Suresh Kumar v. K. Assan Koya & Sons — 1989 DIGILAW 304 (KER)

Judgment :- Ramakrishnan, J. The appeal and the memorandum of cross objection are filed respectively by the plaintiff and defendant in the suit. 2. Plaintiff and defendant are both firms carrying on business in rice and other food grains in Mattancherry and Calicut respectively. According to the plaintiff, defendant entered into two con tracts on-19-7-1975 with them for the purchase of three wagons each of Nepal rice. The first contract was for three wagons at the rate of Rs.362/- per quintal, biotic, ready R.R. from' Jayamgur 'or' Jogbani 'to Calicut. The second contract was for three wagons again, at the rate of Rs.365/- per quintal biotic, ready R.R. from 'Jogbani' to Calicut. The other terms and conditions of the two contracts were identical. The payment was agreed to be made against R/R in cash or by T.T. at Cochin through bank. There was an agreement to pay interest from the date of contract at 18% and also bank commission at 50 No per hundred rupee. The defendant also paid a total amount of Rs. 18,000/- as advance, at the rate of Rs.3,000/- per wagon. The three wagons forwarded under the first contract and the two wagons forwarded under the second contract as per Invoice Nos. 111 to 115 were taken delivery of by the defendant on due payment by T.T. on Indian Overseas Bank, Cochin-2. However, the third wagon of rice forwarded as per invoice No.116 was not taken delivery of by the defendant. The arrival of the goods on 27-9-1975 was intimated to the defendant duly. The defendant refused to take delivery alleging that 45 bags of rice were completely wet and damaged and that there was shortage in many other bags. They also alleged that the quality of the rice was inferior to the agreed quality. According to the plain tiff the reasons alleged by the defendant for their refusal to take delivery were all false and the real reason for refusal was the fall in prices which occured unexpectedly after the contract was entered into. The plaintiff sent a telegram followed by Ext. A3 letter dated 30-9-1975 requesting the defendant to 'take delivery for which the defendant sent Ext.A4 telegram on 1-10-1975 expressing "their inability to take delivery on the above mentioned false and frivolous grounds. The plaintiff sent a telegram followed by Ext. A3 letter dated 30-9-1975 requesting the defendant to 'take delivery for which the defendant sent Ext.A4 telegram on 1-10-1975 expressing "their inability to take delivery on the above mentioned false and frivolous grounds. Since the defendant failed to take delivery, the plaintiff arranged to take delivery of the goods by effecting payment and had got the goods sold through M/s. Radhakrishna Erady, Merchant, Calicut on Commission basis at the risk and responsibility of the defendant, after due intimation to them. The goods were so sold on 9-10-1975 and the net amount realised was Rs.45,922/67 as evidenced by Ext. A8 sale account. 3. Plaintiff admitted in the plaint itself that as per Ext. A7 resolution passed by the Calicut Food Grains and Provision Merchants Association the plaintiff is bound to give a reduction of Rs. 12/50 per bag from the contract price of the goods. It was further averred that the plaintiff has informed the defendant about their readiness and willingness to give such deduction from the' invoice amount immediately after Ext.A7 resolution was brought to their notice. 4. Plaintiff claimed in the plaint an amount of Rs.10,061/51 as damages for the loss suffered by the plaintiff as a result of the breach of contract committed by the defendant with interest at 6% from the date of the suit. The, amount claimed in the plaint represented the difference between the contract price of one wagon of rice and the net amount realised out of the sale of the said wagon of rice as evidenced by Ext. A8. The said amount was determined, after giving credit to Rs.3,000/- received as advance and Rs.2,000/- liable to be deducted as per Ext.A7 resolution. 5. The defendant denied the existence of the two contracts as alleged in the plaint. However, they admitted that they had purchased five wagons of Nepal rice from the plaintiff during the relevant period. According to the defendant, the plaintiff s agent used to offer them separate consignments of rice and they used to buy goods from Calicut after satisfying about the quantity and quality of goods on inspection. Contracts so entered were all separate and independent and there was no contract for purchase of goods on Baltic terms as alleged in the plaint. The defendants denied the alleged stipulations regarding payment of interest from the date of the agreement and bank commission. Contracts so entered were all separate and independent and there was no contract for purchase of goods on Baltic terms as alleged in the plaint. The defendants denied the alleged stipulations regarding payment of interest from the date of the agreement and bank commission. It was the further case of the defendant, that they were justified in refusing to take delivery of the goods despatched as per invoice No. 116 since on examination they found that 45 bags of rice was completely wet and damaged and that there was substantial shortage in other bags also. They asserted that the plaintiff had broken the contract by supplying goods which are inferior in quality and lesser in quantity. They disputed the right of the plaintiff to claim any damages from the defendant. The defendant also contended that the sale through M/s. Radhakrishna Erady is not binding on them and the sale conducted was not proper. Such a sale and the realisation thereof cannot be taken note of for determining the loss. The interest claimed was contended to be highly excessive. Apart from the above contentions, the defendant also questioned the maintainability of the suit on the ground that the plaintiff is not a registered firm. The jurisdiction of the court to entertain the suit was also disputed. 6. The learned Sub Judge found that the defendant firm had entered into two contracts as alleged by the plaintiff firm. It was also found that the defendant was not justified in refusing to take delivery of the goods. The court further found that there was a shortage of 522 Kgs. of rice from the agreed quantity and 40 bags of rice was wet and damaged. On the basis of the said finding the learned Sub Judge held that the defendant cannot be made liable for the price of the 40 bags of damaged rice and for the short delivered quantity of 5 bags and 22 Kgs. of rice. It was also found that after deducting Rs.12/50 per bag as per Ext. A? resolution the contracted value for 115 bags would come to Rs.40,537/50. The bank commission and interest for the said amount was fixed at Rs.1807/-. Thus the learned Sub Judge arrived at the total contract amount for 115 bags which were available for sale at Rs.42,344/50. It was also found that after deducting Rs.12/50 per bag as per Ext. A? resolution the contracted value for 115 bags would come to Rs.40,537/50. The bank commission and interest for the said amount was fixed at Rs.1807/-. Thus the learned Sub Judge arrived at the total contract amount for 115 bags which were available for sale at Rs.42,344/50. The learned judge calculated the re-sale value of 115 bags at the rate of Rs.325/- per bag and fixed the same at Rs.37,375/-. The difference between the contract price and sale price was accordingly found to be Rs.4,969/50. Deducting Rs.3000/- advance amount admitted by the plaintiff as paid by the defendant, the learned Sub Judge came to th'e conclusion that the plaintiff had incurred a total loss of Rs. 1969/50. To this amount the learned judge added 5% interest being sales tax due and chargeable under Ext.A8 and fixed the damages at Rs.2,000/-. Accordingly a decree for Rs.2,000/- alone was granted. The court found that it has jurisdiction to entertain the suit. On the question whether the plaintiff is a registered firm or not the learned judge directed the plaintiff to produce sufficient evidence to prove the registration of the firm before the execution court as condition for his entitlement to execute the decree. 7. In the appeal the appellant-plaintiff has filed C.M.P. No. 17595 of 1989 for permission to produce the original true copy of the register of firms issued by the Registrar of Firms evidencing the fact of registration of the firm with effect from 8-7-1968 with serial No.671 of 1968. We have allowed the said petition on 12-7-1989. Document produced proves beyond doubt that the plaintiff firm is a registered firm with effect from 8-7-1968 and effectively answers the major objections taken by the defendant in the suit, in the memorandum of cross-objections and strongly pressed before us. 8. The first question to be considered in the appeal is whether the defendant had entered into two contracts" with the plaintiff as alleged in the plaint. There is no case for the plaintiff that the alleged contracts were entered into on the basis of any written document signed by both the parties and evidencing the terms and conditions of the contract. The plaintiff mainly relies upon the oral and documentary evidence in the case to prove the existence of the two contracts and its terms. There is no case for the plaintiff that the alleged contracts were entered into on the basis of any written document signed by both the parties and evidencing the terms and conditions of the contract. The plaintiff mainly relies upon the oral and documentary evidence in the case to prove the existence of the two contracts and its terms. The defendant has totally denied the existence of the two contracts as alleged in the plaint. However there are two or three significant circumstances which would highly probabilise the case of the plaintiff and definitely disprove the case set up by the defendant. According to the plaintiff the defendant had paid a total amount of Rs.18,000/- as advance towards the price of six wagons of Nepal rice at the rate of Rs.3,000/-per wagon. It was also alleged in the plaint that after adjusting Rs.15,000/- out of the total amount of Rs.18,000/- against the price of five wagons of rice there remained a balance of Rs.3,000/- to be adjusted against the price of the sixth wagon. The defendant has not denied the payment of Rs. 18,000/-as advance. In fact the defendant has also claimed that there is an amount of Rs.3,000/- due from the plaintiff. This significant admission on the part of the defendant, cuts at the very root of the defendant's case that they have not entered into any contract for purchase of any specified quantity of Nepal rice to be delivered at a future time from the plaintiff and were only purchasing actual consignments of rice offered for sale at Calicut after the goods have actually arrived at Calicut. If the purchases effected by the defendants were as stated by them in their written statement and evidence, there would not have been any occasion for payment of any advance and there would not have been any occasion for paying anything more than the actual price of goods purchased. The fact that advance was paid and the further fact that out of the total amount of Rs. 18,000/- paid as advance an amount of Rs.3,000/- still remained with the plaintiff would highly probabilise the case of the plaintiff that part of the contract for purchase of Nepal rice on terms and conditions agreed at the time of payment of advance remained to be performed when the sixth wagon was despatched as per the invoice No. 116. 18,000/- paid as advance an amount of Rs.3,000/- still remained with the plaintiff would highly probabilise the case of the plaintiff that part of the contract for purchase of Nepal rice on terms and conditions agreed at the time of payment of advance remained to be performed when the sixth wagon was despatched as per the invoice No. 116. Further Exts.Bl to B5 credit bills produced by the defendant would show that for the admitted purchases effected by the defendant from the plaintiff as per invoices 111 to 115 the defendant was charged with bank commission, interest from the date of despatch to the date of delivery and dunnage. The payment for the five wagons admittedly purchased and taken delivery by the defendant was also effected on that basis. The price shown in all the bills was Rs.365/- per quintal. The quantity purchased was either 160 or 170 quintals amounting to one wagon load each. Ext.B2 to B5 specifically contained entries showing the place of despatch also. If the purchase was of goods ready for delivery at Calicut for a price fixed at Calicut after inspection of the goods there was no necessity to show all the above details in the said credit bills. There would not have been any occasion for fixing a price for the rice separately and further charging the defendant with interest from the date of despatch of goods, bank commission and dunnage separately. Such charging of bank commission interest and dunnage would clearly show that the contract between the parties was to supply rice on biotic terms. There would not have been any occasion for fixing a price for the rice separately and further charging the defendant with interest from the date of despatch of goods, bank commission and dunnage separately. Such charging of bank commission interest and dunnage would clearly show that the contract between the parties was to supply rice on biotic terms. Lastly but most significantly we may also usefully refer to the contents of the telegram Ext.A4 which was admittedly sent by the defendant firm alleging specifically a breach of contract on the part of the plaintiff and claiming back the advance paid by the defendant: "RECEIVED UNABLE TAKE DELIVERY CONSIGNMENT INVOICE 116 JOGBANI/CALICUT BECAUSE OVER 45 BAGS COMPLETELY WET AND DAMAGED BESIDES SHORTAGE IN MANY OTHER BAGS ON ACCOUNT OF THE SAME BEING IN A TORN AND LOOSE CONDITION STOP IN SHORT CONTRACTED QUANTITY OF GOODS NOT OFFERED FOR DELIVERY STOP GOODS ALSO FOUND TO BE OF INFER10R QUALITY THAN THAT CONTRACTED STOP ALLEGATION THAT OURSELVES DISPUTING LIABILITY DUE HEAVY MARKET FALL ABSOLUTELY FALSE STOP NO APPRECIABLE MARKET FALL STOP YOURSELVES REALLY GUILTY OF BREACH OF CONTRACT AND LIABLE PAY DAMAGES IN ADDIT10N REFUND OF ADVANCE STOP OURSELVES NOT LIABLE FOR ANY CLAIM STOP UNLESS DAMAGES AND ADVANCE ARE PAID FORTHWITH TAKING STEPS FOR BREACH OF CONTRACT". 9. In the circumstances, we agree with the finding of the trial court that the defendant had entered i) ito two contracts as alleged by the plaintiff to purchase six wagons of Nepal rice on difficult terms. .10. Before considering the question as to who has actually broken the contract, whether the plaintiff or the defendant it is necessary to understand the meaning and legal implications of the word "difficult" as used in commercial transactions. In Firm Hajarimal v. Firm Gulabchand (AI.R.1956 Nag. 118) it has been held that the word "bilticut" means only a contract F.O.R.,the price having to be paid against the delivery of railway receipt. A Division Bench of this court in the decision reported in Moo Jaitha & Co. v. Seth Kirodimal (1960 K.L.T.574) had adopted the meaning assigned to the word v bilticut' in the decision reported in Firm Hajarimal v. Firm Gulabchand (AI.R.1956 Nag. 118) observing that the parties to the said appeal had agreed upon the authority of the said decision of the Nagpur High Court. The words "F.O.R". v. Seth Kirodimal (1960 K.L.T.574) had adopted the meaning assigned to the word v bilticut' in the decision reported in Firm Hajarimal v. Firm Gulabchand (AI.R.1956 Nag. 118) observing that the parties to the said appeal had agreed upon the authority of the said decision of the Nagpur High Court. The words "F.O.R". used in commercial contracts means "free on rail": that is the seller is to put the goods on railway at his own expense on account of the person for whom the goods are consigned by rail. The price fixed at the time of entering into a contract "bilticut" would include the cost of the goods and all expenses that may be incurred upto the delivery of the goods to the railway. Delivery is made to the railway and as soon as they have been accepted for carriage, the goods are ordinarily, unless a different intention appears, at the risk of the buyer. The seller performs his duty when the goods are put on rail taking reasonable care. A passage containing an illuminating discussion on the duties of the parties to F.O.R. contracts from Benjamin's Sale of Goods can usefully be quoted in this connection: "Duties of the parties. An f.o.r. contract is a contract by which the seller undertakes at his expense to put the goods into the possession of a rail earner (or, if the contract is on so-called f.o.t. terms, to bear the expense of loading them on the railway truck), usually at a named place of departure, for transmission to the buyer. The seller is bound to put the goods free on rail within the time fixed by the contract, or, if no time is fixed, within a reasonable time. He is also bound to make a reasonable contract with the carrier under S.32(2) of the Sale of Goods Act 1979. As delivery to the carrier is prima facie deemed to be a delivery to the buyer, the latter is (unless the contract otherwise provides) bound to pay at this point, or at least to be ready and willing to do so". (Benjamin's Sale of Goods - second Edition (1981) Page 1933). 11. The next question to be considered is whether the defendant was justified in refusing to take delivery of the sixth wagon of rice supplied on any of the grounds alleged by the defendant. (Benjamin's Sale of Goods - second Edition (1981) Page 1933). 11. The next question to be considered is whether the defendant was justified in refusing to take delivery of the sixth wagon of rice supplied on any of the grounds alleged by the defendant. According to the plaintiff he had despatched one wagon load of Nepal rice from Jogbani to Calicut. The grounds on which the defendant has refused to accept the goods have been stated in Ext.A4 telegram which we have already quoted in full. Those grounds were repeated in the written statement as well. The ground that the quality of rice supplied was inferior to the qualilty agreed for is not substantiated by adducing any reliable evidence. D.W.I has admitted that there is-no record to show the quality of the rice agreed to be supplied. In the absence of such evidence there is no basis for contending that the rice supplied is inferior to the agreed quality. Ext.A4 telegram shows that the rice was despatched from Jogbani as agreed, as per invoice No. 116. Thus it has to be held that the defendant had failed to establish that there is difference in the quality of rice supplied and agreed to be supplied. The other two grounds mentioned are that the goods supplied fell short of the quantity agreed and that a substantial portion of the goods were completely damaged. 160 bags of rice having a total weight of 16,000 Kgs. was the agreed quantity. As per Ext. A8 sale account it is seen that 160 bags of Nepal rice arrived as per invoice. JBN 116 was taken delivery of by M/s. Radhakrishnan Eradi commission agents and the total weight of the 160 bags was 15,478 Kgs. The entire quantity of rice was sold at Rs.325/- per quintal. The fact that the entire quantity of rice taken delivery of by the commission agents was sold at a uniform rate of Rs.325/- per quintal would show that the ground alleged by the defendant that 45 bags of rice was wet this statement of P.W.I that the learned Sub Judge has come to the conclusion that P. W.I has admitted that 40 bags of rice was wet and damaged. We find no justification in the statement of the witness to arrive at such a conclusion. We find no justification in the statement of the witness to arrive at such a conclusion. Merely because it is stated that 10 to 40 bags were lsightly wet it does not follow that the entire quantity of rice contained in 40 bags was completely damaged. This conclusion was not at all justified especially in view of the fact that the entire quantity of rice was sold for one and the same price as seen from Ext.A8. Hence it has to be held that there is no reliable evidence to establish that any part of the goods were damaged on account of the fact that the goods were wet and the defendant was not justified in refusing to take delivery of the goods on that ground also. 12. What remains to be considered is the question whether the defendant was justified in refusing to take delivery on the ground that the quantity supplied was 522 Kgs. lesser than what was contracted for and some 40 bags of rice were lsightly wet as admitted by P. W.1, when it reached Calicut. We feel that in the nature of the contract entered into between the parties and the law on the point the defendant was not justified in refusing to take delivery on either or both of the above grounds. As we have already explained under the bilticut contract the seller's responsibility is to deliver the goods in a reasonably safe manner to the Railway for carriage to the place of destination and the risk of deterioration of goods in quantity and quality necessarily incidental to the course of transit is that of the buyer. This is also the general law unless otherwise agreed is clear from the provisions contained in S.40 of the Indian Sale of Goods Act which is to the following effect: "Where "the seller of goods agrees to deliver them at his own risk at a place other than that whether they are when "sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit." 13. In the light of the facts and circumstances of the case we are of the view that a shortage of 522 Kgs. of rice out of an agreed quantity of 16,000 Kgs. In the light of the facts and circumstances of the case we are of the view that a shortage of 522 Kgs. of rice out of an agreed quantity of 16,000 Kgs. of rice and the lsight witness in respect of about 40 bags of rice can reasonably be characterised only as deterioration in the quantity and quality necessarily incidental to the course of transit from Jogbani to Calicut and the loss if any on account of such deterioration is liable to be borne by the defendant and the defendant was not justified in refusing to take delivery on those grounds. We accordingly confirm the finding of learned judge that the defendant was not justified in refusing to accept the 6th wagon of rice supplied by the plaintiff. 14. The learned counsel for the respondent has advanced an argument that since the quantity of goods delivered was definitely less than the exact quantity contracted to be delivered his client was entitled to reject the entire goods as provided in S.37(1) of the Sale of Goods Act. S.37(1) of the Act is in the following terms: " Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered He shall pay for them at the contract rate." and completely damaged is not true. The learned judge has entered a rending that 40 bags of rice was completely damaged basing upon an alleged admission by P.W.I. The Even though it is true that S.37(1) of the Act provides for rejection of the goods when the seller delivers to the buyer a quantity of goods less than what was contracted for, we find that the said rule is subject to a general rule of law namely "de minimis non curat lex". It has been held so by Ahmadi J. in a decision reported in Dudhia Forest Co-op. So v. Mohamed & Co (1980 Guj. L.R.272), where it was observed thus: "It is the duty of the seller to deliver to the buyer the quantity of goods stipulated in the contract. It has been held so by Ahmadi J. in a decision reported in Dudhia Forest Co-op. So v. Mohamed & Co (1980 Guj. L.R.272), where it was observed thus: "It is the duty of the seller to deliver to the buyer the quantity of goods stipulated in the contract. However a lsight deficiency in the quantity will not entitle the buyer to reject the goods or claim damages on the principle de minimis non curatlex, because some flexibility in such contracts of sale of goods in bulk is unavoidable and trivial shortfall in quantity must be overlooked. If the difference is, however, substantial, the buyer would be justified in resorting to S.37(1) of the Sale of Goods Act" 15. We also find that the scope, purpose and effect of the Deminimis rule 'as applied to the law of sale of goods have been succinctly explained in Benjamin's Sale of Goods thus: "A deficiency or excess in quantity which is "microscopic" and which is not capable of influencing the mind of the buyer will not entitle him to reject the goods, for de minimis non curat lex. Some lsight elasticity in carrying out a commercial contract for the supply of goods in bulk is unavoidable, and the courts will not allow the buyer to take advantage of a merely trivial difference in quantity if the delivery is substantiality of the quantity named." (Benjamin's Sale of Goods- Second Edition (1981) Para-623 page 298) In view of the legal position explained above we are of the view that a shortage of 522 Kgs. out of a quantity of 16,000 kgs. contracted to be supplied, is only a lsight deficiency which comes within the "de minimise rule" and we hold that the defendant was not justified in rejecting the goods even under S.37(1) of the Sale of Goods Act. 16. The further question to be considered is about the quantum of damages claimable by the plaintiff. In the light of the findings-recorded above, we hold that the plaintiff is entitled to the difference between the price of goods agreed and what was actually obtained on sale, of the goods through M/ s. Radhakrishnan Erady as claimed in the plaint. The plaintiff has arranged the goods to be sold through the commision agents only after the final rejection of the goods as per Ext.A4 telegram. The plaintiff has arranged the goods to be sold through the commision agents only after the final rejection of the goods as per Ext.A4 telegram. After the rejection of the goods by the defendants the plaintiff has taken all steps necessary to dispose of the goods urgently in the ordinary course of business. Even though the defendant had contended that he is not bound by the sale conducted through M/s. Radhakrishnan Erady and that the sale conducted was not for the best price prevailing in the market; no reliable material is available on record to hold that the sale was not for market price or that the sale was conducted in an improper manner. The plaintiff has adduced oral evidence corroborated by Exts. A10 and A11 to establish that the price fetched at the sales more or' less equal to the market price prevalent at the relevant time. In the absence of any other reliable evidence adduced by the defendant to show that the market price of Nepal rice was substantially different fromRs.325/- per quintal we hold that the plaintiff is entitled to claim the difference in the contract price and the price fetched oh the sale of the rice through M/s.Radhakrishnan Erady as evidenced by Ext.AS. The learned Sub Judge has in the circumstances gone wrong in holding that the plaintiff was hot entitled to get damages on the basis that he had supplied the entire quantity of rice contracted to be supplied. Hence we set aside the finding of the lower court regarding the quantum of damages and hold that the plaintiff is entitled to get the entire amount of Rs. 10,061/51 as damages. The appeal is thus allowed. While considering the points raised in the appeal we have also considered and answered the points raised in the memorandum of cross objections. We find no merit in any of the contentions raised in the cross objections and we dismiss the same. The parties are directed to bear their respective costs in the appeal and cross objections.