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Venkateswara Minerals, Firm and anr. Vs. Jugalkishore Chiranjitlal, Firm - Court Judgment

LegalCrystal Citation
SubjectCommercial;Contract
CourtKarnataka High Court
Decided On
Case NumberFirst Appeal No. 134 of 1975
Judge
Reported inAIR1986Kant14; ILR1985KAR2992; 1985(2)KarLJ319
ActsIndian Contract Act, 1872 - Sections 4, 54, 55, 63 and 73; Sale of Goods Act, 1930 - Sections 11, 12, 55 and 56
AppellantVenkateswara Minerals, Firm and anr.
RespondentJugalkishore Chiranjitlal, Firm
Appellant AdvocateC.M. Monappa, Adv.
Respondent AdvocateN. Govinda Bhat, Adv. for ;S.G. Sundaraswami, Adv.
Excerpt:
(i) commercial - waive - indian contract act, 1872 - whether time was of essence of contract and whether it was waived by plaintiff - parties fixed definite period of 45 days for performance of contract - agreement was executed on 01.01.1968 - period of 45 days stipulated in agreement for performance of contract would expire on 16.03.1968 - plaintiff called upon defendant to deliver goods by letters - defendant without supplying red-oxide asserted that time was not of essence of contract and he was always ready and willing to supply red-oxide but plaintiff did not co-operate by making available railway wagons for purpose - defendant's offer to deliver goods after expiry of contract period was meaningless - plaintiff had not waived time which was of essence of contract. (ii) breach of..........the promisee. it is only at the request of the promisor that the promisee may agree to extend the time of performance and thereby bring about an agreement for extension of time. therefore, it is only as a result of the operation of s. 63, contract act, that the time for the performance of the contract can be extended and that time can only be extended by an agreement arrived at between the promisor and the promisee.'the supreme court in keshavlal lallubhai v; lallubhai trikumlal mills ltd. : [1959]1scr213 thus :'the true legal position in regard to the extension of time for the performance of a contract is quite clear under s. 63 of the indian contract act. every promisee, as the section provides, may extend time for the performance of the contract. the question as to how extension of.....
Judgment:

Jagannatha Shetty, J.

1. This appeal by the defendant has been preferred against the decree and judgment dt. August 23, 1975 made in O.S. No. 10 of 1971 by the Civil Judge, Bellary.

2. Briefly stated the facts are these :

Plaintiff is a registered firm and so too the defendants. They are carrying on business as mineral dealers. On Feb. 1, 1968 the defendants-firm (collectively called 'the defendant) entered into an agreement with the plaintiff at Madras to sell 600 tonnes of red-oxide at Rs. 50/- per. tonne F.O.R. Torangallu, Hospet, Bellary. In consideration for the sale of redoxide, plaintiff paid Rs. 30,000/- to the defendant. The delivery was required to be made within 45 days from the ready stock available at Bellary. The time was considered as of the essence of the agreement. If the goods were not delivered within 45 days, plaintiff could ask for refund of the purchase price. The defendant was having its head office at Madras and a Branch Office at Bellary. The Head Office sent instructions to the Branch Office apprising the latter of the agreement and asking to comply with the terms thereof. But the defendant did not supply the goods within the stipulated time with the certificates required in spite of repeated reminders from plaintiff. So plaintiff brought the suit for recovery of Rs. 30,000/- paid under the agreement

3. The defendant resisted the suit, inter alia contending that the goods agreed to be sold were always kept ready for delivery. to the knowledge of plaintiff, but it could not be delivered since plaintiff did not requisition railway wagons as required under the agreement. The requisition of wagons was a necessary conditi6n of the contract, but plaintiff in view of the falling price of red-oxide made only paper pretences for taking delivery while in effect and in practice failed to perform his part of the contract. The time was not of the essence of the contract. However, the defendant for keeping up smooth relationship between the parties was always ready and willing to deliver the goods as per conditions prescribed under the contract. The goods were kept ready to despatch with all the necessary certificates when plaintiff extended time for delivery, but even then, plaintiff did not intimate the availability of railway wagons. Plaintiff has thus committed a breach of the contract and therefore not entitled to get back the price money paid. With these and other allegations the defendant prayed for dismissal of the suit.

4. Out of the issues framed by the trial Court, the following may be relevant for our consideration

(i) Whether the defendant has committed a breach of the contract inasmuch as it has not supplied the ore within the stipulated time?

(ii) Whether time was of the essence of the contract?

The evidence produced by the parties consists mostly of letters exchanged between them and their legal Advisors with the oral evidence of one witness on each side. On an appreciation of the evidence, the trial Court came to the conclusion that time was of the essence of the contract and the defendant has committed a breach of the contract by not supplying the red-oxide as per agreed conditions.

5. We have heard Mr. C.M. Monappa for the appellants and Mr. R.N. Govinda Bhat for the respondent. In the light of submissions made by counsel on both sides and upon considering the material on record, the following two points arise for our consideration :

(i) Whether time was of the essence of the contract and, if so, whether it was waived by plaintiff?

(ii) Whether there was a breach of the contract and, if so, by whom?

Re. Point No. (i) :

6. This point turns on the construction to be put upon the terms of the contract and the correspondence which has taken place between the parties and their legal advisors The professed object of the Court in construing a written contract is to discover the intention of parties, the written declaration of whose minds it is. But this intention must be ascertained from the document itself; it is not possible to go outside the terms set down, and to substitute for these, a guess as to what the parties might have intended in the circumstances. This is a basic principle to be remembered in construing a contract. Ex. P. 4 is the contract Dt. Feb. 1, 1968 containing the following relevant terms and conditions:

(i) Goods should be packed in once used strong cement gunny bags of 50 kgs. per bag net.

(ii) Stocks shall be sampled and analysed by Essen & Co., and analysis certificate and geological permit shall be produced by the sellers before loading.

(iii ) The defendant should at his own expenses transport the red-oxide and load the prescribed quality and quantity into the wagons F.O.R. Torangallu.

(iv) If on analysis the results are below 96% Ferric Oxide, a penalty of Rs. 2.50 per unit up to 94% shall be paid by the defendant and below 94% plaintiff had the option to reject the goods.

(v) Delivery shall be completed within 45 days from the date of the contract. The time being of the essence of the contract, in default ,the defendant should refund forthwith the purchase price and pay the plaintiff liquidated damages of Rs. 2/- per tonne undelivered.

The contract also provides that in consideration of the terms agreed upon, plaintiff paid the full sale price for 600 tonnes, i.e., Rs. 30,000/- to the defendant who executed a receipt for having received the said sum.

It will be therefore seen that the parties have fixed a definite period of 45 days for the performance of the contract.

7. The contract in question is a commercial contract. In commercial or mercantile contracts, the need for certainty is of great importance and it is this aspect of the matter that compels courts generally to construe time as of the essence of commercial contracts. The law relating to time being of the essence of contract has been neatly summarised in the passage in Halsbury's Laws of England - IV edition - Vol. IX - at para 481 :

'The modern law, in the case or contracts M all types, may be summarised as follows : Time will not be considered to be of the essence unless (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or (3) a party who has been subjected to unreasonable delay gives notice to the party in default making time of the essence.'

Again para 482 states :

'...............Broadly speaking, time will be considered of the essence in 'mercantile' contracts and in other cases where the nature of the contract or of the subject matter or the circumstances of the case require precise compliance.'

These principles have been emphasised by the Supreme Court in Mahabir Prasad Rungta v. Durga Datta : [1961]3SCR639 and in M/s. China Cotton Exporters v. Beharilal Ramcharan Cotton Mills Ltd, : [1961]3SCR845 . In the instant case however, the stipulation as to time being of the essence of the contract gives no scope for ambiguity. It is not susceptible of two meanings. The parties have expressly stated nay emphasised by the inclusion of a further clause that time should be considered as of the essence of the contract. We have therefore no hesitation in agreeing with the conclusion of the trial Court that the parties intended that the period of 45 days stipulated for delivery of red-oxide should be considered as of the essence of the contract.

8. The next part of he question is, whether the time which has been prescribed as a condition for the performance of the contract has been waived by plaintiff. Mr. Monnappa, for the appellant, urged that it has been expressly waived by plaintiff. In support of the contention he relied upon a letter Ex. P. 10 dt. Aug. 2, 1968 written by the legal advisor of plaintiff. The relevant portion of that letter reads :

'As a gesture of accommodation in view of the past relationship between my clients and yourselves but without prejudice I am instructed to offer to you extension of one week from the date of receipt of this notice to fulfil strictly all the terms of the agreement of 1-2-1968 by supplying red-oxide in suitable package bags with geological permit obtained beforehand after sampling and analysis by Essen Co. analysts. This is the last and final offer which my clients are prepared to make and on your failure to comply strictly with this offer within the time stipulated my clients withdraw the offer and will enforce their rights under the contract against you for the breach of the terms of the contract. Please note.'

Left to itself, this portion may lend support to the contention of Mr. Monappa, but we cannot read it in isolation. The letter was written by the legal advisor without prejudice to the contention of plaintiff, the contention being that it was the defendant who has committed a breach of the contract and so liable to refund the price paid. It was stated therein :

'I am, therefore, issuing this notice to you to refund the amount of Rs. 30,000/- received by you as advance payment of the red-oxide and damages already claimed in my notice dt. 20th March, 1968, namely, Rs. 1,200/- and demand that you should pay this money with interest at 12 per cent per annum from 1-21968 to date of payment and legal notice charges of Rs. 100/- for this notice within 8 days of the receipt of this notice.'

The letter next states that as a gesture of accommodation in view of the past relationship between the parties, the legal advisor was instructed to offer extension of one week from the date of receipt of Ex. P. 10 to fulfil strictly the terms of Ex. P. 4. This letter could not be construed as extending the time by one week: it is just an offer to extend the time by one week Indeed, plaintiff could not have unilaterally extended the time specified in the contract. It is an accepted principle that one party has no power to alter or vary the binding terms in a contract. As the old maxim goes there must be consensus ad idem and the parties must agree together. This has been made more clear by the provisions of Ss. 55 and 63 of the Indian Contract Act.

9. Section 55 so far as it is relevant provides :

'When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.'

Section 63 provides :

'Every promise may dispense with or remit wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.'

Under S. 63 the promisee may make certain concession to the promisor and one of them is that he may extend the time specified for the performance of the contract. But it cannot be a unilateral extension on the part of the promisee alone. The earliest case on this view is that of the Bombay High Court in Anandram Mangturarm v. Bholararm Tanumal, AIR 1946 Bom 1. Stone, C.J., speaking for the Bench observed that there should be consensus ad idem, express or implied to extend the time either to any particular date or to the happening of some future event and mere forbearance to institute proceedings or to give notice of rescission cannot be an extension of the time for performance of the contract within the meaning of S. 63 Contract Act.

Chagla, J., (as he then was) in his concurring judgment observed :

'Under S. 55, Contract Act, the promisee is given the option to avoid the contract where the promisor fails to perform the contract at the time fixed in the contract. It is open to the promisee not to exercise the option or to exercise the option at any time, but it is clear to my mind that the promisee cannot by the mere fact of not exercising the option change or alter the date of performance fixed under the contract itself. Under S. 63, Contract Act, the promisee may make certain concessions to the promisor which are advantageous to the promisor, and one of them is that he may extend the time for such performance. But it is clear again that such an extension of time cannot be a unilateral extension on the part of the promisee. It is only at the request of the promisor that the promisee may agree to extend the time of performance and thereby bring about an agreement for extension of time. Therefore, it is only as a result of the operation of S. 63, Contract Act, that the time for the performance of the contract can be extended and that time can only be extended by an agreement arrived at between the promisor and the promisee.'

The Supreme Court in Keshavlal Lallubhai v; Lallubhai Trikumlal Mills Ltd. : [1959]1SCR213 thus :

'The true legal position in regard to the extension of time for the performance of a contract is quite clear under S. 63 of the Indian Contract Act. Every promisee, as the section provides, may extend time for the performance of the contract. The question as to how extension of time may be agreed upon by the parties has been the subject-matter of some argument at the Bar in the present appeal. There can be, no doubt, we think, that both the buyer and the seller must agree to extend time for the delivery of goods. It would not be open to the promisee by his unilateral act to extend the time for performance of his own accord for his own benefit.'

In view of this clear legal position in regard to extension of time, we must reject the contention of Mr. Monappa that Ex. P. 10 had the effect of extending the time stipulated for the performance of the contract.

10. If the defendant had accepted the offer under Ex. P. 10, then, it would have been possible to suggest that the time for the performance has been extended by seven days from the date of receipt of Ex. P. 10. Unfortunately, the defendant did not intimate their acceptance of the offer made by plaintiff. Nor they had kept ready the required certificates specified under the contract. Ex. P. 10 was received by the defendant on Aug. 6, 1968. Within one week thereafter, they ought to have replied in accepting the offer. The acceptance could have been intimated by any of the methods prescribed under S. 4 of the Contract Act. But there was hardly any response express or implied from the defendants within one week from the date of receipt of Ex. P. 10. It was only on Aug. 24, 1968, the legal advisor of the defendant wrote a letter Ex. P. 11 to plaintiff reiterating that the defendant did not at any time commit any breach of the contract. In that letter it was stated that the defendant had obtained two geological permits, viz., 307 dated Feb. 12, 1968, for despatch of 100 tonnes of red-oxide ore. It was also stated that the permit for 100 tonnes of red-oxide although had expired could be renewed within 48 hours. It was further stated that the analysis report from Essen & Co., was already obtained as far back on Mar. 21, 1968 which was within the knowledge of plaintiff.

Even this letter Ex. P. 11 does not give us an indication that the defendant has performed their part of the contract within the stipulated time much less within the extended period of 7 days offered under Ex. P. 10. No doubt the geological permit for 100 tonnes of red-oxide was obtained in Feb. 1968 and we could proceed that it could have been renewed by a short notice. May be that the defendant might have obtained geological permit for 500 tonnes of red-oxide on Aug. 12, 1968, i.e., within the extended period of 7 days from the date of receipt of Ex. P. 10 but that was never communicated to plaintiff. Plaintiff was informed of that fact only under Ex. P. 11 dated Aug. 24 1968 and there is no acceptable evidence to show that it was brought to the notice of plaintiff earlier. We are therefore unable to hold that the time for the performance of the contract has been extended by consent of both the parties.

11. Before parting with this aspect of the matter it is necessary to consider the next contention of Mr. Monappa that plaintiff has waived the condition of time stipulated under the agreement. Counsel urged that plaintiff by writing Ex. P. 10 has waived the time being of the essence of the contract. In our opinion, there is absolutely no scope for such an inference in view of the earlier letters written by plaintiff. The agreement was executed on Feb. 1, 1968. The period of 45 days stipulated in the agreement for the performance of the contract would expire on March 16, 1968. Plaintiff has called upon the defendant to deliver the goods by letters Exs. D1 dt. Feb. 5, 1968, D2 dt. Feb. 7, 1968 and P. 5 dt. Mar.,6, 1968. In all these letters, plaintiff has reminded the defendant that 'so far the goods have not been tendered by you for delivery in terms of contract between us, although the end of delivery period stipulated in contract is fast approaching'. Then followed Ex. P. 17 dt. Mar. 20, 1968 written by the legal advisor of plaintiff to the defendant. The relevant portion of that letter reads :

'Despite these repeated requests delivery and despatching instructions, you have failed to fulfill the contract within the time stipulated i.e., within 45 days (from) 1,2-1968. The delivery of 8 tonnes to Chetan Minerals is no in accordance with the terms of the contract. You have not delivered the geological permit and analysis certificate from M/s. Essen & Co.'.

'Time was and has been the essence of this contract. You are therefore called upon to (1) refund Rs. 30,000 paid on,1-2-1968 as the full sale price of 600 tonnes.'

'If within 8 days of the receipt of this notice your head office or you fail or neglect to comply with the above demands, my clients will sue you for the amount and take other suitable steps to enforce their rights in of law. Please note.'

The defendant without supplying the redoxide asserted in Ex. P. 6 dt. April 9, 1968 that time was not of the essence of the contract and he was always ready and willing to supply the red-oxide, but plaintiff did not co-operate by making available railway wagons for the purpose.

Ex. P. 17 was followed by another letter Ex. D. 4 dt. April 27, 1968 from the legal advisor of plaintiff stating that the defendant's offer to deliver the goods after expiry of the contract period was meaningless and they should return the price money paid under Ex. P. 4. In view of these letters, we cannot hold that plaintiff has waived the time which was of the essence of the contract.

12. Re. Point No. 2 :

The critical point to be considered here is as to who has committed the breach of the contract. The answer to this question largely turns upon the stipulations imposed under the contract whether making available railway wagons by plaintiff was a condition precedent to liability to supply the red-oxide by the defendant. To put it in other words, whether the defendant's obligation to supply the redoxide was made conditional upon the, requisitioning of railway wagon by plaintiff. In the usual sense, the condition means as essential undertaking in the contract which one party promises will be made good. If it is not made good, not only the other party be entitled to repudiate the contract, but also to sue for damages for breach.

Mr. Monnappa urged that the defendant was always ready and willing to perform their part of the contract, but plaintiff did not perform his part of the contract by requisitioning railway wagons for the purpose of loading red-oxide and since admittedly there were no railway wagons made available by plaintiff, the defendant could not dispatch the goods within the stipulated period. Counsel also urged that the geological permit and the analysis report from Essen & Co. were not necessary for plaintiff to apply for railway wagons. In support of this contention, counsel relied upon the evidence of Chiranjeethlal Agrawal (P. W. 1), who was stated that the geological permit and analysis report were not necessary to apply for wagons.

13. We do not think that we could accept the contention which runs contrary to the terms of the written contract. Ex. P. 4 provides specifically :-

Stocks shall be sampled and analysed by Essen & Co. and analysis certificate and geological permit shall be produced by the sellers before loading. If on analysis the results are below 96%, Ferric Oxide, a penalty of Rs. 2.50 per unit up to 94%, shall be paid by the seller. Rejection below 94%.'

It will be seen that the parties agreed that geological permit and analysis certificate should be produced by the defendant before loading the red oxide in the wagons. It was necessary for the defendant to furnish these certificates in advance beacause plaintiff has been given the right to reject the goods if the analysis certificate indicated that the Ferric Oxide content was less than 94%. In order to exercise this right of rejection. plaintiff must have in advance the said certificates before the red-oxide is loaded in the wagons, since it would he difficult for him to reject the goods after loading or in transit. Secondly, the defendant must also inform plaintiff that they Were ready to move the goods from the place where it was stocked to the place of loading that is - Tornagallu. That could be possible only when they, have obtained a geological permit from the department. Such a certificate is also necessary for plaintiff to supply for wagons. The intention of the parties in this regard has been expressly made clear by the following clause in the contract Ex. P. 4 :

'The seller will handover the analysis certificate and movement permit issued by (he Geologist, Bellary, for the goods sold as arid when they become ready for delivery in order to enable the purchaser to requisition wagons from the railways.'

It is clear from the above clause that the defendant should furnish the analysis certificate and geological permit in order to enable plaintiff to requisition wagons from the railways for loading the red-oxide. The requisition of railway wagon by plaintiff in the circumstances was only a contingent condition, i.e., that obligation would not come into force unless or until the defendants performed their obligation by securing the said necessary certificates.

Needless to state that the defendant was not ready with any one of the said requirements. .In the written statement, the defendant has stated that they obtained an analysis certificate only on Mar. 21, 1968 and send the same to plaintiff on Mar. 30, 1968. This is evidently after the time prescribed for performing the contract under Ex. P. 4. The defendant obtained Ex. D. 6 - geological permit - for despatch of 100 tonnes, of red-oxide on Feb. 12, 1968 but there is no evidence to show that this was communicated to plaintiff. That apart, the geological permit for 500 tonnes of redoxide was obtained by the defendant only on Aug. 12, 1968. This was sent to plaintiff under Ex. P. I I dt. Aug. 24, 1968. Therefore, it will be seen that the defendant did not perform their part of the contract and they must therefore, be held to have committed a breach of the contract.

14. In the result, the appeal fails and is dismissed.

In the circumstances of the case, we make no order as to costs.

15. Appeal dismissed.


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