1. The defendant in O. S. Nos. 628, 656 and 663 of 1667 on the file of the Court of the Subordinate Judge of Coimbatore has preferred these appeals.
2. The defendant Messrs. Kamala Sugar Mills Ltd., are manufacturers of starch flour and liquid glucose. The plaintiff who was interested in the said goods entered into five contracts in December, 1964 with the agent of the defendant at Delhi. The contracts are exhibited as Exs. A-l, A-2, A-3, A-4 and A-5. Ex. A-l is dated 3-12-1964 which was for the supply of one wagon (220 bags) of starch flour at Rs. 42.50 per 50 K. Gms. Exs. A-2 and A-3 dated 8-12-1964 were each for the supply of 2 wagons of starch flour (here there is no further description as to the quantity of bags) at Rs. 42.50 P. per 50 K. Gms. Exs. A-4 dated 17-12-1964 is another contract for the supply of two wagons of starch flour (here the descriptive content of each wagon is given as 200 bags) at Rs. 45/- per 50 K. Gms. The fifth contract is under Ex. A-5 dated 26-12-1964. This was for the supply of one wagon (200 bags) of starch flour at Rs. 50/- per 50 K. Gms. and one wagon of liquid glucose (50 barrels) at Rs. 345/- per barrel. These contracts were entered into at Delhi and the defendant was represented by their agent.
3. The relevant terms of the contract under which the parties stipulated to sell and purchase may be immediately referred to. The mode of payment was understood as cash against R. R. or documents through bank or per V. P. P. The despatch of the goods was at the buyer's risk and responsibility. The defendant stipulated that they should not be held responsible for any loss or damage or any mishappening to the goods after they leave their premises. The prices quoted were subject to revision without any notice or adjustment in accordance with the price ruling at the time of despatch and the goods were to be supplied subject to availability. Inter alia, the contract provided that all orders were booked subject to confirmation by the defendant whose representative was at Delhi. The defendant also reserved the right to accept or reject any order in part or in full (Clause 3). We have already referred to the right vested in the seller to revise the prices in accordance with the ruling rate. This is in Clause 9. We are not referring to the other clauses as they are not quite relevant.
4. The plaintiff paid the stipulated advances payable under each of those contracts. Excepting for the supply of 150 bags of starch flour under Ex. A-l, no other supply was made. The plaintiff made incessant demands and issued reminders to the defendant for the supply of starch flour and liquid glucose. Exs. A-7 and A-8 are some of such reminders issued by the plaintiff reminding the defendant of their obligation to supply the agreed quantities of goods under the respective contracts. They called upon the defendant to start execution of the orders under Ex. A-8 dated 28-12-1964. To this, the defendant sent a reply under Ex. A-9 which reads as follows:
".....We thank you for your letter dated 28-12-1964 (Regd.). Every effort is being made to despatch the goods ordered through our sales depot agents in Delhi. Due to non-availability of railway wagons, we could not despatch earlier.
We shall despatch as soon as the position improves.
Our current rates for Glucose and starch are as follows:
1. Liquid Glucose in New drums Rs. 73/- per 50 Kg. Ex. Depot at Delhi.
2. Liquid Glucose in old drum Rs. 69/-for 50 Kg. Ex. Depot at Delhi.
3. Starch in Bags Rs. 1,200/- per M. Ton ex-factory.
Regarding booking advance orders for the above items for the year 1965 you are requested to kindly contact our Depot Agents in Delhi for further information....."
5. The plaintiff having had no satisfaction in spite of such reminders and having reasonably complained about the inaction in the matter of supply of goods, was interested in claiming compensation for the non-supply of the goods and non-performance of the contracts.
6. The defendant, however, far from respecting their obligations under the contract, wrote to the plaintiff on 17-1-1965 that the orders cannot be executed at the rates booked by their agent as the price of raw materials had suddenly shot up and that the supply would be made if the plaintiff was prepared to pay Rs. 70/- per 50 K. Gms. of starch. The plaintiff naturally resisted this counter offer and after exchange of correspondence through lawyers, instituted the present suit. The plaintiff alleges that the contract has been broken by the defendant on or about 21-1-1965 and it is not in dispute that this averment applies to all the contracts in question which are the subject-matter of the three suits under consideration by us. After having pleaded that the defendant broke the contracts on or about 21-1-1965, the plaintiff, for reasons not clear, assessed the market value of the goods which were not supplied to them during the first week of March, 1965 and claimed the difference between that market rate and the contract rate as damages. The plaintiff also admits in the course of his pleadings that the price of the commodities which he bargained to purchase from the defendant was fluctuating during the time when he entered into the contracts and soon thereafter.
7. The defendant in their written statement after admitting that the contracts were entered into referred to their right under the contract to ask for enhanced price from time to time. They stated that they tendered the goods for despatch at such enhanced rates and as the plaintiff insisted that the supply should be made at the contract rates, they could not further the supplies as contracted. There case is that since the plaintiff was not inclined to pay the revised price for starch or for liquid glucose, they treated the said orders as cancelled. They would refer to the opportunity which they gave to the plaintiff to perform the contract by paying a higher price. According to them, the plaintiff not having availed themselves of the said opportunity, cannot come to Court and seek for damages, when, in the circumstances of this case, they (defendant) were always ready and 'willing to supply the goods though for a higher price and not for the contract price. Explaining the delay in the matter of the despatch of the goods, the defendant would plead that it was beyond their control and they could not do so because of the non-availability of the railway wagon. In these circumstances, the claim for damages is disputed. One other defence taken was that a wagon could contain only 150 bags of starch and in the absence of the descriptive content in each of the orders regarding the number of bags which were to be supplied under each of such contracts, the ordinary presumption is that a wagon could contain only 150 bags as, according to the plaintiff, when they executed Ex, A-l contract, they secured one wagon from the Railway and that wagon could contain only 150 bags. On the basis of this, the defendant wants to raise the presumption that if there was a contract for the supply of one or two wagons of starch flour, it means that it is only for the supply of 150 bags or multiples thereof and not 200 bags and multiples thereof as claimed by the plaintiff.
8. In the written statement, the defendant has curiously referred to another date as the date when there was a breach of the contract. According to the defendant. the plaintiff committed a breach and that breach was on 16-2-1965. There is no particular pleading refuting the allegation made by the plaintiff that the contracts are to be deemed to have been broken by the defendant on or about 21-1-1965.
9. In the light of the above pleadings, the following issues were framed by the learned trial Judge in each of the suits; O. S. No. 628 of 1967:
1. Who committed breach of contract ?
2. Whether there is privity of contract between plaintiff and defendant ?
3. Whether Clauses 3, 4 and 9 of the contract are not just, valid and binding on the parties?
4. Whether the defendant is entitled by virtue of el. 9 to claim higher rate of price prevailing at the time of despatch ?
5. Whether the defendant is entitled to reject any contract as manufacturers by virtue of Clause 3?
6. Whether the defendant was proper in refusing to perform the contract as plaintiff refused to abide by the claim for the higher price ?
7. Whether the defendant agreed to or accepted the contracts ?
8. Whether the contract was only for 2 wagon loads of starch and not for 400 bags ?
9. Whether the contract K-4 was only for one wagon load of starch or for 200 bags ?
10. Whether claim in respect of the contract K-4 is in time ?
11. Whether Bholaram Rangalal Jain was a selling agent or only a depot agent of defendant ?
12. Whether Bholaram Rangalal Jain was authorised to assure that one wagon load is 200 bags ?
13. Whether Bholaram Rangalal Jain fixed any period for performance ?
14. What is the period agreed, if any, for performance ?
15. Whether plaintiff is entitled to any damages, and if so, to what extent ?
16. Whether plaintiff is entitled to interest ?
17. Whether plaintiff is entitled to return of the advance amount of Rs. 1,000/-?
18. To what relief O. S. No. 656 of 1967:
1. Whether the defendants have committed breach of contract and have failed to supply the goods as agreed upon and for the agreed price ?
2. Whether Clauses 3, 4 and 9 of the printed conditions are not just, valid and binding on the plaintiff?
3. Whether the defendant was proper in rejecting was contracts?
4. Whether Bholaram Rangalal Jain was a selling agent or only a depot agent of defendant ?
5. What is the period, if any, agreed for performance?
6. Whether the plaintiff is entitled to interest ?
7. Whether the plaintiff is entitled to return of advance amount of Rs. 2,000/- ?
8. Whether the plaintiff is entitled to the decree as prayed for with costs ?
9. To what relief, is the plaintiff entitled to O. S. No. 663 of 1967:
1. Who committed the breach of contract?
2. What is the date of breach?
3. Whether Bolaram Rangalal Jain was not agent of the defendant and whether the contracts entered into by the agent are not binding upon the defendants as contended in paragraphs 7 to 9 of the written statement?
4. Whether the defendant has not accepted the contract as alleged in paragraph-8 of the written statement, in view of the defendant's letter dated 28-12-1964 and other correspondence?
5. Whether the alleged cancellation of the contracts by the defendant as alleged in paragraph-4 of the plaint true, valid and binding on the plaintiff?
6. Whether the alleged printed conditions 3, 4 and 9 are true, valid and binding upon the plaintiff and whether the defendant is entitled to rely upon them and refused to supply the goods at the contract rale?
7. To what damage, if any, is the plaintiff entitled? what is the market rate of starch on the dates of breach of contracts?
8. Whether the contention of the defendant that one wagon of goods would mean only 150 bags of starch and not 200 bags is true and valid? and whether the acceptance of the defendant's agent that, one wagon means 200 bags is unauthorised, erroneous and not binding upon the defendant as alleged in paragraph-10 of the written statement?
9. Whether the order in respect of K-4 has been performed by the defendant as contracted by him in paragraph 12 of the written statement? and whether the claim in respect of 50 bags of starch not supplied and the contract the order is barred by limitation?
10. Whether the plaintiff is entitled to interest?
11. To what relief?
10. As is seen from the substance of the issues as above, they are overlapping.
11. On the main issue which was urged by the plaintiff, the court agreed with them when it held that Clauses 3 and 9 are not enforceable, repugnant, void and against public policy. Having found thus and made certain observations in connection thereto, the learned Judge was of the view that the defendant was not entitled to raise the price unilaterally. On an appreciation of the documentary and oral evidence, the lower court found that there was a breach as complained of. While assessing damages, the lower court, not for any clear or cogent reason, totally agreed with the plaintiff's claim and decreed the suit. Lastly, when a wagon of starch flour is the subject matter of the contract on the question whether it is a contract to sell 200 bags of starch flour or 150 bags, he held that the parties intended that the seller should supply 200 bags of starch, even though the contract to supply one wagon of starch flour. It is as against this judgment and decree of the court below, the defendant has come up in appeal.
12. This is a case where the defendant admittedly did not supply the goods contracted for under Exs. A-2, A-3, A-4 and A-5. A hesitant reference was made in the course of the argument as to whether the contract under Ex. A-5 was received prior to Ex. A-9. Ex. A-9 is dated 1-1-1065. Under it, the defendant unequivocally said on being incessantly reminded of their failure to supply the goods under the contract that every effort was being made to despatch the goods ordered through their sales depot agents in Delhi. The defendant would unhesitatingly confess that due to non-availability of Railway wagons, they could not despatch the goods earlier.
13. The learned counsel for the appellant (defendant) in these appeals says that as Ex. A-5 was received by the defendant only on 3-1-1965. after service of Ex. A-9 and even if this factor does affect the defendant, it cannot make any impact on the supervening contract entered into between themselves and the plaintiff under Ex. A-5. That the contract Ex. A-5 dated 26-12-1964 was received by the defendant on 3-1-1965 is spoken to by D. W. 1. Besides this, there is no acceptable material to take it for granted that Ex. A-5 contract was received by the defendant only on 3-1-1965. While referring to this in passing at this stage only to complete the narration, in our view, the receipt of the contract Ex. A-5 on 3-1-65 by the defendant, even if true, would nol alter the legal position of the conclusion which would reasonably flow from the admitted facts in this case.
14. Learned counsel for the appellant-defendant would refer to Ex. A-12 which appears to be the sheet anchor of the defendant's case. This is dated 17th January, 1965. We have already seen that in Ex. A-9 dated 1-1-1965 the defendant unequivocally presented the situation that they were ready to despatch the goods ordered by the plaintiff, but they were unable to do so because of the non-availability of Railway wagons. But about two weeks later, the defendant would take up the position that the orders cannot be executed at the rates booked by their agent as the prices of raw materials had suddenly shot up. They demanded a higher price as a condition precedent for the supply of the goods already contracted for. They made it clear that if the plaintiff were inclined to purchase at Rs. 70/- per 50 K. Gms. of starch, they would continue the supplies. Ex. A-12 makes the mind of the defendant very clear. They were not prepared to supply any more goods under the various contracts unless the plaintiff was prepared to pay the higher rate demanded by them.
15. The question which immediately arises for consideration is whether one of the terms in the contract which enabled the defendant to fix a price of their choice in the case of the execution of the contract is a binding term and whether the non-observance of it will deny the plaintiff the right to claim damages, if the seller (defendant) failed to perform the contract.
16. It is in this context that Ex. A-9 looms very large. Even though in the pleadings, the plaintiff also would refer to the fact that the price of starch was hopelessly fluctuating, yet, it cannot be said that as between the 1st of January and 17th of January, 1965, there was so much of fluctuations, which would enable the defendant to claim an increased rate and avoid the contract rate. Excepting for the ipse dixit of the defendant, there is no evidence to show that such was the position or situation. Even otherwise, under Ex. A-9, the defendants committed themselves to the fact that the goods which were initially unascertained were ascertained by them and delineated by them and they were ready for despatch; and but for non-availability of wagons, the defendant would have despatched the same. After having committed themselves to that position, the defendant innocuously refers to the current rate of glucose and starch in that letter and obviously, the said quotations as current rate on 1st January 1965 were given by them, so that the plaintiff, if they were inclined to place any further orders, such would be the price for future supplies. The defendant, on that date, did not take up the position that the goods covered by the contracts could only be supplied to the plaintiff if and when they pay a higher rate or the current rate referred to by them in Ex. A-9. The learned counsel for the appellant, relying upon the terms of the contract and particularly Ex. A-12, would say that the plaintiff is bound to pay the increased rate. Clause 9 of the contract reads thus:
"PRICES: Prices quoted are subject to revision without any notice or adjustment in accordance with the price ruling at the time of despatch and the goods will be supplied subject to availability".
17. Even though on a first blush, the Clause would enable the seller to unilaterally assume a right in himself to increase the contract price without notice, but yet, this power contracted for by the seller is conditioned by the fact that the ruling price at the time of despatch is higher than the contract price. Therefore, it follows that the seller cannot on his own motion and without any more proof of the increase in price demand the same under Clause 9. We searched in vain in the records and in fact, the learned counsel for the appellant fairly stated that excepting for the evidence of D. W. 1 who was the only witness examined, there was no such proof of the increase in the price of the contracted goods at or about the time when Ex. A-12 was written. Even otherwise, we are of the view that the burden which lay very heavily on the defendant to prove that the prices were fluctuating as between the 1st and 17th January has not been discharged in a manner known to law.
18. The lower court, however, put it on the ground that Clause 3 and Clause 9 of the contract are opposed to public policy. Public policy, which sometimes confronts Civil Courts, while interpreting the documents and instruments entered into inter vivos between the parties as also by conduct of parties, is not an immutable doctrine. With the passage and march of time, it changes, and has to change. Unless the court is satisfied on the pleadings and the evidence let in that the bargain contained in a contract is so irrational, unconscionable, illegal and avoidable, the normal course of a contract ought not to be stemmed, but, on the other hand, the court should aid to follow up such contracts and ease the methods to implement them.
19. Section 23 of the Contract Act which provides the basis for Courts to find whether a contract is opposed to public policy says that a contract with consideration or object which is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent, or involves or implies injury to the person or property of another is a contract which is opposed to public policy. The foundation on which the principle of public policy is based is that no court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If the cause of action springs from ex turpi causa, then the courts are prevented from assisting a litigant who bases his cause of action On such immoral and illegal causes. But it is always necessary that the court's conscience should be satisfied that the illegality, immorality or irrationality complained of in a contract goes to the very root of the matter and shakes its foundation. If such is the situation, then the courts will not assist the litigant who seeks its assistance under such circumstances.
20. If the above is the basic concept which surrounds public policy, we are unable to agree with the trial court that Clauses 3 and 9, the former vesting a right in the seller to accept or reject orders' formerly booked by its representative and the latter clause whereunder a higher price was demanded by the seller under certain circumstances, have to be whittled down and thrown out as clauses which are opposed to public policy.
21. Commercial transactions couched in easy and understandable language and contained in a contract have to be respected according to its tenor. This is so because, the parties with open eyes and being conscious of the merit of the letter and spirit of the Clauses in such a contract do enter into them.
22. The courts, therefore, ought not to be astute to defeat the efficacy of such document or destroy such bargains. While interpreting a commercial contract, a broader outlook has to be adopted and care should be taken to avoid an artificial and unrealistic approach in the matter of the understanding the meaning and purpose of such documents. In such cases, the courts should occupy the chair of the contracting parties and reasonably understand their minds and intents. If after such an approach the instrument still presents circumstances which the conscience of a reasonable and prudent person cannot accept and if ex facie the terms are so unconscionable, illegal and designed to avoid or evade law, then only the doctrine of public policy will intervene, and will not implement such bargains.
23. In the instant case, we are satisfied that Clauses 3 and 9 nay the tenor of Exs. A-1 to A-5 do not pose any irrational principle in commercial practice nor could it be said to be so unconscionable so as to be ignored by courts as being opposed to public policy.
24. But then the question is whether, in the circumstances, the plaintiff who has come to court claiming damages or compensation for non-performance of the contract is entitled to damages at all. As we said, the appellant-defendant under Ex. A-12 made it clear that they would not supply or perform the contract unless an increased price was paid for the goods. In particular, while dealing with the contract made under Ex. A-5, the defendant would say under Ex. A-14 that due to the increase in the price of raw materials, they were unable to register their order. Obviously, they were trying to take advantage of Clause 3 of the contract. But their conduct in having written about Ex. A-5 belatedly on 15th February, 1965 after encashing the draft which was sent as advance by the plaintiff towards Ex. A-5 is something which obviously exposes the appellant-defendant who uniformly was bent upon avoiding performance of the contracts including Ex. A-5, The defendant would admit that they did not perform the contracts under Exs. A-2, A-3 and A-4 and they partly performed the contract under Ex. A-l. They would rely upon their right to demand a higher price being not satisfied with the payment of the contract rate. But. in our view, there is no proof of increase in market rate as between the 1st and 15th January, 1965, which would prompt a reasonable person to demand a rate higher than the contract rate. Even under Ex. A-9, the defendant made it clear that the rates quoted by them would apply for the year, 1965 and the orders booked in that year. They did not refer to the 1964 contracts at all. This is also an indication to show that in so far as 1964 contracts are concerned, for which they (defendants) had already made the necessary preparation to despatch the goods, they cannot wriggle out and insist on an increase in price under the guise of the so-called power vested under Clause 9 of the contract. On the ground that there is no proof of the increase in the market price in the month of January. 1965 excepting for the bare statements from time to time by the defendant or by D. W. 1 in the box and also on the ground that the goods had been ascertained by the defendants, as is seen from the text of Ex. A-9, they (defendant) cannot escape reasonable damages which flow from the breach, which breach is referable to their conduct in the non-supply of the contracted goods.
25. The question incidentally arose whether the rule of intention in Section 23 of the Sale of Goods Act would apply to the facts of this case. It would be convenient to refresh about the terms of the contract. No doubt, Clause 1 says that the R. R. was deliverable against cash or documents negotiated through Bank. But Clause 4 says that the goods would be despatched at the buyer's risk and responsibility. Clause 6 says that the defendants were not responsible for any loss or damages or any mishappening to the goods after they had left their premises.
26. The learned counsel for the appellant (defendant) basing his contention of Clause 1 would say that the property in the goods did not pass until the R. R. was honoured by payment either in cash or through the agency of the bank. This may be so if Clause-1 stood alone. But Clauses 4 and 6 which cannot be reconciled with Clause 1 would give the reasonable impression that once the defendant despatched the goods, they travel at the buyer's risk. This Clause cannot, therefore, avoid the rule of intention provided for in Section 23(1) of the Sale of Goods Act which says : "Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made".
27. The very fact that under Ex. A-9, the defendant made it clear that all the goods had been appropriated and were ready for despatch, and which communication the plaintiff took it for granted, raises the usual presumption that the defendant as seller had appropriated the goods unconditionally to the respective contracts and they were in a deliverable state, and the only thing which remained in order to perform the contract was only to put them in a wagon for onward transport. In the instant case, the assent of the buyer (plaintiff) is implied and it has been given by them even before the appropriation was made. In our view, therefore, in the light of the disclosed facts, the property in the goods under the various contracts had passed to the plaintiff.
28. If, therefore, the sellers fail to perform their part of the bargain, the buyer would certainly be entitled to da mages which flow reasonably from such breach. The plaintiff themselves in the pleadings would say that the date of breach on each of the contracts was 21st January, 1965. Therefore, they cannot shift from this date, so as to get higher damages to March. 1965. We should, therefore, find from the records whether there is reasonable material to find the market rate of the goods in or about 21st January, 1965. The defendant themselves have provided the market rate under Exs. A-9 and A-12. Under Ex. A-9, they would say that the rates at which they would book orders in 1965 was Rs. 60/- per 50 K, Gms. for the supply of starch and Rs. 69/- for 50 K. Gms. in old drums for the supply of liquid glucose. We accept this, in the absence of any other accept able evidence, as the measure to be adopted for the award of damages. The lower court obviously relied upon P. W. 1. But P. W. 1's evidence is again his own bare ipse dixit. Having regard to the stand taken by the plaintiff that the breach had occurred on 21-1-1965 and as the defendant themselves have stated in Ex. A-9 as to what possibly can be the market price in January, 1965 at the earliest, we adopt the price in Ex. A-9 as reflecting the correct market price in January, 1965. The plaintiff would be entitled to damages that flow from the breach. There has been no supply in so far as the contracts covered by Exs. A-2, A-3, A-4 and A-5 are concerned. Only 150 bags were supplied under the contract Ex. A-1.
29-30. Before we assess the damages, it is necessary to find as to what was the intention of the parties when they contracted to buy one wagon of starch whether it was to purchase 150 bags or 200 bags. Exs. A-l, A-4 and A-5 give the clue that the intention of the parties was to supply 200 bags or purchase 200 bags, when they referred to the supply of one wagon of starch. In fact, the above contracts referred to 200 bags as the normal content of a wagon. But the learned counsel for the appellant-defendant relying upon Ex. A-11 which was the bill prepared by them when they supplied 150 bags of starch under Ex. A-l argued that the said bags were sent in a wagon and. therefore, one wagon could contain only 150 bags. We are unable to agree. No expert evidence was let in to show that a wagon which could be despatched by the defendant from its nearest Railway Station in South India could hold only 150 bags and not more. Even otherwise, there is intrinsic evidence as per the recitals in Exs. A-l, A-4, and A-5 that what was contracted for was 200 bags of starch and that the parties intended to sell and purchase 200 bags when they contracted to supply one wagon. There is evidence on the side of the plaintiff to show that one wagon could contain 200 bags -- vide Exs. A-27 and A-28. The plaintiff, therefore, would be entitled to damages as per the calculations below:
So far as the non-supply of starch is concerned, the prevailing market rate on or about the date of breach should be deemed as Rs. 60/- per 50 K. Gms. It is worked out by us on the quotation given by the defendant in Ex. A-9. Therefore, the plaintiff would be entitled to damages for the non-supply of the goods under Exs. A-2, A-3, A-4 and A-5 and the damages for non-supply of starch would be worked out on the basis of the difference between Rs. 60/- and the contracted rate. So far as the non-supply of liquid glucose is concerned, the damages would be worked out again at Rs. 69/- per 50 K. Gms. which was the quotation of the defendant themselves under Ex. A-9. This works out to Rs. 414/- per barrel. The contract rate was Rs. 345/- per barrel. The plaintiff would be entitled to the difference as above for each barrel.
31. The appeals are partly allowed and each party will bear their own costs in this court. This plaintiff would be entitled to interest at 6% on the amount worked out from the date of suit till the date of payment.
32. These Appeals having been set down this day for being mentioned, the court made the following Order:--
33. In the lower Court also, the appellant, who succeeded will suffer only proportionate costs.