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indra Agencies and ors. Vs. L.D. Seymour and Co. (India) Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 87-D of 1955
Judge
Reported inAIR1966P& H105
ActsSale of Goods Act, 1930 - Sections 60
Appellantindra Agencies and ors.
RespondentL.D. Seymour and Co. (India) Ltd.
Appellant Advocate Hardyal Hardy and; S.S. Chhadha, Advs.
Respondent Advocate Faqir Chand and; Bedi, Advs.
Cases ReferredIn Mahabir Prasad Rungta v. Durga Datta
Excerpt:
.....foundation of the claim being that the defendants, indra agencies and its partners, failed to take delivery of the goods at the stipulated time and these had to be sold at their risk. as frequent reference would be made to the terms embodied in this letter, it would be well to set it out in detail. you are free to deal with your stocks in the manner you deem best and the same has nothing to do with us. but in that case he keeps the contract alive for the benefit of the other party as well as his own: ' this statement of the law is well recognised and is set out in chitty on contract (20th edition) at pages 252-53 under the heading of 'renunciation'.the plaintiff undoubtedly had an option either to treat the letter of 19th of july, 1951, as a rescission of the contract and to sue for..........sale of goods act:--'where either party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages, for the breach.'the rule governing the principle set out in section 60 of the sale of goods act has been explained by chief justice cockburn in frost v. knight, (1872) 7 ex 111, in words of the following passage which is cited with approval in the judgment of the court of appeal in johnstone v. milling, (1886) 16 qbd 460 (at p. 470) by lord justice cotton:--'the law with reference to a contract to be performed at a future time, where the party bound to performance announces prior to the time his intention not to perform.....
Judgment:

Shamsher Bahadur, J.

1. The plaintiff L. D. Seymour and Company, whose claim for recovery of Rs. 14,729-14-0 as damages has been decreed by the learned Subordinate Judge, Delhi, for a sum of Rs. 10,028-4-0 with proportionate costs, brought the suit on 15th November, 1951, the foundation of the claim being that the defendants, Indra Agencies and its partners, failed to take delivery of the goods at the stipulated time and these had to be sold at their risk. The amount claimed by the plaintiff company represented the shortfall in the price as the difference between the contractual rate and the market rate for the commodity on the date of sale. From the decree of the Subordinate Judge Delhi, passed on 4th of April, 1955, the defendants have filed the appeal (R. F. A. NO. 87-D of 1955), while the plaintiff-respondents have preferred cross-objections under Rule 22 of Order 41 of the Code of Civil Procedure for the decretal amount being enhanced to the sum actually claimed in the suit. This judgment will dispose both the appeal and the cross-objections.

2. The basis of the claim in the contract embodied in the letter written on behalf of the plaintiff company on 31st of May, 1951 to the defendants Messrs. Indra Agencies. As frequent reference would be made to the terms embodied in this letter, it would be well to set it out in detail. The letter is as under:--

'We beg to confirm what has already been settled between us which is as under:--

1. That we shall supply and you would take the entire consignment above Mercks Penicillin having arrived per as 'Steel Advocate' and 'Ex-minister' and as detailed below and already received in India about a month ago and is under clearance at the moment...... of our clearing Agents at Bombay:--

'25000 vials of 5 lac units Mercks penicillin G Crystalline.

5000 vials of 10 lacs units Mercks penicillin G Crystalline.

2. That we shall charge you the same at the actual GIF value......

3. That we will supply you 5 lacs lot in 10 equal instalments cash payment and you would take each instalment practically every week from the date we notify you. The 10 lac lot of 5000 vials will be given delivery to you after the entire quantity of 5 lacs is taken delivery of by you. This will be delivered in Delhi at the prices provisionally fixed at below:--

5 lac at Rs. 1-9-0 per vial.

10 lac at Rs. 2-8-0 per vial.

The above rates are fixed for the first 9 instalments while in the 10th all the actual calculation will be made and the actual amount payable then shall be paid. However, if the transport creates any difficulty for getting the above goods from Bombay to Delhi the instalment may be delayed accordingly.

4. You can secure delivery of the same in one or more instalments in Bombay provided the goods are not railed in Delhi against cash payment as per rates fixed provisionally for Bombay delivery are as under:--

5 lac at Rs. 1-8-6 per vial.

10 lac at Rs. 2-7-6 per vial.

'5. The delivery of the above quantities of 5 lac and 10 lac are to be completed within 10 weeks after we have notified to you to start taking the delivery.'

3. In pursuance of these terms, the plaintiff-Company wrote to the defendants on 4th of June, 1951 (Exhibit P-3 at p. 81 of the paper-book) that 25000 vials of 5 lac units had arrived in their warehouse and the defendants were asked to take deliveries in accordance with the contract. No heed was taken to this letter and the plaintiffs were impelled to write further letters to the defendants, one on 25th of June, 1951 (Exhibit P-4) and the other on 7th July, 1951 (Exhibit P-5). In the latter communication, the plaintiffs drew the attention of the defendants to their letter of 25th June, 1951, and asked them to take delivery of the goods in accordance with the terms of the contract, pointing out that nearly 5 weeks had elapsed since the goods had arrived. The defendants were told that they had to pay interest at the rate of 9 per cent and warehouse charges at the rate of four annas per carton per week. These letters did not produce the desired effect and eventually the defendants sent a letter (Exhibit P-6) on 19th July, 1951, which is to this effect:--

'We refer you to your offer, dated 31-5-1951 on the subject above cited. Immediately on arrival of the undersigned from Bombay on 11-6-1951, you were instantly advised that we are not at all interested in the proposal. The current rates, then prevailing in Bombay were rather misrepresented to my younger brother, so do the despatch of the goods. They were said to be available in Bombay, for ready sales, then, but the fact was just the opposite; that they were despatched from Bombay, long before that date. In view of the circumstances it was not worthwhile for us to go in for the same; and we had accordingly declined our interest in the matter, verbally to you, which we hereby confirm in writing. You are free to deal with your stocks in the manner you deem best and the same has nothing to do with us.'

The plaintiffs promptly replied by their letter Exhibit P-7 of 20th July, 1951, reiterating that the terms of the agreement had crystallised into a contract and there was no misrepresentation of any kind. The plaintiffs then disposed of the stocks after an anonymous advertisement to this effect had been made in the papers. There had been an offer made to the plaintiffs (Exhibit P-15) on 27th August, 1951 for buying the entire stock of penicillin at Re. 1 per vial. The plaintiffs finally accepted the offer of one Messrs. Krishnamurti and Company, sent to them on 3rd September, 1951 (Exhibit P-1/A) for the purchase of 5 lac vials at Rs. 1-2-0 per vial and 10 lac vials at Rs. 2-2-0 per vial. The penicillin was sold at these rates according to the plaintiffs on 11th of September, 1951, and the price so realised being short of the contractual rates by Rs. 14,729-14-0 a suit for recovery of this amount was filed on 15th of November, 1951.

4. It is no longer necessary to refer to the pleas of the defendants that the letter of 31st of May, 1951, only constituted a proposal or that misrepresentation was exercised in the making thereof as the learned counsel no longer presses them. The issues covered by these pleas have been decided in favour of the plaintiffs and the substantial question raised in this appeal by Mr. Hardyal Hardy, the learned counsel for the defendant-appellant is concerned only with the following three issues numbered as 2 to 4:--

'2. On what date the breach of contract took place ?

3. To what damages the plaintiff is entitled ?

4. Whether the plaintiff is entitled to damages on the basis of resale of the goods and the defendants are bound by the resale ?'

5. The learned counsel for the appellants submits that even assuming that no reply was sent to the plaintiff's letters of the 4th June and 25th June, 1951, the contract was repudiated by Exhibit P-6 on 19th of July, 1951. The plaintiffs had no business to aggravate the damages on the falling market after that date. It is contended that the penicillin which hitherto had been imported under a licence of the Government was declared a free article of import under open general licence and the prices accordingly had started falling. Indeed, the defendants had demurred to the terms of the contract on this ground because they had not been apprised of it in time. Mr. Hardy contends that accepting the statement of Kanshi Ram Sahni, P. W. 5, the prices of penicillin in the wholesale market of Delhi did not show any appreciable decline towards the end of July, 1951, and if the vials had been sold immediately after the repudiation the damages could have been considerably mitigated. In Mr. Hardy's submission, the date of breach could not be put much after 19th of July, 1951 and the plaintiffs were not justified in putting off the re-sale of the goods which had not been accepted by the defendant-firm. Kanshi Ram Sahni, who is the plaintiffs' witness and on whose testimony reliance is also placed on behalf of the defendants is a wholesale chemist and druggist and had been dealing with Mercks' penicillin during the months of June to October, 1951. Exhibit P. W. 5/1 is a statement produced by this witness to show price variation between 5th June, 1951 and 29th August, 1951 of 5 lac and 10 lac vials of penicillin. On 19th of July, 1951, the rate of 5 lac was Rs. 1-5-6 per vial while that of 10 lac was Rs. 2-7-0. The last transaction is of 29th August, 1951, and the rates are Rs. 1-4-0 and Rs. 2-7-6, respectively. It is to be noted, however, that the transaction of 5 lac unit vials related to 20 tubes while that of 10 lac was of 10 tubes. It was argued before the trial Judge and the reasoning commended itself to the learned Judge that in bulk purchase the prices may sag considerably.

6. The trial Judge while accepting 19th of July, 1951, as the date of repudiation has taken into consideration the effect of the third clause of the agreement embodied in Exhibit P-3 for the assessment of damages. It is to be borne in mind that the deliveries were to be made weekly first of 5 lac vials in 10 equal instalments. It can reasonably be urged that each different instalment amounted to a distinct contract. A unilateral repudiation of the contract does not per se put an end to the contract. Under Section 60 of the Indian Sale of Goods Act:--

'Where either party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages, for the breach.'

The rule governing the principle set out in Section 60 of the Sale of Goods Act has been explained by Chief Justice Cockburn in Frost v. Knight, (1872) 7 Ex 111, in words of the following passage which is cited with approval in the judgment of the Court of Appeal in Johnstone v. Milling, (1886) 16 QBD 460 (at p. 470) by Lord Justice Cotton:--

'The law with reference to a contract to be performed at a future time, where the party bound to performance announces prior to the time his intention not to perform it, as established by the cases of Hochster v. De La Tour, (1853) 2 E and B 678 and Danube and Black Sea Co. v. Xenos, (1863) 13 CB (NS) 825, on the one hand, and Avery v. Bowden, (1855) 5 E1 and B1 714, Reid v. Hoskins, (1856) 6 E1 and B1 953, and Barwick v. Buba, (1857) 2 CB (NS) 563, on the other, may be thus stated. The promisee, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-performance; but in that case he keeps the contract alive for the benefit of the other party as well as his own: he remains subject to all the obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it: on the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it; and in such action he will be entitled to such damages as would have arisen from non-performance of the contract at the appointed time, subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss.'

This statement of the law is well recognised and is set out in Chitty on Contract (20th Edition) at pages 252-53 under the heading of 'Renunciation'. The plaintiff undoubtedly had an option either to treat the letter of 19th of July, 1951, as a rescission of the contract and to sue for damages at once or wait till the time for performance had arrived. In the latter case, if the contract had to be kept alive it was for the benefit of both parties and the defendants if they were so minded could have come round and taken delivery of the stocks according to the periods stipulated for instalments. The date of breach has to be viewed in this perspective. Mr. Hardy has invited our attention to the statement of law in Benjamin on Sale (8th Edition) at page 820. This is a passage culled from Roth and Co. v. Taysen, (1895) 73 LT 628, and lays down that:--

'Though prima facie the measure of damages must be calculated with reference to the market price when the contract ought to have been performed, yet the sellers, having on July 24 accepted the buyers' repudiation, he could not allow the damages to be aggravated on a falling market, and should have resold at once, and the damages were accordingly the loss on July 24.'

It is, however, to be noticed that even Benjamin referred with approval to the doctrine laid down by Chief Justice Cockburn in (1872) 7 Ex. 111, and it is stated at page 564 of this treatise that 'the promisee has the option either of accepting the promisor's refusal to perform as an immediate breach of contract, or of refusing to accept the repudiation, in which case he treats the contract as an existing one, not only for his own benefit, but also for that of the promisor.'

7. The conclusion of the learned Judge that though the breach of contract took place on 19th of July, 1951, the plaintiffs were entitled to wait till the last instalment of delivery was due in the middle of August appears to be correct and damages ought to be computed on that basis. Exhibit P. W. 5/1 which, according to both parties, provides a good guide for determination of the prices prevailing at the time shows that in the middle of August the price of 5 lac units penicillin was Rs. 1-4-0. The proportionate price of 10 lac units has been calculated by the trial Judge at the rate of Rs. 2-5-0 and the counsel for the appellant has not disputed these rates if we hold that the plaintiffs were entitled to keep the contract alive till the date for delivery of the last instalment had arrived. The calculations of the learned Judge are not disputed if the date of breach is taken to be the middle of August, 1951, and the rates are Rs. 1-4-0 for a 5 lac units vial and Rs. 2-5-0 for the 10 lac unit vial. The price for resale on these rates comes to Rs. 42,812-8-0 in all while if the goods had been sold at the contractual rate the price fetched would have been Rs. 51,562-8-0. When there is an available market for the goods in question the mea-sure of damages for non-delivery is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered. The plaintiffs are thus entitled to a sum of Rs. 8,750 on basis of resale. We are unable to agree with Mr. Bedi that the damages should be calculated on basis of the offer of September 3rd, 1951 in Exhibit P-20, made after the advertisement had been made in the Hindustan Times, at Rs. 1-0-6 per vial for 5 lac units and Rs. 2-1-0 per vial for 10 lac units. The plaintiffs who had received the notice of repudiation on 19th of July, 1951, could not have deferred the resale beyond the date when the last delivery was due, even on the option which the plaintiffs should be taken to have exercised under Section 60 of the Sale of Goods Act. The market which seemed to be fairly stationary in the month of July had definitely shown a downward trend in August and it became more pronounced in the month of September, 1951. In this context it was the plaintiffs' duty to have mitigated aggravation of damages.

8. The trial Judge has further awarded a sum of Rs. 1,278-4-0 as interest. The ground for the award of interest appears to us to be tenuous. In the words of the trial Judge, the plaintiffs had been falsely accused of misrepresentation and for this reason interest has been awarded on the decretal amount. Reliance has been placed by the learned Judge on a decision of the Supreme Court in Trojan and Co. v. Nagappa Chettiar, AIR 1953 SC 235. It is to be observed, however, that such interest, as stated at page 204 of this report is to be allowed by a Court of Equity in the case of money obtained or retained by fraud. If the defendants had taken a false plea of misrepresentation that would not provide a ground under the ruling of this decision for a Court of Equity to award interest. The principles for the award of interest have been well and truly laid down in the Privy Council decision of Bengal Nagpur Rly. Co. Ltd. v. Ruttanji Ramji, AIR 1938 PC 67. Right Hon'ble Sir Shadi Lal in delivering the judgment of the Board said at page 70:--

'Interest for the period prior to the date of the suit may be awarded, if there is an agreement for the payment of interest at a fixed rate, or it is payable by the usage of trade having the force of law, or under the provision of any substantive law entitling the plaintiff to recover interest as for instance the Court may award interest at the rate of 6 per cent, per annum, when no rate of interest is specified. ..'

Latterly, the Supreme Court also had occasion to make reference to interest awarded by way of damages up to the date of suit. In Mahabir Prasad Rungta v. Durga Datta, AIR 1961 SC 990, the position of the law is thus stated in paragraph 12:--

'Learned counsel for Durga Dutta claimed interest as damages; but it is well settled that interest as damages cannot be awarded. Interest up to date of suit, therefore, was not claimable, and a deduction shall be made of such interest from the amount decreed.'

The interest for two months awarded by the learned Judge up to the middle of August, 1951, amounting to Rs. 1,278-4-0 is, therefore, unjustifiable and must be taken off from the decretal amount.

9. Though we do not see force generally in the cross-objections filed on behalf of the plaintiffs, the point relating to interest urged by Mr. Bedi, the learned counsel for the plaintiffs, is substantial. It is contended that there was no ground for withholding the award of interest on the decretal amount from the date of the suit till the date of realisation. That this is normally done is not disputed. Indeed, in the Supreme Court decision cited aforesaid, Mr. Justice Hidayatullah said that the grant of interest pendente lite until the date of realisation is always within the discretion of the Court. Mr. Hardy has not been able to adduce any satisfactory reason why this right to claim interest pendente lite should be denied to the plaintiffs. It is common ground that interest at the normal rate of 6 per cent on this sum comes to Rs. 1,222, and this sum would be added to the decretal amount.

10. In the result, the appeal of the defendants is allowed to the extent that a sum of Rs. 1,278-4-0 will be deducted from the decretal amount. The cross-objections are likewise allowed to the extent that a sum of Rs. 1,222 will be added to the decretal amount. Both parties will get their proportionate costs of the appeal and cross-objections.

P. D. Sharma, J.

11. I agree.


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