S. Mahboob Ellahie and Co. v. Messrs. Cox and Co. — 1922 DIGILAW 99 (CAL)

JUDGMENT C.C. Ghose, J. - By a contract in writing, being contract No. 2963 and bearing date the 28th June 1920 the Plain firm agreed to bay and the Defendants Messrs. Cox & Co. (who are Bankers, being a Company with limited liability incorporated in the United Kingdom) agreed to sell on demand drafts of London for 5,000 at 1-8 5/8 per rupee of which 2,500 were to be delivered in July 1920 and the balance 2,500 in August 1920. The Plaintiff firm failed to take delivery of the July portion of the contract and on the 3rd August 1920 a reminder in a printed form was sent by the Defendant Bank to the Plaintiff firm drawing the latter's attention to the fact that the July portion of the said contract had remained outstanding and enquiring whether the Plaintiff firm wished the contract to be cancelled at the day's rate of exchange or whether they wished to take up the contract with penalty and to have the delivery extended. There was no reply to the reminder of the 3rd of August but in a letter to the Defendant Bank, dated the 23rd August 1920, the Plaintiff firm observed as follows :-- The last of the contracts, viz., for 5,000 on two equal of 28th June 1920 is not of course yet settled and we shall be glad to know if you will please grant an extension of time so as we may be able to clear it off at our convenience and oblige. On the 31st August 1020 the Defendant Bank sent a reminder in a printed form to the Plaintiff firm as regards the August portion of the contract. No response came from the Plaintiff firm and on the 7th September 1920 the Defendant Bank wrote to the Plaintiff firm enclosing a statement for difference in exchange on the July portion of the said contract showing that a sum of Rs. 3,226-1-6 had become due to the Defendant Bank. On the 10th September 1920 the Defendant Bank asked for the Plaintiff firm's confirmation letter in respect of the said statement for difference in exchange on the July portion of the contract. 3,226-1-6 had become due to the Defendant Bank. On the 10th September 1920 the Defendant Bank asked for the Plaintiff firm's confirmation letter in respect of the said statement for difference in exchange on the July portion of the contract. It appears that Mahboob Ellahie who is stated to be the capitalist partner in the Plaintiff firm had an account current with the Defendant Bank and the latter made on the 7th of September a debit entry of Rs. 3,226-1-6 in the said account current of Mahboob Ellahie in these words : " Difference in exchange on Occhavlall M. Dass' Contract No. 2963, dated 28th June 1920, 2.500. July delivered cash 1-8 5/8 and "1-11 1/16" This debit entry in the account current of Mahboob Ellahie was of course irregular and it was rightly taken exception to by Mahboob Ellahie in a letter to the Defendant Company, dated the 14th September 1920, which ran as follows:-- I acknowledge receipt of your favour of 7th and 10th instant, the subject of which drew my special attention. At present the condition of the market is very bad and also I have no foreign drafts in hand so as my firm would have been able to buy demand drafts from you in exchange and I assure you my firm would do best to clear the above contract as soon as possible. It seems quite extraordinary to me how you debited Rs. 3,226-1-6 in my account whereas I did not instruct you to do so and I shall be glad to hear from you soon to have the above amount re-credited in my account so as not to cause any inconvenience. 2. On the 18th September 1920 the Defendant Bank informed the Plaintiff firm that the debit entry of Rs. 3,226-1-6 of the 7th September had been reversed and asked the Plaintiff firm to send them cash for the amount, being the difference in exchange on the July portion of the said contract. The Plaintiff firm did not reply to this communication but on the 12th October 1020 they requested the Defendant Bank to cancel the contract at the day's rate and to send them a cheque in full settlement on difference in exchange and after debiting the overdue interest payable by the Plaintiff firm. The Plaintiff firm did not reply to this communication but on the 12th October 1020 they requested the Defendant Bank to cancel the contract at the day's rate and to send them a cheque in full settlement on difference in exchange and after debiting the overdue interest payable by the Plaintiff firm. The Defendant Bank at once pointed out that the July portion of the said contract had been cancelled on the 7th September and that a sum of Rs. 3,226-1-6 had become due and payable by the Plaintiff firm and that this sum had not yet been paid to the Defendant Bank. On the 1st November 1020 it appears that two representatives of the Plaintiff firm called on Messrs. Logan and Collins who are employed as Accountant and Sub-Accountant respectively in the Defendant Bank and discussed the matter with them. At that interview according to the Defendant Bank the Plaintiff firm stated that they would call on the following day to settle the cancellation of the August portion of the said contract and at the same time pay in a sum of Rs. 3,226-1-6 due to the Defendant Bank in consideration of the July delivery having been cancelled on the 7th September (see letter of the 2nd November from the Defendant Bank. The Plaintiff firm, however, gave in a postscript to their letter of the 2nd November a different version of the interview) and they denied that any settlement was come to at the interview of the 1st November and they maintained that no portion of the contract had been cancelled prior to the 12th October. On the 3rd November the Defendant Bank wrote to the Plaintiff firm in these terms :-- We are in receipt of your letter of the 2nd instant and note your remarks re. the above. We beg to state that unless you pay in a sum of Rs. 3,226-1-6 and also the August portion of the contract is taken up by the close of business on Saturday, the 6th instant, we shall cancel same and claim the difference of both portions of the contract through our solicitors without further notice. 3. the above. We beg to state that unless you pay in a sum of Rs. 3,226-1-6 and also the August portion of the contract is taken up by the close of business on Saturday, the 6th instant, we shall cancel same and claim the difference of both portions of the contract through our solicitors without further notice. 3. There was no reply to this letter of the 3rd November and on the 8th November 1920 the Defendant Bank wrote to the Plaintiff firm to say that they had cancelled the August portion of the said contract and enclosed a statement for difference in exchange in favour of the Defendant Bank for Rs. 2.966-6-0. This statement shows that in respect of the August portion of the contract the exchange was so much in favour of the Plaintiff firm on the 8th November that the latter had to get a sum of Rs. 259-11-6 from the Defendant Bank with the result that the ultimate balance due from the Plaintiff firm was reduced to Rs. 2,966-6-0. The Plaintiff firm took no notice of this communication of the 8th November. On the 30th November the Defendant Bank sent the following letter to the Plaintiff firm:-- Occhavlall M. Dass' Contract No. 2963 of 28th June 1920. 2,500--July delivery. 2,500--August delivery. Please note that we are to-day cancelling the above contracts. 4. At about this date, the exchange bad become so favourable to the Plaintiff firm that they lust no time in accepting the said cancellation and in acknowledging the receipt of the Defendant Bank's letter of the 30th November and in placing the matter in the hands of their solicitors. The Plaintiff firm asked for statement of account and on the 2nd of December 1920 the Defendant Bank furnished statement of account which showed that in respect of the August portion of the contract the exchange had become so favourable on the 30th November to the Plaintiff firm that they had to receive from the Defendant Bank a sum of Rs. 3,167-10-0 on difference in exchange and that the debt due from the Plaintiff firm as a result of the cancellation of the July portion of the contract on the 7th September was entirely wiped out with the exception of a small sum of Rs. 58-7-6. 3,167-10-0 on difference in exchange and that the debt due from the Plaintiff firm as a result of the cancellation of the July portion of the contract on the 7th September was entirely wiped out with the exception of a small sum of Rs. 58-7-6. The Plaintiff firm, however, contended that having regard to the Bank's letter of the 30th November the Defendant Bank were bound to calculate the difference in exchange in respect of the entire contract at the rule prevalent on the 30th November (which was 1-6 3/8 shillings per rupee) and to pay to the Plaintiff firm a sum of Rs. 7,124-4-10 in respect of the July and August portions of the said contract. The Plaintiff firm have accordingly claimed this sum in their plaint in this suit. 5. The Defendant Bank in their written statement state that for many years past in Calcutta it has been the custom and practice of the Exchange Banks in Calcutta at their option to grant to buyers of sterling drafts an extension after the due date on a penalty (viz., the payment of interest for any period after the due date) or to declare the contract cancelled in case of default by the buyer. They state that the Plaintiff firm were aware of the existence of such custom and practice and indeed they requested the Defendant Company to extend the due date for taking delivery of the July portion of the said contract. They state further that the Plaintiff firm notwithstanding their promises to pay did not pay the said sum of Rs. 3,226-1-6 nor did they pay the said sum of Rs. 2,966-6-0. Meanwhile the rate of exchange had become so much in favour of the Plaintiff firm that the Defendant Bank as an act of favour made the cancellation of the August portion of the contract operative as and from the 30th November 1920 with the result that on adjustment of accounts a sum of Rs. 58-7-0 only was found due from the Plaintiff firm. The Defendant Bank state that by inadvertence in the letter of the 30th November the July portion of the contract (which had in fact been cancelled on the 7th September and of which cancellation the Plaintiff firm were well aware) had been referred to and that the Plaintiff firm were taking an unfair advantage of such inadvertence. 6. The Defendant Bank state that by inadvertence in the letter of the 30th November the July portion of the contract (which had in fact been cancelled on the 7th September and of which cancellation the Plaintiff firm were well aware) had been referred to and that the Plaintiff firm were taking an unfair advantage of such inadvertence. 6. The following issues were accordingly settled between the parties:-- 1. Was the July portion of the contract mentioned in the plaint cancelled by the Defendant Bank on the 7th September 1920 ? 2. If not, was there any extension granted and if so, up to what date? 3. When was the August portion of the said contract cancelled? 4. Are the Plaintiff firm entitled to claim from the Defendant Bank the sum of Rs. 7,124-4-0 or any portion thereof? 5. Was any mistake made by the Defendant Bank in referring to the July portion of the contract in their letter of the 30th November? 6. Is there a custom or practice as alleged in paragraph 4A of the written statement? 7. Were the Plaintiff firm aware of the said custom and practice? 8. Did the Plaintiff firm promise to pay the sum of Rs. 3,226-1-6 and to settle the cancellation of the August portion as alleged in para, 6 of the written statement ? 7. The onus of proof as regards issues Nos. 1 to 4 was on the Plaintiff firm. They did not call any oral evidence as regards these issues but contented themselves by tendering the correspondence between the parties (Ex. C). On the issues Nos. 5--8 the onus was on the Defendant Bank and they called several witnesses. The Plaintiff firm thereafter called rebutting evidence as regards the last-mentioned issues. 8. The first witness called on behalf of the Defendant Bank was their Manager Mr. W. D. Woellwarth. He stated that the Plaintiff firm failed to take delivery of the July portion of the contract and that he had no other alternative but to cancel the same as the rate of exchange was going up and the Defendant Bank's losses were increasing every day and they had to stop somewhere. He spoke to the custom and practice referred to in para. 4A of the written statement and said that the cancellation of the 7th of September was in accordance with such custom and practice. He spoke to the custom and practice referred to in para. 4A of the written statement and said that the cancellation of the 7th of September was in accordance with such custom and practice. According to this witness it was entirely at the option of all Exchange Bank to grant an extension of time to the buyer or not and further that even if an extension of time were granted it was entirely at the option of the Bank to cancel the contract on any date the Bank liked, because the rate might he going up the whole lime. The Plaintiff firm did not take delivery of the August portion of the contract; the Bank therefore had to send the letter of the 8th November referred to above but they did not sell in the open market against the Plaintiff firm in respect of the August portion with the result that when exchange did improve in favour of the Plaintiff firm the benefit of the improved exchange was given to the Plaintiff firm. The witness stated definitely that at no time was there any intention of going hack upon the cancellation of the 7th September and that us a matter of fact the July portion of the contract had Clever been extended to the 30th November. In cross-examination Mr. Woellwarth pointed out that immediately after the expiry of the due date of the July portion of the contract the Plaintiff firm were asked to take the same up; they failed, however, to take it up and it was allowed to continue uncancelled till the 7th of September when it was definitely cancelled. The next witness on behalf of the Defendant Bank was their Sub-Accountant Mr. J. F. Collins. He referred to the cancellation of the 7th September and to the interview of the 1st November between himself and Mr. Logan on the one side and Balliaddin and Narul Haque on the side of the Plaintiff firm. Balliaddin who is the Manager of the Plaintiff firm acted as the interpreter and in the presence of Narul Haque and apparently after consultation with him Balliaddin promised at that interview that the difference on the July portion would be paid and that the August portion of the contract would be taken up on the next day, i.e., 2nd November. Balliaddin who is the Manager of the Plaintiff firm acted as the interpreter and in the presence of Narul Haque and apparently after consultation with him Balliaddin promised at that interview that the difference on the July portion would be paid and that the August portion of the contract would be taken up on the next day, i.e., 2nd November. That promise, however was not kept and hence the Defendant Bank wrote the letter of the 2nd November referred to above. As regards the cancellation of the 8th November the witness stated that the matter stood on a different footing because in respect thereof the Defendant Bank had not gone into the market and had not therefore passed the entries through their books. The witness stated that the reference to the July portion in the letter of the 30th November which was drafted by him was a mistake, but the Plaintiff firm knew well that the duly portion had been cancelled on the 7th September. He said as soon as it was discovered that the Plaintiff firm were taking advantage of the mistake in the letter of the 30th November the Defendant Bank fully explained the position to the Plaintiff firm's solicitors. He said that the Plaintiff firm were fully aware of the custom referred to above and that as a matter of fact the July portion of the contract was not kepi open after the 7th September. In cross-examination the witness stated that as against the July portion of the contract the Defendant Bank actually bought in the open market ; the entry, however, was not made on the 7th September in the books of the Defendant Bank but it was made on the 9th September showing that it was brought into the actual transactions of the Bank ; there was no difference in the rates of the 7th September and the 9th September. The witness stated that as against the cancellation of the 8th of November there was no entry in the books of the Defendant Bank, the idea being that having regard the then improving exchange, the Defendant Bank were expecting to wipe out the loss on the July portion by giving to the Plaintiff firm the entire benefit of the improved exchange as regards the August portion. The witness was cross-examined minutely. The witness was cross-examined minutely. As to the interview of the 1st November he maintained that at that interview the Plaintiff firm had definitely accepted the cancellation of the 7th September and had promised to pay the sum of Rs. 3,226-1-6 and to take up the August portion, but they failed, however, to carry out their promise. Mr. Logan, the Accountant of the Defendant Bank, was next called and he corroborated the last witness account of the interview of the 1st November. Mr. Logan spoke to the custom referred to above and corroborated Mr. Woellwarth and Mr. Collins. Mr. Logan was cross-examined at great length about the two cancellations of the 7th September and the 8th November. He explained that in respect of the cancellation of the 7th September the exchange had been fixed and an entry had been made in the Defendant Bank's books, whereas in respect of the cancellation of the 8th November all that had been done was that the rate of exchange had been fixed but no entry had been made in the Defendant Bank's books with result that the possibility of giving the benefit of the improved exchange to the Plaintiff firm had remained open to the Defendant Bank. Mr. Graham who is the Assistant Accountant in the National Bank of India produced before me an extract from the Rules of the Exchange Banks Association in Calcutta (Ex. 1) which ran as follows :-- If a contract is not taken up during its currency if is at the Bank's option to cancel it at any time thereafter at the current rate for the day under notification to the other contracting party and further the other contracting party has no option to cancel such a contract unless and until such party has paid in full the different claimed by the Bank for such cancellation. 9. The last witness on behalf of the Defendant Bank was one Keder Nath Khettry. He said that he had been a bullion exchange broker in Calcutta for 18 years and that in contracts of this description if delivery was not taken on the due date by the buyer it was entirely at the option of the Exchange Bank either to cancel the contract car to extend the time charging interest for the period of extension. 10. 10. In rebuttal of the evidence sketched thus far the Plaintiff firm examined two witnesses, viz., Balliaddin and Narul Haque. The former denied the account of the interview of the 1st November set out above. He said that at that interview he pointed out to Messrs. Logan and Collins that the Defendant Bank had given no notice of the cancellation of the duly portion of the contract on the 7th September and had indeed no right to cancel the same and that nothing was settled at that interview. In cross-examination he said that at an interview on the 26th August he informed the Bank that he would take delivery of the July portion and that the Defendant Bank agreed to extend the time for taking delivery. According to this witness the Defendant Bank promised to write mentioning he date up to which extension would be granted but the Bank never wrote. He further said that there was an interview on the 13th September, i.e., after receipt of the letter of the 7th of September (when he found out that the Bank had cancelled the July portion of the contract) between him and Messrs. Logan and Collins. He said that at that interview he taxed. Mr. Logan and Mr. Collins for their failure to carry out their promise and he maintained that inasmuch as at no time prior to the 30th November had the July portion been cancelled the Plaintiff firm were entitled to settle the whole contract on the rate prevalent on the 30th of November. The next witness Narul Haque simply corroborated Balliaddin. 11. In this state of the evidence it has been contended before me on behalf of the Plaintiff firm (1) that the Defendant Bank have not followed the custom set out in Ex. 1, (2) that there was no cancellation of any portion of the contract before the 12th of October--which cancellation, however, was not acted upon by the Defendant Bank, (3) that on the 30th November the Defendant Bank cancelled the entire contract and not merely the August portion, (4) that the Plaintiff firm made no promise whatsoever on the 1st November to pay the said sum of Rs. 3,226-1-6 but they have maintained throughout the position that they did not accept the so called cancellation of the 7th September, and (5) lastly, that whatever might have been the intention of the Defendant Bank when they wrote the letter of the 30th of November, if the Bank's letter was free from ambiguity and the answer of the Plaintiff firm was similarly free from ambiguity, the Defendant Bank must, be held to be bound to the terms of the letter of the 30th November and cannot be allowed to escape from the effect of the acceptance of the Bank's letter by the Plaintiff firm. In support of this last contention reliance was placed on the case of Stewart v. Kennedy [1890] 15 A. C. 75 at p. 121. 12. On behalf of the Defendant Bank it is argued (1) that they have followed the custom referred to in paragraph 4A of the written statement, (2) that on the expiry of the due dale the Defendant Bank were entitled to cancel the duly portion of the contrast and that in fact there was such a cancellation on the 7th September. (3) that the cancellation of the 8th of November with reference to the August portion stood on a different footing inasmuch as the exchange had not been fixed although in all other respects it was a proper cancellation, (4) that it is abundantly apparent from the correspondence and from the evidence that the Plaintiff firm were aware of the cancellation of the 7th of September and had made a promise to pay the said sum of Rs. 3,226-1-6, (5) that it is likewise apparent that the reference to the July portion of the contract Pad in the letter of the 30th November was a Blip or mistake on the part of the writer thereof and that taking advantage of the said slip or mistake the Plaintiff firm have put forward a dishonest claim for Rs. 7,224-4-10. 13. On the evidence before me I think it is reasonably clear that the Defendant Bank have acted in this case in accordance with the custom referred to in the written statement and more particularly set out in Ex. I. I think it is straining the language of Ex. I too far to hold that notification of intention to cancel a contract must in all cases precede cancellation. I. I think it is straining the language of Ex. I too far to hold that notification of intention to cancel a contract must in all cases precede cancellation. The Bank to my mind have proved the existence of the custom relied upon by them and it appears to me that in exercise of their option to cancel they cancelled the July portion of the contract. Whether a particular cancellation is effective or not must be gathered from all the circumstances connected with such cancellation. And there can be no doubt that the letter of the 7th September with its enclosure was understood by Balliaddin as the July portion of the contract. It was in law and in fact a proper date, the 7th September, as showing conclusively that the purchase by the Bank against sale of drafts on London for 2,500 for July had been brought into the Bank's transactions. I hold further that no suspicion can be east upon the Defendant Bank's books by reason of the entry being under date the 9th September and not under date the 7th September. In my view therefore there is no substance in the contention that the first cancellation of the July portion of the contract, whatever it was, was on the 12th October 1020. The correspondence and evidence which I have attempted to sketch thus far show conclusively to my mind that the position taken by the Bank on the 7th September in respect of the July portion of the contract was not challenged, nor dissented from by the Plaintiff firm at any time between the 7th September and the 18th September. I do not accept as true the evidence of Balliaddin to the effect that be had interview with Messrs. Logan and Collins on the 26th August and 13th September. If he had such interviews on these two dates, then how came it that this fact was not put to Messrs. Logan and Collins in cross-examination. The letter of the 12th October 1920 cannot in my opinion be treated as the first pronouncement on the question of cancellation of the July portion of the contract. I accept entirely the Defendant Bank's account as regards the letter of the 8th November. Logan and Collins in cross-examination. The letter of the 12th October 1920 cannot in my opinion be treated as the first pronouncement on the question of cancellation of the July portion of the contract. I accept entirely the Defendant Bank's account as regards the letter of the 8th November. The idea apparently so far as the Bank was concerned was to keep the matter of the cancellation of the August portion open, because the exchange was then improving and there might be some chance of recouping the loss which the Bank had already sustained on the July portion and which loss the Plaintiff torn had shown no disposition to make good by giving to the Plaintiff firm the benefit of the improvement in the exchange as regards the August portion. I see nothing unusual or suspicious in what the Bank did. On the question as to what transpired at the interview of the 1st November, having seen the witnesses in the box, I accept the evidence of Messrs. Logan and Collins in preference to that of Balliaddin and Narul Hague. I find as a fact on the evidence on record that the latter, i.e., Balliaddin and Narul Haque made a promise to pay the said sum of Rs. 3,226-1-6. It is said that the Bank did not challenge the correctness of the statement in the postscript to the letter of the Plaintiff firm, dated the 2nd November. This criticism is true so far as it goes, but the Bank apparently thought that it was useless to waste breath over people like Balliaddin and Narul Haque--a view which I am not prepared to describe as unreasonable. The subsequent correspondence shows that the truth of the matter lies rather on the side of the Bank than on the side of the Plaintiff firm. It is said, however that after all is said and done the Plaintiff firm must succeed in this suit even assuming that there was a mistake in the letter of the 30th November if the mistake was an unilateral one. No doubt the law judges of an agreement between two persons from the mutual communications which take place between them. In this case I find as a fact that the reference to the July portion in the letter of the 30th November was a slip or mistake on the part of the writer thereof. No doubt the law judges of an agreement between two persons from the mutual communications which take place between them. In this case I find as a fact that the reference to the July portion in the letter of the 30th November was a slip or mistake on the part of the writer thereof. The question is, as has been said in a very old case, whether the law "will be extreme to mark what is done amiss." In my opinion all circumstances sufficient to lay claim to a favourable consideration of the Bank's case are present on the evidence on record and I hold that a hardship amounting to injustice would be inflicted upon the Bank by holding the Bank strictly to their letter of the 30th November in the circumstances of this case and that therefore it is unreasonable to hold them to it in respect of the July portion [see Webster v. Cecil [1861] 30 Beav. 62, Tamplin v. James [1879] 15 Ch. D. 215 and Aspinalls v. Powell [1889] 60 L. T. 595]. I think the conclusion is irresistible that the Plaintiff firm were anxious to snap at the supposed offer in respect of the July portion in the letter of the 30th November which they must have perfectly well known to have been made by mistake. The result is that in my opinion there is no substance whatsoever in the Plaintiff firm's claim and the suit must be dismissed with costs on scale No. 2. The Plaintiff firm will be entitled to the costs of the 27th January 1922.