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The Hind Mercantile Corporation Ltd. Vs. Miryala Venkateswarlu and Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 255 of 1953
Judge
Reported inAIR1959AP545
ActsSale of Goods Act, 1930 - Sections 35; Indian Contract Act, 1872 - Sections 1; Forwards Contracts (Regulation) Act, 1952 - Sections 2
AppellantThe Hind Mercantile Corporation Ltd.
RespondentMiryala Venkateswarlu and Co. and ors.
Appellant AdvocateG. Venkatrama Sastry, Adv.
Respondent AdvocateP. Sithikantha Sastry and ;M.V. Srinivasa Rao, Advs.
DispositionAppeal allowed
Excerpt:
.....of the breach, rs. as regards the other contract, the lower court held that there was a statutory obligation on the part of the plaintiff to apply for delivery and since he failed to do so, there was no obligation on the part of the defendants to supply and as such there was no breach committed' by the defendants; under the english act it is for the buyer to take delivery and in the absence of any other agreement the duty o the seller to deliver is satisfied by his affording to the buyer reasonable facilities for taking possession of the goods at the agreed place of delivery. where, therefore, section 35 had been conformed to by the plaintiff and the defendants failed to supply the goods as per the terms of the contract, they are liable to pay damages......same and two other witnesses of other firms doing business in groundnut oil, to prove the trade usage. defendants examined one witness being defendant no. 3.in addition to this oral evidence the correspondence between the parties (notices and telegrams) and other documents including the book maintained by the broker were produced. on this evidence the trial court came to the following conclusion; (a) the alleged settlement pleaded by the defendants was not established, (b) it was proved that 60 empty drums had been taken; having taken the empty drums the defendant's failed to fill them with oil as they were bound to do under the contract and therefore, there was a breach and defendants were liable to make good to the plaintiff the difference between the contract ptice and the market.....
Judgment:

Srinivasachari, J.

1. This is an appeal and a memorandum of cross-objections before this Court against the judgment of the Subordinate judge, Guntur. The brief facts relating to this case are that the plaintiffs firm carrying on business in groundnut oil entered into two contracts with the firm of the 1st defendant by its partners, defendants Nos. 2 to 4. The first contract was for the supply of 120 drums of groundnut oil at Rs. 16-4-0 per maund of 25 Ibs. for ready delivery on the Guntur Railway Platform, the payment being made against delivery.

The other contract was for the supply of 60 drums of the same oil for delivery likewise at Guntur Railway platform. These contracts were entered into and signed in the broker's office at Guntur and attested by the broker. The plaintiff alleged that according to the trade usage obtaining in contracts relating to groundnut oil, the seller, if he were outside Guntur, had to take empty drums from the buyer at his expense, fill them with oil and bring them to Guntur Railway platform, weigh them and take the contracted price for the quantity of oil Supplied. He stated that on 12-8-1951 the defendants sent for 60 empty drums as the first instalment from the plaintiff Accordingly the empty drums were handed to the defendant's agent. After taking the enipty drums the defendants did not fill them up with oil as they should have done.

They failed to deliver the oil in spite of several requests by the plaintiff, who had to export the said oil to Calcutta. Finally, the plaintiff said that he sent-wires on the 25th, 27th and 30th of August 1951 demanding the supply as per the contracts. While not carrying out the terms of the contracts,. the defendants sent a telegram on 31-8-1951 in reply to the several notices issued stating that the contract of the 9th instant had been cancelled on the same day and settlement made at Rs. 16/-, The plaintiff alleged that there had been a breach of contract oh the part of the defendants and they were liable for damages, the difference between the contract rate and Rs. 18/- being the market price of the day on which the supply was to bo made.

Plaintiff, therefore,- claimed a sum of Rs. 5445/-on account of the difference in price and also a sum of Rs. 1415/- on account of the value of 60 empty drums taken by the defendants and not returned. Defendants pleaded that as there was a downward tendency, the plaintiffs agent settled both the contracts on the evening of the 9th of August 1951 alone and under this settlement the plaintiff agreed to pay the difference of four annas per maund in respect of one contract. The trade usage relied on by the plaintiff was denied. A further plea was raised that the suit contracts were in the nature of 'forward contracts'. They denied that there was any default on their part 'and that any breach had occurred entitling the plaintiff to claim damages.

The main issues raised by the trial Court were (1) whether-the settlement alleged by the defendants was true, (2) whether defendants committed breach of contract, (3) whether the suit contract could be regarded as a forward contract as contended for by the defendants and (4) to what damages, if any, was the plaintiff entitled? The plaintiff examined the manager of the plaintiff firm and a broker in whose books the suit contract was entered and who attested the same and two other witnesses of other firms doing business in groundnut oil, to prove the trade usage. Defendants examined one witness being defendant No. 3.

In addition to this oral evidence the correspondence between the parties (notices and telegrams) and other documents including the book maintained by the broker were produced. On this evidence the trial Court came to the following conclusion; (a) the alleged settlement pleaded by the defendants was not established, (b) it was proved that 60 empty drums had been taken; having taken the empty drums the defendant's failed to fill them with oil as they were bound to do under the contract and therefore, there was a breach and defendants were liable to make good to the plaintiff the difference between the contract ptice and the market rate on the date of the breach, Rs. 17-14-0.

He, therefore, awarded the difference of Rs. 1-14-0 per maund on the 60 drums amounting to Rs. 1855/- as damages. As regards the other contract, the lower court held that there was a statutory obligation on the part of the plaintiff to apply for delivery and since he failed to do so, there was no obligation on the part of the defendants to supply and as such there was no breach committed' by the defendants; The local custom alleged by the plaintiff for the supplier to ask for empty drums in the first instance was not upheld by the trial Court on the ground that it was not consistent, definite and reasonable to be relied upon as a trade usage in variation of the Statute Law.

Therefore, the claim of the plaintiff with regard to the. 120 drums was negatived. As regards the price of the empty drums the lower court decreed the suit to the extent of Rs. 23/- being the price ot one drum as 59 drums had been delivered to the plaintiff at the institution of the suit. The total decree passed in favour of the plaintiff was for Rs. 1878/- with future interest and proportionate costs. Against the above decree plaintiff has filed an appeal and the defendants have filed a memorandum of cross-objections.

2. The question as to whether there was a breach of contract on the part of the defendants as alleged by the plaintiff depends upon whether the statutory requirement under the law of the buyer having to apply for delivery of the goods had been complied with by the plaintiff because under the law the obligation to supply the goods on the part of the supplier does not. arise until there is an application for delivery. Under the English Act it is for the buyer to take delivery and in the absence of any other agreement the duty o the seller to deliver is satisfied by his affording to the buyer reasonable facilities for taking possession of the goods at the agreed place of delivery.

But in India it is obligatory on the part of thebuyer to apply for delivery. That is made clearby SECTION 35 of the Sale of Goods Act. Section 35says that apart from any express contract theseller of goods is not bound to deliver them untilthe buyer applies for delivery. It would, therefore,follow that unless there is a contract to the contrary to relieve the buyer from the obligation toapply for delivery, or unless there is a trade usageor custom which expressly relieves the buyer fromthe statutory obligation, the seller is not bound todeliver. Therefore, if the seller can establish thatthere was no demand to the delivery of the goods,there can be no. question of breach of Contract if hefails to deliver goods and the buyer can have nocause of action as against the seller,.

3. What is sought to be alleged and proved .. in this case is that in matters relating to trade in groundnut oil there is a trade usage or custom prevalent in Guntur to the effect that the seller as to take empty drums from the buyer, fill them up with oil and have them delivered on the Guntur railway platform. The custom is spoken to by P. W. 2 Markendevulu. who says that there is a custom that the seller should apply for drums, take them at his expense, fill them, and bring them to Guntur Railway platform. In support of this statement of bis, he has produced Exs. A-19, a book maintained for supply of drums. Exs. A-20 and A-20(a) also have been produced. Ex. A-20 is the application for 60 drums and Ex. A-20(a) is the acknowledgment of the lorry driver taking delivery of the empty drums.

This custom is also spoken to by P. W. 3 who is a broker in the firm of Kondalrao and Narsiah. He says that if the seller is in the villages, he has to come to the buyer and take empty drums. The . statement of P. W. 4 an accountant in the firm of Dattaram and Sons, who deals in oil business is also to the same effect that the seller has to take empty drums in a week and has to effect delivery on railwav platform. It would, therefore, be apparent from the statements of these three witness-as on behalf of the plaintiff that they speak to a custom prevalent in Guntur under which where the seller happens to be outside Guntur, he has to apply for empty drums, take them, fill them up and deliver oil in drums on the Guntur Railway platform. In so far as this custom is concerned, the lower Court has ignored it on the prouud that the custom is not consistent and reasonable.

Defendant No. 3 who has been examined as D. W. 1 does not deny the fact of empty drums being taken. He says 'in all contracts entered into by us in Guntur we effect delivery on the Railway platform. We take empty drums to Narasaraopet our clerks take the letters, take a gate pass and bring the empty drums'. This statement of D-3 corroborates what has been stated by the plaintiffs' witnesses. In my opinion, if a trade usage exists that the supplier should procure the empty drums from the buyer, fill them up and deliver the goods at a railway platform, such usage cannot be regarded as being inconsistent with the terms of the contract.

Having regard to the nature of the contract, evidence is also admissible- to prove the usage of trade with regard to supply and delivery. Extrinsic evidence is always allowed to prove the custom and usage governing such transactions. It is not necessary to establish in proving such trade usage or custom, antiquity, uniformity and notoriety. Such. custom must be presumed to be an ingredient tacitly imported by the parties into their contract. So it has been held in Juggomohan Ghosh v. Manikchand, 7 Mco Ind App 263 (PC). This principle that in commercial transactions extrinsic evidence of custom and usage is admissible to annex incidents to written contracts in matters with respect to which they are silent has been established as early as Hutton v. Warren, (1830) 5 LJ Ex 234.

In the case of Humphrey v. Dale, (1857) 26 LJ (QB) 137 the same principle was approved and it was held that such a trade usage could not be regarded as being repugnant to the contract. A similar case came up for consideration before the Calcutta High Court in the case of Bejoy Krishna v. North Bengal Sugar Mills, ILR (1945) 2 Cal 173: (AIR 1949 Cal 490). There the contract was for the supply of liequid molasses F. O. R. Gopalpur.

There was nothing in the contract to suggest as to whether the buyer or the seller was responsible for procuring tank Wagons at the site where the molasses could be pumped into the tank wagons. In that case the learned Judges held that there would be no inconsistency in adding to the clause relating to the sale, the trade usage that the mills should procure the rail wagons into which they were to load the goods. It would, therefore, follow that if the nature of the transaction is such that it would take sometime to put the goods in a deliverable condition, then the obligation of the buyer to apply for delivery is postponed to a reasonable time, a time which would reasonably be required to make the goods ready for delivery.

In the leading case which went up to the Privy Council of Nune Sivayya v. Maddu Ranganayakulu, 62 Ind App 89; (AIR 1935 PC 67), their Lordships of the Privy Council were considering about the import of Section 93 of the Indian Contract Act which subsequently was replaced by Section 35 of the Sale of Goods Act.

They observed that the words 'special promise' meant an express stipulation as to delivery which relieved the buyer from the obligation to apply for delivery. Such stipulation, they observed, might arise out of usage or custom of trade as provided by Section 1 of the Contract Act. The Privy Council said that the obligation on the seller to inform the buyer when the goods were in a deliverable state was not a 'special promise' within the meaning of Section 93 of the Contract Act. In the case in question the goods had to be obtained by tho seller from distant mills.

Although their Lordships held that it could not be regarded as coming within the meaning of the words 'special promise' in Section 93 they said that this circumstance of the goods having to be gotfrom distant mills would justify the postponing ofthe obligation of the buyer to apply for delivery.In effect the principle laid down by. the PrivyCouncil was that an obligation on the part of theseller to inform the buyer that the goods are in adeliverable state would postpone the obligationon the buyer to apply for delivery on the lapse ofa reasonable time that time being necessary toenable the goods to be procured by the seller fromtho mills.

4. On the analogy of that principle, if from . the nature of the transaction, the seller had to requisition empty drums from the buyer in order that oil may be filled in those drums and delivered the statutory obligation under. Section 35 of the Sale of Goods Act is postponed to a reasonable time that being the time requisite for the supplier to call for the empty drums and fill them up. It that principle were applied to this case it would appear that the 'plaintiff applied for delivery on 30-8-1951 which could be regarded as a reasonable time within which the plaintiff applied for deli-very of the goods as required by Section 35 of Sate of Goods Act. Where, therefore, Section 35 had been conformed to by the plaintiff and the defendants failed to supply the goods as per the terms of the contract, they are liable to pay damages.

The plea set up by the defendants was that as the price was going down there was a settle-ment on the very date when the parties entered -into a contract. The evidence with regard to this settlement consists of the solitary statement of defendant 3. The lower Court has rightly rejected this plea as not having been established by the evidence. Being businessmen; if there was a settlement as alleged, their account books would show as to what the settlement was. Defendants have not chosen to produce the account books and tho Court, would be justified in drawing an adverse inference against the defendants when they withheld the production of the account books.

5. The argument, relating to the transaction partaking of the nature of a forward contract is also to be rejected, because the transaction related to ready delivery in respect of goods which were ready and available and with regard to which the buyer could apply as soon as he could and this fact is Supported by the evidence of Marken-deyulu, P. W. 2 and also by the broker Laxmi Narasaiah, who says that ready delivery always meant a sale in respect of ready goods.

6. The result is that the appeal is allowed with costs throughout and the memorandum of cross-objections dismissed with costs. The plaintiff would be entitled to the difference of price ot 120 drums of oil at the same rate at which the lower Court has awarded damages on the 60 drums. The total amount of damages that the plaintiff would be entitled would be Rs. 5445/-. There will be a decree for Rs. 54457- together with future interest at the rate of 6 per cent per annum from the date of the suit till the date of realisation.


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