Patna High Court
Orissa Textile Mills Ltd. And Anr. vs Ganesh Das Ramkishun on 26 August, 1960
Equivalent citations: AIR1961PAT107, AIR 1961 PATNA 107
ORDER Raj Kishore Prasad, J.
1. The present application, in revision, has been presented, by the defendants, under Section 25 of the Provincial Small Cause Courts Act, against the judgment of the learned Small Cause Court Judge, Muzaffarpur, decreeing the plaintiff's suit for damages for breach of contract,
2. What happened was this :
On the 6th January, 1956, an order was placed by the plaintiff with defendant 1 -- Orissa Textile Limited Cuttack -- through its selling agent at Muzaffarpur, defendant 2, for supplying five bales of dhotis of certain specifications at certain fixed rates, besides Excise Duty, etc. The said goods were to be sent to Muzaffarpur Railway Station by Goods Train at owner's risk, and their delivery was to be given within January, 1956. This order, which is exhibit 3, was accepted by defendant 1, through its agent, defendant 2, by its letter of the 27th January, 1956, Exhibit E, by which defendant 1 agreed to deliver the goods within January-February, 1956.
3. Out of these five bales, only one bale was supplied to the plaintiff till February, 1956, but the remaining four bales were not at all supplied by the defendants to the plaintiff. Defendant 2, the agent of defendant 1, however, by a letter of the 6th March, 1956, Exhibit A (1), informed the plaintiff that the four bales, which remained to be delivered could be delivered to him if he agreed to pay the new Excise Duty. The plaintiff, in his reply, by a letter of the 10th March, 1956, Exhibit A, informed defendant 2, that he was prepared to take delivery of the remaining bales, but only at the old contract rate. The remaining goods therefore, were not supplied by the defendants to the plaintiff.
4. The plaintiff, therefore, on the 23rd November, 1957, brought the suit, out of which the present application arises, for recovery of damages for breach of the contract, exhibits 3 and E, referred to before.
5. The suit was contested by the defendants on several grounds. Three of them, with which alone we are concerned here, will appear from the arguments advanced in this Court, and, dealt with hereinafter.
6. The learned Judge found that time was the essence of the contract, that defendant 2 also wast liable for the claim of the plaintiff; and that the plaintiff was entitled to damages at the rate of -/8/- annas per pair of dhoti as claimed. He, accordingly, decreed the plaintiff's suit.
7. The first question, which has been pressed by Mr. Jaleshwar Prasad, appearing for the petitioner, is that time was not the essence of the contract between the parties.
8. On this point the relevant provision of law is Section 11, Indian Sale of Goods Act, 1930 (Act III of 1930), which is ,in these terms :
"11. Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to, time is of the essence of the contract or not depends on the terms of the contract.''
9. The first part of Section 11, quoted above, makes an exception only in favour of time of payment and is dependent on the intention of the parties. The second part is merely a matter of contract. Though Section 11 makes it clear that stipulations as to time of payment would ordinarily be not of the essence of a contract for sale of goods yet on the question whether time of delivery of goods would also be not of the essence of the contract, the section merely says that it depends on the terms of the contract. In the case of time of payment, therefore, the intention of the parties is the decisive factor, whereas, in the case of time of the delivery of goods, the terms of the contract are the decisive factor.
10. But, in the ordinary commercial contracts for sale of goods, time is prima facie of the essence of the contract with respect to delivery. Where forward contracts are entered into by parties, who are anticipating fluctuations in prices, in the absence of any evidence to the contrary, the prima facie view that in commercial transactions stipulations as to time of delivery are usually of the essence of the contract may be accepted. The parties who are gambling on fluctuations in prices must obviously have intended that time was of the essence of the contract.
Generally speaking, therefore, stipulations regarding time for delivery of the goods are deemed to be of the essence of the contract in mercantile transactions. The reason of the rule is obvious. A mercantile contract is not always an isolated transaction, but a link in a chain of transactions, and, if A does not keep his contract with B then B may not be able to keep his contract with C, so that punctual performance may go to the whole consideration for the sale.
11. Time is always considered of the essence of the contract in the following cases:
(1) Where the parties have expressly agreed to treat it as of the essence of the contract;
(2) where delay operates as an injury; and, (3) where the nature and necessity of the contract require it to be so construed.
12. Applying the above tests to the present case, let us see if the finding of the court below, that time was of the essence of the contract, is correct in law.
13. We have, therefore, to find out, on the terms of the present contract itself, whether time was of the essence of the contract,
14. In the instant case, the plaintiff, in his order Exhibit 3, fixed the end of January, 1956, for the fulfilment of the contract. The defendants, while accepting the plaintiffs order for supply of the goods, in their letter of acceptance, extended the time of delivery to the end of February, 1956. It was conceded by both the parties in this Court that the plaintiff agreed to the extension of the time nd, therefore, the end of February, 1956, was the date fixed for the fulfilment of the contract.
This extension of time by the defendants and its acceptance by the plaintiff clearly shows that time was of the essence of the contract. Where time is of the essence of the contract and is extended the extended date is also of the essence of the contract. The time of delivery was certainly a necessary term, and, that is the reason why the parties intended it to be a term of the contract. The letter sent by defendant 2 in March, 1956, Exhibit A(l), offering to supply the remaining goods in March, 1956, on the plaintiff agreeing to pay the new Excise Duty and the plaintiff's reply to it, Exhibit A, agreeing to accept the goods in March, 1956, at the old rate, but reluctant to pay the new Excise Duty, also point to time being of the essence of the contract. In my opinion, therefore, the learned Judge has rightly held that time was of the essence of the contract.
15. The next question is, what is the effect of the failure of the defendants to perform the contract, whereof time was of the essence? The answer to this question is to be found in Section 73 of the Indian Contract Act, 1872, hereinafter referred to as 'the Act'. Section 73 of the Act, omitting the unnecessary portion, is to the following effect;
"73. Compensation for loss or damage caused by breach of contract -- When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
X X X X"
16. Section 73 is one of the three sections under Chapter VI, which deals with the consequence of breach of contract. When a contract has been broken, as here, the party, who suffers by such breach, is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby.
17. It is quite settled that, generally, on a contract to supply goods of a particular sort, which, at the time of the breach, can be obtained in the market, the measure of the damages is the difference between the contract price and the market price at the date of the breach. If, however, the market rate on the due date is not available, the court may I take into consideration the rate prevalent just be-
fore and just after that date. But, if the subject matter of the contract is not marketable, then in that case the value must be taken as fixed by the price which actually has to be paid for the best and nearest available substitute.
But where no substitute is available, then if there has been a contract to resell them, the price at which the contract was made will be evidence of their value; but if there has been no such contract, the market value may be estimated by adding to their price at the place where they were purchased the costs and charges of getting them to their place of destination, and the usual importer's profits. Again, if the buyer, after giving the seller time at his request, finally has to go into the market and buy at an advanced price, he may recover the whole difference between the contract price and the price he actually paid. "The defendant, in effect, bought forbearance, and must pay for it". Accordingly, the decisive date for fixing the damages is the last date to which the contract was extended; See Pollock and Mulla's Indian Contract Act, Eighth Edition, 1957, pages 442-443, and, the authorities cited therein,
18. As observed by Lord Wright, in Erroll Mackey v. Kameshwar Singh, AIR 1932 PC 196 : .59 Ind App 398.
"If there was an available market for the goods at the date of breach the damages must be based on the difference between that market price and the contract price; a contract of resale becomes immaterial, because if there was a market, the law presumes that the buyer can minimise his damages by procuring substituted goods in the market, so that he is thus in the same position, apart from the difference in price, as if the seller had not made default. Hence the difference of price, if the market price exceeds the contract price, is the sole damage in general recoverable".
19. In the light of the above principles, it is now necessary to consider how the damages are to be ascertained and if the court below has adopted the correct basis for awarding damages.
20. In the instant case, there is no dispute that there was breach of contract, and, that the date of the breach was the end of the. month of February, 1956, which was the last date for the delivery of the remaining four bales of dhotis in question.
21. The only contention, by Mr. Jaleshwar Prasad, on the question of damages, was that as the plaintiff had not proved a rise over the contract rate, in the price of dhotis, on the 1st March, 1956, the material, date, he was not entitled to any damage at all, and, therefore, the damage allowed at the rate of -/8/- annas per pair of dhotis was illegal.
22. In support of his contention, he relied on Bench decision of the Calcutta High Court in Bijay Singh v. Bilasroy and Co., AIR 1952 Cal 440 in which it was held, relying on Jamal v. Molla Dawood, Son, and Co:, 43 Ind App 6 : AIR 1915 PC 48, that, upon a breach of a contract for the sale of goods, the measure of damages is the difference between the contract price and the market price at the day of the breach, and, that, unless there is an extension of the due date, damages on the basis of the rate prevailing at a later date cannot be awarded. In that case, the due date was the last dates in July, August and September, 1848, but the arbitrators awarded damages on the basis of the rate on October 1, 1946, on the ground that there was no free market available for the goods in suit on the contract due dates, and, the first free market available, thereafter, was on the 1st October, 1946.
The award was supported on the ground that there was an extension of time of the delivery of the goods, but this contention was rejected. This case prima facie supports the contention of Mr. Jaleshwar Prasad, but, if I may say so with respect, the rule, laid down in the above Calcutta case, seems to be very wide. It is not correct to say that in no case whatsoever damages on the basis of the rate prevailing even at a later date, just after the expiry of the due date, cannot at all be awarded. I respectfully dissent from it.
23. The limits of the rule of market rate have been explained by the Privy Council in Wertheim v. Chicoutimi Pulp Co., 1911 AC 301, 307, 308, which, however, was a case not of delivery withheld, but of delivery delayed. The market rate is only a presumptive test: "It is the general intention of' the law that in giving damages for breach of contract, the party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed", and the rule as to market price "is intended to secure only an indemnity" to the purchaser".
The market value is taken because it is presumed to be the true value of the goods in the open market. Similarly, when the delivery of goods purchased is delayed, the goods are presumed to have been at the time they should have been delivered worth to the purchaser what he could them sell them for, or buy others like them for, in the open market, and when they are in fact delivered they are similarly presumed to be, for the same reason, worth to the purchaser what he could then sell for in that market". There is an important exception "if in fact the purchaser, when he obtains possession of the goods, sells them at a price greatly in advance of the then market value". In such a case he must allow for the profit he actually makes and can recover only his actual loss otherwise he would be placed in a better position than if the contract had been performed: See Pollock and Mulla's Indian Contract Act, 1957 Edition, page 444.
24. A Division Bench of the Orissa High Court, in Ramdhan Das Ram Kissan Firm v. Kishori Chand GeOr Firm, AIR 1954 Orissa 254. relying on Jugmohan Das v. Nussarwanji, ILR 26 Bom 744, held that if the market price on the date of the breach is Dot available as no transaction took place on that date, the rate that was prevalant just before and just after that date can be taken into consideration.
25. The Bench decision of the Patna High Court in The Union of India v Baijnath Madan Lall, AIR 1951 Pat 219 was also a case of late delivery. The views taken by the Orissa High Court and the Bombay High Court, in the above mentioned cases, seem to me, if I may say so with respect, to be the correct view of the law, and I express my cordial assent to the same.
26. The learned Judge has referred to Exhibits 2, 4, 5 and 1 to l(f) in support of his finding that the price of dhotis of the two varieties in question had gone up in Muzzaffarpur market by -/8/- annas per pair.
27. Mr. Jaleshwar Prasad argued that the above documents relied upon by the court below do not refer to sales on the 1st March, 1956, but are either prior or subsequent to that date, and, therefore, they cannot furnish the correct data far determining the measure of damages.
28. Mr. J. C. Sinha. who appeared for the plaintiff-opposite party, frankly conceded! that really the relevant documents, on which the measure of damages, should be fixed, are Exhibits l(e), dated the 23rd March, 1956, and, 1 (a) dated the 31st March, 1956, from which it would appear that there was an increase of -/8/- annas in a pair of dhoti of the qualities in question.
29. It is true that there is.no evidence of any sale of these two kinds of dhotis on the date of the breach, that is. the 1st March, 1956. It is also true that the above two sales are of the fourth week of the month of March. 1956, but certainly they are in close proximity and just after tie date of breach. P. W. 2, the salesman of the plaintiff, however, stated that dhotis of the quality No. 4528 were sold at Rs. 4-14 per pair and of the quality No. 4529 were sold at Rs. 5-6 per pair in February, March and April, 1956.
These two varieties are the subject-matter of the suit. The evidence of P. W. 2 has not been rejected by the court below, although it is a fact that the evidence of P. W. 2 has not been mentioned, but that appears to be due to the fact that as the court below considered the documents, referred to before, to be sufficient and quite consistent! with the oral evidence admitted by the plaintiff, it did not refer particularly to the oral evidence adduced by the plaintiff.
The court below, however, rejected the oral evidence adduced by the defendants. P. W. 2 was not cross-examined. It is, therefore, established on the evidence of P. W. 2 that the rise, which took place in the prices of dhotis in question continued to be the same during the months of February, March and April, 1956. In this view, in my opinion, it cannot be said that the finding of the court below that the rise was to the extent of -'/8/- annas per pair of dhotis was arrived at on no legal evidence,
30. It is well settled by now also by the decision of the Supreme Court in Pannalal Jankidas v. Mohonlall, AIR 1951 SC 144 that where an injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages, the court should as nearly as possible get at that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation.
31. In my opinion, in the instant case, similar is the position on the evidence, just referred to, and, on the authorities, mentioned before, there is, therefore, no doubt that the court below has awarded damages, which should in law have been awarded, to the plaintiff for the admitted breach of the contract between the parties. I would therefore, overrule this objection.
32. Lastly, it was argued that defendant 2, being an agent of defendant 1, was not liable to the plaintiff. Mr. Jaleshwar Prasad, in support of the contention, relied on Section 230 of the Indian Contract Act. Section 230 is in these terms:--
"230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal -- In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.
Presumption of contract to contrary. -- Such a contract shall be presumed to exist in the following cases:-
(1) where the contract is made by an agent for the sale or purchase of goods for a merchant resif-dent abroad;
(2) where the agent does not disclose the name of his principal;
(3) where the principal, though disclosed cannot be sued".
Section 230, Contract Act, provides that the agent is not personally bound by the contract except in the three Cases specified therein. But section 230 provides only that, in the absence of any contract to that effect, the agent is not personally bound by the contract entered into by him on behalf of his principal. The question, therefore, which arises is, whether any contract to the contrary can be inferred, in the instant case, under which defendant 2 can also be made liable? To answer this question one has naturally to look to the contracts between the parties which are Exhibits 3 and C. (33) Mr. Sinha relied on clause 5 of the "Terms And Conditions" printed on the back of the printed Order Form, Exhibit 3. Clause 5 of Exhibit 3 is as follows:-
5. The mills or selling agents will not be responsible for any losses due tp delay in delivery, partial delivery or non-delivery of the goods as a result of strikes, lockouts, accident to machinery, natural calamities, Government restrictions or other such causes beyond the control of the mills and selling agents".
34. Mr. Sinha also relied on clause 4 of the Agreement of Agency entered into between defendants 1 and 2, which is Exhibit C. Clause 4 of Exhibit C, is to the following effect:
"4. That all risks, responsibilities and liabilities for the price of goods sold and its realisation shall, be on the Agents who will be responsible for the fulfilment of the contract between the Principals. and the Buyers.
35. Clause 5 of Exhibit 3 in express terms excludes the liability of the selling agents only in the cases specifically mentioned therein. Clause 5 of Exhibit 3 does not confer upon the selling agents the general exemption from liability in all cases. It is clear, therefore, that the selling agent, like defendant 2, of defendant 1, will not be liable only in those cases which are enumerated and specially mentioned in clause 5 of Exhibit 3, otherwise he will be liable if the facts of a particular case justified.
36. Similarly, the agency agreement, Exhibit, C, between defendants 1 and 2, inter se, by Clause 4 in express terms provided that "all risks, responsibilities and liabilities for the price of goods sold and its realisation shall be on the agents who will be responsible for due fulfilment of the contract between the principals and the buyers".
37. Oh reading Clause 5 of Exhibit 3 and Clause 4 of Exhibit C, together, it is plain, beyond any manner of doubt, that defendant 2, although he was a selling agent of defendant 1, was also liable to the plaintiff, along with his principal.
38. In the instant case, the above two documents, Exhibits 3 ,and C, clearly indicate a contract to the contrary within the meaning of Section 230 of the Contract Act, and, therefore, defendant 2 cannot claim immunity from liability.
39. Ordinarily, an agent contracting in the name of his principal and not in his own name is not entitled to sue nor can he be sued on such contracts. But the question, whether an agent, apart from the cases specially mentioned in Section 230. is personally liable, depends on the intention of the parties and the contract between the principal and the agent. Here, defendant 2 in express terms agreed, in his agency agreement with his principal defendant 1, to be liable for all risks and responsibilities and for the realisation of the price of all goods, except in the cases mentioned in clause 5 of Exhibit 3. The liability of defendant 2 was, therefore, general, and, as such he would be liable on the contract sued upon, unless he establishes the existence of one of the circumstances mentioned in clause 5 of Exhibit 3, which alone could exempt him from liability. This defendant 2 has failed to do. He is, therefore, liable on the contract sued upon.
40. Mr. Jaleshwar Prasad, however, relied on a decision of P. B. Mukherji, J., of the Calcutta High Court, in Nicholas Schinas v. Nemazie, AIR 1952 Cal 859, and, on a Letters Patent Bench decision of this Court in Raghunath Jha v. Kesari Lal, AIR 1934 Pat 269, in support of his contention that defendant 2, being an agent of defendant 1 was not liable.
41. In the Calcutta case, AIR 1952 Cal 859, it was held that on the contract, in that case, both principal and agent cannot be sued in the same suit. In that case, there was no contract to the contrary within the meaning of Section 230, Contract Act, as is the case here. Moreover, in that case it was held that the plaint of that suit even after the amendment, did not disclose any cause of action whatsoever against the defendant 2 of that suit, who was the agent. The farts of that case are entirely different from those of the present case and as such that decision can have no application here.
42. In the Patna case, AIR 1934 Pat 269, it was held that agent cannot be sued when the principal is disclosed. In that case also, Sir Courtney-Terrel, C. J., with whom Kulwant Sahay, J., agreed, observed that "the simple point upon which the suit as against defendant 2 (i.e. the agent), must of necessity fail, is the fact that the plaint discloses no cause of action whatsoever against him". For that reason, in my opinion, that case also is of no assistance here to the petitioner,
43. Here, the plaint does disclose a cause of action against defendant 2, the agent, also. The order, Exhibit 3, was placed at Muzaffarpur by the plaintiff through defendant 2, the agent of defendant J. As already indicated, on Exhibits 3 and C, it is plain that the liability of defendant 2, except in the special cases mentioned in clause 5 of Exhibit 3, was absolute. This contention of Mr. Prasad also, therefore, must be rejected.
44. In the result, the application fails, and, the rule is discharged; but, in the circumstances of the case, there will be no order for costs.