1. This is a suit to recover the balance of the price of goods sold and delivered by the plaintiffs to the defendants under several contracts. The defendants counter-claim a larger sum than that claimed by the plaintiffs as damages for failure on the part, of the plaintiffs to deliver the balance of the goods.
2. The plaintiffs deal in lime. The defendants are building contractors. The plaintiffs allege that they sold and delivered to the defendants lime under the following contracts, viz :-
(1) contract dated April 16, 1916 ( Ex. A ), for the supply of lime for the Navatia Flour Mills at the rate of Rs. 2-13-3 per candy;
(2) a verbal contract entered into some months after the date of Ex. A, for the supply of lime for the Planet and Indo-China Mills at Rs. 2-11-6 per candy;
(3) contract dated April 6, 1917 (Ex. B), for the supply of lime between 560 and 700 candies as ordered by the defendants from time to time for the Indo-China Mills at the rate of Rs. 3-6-3 per candy; and
(4) contract dated April 6, 1917 (Ex. C), for the supply of lime from time to time amounting to about 1500 candies as ordered by the defendants for the Planet Mills, at the rate of Rs. 3-8-3 per candy.
3. The contracts, Exs. B and C, superseded the verbal contract referred to above from the date they were entered into.
4. The plaintiff's allege that they supplied lime to the defendants prior to April 6, 1917, and that from and after that date they supplied to the defendants about 442 1/2 candies for the Planet Mills and 380 candies for the Indo-China Mills under the said contracts, Exs. B and C.
5. There is no time mentioned for the payment of price under the contract Ex. A. By the contracts, Exs. B and C, it was provided that the defendants should pay the price of such quantity as was delivered after retaining 10 per cent. as a deposit, and that the balance of the price should be paid after the building works referred to therein were completed.
6. It is common ground that deliveries were made under the contracts, Exs. B and C, until June 10, 1917. Disputes had arisen between the parties prior to that date, but they took an acute form after that date, and the plaintiffs ceased to supply lime after June 10, 1917, though the defendants required them to do so.
7. By their letter of June 23, 1917 (Ex. F), the defendants complained that the plaintiffs had ceased to deliver further lime, and suggested that the reason why the plaintiffs did so was that the rate of lime had gone up considerably since the date of the said contracts. By the said letter the defendants required the plaintiffs to supply 25 carts per day (one cart containing two candies) for the Navatia Flour Mills and 20 to 25 carts per day for the Planet Mills and they gave final notice to the plaintiffs that in default of the plaintiffs' complying with the said requisition by Wednesday next June 27, they would buy lime against the plaintiffs. To the said letter the plaintiffs replied on June 27, stating that the amount due to them for the lime already supplied to the defendants was Rs. 1795, that the amount payable to them after deducting 10 per cent, was Rs. 1332, and that unless the defendants paid that sum they would not supply further lime. On Jane 29, the defendants replied to the said letter stating that the amount due to the plaintiffs after deducting 10 per cent. was Rs. 269 only and they sent a cheque to the plaintiffs for that amount. With the said letter the defendants sent a statement of account from which it appears that they claimed to retain a deposit of Rs. 10 not only in respect of lime supplied under the contracts Exs. B and C but under the earlier contracts. To the said letter the plaintiffs replied on July 3, stating that they had accepted the said cheque under protest. By the said letter the plaintiffs purported to put an end to the said contracts on the ground that the defendants had not paid to them all that was due to them and they threatened to file a suit to recover the balance of the price.
8. Thereafter the defendants commenced purchasing lima in the market against the plaintiffs, and, according to their case, they bought about 400 candies between July 4 and 13, 1917. In the meantime on July 6, the defendants through their attorneys wrote to the plaintiffs stating that as the plaintiffs had refused to perform their part of the contract and had committed a breach thereof, the defendants had purchased lime in the market on account and at the risk of the plaintiffs at Rs. 4-14-0 per candy, and that the defendants would hold the plaintiffs liable for the consequence.
9. The plaintiffs did not reply to the said letter, and, as stated above, the defendants went on buying until July 13, 1917. On August 13, the defendants through their attorneys wrote to the plaintiffs stating that they had purchased 400 candies of lime at Rs. 4-14-3 per candy for the Planet Mills, and as the defendants wanted more lime they were advised, without prejudice, to give one more opportunity to the plaintiffs not to further commit breaches of the contracts. By the said letter the defendants called upon the plaintiffs to deliver for the Planet Mills a sufficient quantity of lime, and intimated to the plaintiffs that if they failed to do so within forty-eight hours the defendants would buy the same in the market against the plaintiffs. The plaintiffs did not reply to the said letter. Thereafter the defendants did not issue any orders to the plaintiffs for the supply of lime, and according to their case they purchased several candies of lime between October 3 and 30, 1917.
10. On March 19, 1918, the defendants sent a solicitors' notice to the plaintiffs demanding Rs. 494 alleged to be damages sustained by them by reason of failure on the part of the plaintiffs to deliver lime for the Planet Mills. The plaintiffs did not reply to the said letter nor to the two reminders sent on April 13, 1918 and on June 6, 1918.
11. Nothing was done by either party for about two years, and on June 8, 1920, the plaintiffs filed the present suit in the Court of Small Causes at Bombay to recover Rs. 1800 being the balance of the price of the lime sold and delivered to the defendants under all the said contracts. The suit was filed just in time to save it from the bar of limitation, the last delivery of lime having been made as stated above on June 10, 1917. The writ of summons was served upon the defendants on August 23, 1920. On August 30, 1920, the defendants obtained an order for transfer of the suit to the High Court. On September 14, 1920, the defendants filed their written statement and counter-claim.
12. In their written statement the defendants say that the balance due to the plaintiffs for the price of the goods was Rs. 1385 and not Rs. 1800, that out of the said sum the plaintiffs' claim for Rs. 1163 was barred by the law of limitation, and that the balance legally due to the plaintiffs was Rs. 221 only. The defendants further say that as the plaintiffs failed to deliver the balance of lime under the said contracts, they sustained damages to the extent of Rs. 2716. The defendants gave credit to the plaintiffs for Rs. 221 and they counter-claimed Rs. 2494.
13. At the hearing of the suit the following questions were raised, viz.-
1. Whether the claims, if any, of the plaintiffs for the price of lime supplied prior to June 7, 1917, was barred by the law of limitation ?
2. Whether the plaintiffs were justified in refusing to deliver further lime to the defendants under the said contracts ?
3. If not, whether the defendants are entitled bo their counter-claim?
4. Whether the defendants' counter-claim is barred by the law of limitation ?
5. What amount, if any, is due from either party to the other ?
14. It was agreed between the parties at the hearing of the suit that the questions of limitation should be disposed of first by the Court. It was also agreed that to determine the question whether the counter-claim was time-barred, the Court should proceed on the assumption that the plaintiffs were not justified in refusing to deliver further goods, in other words, that the plaintiffs committed a breach of the said contracts.
15. As regards the question whether the plaintiffs' claim in respect of the items prior to June 7, 1917, is barred by limitation, I have no doubt that it is not. Both the plaintiffs and the defendants kept only one account of the transactions from the date of Ex. A In Bonsey v. Wordsworth (1856) 18 C.B. 325 followed by Jenkins C.J. in Kedar Nath v. Denobandhu 19 C.W.N. 724 it was said on the strength of the previous authorities that 'where a tradesman has a bill against a party for any amount in which the items are so connected together, that it appears that the dealing is not intended to terminate with one contract, but to be continuous, so that one item, if not paid, shall be united with another and form one continuous demand, the whole together forms but one cause of action and cannot be divided.' It is clear from the passage cited above that if all the items form but one cause of action, it is idle to suggest that a part of it can be barred by limitation, and that the rest may not be so barred. In fact counsel for the defendants, at a later stage of the proceedings, gave up the contention as to limitation, with the result that the amount admittedly due by the defendants to the plaintiffs is now Rs. 1385 instead of Rs. 221.
16. In determining the question whether the defendants' counter-claim is barred by limitation, I am asked to assume that the plaintiffs committed a breach of the said contracts in not making further deliveries to the defendants after June 10, 1917. The question is-what is the date of the breach On behalf of the plaintiffs it is contended that the date of the breach is July 3, 1917, being the date on which the plaintiffs gave notice to the defendants that they would not supply any more lime, or, at the latest, August 15, 1917, being the date within which the defendants required the plaintiffs to supply further lime by their letter of August 13, 1917. On the other hand, it is contended for the defendants that the earliest date of the breach is October 3, 1917, being the date on which the defendants recommenced purchasing in the market against the plaintiff's subsequent to their letter of August 13, 1917.
17. In dealing with this question it is to be noted that the contracts were for delivery of lime to the defendants from time to time as they required it for their works. In such case when the seller clearly shows his intention not to be bound by and to repudiate the contract, the buyer, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed and then hold the seller responsible for all consequences of non-performance, but in that case he keeps the contract alive for the benefit of the seller as well as his own; the buyer remains subject to all his obligations and liabilities under it, and enables the seller not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstances which would justify him in declining to complete it. On the other hand, the buyer may, if he thinks proper, treat the repudiation of the seller as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it, and in such action he will be entitled to such damages as would have arisen from non-performance of the contract at the appointed time, subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his damage: Frost v. Knight (1872) L.R. 7 Ex. 111; Cort v. Ambergate &c.; Railway Co. (1851) 17 Q.B. 127 Braithwaite v. Foreign Hardwood Co. ( 2 K.B. 543(; Melachrino v. Nickoll and Knight ( 1 K.B. 693(. Such being the law, it has to be determined whether when the plaintiffs gave notice to the defendants by their letter of July 3, 1917, that they would not make further deliveries, the defendants treated the repudiation as a wrongful putting an end to the contracts. On behalf of the defendants it is contended that the contracts being for the supply of lime from time to time to the plaintiffs as required by the defendants, the defendants' letter of July 6 amounted to an acceptance of the plaintiffs' refusal as a breach not to the extent of the entire residue of lime to be supplied under the said contracts, but to the extent of such quantity only as they required by their letter of June 23. By that letter the defendants required the plaintiffs to send twenty-five carts per day for the planet Mills, and threatened that in default they would buy 'the lime' in the market on account and at the risk of the plaintiffs. In their letter of June, 29 the defendants' attorneys wrote: 'Our clients have waited long enough for the supply of lime, and please note that if your clients do not supply lime to our clients by tomorrow our clients will purchase the same from the market at your clients' risk and on their account. Please treat this notice as final.' To the said letter the plaintiffs replied on July 3, stating that as the defendants had not paid the amount due to them they would not make further deliveries. This was a clear and unequivocal expression of intention on the part of the plaintiffs not to supply any further lime. According to the defendants' case, they started buying lime in the market from July 4, 1917, and continued to do so until July 13, 1917. To the said letter of July 3, the defendants through their attorneys replied on July 6, as follows:-
As your clients have declined to carry out their part of contract and have committed a breach thereof our clients have purchased lime from the market on your clients' account and at their risk at Rs. 4-14-0 per candy and they hold your clients liable for the consequences thereof. Our clients hold your clients' deposit for the damages they are likely to suffer.
18. The impression produced on my mind after perusing that letter was that the defendants treated the plaintiffs' repudiation as an immediate breach patting an end to the said contracts in their entirety. Thereafter the defendants were not bound to accept any lime from the plaintiffs under the said contracts, and they could have at once sued the plaintiffs for damages for failure to deliver the rest of the lime under the said contracts I, therefore, hold that the breach, if any, of the said contracts took place on July 6, 1917. But even if it be not so, I think that the defendants' letter of August 13, is a clear intimation to the plaintiffs that unless the plaintiffs supplied further lime within forty-eight hours, the defendants would treat the plaintiffs' repudiation as a breach of the contracts in their entirety. The defendants in fact did so. They did not order any more lime from the plaintiffs and they started buying against the plaintiffs from October 3, 1917. Therefore, oven if the defendants did not, by their letter of July 6, accept the plaintiffs' refusal as a breach of the contracts for the entire residue of the lime to be delivered thereunder, they did so by their letter of August 15, in which case the date of the breach would be August 15, 1917. I prefer to hold that the breach took place on July 6, 1917.
19. But though the date of the breach be July 6, or August 15, 1917, it does not follow that the whole of the defendants' counterclaim is time-barred, for it is possible to look at the matter from another point of view.
20. The defendants' cross-claim for damages amounts to Rs. 2716. The plaintiffs' claim is for Rs. 1,800. The defendants in their pleading gave credit to the plaintiffs for Rs. 221 admitted by them to be due to the plaintiffs and they counter-claimed for the balance, viz., Rs. 2,494. Had the defendants' pleading been properly drawn, the defendants would have in their written statement claimed to set off against the amount that might be awarded by the Court to the plaintiffs an equal amount of their claim, and they would have counter-claimed for the balance (1); I do not think that the fact that, the defendants have not pleaded a set-off by their written statement precludes them from pleading a set-off now ; see McGowan v. Middleton (1883) 11 Q.B.D. 464. I think if the defendants' cress-claim against the plaintiffs can be treated partly as a set-off and partly as a counter-claim, the defendants are entitled to ask the Court, even at this stage, to treat it as such. The omission to plead part of the cross-claim as a set-off amounts merely to a technical defect which can be cured, if necessary, by an amendment of the pleading.
21. The defendants having given up their contention as to limitation, the amount now admittedly due by them to the plaintiffs is Rs. 1385. The defendants are therefore entitled to ask the Court to treat their cross-claim to the extent of Rs. 1385 or such larger sum as might be awarded by Court to the plaintiffs as a set-off, and to treat the balance as a counter-claim. It is clear that the defendants cannot claim a set-off in the present case under the Code of Civil Procedure, Order VIII, Rule 6, because the defendants' claim is not for an 'ascertained' sum within the meaning of that rule, but for unliquidated damages for alleged breaches of the said contracts. But the Code does not exclude what is called an equitable set-off provided the defendants' cross-demand arises out of the same transaction as the plaintiffs' claim: Clark v. Ruthnavaloo (1865) 2 M.H.C. 296. In the present case it is not denied that the defendants' cross-demand arises out of the same transactions. The defendants, therefore, are entitled to claim an equitable set-off in the present case : Kishorchand v. Madhowji Visram I.L.R. (1880) 4 Bom. 407. The provisions of Order XXI, Rule 19, clearly show that an equitable set-off may be allowed by the Courts of British India : see Narasimha Rao v. Zamindar of Tiruvur I.L.R.(1919) Mad. 873.
22. Under Rule 118 of the Bombay High Court Rules (which is taken from R.S.C., Order XIX, Rule 3) a defendant may set up by way of set-off or counter-claim, against the claims of the plaintiff, any right or claim whether such set-off or counter-claim sounds in damages or not. It must, however, be observed that nothing which was not a good set-off before the passing of the said rule can be a good set-off under the said rule; the set-off must still be for an ascertained sum or it must arise out of the same transaction as the plaintiff's claim. A counter-claim, however, need not arise out of the same transaction. Set-off is a ground of defence and it should be pleaded in the written statement. Counter-claim does not afford any defence to the plaintiff's claim; it is a weapon of offence which enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action: Stooke v. Taylor (1880) 5 Q.B.D. 569.
23. The above distinction between set-off and counter-claim has an important bearing on the question of limitation, for if the statute of limitations is pleaded to a defence of set-off, the plaintiff, in order to establish his plea, must prove that the set-off was barred when the plaintiff commenced his action; it is not enough to prove that it was barred at the time when it was pleaded : Walker v. Clements (1850) 15 Q.B. 1046. In the case, however, of a counter-claim, it is enough for the plaintiff to prove that the counter-claim was barred when it was pleaded: McGowan v. Middleton (1883) 11 Q.B.D. 464. The case of Walker v. Clements, referred to above, was one of legal set-off. But the same principle has been held to apply to cases of equitable set-off: Narasimha Rao v. Zamindar of Tiruvur I.L.R. (1919) Mad. 873; Pragji Lal v. Maxwell I.L.R.(1885) All. 284.
24. I have already held, upholding the plaintiffs' contention, that the breach (if any) on the part of the plaintiffs, which gave rise to the defendants' counter-claim for damages, arose on July 6, 1917. The present suit was instituted on June 8, 1920, Therefore, the defendants' cross-claim to the extent of the amount that may be decreed to the plaintiffs in this suit, is not barred by the law of limitation. As regards the balance of the defendants' cross-claim, I hold that it is barred by limitation as the counter-claim was not filed until September 14, 1920. The same view was taken by the High Court of Madras in Narasimha Rao's case referred to above.
(1) See Bullen and Leake's Precedents of Pleadings, 6th Ed., p. 775,