Vilas Udyog Ltd., Jamnagar vs M/s. Prag Vanaspati Products

S.H. Sheth, J.—The defendant-firm had agreed in 1964 to purchase from the plaintiff-company 120 barrels of groundnut oil at the rate of Rs. 22.80 per 10 kilograms on what is called "Ready Indent" basis. This oral transaction was subject to confirmation by the defendant-firm and it was also subject to payment by the defendant-firm to the plaintiff-Company of a sum of Rs. 4,000 as advance money. The plaintiff-Company had to supply empty barrels for the purpose at the rate of Rs. 34 per barrel. The defendant-firm has been carrying on business at Aligarh. The goods, therefore, had to be transported from Ahmedabad to Aligarh by railway at the cost of the purchaser. The defendant-firm was required to pay the price of the goods through the plaintiffs bankers. The defendant paid Rs. 4,000 to the plaintiff as advance money by cheque drawn on the Punjab National Bank, Jamnagar. On 30th December, 1964 the plaintiff applied to the Railway Administration for wagons for dispatching the goods to Aligarh. On account of the difficulties which the Railway Administration had been facing in the matter of supplying wagons it could supply them to the plaintiff only on 31st January, 1965. The plaintiff dispatched 140 barrels of groundnut oil by two railway wagons from Ahmedabad to Aligarh under two separate railway receipts. By its telegram dated 30th January, 1965 the defendant terminated the contract. The plaintiff received the telegram on 1st February, 1965. At that time the prices of the groundnut oil were falling. The plaintiff, on having received on 1st February, 1965 the aforesaid telegram from the defendant intimated to the defendant that the goods had already been dispatched on 31st January. 1965. The plaintiff had obtained two separate railway receipts in respect of the goods which it had dispatched to the defendant. It had prepared two separate bills both dated 3rd February. 1965. One bill was for Rs. 30.532.68 p. and another was for Rs. 31,744.44 p. The goods reached Aligarh in due course of time. The defendant did not retire the documents, did not honour the Hundis which the plaintiff had drawn upon it and did not take delivery of the goods. Therefore, the plaintiff sold away the goods at the defendant''s cost and risk in Aligarh market and realized Rs. 46.766.02 p. According to the plaintiff it suffered a loss of Rs. 11,672.53 p. The particulars of this amount have been stated in details in paragraph 5 of the plaint. The defendant refused to pay to the plaintiff the loss suffered by it. even though the plaintiff had called upon the defendant to do so. The plaintiff, therefore, filed the present suit to recover Rupees 11.672.53 p. on account of loss suffered by it in respect of this transaction.

The defendant in its Written Statement, Ex. 11, denied the plaintiff''s allegations. It contended that Bhagwandas who was the agent of both the parties had informed the defendant that a bargain in respect of 120 barrels of groundnut oil was struck with the plaintiff and that the price which was fixed was Rs. 22.80 per 10 kilograms. The terms of the contract were that the transaction was "Builty cut", "Ready Indent" and that the defendant had to pay Rs. 4.000 in advance to the plaintiff. The defendant sent to Bhagwandas on 29th December. 1964 the aforesaid sum of Rs. 4,000. The defendant has admitted in its Written Statement that it had not retired the documents relating to the delivery of the goods to it at Aligarh end had dishonoured the Hundis drawn by the plaintiff. However, it seeks to justify this action of its on the ground that there was no completed contract between the plaintiff and the defendant and that it was the plaintiff which had committed breach of the contract. On 26th December, 1964 the defendant had sent the confirmation of the transaction to the plaintiff with a formal contract for execution by the plaintiff. The plaintiff did not execute the document because it was marking the trend of prices of the goods in question. According to the defendant, the plaintiff had, therefore, been avoiding the execution of the contract because prices had been rising. It was under those circumstances that the defendant cancelled the contract on 30th January, 1965 and demanded back from the plaintiff the amount of Rs. 4,000 paid as and by way of advance to the plaintiff. On 2nd February 1965 the defendant was informed by one Mantri that the goods had already been dispatched. On 3rd February, 1965 the defendant sent a reply to the plaintiff by which it informed the plaintiff that the transaction in question had already been cancelled by it and demanded repayment of the advance money paid by it to the plaintiff. On 3rd February, 1965 the defendant received a telegram from ''Nut Jali'' intimating to the defendant that the goods in question had already been dispatched. On 5th February 1965 the defendant sent a further reply to the plaintiff stating that there had been no subsisting transaction between them and that, therefore, the documents in relation to the transaction had not been honored. It has been stated by the defendant further that since the plaintiff did not repay to it the amount of Rs. 4000/-paid to it as advance money, it had filed a suit for its recovery in the Aligarh Civil Court. According to the defendant, the plaintiff was guilty of breach of contract and ad not right to file the present suit.

The learned Trial Judge raised the issues, tried the suit and dismissed it.

It is that decree of dismissal which is challenged by the plaintiff in this appeal.

Before we proceed to examine the contentions raised by Mr. Vakil who appears for the plaintiff it is necessary to notice the findings recorded by the learned Trial Judge. He has recorded in favour of the plaintiff the following findings. The plaintiff has a right to maintain the present suit. The plaintiff has cause of action to file the present suit. The defendant had agreed to purchase 120 barrels of groundnut oil on the terms alleged by the plaintiff. There is only one finding which has been recorded by the learned Trial Judge against the plaintiff and in favour of the defendant. According to the learned Trial Judge the defendant war. justified in not retiring the documents and that therefore there was no breach of contract on its part. Therefore, the plaintiff was not entitled to recover any loss from the defendant. The three findings recorded by the learned Trial Judge in favour of the plaintiff have not been challenged before us by Mr. Parekh. The learned Trial Judge has also recorded in favour of the plaintiff a finding that the condition relating to "Ready Indent" had been observed by them and that there was no breach on the part of the plaintiff in that behalf. "Ready Indent" means that immediately on the conclusion of the contract between the parties the seller sends an indent to the Railway Administration for supply of wagons to transport the goods to the destination of its delivery. Inter alia, therefore, "Ready Indent" presupposes that the goods in respect of which transaction has been struck must be readily available for transport from the place of its purchase to the place of its sale. Both the learned advocates appearing before us have agreed that term relating to "Ready Indent" means this and nothing else. There are certain other facts also in respect of which the learned Trial Judge has recorded his findings. The plaintiff had dispatched to the defendant 140 barrels of ground-nut oil as against the contract quantity of 120 barrels. Mr. Vakil appearing for the plaintiff, has not challenged this finding. We, therefore, proceed to examine the contentions raised before us on the basis of tin''s finding. It is also not in dispute before us that the additional quantity of 20 barrels was supplied by the plaintiff to the defendant at a different rate. There are two bills on record which the plaintiff sent to the defendant. They are at Exs. 50 and 51. Both these bills, when read together, show that the contract quantity of 120 barrels of ground-nut oil was supplied by the plaintiff to the defendant at the contract rate of Rupees 22.80 p. per 10 Kilograms and that the additional quantity of 20 barrels ground-nut oil had been supplied by it to the defendant at the rate of Rs. 19.50 p. per 10 kilograms. These two bills clearly show that between the date of the contract and the date of dispatch of goods to Aligarh the prices of the goods in question had been falling. We have to examine the rival contentions of the parties in light of these two facts which emerge from the hills. Exs. 50 and 51. To repeat, the quantity which the plaintiff sought to supply to the defendant was more than the contract quantity. The second thing is that the prices of the goods in question had been falling. It is Mr. Vakil''s contention that it was the defendant who had committed the breach of contract and that, therefore, the plaintiff was entitled to recover from the defendant such loss as it had suffered on account of the defendant''s refund to take delivery of the goods at Aligarh. In reply. Mr. Parekh has contended that since the plaintiff had. dispatched the excess quantity of goods to the defendant, under S..37 (2) of the Sale of Goods Act. the latter was entitled to reject the entire quantity. Before we examine the validity of these two rival contentions it is necessary to refer to a few Letters which are on record.

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From the aforesaid correspondence the facts which clearly emerge arc that the defendant had been complaining that the. plaintiff had not honoured the condition (sic) fating to "Ready Indent". The learned That Judge has found in favour of the plaintiff on this aspect of the case and has recorded the finding that the plaintiff had not violated that condition. That finding has not beer challenged by Mr. Parekh before us. It also appears to us that this finding is unchallengeable because the prices of the goods in question as shown by the two bills, Exs. 50 and 51, had been falling and it that was so, there was no reason for the plaintiff to detain the goods any longer than it was necessary for it to do so on account of non-availability of railway wagons, for the time being. No seller of goods will detain the goods and supply them late if the prices of the goods are falling. On the contrary, a seller will be very eager and anxious to supply then to the buyer lest the buyer should go back upon it on account of the falling prices.

The next fact which emerges from the aforesaid correspondence and about which there is no dispute before us is that the plaintiff had supplied to the defendant more than the contract quantity of goods in question. Whereas the contract between the. parties provided for supplying to the defendant 120 barrels of ground-nut oil, the plaintiff had dispatched to the defendant 140 barrels of the said commodity. Mr. Parekh has argued that u/s 37 (2) of the Sale of Goods Act, 1980 the defendant had two options. It was open to the defendant to accept the goods covered by the contract and to reject the rest. It was also open to he defendant to reject the entire goods. According to Mr. Parekh the defendant exercised the latter option and in doing so it did nothing wrong. The argument which Mr. Parekh has advanced has force and substance. If a seller delivers to a buyer goods which are slightly or marginally in excess of the contract quantity, it may not bring into play sub-section (2) of Section 87. Ordinarily, there would be such a case where the quantity supplied is to be computed in terms of weight. But no such difficulty is likely to arise where a commodity is to be delivered not so much in terms of weight as in terms of number of its containers like barrels, times or sunny bags. The quantity supplied by the plaintiff to the defendant exceeded the contract quantity by 20 barrels. The additional quantity of 20 barrels was equal to 1/6th of the total contract quantify. In any case, such a quantify cannot be considered to be marginal or insignificant. It is therefore clear that u/s 37 (2) the defendant had a right to reject the entire goods.

Mr. Vakil has in reply argued that right to reflect the goods is not equivalent to right to cancel the contract. Even if the defendant rejected the goods under sub-section (2) of Section 37 the plaintiff had the right to tender again to the defendant the contract quantity subject to the terms and conditions of the contract and the defendant was bound to accept the contract quantity if tendered again, if all other terms and conditions of the contract were satisfied. The argument advanced by Mr. Vakil appears to us to be well founded. The right to reject the goods contemplated by sub-section (2) of Section 37 is not, in our opinion, equivalent to right to cancel the contract or to repudiate it. In taking this view we are supported by the decision of the Queen''s Bench Division in Borrowman v. Free, (1878) 4 QBD 500. This is the decision rendered by the Court of Appeal in England. In that case the seller shipped contracted goods by ''Charles Platt'' but the shipping documents did not accompany the consignment. The buyer, therefore, refused to take delivery of the goods. This situation gave rise to a dispute between the buyer and the seller and it was referred to arbitration. The arbitrator held that the tender of goods shipped by the seller by ''Charles Platt was invalid. Thereupon the seller offered another set of goods answering all requirements of the contract and shipped by ''Maria D''. The buyer refused to accept the goods and contended that the seller having exercised option to offer the goods shipped by ''Charles Platt'' could not make another offer of goods shipped by ''Maria D''. The Court of Appeal rejected this contention and held that the buyer was bound to accept the second tender of goods and that it was not open to the buyer to contend that merely because the first tender of goods was invalid, it was not open to the seller to make a second tender of goods.

In the instant case, if the defendant had merely rejected the goods on the ground that the quantity supplied by 1 he plaintiff to it was in excess of the contract quantity, it was open to the plaintiff to supply to the defendant the contract quantity, subject to other terms and conditions of the contract The plaintiff, however, could not do it because as early as on 30th January 1965 the defendant had unilaterally cancelled and repudiated the contract. It may be noted at this stage that the ground which the defendant has urged in support of its action to cancel or repudiate the contract by its telegram dated 30th January 1965 has been found to be unwarranted and unjustified in law. The facts of the case also do not support it. It must therefore be held that the defendant had no ground or reason to unilaterally cancel or repudiate the contract by its telegram dated 30th January 1965. By doing so. in our opinion. it was the defendant who committed the breach of contract. The story does not end there. The letter, Ex. 75, written by the defendant to broker Parasram on 6th February 1965 sets out three reasons for its having unilaterally cancelled or repudiated the contract. These three grounds when set out in chronological order are as follows: (1) It had already cancelled the contract on 30th January 1965; (2) The quantity which the plaintiff dispatched to the defendant was in excess of the; contract quantity; and (3) the prices of the goods had been tailing and the defendant was ready to purchase the goods at the rate ruling on the date of the dispatch of the goods from Ahmedabad to Aligarh. It is therefore clear that since the defendant had already unilaterally cancelled or repudiated the contract, the plaintiff could not make a second tender of the goods answering die contract: quantity to the defendant. It was all the more so because that cancellation was reiterated by the defendant in the aforesaid letter and if further stated that the defendant was prepared to purchase the goods at a price ruling at the date of the dispatch of the goods from Ahmedabad to Aligarh. In view of the fact that the prices of the goods in question had been falling, it is quite clear that the defendant was not prepared to honour the contract, even in respect of the contract quantity but it was prepared to purchase them at a lower ruling price. The facts stated above go to show that on account of the unilateral cancellation or repudiation of the contract by the defendant without any justifiable reasons and on account of its reiteration of the said cancellation and of its readiness to purchase the goods at a lower price, the plaintiff was prevented from making a second tender of the goods answering the contract quantity at the contract price. In our opinion, therefore, it was the defendant who committed breach of contract and not the plaintiff.

Mr. Vakil has relied upon a decision of the Madras High Court in Nannier and Another Vs. N.M. Rayulu Iyer, Nagasami Iyer and Co., . The facts of that case show that a party to the transaction in question there had repudiated the contract. That repudiation was accepted by the other side. The suit proceeded, therefore, on the footing that there was repudiation by one party and acceptance of the repudiation by another party. In the instant case, the defendant unilaterally repudiated the contract. That repudiation was not accepted by the plaintiff. Therefore, the principle laid down in that decision cannot be applied to the instant case,

Mr. Parekh has placed reliance upon the decision in Hession v. Jones (1914) 2 KB 421. That is a decision rendered by the King''s Bench Division in a Review Application. So far as that decision is concerned, there is no principle laid down in it which can be applied to the instant case. Mr. Parekh has, however, relied upon the statement of facts which have been recorded therein and which were taken from the earlier judgment under review in that case. Unless we have before us the judgment under review itself it is difficult to make any use of this decision.

On the aforesaid findings we are of the opinion that the learned Trial Judge was in error in recording the finding that the plaintiff had committed breach of contract. We set it aside. We are of the opinion that it is the defendant which committed the breach of contract.

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