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Sita Ram Vs. Kunj Lal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberFirst Appeal No. 334 of 1951
Judge
Reported inAIR1963All206
ActsContract Act, 1872 - Sections 23; Uttar Pradesh Gur Control Order, 1946; Defence of India Rule - Rule 81(2); Sale of Goods Act, 1930 - Sections 55
AppellantSita Ram
RespondentKunj Lal
Appellant AdvocateJ. Swarup and ;H. Swarup, Advs.
Respondent AdvocateAmbika Prasad and ;N.A. Rahman, Advs.
DispositionAppeal allowed
Excerpt:
.....- contract - section 23 of contract act and clauses 3 and 4 of u.p. gur control order, 1948 - jaggery powder one of the controlled commodities could only be sold and purchased at rates notified by u.p. gur control order - rates above the controlled rate is illegal. (ii) contract - enforceability - section 23 of contract act, 1872 - contract continues to be illegal even after legal provision ceases to be effective. (iii) resell of goods - section 55 of sales of goods act, 1930 - resale not in accordance with law as without due notice - illegal. - - the main defence, at any rate the defence on which specific and strong reliance was placed before us by learned counsel for the defendant-appellant, was defence which questioned the legality of the contract. we have considered it..........in respect of damages for breach of a contract which was entered into in respect of supply of jaggery powder (a form of gur).2. on the 14th august, 1947, the defendant was alleged to have contracted to purchase four wagons of jaggery powder roughly weighing about 2,000 maunds through the plaintiff's agency at two different rates. the first two wagons were contracted to be supplied at rs. 25/8/- per maund, while the other two wagons at rs. 25/12/- per maund. the price agreed to be paid was, what was in the market known as, bilti-cut rate, that is to say, it was inclusive of charges incurrable to have the goods loaded in wagons, i.e., the rates were f.o.r. rates. according to the plaintiff, it was agreed that commission, would be paid at the rate of rs. 1/9/- per cent that expenses,.....
Judgment:

Mukherji, J.

1. This is an appeal by a defendant arising out of a suit for the recovery of a sum of Rs. 11,773/15/6 in respect of damages for breach of a contract which was entered into in respect of supply of jaggery powder (a form of gur).

2. On the 14th August, 1947, the defendant was alleged to have contracted to purchase four wagons of jaggery powder roughly weighing about 2,000 maunds through the plaintiff's agency at two different rates. The first two wagons were contracted to be supplied at Rs. 25/8/- per maund, while the other two wagons at Rs. 25/12/- per maund. The price agreed to be paid was, what was in the market known as, Bilti-cut rate, that is to say, it was inclusive of charges incurrable to have the goods loaded in wagons, i.e., the rates were F.O.R. rates. According to the plaintiff, it was agreed that commission, would be paid at the rate of Rs. 1/9/- per cent that expenses, etc. would be at one anna per cent., and that brokerage would be Rs. 10/- a wagon. In pursuance of the aforementioned contract it was alleged by the plaintiff and agreed to on behalf of the defendant, that the defendant had deposited a sum of Rs. 2,000/- on the 28th August, 1947, with the plaintiff.

3. On the 23rd August, 1947, one wagon was despatched to the defendant in terms of the aforementioned contract and the second wagon was despatched on the 12th September, 1947. After the respective wagons were despatched, Railway Receipts were sent and the recovery or the amounts was made through Hundis. It appears that a sum of Rs. 11,983/2/- was received on the 29th August, 1947, and another sum of Rs. 11,981/4/- was received on the 15th August, 1947. After the two wagons mentioned above had been despatched the position in regard to the availability of wagons became precarious, and therefore despatch of jaggery, sugar and such other commodities could only be made on obtaining a requisite permit for despatch of such goods. There was admittedly no requisite permit in favour of either of the parties for the despatch of jaggery in pursuance of the aforementioned contract, so that right from September till December 1947 the remaining two wagons of jaggery could not be despatched.

4. On the 9th December, 1947, the plaintiff informed the defendant that the control in respect of movement of jaggery had been lifted and that it was therefore possible to despatch the balance of the goods of the contract. According to the plaintiff, the defendant's man came and had the goods weighed and despatched. The first despatch, after the movement of goods had been restored, was made on the 11th December, 1947, and the Railway Receipt in respect of this despatch was sent along with a Hundi to the defendant at Indore for being honoured. The second wagon was despatched on the 16th December, 1947, and along with the Railway Receipt for this wagon a Hundi was also sent to the defendant. The defendant refused to honour the Hundis and refused to take delivery of the wagons which had been despatched on the two dates in December 1947, mentioned above. The plaintiff, therefore, was faced with the situation that the goods which he had despatched to Indore lay there at his peril and therefore what he did was that he serves the defendant with a notice dated the 3rd January, 1948, saying that he would sell the goods. The defendant However took no steps after receipt of the notice and, the plaintiff re-sold the goods at Indore on the 6th January, 1948. This was the case set up by the plaintiff in regard to the re-sale. The plaintiff's further case in regard to this re-sale was that the goods fetched a price of Rs. 10/12/- per maund. The plaintiff filed the suit, out of which this appeal arises, for damages, as we have said earlier, for a breach of contract and claimed damages in regard to the difference between the contracted price and the price actually fetched on re-sale of the goods, as also commission and incidental charges. The plaintiff also claimed a certain sum of money, which, according to him, he had advanced to the defendant for paying up a portion of the price of the goods which had to be supplied by the plaintiff. This advance and payments by the defendant, according to the plaintiffs case, were necessitated by the fact that the plaintiff was unwilling to enter into a contract for the supply of jaggery powder at rates which were above the controlled rates.

5. As we said earlier, this was a suit for the recovery of a certain sum of money by way of damages for breach of a contract. On behalf of the defendant ft was pleaded that there was no breach of contract on his part and in effect he pleaded that the plaintiff was entitled to nothing. The defendant joined issue with the plaintiff as to the rate at which jaggery powder had to be supplied. There was a specific denial in the written statement on behalf of the defendant in regard to the case which was set up by the plaintiff, though not specifically in the plaint, in regard to his having advanced a certain sum of money, in two Instalments, which was said to have been utilised by the defendant for payment to persons from whom the jaggery powder was purchased for supply, at rates which were beyond the controlled rates. The main defence, at any rate the defence on which specific and strong reliance was placed before us by learned counsel for the defendant-appellant, was defence which questioned the legality of the contract. What was contended in regard to this defence was that at the time when the contract for the supply of jaggery powder was entered into jaggery powder was one of the controlled commodities and it could only be sold and purchased at rates notified by Government under the United Provinces Gur Price Control Order, 1946.

6. For the purposes of determining this appeal we have not thought it necessary to go in great detail in regard to the various contentions raised by the parties touching on questions of fact and the various Issues that were struck by the Court below, for a reference to the issues struck in the court below would show that there were as many as 11 issues struck.

We have considered it desirable to take this course because, in our view and also in the view of learned counsel appearing for the parties, the case really concluded on the question of law which was clearly raised by issue No. 3 which was in these words:

'3. At what rate was the contract of purchase made between the parties? Can the plaintiff claim more price than the controlled rate in any case?'.

Sugar of various kinds was among the list of controlled commodities controlled by Order under the powers vested in Government under clause (c) of Sub-section (2) of Section 3 of the Essential Supplies (Temporary Powers) Act, 1946 (Act XXVI of 1946). There was in the United Provinces a notification in force which was made under the powers conferred on Government by Sub-rule (2) of Rule 81 of the Defence of India Rules. Under that rule the United Provinces Government, as if then was, promulgated an Order called the United Provinces Gur Price Control Order, 1946. Under clause 3 of this Order no person in a wholesale transaction could sell or offer for sale and purchase or offer for purchase in a controlled gur market gur at 3 price in excess of the maximum prices for different varieties specified in the schedule annexed to that Order. Clause 4 of the same Order provided that no gur was to be delivered or accepted in pursuance of an agreement entered into before the date of that Order at a price in excess of the maximum price referred to in Clause 3(i) of the Order. Because pf the Control Order it was not possible for any one to sell gur as also the various types of it, which included jaggery powder, at a price other than that fixed by the Control Order. There was no difference between learned counsel for the parties before us that the article which was contracted to be sold or supplied was an article of human consumption the price of which had been legally controlled by the aforementioned Order, namely, the Gur Price Control Order. Counsel also agreed that the controlled rate for the commodity F. O. R. was Rs. 19/1/- per maund. It is, therefore, clear that no supply or sale could be made at rates higher than Rupees 19/1/- per maund at the time when the contract in question was entered into namely, the 14th August, 1947. The plaintiff appears to have been conscious of the dangers which beset his case if he claimed straightway price at the rate of Rs. 25/8/- and Rs. 25/12/- per maund, and, therefore, he spun out a case, though not clearly in his plaint, that the contract of supply really was at Rs. 19/1/- per maund but the jaggery powder had to be bought at higher rates namely Rs. 25/8- and Rs. 25/12/- per maund, because no one was prepared to sell jaggary powder at the controlled rate and therefore the defendant himself agreed to pay the difference between the controlled rate of jaggery powder and the rate at which the powder was available for purchase by borrowing the amount from the plaintiff's firm and making the payments to the suppliers direct. This argument was advanced apparently to salvage the plaintiff's case from the devastating effect which the law would have on his case if the contract could be one of sale at rates higher than the controlled rate. The evidence in the case did not sustain the plaintiff's contention of faking advance from him by the defendant and the defendant making payments direct to the suppliers of jaggery powder to make up the difference between the controlled rate and the rates charged by the suppliers for the jaggery powder. The trial court did not find this established, and we have found it also unestablished. So that, the position that obtained was that the plaintiff's contention that he did not contract to supply jaggery powder at rates higher than the controlled rate could not be sustained, and that what appeared to be true was that the plaintiff and the defendant, each in his turn, agreed to supply and take jaggery powder at rates much above the controlled rate. The question that, therefore, remains to be answered is whether such a contract could be sustained.

7. Mr. Hari Swarup, appearing on behalf of the appellant, contended that the contract which was attempted to be enforced by the plaintiff was in the teeth of the provisions of the Control Order and whatever quibbling the plaintiff resorted to he could not get over the patent fact that his quibblings were merely vain attempts at defeating a provision of law. It was pointed out that under Section 23 of the Indian Contract Act if the consideration or object of an agreement was of such a nature that if permitted it would defeat some provision of law then such an agreement was unlawful. There can be no doubt that the agreement in the present case was of such a nature that if it was permitted to pass muster it would put at naught the provisions of the Gur Price Control Order. The contract in the instant case was certainly tainted with all that anti-social desire against which the Control Orders attempted to fight. We have noticed the provisions of Clauses 3 and 4 of the United Provinces Gur Price Control Order, 1946, earlier and those two clauses clearly show that no one could in a wholesale transaction sell or offer for sale and purchase or offer for purchase in a controlled gur market gur at a price in excess of the maximum prices fixed for the different varieties specified in the schedule annexed to that Order. Further, the Gur Price Control Order made it perfectly clear that it also hit the transactions which had been entered into prior to the coming into force of the Control Order in those cases where the supply had not been made. Therefore, there could be not the slightest doubt that any transactions which had the effect of the sale and purchase of the varieties of gur, which were controlled and the prices of which had been fixed at rates different, were to be illegal transactions.

8. Mr. Ambika Prasad, appearing on behalf of the plaintiff-respondent, raised two contentions in answer to the legal contention raised by Mr. Hari Swarup. The first contention raised by Mr. Ambika Prasad was that the illegality of the contract had not been specifically pleaded on behalf of the defendant-appellant and, therefore, we should not countenance the argument, and secondly, he contended that there was no specific provision prohibiting the supply of the particular jaggery powder by a supplier. The prohibition, he contended, was against sale alone. We will now notice the two contentions in the order in which they were raised by Mr. Ambika Prasad.

9. In regard to the first contention, it has to be noticed that in paragraph 23 of the written statement (Further Pleas) the defendant pleaded that the controlled price of jaggery was Rs. 19/1/- per maund and that the same could not be sold at a higher price. He specifically pointed out in that paragraph that sale at a higher price would amount to a crime. Even if there had been no such specific case of illegality set up on behalf of the defendant it would have been open to the court when called upon to enforce a contract to see whether or not that contract was legal.

10. In Gedge v. Royal Exchange Assurance Corporation, 1900-2 QB 214 it was pointed out that

'Where, on the trial of an action, the plaintiff's case discloses that the transaction which is the basis of his claim Is illegal, the Court cannot properly ignore the Illegality or give effect to the claim, even if the illegality be not pleaded or relied on by the defendants.'

11. We have not been shown any Indian authority or for the matter of that any authority which doubts the proposition quoted above from the Gedge's case 1900-2 QB 214. Indeed, it would be undoing the purpose for which the law stands if a Court was precluded from giving effect to the law and from observing illegalities simply because the defendant either through inadvertence or ignorance or even design refrained from bringing them to the notice of the Court.

12. In regard to the second contention of Mr. Ambika Prasad we would start by pointing out that the mere want of specific words making the contract void would not save the contract from the evil effects of the Control Order. In this connection we wish to point out what was said by Lord Esher, M. R. as far back as 1835 in Melliss v. Shirley and Feemantle Local Board of Health, (1885) 16 QBD 446 at p. 451. Lord Esher, M. R. said:

'that, although a statute contains no express words making void a contract which it prohibits yet, when it inflicts a penalty for the breach of the prohibition, you must consider the whole Act as well as the particular enactment in question, and come to a decision, either from the context or the subject-matter, whether the penalty is imposed with intent merely to deter persons from entering into the contract, or for the purposes of revenue, or whether it is intended that the contract shall not be entered into so as to be valid at law.'

13. Mr. Ambika Prasad also raised another contention in this connection and he submitted that even if the contract was illegal at the time when it was entered into and even if the contract could not be enforced during the time when the Gur Price Control Order was in operation, there could be no difficulty in enforcing the contract when the Control Order was no more effective. We are unable to accept this contention, for when a Court is called upon to enforce a contract it has to see whether the contract, when it was entered into, was valid or invalid. If Mr. Ambika Prasad's argument were to be countenanced, then in a case where a minor made a contract during his minority it could be enforced against the minor when he attained majority. This obviously could not be done, and the reason why it could not be done is that at the time when the contract was entered into it was void. Similar must be the position of a contract entered into in defiance of a legal provision. We are, therefore, unable to accept the contention of Mr. Ambika Prasad to the effect that the contract, when it was being enforced, was not hit by any subsisting law.

14. The supply was to be made, as we said earlier, of the entire quantity contracted for purchase in four wagons. Two of the wagons rolled in at Indore and were taken delivery of and payments made which were far in excess of the amount payable for the jaggery powder supplied in those two wagons. Two more wagons were to be received, but, as we have pointed out above, these two wagons could not be sent in time because of the control of movements of wagons of jaggery powder without- relevant permits. The result was that the supplies of the two wagons were delayed and these two wagons moved out of Muzaffarnagar sometime in December 1947, Goods in these two wagons were not taken delivery of and the Hundis which covered the price due on the balance of the transactions were dishonoured. The goods were re-sold after notice to the defendant, as we have already noticed earlier, and they fetched a certain price. Two questions arose on the situation adumberated above, first, who was responsible for the breach of the contract, and secondly, whether the re-sale was proper and what was the price fetched at that re-sale. The plaintiff would be responsible for the breach if he had been responsible for the delay and if time had been of the essence, otherwise the breach must be held to have been committed by the defendant. The evidence indicated that even it there was a long gap between the first supplies and the second lot of supplies, that delay was not due to any fault of the plaintiff: the delay was due to the non-availability of transport. No one pleaded frustration of contract. Therefore that question did not arise for our consideration. The plaintiffs evidence indicated that the defendant's man came when he was informed that supplies could be made since wagon movement had been free and that the defendant's man himself had the goods weighed and despatched, though with the assistance of the plaintiff. The Court below has not accepted the case of the plaintiff that the defendant's man came and had the goods actually weighed and despatched, but even so there was nothing in the evidence to indicate whether or not the plaintiff's contention, that he sent information to the defendant on the 9th December, 1947, that loading of goods in wagons was then possible and that he was going to despatch the goods, was correct. It was not contended on behalf of the defendant that he had not received the information or that he had countermanded the supply. The evidence on the record was much too thin, in our opinion, to support the contention that time was of the essence. The real reason why the delivery was not taken was possibly that purchasing jaggery powder at the rates at which it had been contracted for at the time when it was being supplied in the second lot was not as profitable as accepting jaggery powder at those rates in August or September, 1947.

15. We will now go on to consider whether the re-sale was proper and what was the rate at which the jaggery powder had been re-sold. There is undoubted evidence that requisite notice for re-sale was sent on the 3rd January, 1948, but there is equally satisfactory evidence to show that re-sale of the goods had commenced on the 1st of January, 1948, namely, prior to the notice, even though the ultimate receipt of price and credit of the same in the books of the plaintiff was made on the 6th of January, 1948. The position, therefore, would be that the re-sale was not in accordance with law, i.e., there was no re-sale after due notice as required by the Sale of Goods Act. The question of price fetched at the re-sale also has to be decided, in our opinion, against the plaintiff. The plaintiff's contention was that at the re-sale the price obtained for the goods was at the rate of Rs. 10/12/- per maund. The evidence, however, indicates that the prices of jaggery powder during the relevant period of the re-sale varied between Rs. 17/8/-and Rs. 19/- per maund. The account books of some of the purchasers or alleged purchasers also indicate the rates to have been between Rs. 17/8/- and Rs. 19/-per maund. The Court below struck a mean between the varying rates and held that the price fetched at the re-sale should be accepted at Rs. 18/- per maund. We have found it difficult to say on the state of the evidence on the record that the Court below was wrong In its view in regard to the price fetched at the re-sale.

16. Counsel for the parties are agreed that if the rate for the supply of jaggery powder had to be Rs. 19/1/-per maund and if the price fetched at the re-sale Had to be Rs. 18/- per maund, then after giving credit of the amounts received by the plaintiff there would be nothing due to the plaintiff from the defendant. On this agreed position of the state of accounts there could be no other decision on the findings already arrived at by us but that the plaintiff was not entitled to receive anything in regard to the contract from the defendant.

17. Before we part with this case we have to notice a cross-objection, because there was a cross-objection, on behalf of the plaintiff. The cross-objection was confined to three matters, first, the price fetched at the re-sale, secondly, the recovery of commission and incidental charges in respect of the transactions, and thirdly in regard to the two sums of Rs. 3,200/- each, alleged to have been advanced by the plaintiff to the defendant for being paid by the defendant to those persons from wham the jaggery powder had actually been purchased for being supplied through the plaintiff's Arhat. We have already noticed, while disposing of the appeal, that the case of alleged advances could not be sustained, and we reiterate that finding here as well. We have also found that the price fetched at the re-sale was not what the plaintiff said it was, namely, Rs. 10/12/- per maund, but it was Rs. 18/- a maund on an average. In regard to the recovery of commission and incidental charges, all we need say is that since the contract was unenforceable these charges could also not be recovered. For the reasons given above, we have seen no merit in the cross-objection which we dismiss.

18. In the result we allow the appeal and set asidethe decree of the Court below, but in the circumstancesof the case we direct the parties to bear their owncosts of the appeal. The cross-objection is dismissed. Inrespect of the cross-objection also we direct the partiesto bear their own costs.


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