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Jugal Kishore Vs. Ram NaraIn and anr. - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported inAIR1923All199; 80Ind.Cas.297
AppellantJugal Kishore
RespondentRam NaraIn and anr.
Cases ReferredNait Ram v. Shib Dat
Excerpt:
.....- mortgage of moveable property not in existence, validity of--contract act (ix of 1872), section 74--sale of goods--damages, assessment of--liquidated damages--appeal, second--damages--finding of fact--arbitrary finding. - - on a suit brought by the plaintiff against deoki prasad as well as bansidhar it was held that in effect a valid charge had been created on the indigo produce even though that produce was not actually in existence at the time when the contract was entered into and further that bansidhar having wrongfully converted the security created by the bond was liable to the plaintiff for damages sustained by him. 5. in my opinion, when a contract like the present was broken the plaintiff was entitled to a reasonable compensation not exceeding the amount which was actually..........just now. the fact remains that there was an agreement between the parties to pay damages at a fixed rate, and the lower appellate court has not come to any finding that calculating on the difference between the market rata and the contract rate the amount of damages to which the plaintiff would have been entitled was much lower than the amount agreed upon. his finding is, therefore, defective, and i feel that i cannot dispose of this appeal without having a dear finding on the amount of damages to which the plaintiff is entitled. i accordingly send down the following issues for determination by the lower appellate court:(1) was the rate at which damages were to be assessed as mentioned in the contract excessive?(2) if so, what is the reasonable compensation (not exceeding that.....
Judgment:

Sulaiman, J.

1. This is a plaintiff's appeal arising out of a suit for recovery of damages for breach of a contract to supply sugar-cane juice. This and other remaining appeals are connected and in all of them practically the same point arises for determination. I propose to take up Second Appeal No. 1627 of 1920 as the principal case. In this case there was a contract between the plaintiff, on the one hand, and defendant No. 1 on the other, entered into on the 21st of February 1919 under which Rs. 40 were paid by the plaintiff as an advance and it was agreed that the defendant No. 1 would supply to the plaintiff the sugar-cane juice which would be the product of the 8 bighas of land mentioned in the contract and that this juice would be supplied at the rate of Rs. 34 per karda each karda being equivalent to 50 maunds. There was a provision in the deed that, if the juice supplied was not in value equal to the amount advanced then the plaintiff would be entitled to recover the balance together with interest at the rate of 2 per cent. per mensem. It contained an undertaking that defendant No. 1 would not sell the juice to any one else and would not enter into a contract for the supply of this juice with any third party, that in case he did so and broke the contract the plaintiff would be entitled to recover damages at Rs. 10 per bigha. The amount advanced was made a charge on the future produce of the land. On the findings of both the Courts below it is clear that defendant No. 2, with a full knowledge of the existence of this contract, purchased the juice from defendant No. 1 and appropriated it and thereby assisted defendant No. 1 in breaking his contract with the plaintiff.

2. The plaintiff had claimed damages at the rate mentioned in the written contract both as against defendant No 1, and his transferee defendant No. 2. On behalf of the transferee it was pleaded that he himself was not liable in as much as he was a purchaser without notice. Both the Courts below have found it, as a fact, that defendant No. 2, had full notice of the previous contract and was liable equally with defendant No. 1.

3. The Court of first instance decreed the amount claimed in full but that amount has been reduced by the lower Appellate Court. The plaintiff has come up in second appeal from the decree of the lower Appellate Court and asks for the whole amount claimed. The defendant transferee has filed cross-objections denying his liability to pay anything at all. I propose to take up the cross-objections first, because, if those objections are allowed, defendant No. 2, would have to be exempted completely. On his behalf it is strongly contended that the mortgage of moveable property which was not in existence at the time when the contract was made was invalid and that in any case the plaintiff is not entitled to any relief against the defendant transferee. In my opinion, this point is concluded by the case of Bansidhar v. Sant Lal 10 A. 133 : A.W.N. (1888) 35 : 6 Ind. Dec. (N.S.) 90 which I am unable to distinguish. In that case a contract was entered into by one Deoki Prasad with the plaintiff for supplying indigo produce for the years subsequent to 1292 Fasli and the said produce was agreed upon to remain hypothecated in lieu of the amount from Deoki Prasad and attached the indigo produce in the hands of Bansidhar the latter objected on the ground that the property had been previously sold to him. On a suit brought by the plaintiff against Deoki Prasad as well as Bansidhar it was held that in effect a valid charge had been created on the indigo produce even though that produce was not actually in existence at the time when the contract was entered into and further that Bansidhar having wrongfully converted the security created by the bond was liable to the plaintiff for damages sustained by him. The decision was based on the general principles of equity and the claim was held to be enforceable as against the transferee of the produce with notice of the equitable interest. This case does not seem to have been dissented from in any subsequent case. On the other hand, the principle laid down therein has been followed in the case of Navajee v. The Administrator General of Madras 22 I.C. 566 : 38 M. 500. The facts of the former case are parallel to the facts of the case before me and I am unable to distinguish the two cases and as a single Judge I am bound to follow the ruling in Bansidhar v. Sant Lal 10 A. 133 : A.W.N. (1888) 35 : 6 Ind. Dec. (N.S.) 90. In my opinion, therefore, the objections raised by the defendant-transferee that he is not liable at all are without force and must be dismissed.

4. Coming to the question raised in appeal, I am of opinion that it is necessary to have a clear finding on the amount of damages claimed by the plaintiff before disposing of the appeal finally. Ordinarily the question as to the amount of damages to which the plaintiff is entitled is a question of fact and the finding as to the amount of damages arrived at by the lower Appellate Court would be binding on this Court. In the present case, however, the learned Additional Subordinate Judge has fixed the amount of damages obviously in a most arbitrary manner. He says 'I think the plaintiff should have bean awarded reasonable damages and they should not have influenced the fact that the plaintiff would have made large profits, if the juice had been delivered to him. I think damages equal in amount to the sum advanced would be sufficient and reasonable in each case.' It is noteworthy that the amount advanced was really in the nature of an earnest-money and did not by any means, represent the greater part of the amount which would ultimately have to be paid by the plaintiff for the quantity of juice actually supplied. To fix the damages at an amount equal to the earnest-money advanced in all the cases without exception is obviously arbitrary. Furthermore the lower Appellate Court has professedly ignored the fact that, if the contract had been carried out the plaintiff would have made huge profits and it was of opinion that that circumstance should on no account be taken into consideration. Under these circumstances, I am of opinion, that the amount fixed by him arbitrarily cannot be taken as an amount arrived at on a finding which is binding on this Court.

5. In my opinion, when a contract like the present was broken the plaintiff was entitled to a reasonable compensation not exceeding the amount which was actually fixed by the parties. The amount of damages fixed by the parties was at the rate of Rs. 10 per bigha. If there was anything to show that this amount was excessive it would be open to the Court to reduce it to a reasonable amount. Under Section 74 of the Indian Contract Act the Court now is not bound to award the same amount of damages which is mentioned in the contract as the amount to be payable in case of such a breach of contract and that amount is to be taken only as a maximum amount and the Court has power to reduce it to a sum which it considers reasonable. In the case of Nait Ram v. Shib Dat 5 A. 238 : A.W.N. (1883) 2 : 3 Ind. Dec. (N.S.) 209 which also on facts was a case somewhat similar to the present one, it was said that the method of assessing damages in case of a broach of the contract would be to ascertain the quantity of indigo which could have been pressed out of the stipulated amount of indigo plant, to ascertain the price at which the indigo might have been fairly sold in the market during the season to which the contract related deducting, of course, from such price the ordinary charges of producing and selling the quantity of indigo in question and that in no case the amount so awarded should exceed the amount of liquidated damages fixed by the parties. In the present case the plaintiff actually led evidence to show that about the time when delivery of the sugar-cane juice should have taken place the price had gone up unusually high and the difference in the correct rata and the market rate even exceeded considerably the rate which had been fixed by the parties as the basis for liquidated damages. Whether this in fact was so or not is a matter which I do not propose to determine just now. The fact remains that there was an agreement between the parties to pay damages at a fixed rate, and the lower Appellate Court has not come to any finding that calculating on the difference between the market rata and the contract rate the amount of damages to which the plaintiff would have been entitled was much lower than the amount agreed upon. His finding is, therefore, defective, and I feel that I cannot dispose of this appeal without having a dear finding on the amount of damages to which the plaintiff is entitled. I accordingly send down the following issues for determination by the lower Appellate Court:

(1) Was the rate at which damages were to be assessed as mentioned in the contract excessive?

(2) If so, what is the reasonable compensation (not exceeding that amount) to winch the plaintiff is entitled on account of the breach committed by the defendants?

6. On return of the findings the usual ten days will be allowed for cross-objections.


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