AI Structured Summary
Not yet generated for this judgment
Judgment
Walsh, J.—The defendant in this appeal is a toll-gate contractor. He had rented a toll at Tamarasseri for 1921-22 for a sum of Rs. 7,500.
The contract was to run from 1st April 1921 to 31st March 1922. He defaulted in October 1921, owing to the Moplah rebellion. In all he paid for
the contract amount Rs. 3,300. The District Board of Malabar (plaintiff) granted a remission of Rs. 2,000. The Board exercised its option of resale
which was held on 26th October 1921, but at which there were no bidders. A second sale was held on 10th December 1921. The resale resulted
in a loss of Rs. 2,795. Deducting the Rs. 2,000 remitted the Board sued for the balance of Rs. 795 with interest at ""the stipulated rate of 12 per
cent.
Various contentions were raised of which the only two which arise in second appeal are the questions of limitation and the matter of interest. As
regards limitation the trial Court found that the suit which was brought on 12th November 1924 was time-barred and dismissed it. On appeal the
lower appellate Court held that the suit was in time and gave a decree to the District Board. Against this decree the defendant has filed this appeal.
The question of limitation arises in this way. Under para. 6 of the conditions of lease,
if a kist be not paid on or before the date fixed in the patta it will be regarded as an arrear after that date, and interest at 12 per cent per annum will
be charged on it for the actual number of days of default; and the toll will be liable to be resold or conducted under amani subject to the conditions
mentioned in para. 3.
Para. 3 says that the farm will be resold at the purchaser''s risk or conducted under amani. It says:
In either case the deposit shall be forfeited and the purchaser will have no claim to any excess that may be realized by the second sale and will be
held responsible for any deficit that may result by such resale.
Para. 7 runs
If a re-sale is ordered, the President may, at his discretion, conduct the toll under amani or permit the original purchaser to conduct it during the
period between the order for the resale of the farm and the confirmation of the resale.
It may be noted that para. 3 does not create a liability for deficit if the toll is conducted under amani during the period of amani. The suit was
brought more than three years after the first attempted sale on 10th December 1921, but within three years after the actual sale on 26th December
1921, and the question is, which is the correct date from which to reckon limitation?
It is quite clear from paras. 6 and 7 that once resale is ordered, the lessee loses any further benefit of the contract except in so far as the
President may permit him to continue conducting the collection of the toll. Therefore the order for resale is a clear indication that the promisee had
put an end to the contract owing to the default of the promisor. The learned District Munsif has held, and I think rightly, that it is not open to the
promisee to use his discretion in putting off the date of the re-sale and thereby depriving the defendant of the plea of limitation, although in this
particular case the adjournment of the sale was probably made in the interests of defendant 1. It is argued for, the appellant; that such a re-sale
was merely for ascertainment of damages and will not affect the starting point of limitation. 19 Halsbury, p. 42, Section 64 says,
In the action for a breach of contract the cause of action is the breach. Accordingly such an action must be brought within six years of the breach;
after the expiration of that period the action will be barred, although damage may have accrued to the plaintiff within six years of action brought. In
such an action it is not necessary to prove actual damage, and special damage is merely alleged as a measure of the damages to be recovered. The
time is not extended by the fact that the breach had not been discovered, or that damage has not resulted until after the expiration of six years.
It has to be noted that this suit is one for damages. In Battley v. Faulkner [1820] 160 E.R. 668 where certain wheat delivered was useless and
consequently the profit which might have arisen from the land on which it was sown was lost it was held that the cause of action arose at the
delivery of the wheat, Abbot, C.J., observed:
The plaintiff in this case might, as soon as he knew of the defective quality of the wheat, or at any time within the six years, have sued out a writ,
and have thus obtained an efficient remedy against the defendant; it is by his own negligence that he is deprived of his remedy, and he has no right
to complain.
He says also:
It would be extremely dangerous to require in every particular case, the precise period of time when the damage first came to the knowledge of the
plaintiff, and in many instances it would deprive the party of the benefit which the legislature intended to confer upon him.
The learned Subordinate Judge has held that Section 107, Contract Act, which has been wrongly printed in the judgment as Article 107, Lim.
Act, applies to a case like the present and that the District Board had a reasonable time within which to hold the resale. But in Jamal v. Moolla
Dawood Sons & Co. AIR 1915 PC 48 it was laid down that Section 107 only applies to specific cases where a seller has a lien on goods or has
stopped them in transits. Their Lordships say: ""This section follows upon sections dealing with those subject-matters."" I am quite clear that Section
39, Contract Act, applies to the present case. It runs:
When a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to
the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.
As pointed out above, the notice of resale put an end to the contract because thereafter the promisor could not conduct the toll or could only
conduct it under the permission of the President of the District Board. Therefore there is no extension of the time for performance granted by the
promisee in this case once the re-sale had been ordered. Section 63 does not therefore apply. In this connexion may be quoted Muthayya
Maniagaran v. Lakku Reddiar AIR 1914 Mad 573, where it was held that Section 63, Contract Act, does not entitle a promisee for his own
purposes and without the consent of the promisor to extend the time for performance which had been agreed to by the parties to the contract; nor
does Section 55 enable him to keep alive a broken contract in the hope of being able to recover heavier damages for its breach. Ayling, J., says:
Section 63 deals only with concessions on the part of the promisee advantageous to the promisor and cannot be invoked to support an extension
of time by the promisee for his own benefit,
and says
that Section 55 read with Section 2(1) means nothing more than this: on the promisor''s failure to perform within the contract time, the promisor
loses the power to enforce the contract, that is, to claim any advantage due to himself there-under. The promisee has the option of enforcing it or
not as it may suit him, and if he elects to enforce the contract, he can, u/s 73, obtain only such damages as naturally arose in the usual course of
things from the breach or the parties knew, when they made the contract, to be likely to result, which cannot include any aggravation of damages
caused by the promisee''s action or inaction subsequent to the breach.
No doubt, in the present case the delay in re-sale was advantageous to the defendant as there were no bidders at the first sale and so the sale
was adjourned; but that will not, I think, alter the principle (where the promisor has not consented to the course). To hold otherwise would lead to
very great difficulties, even though the promisee may sincerely believe that he is doing his best for the promisor. In the natural course of events, the
longer the resale is deferred, the less would it fetch as the period for collecting the toll becomes shorter; so that, even if the promisee thought that a
better price would be realised by adjourning a sale on account of low bidding, it would be manifestly unjust to allow him to substitute his own
forecast, which might after all prove to be wrong, for the consent of the promisor to such a course; in any event, the course adopted has in the
present case, seriously prejudiced the promisor subsequently in the matter of limitation if the view of limitation taken by the lower appellate Court is
correct. It has been asked on behalf of the respondent, what would happen supposing the contract had been one for five years and the default had
occurred after two or three months, and after the notice of re-sale owing to no bidders appearing the lease could not, in fact, be resold for a period
of more than three years? The case is a highly hypothetical one because, as observed above, the longer the sale is deferred the less ordinarily will it
fetch, and if no purchaser be found for three years, it is very unlikely that any purchaser will be forthcoming at the end of that time; but in any case,
the promisor cannot be deprived of the advantage which he derives from limitation, and the promisee can always enforce the other branch of the
contract by suing for the contract money itself.
The learned advocate for the respondent attempted to get out of the difficulty by arguing that as regards re-sale the contract is one of indemnity
by the promisee, that as such the cause of action only came into existence when there was the actual sale and that therefore limitation starts from
that date. In this connexion he quotes Seetana v. Narayanamurthy AIR 1920 Mad 615. That was an obvious case of indemnity where a member
of a joint Hindu family undertook to bear all the debts alleged to have been incurred by him for family purposes and the other defendants were to
have nothing to do with them. Obviously, the cause of action there only arose when those, who had been indemnified, suffered damage by being
called upon to pay the debts. Section 124, Contract Act, is the section which deals with an indemnity contract. Without damage there is no cause
of action under that section. It is clear however that the District Board suffered damage as soon as the defendant defaulted in payment. Another
case quoted for the respondent is Kedar Nath v. Har Govind AIR 1920 All 605. There, a person was entrusted with a certain sum of money with
instructions to pay it to another person to whom the person who entrusted the money was liable. He failed to pay the money, in consequence of
which the person who entrusted the money had to pay a large sum of money for interest to his creditor. It was held that under Article 83, Lim. Act,
a suit to enforce the indemnity or for damages resulting from the delay, if filed within three years from the date of the actual injury, is within time.
That suit was for damages for breach of the contract and not for compensation by reason of the avoidance of the contract. Certain remarks of
Ashworth, J., are quoted which are as follows:
It has been suggested that, if this view is correct, the promisee has no remedy until years after the breach. It may be remarked however that in such
a case as this, though he could not sue for specific performance, he could have treated the agreement as void u/s 55, Contract Act, and sued for
restoration of the Rs. 5,000.
These remarks are obiter. In Gopala Ayyar v. Ramaswamy Sastrigal (1912) 10 IC 320, it was held that in such a case if the plaintiff waited till
the expiry of a reasonable time, the defendant''s breach of contract would give him a cause of action, whether the plaintiff himself paid the debts or
not, and the question as to what is a reasonable time is a question of fact. I do not consider that Seetanna v. Narayanamurthy AIR 1920 Mad 615,
or Kedar Nath v. Har Govind AIR 1920 All 605, is of any assistance to the respondents. Another case quoted for the respondent is Mancherji
Bommanji v. Nusserwanji Mancherji (1896) 20 Bom. 8. That case also is different from the present one, because in that case the money remained
with the defendant''s firm destined for the purchase of ornaments and the intention was that the money should not be paid until the plaintiffs required
it for the purpose for which it was destined and demanded and it was held that the contract was not broken until the plaintiffs demanded the
money.
It is argued for the respondent that Jamal v. Moolla Dawood Sons & Co. AIR 1915 PC 48 has no application to the present case as in that
case there was only one contract, while there are two here, that Muthayya Maniagaran v. Lekku Reddiar AIR 1914 Mad 573 did not deal with
the starting point for limitation and with the measure of damages and was also a case of a single contract. I think that Section 107 will not apply to
a case of this sort and that Section 63 will not enable a promisee to avoid limitation by postponing the date of re-sale after he has chosen to treat
the contract as broken by ordering a re-sale. I would therefore hold that the suit is barred by limitation.
I may also give my opinion with regard to the question of interest. Here the legal principles contended for by the learned advocate for the
appellant are not seriously challenged, namely, that in the absence of a contract interest cannot be granted on equitable principles, and there must
be a sum certain, which cannot be in the present case as it depends upon an uncertain future event: vide Nanchappa Goundan and Others Vs.
Vatasari Ittichathara Mannadiar, . The Interest Act admittedly does not apply: vide Maine & New Brunswick Electrical Power Co. v. Hart (1929)
AC 631, which is the authority followed in Nanchappa Goundan and Others Vs. Vatasari Ittichathara Mannadiar, : vide also Ramalinga Mudaliar
(died) and Others Vs. S.R. Muthuswami Aiyar and Sons, . But it is argued for the appellant that the deficit in re-sale which represents damages
ascertained by the Board includes interest. In regard to this, it is only necessary to read the abstract of the plaint as set out in both the judgments to
see that this interest was not treated as part of the deficit in re-sale. The loss by the re-sale is said to be Rs. 795 and it was on this sum that interest
at the stipulated rate which is said to be 12 per cent was asked for. The clause of the agreement which awarded 12 per cent interest is para. 6.
That contemplated what was due on the arrears of kist. The plaintiff had the option either of bringing a suit for arrears of kist with interest at 12 per
cent or of re-selling the toll and making the defendant liable for the loss, if any, resulting from the re-sale. I am of opinion therefore that when the
suit is brought for damages on the re-sale, interest cannot be awarded. In the result the appeal is allowed and the suit dismissed with costs here and
in the lower appellate Court.