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Bharat Electronics Ltd. and anr. Vs. American Export Isbrandsen Lines Inco, Madras - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberAppeal No. 830 of 1974
Judge
Reported inAIR1979Mad267; (1979)2MLJ304
ActsIndian Contract Act - Sections 20, 63 and 72
AppellantBharat Electronics Ltd. and anr.
RespondentAmerican Export Isbrandsen Lines Inco, Madras
Cases ReferredDay v. Mclea
Excerpt:
.....condition. a survey disclosed that 4 cartons were completetly empty. the plaintiff company sent a claim bill for a sum representing the value of the goods lost by non-delivery. a notice was also sent through the recovery agent. the defendants stated that under the bill of lading they were liable to pay only a lesser sum than that was mentioned in the claim notice. accordingly a revised bill was made and a lesser sum was received by the plaintiff. subsequently, the plaintiff found that there was a mistake, as the revised bill proceeded on the basis that there was only one carton in which all the four tubes were to be found, while actually there were four cartons in which the four tubes were sent. the plaintiff, therefore, demanded the balance of money. the defendants who resisted the..........on 1-10-1969. which disclosed that 4 cartons were completely empty. bharat electronics ltd. sent a claim bill dated 19-11-1969 for a sum of rs. 20496 representing the value of the goods lost by non-delivery. as there was no response, a notice was sent through the recovery agent for the said sum. by a letter dated 3-3-1970 the defendants informed bharat electronics ltd. that under clause 17 of the bill of lading they were liable to pay only rs. 3753-75. a revised bill was made out accordingly, and a sum of rs. 3753-75 was received. subsequently, bharat electronics ltd. found that there was a mistake, as the revised bill proceeded on the basis that there was only one carton in which all the four tubes were to be found, while actually there were four cartons in which the four tubes were.....
Judgment:
1. The short question that arises for consideration is whether the plaintiffs are entitled to recover a sum of Rs. 11,261-25 after having executed a receipt in full settlement for a sum of Rs. 3753-75 for non-delivery of certain goods shipped through the defendant. The plaintiff is Bharat Electronics Ltd. Bangalore. It purchased 20 cartons of Electron tubes from an American company. The goods were sent under a Bill of Lading from New York by s.s. 'Flying Cloud' belonging to the defendants. The ship arrived at Madras on 22-9-1969. When the goods were unloaded 9 cartons were found to be in a damaged condition. A survey was conducted on 1-10-1969. Which disclosed that 4 cartons were completely empty. Bharat Electronics Ltd. sent a claim bill dated 19-11-1969 for a sum of Rs. 20496 representing the value of the goods lost by non-delivery. As there was no response, a notice was sent through the recovery agent for the said sum. By a letter dated 3-3-1970 the defendants informed Bharat Electronics Ltd. that under clause 17 of the Bill of Lading they were liable to pay only Rs. 3753-75. A revised bill was made out accordingly, and a sum of Rs. 3753-75 was received. Subsequently, Bharat Electronics Ltd. found that there was a mistake, as the revised bill proceeded on the basis that there was only one carton in which all the four tubes were to be found, while actually there were four cartons in which the four tubes were sent. Bharat Electronics Ltd., therefor, demanded a sum of rupees 11261-25.

2. The defendants contended that the sum of Rs. 3753-75 had been paid in full and final settlement and that, therefore, there was no liability to pay the further sum of Rs. 11261-25. The second plaintiff is the insurer who, on payment to Bharat Electronics Ltd. has been subrogated to the rights of Bharat Electronics Ltd., and, therefore, both of them filed the present suit.

3. The defence was that there was a delay of nine days in the survey and that during this period there was scope for damage or pilferage while the tubes were in the custody of the Port Trust. The Port Trust itself had annotated the goods and only two cartons were found empty, whereas in the survey held subsequently 4 cartons were said to be empty. It was, therefore, contended that there was some pilferage or loss while the goods were in the custody of the Port Trust and that the defendants were not liable. According to the defendants, the amount having been received in full settlement, there was no justification for claiming the further amount under suit and that there was no misrepresentation on its part as alleged in the plaint. The following issues were framed:--

1. Whether the defendants are liable for the 9 cartons as alleged by the plaintiffs?

2. Whether the defendants are liable to pay Rs. 11261-25 as claimed by the plaintiffs?

3. Whether the plaintiffs passed the bill for Rs. 3753-75 due to misrepresentation of the defendant and whether it is not binding on them?

4. Whether the plaintiffs are estopped from making the suit claim after having passed the bill for Rs. 3753-75 in full settlement?

5. To what relief?

Additional Issues:--

6. Whether the mistake is unilateral or mutual?

7. Whether the agreement is void and not binding on the plaintiffs?

The trial Court held that the defendants are not liable to pay the sum of Rs. 11261-25, that the amount already paid, viz. Rs. 3753-75 was not paid by misrepresentation, and that the plaintiffs were estopped from making the suit claim after having accepted the sum of Rs. 3753-75 in full settlement. The suit was, therefore, dismissed. The present appeal has been filed by the unsuccessful plaintiffs.

4. The short question that arises for consideration is whether there was unilateral or bilateral mistake in accepting the sum of Rs. 3753-75. The plaintiffs could claim the balance in case it was found that the mistake was as mentioned.

5. On 26-6-1969, under the Bill of Lading marked as Ex. A 19, 20 cartons of electron tubes were despatched to the first plaintiff from New York by s.s. 'Flying Cloud.' After the goods were received when it was found that 9 cartons were in damaged condition, a survey was not effected through the recognised surveyors. By the report dated 14-10-1969, marked as Ex. B 14, they reported that 5 cartons were sound and that 4 cartons were found completely empty. The pro forma claim bill dated 15-11-1969, Ex. A. 1, was prepared on this basis and sent to the defendant's representative, M/s J. M. Baxi and Co. 21 Thanbu Chetti St, Madras 1, claiming Rs. 20496 as the cost of 4 numbers of Littons magnetrons type 7008 AE elr. 01/d short received along with freight and insurance charges. This was accompanied by a covering letter dated 19-11-1969, Ex. A 2. The second plaintiff as insurer paid the amount to the first plaintiff and not subrogated by Ex. B 1 dated 27-11-1969. The Life Insurance Corporation appointed Standard Surveillance corporation, Madras, to effect the settlement. The said Surveillance corporation, acting as the agent of the Life Insurance corporation, prepared the bill Ex. A 3, dated 21-1-1970 in which it was mentioned as follows:--

"To value of 4 pcs. Litton Magnetrons type 7008 AE elr. 01/d. in case No. 4 found empty at . 660 each...... . 2640.00" It will be seen that instead of saying that 4 cases were found empty the authorised agent had mentioned that in one case viz., case No. 4, 4 pieces were found empty. This was accompanied by a covering letter Ex.B. 4, dated 21-1-1970 and addressed to the defendant's representative at Madras. On behalf of the defendants there was a reply on 28-1-1970 in which it was stated that there was a delay of 9 days in the survey and that during that period the consignment might have been subject to considerable additional handling and damage or pilferage resulting in loss, for which the steamer could not in any way be held liable. It was also pointed out that there were no remarks in the Chief Officer's report regarding the above consignment which further went to prove that the consignment had been landed in a good condition. There was also a query regarding the absence of Customs Officer's at the time when the survey was conducted. Even though the survey was fixed on 25-9-1969, it was conducted only on 1-10-1969 and the plaintiff's authorised agent was requested to explain the delay in the survey. By a letter dated 2-3-1970, the plaintiff's authorised agent advised the defendants' representative that the 'cartons in question' were annotated as empty and, therefore, the carrier was properly liable. As no customs duty had been claimed, it was pointed out, that the absence of the Customs officer was irrelevant. On 3-3-1970, there was again a letter by the defendant reminding about the absence of a reply to Ex. A. 4 dated 28-1-1970 written by the defendants to the plaintiffs' agent. In this letter written by the defendant itself marked as Ex.A. 6 it was added-

"You will note that as per clause No. 17 of the relative Bill of lading, the liability per package is limited to 500. Hence, your claim must be limited to 500 equivalent to Rs. 3753-75. Please arrange to resubmit us your original claim bill is returned herewith."

The plaintiffs thereupon sent a revised bill for Rs. 3753-75 under Ex.B. 7, dated 9-3-1970, and in that letter it was stated as follows:--

"As desired we enclose our amended bill for Rs. 3753-75 and shall be obliged if you will let us have your cheque in settlement at your earliest........"

Some other details were called for by the defendant under Ex.A. 7 from the plaintiffs' agent and ultimately under Ex.B 10, letter dated 23-3-1970, an indemnity letter was taken from the plaintiffs' agent. There was also a receipt under Ex.B. 9, taken from the plaintiffs' agent and this is dated 28-3-1970, in which it is stated:--

"In settlement of claim for loss out of 20 cartons electron tubes Ex s.s. Flying Cloud, of 22-9-1969 New York Madras-Bill of Lading No. 30".

The defendants' representative in Madras paid the amount by cheque to the plaintiffs' representative observing that "it was towards settlement of your following bills:"

6. It was, thereafter, discovered by the plaintiffs' agent that actually 4 cartons were found empty and that the total liability should be 2000 at the rate of 500 per carton as against only 500 as claimed under the revised bill. The plaintiffs' agent, therefore, made a demand on the defendants' agent or representative for payment of Rs. 11261-25 being the balance. This was forwarded to the defendants who were of the opinion that once the claim had been settled and finalised it could not be reopened and, therefore, regretted their inability to pay. After some further correspondence, the suit claim came to be made and it has been dismissed.

7. In the correspondence there is reference to 'annotation' by the Port Trust and this annotation is borne out by Ex. A5 dated 21-2-1970. It is stated that 9 cartons were annotated at the time of landing. The annotation was as follows-

"4 cartons--'cover torn and contents falling out'

3 cartons--'damaged'

2 cartons--'empty'."

The learned counsel for the respondent submitted that in view of the Port Trust's contention that only 2 cartons were found empty, the survey report as if 4 cartons were found empty would not be correct. In his submission the report of the surveyor that 4 cartons were empty may be due to the pilferage or loss during the custody of the Port Trust. The contention is that even with reference to these 2 cartons, at any rate, it would only be the Port Trust, which would be liable.

8. It is not possible to accept the respondent's submission. In Surendra Overseas Ltd. v. Union of India, there was no physical delivery of the cargo to the consignee, though the goods were discharged at the quay, when the Port Trust took delivery of the goods. In respect of the short landing there was a claim for damages. It was held that when the consignee received the cargo there was a short-landing and damage to the goods and that the consignee was entitled to claim damages from the shipping company. Until actual delivery of the goods to the consignee, the consignor or his agent would be liable. As there was short-delivery here, the liability is clear. Delivery to Port Trust is not delivery to buyer.

9. The learned counsel for the respondent relied also on another decision in M/s K. P. V. Sheik Mohamed Rowther v. Trustees of Port of Madras, ILR (1975) 1 Mad 59. In that case, there was a claim for demurrage by the Port Trust from the consignee. It was held that the goods having remained in the custody of the Port Trust on the default of the consignee to satisfy the customs authorities that the import was authorised the consignee became liable to storage or demurrage charges as owner of the goods, the storage being for the sole benefit of the consignee. It was held that there was no provision in the Act, which gave a recourse to the Port Trust as against the ship owner or the steamer agents for the demurrage charges which was incurred while the goods were in its custody. This decision has no scope for application in the present case, because this is not a case for recovery of any demurrage charges by the Port Trust on account of any default on the part of the consignee. In the present case, the consignee had taken all possible steps to take delivery of the goods. But he could not take delivery because of the goods not being found. In these circumstances, the principle that the owner of the goods has to pay the demurrage charges can have no scope for application. The principle that once the Port Trust had given a receipt to the shipping company, after receiving the delivery of the goods, the shipping Company is not liable, because of S. 39(3) for any loss or damage is not also relevant in the context of the present claim, because the receipt given by the Port Trust to the shipping company is not in evidence and this matter had not been also taken in the court below so that any evidence on this point could have been produced.

10. The annotation by the Port Trust cannot be conclusive especially when an independent survey has been conducted and a surveyor had made a report. At no stage of the proceedings the surveyor's report was challenged. Therefore, it is too late in the day for the defendant's counsel to argue that the Port Trust having annotated only in respect of 2 empty cartons, the plaintiffs cannot make any claim for any larger number. This is a factual objection which should have been taken in the court below. The report of the surveyor makes it clear that 4 cartons were found empty as we are concerned with the question as to whether the defendant is liable to make good the value of the 4 cartons subject to the limit fixed in the Bill of Lading.

S. 20 of the Indian Contract Act provides-

"Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation--An erroneous opinion as to the value of the thing which forms the subject matter, of the agreement, is not to be deemed a mistake as to a matter of fact."

S. 22 is also material for our present purpose. It runs as follows-

"A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact".

In this case, the real question is whether it is a unilateral or mutual mistake. If it is a case of unilateral mistake, it would come within the scope of S. 22, as the contract would not be voidable. If, however, the mistake is not unilateral, then S. 20 would have applied so as to render the agreement void. The agreement for the present purpose is the agreement to receive the sum of Rs. 3753-75 in full settlement.

11. A case similar to the one here arose before the Court of Appeal in U. K. in Neuchatel Asphalte Co. v. Barnett 1957-1 WLR 356. A Company agreed to do certain work for 259. Disputes arose over the way the work had been done. The company had received 125 on account from the other contracting party. However, the company demanded the balance of

134. The other contracting party enclosed a cheque for the words in full and final settlement of account' were typed and sent to the company's office. It was stated that a statement of account was also sent, but none accompanied the latter. The Company contended that the sum of 75 had not been accepted in full and final satisfaction and sued for the balance also. In dealing with this claim Denning LJ as he then was, pointed out that it was the object or intention that was relevant and that the typed or printed words could not be allowed to make a trap for the unwary. Hodson LJ, also put it as a matter of intention as to whether the amount had been accepted in full and final settlement. Morris L J referred to an earlier decision in Day v. Mclea 1889-22 QBD 610. In that case, Bowen LJ had stated as follows-

"It seems to me, as a matter of principle as well as of authority, that the question whether there is an accord and satisfaction must be one of fact. If a person sends a sum of money on the terms that it is to be taken, if at all, in satisfaction of a larger claim; and if the money is kept, it is a question of fact as to the terms upon which it is so kept. Accord and satisfaction imply an agreement to take the money in satisfaction of the claim in respect of which it is sent. It accord is a question of agreement, there must be either two minds agreeing or one of the two persons acting in such a way as to induce the other to think that the money is taken in satisfaction of the claim and to cause him to act upon that view. In either case it is question of fact."

12. Morris LJ was also of the view that in that particular case, the cheque for 75 had not been accepted in full and final settlement. Day v. Mclea 1889-22 QBD 610 was followed in Shyamnagar Tin Factory Pvt. Ltd. v. Snow White Food Product Co. Ltd. and also by a Bench of the Patna High Court in the Union of India v. Narayanalal, . The passage from Day v. Mclea 1889-22 QBD 610 was noticed by the Supreme Court in Kapurchand Godha v. Mir Nawab Himayatalikhan Azamjah . Jewellery had in that case been supplied to the Prince of Berar, who had acknowledged them for the value of Rs. 27,79,000. The bill had also apparently been accepted by the Nizam himself. In Feb. 1949 when Hyderabad was under military occupation, a Committee was set up by the Military Governor to scrutinise all debts of the Prince of Berar and his younger brother. The Committee reported with reference to this claim that the amount should be settled for a sum of Rs. 20,00,000 and the appellants were paid Rs. 20,00,000 in full settlement. He later on filed a suit against the Prince of Berar. The suit claim was decreed in the original side of the Bombay High Court. On appeal the judgment of the trial Judge was reversed by a Division Bench. On appeal to the Supreme Court, the judgment of the Division Bench of the Bombay High Court was confirmed. The passage from Day v. Mclea 1889-22 QBD 610 has been quoted in the judgment.

13. It is thus clear from these decisions that the background or the intention of the parties has to be examined in order to find out whether there has been an accord and satisfaction. Merely because a cheque drawn or an amount paid in full satisfaction has been accepted, it would not follow that there has been an accord and satisfaction so as to disentitle the plaintiffs from coming forward with a suit for the proper amount.

14. S. 63 of the Contract Act provides that a promise may dispense with or remit, wholly or in part the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. In order that there may be such dispensing with or remission, wholly or in part of the performance of the contract, there must be a conscious act on the part of the said person. In other words, he must realise that he is taking a smaller amount for a larger amount than is due to him. If there is mistake as to a matter of fact essential to the agreement, which in this case is the accord and satisfaction, then the agreement, which in this case is the accord and satisfaction, then the agreement would fall under Section 20 of the Act. Similarly if a party who is alleged to have dispensed with or remitted a part of the performance, was not conscious of the circumstances under which he was accepting a smaller sum, then also it is possible to hold that he has not remitted or dispensed with the performance of the contract.

15. Sec. 72 of the Contract Act Provides for the recovery of the amount paid by mistake or under coercion. That section cannot apply to the present case because there is no payment by one to another. This is a case where the amount is sought to be recovered because the full amount due was not paid. S. 72 cannot apply to a case where there is no overpayment. It is unnecessary to go into the decisions cited on the question of the recoverability of the amount paid in excess under a mistake of fact or law.

16. It is also unnecessary to go into the decisions of U. K. based on common law, cited before me on the question of mistake, as the matter is governed in India by the provisions of the statute, viz. Indian Contract Act.

17. I have to examine the facts in this case to find out whether there was any unilateral or a mutual mistake. At the time when the plaintiff's agent preferred a claim under Ex. A. 3, the Bill of Lading was not available with it. Though by a reference to Ex B 14, it could have been discovered that 4 cartons were empty, still on account of some mistake it was thought that one carton contained 4 tubes and that one carton alone was empty. The defendant had at all material times the Bill of Lading. The defendant was also aware of the manner in which the goods were despatched from New York. In the Bill of Lading, it is clearly stated that there were 20 cartons which contained the tubes. There is also marking 1/20 in the Bill of Lading so as to show that each carton contained one tube. The defendants could, therefore, have verified whether the claim as made by the plaintiff's authorised agent was proper. It could then have pointed out that 4 tubes could not have been in one carton. If this mistake had been pointed out, the plaintiffs' authorised agent would have made a revised claim. This was not done. Apparently the shipping company also proceeded on the basis that four tubes could have been packed in one carton. Under the bill of lading the liability was limited to 500 dollars in respect of one package. On the view that there was only one carton which contained the four tubes as claimed by the plaintiffs' authorised agent, the defendants also asked for a revision of the bill. The defendants were thus also under a mistake as to the number of tubes in any carton. I do not think that the defendants were trying to cash in on any mistake of the plaintiffs' authorised agent. There would be misrepresentation if the defendants, being aware of each tube being packed in a separate carton, wanted to induce the plaintiffs' agent to make out a claim for a single package, as if 4 tubes were in one single package. It would not be proper to attribute such unethical practices to a company which has world-wide connections. In my view, the defendant was also under a bona fide mistake in thinking that four tubes were packed in a single carton. In one view, it would be a case of misrepresentation, as the defendants would not be unaware of the number of the tubes in a package. In such circumstances, if they made a representation that the claim had to be restricted to one package containing four tubes, it could even amounted to a deliberate attempt at misleading the plaintiffs. However, the inference of mistake would in the context of the facts here seem more probable or reasonable. I do not therefore accept the contention of misrepresentation put forward for the appellant.

18. The result is that under S. 20 of the Indian Contract Act, the agreement to receive the sum of Rs. 3753-75 in full satisfaction would be avoided and the plaintiff would be entitled to receive the balance. The plaintiffs are thus entitled to a decree. As the second plaintiff has already paid the amount to the first plaintiff, there will be a decree in favour of the second plaintiff as against the defendants. The appeal is accordingly allowed with costs.

19. Appeal allowed.


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