1. This appeal arises from a suit brought by the plaintiffs in the Subordinate Judge's Court at Madura, or a hundi or bill of exchange, executed by one Pasimuthu Pillai, on behalf of the firm of one Kuppuswamy Aiyar, now deceased, in Madura, whose agent he was. The hundi was drawn, in favour of one Kolandavelu Pillai, the 2nd plaintiff, as representing the 1st plaintiff's firm, on the 23rd of August, 1918 and is for a sum of Rs. 22,066. It was drawn on the 1st defendant's firm in Madras and is marked Exhibit A in the case. It was dishonored when presented to the Madras firm notice was given of it to the 1st defendant, who was called upon to pay, but failed to do so. Hence, this suit was brought. Kuppuswami Aiyar died, leaving the 2nd and 3rd defendants as his sons and heirs, who succeeded to their father's estate and his trade. The 2nd plaintiff has been joined as a plaintiff to avoid any objection as to parties.
2. The circumstances under which this hundi was executed are briefly these:
The first defendant's firm carried on trade in Madura in yarn and cotton, thread and in the course of that trade,, the agent of the firm, Pasimuthu Pillai, who was looking after the business,, entered into seven contracts with Kolandavelu Pillai, the agent of the 1st plaintiff's firm, about the middle of August 1918, for the purchase of 229 bales of yarn to be manufactured by the Madura Mills, of certain counts at certain stated prices. Of these contracts, we are concerned in the suit with only four of them, relating to 153 bales. The contracts were originally made orally, but at the request of the 1st defendant's agent, they were reduced to writing on the 7th of September, 1918. They are called varthamanam letters, Nos. 21, 22, 23 and 24, and are filed in the case, as Exhibits B, B-1, B-2 and B-3. The terms of the contracts are fully set out in these letters, and it appears from them that the suit hundi amount was made up of advances, agreed to be paid under the contract, towards the purchase moneys at the rate of Rs. 150 per bale, for 25 bales, under Exhibit B; 20 bales under Exhibit B-1; and 10 bales under Exhibit B-2; and at the rate of Rs. 142 per bale, for 98 bales, under Exhibit B-3, less Rs. 100 paid in cash, which is the subject-matter of the suit, O.S. No. 12 of 1920, brought by the 1st defendant against the 1st plaintiff and tried along with the suit. Only two bales were actually taken delivery of and paid for by the 1st defendant under the contracts. Plaintiffs assert in their plaint that the contracts were broken by the 1st defendant and not by themselves. They claim the amount due under the hundi with interest and costs.
3. The defendants pleaded that the plaintiffs committed breach of contract and were not therefore entitled to claim the hundi amount and further that the hundi, having been passed in part payment of the stipulated price for goods, to be manufactured, and no goods having been sold or offered for sale to 1st defendant, was not enforceable. In reply to the defendant's pleas, plaintiffs contended that the suit being one on a negotiable instrument, a collateral enquiry could not be held in this suit into the question as to who committed the breach of contract, as such an enquiry is barred by Section 45 of the Negotiable Instruments Act, even though as the payee, he was a holder standing in immediate relation to the 1st defendant, the drawer. They also contended that if the question of breach could be gone into, the 1st defendant committed the breach, and the damages, they are entitled to, being more than the hundi amount, there was no failure of consideration on the hundi.
4. The Subordinate Judge overruled the objection under Section 45, and holding that the breach was committed by the plaintiff dismissed their suit, except to the extent of Rs. 284 of the hundi amount, which had been taken into consideration in paying the price of the two bales delivered, for which he gave a decree. He also decreed O.S. No. 12 of 1920 for Rs. 100; 1st plaintiff's legal representatives have appealed to us against the decrees in both these cases, the latter by way of a revision petition under Section 25 of Act IX of 1887.
5. As regards the objection raised by the plaintiffs against the defence under Section 45, I think the Subordinate Judge is right in overruling it. That section is based on the English Law on the point, which is stated by Chalmers in his book on Bills of Exchange, 8th Edition, p. 115, to be as follows:
Partial failure of consideration is a defence pro tanto against an immediate party when the failure is an ascertained and liquidated amount, but not otherwise,
that is, when a collateral enquiry becomes necessary, for the purpose. Illustration 1, given on the same page, explains what a collateral enquiry is. Illustration 2, however, shows that where a bill is drawn for the price of 2 bales and only one is delivered, the defence that consideration has failed to the extent of one half is available. That position is supported by the case of Agra and Masterman's Bank v. Leighton (1866) L.R. 2 Ex. 56. Now, in the present case, as I have already stated, the hundi amount represents the advance price paid for the 153 bales, the advance towards each bale being definite and fixed. The consideration for the hundi can thus be pleaded to have failed, with reference to all the undelivered bales and that is a sum that could be computed without any inquiry. In this view it will be the plaintiffs that will suffer if their objection is upheld. But it seems to me that the case should not be disposed of in that manner but the question of who committed the breach, should be considered, without driving the parties to another suit, and thereby multiplying litigation. In England, it is open now to the parties, to raise the question as to breach, in a suit on a bill by counter-claiming. In the present case, the question, as to who committed the breach, has been raised in the pleadings, each party charging the other with the breach and it has been fully tried out by the lower Court and dealt with by it in its Judgment. To these circumstanoes, it seems to ma that we should deal with the case, as if it were one for damages for breach of contract. If the breach is on plaintiffs' part, as held by the lower Court, its decree will be right; if it is on the 1st defendant's part, as contended for by the plaintiffs, there is no reason why plaintiffs should not be allowed to recover the hundi amount, as damages in this suit. No further amendment of the pleadings seems to be necessary for the purpose.
6. The question then is who committed the breach in this case? As the contracts referred not to ready goods, but to goods to be manufactured hereafter by the Madura Mills and to be allotted by them, to the purchasers, from whom plaintiffs, Vardoss Ramachan & Brothers, were to get them and the plaintiffs themselves were to get them from the latter firm, it was naturally arranged that plaintiffs were to give notice, in the first instance, to the 1st defendant, when the bales were issued by the Mills and finally allotted to the plaintiffs by their vendors. The contracts provide that on the day after receiving such notice, 1st defendant was to pay the price, deducting the advance on them and take delivery. The first two bales, of which notice was given by Exhibit C-1, to the 1st defendant under Contract No. 24 were paid for and taken delivery of, according to the terms of Exhibit B-3, About 5 days after 1st defendant was again given notice by Exhibit 0-4, of a lot of 3 bales of 22-1/2 counts, being ready for delivery. The market seems to have fallen for these goods, in the meanwhile. The 1st defendant instead of taking delivery as before, the next day after C-IV was received, as he was bound to do under his contract, Exhibit B-3, raised objections and sent his letter Exhibit 1, and asked whether the Mill had delivered the above mentioned goods, at the prices stated in Exhibit B-3, the varthamanam letter, and also said the Mill invoice should be shown to him. The contract Exhibit B-3 does not speak of any Mill price; but only of the price at which P.S. Latchmana Iyer & Sons bought the bales and there is no provision in it, to show the Mill invoice. In fact, it is stated to us that the Mill invoice remains with the original purchaser from the Mill and it is not passed on, to the subsequent purchasers of smaller lobs. Even if the Mill price were mentioned in Exhibit B-3, it does not seem to be a part of the description of the goods and is not essential for the identification of the goods purchased, the goods are here identified, as being 22-1/2 counts of yarn, manufactured by the Madura Mills and sold by them to Tholasi Iyer & Sons and by them, through the intermediary sellers, to the plaintiffs. On receiving Exhibit 1, plaintiff sent Exhibit 2, to say that they were not bound under their contract, to answer the questions asked, or to produce the Mill invoice; they offered to show Ramchan's letter of intimation and called upon 1st defendant to pay the price with interest, for the period of the delay and take delivery at once. About 5 days after 1st defendant sent another letter Exhibit 3, in which he insisted on being shown the Mill invoice and the bale number and stated that, on default he would hold the plaintiffs liable in damages. Further correspondence passed between the parties, Exhibits D, G, D1, 2, 4 and 5; but they made no difference in the position taken up, by the parties. The contents of those letters are set out fully by the Subordinate Judge and need not be repeated here. It was argued that because in the last paragraph of Exhibit G, the plaintiffs still offered to deliver the bales, they condoned the previous breach if, any, and kept the contracts alive; but this is of no importance, as 1st defendant took no advantage of it, bat treated the contracts as broken, even after Exhibit G, and called back the whole of the advance : see Exhibit H. As the 1st defendant failed to take delivery, plaintiffs failed to take the bales from their vendors and in consequence, Ramchan & Brothers gave them notice that they had sold away the goods in public auction and this fact is mentioned in Exhibit IV; with that, the controversy, as regards these 3 bales, came to an end.
7. In spite of the conduct of the 1st defendant, plaintiffs again gave him notice Exhibit X of 2 bales of Madura Mill yarn, No. 24, being ready for delivery and asked him to pay for them and take delivery. This notice was also under Exhibit) B-3. The 1st defendant again adopted the same tactics as before and instead of paying and taking delivery wrote letter Exhibit XI, in similar terms to Exhibit 1. The plaintiffs wrote Exhibit XII, offering to give 1st defendant ail facilities to inspect the goods, as well as the papers, etc., which they had but he did nothing, except to sand a lawyer's notice. Exhibit XII calling for a return of his advance with interest on the footing that the contracts were off.
8. With that, the correspondence ended. The plaintiffs failed to get the 1st defendant to pay and take delivery of the goods, or even to inspect them to satisfy himself, that the bales were those contracted for, if he really doubted their identity. There is evidence to show that the market was falling and it was not to the 1st defendant's interest to perform the contracts, he was clearly trying to get out of his contracts. It is true, as the Subordinate Judge remarks, relying on the observation in Bowes v. Shand (1877) 2 A.C. 455 that if 1st defendant thought he was going to be a loser, by accepting the goods, there was nothing to prevent him from trying to escape from a losing bargain, if he could do so lawfully. But he can do so, only for a legal and proper reason, but not on mere subterfuges.
9. The bales, about which plaintiffs gave notice of readiness to deliver, are asserted by them to be bales contracted for. They were buying from Ramchan & Brothers and they got notices from that firm, which are produced. There seems to be no reason to doubt that the bales, about which notices were given were the bales contracted for. An attempt was made by the defendants to prove that there were no bales of the contract description to which the notices Exhibits C-4 and X could apply, by calling the Mill clerk, the only witness examined in the case; but the attempt has failed. He admitted by reference to the Mill ledgers that before 25th September, 1918, 2 bales of 21 counts and 15 bales of 22i counts, Madura Mills Yarn, was delivered to Thoiasi Aiyar & Brothers. He mentions different prices for these bales but I do not think that that matters, as I have already explained above. The bales of which notice was given by the plaintiffs, were evidently part of those bales; there is nothing to show the contrary.
10. The learned Subordinate Judge has held that the plaintiffs committed breach of contract, because in his opinion, the 'plaintiffs failed to discharge the obligation cast upon them, by Section 38 of the Contract Act in regard to the identity of the goods.' It is contended that because the plaintiffs did not answer the questions put to them in Exhibits 1 and 2 and did not produce the Mill invoice, or otherwise prove to the 1st defendant's satisfaction, the identity of the bales they offered to deliver, with the bales contracted for, they committed breach of contract. Section 38, Clause 3, does not, in my opinion, lay such a heavy burden, on the seller, as is claimed. It only requires that the promisee must have a reasonable opportunity of seeing that the thing offered is the thing, which the promisor is bound by his promise to deliver. The promisor is under no obligation to prove the identity of the thing offered, to the promisee's satisfaction. It is the promisee's duty, to take the steps necessary to satisfy himself. The promisor has only to give him an opportunity for it. In this case, the goods could have been inspected, if the 1st defendant had applied to the plaintiffs to enable him to do so, and to see the account and the number of the bales, which according to the Mill clerk, are marked on the outside of the bale. If he wanted to see the Mill invoice, ho could have applied to Thoiasi Ayyar, through plaintiffs, or directly. But the 1st defendant took no steps for these purposes but contented himself with writing letters with a view to raise a defence subsequently. Plaintiffs offered to place all their 'goods and papers, etc,' in 1st defendant's hands by Exhibit XII, but he did not accept the offer. In these circumstances, I have come to the conclusion, that plaintiffs did all that they were bound to do, under their contracts and that there is no default on their part.
11. It was further argued that the plaintiffs should have reduced the goods to actual physical possession, before giving notice, and not having done so the notices were bad. I am unable to accept this argument. The goods were under the control of the plaintiffs and they were able and willing to deliver, if the price was paid, as they did, in the case of the 2 bales which were taken delivery of, by the 1st defendant, at the beginning.
12. That is all that the Section 38, Clause (2), requires. Actual physical possession of the goods is not necessary. Delivery is often given, on delivery orders in the trade.
13. Having come to the conclusion that the plaintiffs committed no default, I must hold that 1st defendant committed breach, by refusing to take delivery and calling back his advance and that he is liable in damages. Ordinarily, an enquiry will have to be held to ascertain the amount of damages, but as plaintiffs have sued for the hundi amount and as it is conceded that damages are likely to exceed the amount, I think, we are justified in giving the 1st plaintiff a decree for the hundi amount. I would reverse the decree of the lower Court and give 1st plaintiff a decree for Rs. 22,066, with interest at 6 per cent, from the date of the hundi to the date of payment and costs in both this and the lower Court, against the estate of the 1st defendant, including the shares of his minor sons. O.S. No. 12 of 1920 will be dismissed with costs, in this and the lower Court.
14. I agree with the order proposed. I am satisfied, for the reasons given by my learned brother, that it was list defendant, who committed the breach of the contract and therefore plaintiffs are entitled to the damages. As plaintiffs only claim the amount of the plaint hundi, which is less than the amount of damages claimable, it is unnecessary to decide the question of whether Section 45 of the Negotiable Instruments Act is applicable to the facts of this case, and therefore, on that point, I reserve my opinion.