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Hasenbhoy Jetha, Bombay Vs. New India Corporation Ltd., Madras - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberO.S. Appeal No. 17 of 1950 and C.M.P. Nos. 5864 of 1951 and 1713 of 1954
Judge
Reported inAIR1955Mad435
ActsContract Act, 1872 - Sections 73; Sale of Goods Act, 1930 - Sections 16(2) and 59
AppellantHasenbhoy Jetha, Bombay
RespondentNew India Corporation Ltd., Madras
Appellant AdvocateK. Rajah Iyer, Adv. and ;King and Partridge
Respondent AdvocateR. Swaminatha Iyer, Adv.
Cases ReferredMuthukrishna Reddiar & Sons v. Madhavji Devichand
Excerpt:
.....in a satisfactory working order, that the appellants sold as a rebuilt and re-conditioned second-hand crusher, one which was in fact perfectly useless in breach of 'their assurances and the implied, if not, specific warranty contained in the correspondence'.on the basis of that finding the learned judge held that the respondents were clearly entitled to a refund of the entire purchase price that they paid, viz. 858-8-0 and the respondents having paid the same amount on 30-6-1947- claimed this sum also by way of damages by an amendment of the plaint in 1948. 5. the appellants contended that the machine was sold as a specific article, that it was opened and inspected by the respondent's representative part by part, that such of the parts as were not approved by the respondents'..........jetha, a firm carrying on business as stockists and suppliers of hardware goods and second-hand machinery in bombay. the suit was instituted in march 1946 by the respondents herein for recovery of damages of a sum of rs. 8187-8-0 oil the ground that the appellants firm was guilty of 'breach of contract, breach of condition and breach of warranty and fake representations and assurances as detailed in paras. 4, 5, and 7 of the plaint'. by a subsequent amendment in 1948, the respondents claimed that, they were entitled to the return of the sale consideration of rs. 11,500 plus the amounts expended by them by way of repairs, or in the alternative to recover damages already claimed by them in the original plaint plus a sum of its. 858-8-0 spent for repairs on 30-6-1947 making in all.....
Judgment:

Umamaheswaram, J.

1. This appeal is brought by the defendants Hasanbhoy Jetha, a firm carrying on business as stockists and suppliers of hardware goods and second-hand machinery in Bombay. The suit was instituted in March 1946 by the respondents herein for recovery of damages of a sum of Rs. 8187-8-0 oil the ground that the appellants firm was guilty of 'breach of contract, breach of condition and breach of warranty and fake representations and assurances as detailed in paras. 4, 5, and 7 of the plaint'. By a subsequent amendment in 1948, the respondents claimed that, they were entitled to the return of the sale consideration of Rs. 11,500 plus the amounts expended by them by way of repairs, or in the alternative to recover damages already claimed by them in the original plaint plus a sum of Its. 858-8-0 spent for repairs on 30-6-1947 making in all Rs. 9046. The appellants herein contended that they were not liable to return the saie consideration, or pay any amount by way of damages, as the second-hand stone-crusher was purchased by the plaintiff company after inspection and that no assurances, express or implied, were given by them.

The suit was heard by Mack J. and the main issue for determination was whether the appellants were guilty of breach of warranty at the time they sold the crusher to the respondent. The learned Judge believed the plaintiffs' evidence that the appellants gave an assurance that the crusher was in a satisfactory working order, that the appellants sold as a rebuilt and re-conditioned second-hand crusher, one which was in fact perfectly useless in breach of 'their assurances and the implied, if not, specific warranty contained in the correspondence'. On the basis of that finding the learned Judge held that the respondents were clearly entitled to a refund of the entire purchase price that they paid, viz., to this Rs. 11500 plus Rs. 1458-8-0 spent by them for repairing the crusher,

A decree was passed declaring that the crushing machine sold by the appellants to the respondents was the property of the appellant firm and that the appellants should pay to the plaintiffs a sum of Rs. 12,958-8-0 with interest at six per cent, from the date of the decree till the date of payment. The decree further provided that if the crushing machine was not removed from its present site by the appellants on or before 18-2-1950, the respondents were entitled to bring it to sale in execution as scrap iron and appropriate the net sale proceeds towards their decree. As against the judgment and decree of Mack J., the appeal was filed by the defendants-appellants.

2. The first contention of the learned advocate for the appellants was that as per the contract entered into by the appellants with the respondents evidenced by Ex. D-10 dated 22-8-1945, the entire sale consideration of Rs. 11,500 was paid by the respondents and the stone-crusher was delivered to the respondents in October 1945 and that the sale was completed and title passed to the respondents and that consequently the decree declaring that the appellants were the owners of the crushing machine and directing the refund of the sale consideration was wholly erroneous. We agree with this contention of the appellants and we do not see how the breach of any assurances or warranty, as found by the learned Judge, entitles the respondents to a refund of the purchase price. The title in the second-hand crusher having passed to the respondents, they are entitled only to recover damages for breach of contract or warranty, express or implied, as pleaded by them. We therefore set aside the decree of the learned Judge directing the appellant! to return the sale consideration of Rs. 11,500.

3. The next and main question that arises for consideration is as to whether the appellants are liable to pay any damages, and if so, what amount. It is necessary to set out the relevant facts for deciding this question. The case of the respondents is that on or about 22-8-1945 the appellants agreed to supply to the respondents at Madras a stone-crusher (Baxter make) size 20' X 9' for breaking road metal for Rs. 11,500 and that the respondents agreed to purchase the said stone-crusher from the appellants on the express and specific assurance by the appellants that the said crusher had been recently overhauled and tested by them and was in a satisfactory condition and on the further assurance by the appellants that a demonstration of the working condition thereof was quite unnecessary.

In paragraph 5 of the plaint they further alleged that at the time of placing the order they informed the appellants of the urgent and important contract which they hail entered into with the public works department, Madras, for the laying out of a section of the Madras-Bangalore road and that the said stone-crusher was required by them for the purpose of carrying out the said contract and that the appellants expressly assured them that the stone-crusher would adequately meet their requirements, In para 6 they stated that though they took delivery of the machine on or about 10-10-1945 after paying the full consideration they found that they could not work the machine on account of the defecfs mentioned in para 7 of the plaint. They informed the appellants by their letter dated 20-11-1945 about the defective condition of the machine and gave a notice on 4-2-1946 claiming a sum of Rs. 8187-8-0 by way of damages. The appellants having denied their liability, the suit was instituted in March 1946.

4. Finding that in spite of the repairs of the machine it would not work, the respondents entrusted the machine on or about 14-6-1946 to Messrs. Marshall Sons and Co. (India) Ltd., for further repairs and ovehauling, which the latter carried out as per their bill dated 25-4-1947 for Rs. 858-8-0 and the respondents having paid the same amount on 30-6-1947- claimed this sum also by way of damages by an amendment of the plaint in 1948.

5. The appellants contended that the machine was sold as a specific article, that it was opened and inspected by the respondent's representative part by part, that such of the parts as were not approved by the respondents' representative were replaced by the appellants in his presence and to his satisfaction and that the respondents' representative was satisfied with the working of the machine when worked by hand. They denied having given any assurances, express or implied, as alleged by the respondents and that as the respondents' representative was satisfied with the working condition of the machine and did not ask for demonstration, no demonstration was given. They contended that in the circumstances the respondents were not entitled to claim any special damages or charges incurred for repairs before or subsequent to the suit. Issues 1 and 4 relate to the liability of the appellants for damages and issues 2, 5 and 6 relate to the quantum of damages. The learned Judge found, as stated in paragraph supra that the appellants were guilty of breach of assurances and warranty, but did not determine what damages were payable by the appellants.

6. The appellants are a well-reputed firm of dealers in second-hand drums, machines, hardware, wooden casks and stone-crushers. The respondents who had entered into a contract with the Public Works Department, Madras for laying out a section of the Madras-Bangalore route, required a stone-crusher. New stone crushers were not available at the time. So P. W. 3 went to Bombay for the purpose of finding out whether any secondhand stone-crushers were available. The appellants' firm had two stone-crushers at the time, a bigger one 24' x 14' jaw and a smaller one 20' x 9' jaw. Correspondence passed between P. W. 3 and the appellants' firm in regard to the bigger stone-crusher. In Ex. D-5 dated 29-7-1945 the appellants wrote to P. W. 3's firm Messrs. Gammines Ltd. in the following terms: 'The stone-crushers under reference are just like new ones as the same have undergone thorough repairs and each and every part which were unserviceable were replaced with the new ones, hence in other words, if we say they are second hand rebuilt new machines, there is no hitch about it and that therefore they are capable of giving the same service, which only new ones can afford to give.'

7. P. W. 3 accompanied by P. W. 2, the Managing Director of the respondents' company, went to Bombay and arranged for the purchase of the smaller crushing machine. D. W. 1 the partner in the appellants' firm admitted that ho told P. W. 3 that the suit machine was overhauled and reconditioned. While P.Ws. 1 to 3 spoke about the assurances given by the appellants' firm as to the working condition, D. W. 1 denied that any such assurances were given. The witnesses examined on behalf of the respondents denied that there was any inspection of the machine. D. W. 1 said that P. W. 1 who was an Engineer and the son of P. W. 2 came to the appellants' firm on several occasions, that the machine was dismantled, that various parts were replaced by D. W. 1's firm at the instance of P. W. 1, The correspondence that passed between the parties clearly shows that P. W. 1 inspected the crusher and that some of the old parts were replaced by new ones at the instance of P. W. 1. For example in Ex. D-19 dated 20-11-1945 the respondents wrote to the appellants stating that they did not notice the plate to strengthen the sides with a bolt fixed on the frame while examining the crusher and that they felt doubtful if it was the same frame that was inspected by them at Bombay that had been sent to them.

From this it is clear that the evidence of D. W. 1-is true and that there was an inspection of the crusher. It is also clear from the evidence that while there was no demonstration given by the appellants' firm, a hand test was carried out. As regards the reasons for giving no demonstration, the parties vary. The respondents' case was that the appellants assured them that a demonstration was unnecessary. P. W. 1 stated that demonstration was not given, as the appellants had no prime mover. The evidence of all the respondents' witnesses was that there was no electric power available for giving a 'demonstration. The appellants have satisfactorily established that there was an electric sub-station located in the workshop and that die story of the respondents is false. We are prepared to accept the respondents' (sic) evidence that there was electric power available for the purpose of giving a demonstration. But it is not clear from the evidence of the witnesses as to whether a motor with the necessary horsepower was available to work the crushing-machine.

A reading of the entire evidence leads us to think that as the respondents were in a hurry to purchase the crushing machine for the purpose of carrying out the contract which they entered into with the P. W. D. authorities, Madras, and the demonstration would take a long time, the respondents acted on the assurance of the appellants that the machine was in a working condition, They were apparently satisfied with the working by the hand. Admittedly the machine was sent by the appellants to the respondents in October 1945 and immediately when they attempted to work it, they noticed the several defects pointed out by them in their letter, Ex. D-19 dated 20-11-1945. In spite of having effected repairs, they found that they were not in a position to turn out more than 11/2 tons per hour, It is admitted that a new machine would produce an outturn of 10 to 15 tons per hour. The Engineer examined on behalf of the appellants D. W. 3 admitted that a reconditioned and second hand machine would produce 6 to 8 tons per hour. He had to admit that if the crusher did not produce more than 11/2 tons per hour it is not worth while to have, such a crusher or repair it. The respondents sent the machine to Messrs. Marshall Sons and Co., for further repairs after the institution of (he suit and even after those repairs they found that it was absolutely of no use.

8. The question that arises for consideration is whether having regard to the terms of the contract, Ex. D-10, there is no implied warranty as to its merchantable quality and whether the appellants are not liable to pay any damages to the respondents. Mr. Rajah Aiyar, the learned advocate for the appellants laid great stress on the following two clauses in Ex. D-10 :

'We take pleasure to confirm the sale of one second hand Baxter make stone-crusher, sold to you in the presence of Mr. Canapathy of Gammies Ltd. on the terms and conditions as under :

Description : one second hand stone crusher, Baxter make, size 20' x 9' without screen, but complete otherwise, and with jaws etc., also with trolly as to make the machine portable and in the condition as seen by you and approved by you.....

Inspection : The machine will be opened out for your inspection and the same will be refitted, free of any cost.'

The argument of the learned Advocate for the appellants was that the respondents agreed to purchase the machine in the condition as seen and approved by them. His contention was that the respondents-buyers satisfied themselves about the machine which they purchased and that the principle summed up in the maxim 'Caveat Emptor' applies.

The respondents' advocate on the other hand contended that the case fell within, Section 16(2), Sale of Goods Act, that the crushing machine was bought by description from the appellants, who dealt in goods of that description and that there was an implied condition that the goods should be of merchantable quality and that as the crushing machine was not able to produce more than 11/2 tons per hour by reason of the latent defects in the machine, the sellers, i.e., the appellants were liable in damages. His case was that the crushing machine, which produced 11/2 tons per hour is really no crusting machine at all and is of absolutely no use to the buyers. We agree with the contention of the respondents, that inspection of the machine without demonstration by the use of electric power did not reveal the latent defects in the machine and that the machine which was supplied to the respondents and which was producing only 11/2 tons per hour cannot be regarded as a crushing machine capable of being put for proper use and that it is consequently not of merchantable quality within the meaning of Section 16(2), Sale of Goods Act.

9. The common law rules on the subject of implied conditions, or warranty of quality, or fitness were stated and the cases were classified by Mellor J. in delivering the judgment of the Queen's Bench Division in -- Jones v. Just', (1S68) 3 QB 197 at p. 202 (A). The Sale of Goods Act of 1893 codified the English law relating to the Sale of goods. Section 14(2), English Act corresponds to Section 16(2), Indian Sale of Goods Act Having regard to the codification of the law, it is unnecessary for us to deal with the several cases cited at the liar and which are based on the common law principles. Pollock and Mulla in his commentary on the Indian Sale of Goods Act, 2nd End. at p. 81 has clearly set out the differences between the common law rule and Section 16(2) in the following terms :

'Sub-section (2) embodies the second exception recognised at common law to the maxim 'caveat emptor' but again introduces important modifications in favour of the buyer; for whereas at common law the implication of a condition that the goods were of merchantable quality did not arise if the buyer had 'an opportunity to examine' the goods, under this Section, it will only be negatived if the buyer has 'actually examined' the goods.

Further, while it was at least doubtful whether the seller was, at common law, liable for latent defects which rendered the goods unmerchantable in those cases where the buyer had the opportunity of examining the goods under the Act the seller is so liable, even if the goods are examined by the buyer. The rule therefore now is, in the case of goods sold by description by a seller who deals in such goods, that he is always, in the absence of agreement to the contrary, responsible for latent defects in the goods which render them unmerchantable whether the buyer has examined them or not, and for all such defects whether latent or discoverable on examination in cases where the buyer has not in fact examined the goods ..... It is to be observed, also, that the implied condition applies to all goods bought from a seller who deals in goods of that description, whether they arc sold under a patent or trade name or Otherwise.'

10. Benjamin in his learned Treatise on the Law of Personal Property, 8th Edn., also lays down the law in the same terms. At p. 644 he states as follows:

'Under the Act, if the goods are bought by description (a phrase which has already been shown not to be necessarily synonymous with kind or class) the condition of merchantable quality will he excluded, not, as at common law, by the existence of an opportunity of examination, but only by an actual examination, and then only as regards discoverable defects. No condition will be implied unless the seller deals in goods of that description, i.e., kind.'

Applying those principles to the present case, all the conditions are satisfied. The appellants' firm is a well reputed firm dealing in second baud crushing machines. The respondents agreed to purchase a crushing machine of the description mentioned in Ex, D. 10 without a screen. It is found that the machine is not of merchantable quality inasmuch as it produces only 1 1/2 tons per hour. The inspection made by the respondents' representative was of no use inasmuch as the defect is a latent defect, which could not he revealed except by a demonstration with electric power and which was in fact not done or avoided on the assurance given by the appellants' firm. The mere fact that there was an opportunity to inspect or that an inspection was done, or that the machine was worked by hand is of no use, as the latent defect was not revealed by such inspection.

11. The decision in -- 'Bristol Tramways etc. Carriage Co. Ltd. v. Fiat Motors Ltd.', 1910-2 KB 831 (B) is directly applicable to the facts of the present case. The plaintiffs in that case bought '24/40 h.p. fiat omnibus chassis', which they had inspected and 'six 24/40 h.p. fiat omnibus chassis' at an agreed price. The chassis when delivered were unfit to perform the work required of them. In an action for damages it was held that it was not a contract for the sale of a specified article under its patent or trade name and that the condition implied by Sub-section 2 of Section 14 that the goods are of merchantable quality applied to all goods bought from the seller who deals in goods of that description whether they are sold under a patent or trade name or otherwise. Farwell L.J. observes at p. 841 as follows:

'The phrase 'merchantable quality' seems more appropriate to a retail purchaser buying from a wholesale firm than to private buyers, and to natural products, such as grain, wool, or flour, than to a complicated machine, but it is clear that it extends to both In -- 'Grant v. Australian Knitting Mills Ltd.', 1936 AC 85 (C), Lord Wright in delivering the judgment of the Judicial Committee in an appeal from South Australia and construing Section 14(2) of the South Australia Sale of Goods Act, 1895, which is identical with Section 14(2) of the English Sale of Goods Act, 1893, observed at p. 100 of - the report as follows:

'It may also be pointed out that there is a sale by description even though the buyer is buying something displayed before him on the counter; a thing is sold by description, though it is specific so long as it is sold not merely as the specific thing but as a thing corresponding to a description, e.g. woolen under-garments, a hot water bottle, a second hand reaping machine, to select a few obvious illustrations.' The present case of a sale of second hand crushing machine falls within one of the illustrations given by Lord Wright. So far as the Indian decisions are concerned the case of -- 'G. McKenzie and Co. (1919) Ltd. v. Nagendranath Mahalanabis', ILR 1946 1 Cal 225 (D) is to the point In that case it was found that the particular car delivered to the plaintiff was not what a Plymouth car of average quality may be expected to be and that the defect due to bad workmanship and faulty parts was a latent defect and that the plaintiff would not have discovered the defect even if he had examined the car and that the defect made the car unmerchantable. It is obvious that if a person purchased a second hand car, which is not able to run more than 4 or 5 miles per hour, it is absolutely of no use as a car. Mr. Lush K.C. argued in 1910 2 KB 831 (B), that the omnibus or chassis sold' in the said case was no omnibus or chassis at all and the argument was upheld.

Applying those decisions to the present case, the crushing machine, which produces 1 1/2 tons per hour cannot be regarded as a crushing machine at all and even according to D.W. 3 it is not worthwhile 'to have such a crusher or repair such a crusher.' As to the scope of Section 16(2) and the meaning of merchantability, reference was made by the learned Advocate for the respondents to the decision of a Bench of this Court in -- 'Agha Mirza Nasarali Khoyee and Co. v. Gordon Woodroffe and Co. (Madras) Ltd. AIR 1937 Mad 40 (E), but it is unnecessary to deal with the facts of that case as they are not in 'pari materia' with the facts in this case. Among the cases cited by the learned advocate for the appellants it is only necessaiy to refer to the case -- 'Thornett - and Fehr v. Beers and Son', 1919-1 KB 486 (F). That was a case where the defendants, who were desirous of purchasing a quantity of vegetable glue from the plaintiffs who dealt in that commodity, went to the warehouse where the glue, which was in barrels, was stored, but being pressed for time did not have any of the barrels opened, but merely looked at the outside of the barrels.

Bray J. held that the defendants could not be heard to say that they had not examined the glue and were not aware of the defects, as the defects complained of were apparent, the moment the cakes were opened. The defects in that case were not latent defects, as in the present case and the finding of the learned Judge was that the defendants had examined the goods within the meaning of Section 14(2). That case is therefore distinguishable from the facts of the present case.

12. A number of other cases bearing on the common law principles were referred to by the learned advocate for the appellants and we do not think it necessary to refer to them, as we are only concerned with the construction of Section 16(2) of the Indian Sale of Goods Act corresponding to Section 14(2) of the English Sale of Goods Act. In the view taken by us it is unnecessary for us to deal with Section 16(1) of the Act as to how far the buyers relied on the sellers' skill or judgment in supplying the crushing machine. It is also unnecessary to decide whether the plaintiffs are speaking the whole truth when they say that they informed the defendants of the immediate purpose for which the crushing machine was required, or regarding the express assurances alleged to have been given by the appellants as to its working condition. As our judgment proceeds on the basis that the appellants are liable in damages by reason of the implied warranty or condition laid down in Section 16(2), it is unnecessary to consider whether any oral evidence in regard to the alleged assurances or warranty or condition is admissible under Sections 91 and 92 of the Evidence Act by reason of the contract having been reduced to writing.

13. The learned trial Judge, Mack J. did not address himself to the question of damages and decide issues 2, .5 and 6. It is therefore necessary that the suit should be remanded for a determination of those issues and fixing the damages payable by the appellants. There is moreover an application filed bv the respondents before us for amending the plaint C, M. P. No, 1713 of 1954 and claiming a larger sum by way of damages. We do not think it is necessary for us to pass any final orders on this amendment application. We direct that this application may also be transmitted along with the suit to the trial Judge, who will consider the application on its own merits.

14. In the result, the decree of the Court below is set aside and the suit is remanded for determining the quantum of damages payable to the respondents. We do not think it necessary to deal with the decision in -- 'Muthukrishna Reddiar & Sons v. Madhavji Devichand, and Co. Ltd.', : AIR1953Mad777 (G), as to the measure of damages, as the trial Judge will deal with that question in determining the quantum of damages. The costs of the appeal will abide the result of the suit.

15. C. M. P. No. 5864 of 1951: This petition will be disposed of by the trial Judge.

16. The appellants will be entitled to a refund of the court-fee paid on the memorandum of appeal.


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