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R.V. Narayanaswami Chetty, Sole Proprietor of R.V.N. Chandrasekhara Chetti Vs. Soundararajan and Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported inAIR1958Mad43; (1957)2MLJ328
AppellantR.V. Narayanaswami Chetty, Sole Proprietor of R.V.N. Chandrasekhara Chetti
RespondentSoundararajan and Co. Ltd.
Cases ReferredRadhelal v. RatanlalI.L.R.
Excerpt:
- rajagopala ayyangar, j.1. this appeal and the memorandum of objections are against the judgment of our learned brother panchapakesa ayyar, j., in c.s. no. 363 of 1949 on the original side of this court. the suit was one by a buyer for recovery of damages for non-delivery, and the claim made was for rs. 51,499-6-0. the learned judge held, that the defendants (the sellers) were in default, and decreed the suit to the extent of rs. 3,000. the plaintiff has filed this appeal, and the excess amount claimed in it, is confined to rs. 17,349. the defendants (sellers) have filed a memo, of cross-objections, disputing the learned judge's finding regarding breach on their part, and on this basis pray for the setting aside of the decree for rs. 3,000 passed against them.2. the two points therefore.....
Judgment:

Rajagopala Ayyangar, J.

1. This appeal and the memorandum of objections are against the judgment of our learned brother Panchapakesa Ayyar, J., in C.S. No. 363 of 1949 on the Original Side of this Court. The suit was one by a buyer for recovery of damages for non-delivery, and the claim made was for Rs. 51,499-6-0. The learned Judge held, that the defendants (the sellers) were in default, and decreed the suit to the extent of Rs. 3,000. The plaintiff has filed this appeal, and the excess amount claimed in it, is confined to Rs. 17,349. The defendants (sellers) have filed a memo, of cross-objections, disputing the learned Judge's finding regarding breach on their part, and on this basis pray for the setting aside of the decree for Rs. 3,000 passed against them.

2. The two points therefore that arise for consideration are : (1) The correctness of the finding of the learned trial Judge that it was the defendants who were guilty of breaking the contract. (2) The correctness of the quantum of damages awarded to the plaintiff. These we shall consider in that order.

3. Before setting out or examining the details of the controversy between the-parties bearing on the first of these points, it would be convenient to narrate certain facts as regards which there is no dispute. The plaintiff and the defendants are both merchants of Madras. The suit contract is Exhibit P-1, dated nth April, 1949. It is in the form of a letter, addressed by the plaintiff to the defendant and. recites the purchase of 1310 bags of ' self-raising Australian flour ', each bag weighing 1501b. gross. The price fixed was ' Re. 0-5-9 per lb. c.i.f., Madras Harbour, sales-tax extra '. The payment was to be on or before the arrival of the steamer'. The shipment was per S. S. Masula from Australia, which, it is admitted, had already left Australian waters, and was on its way to Madras by the date of the suit contract. The sale was therefore one '' on c.i.f. terms ' in regard to goods afloat. The contract contained no reference to the party on whom the obligation lay, to arrange for or obtain an import licence, notwithstanding that during the period relevant to the contract in suit, it is common ground, the import into India of flour from Australia was subject to control restrictions based on quotas. Under the regulations framed in that behalf, licences were granted permitting the importation of goods of specified value, the quantity allowed to each importer, being dependent upon various factors, like their imports in certain previous years, which were treated as basic. Licences were generally valid for shipment for a period of one year from the date of their issue, and in order that a licence could cover a particular import, the goods should have been actually shipped from the supplying country on a date when the licence was in force. By the date of the suit contract, the defendants had obtained two licences under each of which they could import from Australia flour of the value of fifty thousand-rupees, the two licences being operative from a date which covered the period when S. S. Masula left Australia, while the plaintiff held admittedly no import licence. The sellers had made arrangements for payment to their Australian suppliers by a letter of credit with the Bank of New South Wales, and the shipping and other documents in relation to the suit consignment had been received in Madras on 7th April, 1949, by the Mercantile Bank, Madras, with instructions to hand them over to the defendants on payment. S. S. Masula arrived, at Madras on 17th May, 1949. A day before the arrival of this steamer, the defendants paid the bank the amount due to their suppliers, and with the aid of the documents, cleared the goods from the vessel on 27th May, 1949, on the strength of one of their own import licences.

4. The defendants had also ordered by cable, dated 18th April, 1949, further quantities of the same goods from Australia and had been informed by letter, dated 27th April, 1949, from their Australian correspondents, that 2,400 bags were being despatched against this further order. On 13th May, 1949, the defendants sold to Messrs. Trade and Travel Ltd., Merchants in Calcutta, 1,200 bags of flour ''at Rs. 67-1-0 per bag of gross, f.o.b. Madras', the goods to be shipped ''from Madras to Calcutta on a through steamer during May or June, 1949'. These further shipments ordered by this defendant on 18th April, 1949, arrived at Madras per board S. S. Alcion only at the fag, end of June or the beginning of July, 1949, but without waiting for the arrival of this further consignment, the defendants despatched on 15th June, 1949, 1,200 bags out of the S. S. Masula shipment to the Calcutta purchaser. The facts stated upto now are not in controversy.

5. No correspondence passed between the parties from 11th April, 1949, right up to the week after the defendants despatched to Calcutta 1,200 of the 1,310 bags received by them by S. S. Masula. The plaintiff was the first to write and he did so on 24th June, 1949, and in this letter Exhibit P-2 he complained of default on the part of the defendants, in giving him delivery of the 1,300 Masula bags, though the steamer had arrived long before. He further averred that the defendants had been putting off delivery on the ground of some clerical defect in their import licence, which, it was represented, had been sent to Delhi for some corrections, and stating that delivery could be given only after the licence was got back with the defects rectified. The plaintiff required the defendants to definitely fix the time when the delivery would be effected, adding that though he on his part was always ready and willing to pay the price, he could not do this because the defendants were not willing to effect delivery. Exhibit P-3, the reply by the defendants, was on 27th June, 1949. They expressed surprise at the contents of Exhibit P-2 and put forward the case, that they were not to blame for the delivery not being effected but that this was due to the plaintiff not having the necessary import licence to clear the goods from the harbour, in breach of the assurance given at the time the contract was entered into, that he had an import licence, with which he would clear the goods. They went on to add that if this import licence was handed over even then, they would have no objection to deliver the 1,310 bags. The plaintiff's reply was Exhibit P-4 of the same date and in this he made his position clear. He said:

We had contracted for shipped goods and covered by your own import licence. The contract does not specify nor was it even the subject of talk between us that we should procure any import licence. Indeed it could not have been so, for the simple reason that the goods had already been shipped by 5. S. Masula and should have been delivered to us after clearance without any necessity or obligation on us to produce any import licence as falsely stated by you in the letter under reply

6. He then went on to deny that the defendants had required him to produce the import licence. Further correspondence passed, each merely repeating his or their story until the suit G.S. No. 363 of 1949 was filed on 1st August, 1949.

7. The plaintiff in his plaint pleaded the case which he had put forward in the correspondence Exhibits P-2 and P-4 and estimated the damages which he had suffered at Rs. 51,499-6-0. This figure was arrived at by calculating the difference between the contract rate and the market rate on the date of the breach at Rs. 0-4-3 per lb. The dates 15th June, 1949, when the defendants consigned 1,200 bags out of what they had received by S. S. Masula to Calcutta, and 29th June, 1949, when Exhibit P-5 was written, were assigned as the date when the breach occurred. The allegations in the plaint proceeded as if the suit contract was one for the sale of goods simpliciter without being one of c.i.f terms.

8. In this written statement the defendants pleaded, that it was the plaintiff that had broken the contract by reason of (1) not being in a position to clear the goods by possessing himself of the requisite import licence, and (2) the non-payment of the price before the arrival of the steamer as stipulated in the contract. The rest of the allegations were merely a repetition of the version put forward by them in the correspondence. The defendants made a counter-claim for Rs. 25,000 odd. This was grounded on the allegation, that by reason of the failure on the part of the plaintiff to clear the 1,310 bags with the aid of his own import licence, the defendants had been obliged to clear the goods by utilising their own licence, with the result that when the S. S- Alcion arrived with 2,400 bags at the end of June, 1949, the value of the goods, which they could import, after allowing for the S. S. Masula shipment, was not sufficient to cover the entirety of the goods, so that the defendants were penalised by the customs authorities for importing goods without a proper import licence, and on that account a fine of Rs. 25,000 had been levied on them. This was claimed as the damages which the plaintiff had to pay to the defendants, as resulting from the breach of his obligation to clear the S. S. Masula goods, with his own licence. On these pleadings the following issues were framed:

(1) Was there an agreement between the parties that the plaintiff should procure an import licence?

(2) Did the defendant commit any breach of the suit contract, and, if so, what was the date thereof, and what the market rate fox the goods on that date?

(3) To what damages is the plaintiff entitled if the defendant was in breach?

(4) Or did the plaintiff commit any breach of the suit contract as alleged in the written statement and counter-claim?

(5) Is the plaintiff liable to pay demurrage and other charges alleged to have been incurred by the defendant in clearing the goods covered by the suit contract?

(6) Is the plaintiff liable to reimburse the defendant with the alleged penalty sum of Rs. 25,000 or any portion thereof?'

(7) To what reliefs are the partief entitled?

9. Besides the correspondence, the plaintiff and the managing director of the defendant-company gave evidence on their respective sides as P.W. 1 and D.W. 1, and in addition the plaintiff examined a merchant who gave evidence about some conversation had with the defendants on plaintiff's account.

10. On issue 1 the learned Judge held in favour'of the plaintiff, that there was no specific agreement between the parties that the plaintiff should procure an import licence and clear that goods with such a licence. He held that the suit contract was one for sale on c.i.f. terms, and that under the law governing c.i.f. contracts it was the duty of the buyer to procure an import licence to clear the goods after receiving the c.i.f. documents. This was recorded in these terms:

On issue 1, I find that there was no agreement in fact between the parties that the plaintiff should procure the import licence for the goods under Exhibit P-1, but that under the law governing c.i.f. contracts he was bound to procure the 'import licence.

11. On issue 2, he held that the defendants had been guilty of a breach in not tendering the bill of lading, the policy and the invoice, but that the plaintiff was to blame for not providing himself with an import licence with which to clear the goods. The finding on issue 2 was therefore a composite finding. For this latter reason the learned Judges added ' there would be a drastic reduction of damages '.. In view of this and other circumstances which the learned Judge mentioned he came to the conclusion that, though the difference between contract and market prices at the date of the breach might indicate a sum of about Rs. 9,000 as the damages to which the plaintiff would normally be entitled, Rs. 3,000 as damages would be all for which the plaintiff could get a decree. Issue 6, which arose out of the counter-claim, was found against the defendants, and there has been no appeal by them in regard to this portion of the case. On issue 4 the learned Judge held that the plaintiff did not commit any breach of the contract, because of the finding that he had not expressly assured the defendants that he would get an import licence. On these findings the learned Judge granted the plaintiff a decree for the sum of Rs. 3,000.

12. We shall now proceed to consider the two points that arise in this appeal. The first question, which Mr. Krishnaswami Ayyar, learned Counsel for the appellant, urged before us, was that on the finding of the learned Judge, that the defendants had broken the contract by not tendering the bill of lading, the learned Judge erred in law in not awarding to the plaintiff damages based on the difference between the contract and market prices on the date of the breach, and that the reasons assigned for reducing the damages and awarding the sum considered to be reasonable were irrelevant for computing damages arising out of the breach of contract. Learned Counsel also disputed the statement of law by the learned Judge, that it was the duty of a buyer on c.i.f. terms to procure an import licence to enable him to clear the goods, and urged that the decisions of the English Courts followed by a Bench of this Court clearly laid this obligation on the seller. On the other hand, Mr. Thiyagarajan, learned Counsel for the seller-respondent, besides contesting these submissions on behalf of the appellant, urged that the learned Judge was not right in his finding on issue No. 1 regarding there being no representation, assurance or agreement that the plaintiff would clear the goods covered by the shipment with the aid of his own import licence. Learned Counsel relied in this connection on the evidence of the defendant's Managing Director as D.W. 1, that the plaintiff had assured him at the time the contract was entered into, that it was he who was in possession of an import licence, with which he would clear the goods. His further submission was that under the terms of the contract Exhibit P-1the plaintiff had specifically undertaken to pay the price of the goods before the arrival of the ship, and that this stipulation superseded or modified the duty of the c.i.f. seller to tender the required documents, as a condition for the payment of the price. As the contentions raised by Mr. Thiyagarajan touch the root of the case and would, if accepted, lead to the dismissal of the suit, it would be convenient to deal with them first, before discussing the other points.

13. The question that first arises for consideration is, whether there was any representation or assurance by the plaintiff, as to his having an import licence, and whether there was any specific contract of understanding between the parties, that the imported goods would be cleared by the buyer, with the aid of the import licence which he represented he possessed. Mr. Thiyagarajan has placed the entire evidence on this matter before us, and having considered it carefully we are of the opinion that the learned Judge was right in finding this issue against the defendants. The' suit contract was entered into after the goods had left the Australian port, and it is now common ground that the defendants alone held an import licence, and that the plaintiff did not have one. In order that the import licence could validly cover the import, it must be of a date anterior to the shipment. It was the defendants alone who knew the date of the shipment, and it is hard to believe that, if the plaintiff had made any representation of his having possessed a licence whose validity extended to a date before April, 1949, the defendants did not ascertain the details of it or make a reference to it in the contract itself, particularly as the defendants were contemplating the import of further flour from Australia, which they actually ordered about a fortnight after the date of the suit contract. This apart, the conduct of the defendants in not taking the initiative to get the plaintiff to clear the goods is a clear indication, that the story of the plaintiff's representation that he had an import licence which he would utilise for clearing the Masula consignment, is an after-thought. Mr. Thiyagarajan, however, urged that the very fact, that the defendants had after the contract with the plaintiff under Exhibit P-1, ordered rupees one lakh worth of goods on 27th April, 1949, an import which would cover the full amount of the value of the two licences which they held, strongly probabilised the defendants' case, that they expected the plaintiff to clear the goods on his own licence. We are not impressed with this argument for the reasons we have aleady indicated. The market appears to have been steadily rising, and it is probable that in view of this feature, the defendants had ordered further imports, hoping that they might be able to clear the goods through the import licence of someone else, or if it came to that, by paying any penalty imposed by the Customs authorities. In fact at one stage the suggestion of Mr. Thiyagarajan was, that having regard to the understanding between the parties, it was the duty of the plaintiff to have cleared the goods with the aid of a licence held by someone else, if he did not possess a licence himself to import the goods. In our opinion, the finding of the learned Judge on issue 1 is correct, and the challenge to it by learned Counsel for the respondents must be rejected.

14. If then there was no such agreement between the parties, that the plaintiff should clear the goods with the aid of his own import licence, the next question is, whether under the law an obligation was cast on a buyer on c.i.f. terms to arrange for the clearance of the goods with his own import licence. In regard to this matter, the learned Judge said ' under the law governing the c.i.f. contracts the plaintiff was bound to procure the import licence and clear the goods himself.' Mr. T. M. Krishnaswami Ayyar urged that the learned Judge was not right in this view and referred us to a decision of a Bench of this Court in Galiakotwala & Co. v. Narasimhan & Brother (1953) 2 M.L.J. 372 as authority for the position, that the obligation to procure an import licence in a contract, such as the one before us, was on the seller. That case arose out of a buyer's suit for damages against sellers, alleging breach by non-delivery. The buyers were merchants in Coimbatore, and they had bought from the defendants who carried on business at Salem, tapioca starch f.o.r. Sankaridrug (Salem). The goods were to be despatched to Ahmedabad and other places, and on the date of the contract there were in operation 'a Starch Control Order '. and a ' Madras Tapioca (Movement Control) Order ', under which goods could not be moved from Salem District, without a licence granted by the District Authorities. The sellers, who under the rules, had to apply for the permit to export, made an application there for, which however they subsequently withdrew. The sellers effected no delivery in pursuance of the contract and when sued for damages for non-delivery, pleaded frustration and impossibility of performance, the plea being rested on the absence of a permit from the control authorities. The buyers' suit was dismissed by the Subordinate Judge, who held that the law cast no obligation on the sellers to procure a licence and that, as in fact the sellers did not have a permit, their defence of frustration could be sustained. On appeal this decision was reversed by Mack and Krishnaswami Nayudu, JJ., who held that as there was a restriction on exports at the time the contract was entered into

it can reasonably be held, that the sellers agreed to sell subject to their being able to export the goods to the destination mentioned in the contract, which implied an obligation on their part to apply for and obtain the necessary licence.

Relying on this passage, Mr. Krishnaswami Ayyar urged that in every case the obligation to procure licences was that of a seller, and that the learned trial Judge was wrong in stating that this was an obligation of the buyer. In further support of this position learned Counsel also relied on the decision of the /Court of Appeal in Anglo-Russian Merchant Traders and John Batt & Co., (LondonL.R. (1917) 2 K.B. 679, In re) and a passage in the judgment of Chagla, J., (as he then was) in Phoenix Mills, Ltd. v. M. H. Dinshaw & Co. : AIR1946Bom469 reading:

Under a c.i.f. contract there is an obligation upon the seller to do everything in his power to see that the buyer is in a position to obtain delivery of the goods shipped.

15. Mr. Thiyagarajan, however, submitted that the decision of this Court in Galiakotwala's case (1953) 2 M.L.J. 372, which followed that of the Court of Appeal in Anglo-Russian caseL.R. (1917) 2 K.B. 679, dealt with the obligation of a c.i.f. seller to procure facilities to enable him to tender the documents which it was the duty of a seller to tender and-did not bear on the question of the obligation to obtain facilities for enabling the goods to be unloaded from the ship or taken out from the port by clearance. We see force in this criticisim. Before, however, dealing with the cases themselves it would not be out of place to detail the obligations of seller and buyer in a contract on c.i.f. terms.

16. The vendor, on c.i.f. terms is in the absence of any specific provision to the contrary, bound by his contract (i) to make out an invoice of the goods sold (2) to ship the goods at the port of shipment, unless the contract is in regard to goods already afloat; (3) to procure on shipment a contract of affreightment under which goods will be delivered at the destination contemplated by the contracts; (4) to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. The seller having procured the necessary documents is under an obligation to send them forward to the buyer, accompanied by an invoice showing the amount due from the buyer, within a reasonable time. He must make every reasonable exertion to send them forward as soon as possible after he has destined the goods to the buyer. If no place be named in the contract for the tender of the shipping documents, they must prima facie be tendered at the residence or place of business of the buyer. The buyer must be prepared to pay or accept the draft, as the case may be, according to the terms of the contract of sale, within a reasonable time after the shipping documents are tendered to him. What is a reasonable time is a question of fact depending on the circumstances of that case. In ordinary cases obviously payment must be made promptly on the tender of the documents with the invoice. As the essential feature of a contract of sale c.i.f. is that performance is satisfied by delivery of documents and not by the actual physical delivery of the goods, it follows that all that the buyer can call for is the delivery of the documents we have mentioned. This represents the measure of the buyer's right and the extent of the vendor's duty. The buyer cannot refuse the documents and ask for the actual goods nor can the vendor withhold the documents and tender the goods they represent.

17. It would, therefore, be seen that while it is the duty of a c.i.f. seller to see that he is in a position to procure the necessary documents for tender, which might entail an obligation to ensure that the export is possible, for otherwise the shipping documents cannot be obtained, there would not be necessarily any obligation on him to see that the buyer was in a position to clear the goods from the ship or clear them through the Customs at the port of destination.

18. The observation of Chagla, J., on which Mr. Krishnaswami Ayyar relied in this connection and which we have extracted earlier, cannot really bear the interpretation sought to be placed on it. The learned Judge was there dealing with a contention, which he accepted, that the invoice which the c.i.f. seller in that case tendered was not in order, in that what was tendered was a copy and not the original, which latter alone the Customs authorities would recognise and act on. It was therefore a case where the invoice which was one of the documents the seller had to tender was not in order, and the passage has to be read with reference to this feature.

19. We shall now consider the two decisions relied on by Mr. Krishnaswami Ayyar, Anglo-Russian Merchant Traders and John Batt & Co. (London) In reL.R. (1917) 2 K:B. 679, Galiakotwala & Co. v. Narasimhan & Brother (1953) 2 M.L.J. 372, in that order.

20. John Batt & Co., (London), merchants of London, sold to Anglo-Russian Merchant Traders, Ltd., also of London 50 tons of aluminium bars to be shipped to Vladivostock. The price was to be 180 per ton c.i.f. to Valdivostock, payment cash, against documents by London bank. At the date of the contract there was a prohibition of export of aluminium from England except on licence granted by the British Government. The sellers applied for a permit but this was refused, and in consequence they failed to deliver the aluminium. The buyers claimed damages for this failure on their part to ship. The contract contained an arbitration clause, and the arbitrator found that, in the absence of an express term in the contract relieving the sellers of liability in the event of failure to ship by reason of permits not being obtained, the sellers must be taken to have assumed an absolute obligation to obtain a permit, and holding on this basis the sellers to be in breach, the buyers were awarded 2,500 as damages. The award was made in the form of a special case, subject to the opinion of the Court on the point of law just now indicated. Bailhache, J., held that the award was right and that the sellers were in default. The Court of Appeal, which consisted of Reading, C.J., Cozens-Hardy, M.R. and Scrutton, L.J., reversed this decision, holding that the implied obligation on the part of the sellers was not absolute and no higher than that they should use their best endeavours to obtain a permit, and that the sellers did not warrant that if they were unable to obtain a permit, they woald render themselves liable in damages.

21. The ratio of the decision of the Court of Appeal is to be found in the following passage in the judgment of Reading, C.J., at page. 686:

A party to a contract may warrant that he will obtain a licence, but no such term can be implied in this case. The reasonable view of the contract, in my opinion, having regard to the statement in the The MoorcockL.R. 14 P.D. 68, is that the sellers sold subject to their being able to ship under a licence, and that they impliedly undertook to use their best endeavour to obtain a licence. The umpire has found that they used their best endeavours, the failure to ship being due to their inability to obtain a licence, and therefore there has been no breach of contract:

and of Scrutton, L.J., to similar effect at page 689:

In order to support the learned Judge's construction of the contract it is necessary to make a large implication in the contract. A large number of words would have to be read into it. In the view I take of the meaning of the contract very few words have to be read in. Bearing in mind the statement of Bowen, L.J. in The MoorcockL.R. 14 P.D. 68, I cannot think it necessary in order to give business efficacy to the contract to read it as meaning that the sellers undertook the obligation of getting a licence or paying damages. It is sufficient in order to give business efficacy to the contract to hold that no higher obligation can be implied than that the sellers would use reasonable diligence to get a licence.

22. While we agree with the submission of Mr. Thiyagarajan, that the construction which Mr. Krishnaswami Ayyar sought to place on this decision, that in every case it was the duty of a seller to procure the necessary licences and that he would be excused only if he was unable to do so notwithstanding every effort on his part, is not correct, the reasoning of Scrutton, L.J., suggests an approach to the question which we could usefully apply to the consideration of the point involved in the appeal before us. We also agree with Mr. Thiyagarajan, that the decision in Galiakotwala's case(1953) 2 M.L.J. 372, is no authority, as urged by Mr. Krishnaswami Ayyar, that in every case of a c.i.f. contract the law casts an obligation upon the seller to obtain an import licence so as to enable the buyer to clear the goods from the port. Take the case of a normal c.i.f., sale between merchants in different countries. It is one thing to say that the seller, who is presumably acquainted with the laws of his country, is being held, therefore, to be under an obligation to see that export becomes possible by obtaining a licence, if this can reasonably be obtained. This is all the extent to which the decision in Galiakotwala & Co. v. Narasimhan & Co. (1953) 2 M.L.J. 372 can carry learned Counsel for the appellant. On the other hand, to hold that, in the illustration we have taken, the foreign seller, who is presumably unacquainted with the laws of the importing country, shall undertake to see that the buyer is provided with an import licence, would, in our opinion, be unreasonable in extreme and therefore not to be presumed.

23. Mr. Thiyagarajan for his part relied on the decision of the Court of Appeal in H. 0. Brandt & Co. v. H. N. Morris & Co L.R. (1917) 2 K.B. 784. It was for the sale of 60 tons of aniline oil. The contract was between two merchants both of Manchester, the buyers acting on behalf of American principals. The delivery was to be f.o.b and spread over a number of mon,ths. There was no prohibition against export at the time the contract was entered into. Subsequent thereto, aniline oil was added to the list of articles whose export was prohibited except under licence. A portion of the goods was delivered and exported before the restrictions were imposed, and thereafter the sellers made no application for a licence and no goods were delivered because of these restrictions. The buyers instituted the suit for damages, contending that it was the duty of the sellers to have obtained an export licence and that as they failed in this, they were liable in damages. Lawrence, J., who tried the action, decided in favour of the plaintiff-buyers. This was reversed on appeal, Viscount Reading C.J., stating this in regard to the sellers' obligation to obtain an export licence:

. . . . the learned Judge held that there was a duty on the defendants to use their best endeavours to obtain a licence to export the oil and he was not satisfied that they had done so; and that, even if the duty was not imposed on them by the contract, they had taken upon themselves the duty. I am unable to agree with the learned Judge that the duty of applying for the licence was upon the defendants. They had contracted to sell f.o.b...They had therefore contracted to put the oil on board a vessel selected, not by them, but by the plaintiffs. It was the duty of the plaintiffs to find the ship, and the facts which it was necessary to state when a licence had to be applied for were known to them and not to the defendants. All that the sellers know in such a case is that they have sold the goods to their buyers

Scrutton, L.J., said:

In this case it becomes necessary to go further and to decide whether in this f.o.b. contract' the obligation to obtain a licence, in case there should after the making of the contract be a prohibition against export, lies upon the sellers or the buyers. The buyers must provide an effective ship, that is to say, a ship which can legally carry the goods. When the buyers have done this the sellers have to put the goods on board the ship. If that is so, the obtaining of a licence to export is the buyers' concern.

24. Mr. Thiyagarajan submitted that the extracted passages supported the positions that the obligation to procure an import licence was in every case that of the buyer and not of the seller.

25. That Brandt & Co. v. H. N. Morris & Co. Ltd., L.R. (1917) 2 K.B. 784 laid down no absolute rule of law on the subject of a buyer's obligation in contracts of f.o.b. terms is clear from the decision of the House of Lords in A. ,V. Pound & Co. Ltd. v. M.W. 'Hardy & Co.,L.R. 1956 A.C. 588 affirming the Court of Appeal in Hardy v. Pound Inc.L.R. (1955) 1 Q..B.499. The contract was f.a.s. ard was between Pound & Co. of London, the sellers and Hardy & Co., Inc. of New York, the buyers. The goods were to be shipped from Lisbon, and their destination was Rostock in East Germany. The Portuguese authorities at Lisbon refused a licence to export the goods to East Germany, and the question was whether the buyers were in default in not taking the goods on board their vessel at Lisbon, the sellers claiming damages for this breach. The arbitrators decided in favour of the sellers and this was confirmed by McNair, J., on the special case, who felt himself bound by the decision in H.C. Brandt & Co, v. H. JV. Morris & Co. Ltd.L.R. (1917) 2 K.B. 784, where the sale was f.o.b. The Court of Appeal however reversed this decision for the reason, that it was the sellers who were acqnainted with the law in Portugal, and that under that law it was the sellers that could obtain the licence to export and not the buyers. On these facts, the learned Judges held that both parties seemed to have assumed that the suppliers--the correspondents of the sellers--would arrange for a licence. Singleton, L.J., said in the Court of Appeal:

The question to be determined depends on the construction of the contract and on the facts of this particular case. It is not a case in which both parties are in this country and one (the buyer), wishes to export goods from this country.... They (buyers) cannot be made to pay damages unless they have broken the contract. It was the duty of the sellers to place the goods alongside the ship. They could not do that unless an export licence had been obtained. The buyers knew nothing as to this. One cannot determine the duties of the parties to a contract of this nature without regard to the facts, and among the facts of importance are the place at which the contract is made, the situation of the parties, and the place at which the goods are at the time the contract is made....The sellers were in a better position to deal with any question as to a licence than were the buyers,. for they, in turn were contracting with Portuguese suppliers.

In the circumstances, I consider that the duty of obtaining the licence was upon the sellers rather than upon the buyers; the sellers were in touch with their suppliers through whom alone a licence to export could be obtained....It may be that the question of licence was overlooked on both sides, or that neither realized that, in the absence of an export licence, the contract could not be fulfilled.

26. The argument advanced for the appellant before the House was that, as it was a ' free alongside' (f.a.s.) contract the buyers had undertaken to provide a ship alongside which the goods could legally be placed, that the sellers' obligation arose only when an effective ship, effective to carry the goods to the destination intended, had been provided by the buyers, and that Brandt's caseL.R. (1917) 2 K.B. 784, had laid down that the risk of getting a licence always fell on the buyer.

27. The Lord Chanceller Lord Kilmuir, in rejecting these arguments, said (pages 601, 602) : '

In my opinion it is necessary to remember in comparing Brandt's case3 with any other in this field (1) that the parties had not contracted with reference to an existing licensing system (2) that a United Kingdom licensing system overtook their contract; (3) that either party could have applied to the British authorities; (4) that the buyers alone knew the facts which it was necessary to state when a licence was applied for.

28. The approach of Viscount Simonds to this question is the same as that we referred to a little earlier as helpful for the decision of this appeal. The learned Lord said (at page 606):

My Lords, it is very clear that this obligation is not imposed on the respondents by an express term of the contract. Is a term, then, to be implied by which it is imposed I can see no ground for saying that it should be. On the contrary, every circumstance in the case suggests that, if the ' officious bystander ' had said at the making of the contract : ' Of. course, gentlemen, you intend the buyer to get the export licence,' it must at once have been repudiated by the respondents and probably by the appellants also, who by their conduct showed where they thought that duty lay, and were anxious, too, to prevent the respondents making contract with the suppliers through whom alone a licence could be obtained. It is, in my opinion, plain that according to the ordinary principles of construction no obligation is to be implied.

29. Applying these principles to the present case the factors to be considered are : (1) The sale was in regard to goods afloat on the date of the contract. (2) The parties, who were both merchants in Madras and therefore presumably acquainted with the Import Control Regulations, had contracted with reference to an existing licensing system in force. (3) Under the Import Control Rules a licence that would enable the buyer to clear the goods, which was the purpose of his purchase, should have a period of validity which extended from at least the date of the shipment. The seller, who had purchased the goods from the foreign merchant ,was in a position to know the date of the shipment, and in fact as that involved compliance with Exchange Control Regulations, by opening a letter of credit, he had presumably obtained this facility with the aid of a duplicate of the import control licence which he held. (4) The seller had an import control licence while the buyer did not have any.

30. In these circumstances, in the absence of an express term in the contract, the Court would, in our judgment, be justified in importing a term, that the buyer shall be permitted to avail himself of the import licence held by the seller. We consider that the business efficacy of the transaction would be effectuated only by implying such a condition. We are not unmindful of the decision of Bray, J., in American Commerce v. Frederick 35 Times Law Reports 224, where the learned Judge held that subject to-the terms of the contract payment of import duties on goods imported under c.i.f. contract forms no part of the seller's obligation, and if the seller should have to pay them because tender is made after arrival of the goods, he can recover the amount from the buyer, and that conversely export duties, in the absence of agreement to the contrary, are payable by the seller under c.i.f. contract, since they are an expense necessarily incurred before he can fulfil his obligation to ship the goods. Our decision in favour of the buyer does not involve any departure from the law as thus stated.

31. The question next to be considered is, whether or not the seller committed a breach of contract by not tendering the documents to the buyers. Before dealing with this point, it is necessary to mention one matter which has loomed large in the correspondence, and which is dealt with by the learned Judge in his judgment namely that the contract under Exhibit P-1 was one for the sale of goods, simpliciter as distinct from a contract on c.i.f. terms. So far as the contract under Exhibit P-1 itself is concerned, it clearly states that it is to be on c.i.f. terms. That the parties were aware of the difference between a contract on c.i.f. terms and an ordinary contract for sale of goods is apparent from a comparison with Exhibit P-8 entered into in March, 1949. In the latter contract the letters ' c.i.f', did not occur, and the delivery is said to be on arrival of goods which were then afloat. The only circumstance which could be urged in support of a plea, that the suit contract was for the sale of goods simpliciter, is a reference to sales-tax, which would be payable only if a sale of goods took place within the State. But in our opinion this is too slight a circumstance to militate against the contract being treated as purely a c.i.f. contract.

32. This apart, the treatment by the plaintiff in the correspondence and even in the pleadings, of the suit contract as if it were one for delivery of goods, is due to the circumstance, that the correspondence started after the defendants had retired the documents, cleared the goods from the harbour and in fact had, in implementation of a different contract of sale, shipped the goods to Calcutta. At that stage, towards the end of June, 1949, there was no question of the plaintiff demanding the delivery of the documents, as, to their knowledge, the goods had arrived and had been taken delivery of by the defendants. It is in these circumstances that, with due respect to the learned Judge, we are unable to endorse his opinion, that the plaintiff acted improperly in calling for the delivery of the goods instead of for the delivery of the documents.

33. We shall now consider two related points (1) whether it was the duty of the seller on the terms of the contract in the present case to tender c.i.f. documents to the buyer and (2) whether he actually tendered them. That it is the duty of a seller on c.i.f. terms to tender the documents within a reasonable time after shipment, and in the present case after the contract, as the goods were then afloat, would be seen from our earlier summary of the law and is too well settled to require elaboration. ' The seller ' said Scrutton, J., in Landauer & Co. v. Craven and Speeding BrothersL.R. (1912) 2 K.B. 94 , ' must, as soon as possible after he has sent forward the cargo send forward the documents to the vendee or consignee '. Lord Birkenhead said in Johnson v. Taylor Brothers & Co.L.R. (1920) A.C. 144 , 156 that the seller was bound to tender documents to the buyer ' within a reasonable time after shipment'. Lord Atkinson in this last decision, said that these documents should be forwarded with all reasonable despatch. The reason for this was thus stated by Kennedy, L.J., in Biddell Brothers v. Clemens Horst & Co. L.R. (1911) 1 K.B. 934 :

The buyer by getting the documents into his hands at the earliest possible moment obtains the privilege and absolute power of profitably dealing with the goods days or weeks, or perhaps in the case of shipment from a distant port, months before the arrival of the goods themselves. This is indeed, the essential and peculiar advantage which the buyer of imported goods intends to gain under the c.i.f. contract.

34. Applying the principles to the present case, it would have been the obligation of the seller to have arranged for the tender of the documents immediately on the contract being entered into, as documents had been received in Madras by the Mercantile Bank a few days prior to the contract Exhibit P-1. Mr. Thiyagarajan, however, urged that this obligation was nullified or stood modified by reason of the terms of the contract, under which the buyer undertook to pay for the consignment before the arrival of the steamer. We are unable to accept this argument. Normally the duty of a buyer on c.i.f. terms is to pay the price on tender of the documents. If the obligation of the seller was to have tendered the documents promptly and with reasonable despatch after he was in a position so to tender--and in this case he was in a position to do this even on the 12th April, 1949--the duty of the buyer to pay before the arrival of the goods cannot be construed as a stipulation that the payment would be made even before the tender of the documents. It would be a question for consideration, if a contention were raised on behalf of the buyef that whatever be the date of the tender of the documents he had time till the arrival of the steamer to pay the price, that is, as absolving him from the duty of making payment immediately on tender of the documents. In whatever manner this latter contention might be answered, in our opinion, it is not correct to regard this stipulation by the buyer as to the payment of the price before the arrival of the steamer, as one which absolved the seller of his obligation to tender the documents, which admittedly were within his power, within a reasonable time, after the contract was entered into.

35. If such was the obligation of the buyer, we have next to consider the evidence as to whether he did tender the documents and if so when. In his evidence D.W. 1, on behalf of the defendants deposed, that even on the date of the contract, he informed the plaintiff that the documents were ready with the bank, and that payment might be made and delivery taken of those documents.' According to him the plaintiff's answer to this was : ' You say the steamer would take about 20 days to come. I will take the documents later on, but anyhow before the steamer arrives '. He also added that before himself paying the Mercantile Bank and clearing the documents, he went to the plaintiff's place of business on 16th May, tendered the documents and asked for the money; and the reply was that, as the plaintiff did not have the licence then, as soon as he got the licence, he would go over to him and take the documents. The plaintiff denied the story both as regards the conversation as well as the meeting on the 16th May. The learned Judge was not inclined to believe D.W. i's evidence, and we are not disposed to differ from him. It will be seen that this evidence of D.W. 1 at every stage makes up the story of the plaintiff having an import licence or undertaking to procure one--a story which we have rejected as wholly improbable. Mr. Thiyagarajan invited our attention to the fact, that the plaintiff himself had admitted the presence of D.W. 1 in his place of business on the 16th of May and urged this as some proof of the truth of the defendants' version. The plaintiff however explained that there were other transactions between the plaintiff and the defendants, and that it was in relation to these that D.W. 1 came to him. But this apart, that the tender neither of 11th April, or 16th May is referred to in Exhibit P-3 dated 27th June, 1949, the first letter, which emanated from the defendants after the suit contract, is in our opinion sufficient to discredit this oral story of the tender. Besides, we have the undoubted facts, that the defendants admittedly did not have an invoice for the purpose of tender, that produced by them in Court being obviously one got up subsequently and which the learned Judge had no hesitation in rejecting as spurious.

36. This discussion would indicate our agreement with the learned Judge in his findings (a) that it was the duty of the defendants to have tendered the documents and (b) that they failed to discharge this duty.

37. Mr. Thiyagarajan next contended that, as the tender of the documents and payment of the price were concurrent conditions, the plaintiff could not succeed in any action for damages for breach of contract by reason of the failure to tender the documents, unless he proved to the Court, his readiness and willingness to make the payment on tender. Learned Counsel referred us to the decisions in Chengravelu Chetti & Sons v. Venkanna & Sons (1924) 49 M.LJ. 300, Radhelal v. RatanlalI.L.R. (1949) Nag. 555 , Bubby Hurry and Co., v. Hortz & Co.A.I.R. 1923 Lah. 541 and several others in support of the position, that payment of the price and delivery of the goods were concurrent conditions, and in the absence of pleading and proof of the buyer's readiness and willingness to pay the price if the delivery took place, he could not successfully maintain a suit for damages for breach of contract. The principle, which learned Counsel referred to, is indicated in statutory form in Section 51 of the Contract Act:

When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

Though common law rules of pleading required the plaintiff to aver specifically performance or offer to perform his part, that has been departed from in England under the Rules of the Supreme Court, Order 19, Rule 14. The same rule of pleading obtains in this country under Order 6, Rule 6 which reads:

Any condition precedent, the performance or occurrence of which is intended to be contested, shall be distinctly specified in his pleading by the plaintiff or defendant as the case may be; and, subject thereto, an averment of the performance or occurrence of all conditions precedent necessary for the case of the plaintiff or defendant shall be implied in his pleading

In the present plaint in paragraph 7 the plaintiff stated that he. had always been and was ready and willing to perform his part. No doubt this was denied in paragraph 8 of the written statement in these words:

. . . . the defendant charges that the plaintiff was never ready and willing to perform his part of the bargain and that he was evading taking delivery of the documents as already stated, and that the plaintiff has committed the breach of the contract...in not paying for and taking delivery of the documents.

The matter ' already stated ' and ' his part of the bargain ' mentioned here are reference to the assurance by the plaintiff of his having an import licence and the representation that he would clear the shipment by utilising that licence. If this part of the story is, as we have found, false, it would follow that the defendants were never ready to deliver the documents according to the contract, namely that they offered to get them cleared, with the aid of their own import licence. Therefore the defendants had evinced an intention nor to perform the contract, and by their conduct relieved the plaintiff from the obligation of tendering the price.

38. We thus find ourselves in complete agreement with the finding of the learned Judge, that the defendants committed the breach of the suit contract by not tendering the bill of lading, insurance policy and the invoice at any time to the plaintiff.

39. The question next to be considered is the damage to which the plaintiff would be entitled by reason of this breach of contract on the part of the defendants. The amount of this damage would be the difference between the contract price and the market price on the date of the breach. In regard to the date of the breach, the statement in the plaint was that the breach happened on 15th June, 1949 when the ' Masula' goods were transhipped to Calcutta. This, however, would not be correct, as the breach consisted in the failure on the part of the defendants to tender the c.i.f. documents to the plaintiff, and as there could have been no tender of these documents after the defendants themselves cleared the goods on 27th May, 1949, the learned Judge was right in holding that the breach occurred on that date.

40. Mr, Thiyagarajan learned Counsel for the respondents urged before us that the burden of proving the quantum of damages was on the plaintiff, and that there was no evidence placed before the Court as regards the market price on or at about the date of the breach to permit a calculation of the damage suffered by the plaintiff. The legal submission of learned Counsel is well founded, namely that unless there was evidence placed before the Court by the plaintiff as regards the market price at the relevant dates, there cannot be a decree for damages against the defendants. Learned Counsel also is right in his submission, that the recorded deposition or the documents filed do not furnish any evidence on this matter. But the learned Judge however states in his judgment:

The market price for the goods on the-date of the breach . . . 27th May, 1949...is found to be Re. 0-6-6 per pound on the spot, on the evidence on record.

It is clear from this passage that the deposition as recorded by the Stenographer omits some answers which showed Re. 0-6-6 per lb. as the price on 27th May, 1949, and this sentence in the judgment must have been based on the learned Judge's note of the evidence.. As the contract price was Re. 0-5-9 Per lb. there was therefore a difference Re. 0-0-9 per lb. between the contract and the market prices. It would have yielded for 1310 bags of 150 lbs. each a total figure of about Rs. 9,200. Subject to certain deduction to which we shall refer the plaintiff would have been entitled to that net sum. The learned Judge however reduced the damages for the reasons stated by him thus:

. . . because of three terrible defects in his claim. The first was that he was always asking for the goods, and never for the documents, to which alone he was entitled, and he was insisting that the defendant company should clear the goods with their own import licences and hand over the goods to him, a totally unsustainable claim under a c.i.f. contract. Though this would not affect the liability of the defendant company for the breach and for damages, it will certainly affect the quantum of damages drastically. The second defect in the plaintiff's claim was that he did not even tender the price of the goods under the contract on the arrival of the ship with the goods, and though he was bound to do so under Exhibit P-1. Though I do not agree with Mr. Thiyagarajan's contention that, for this reason the suit itself should be dismissed with costs. . . . it is obvious that the damages must be drastically cut down owing to this circumstance also. Of course, it is true, as the learned Counsel for the plaintiff urged, that the plaintiff is not a pauper and was well able to pay the amount due under Exhibit P-1 at the time the ship arrived, and it is only his obstinacy in demanding for the goods themselves which stood in the way of his tendering the amount due under Exhibit P-11. But that will not affect this point regarding the mitigation of damages. The third defect is that the plaintiff admitted as P.W. 1 that he could not clear the goods without an import licence. As I have already held that the plaintiff alone should have got the import licence and cleared the goods; it is obvious that even if the documents were tendered to him by the defendant-company, the plaintiff could have cleared the goods only by paying penalty, as the defendant did, and the penalty would have eaten away substantially into, the damages if calculated at Re. 0-0-9 Per pound.

For all these reasons, I hold that Rs. 3,000 damages with proportionate costs will be all that the plaintiff is entitled to, in the circumstances of this case, for the breach mentioned above.

With great respect to the learned Judge, we are unable to agree with this reasoning or to treat the three points mentioned as relevant grounds upon which damages payable for a breach of contract could be reduced. In our opinion each one of these three grounds might in a proper case be held to negative any breach on the part of the defendants; but if, as found by the learned Judge, the defendants did break the contract, they furnished no relevant basis for reducing the quantum of damages. We would only add that we did not understand learned Counsel for the respondents to support the reasoning of the learned Judge as regards the grounds for reducing the damages.

41. We shall refer to the deductions to which damages calculated at a difference of Re. 0-0-9 Per lb would be subject. The first is that the weight of each bag which in the contract was mentioned as 150 lbs., was the gross weight including the weight of the gunny in which the flour was packed. The average weight of such gunnies we take it, would be 4 lbs. The other deductions that have to be made are Re. 1 per bag for handling charges, that is, porterage and transit charges for getting the goods from the ship into the godown. Further as the average weight of each gunny bag would be 4 lbs. (the 150 lbs. being the gross weight of each bag) there would be a reduction of Re. 0-6-6- or Re. 1-10-0, from the damages payable on each bag. As against this sum the value of the gunny bag which the buyer would have got has to be excluded. As the price of this would be about 10 or 11 annas each, the net total amount deductible under this head would be roughly Re. 1-0-0 per bag. These together would therefore amount to Rs. 2,620 or thereabouts. We would therefore fix the damages payable at the round sum of Rs. 6,500 in the place of Rs. 3,000 decreed by the learned Judge.

42. Mr. Krishnaswami Ayyar suggested that as the defendants had made a counterclaim for Rs. 25,000 that might be some indication of the damages sustained by the plaintiff. We are wholly unable to accept this argument. The counter-claim was based not on any difference between the contract price and the market price but on the penalty which had been imposed upon the defendants by the Customs authorities when the import licence held by them did not cover the entirety of the Alcion shipment.

43. The result is that the appeal is allowed in part and in the place of Rs. 3,000 decreed by the learned Judge, the plaintiff-appellant will be entitled to a decree for Rs. 6,500. The parties will pay and receive proportionate costs in the appeal. The memorandum of objections is dismissed with costs. So far as the costs at the trial are concerned, we are not disposed to vary or disturb the order of the learned Judge passed in that behalf.

44. The appellant who has paid Court-fee on his appeal on the amended scale will be entitled to a refund of the excess over what was payable under the High Court-fee Rules, 1933.


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