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Shantilal Chunilal Vs. Versatile Traders Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case Number O.C.J. Appeal No. 15 of 1945 and O.C.J. Suit No. 667 of 1944
Judge
Reported inAIR1946Bom477; (1946)48BOMLR308
AppellantShantilal Chunilal
RespondentVersatile Traders Ltd.
DispositionAppeal dismissed
Excerpt:
contract- breach of-damages-sale of cotton yarn-notification prohibiting such sale without license-license obtained before date of delivery-contract whether unenforceable- ' sell '-' carry on business '-meaning of.;the word ' sell,' as used in notification no. 24|3, dated july 31, 1942, issued by the government of bombay, means an actual sale when the property in the goods passes and does not include an agreement for sale. the expression ' carry on business ' connotes a series of transactions, and does not include isolated transactions.;mischeff v. springett [1942] 2 k. b. 331,- followed.;lambert v. rowe [1914] 1 k. b. 38, emperor v. joy ram pathak [1944] a. i. r. cal. 121, and pyare lal v. emperor [1945] a. i. r. all. 135, referred to.;in july 1942 the government of bombay issued a..........the learned judge in the court below has dealt with this matter under the cotton cloth and yarn contracts ordinance, 1944, which raises a somewhat difficult problem. but in this court, although it was mentioned in the 'court below, what have been relied on are clauses 10 and 12 of the cotton cloth and yarn control order, 1943, from the terms of which it is clear that no manufacturer or dealer could have sold on december 22, 1942, yam at more than the controlled price which was re. 1-11-0 per 1b. that is an end of the appeal on that point.21. the result is that the appellant fails in his appeal and the respondents fail on their cross-appeal.22. with regard to costs, we have invited the observations of counsel on the question of costs, and in my view the proper order in the.....
Judgment:

Leonard Stone, Kt., C.J.

1. This is an appeal from the judgment of Mr. Justice Kania dated January 25, 1945.

2. The matter arises out of two contracts for the sale of yarn dated respectively April 22 and 24, 1943. In the trial Court a number of points were taken, but these have dropped out or have been given up, leaving two main issues which we have to consider. The issue which comes first is with regard to the validity of the contract. On that issue the appellant in this Court succeeded in the Court below. The other issue concerns the quantum of damages for the breach of contract, and on that issue the respondents succeeded and the appellant filed this appeal. Thereupon the respondents cross-appealed on the issue of validity. The cross-appeal has been argued first in this Court, since, if it succeeds, the appeal with regard to the quantum of damages would not arise.

3. Mr. Tendolkar for the respondents on the cross-appeal submits that the transactions by the appellant (the vendor) were illegal and void as being in contravention of Notification No. 24)3 of the Government of Bombay dated July 31, 1942, which is as follows:-

With effect from 1st September 1942 (that date was subsequently extended to the 1st of November 1942) no person in the Province of Bombay shall sell, store for sale, or carry on business in cotton yarn except under and in accordance with the conditions of a license in the form in Schedule B granted by the Yarn Commissioner for the Province of Bombay.

4. Then there is Rule 121 of the Defence of India Rules upon which Mr. Tendolkar also relies, and that is in these terms:

Any person who attempts to contravene, or abets, or attempts to abet, or does any act preparatory to a contravention of any of the provisions of these rules or of any order made thereunder, shall be deemed to have contravened that provision, or as the case may be that order.

5. Before proceeding further it is necessary to mention certain dates and facts, The two contracts for the sale by the appellant to the respondents were each for 5,000 Ibs. of cotton yarn and are dated April 22 and 24, 1943. The original dates for delivery were respectively in June and in May of that year. But it is common ground that these dates were extended by mutual agreement to December 22, 1943, and that that is the date in each case on which a breach of contract took place. The contracts are in the name of the appellant and are his personal contracts, although in fact he was a partner in a firm of wholesale and retail cotton merchants called the Ruby Thread Company, the only other partner in that firm being Shridhar Balkrishna Antarkar. On August 21, 1942, an application for a license under the Notification of July 31, 1942, was made by ' Shridhar Balkrishna Antarkar, partner Ruby Thread Co.' and on November 1, 1942, a license was in fact granted by the Yarn Commissioner for the Province of Bombay, the licensee being Shridhar Balkrishna Antarkar without the qualification of his being a partner in the firm of Ruby Thread Co. Accordingly on November 23, 1942, a letter was written to the Commissioner which said:

We hereby wish to point out that the licenses in question were required to be brought out in the name of this firm i.e. ' The Ruby Thread Co.', and not in the individual name of the undersigned.'

' We shall therefore thank you to make the necessary amendment in your registers and oblige.

6. That letter was sent by Mr. Antarkar 'for the Ruby Thread Co.' It does not appear that any acknowledgment, far less a reply, was ever received to that letter. The appellant in fact himself obtained a license on September 24, 1943, that is to say long after the date of the two contracts, but before the extended date for delivery. By his evidence the appellant says that he has been doing business in yarn for the last three years and he continues:

In 1942 I was doing business in the name of Ruby Thread Co. in partnership with S, B. Antarkar. He was a working partner. Antarkar applied for a license in the name of Ruby Thread Co, He had signed the application in his name for the partnership. The authority issued a license in the name of Antarkar.

Then later in his evidence:

Ruby Thread Company was not a registered partnership. There was no written partnership agreement. Exs. B and C (those in fact are the two contracts) were my personal contracts with the defendants.

' I sold yarn to the defendants only and that was because they came with a recommendation from the Controller. Otherwise my business is of Government contracts.

7. That being the position, Mr. Tendolkar for the respondents makes the following submissions on the question of validity: first, that both contracts are illegal, because they are transactions of the appellant who must have been carrying on business in breach of the Notification; secondly, that both contracts are void, because they are sales by the appellant who had no license.

8. With regard to the first contention, Mr. Setalvad for the respondents suggests that it is not open to the appellant to take this point as it is not raised on the pleadings. The learned Judge in the Court below has accepted that view of the matter. What he says is this:

The second ground of attack based on the same notification was that the plaintiff could not carry on business in yarn except in accordance with the conditions of the license. It is clear that the burden of proof for the contention that the transactions in question are void is on the defendants. It is first necessary for them to allege on what grounds the transactions are contended to be void and plead the necessary facts in that connection. In my opinion paragraph 2 of the written statement does not aver that the transactions are void because the plaintiff carried on business in yarn without a license. Reading that paragraph as a whole the contention appears to be that as the plaintiff had no license he could not enter into an agreement for sale.

Paragraph 2 of the written statement is in these terms:

Referring to paras. 2 and 3 of the plaint the defendants say that as they subsequently learnt the plaintiff had no license to sell, store for sale or carry on business in cotton yarn at the date or dates when the plaintiff purported to enter into the contracts referred to therein with the defendants. The defendants say that the plaintiff appears to have obtained the requisite license for the first time on or about September 24, 1943. The defendants under the circumstances submit that the plaintiff was not entitled to enter into the said contract for the sale of yarn and purported to enter into the same under the false pretences that he was the holder of the requisite license and was in a position to sell the said yarn to the defendants. The defendants also submit that the plaintiff, not being competent to enter into the said contracts, is not entitled to maintain the suit based upon the said contracts. The defendants put in the following written statement without prejudice to the above contention.

9. Now it is clear that although that averment states that the plaintiff ' learnt' that the appellant had no license, what is submitted is that the appellant was not entitled to enter into the contracts of sale, so that anyone reading this plea would think that the complaint of illegality comes under the prohibition against selling and not the prohibition against carrying on a business. There is no averment to the effect that the appellant carried on a business in breach of the notification or that these contracts were entered into as part of any such business. In my judgment the learned Judge in the Court below was quite right in the view which he took; but apart from this, there is no evidence that, except as a partner in the Ruby Thread Company, the plaintiff personally had ever carried on business. To carry on a business connotes a series of transactions. In this case the evidence is that the two contracts were exceptions, having been made under the recommendation of the Controller and that they were isolated transactions. Accordingly in my judgment the respondents cannot succeed on this submission.

10. This brings me to the second point, viz. whether these two transactions were sales within the meaning of the Notification. It is to be observed in the first place that what is prohibited is selling, storing for sale or carrying on business. The more usual form of words found in Orders and Ordinances of this nature of dealing in or of offering for sale are not to be found in this case.

11. Now with regard to the meaning of the word ' sell,' we have been referred to four cases of which it is necessary to say something. The first of those cases to which I desire to refer, it being under war time emergency legislation of this war, is the case of Mischeff v. Springett [1942] 2 K. B. 331. That case under the English emergency legislation dealt with the meaning of the word ' sell ' and at p. 336 Mr. Justice Tucker said this:

We have to determine what is the meaning of ' sell' in Article 2 of the Canned Sardines (Maximum Prices) Order, 1941. It is conceded that no offence has been committed in this case unless the completing into a sale, after the order came into force, of what was a perfectly legitimate agreement to sell, constitutes an offence. In my view, in a commercial transaction of this kind the word ' sell' or ' sale' must be given the meaning which it bears in the Sale of Goods Act, and it is clear that in the Sale of Goods Act the word ' sale' necessarily implies something under which the property in the goods has passed and includes a contract under which the goods have passed.

12. Before referring to the other cases it is only necessary to say that under the Indian Sale of Goods Act the position is similar. Sub-section (13) of Section 2 defines ' seller ' as meaning ' a person who sells or agrees to sell goods '; thereby in that definition drawing a distinction. But the matter is made abundantly plain when Section 4 is looked at, Sub-section (3) of which provides that where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.

13. The other three cases which are relied on for the opposite point of view are, first, Lambert v. Rowe [1914] 1 K. B. 38. That was a case under the Markets and Fairs Clauses Act, 1847, which provided that any person who shall ' sell' tollable articles at any place within the prescribed limits of a market except in his own dwelling place or shop is guilty of an offence. At p. 49 Mr. Justice Scrutton, as he then was, said:

I think the reasoning of that is that, whereas generally people are assumed to know the law, this Act has been passed upon the supposition that they do not, and that when the Legislature is dealing with farmers and tolls in market towns it forbids them to sell in a sense that they will understand, as when an agreement for a sale is spoken of as a sale, and not in a sense that they never heard of, as when the existence of the sale is made to depend upon minute distinctions about the property passing.

14. I think that case is a very special one which is concerned with an Act of Parliament nearly 100 years old and directed to a particular class of community.

15. The next case that we have been referred to is a case from the Calcutta High Court, Emperor v. Joyram Pathak A. I. R [1944] Cal. 121. That was under one of the Calcutta Price Control Orders, the terms of which are unfortunately not set out in the report, but from the judgment of the learned Chief Justice it appears that the words ' offer for sale ' must have been contained in such order. If that be so, the case is clearly distinguishable.

16. The fourth and last case is Pyare Lal v. Emperor : AIR1945All135 in which Mr. Justice Braund based his judgment, which was under a similar Ordinance, being the Cotton Cloth and Yarn Control Order of the United Provinces, on the case of Lambert v. Rows, and it appears that the case of Mischeff v. Springett was not referred to either by the learned Judge or in the arguments before him. I prefer to follow the case of Mischeff v, Springett, with the reasoning of which I respectfully concur.

17. In this case, however, not only have we the meaning of ' sale ' and ' sell' in the Sale of Goods Act, but in the schedule to the Notification itself is the form of license. To this are annexed certain conditions which the licensee has to fulfil. He has to submit statements of what stocks he has, what he has disposed of and what remains, and it is clear from the use of the word ' sold ' in those conditions that what is being, dealt with are actual sales in the sense of the property in the goods passing to some other owner. In my judgment ' sell' in this Notification means an actual sale when the property in the goods passes and does not include an agreement for sale.

18. That brings me to Rule 121. With regard to that rule the learned Judge has said this:

On the footing that the word ' sell' in the notification does not coven an agreement to sell, the making of the contracts does not fall under Rule 121 of the Defence of India Rules. The making of a contract does not itself contravene or abet, or attempt to abet a contravention. A sale takes place when a person delivers property to another for a consideration and -on receipt of the consideration the ownership of the property is transferred to the other party. If that is accepted as the correct description of a sale, the making of a contract for future delivery is not itself an act preparatory to contravention. After making such a contract and realising that the performance of it without a license would be a contravention the seller may not take any further steps. Therefore in my opinion the making of a contract does not fall within any of the words used in Rule 121.

19. I respectfully agree with the view expressed by the learned Judge on this point and it follows that the cross-appeal in my opinion fails.

20. Next comes the substance of the appeal, which is the question of damages. The learned Judge in the Court below has dealt with this matter under the Cotton Cloth and Yarn Contracts Ordinance, 1944, which raises a somewhat difficult problem. But in this Court, although it was mentioned in the 'Court below, what have been relied on are Clauses 10 and 12 of the Cotton Cloth and Yarn Control Order, 1943, from the terms of which it is clear that no manufacturer or dealer could have sold on December 22, 1942, yam at more than the controlled price which was Re. 1-11-0 per 1b. That is an end of the appeal on that point.

21. The result is that the appellant fails in his appeal and the respondents fail on their cross-appeal.

22. With regard to costs, we have invited the observations of counsel on the question of costs, and in my view the proper order in the circumstances will be that the costs as directed by the learned Judge in the Court below will remain undisturbed and that there will be no order as to costs in this Court either of the appeal or of the cross-appeal.

Chagla, J.

23. I agree.


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