction that the Bank guarantee, which stood furnished, would remain operative till the disposal of the appeals. As if to add one more twist to the events, the Deputy Excise and Taxation Commissioner (Appeals) dismissed the appeals and asked M/s. Dalmia Cements Ltd. to deposit the amount of Rs.98,872.85 within four days. On March 21, 1972 the Assessing Authority encashed the Bank guarantee for that amount but returned the same on April 5, 1972 as M/s. Dalmia Cements Ltd. had deposited the amount in question. (See Ex.PW 2/7). Ultimately on February 8, 1973 the Sales Tax Appellate Tribunal while setting aside the orders of the Assessing Authority and the Deputy Excise and Taxation Commissioner, directed the Assessing Authority to return a finding on merits. The curtain was drawn finally on September 1, 1975 when the Assessing Authority held that no sales tax was leviable and directed the refund of Rs. 38,872.85. The refund was actually made on September 12, 1975.

2. Remember the first salvo Well, so long as the battles ranged on before the Sales Tax Authorities and the High Court, M/s. Dalmia Cement Company kept on laying claim on the State Trading Corporation with regard to the expenses etc. being incurred by it and the State Trading Corporation also remained firmly entrenched to its position that it was Dalmias negligence which had brought about that situation and as such it was not liable to reimburse. It is this dispute which is at the centre-storm.

3. One thing more. The suit is by Dalmia Dairy Industries Ltd. Why Because it claims to be the successor of Ms. Dalmia Cements Ltd.

4. The main defence setup by the State Trading Corporation stands already noticed above. However, for clarity it may be reiterated. The Corporation claims that since M/s. Dalmia Cement Ltd. was grossly negligent in the conduct of the matter, no liability can be fastened on to it. Ofcourse, the State Trading Corporation has also pleaded that its dealing being not with the plaintiff Company but with M/s. Dalmia Cements Ltd. the suit as framed is not maintainable. The defendant is also taking refuge under the plea that the suit is barred by limitation. Yet another plea which figures in written statement also needs to be mentioned. It arises from a letter dated October 27,1976 written by the plaintiff-company offering to settle the claim at Rs. 55,000. The defendant alleges that as from the original claim amounting to Rs. 63,000 the plaintiff company had voluntarily reduced it to Rs. 55,000 through the said letter, it was a pointer towards the falsity of the claim.

5. It is time now to notice the issues framed. They run as under:

1. Whether the plaintiff has the locus standi to file the present suit against the defendant OPP

2. Whether the suit is within time OPP

3. Whether the defendant was liable to pay Sales-tax in respect of the subject imports of cement If so, to what effect OPP

4. Whether the plaintiff paid a sum of Rs. 52,442.30 or any part thereof, by way of interest, on the sum of Rs. 98,872.85, realised by the Assessing Authority, Amritsar, towards the Bank guarantee furnished by the

plaintiff and whether the defendant is liable to pay the same or any part thereof to the plaintiff OPP

5. Whether the plaintiff incurred an expenditure of Rs. 20,562.48 or any part thereof on litigation with the Punjab Sales Tax Authorities and is the defendant liable to pay the same or any thereof If so, what amount OPP

6. Whether the plaintiff is entitled to interest from the defendant on any amounts that may be found due to the plaintiff under Issue No. 4 and/ or Issue No. 5 If so, at what rate and on what period OPP

7. Whether the plaintiff can claim any amount over and above what was demanded by letter dated 27.10.1976

8. Relief.

Issue No. 1

6.With regard to Issue No. 1undoubtedly it was M/s. Dalmia Cement Ltd. which was to clear cement on behalf of the State Trading Corporation and it was the said company which had completed the transaction and dealt with the defendant Corporation and had fought litigation on the point of levy of sales tax and penalty. In short thus it was Dalmia Cement Ltd. which had acted as the agent (See letter Ex. P-4). But then it is in the evidence of PW-3 C.P. Malik that there has been a change of name from the previous M/s. Dalmia Cement Ltd. to Dalmia Dairy Industries Ltd. This is further borne out from the certificate of incorporation Ex. P-3. This being the position I need say no more than this that the plaintiff-Company does have locus-standi to file the present suit.

Issue No. 2

7. Is the suit within time This question relates to Issue No. 2. It was argued by the learned Counsel for the State Trading Corporation that the cause of action arose on February 16, 1966 when M/s. Dalmia Cement Ltd. received show cause notice from the Sales Tax Assessing Authority or at the most on March 9,1966 when an ex parte order was passed by that Authority and that the period of limitation being one year under Article 72 of the Limitation Act, and the suit having been instituted in August, 1978, it would be barred by limitation.

8. When did the cause of action arise To my mind a mere issuance of a show-cause notice cannot be taken to have given the cause of action. At that stage M/s. Dalmia Cement Company as a selling agent of the State Trading Corporation did not incur any liability nor had it incurred any expense to lay a claim for compensation. I do tend to agree with the learned Counsel for the plaintiff-company that it was only when the order levying sales tax and penalty was set aside that the cause of action could be taken to have accrued. Before that the plaintiff-company could not lay its claim with regard to either interests or expenses incurred. This was on September 1, 1975. The suit was instituted on August 30, 1978.

9. I find no justification to apply Article 72. Article 72 relates to a suit for compensation for doing or omitting to do an act alleged to be in pursuance of any enactment. Thus the act or omission must be one which can be in pursuance of an enactment. The present is not such a case.

10. As noticed above, M/s. Dalmia Cement Ltd. was the selling agent of the State Trading Corporation. Here is a suit to indemnify which is neither covered by Article 42 nor by Article 43. Thus it would be covered by the residuary Article 113 and limitation would start from the date when the right to sue accrued. The period of limitation prescribed is three years. The suit thus is within limitation.

Issue No. 3

11. Coming to Issue No.3, I need say no more than this that admittedly neither the plaintiff nor the defendant was liable to pay Sales Tax.

Issue Nos. 4, 5 and 6

12. Issues Nos. 4, 5 and 6 being interconnected, I propose to deal with them together.

13. The statements of PW-6 S.N. Mittal and P.W. 7 .P. Gupta read along with letters Ex. PW 6/16, PW 6/17 sent by the plaintiff-company to the State Trading Corporation and the exerpts (Ex PW 7/40) prepared by PW-7 O.P. Gupta go to show that expenditure incurred by the plaintiff-company on litigation from the period April 15, 1966 to September 10, 1975 amounted to Rs. 20,562.47.

14. As regards the claim with regard to interest, PW-7 O.P. Gupta and PW-6 S.N. Mittal have proved Ex. PW 6/17 and its two annexures. Besides that O.P. Gupta has proved charts Exs. PW 7/1 and PW 7/2 relating to the period March 21, 1972 to September 12, 1995 and September 13, 1975 to August 15, 1978 respectively. The charts pertain to interest calculated on monthly basis. As per the evidence so produced the total amount of interest comes to Rs. 52,423.30.

15. As regards claim for damages suffered because of the blockade of Rs. 52,442.30 and Rs. 20,568.48 by way of interest, we have the statement of PW-7 O.P. Gupta who has proved the chart Ex. PW 7/2 prepared by him. The evidence so led proves such amount to be Rs. 43,303.60.

16. I may mention here that during arguments the learned Counsel for the defendant had not challenged the veracity of the evidence so led. In fact his only contention was that since it was M/s. Dalmia Cement Ltd. which was negligent and since it was on account of its fault that rounds of litigation had to be gone through, the defendant State Trading Corporation was not liable for a single paisa.

17. The main thrust of the argument of the learned Counsel for the defendant Corporation was that had M/s. Dalmia Cement Ltd. put in appearance before the Sales Tax Assessing Authority at Amritsar in response to the show cause notice, there would have been no ex parte order and thus no writ in the High Court or appeals before the Sales Tax Authorities.

18. Undeniably, M/s. Dalmia Cement Ltd. did not put in appearance before the Assessing Authority on the date fixed in response to the show cause notice. But then it did, and with promptitude, write a letter to the Authority that cement having been imported by the State Trading Corporation, all enquiries be addressed to them. The company also lost no time in communicating with the State Trading Corporation and forwarding it with a copy of the show-cause notice. That M/s. Dalmia Cement Company was not at fault in not putting in appearance and that the Assessing Authority acted in haste in passing an ex parte order would be borne out from the order of February 8, 1973 passed by the Sales Tax Appellate Tribunal. The Tribunal observed:

It is thus clear that the Assessing Authority acted in undue haste and required the appellate firm to appear before it within an unreasonably short period. In any case, it is clear that the Assessment proceedings have not remained pending for a long. In the normal course, it would have been appropriate to give the appellate firm a fresh opportunity to appear and to be heard after the letter dated 16.2.66 was received by the Assessing Authority.

19. I feel the observations reproduced above provide a complete answer to the contention of the learned Counsel for the State Trading Corporation. True, an agent is, in general, under a duty to keep his principal informed about matters which are of his concern. The principle is as old as the hills. (See: Sillv.Thomas (1839) 8 C&P 762). But then the agent in our case did not fail in this duty. It all along kept the defendant informed of all the developments and steps being taken. It need hardly be mentioned that an agent need not exhibit in performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. That is to say, he is not liable for mere errors of judgment. Fridman in his Law of Agency, says that as long as the agent has behaved with normal care and skill, having regard to the nature of his business, and has acted in as reasonable a manner as could be expected from an agent, the agent will not be liable for negligence even if his efforts were not successful. The misfortune of the defendant-Corporation is that in the case in hand the plaintiff company acted all along in as reasonable a manner as could be expected from it. The steps taken by it were throughout in the interests and for the benefit of the State Trading Corporation.

20. The principals duty to indemnify his agent against losses, liabilities and expenses can be and more usually is implied. True, such liability may be excluded by the contract, if any but here no such plea has been taken. As noticed above, the liability of the defendant is denied on the ground that it was caused by plaintiffs gross negligence. Though not referred to, the argument seems to be directly inspired by Thackerv.Hardy, (1878) 4 QBD at 687 per Lindley J. and Duncanv. Hill,(1873) LR 8 Ex 242 and probably by the case coming from New Zealand namely New Zealand Farmers Co-operative Distributing Co. Ltd. v. National Mortgage & Agency Co. of New Zealand,(1961) NZLR 969.

21. Though repeatedly stress was laid on the so-called negligence of M/s. Dalmia Cement Company which was characterised as gross, one need repeat only what has already been said by Rolfe B in Wilsonv.Brett, (1843) 11 M&W, 113, 115 that gross negligence is merely ordinary negligence with a vituperative epithet. I have already shown above that M/s. Dalmia Cement Company Ltd. cannot be accused either of negligence or want of care. Standard of care required is the standard demanded by the circumstances of that particular case [Ormerod L.J., in Houghlandv. R.R. Low (Luxury Coaches) Ltd., 1962 (1) QB 694], and I have no manner of doubt that standard of care demanded in the case in hand had been observed.

22. For the reasons recorded above, I decide the issues in favour of the plaintiff Company.

Issue No. 7

23. This leaves me with Issue No. 7. At the centre-storm of this issue is the letter which the plaintiff-company wrote to the defendant on October 27,1976 (Ex. D-4). Its relevant portion runs as under:

Against our claim for about Rs. 63,800 and keeping in view the good relations we have with each other, we hereby confirm to settle claim for total payment of Rs. 55,000.

We trust you will find this in order and as discussed with yourselves we request you to kindly issue the cheque at the earliest.

24. It was contended by the learned Counsel for the plaintiff that the letter contained only an offer and since it evoked no response from the defendant Corporation, the offer must be taken to be of no consequence. On the other hand it was argued on behalf of the defendant Corporation that through the letter in question the plaintiff-company must be taken to have given up its claim over and above the claim of Rs. 55,000. I do tend to agree with the learned Counsel for the State Trading Corporation that by the letter in question the plaintiff Company had voluntarily reduced the claim to Rs. 55,000 and that consequently it cannot now lay a claim beyond that amount. The issue stands decided accordingly.

Relief

In view of my finding on the above issues I pass a decree for the recovery of Rs. 55,000 with costs in favour of the plaintiff-company and against the defendant State Trading Corporation of India Ltd. The plaintiff-Company shall also be entitled to interest at the rate of 15% per annum on the decretal amount from the date of institution of the suit till realisation.