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Mohammad HussaIn Vs. Firm Andani Co. - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtMadhya Pradesh High Court
Decided On
Case NumberFirst Appeal No. 17 of 1953
Judge
Reported inAIR1959MP30
ActsLimitation Act, 1908 - Schedule - Articles 97 and 115; Contract Act, 1872 - Sections 39 and 55; Sale of Goods Act, 1930 - Sections 61; Code of Civil Procedure (CPC) , 1908 - Order 6, Rule 17
AppellantMohammad Hussain
RespondentFirm Andani Co.
Appellant AdvocateVijayavarji, Adv.
Respondent AdvocateG.M. Chafekar, Adv.
DispositionAppeal dismissed
Cases ReferredIn Madhavdas Parmanand v. Jan Mohammad Ghulam Hyder
Excerpt:
.....unreliable. he therefore held that the plaintiff had failed to prove the alleged extension of the time for delivery up to 1-4-1949. the cause of action for the suit for refund of rs. the consideration failed when the contract, whereby the defendant had to purchase the ginning factory in question, fell through and the factory was sold to a third party. he referred to the statement in para 3 of theplaint bearing on this point and said that the consideration is stated to have failed after 1-4-1949and that for that reason the claim was within timeon the date of suit namely 29-3-1952. 10. he relied upon the decisions reported in mt. 10,000/- were not honoured or in case the proprietor javarchand fails to secure the order for dismantling the factory from the government the agreement would..........them.19. in abdul shakur v. rajendra kishore, air 1935 all 759 (h), .the facts were that plaintiff paid consideration money for defendant's promise to execute the lease of his land. the defendant broke the promise and refused to execute the lease. the plaintiff sued for refund of money paid by him, for the defendant's promise, on 26-10-1926 and 1-1-1927.the suit was 6ied on 26-10-1929, allsop j., held that it was either a claim for money paid on existing consideration which afterwards failed in that the payments were made in consideration of promise to execute the lease and the promise was later repudiated or it was a claim for compensation for breach of contract express or implied not in writing registered and not specifically provided for.20. this case suggests that where the.....
Judgment:

V.R. Nevaskar, J.

1. The appeal involves consideration of a question regarding limitation.

2. Plaintiff Mohammad Hussain Bohara of Sanawad filed this suit for the recovery of Rs. 6800/- on the allegations that the defendant had agreed to sell to him the corrugated iron sheets covering the entire premises of the 'Merchant Gin' at Sanawad which the latter had agreed to purchase from a third party at the rate of Annas 3 1/4 per square foot. The contract was entered into on 31-1-1949 and the plaintiff paid Rs. 5000/- towards the contract.

The delivery of the sheets was agreed to be given within thirty days. A document containing, these terms was executed between the parties. The defendant, it is said, failed to give delivery as agreed before 3-3-1949 and prayed for the extension of the period for delivery. The plaintiff agreed to the extension by a fortnight. There was further extension by three days subsequent to the date fixed for delivery under the earlier extension up to 1-4-1949.

But even then the defendant failed to deliver. Later the defendant, who had contracted to purchase the 'Merchant Gin' had his contract of sale cancelled and the said property was sold to a third party. The plaintiff called back the amount of Rs. 5000/- advanced by him as also interest thereon by way of damages at rupee one per cent, hut the defendant failed to comply. The plaintiff therefore sued for Rs. 5000/- as principal and Rs. 1800A as interest from 2-3-1949 up to 2-3-1952.

3. The cause of action for the suit was stated to have arisen on 2-3-1949 and on the dates up to which the period of delivery was extended i. e., on 17-3-1949 and 1-4-1949.

4. The defendant admitted the agreement dated 31-1-1949 as pleaded by the plaintiff and also admitted that he could not give delivery by 2-3-1949. According to him he had requested for extension of time but that was not acceded to by the plaintiff. On the contrary, according to him, the plaintiff turned down the request on the ground that the time was the essence of the contract; There was no extension either till 17-3-1949 or 1-4-1949 as pleaded by the plaintiff. There was failure to deliver on his part on the agreed date 2-3-1949 and for that reason time began to run against the plaintiff from that date. The claim of the plaintiff was therefore said to be barred by limitation.

5. The trial court framed issues bearing on the question of alleged extensions of period of delivery by mutual agreement till 17-3-1949 and 1-4-1949 as according to him on findings on these questions the issue pertaining to limitation depended.

6. That court considered the oral and documentary evidence bearing on these questions. Documentary evidence consisted of three telegrams one dated 2-3-1949 given by the defendant to the plaintiff expressing inability to give delivery and requesting for extension of time by fifteen days, telegraphic reply dated 3-3-1949 by the plaintiff refusing to give extension asserting that the time was the essence of the contract and threatening legal action in case delivery was not given on that day and lastly plaintiff's telegram dated 15-3-1949 stating that he would meet the next day for taking delivery at Sanawad and bringing to the notice of the defendant the rumours of his Indore transaction and threatening legal action if this were true.

Besides this there was the admitted conduct of the plaintiff in filing criminal prosecution against the defendant on 22-3-1949 for the act of the latter in securing Rs. 5000/- from him by resorting to cheating and also the oral evidence of two witnesses Dharamchand and Fakruddin regarding the incident of extension dated 17-3-1949 and witness Rajabali regarding the incident of 3-3-1949.

7. The learned trial Judge considered the story of extension of 3rd not reliable as the statement of Rajabali appeared to him to be unnatural and halting and was also inconsistent with the reply given by the plaintiff on the same date. As regards the incident of 17th he held the story told by Dharamchand and Fakruddin regarding the talk of extension to be seriously contradictory to the tone of telegram dated 15-3-1949 and also inconsistent with plaintiff's conduct in launching criminal prosecution on 22-3-1949 that is prior to the completion of the period extended. He held the statements of these witnesses unreliable.

He therefore held that the plaintiff had failed to prove the alleged extension of the time for delivery up to 1-4-1949. The cause of action for the suit for refund of Rs. 5000/- and interest by way of damages therefore, according to him, arose on 2-3-1949 (3-3-1949) and that the suit filed on 29-3-1952 to have been barred by time.

8. In this appeal Mr. Vijayavargiya who appeared for the appellant contended that the dismissal of the suit on the ground of limitation was illegal as according to him the Article of limitation applicable in this case was 97 and not Article 115 or any other Article.

9. He urged that the plaintiff had advanced Rs. 5000/- on the existing consideration which was to proceed from, the defendant namely the corrugated iron sheets covering the premises of the 'Merchant Gin' at Sanawad which the defendant had contracted to purchase. The consideration failed when the contract, whereby the defendant had to purchase the Ginning factory in question, fell through and the factory was sold to a third party.

He referred to the statement in Para 3 of theplaint bearing on this point and said that the consideration is stated to have failed after 1-4-1949and that for that reason the claim was within timeon the date of suit namely 29-3-1952.

10. He relied upon the decisions reported in Mt. Basso Kuar v. Lala Dhum Singh, 15 Ind App 211 (PC) (A):Amna Bibi v. Uditnaran Misra, 36, Ind App 44 (PC) (B); J. G. Galstaun v. Sahebzadi Manioodi Begum, AIR 1929 Gal 216 (C), Lach-man Kachhi v. Secretary of State, AIR 1934 All 547 (D); N. V. Jagannadhayya V. Ramanatha, (S) AIR 1955 Orissa 11 (E); Gujranwala Municipality v. Charanji Lal, AIR 1935 Lah 685 (F) & Anant v. Sarup Singh, AIR 1928 All 360 (2) (G). Reference was also made by the learned counsel to the commentary in Chitaley's Limitation Act Note 11 under Article 97.

11. In the alternative he pressed for an application submitted on behalf of the plaintiff applicant dated 16-10-1957 whereby the latter wanted to amend his plaint by which the plaintiff desired to add the averment to the effect that under the agreement between the defendant and the proprietor of the factory it was provided that in case the defendant's Hundi for Rs. 10,000/- were not honoured or in case the proprietor Javarchand fails to secure the order for dismantling the factory from the Government the agreement would stand cancelled and that as Javarchand failed to secure that order the contract got cancelled after 1-4-1949.

12. This petition for amendment was opposed on behalf of the defendant on the ground that this would entail remand for investigating disputed questions of fact newly raised and when the claim as initially set up had become barred by time.

13. Short question which we have to consider is whether Article 97 or Article 115 of the Limitation Act applies to this case and assuming that Article 97 applies when can it be said that the consideration for the contract failed.

14. Article 115 of the Limitation Act deals with a suit for compensation for the breach of a contract not in writing registered and not specifically provided for elsewhere in Schedule I. Period of limitation is three years from the date when the contract is broken. The word compensation used in this Article is sufficiently comprehensive to include a claim for damages as well as for refund of money paid as advance to the defendant for the performance of the contract. Even claim for interest on the amount of consideration would fall within that term.

15. Article 97 of the Limitation Act on theother hand deals with a suit for recovery of moneypaid on an existing consideration which afterwardsfails. Period of limitation is three years from thedate of failure. Consideration which existed at thetime when the money is paid may later fail for variety of reasons. It may fail because the subject matter for which the parties had contracted ceases to exist.

It may also fail because the completion of the bargain depends upon discretionary power of some authority. It may also fail because either the plaintiff himself or the defendant commits breach of the contract in pursuance of which the money was paid and circumstances be such that the plaintiff ought to get back what he paid.

16. The words 'existing consideration' suggest consideration which is not either void ab initio or illegal. Therefore Article 97 has no application where the contract is forbidden by law or is void ab-initio.

17. Where the defendant commits breach and the plaintiff does not or cannot keep the contract as subsisting and the contract is brought to an end there is immediate failure of consideration on the occurrence of the breach and the plaintiff's right to claim the money paid arises at that point of time.

18. These principles follow from number of cases, a brief reference to a few be useful to clarify them.

19. In Abdul Shakur v. Rajendra Kishore, AIR 1935 All 759 (H), .the facts were that plaintiff paid consideration money for defendant's promise to execute the lease of his land. The defendant broke the promise and refused to execute the lease. The plaintiff sued for refund of money paid by him, for the defendant's promise, on 26-10-1926 and 1-1-1927.

The suit was 6Ied on 26-10-1929, Allsop J., held that it was either a claim for money paid on existing consideration which afterwards failed in that the payments were made in consideration of promise to execute the lease and the promise was later repudiated or it was a claim for compensation for breach of contract express or implied not in writing registered and not specifically provided for.

20. This case suggests that where the consideration consists of promise to do something for the plaintiff and the promise is repudiated there would both occur breach of contract and failure of consideration and the date of failure of consideration would be the same as the date of breach.

21. In Madhavdas Parmanand v. Jan Mohammad Ghulam Hyder, AIR 1942 Sind 37 (I), plaintiff sued for refund of money paid by him to the defendant under a promise by the latter to convey land to him, after the plaintiff himself had broken the agreement. It was held by Davis C. J. and Weston J., that Article 97 of the Limitation Act does not make cause of failure of consideration material to its application and that they could see no reason why the Article should not be applied when failure of consideration is attributable to the default on the part of the plaintiff.

There was failure of consideration in that case, according to them, when on the breach committed by the plaintiff the defendant put an end to the contract.

22. This case suggests that where either party commits breach and the party not in default puts an end to the contract there is failure of consideration. This case is followed in (S) AIR 1955 Orissa 11 (E). In that case Panigrahi and Mohapatra JJ., pointed out the distinction between Arts. 115 and 97 of the First Schedule of the Limitation Act. According to them:

'Article 115, Limitation Act would apply to a case of damages for breach of contract by the de-fendant, and Article 97 would apply to a case where that which is to pass from one contracting party to the other cannot, by reason of the circumstances since the contract, pass to the other party, and therefore the plaintiff calls upon the defendant to fulfil the terms of the contract either expressly or impliedly, that he will in such circumstances, return anything which has been already paid on account of the contract'

23. In AIR 1934 All 547 (D), the facts were that on 24-2-1926 the plaintiff paid to the Receiver of an insolvent's estate Rs. 325/- as part of the purchase money of the estate of the insolvent which the Receiver promised to transfer to him on receipt of sanction of the Court. Insolvency Court did not accord sanction to the proposed sale and the estate was sold in court auction on 5-9-1927.

Plaintiff thereupon sued for refund of consideration on 16-5-1931. It was held by Sulaiman O. J. and King J., that Article 97 applied to the case. According to him, the consideration which existed at the date of Receiver's promise failed when the estate was auctioned and the suit was barred. It must be noted that for the purpose of that case it was immaterial whether the failure of consideration occurred on the date when the Court refused sanction or when the property was auctioned.

24. In 15 Ind App 211 (PC) (A), the facts were that the defendant being indebted to the plaintiff agreed to convey certain land to him, setting off the debt against part of the price. Disputes arose as to the terms of the bargain. The defendant thereupon sued to enforce the agreement but was unsuccessful. The plaintiff afterwards sued for his debt. The defendant pleaded limitation.

25. Their Lordships of the Privy Council in this case held that the decree dismissing the defendant's suit was the starting point of limitation. That, according to him, imposed under Section 65 of the Contract Act fresh obligation to pay his debt and in the alternative it imported within the meaning of Article 97 a failure of consideration which entitled him to retain it.

26. The case in 36 Ind App 44 (PC) (B), depicts the same principles as to the implication of Article 97.

27. I may in this connection also refer to Sections 39 and 55 of the Contract Act and Section 61 of the Sale of Goods Act. Under Section 39 of the Contract Act when a party to a contract has refused to perform or disabled himself from performing his promise in its entirety the promisee may either put an end to the contract or may signify by words or conduct his acquiescence in its continuance.

28. Under Section 55 of the Contract Act where in a contract time is the essence of it and a party who is found to perform his promise within the time fixed fails to do so the contract becomes voidable at the option of the other party.

29. Section 61 of the Sale of Goods Act saves plaintiff's right to recover the money paid where the consideration for the payment of it has failed.

30. Now on facts as found the present is a case arising out of an agreement to sell corrugated iron sheets covering a certain property which on the date of the contract belonged to a third party. These sheets being articles of trade time would presumably be the essence of the contract. The written agreement mentioned the actual date by which the delivery ought to have been given. The defendant knowing the fact applied to the plaintiff for extension.

The plaintiff refused and asserted that the time was the essence of the contract. He then on 15-3-1949 stated in his telegram that he would meet the plaintiff the next day for delivery and later 011 22-3-1949 filed criminal prosecution. By his conduct plaintiff will be deemed not to have kept the contract alive for performance particularly when the time had been made the essence by his reply by the plaintiff.

The plaintiff's case regarding extension granted by him upto 1-4-1949 has been rejected and that finding is neither assailable nor challenged, before us. The consideration for which the plaintiff had paid Rs. 5000/- therefore failed when the contract failed though due to the default committed by the defendant.

31. The iron sheets were not the property of the plaintiff and the plaintiff had never become the owner thereof. Their subsequent disposal by the owner cannot be called failure of consideration for which money was paid. That consideration was defendant's promise to secure delivery to the plaintiff of the iron sheets by the 2nd of March 1949. He failed to perform that promise and there was failure of consideration.

32. It therefore follows that whether we apply Article 97 or Article 115 of the Limitation Act the result is the same.

33. The plaintiff's conduct in filing criminal,prosecution for cheating takes the matter beyond controversy and the suit on 29-3-1952 is any way barred.

34. Mr. Vijayavargiya contended before us that the plaintiff had paid the amount claimed as an advance for the price with respect to a specific moveable property in a deliverable state and that as long as that property had not passed out of the hands of the person from whom the defendant was to acquire there would be no failure of consideration.

35. I am unable to accept this meaning of failure of consideration as applicable to the facts of this case. In the first place when the plaintiff contracted to sell the sheets they were neither movable property nor in a deliverable state. Reference to the building of 'Merchant Gin' in the contract was intended to have the plaintiff notice as to what he would get under the contract.

Assuming that the proprietor of the 'Merchant Gin' had not sold the factory to a third party but had continued to own it could it have been said that the period of limitation for the recovery of consideration would never have commenced although the defendant had committed the breach of the contract and had refused to perform the same. It is too much to hold that way.

36. As regards plaintiff's application for amendment in the first place the same is belated and seeks to introduce new allegations of fact which would entail retrial and in the second place even with the amendment sought the plaintiff's case, as discussed above, cannot succeed. I am not prepared to grant leave sought for particularly as on the date of the application plaintiff's claim would be barred by time.

37. The appeal therefore has MO force.

38. It is dismissed with costs.

T.C. Shrivastava, J.

39. I agree.


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