Sriram Agarwall and Others vs Sagarmal Modi

Panigrahi, C.J.—This second appeal arises out of suit for damages for breach of contract. The admitted facts are that the Defendants agreed to supply 4,000 maunds of sabai grass F.O.R. Pendra Road at Rs. 2-1-0 per maund and received Rs. l000/-as deposit. One of the stipulations among others (Sic was that the Defendant) should go on supplying sabai grass, and receiving the price from time to time, while the Plaintiff, in his turn, was to supply wagons according to the Defendants'' requirements every mouth. In the event of the Plaintiff''s failure to supply the, wagons he was bound to take charge of the goods lying in the godown of the Defendants on payment of the entire price due on the same. The contract was agreed to be performed by the 30th June 1945.

The facts found by both the Courts below are these. The Defendants intimated to the Plaintiff, by a letter, Ext. B-1 dated 19-1-45 that ten wagons were required for delivery of the sabai grass that had already been collected by them. The Plaintiff however put off the supply of wagons for taking delivery, till the 20th February 1945. After some correspondence with the Plaintiff, the Defendants sent Ext. B-7 on 20-2-45 intimating to the Plaintiff that they were going to sell the goods to other persons and make the Plaintiff responsible for the loss incurred in the transaction.

The present suit was tiled on 12-5-45 alleging breach by the Defendants and claiming recovery of damages amounting to Rs. 847-8-0. The Plaintiff also claimed recovery of the sum of Rs. 1000/-/- deposited by him with the Defendants.

These are concurrent findings of fact but curiously enough the Courts below have come to contrary findings on the question as to who is responsible for the breach. The trial court held that Defendants did not repudiate the contract by their letter Ext. B-7 and that, on the other hand, the Plaintiff was guilty of a breath of contract in having failed to take delivery of the two thousand and odd maunds of sabai grass tendered by the Defendants in January 1945. The trial court therefore negatived the claims of the Plaintiff for compensation and held that he was not entitled to recover the earnest money of Rs. 1000/-/ which had been deposited with the Defendant. The Plaintiff''s suit was accordingly dismissed. On appeal, the learned District Judge accepted the findings of fact arrived at by the trial court, but differed from it on the question as to whether Ext. B-7 amounted to a complete rescission of the contract by the Defendants. The lower appellate court held that it was the Defendants who treated the contract as terminated before the expiration of the period stipulated in the contract (Ext. 1). Accordingly to the lower appellate court the Defendants were bound to wait till the 30th June 1945 and go on tendering sabai grass to the Plaintiff from time to time, till that date, irrespective of whether or not the Plaintiff fulfilled his part of the contract. In this view the learned District Judge granted a decree to the Plaintiff In term, of the plaint. It is against this judgment that the Defendant has come up to this Court in second appeal.

Learned Counsel for the Appellant-Defendants has placed reliance on Section 30 of the Sale of Goods Act which deals with deliveries in instalment. As I have already stated above Ext.-1 the contract clearly stipulated for instalmental deliveries though the performance of the contract was to be completed by the 30th June 1945. Sub-section (2) of Section 38 says

where there is a contract for the sale of goods to be delivered by stated instalment which are to be separately paid for, and the buyer neglects or refuses to take delivery of, or pay for, one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation.

Both parties concede- and indeed it has been found by both the courts-that the contract is one and indivisible though the performance is stipulated to be made in stages. The question, therefore, is whether the failure of the Plaintiff to take delivery of the two thousand and odd maunds of grass tendered by the Defendants can be regarded as a severable breach giving rise, only to a claim for compensation, or whether it amounts to a repudiation of the contract in it entirety. Our attention was drawn to a decision reported in Khettra Mohan Dey and Co. Vs. Benode Behary Sadhu, where Rankin C.J. held that in similar circumstances, failure or breach of part of a contract would amount to a repudiation of the whole contract. In that case the contract was for supply of 300 tons of repe see cake though the delivery was arranged to be made in separate instalments. Half of the quantity contracted for was tendered and the Plaintiff refused to take delivery. Their Lordships of the Calcutta High Court, following the leading case of Honch v. Muller 7 Q.B.D. 92 held that the Plaintiff having failed as regards no less than half, at the outset of the contract, in effect repudiated the contract, and was guilty of a breach. Another decision to the same effect is that reported Volkari Brothers v. Rutnavelu Chetty ILR 18 Mad. 63. The question in each of these cases was whether repudiation of a part of the contract would amount to repudiation of the whole contract and that has to be decided with reference to the contract as a whole. In the instant case the Plaintiff having failed to accept delivery of more than half the stipulated quantity of goods was clearly of a breach of the entire contract and the Defendants were justified in refusing to abide by the terms of the contract. In such circumstances, the Plaintiff is not entitled to any compensation on the ground of breach by the Defendants. On this part of the Plaintiff''s case therefore we would hold that the claim for damages for breach of contract could be dismissed with costs, as held by the trial court.

The Plaintiff''s claim with regard to the refund of Rs. 1000/-/ however stands on a different footing. The language of the contract between the parties is undoubtedly capable of more than one interpretation and learned Counsel for the parties have each put his own interpretation upon the contract. One thing, however, is clear and that is that the contract is silent as to what is to happen to this sum of Rs. 1000/-/- in the event of a breach of contract. The equitable rule in such (sic-a) case would be that the earnest money is forfeited in order to cover possible loss that may be incurred by the party not guilty of breach. In this case, however, the Defendants do not allege that they had suffered any loss on account of the Plaintiff''s failure to perform his part of the contract. It is, on the other hand pointed out by learned Counsel for the Respondent that the Plaintiff''s evidence would go to show that the Defendants had in fact, made a profit by selling the goods which the Plaintiff failed to take delivery of. We would therefore, differing from the trial court on this part of the case, hold that the Plaintiff should be held entitled to get a refund of the sum, of Rs. 1000/- deposited by him with the Defendants.

The result will, therefore, be that the Plaintiff''s suit so far as it relates to the recovery of damages from the Defendants for alleged breach of contract will stand dismissed with costs throughout. The appeal will be allowed with costs to this extent. The Plaintiffs shall, however, be granted a decree for recovery of the sum of Rs. 1000/-/- deposited by him with the Defendants, and each party shall bear his own costs in this Court in respect of this claim, we would further direct that the Plaintiff shall pay the proportionate costs on the sum of Rs. 1000/- incurred by the Defendants in the Courts below.

Mohapatra, J.

I agree.