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South Indian Export Co. Vs. A. Subba Naidu and anr. - Court Judgment

LegalCrystal Citation
Decided On
Reported in7Ind.Cas.243
AppellantSouth Indian Export Co.
RespondentA. Subba Naidu and anr.
Cases ReferredSubba Naidu v. Hajee Badsha Sahib
specific relief act (i of 1871), section 57--breach of contract--injunction. - .....have committed a breach of the contract. now the pleadings have set up certain allegations of breach of contract by the plaintiffs which form the subject of first three issues with which i will proceed to deal. the first issue is : have the plaintiffs improperly charged commission as alleged in paragraphs 8 and 10 of the written statement ?' now the first objection is that the plaintiffs have charged commission on the sale of micas, when according to the contention of the defendants there had been ho complete sale.6. the words of the agreement are that 'the company plaintiffs are entitled to receive a commission on the gross amount realised by sale of any mica, splittings and chikas produced from the mines'. now what has happened is that a mr. illegue, who is the agent of a german.....

Wallis, J.

1. This is a suit by the South Indian Export to for specific performance of an agreement entered into on the 17th February 1906 with the defendants and for an injunction restraining the defendants from committing a breach of the plaint agreement and for damages.

2. It is obviously contended that the agreement is one which is capable of specific performance and the plaintiffs have stated through their counsel that if an injunction is granted against the defendants, they do not press their case for damages. It has been agreed by both sides that the question of damages should stand over pending the decision as to whether an injunction should be granted.

3. In the first place, I may say a word about this agreement in general. The defendants are the owners of valuable mica mines in the Nellore District and it has been stated in evidence that they have had some difficulty in working these mines, which are undoubtedly very valuable and in fact their arrangements for financing these mines have during the past few years--many years I may say--formed the subject of frequent litigation in this Court. The present agreement was entered into with a view, it recites, to the liquidation of the defendants' debts specified in the second schedule and also with a view to enabling the defendants to retain the management of' their business in mica mining in their own hands. And the scheme of the arrangement appears to have been first of all--most important of all:--that the agreement was to be a 5 years one and the plaintiffs were to give the defendants a standing advance of Rs. 55,000 for that period. Then the plaintiffs were to appoint a manager to assist the defendants in the management of their business, I suppose, because the defendants were not considered to be very successful business people. And the plaintiffs were also to assist them with their advice in the conduct of their business and especially, as appears from Clause 9, in the matter of sales. The sales were not left in the entirety to the plaintiffs, but were to be made in a sort of way jointly, by the plaintiffs and defendants that is to say, whoever, the plaintiffs or the defendants, got the best offer for sale, that sale was to take place, and the plaintiffs were entitled for their services and as regards the advice including this matter of arranging the sales to a commission of 5 per cent. And though it is'' not so expressly stated, I think that this stipulation must be considered in connection with the whole agreement and also as part of the consideration for the undertaking by the plaintiffs to give the defendants a standing advance of Rs. 55,000, for 5 years.

4. The plaintiffs are an expert company of traders; they are not bankers: and it is plain on the face of the agreement that this was one of the considerations which induced them to enter into it and to make this advance to the defendants.

5. Now the defendants have admittedly broken this agreement. Some of the terms of the agreement were that all deliveries of mica by the defendants to any of their vendees were to be made through the plaintiff and also all monies paid for mica by vendees to the defendants were to be paid through the plaintiffs and it was only after certain deductions including their commission had been made that the balance was to be handed over by the plaintiffs to the defendants. These stipulations were considered necessary by the parties for the protection of the plaintiffs and these are the stipulations which the defendants have admittedly violated by parting with their mica to third parties without the intervention of the plaintiffs. Now the first question which arises for decision is whether this is a proper case for granting an injunction such as is contemplated by Section 57 of the Specific Relief Act. The plaintiffs did not contend that this contract could, in all its details, be specifically performed; but they asked the Court to interfere by enforcing the negative covenant which is to be found in the agreement in effect, viz., that the defendants will not part with their mica without plaintiff's consent to third parties. The first question in assuming that the defendants have committed a breach of their agreement and assuming for the moment that plaintiffs have not committed any breach, whether an injunction should be granted; I see no reason why such an injunction should be granted. It is not the practice, as I understand, now always for the Court to enter into a consideration of the greater or less adequacy of the consideration. That is a matter for the parties who are the best Judges for their own interests in entering into a contract. And I may also say that it has been pointed out in some cases that it is for the interest of persons in the position of the defendants that breaches of agreement of this sort should be prevented by an injunction because unless there is that security they will not have the advantage of people entering into such agreements with them. Further we have to consider the position of the plaintiffs: I think this is the sort of case in which the Courts are wont to interfere to prevent a breach of a negative covenant by an injunction. The circumstances of the present case resemble a good deal the case of Subba Naidu v. Hajee Badsha Sahib 26 M. 168 : 13 M.L.J. 13. Among the English cases I may refer to Metropolitan Electric Supply Company Limited v Gnder (1901) 2 Ch. 799 : 70 L.J. Ch. 862 : 84 L.T. 878 : 49 W.R. 508 : 65 J.P. 519 : 17 T.L.R. 435. I do not think unless an injunction of this sort were granted, the plaintiffs would have any adequate remedy open to them. Damages cannot be awarded in this suit for the present breach and would not prevent the defendants from committing fresh breaches and driving the plaintiffs to a fresh suit in future. Therefore, I think that they have a right to the injunction, unless it could be shown that they themselves have committed a breach of the contract. Now the pleadings have set up certain allegations of breach of contract by the plaintiffs which form the subject of first three issues with which I will proceed to deal. The first issue is : Have the plaintiffs improperly charged commission as alleged in paragraphs 8 and 10 of the written statement ?' Now the first objection is that the plaintiffs have charged commission on the sale of micas, when according to the contention of the defendants there had been ho complete sale.

6. The words of the agreement are that 'the Company plaintiffs are entitled to receive a commission on the gross amount realised by sale of any mica, splittings and chikas produced from the mines'. Now what has happened is that a Mr. Illegue, who is the agent of a German Mica Merchant out here, has contracted with the defendants to purchase mica from them and has advanced them money on account of such purchase without much regard to the question whether the mica which he contracted to buy was ready for delivery or was lying unworked up in at the mites or not yet got from the mines. Mr. Subramania Aiyar has referred to the provisions of the Contract Act which go to show that there was no completed sale of mica which had not been ascertained and was not ready for delivery. But there were undoubtedly contracts of sale in respect of this mica and, in my opinion, the advance made for the purchase of mica under these circumstances would come within the meaning of the words gross amount realised by sale of any mica..' The fact that these amounts were realised before some of the mica was got from the mines does not appear to me to affect the question. The actual circumstances under which these advances were made were as follows:

7. Mr. I. opened what was styled a purchase account with the defendants, and it was the plaintiffs who advanced the money which was paid to the defendants in advance, on account of these purchases for Mr. I. and Mr. I. was debited by the plaintiffs with the amount of these advances. This is shown to have been the nature of the transactions by the evidence of Mr. I. himself and of Mr. Simson which is uncontradicted. Certain correspondence has been put in which Mr I. writing to the South Indian Export Company speaks of guaranteeing' the advance by the South Indian Export Co. and of debiting the amount as usual to his purchase account. But the real nature of the transaction clearly, in my opinion, is as explained by the evidence, viz. :--that the South Indian Export Co. on behalf of I. and his principal found the money which was to be paid as advance purchase money to the defendants for mica which the defendants contracted with Mr. I. and his principal to deliver. The plaintiffs have deducted their commission at the specified rates on the amounts advanced. And the scheme of the agreement is that before any sale proceeds of the mica were paid to the defendants the plaintiffs were to deduct their commission. And it is further to be observed that the defendants were perfectly well aware at the time that these deductions of commission were made. There is one letter of theirs in which it is actually referred to. And all the statements of account showing this deduction were submitted to them and approved of by them as correct. As pointed out by Mr. Simson in his evidence, it is perfectly certain that if the defendants had taken objection to any deduction of this commission in the first instance none of these transactions which really consisted in finding money by the plaintiffs would have gone through at all. Under these circumstances, apart from the strict propriety of the deductions of commission in this manner, I do not think that the defendants are entitled to raise any objection to it now at any rate, as a ground for inducing the Court to refuse an injunction. So much for this which is perhaps the chief breach of the contract alleged. I may say also that this could only be a breach of the contract in so far as it involves a failure to pay the proper balance over to the defendants. But again I do not see how, where payments have been made rightly or wrongly with the consent of all the parties, how that can properly afterwards be set up by one side as a defence to a subsequent breach of contract.

8. Then the breaches relate to minor matters. It is alleged that the plaintiffs have charged this commission twice over in some cases. This is denied on oath and there is absolutely no evidence to this effect.

9. It is also objected that the plaintiffs have committed a breach of the contract in calculating interest (i.e.) they calculated interest half-yearly at the end of June and at the end of December. They swear that this is the universal custom of European merchants in Madras and as the defendants had a great many dealings with European merchants, they must have known perfectly well that this is the case. I think there is no substance in this objection. And there is also another objection taken, that in one instance there was an over-calculation of interest. It is admitted by the plaintiffs that they have charged interest on interest for 9 days and for 4 months too long. But the total amount was stated to be Rs. 1/8 and I think it is absurd to suggest that a trivial error of this sort, to which the objection was taken and which would have been corrected if pointed out, should be a ground for refusing to protect the plaintiffs against a breach of the negative covenant by the defendants. Then the other objection as to the charging of commission relates to the fact that the plaintiffs have charged 21/2 per cent commission on certain goods which were procured by them locally for the defendants, whereas in the agreement they undertook to arrange to import and supply such articles. It is contended that procuring the goods locally was not a compliance with this stipulation. Whether that be so or not, the goods were procured in the way to the knowledge of the defendants who had full notice of it in the accounts which were tendered and which have been referred to. And they took no objection to it at the time and signed an acknowledgment that the accounts were correct. I think that in the circumstances, even if this was not a strict compliance with the contract, they accepted another sort of performance and at any rate, this is not the sort of breach which they would be entitled to rely upon in answer to the plaintiffs' present claim for a remedy. If they had any objection to those goods supplied to them or to the commission being charged in this way, it was perfectly open to them to call the attention of the plaintiffs to what were the conditions of the contract and to insist upon these conditions and then if the plaintiffs had refused, there might be good grounds for saying that the plaintiffs had been guilty of a breach of the contract. But merely because both parties knowingly and willingly depart from the exact terms of the contract and perform it in some other way, it cannot be said that there has been any breach of the contract. And then the third issue is : Did the plaintiffs commit a breach of their contract to give the defendants a standing advance of Rs. 55,000? The answer to that, in my opinion, is no. The only alleged breach of this is there were a few days in October and November of one year when the advance stood below Rs. 50,000. And when the case is investigated, it turns out that the plaintiffs for these days allowed the defendants interest on money which was at their disposal and which was lying idle because there was some dispute between two persons with whom the defendants had entered into engagements. There is absolutely no ground whatever for suggesting that the plaintiffs committed a breach of their agreement to give the defendants this permanent standing advance.

10. In the written statement there was a further allegation that the plaintiffs had undertaken by this agreement to make such advances from time to time to the defendants as might be necessary for the defendants. Such an unheard of stipulation is not to be found, I need hardly say, in the agreement. I declined to grant an issue on this because there is absolutely no colour for such a contention in the agreement.

11. In the written statement the defendants also contended that the agreement as to the plaintiffs assisting the defendants with their advice in the conduct of their business was too vague to be enforced and that it was invalid, on this also I was of opinion having referred to the nature of the business and the whole circumstances of the case that there was no foundation for that contention and I did not frame any issue in regard to it.

12. In the result, I find that this is a proper case in which the Court ought to interfere to restrain the defendants with regard to what is in effect a negative covenant on their behalf (i.e.) not to deliver their mica except through the plaintiffs, not to receive payment except through the plaintiffs, the most material stipulations which were inserted for the protection of the plaintiffs and without which, in my opinion, it is pretty clear that the plaintiffs would not have safely entered upon this agreement at all.

13. For these reasons, I think that the defendants have failed to show any such breach of the contract on behalf of the plaintiffs as under the proviso to Section 57 of the Specific Relief Act would disentitle them to the injunction prayed for. I accordingly grant the injunction with costs.

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