Andhra HC (Pre-Telangana)
Andhra Pradesh Tobacco Growers ... vs Anjaneya Tobacco Co. And Others on 9 July, 1998
Equivalent citations: 1998(5)ALD188, 1998(5)ALT331
Author: T. Ranga Rao
Bench: T. Ranga Rao
JUDGMENT
1. Plaintiff is the appellant, who filed the suit against the respondents for recovery of a sum of Rs.4,51,161/- with subsequent interest and costs.
2. Plaintiff is a Company established for purpose of purchasing tobacco from the growers and selling the same to buyers. With a view to disposing of the stocks of tobacco that was purchased by the plaintiff from the ryots during the year 1985, plaintiff-Company has called for tenders from the tradesmen for the sale of BFC High Grade 1984 tobacco of 6.27 lakh kgs. and the first defendant which is a registered firm became the highest bidder on 25-2-1985 and purchased the same at the rate of Rs. 10-10 ps. per kg. and in pursuance of the acceptance of the first defendant's tender, a stamped agreement was entered into between the plaintiff and the first defendant on 26-2-1985. According to the terms of the agreement, defendants have to lift the entire stock on or before 15-4-1985 by paying the amount in advance. Defendants have lifted only 3.52 lakh kgs. of tobacco before the due date and asked for extension of time pleading inability to lift the balance stock tilt the end of May, 1985 by their letter dated 17-4-1985. The plaintiff, however, extended the period up to 25-5-1985. Accordingly, an agreement dated 4-5-1985 was also entered into incorporating a condition that defendants should pay interest at 18 percent per annum on the entire stocks that was left them and also on the stock that may be lifted from 16-4-1985 to 25-5-1985, and in case defendants fail to lift the stock after paying the balance amount by 25-5-1985, plaintiff-Company will be at liberty to sell the unlifted stock in public auction after giving 10 days notice, and in case the amount so fetched falls short of the value as fixed in the agreement dated 26-2-1985, plaintiff-Company will be entitled to recover the deficiency and costs incurred in that regard from the defendants. Even then, defendants have failed to lift the stock and the plaintiff-Company issued notices dated 12-6-1985, 17-7-1985/25-9-1985 for which defendants sent replies dated 3-7-1985, 24-8-1985 and 24-10-1985 respectively, whereunder they have merely repeated their old song for further extension of time. Plaintiff-Company lost faith in defendants and finally got issued a lawyer's notice dated 16-12-1985 to the defendants stipulating 10 days time from the date of receipt of the notice to lift the stock and for payment, and in default, it will be compelled to sell the stock under tender-cum-open-auction and the defendants will be responsible for the deficiency if any that may arise in that connection. Although the said notice was acknowledged by defendants, no reply was given. Plaintiff-Company is always ready and willing to comply with the terms of those agreements. Plaintiff-Company waited for more than reasonable time, and having folly satisfied that defendants are not able to comply with the terms of the contract, conducted auction on 19-7-1985 and the balance of stock was sold for a sum of Rs.19,05,986-80ps. In lieu of Rs.27,18,850/-which was the agreed amount, resulting in a loss of Rs. 8,05,862-20 ps which the defendants are squarely liable to pay, together with interest at 18 per cent per annum from 16-4-1985 to 25-5-1985 as agreed upon after deducting the amount paid by the defendants to the Plaintiff-Company and also taking into account the earnest money deposit of the defendants in a sum of Rs. 1-00 lakh, lying with the plaintiff and as the plaintiff has to recover a sum of Rs. 4,51,1657- and accordingly, notice dated 16-11-1986 was issued through its lawyer, and the defendants sent a contentious reply dated 12-1-1987. Hence the suit.
3. Third defendant filed written statement which was adopted by all the other defendants. According to them stipulation of time in the agreement is not the essence of contract; various letters and other documents executed by defendants in favour of plaintiff were all obtained by undue influence and due to economic duress. Defendants have an Egyptian export order, but it could not fructify because of the dealy in receiving foreign exchange by the buyer. Plaintiff shifted the stock from Tangutur to Ongole and in that process, defendants apprehend some mischief by way of replacement with inferior quality of tobacco in place of superior quality, in addition to deterioration of quality and loss of weight. As the ownership in goods did not pass to the defendants, plaintiff is not justified in exercising right of resale. There is no notice of resale to the defendants to enable them to take precautions to mitigate the loss. Tender for resale is collusive which is the result of conspiracy between the buyers. Plaintiffs are not entitled to claim interest.
4. Lower Court framed necessary issues.
5. Plaintiff examined its partner and marked Ext. A-1 to A-18. Defendants did not adduce any evidence except examining D.W.1 in chief.
6. Sri B. Adinarayana Rao, learned Counsel for the appellant and Sri G. Peda Babu, learned Counsel for the respondents reiterated their contentions before us as advanced in the lower Court.
7. PW1 has stated in his evidence about conducting tender-cum-auction for the disposal of 6.27 lakh kgs of tobacco on 25-2-1985 in which the first defendant became the highest bidder, execution of the agreement dated 26-2-1985 (Ex.A2), lifting of only 3.52 lakh kgs of tobacco before the stipulated date, issuance of notice by the plaintiff and request made by the defendants seeking extension of time which resulted in supplemental agreement dated 4-5-1985 extending the time up to 25-5-1985, subsequent notices by plaintiff and request for extension of time by defendants and reply notices etc.
8. DW1 was examined in chief on 10-3-1995 in cross-examination was differed by an order of the Court at the request of plaintiffs Counsel, and the matter was posted to 16-3-1995. On 16-3-1995 DW1 was not present and both parties were absent on account of Boycott by advocates, and as such, the matter was posted for arguments. Subsequently both the advocates argued the matter.
9. So, it is clear that DW1 did not turn up on 16-3-1995 for cross-examination although the matter was adjourned after chief-examination on 10-3-1995, to that date by an order of the Court. There was also no request made on behalf of defendants to recall him for cross-examination, though the matter was posted for argument as a next step by an order dated 16-3-1995. Therefore, the evidence of DW1 in chief-examination without affording an opportunity to the plaintiff to cross-examine him cannot be used as evidence in this case. We are therefore left with the evidence of PW1 and Exs.A1 A18.
10. Now, it has to be seen in the light of evidence on record, whether the defendants have established any of the grounds raised by them to non-suit the plaintiff?
11. In view of the evidence of PW1 the agreement dated 26-2-1985 marked as Ex.A1 as well as the supplemental agreement dated 4-5-1985 marked as Ex. A-2 are proved. As per the terms of those agreements, defendants have agreed to lift the stock in the first instance before 154-1985 by paying at the rate of Rs. 10-10 ps. per kg. and later extended the date up to 25-5-1985 agreeing to pay interest at 18 per cent per annum on the entire stock from 16-4-1985 to 25-5-1985. The relevant clause in Ex.A2 show's that if defendants fail to pay the balance amount and lift the stock by 25-5-1985, plaintiff is entitled to sell the unlifted stocks by open auction after giving 10 days notice and recover the resultant loss on re-sale.
12. Inspite of several notices dated 12-6-1985, 17-7-1985 and 25-9-19S5, defendants did not lift the stocks by paying the agreed rate, but went on seeking extension of time. Plaintiff finally issued lawyer's notice on 16-12-1985, marked Ex.A9 informing the defendants that unless the remaining stock is lifted within 10 days from the date of receipt of the said notice, plaintiff would be compelled to sell the same under tender-cum-open-auction and the defendants would be squarely responsible for the resultant loss due to the auction. Though the said notice was acknowledged by the defendants, no reply was issued. Therefore, plaintiff conducted auction on 19-7-1986 by tender-cum-open-auction and due to re-auction, there was loss of Rs.8,05,863-20 ps which the defendants are liable to pay with interest at 18 per cent per annum from 16-4-1985 to 25-5-1985 as agreed upon. But the contention of the defendants is that time is not essence of the contract and that plaintiff is not entitled to sell the stock by tender-cum-open-auction as original stipulation under Ex.A1 was by way of open auction. It is also their contention that no notice of the date of re-auction was given to them, and therefore, the auction is bad.
13. In contracts relating to movables generally time is the essence of contract unlike immovable property unless otherwise stipulated. However, where monetary compensation would be an adequate remedy for non-performance, a relief by decree for damages would be granted and not specific performance. It is welt settled that granting of specific performance is within the discretion of the Court. Section 58 of Sale of Goods Act is supplementary to the provisions of Chapter II of Specific Relief Act as regards specific performance of contract relating to movable property which is an exception to the general rule of grant of damages, but in exceptional cases there is no bar for specific performance. However, in this case, the terms of the contract under Ex.A2 are clear by virtue of which the plaintiff is entitled to conduct re-sale and recover the resultant loss. Inspite of notice under Ex.A9 intimating the defendants that unless remaining stock is lifted on payment of price within 10 days, the same would be sold under tender cum-open-auction and the resultant loss would be recovered from them, the defendants did not comply with it. Therefore, we are of the view that the contention that lime fixed under Exs.A1 and A2 are not the essence of the contract cannot be accepted.
14. However, the lower Court placing reliance on the circumstance that the plaintiff went on extending time at the request of the first defendant, and so plaintiff did not treat the time stipulated under Exs.A1 or A2 as essence of the contract. This view is erroneous. The mere fact that time was extended by mutual consent does not make the stipulation any the less essence of the contract. But on the other hand such extensions only mean that the time, as originally stipulated, was extended by mutual consent, and the parties arc bound to perform the terms of the contract, before the extended date stipulated under the contract, and time continues to be the essence of contract. When time is not the essence of the contract, there is no need for the defendants to seek extension of time by so many letters. The conduct of the defendants also is no different before the suit was filed. Therefore, the conduct of the plaintiff in extending time cannot form the basis for coming to the conclusion that time is not essence of the contract as that circumstance is irrelevant as subsequent conduct of the party is immaterial in judging whether time is essence or not in a particular contract.
15. As already seen, plaintiff issued Ex.A9 notice on 16-12-1985 intimated the first defendant that inspite of several opportunities, defendant No.1 did not lift the stock nor choose the pay balance of sale price and so, finally they were given 10 days time from the date of receipt of the notice to pay the balance amount and lift the stock, failing which stocks would be sold and the resultant loss will be recovered from the defendants. It was also specifically mentioned that stocks would be sold under tender-cum-open-auction. The first defendant though received the notice did not choose to send any reply nor object to tender-cum-open-auction. Plaintiff has waited till 19-7-1986 and stocks were sold by calling tenders from the interested parties through newspapers. As defendants have already committed default, plaintiff has intimated by issuing notice dated 16-12-1985 that unless stocks are lifted and payment made within 10 days from date of receipt of the notice, it is entitled to proceed with auction and defendants cannot claim any further notice, as it is clearly mentioned in the said notice that re-sale would be held by tender-cum-open-auction and the resultant loss would be recovered from the defendants. In view of this notice issued under the terms of Exs.A1 and A2 agreements, which was never replied to, by disputing the right of the plaintiff, it is not open to the defendants to dispute the same in this suit. In fact, in all the notices, plaintiff was reiterating its right to sell the balance of stock by way of re-sale and recover the loss from the defendants, for which defendants did not raise any objection in any of their replies. Therefore, this contention of the defendants, in our view has no force.
16. Learned Counsel for the defendants submits that as ownership in goods did not pass to the defendants, plaintiff is not justified in exercising right of re-sale and for that proposition reliance is placed on a judgment reported in Ambalavana Chettiar & Company. v. Express Newspapers Ltd., 1968 (2) An. WR 34 (SC). The decision has no application to this case inasmuch as there is a specific clause in Ex.A2 agreement, whereunder the plaintiff is empowered to sell the unlifted stocks by open auction in the event of failure on the part of the first defendant to lift the stock by 25-5-1985. Therefore, the -lower Court also has negativated this contention rightly.
17. Sri G. Peda Babu, learned Counsel for respondents submits that the plaintiff having issued notice on 16-12-1985, stating that unless stocks are lifted and payment made within a period of 10 days from the date of receipt of the notice, plaintiff would proceed with auction and recover the resultant loss, did not conduct auction within a reasonable period which resulted in loss of season for purchase of tobacco. According to the learned Counsel, plaintiff should have conducted auction within a reasonable period of time after issuance of notice in December, 1985, but instead waited to hold auction till July, 1986 which is unduly long and unreasonable. Learned Counsel placed reliance on subsection (2) of Section 54 of the Sale of Goods Act, 1930 which is as follows:
"Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to resell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale, If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale."
No doubt, an unpaid vendor, who has the right of re-sale as per the terms of the contract, has to exercise due diligence and attract the maximum price from the market as a reasonable prudent vendor, particularly in case of perishable goods, at times of following market, as it is possible that in a rapidly declining market goods may fetch considerably lower price on re-sale although the market rate on the date of the breach might have been higher. Normally the measure of damages is prima facie the difference between the contract price and the market price on the date of the buyer's refusal to accept the goods. But in the case on hand, the defendants went on seeking extension of the time on one ground or the other. It is their case that they have an Egyptian buyer who is willing to lift the stock, but due to foreign exchange problem the same could not be materialised, and therefore, they have asked for extension of time on many occasions. What is a reasonable time, as indicated under sub-section (2) of Section 54 of the Sale of Goods Act, has to be decided on the facts and circumstances of each case. Having regard to the facts of this case, it cannot be said that the plaintiff has unduly prolonged issue of re-sale, and therefore, it cannot be said that re-sale was not conducted within a reasonable period. Therefore, this submission also has no force.
18. Sri G. Peda Babu, learned Counsel for respondents next contended that the plaintiff has sold the stock by way of re-sale and claimed resultant loss which includes loss resulted by re-sale of scrap tobacco (inferior quality) which according to the first defendant, as per the terms of the agreement, is entitled to reject, and therefore, any loss occasioned on such re-sale of stock cannot be mulcted to the first defendant. We cannot agree with this contention since the defendants never took such a plea in their written statement. There is also no evidence adduced by them, and therefore, this contention, in our view cannot be accepted. It is accordingly rejected.
19. Sri G. Peda Babu, learned Counsel for respondents has finally contended that plaintiff has not claimed interest in the plaint at any particular rate from 25-5-1985 till the date of payment, and as such, plaintiff is not entitled to interest at contract rate. As payment of interest is in the discretion of the Court, and having regard to the fact that plaintiff has not claimed interest at a particular rate, we are of the view that ends of justice would be met if interest is granted at 6 per cent per annum from the date of the suit till realisation.
20. For all the above reasons, the decree and judgment of the lower Court is set aside, and the suit claim is decreed against defendants 1 and 2 and the assets of D3 lying in the hands of D4 to with interest at 6 per cent per annum from the date of the suit till realisation. The appeal is accordingly allowed, but in the circumstances without costs.