Case Summary
| Citation | |
| Keywords | |
| Facts | |
| Issues | |
| Contentions | |
| Law Points | |
| Judgement | |
| Ratio Decidendi & Case Authority |
Full Case Details
R. S. BACHAWAT, J. – The dispute arises out of a contract between the appellants and the
respondent entered into on November 13, 1951. The terms of this contract were recorded in
writing in the form of a letter written by the respondent to Appellant 1 and set out below:
“Messrs. P.S.N.S. Ambalavana Chettiar and Company Ltd., 260, Angappa Naicken
Street, Madras.
Dear Sirs,
We confirm having purchased from you and the Madras Paper Marketing
Company, Madras, 500 tons of Russian Newsprint as per the following description:
About 70 per cent in reels of 34 inches width.
“15 per cent in reels of 22 inches width; 15 per cent in reels of 36 inches width”
at annas 9 per lb. ex-wharf Bombay duty, etc., paid. The buyers are to take delivery
within four days of the offer of delivery. Any wharfage, etc., up to the fourth day of
the offer of delivery will be on seller’s account and thereafter on buyer’s account.
We have also sold you about 415 tons of Russian newsprint in sheets in size of
about 30″ x 42″ (760 mm X 1085 mm) ex-godown, Madras at Re. 0-9-6 per lb. We
will keep the stock of sheets in our godown on your account free of rent. We shall
advance you moneys against this newsprint at annas 8 per lb. This advance will carry
interest at 5 per cent per annum. We will also charge you the exact amount of
insurance which we pay to our Insurance Company against the goods.
We shall pay Rs 5,60,000 to your Bankers in Bombay and take delivery of the
500 tons of newsprint from the harbour in Bombay. Accounts wilt be made on the
basis of the above arrangement and whatever one party is liable to pay to the other
will be adjusted subsequently.”.
- The document shows that the respondent agreed to buy from the appellants 500 tons of
Russian newsprint in reels at 9 annas per lb., ex-wharf, Bombay and to take delivery of the
goods on payment of Rs 5,60,000. At the same time, the appellants agreed to buy from the
Respondent 415 tons of Russian newsprint in sheets then lying in a godown in Madras at 9
annas 6 pies per lb. upon the term that the appellants would pay the insurance charge and also
interest at 5 per cent per annum on an amount equivalent to the price of the goods calculated
at 8 annas per lb. The understanding was that the appellants would within a reasonable time
take delivery of the goods bought by them in instalments and the accounts would be finally
adjusted on the completion of the deliveries. It may be mentioned that Appellant 2 carried on
business under the name and style of Madras Paper Marketing Company. - On November 26, 1951, the parties orally agreed that instead of 500 tons the
respondent would buy 300 tons of newsprint in reels and that instead of 415 tons the
appellants would buy 300 tons of newsprint in sheets and the terms of the contract dated
November 13, 1951 would stand varied accordingly. - On December 5, 1951, the respondent took delivery of 300 tons of newsprint in reels
on payment of Rs 3,18,706-9-10 and a sum of Rs 57,816-13-2 remained due to the appellants
on account of the price of these goods. From November 29, 1951 up to February 27, 1952, the
appellants took delivery of 122324 lbs. of newsprint in sheets on payment of Rs 63,032-15-9
to the respondent. Subsequently, the appellants refused to take delivery of the balance 547501
lbs. of newsprint in sheets. Counsel for the parties agreed before us that March 29, 1952 was
the date when the appellants repudiated the contract. On April 21, 1952 after giving notice to
the appellants the respondent resold the balance goods to one G.R. Lala at 6½ annas per lb.
- On April 18, 1952, the appellants filed in the High Court of Madras C.S. No. 175 of
1952 claiming from the respondent Rs 57,816-13-2 on account of the balance price of 300
tons of newsprint in reels and interest thereon. The respondent admitted the claim for the
balance price. On July 30, 1952, the respondent filed in the High Court of Madras C.S. No.
262 of 1952 claiming a decree for Rs 62,266-13-2 on account of the balance price of 122324
lbs., the deficiency on resale of 547501 lbs. of the newsprint in sheets, interest and insurance
charges after setting off the sum of Rs 57,816-13-2 due to the appellants. The principal
defence of the appellants was that the contract with regard to 415 tons of newsprint in sheets
was cancelled in November, 1951 and that Appellant 2 was not a party to this contract. The
appellants also denied the factum and validity of the resale. The two suits were tried by
Rajagopala Ayyangar, J. He dismissed C.S. No. 175 of 1952 and decreed C.S. No. 262 of - From these two decrees, the appellants filed two appeals in the High Court of Madras.
A Division Bench of the High Court dismissed the two appeals. The present appeals have
been filed on certificates granted by the High Court. - The two courts concurrently found that (1) Appellant 2 was a party to the contract of
purchase of 415 tons of newsprint in sheets, (2) on November 26, 1951 the parties orally
agreed that instead of 415 tons the appellants would buy 300 tons of the newsprint and (3)
there was no cancellation of the contract as alleged by the appellants. These findings are not
challenged. The two Courts concurrently found that the resale held on April 21, 1952 was
genuine and was effected at a proper price on due notice and after proper advertisement. Mr
Gupte attempted to challenge these findings, but we see no reason to interfere with them. The
principal argument advanced by Mr Gupte was that the property in the goods resold on April
21, 1952 had not passed to the appellants and the resale was consequently invalid. We are
inclined to accept this argument. - It is to be noticed that the contract did not envisage any loan of money by the
respondent to the appellants on the security of the newsprint in sheets. The payment of Rs
3,18,706-9-10 was made by the respondent towards part discharge of its liability for the price
of the newsprint in reels. No doubt, the contract stated: “We shall advance you moneys
against this newsprint at annas 8 per lb. This advance will carry interest at 5 per cent per
annum.” But the real import of this clause was that the appellants would pay interest at 5 per
cent per annum on an amount equivalent to the price of the newsprint in sheets calculated at 8
annas per lb. The respondent was not a pledge of the newsprint in sheets and had no right to
sell the goods under Section 176 of the Indian Contract Act, 1872. The real question is
whether the respondent had the right to resell the goods under Section 54(2) of the Sale of
Goods Act, 1930. - The seller can claim as damages the difference between the contract price and the
amount realised on resale of the goods where he has the right of resale under Section 54(2) of
the Sale of Goods Act. The statutory power of resale under Section 54(2) arises if the property
in the goods has passed to the buyer subject to the lien of the unpaid seller. Where the
property in the goods has not passed to the buyer, the seller has no right of resale under
Section 54(2). The question is whether the property in the 300 tons of newsprint in sheets had
passed to the appellants before the resale.
- On November 13, 1951, the respondent agreed to sell to the appellants the stock of 415
tons of newsprint in sheets then lying in the respondent’s godown in Madras. There was an
unconditional contract for the sale of specific goods in a deliverable state and the property in
the goods then passed to the appellants. But on November 26, 1951, the contract was varied in
a material particular. The parties agreed that the appellants would buy only 300 tons of the
stock of 415 tons of newsprint then lying in the respondent’s godown. The result was that in
place of the original contract for sale of specific goods a contract for sale of unascertained
goods was substituted. - Rajagopala Ayyangar, J., held that the effect of the variation of the contract on
November 26, 1951 was that the appellants and the respondent became joint owners of the
stock 415 tons. In our opinion, this was not the correct legal position. The parties did not
intend that the appellants would buy undivided share in 415 tons of newsprint. On November
26, 1951 the bargain between the parties was that the appellants would buy and the
respondent would sell 300 tons out of the larger stock of 415 tons. - The appellate court held that the property in the entire 415 tons passed to the
appellants who were subsequently reviewed from their liability to take 115 tons and that the
respondent could resell any 300 tons out of the larger stock of 415 tons. We are unable to
accept this line of reasoning. It is true that originally the property in the entire 415 tons had
passed to the appellants. But the result of the variation of the contract was to annul the
passing of property in the goods. The effect of the bargain on November 26, 1951 was that the
respondent would sell and deliver to the appellants any 300 tons out of the larger stock of 415
tons. As from November 26, 1951, the property in the entire stock of 415 tons belonged to the
respondent. The parties did not intend that as from November 26, 1951 the property in any
individual portion of the stock of 415 tons would remain vested in the appellants. - Section 18 of the Sale of Goods Act provides that where there is a contract for the sale
of unascertained goods no property the goods is transferred to the buyer unless and until the
goods are ascertained. It is a condition precedent to the passing property under a contract of
sale that the goods are ascertained. The condition is not fulfilled where there is a contract for
sale of a portion of a specified larger stock. Till the portion is identified and appropriated to
the contract, no property passes to the buyer. In Gillett v. Hill [149 ER 871, 873] Bayley, B.
said:
“Where there is a bargain for a certain quantity extra greater quantity, and there is
power of selection in the vendor to deliver which he thinks fit, then the right to them
does not pass to the vendee until the vendor has made his selection, and trover is not
maintain able before that is done. If I agree to deliver a certain quantity of oil as ten
out of eighteen tons, no one can say which part of the whole quantity I have agreed to
deliver until a selection is made. There is no individuality until it has been divided.”
- No portion of 415 tons of the newsprint lying in the respondent’s godown was
appropriated to the contract by the respondent with the appellants’s consent before the resale.
On the date of the resale, property in the goods had not passed to the buyer. Consequently, the
respondent had no right to resell the goods under Section 54(2). The claim to recover the
deficiency on resale is not sustainable. - The respondent is entitled to claim as damages the difference between the contract
price and the market price on the date of the breach. Where no time is fixed under the contract
of sale for acceptance of the goods, the measure of damages is prima facie the difference
between the contract price and the market price on the date of the refusal by the buyer to
accept the goods, see Illustration (c) to Section 73 of the Indian Contract Act. In the present
case, no time was fixed in the contract for acceptance of the goods. On March 29, 1952, the
appellants refused to accept the goods. The respondent is entitled to the difference between
the contract price and the market price on March 29, 1952. Counsel for both parties requested
us that instead of remanding the matter we should assess the damages on this basis and finally
dispose of the matter. We have gone through the materials on the record and with the
assistance of counsel, we assess the market price of the Russian newsprint in sheets on March
29, 1952 at 8 annas per lb. Counsel on both sides agreed to this assessment. The claim of the
respondent for Rs 6,798-5-1 on account of interest and Rs 1119-6-0 for insurance charges is
admitted before us by Mr Gupte - In the result, Civil Appeal No. 165 of 1965 is allowed in part, the decrees passed by
the courts below are varied by substituting therefore a decree in favour of the respondent
against the appellants for a sum of Rs 10,980-12-8 with interest thereon at 6 per cent per
annum from July 30, 1952. Civil Appeal No. 166 of 1965 is dismissed.
