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Har Bilas Vs. Mahadeo Prasad - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAllahabad
Decided On
Reported inAIR1931All539
AppellantHar Bilas
RespondentMahadeo Prasad
Cases ReferredCarlisles Nephews & Co. v. Bioknauth Bucktar Mull
Excerpt:
.....section 27, contract act, in that it contained an agreement prohibiting the defendant from selling sand to four factories and thus restrained him from exercising a lawful profession, trade or business. the question is whether such a stipulation as this which prohibits any sales being made by the plaintiffs of goods of this description to other persons during the particular time, is a stipulation in restraint of trade within the meaning of that section (section 27). the language of section 27 is no doubt somewhat general and unsatisfactory but i am clearly of opinion that it was never intended to prohibit such a stipulation as that with which we are now dealing in contract for the sale of goods. the object of this agreement apparently was to enable the requisite number of dhotis to be..........to provide other sand to the four factories. it is not the case that he was only prohibited from supplying sand to those factories until he should have supplied a specified amount to the plaintiff. it seems to me therefore that it is not possible to interpret agreement in the present case in any other way than as a restraint on trade, though the evidence is not sufficient to show how great or how small the restriction was.7. an agreement of this kind is only void, to the extent to which it restrains trade or business, and i am of opinion therefore that the whole agreement between the parties would not be invalidated by this clause. the decree however is one only for damages in. respect of a breach of this particular clause, and therefore in my opinion that suit must fail. the result is.....
Judgment:

Kendall, J.

1. This second appeal arises from a suit for a perpetual injunction and for damages for breach of contract. The parties had entered into a contract by which the defendant-appellant agreed to sell silica sand to the plaintiff-respondent under conditions of which the essential ones are as follows:

1. That the defendant undertook not to sell silica sand to four specified factories.

2. That he should sell it to the plaintiff at a specified rate and get it loaded in a wagon.

3. That he should supply 2,068 maunds of white sand per mensem at the currant rate and get it loaded.

4. That if the defendant should sell silica sand to any of the four factories named he should pay damages at the rate of Rs. 100 per wagon of sand so sold.

5. That the plaintiff should pay in cash the price of the sand between the 20th November and the 19th December 1927 at the time of loading the goods and thereafter should pay an advance of Rs. 400 on 20th December 1927 as earnest money.

6. That the contract was to be in force for one year.

2. According to the findings of the trial Court the defendant failed to supply the 2,068 maunds during the first month, and thereby broke the contract but the Munsif dismissed the suit because the contract itself offended against the provisions of Section 27, Contract Act, in that it contained an agreement prohibiting the defendant from selling sand to four factories and thus restrained him from exercising a lawful profession, trade or business. The lower appellate Court however found that the agreement was not a breach of Section 27, and gave the plaintiff a decree for the damages claimed, viz., Rs. 200 on account of two wagons said to have been sold by the defendant in contravention of the prohibitory clause in the contract.

3. It was argued in appeal before me that as the plaintiff did not pay the first instalment of Rs. 400 the defendant-appellant was justified under Section 51, Contract Act in not supplying more sand. But the fact is that the defendant was the first to break the contract because he did not supply the sand stipulated for during the first month, and the plaintiff was therefore under no obligation either to pay for anything that had not been supplied or to pay the advance of Rs. 400 on 20th December.

4. The real ground of appeal which has been argued before me is that the decision of the lower appellate Court in regard to Section 27, Contract Act, is incorrect, and 1 am asked to bold that the clause prohibiting the defendant from selling sand to the four factories named is an agreement restraining the defendant from exercising a lawful trade or business and is therefore void. Several decisions have been referred to on either side, but I do not propose to refer to all of these at length, because they are only conclusive in respect of the special circumstances of the cases decided. The provisions of the Act are, it is true, capable of a wide and also of a narrow interpretation and the lower appellate Court in dealing with this issue relied on the case of Carlisles Nephews & Co. v. Ricahnauth Bucktear Mull [1882] 8 Cal. 809. There is a passage in this judgment on which special stress has been laid by the learned Counsel for the respondent, namely:

The question is whether such a stipulation as this which prohibits any sales being made by the plaintiffs of goods of this description to other persons during the particular time, is a stipulation in restraint of trade within the meaning of that section (Section 27). . . . The language of Section 27 is no doubt somewhat general and unsatisfactory but I am clearly of opinion that it was never intended to prohibit such a stipulation as that with which we are now dealing in contract for the sale of goods. If we were to hold that it did I think we should not only be stultifying ourselves but the legislature who passed the Act.

5. Neither in that case nor in the two cases of our own High Court on which reliance has been placed Kuber Nath v. Mahali Ram [1912] 34 All. 587 and Pothi Ram Fatima [1915] 37 All. 212 is there any elaborate discussion of the limitations of Section 27. In 37 Allahabad the circumstances are altogether different from those in the present case, since two zamindars had mutually agreed net to allow cattle markets to be held on their land on the same day, an agreement which was certainly not made in restriction of trade. Moreover the case of Carlisles Nephews & Co. v. Bioknauth Bucktar Mull, which the lower appellate Court considers to be 'quite on all fours with the present case' seems to me to be distinguishable. One firm had to supply 136,000 pairs of animal bordered dhotis before a specified date and agreed to make no sales of these dhoties to others before a prior date. The object of this agreement apparently was to enable the requisite number of dhotis to be supplied in time, and bad the full number been supplied before the prior date named, it is scarcely conceivable that the firm would have been held to be prohibited by that agreement from selling other dhotis of the description in the open market.

6. In the present case there is nothing to show that the defendant was not in a position to supply the plaintiff with silica sand to the amount stipulated for, and at the same time to provide other sand to the four factories. It is not the case that he was only prohibited from supplying sand to those factories until he should have supplied a specified amount to the plaintiff. It seems to me therefore that it is not possible to interpret agreement in the present case in any other way than as a restraint on trade, though the evidence is not sufficient to show how great or how small the restriction was.

7. An agreement of this kind is only void, to the extent to which it restrains trade or business, and I am of opinion therefore that the whole agreement between the parties would not be invalidated by this clause. The decree however is one only for damages in. respect of a breach of this particular clause, and therefore in my opinion that suit must fail. The result is that the appeal is allowed, the order and decree of the lower appellate Court are set aside and the plaintiff-respondent's suit is dismissed. The appellant will receive his costs throughout. The cross objection has not been pressed and is dismissed.


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