British Paints (India) Ltd. v. Union of India AIR 1971 CAL. 393

Case Summary

Full Case Details

The Union of India invited tenders for the supply of paints of the description compound
recolouring Olive Green Scamic 314 for faded tents to Specification Ind/32/7037. The
plaintiff offered a tender. The laboratory did not consider the sample to be up to the mark, but
the higher authorities of the Defence Department accepted this tender, and placed an order
with the plaintiff for supply of 500 Cwt. of this article and the price was fixed at Rs. 256/-
F.O.R. Calcutta per Cwt. According to the contract the goods were to be inspected by the
Inspector at Calcutta, and if he was satisfied that these were up to the mark, then the same
could be dispatched by the plaintiff on receipt of the inspection notes. The original date of
delivery was fixed on 15th of October, 1952, but the plaintiff stated that it might not be in a
position to do so as it had to indent some of the ingredients from U.K., and on their successive
applications for extension of time, time for supply was finally extended up to the 30th of
April 1953. 9 Cwt. of this article was inspected on the 16th October 1952 and accepted and
dispatched on the 5th December 1952. The second lot consisting of 59½ Cwt. was inspected
on the 16th March 1953, and was rejected on the 22nd April 1953, and again offered after
some reconditioning on the 30th April 1953, and rejected on the 19th May 1953. The third lot
of 150 Cwt. was inspected on the 30th March 1953 and accepted and dispatched on the 17th
April 1953. The fourth lot consisting of 188 Cwt. was inspected on the 13th April 1953, and
was rejected on the 7th May 1953. The last lot consisting of 93½ Cwt. together with 59½
Cwt. constituting the second lot, were inspected on the 30th April 1953, and rejected on the
19th May 1953. Therefore, the defendant had accepted 159 Cwt., and the balance of 341 Cwt.
constitutes the disputed item. The defendant terminated this contract on the ground that the
delivery was not made by the 30th April by its letter dated the 1st of May 1953. Before the
receipt of this letter, Mr. Bogh the Technical Director of the plaintiff company went over to
Kanpur to find out how the test was carried on there and he was given every opportunity to
see that on the 1st of May 1953. On his coming back, the letter of cancellation of the contract
was gone into, and the plaintiff requested the Kanpur authorities where the tests were to be
done, to enable its chemist Mr. Ghosh to come and see for himself why the goods were
rejected. Mr. Ghosh came there in the third week of May 1953, and with the help of Drs.
Ranganathan and Balakrishnan he saw how the test was carried on. The reconditioned sample
which he had brought was tested by the authorities at Kanpur, at the request of the plaintiff by
its letter the 22nd May 1953, and on the 30th May the Kanpur authorities wrote to the
Inspector in Calcutta, with copy to the plaintiff, that his reconditioned sample was “found to
conform to the quoted particulars in all respects and is therefore acceptable.” There was
further correspondence between the plaintiff and the defendant re: the acceptance of the goods
but the defendant by its letter dated the 30th September 1953 intimated that its decision as
conveyed by its letter dated the 1st of May 1953 was final and cannot be altered and further
that the stores offered by the plaintiff “were not in accordance with the terms of the Contract
for quality.” Thereafter the plaintiff served the usual notices on the defendant and the matter
had also been referred to arbitration. The Arbitrators however found that under the terms of
the contract, the Inspector’s decision was to be final and binding on the parties, and, as such,
held that they had no jurisdiction to enter into this question of the rejection of the supplies on

the ground that this did not conform to the required specification. The main ground of the
plaintiff is that the test made by the Kanpur authorities was not in accordance with the
agreement inasmuch as they “were carrying out the test by comparing the supplied material
with a tinted slip prepared some months ago with the paint from the said sample No. 30/100”
and not in the same manner and at the same time as provided for in the Agreement. It was
further alleged that the Inspector carried out the inspection capriciously and not in accordance
with the said specification. The plaintiff further alleged that the materials were specially
manufactured for the purpose of this tender and could not be resold in the market and claimed
a sum of Rupees 88,496/- as damages inclusive of storing charges on the basis of the price at
which the plaintiff agreed to supply together with a sum of Rs. 5,228/- by way of interest.
The total claim was thus laid at Rs. 93,724/-. The Union of India contested the suit alleging
that time was of the essence of the contract and further that the tests at Kanpur were carried
on in accordance with the rules, and that the Inspector’s reports were not at all arbitrary, and
that the supplies were not accepted as the same were not of the requisite quality. The learned
Subordinate Judge at Alipore held in favour of the defendant on all the points involved and
dismissed the suit. Hence this appeal.
S.K. CHAKRAVARTI, J. – 2. Now under the terms of the Agreement “the Inspector’s
decision as regards rejections aforesaid shall be final and binding on the parties.” In this case,
as we have already pointed out, the Inspector’s reports are to the effect that the articles are not
according to the specification and the shade is lighter than the sample of 30/100” and “did not
match also the standard olive green scamic 314.” Prima facie, therefore, the plaintiff will be
bound by it and its claim to damages cannot be entertained. Mr. Rabindra Mohan Mukherjee
learned Advocate appearing on behalf of the appellant submits that the Inspector did not
apply his mind to the point and merely dittoed what was written by the authorities at Kanpur
and, as such his Reports are perverse and arbitrary and cannot bind the parties. In the next
place, it has also been urged that the tests which had been urged that the tests which had been
made at Kanpur were not in accordance with the Contract, in view of the facts that the tests
were not carried on with reference to the accepted sample 30/100 at the time of examination
of the contents of the further supplies, but with tints made at a distant time. It has also been
urged that the sample 30/100 had already been destroyed.

3. Now, if the contentions or either of them are accepted, then it must be held that the
   Inspector’s reports would be arbitrary, and it would be open to the plaintiff to challenge the
   order of rejection prima facie passed on that basis, and the order of rejection would not stand.
4. The Inspector in question, Colonel Pillay has been examined in this case and his
   evidence would disclose that he did apply his mind. He waited for 3 to 4 days to make up his
   mind after obtaining the reports from Kanpur and appears to have taken other factors also into
   consideration. There is no reason to disbelieve his testimony in this respect. There were not
   proper facilities for testing in Calcutta, and the procedure appears to be to send the same to
   Kanpur for testing, and on getting their reports, the Inspector in Calcutta was to decide
   whether the goods were to be accepted or not. Moreover, the tests at Kanpur were carried on
   by experts namely, Dr. Ranganathan and Dr. Balakrishnan and if the Inspector acted on the
   basis of such reports, it cannot be said that he did not apply his mind thereto. In the
   circumstances, we must overrule the contention of Mr. Mukherjee in this respect.

5. As regards the tests at Kanpur it would appear from the evidence of Dr. Ranganathan
   and Dr. Balakrishnan and specially of the latter that every time a sample of the supply came,
   they carried on the tests with reference to the sample 30/100 and that they did so even in the
   case of these three rejected supplies. They have emphatically denied that the sample 30/100
   had been destroyed. Mr. Bogh who called on them on the 1st of May 1953 did not at all ask
   them as to whether that sample 30/100 had been destroyed or not. He only wanted to see how
   the test was done and it was not necessary therefore, to bring out the sample 30/100 which
   was kept in safe custody, so to say to show the method of testing. Mr. Bogh in his crossexamination had stated that that sample had been destroyed. As a matter of fact no such
   complaint in writing was made to the authorities concerned. Mr. I.B. Ghosh the Chief
   Chemist of the plaintiff firm of course states that he was told that the sample had been
   destroyed. This fact has been denied by Drs. Ranganathan and Balakrishnan, and the learned
   Judge appears to have preferred the testimony of the latter gentleman, to that of Mr. Ghosh.
   We see no reasons to differ from him in the assessment of his evidence. They are responsible
   Officers and under the rules so long as the Contract is alive they are bound to keep it and it is
   only when much later they came to know that the Contract had been cancelled they destroyed
   the sample. As a matter of fact, when Mr. Ghosh called on the Kanpur authorities in May
   1953 he took with himself a reconditioned sample. It would appear from the evidence that
   some amount of black carbon was put in to make the colour a bit darker and thereafter that
   passed the test. When the second batch of 59½ Cwt. had been rejected, the plaintiff wrote to
   the authorities concerned that they would supply these things after reconditioning. This fact
   would also disclose that the supplies which had been made and rejected did not conform to
   the required specification. It would further appear from the evidence of Mr. Bogh and Mr.
   Ghosh that they did not carry on the tests in their own laboratories with any cotton Dosuti. As
   a matter of fact, Mr. Bogh was not aware what cotton Dosuti was, and he asked for a sample
   of that from the Kanpur authorities. Therefore, the fact that according to the plaintiff’s own
   technical men, these three supplies in question were up to the specification, cannot override
   the opinion of the Kanpur authorities. Under the terms of the Contract, the test is to be made
   by applying the sample “to a piece of cotton dosootie or sheeting used in the manufacture of
   tents.” That was not done at all by the plaintiff. Mr. Mukherjee has also made grievance of
   the fact that the Kanpur authorities had carried on the test with a piece of scoured cotton
   dosootie and not an unscoured one. The evidence of Dr. Balakrishnan would show that they
   always carry on the test on scoured cotton dosootie and it is cotton dosootie which is mostly
   used in the manufacturing of tents. Scoured cotton dosootie is also cotton dosootie, and in the
   circumstances it cannot be said that the test carried on by the Kanpur authorities on scoured
   cotton dosootie would be inconsistent with the terms of the contract.
6. Mr. Mukherjee has laid stress on the fact that the plaintiff had also got the rejected
   supplies tested by an expert Mr. Monk and his report and evidence would disclose that the
   rejected articles were of the same quality as the tender sample 30/100, a duplicate of which
   had been kept in the plaintiff firm. Mr. Monk carried on his test in the absence of the
   defendant. He did so also more than three years after the articles had been made and his own
   evidence would disclose that the articles were not exactly of the same quality as before
   something having already evaporated. He also did not apply the same to any scoured cotton
   dosootie or any sheeting used in the manufacture of tents. What is worse, he took samples

from each of the rejected barrels and made a hotchpot of the same, and then made the
comparison. The plaintiff had already written to the defendant to offer the 59½ Cwt. after
reconditioning and it is quite likely that it was so done. Therefore, we cannot accept the
evidence of Mr. Monk in this respect. What is more, as we have already pointed out, the
Kanpur authorities had made the tests in accordance with the rules, and found the quality not
up to the mark, and the Inspector’s report is based on that and the Inspector also applied his
mind to it, and the Inspector’s report in this connection is final and conclusive, and cannot be
overruled by Mr. Monk’s opinion.

7. It has further been urged by Mr. Mukherjee that the delivery has been made in time and
   that the defendant had voluntarily or involuntarily waived the quality and therefore was not
   competent to reject the supplies. It would appear that Mr. Ghosh went to Kanpur with the
   reconditioned sample and the Kanpur authorities found it acceptable. Mr. Mukherjee,
   therefore, submits that the defendant was not therefore right in cancelling the Contract and in
   refusing to give them any further time to recondition the rejected goods in accordance with
   the approved sample. Now, the Contract was cancelled on the 1st of May 1953 and the
   Contract had been made with the Director-General of Supply. The Kanpur authorities cannot
   extend the time of delivery, and therefore, this point also fails. At no stage was there any
   waiver of the quality.
8. In this connection Mr. P.K. Sengupta learned Government Advocate points out that the
   plaintiff did not give sufficient time for inspection even. It would appear from Section 17(2)
   of the Indian Sale of Goods Act that if the purchase was being made on the basis of a sample,
   some reasonable time must be given to the purchaser to find out if the goods offered were in
   accordance with the sample. It would further appear from the evidence that after the goods
   were manufactured, the plaintiff was to send an intimation to the Inspector in Calcutta and he
   would take samples and then send the same to Kanpur and there it must be tested and the test
   alone would take at least three days. All these were within the knowledge of the plaintiff.
   The plaintiff, however, offered the reconditioned second supply and the 4th and 5th
   instalments on the 30th April by its letter dated the 29th and the delivery date being the 30th
   April there was not sufficient time to inspect.
9. Mr. Mukherjee has very strenuously contended that time was not of the essence of the
   contract and that the respondent was not entitled therefore to cancel the Contract on the 1st of
   May on the alleged default to make delivery of the goods by the 30th April. It would appear
   from the Contract itself that time was specifically made of the essence of the Contract. Mr.
   Mukherjee submits that inasmuch as the time had been extended from time to time, it would
   appear therefrom that the Union of India did not consider the fixed time to be a condition it
   was a warranty and nothing more and the action of the Union of India in cancelling the
   Contract unilaterally was an anticipatory breach, and would entitle the plaintiff to damages.
   In Gomathi Nayagam v. Palaniswami [AIR 1967 SC 868], it has been laid down that
   “Intention to make time of the essence of the contract may be evidenced by either express
   stipulations or by circumstances which are sufficiently strong to displace the ordinary
   presumption that in a contract of sale of land stipulations as to the time are not of the
   essence.” In this particular case, as we have already pointed out, there was an express
   stipulation that time would be of the essence of the Contract. It is no doubt a fact that the

original time for delivery in the Contract namely 15th of October 1952 was extended from
time to time or the application express or implied of the plaintiff up to the 30th of April 1953.
In its telegram as also letter dated the 2/3rd March 1953 the defendant made it quite clear that
there would be no further extension of time. In Md. Habidullah v. Bird and Co. [AIR 1922
PC 178], it has been held by the Privy Council that when after the seller of goods has failed to
deliver them at the agreed time the buyer has agreed to an extension of time for delivery, the
effect of Section 55 of the Indian Contract Act is that the buyer is entitled to damages
computed in the ordinary way, if the seller fails to delivery within the extended time. Mr.
Mukherjee, with his usual fairness, has placed before us the aforesaid two decisions and has
also relied on Burn & Co. v. Morvi State [AIR 1925 PC 188] and more particularly on
Hindusthan Construction Co. v. State of Bihar [AIR 1963 Pat 254]. In Burn & Co. case, the
Privy Council, on an interpretation of the terms of the Contract came to the conclusion that
the intention of the parties when the Contract was made, was that time should be of the
essence of the Contract. In the Hindustan Construction Co., the court, on an analysis of the
terms and specially in view of the facts, that there was a provision for daily damages after the
default is made, and the State of Bihar which had the option of determining the Contract did
not avail itself of the option, held that time was not of the essence of the Contract. The facts
in that case are entirely different from the facts, of the present case wherein the plaintiff had
asked for extension of time again and again and the defendant had reluctantly to agree thereto.
Even, in this decision it has also been laid down that an intention to make time of the essence
of the Contract must be expressed in explicit and unmistakable language in the agreement
itself and if by any means such an intention is not explicit, it may be inferred from the
antecedent conduct of the parties and surrounding circumstances but not from the subsequent
conduct of the parties after the Contract was made. We are therefore, of opinion that in this
particular case time was of the essence of the Contract and this time would also include the
extended time as agreed upon by both the parties. This term in the agreement was a condition
precedent and not a mere warranty.

10. Mr. Mukherjee has also relied on Section 23 of the Sale of Goods Act and submits
    that as in the month of May the Kanpur authorities found the reconditioned sample to be
    acceptable, Section 23 would apply. In this case the Contract was cancelled originally by
    letter dated the 1st of May 1953 as the goods were not delivered by the 30th of September
11. In that letter it has been stated that the stores offered by the plaintiff were not in
    accordance with the terms of the Contract for quality and were therefore, rejected. At one
    stage of the arguments, it was urged on behalf of the appellant that as the Inspector’s reports
    regarding the goods were not available on the 1st May 1953, the authorities had no materials
    before it under which it would cancel the Contract. In Nune Siwayya v. Maddu [(1935) 62
    IA 89, 98 (PC)], it has been held by the Privy Council that in a suit for damages for breach by
    repudiation of the Contract for the sale of goods, the defendant can rely upon any grounds for
    repudiation which existed when he repudiated; he is not confined to the ground which he then
    stated. After the Inspector’s reports were made available and showed that the goods were not
    in accordance with the tender, it was up to the Union of India to take up that ground as well.
    Mr. Sengupta in this connection has already drawn our attention to Ext. 3-C the condition of
    Contract. Now the term “delivery” as defined therein means “Delivery by the dates specified
    in the acceptance of tender of stores which are found acceptable by the Inspector and not the

submission of stores which are not to the required standard or which are not delivered by due
dates.” In this particular case, the goods were not properly delivered by the 30th of April

1953. The goods were not up to the standard, and there was no sufficient time given to Union
      of India for inspecting the same, as we have already pointed out.
1954. Mr. Mukherjee has also submitted that as the defendant also claimed liquidated
      damages, the defendant was not entitled to cancel the Contract. We are not in a position to
      accept this contention. In Ext. 3-C it has been specifically laid down that if any stores are
      rejected, the Secretary shall be at liberty to (a) to allow the Contractor to resubmit the stores
      within a time specified by himself, (b) buy the quantity of the stores rejected by others of a
      similar nature elsewhere at the risk and cost of the contract etc. or (c) terminate the contract
      and recover from the contractor the loss the purchaser thereby incurs. Therefore, it was
      within the rights of the defendant to terminate the contract. The defendant has not made any
      attempt to recover the loss if any, he has suffered for the default of the plaintiff. By Ext. 20
      the defendant while cancelling the Contract for the supply of the further materials had merely
      asked the plaintiff to note that right to recover liquidated damages for delayed supply was
      reserved. There was no claim actually made for liquidated damages. In the subsequent letter
      (Ext. 51) no such claim was even referred to. In the circumstances, this objection must be
      overruled.
      
      12. The result, therefore, is that we find that in this case time was of the essence of the
      contract and that the time was extended up to the 30th of April 1953 by the mutual consent of
      the parties and that the goods had not been offered or delivered in time, and were also not of
      the requisite quality. The defendant, therefore, was within its rights to repudiate the contract
      for the supply of the remaining portion of the goods, and this appeal therefore, must fail.
      
      13. At the same time we must note that we do not find that there has been any deliberate
      negligence on the part of the plaintiff. They had difficulties of their own, inasmuch as they
      had to import some of the ingredients, and the defendant itself was also responsible for some
      delay, inasmuch as, in the month of January it suddenly directed the defendant to supply the
      goods in galvanized sheets. If the plaintiff’s men had gone over to Kanpur by the 30th April
      on getting the rejection slip of the second lot, then further troubles might have been avoided.
      Unfortunately however, its representatives went to Kanpur after the cancellation of the
      Contract, and it is quite clear from the evidence, that the goods were required very urgently
      for Military purposes and it was not possible for the defendant to wait any further, We,
      therefore, dismiss this appeal, but direct that each party will bear its own costs.