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Muthu Karu V. Alagappa Chettiar and anr. Vs. Krishnier and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1927Mad62; 97Ind.Cas.866
AppellantMuthu Karu V. Alagappa Chettiar and anr.
RespondentKrishnier and ors.
Cases ReferredMuthukaruppa Mudali v. Kathappudayan
Excerpt:
.....acted as benamidar for the third defendant, completely failed in the court below and it scarcely deserved the lengthy discussion which the subordinate judge devoted to it in paras. 28 and 29 of his judgment, seeing that this was not clearly raised as a defence to the suit in 1st defendant's written statement nor was there any issue on the point. tholasi iyer was part of the description of the goods, that 1st defendant failed to prove any connexion between the bales obtained through alagiriswami iyer, whose name appears in ex. the plaintiff was not bound to accept goods different from those described in his contract, and upon the 1st defendant's failure to supply the proper goods, he was entitled to recover the sums advanced by him with interest......between the bales obtained through alagiriswami iyer, whose name appears in ex. ii, and the goods contracted to be got through tholasi iyer, and that unless the goods tendered were the same goods that he purchased, the plaintiff was legally entitled to refuse to accept them especially when the market was falling and when traders, who had paid more for goods than they were worth at the time, would be glad to palm them off on some one else. plaintiff's witness no. 2 proved that there was no contract in 1918 for yarns of 24 counts between his master tholasi iyer and ramalinga mudaliar and sons, the vendors to 1st defendant. the plaintiff took this objection in his notice of suit (ex. h); and the 1st defendant in his reply (ex. d) to the plaintiff's letters (exs. c and ci) wrongfully.....
Judgment:

Venkatasubba Rao, J.

1. The question to be decided in this appeal is whether the plaintiff is entitled to the return of the advance paid by him in respect of a yarn contract. The contract was entered into between the plaintiff and the 1st defendant. The 2nd defendant is sought to be made liable on the ground that he guaranteed the performance of the contract by the 1st defendant and also on the ground that he was guilty of some fraud which would fix him with responsibility. The 3rd defendant is the agent of the 2nd defendant and for the purpose of this appeal it is unnecessary to make any distinction between the 2nd and 3rd defendants as it is not disputed that the 3rd defendant acted for and on behalf of the 2nd defendant.

2. The facts are simple, although the judgment of the lower Court has given them the appearance of great complexity.

3. Ramalinga Mudaliar and Sons agreed to sell the 2nd defendant 50 bales of Madura yarn of 24 counts. The 2nd defendant agreed to assign this contract in favour of the 1st defendant. The consideration for the assignment was Rs. 600. This transaction is evidenced by Ex. I, dated 9th August 1918. For this sum of Rs. 600 the 1st defendant executed in favour of the 2nd defendant a promissory note see Ex. 6, dated 9th August 1918. In pursuance of this arrangement R. M. & Sons (which shall represent Ramalinga Mudaliar and Sons in this judgment) passed a letter to the 1st defendant dated the 10th August 1918, Ex. 4. It recites that they originally agreed to sell the goods to the 2nd defendant and that at his request they consented to sell them to the 1st defendant. The sale was in respect of future goods, and the 2nd defendant, having regard to the fluctuating market, thought it more prudent to get a clear profit of Rs. 600 than be involved in obligations under a speculative contract. The 1st defendant thus became the owner of the goods. Then there was first an attempt to sell those goods to Hanumantha Iyer and get the latter in his turn to sell them to the plaintiff. It was the 2nd defendant who made this attempt but it failed. Exhibit A, dated 21st August 1918 is an agreement executed by the plaintiff in favour of Hanumantha Iyer agreeing to purchase these goods. The attempt to get Hanumantha Iyer to buy the goods having failed, direct relations were brought into existence between the 1st defendant and the plaintiff. The varthamanam or contract Ex. B, dated 25th August 1918 was executed by the 1st defendant in favour of the plaintiff. This is the contract with which we are concerned. The 2nd defendant for bringing about this transaction, received a brokerage of Rs. 400. It will thus be seen that the 2nd defendant carefully avoided being himself a party to any contract but succeeded in securing to himself a sum of Rs. 1,000 clear of all obligations. The plaintiff paid the 1st defendant under Ex. B Rs. 7,200. It was thus made up: The price settled was Rs. 19-11-0 per case; the original price payable to the mill was Rs. 15-8-0. The excess payable over the mill price was Rs. 6,700. Advance at the rate of Rs. 10 for 50 bales amounted to Rs. 500. The plaintiff was to pay at the time of delivery the price calculated at Rs. 15-8-0 a case less Rs. 10 a bale. Pausing here just for a moment we find that the net amount received by the 1st defendant in this transaction is Rs. 2,900.

Rs.Received under Ex. B ... 7,200Paid under Ex. 4 ... 3,300----- Difference ... 3,900The aggregate of the two sumsRs. 600 and Rs. 400 paid to the 2nd defendant ... 1,000-----Difference ... 2,900-----

4. As there is a constant reference to the sums of Rs. 3,900 and Rs. 1,000 in the evidence given in the case, I have here shown how the sums were arrived at.

5. The contest is triangular, the plaintiff contending that both the 1st and 2nd defendants are liable, the 2nd defendant denying his liability and the 1st defendant suggesting that he was a mere benamidar and that the 2nd defendant alone was liable. (His Lordship then dealt with the evidence: that Defendant No. 2 was not liable in any case.) Now the principal question remains in Appeal No. 92 of 1923 was the 1st defendant guilty of a breach of the contract? The goods are described in Ex. B, as 50 bales of yarn, 24 counts, which the 1st defendant purchased from R. M. & Sons. This is the description given in the body of the contract. Then, at the foot of the letter, details are given. It is said that these identical bales were purchased from the Madura Mills by Tholasi Iyer who sold them to R. M. & Sons who in their turn sold them to the 1st defendant.

6. Contracts of this kind were very usual after the War was declared, when trade in yarn was very brisk and large profits were expected. Future goods were bought and sold and there was generally a chain of successive contracts relating to the same set of goods. Now, the question is, do these provisions relating to the 50 bales of yarn go to the root of the contract or are they mere independent agreements, a breach of which will not justify a repudiation of the contract but will only give rise to a cause of action for compensation in damages.

7. The 1st defendant gave an arrival notice in respect of 5 out of the 50 bales. Were these 5 bales a part of the contracted goods? The 1st defendant received a notice from R. M. & Sons regarding these 5 bales, but R. M. & Sons in their turn had not purchased these goods from Tholasi Iyer. It is admitted on the other hand that R. M. & Sons purchased them from one Alagiriswami. The contract relates to the goods purchased by Ramalinga from Tholasi. It has not been shown that there was any contract between Ramalinga and Tholasi. Nor has it been shown, though in my opinion, that is not material, that Alagiriswami purchased these goods from Tholasi. Indeed, it has not been shown that the goods offered had any connexion with the goods which Tholasi had agreed to buy from the Mills. Thus, every link in the chain beyond Ramalinga is wanting. Can it be said that the 1st defendant performed his contract by offering the 5 bales which he did? I entertain no doubt on this point. In my opinion, the 1st defendant was clearly guilty of the breach.

8. In Bowes v. Shand [1877] 2 A. C. 455 which is a leading case on the subject, a contract for goods to be shipped during the months of March and April, was construed according to its literal meaning and goods partly shipped in February, for which bills of lading were signed then, were held not to satisfy the contract. Lord Blackburn points out in very forcible words that if the description of the article tendered is different in any respect, it is not the article bargained for and the other party is not bound to take it. It must be shown not merely that the article is equally good, but that it is the same article as the parties have bargained; for otherwise they are not bound to take it. I do not propose to quote the famous passage at page 480 (A. C.) in the judgment of Lord Blackburn which deals with this point. The English Courts have repeatedly taken this view. In Behn v. Burness [1863] 3 B. & S 751 action was brought upon a charter party in which it was agreed that Behn's ship 'now in the port of Amsterdam' should proceed to Newport and there load a cargo of coal. At the date of the contract, the ship was not in the port of Amsterdam. When she reached Newport, Burness refused to load a cargo and repudiated the contract. The Court held that the words 'now in the port of Amsterdam' amounted to a condition the breach of which entitled Burness to repudiate the contract. I shall qnote only one other English case which brings out this point very forcibly. In Ashmore v. Cox [1899] 1 Q. B. 436 the contract relates to an intended shipment of Manilla hemp to be shipped by sailor or sailors between May 1 and July 31. The question was whether the terms relating to shipment by sailors and between certain dates were conditions. In or about September a shipment was made by a steamship from Manilla of hemp which in regard to quality would have satisfied the contract. The steamship was expected to arrive in London about the time that hemp would arrive if shipped by a sailor between May 1 and July 31. It was held that the terms relating to shipment by sailors and the date of shipment were conditions.

9. This principle has been repeatedly affirmed by this Court. In Sivarama Aiyar v. Subbiah A. I. R. 1922 Mad. 28. the contract was to supply goods which the plaintiff had previously agreed to purchase under a specific contract with Messrs. Beardsell & Co. The goods actually tendered to the defendants were goods which the plaintiffs had received under a different contract with the same firm, and the goods were of the same quality and mark and of even a higher price. It was held by Sir John Wallis and Ramesam, J., that the goods tendered did not answer the description in the contract. Bowes v. Shand [1877] 2 A. C. 455 was referred to and followed.

10. In C. S. A. No. 11 of 1920 Sir John Wallis, C. J., and Odgers, J., took the same view. The contract was for the sale of yarn described as 'office stock' which meant that the bales were then in the godowns of an importing firm. It was held that the buyers were entitled to the goods corresponding in every way to the description in the contract and that similar bales which were not 'office stock' could not be tendered although their commercial value to the buyers might be equally great. Bowes v. Shand [1877] 2 A. C. 455 was followed.

11. In O. S. A. No. 58 of 1920 heard by Coutts-Trotter, J. (as he then was) and Ramesam, J., the plaintiffs agreed to sell the bales due to them at Bombay as per shipment July-December 1918. The goods tendered were goods which the plaintiffs bought for cash in the market some time in August. The learned Judges held that the goods tendered did not answer the description in the contract, observing, that the defence was wholly devoid of merit as it mattered very little to the defendants how the plaintiffs had obtained the goods, but that it was clear law that the defendants were not bound to accept goods different from those contracted for.

12. In the present case, there can be no doubt that the term to the effect that the goods formed the subject-matter of certain specified previous contracts, constitutes a part of the description of the goods and it is too late in the day to contend that the plaintiff was bound to accept goods which were outside the contract between the parties.

13. It was next suggested on behalf of the 1st defendant that the plaintiff by asking information in regard to the goods mentioned in the arrival notice, must be deemed to have refused to perform the contract and must be further deemed to have put forward a ground for his refusal and that, therefore, he cannot now be allowed to rely upon a different ground. This contention is wholly unfounded as the plaintiff did neither refuse to perform the contract nor allege a reason for such refusal. The seller is bound on request to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract: see Section 38 of the Contract Act corresponding to Section 34 (2), Sale of Goods Act: see also Benjamin on Sales, 6th Edition, page 842. The first defendant most unreasonably refused to comply with the plaintiff's request and it is unnecessary to consider the effect of this conduct as I have already held that by tendering wrong goods he committed a breach of the contract.

14. Mr. A. Krishnaswami Iyer the learned vakil for the plaintiff contends that apart from the question as to whether the 1st defendant committed a breach of the contract or not the plaintiff will be entitled to the return of the advance. In the view I have taken of the other points raised, it is unnecessary to decide this question.

15. The result is that Defendants Nos. 2 and 3 succeed and their appeal, No. 56 of 1923, is allowed and the suit is dismissed with costs against them throughout, and the 1st defendant fails and his appeal, No. 92 of 1923, is dismissed with costs of the plaintiff.

Spencer, J.

16. I agree. The suggestion that in signing the suit contract (Ex. B) 1st defendant acted as benamidar for the third defendant, completely failed in the Court below and it scarcely deserved the lengthy discussion which the Subordinate Judge devoted to it in paras. 28 and 29 of his judgment, seeing that this was not clearly raised as a defence to the suit in 1st defendant's written statement nor was there any issue on the point. The 3rd defendant admittedly was 2nd defendant' s agent in the transaction, and 2nd defendant was named in Ex. B, which made it extremely improbable that the 1st defendant was merely lending his name to the 2nd defendant. Moreover in Ex. D the 1st defendant speaks of the contract as one between him and the plaintiff.

17. Upon the question of the liability of the 2nd and 3rd defendants, which is the subject of Appeal No. 56 of 1923, in my opinion, it is clear from the evidence that they acted in the matter as brokers and that they did not make themselves liable as sureties to the principals for seeing that the transaction was carried out. The statement of plaintiff's gumashta (plaintiff's Witness No. 1) that they said at the time of Hanumantha Iyer's purchase that they would be responsible for the supply of goods through 2nd defendant' s firm, even if true, is not enough to fix them with any liability for the nonperformance of the contract between the plaintiff and the 1st defendant, in the absence of any formal guarantee. A mere recommendation by C that A should buy goods of B will not entail on C the consequences that might flow from his guaranteeing that A will not suffer any loss if he takes up B's offer of sale: cf. Muthukaruppa Mudali v. Kathappudayan [1914] 27 M. L. 249.

18. The Subordinate Judge appears to have concluded that all the defendants conspired to play a fraud upon the plaintiff, but it was conceded during the hearing of this appeal that the plaintiff was not able to prove the knowledge that it would be necessary for him to establish against the 2nd defendant before any case of fraud could be said to be made out.

19. Upon the question of breach of contract by 1st defendant and plaintiff's right of repudiation which form the subjects of the 4th and 5th issues and of A. S. 92 of 1923, I feel no doubt that the statement at the foot of Ex. B that the bales were ordered from the Madura Mill by M. P. Tholasi Iyer was part of the description of the goods, that 1st defendant failed to prove any connexion between the bales obtained through Alagiriswami Iyer, whose name appears in Ex. II, and the goods contracted to be got through Tholasi Iyer, and that unless the goods tendered were the same goods that he purchased, the plaintiff was legally entitled to refuse to accept them especially when the market was falling and when traders, who had paid more for goods than they were worth at the time, would be glad to palm them off on some one else. Plaintiff's Witness No. 2 proved that there was no contract in 1918 for yarns of 24 counts between his master Tholasi Iyer and Ramalinga Mudaliar and Sons, the vendors to 1st defendant. The plaintiff took this objection in his notice of suit (Ex. H); and the 1st defendant in his reply (Ex. D) to the plaintiff's letters (Exs. C and CI) wrongfully declined to furnish information which the plaintiff was entitled to demand for the purpose of ascertaining whether the goods which were about to be offered were the goods which the 1st defendant was bound by his contract to offer. The plaintiff was not bound to accept goods different from those described in his contract, and upon the 1st defendant's failure to supply the proper goods, he was entitled to recover the sums advanced by him with interest. A. S. No. 92 of 1923 is, therefore, dismissed with costs of the plaintiff, and A. S. No. 56 of 1923 is allowed with costs of Defendants Nos. 2 and 3 in this Court and the Court below payable by the plaintiff.


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