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Ruttonsey Rowji and ors. Vs. the Bombay United Spinning and Manufacturing Co., Ltd. - Court Judgment

LegalCrystal Citation
CourtMumbai
Decided On
Judge
Reported inAIR1916Bom4; 37Ind.Cas.271
AppellantRuttonsey Rowji and ors.
RespondentThe Bombay United Spinning and Manufacturing Co., Ltd.
Excerpt:
contract act (ix of 1872), sections 1, 118 - contract for sate of goods--variation in contract--goods not according to sample--recission for breach--mercantile custom, plea of, in variation of contract, whether sustainable--evidence act (i of 1872), section 92 proviso 5--arbitration, reference to, scope of--right of arbitrators to rely on custom--award decreeing allowance on reduction, egality of--'delivery,' physical and constructive--civil procedure code (act v of 1908), schedule ii. - - 9. as to the objection mentioned in the said clause 8, we are bound to make the same known in writing within eight days after the goods are tendered and should we fail to do so, then we agree that our objection shall not at all prevail and we are bound to take delivery of the said goods. it is, i..........defendants about once each month would send the buyer a delivery order in respect of such of the contract goods as were ready for delivery in the company's godown and the buyer would sign an acknowledgment of delivery of so many bales and the goods would be debited to him by the defendants. if his obligation to clear the goods within twenty-four hours under clause 3 was not discharged, interest would begin to run as well an godown rent for the storage in the defendants' godown and, insurance, other charges under clause 6 to be followed on failure to clear and pay for this goods within a reasonable time by sale by the defendants at the buyer's risk and cost. under clause 9 of the contract objections to the goods would not prevail if not made within eight, days and the buyer would be.....
Judgment:

Basil Scott, C.J.

1. This is an appeal from the judgment of Mr. Justice Macleod in a suit filed by the plaintiffs, in which they claimed delivery of 113 bales of piece goods and tendered Rs. 7,236 as the price thereof. The defendants counter-claimed a sum of Rs. 20,000 which, they contended, was due to them by the plaintiffs in respect of goods not taken delivery of. Judgment was given for the defendants upon their counter-claim.

2. The defendants entered into various contracts, seven in number, in September and October 1913, for the sale and delivery of piece goods of certain specified descriptions. The contracts will be referred to under the letters A to G.

3. Contract A was for 251 bales of which the plaintiffs took delivery of some, while the contract was cancelled as regards others and 84 bales remained the subject of dispute.

4. Contracts B, C and D covered 658 bales of which 159 were taken delivery of by the plaintiffs who refused to take delivery of the rest, on the ground that the defendants had broken a condition not to give delivery of similar goods to other dealers during the period fixed for delivery under the said contracts.

5. Contracts E, F and G covered 305 bales of which 150 were taken delivery of by the plaintiffs, while as to 42 the contract was cancelled and the plaintiffs demanded the balance of 113 on payment of the contract price Rs. 7,236.

6. The result, therefore, was that the plaintiffs claimed to eliminate from consideration the 84 bales under contract A and 499 bales under contracts B, C and D. The defendants' counter-claim is for payment of the bales which the plaintiffs claim to eliminate from consideration.

7. Dealing first with the disputed bales under contract A, by a contract, dated the 1st of October 1913, the plaintiff stipulated that as regards the goods to be delivered the quality and width was to be given according to the Textiles' goods Nos. 299 1/2, 999, 9,999 and 99,999 and reinforced the stipulation in his signature by repeating that 251 bales according to the 'Textiles' goods were to be taken. The price of the goods was fixed at Rs. 5-10-0 a piece, each bale containing 60 pieces. The agreement as to price and quantity was confirmed by the defendants' secretary in a document of the same date. The contract signed by the plaintiffs was in a printed form containing nine numbered clauses, which appear in all the contracts the subject of this suit. For the purpose of the dispute regarding the 84 bales under contract A, it is sufficient to set out the 8th and 9th clauses:

8. If we have any objection as to finish, quality, width, number, stamp and heading, we agree to refer the same to the arbitration of two members of the Bombay Mill Owners' Association. Out of them one member shall be of our selection and one member shall be of your selection. Should the arbitrators be not unanimous then they are to appoint an umpire and both the parties are to agree to the umpire's award.

9. As to the objection mentioned in the said Clause 8, we are bound to make the same known in writing within eight days after the goods are tendered and should we fail to do so, then we agree that our objection shall not at all prevail and we are bound to take delivery of the said goods.

8. After delivery of some of the goods had been taken under this contract, disputes arose, as the plaintiffs contended that the goods were not according to the contract. Upon this dispute a reference to arbitration took place under clause 8 of the contract. The defendants appointed Mr. Langley and the plaintiffs appointed Mr. Lalji Naranji as their respective arbitrators. The reference was made on the 8th of July 1914 in a letter addressed to the arbitrators by the plaintiffs' solicitors (Exhibit M), after a copy of it had been submitted to the defendants' attorneys on the 20th of June. The reference is in these terms:

Clause 8 of the contract provided for reference to arbitration of two members of the Bombay Mill Owners' Association if a difference arose between the parties. A difference has arisen between the parties under the above clause, as to whether the goods tendered are in accordance with the contract, and you gentlemen have been appointed arbitrators to decide the question. We understand you intend to make an appointment as to the time when you would go to survey.

9. The arbitrators were then requested to give timely intimation of the time of survey, as it was necessary for the parties to be present.

10. On the 31st of June the arbitrators published their award, which states that they met to settle the dispute between the defendants and the plaintiffs regarding a contract which stipulated that the goods were to be of the same quality as the goods of the Textile Mill Nos. 299 1/2, 999, 9,999 and 99,999. That pieces of the Textile Mill manufacture were produced and inspected by both parties as a basis for arbitration and that in comparing them with pieces from the bales delivered by the defendants there was found to be a difference in finish, quality, width, and, in some cases, of design and colour. The arbitrators then proceeded to state that their award was that the buyer was entitled to an allowance of 4-annas per piece on 84 bales only and must take delivery as per terms of contract with this allowance. And they stated that in their opinion these 84 bales should be free of interest to the buyer up to the 31st of July and should be debited on that date.

11. Four days later the defendants' solicitors wrote to the arbitrators stating as follows:

With reference to your survey report of the 31st of July last regarding the dispute between our client and Mr. Ruttonsey Rowji, we are instructed to state that you were only requested to report on the quality, finish, etc., of the 84 bales in question. You had no right to state in the above report that, in your opinion, the said 81 bales should be free of interest to the buyer uptil the 31st of July and should be debited on that date. Our clients, therefore, do not bind themselves to accept the above statement.

12. The defendants were not the only objectors to the award; for, on the 10th of August, the plaintiffs' solicitors addressed those of the defendants referring to the arbitration and the award as follows:

We must state at once that our client has been advised that the direction in the award that our client should take the goods at the allowance specified is outside the scope of the reference. Our client is not bound to take the goods on an allowance and declines to do so.

13. With regard to these two letters, it is to be noted that the defendants merely stated that they did not bind themselves to accept the statement about interest and that the plaintiffs' refusal to be bound to take the goods on an allowance was not communicated until five days or more after the declaration of the European war.

14. The question is whether the plaintiffs are bound to take the 84 bales at an allowance reducing the contract price. There is no such provision in the contract and, so far as there is any indication as to the result of a successful objection regarding the Quality, etc., of the goods tendered, Clause 9 impliedly indicates that the plaintiffs would not be bound to take delivery. The defendants' case, however, does not rest upon the terms of the contract. A day before the hearing commenced in the lower Court, the defendants' solicitors gave notice that at the hearing of the suit they would, if necessary, rely on a custom of trade in Bombay, applicable to the sale of goods to be manufactured of the quality and description referred to in the contracts in this suit, that a buyer has not a right to reject merely for difference in width, etc., provided that the difference is not unreasonable and is a matter that can reasonably be met by an allowance in the price.

15. At the hearing an issue was raised regarding the alleged custom. It was objected to by the plaintiffs, but was allowed by the learned Judge subject to amendment of the written statement by the defendants. Thereafter, at the trial, evidence was given of the alleged custom.

16. It is not contended that such evidence was inadmissible provided the custom proved did not annex an incident to the contract repugnant to, or inconsistent with, the expressed terms see Section 92 of the Indian Evidence Act, proviso 5.

17. The defendants rely upon the custom alleged to avoid the ordinary consequences of a breach of contract for sale of goods according to sample, resulting from the provisions of Section 118 of the Indian Contract Act. They contend that such a custom modifying the consequences resulting from the application of Section 118 would not, within the meaning of Section 1 of the Indian Contract Act, be 'inconsistent with the provisions of the Act.' Nor do the plaintiffs, as I understood the argument, contend that the custom would be inconsistent with the provisions of the Act. They insist, however, that it would be inconsistent with the provisions of the contract. The learned Judge held that the evidence conclusively proved that in the country piece goods trade, where a contract is made for unascertained goods either according to a particular sample provided by the buyer or according to a stock number of the manufacturer and the contract contains an arbitration clause under which all disputes are to be referred to arbitration, the arbitrators proceed on the footing that under the reference they are to survey the goods and either award that the goods may be rejected or must be taken with or without an allowance. This is not a custom regulating the rights of parties under the contract so as to be inconsistent with its express terms, but rather a customary incident annexed to the powers of arbitrators on their appointment under contracts of this description.

18. It appears to me that such a custom, as is alleged in the amended written statement, would be inconsistent with the stipulation in the contract that a certain quality of goods should be delivered in return for payment of a certain fixed price. The same question has, in England, given rise to differences of judicial opinion. In Walkers, Winser Hamm and Shaw Son & Co. In re (1904) 2 K. B. 152 : 73 L.J. K. B. 325 : 90 L.T. 454 : 53 W. R. 79 : 9 Com. Cas. 174, 20 T. L.R. 274. it was argued that the introduction of a price is merely to set up a standard of value, that is, the value of goods corresponding to the sample, and there may be a consistent custom providing for the variation in price upon a variation in quality, and Mr. Justice Channel held that if,, the custom went to the length of saying that there should be no remedy for any variation in quality, it would be unreasonable but being simply a custom that the buyer cakes the goods with a variation in price and with the limitation imposed by the words unless the same is excessive or unreasonable, it would not be inconsistent with the written contract. On the other hand, Lord Justice Moulton in North Western Rubber Company, and Huttenbach and Co., In re (198) 2 K. B. 907 : 78 L.J. K. B. 51. expressed the opinion that such a custom contradicted the written contract relieving, the vendor from his obligation and entitling him to require the purchaser to accept that which was not in accordance with the description.

19. It does not appear to me that the question whether such a custom, as is alleged, would be inconsistent with the written contract is affected in any way by the judgments of the House of Lords in the recent case of Produce Brokers Company, Limited v. Olympia Oil and Cake Co. (1916) 85 L.J. 160.

20. I agree with the learned Trial Judge in preferring the reasoning of Lord Justice Moulton to that of Mr. Justice Channel.

21. This conclusion, however, by no means disposes of the question regarding the 84 bales. The arbitrator Langley has deposed that he and his co-arbitrator made their award upon the footing that a custom did exist that the buyer of local piece goods must send the goods to be surveyed and is only entitled to reject if the surveyor decides the goods are so much off the sample that they are not saleable as of the quality ordered. If there is a difference which does not amount to this, he is bound to take it on an allowance. Langley and his co-arbitrator understood they were to proceed with the reference in the usual way and did so, awarding an allowance of 4 annas per piece. Lalji Naranji's evidence in examination-in-chief is to the same effect. The cross-examination was not directed to the practice before arbitrators but rather to the custom set up in the written statement.

22. It is permissible for arbitrators, who are experts in the trade in which the question referred to them has arisen, to act upon their own knowledge of the usages of that trade: see the judgment of Lord Loreburn in the case of Produce Brokers Company Limited v. Olympia Oil and Cake Company (1916) 85 L.J.K.B. 160.

23. It is, however, contended for the plaintiffs that the practice of arbitrators in fixing allowances, even if sanctioned by custom, is irrelevant in the present case owing to the restricted terms of the reference of the 8th of July. It is contended that the arbitrators had no authority to decide any question but that stated in the reference, namely, whether the goods tendered were in accordance with the contract. This contention receives support not only from the defendants' solicitors' letter of the 3rd of August and the post helium repudiation by the plaintiffs' solicitors but also from the decision of the Court of Appeal in England in Re Arbitration between Green & Co. & Balfour, Williamson, & Co. (1890) 63 L.T. 325., in which it was held that under a very similar reference the arbitrators had no jurisdiction to award that the buyer should take goods found to be not up to the sample with a reduction of price. It is apparent, however, from the judgments delivered in that case that evidence would be admissible to show that the arbitrators had in fact been asked to decide something more.

24. In the arbitration under contract A the facts are that at the survey the plaintiffs asked Lalji Naranji, who was his nominee, to award an allowance in the hearing of Lukhmidas Vussonji, the defendants' salesman, who represented them at the survey. No objection to such a course was taken by Lukhmidas nor have the defendants ever objected to the allowance made by the arbitrators. In this respect, therefore, they must be taken to have ratified the conduct of their representative in not objecting to the request of Raoji that an allowance should be made. Under these circumstances, I see no reason to differ from the conclusion arrived at by the learned Judge that it cannot be said that the question of the allowance was not properly referred to the arbitrators.

25. In this view of the case, the question whether the custom alleged would be inconsistent with the written contract standing alone, is not the crucial question. The plaintiffs are bound by the award made in pursuance of their request and not objected to by their opponents.

26. I may observe that there appears to me to be no foundation for the defendants' contention that the scope of the reference was not the subject of consideration In the Trial Court. It is, I think, perfectly clear that the learned Judge was dealing with this point in the passage in which he discusses the conduct of the plaintiffs at the time of the survey. It is equally clear that the same point has been urged on behalf of the plaintiffs in Clause 10 of the memorandum of appeal.

27. For the reasons stated above, I am of opinion that the decision of (he learned Judge regarding the 84 bales under contract A should be affirmed.

28. The remaining point is whether the defendants have broken the contracts B, C and D of September 1913, in which they agreed as follows:

We are to give delivery of the goods which may have been sold before this contract but we are not to give delivery of the same during your period.

29. Prior to these contracts the defendants had entered into contracts on similar printed forms with two other dealers for delivery of similar goods over certain periods, which were running in September 1913 but would expire before the periods for delivery of the plaintiffs' goods under contracts B, C and D would commence.

30. The common features of all the contracts material for, the present point are Clauses 1, 3, 4, 5, 6 and 7 in Exhibit O-I:

I, We have purchased the said goods under manufacture and we bind ourselves to take delivery of all the goods appertaining to this contract or a part thereof as you may give delivery.

3. Should we fail to clear the goods within twenty-four hours of their being ready for delivery, then the goods shall remain at our risk and we are responsible for all kinds of damages.

4. Tour giving notice of the goods being ready is tantamount to your tendering the same. On the notice being posted to our address the same would be considered to have reached us.

5. When you tender the goods we are bound to pay for and clear the same.

6. If we do not clear the goods, then we are to pay interest at the rate of 9 per cent, from the date on which the same should have been cleared. So also we bind ourselves to pay godown rent, insurance (charges) and whatever other expenses may be incurred.

7. Should we fail to clear the goods in time, then you may sell the same at any time you like either by public auction or by private sale in cue lot or in pieces at our risk and cost: and as to whatever loss you may suffer thereby we are to pay the same without (raising) any objection and as to whatever profit may be made we shall have no manner of right thereon.

31. In practice the defendants about once each month would send the buyer a delivery order in respect of such of the contract goods as were ready for delivery in the Company's godown and the buyer would sign an acknowledgment of delivery of so many bales and the goods would be debited to him by the defendants. If his obligation to clear the goods within twenty-four hours under Clause 3 was not discharged, interest would begin to run as well an godown rent for the storage in the defendants' godown and, insurance, other charges under Clause 6 to be followed on failure to clear and pay for this goods within a reasonable time by sale by the defendants at the buyer's risk and cost. Under Clause 9 of the contract objections to the goods would not prevail if not made within eight, days and the buyer would be bound to take delivery not withstanding his objections.

32. The defendants contend that the debiting of goods to the buyer and, sending him a delivery order for signature marks the period of delivery, for within twenty-four hours the defendants would hold, uncleared goods as warehousemen and bailees for the buyers.

33. In my opinion this contention is correct 'Delivery' within the meaning of the added clause relates to some act to be done by the sellers, but their obligations ceased with the debiting of the goads and their transference from the defendants' mills to their godown. Thereupon constructive delivery took, place: 'It is a change of possession without any change of actual, custody A seller in possession may assent to hold the thing sold on account of the buyer. When he begins so to hold it, this has the same effect as a physical delivery to the buyer or his servant, and is an actual receipt by the buyer:' see Pollock and Wright on Possession, page 72. Holmes, in the Common Law, page 233, remarks that

Where goods remain in the custody of a vendor, appropriation to the contract and acceptance have been confounded with delivery. Our law has adopted the Roman doctrine, that there may be a delivery, that is, a change of possession, by a change in the character in which the vendor holds, but has not always imitated the caution of the civilians with regard to what amounts to such a change.

34. Here, in my opinion, the provisions of the contracts preclude the possibility of doubt as to the point of time when the change occurs. It is not necessary to repeat the indications noted by the learned Trial Judge of the understanding of the parties in the matter, but we may add that the award, itself affords an instance of the practical effect of Clause 9 of the contract. The arbitrators, experts in the practice of the trade, held that with regard to the bales debited on the 30th May and objected to on the 5th June interest should only run from the 31st of July, the date of the award upon the objections. This would be, the period of change of possession, if not of custody.

35. The decree of the lower Court must be affirmed and the appeal dismissed with costs oh the appellants.

Heaton, J.

36. I agree that the appellants' contention as to contract A fails and that Macleod, J.'s judgment in this particular should be affirmed. But I am far from sure that it cannot be affirmed on the ground that there is not any contradiction or repugnance between the written contract and the contract as modified by the custom. Whenever a custom prevails, it necessarily leads to the establishing of a contract different in some particulars from the written contract, otherwise custom would be useless and would never be relied on. Variation from the written contract is, therefore, inevitable where a custom has to be relied on. But variation need not be contradiction or repugnance; in some cases it is, in some it is not. In this particular case I think it is not. I need not develop the point, as the judgment of Macleod, J., is supported on other grounds.

37. As to the rest of the decision I agree.


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