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M. Gulamali Abdul HussaIn and Co. Vs. A.P.M.S. Mohamed Yousuf and Brother and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 13 of 1949
Judge
Reported inAIR1954Mad268; (1953)IMLJ504
ActsSale of Goods Act, 1930 - Sections 39; Contract Act, 1872 - Sections 39
AppellantM. Gulamali Abdul HussaIn and Co.
RespondentA.P.M.S. Mohamed Yousuf and Brother and anr.
Appellant AdvocateK. Narasimha Iyer, Adv.
Respondent AdvocateN.K. Prasad, ;C.R. Pattabhiraman and ;Ramanatha Iyer, Advs.
Cases ReferredMuthaya Manlgaran v. Lakku Reddiar
Excerpt:
.....for date of breach--duty and rights of purchaser;the plaintiffs entered into six c.i.f. contracts with the defendants for the sale of 'brass scrap', and documents were tendered with reference to some of the shipments in may 1945, while with reference to the remaining goods, there was not tender before 18th june 1945. disputes having arisen between the parties, the defendants were willing to honour the hundies only if certain demands of theirs were complied with, and ultimately wrote on 18th june 1945 finally refusing to retire the drafts.;held: the defendants' contention that the contracts were broken on 18th june 1945 must be accepted, and the damage calculated according to the market rate on that date. it was necessary to decide with reference to each contract when it was..........written by the defendants from bombay, it says:"we have accepted your offer accordingly for 5 tons 'brass bhangar of utensils' at rs. 138 per cwt. c.i.f.........(torn) which also please despatch along with the yes........ (torn) purchase at your earliest and oblige." the documentary evidence relating to the third contract consists of a telegraph ex. d. 18 and a letter ex. d. 19 sent on 17-1-1945 by the agent of the madras branch of the defendants firm to the head office. they state that 10 tons of 'brass bhangar' had been purchased from the plaintiffs at rs. 166. with reference to the 4th contract there is ex. v. 1 which is a copy of the letter dated 16-4-1945 written by the defendants from, bombay to the plaintiffs. the receipt of this letter is denied by the plaintiffs. it states:.....
Judgment:
1. This is an appeal by the defendants against the judgment and decree in C. S. No. 158 of 1945 on the Original Side of this Court. That was a suit instituted by the respondents for damages for non-acceptance of goods under six contracts. The appellants are a firm of merchants carrying on business in the export and import of metals in Bom bay and they have branches in Madras and other places. The respondents are a firm of merchants carrying on business in the purchase and sale of scrap metal in Madras, From 1942 the appellants were also, doing business as manufacturers of brass sheets and have been purchasing for that purpose scrap brass in the market of Madras and elsewhere. In this litigation, we are concerned with six contracts entered into by the appellants. with the respondents for purchase of scrap brass as per particulars mentioned below:

Dates 'of contract Quantity Price

1. 30-11-1914 5 tons Rs. 136 per cwt.

2. 1-12-1944 5 tons Rs. 138 per cwt.

3. 17-1-1945 10 tons Rs. 166 pet cwfc.

4. 16-4-1.945 5 tons Rs. 149 per ewt.

5. 17-4-1945 15 tons Rs. 147 per cwt.

6. '24-4-1945 20 tons, Rs. 147 per cwt.

2. All these contracts were C. I. P. Bombay; no-time was fixed for the performance of the contracts.

3. In the performance of these contracts, the plaintiffs despatched 15 tons per S.S. "Seawall'.' on 19-4-1945 and sent invoice No. 408 therefor to the defendants (Ex. P. 17). The price charged thereunder is Rs. 166 per cwt. for 10 tons and Rs. 149 per cwt for 5 tons. That would be the price-payable under contracts Nos. 3 and 4 respectively. It must be noted that no goods had been despatched in performance of contracts Nos. 1 and 2, under which the prices were respectively Rs. 136 and Bs. 138 per cwt. That is to say, the plaintiffs appropriated the 15 tons to contracts Nos. 3 and 4, while contracts Nos. 1 and 2 remained unperformed. On 20-4-1945 the plaintiffs shipped 10 tons per S.S. "Janaki" from Cochin port and sent invoice-No. 408 therefor to the defendants (Ex. P. 18). The price charged in this invoice is Rs. 147 per cwt. and that is the price fixed under contracts Nos. 5 sad 6. Both the above invoices Exs. P. 17 and P. 18 were received by the defendants on 23-4-1945 and the same was acknowledged by them in Ex. P. 21.

4. On 2-5-1945 the plaintiffs despatched 12 tons-by rail from Bangalore to Kurla and sent invoice-No. 411 therefor to the defendants (Ex. P. 24). In this also the price charged was Rs. 147 per cwt that being the price fixed in contracts. Nos. 5 and 6. The relative railway receipts were sent to National Bank, Calcutta, with a draft for Rs. 34,708-3-0;being the amount of the invoice and the bank issued a notice to the defendants on 7-5-1945 that the bill-should be honoured within a week (Ex. D. 11). On 12-5-1945 the defendants sent a wire to the plaintiffs protesting against the amount of the invoice and followed it up with a letter, Ex. P. 30 in which they stated that the consignment should first be appropriated towards the first two contracts and priced at the rates fixed under those contracts and that on that basis the amount of the bill should be reduced by Rs. 5,800. The goods actually arrived at Kurla on 13-5-1945 and the defendants retired the Bank draft and took delivery of the goods. On 14-5-1945 the defendants sent the wire, Ex. P, 33 to the plaintiffs. It is as follows:

"240 bags of Kurla wagon arrived yesterday on weighment found ........(?) gross weight cwts.

233, please send representative or ask anyone check (?) clear soon will not pay other hundi." At this stage, the goods shipped per S.S. "Seawall" arrived in Bombay. On 15-5-1945 the defendants sent the following telegram to the plaintiffs (Ex. P. 38):

"Instruct bank receiving less shortage and other amounts, goods arrived, not responsible shortage and wharfage."

Meantime the plaintiffs had shipped 3 tons by S.B. "Jalaganga" on 7-5-1945 and sent invoice No. 384 therefor to the defendants (Ex. P. 23). On 22-5-1945 they despatched a further quantity of 8/1/2 tons by rail to Cochin for being shipped to Bombay and sent invoice No. 390 therefor (Ex. P. 42); By 27-5-1945 they had secured the balance of 111/2 tons for delivery to the defendants and they had stocked the same in Madras harbour ready to be shipped, and sent invoice No. 391 to the defendants (Ex. P. 47).

5. The defendants, however, raised several disputes and declined to take delivery of the goods; there was an exchange of telegrams and letters and lawyer's notices ending with Ex. D. 12 dated 18-6-1945, wherein the defendants unequivocally refused to take delivery of the goods or pay for them. The plaintiffs' representatives thereafter went to Bombay with a view to settle the matter amicably. But nothing came out of the negotiations and eventually the plaintiffs filed the suit out of which this appeal arises on 14-8-1945, claiming a sum of Rs. 56,775-6-6, as damages for non-acceptance.

6. It will be seen that under the six contracts the plaintiffs had to deliver in all 60 tons. 12 tons were sent by rail to Kurla and the defendants took delivery of them. The suit is for damages for non-acceptance of the remaining 48 tons. According to the plaintiffs, 15 tons had been shipped per S.S. "Seawall", 10 tons per S.S. "Janaki"; 3 tons per S.S. "Jalaganga"; 81 tons had been consigned to Cochin for being shipped to Bombay (Ex. P. 42) and the remaining 114 tons were kept ready for delivery in Madras harbour (Ex. P. 47);' and they were not despatched owing to repudiation by the defendants. The plaintiffs alleged that the contract was finally broken by the defendants on 10-8-1945 when the negotiations in Bombay broke down and damages are claimed on the basis of the market rate as on 10-8-1945.

7. The defendants, besides contesting the claim of the plaintiffs for damages for non-acceptance of the 48 tons, filed a counter-claim with reference to the 12 tons consigned to Kurla of which they had taken delivery after payment. They pleaded that the goods actually sent by the plaintiffs to Kurla were not in accordance with the contract and were inferior in quality, that there was shortage in quantity, that the plaintiffs were therefore, liable in damages therefor, that the action of the plaintiffs in appropriating the goods to later contracts while the earlier contracts had remained unperformed was illegal and in contravention of an express agreement between the parties that the contracts should be performed in chronological order, that the goods sought to be supplied were not of the quality agreed, that therefore, the defendants were within their rights in not taking delivery of them, and that in any event the contract must be deemed to have been broken on 20-5-1945 and that the damages claimed were excessive.

8. The suit was tried by Bell J. He held that the goods tendered were in accordance with the contract; that no shortage in quantity had been established; that there was no agreement that the contract should be performed in chronological order; and that the defendants were in breach in not taking delivery of the goods. He also held that the contracts were broken by the defendants only on 10-8-1945 when the negotiations finally broke down. In the result, he dismissed the counter-claim and decreed the suit as prayed for. The defendants appeal.

9. Before us Mr. K. Narasimha Aiyar, the learned counsel for the appellants, did not press the counter claim for damages in respect of the Kurla consignment. With reference to the decree for damages for non-acceptance granted in favour of the plaintiffs, he raised two contentions: (1) that the goods tendered were not in accordance with the contract and that, therefore, the defendants were not bound to take delivery of them and (2) that even if the defendants were in default in not taking delivery of them, the breach of the contracts accrued on 18-6-1945 and that the damages should be computed on the basis of the market rate as on that date and not as on 10-8-1945.

10. On the first contention, the point for determination is, what was it that the defendants agreed to purchase under the contracts and what was it that the plaintiffs actually tendered. The contracts were generally settled by conversations over the phone and we have to depend on the correspondence following thereon for ascertainment of the terms. Exhibit P. 10 relates to the first contract and is a letter written by the defendants from Bombay. It says: "With reference to the telephone conversation today we had with you, we hereby confirm having purchased from you 5 tons of old 'brass bhangar utensils' at Rs. 136 per cwt. C. I. P. Bombay prompt shipment.........As regards the quality please be careful that there may not be any mixture and it should be of pure 'utensils bhangar' as promised by you over the plione."

Exhibit P. 12 relates to the second contract and it is a letter written by the defendants from Bombay, It says:

"We have accepted your offer accordingly for 5 tons 'brass bhangar of utensils' at Rs. 138 per cwt. c.i.f.........(torn) which also please despatch along with the yes........ (torn) purchase at your earliest and oblige." The documentary evidence relating to the third contract consists of a telegraph Ex. D. 18 and a letter Ex. D. 19 sent on 17-1-1945 by the agent of the Madras branch of the defendants firm to the Head Office. They state that 10 tons of 'brass bhangar' had been purchased from the plaintiffs at Rs. 166. With reference to the 4th contract there is Ex. V. 1 which is a copy of the letter dated 16-4-1945 written by the defendants from, Bombay to the plaintiffs. The receipt of this letter is denied by the plaintiffs. It states: "As per the conversation over the phone, we confirm having purchased five tons 'brass bhangar utensil' at Rs. 149 per cwt. c. i. f. Bombay on the condition that the material will be despatched by ready steamer." The concluding portion of the letter refers to contract No. 5. It runs as follows: "We have done further business of 15 tons of 'brass bhangar utensil' at Rs. 147 c i.f. Bombay on the same condition as above." It is abundantly clear from the foregoing that what the defendants contracted to purchase was 'brass bhangar utensils. The point now in controversy is whether that means the same thing as 'brass scrap' which is what the plaintiffs tendered. The contention of the appellants is that there is vast difference between 'brass bhangar utensils' and 'brass scrap'; that while 'brass bhangar utensils' will consist of brass utensils which have become unfit for use, 'brass scrap' will include odds and ends of broken brassware; that the latter will be distinctly inferior in quality to old utensils; that further, they will be less-suited for being melted and manufactured into brass sheets; and that therefore, in tendering 'brass scrap' the plaintiffs have not tendered goods in accordance with the contract.

11. The contention of the plaintiffs on the other hand is that 'bhangar' is only a Guzerati equivalent to English 'scrap'; that 'brass bhangar utensils' and 'brass scrap' meant the same thing and were understood by the parties to mean the same thing; and that it was on that basis that the parties had entered into the contracts. In support of this contention, reliance was placed on the invoices and correspondence between the parties relating to the contracts. Exhibit P. 3 is a letter from the plaintiffs to the defendants confirming the sixth contract. It states: "We confirm telegrams exchanged between us on 24-4-1945 as a result of which we have accepted to supply you 20 tons 'brass scrap' at Rs. 147 per cwt to be shipped by steamer, as early as possible."

Exhibit P. 17 is invoice No. 408 and relates to the 15 tons shipped per S.S. "Seawall". It described the goods merely as "old brass". Exhibit P. 18 is the invoice relating to ten tons shipped per S.S. "Janaki". The goods are described as "brass scraps". Exhibit P. 24 is the invoice sent by the plaintiffs for the Kurla consignment: It described the goods as 'brass scraps'. Exhibit P. 28 is the invoice relating to the 3 tons consigned by S.S. "Jalaganga"; Ex. P. 42 is the invoice for 8i tons 'stocked at Cochin for shipment to Bombay; and Ex. P. 47 is the invoice for 111 tons stocked in the Madras Harbour. All these invoices describe the goods as 'brass scraps' and they were all accepted by the defendants without any protest. The plaintiffs contend that this conduct is explicable only on the basis that 'brass bhangar utensils' and 'brass scraps' meant the same thing.

12. We are much impressed by this contention. The defendants are experienced businessmen and if, as is now contended, 'brass scraps' are something different from 'brass bhangar utensils', it is inconceivable that they should not have demurred on the terms of the contract as set out in Ex. p. 3 or that they should have accepted invoice after invoice describing the goods consigned as brass scrap' without raising any protest. On the other hand, in Ex. P. 21 they acknowledge the receipt of two invoices Exs. P. 17 and F. 18 and state:

"We note from your above two invoices that 300 'brass scrap' are shipped from Madras and 200 from Cochin".

No complaint is made that the goods mentioned in the invoices were different from the goods which were the subject matter of the contract. Even more significant is their conduct with reference to the 12 tons consigned by rail to Kurla. They took delivery of them on 13-5-1945; immediately weighed them and sent a wire EX. P. 33 to the plaintiffs complaining about the shortage in weight. No complaint was made that the goods sent were not 'brass bhangar utensils' but a different variety called 'brass scraps'. On 15-5-1945 the defendants sent Ex. P. 37 with reference to the same matter. Therein also there is no whisper that the goods despatched as 'brass scraps' were different from the goods contracted for.

X X X X

13. (After discussing the evidence in the case, their Lordships proceeded) Therefore, it can only be argued that in view of the statements in the correspondence and in the plaint, the burden of proving that 'brass utensils bhangar' and 'brass scrap' are the same is heavily on the plaintiffs. But the evidence in support of the contention of the plaintiffs is overwhelming. It consists of documents to which defendants themselves are parties and of the testimony of witnesses which is beyond cavil. On a consideration of the entire evidence, oral and documentary, we agree with Bell J. that 'brass scraps" and 'brass utensils bhangar" mean the same thing and that the parties entered into the contracts on the basis that they are identical and that, therefore, the defendants are in breach in not taking delivery of the goods.

14. We have assumed so far that it is open to the defendants to plead that the goods which were consigned per S.S. "Seawall" "Janki" and "Jalaganga" were not in accordance with the contract. That, however, is not the true legal position. The contracts were c. i. f. and. in a c. i. f. contract, the purchaser is bound to accept the documents which represent the goods and honour the draft and is not entitled to raise at that stage any question as to whether the goods are in accordance with the contract or not. If after taking delivery of the goods, it is found that they are not in accordance with the contract, then of course the purchaser has a right to reject the goods and to pursue his remedies against the seller. Therefore, the plea that the goods were not in accordance with the contract, though open to consideration in the counter-claim of the appellants, is not permissible as a defence to' the action of the plaintiffs for damages for wrongful refusal to accept the documents and to honour the drafts. The contention of the defendants that they were not bound to honour the hundies because the goods were not in accordance with the contracts must accordingly be overruled. In the result, it must be held that the defendants committed breaches of the contracts and are therefore liable to the plaintiffs in damages.

15. The next question is, to what damages the-plaintiffs are entitled and that depends on what date the contracts were broken by the defendants. The appellants contend that the breach was on 18-6-1945, while the respondents maintain that it was on 10-8-1945. Bell J. accepted the latter date as the correct one as negotiations between the parties were going on in July in Bombay and they finally; broke down only on 10-8-1945. It should be observed that as the claim for damages relates to six contracts, it should, properly speaking, be necessary to determine with reference to each contract when it was broken; and this is so particularly in this case as the contracts were c.i.f. and ill such contracts the purchasers commit breach when the documents are tendered and refused. In this case the documents had been tendered with reference to some of the shipments in May itself, while with reference to the remaining goods, there had been no tender prior to 18-6-1945. Disputes having arisen between' the parties, the defendants were willing to honour the hundies, only if certain demands of theirs were complied with. There was correspondence between the parties and ultimately the defendants sent Ex. D. 12 on 18-6-1945 finally refusing to retire the drafts. Thereafter, there was no further correspondence. Mr. K. Narasimha Aiyar, the learned advocate for the appellants contends that when once the time for performance has arrived and there is default, the contract must be held to be broken on that date and damages should be assessed on the basis of the market rate on that date and he quoted --'Muthaya Manlgaran v. Lakku Reddiar', AIR1914 Mad 573 (A), in support o this position. That, is not disputed by the respondents. The appellants accordingly argued that though the correspondence upto 18-6-1945 might be construed as involving an extension of time for payment of the drafts, in view of the clear refusal contained- in Ex. D.12 dated 18-5-1945, it must beheld that the contracts in respect of which performance had already fallen due were finally broken on that date and as to others, there was an anticipatory breach. The respondents contend that the negotiations did not finally terminate on 18-6-1945, that after the date of Ex. D. 12, P. Ws. 4 and 5 had been to Bombay, the talks for settlement were going on between them and the defendants and that it was only on 10-8-1945 that the father of D. W. 6 finally told the plaintiffs that the defendants would not take delivery of the goods. The plaintiffs further stated that the father also told them that the goods might be sold in the market and that they would pay the difference. This is denied by D. W. 6 and sounds improbable. This conversation can in no wise be construed as an agreement extending the time for performance. We accordingly accept the contention of the appellants that the contracts were broken on 18-6-1945.

16. The next point for decision is about the market rate for brass scraps on 18-6-1945. P. W. 11 gave evidence that the price of one cwt. of brass scraps on 12-6-1945 was Rs. 119-4-0 and that it remained at the same level on 22-6-1943. Exhibit D. 3 shows that in Bombay the price of one cwt. on 20-6-1945 was Rs. 124. According to Ex. D. 4 the market rate of "brass bhangar" on 19-6-1945 Was Rs. 123 per cwt. We think that the market rate for the brass scrap on 18-6-1945 may be fixed at Rs. 120-per cwt. On this basis the plaintiffs would be entitled to Rs. 27920 by way of damages. The plaintiffs also claimed a sum of Rs. 4000 as damages for loss of goods by theft, while they were stocked in the Bombay wharfage. This is clearly inadmissible and must be disallowed. The plaintiffs paid a sum of Rs. 3500 as demurrage to the harbour authorities while the defendants were in correspondence with them and this amount is also claimed as part of damages. There is no opposition to this claim and it will be allowed. The plaintiffs also claimed a sum of Rs. 2155-6-6 as interest on the amounts claimed. But no interest can be allowed on a claim for damages and this item must therefore be disallowed.

17. In the result, the appeal is allowed in part and there will be a decree for Rs. 31420 in favour of the plaintiffs with interest thereon at 6 percent from the date of the decree 20th January 1949. The plaintiffs will also be entitled to proportionate costs both here and in the court below. The costs of the commission at Bombay will be-allowed in full in favour of the plaintiffs. The defendants will bear their costs throughout.


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