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Bengal Corporation Private Ltd. Vs. the Commissioner for the Port of Calcutta - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberCommercial Cause Suit No. 763 of 1966
Judge
Reported inAIR1971Cal357
ActsEvidence Act, 1872 - Section 64; ;Sale of Goods Act, 1930 - Sections 16(1) and 59; ;Contract Act, 1872 - Section 72
AppellantBengal Corporation Private Ltd.
RespondentThe Commissioner for the Port of Calcutta
Appellant AdvocateS. Tibrewal, Adv.
Respondent AdvocateR.L. Sinha and ;A.N. Das, Advs.
Cases ReferredMithan Lal Inder Narain v. Suraj Parshad Madan Gopal
Excerpt:
a) it was ruled under section 64 of the evidence act, 1872, that certificates issued by the plaintiff to the defendant and statements in relevance to it would not be challenged by the defendant as incorrect - as it was found that maker of the statement would not testify correctness b) it was adjudged under section 16(1) of the sale of goods act, 1930, that 'implied warranty' would be presumed if the three condition in the said section were proved - t.k. basu, j.1. this is an action by the plaintiff bengal corporation private ltd. for the recovery of a sum of rs. 11,399.81 p. as the balance of the price of goods sold and delivered.2. according to the plaintiff it is the sole agent in india of teikoku sangyo co. ltd.. osaka, japan who are manufacturers of wire ropes. on the 10th november 1962 the defendant, commissioners for the port of calcutta, issued invitation for tenders in respect of the supply of wire ropes of various specifications mentioned therein. pursuant to the invitation for tender, the plaintiff offered to supply to the defendant wire ropes of the required specifications manufactured by its japanese principals. the salient terms of the offer of the plaintiff were, inter alia, the following:(a) the plaintiff would supply.....
Judgment:

T.K. Basu, J.

1. This is an action by the plaintiff Bengal Corporation Private Ltd. for the recovery of a sum of Rs. 11,399.81 P. as the balance of the price of goods sold and delivered.

2. According to the plaintiff it is the sole agent in India of Teikoku Sangyo Co. Ltd.. Osaka, Japan who are manufacturers of wire ropes. On the 10th November 1962 the defendant, Commissioners for the Port of Calcutta, issued invitation for tenders in respect of the supply of wire ropes of various specifications mentioned therein. Pursuant to the invitation for tender, the plaintiff offered to supply to the defendant wire ropes of the required specifications manufactured by its Japanese principals. The salient terms of the offer of the plaintiff were, inter alia, the following:

(a) The plaintiff would supply with each consignment a manufacturer's Test Certificate and also a Lloyd's Certificate,

(b) The goods would conform to B.S.S. 302/621 of 1957,

(c) The defendant at its own costs would be entitled to have an independent inspection of the goods,

(d) The defendant would have the goods inspected prior to their shipment.

3. The offer of the plaintiff was accepted by the defendant. Commissioners for the Port of Calcutta and the relevant orders were issued containing the terms and conditions which have been set out above.

4. Pursuant to the above agreement the plaintiff between March, 1964 and April. 1964 supplied diverse quantities of wire ropes of a total value of Rs. 3,32,898.41 P. It is to be noted at this stage that the defendant accepted the bulk of the goods without raising any dispute. We are only concerned in this suit with the supply of two reels of wire ropes which were delivered pursuant to two orders being Order No. C 2113/50 and Order No. C 2114/50 both dated the 14th March, 1963. According to the plaintiff the price of the wire ropes supplied pursuant to the above two orders has not been paid by the defendant.

5. At the time of the agreement the plaintiff furnished security deposit in various instalments amounting to a total sum of Rs. 15,000/-. The defendant has repaid a sum of Rs. 14,000/- out of the security money. The plaintiff in this suit claims the balance of security deposit amounting to Rs. 1,000/-.

6. According to the written statement filed by the defendant it was a condition of the contract that the plaintiff would supply wire ropes of non-rotating type of various specifications mentioned therein. The defendant was well aware that the two reels of wire ropes which are the subject-matter of this suit were required for use in cranes. According to the pleading it was an express or implied condition or warranty of the said orders that the wire ropes mentioned therein should be of non-rotating type and fit for use in cranes. It was further an implied condition that the two reels of wire ropes should be free from any defect rendering them unfit for use on cranes which would not be apparent on reasonable examination of the reels.

7. According to the defendant the plaintiff supplied two reels of wire ropes which did not correspond with the agreement and condition or warranty as to quality and fitness. They were not non-rotating type wire ropes. The non-rotating quality of the two reels were not apparent upon reasonable examination of reels and could only be tested on use on cranes. The two reels supplied by the plaintiff within a week of installation on cranes failed while in use on the cranes due to formation of bird cage, i.e., inner strands coming out of the outer strands, nearly at the junction of the operating and non-operating portions of the wire ropes on the ground. The said defects were discovered for the first tune during routine inspection of the said wire ropes by the crane operators of the defendant. The defendant duly intimated the defects to the plaitinff by a letter dated the 17th August. 1964 and the plaintiff took out cut piece samples of the said wire ropes.

8. It is stated that by reason of the aforesaid defects the said two reels of wire ropes were worth Rs. 9,477-33P and Rs. 1000/- less than what they would have been if they had been wire ropes of the description and quality in accordance with the said agreement condition and warranty. As there was no stock of wire ropes available in the market of the same type and ships carrying foodgrains had to be continuously unloaded, the defendant was compelled to use the two reels of defective wire ropes.

9. The defendant claims that it is entitled to set up the breaches of condition which they were compelled to treat as breaches of warranty against the plaintiff in diminution or extinction of the entire price claimed as and by way of set off or counter-claim.

10. It is to be observed from the pleadings that the defendant does not dispute that the amount of the balance of price which is claimed by the plaintiff remains unpaid. The defendant does not also dispute that the balance of Rs. 1000/- out of the security deposit has not been paid to the plaintiff. The defendant sets up a claim by way of set off on the grounds mentioned in the written statement.

11. The following issues were framed at the trial:

(1) Did the plaintiff supply to the defendant wire ropes specified in the Order No. C of the notes 2113/50 and 2114/50 dated 14th March, 1963 as alleged in paragraphs 5 and 7 of the plaint?

(2) Was the said wire rope duly tested or inspected by or on behalf of the defendant before the supply?

(3) Did the plaintiff at the time of placing of the said orders know that the defendant required the said wire ropes for use on cranes as alleged in paragraph 4 of the written statement?

(4) (a) Was it an express or implied condition or warranty of the said orders that the said wire ropes should be non-rotating type and fit for use on cranes as alleged in paragraph 4 of the written statement?

(4) (b) If so, were the two reels of wire ropes supplied by the plaintiff in accordance with the condition or warranty?

(5) Was it an implied condition of the said agreement that the wire ropes should be free from any defect rendering them unfit for use on crane which would not be apparent on reasonable examination of the reels as alleged in paragraph 4 of the written statement?

(6) Did the said wire ropes fail within a week of installation on cranes while in use on cranes due to formation of bird cage (inner strands coming out of the outer strands) as alleged in paragraph 6 of the written statement?

(7) Were the alleged defects in the said two reels of wire ropes not apparent upon reasonable examination of the reels or could only be tested on use on cranes as alleged in paragraph 6 of the written statement?

(8) Did the defendant duly accept the goods as alleged in paragraph 8 of the plaint?

(9) Is the defendant entitled to set off or counter-claim as alleged in paragraph 7 of the written statement; if so, for what amount?

(10) To what relief, If any, Is the plaintiff entitled?

12. Before I deal with the respective issues and give my findings thereon it would be necessary to dispose of an objection on the question of admissibility of certain documents. These documents were tendered on behalf of the plaintiff subject to objection by Mr. R. L. Sinha appearing on behalf of the defendant, The documents are Exts. C, D, F, G, J, and K. The broad objection that has been taken to the admissibility of all these documents is that the contents of these documents have not been proved. According to Mr. Sinha. the learned counsel for the defendant, the contents of these documents could only have been proved by calling the makers of those documents, No attempt has, however, been made to call the writers of any of the letters which are the subject-matter of this controversy. Hence, it is submitted, thaf these documents should not be allowed to be kept on the records of this suit but should be expunged.

13. Mr. Tebriwal for the plaintiff did not seriously dispute the proposition of law that the correctness of the contents of the documents cannot be proved except by calling the makers of the documents or some person who is competent to testify to the correctness of the content of a particular document. He, however, submitted that for the purpose of his client's case the proof of the existence of some of these documents was sufficient. This contention will have to be dealt with separately with reference to the different exhibits.

14. With regard to manufacturer's Test Certificates and Lloyd's Test Certificates it is submitted on behalf of the plaintiff that in paragraph 7 of the plaint it has been specifically alleged that these Test Certificates were supplied by the plaintiff to the defendant along with the supply of the goods. In paragraph 6 of the written statement it is admitted by the defendant that these certificates were furnished. It is further stated in the written statement that the Test Certificates furnished by the plaintiff were for break-load test. There is no allegation in the written statement that the contents of these certificates were not correct. In these circumstances, it is submitted that the defendant is not entitled now to take the stand that the contents of these certificates are not correct and insist on proof of the correctness of the contents of these certificates.

15. Adverting to another aspect of this question it is submitted on behalf of the plaintiff that the obligation of the plaintiff under the contract was to furnish these test certificates. On the admitted facts this obligation of the plaintiff has been discharged. It is now for the defendant to allege and prove that the certificates which were furnished in terms of the agreement of the parties were incorrect. In other words, the onus is on the defendant to allege and prove that these certificates were not correct. That onus has not been discharged by the defendant.

16. In my view this contention on behalf of the plaintiff is well-founded. On the pleadings there is no challenge that the certificates which were admittedly supplied by the plaintiff to the defendant contained any incorrect statement. That being the position, the defendant, in my view, is not entitled to raise the objection that these Test Certificates were not correct and insist on proof of the correctness of the contents of these documents.

17. I make it clear, however, that the above finding is confined only to the manufacturer's Test Certificates and Lloyd's Test Certificates, viz., Exts. K and L. With regard to the other exhibits which were tendered subject to objection, I am of the view that as no one has testified as to the correctness of the contents of those letters and the authors of these letters have not been called, the correctness of the contents of these letters has not been proved. The existence of those letters has, however, been proved, in other words, it has been established that these letters were actually written and these exhibits wills form part of the records only for that limited purpose.

18. Coming to the issues, the first Issue to be decided is whether the plaintiff supplied to the defendant wire ropes in accordance with the orders. Only two orders are in dispute in this suit which, as I have said, are orders Nos. C 2113/50 and C 2114/50, both dated the 14th March, 1963. These are to be found at pages 23 and 24 of Ext. A. The material portion of the description of the wire rope in C 2113/50 is as follows:--

'One reel of 56000 ft. ungalyanized wire rope best plough steel, non-spinning ordy, lay tensile strength 100/110 tons P. S. I. -- 2.1/8' circumference x 17/7 const.'

Similarly the material portion of the description in C 2114/50 is as follows:--

'One reel of 4000 ft. ungalvanized best plough steel wire rope, non-spinning ordinary lay, tensile strength 100/110 P.S.I.--2 1/2' cir x 17/7 const.'

19. It was not disputed that so far as these wire ropes are concerned, the expression 'non-spinning' is the same as 'non-rotating'. The only controversy with regard to this question is whether the wire ropes supplied by the plaintiff conform to the specification that they should be of the 'non-spinning' or 'non-rotating' type. There is no other controversy or grievance with regard to the description or quality of the goods which were supplied.

20. As already indicated, it has been alleged in the written statement in paragraph 6 that the two reels of wire ropes did not correspond to this particular specification and were not 'non-rotating' type. On a proper reading of paragraph 6 of the Written Statement it seems to me that the allegation is that as a result of this non-conformity with the description of the goods, the reels of wire ropes failed while used on the cranes due to the formation of bird cage, i.e., inner strands coming out of the outer strands.

21. In my view, this controversy Is really clinched by the two answers to questions which was asked of Mr. Sankar Das Mitra, the only witness on behalf of the defendant. Q. 171 and Q. 172 are as follows:--

'Q. 171. To Court: Combination of strands will give you an idea as to whether it is of rotating type or non-rotating type and that can be ascertained by visual inspection?/Yes.

Q. 172. To Counsel: What is the difference so far as the wire rope of a rotating type is concerned and wire rope of non-rotating type is concerned?/17/7 construction is a non-rotating type and 6/37 is a rotating type.'

It is to be observed that the contract for both the reels provide that they would be of 17 x 7 construction. There is no dispute that the goods supplied by the plaintiff did correspond to this specification and were in fact of 17 x 7 construction. In fact, both parties have throughout proceeded on the basis that the wire ropes were of 17 x 7 construction. If that is so. it would be non-rotating type according to the evidence of the defendant's own witness Mitra. No other witness has even suggested that a wire rope having 17 x 7 construction could be of any other type than non-rotating. That being the position, it must be held that the only grievance of the defendant with regard to the wire ropes not conforming to the specifications in the contract fails on the evidence of the defendant's own witness. Issue No. 1 must, therefore, be answered in the affirmative.

22. The next issue is whether the wire ropes were duly tested or inspected by or on behalf of the defendant before their supply. The tender which was submitted by the plaintiff and which is to be found at page 4 of Ext. A contain a clause as to inspection in the following terms:

'Independent inspection Is acceptable to our principals the cost of which shall be to your account.'

In the conditions of the tender which was invited by the defendant Clause (3) provides as follows:

'Samples, if required, are to be marked and labelled so as to correspond with the times in the tender and sent to the Controller of Stores' Office so as to arrive there simultaneously with the tender.'

According to the evidence of Paban Guha on behalf of the plaintiff samples were submitted by the plaintiff company to the Port Commissioners along with the tender (Qq. 22-27). Guha further says that the Port Commissioners nominated Lloyds Register of Shipping to inspect the goods (Q. 34). This part of the plaintiff's case has not been contradicted by any evidence on behalf of the defendant either oral or documentary. In this state of the evidence it must be concluded that the wire rope was inspected on behalf of the defendant before their supply.

23. It is clear from the certificate furnished by Lloyds Register of Shipping that these wire ropes corresponded to the specifications laid down in British Standard Specification 302/621 of 1957. The British Standard Specification 302 and 621 of 1957 with regard to wire ropes for cranes and excavators and general engineering purposes were tendered and marked as exhibit by consent of parties, formal proof being dispensed with. From a perusal of the specifications it is found that various tests have been prescribed with regard to the construction, strength, size, weight, lay, material, galvanizing, tensile strength etc. Since the goods were found to conform to the British Standard Specifications it must be presumed that all these tests had been carried out prior to the certificate being issued by Llyods Register of Shipping. In that view of the matter, it must also be held that the wire rope was duly tested on behalf of the defendant before their supply. Issue No. 2 is answered accordingly.

24. Mr. Tibrewal for the plaintiff drew my attention in this connection to Regulation 30 of Indian Dock Labourers Regulations, 1948 which have been framed under Section 5 of the Indian Dock Labourers Act, 1934. Regulation 30 (1), inter alia, provides as follows:--

'No rope shall be used in hoisting or lowering unless--

(a) it is of suitable quality and free from patent defect; and

(b) in the case of wire rope, it has been examined and tested by competent persons in the manner set out in Schedule 2.'

It was submitted that Regulation 30 casts a statutory obligation upon the Port authorities to test every piece of rope before their use in hoisting or lowering which, in other words, means before use in cranes. From that I was invited to presume that the law must have been complied with and that the Port Commissioners must have tested these ropes before hoisting or lowering.

25. In my view, this statutory provision does not throw any light on the facts to be decided under Issue No. 2. What I am called upon to decide is whether the wire ropes were tested before their supply. What Regulation 30 of the Dock Regulations provides is that they must be tested before actually hoisting or lowering the cranes. Therefore, if I presume that this statutory obligation must have been discharged by the Port authorities, it would not establish whether these wire ropes were tested before they were supplied to the defendant by the plaintiff.

26. The next issue is whether the plaintiff, at the time the orders were placed, knew that the defendants required the wire ropes for use on cranes. It is nobody's case that there was any express communication of the purpose for which these wire ropes were to be used from the defendant to the plaintiff. In fact, all the documents with regard to the contract, namely, the invitations to tender, the tender and the orders appear to be silent on the purpose for which the Port Commissioners required these wire ropes. Mr. Sinha, however, strongly relies on that clause in the order at pages 23 and 24 of Ext. A which provides that the test certificate from the manufacturers must be, inter alia, under Regulation 30 (1) (b) of the Dock Regulations of 1948. This Regulation 30 (1) (b), as has already been indicated, deals with the testing of wire ropes before 'hoisting or lowering'. This 'hoisting or lowering' can only be in connection with the use on cranes. Since the plaintiff knew that the manufacturers had to provide a certificate in compliance with this Regulation 30 (1) (b) of the Dock Regulations and such a certificate was in fact supplied, the plaintiff must be held to have the knowledge that these wire ropes were needed for use on cranes.

27. In my view this contention of Mr. Sinha is of substance. It is clear from the orders that the manufacturers had to furnish a certificate in compliance with Regulation 30 (1) (b) of the Dock Regulations, such a certificate can only have relevance for the purpose of 'hoisting or lowering' with the help of ropes. Such hoisting and lowering with the help of wire ropes can only be on cranes. Therefore in my view the plaintiff must be held to have been imputed with the knowledge that these wire ropes were required for use on cranes in the facts and circumstances of the case.

28. Issue No. 3 is, therefore, answered in the affirmative.

29. Issue No. 4 is whether it was an expressed or implied condition or warranty that the wire ropes should be non-rotating type and fit for use on cranes and if so were the wire ropes supplied in accordance with such condition or warranty. As is clear from the language of the issue this involves an investigation as to two different warranties, viz., warranty as to the wire ropes being of the non-rotating type and a further warranty as to fitness for use on cranes. These will have to be investigated separately.

30. With regard to the warranty that the wire ropes should be non-rotating type it is not necessary to find out any implied condition or warranty. As I have already said the contract expressly provides that the wire ropes should be of the 'non-spinning' type which is the same as non-rotating type. With regard to this part of Issue No. 4 fa) I therefore hold that there was an expressed warranty that the wire ropes should be non-rotating type.

31. With regard to this part of Issue No. 4 (b) it must be held as I have discussed earlier that on the evidence of defendant's own witnesses the goods were of the non-rotating type. As such the wire ropes supplied by the plaintiff were in accordance with this express warranty that they would be of the non-rotating type.

32. With regard to the other part of Issue No. 4 (a) viz.. whether there was an express or implied condition or warranty that the wire ropes should be fit for use on cranes it would be necessary to embark on a wider enquiry in the field of law of sale of goods and its application with regard to the facts of the present case.

33. As I have already observed there is no reference in any of the contract documents as to what was the purpose for which the defendant required these wire ropes. There is no express mention anywhere in these documents that these wire ropes were needed for use on cranes. As such the question of there being an express warranty that the wire ropes would be fit for use on cranes does not arise. The next question is: was there an implied condition or warranty to this effect?

34. Mr. K. L. Sinha for the defendant in this connection relies on Section 16(1) of the Sale of Goods Act, 1930 (hereinafter referred to as the Act). Section 16(1) of the Act is on the following terms:

'Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:--

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.'

35. This Sub-section (1) of Section 16 of the Act, as it well-known, engrafts an exception on the general maxim caveat emptor. It is also clear on an analysis of Section 16(1) that three conditions have to be satisfied before a buyer can invoke the implied condition that the goods supplied shall be reasonably fit ion a particular purpose. The three conditions are as follows:

(a) The buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required.

(b) This 'making known' to the seller of the purpose would show that the buyer relies on the seller's skill or judgment.

(c) The goods are of a description which it is in the course of the seller's business to supply.

This question as to the applicability of Section 16(1) of the Act therefore involves an investigation into a mixed question of law and fact. In other words, the Court has to find as a fact whether these three conditions which I have set out above for the applicability of Section 16(1) are satisfied. If they are satisfied, the Court is to draw the conclusion that in law it amounts to 'implied warranty' as provided in that Sub-section.

36. From this, it necessarily follows that any buyer who is seeking to invoke the protection granted to it by Section 16(1) of the Act must allege and prove that the three conditions which are necessary for its application have in fact been satisfied. It is now necessary to ascertain whether these facts have been alleged and proved by the buyer who is the defendant in the facts and circumstances of this particular case.

37. Turning to the written statement it is found that the defendant alleges in paragraph 4 that the plaintiff well knew that the defendant required the wire ropes for use in cranes. This is undoubtedly sufficient pleading the first condition. There is however no pleading that the buyer made known to the seller the purpose for which the goods were required so as to show that the buyer relied on the seller's skill or judgment. There is no pleading that the goods are of a description which it is in the course of the seller's business to supply. Turning to the oral and documentary evidence it is found that there is no evidence that the buyer relied on the seller's skill or judgment or that the goods were of a description which was in the course of the plaintiff's business to supply.

38. Mr. Tibrewal for the plaintiff submits that on the evidence it should be held that the buyer did not rely on the seller's skill or judgment. With reference to the invitation for tender, it was pointed out that even the country of manufacture was not indicated but the tenderer was invited to state the maker's name, brand, quality and country of manufacture. The contract provided for the supply of samples of the goods. It further provided that a manufacturer's certificate would have to be furnished long with the goods. The contract further provides for independent inspection which was in fact carried out by Lloyd's Register of Shipping as the nominee of the buyer. All these facts, according to the plaintiff, would go to show that the buyer had guarded and protected itself in all possible ways at all stages. Therefore, there was no reliance by the buyer on the seller's skill and judgment.

39. If I had to decide this question on merits I would have no hesitation In accepting the plaintiff's contention as of substance. In my view, however, this question does not really fall for consideration on merits. As I have indicated if the defendant in this case seeks to rely on the provisions of Section 16(1) of the Act it is for the defendant to allege that the three conditions for the applicability of that provisions exist in fact. It is then for the defendant to prove those facts. In the present case except for the pleading of the first condition there is no pleading of the other conditions necessary for the applicability of Section 16(1) of the Act. In these circumstances, the defendant in my view is not entitled to rely on the provisions of Section 16(1) of the Act. Mr. Sinha referred to a decision of the Judicial Committee in a case which went up from Australia. That is the case of Richard Thorold Grant v. Australian Knitting Mills Ltd., AIR 1936 PC 34. Section 14 of the South Australia Sale of Goods Act (1895) is in pari materia with Section 16 of our Act. It was held by Lord Wright delivering the opinion of the Judicial Committee that the first exception to Section 14 of the South Australian Act, if its terms are satisfied, entitles the buyer to benefits of an implied condition that the goods are reasonably fit for the purpose for which the goods are supplied, but only if that purpose is made known to the seller 'so as to show that the buyer relies on the seller's skill or judgment'. 'It is clear', observed Lord Wright at page 40 of the report 'that the reliance must be brought home to the mind of the seller, expressly or by implication. The reliance will seldom be express, it will usually arise by implication from the circumstances: thus to take a case like that in question of a purchase from a retailer the reliance will be in general inferred from the fact that a buyer goes to the shop in the confidence that the tradesman has selected his stock with his skill and judgment; the retailer need know nothing about the process of manufacture; it is immaterial whether he be manufacturer or not.'

40. On the strength of this passage it was submitted on behalf of the defendant that although the plaintiff may be unaware of the process of manufacture or of any manufacturing defect he would nevertheless be liable for a breach of implied condition. As I have already held that on the pleadings and the evidence the defendant is not entitled to invoke the provisions of Section 16(1) of the Act. In that view of the matter this contention could not be dealt with in any greater detail.

41. Mr. Sinha next fell back upon Section 16(2) of the Act which is in the following term:

'16 (2): Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not) there is an implied condition that the goods shall be of merchantable quality;

Provided that If the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.'

According to Mr. Sinha since the goods were admittedly bought by description and the seller dealt with the goods that description, his client is entitled to invoke the implied condition that the goods shall be of merchantable quality. It was further argued that, on the facts, it should be held that the goods which were supplied were not of 'merchantable quality' and as such there has been a breach of an implied condition which the defendant was compelled to set up as a breach of warranty. Consequently the defendant is entitled to set up the claim he has made in diminution or extinction of the price according to the provisions of Section 59 of the Act.

42. A number of authorities were cited by both parties as to what was the exact legal connotation of 'merchantable quality'. Mr. Sinha relied on a decision of a Division Bench of the Madras High Court in the case of National Traders v. Hindustan Soap Works, : AIR1959Mad112 . Reference was also made to another decision of the Madras High Court in the case of Agha Mirza Nasarali Khoyee & Co. v. Gordon Woodroffe & Co., AIR 1937 Mad 40. Mr. Tebriwal on the other hand relied on a passage in the well-known Judicial Dictionary 'Words and Phrases judicially defined' edited by Sir Ronald Burrows (Second Edition, Vol. III) at page 249. Reference was also made to a recent House of Lord's decision in the case of Henry Kendall & Sons v. William Lillico & Sons Ltd., (1968) 2 All ER 444. This decision is an unusually long one running over 50 pages of the report and contains an authoritative and exhaustive review and discussion of the entire case law on the subject of 'merchantable quality.'

43. I have merely noticed these authorities but I do not propose to discuss them in detail or express any opinion because, in my view, the main part of Section 16(2) of the Act is not attracted in the facts of the present case. As I have already held, the buyer through its representatives had examined the goods prior to the delivery thereof. That being the actual position, this is a case which comes under the proviso to Section 16(2) of the Act. In other words the only question is: Is there any defect in the goods which would not have been revealed on such examination? To put it in a different way, was there any 'latent defect' as it is called in the goods supplied by the plaintiff? But this question will have to be considered under a different issue.

44. In these circumstances it must be held that the defendant is not entitled to invoke the implied condition of 'merchantable quality' for the reasons given above.

45. Issues Nos. 5, 6, and 7 may be conveniently taken up together. On this part of the case it has been submitted on behalf of the defendant that there was a manufacturing defect in the two reels of wire ropes which were supplied by the plaintiff. It has further been submitted that this manufacturing defect is a 'latent defect' which would not be apparent on reasonable examination of the reels. In the circumstances the defendant seeks the aid of the proviso to Section 16(2) of the Act.

46. Mr. Tebriwal submitted that there was no allegation of any particular manufacturing defect in the written statement. The only grievance which is made in paragraph 6 of the written statement is. as I have already observed, that the two reels of wire ropes were not non-rotating type and, as such, they did not conform to the specifications in the contract. The formation of the bird cage (the inner strands coming out of the outer strands), on a proper reading of the written statement in my opinion is merely the effect or consequence of the above non-conformity with the contract specifications. It is not an independent defect alleged in the written statement. In that state of affairs, the only question that falls for consideration is whether the wire ropes supplied were of the non-rotating type as required by the contract. I have already held under issue No. 1, they were of the non-rotating type as they fulfilled the necessary constructional requirements namely, 17 x 7. This is also admitted by the witness for the defendant.

47. It is further submitted on behalf of the plaintiff that there was no allegation of any 'latent defect' in the wire ropes supplied and, as such, this question did not really arise for consideration. It must be said, however, that the defendant has in the written statement stated that the alleged breach of condition by the plaintiff was such as could not be revealed by reasonable examination of the goods. In my view, the defendant is entitled to urge this contention which will have to be decided on merits.

48. On the state of the oral and documentary evidence, it would be reasonable, in my view, to come to the conclusion that the wire ropes supplied did reveal a defect at a certain point of time after it was used. The defendant's witness has in answer to questions 54 to 59 given evidence of the nature of the defect in the wire rope. It is to be noticed, however, that he does not speak of any manufacturing defect in this part of his evidence. In cross-examination in answer to Qq. 325 to 331 Mitra has fairly admitted that he is not competent to speak about any manufacturing defect.

49. Coming to the evidence of the plaintiff's own witness it is to be noticed that he does speak of a deformation for which he has a different explanation. Q. 198 of the evidence of Paban Guha is as follows:--

'So, you see there has been some deformation in the wire rope supplied?/ Yes, I have already stated that that waa due to the chisels used and for which we were saying that it was mishandled.' Q. 195 may also be noticed in this connection: 'Therefore, the inner strand has come out of the outer strand, it is quite clear from your letter?/What I mean to say is this that that was due to use of the wire ropes, but when these were shown to us we found that two wire ropes placed side by side were hammered with the help of chisels and due to that there was twisting, but no inner strand had actually come out.'

50. The documentary evidence In this connection may also be noticed at this stage. On the 19th June, 1964, the plaintiff's witness Mitra, who was an Engineer-in-Charge, Dockyard, sent a report to the Inspecting Engineer wherein it was stated that on a particular crane at the Garden Reach Jetty the hoist wire-rope had to be replaced thrice, that is, on 30-3-64. 7-5-64 and 13-6-64, due to formation of birdcage on the rope.

51. Thereafter on the 17th August, 1964, a letter was written by the defendant to the plaintiff. The letter set out what purports to be an extract from a report submitted by the Commissioners, Executive Mechanical Engineer (Haldia) deputed to investigate into the reported defect of the wire ropes supplied by the plaintiff. This report inter alia states as follows:--

'The damaged rope samples show that the inner strands have stretched too far on loading during operation and have come out of the outer strands forming a birdcage.'

A similar letter was addressed to the plaintiff by the defendant on the 28th October, 1964 and is to be found at page 72 of Ext. A. That letter again set out what purports to be a report of the Chief Mechanical Engineer, containing, inter alia, the following observations:

'The defect is ascribed due to a fault in manufacture although the rope might have complied with the provisions of the British Standard Specification from strength point of view.' The letter in its last paragraph stated as follows:--

'In view of what has been stated above it is crystal clear that the failure is not due to anv mishandling of wire ropes as presumed by your principals but is due to inherent manufacturing defect. Will you, therefore, please take up the matter with your principals for further investigation and advice the outcome at an early date.' It will be noticed that the expression 'manufacturing defect' is being used for the first time in this letter.

52. On the 6th November. 1964, the plaintiff wrote a letter to the Controller of Stores of the defendant. The third paragraph of the letter is as follows:

'During our discussions on 28th October, 1964, you had given us to understand that the entire quantity of the two sizes of wire ropes supplied to you have been consumed although those were found to be defective during the very first operation. If the entire quantity had not been used up arrangement could have been made for inspection of the same by the suppliers and replacement, if found necessary.'

53. This letter, in my view, is a tacit recognition on the part of the plaintiff that there was some defect in the wire ropes supplied. To the same effect is a paragraph in a letter dated the 23rd December, 1964, which is to be found at page 78 of Ext. A. In this letter the plaintiff, inter alia, states as follows:--

'As advised to you earlier kindly arrange to return the defective wire ropes mentioned in your letter No. T/2226/62-63/ MS dated 17th August. 1964 and subsequent letters so that we may arrange to return the same to the manufacturers and arrange for replacement of the same.' The last letter to be noticed on this point is dated 18th January, 1965 written by the plaintiff to the Controller of Stores of the defendant. The second paragraph of the letter is as follows:-- 'From the samples of damaged wire ropes 2.1/8' x 2.1/4' cir. sent to us which were shown to you subsequently, it was evident that no wires of the ropes have shaped at any spot, but the outer strands had given way from the inner strands, perhaps due to some mishandling.' On the basis of this documentary evidence I am of the view that the wire ropes did develop a defect.

54. But the question that naturally arises is as to what was the cause of this defect. The plaintiff in its letters has been contending that the defect is due to mishandling. It is the defendant's contention in the correspondences that it is a manufacturing defect. Can this lis be resolved on the state of the evidence before me? Mr. Tibrewal for the plaintiff submitted that the allegation of manufacturing defect in the letters of the defendant are really based on the two reports of the Executive Mechanical Engineer (Haldia) and the Chief Mechanical Engineer of the defendant. None of these two gentlemen chose to come before me and give evidence. No explanation has been suggested by the defendant as to why these Engineers were not called to depose to their specialised and perhaps expert knowledge on the nature of the defect. That being so, there is no evidence before me of any manufacturing defect. The allegations contained in the letters written by the Commissioners are really based on the hearsay documentary evidence of these Engineers.

55. In my view this contention of Mr. Tibrewal is sound. As I have said there is no specific allegation of any manufacturing defect in the written statement of the defendant. The letters are based on the reports of certain gentlemen who have not been called to give evidence before me. Even Mr. Mitra doea not use the expression 'manufacturing defect' in his examination-in-chief. In his cross-examination he frankly admits that he is not capable of deposing as to any manufacturing defect.

56. On the other hand, it has been suggested in the cross-examination of Mitra that the formation of birdcage could be the result of various types of mishandling and various components of the crane and the pulley not working properly. In question 193 Mitra admits that the life of a wire rope depends on its proper handling. In Q. 194 he further admits that if the wire rope is not properly handled kinks may be formed in the rope. Various other questions on this aspect of the matter are to be found in Qq. 195 to 216. The upshot of this evidence is a frank admission by Mitra that there could be several reasons in connection with handling and operation of the wire ropes in the crane which could result in the defect that is alleged by the defendant.

57. Mr. Tibrewal sought to argue that it was for the defendant to establish that all the components of the crane and the pulley and the other connected instruments were working properly. It was submitted that this was a matter within the special knowledge of the defendant. It is not necessary for me to express any opinion on this contention. It is because in my view the onus was entirely on the defendant to establish that there was a manufacturing defect in the wire ropes and that onus has not been discharged. It is to be remembered that samples of these goods were provided along with the tender. The defendant nominated Lloyd's Register of Shipping for prior inspection of the goods before delivery. Such inspection was allowed. The contract provided for the furnishing of manufacturing certificates. This requirement was duly complied with. The manufacturer's certificate was accepted by the defendant without demur. Lloyd's Test Certificate shows that the goods corresponded to the British Standard Specification which as I have already stated, prescribes almost all conceivable types of test of a wire rope. The goods were kept in the godown of the defendant for a period of three weeks before their use commenced. There was no complaint as to any defect at this stage. It is on evidence, with reference to the stock ledger of the defendant, that for the first five weeks of its use the wire rope did not develope any trouble.

58. In that state of affairs It was, in my view, clearly the duty of the defendant to establish before this Court with satisfactory evidence that the formation of the birdcage was due to a manufacturing defect. If the formation of the birdcage is merely the consequence of the breach alleged in the written statement, namely, the wires not being of the non-rotating type, then since I have held that the wires were of the non-rotating type, no other question need really arise. But even assuming that in spite of the pleadings the defendant was entitled to set up a case of a manufacturing defect in the wire ropes and also the case that the defects were 'latent' in the sense that they could not have been detected by reasonable examination prior to or after delivery, I have no hesitation in holding that, on the evidence before me, that case has not been proved.

59. Since I have come to the conclusion that the defendant has failed to prove that there was any manufacturing defect in the wire rope, the question as to whether the defects were 'latent defect' so as to attract the applicability of the proviso to Section 16(2) of the Act, does not really fall for consideration. Certain authorities were cited on both sides on the meaning of the expression 'latent defect'. In the view that I have taken, it is not necessary to deal with the authorities. This somewhat intricate question in the law of Sale of Goods may be left for consideration on an appropriate future occasion.

60. In view of the above observation issue No. 5 must be answered in the negative.

61. With regard to Issue No. 6 I have said that the wire ropes developed a defect long after a week of its installation. I am of the opinion that there was a formation of birdcage, i.e., inner strand coming out of the outer strand.

62. Issue No. 7 must be answered in the negative in view of what has been stated earlier.

C3. Issue No. 8 relates to the question as to whether the defendant duly accepted the goods. The argument of the plaintiff on this issue is really based on Section 42 of the Act, which may be noticed at this stage.

'Section 42 -- The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller or when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.'

It is submitted on behalf of the plaintiff that all the conditions laid down in Section 42 of the Act have been fulfilled and as such it should be held that the defendant has duly accepted the goods. In my view this contention on behalf of the plaintiff should be accepted. It is no-body's case that there was any protest with regard to the quality of the goods at the time of delivery. It was pointed out that the goods were kept in the go-down of the Port Commissioners for at least three weeks prior to its actual use. The goods were delivered on the 3rd and 4th March, 1964 and the first use from the crane of the defendant on the 30th March, 1964. This is the evidence of Mitra for the defendant, that is also the evidence of the stock ledger book of the defendant. This should be held to be 'a reasonable time' for the retention of the goods without intimating to the seller that the buyer has rejected them. In fact, the first intimation of any alleged defect of the goods is contained in the letter of the 17th August. 1964 which is nearly five and half months after the delivery of the goods. With regard to the exercise of an act of ownership it was rightly submitted that the goods were kept in the godown of the defendant. They were cut into pieces and fitted on the cranes. All these are acts which are inconsistent with the ownership of the seller.

64. It must be said that Mr. R. L. Sinha for the defendant did not seriously contest the position that the buyer had accepted the goods. In fact, his argument is really based on this fact since the buyer's own case is that he has been compelled to treat the breach of an alleged condition as a breach of warranty. Having regard to this fact I hold that the Issue No. 8 must be answered in the affirmative.

65. Mr. Tibrewal in this connection sought to advance an extreme contention that after the buyer has accepted the goods he is precluded from setting up the breach of warranty and claim dama-* ges on the basis thereof. It was submitted that the goods may be accepted conditionally or unconditionally at the time of delivery. Unless there is a conditional acceptance and that at the time of delivery and not later it is not open to the buyer to set up the plea of a breach of condition or a breach of warranty depending on the circumstance of the case,

66. Reliance was placed by Mr. Tibrewal in this connection on a decision of the Madras High Court in the case of M/s. Sha Thilokchand Poosaji v. Crystal and Co., : AIR1955Mad481 . Reference was invited to paragraph 14 of the report which deals with this question but I do not find that there is any proposition laid down that unless the goods are conditionally accepted by the buyer he is precluded from setting up a breach of warranty after the delivery of the goods.

67. Reliance was also placed on a decision of the Nagpur High Court in the case of Mangilal Karwa v. Shantibai, reported in AIR 1956 Nag 221. At paragraph 11 of the report the learned Judge observed as follows:

'The question whether the defendant purchaser had an option to reject the goods because what he bargained for was Masur and not some rotton stinking stuff which was once masur of that year's harvest does not arise for consideration in this case. For, even if there be a breach of a condition the defendant by taking delivery has, under Section 13 of the Act, elected to treat it as a breach of Warranty which under Section 59 entitles him to diminution or extinction of the price.

It is settled law that even after the goods have been delivered into the actual possession of the buyer, the performance of the seller's duties may still be incomplete by reason of the breach of some of the conditions or warranties -- express or implied -- whether as to the title or, quality, or fitness to which he has bound himself by the contract. (Benjamin on Sale p. 984)'.

I do not see how these authorities are of any assistance to Mr. Tibrewal in support of the proposition that he has advanced before me. This decision does not mention any point of time at which the complaint as to breach of warranty has to be made.

68. The complete answer to Mr, Tibrewal's contention, in my view, is provided by Section 59 of the Act which clearly postulates that even when a buyer has accepted the goods, he is entitled to set up against the seller a breach of warranty in diminution or extinction of the price or to sue the seller for damages for breach of warranty. The only handicap of such a buyer who has accepted the goods is that he is precluded from treating the breach of a condition as a ground for repudiating the contract. He is compelled to treat the breach of a condition as a breach of warranty and seek his remedies as provided for in Section 59 of the Act.

69. On the question of what is a reasonable time for examination of the goods Mr. Tibrewal relied on two decisions. One is a decision of the Lahore High Court in the case of Mithan Lal Inder Narain v. Suraj Parshad Madan Gopal, AIR 1932 Lah 52. The other is a decision of the Calcutta High Court in the case of Re: Andrew Yule & Co. (Ameer Ali J.), in AIR 1932 Cal 879. As I have already held that the defendant had a reasonable time for inspection of the goods during which he retained them without intimation to the seller, it is not necessary, in my view, to deal with these authorities.

70. Issue No. 9 deals with the question as to whether the defendant is entitled to set up or counter-claim as alleged in the written statement and, if so, for what amount. For the reasons given above it must be held that the defendant is not entitled to set up or counter-claim any amount. The issue No. 9 is, therefore, answered in the negative.

71. Before I conclude it will not be inappropriate to deal with a question raised by Mr. Tibrewal as to what is the measure and the proof of damages in a suit of this description. The legal position on this question is well established. In a suit by the seller where the buyer sets up a breach of warranty and claims damages in diminution or extinction of the price claimed by the seller by exercising his right under Section 59 of the Act, actual damages have to be proved. The measure of damages again is really not different from the measure adopted in the law of contract. In assessing the damages which the buyer would be entitled to under Section 59 of the Act, two things have to be found out. The first conclusion that the Court has to arrive at is what is the value or price of the goods which were contracted to be bought and sold. The Court has further to find out as to what is the value or price of the goods in respect of which a breach of warranty is being set up. Having done so, the Court has to deduct the second figure from the first and the difference would be the measure of damages which the buyer is entitled to in diminution or extinction of the price claimed by the seller.

72. It was submitted that in this case there was no evidence of the amount which represents the difference between the two values or prices which I have mentioned above. This contention is well founded.

73. In my view, the defendant has entirely failed to establish as to what is the shortfall in the value or the price of the goods by reasons of the alleged defect In the wire ropes. Consequently, even if I had come to the conclusion that the plea of breach of warranty has been established, the defence would have failed on the ground that the proper measure of damages has not been proved according to the well established legal principles. Having regard to my finding on the question of warranty and its breach, it is, however, not necessary to pursue this aspect of the question any further.

74. In the result, there will be a decree for Rs. 10,477.64 P. being the balance of the price of goods sold and delivered and the balance of the security deposit.

75. There will be a decree for Interest at the rate of 6% on the sum of Rs. 9,477.64 P. being the balance of price of the goods sold and delivered from the 30th August, 1965 to the 6th April, 1966.

76. There will also be a decree for interest at the rate 6 per cent, on the security deposit of Rs. 1000/- for the period between 6th April, 1964 and 6th April, 1966.

77. There will be interim interest and interest on judgment at the rate of 6 per cent, on the principal sum of Rs. 10,477.64 P.

78. The plaintiff is entitled to the costs of this suit.


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