1. Under Ordinance 9 of 1914 and the rules prescribed thereunder the plaintiff's were appointed wholesale dealers of rice at Sattur. The defendant Municipal Council of Srivilliputur appointed a Local Emergency Committee for the purchase of rice from the plaintiffs. This Local Committee used to indent for the monthly supply and the Collector allotted the quantity to be supplied. In January 1920 the defendant Municipality applied for a certain
2. For the appellant it is contended that a breach of a statutory Regulation does not fall under Section 65, Contract Act. Annada Mohan Roy v. Gour Mohan Mullick AIR 1923 PC 189 is strongly relied on. There, there was a contract by a Hindu to sell immovable property to which he was the next reversionary heir-expectant upon the death of a widow in possession and to transfer it upon possession accruing to him. It was held that this being void under Section 6(a), T.P. Act, 1882 the time at which such an agreement is 'discovered to be void' so that a cause of action to recover the consideration arises under Section 65, Contract Act, 1872, in the absence of special circumstances is from the date of the agreement. Their Lordships held (p. 937 of 50 Cal.) that Section 65 did not apply to such a contract. In that case another Privy Council case Harnath Kunwar v. Indar Bahadur Singh AIR 1922 PC 403 was pressed upon their Lordships. In the latter case a Hindu, while next reversioner to an Oudh estate, obtained a decree declaring that a will which the widows of the last holder alleged authorized them to adopt was invalid and that he was entitled to the estate upon the death of the last surviving widow. Prior to that event occurring he purported to sell half the estate in consideration of Rs. 25,000 advanced to him declaring by the sale-deed that when he succeeded he would put the vendee in proprietary possession. After the death of the last surviving widow the widow of the purchaser sued the vendor for possession, or alternatively to recover the purchase money with interest. It was held that there was no effectual transfer of the villages, since the vendor had only an expectancy and the decree did not create any greater interest in him but that under Section 65, Contract Act, 1872 the purchase money was recoverable, with interest from the date of the suit, the period of limitation not running until the rights of the purchaser were discovered to be unenforceable. The facts of that case are peculiar and their Lordships held that in those peculiar circumstances there was a misapprehension as to the private rights of the vendor which he purported to sell and that the true nature of those rights was not discovered by the plaintiff earlier than the time at which his demand for possession was resisted. The agreement was discovered to be void and the discovery in their Lordships' view was one within the words and the meaning of Section 65, Contract Act. This difference is stressed by their Lordships in Annanda Mohan Roy v. Gour Mohan Mullick AIR 1923 PC 189 (of Cal. 50) where they say:
In that case, however, there were special circumstances wholly different from those in the present case, circumstances which were proved in evidence and were sufficient for their Lordships to act upon and to enable them to say that the discovery in the case was later than the date of the contract itself.
3. These are the two important Privy Council cases relied on one by each side respectively. The case in Harnath Kunwar v. Indra Bahadur Singh AIR 1922 PC 403 cannot be taken as authority for saying that a contract entered into in breach of the statutory provisions of Sections 44 and 45, District Municipalities Act can be brought under Section 65, Contract Act for purposes of a 'quantum meruit' or a quantum valebant.' In Veeranna Ambalam v. Ayyaahi Ambalam AIR 1926 Mad 168 it was held that a contract which was necessarily invalid from its inception would not fall under Section 65. In Radhakrishna Das v. The Municipal Board of Benares (1905) 27 All 592 the learned Judges consider the applicability of Section 65, Contract Act in a case exactly similar to the present. They say:
There was no illegality in the action of the Municipality in passing a resolution (accepting the appellant's tender and therefore it cannot be said that the agreement, if any, constituted by the tender and acceptance of it, has been discovered to be void. The agreement is unobjectionable but it did not ripen into a binding contract by reason of the neglect of the parties to comply with the provisions of the section under which the Municipality could alone contract. The words of the section, namely 'When a contract becomes void' evidently have no application because there was no contract. If we were to hold that this section was applicable, we should render nugatory the salutary provisions of the Municipalities Act which provide that 'a contract executed otherwise than in conformity with it shall not be binding on the Board.' Likewise Section 70 appears to us to have no application.
4. In Wolf & Sons v. Dadiba Khimji & Co. AIR 1920 Bom. 192 it was held that advantage must be received before the contract becomes void but that is not the case here. Some cases are relied on by the respondent to show that a contract entered into in breach of a statutory regulation would nevertheless fall under Section 65. One is Auryaprabhakara Rao v. G. Sanyasi AIR 1925 Mad 885 the decision of a single Judge. It may be noted that the applicability of that section was merely examined with reference to the question of limitation. Girraj Bakhsh v. Hamid Ali (1887) 9 All 340 was a case of a mortgage entered into by the minor's mother without the permission of the Court. It was held that the benefit obtained on the mortgage must be refunded. This must be considered overruled by the Privy Council decision in Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 where it was held that a mortgagee who advanced money to a minor on the security of a mortgage is not entitled to repayment of money on decree being made declaring the mortgage invalid. In Appasami v. Narayanaswami A.I.R. 1930 Mad. 945 a minor fraudulently represented himself as a major. Therefore there was in that case a mistake of fact at the time of the contract. Thangammal Ayyar v. Krishnan AIR 1930 Mad 132 is a case between a legal practitioner and his client. The agreement which had not been filed in Court was held to be void. Nevertheless it was held that the pleader was still entitled to claim any reasonable remuneration in respect of his professional services. That case is distinguishable because the pleader had a right outside the alleged agreement whereas in the present case the plaintiff's case is one founded on his contract. Municipal Board Lucknow v. Debi Das AIR 1920 Oudh 388 followed Lawford v. Billericay Rural Council (1908) 1 KB 772 and Young & Co. v. Mayor and Corporation of Royal Leamington Spa (1883) 8 AC 517 which have been distinguished in Municipal Council, Tiruvarur v. Kannuswami Pillai (1) Municipal Committee, Gujranwala v. Fazal Din AIR 1929 Lah 742; followed Srirangam Municipal Council v. Bodi AIR 1924 Mad 162 which is the decision of a single Judge and which is dissented from by Sir Kumaraswami Sastri, J., and myself in Municipal Council, Tiruvarur v. Kannuswami Pillai (1). Two cases are however relied upon to show that a 'quantum meruit' can be granted in the case of a contract entered into by a Municipality in which the requirements of Sections 44 and 45, District Municipalities Act, are not complied with. One is the case in Municipal Council, Tiruvarur v. Kannuswami Pillai (1) quoted above. But it would be seen therefrom that
both the parties are agreed before us that if the contract is found invalid they should accept a decree on a 'quantum meruit' basis
so that the legality of a 'quantum meruit' was not raised. The other case is the one in Mohamed Ebrahim Molla v. Commissioners for the Port of Chittagong : AIR1927Cal465 to which we referred in that judgment. In that case the Commissioners for the port of Chittagong sued the defendant for the recovery of money due as hire of a tug lent to the defendant under a contract The contract was not under seal as required by Section 29, Chittagong Port Act, 1914. It was held that the Act was imperative in its terms and the plaintiffs could not sue on the contract, but, a quantum meruit' was allowed. This case is alluded to in Pollock on Contract, p. 378. He says:
It appears from the report of this case that counsel for the defendant (who was the appellant before the Court) himself conceded that the plaintiffs were entitled (though not in that suit) to some compensation for the use of the tug. It is submitted that both counsel and the Court were in error in thinking that the plaintiffs were entitled to recover 'quantum meruit.' No question of payment upon a 'quantum meruit' can arise where an act is imperative.
5. I therefore consider that the contention of the appellant that no 'quantum meruit' or 'quantum valebat' can be allowed is correct. If the 'quantum meruit' is to be, as given by the lower appellate Court, on the profit which the defendant had made then it is clear from the accounts Ex. 4 that the Municipality derived no profit. But on this point I should hold that if an allowance is to be made it must be a ''quantum valebat' and the plaintiffs would be entitled to recover the price of the rice fixed at the time of supply.
6. Turning to the ground of limitation it is argued that the letter Ex. F (2) on which the learned Subordinate Judge relies written by the President of the Local Emergency Committee will not save limitation as there is nothing to show that he represented the committee. I cannot agree with this contention. The point has not been taken at all in first appeal. The matter was only taken in a general form in the grounds of the second appeal (para. 21), viz., 'The Court below ought to have held that the suit was barred by limitation.' The correspondence was conducted by the President of the Committees. He was put into the witness-box, but no question was put to him that he had no authority to carry on the correspondence. In Braja Sundar Deb v. Bhola Nath AIR 1919 PC 120 it was held that a person with authority to purchase and settle the price of goods had equal authority to acknowledge and that the authority to do so need not be express. In Ganga Ram v. Lachman Singh : AIR1925All176 , it was held that it can be presumed from the attendant circumstances that acknowledgment made by the agent is authorized: see also Rala Singh v. Bagwan Singh & Sons AIR 1925 Rang 30. Such acknowledgment may be addressed to a person other than the person entitled to the property or right (Expl. 1, Section 19, Lim. Act). I agree with the learned Subordinate Judge that the letter Ex. P-2 saves limitation. One more argument is raised on behalf of the respondents, namely, that the parties are governed by the Ordinance, that the contract is made under it and that the Municipal Council was not acting as a Municipal Council in making the contract: Douglass v. Rhyl Urban Council (1913) 2 Ch 407 Attorney-General v. Gaskill (1833) 22 Ch D 537 Mathura Mohan Saha v. Ram Kumar Saha (1916) 43 Cal 790 and Leake on Contracts, 447 were quoted. This contention was also raised before the learned Subordinate Judge who deals with it in para. 7 of his judgment. I agree with his conclusions. The Ordinance lays down that the Governor-General-in-Council or the Local Government may require any persons or class of persons to make a return of any article of commerce of which he or any person belonging to such class is the owner, and that if any article is found to be unreasonably withheld from the market on the issue of notification under Section 6, any person empowered by the Governor-General or the Local Government may take possession of any articles so notified on paying compensation. There is nothing in this to prevent the plaintiffs from making their contract with the Municipal Council in the statutory terms prescribed in Sections 44 and 45, District Municipalities Act. I consider that these terms were applicable.
7. The appeal in my opinion must be allowed with costs and the suit dismissed with costs throughout. I cannot help observing that the defendant council were put into an extremely awkward position. Correspondence shows that they were not free agents either in the matter of buying or selling and yet they were to be considered responsible for any loss which might accrue owing to fall in prices. The Emergency Committee was a purely honorary body and neither it nor the Municipal Council were going to make any profit out of the transaction. It is immaterial that the Municipality did take a sum of Rs. 500 for peace celebrations because this was returned. The Emergency Committee was at one time called on by the Collector to make good a deficiency of Rs. 285-10-0 in regard to another Union (Elayangudi Union). That sum however was also refunded by the Collector. It would appear hard to hold the Municipal Council responsible for trading losses in a matter in which they had no freedom of action and in which they and their agent, the local Emergency Committee, were serving the public in an honorary capacity. If the contract had been made in accordance with the statutory regulation it would certainly appear hard in the circumstances that the Municipal Council should have had to make good presumably from the ratepayers' money, a loss for which they were not responsible. This question does not however arise owing to, the fact that the contract actually made was void.