VENKATARAMIAH, J. ( 1 ) THE above appeal arises out of OS. No. 492 of 1964 on the file of the addl. Civil Judge, Civil Station, Bangalore. The plaintiff is a Co-operative society engaged in the business of import, export and distribution of goods amongst other Co-operative Societies in the State of Mysore governmental agencies and other sections of the public. Defendant 1 is a partnership firm carrying on business at Rangoon. Defendant 2 is a company acting as the agent of defendant 1 at Calcutta and defendant 3 is the agent of defendants 1 and 2 at Bangalore City. Under an agreement dt. December 12, 1063 the pliantiff agreed to buy from defendant 1 5797 bags of best medium sized Auaghaun Seed potatoes at Rs. 54 per bag CIF. Madras. Similarly under another agreement dt. December 27, 1963, it agreed to buy from defendant 1 an additional quantity ot 478 bags of seed potatoes of the same quality at the same price the other terms and conditions of the two agrements were identical. ( 2 ) THE agreements were signed by defendant 3 on behalf of all the defendants. Under the said agreements defendant 1 undertook to supply the seed potatoes on or before January 5, 1964 with the stipulation that it would pay a sum of Rs. 10 per bag in the event of the goods not being supplied on or before that date Defendant 1 further undertook to furnish the Phyto Sanitary Certificate issued by the Agricultural department, Government of Burma, certifying that the seed potatoes were free from all diseases such as Wart disease Bacterial Ring Rot, etc. and also Fumigation Certificate issued by a recognised institution at Burma. Defendants 2 and 3 agreed to act as guarantors for the fulfilment of the conditions of the agreements by defendant 1. The goods had to be despatched by steamer 'malaya' or any other substitute. Since the steamer 'malaya' was not available, the goods were despatched by steamer 'negobla' which reached Madras on Jan 12, 1964. By then the plaintiff had remitted rs. 3,38,498 inclusive of Bank charges by means of a letter of credit opened for facilitating payment to defendant 1. The goods had to be despatched by steamer 'malaya' or any other substitute. Since the steamer 'malaya' was not available, the goods were despatched by steamer 'negobla' which reached Madras on Jan 12, 1964. By then the plaintiff had remitted rs. 3,38,498 inclusive of Bank charges by means of a letter of credit opened for facilitating payment to defendant 1. According to the plaintiff when its representatives inspected the goods on January 13, 1964, after their arrival at Madras, they found that the goods were not of good qualitv, they had become rotten, and consequently foul smell was emanating from them. Entomologist of Government of India also certified that a certain percentage of the goods had become rotten. It is also the case of the plaintiff that there was shortage in the quantity of potatoes supplied. The plaintiff which ultimately took delivery of the goods pleaded that it suffered loss and damage to the extent of Rs. 2,80,866 owing to the breach of warranty committed by defendant 1 as all the goods could not be utilised for the intended purpose and that the customers of the plaintiff had rejected the same for the said reason. The plaintiff, however, instituted the suit out of which this appeal arises, for recovery of Rs. 1,25,465-59 only by limiting its claim to that sum by way of damages for breach of contract committed bv defendant 1. Defendants 2 and 3 who were agents of their foreign principal defendant 1 were also sued as they were also liable in law both as guarantors and as agents of a foreign principal. Before the trial Court, defendant 1 remained ex-parte. Defendants 2 and 3 contested the suit. They denied the claim of the plaintiff and raised various grounds in their defence. In particular they urged that defenddant 1 had not committed any breach of agreement. At the conclusipn of the trial, the lower Court found that the plaintiff had not established its claim and dismissed the suit. Hence this appeal. ( 3 ) SRI S. Nanjundaswamy, the learned Counsel for the plaintiff, after taking us through the oral and documentary evidence on record contended that the findings of the Court below were erroneous. At the conclusipn of the trial, the lower Court found that the plaintiff had not established its claim and dismissed the suit. Hence this appeal. ( 3 ) SRI S. Nanjundaswamy, the learned Counsel for the plaintiff, after taking us through the oral and documentary evidence on record contended that the findings of the Court below were erroneous. Before dealing with the cases put forward by the parties before us, it is useful to refer to the legal incidents of a CIF contract and the corresponding rights and obligations of the buyer and seller under that contract. A CIF contract is one which is commonly resorted to by persons dealing in international trade. In the case of such contracts the cost of the goods, insurance charges and the freight in respect of the goods in question upto the place of destination have to be borne by the buyer. The payment of the price to the seller is generally arranged to be effected in those cases through the machanism of a Letter of Gredit issued by a banker at the instance of the buyer who undertakes to reimburse the issuing banker to the extent of such payment. The issuing Bank arranges payment of the price to the seller on his producing either before it or beiore another banker on whom the Letter of Credit is drawn as the case may be, the invoice, the bill of lading and the insurance policy in respect of the goods which are the subject matter of sale. While doing so, the bankers concerned do not act as the agents of either the seller or the buyer in connection with the sale. The delivery of invoice, bill of lading and the insurance policy to the bank and receipt of money by the seller pursuant to a Letter of Credit opened for the said purpose cannot be considered as delivey of goods to the buyer. ( 4 ) THE question whether a purchaser under a CIF contract is entitled to reject the goods as not being in accordance with the terms cf the contract notwithstanding that the property in the goods has passed to him by delivery of the bills of lading when he had no opportunity to inspect the goods before was considered by the High Court of Madras in A. R. Muthukrishna redder and Sons v. Madhavji Devichand and Co. Ltd. AIR 1953 Mad, 817 wherein Venkatarams alyar, J. in the course of the judgment observed as follows :on the question whether the plaintiffs are entitled to reject the goods there has not been much of an argument before us. There is authority for the position that m a C1f contract the purchaser is entitled to reject the goods as not being in accordance with the terms of the contract notwithstanding that the property in the goods has passed to him by delivery of the bills of lading if he had no opportunity to inspect the goods before. It is only when he does any act which is inconsistent with the ownership of the seller that he loses his right of rejection under Section 42, Sale of Goods Act. . . . . ( 5 ) IT is settled law that even in the case of CIF contracts, the goods which are the subject matter of sale should be of merchantable quality at the time they are delivered to the buyer at the place of destination and during a leasonable time thereafter. A summary of several decisions of English courts bearing on the questiun is set out at page 650 in Benjamin on Sale, 8th Edn as follows : the rule deducible from the authorities is, it is submitted, as follows: The goods despatched, if they are perishable, will not be merchantable unless they can so stand the journey in the ordinary course of transit to the buyer as to be merchantable (saving necessary deterioration) on arrival, and until the buyer has a reasonable opportunity of dealing therewith in the ordinary way of business. Of deterioration arising from exceptional or accidental causes the owner must toke the risk; that is to say, the seller if he contracted to deliver the goods at their destination or has otherwise retained the right of dis posal until the arrival of the goods, or the buyer if the goods were merely to be sent off The rule is, of course subject to any contrary intention as to the incidence of the risk. ( 6 ) IN paragraph 297 of Volume 34 of Halsbury's Laws of England (Third edn.) which deals with CIF contracts, we find the following passage : the buyer by acceptance of the documents does not thereby lose has right to reject the goods on actual delivery, if the goods are not in accordance with the contract. The place of delivery is prima facie the proper place for inspection, but the circumstances of the case may show some other place or later time to be appropriate. In particular, where goods to the knowledge of the seller are purchased by the buyer for delivery to a further destination, and the nature of the goods and the way m which they are packed makes it unreasonable to inspect immediately on delivery the right to reject will be extended to the later date. . . . . . From the foregoing, it is clear that even in case of CIF contracts, unless there is a contract to the contrary, a buyer has the right of inspection of the goods before accepting them and to reject them if they do not answer the agreed specifications or when he accepts, to sue the seller for recovery of excess price paid m respect of the quantity which is not of merchantable quality under Sec. 59 of the Sale of Goods Act (hereinafter referred to as the Act ). The burden of establishing the claim however is on the plaintiff. We shall now proceed to consider the evidence placed before the court The oral evidence consists of the depositions of several witnesses examined on behalf of the plaintiff and of defendant 3 who is the sole witness on behalf of defendants 2 and 3. A large number of docments have been marked as exhibits m the case. ( 7 ) EXHIBIT -P127 dt December 12, 1963, and Ext. P128 dt. December, 27, 1963, are two agreements under which defendant 1 agreed to sell 5787 and 478 bags of best medium sized Auaghan Seed Potatoes at Rs. 54 per bag CIF Madras These agreements are signed by defendant 3 on behalf of himself and on behalf of defendants 1 and 2 as their agent. All other terms and conditions m the two agreements are identical. 54 per bag CIF Madras These agreements are signed by defendant 3 on behalf of himself and on behalf of defendants 1 and 2 as their agent. All other terms and conditions m the two agreements are identical. There is provision for the supply of Phyto Sanitary Certificates and the Fumigation Certificates issued by the Agricultural Department of the Government of Burma. The goods were to be delivered on or before January 5, 1964. Auaghan is stated to be a place m Burma which was stipulated to be the place of origin of the goods. It was m the contemplation of parties and it is not also disputed before us that the potatoes in question were intended for being used as seed for growing potatoes in the State of mysore. The insistence on the production of a certificate showing that the goods should be free from several diseases which were likely to attack potatoes also shows that the seller knew the purpose for which they were being bought by the buyer. Although it was at one stage contended on behalf of the plaintiff that the sowing season of potatoes was to come to an end by the second week of January 1964 and that therefore time was the essence of the contract, the said contention was not pursued further as the result of the case did not depend on that point. Hence we do not also find any need to refer to the several documents marked as exhibits in the case Which are relevant only to that question. What was however argued on behalf of the plaintiff and which we consider to be material for the purpose of this case is that the parties knew that the goods were intended to be used as seed in the ensuing sowing season which was likely to come to an end by the end of January 1964 and that they should be fit for baing used accordingly. It is reasonable in these circumstances to construe the agreements as those under which the seller undertook to supply goods of that quality which would be fit to be used as seed ft the time of their delivery at Madras and within a reasonable time thereafter, for no buyer would buy the goods only 'to lay them on a dunghill. (Sec Per Lord ellenborough in Gordiner v. Gray (4 Camp. 144-16 R. R. 764) ). (Sec Per Lord ellenborough in Gordiner v. Gray (4 Camp. 144-16 R. R. 764) ). ( 8 ) IN the instant case the goods are stated to have been loaded into the ship 'negobla at Rangoon on January 3, 1964, as can be seen from the Bill of Lading Ext,p264 and it was known that the ship would be reaching madras via Colombo. Ordinarily the said journey of the ship would take five or six days and in these circumstances the goods to be supplied should be these capable of being used as seed potatoes within at least a fornight after they reached Madras. In other words, the goods should be fit to be used as seed potatoes for about twenty days after they were loaded into the ship, that is till January 23, 1964. We cannot agree with the argument of Sri Bannerjea the learned Counsel for defendants 2 and 3 that the responsibility of the seller was over immediately after the goods were loaded into the ship and that if the goods deteriorated thereafter, the buyer should bear the consequent loss. The mere fact that defendant 1 has produced the Phy to Sanitary Certificate (Ext. P17) and the Fumigation Certificate in respect of the goods issued by the Burmese authorities does not deprive the plaintiff of its right of inspection of the goods at the time of delivery and to reject the goods if they are not in order or to accept'the goods and to claim the relief under S. 59 of the Act. Similarly the argument that the plaintiff could have sent its representative to Burma to inspect the goods as it had done on an earlier occasion also is not available to the defendants. Sri Bannerjea sought to construct an argument on the basis of Ext. P65 that the plaintiff having declined to inspect the goods at rangoon could not exercise the'said right at Madras. In Ext. P55 dt. 12-12- 1963 the plaintiff has written that as there was no sufficient time it was not sending a representative to inspect the goods before they were despatched and it depended upon defendant 1 for despatching goods of proper quality. From this it is not possible to spell out that the plaintiff had waived its right of inspection at the time of delivery. From this it is not possible to spell out that the plaintiff had waived its right of inspection at the time of delivery. We shall next consider whether the plaintiff has established that the goods were not according to agreed specification or quality when they were unloaded at Madras or within a fornight thereafter. There is no dispute that the goods in question are of perishable character. PW. 2 Bodharao s. Prayag PW. 3 K. Madhava Rao and PW. 7 S. G. A. Naidu, are the three witnesses who were present at Madras when the goods arrived at madras. PW. 2 who was a Joint Registrar of Co-operative Societies in the service of the Government of Mysore, was working as the General Manager of the plaintiff Society from 9-1-1964. His evidence is that he went to madras on 12-1-1964 to take delivery of goods. The ship arrived at Madras harbour at 8-00 p. m. on 12-1-1964 and that he was present when the goods in question were being unloaded. At that time foul smell was emanating from the bags consigned to the plaintiff and that the Entomologist of Govt of India was informed about the same. The goods were removed to a place near Madras. The goods were subjected to fumigation treatment and they were despatched thereafter within 7 days to the customers. He has stated that about 2000 bags of potatoes were sent to Bangalore as they contained rotten potatoes, PWs. 3 and 7 corroborate the evidence of PW. 2 on the above question. That certain quantity of goods unloaded at Madras had deteriorated and become unfit for use is proved beyond doubt by the contents of Ext. D15 which is the Survey Report issued by the Surveyor on benalf of Wilson and Co. (P) Ltd. who are Lloyd's Agents which also contains the certificate issued by the Entomologist, Government of India. Ext. D15 was admitted by consent of parties before the Court below and its genuineness 15 not questioned before us. D15 which is the Survey Report issued by the Surveyor on benalf of Wilson and Co. (P) Ltd. who are Lloyd's Agents which also contains the certificate issued by the Entomologist, Government of India. Ext. D15 was admitted by consent of parties before the Court below and its genuineness 15 not questioned before us. It shows that the goods arrived at Madras on 12th January 1964, the goods reached the place where the survey was held on the 13th and the 14th, that the application for survey was made on the 13th, but reached on the 16th and the survey was actually held between the 16th and the 19th at an open plot at Mekkundam village situated seven miles away from Madras. It further shows that the potatoes were rotten and emitting foul smell (see column 8) and that all the bags were intact end showed no signs of contact with water or other extraneous matter, but they were however all stained by liquid which was found coming from rotten potatoes in each bag. The certificate of the Entomologist referred to in the Survey Report states that when fifteen per cent of the consignment was sampled end examined it was seen that about four per cent by weight of the tubes were found rotten and totally unfit for any purpose and that they were therefore destroyed. When the! entomologist was asked by the Surveyor to let them know the cause of the damage sustained by the potatoes, he replied on 22-1-1964 stating that damage was due to Saphrophytic Fungi and the affected tubers were unfit for any purpose. Sri Bannerjea urged that no reliance could be placed on the said certificate since the defendants had no opportunity to be present at the time of survey and examination and the certificate had been issued behind their back. We do not find any substance in this contention. There appears to be no good ground to reject the Survey Report and the Certificate of the Entomologist. In the circumstances of this case, we feel that the probative value of the Survey Report is not in any way affected by reason of the defendants not being present at the time of the survey. There appears to be no good ground to reject the Survey Report and the Certificate of the Entomologist. In the circumstances of this case, we feel that the probative value of the Survey Report is not in any way affected by reason of the defendants not being present at the time of the survey. We are satisfied that the plaintiff has established that four per cent of the total number of bags of potatoes from which samples were taken and examined had become rotten either at the time of delivery at Madras harbour or within January 19, 1964, which was the last day on which the survey was held. ( 9 ) THE next question for consideation is what was the total weight of potatoes which had become rotten and was therefore destroyed. Sri Nanjundaswamy argued that four per cent of the entire consignment should be treated as having become rotten. He also relied upon certain letters written by the Consumer Co-operative Societies complaining against the inferior quality of goods. It is not clear from those letters to which part of the goods they relate and when the goods referred to therein became unfit for use. But Sri Bannerjea contended that according to Ext. P260 the bill for transport charges submitted on 4-2-1964 by M|s RKT. and Co. Cargo movers of Madras to whom the work of transporting the goods from Madras to various places in the State of Mysore had been entrusted by the plaintiff, 4245 bags had already been transported by 15-1-1964 and before. the survey commenced and therefore the quantity of potatoes which had become rotten could only be four per cent of the remaining quantity of 1978 bags (the total quantity despatched from Rangoon being 5746 plus 478 bags ). It was also argued by him that the non-examination of the drivers of lorries and other persons who handled the goods despatched prior to the 16th should lead to the inference that the said goods must have been in good condition. The submission made by Sri Bannerjea appears to us to be more convincing since it is not disputed that the only quantity that could have been examined by the Entomologist was the quantity remaining at the place of survey on the 16th January 1964 on which date the survey of the goods commenced. The submission made by Sri Bannerjea appears to us to be more convincing since it is not disputed that the only quantity that could have been examined by the Entomologist was the quantity remaining at the place of survey on the 16th January 1964 on which date the survey of the goods commenced. It is not therefore reasonable to infer that any part of the potatoes despatched from Madras upto 16th January 1964, had become rotten. We are of opinion that four per cent of 1979 bags alone had become rotten. According to Ext. D15, the gross weight of 1000 bags of potatoes was 72,915 Kgs. and out of that 3006 Kgs, had become rotten. ( 10 ) IT follows that approximately 6000 Kgs. of potatoes from out of 1970 bags had become rotten and they had been destroyed. The average weight of each bag is about 73 Kgs. 6000 Kgs. of potatoes would be approximately equivalent to 83 bags. The price paid in respect of them at the rate of rs. 54 per bag GIF Madras was Rs. 4,482. According to the agreement a sum of Rs-10 per bag was payable as damages in the event of default on the part of defendant 1. We do not consider that the said sum as excessive and hence the damages payable on that account will be Rs. 830. Sri Bannerjea argued that the defendants were not liable to pay any damages at all on the ground that the business of defendant 1 having been nationalised by Burmese Government no suit could lie against a foreign sovereign or its agents for damages. In the absence of any convincing evidence in support of the allegation that the business of defendant 1 had been nationalised we do not feel'called upon to express any opinion on the said question. ( 11 ) IT was next argued on behalf of defendants 2 and 3 that the plaintiff having not taken steps to recover the damages from the Insurer and having not impleaded the Insurer and the Shipping Co. as parties to the suit defts. 2 and 3 are not liable to pay damages. We do not agree with the above submission. as parties to the suit defts. 2 and 3 are not liable to pay damages. We do not agree with the above submission. It is in evidence that immediately after it was noticed that certain quantity of potatoes had become rotten, the plaintiff did lodge a claim with the Insurer who repudiated the same on the ground that the loss was due to the internal vice of the goods in question which was not covered by the policy. Ext. D15 the Survey Report shows that the bags were intact and they had not suffered any external damage. In the cricumstances, the insurer and the Shipping Company cannot be considered as necessary parties. ( 12 ) ON a consideration of the entire matter, we hold that the defendant are liable to pay the plaintiff a sum of Rs. 4,482 being the price of 83 bags of potatoes and Rs. 830 by way of damages for not supplying the said quantity according to the agreement. We, therefore, set aside the decree of the Court below and make a decree for Rs. 5,312 only against the defendants with interest thereon at six per cent per annum from the date of suit i. e 9-12-1964 till date of payment. The plaintiff is also entitled to proportionate costs in this Court as well as in the Court below. ( 13 ) THE appeal is accordingly allowed in part. --- *** --- .