Vishnu Shanker Misra v. Rohtas Financiers — 1984 DIGILAW 323 (ALL)

JUDGMENT E S. Varma, J. 1. This is a plaintiff's appeal arising out of a suit filed by him against M/s. Rohtas Financiers and Sri Lal Chand Rastogi, Partner Rohtas Financiers, Hire purchase Financiers of Automobiles, Hazratgani. Lucknow. The prayer in the suit was that a decree for damages for sum of Rs. 46,250/-be passed against the defendants, for breach of contract. In the first intsance an application for forma pauperis was filed. The said application was allowed and registested as Regular Suit No. 85 of 1967. The learned Additional Civil Judge by judgment and decree dated 5-12-1968 dismissed the plaintiff's suit. The appellant then filed an application for leave to appeal in forma pauperism. The prayer was granted by this court and the application for leave to appeal was converted into First Civil Appeal No. 17 of 1971. 2. The case of the plaintiff as disclosed in the plaint is that he had been doing truck business and on 14-1-1963 he entered into an agreement with defendants 1 and 2 to purchase Vehicle No. U. P. L. 4108 on hire purchase system. A sum of Rs. 101/- was paid by the plaintiff to defendants as advance money. It was further stipulated that Rs. 4000/- was to be paid as initial payment and the rest of the amount, namely, Rs 15,000/- would be realised by the defendants from the plaintiff in twenty four equal instalments. The agreement of hire purchase was to be filled in by the parties simultaneously with the delivery of vehicle and the initial amount of Rs. 4000/- was to be paid by the plaintiff to the defendants. The plaintiff was also required to furnish guarantors to be approved by the defendants. On 14-1-1983, it is stated by the plaintiff in the plaint that the defendants informed him that the said vehicle needed repairs and recolouring and the said vehicle would be delivered to the plaintiff within a month from that date. When the plaintiff approached the defendants for delivery of vehicle the defendants informed him that the vehicle was not ready for delivery and it shall be delivered just after 'Holi' festival. It is also asserted that an 13-3-1963 when the plaintiff again approached the defendants he 'handed over' the balance of the initial money but the defendants again informed the plaintiff that the vehicle is not ready for delivery. It is also asserted that an 13-3-1963 when the plaintiff again approached the defendants he 'handed over' the balance of the initial money but the defendants again informed the plaintiff that the vehicle is not ready for delivery. The same reply was given by the defendants when the plaintiff approached the defendants on 20-3-1963. On 23-3-1963 the plaintiff sent a registered acknowledgement due notice to defendants 1 and 2, requiring them to pay Rs.2000/- as damages upto 23-3-1963 and also a further sum of Rs. 50/-per day with effect from 23-3-63 till the delivery of the truck. The defendants admit that the said notice was received by both the defendants on 26-3-1963. It has also been stated in the plaint that on 24-8-1965 the plaintiff again sent a notice to the defendants requiring them to pay damages to the tune of Rs. 46,250/-. According to the plaintiff the notice dated 24-8-1965 was received by defendant no. 1 on 25-8-1965 and the plaintiff in order to maintain his family had to purchase another vehicle and due to shortage of funds was able to ply the vehicle only in December, 1963 after he had arranged funds. The plaintiff's case is that non-delivery of Vehicle No. U.P.L. 4108 put the plaintiff to great loss and he had to take help of his friends for meeting the daily needs. The plaintiff also states that the purchase of other truck did not yield any profit and be suffered great loss in business. In paragraph 17 of the plaint the plaintiff has claimed Rs. 46,250/- as damages on account of nondelivery of truck U. P. L. No. 4108. In para 19 it has been stated that the defendants had disposed of Truck U. P. L. No. 4108 on profits. According to the plaint cause of action accrued to the plaintiff on 14-1-1963, 25-3-1963 and 25-8-1965. In this way the plaintiff claims a decree for Rs. 46,250/- and since he was unable to pay the court fee, he applied for leave to appeal in forma pauperism. The plaintiff was permitted to appeal as a pauper. The suit was contested by the defendants and they filed a written statement. The defendant's case is that on 14-1-1963 the plaintiff came to the defendants for finance and for entering into hire purchase agreement. The plaintiff was permitted to appeal as a pauper. The suit was contested by the defendants and they filed a written statement. The defendant's case is that on 14-1-1963 the plaintiff came to the defendants for finance and for entering into hire purchase agreement. The plaintiff was told that the truck in question was in the workshop and for that transaction the terms of hire purchase were communicated to the plaintiff and a printed copy of an agreement and form was given to him to be tilled in and executed by him alongwith a guarantor. The plaintiff was asked to deposit a sum of RS. 101 towards documentation and other incidental charges according to the practice prevalent in the defendant's firm. The plaintiff deposited this amount with the defendants. The plaintiff was further asked to furnish a guarantor and execute the documents in connection with hire purchase and further to deposit the initial money. The defendant's case is that after that the plaintiff never turned up to execute the documents and to make initial deposit. This was in spite of letter issued to the plaintiff. According to the defendants there was no completed contract inasmuch as guarantor was not produced and necessary documents were never executed. According to the defendants the execution of documents was a condition precedent. In paragraph 29 of the written statement defendants denied that the plaintiff ever approached the defendants to make initial deposit and when the plaintiff did not turn up the defendants entered into a hire purchase agreement with M/s. Brij Kishore Ganga Prasad with respect to the said truck. The defendant also contended that even if it was held that there was a completed contract the plaintiff committed breach in complying with the terms of the conditions there of It is further contended by the defendants that the plaintiff could not arrange for the initial deposit and the guarantor to enable him to enter into the hire purchase agreement and execute the documents in connection therewith. On these facts the defendants case is that the plaintiff is not entitled to any damages and the plaintiff's suit is liable to be dismissed. 3. On the above pleadings the following issues were framed :- "1. Whether there was a contract entered into between the parties as alleged in para 1 of the plaint ? 2. On these facts the defendants case is that the plaintiff is not entitled to any damages and the plaintiff's suit is liable to be dismissed. 3. On the above pleadings the following issues were framed :- "1. Whether there was a contract entered into between the parties as alleged in para 1 of the plaint ? 2. Whether the defendants committed breach of contract entered into the agreement as alleged in para 19 of the plaint ? 3. Whether the plaintiff committed breach of contract as alleged in para 31 of the written statement ? 4. Whether the plaintiff is entitled to the damages ? If so, whether the damages claimed are excessive, if so, to what amount of damages is the plaintiff entitled ? 5. To what relief, if any, is the plaintiff entitled ? 6. Whether there was an agreement as alleged in amended para 1 of the plaint with respect to the price of the vehicle ? If so, its effect ? A perusal of the pleadings of the parties, the statement of the witnesses and the judgment rendered by the trial court indicates that the so called agreement set up by the plaintiff was oral. The trial court on issues 1 and 6 recorded a hading that there was a contract between the parties as alleged in paragraph 1 of the plaint. The finding on issues 2 and 3 recorded by the trial court was that breach of contract was not from the side of the defendants but was from the side of the plaintiff and hence the claim for damages was not entertainable. On these findings the trial court dismissed the suit. 4. In this appeal we have heard learned counsel for the parties at great length. It was contended by Mr. L. R. Acharya. learned counsel for the appellant that the court below recorded a finding that there was a contract between the patties such as is alleged in the plaint. He contended that the breach of contract was occasioned by the conduct of the defendants and not the plaintiff. He accordingly pressed that the claim for damages should have been decreed by the trial court. On the other hand Mr. He contended that the breach of contract was occasioned by the conduct of the defendants and not the plaintiff. He accordingly pressed that the claim for damages should have been decreed by the trial court. On the other hand Mr. R. K. Srivastava, learned counsel for the respondents contended that since there was no completed contract the terms of which had to be reduced in the form of hire purchase agreement the plaintiff is not entitled to any damages. The learned counsel elaborates his submission by saying that the agreement referred to in the plaint was not enforceable as the terms thereof were condition precedent before the transaction could go through. Since there was no completed contract between the parties the claim for damages is not maintainable. In view of the fact that the terms of the agreement set up in the plaint are said to have been agreed to orally between the parties, it would be necessary to examine the pleadings of the parties and their submissions in order to ascertain the correct terms on which the transaction had to be entered into between the parties. PW 1 Bishun Shanker, plaintiff clearly states in his plaint that the agreement between the parties was for the purchase of vehicle on hire purchase system. The plaint also indicates that the agreement of hire purchase had to be filled in by the parties, preceded by the payment of initial amount of Rs. 4000. In his statement the plaintiff has stated in examination-in-chief that it was agreed that he would get the truck on hire purchase system. The form of bire purchase agreement filed in this case indicates that one of the conditions for entering into hire purchase agreement was furnishing of guarantor by the plaintiff. In paragraph 33 of. the written statement it has been specifically submitted by the defendants that the plaintiff could not arrange for the initial deposit and the guarantor to enable him to enter into hire purchase agreement and execute the documents In connection therewith. In the additional written statement it was pleaded that there was no completed agreement with respect to the price nor agreement of hire purchase was filled and no names of guarantors were furnished by the plaintiff. In the additional written statement it was pleaded that there was no completed agreement with respect to the price nor agreement of hire purchase was filled and no names of guarantors were furnished by the plaintiff. DW 1 Lal Chand in his statement has stated that in order to effectuate the agreement of hire purchase the form bad to be filled in and the hirer was required to furnish a guarantor. 5. According to the plaint the names of the guarantors given by the plaintiff were approved by the defendants. The statement of plaintiff Bishun Shanker as PW 1 is that when the defendants agreed that the truck would be given to him on hire purchase system and an initial demand of Rs. 4,000/-was made, he paid Rs. 101/- as an advance to the defendants, promised to deliver the truck after one month. He said, that when he received defendants' notice dated 5-2-63 to take the truck, he went to the defendants but they asked him to take the delivery of the vehicle after Holi and when he again went on 13-3-63, the defendants said that the vehicle was not ready and may be taken by him after one week. He lastly said that on 20-3-63 again the defendants said that the vehicle was not ready. He did not speak in the examination-in-chief of either tendering any guarantor or of the defendants' accepting the proposed guarantors. In cross-examination however, he said that on 12-2-63 (after he received the notice dated 5-2-63 from the defendants) he took the guarantors to the defendants, but he did not say that the defendants accepted the persons concerned as guarantors. It is significant that although he named Pratap Narain and Raja Ram as the persons whom he had taken to the office of the defendants on 4-1-6i, he did not specifically state that they were the very persons whom he had offered as guarantors. He admitted that he did not take Raja Ram and Pratap Narain to the defendantss office after 12-2-63. 6. Pratap Narain (PW 2) stated that on 13-1-63 he had gone with the plaintiff along with Raja Ram to the defendants' office as guarantors. He said, after perusing his documents the defendants demanded the 'Bajaja' (whatever it means) whereupon the plaintiff paid 101/- rupees to the defendants who gave a receipt. 6. Pratap Narain (PW 2) stated that on 13-1-63 he had gone with the plaintiff along with Raja Ram to the defendants' office as guarantors. He said, after perusing his documents the defendants demanded the 'Bajaja' (whatever it means) whereupon the plaintiff paid 101/- rupees to the defendants who gave a receipt. In the first place the date of 13-1-63 stated by him is incorrect; it could not have been prior to 14-1-63. In the second place even the plaintiff does not state that on 14-1-63 PRATAP Narain or Raja Ram had appeared before the defendants as guarantors; the plaintiff has stated earliest appearance of the guarantors before the defendants on 12-2-63. It is noticeable that PW 2 PRATAP Narain admitted that defendants did not furnish any forms to him being filled up. He admitted that even the hire purchase agreement form had not been shown nor any talk whatsoever took place for filling the form; it is admitted that guarantee was to be submitted on a form. If the defendants did not even submit a form to the guarantors nor even talked about the filling of any form, it is difficult to see how the defendants could be said to have agreed to accept Pratap Narain and Raja Ram as guarantors. Pratap Narain (PW 2) seems to have over done his job. He went to the extent of stating that one month after (13-1-63) he and Raja Ram along with the plaintiff again went to the defendants' office where the plaintiff gave money to defendants and asked for the vehicle. It is noticeable that in para 5 of the plaint it was stated that on 13-3-63 the plaintiff again approached the defendants' and handed over the balance of the initial money to the defendants, but in his own deposition the plaintiff did not state that he handed over any money to the defendants except the sum of Rs. 101/- on 14-1-63. Indeed, it is not stated at all on behalf the plaintiff-appellant that he ever made good the whole of the initial amount of Rs. 4,000/- and yet PW 2 Pratap Narain goes on to say so, and ascribes the point of time one month in advance of the point of time even set forth in the plaint. 7. PW 3 Raja Ram has spoken almost in the same terms as PW 2 Pratap Narain. 4,000/- and yet PW 2 Pratap Narain goes on to say so, and ascribes the point of time one month in advance of the point of time even set forth in the plaint. 7. PW 3 Raja Ram has spoken almost in the same terms as PW 2 Pratap Narain. He admitted that he had been doing pairvi on behalf of the plaintiff in the suit and in that connection had also been spending some of his own money. He is, therefore, an interested witness. 8. The theory of the plaintiff, therefore, offering any guarantor is not established by evidence. The defendant in his statement has stated that the plaintiff did not furnish the guarantor. On these facts, we are of the view that the conditions precedent for entering into hire purchase agreement was the execution of the agreement on the form supplied by the defendants and the furnishing of the guarantor, which is not established to have been done. The trial court has recorded a finding that no hire purchase agreement was entered into but he has found that there was a contract regarding the purchase of the vehicle in dispute. What has to be determined in the instant case is whether the intention of the parties was that the rights of the parties shall be governed by the execution of the hire purchase agreement or the execution of the agreement would be postpored to a further date. The law relating to hire purchase agreement is codified in Section 4 of the Sale of Goods Act, 1930. At common law, a hire-purchase agreement means a contract for the hiring of goods under which there is conferred on the hirer an option to buy the goods. The salient features of such an agreement are, firstly, that during currency of the agreement, the property in the goods remains in the owner and the capacity of the hirer is that of a mere bailee having no power to dispose of the goods, and, secondly, that the hirer has an option to buy the goods but not a binding obligation to do so. In practice, hire-purchase is a device used in order to secure possession and the use of the goods to an intending buyer over a period during which he pays the price and interest by instalments while the seller retains the title to the goods as security for the unpaid balance of the price. If this is the real effect of the agreement there is no contract of sale until the hirer has made requisite number of payments and he remains a bailee until then. A hire-purchase agreement partakes of the nature of a contract of bailment with an element of sale added to it. A hirer may not be bound to purchase the thing hired but if there is an obligation or an option to buy on the terms that the hirer on payment of number of instalments shall enjoy the goods which ultimately may become his property, the transaction amounts to one of hire purchase though the title to the goods would remain with the owner till all the instalments are paid. The law contemplates some hire purchase agreements which are in relation to contracts to purchase and in those contracts the contract is of sale and not of hiring although the price is to be paid by instalments. The question that is to be ascertained in the instant case is whether the terms of the contract as ascertained from oral evidence (there being no documentary evidence of a concludedd Contract) make out a case for contract of sale or only an agreement for hiring. It is a matter of construction whether the terms of the contract are to be regarded as contract of hiring or a contract of sale. 9. The law of contract recognizes a distinction between an agreement which is final in its terms and therefore binding, and an agreement which is dependant upon a stipulation for a formal contract. Jessel, M. R. in Winn v. Bull, (1977)-7 Chancery Division-29 laid down the following principles to determine the question when an agreement should be treated to be final and when it is to be treated as dependent upon a formal contract. Jessel, M. R. in Winn v. Bull, (1977)-7 Chancery Division-29 laid down the following principles to determine the question when an agreement should be treated to be final and when it is to be treated as dependent upon a formal contract. At page 32 his Lordship while approving the observation of Lord West bury observed as follows J- "I entirely accept the doctrine............that if there had been a final agreement, and the terms of it are evidenced in a manner to satisfy the Statute of Frauds, the agreement shall be binding, although the parties may have declared that the writing is to serve only as instructions for a formal agreement, or although it may be an express term that a formal agreement shall be prepared and signed by the parties.........But if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation." The observations quoted above were approved by Parker, J in Von Hatzgeldt. Wildenburg v. Alexander, (1912) 1 Chancery Division-284 the learned Judge observed as follows :- "It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplates the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored." A perusal of the decis. on would indicate that arker, J. applied the principles laid down in Winn v. Bull, (1877) Chancery Division-29 and agreed with the opinion of Jessel M. R. The observations made by Parker, J. in the above mentioned case were relied upon by the Privy Council in Seth Hukum Chand v. Raja Ran Bahadur Singh, 1924 PC 156 and Shanker Lal Narayandas Muncade v. The New Moffussil Co. Ltd, 1946 PC 97. From a scrutiny of the decisions referred to above, the question for consideration is whether the agreement set up by the plaintiff, although oral, makes out a contract of sale or it has to be regarded as such only after execution of a formal document, namely the execution of a hire-purchase agreement. Paragraph 1 of the plaint is specific that the plaintiff wanted to purchase Truck U. P. L. No. 4108 on "hire purchase system". This is the agreement that has been set up on the plaint. The next paragraph also mentions that the agreement of hire purchase has to be filled in by the parties. The plaintiff in his statement as PW 1 stated in the examination-in-chief that it was stipulated that the truck in question shall be given to him on hire purchase system. He further states that four thousand rupees has to be paid initially and the rest of the amount was to be paid in instalments. The form of hire purchase agreement has been filled which also stipulates that the hirer shall furnish a guarantor for carrying out the terms of the agreement. From what has been stated above, it is thus obvious that the agreement entered into between the parties for the purchase of the vehicle was dependent upon the execution of hire purchase agreement which also requires the necessity of a guarantor to be available for the payment of the money in case of the default on the part of the hirer. Although the terms of the contract set up by the plaintiff are not incorporated in a document but there is evidence on record from which it appears that purchase of Vehicle No. U.P.L. 4103 was to be made by the execution of a hire purchase agreement. In this way the conditions in regard to the execution of the agreement was a condition precedent and a hire purchase agreement in the instant case would come into existence only when the agreement had been entered Into. 10. It has been strenuously contended on behalf of the appellant that the vehicle in question was not ready for delivery and the stipulation was that the initial amount shall be paid simultaneously with the delivery of the vehicle. In this respect he relied upon the statement of PW 1 bishun Shanker to the effect that he approached defendant no. 10. It has been strenuously contended on behalf of the appellant that the vehicle in question was not ready for delivery and the stipulation was that the initial amount shall be paid simultaneously with the delivery of the vehicle. In this respect he relied upon the statement of PW 1 bishun Shanker to the effect that he approached defendant no. 1 for delivery of the vehicle but each time he was informed that the vehicle was not ready. Reliance was also placed by the learned counsel for the appellant that ultimately the defendant no. 1 sold the vehicle to another person on profits. In our opinion the story set up by the plaintiff that he approached respondent no. 1 and each time he was informed that the vehicle was not ready, could at best be only partially believable, for while on the one hand he might have gone to the defendants to demand the vehicle, on the other hand he himself was not ready and willing to perform his own part of the contract namely to provide the requisite guarantors or to pay the whole of the initial money. DW 1 Sri Lal Chand, proprietor of respondent no. 1 has stated that he insisted that the plaintiff should furnish guarantors and that there was no completed agreement between him and the plaintiff. DW 2 Jagat Narain is the Branch Secretary of National Insurance Co. He stated that he had introduced the plaintiff with respondent no. 1. He has also stated that the terms were explained to the plaintiff and the plaintiff was required to deposit the initial amount and two guarantors would be furnished by the hirer and rest of the amount was required to be paid by instalments and the interest would be calculated 16% per annum. It has also come in evidence of the plaintiff and defendant that Rs. 101/- was paid by the plaintiff to respondent no. 1 for miscellaneous expenses. In the cross-examination DW 2 Jagat Narain stated that a sum of Rs. 101/- was taken towards expenses for preparing stencil for a completed contract. There is nothing in the defendants' evidence to show that the plaintiff had offered the whole of the initial money or had furnished the requisite guarantors as a step towards the finalisation of the hire-purchase agreement. 101/- was taken towards expenses for preparing stencil for a completed contract. There is nothing in the defendants' evidence to show that the plaintiff had offered the whole of the initial money or had furnished the requisite guarantors as a step towards the finalisation of the hire-purchase agreement. On the grounds stated above, we are of the view that the story set up by the plaintiff that the execution of the agreement was delayed by the conduct of the defendants in not providing the vehicle, appears to be unreliable. 11. On behalf of the appellant it was contended that Ext. 2 dated 5-2-1963 is an admission on the part of respondent no. 1 that the transaction in regard to sale of Truck No. U.P.L. 4108 was a settled transaction. According to the learned counsel for the appellant this amounts to an admission on the part of respondent no. 1 and he should be bound down to his own admission, and cannot be permitted to turn round and say that there is no completed contract between the parties. In this respect he relied upon section 31 of the Evidence Act, and cited a number of authorities in support of this proposition. In our opinion, there is no room for the application of Section 31 of the Evidence Act. In Ext. 2 it has also been stated that the transaction relating to the truck to be on "hire purchase basis." It is admitted case of the parties that the sale of the vehicle in question shall be effected on hire purchase system. The evidence of DW 1 Sri Lal Chand and DW 2 Jagat Narain is specific as to the manner in which hire purchase agreement is to be executed. The oral evidence led by the parties also leads us to the conclusion that the execution of agreement and furnishing of guarantor was a condition precedent to the existence of the transaction. In this view of the matter, it is not possible to agree with the learned counsel for the appellant that the transaction in regard to sale of truck was a completed contract. A perusal of Ext. 2 would further indicate that the words "settled the above transaction of the truck." If Ext. In this view of the matter, it is not possible to agree with the learned counsel for the appellant that the transaction in regard to sale of truck was a completed contract. A perusal of Ext. 2 would further indicate that the words "settled the above transaction of the truck." If Ext. 2 is read as a whole the conclusion appears to be irresistible that what was settled was that the truck in question shall be sold on hire purchase basis which can actually be effectuated with the execution of the agreement, in the manner provided for by the agreement. We are, accordingly of the view that it is not possible for the appellant to draw assistance from Ext. 2. The court below has recorded a finding that there was a contract between the parties as alleged in paragraph 1 of the plaint. The learned court below committed an error in not recording a clear finding on the question whether the execution of document and the furnishing of guarantor were conditions precedent to the hire purchase agreement. We have examined the record ourselves and we are of the view that there was no completed contract of hire purchase agreement. The story set up by the plaintiff that the execution of the agreement was delayed on account of the conduct of respondent no. 1 and that he could not deliver the vehicle by reason of the fact that it was under repairs, appears, to be unbelievable. ONce it is held that there is no completed contract between the parties for the purchase of truck on hire purchase system, it cannot be said that any breach was committed by the defendants so as to justify the plaintiff to set up a claim for damages. 12. Learned counsel for the appellant by reference to Section 73 of the Contract Act submitted that although the pleadings of the plaintiff on the question of quantum of damages are not specific and clear, the plaintiff, is nevertheless entitled to damages and the claim of the plaintiff cannot be thrown out merely on account of lack of particulars in the plaint. It is unnecessary to enter into this controversy any further as we are of the view that there was no completed contract between the parties in regard to the purchase of truck in question. It is unnecessary to enter into this controversy any further as we are of the view that there was no completed contract between the parties in regard to the purchase of truck in question. Reference may be made in this connection to the own statement of the plaintiff that he had purchased a truck in September, 1963 but had started plying in December, 1963. The claim for damages, if at all, could not extend to any period beyond September, 1963 because any claim of damages subsequent to that period on account of the failure of the truck which was actually purchased by the plaintiff would be too remote a claim to be acceptable in law. 13. In view of our above finding the dismissal of the suit by the trial court deserves to be sustained and the appeal must fail. 14. The appeal is dismissed. Parties shall bear their costs of this appeal. Appeal dismissed.