Madras High Court
Pl. Palaniappan vs The Jankiram Mills Ltd. on 25 February, 1997
Equivalent citations: 1997(3)CTC423
Author: D. Raju
Bench: D. Raju, V. Kanagaraj
ORDER D. Raju, J.
1. The above appeal has been filed under Clause 15 of the Letter Patent against the judgment of a learned single Judge of this Court dated 5.7.1991 in A.S. No. 432 of 1981 rendered in common with a connected appeal arising out of the same suit, where under the learned single Judge has chosen to dismiss the appeal confirming thereby the judgment and decree of the learned trial Judge dated 28.8.1980 in O.S. No. 624 of 1977, decreeing the suit claim for recovery of a sum of Rs. 22,691.04 with interest at 6% per annum on Rs. 21,889.19 from the date of plaint till the date of realisation.
2. The short resume of facts necessary for appreciating the questions addressed before us are that the first defendant was said to have approached the plaintiff through the second defendant for supply of yarn from the plaintiff-Mills, to which the plaintiff agreed and the second defendants sent a letter of confirmation of sale for supply of 51 bales of N.F.2/17 yarn at the rate of Rs. 62.50 Ex. Mills for 5 kilograms to be supplied in January, 1965 along with a covering letter with a copy to the first defendant. The plaintiff was said to have sent a contract form to the first defendant for his signature, which was also singed by the first defendant on 7.1.1976 and returned to the plaintiff. On 5.1.1976 the said 51 bales of yarn as per the request of the defendants was sent through lorry in 10 invoices. One invoice for six bales and the other invoices for five bales each. The receipts and bundles were also said to have been sent through the Indian Bank, Rajapalayam to the Indian Bank, Devengapet Branch, Coimbatore, to be delivered to the first defendant on payment of the invoice amount. The first defendant retired three invoices and did not retire the other invoices, inspite of repeated requests over phone, telegram and letters. In the meanwhile, another request appears to have been made from the defendants for another 50 bales of 2/N.F. 16 yarn from the plaintiff Mills. The second defendant was said to have signed the confirmation letter with a covering letter dated 21.1.1977 for supply of 50 bales at the rate of Rs. 66 per Kg. Ex.Mill, sales tax, charity etc. The plaintiff appears to have agreed to readily deliver them in the same month, namely, January, 1977 and acting on the confirmation letter of the second defendant and the telephonic conversation with the first defendant on 22.1.1976, the plaintiff sent the first consignment of 15 bales to the first defendant on 23.1.1976 and the copy of invoices, despatch advice etc. were sent to the first defendant. The original invoice and the related documents were sent by the plaintiff through the Indian Bank, Rajapalayam to the Indian Bank, Devengapet, Coimbatore, the first defendant received the bill intimation from the Indian Bank. The plaintiff also appears to have sent another despatch of 10 bales on 28.1.1976 and another 10 bales on 29.1.1976 and further 10 bales on 31.1.1976 and yet another 5 bales on 3.2.1976 to the first defendant and sent the usual records to him through the Indian Bank. The plaintiff came to know subsequently that the invoices were not retired and the plaintiff sent a telegram on 6.2.1976 and letter on 9.2.1976 to the first defendant requesting the first defendant to retire and effect payment for both the consignments, with copies to the second defendant. Since there was no reply from either of the defendants and inspite of the telegram sent, there was no positive response, the plaintiff appears to have sent its representative and despite all these effort taken, the deliver of 86 bales has not been taken. A registered letter dated 27.2.1976 was issued informing the defendants that if the bales are not cleared within five days from the receipt thereof, the same will be sold in public or private sale and the loss as well as the expenses incurred therefore would be recovered from them. The first defendant appears to have issued a reply containing untenable contentions. It is on account of the above commitments, the plaintiff claimed to have incurred loss, to recover which the suit came to be filed. It is stated in the plaint that 86 bales in two consignments were sold out for a sum of Rs. 2,24,183.10 and including the bank commission, interest, lorry hire and demurrage it came to really a sum of Rs. 2,46,072.20 and the amount claimed was the difference between the two.
3. The plaintiff instituted the suit both against the first defendant and the second defendant. The first defendant filed a written statement contending among other things that the plaintiff violated the instructions of the defendants to send the goods in 10 instalments under separate invoices at regular intervals. Since the plaintiff acted against such specific instructions as also the terms and conditions, subject to which orders were placed, the first defendant could not clear the same for no fault of his. The first defendant denied having given any despatch instructions to the plaintiff to send the goods nor does he authorised any one to act on his behalf in that regard. It was also contended that the title in the goods did not pass to the buyer until the documents are cleared from the Bank and consequently, the plaintiff had no right of resale under law and in any event, in such cases the seller shall claim only the difference between the contract rate and the market rate prevailing at the relevant date of breach. It was also contended that the plaintiff had sustained loss for the reason that the yarn in question had then been selling at a very high rate in the market and the plaintiff had actually made enormous profit out of the transaction.
4. The second defendant filed a written statement adopting and reiterating the contentions put forward by the first defendant and contending in addition thereto that he was only a broker and acted based on the informations and instructions furnished by the first defendant, that he is not personally liable and that, therefore, there was no cause of action against the second defendant to make such a claim. The plaintiff appears to have filed a reply statement reiterating the stand taken in the plaint and making further submissions in respect of his claim.
5. On the above claims and counter-claims, the suit came to be tried and both parties adduced oral and documentary evidence. On a consideration of the materials so produced, the learned trial Judge by his judgment and decree dated 28.8.1990, decreed the suit holding that the transfer of property in the goods despatched on the advice and instructions proved to have been given in the matter, passed to the purchaser and therefore, the resale of the goods and the claim for recovery of the difference between the sale value of the goods and the amount realised in the resale was justified. The learned trial judge decreed the suit claim against both the defendants. Aggrieved, the first defendant has filed A.S. No. 432 of 1981 and the second defendant A.S.No.318 of 1985. Both the appeals came to be dealt with together and the learned first appellate Judge allowed the appeal filed by the second defendant, while dismissing the appeal filed by the first defendant-appellant herein. We are not concerned in this case with the fate of the claim or of the appeal filed by the second defendant. Hence, the above appeal, by the 2nd defendant.
6. Mr. Parthasarathy, learned counsel appearing for the appellant while reiterating the stand taken before the Courts below on behalf of the appellant-first defendant contended that on the materials placed on record, the learned trial Judge as well as the learned first appellate Judge could not have legitimately come to the conclusion that the transfer of property in the goods despatched passed in favour of the appellant entitling the plaintiff to have the goods resold at the risks and loss of the first defendant. The learned counsel further contended that having regard to this vital fact that there had been no transfer of property or title in the goods in question in favour of the appellant on the date of the alleged breach, the plaintiff, if at all, would be entitled to the difference between the sale price and the market rate for the goods prevailing as on the date of breach and the question of recovering the difference between the sale price and the price realised on account of the resale of those goods, does not arise in law. Per contra, Mr. R. Thiagarrajan, learned senior counsel for the first respondent- plaintiff while adopting the reasons assigned by the learned single Judge as also by the learned trial Judge, contended that the evidence adduced in the form of documents as also oral evidence proved beyond reasonable doubt that the transfer of property in the goods despatched has passed in favour of the appellant even when they were despatched through lorry at the request and on the directions and instructions emanating from the defendants and consequently, the right of resale exercised and the claim made as a consequence thereof for the loss suffered was quite in accordance with law and has been rightly countenanced by the learned trial Judge as well as the learned first appellate Judge and no exception could be taken to the findings recorded either on account of any infirmity in law or on any vital facts pertaining to the appreciation of the claim.
7. Learned counsel for the appellant invited our attention to some of the decided cases to which a reference will be made hereinafter. Both the learned counsel invited our attention to the evidence on record as also the findings recorded, the relevant provisions contained in the sale of Goods Act and tried to draw inspiration for their respective sand from some of the judgments, which will be noticed hereinafter.
8. Strong reliance has been placed by the learned counsel for the appellant on the decision in Commissioner of Income-Tax, Madras v. Mysore Chromite Ltd., . That was case which was taken up before the Supreme Court from a decision of this Court. The matter arose under the Income-tax Act, 1922 and the assessee -company carrying on business in India shipped the goods to American and European buyers outside India under bills of lading issued in its own name. Under the contract, it was not obliged to part with the bill of lading, which is the document of title to the goods until the bill of exchange drawn by it on the buyers' Bank in London where the irrevocable letter of credit was opened, was honoured. The bill of exchange together with the relative bill of lading endorsed in Bank by the assesses-company and the provisional invoice was then negotiated with the Eastern Bank Ltd., Madras, the Bankers of the assessee-company with the amount of the bill of exchange and the Eastern Bank Ltd., London, used to deliver the bill of lading and the invoice to the buyers' Bank. The buyers' Bank in due course used to pay the amount of the bill of exchange to the Eastern Bank Ltd., London. Thereafter, on arrival of the goods and after weighment and essay, the sale price was ascertained and the balance of price, after deducting the payments made against the bill of exchange used to be paid to the Eastern Bank Ltd., London, which was the assessee-Company's agent and banker in London. On the above set of facts, the Income-tax officer assessed the assessee-company on the entire profits in respect of those sales on the footing that they arose and were also received in British India. Though before the first appellate authority the assessee failed, the Tribunal sustained the claim of the assessee holding that the sales took place outside the British India and that the money in respect of such sales was also received by the agent of the assessee company in London. Aggrieved, the matter was further pursued before this Court unsuccessfully and thereafter, the matter was taken before the Apex Court. It was in the said context, the relevant scope of Sections 23 and 25 of the Sale of Goods Act came to be considered by the Apex Court us hereunder:
"Learned Solicitor-General appearing in "support of this appeal contends that having regard to the terms of the contracts the sales must be regarded as having taken place in British India. The facts strongly relied on by him are (i) that the price and delivery of goods were on F.O.R. terms, (ii) that in the European contracts the insurance, if any, was to be the concern of buyers and (iii) that payment of the 80 per cent, or 90 per cent, as the case may be was made in Madras by the Eastern Bank Ltd., Madras, to the assessee company on the delivery of the documents. All these facts taken together indicate, according to his submission, that the property in the goods passed at Madras and the sales accordingly were completed in British India. We are unable to accept this line of reasoning.
According to Section 4 of the Indian Sale of Goods Act a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price and where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. By Sub-section (4) of that section an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
Section 18 of the Act clearly indicates that in the case of sale of unascertained goods no property in the gods in transferred to the buyer unless and until the goods are ascertained. In the present case, the contracts were always for sale of unascertained goods. Skipping over Sections 19 to 22 which deal with contract of sale of specific goods we come to Section 23 which lays down that where there is a contract for the sale of unascertained future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with assent of the seller, the property in the goods thereupon passes to the buyer.
It is suggested that as soon as the assessee company placed the goods on board the steamer named by the buyer at the Madras Port the goods became ascertained and the property in the goods passed immediately to the buyer.
This argument, however, overlooks the important word "unconditionally" used in the section. The requirement of the section is not only that there shall be appropriation of the goods to the contract but that such appropriation must be made unconditionally. This is further elaborated by Section 6 which provides that where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such a came, notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
The question in this case, therefore, is was there an unconditional appropriation of the goods by merely placing them on the "ship? It is true that the price and delivery was F.O.B., Madras, but the contracts themselves clearly required the buyers to open a confirmed irrevocable Bankers' credit for the requisite percentage of the invoice value to be available against documents. This clearly indicated that the buyers would not be entitled to the documents, that is, the bill of lading and the provisional invoice, until payment of the requisite percentage was made upon the bill of exchange.
The bill of lading is the document of title to the goods and by this term the assessee company clearly reserved the right of disposal of the goods until the bill of exchange was paid. Placing of the goods on board the steamer named by the buyer under a F.O.B. contract clearly discharges the contractual liability of the seller as seller and the delivery to the buyer is complete and the goods may thenceforward be also at the risk of the buyer against which he may cover himself by taking out an insurance, 'prima facie' such delivery of the goods to the buyer and the passing of the risk in respect of the goods from the seller to the buyer are strong indications as to the passing also of the property in the goods to the buyer but they are not decisive and may be negatived, for under Section 25 the seller may yet receive to himself the right of disposal of goods until the fulfilment of certain conditions and thereby prevent the passing of property in the goods from him to the buyer. The facts found in this case are that the assessee company shipped the goods under bill of fading issued in its own name. Under the contract it was not obliged to part with the bill of lading which is the document of title to the goods untill the bill of exchange drawn by it on the buyers' Bank where the irrevocable letter of credit was opened was honoured. It is urged that under the provision in the contract for weighment and essay, which was ultimately to fix the price unless the buyer rightly rejected, the goods as not being in terms of the contract, the passing of property in the goods could not take place until the buyer accepted the goods and the price was fully ascertained after weighment and essay.
It is submitted that being the position the property in the goods passed and the sales were concluded outside British India, for the weighment, sampling, assay and the final fixation of the price could only taken place under all these contracts outside British India. It is not necessary for us to express any opinion on this extreme contention. Suffice it to say, for the purposes of this case, that in any event upon the terms of the contracts in question and the course of dealings between the parties the property in the goods could not have passed to the buyer earlier than the date when the bill of exchange was accepted by the buyers' Bank in London and the documents were delivered by the assessee company's agent, the Eastern Bank Ltd., London, to the buyers' Bank. This admittedly, and as found by the Appellate Tribunal always took place in London. It must, therefore, follow that at the earliest the property in the goods passed in London, where the bill of leading was handed over to the buyers' Bank against the acceptance of the relative bill of exchange. In the premises, the appellate Tribunal as well as the High Court were quite correct in holding that the sales arose outside British India and 'or hypothesis', the "Profits derived form such sales arose outside British India."
9. Learned counsel for the appellant invited our attention to some of the provisions in Chapter III of the Sale of Goods Act, 1930, pertaining to the transfer of property as between the seller and buyer and contended that the provisions contained in Sections 19 and 20 must be considered in the light of Section 25 of the said Act and if thus construed in the fact situation of the case before us, the only conclusion that could have been arrived at was that the property or title in the goods does patched did not really pass in favour of the first defendant entitling the plaintiff to invoke its right of resale. The learned counsel has also adverted to the decisions in P.S.N.S.A.C. & Co. v. Express News Papers, and Carona Sahu Co. v. State of Maharashtra, A.I.R. 1968 S.C. 1153. In P.S.N.S.A.C. & Co.'s Case, , it was held by the Apex Court that the seller can claim as damages the difference between the contract price and the amount realised on resale of the goods, whether he had the right to resale under Section 52(2) of the Sale of Goods Act and the statutory power of resale under Section 54(2) arises if the property in the goods has passed to the buyer subject to the lien of the unpaid seller and where the property in the goods has not passed to the buyer, the seller has no right of resale under Section 54(2), It was also observed therein that Section 29 of the Sale of Goods Act provides that where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained and it is a condition precedent to the passing of property under a contract of sale that the goods are ascertained. The fact situation dealt with therein would go to show that the consideration with reference to transfer of property in the goods centered round the peculiar facts of the case involving sale of unascertained goods. Apart from the relevance of the said decision with reference to the rights of a seller under Section 54(2), the decision can be of no assistance to us in determining the question when actually the property in the goods despatched in this case under the terms of contract between the parties to this case, has passed.
10 In Carona Sahu Co.'s case, , the Constitution Bench of the Apex Court had an occasion to deal with the question of transfer of property once again in the context of sale of unascertained goods. At the same time, some of the observations made therein would help proper appreciation of the claims of parties before us in this case. It was observed therein in paragraph 4 as hereunder:
"The law is well established that in the case of contract for sale of unascertained goods the property docs not pass in the purchaser unless there is unconditional appropriation of the goods in a deliverable state to the contract. In the case of such a contract, delivery of the goods by the vendor to the common carrier is an appropriation sufficient to pass the property. But there is a difference in the legal effect of delivering goods to a common carrier on the one hand and shipment on the other hand, where goods are delivered on board of a vessel to be carried, and a bill of lading is taken, the delivery by the seller is not delivery to the buyer, but to the captain as bailee for delivery to the person indicated by the bill of lading. The seller may therefore take the bill of lading to his own order. The effect of this transaction is to control the possession of the captain and make the captain accountable to deliver the goods to the seller as the holder of the bill of lading. The bill of lading is the symbol of property and by so taking the bill of lading the seller keeps to himself the right of dealing with property shipped and also the right of demanding possession from the captain, and this is consistent even with a special term that the goods are shipped on account of and at the risk of the buyer. In Gobarron v. Kreeft, (2875) 10 Ex 271, Lord Parker laid down the principle as follows:
"The English cases, however, on which the Sale of Goods Act, was founded seem to show that the appropriation would not be such as to pass the property if it appears or can be inferred that there was no actual intention to pass it. If the seller takes the bill of lading to his own order and parts with it to a third person, not the buyer, and that third person, by possession bill of lading, gets the goods, the buyer is held not to have the property so as to enable him to recover from the third party, notwithstanding that the act of the seller was a clear breach of the contract."
Ss. 23 and 25 of the Indian Sale of Goods Act are identical in language to the corresponding provisions of the English Sale of Goods Act, Section 25 states as follows:
"(1) "Whether there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other belles for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
(2) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal."
Emphasis is made on the conspicuous difference between a contract pursuant to which the delivery of goods has been made by the vendor to the common carrier by its appropriation sufficient to pass the property on the one hand and the difference in the legal effect of shipment on board a ship under a bill of lading on the other, where goods were delivered on board of a vessel to be carried.
11. A careful analysis of Section 19 would go to show that unless a different intention appears, the rules contained in Sections 20 to 24 would be the rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Section 20 provides that where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. Section 25, particularly Sub-section (3) provides that where the seller of goods drawn on the buyer of the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange, and if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him. Sub-section (1) of Section 25 stipulates that where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal the goods until certain conditions are fulfilled, and in such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
12. A combined reading of all these provisions as also the decisions relied upon and noticed supra, would go to show that the principles contained in the provisions referred to above are subject to the contract to the contrary or the intention of the parties as to the passing of the property in the goods as disclosed from the contract and it is only in the absence of such indication in the understanding between the parties or the contract entered into between them, that these statutory principles, will come to operate. There cannot be, therefore, any hard and fast rule of universal application in matters of this kind and particularly with reference to the principles to be applied in ascertaining the point of time when the transfer of property involved in the goods agreed to be or actually sold, passed from the buyer to the seller.
13. Coming to the facts of this case, we see from the judgment of the leaned trial Judge, who has elaborately as also exhaustively adverted to the various terms and stipulations contained in the correspondences exchanged between the parties, the contract in respect of the first transaction and the instructions said to have been issued by the defendant over telephone, specific findings have been recorded in paragraph 11 and 12 that the intention of the parties was to pass the property in the goods to the buyer as and when the goods have been despatched. The learned first appellate Judge also considered these aspects in paragraphs 7 and 8 of his judgment and concurred with the findings of the learned trial Judge. In coming to such a conclusion, the learned Judges have adverted to several features of the bargain and transactions between the parties, before they arrived at such a conclusion rejecting the claim of the first defendant that no transfer of property or title passed to him in the goods, at the point of time when the breach of the contract appears to have occurred. We find that in some of the letters, particularly Ex.A-2, it is found notices that the second defendant has written to the plaintiff confirming the fact of the goods having been sold and the contract from Ex.A-3 disclosing against the column relating to delivery as "right" and the goods having been despatched at buyer's risk the moment it left the mills of the plaintiff. Though no doubt the clause relating to the risk may not be decisive of the factor relating to the point of time at which the title in the goods passed, the courts have held that the risk factor is a relevant piece of material, which taken together with the other facts and circumstances of a case could strongly support the claim of transfer of property in the goods despatched. The learned counsel for the appellant placed strong reliance upon the fact that the indication particularly in the instruction forwarding the invoice, wherein it has been maintained by the plaintiff that the first defendant has to clear the bills from the Bank and retire the documents and obtain the invoice to take delivery of the goods to contend that till such an event occurs, the ownership or title in the goods did not pass in favour of the purchaser. As noticed earlier, from this solitary fact alone, we could not accept the stand taken for the appellant relating to the point of time of passing the title in the goods despatched in this case of ascertaining goods as per instructions of the defendants indicative of outright sale by placing the goods in the hands of the common carrier. As rightly pointed out for the plaintiff by the learned counsel, apart from the other facts and circumstances noticed in this case, the fact that the first defendant has honoured by retiring some of the despatched out of the same consignment and was taking time and was keeping quiet for substantial tire before repudiating the contract and committing breach, would go to show that the time of the appellant regarding the passing of title cannot be accepted. That apart, we are also of the view that the case on hand is one, where there had been despatch of goods as per the specific instructions and directions of the defendants, acting together, by dispatching them through a common carrier, which happened to be in this case, lorry, and the appropriation of the goods, which specified ready for delivery sale must considered to have taken place immediately followed by the transfer of property in the goods involved and the mere fact that the invoices were forwarded through bank does not militate against the transfer of property having taken place on the date of despatch of the goods at the risk and responsibility of the purchaser first defendant. Consequently, we see no infirmity whatsoever in the conclusions arrived at concurrently both by the learned trial Judge and the first appellate Judge in this regard, warranting our interference.
14. In the conclusion of ours concurring with the finding of the learned first appellate Judge on the question of passing of title in the goods even prior to the date of breach of the contract, the plaintiff had the right to invoke the power of resale and claim damages measured with reference to the difference of the contract price for the goods and the price actually realised on the resale of the goods. The decision in P.S.N.S.A.C. & Co.'s case, , relied upon for the appellant will have no application to the case on hand in view our specific finding, unlike in the case before the Apex Court, that the transfer of property or title to the goods passed in this case in favour of the purchaser on the despatch of the specific and ascertained goods by delivery to the common carrier. The appeal, therefore, fails and shall stand dismissed. There will be no orders as to costs.