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Ramalinga Mudaliar (Died) and ors. Vs. S.R. Muthuswami Aiyar and Sons, Through One of Its Partners S.R. Muthuswami Aiyar - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1927Mad99; (1926)51MLJ765
AppellantRamalinga Mudaliar (Died) and ors.
RespondentS.R. Muthuswami Aiyar and Sons, Through One of Its Partners S.R. Muthuswami Aiyar
Cases ReferredLala Balla Mal v. Ahad Shah
Excerpt:
- - 2. it is not now seriously contested that if his claim for the return of his deposit as advance is to be regarded as being in any way corresponding to the common law claim for the return of money had and received to his use as on a failure of consideration, he cannot be entitled to interest. if the latter claim is well founded, it cannot prejudice the plaintiff that he has not thought it worth while to pursue the former. if he is to be given interest on his advance as well as the difference between the contract and the market rate, he is being enabled to put money into his pocket which he would not have had, if the contract had been carried out. corlazzi (1835) 150 e r 71 which does look very much like an authority for the plaintiff in this case. we are really sitting here to.....murray coutts trotter, kt., c.j.1. but for illustration (r) to section 73 of the indian contract act, i should have felt very little difficulty about this case. it was a case of a sale of goods where the buyer agreed to pay considerable sums of money by way of advance before the due time for delivery of the goods and where the seller defaulted in the end and did not deliver the goods he had contracted to deliver. under the contract the advances were merely in anticipation of the purchase price and there was no provision that interest on them should be credited to the buyer against the final adjustment. in this case the buyer has brought a suit in which he has not pressed for his ordinary remedy, namely, the difference between the contract price and the market price at the date of breach.....
Judgment:

Murray Coutts Trotter, Kt., C.J.

1. But for illustration (r) to Section 73 of the Indian Contract Act, I should have felt very little difficulty about this case. It was a case of a sale of goods where the buyer agreed to pay considerable sums of money by way of advance before the due time for delivery of the goods and where the seller defaulted in the end and did not deliver the goods he had contracted to deliver. Under the contract the advances were merely in anticipation of the purchase price and there was no provision that interest on them should be credited to the buyer against the final adjustment. In this case the buyer has brought a suit in which he has not pressed for his ordinary remedy, namely, the difference between the contract price and the market price at the date of breach but has merely asked for the return of his deposit with interest. The question that has been referred to us is whether, if he elects such a remedy, he can have back not merely his deposit, which is not contested, but interest upon it during the time that it was in the hands of the seller.

2. It is not now seriously contested that if his claim for the return of his deposit as advance is to be regarded as being in any way corresponding to the common law claim for the return of money had and received to his use as on a failure of consideration, he cannot be entitled to interest. Lord Tenterden's Act, 3 and 4 William IV, Ch. 42, Section 28 obviously does not provide for such a case as this and 1 think it is quite clear that the Indian Interest Act of 1839 is a mere repetition for this country of the provisions of Lord Tenterden's Act.

3. But the plaintiff puts his case on a different ground. He puts it as a claim by way of damages flowing from the Breach of contract of the seller and it is quite clear that if he has two causes of action he is entitled to pursue only one of them and give up the other, namely, the cause of action for money had and received to his use. It was practically agreed during the discussion that if the plaintiff's contention was right he would be entitled to claim damages under two heads; he will be entitled (1) to the difference between the contract and the market price, and (2) in addition, to interest in the nature of damages for being kept out of the money which he paid as advances. If the latter claim is well founded, it cannot prejudice the plaintiff that he has not thought it worth while to pursue the former. On general principles that contention seems to me unsound, and I think one must test it on the footing that if the plaintiff was right at all he can recover damages under both these heads cumulatively although he has only chosen in this particular instance to ask under one. It appears to me that the contract having been broken, all that the plaintiff can be entitled to is to be put in the same position as if it had been carried out.Had it been carried out, he would have been in this position; he would have advanced money under the contract without interest and he would have received the goods at the contract rate. Instead, we are to deal with it on the footing that he goes into the market and has to buy corresponding goods at a higher rate. That which puts him where he ought to have been if the contract Had been carried out is to get the difference between the contract price and the market price plus the amount of the advance that he made which ex hypothesi would not have borne interest if the contract had been executed. If he is to be given interest on his advance as well as the difference between the contract and the market rate, he is being enabled to put money into his pocket which he would not have had, if the contract had been carried out.

4. I believe the difficulty has arisen owing to the common practice of plaintiffs to abandon their proper remedy, that is, the difference between the contract and the market rate and sue only for the return of the advance. The practice arose during what is known as the speculation period when it was almost impossible owing to the suspension of business to ascertain what the market price on any given date was. In a case where a plaintiff says: 'I am no doubt entitled to damages on the ordinary basis, but it is almost impossible to ascertain them and I am content to take my advance back with interest' and the defendant accepts that as a rough and ready estimate of what the damages on the ordinary basis would work out at, there is no difficulty. But I cannot see that the plaintiff is entitled to enforce such a course on an unwilling defendant. To take any other view appears to me to be giving the plaintiff not merely an indemnity but a bonus. I am, therefore, of opinion that where a plaintiff without the consent of the defendant elects only to sue for the return of his deposit giving up his claim to damages based on the difference between the contract and market rate, he cannot recover interest on his advance.

5. As to illustration (r) to Section 73 of the Contract Act, I admit the difficulty which it creates. I am content for myself to say that it does not deal with a case of a sale of goods and that I cannot conceive that the Indian Legislature intended by so remote a side-wind to upset the settled principles of the English common law as to the measure of breach of damages in contracts of sale.

6. The only other difficulty that pressed upon me is the decision in Startup v. Corlazzi (1835) 150 E R 71 which does look very much like an authority for the plaintiff in this case. The correctness of that decision has been questioned in such standard works as Blackburn and Benjamin and I can only say for myself that I am quite unable to understand on what principles it proceeded. I have not thought it worth while to discuss the Indian cases. They have been fully considered in the referring judgment of Viswanatha Sastri, J., and in the judgment about to be delivered by my brother Ramesam. We are really sitting here to resolve as best we can for this Court the conflicting views expressed in these cases.

7. I desire to point out that if the plaintiff is entitled to interest, I do not see over what period it is to be calculated He was clearly entitled to none up to the date of breach because up to that time it was in the contemplation of both parties that the money should remain in the hands of the seller. For any period after that and before the plaintiff launched his suit it appears to me that he has himself to blame if such a period existed. By deferring the filing of his plaint he cannot cast an additional burden on the defendant. As for the period between the filing of his plaint and the determination of the suit, he is entitled to interest in the ordinary way and he will get it.

8. I think that the state of the case-law in this country may have misled the plaintiff as to the true nature of his remedy and that if he now desires to go to the Court below and endeavour to prove damages on the basis of the difference between the market and the contract price, he ought to be allowed to do so.

Ramesam, J.

9. The facts of this appeal are stated in the referring judgment of Viswanatha Sastri, J., and need not be repeated. The question referred to the Full Bench is, whether the plaintiff is entitled to interest on the amount advanced on a contract for sale of goods, to a refund of which he is admittedly entitled. The appellant's contention is that under the Interest Act, he is not entitled to interest. The respondent contends first, that the matter does not fall under the scope of the Act and secondly, that, even if it does, it falls under the proviso according to which ' interest shall be payable in all cases in which it is now payable by law '. He contends that interest can be recovered as damages under Section 73 of the Contract Act. The Interest Act is based upon Section 28 of Lord Tenterden's Act, 3 & 4 William IV, Ch. 42. would therefore first refer to the English Law on the question. In Be Havilland v. Bowerbank (1807) 1 Camp 50 and (1807) 1 Camp 50 Bernales v. Fuller (1810) 2 Camp 426 Lord Ellenborough, C.J., disallowed interest in actions for money had and received. These were sought to be distinguished in Calton v. Bragg (1812) 15 East 223 on the ground that the plaintiff's action in the last case was on a running account between the parties, in the course of which the plaintiff had supplied the defendant with goods, and also lent him several sums at different times. The Court held that interest is not allowable by law when money is lent generally, without a contract for it expressed, or to be implied from the usage of trade, or from special circumstances or from written securities for the payment of principal money at a given time. Lord Ellenborough, C.J. observed:

The mere form of the count cannot make any difference in this respect, for in most cases it happens that a plaintiff may either frame his count for money had and received, or for money lent. If interest were due in this case, why should it not also be due where goods are to be paid for at a certain day, when that time arrives, as Baron Montagu in one of the old cases is stated to have held; or in any other case where money is to be paid at a certain day? Those cases press closely upon the present. If there were any general rule for interest to run upon money due, why should it not be allowed upon all book debts? Juries would give ear readily enough to such a direction: but I dare not vary from the practice which has long prevailed in all the Courts of Westminster Hall. If it be fit that the whole course of our proceedings in respect to giving interest should be recast, it must be done by Act of Parliament. Where one directs his agent to advance money to another, what difference can it make as to the point of interest, whether he afterwards counts for money had and received or for money lent. If interest were demandable generally upon money due, why should it have been thought necessary to introduce, as it has prevailed in practice, a particular count for interest agreed to be paid where the law would have given it without such an agreement. But in fact there has Keen no instance of its being allowed except upon written securi ties for the payment of money at a given time, or upon an express or implied agreement for it.

10. This was followed in Higgins v. Sargent (1823) 2 B & C 343. There the action was upon a policy of insurance. The next case that may be referred to is Page v. Newman (1829) 9 B & C 378. The action was to recover money lent. Lord Tenterden, C.J., followed the last two cases. So far all the cases relate to actions in which money was to be paid to the plaintiff as part-performance of the contract, whether it is a contract of loan or goods sold or insurance. It is at this stage that the Statute 3 and 4 of William IV was passed. The next case I would refer to is Gosbell v. Archer (1835) 2 Ad & El 500. In that case the lands of defendant were put up by him for auction. The plaintiff paid a deposit. A written memorandum of the contract was signed by the auctioneer's clerk who was held not to be the agent of the defendant. The defendant could not make out a title and the plaintiff sued to recover the amount deposited. It was held that he could not recover interest. The only question discussed by the learned Judges (Lord Denman, C.J., Littledale and Williams, JJ. )was whether the receipt given by the auctioneer's clerk fell under Section 4 of the Statute of Frauds. It was held it did not. No other question was discussed, and therefore I do not think the appellant can very much rely upon this case. As there is no contract which could be proved, there could be no breach of contract and no claim for damages. The same remarks would apply to the next case strongly relied on by the appellant, namely, Walker v. Constable (1798) 1 Bos & Pul 306 . The plaintiff based his action on the allegation that he contracted with defendant for the purchase of an estate, the sale being by auction and that he afterwards abandoned the contract. There was also a count for money had and received. It was held he could not recover interest as the specific contract could not be proved, it not being reduced to writing and the Statute of Frauds proved an obstacle to the proof of the contract. In Farquhar v. Farley 7 Taunt 592 the action was by a purchaser at an auction but the subject-matter of the sale was not real property but the reversionary interest in bank stock. Plaintiff sued to recover back his deposit and it was held that he was entitled to recover interest also. Gibbs, C.J. says:

The plaintiff sues, and alleges as a part of the damage, which he says, he has sustained, that he has lost, from the time when the contract ought to have been completed the use of the sum which he had deposited towards his performance of the contract. There was a case tried before Lord Ellenborough, C. J, hardly distinguishable from the present [Dc Bernales v. Wood (1812) 3 Camp 258 ]. That was an action in which the plaintiff recovered back a deposit from the auctioneer himself; so it went even further than I should have thought it necessary to carry the law in the present case. In many cases it has been held that on the mere fact of one man having in his hands the money which belongs to another, interest is recoverable.

11. It is true that the last sentence of Gibbs, C.J. is somewhat indefinite and does not state any principle but the earlier sentences show that the action was regarded as one for damage for breach of contract and in this respect it was not distinguishable from De Bernales v. Wood (1812) 3 Camp 258 , which relates to the sale of a real estate, and in which Lord Ellenborough, C.J. awarded interest as 'special damage'. It seems to me that this case is not inconsistent with the cases cited by the appellant and supports the respondent's contention that where there is a breach of contract, interest may be awarded as damages and in such a case the Act does not affect the right. The Act was not expressly referred to by the Court. Here I may refer to the very early case of Flureau v. Thornhill (1776) 2 Bl 1078 . In that case there was a sale by auction of a certain leasehold. The defendant could not make out a title. Then the defendant offered to the plaintiff his deposit with interest and costs. The plaintiff claimed a further sum as damages for the loss of the bargain. It was held that plaintiff was not entitled to any damages for the loss of the bargain. Blackstone, J., said: ' If the vendor has not a good title, the return of the deposit with interest and costs is all that can be expected. ' The rule has been adopted in later cases, for example, in Bain v. Fothergill (1874) L R 7 H L 158, In re Marshall and Salts Contract (12) and In re Hargreaves and Thompson's Contract (13); in all these cases the rule of law laid down in 1776 was adhered to, but this principle that there can be no damage for the loss of the bargain is peculiar to English Law and has not been adopted in India. But this has nothing to do with the other principle adopted in the English cases according to which the deposit could be recoverable with interest. I do not think these cases can be distinguished on the ground that interest was in substitution of the damage for the loss of the bargain. 1 do not think it has been stated anywhere in that form. The real ground for the award of interest in all these cases is that it is a damage flowing from the breach of contract and therefore interest can be awarded. No exception is made in Section 28 of Lord Tenterden's Act in favour of contracts relating to real estates. If the Act is to be construed as applying to damages for breach of contract also and is not to be confined to moneys recoverable on the basis of performance of a contract one has to say that the English cases decided after the Tenterden's Act were erroneously decided, but seeing Bain v. Fathergill (1874) L R 7 H L 158, is a decision of the House of Lords, it is impossible to say so. It seems to me that the proper way of explaining the cases relating to real estate is that they did not fall within the purview of the Statute or at any rate were covered by the proviso. Therefore, in all these cases interest was recoverable as damages for breach of a contract and not on account of any peculiarity of English Law. This was the view of Lord Ellenborough, C.J., in De Bernales v. Wood (1812) 3 camp 258 where he relied on the former case. The next case I would, refer to is Fruhling v. Schroeder and Ors. (1835) 2 Bing (N C) 77 . In that case a sum of money which the defendant had received for J and for which interest was allowed in favour of J was transferred to plaintiff at J's request. It was held that the plaintiff could not recover interest. The Court considered it as a case of money had and received and disallowed interest following De Havilland v. Bowerbank (1807) 1 Camp 50, De Bernales v. Fuller (1810) 2 Camp 426 and Walker v. Constable 126 E R 919. It seems to me that this case was clearly covered by the Act and cannot help the appellant in the present case. The action in that case cannot be said to be one for damages for a breach. ' There is no contract between the plaintiff and the defendant. In Startup v. Cortazzi (1835) 150 ER 71 the suit related to damages for a breach of contract to deliver a quantity of linseed. It was held that the plaintiff was entitled to recover (1) the return of the money advanced, (2) interest on it, and (3) difference between the contract price and the price at the date of performance. It is true there are not many cases in English Reports similar to this case in which both damages for loss of the bargain and interest on the advance were given. It is also true that some remarks have been made against this case in Blackburn on Sales at pages 555 to 556 and in Mayne on Damages, 9th edition, pages 184 to 186. In the former it is said that the report was obscure, in the latter it is said that it is difficult to find the principle. But I think what was being discussed is the question relating to the damages for the loss of bargain whether the difference should be between the contract price and the price at the date of trial or the price at the date of performance or at the date of breach. The case has been referred to without any adverse comment in Benjamin on Sales, page 1096 and in Halsbury's Laws of England, Vol. 25, page 271, section 472 and has never been judicially disapproved. But whatever doubts there may be on this ques-tion in English Law it seems to me that the principle of the case of Startup v. Cortazzi (1835) 150 ER 71 was adopted as illustration (r) of Section 73 of the Contract Act. This illustration shows that not only the advance for the passage to Sidney and not only the difference between higher freight that the plaintiff had to pay but also the interest on the advance could be recovered. It seems to me that where a defendant breaks the contract and does not refund any advance paid to him the interest and the advance is one of the items of damage necessarily flowing from the breach. In English Law in the case of real estates it may be there is no other item of damage for loss of bargain, but in the case of other contracts in English Law and in the case of all contracts in Indian Law, the advance money and interest on it were regarded as an item of damage In addition to the difference of price. I do not see any reason to think that illustration (r) was not deliberately put under the Act and was a slip and that therefore we ought not to follow it. On the other hand, it seems to me to stand to common sense and shows that the decision in Startup v. Cortazzi (1835) 150 ER 71 was adopted by the Indian Legislature.

12. The decision of the House of Lords in London, Chatham and Dover Railway Company v. South Eastern Railway Company (1893) A C 429 is not against the respondent, for the case there related to sums recovered in performance of contract and was therefore covered by the Act. In that case Lord Herschell said at page 437:

I think that when money is owing from one party to another and that other is driven to have recourse to legal proceedings in order to recover the amount due to him, the party who is wrongfully withholding the money from the other ought not in justice to benefit by having that money in his possession and enjoying the use of it, when the money ought to be in the possession of the other party who is entitled to its use. Therefore, if I could see my way to do so, I should certainly be disposed to give the appellants, or anybody in a similar position, intsrest upon the amount withheld from the time of action brought at all events. But I have come to the conclusion, upon a consideration of the authorities, agreeing with the Court below, that it is not possible to do so.

13. I have already said that that case was not a case of damages for breach of a contract. Lord Shand said:

I regret that the law of this country in regard to the running of interest is not like the law of Scotland.

14. In Johnson v. Rex (1904) A C 817 Lord Macnaghten said at page 822:

In order to guard against any possible misapprehension of their Lordships' views, they desire to say that, in their opinion, there is no doubt whatever that money obtained by fraud and retained by fraud can be recovered with interest, whether the proceedings be taken in a Court of Equity or in a Court of Law or in a Court which has a jurisdiction both equitable and legal.

15. I think the principle underlying this dictum is that in such a case interest was recoverable as a damage for the fraud whether arising in contract or in tort. In that case the Crown intentionally brushed aside all questions of fraud and accepted repayment of money paid by mistake. So, no interest was allowed. It cannot help the appellant. In In re, Hargreaves and Thompson's Contract (13) Lindley, L.J., said:

But all such damages as interest and expenses of investigating the title, which, although they are called damages are matters rather for computation and taxation than for an inquiry, the Court has authority to order to be paid.

16. This is in consonance with the view of Ellenborough, C.J., in De Bernales v. Wood (1812) 3 Camp 258 and Gibbs, C.J. in Far-quhar v. Farley 7 Taunt 592. This was followed in In re Marshall and Salt's Contract (12).

17. I do not think it is necessary to discuss the Indian cases at great length. In view of Lord Davey's observations in Ganesh Baksh v. Harihar Baksh I.L.R.(1904) A 299 it cannot be said that the observations in Kamalammal v. Peeru Meera Levvai Rowthen I.L.R. (1897) M 481 on Section 73 of the Contract Act are final. I come to the conclusion that in all cases where there is a breach of contract on the part of the defendant and the plaintiff is entitled to damages for the breach, he is entitled to interest on any sum advanced to a refund of which he is entitled, besides any other item of damage to which he may be found also entitled. My answer to the question referred to the Full Bench is in the affirmative.

18. After I have written the above, I have had the advantage of perusing the judgment of my Lord the Chief Justice and while regretting 1 have to differ from him I wish to add a few words with reference to it. If the matter is one of purely ascertaining the English law, I would not perhaps differ from my Lord's judgment. Even assuming that the view I have taken above of the English law is erroneous, I am of opinion that the Indian law as expounded in the Contract Act is different.

19. In the first place I do not see anything unreasonable in allowing the relief as an heading of damage. It is a relief in addition to the difference of prices. I do not see that giving such a relief places the plaintiff in a better position than if the contract was carried out. We are all agreed that, up to the date of performance (or breach) the plaintiff is not entitled to interest. But after the said date, when the defendant breaks the contract and does not return the money, the plaintiff has to spend other money from his pocket to get similar goods in the market. He will be out of property twice over. When he wants goods, it is reasonable he should spend their price once but when he is asked to spend twice over, I do not see the justice of depriving him of interest. I do not see that he gets any bonus in addition to indemnity. There must be some interest between the breach and suit and I do not think it is a fair answer to say to the plaintiff that he has to thank himself for the delay however reasonable it is. But I have not to find reasons for my view or to justify illustration (r) to the Contract Act. The illustration is there, and after the remark of 35. Lord Shaw Mahomed Syedol Ariffin v. Yeoh Ooi Gark (1916) 2 A C 575 where he says:

It is the duty of a Court of Law to accept, if that can be done, the illustrations given as being both of relevance and value in the construction of the text. The illustrations should in no case be rejected because they do not square with ideas possibly derived from another system of jurisprudence as to the law with which they or the sections deal and Lord Atkinson in Lala Balla Mal v. Ahad Shah (1918) 35 M L J 614 . I cannot ignore it even if I wish to. I am not able to avoid it by saying that the actual illustration relates to freight and not to sale of goods. I am not able to see any difference in principle between the two.

20. I agree that, in the view of the majority, the plaintiff may be given an opportunity to prove the difference in prices if he chooses to do so. I understand we are all agreed that plaintiff is entitled to interest on the deficit from the date of the plaint.

Beasley, J.

21. I have had the advantage of reading the judgment of the learned Chief Justice and am in entire agreement with it, and only desire to add a few observations with regard to illustration (r) to Section 73 of the Indian Contract Act and as to how far such illustration must be taken to be part of the statute because that is the only difficulty I felt about this case as interest is clearly allowable if this illustration must be taken as part of the statute.

22. In the first place it illustrates a remedy in damages quite contrary to the now well-settled principles of the Common Law of England with regard to the measure of damages for breach of contract for sale of goods, and secondly it does not appear to be based upon any reported or now accepted decision either in England or in India and furthermore it is not a case of breach of contract for sale of goods at all.

23. I can see no authority whatever for that illustration except Startup v. Cortazzi (1835) 150 E R 71 which is not now good law. But the question that arises of course is how illustrations to sections of statutes are to be treated? This question has been con-sidered in two reported cases in the Privy Council. In Mahomed Syedol Ariffin v. Yeoh Ooi Gark (1916) 2 A C 575 Lord Shaw on page 581 says:

On the second point their Lordships are of opinion that in the construction of the Evidence Ordinance it is the duty of a Court of Law to accept, if that can be done, the illustrations given as being both of relevance and value in the construction of the text. The illustrations should in no case be rejected because they do not square with ideas possibly derived from another system of jurisprudence as to the law with which they or the sections deal, And it would require a very special case to warrant their rejection on the ground of their assumed repugnancy to the sections themselves. It would be the very last resort of construction to make any such assumption. The great usefulness of the illustrations, which have, although notpart of the sections been expressly furnished by the Legislature as helpful in the working and application of (he statute, should not be thus impaired.

24. The other case is Lala Balla Mal v. Ahad Shah (1918) 35 ML J 614 (PC). On page 617 Lord Atkinson says:

Four illustrations are given. These are to be taken as part of the statute.

25. That is the only reference to this point in the whole of the judgment. I do not take either judgment to mean that under every circumstance an illustration must be taken as part of the statute. All that in my view is meant is that a Court should not lightly disregard the illustrations merely because they do not seem to be in accord with generally accepted ideas as to the law in other places.

26. In the present case there is no question that the illustration is in direct conflict with English decisions and is entirely opposed to the settled principles of the English law as to the measure of damage in such cases and moreover it deals with a case of a different nature to this.

27. In my opinion we are not obliged to accept the illustration as stating the intention of the Legislature in a case of damages for breach of contract for the sale of goods; and I do not feel myself bound by that illustration.

28. I agree with the learned Chief Justice that this claim for interest cannot be allowed.


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