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1955 DIGILAW 95 (MP)

Harischandra Dwarkadas Cloth Market Indore v. Firm Murlidhar Chironjilal

1955-10-03

CHATURVEDI, SHINDE

body1955
JUDGEMENT : CHATURVEDI, J. This is plaintiffs first appeal against the decree and judgment dated 30-6-1952, passed by the District Judge Indore in C. O. Suit No. 47 of 1949. Plaintiff claimed from the two defendants Rs. 35733/14/2 on account of damages for breach of contract. The facts are that on 29-6-1947 defendant No. 2 Babulal entered into a contract with the plaintiff for sale of 70,000 yards canvas from the goods disposed off by the Military Department of the Government of India, at the rate of rupee one per yard. The plaintiff paid rupees 4000/- as advance to be adjusted towards the price. The goods were to be delivered on or before 5-8-1947 F. O. R. (free on rail) at Cawnpore by handing over the receipt in Calcutta. The contract Ex. P/1 is in following words : 2. This contract was signed by Babulal defendant No. 2 on behalf of Firm Murlidhar Chironjilal. Defendant No. 2 Babulal was the proprietor of the Firm Radhsham Roshanlal of Indore. It is said that the license to sell cloth in the name of this Firm was suspended by the Textile Authority and therefore the contract was executed in the name of Finn Murlidhar Chironjilal defendant No. 1. Now, Babulal is father-in-law to Chirongilal, proprietor of Murlidhar Chironjilal, who is his son-in-law. On 29-7-1947 the plaintiff sent a telegram reminding defendant No. 1 that delivery was due on 5-8-1947 and informed him that they were sending a man from Cawnpore to ascertain that the goods were of agreed quality. On 30-7-1947 defendant No. 1 replied by telegram through his lawyer, Mr. Dravid, saying that "there was no condition in the contract for selection of goods and that Railway had stopped loading hence the fulfilment of contract was impossible. I request to treat the contract as cancelled." Subsequently, on 8-8-1947 Shri N.H. Dravid, pleader for Messrs. Murlidhar Chironjilal, sent a letter to the pleader for the plaintiff saying that the contract had become incapable of performance and therefore the defendant Murlidhar Chironjilal wished to return the sum of Rs. 4000/- which had been paid towards the contract. A draft dated 7-8-1947 for the amount of Rs. 4000/- in favour of the plaintiff was sent. Mr. Samvatsar pleader for the defendant then replied that the sum of Rs. 4000/- the plaintiff is entitled to get, besides the sum of Rs. 4000/- which had been paid towards the contract. A draft dated 7-8-1947 for the amount of Rs. 4000/- in favour of the plaintiff was sent. Mr. Samvatsar pleader for the defendant then replied that the sum of Rs. 4000/- the plaintiff is entitled to get, besides the sum of Rs. 35729/2/4 as damages, and, that the plaintiff had no objection to receive Rs. 4000/- without prejudice to his claim for damages. On 3-10-1947 the plaintiff gave notice to defendant No. 2 Babulal, who in his reply repudiated the contract and his liability and said that he had no concern with defendant No. 1. The plaintiff then filed this suit claiming damages amounting to Rs. 35,729/2/8 and Rs. 4/11/6 as cost of notice against defendant No 1. The plaintiff prayed that a decree be passed for this amount of Rs. 35733/14/2 against such of the defendants as may be found liable for the aforesaid sum and for costs of the suit; and interest be awarded to the plaintiff from the date of the suit till realisation. 3. In his written statement defendant No. 2 admitted the contract as alleged but said that it was made on behalf of defendant No. 1 who was the contracting party. He urged that there was no cause of action against him; that the contract was in breach of law; that the plaintiffs had no right to select the goods and that booking for Calcutta was closed and therefore the contract had become impossible of performance. Defendant No. 2 stated that the defendant No. 1 being a non-resident foreigner, the Indore Court had no jurisdiction to try the suit; that the contract was void under S. 23 of the Contract Act. It was further stated that the draft for Rs. 4000/- was sent to the plaintiff with a clearly expressed intention of cancelling the contract; that after accepting the draft the contract ought to be deemed as cancelled. Impossibility of performance of contract was also pleaded. It was further stated that defendant No. 1 had not authorised Mr. Dravid for sending any of the replies to the plaintiffs notice. The claim for damages and the rate of cloth both were disputed. Impossibility of performance of contract was also pleaded. It was further stated that defendant No. 1 had not authorised Mr. Dravid for sending any of the replies to the plaintiffs notice. The claim for damages and the rate of cloth both were disputed. The Court below framed 5 issues but as only 3 of them are material for the purposes of this appeal, we confine our attention to these 3 issues : "(1) Was booking of goods by railway from Cawnpore to Calcutta stopped so as to make it impossible for the second defendant to deliver the goods loaded in wagons at Cawnpore Railway Station on or before 5-8-1947? (2) Is plaintiff entitled to damages for breach of the contract, if there was any, at the rate of Re. 0/8/3 per yard of the canvas agreed to be sold? (3) Did the second defendant act as the agent of the first defendant in entering into contract in question and if he did so act and without authority, was the contract ratified by the first defendant by the telegram dated 30-7-1947 sent by Mr. Dravid purporting to act on his behalf and the subsequent letters purporting to be sent on behalf of the first defendant to the plaintiff? 4. Mr. Chitale, learned counsel for the appellant, strenuously urged that the finding on issue No. 1 was incorrect and inconclusive also. The learned District Judge rightly states in the judgment, in the beginning, that it was for the defendants to prove that booking of the stipulated canvas from Cawnpore to Calcutta was impossible upto 5th of August so as to make it impossible for them to make the delivery of goods in terms of the contract. The learned Court below then discusses the evidence of D. W. Vishvanath Bhartia who deposed to have visited the Cawnpore Railway Station Goods-shed with priority certificate at the relevant time but was informed that the booking was closed. He also said that Kanhyalal sent by the plaintiff also went to the Goods-shed with priority letter to no better success. The District Judge then concludes by saying "the statement of this witness is not supported by any documents. He says that he destroyed the forwarding notes as useless but no attempt is being made to produce the Priority certificate or to explain what became of it. The District Judge then concludes by saying "the statement of this witness is not supported by any documents. He says that he destroyed the forwarding notes as useless but no attempt is being made to produce the Priority certificate or to explain what became of it. There is no evidence even to show that one was ever obtained besides the bare statement of the witness, who being a son-in-law of defendant No. 2 and brother-in-law of defendant No. 1 Chironjilal cannot be considered uninterested in the result of the suit." 5. From the above extract from the judgment of the learned District Judge it would be quite clear that he did not believe the testimony of D. W. Vishvanath Bhartia, the only witness produced by the defendants, to prove that booking of the stipulated canvas from Cawnpore to Calcutta had become impossible of performance. We entirely concur in his views of this witness. But it becomes very difficult to know from this evidence how then the learned District Judge decided the issue against the plaintiff. 6. He also tried to criticise the evidence of the plaintiff on this point. The plaintiff examined Gopaldas, manager of the Firm Chaganlal, who produced the letter Ex. P-24 asking the Goods Inspector of East Indian Railway, Cawnpore, about the booking of cloth under permit. There is an endorsement by some person on this letter saying "Howrah is open for booking". From this, it appears that Motilal Chajulal, General Merchants, Cawnpore, were inquiring whether cloth could be sent by Railway from Cawnpore to Calcutta and the reply was that it could be sent. From this, it cannot be inferred that the canvas in question could have been booked. At the same time, it is not possible to say whether booking of canvas was closed. Then, the learned District Judge discusses the evidence of Balkrishna Vaidya a witness produced by the plaintiff. He was in charge of the outward section at the Cawnpore Central Goods-shed in 1949. He identified that the endorsement on Ex. P-24 was in the handwriting of his predecessor Shri Vibhuti Bhushan Benarji. He has admitted that he could not find any booking of cotton canvas in the month of July and August 1947. He also expressed his inability to state what local restrictions for booking to Howrah existed in July and August 1947. He identified that the endorsement on Ex. P-24 was in the handwriting of his predecessor Shri Vibhuti Bhushan Benarji. He has admitted that he could not find any booking of cotton canvas in the month of July and August 1947. He also expressed his inability to state what local restrictions for booking to Howrah existed in July and August 1947. The learned District Judge rightly remarked that this witness was not asked to consult the necessary records and to depose about the restrictions of the local booking at the relevant time. So no useful purpose can be served by referring to some extracts here and there from his statement. The learned District Judge has nowhere given a clear finding that at the material time the railway booking had been stopped so far as the canvas in question was concerned. Such a finding was essential for dismissing the suit. From the evidence as discussed by the learned District Judge it is manifest that issue No. 1 ought to have been decided in favour of the plaintiff. It was the duty of the defendants to prove that they had used reasonable diligence for obtaining wagons, by renewed efforts on their part, during the material time, and could not succeed and that at the date of cancellation of the contract the reasonably commercial probabilities were that necessary wagons would not be available. 7. After a careful survey of the meagre available evidence on record, I am of opinion that it is not possible to hold that wagons were not available or that the railway department had stopped booking of canvas during the month of July and up to 5-8-1947. We would therefore decide the issue against the defendants and in favour of the plaintiff. Much argument had been advanced on the question relating to the doctrine of frustration. I think no useful purpose would be served by going through the various rulings relied on by Mr. Chitale as the doctrine of frustration could not avail the defendants when they have not been able to prove that Railway booking was closed during the material time. 8. Of course, on the true construction of the contract it seems to me that delivery of goods in this case was not made contingent on the supply of wagons by the Railway Department. 8. Of course, on the true construction of the contract it seems to me that delivery of goods in this case was not made contingent on the supply of wagons by the Railway Department. Here there was a positive contract to do a thing, not in itself unlawful, and the contractor had to perform it or pay damages for not doing it, although in consequence of unforeseen accidents the performance of contract may become unexpectedly burdensome or even impossible : Girija Proshad Pal v. National Coal Co. Ltd., AIR 1949 Cal 472 (A) and Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd., 1942 AC 154 at p. 204 (B). 9. In July-August 1947 the situation created by the Second War had not eased and the parties could naturally anticipate restrictions of various kinds which would make sending of goods by railway wagons more difficult than in times of peace; and the parties, if they so desired, would have provided against any risk due to non-supply of wagons by the Railway Department. Where knowing all this the defendant by his own contract created a duty upon himself he is bound to make it good, and is not excused for non-performance because of being prevented by non-supply of wagons by the Railway Department. In my opinion, the plea of the defendants on this point ought to have been rejected by the Court below and the plaintiff ought to have been held entitled to damages for breach of contract. 10. As regards issue No. 3, there is sufficient evidence to indicate that the contract was made by defendant No. 2 Babulal on behalf of his son-in-laws firm Murlidhar Chironjilal. Chironjilal avoided to come as a witness; and, the statements of Babulal (Defendant No. 2) and the broker Kanhaiyalal, and D. W. Vishwanath Bhartiya are sufficient to show that Babulal made this contract with full authority of Murlidhar Chironjilal (Defendant No. 1). Chironjilal had also taken steps to fulfill the contract and had also authorised defendant No. 2 to instruct Mr. N.H. Dravid to send a telegram to the plaintiff on 30-7-1947. There are also subsequent letters showing that he had ratified the contract. In our opinion, the decision of the learned District Judge on this point is correct. 11. Chironjilal had also taken steps to fulfill the contract and had also authorised defendant No. 2 to instruct Mr. N.H. Dravid to send a telegram to the plaintiff on 30-7-1947. There are also subsequent letters showing that he had ratified the contract. In our opinion, the decision of the learned District Judge on this point is correct. 11. It was contended before the learned District Judge, and, the same point was argued before us, that the defendant had sent a draft (Ex. P-3) for Rs. 4000/- as a refund of earnest money and had informed the plaintiff that the contract was cancelled. It was urged that once the plaintiff accepted the draft, it ought to be deemed that the plaintiff also accepted the condition imposed that the contract was cancelled. In other words, it was argued that the plaintiff could accept the draft on the terms offered by the defendant, and therefore his acceptance of the draft would also bar his claim for compensation. In our opinion this contention is without substance. While accepting the draft of Rs. 4000/- on behalf of the defendant, Mr. Samvatsar, Pleader for the defendant, had clearly stated in his reply that the plaintiff was entitled to get the sum of Rs. 4000/-, besides the sum of Rs. 35729/2/4 as damages, and that the plaintiff had no objection to receive Rs. 4000/- without prejudice to his claim for damages. In our opinion, this reply completely safeguards the rights of the plaintiff for recovering damages for the breach of contract. 12. The learned District Judge in upholding the plaintiffs plea on this point has placed reliance on Foster v. Chettey, ILR 2 Rang 204 : (AIR 1925 Rang 4) (C) but, in our opinion, the ruling is not at all applicable to the facts of the present case. It only lays down that where one of several debtors makes on behalf of himself and other debtors payment to the creditor to be appropriated to a specified debt, and the creditor accepts the payment the creditors must apply the payment accordingly and not hold it in a suspense account on behalf of the debtor who made the payment. The facts of the present case are distinguishable and have already been narrated above. 13. Mr. Chitale, on the other hand, places reliance on Murlidhar Chatterjee v. International Film Co. The facts of the present case are distinguishable and have already been narrated above. 13. Mr. Chitale, on the other hand, places reliance on Murlidhar Chatterjee v. International Film Co. Ltd., AIR 1943 PC 34 (D), where the provisions of Ss. 2, 39, 53, 55, 64, 65, 66 and 75 of the Contract Act are fully considered by their Lordships of the Privy Council. There are several observations made by their Lordships in this case which lend support to the plaintiffs case. It has been held that a liability to make restitution attaches to the party putting an end to the contract under S. 39, Contract Act and that if a payment has been made under a contract which has - for whatever reason - become void, the duty of restitution would seem to emerge. A cross-claim for damages, however, stands upon an independant footing, though it arises under the same contract and can be set-off. 14. Applying the principles to the facts of the present case, it will be found that the sum of Rs. 4000/- was paid by the plaintiff in part discharge of the consideration due to defendant No. 1 under the contract. It was a benefit or advantage received under the contract which the defendant No. 1 was bound to restore. The Contract Act manifestly requires the party to give back whatever he has received under the contract. So the mere fact that the plaintiff received Rs. 4000/- could not make the plaintiffs suit liable to be dismissed. 15. The last question for determination is what should be the basis on which damages can be measured. In this case Mr. Chitale contended that the Calcutta rate in August was Rs. 1/8/- per yard for canvas. Mr. Bhalerao, on the other hand, contends that it was the plaintiffs duty to buy the goods in the Cawnpore market and put them in Rails at Cawnpore and charge the defendants as damages whatever he had to spend over and above the stipulated price. In my opinion, it is not the Cawnpore price that is to be considered. The damages will be awarded on the basis of actual profits which the use of the canvas in question would have bought to the plaintiff if it had been delivered to him in Calcutta in time. In my opinion, it is not the Cawnpore price that is to be considered. The damages will be awarded on the basis of actual profits which the use of the canvas in question would have bought to the plaintiff if it had been delivered to him in Calcutta in time. The loss of such profits would clearly constitute a loss or damage naturally arising in the usual course of things. Obviously we have to consider the Calcutta price at the material time; for, the contract was, at the bilty-cut rate i.e., with the sellers obligation to load the goods in the wagon and obtain the railway receipt. The plaintiff has examined Chothmal Sharma of the Firm of Ramavtar Rameshwar and, according to his deposition he had sold coloured canvas from "disposals" on 28-7-1947 at Rs. 1/8/3 per yard. This canvas was purchased from the Director of Disposals Government of India and this canvas was also of 26" and 27" in width. The Ex-mill rate was Rs. 1/8/2 per yard. The payment was received on 9-8-1947. Then, there is the statement of Bajranglal Dhanuka working in the Firm of Gupta and Co. of 180, Cross Street, Calcutta, which deals in cloth. According to this witness, on 6-8-1947, 8000 yards of canvas was sold at Rs. 1/10/- per yard and 5000 yards of canvas was sold on 8-8-1947 at the rate of Rs. 1/10/3 per yard. This was also coloured canvas but Bajranglal Dhanuka does not mention that this canvas was 26" or 27" in width. Clearly, it is Chothmals statement on which basis the profits are to be calculated. Mr. Chitale contends that the profit should be calculated at the rate of eight annas per yard. It is conceded that in the contract in question, in the present case, the canvas was not mentioned as coloured canvas. All that we can say safely from the terms of the contract is that it was a plain canvas which was being purchased by the plaintiff. There is no evidence on record about the rate of this plain canvas. In my opinion it will be reasonable to say that the price of the plain canvas would be two annas per yard less than that of coloured canvas, and so I would take it that the Calcutta price of plain canvas at the material time was Rs. 1/6/- per yard. 16. In my opinion it will be reasonable to say that the price of the plain canvas would be two annas per yard less than that of coloured canvas, and so I would take it that the Calcutta price of plain canvas at the material time was Rs. 1/6/- per yard. 16. Now the person injured by breach of contract is to be placed in the position he would have been in had the contract been performed. Of course, he is not to be put in a better position by recovery of damages for the breach of contract than he would have been in if there had been performance. The fundamental principle of law of damages within the meaning of S. 73, Contract Act is, that the person injured by breach of contract shall have fair and just compensation commensurate with loss sustained in consequence of the defendants breach of contract which gives rise to the action. This amount is to be established with reasonable certainty. It is pointed out in F.T. Kingsley v. Secy. of State for India, AIR 1923 Cal 49 (E) that this does not mean that absolute certainty is required, nor in all cases is there a necessity for direct evidence as to the amount. Damages are not uncertain for the reason that the loss sustained is incapable of proof with the certainty of mathematical demonstration or is to some extent contingent and incapable of precise measurement. It is further observed in this ruling that certainty to reasonable extent is necessary and the loss or damage must be so far removed from speculation or doubt as to create in the minds of intelligent and reasonable men the belief that it was most likely to follow from the breach of the contract and was a probable and direct result thereof. 17. The plaintiff has not proved that there was such a demand for plain "disposal" canvas in Calcutta market that he would have been able to sell the railway receipt if the defendant No. 1 had given him or would have been able to sell the whole lot of 70000 yards immediately after the delivery of goods at Howrah. At all costs he would have paid Rs. 66000/- to the defendant after the receipt of the "bilty" from the defendant. At all costs he would have paid Rs. 66000/- to the defendant after the receipt of the "bilty" from the defendant. We have to take into consideration that there was just saving of this amount as well as the amount of interest on it. The plaintiff also saved expenditure which he would have incurred in carrying the whole lot of 70000 yards of canvas to his own godown and the godown charges for at least a month. These are in my opinion expenses which we have to deduct from the profits that might have accrued to the plaintiff, if the goods had been delivered in time at Howarh. Taking the modest view, I think, a reduction of annas two per yard from Rs. 1/6/- for plain canvas will be a fair and reasonable basis upon which the actual profits to the plaintiff can be assessed. It works out at Rs. 17500/-. 18. Then, there is a term in the contract that the plaintiff has to bear the expenses of transmitting the goods to Calcutta at the rate of Rs. 2/- per bale plus other necessary expenditure : Mr. Chitale conceded that a sum of Rs. 450/- would have been needed for labour and other charges for sending the goods to Calcutta and there were 52 bales of canvas in all. In our opinion, a sum of Rs. 554/- (i.e. Rs. 450 plus 104) should be deducted from Rs. 17500/- and the plaintiff be given a decree for Rs. 16946/-. 19. We will, therefore, allow the appeal against respondent No. 1 Firm Murlidhar Chironjilal and decree the plaintiffs suit for Rs. 16946/- against respondent No. 1. The plaintiff will be entitled to proportionate costs throughout. The appeal against respondent No. 2 will be dismissed with costs throughout. 20. SHINDE, C.J. :- I agree.