1. This is a seller's appeal against an order of Bachawat, J., refusing to set aside an award.
2. Under an arbitration clause contained in a contract of sale of goods, the buyers referred their dispute with the seller that arose out of the contract to the Bengal Chamber of Commerce. The contract was made on May, 10, 1946, for sale of B-Twills. The buyers agreed to buy the goods at Rs. 66-12-0 per hundred bags - delivery July to September, 1946, at the rate of 15,000 bags monthly.
3. The buyers in their turn sold the goods to Messrs. Sohanlal Karnawat. As the goods were not delivered to the buyers, they in their turn could not give delivery to Messrs. Sohanlal Karnawat who, thereupon, by two letters dated October 1, 1946, and October 7, 1946, to their sellers asked for the difference - being the difference between the contract rate and the rate prevailing on October 1, 1946, namely, Rs. 78-4-0 per hundred bags, amounting Rs. 5175/-. The Jute Control Order was at the time when the contract was made in force and expired on September 30, 1946.
4. Receiving the letters from Messrs. Sohanlal Karnawat, the buyers on October 7 and 18, 1846, wrote to the seller as follows:
'Referring to the above our buyers Messrs. Sohanlal Karnawat write us as under in theirs of 1st instant received by us this day which please note in our turn and oblige. As you have failed to deliver the above goods on the respective due dates I have purchased the above goods to-day in open market at Rs. 78-4 per cent. bags against you which please note. The difference bill will be presented to you in due course.'
5. The other letter was substantially in the same terms. The seller did not reply to these letters.
6. It is to be noted that though the first of these letters was written on October 7, 1946, that is to say, shortly after September 30, there is no reference in it of any extension of the due date having been agreed to between the parties. Nor is there any such reference in the other letter.
7. On July 7, 1949, the buyers submitted their statement before the arbitrators. In that statement they referred to the contract and to their sale to Messrs. Sohanlal Karnawat. They said that the difference bill had been duly submitted to the seller, but the seller had not paid the amount due: hence the reference.
8. In the statement also there is no reference of any extension of the due date.
9. The seller submitted his statement to the Bengal Chamber of Commerce in which he said that the buyers were not ready and willing to take delivery and there was no demand for delivery. He further stated: The time for delivery was never extended either by consent or otherwise............'
10. Why the seller pleaded to an extension is not very clear: because the buyers in their statement had not made any case of extension.
11. In reply to this, the buyers in their further statement before the arbitrators said :
'On account of the assurance that the goods would be delivered on receipt, the contract was extended till such time when goods could be available in the free market or it was possible to assess the damages.'
12. The seller in his subsequent statement denied this assurance on any extension. Therefore there was an issue as to whether the due date had been extended which the arbitrators were bound to decide.
13. The arbitrators made the award on March 20, 1950. The relevant portion of the award is as follows:
'We ...........hereby decide and award as follows:
1. That there was no free market available for these goods on the contract due dates of July, August, and September 1946, and the first free market available thereafter was on the 1st October, 1946;
2. That Messrs. Bijoysing Karnawat shall pay to Messrs. Bilasroy & Co., in full settlement of their claim herein the sum of Rs. 5175/- (Rupees five thousand one hundred and seventy five only) together with interest thereon at the' rate of 4 per cent per annum for six months only.'
14. Then there is the direction for payment of costs.
15. The seller made the application on August 24, 1950, for setting aside the award. There are various prayers in the petition; e.g., for a declaration that the award is null and void; that it may be taken off the file etc. etc. But we have been assured by Mr. Meyer, who on behalf of the petitioner, appeared before the learned Judge (Bachawat, J.), that the only prayer he pressed in the Court below was for the setting aside of the award and the application was heard on that basis. This statement of Mr. Meyer is not controverted by respondents' counsel. Bachawat J. dismissed the application. This appeal is from the order of dismissal.
16. On behalf of the appellant two points have been taken before us: (1) the award is bad on the face of it; and (2) that the arbitrators have misconducted the proceedings.
17. On the first point, Mr. Meyer contends that it would appear from Clause 1 of the award that the arbitrators have given damages on the basis of the rate prevailing on l-10-1946. It cannot be disputed that the due date, if the extension was not agreed, must be the last dates in July, August and September, and the law is that upon a breach of a contract for the sale of goods the measure of damages is the difference between the contract price and the market price at the day of the breach. 'JAMAL v. MOLLA DAWOOD, SONS & CO.', 43 Ind App 6 (P C). Unless there was, an extension, the arbitrators could not award damages on the basis of the rate prevailing on October 1, 1946. On the face of the award it is clear that the arbitrators awarded damages on the basis of the rate on October 1, 1946, as
'there was no free market available for these goods on the contract due dates of July, August and September, 1946, and the first free market available thereafter was on the 1st October, 1946.'
The arbitrators could not possibly give damages on such considerations. The law is that the damage must be calculated on the basis of the contract rate, and the rate on the date of breach. There is no reference in the award to any extension of the due date. Mr. Das appearing on behalf of the respondents said that the Court would not be justified in taking into consideration Para. 1 of the award. He said that in that paragraph the arbitrators were giving their reasons and it was not an effective part of the award. We are unable to. agree with him on this point. The arbitrators definitely say: 'We hereby decide & award as follows:' & after that comes Para. 1.
18. Mr. Das has placed reliance on an English case, 'JAMES CLARK (BRUSH MATERIALS) LTD. v. CARTERS (MERCHANTS), LTD.', (1944) 1 K B 566, in support of his contention that the reasons given in the first clause should not be taken into consideration. In this case the award was in this form:
'after careful consideration I find that freight space was not obtainable within the period defined in this contract and I award that the contract be forthwith dissolved without penalty or allowance to either party.'
19. Tucker, J. observed as follows:
'I have, first, to ascertain whether this award necessarily shows that it is based solely on the finding that 'freight space was not obtainable within the period defined within this contract.' I think that Mr. Devlin is right when he contends that it is not for me to read any words into this document, but must take it at its face value. Mr. Hodgson says that I should draw from the document the inference that the award is based only on this finding. I do not think, however, that I am entitled to draw any inference.'
20. The learned Judge goes on that assuming that he was wrong, and that he ought to read the award as being based on the finding stated, he had to see whether that was necessarily erroneous in point of law.
21. It is clear that Tucker, J. was not very clear as to whether he should draw the inference or not. In the case before us, we can ascertain that the award was necessarily based on the finding in Para. 1. Paragraph 2 comes after Para. 1 and gives the figure Rs. 5175/- as the difference between the contract rate and the rate prevailing on October 1, 1946.
22. The numerous decided cases lay down that if the award on the face of it contains a wrong proposition of the law then it comes within the mischief of the rule. In this case Para. 1 is clearly wrong on law. J cannot see how we can say that this is no part of the award. The arbitrators have given damages on a wrong basis. Therefore I think that the award is bad on the face of it. The award, therefore, should be set aside.
23. As to the second ground also, we think Mr. Meyer is right. There is no evidence to support any extension. In fact, I hold that no extension has been properly pleaded. The only pleading on this point is this:
'on account of the seller's assurance that the goods would be delivered on receipt, the contract was extended till such time when goods would be available in the free market or it was possible to assess the damages.'
The fact pleaded is that the seller gave an assurance that the goods would be delivered on receipt; what follows, namely, 'the contract was extended till such time when the goods would be available in the free market...............' is an inference of the party. That is not and cannot be stated as a fact. Therefore, the only material averment' is that there was an assurance on the part of the seller that when he would receive the goods from his sellers he would deliver them. The first point to be noted is that no date of the assurance is given. It is not stated whether the assurance was given orally or in writing. No particulars of the assurance are given. It is not said up to what date the due date was extended. Therefore, there is no proper pleading of an extension. It is only said that the date was extended till 'such time when the goods would be available in the free market'.
24. According to the writer the goods were not available, on September 30, 1946. But within twelve hours, when October 1, 1946 dawned, the goods became available. It is on the face of it absurd. Assuming, however, that the pleading is right, there is a promise on the part of the seller to deliver the goods when he would receive delivery from his sellers. There is ho evidence as to when or whether the seller received the goods.
25. Mr. Das has referred to an unreported decision of this Court-. 'MUKHRAM LUCHMINARAIN v. KHUSIRAM BENARSHILAL', '(Appeal No. 2 of 1949)', 29-3-1949. According to counsel that case is parallel to this case and on the strength of that case counsel said that the learned Judge was' right in holding that there was an extension. I have read carefully the judgment in that case. There is a great difference between that case and the case before us. In that case there were ample materials upon which the learned Judge could come to a finding as to the extension of the due date.
26. In this case the only two facts from which an extension can be inferred are the absence of any reply to the letters which were sent by the buyers to the seller on October 7 and October 18, 1946, and the averment in the buyer's statement that the seller gave an assurance that on receipt of the goods they would be delivered etc. We are unable' to hold that on this bald allegations, it is possible for any Court or tribunal to come to a finding of extension.
27. In this case, could the arbitrators come to a finding? In a Bench decision of this Court presided over by My Lord the Chief Justice 'BAJRANGLAL LADURAM v. GANESH COMMERCIAL CO., LTD.', 55 Cal W N 147 at p 157, it has been observed:
'Arbitrators who are experts in the trade can decide matters which are within their expert knowledge without evidence. But they cannot decide whether two parties have extended the time of delivery except on evidence, as such would not be a matter within their expert knowledge. Counsel for the respondents eventually conceded that the award could not be justified on the assumption that the arbitrators must have held that the time for delivery had been extended. If they had held that the time had been extended such would have been a finding upon no evidence at all and would clearly amount to legal misconduct. There are a number of recent decisions of this Court which have taken this view and which need not be referred to in this judgment.'
28. It is said by Mr. Das that this decision is in conflict with a Bench decision of this Court in 'CHHOGMAL v. SANKALCHAND', 53 Cal W N 828.
29. But I do not think so.'CHHOGMAL v. SANKALCHAND',(53 Cal W N 828) was referred to in 'BAJRANGLAL LADURAM v. GANESH COMMERCIAL CO., LTD.', (55 Cal W N 147).
30. Therefore, it cannot be said that there is any conflict between that decision and 'BAJRANGLAL LADURAM v. GANESH COMMERCIAL CO., LTD', (55 Cal W N 147). And we are bound to follow 'Bajranglal's Case.
31. In the case before us the matter of the extension could not be within the expert knowledge of the arbitrators. Therefore, the arbitrators were bound to take evidence and the onus to prove extension was on the buyers. It has been admitted on behalf of the buyers that they did not tender any evidence on the point. That being the position, the arbitrators came to la finding without evidence, and have misconducted the proceedings.
32. Bachawat, J. has referred to a number of cases. But the vital points in the case are what I have stated. It is not necessary for us to discuss the cases. On the two points which were urged by Mr. Meyer, we hold that the award is bad and should be set aside.
33. The appeal, therefore, is allowed and the learned Judge's order is set aside. The award is set aside. The respondents will pay the costs of this appeal and of the proceedings in the Court below.
34. I agree.