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Guljarilal Kanoria Vs. Busi and Stephenson Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. and D. Nos. 13 and 14 of 1953
Judge
Reported inAIR1960Cal590
ActsArbitration Act, 1940 - Section 30; ;Jute Goods (Export Control) Order, 1949; ;Contract Act, 1872 - Section 73
AppellantGuljarilal Kanoria
RespondentBusi and Stephenson Ltd.
Appellant AdvocateA.C. Bhabra and ;D.C. Sethia, Advs.
Respondent AdvocateR.K. Ghosh and ;Nirmalendu Roy, Advs.
DispositionAppeal dismissed
Cases ReferredMeghraj Sampatlall v. Raghunath and Son
Excerpt:
- .....that it the time when the contracts were made and also at the time when they were broken the jute goods (expert central) order, 1949, was in force. the control order fixed ceiling prices in respect of manufactured jute goods. the ceiling price fixed for 100 bags 'b' twill bags 44' x 26 1/2' was rs. 155/12/- or roughly 245 s. 6d. taking into account the increased export duty of 15 shillings far 100 bags the official ceiling price per 100 bags was roughly 270 shillings per 100 bags on 28-2-1951. it is to be noticed that the respondent claimed damages on the basis of market prices in excess of the ceiling price. the appellant in his answer submitted that the respondent was entitled to only the difference between the contract price and the market price ruling in calcutta on the date of.....
Judgment:

Bachawat, J.

1. The appellant is an Indian merchant. The respondent is a company incorporated in England and carries on business in Liverpool. There were two contracts for sale of 'B' Twill Bags size 44' x 261/2, by the appellant to the respondent. The contracts are dated May 28 and June 29. 1950 respectively. The first contract is for shipment of 100 bales to Nigeria during July/August 1950 at 253 shillings per 100 bags f. o. b. Calcutta with quota secured for Nigeria. The second contract is for shipment of 250 bales to Nigeria during October 1950 but if possible in September 1950 at 245 shillings per 100 bags f. o. b. Calcutta with quota secured for Nigeria, Both contracts provide for payment against documents by confirmed Banker's credit in Calcutta. The contracts are on the terms of the Calcutta Jute Fabrics Shippers Association Contract Form 1935. Each of the contracts contains a wide arbitration clause providing for submission of disputes arising under the contract to the arbitration of the Bengal Chamber of Commerce, Calcutta. The due dates of both the contracts were extended up to 28-2-1951. On 19-1-1931 the appellant refused to perform the contracts. The repudiation was accepted by the respondent, on 16-2-1951. The respondent preferred two separate claims, before the Tribunal of Arbitration of the Bengal Chamber of Commerce. In respect of the first contract for 100 bales the respondent claimed a sum of 1005 as damages on the basis of the difference between the contract price and the repurchase price at 335 shillings per 100 bags. In respect of the second contract the respondent claimed a sum of 3037-10-0 as damages on the basis of the difference between the contract price and the repurchase price of 150 bales at 335 shillings per 100 bags and the re-purchase price of the balance 100 bales at 350 shillings per 100 bags. The respondent stated that-though the official ceiling price was 270 shillings, it was impossible to buy any goods at that, price. It may be mentioned that it the time when the contracts were made and also at the time when they were broken the Jute Goods (Expert Central) Order, 1949, was in force. The Control Order fixed ceiling prices in respect of manufactured jute goods. The ceiling price fixed for 100 bags 'B' Twill Bags 44' x 26 1/2' was Rs. 155/12/- or roughly 245 s. 6d. Taking into account the increased export duty of 15 shillings far 100 bags the official ceiling price per 100 bags was roughly 270 shillings per 100 bags on 28-2-1951. It is to be noticed that the respondent claimed damages on the basis of market prices in excess of the ceiling price. The appellant in his answer submitted that the respondent was entitled to only the difference between the contract price and the market price ruling in Calcutta on the date of the breach and that in view of the Control Order the contract price could not exceed the ceiling price. The Bengal Chamber of Commerce duly made two awards allowing the claim of 1005 in respect of the first contract and the claim of 3037-10 s. in respect of the second contract. The two awards were filed in Court. The appellant applied to the Court for setting aside the two awards. The learned trial Judge dismissed the application and passed two separate judgments on the two awards. These two connected appeals have been filed from the order and the two judgments.

2. On behalf of the appellant Mr. Sethia contended that the arbitrators misconducted themselves by damages on the basis of the difference between the contract price and the repurchase price. He argued that on a breach of contract by a seller to deliver the goods, the buyer would be entitled to the difference between the contract price and the market price on the date of the breach by way of damages and that it would be wholly erroneous to award damages on the basis of the difference between the contract price and the repurchase price as claimed by the respondent. There is no merit in this argument. Mere error of law is not misconduct. The arbitrator is the final judge of both fact and of law. His verdict cannot be assailed on the ground that the award is erroneous either in law or in fact. There is no appeal from an award. The Court cannot review an award on the ground that it is erroneous in law unless the error appears on the face of the award. The awards on the face of them, do not show any error. Besides I am not satisfied that the arbitrators committed any error of law or that they awarded damages on the basis of the cost of repurchase. In the statements of claim the respondent asked for damages on the basis of the difference between the contract price and the repurchase price. On the other hand in his defence the appellant claimed that the damages should be awarded on the basis of the difference between the contract price and the market price prevailing in Calcutta. Issue was joined before the arbitrators on both counts, The arbitrators were called upon to decide whether damages should be awarded on the basis of the repurchase price or on the basis of the market price prevailing in India on the date of the breach. The arbitrators are experts in the trade and are best judges of the market price of the goods prevailing on the date of the breach. The arbitrators may well have thought that the market price of the goods on the date of the breach was such that the respondent was entitled to the sum of 1005 in the case of the first contract and the sum of 3037-10-0 in the case of the second contract.

3. Mr. Sethia and following him Mr. Bhabhra urged that the arbitrators were guilty of misconduct for another reason. They contended that having regard to the Jute Goods (Export Control) Order. 1949 it was illegal to buy and sell jute goods at prices in excess of the ceiling price fixed by the Control Order and that in awarding damages on the basis of a market price in excess of the ceiling price, the arbitrators had recognised an illegal market and had thereby misconducted themselves. They relied upon the principle laid down in a series of decisions in which this Court had to deal with awards made by the Bengal Chamber of Commerce in cases where the breach of con-tract took place while the Jute Price Control Order was in operation and while it was illegal to buy and sell jute at prices in excess of the maximum price fixed by the Jute Price Control Order. They relied particularly upon the decision in Chhhogmal Rawatmal v. Sankachand G. Shah, 53 Cal WN 828 and the decision in Tolaram Nathmal v. Ganesh Commercial Co. Ltd., Appeal from Original Order No. 6 of 1948, cited in Bejoy Singh v. Bilasroy and Co., : AIR1951Cal529 . where Harries, C. J., market for the goods at the controlled rate, the value of the goods on the due dates would be the value as determined by the controlled rate,

4. In my judgment the whole argument of Mr. Sethia and of Mr. Bhabhra proceeds upon a misconception and upon a misreading of the Jute Goods (Export Control) Order. 1949. That order in no way prohibited the sale and purchase of jute goods at prices in excess of the ceiling prices. That order prohibited the export of certain classes or manufactured jute goods except under and in accordance with a licence issued under that Order and also prohibited the issue of an export licence if the price at which the goods had been or were being, sold by the applicant for the licence was more than the ceiling price and an additional sum not exceeding 5 per cent thereof on account of certain brokerage or commission. Consequently, if the applicant for the licence had sold or was selling the goods intended for export at a price in excess of the ceiling price and the extra 5 per cent the applicant would be unable to obtain the export licence or to export the goods.

5. Mr. Sethia argued that in considering the quantum of damages the arbitrators were bound to take into coasideration only the market price ruling in Calcutta for jute goods of like quality bought and sold on the basis of a price f. o. b. Calcutta and upon the terms that the seller would' export the goods to Nigeria and that they could' not take into account the price of those goods. bought and sold on any other terms or conditions. He argued that in. view of the Jute Goods (Export Control) Order rand with Section 23 of the Indian Contract Act, it would be illegal to buy and self jute goods f. o. b. Calcutta for export to Nigeria at a price in excess of the ceiling price. He therefore urged that the market prices of jute goods sold f. o. b. Calcutta for export to Nigeria could not lawfully exceed the ceiling price fixed by the Control Order. I am unable to accept this argument. The Jute goods (Export Control) Order does not prohibit or render unlawful a contract for the sale and purchase of jute goods for export to a place outside India at a price in excess of the ceiling price. Neither the consideration nor the object of such a contract or agreement is unlawful or is of such a nature that if it is permitted it would defeat the provisions of the Jute Good (Export Control.) Order. The contract is not to do an act in contravention of the Control Order. The contract does not require the export of the goods out of India without obtaining an export licence. The hypothetical, contract is a lawful contract and the price though it is in excess of the ceiling price is a lawful price. Having regard to the terms of the Control Order the seller will however be un-able to obtain the necessary export licence as he is selling at a price in excess of the ceiling price and will therefore be unable to export the goods nO seller in his senses would therefore, enter into such a contract knowing fully well that he will be unable to perform the contract. Nor would the seller agree to sell the goods at the ceiling price if the goods were saleable locally at higher price. The arbitrators might well consider that the hypothetical contract was purely imaginary and that the hypothetical contract price of goods sold under such a contract was not available and that the damages should be fixed on some other basis.

6. The basic principle upon which damages are awarded is that the Court endeavours to place the party wronged in the same position in which he would have been if the contract would have been performed by the wrong-doer. In the case of a breach of contract by a seller to deliver the goods under a contract of sale, the primary measure of damages is the difference between the contract price of the goods and the market price thereof on the date and at the place of the breach of contract. By reason of the breach of contract, the buyer loses the difference between the value of the goods which he would have got if the contract would have been performed and the contract price which he would have to pay for them. In a normal ease the value of the goods is fixed by reference to their prevailing market price at the time and place of the breach of contract; it being assumed that the buyer could buy and sell the goods at that price. This rule is embodied in illustration (a) to Section 73 of the Indian Contract Act. That illustration shows that the buyer is entitled to receive by way of compensation the sum, if any, by which the contract price falls short of the price for which he might have obtained the goods of like quality at the time when the goods ought to have been delivered. This is the normal measure of damages. This principle applies when there is an available market for the goods of like quality at the time and place of the breach of contract. If there is no such market the value of the goods which the buyer has Tost as a result of the non-performance of the contract by the seller must be determined by some other means. In the present case the goods ought to have been delivered in Calcutta and the breach of contract took place there. Normally the damages should be fixed with reference to the market price of the goods prevailing in Calcutta. The price of the goods f. o. b. Calcutta to be shipped by the seller to Nigeria with quota for the shipment secured by the seller should be looked at. If the price of the goods on those terms are not available the arbitrators could take into consideration the price of the goods sold in Calcutta on the bans of other terms and condition subject to necessary allowances on account of the difference in the terms of sale e. g. (a) the price of the goods exported to Nigeria from Calcutta while they are afloat and are represented by shipping documents; (b) the price of the goods f. o. b. Calcutta to be shipped and exported by the buyer on his account: (c) the price of the goods bought and sold at Calcutta for internal consumption. Mr. Bhabhra contended thatthese prices could not lawfully exceed the ceilingprice fixed by the Export Control Order. I amunable to accept this contention.

7. Mr. Bhabhra contended that the goods exported out of India while they are afloat andrepresented by shipping documents could, not law-fully be bought and sold. He urged that thebuyer could not lawfully pay for the goods in viewof Section 5 of the Foreign Exchange Regulation Act VII of 1947. I am upable to accept this contention. Having regard to Section 5 and Sub-section (2) of Section 21 of the Act payment for the price could be lawfully made with the permission of the Reserve Bank of India.

8. Mr. Bhabhra contended that the buyer could not obtain an export licence under the Jute Goods Export Control Order if he had bought the goods at a price in excess of the ceiling price. I am unable to accept this contention. Referring to the Control Order Chakravartty C. J., observed in Meghraj Sampatlall v. Raghunath and Son, : AIR1955Cal278 :

'Lastly and this is the point which is fatal to Mr. Dutt's contention, the order deals only with the price at which the exporter will be allowed to sell and not with the price at which the exporter may buy.'

9. The parties could legally buy and sell jute goods in Calcutta at prices in excess of the ceiling prices. The arbitrators could well find that there were an available market and a market price in excess of tbe ceiling price on the date of the breach of the contract. Assuming that there was no available market for the jute goods in Calcutta the arbitrators could take into account the market price of the goods prevailing in a foreign market for the purpose of fixing the value of the goods in Calcutta on the due date.

10. The appellant has therefore wholly failedto substantiate that the arbitrators have recognisedan illegal market or that they have awarded damageson the basis of a market rate at which it was illegalto buy or sell the jute goods on the date of thebreach.

11. In my opinion, there is no merit in these appeals.

12. Appeal No. 13 of 1953 is dismissed with costs. Certified for two Counsel.

13. Appeal No. 14 of 1953 is dismissed with costs.

Lahiri, C.J.

14. I agree.


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