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D.R. Mehta Vs. TIn Plate Dealers Association Ltd. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberLetter Patent Appeal No. 76 of 1963
Judge
Reported inAIR1965Mad400
ActsFinnish Law; Indian Contract Act - Sections 56
AppellantD.R. Mehta
RespondentTIn Plate Dealers Association Ltd.
Cases ReferredIn Satyabarta Ghose v. Mugneeram Bengur and Co.
Excerpt:
.....act, 1872 - respondent neither took any steps to sell goods to plaintiff nor offered to keep goods contracted for plaintiff in his stockyard - respondent also did not inform plaintiff that they were ready and willing to supply goods and would deliver them after restriction was removed - respondent also did not call upon plaintiff to enter into some terms and conditions to keep goods on his behalf in their stockyard - statute law requires that contract should become impossible of performance in its practical sense - plaintiff has proved that respondent has committed breach in not supplying 30 tons of concerned goods and contract has not become impossible of performance - plaintiff entitled to get damages. - - in reply to a further letter of the plaintiff dated 12-10-1957,..........ltd., with its branch offices in madras and bombay, for purchase of 30 tons of electrolytic tin plate cobbles for shipment during may and june at rs. 850 per ton c. i. f. madras and paid an advance of rs. 1500. it was agreed that the respondent should arrange for the shipment of the goods from the united states of america. in spite of repeated demands the respondent did not deliver the goods. but on 12-7-1957, the respondent asked the plaintiff to take delivery of the goods at the bombay office. the bombay officer refused to give deliver. in reply to a further letter of the plaintiff dated 12-10-1957, calling upon the respondent to return the advance and also for payment of damages for failure to deliver the goods, the respondent wrote on 1-11-1957, that they were unable to deliver.....
Judgment:

Venkatadri, J.

(1) This is a Letters Patent appeal preferred by the plaintiff whose suit for recovery of advance and damages was dismissed by Ramakrishnan J. The plaintiff's case is that he entered into a contract on 8-4-1957 with the respondent's company who were carrying on business in Calcutta under the name and style of the Tin Plate Dealers Association (Pte.) Ltd., with its branch offices in Madras and Bombay, for purchase of 30 tons of Electrolytic tin plate Cobbles for shipment during May and June at Rs. 850 per ton C. I. F. Madras and paid an advance of Rs. 1500. It was agreed that the respondent should arrange for the shipment of the goods from the United States of America. In spite of repeated demands the respondent did not deliver the goods. But on 12-7-1957, the respondent asked the plaintiff to take delivery of the goods at the Bombay Office. The Bombay officer refused to give deliver. In reply to a further letter of the plaintiff dated 12-10-1957, calling upon the respondent to return the advance and also for payment of damages for failure to deliver the goods, the respondent wrote on 1-11-1957, that they were unable to deliver the goods in view of the ban imposed by the Deputy Iron and Steel Controller of the Central Government.

The plaintiff further alleges that if the goods had been shipped in May and June 1957, as had been agreed upon originally, they would have arrived in July when there was no restriction on the sale. But, as a matter of fact, the respondent received the goods form America, but he sold them to third parties as the market price of the goods was much higher than the contract rate entered into with the plaintiff. The plaintiff is entitled to call upon he respondent to pay damages as the respondent deliberately committed breach of contract and also damages by way of loss of profit to the plaintiff at Rs. 115 per ton.

(2) But the suit was resisted by the respondent. They contended that when the contract was entered into, they attempted to arrange for the shipment of the goods during May-June 1957 but when it was found that no steamer would be available for Madras, Port, during May-June 1957, they duly informed the plaintiff of their inability to perform the contract. They assert that there was no time fixed for the shipment of the goods under the terms of the contract. They also pleaded that there was a variation of the original contract between the parties and the plaintiff then agreed to take delivery of 25 tons of Electrolytic tin plates waste from ready stock of Bombay in the place of 30 tons of Electrolytic tin plate cobbles, but neither the plaintiff nor his representative even called on the Bombay office to take delivery, though the respondent was ready and willing to supply. In the meantime the ban imposed by the Central Government intervened and necessarily the contract for Electrolytic tin plate cobbles had to be cancelled. Subsequently they returned the advance to the plaintiff by means of a cheque and they are in no way liable to pay damages as there was no breach of contract on their part.

(3) On these pleadings the parties went to trial, before the learned Judge of the City Civil Court, Madras, who found that there was no variation of the original contract as pleaded by the respondent and he held that the respondent committed a breach of contract in respect of the goods, Electrolytic tin plate cobbles. He also gave finding that the performance of the contract had not become impossible by reason of the freezing order passed by the Iron and Steel Controller. He declared that the plaintiff was entitled to damages and he fixed the quantum of damages by calculating 71/2 per cent on the contract price of Rs. 850 per ton on the assumption that according to the Import Trade Control Policy was only 71/2%. Therefore he decreed the suit for damages at Rs. 1912-8-0 and for refund of Rs. 1500 being the advance paid.

(4) The respondent preferred an appeal in the High Court and when the appeal came up before Ramakrishnan J., the learned Judge gave a finding that there was a substitution of a new contract in the place of the original contract for shipment of 30 tons of Electrolytic tin plate cobbles and that, even assuming that there was a contract for the supply of 30 tons of Electrolytic tin plate cobbles, the contract became impossible of performance in view of the Steel Control Order imposed by the Deputy Iron and Steel Controller, Calcutta. In the end, he dismissed the suit for damages since the plaintiff had already received the advance amount paid by him already received the advance amount paid by him form the respondent. It is against this order of dismissal of the suit that the plaintiff has preferred this appeal.

(5) Two questions arise for our consideration on the facts in this case, namely, whether there was a variation of the contract, and whether the contract had become impossible of performance. Taking the first point, form the documents it is clear that the plaintiff entered into a contract originally with the respondent on 8-4-1957, Ex. B. 3, for the supply of 30 tons of Electrolytic tin plate cobbles and the same has been confirmed by the respondent's head office at Calcutta who agreed to supply the goods during May and June form America (Ex. B. 4 dated 20-4-1957). In the month of May the respondent's office form Calcutta wrote to the Madras branch office that the contract materials, i.e., Electrolytic tin plate cobbles were not available for shipment during May and June as there was no steamer calling at the Madras Port. However, they promised to do their best to honour the contract. While the plaintiff and the respondent were corresponding in respect of the supply of 30 tons of Electrolytic tin plate cobbles, in the month of May the plaintiff entered into another contract to purchase 25 tons of Electrolytic tin plate waste at the rate of Rs. 900 per ton. Subsequently, there was exchange of letters between the plaintiff and the respondent in respect of these two contracts, namely, Electrolytic tin plate cobbles and Electrolytic tin plate waste.

In regard to the supply of 30 tons of Electrolytic tin plate cobbles the respondent in the mouth of May stated that it would not be possible for them to supply the materials, as ships were not available for calling at the Madras port during the said months. In regard to the contract of Electrolytic tin plate waste, the respondent reminded the plaintiff to purchase the said materials as not to be kept open indefinitely and since he had failed to accept their offer, they withdrew the offer and treated the letter of the plaintiff to purchase 25 tons of Electrolytic tin plate waste as cancelled. But subsequently there was some arrangement between the respondent and the plaintiff in an by which the plaintiff agreed to take 25 tons of Electrolytic tin plate waste from the Bombay stock. But in the month of July the plaintiff received a letter, Ex. B. 15, wherein it was stated that in regard to 30 ton of Electrolytic tin plate cobbles it would be supplied at the next arrival of the steamer, and with regard to 25 tons of Electrolytic tin plate waste the plaintiff should make arrangements to take delivery of the stock at Bombay office.

But the plaintiff did not take delivery of the 25 tons of the Electrolytic tin plate waste waste from the Bombay office. Therefore in regard to this contract the plaintiff did not take any further steps to purchase the stock from the respondent. Nor did the respondent take nay steps to file a suit against the plaintiff for damages for breach of contract. Therefore form the correspondence that passed between the plaintiff and the respondent in respect of these tow transactions we are convinced that they are two separate contracts, and it cannot be said that either there was a novation or substitution of contract in the place of the original contract for 30 tons of Electrolytic tin plate Cobbles.

(6) When once we have come to the conclusion that they are two separate contracts, we have to consider whether the respondent had committed a breach of contract in respect of the supply of 30 tons of Electrolytic tin plate cobbles. It is clear that the respondent did receive the goods of Electrolytic tin plate Cobbles from America between the months of July and August when the Deputy Iron and Steel Controller served a notice on him directing him not to remove or permit the removal of Electrolytic tin plate cobbles form their stockyards or form any other part of the company's premises to any place outside the precincts of such stockyard. This notice was served on him in August 1957. Now the respondent wanted to rely on this letter to plead that the contract to supply 30 tons of Electrolytic tin plate Cobbles to the plaintiff had become impossible of performance and that there was no breach of contract on their part. On the other hand, if there was no order in force, they would have delivered the goods to the plaintiff.

A reading of the control order only indicates that the respondent is prohibited form removing the goods from the stockyard. They are not prohibited from selling the goods. They could have taken permission from the Iron and Steel Controller to supply the materials to the plaintiff as per their contract entered into in the month of April 1957. They made no attempt to apply to the concerned officers to supply the goods to the plaintiff. We do not think that this is a case of impossibility of performance. There is no material placed on behalf of the respondent that they sincerely attempted to sell the goods to the plaintiff after obtaining the permission of the Steel Controller. Or they could have written a letter to the plaintiff that they were ready and willing to supply the goods, and could have kept part the 30 tons of Electrolytic tin plate cobbles in their stockyard and as soon as the restriction was removed by the Iron and Steel Controller they would supply them, or would sell or keep the goods in their godown on his behalf subject to some terms and conditions for retaining the goods in their godown on his behalf.

(7) It is settled law that before we apply the principle that the contract has become impossible of performance, the first duty is to ascertain the facts forming the basis of the contract and see how far the change in the circumstances in such as to remove the very foundation of the contract itself. The court must as a fact determine whether the circumstances did exist and if so whether they are sufficient to hold that the parties are absolved form their obligations under the contract. It is the essence of the doctrine that the event which causes frustration must have occurred without the fault of either party. Therefore the court ought to see whether it is a case of self-induced frustration in which case there could be no defence at all. In Bank Line Ltd., v. Artur Capel Co., 1919 AC 435 Lord Summer observed at p. 452:

'I think it is now well settled that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a self-induced frustration: indeed, such conduct might give the other party the option to treat the contract as repudiated'. In another case, viz., Hirji Mulji v. Cheong Yue Steamship Co. 1926 AC 497, Lord Summer quotes a passage from the judgment in Dahl v. Nelson Donkin and Co., (1881) 6 AC 38 , where Lord Blackburn refers to frustration as being a matter caused by something for which neither party was responsible, Lord Summer also referred to the observation of Brett J., in Jackson case, 10 C. P. 125 , that one of the conditions of frustration is that 'it should be without any fault of either party'. In Maritime National Fish Ltd. v. Ocean Trawlers Ltd., Lord Wright in delivering the judgment of the Board observed that the essence of frustration is that it should not be due to the act or election of the party and it should be without a fault of either party. In G. A. Galia Kotwala and Co. v. Narasimhan and Bros., : AIR1954Mad119 Krishnaswami Nayudu J. Held, 'in a case where a defence of frustration is raised what the court has to consider is not whether one party or the other has done anything from which responsibility for any breach of contract could be ascertained, but to see whether the circumstances pleaded did exist which could reasonably be considered as sufficient to hold that the parties are absolved form their obligations under the contract'

The short facts in that case are the following. At the relevant time of the contract there was a control over which prohibited except on permits. The defendants, who were the sellers, had in the first instance applied for an export permit, but ultimately withdrew the application. The defendants pleaded that they tried to secure the licence but as they were not able to get it, there was impossibility of performance. This contention was repelled by the learned Judges, who observed as follows at p. 380 (of Mad LJ): (at p. 124 of AIR):

'It will not be open in such a case for a party, whose duty it is to apply for permit, to refuse to apply for permit, or to withdraw the application, as in the present case, and then plead that the contract has become discharged by reason of the prohibition against export relying upon the control order. There was no refusal of permit in the present case, but no opportunity was given to the authorities to grant a permit in view of the defendants' conduct in withdrawing the application. The absence of a permit to export in this case could reasonably be considered to be the consequence of the defendant's withdrawal of the application. The defendant's liability to perform the contract therefore is due to their own default and it would not be open for them to plead frustration.'

Similarly, in Peter Cassidy Seed Co. Ltd. v. Osuustukkuk Auppa, 1957 1 ALL ER 484 there was a contract to purchase 3000 kilos of ants' eggs. The contract contained the clause 'delivery form as soon as export licence granted'. Prior to the contract the sellers assured the buyers that there would be no difficulty in obtaining a licence. But subsequently when the sellers applied for a licence, their application was rejected on the ground that they were not members of the exporters' Association as required under the Finnish law. When an action was brought by the purchasers, the sellers pleaded that he contract had become impossible of performance. Delvin J., who delivered the judgment, observed at page 489:

'Having regard to what I think is the right construction of that clause and to the circumstances in this case, I think that the proper conclusion is that the sellers were warranting absolutely that they would get a licence. If there be any ambiguity in the clause, and if, therefore, it be legitimate to look at what preceded the drawing up of the contract, it would strengthen very much the conclusion at which I have arrived. The facts are set out in the special case. Putting it shortly, the agent of the sellers, in effect, assured the buyer that obtaining a licence was merely a formality, and it was on that basis that the buyers entered into the contract. As that condition has not been fulfilled, it follows that the award in favour of the buyers, awarding them damages must be upheld'.

(8) According to the provisions of S. 56 of the Contract Act, the doctrine of frustration comes into play when a contract becomes impossible of performance. In Satyabarta Ghose v. Mugneeram Bengur and Co., : AIR1954SC44 the Supreme Court observed-

'In deciding cases in India the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in Sec. 56 of the Contract Act, taking the word 'impossible' in its practical and not literal sense'.

Therefore, our stature law requires that the contract should become impossible of performance in its practical sense. In the instant case the respondent neither took any steps to sell the goods to the plaintiff nor offered to keep the goods contracted for the plaintiff in his stockyard, nor informed the plaintiff that they were ready and willing to supply the goods, but would deliver them after the restriction was removed nor called upon the plaintiff to enter into some terms and conditions to keep the goods on his behalf in their stockyard. Therefore we come to the conclusion that the plaintiff has proved that the respondent has committed breach in not supplying 30 tons of electrolytic tin plate Cobbles, and the contract has not become impossible of performance for the reasons mentioned above. Therefore, the plaintiff is entitled to get the damages, and we think that the damages awarded by the trial Court is just not reasonable. We allow the appeal with costs.

(9) Appeal allowed.


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