IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
Suit No.18 1 3 of 198 0
The Cotton Corporation of India Ltd. ... Plaintiffs Versus
Chakolas Spinning and Weaving Mills Ltd. ... Defenda nt s
Mr.Rajesh Shah with Mr.U. Mahaja n i/by M/s.Divekar & Co. for Plaintiffs.
Mr.Pradeep Sancheti with Mr.Sandeep Shreeku m a r i/by M/s.Mulla & Mulla for Defendan t s.
CORAM : SMT.ROSHAN DALVI, J.
Dated : 15 th Decemb er 200 8
1. The Plaintiffs are the canalizing agents of the Governmen t of India for import and supply of foreign cotton to several Indian Textile Mills. The Defenda nt s carry on business of a textile mill.
2. Purs u a n t to the circular issued by the Plaintiffs in respect of availability of cotton from various countries which would be shipped to India, the Defenda nt s registered their offer to purcha se cotton from Mexico, Guatem ala, Nicaragua and Brazil. The Plaintiffs issued their permission / q u o t a letter for 2
specified bales of cotton to the Defenda nt s. The parties entered into a contract bearing No.G- 444 in respect of the shipment import and supply of the cotton from the aforesaid 4 countries specified therein. The parties similarly entered into another contract in respect of further offer of the Defenda nt s for certain cotton from Turkey, of which specified bales were permitted under the Plaintiffs' Contract No.G-
511. Both the contracts are identical. They are marked Exhibits D and H in evidence. The rights and obligations of the parties under those two written contracts would have to be considered upon interpretation of the contracts admittedly executed by the parties.
3. The goods under the said contract arrived at the Port of Cochin except in respect of 1 shipment which arrived at the Port of Mumbai instead. The Defenda nt s were informed by the Plaintiffs to retire their documen t s and clear the consignme nt. The arrival of the shipment is admitted by the Defenda nt s. The goods were not cleared.
4. It is contended by the Plaintiffs that despite corresponde nce through letters and telegrams in that behalf, the Defenda n t s failed to clear the goods, due to which the Plaintiffs incurred demurrage charges and thereafter were constr ained to themselves to clear the goods and store the goods until they 3
were sold to another party. The Plaintiffs accordingly incurred carrying charges in respect of the storage. The Plaintiffs sold the goods at the price which could be obtained upon a private treaty after a tender in that behalf as the sale by auction did not yield any offer.
5. The Defenda nt s contend that 2 of the shipment s arrived late and in view of delay in the shipment s they incurred a loss in their business and were not bound to take delivery of any of the shipment s.
6. Each party has accordingly alleged breach of the contract by the other. Whereas the Defenda nt s have not sued the Plaintiffs on the breach, if any, committed by the Plaintiffs, the Plaintiffs have sued the Defenda nt s for damages for the loss suffered by the Plaintiffs upon a breach by failure to take delivery of the consignment s that arrived in respect of the contract material.
7. Based upon the respective pleadings of the parties which sets out essentially the breaches of one another and the right to claim damages, if any, by the Plaintiffs Justice A.B.Palkar, as he then was, framed the following issues on 11.4.2000 which are answered as follows:-
(1)Whether the Plaintiffs prove that the Defenda nt s committed breach of the Contract by not taking delivery of the cotton under the two contracts. .. .. Yes
(2)Whether the Defenda nt s prove that the Plaintiffs committed breach of the contract by causing delay in delivery of the suit cotton. And if so, whether the Defendan t s are entitled to cancel the contract and not to take delivery of the suit cotton. .. .. No
(3)Whether the Defendant s prove that the Plaintiffs have not taken steps to mitigate the loss and thereby the Defendant s stood discharged of any loss caused to the Plaintiffs. .. .. .. .. Partly Yes. Partly No (as per reason s) .
(4) Whether the Plaintiffs prove that the Plaintiffs suffered loss of Rs.25,62,471.4 1 or for any other amoun t and that the Plaintiffs are entitled to interest thereon as claimed in the Suit. .. .. .. Yes - as per reasons .
(5) What reliefs ? .. .. As per final order .
8. The parties have essentially led evidence of one of their respective officers. Though the Plaintiffs have led evidence of PW2 and 3 in respect of certain corrections and in deposing how certain documen t s cannot be produced, that evidence has proved to be immaterial and need not be considered.
9. All the docume nt s relating to the contract being essentially the corresponde nce that were entered into by and between 5
the parties in respect of the shipment and the delivery of the consignme nt which was required to be taken are admitted docume nt s. They are relied upon by both the parties in their respective Affidavits of document s. The Plaintiffs' docume nt s have been marked Exhibits alphabetically. Certain docume nt s other than those relied upon by the Plaintiffs produced by the Defenda nt s have been marked Exhibits numerically.
10. The essential contention of breach alleged by both the parties shall have to be determined upon interpretation of the docume nt s relating to the suit contracts relied upon by both the parties. It would be material to consider which party committed breach of the suit contracts. If the Plaintiffs committed breach of the suit contracts by delay in delivery entitling the Defendant s to cancel the contract and not to take delivery the entire action of the Plaintiffs would fail and other issues would not be required to be decided. If it is seen that there is no breach committed by the Plaintiffs, it would have to be seen whether any breach was committed by the Defendant s in not taking delivery of the consignme nt under the suit contracts and its conseque nces.
11. It may be mentioned that the fact that the goods arrived and the Defendan t s were asked to take delivery but failed to 6
take delivery is admitted. The Defenda nt s have justified why they would not take delivery of the suit consignmen t s. For such justification the written documen t s between the parties alone would have to be considered and interpreted. Any oral evidence inconsistent with such docume nt a ry evidence would stand excluded under the elementary principle of exclusion of oral by docume nt a ry evidence contained in Section 91 of the Indian Evidence Act.
12. If breach of the contract by not taking delivery of the consignme nt is seen on the part of the Defenda nt s, then further aspect with regard to the entitlement of the Plaintiffs to claim damages for the loss suffered by the Plaintiffs on account of the breach would have to be considered. In that event the mitigation of damages, if any, by the Plaintiffs would further have to be considered.
13. To that end, the Plaintiffs have sought to resell the consignme nt under the contract to a third party. The Plaintiffs have issued a tender / t e n d er s for sale of the goods by public auction. Since the Plaintiffs failed to have any offers in respect of the articles to be auctioned, the Plaintiffs sold the consignme nt s under the suit contracts by private treaty. P.W.1 , a retired officer of the Plaintiffs, who was serving with the Plaintiffs at the time of the suit contract and 7
resale, has led evidence of the resale. He has produced copies of 4 invoices in respect of the consignme nt s under the contract as well as other consignme nt s containing the goods of the contract description to show the sales effected.
14. The Plaintiffs have produced docume nt s in respect of the charges incurred by the Plaintiffs for demurr age etc. Such docume nt s carry a presu m p tion of correctnes s for considering their admissibility under the Commercial Document s Evidence Act and are accordingly not disputed by the Defenda nt s.
15. The Plaintiffs have also relied upon other private docume nt s of their Clearing Agents to prove the further expenses incurred by them, but which docume nt s have not been taken on record as they have not been proved by direct or secondary evidence. The Plaintiffs have fairly given up their claim in that regard.
16. The Plaintiffs have claimed interest as well as carrying charges as per the contract between the parties.
17. Upon giving credit for the amou nt s received by the Plaintiffs on the resale, the Plaintiffs have calculated the loss incurred by them initially as per the Particulars of Claim, Exhibit- A to 8
the Plaint. It would have to be seen whether the Plaintiffs are entitled to be reimbu rsed the loss claimed by them as damages upon resale of the consignment s not accepted by the Defenda nt s under the suit contracts.
18. Issue No.1 : Purs u a n t to the Circular dated 21.2.1971, Exhibit- A in evidence, issued by the Plaintiffs showing the various types of cotton available for allocation to the Textile Mills, the Defendan t s registered their requirement s in respect of 4 types of cotton under their letter dated 7.3.1977, Exhibit- B in evidence. The Defenda nt s specified the time of delivery; they required the cotton for May, Ju ne, July and August shipment. The Defenda nt s also specified the quantity required by them; they required 500 bales of each of the 4 varieties specified in their aforesaid letters. They further specified that they were to avail of credit facilities offered by the Plaintiffs and they would arrange to secure the required guara ntee upon the Plaintiffs confirming the grant of credit. The Defenda nt s applied for 500 bales each of Mexican, Guatem ala, Nicaragua n and Brazilian cotton. The Textile Commissioner, by his letter dated 18.3.197 7, Exhibit- C in evidence, granted to the Defenda nt s 85 bales of Mexican cotton, 50 bales of Guatemala cotton, 500 bales of Central American cotton, 500 bales of Nicaragua n cotton and 500 bales of Brazilian cotton. These were to be imported by the 9
Plaintiffs and were available for immediate contracting and shipment not later than 30.6.1977.
19. The parties however entered into a written Contract No.G- 444 on 18 th March 1977 for supply of 50 bales Guatem ala cotton, 85 bales of Mexican cotton, 500 bales of Nicaragu a n cotton and 500 bales of Brazilian cotton. Central American and Nicaragua n cotton has not been supplied and the parties are not at dispute with regard to that aspect. The other three types of cottons were to be shipped in May, June and July 1977, respectively. As per the modification of the contract made by the Defenda nt s, the shipment s were to be made in "approximately equal quantities " in the aforesaid month s. The Defenda nt s have not pressed the said mode of shipment except for requesting approximately equal quantities.
20. The parties entered into a further Contract No.G- 511, Exhibit- H on 28 th March 1977 for 58 bales of Turkish cotton, which was to be shipped in April /May 1977. The specific requireme nt for the time of shipment set out in the contract was "If possible in April 1977, otherwise in May 1977. "
21. The Defendant s have contended that the goods arrived late and hence they are not bound to accept the delivery. It may 10
be mentioned that the contract specifies the month s of shipment and not the dates of arrival. It is an admitted position between the parties that the date of the shipment of Turkish cotton was 1.6.1977. Contract No.511 shows that shipment was to be made if possible in April 1977, and otherwise in May 1977. It was made on 1.6.1977, a day after the shipmen t period expired.
Brazilian cotton was shipped on 12.8.1977. Under Contract G-444 the mont hs of shipment of Brazilian cotton was Ju ne / J u l y 1977. It was, therefore, shipped 12 days later than the period of shipment specified in the contract.
22. Guatem ala cotton and the Mexican cotton were admittedly shipped during the period of shipme nt specified in the contract. The parties have no dispute with regard to the time of shipment or arrival of those consignme nt s and none are shown to Court.
23. It is contended on behalf of the Defenda nt s that the Turkish cotton arrived on 26.7.1977 and Brazilian cotton arrived on 21.9.1977. It is contended that, therefore, the shipmen t was long delayed. Time, which is ordinarily of the essence in the contract for sale of the movable goods, was importan t to the Defenda nt s and was of essence of this contract and the 11
Defenda nt s were not obliged to take delivery of any of the goods after the contract period.
24. Time is presu m ed to be essence of contract for movables because in a contract for sale of movable goods there are various other inter- connecting contracts - the Defendan t s would have to process the cotton, man ufact u re material and sell it to a third party. The Defenda nt s would have such contract s already entered into and because of delay of one contract the others would be delayed exposing the Defenda nt s to needlessly defend claims for damages in various actions in law. It is upon such a scenario for contract s of movable properties that time which is ordinarily taken to be of essence or even presu med to be of essence, can be shown to be otherwise, expressly or impliedly.
25. The time of shipment is specifically mentioned in the suit contract s, though the fact that time is of essence is not mentioned. It would have to be seen whether time was indeed of essence in the suit contracts or whether the clause relating to the period of shipme nt denoting time for the performance of the contract, indicated and specified otherwise.
26. The circular of the Plaintiffs, Exhibit- A and the quota 12
letter / p e r mi s sion of the Textile Commissioner, Exhibit- C, show initially the availability of certain varieties of cotton which would be imported in shipment s specified in certain month s. The registration of the Defenda nt s for the cotton bales required by them under their letter dated 7.3.1977 shows that they would require the cotton bales specified by them for May, June, July and August shipme nt s at the rate of 500 bales each in every shipmen t. Hence, the Defenda n t s wanted to put up the time- limit for the performa nce of the contract within a 4- mont h period. They would require 500 bales each month beginning May 1977. They required similar quantities of cotton each month, including the last installment of cotton in August 1977. It need hardly be mentioned that the Defendant s would be required to make payment at the time of shipment. Hence, the requireme nt for payment would be to the extent of the price of 500 bales each month. The Defenda nt s' letter specifying the time of shipment in the aforesaid 4 month s further specified the requireme nt of credit facilities to be offered by the Plaintiffs. A reading of the first offer of the Defenda nt s, therefore, shows that they required the consignme nt of cotton over a period of 4 month s when they would take delivery and make payment.
27. Since the cotton was in short supply and the extent of the 13
supply was to be allowed by the Governme nt, the Textile Commissioner granted to the Defenda n t s lesser quantities of certain cotton than what they applied for. Those consignme nt s were available for immediate contracting and shipment. Shipment was to be not later than 30.6.1977. The quota letter / p e r mi s sion showed that no extension of date would be allowed. Hence, the Governme nt required the Defenda nt s not to spread over the contract period as much as the Defenda nt s would have wanted or desired. This would apply specially in respect of the August shipment s.
28. Ultimately, the parties entered into the written contract and the terms of that contract would govern the parties. The original contract, Exhibit- D in evidence, shows the relevant blanks being filled upon a typewriter specifying the months of shipment. The original contract No.G- 444 has been sent to the Defenda nt s. The original contract has been produced by the Defenda nt s in their Affidavit of docume nt s. Copy of the contract containing carbon copy of the typewritten portion which is also signed in original by both the parties is produced by the Plaintiffs. That has been marked Exhibit- D in evidence. The original contract produced by the Defenda nt s is marked Exhibit D-1 in evidence so as to read the two docume nt s together.
29. The typewritten portion at the bottom of the first page of the contract showing the bales actually to be delivered to the Defenda nt s under the contract sets out the period of the shipment. The period is between May and July. The Defenda nt s have put added specifications in black pen in the duplicate copy of the contract, Exhibit- D in evidence. [That portion has been typewritten in the original contract produced by the Defenda nt s marked Exhibit D-1 in evidence.] The added portion against the mont hs of shipment in case of shipment of Guatem ala , Mexican as well as Brazilian cotton shows "approximately equal quantities ". This addition is made by the Defendant s with the same ball pen with which the contract is signed by their represent ative. Hence, a reading of the entire clause relating to the time of shipment shows the Defendant s' desire to obtain only part of the consignme nt of each variety of cotton at one time. Half consignme nt is, therefore, neither wanted nor expected by the Defenda nt s in first mont h of the period of shipment.
30. It is contended by Mr.Sancheti on behalf of the Defenda n t s that the quota letter / p e r mi s sion of the Textile Commissioner, Exhibit- C, is issued under the Essential Commodities Act, 1955 for cotton which is an essential commodity under Section2(a) thereof. The permission is 15
granted for import contracting and shipme nt not later than 30.6.1977. The permission shows that no extension would be allowed. He, therefore, contend s that this is a specified obligation making the time of the shipment of the essence in addition to the presu m p tion under the Sale of Goods Act. The permission / q u o t a letter dated 18.3.1977 which is a cyclostyled letter, would have to be read along with the initial letter of the Plaintiffs themselves dated 21.2.1977, Exhibit- A, showing the availability of cotton for allocation during the specified month s of shipmen t and the later contract specified the periods of shipment extending upto 2 month s. It is argued on behalf of the Defendan t s that such extension would be void. The provisions of the Essential Commodities Act do not show this aspect, though it shows that contravention of any order made under the Essential Commodities Act would be punish a ble under Section 7 thereof. The fact that the Plaintiffs, who are the canalising agents of the Governme nt in respect of cotton itself, have shown the period of shipment in their initial letter as well as in the later contract, the specific time of contracting and shipment mentioned in the Textile Commissioner's order, Exhibit- C, would be taken to be modified in terms of the contract s, Exhibits D & H, by which alone the parties are governed, provided that it is to the extent of the quantity granted.
31. It is also contended that in the letter of the Defenda nt s dated 18.4.1977 immediately after the contract the time was specifically made of the essence. My attention is drawn to the specific paragrap h of that letter in that behalf. It is thus:-
"You may please arrange to effect shipment of the 1135 bales foreign cotton (50 B / s . Guatemala, 85 bales Mexican, 500 Bales Nicaragua & 500 bales Brazilian) to Cochin Port as per shipment periods laid down in the contract. "
It may be mentioned that the said paragrap h repeats the shipment s for the purpose of specifications as to the description of the goods, the quantity, the Port of delivery as well as the "periods" laid down in the contract. It will have to be seen whether a period of 2 month s specified in the contract would show the intention of the parties to make the time of the essence.
32. So far as contract No.G- 511, Exhibit- H in evidence, is concerned, it specifies the time of the contract to be "April/May shipment- buyer's option" and further specifies that if it was possible, it would be in April 1977, otherwise it could be in May 1977. A reading of this clause relating to the time of shipme nt shows that the Defenda nt s did not 17
want delivery urgently or within a specified time- frame. The Defenda nt s were amenable to obtaining delivery within a span of 2 mont hs.
33. The aforesaid two clauses in the aforesaid 2 contracts relating to the time of shipme nt does not show the last date on which the shipmen t is expected or required. In fact, it does not mention the date of shipment - it mentions the month s of shipment. Shipment s could be made within 30 / 3 1 - day period at any time. The aforesaid contract s, therefore, show that though time may be presu me d to be of essence in the contracts of this kind, it was specifically made not of essence in the suit contracts. The shipment on 1.6.1977 may be hours after the technical expiry of the mont h of May 1977.
34. Had the time been of essence and were the Defendan t s to be put to any loss only upon delay in the shipment, even by a single day, the Defenda nt s would be expected to have inquired from the Plaintiffs and stated their position with regard to the conseque nces of late delivery immediately after the last date of shipmen t expired and the goods failed to arrive. The consignme nt s under the contract are stated to have arrived on 26.7.1977 with regard to Turkish cotton and 21.9.1977 with regard to Brazilian cotton, the two 18
consignme nt s in respect of which the Defenda nt s have taken exception. The conduct of the Defenda nt s upon the arrival of the consignme nt s is, therefore, required to be seen. That conduct is reflected in the admitted corresponde nce between the parties by letters and telegrams.
35. The Turkish cotton was shipped on 1.6.1977. This shipment is shown to be delayed by one day. It is shipped a day after the period of shipmen t mentioned in contract No.G- 511. The Plaintiffs issued the shipment advice to the Defenda nt s on 9.6.1977, Exhibit- J in evidence. Mexican cotton was shipped on 12.6.1977. The Plaintiffs issued their shipment advice on 17.6.1977, Exhibit- K in evidence. There is no dispute that this shipme nt is delayed. The Guatem ala cotton was shipped admittedly within the contract period (though the date of shipme nt is not provided by both the parties). The Plaintiffs issued their shipment advice on 30.6.1977, Exhibit- L in evidence, showing that it was shipped in June 1977 itself. The Brazilian cotton was shipped on 12.8.1977. The Plaintiffs issued their shipment advice on 16.8.1977, Exhibit- P in evidence. Hence the shipment was 12 days after the period of shipme nt mentioned in contract No.G- 444.
36. The Plaintiffs issued their invoices upon the Defenda nt s 19
under their forwarding letters soon after the shipping advice was shipped.
37. The Plaintiffs issued their invoice dated 8.7.1977, Exhibit- M, in respect of Turkish cotton under their forwarding letter dated 16.7.1977, Exhibit M-1, setting out the name of the ship and the particulars of the shipmen t, claiming a sum of Rs.1,72,310.3 7 from the Defenda nt s. The Turkish shipment, which is stated to be delayed by one day, is stated to have arrived in India on 26.7.1977. The Defenda nt s have not refused to accept delivery. They have not taken exception to the delivery. They have not raised any dispute before or at the time of the arrival of the shipmen t also. They have simplicitor failed to take delivery.
38. The Plaintiffs issued their invoice dated 9.7.1977, Exhibit- N, in respect of Guatem ala cotton under their forwarding letter dated 19.7.1977, Exhibit N-1, setting out the name of the ship and the particulars of the shipme nt claiming a sum of Rs.1,40,311.30 from the Defendant s. The Guatem ala shipment is not delayed and hence there is no dispute with regard to the time of shipment.
39. Similarly the Plaintiffs issued their invoice dated 20.7.1977, Exhibit- O in respect of Mexican cotton under their 20
forwarding letter dated 1.8.1977, Exhibit O-1, setting out the name of the ship and the particulars of the shipment claiming a sum of Rs.2,35,934.22 from the Defenda nt s. This shipment is also not stated to be delayed and hence there is no dispute with regard to the time of shipment.
40. Similarly the Plaintiffs issued their invoice dated 23.8.1977, Exhibit- Q, in respect of the Brazilian cotton under their forwarding letter dated 13.9.1977, Exhibit Q- 1, setting out the name of the ship and the particulars of the shipment claiming a sum of Rs.14,08,815.8 1 from the Defenda nt s. The date of this shipment is 12.8.1977. Hence it is stated to be delayed by 12 days. The shipme nt advice itself is dated 16.8.1977. The shipmen t advice is, therefore, delayed about by a fortnight. The date of the arrival of the ship is stated to be 21.9.1977. The Defenda nt s have however not refused to accept delivery. They have not taken exception to the delivery. They have not raised any dispute or at the time of the arrival of the shipment also. They have simplicitor failed to take delivery.
41. The positive conduct of the Defenda nt s prevailed during the period of shipment, at the end of the contract period, soon after the contract period expired and the shipment was delayed and at the time the Defenda nt s were advised about 21
the shipment and when they were sent the invoice showing the amou nt under the shipment claimed from them. That conduct is reflected in the commu nication initially contained in the telegrams sent by the Plaintiffs and replied by the the Defenda nt s forming a chain of such corresponde nce between the parties, Exhibit- U (collectively).
42. The initial telegram of the Plaintiffs, which is in respect of the Brazilian cotton, inquires of the Defenda nt s "whether you received original document s and when payme nt s to be made " sent on 21.9.1977.
43. The Defenda nt s never replied to the said telegram until 4.10.1977. Their reply telegram, addressed to the Managing Director of the Plaintiffs Mr.N.S. Kulkarni, mentions about the bales of foreign cotton booked by the Defendan t s due for shipment in April / J u n e . [Contract No.G-444 show s the consignment s due in May / J ul y .] The Defenda nt s have stated that they had program med consu m p tion in August / S e pt e m ber / O c tober and their advance planning has been totally upset by the delay. They further state that the Defenda nt s' Mill was under lockout from 15 th August and hence they cannot avail of the consignme nt. They have also stated that they have large export orders pending for 100% staple fibre fabrics under an order from United Kingdom so 22
that their Mills would be employed for several months in export production of those goods. They have further specified that they are a small unit having only 300 looms and the Plaintiffs would appreciate that it would not be possible for them to take the late consignme nt s which were yet to be received though sched uled in April / J u n e . [The shipment s were scheduled between April to July 1977 .] Conseque n tly they requested to treat the contract as cancelled as per force majeure (beyond their control). They called for confirmation of the position. It can be seen that the Defenda nt s were reluctan t to take delivery not only because the consignme nt s had arrived late and they had suffered any loss thereby, but because of various other factors at their end. Similarly though they claimed that shipment s were due between April to Ju ne, the contracts show otherwise - the shipmen t s could have arrived until the end of July 1977. The shipmen t for Turkish, Guatem ala and Mexican cotton were made in Ju ne 1977 itself. The Brazilian cotton, though delayed, was shipped on 12.8.1977. The initial two shipme nt s had reached by July 1977. That was even before the Defendan t s' Mills were under lockout. The only real reason for avoiding the contract by taking delivery of the shipme nt s as late as in October 1977 is the Defenda nt s' contract with United Kingdom of staple fibre fabrics.
44. The Defendant s have produced their docume nt s relating to the said contract, Exhibit- 12 (collectively) in evidence. The contract s are shown to be bearing Nos.SF1 / 7 7 , SF2 / 7 7 and SF3 / 7 7 . These contract s are shown to have been entered into in May 1977. The contract s, Exhibit- 12 (collectively), dated 9.5.1977 are in respect of staple fibre unprocessed cloth and mentions the delivery period to be Ju ne /A ug u s t 1977. Hence from the Defenda nt s' own docume nt s, it can be seen that after entering into the contract with the Plaintiffs in March 1977 for purch a se of the aforesaid varieties of cotton, the Defenda nt s entered into contract with the third party for supplying / d elivery of other goods in May 1977. Whereas the Defenda nt s were to take delivery between May and July 1977 under the Plaintiffs' contact, the Defenda nt s were to effect delivery between Ju ne and August 1977 under their later contract s with the third party. These the Defenda n t s found themselves unabled to do, they being a small unit having only 300 looms. Conseque ntly on account of their own business position they made a breach of their contract s with the Plaintiffs - they themselves requested cancellation on account of "force majeure", which is directly contradictory to their case of delayed shipme nt. 24
45. In the Plaintiffs' telegram dated 4.10.1977 itself, the Plaintiffs refused treating the suit contract s as cancelled and called upon the Defenda nt s to arrange to take delivery and make payment immediately.
46. In the later telegram of the Defendant s dated 7.10.1977 addressed to the Plaintiffs' Managing Director Mr.Kulkarni they again mentioned about the lockout, the delayed delivery, the delayed shipment as also the Defendant s' other contract s of staple fibre and called upon the Plaintiffs to cancel the contract on the ground of force majeure. The Plaintiff's reply is dated 19 th October 1977. They mentioned about their inability to arra nge clearance at their end and requested the Defenda nt s to take the consignmen t s against payment and warned that otherwise conseque nces would be on their account. In a further telegram dated 22.10.197 7, the Defenda nt s reiterated their position in view of the "unprecedently peculiar and most unfortunate circumstances " and not in view of the delayed shipment s alone. The parties have thereafter corresponded through their Advocates reiterating their position in the letters Exhibit- V (collectively), which need not be repeated.
47. How the terms of the contract between the parties have been interpreted to ascertain the real intention of the parties 25
with regard to making time the essence of the contract has been considered in the case of D.W. Roberts vs. Shaikh Hyder, AIR 192 3 Nagpur 140 . A contract of a similar kind was held not to have the time the essence of the contract. In that case a relevant part of the contract runs thus:
" The whole work will be completed in 4 months from the date of getting permission in writing from Mr.D.W. Roberts.
A fine of Rs.5 per day will be exacted for every day after that date that the work is not completed within the above noted time."
It was held that time was not essence of the contract in that case. The very fact that penalty was stipulated in case of failure to complete the contract within the time indicated in the contract. It would not result in avoidance of contract but accepta nce of performa nce after the stipulated time subject to payment of damages which were fixed.
48. Hence a reading of the whole contract and the conduct of the parties thereupon have to be seen to conclude whether time which is ordinarily of essence of a commercial contract was of essence of the suit contract.
49. It is contended on behalf of the Defenda nt s that the time is essence of the contract of movables. That broad 26
stateme nt per se is incorrect. Time is ordinarily of the essence of a contract of movables. It may be presu m ed to be so. The presu m p tion is rebutt able. It can be rebutted by the parties expressly or impliedly. The expression as well as the implication of the party's intention can be reflected in contract itself. The suit contract shows no urgency on the part of the Defenda nt s. The contract shows the Defendant s' requirement for delivery in 2 installment s. In fact the Defendant s wanted to spread out the delivery and conseque n tly the payment required to be made upon delivery. The second contract No.G- 511 shows the laxity of performa nce. It depends upon when the exporter would find it possible to send the goods - it could be sent in April or in May, 1977. It does not require delivery on one specific day. Hence delay of one day is completely inconseque ntial. Nothing is shown by the Defenda nt s that such delay of one day caused them prejudice, harm or injury.
50. The case of M/s. China Cotton Exporters Vs. Beharilal Ramcharan Cotton Mills Ltd., A.I.R. 196 1 S.C. 12 9 5 was a case in which shipment date was stated to be not guara nteed. The contract stated that the shipment was to be in October - November 1950. In that case import license could not be obtained. Hence it was stated that "therefore" the shipment date is not guara nteed. It was held that that was only for the reason of obtaining the import 27
license, otherwise the shipment period stood guara nteed by virtue of the word " therefore " . Hence the contract has to be read as a whole.
The intention of the parties in the suit contract is not to have shipment on any specific date. Hence, time, which is ordinary of the essence, is not of the essence in this case.
51. In the case of Andard Mount (supra) also time was of essence. That case was for delivery of huma n albumin within one year with initial delivery commencing by a particular mont h. It was held that time was the essence of the contract and in any case it had to be performed within a reasona ble time. If there is no fixed time, a party can make time the essence later by giving notice in that behalf. If time is not of the essence, the contract has to be performed within a reasona ble time. Whether or not, time is the essence can be inferred from what passed between the parties before and not after the contract.
In this case the contracts had to be performed within a period of 2 month s. They had to be performed within a reasona ble time thereafter, since no specific date was required or fixed. The shipmen t effected one day or even 12 days after the period which has not caused any prejudice to the Defenda nt s show that the contract was performed within a reasona ble time. The Defenda nt s cannot breach such 28
contract by non- accepta nce of goods on a plea as to the essence of the contract taken much later without proof of the prejudice caused to them.
52. The aforesaid correspondence unmista k a bly shows that the reason for the Defenda nt s' failure to take delivery was not the delay in shipment. The consignmen t s were delayed - one by one single day and the other by 12 days. That was not inordinate delay. Since time is seen not to have been the essence of the contract and a date of the actual delivery was not agreed upon and over a period of 2 mont hs the shipment s could be effected, a delay of mere 12 days would not be enough to avoid the contract between the parties. The shipment s could have been made within a reason able time. Since the intention of the parties was not to make time the essence, upon initial delay the Defenda nt s did not make any dispute. The very first telegram is only on 4 th October 1977 when the Defenda nt s' hands were full than ks to their later contract executed on 9.5.1977 which drove the Defenda nt s to dishono ur their contract with the Plaintiffs.
53. The conduct of the Defendant s in not clearing the consignme nt of each type of cotton is specifically shown from the admitted corresponde nce between the parties by Mr.Sha h on behalf of the Plaintiffs. The most material docume nt s 29
relating to each of the consignme nt s separately need to be seen.
Turkish cotto n :
(i) The consignme nt was shipped on 1.6.1977, a day after the 2- month period mentioned in Contract No.511 expired. [The contract period being "If possible in April 1977 otherwise in May 1977 ".].
(ii) The Plaintiffs had sent the shipping advice on 9.6.1977 to the Defenda nt s.
(iii) The Plaintiffs sent an invoice on 8.7.1977 under their forwarding letter dated 16.7.1977 to the Defendan t s.
(iv) The Defendant s sent their docume nt s in respect of the consignme nt of 57 bales of Turkish cotton to their clearing agents on 19.7.1977.
(v) The clearing agents accepted the Defendant s' letter and noted the instr uctions under their letter dated 21 st July 1987, part of Exhibit- 2 (collectively).
(vi) The goods arrived in India on 21.7.1977. 30
(vii) The Defenda nt s directed their clearing agents to stop forthwith further processing of copies of docume n t s and all clearance work in respect of the consignme nt on 3.8.1977 under their letter, Exhibit- 11.
It can, therefore, be seen that though the goods were shipped late (by one day), the Defendant s accepted to take delivery in the first instance. The Defendant s even directed their clearing agents to clear the goods by sending their duplicate copies of the documents for processing. It is only much later and for the first time on 3.8.1977 that they changed their instructions and directions to the clearing agents. It wa s only then that they breached the contract, once accepted by them.
I. The Defendant s having breached the contract by not clearing the goods, the Plaintiffs wrote to them on 3.7.1977, Exhibit- 6, that the docume n t s were already sent to the bank and they were
informed by the Cochin Port Trust of the accum ul ation of bales due to non- cleara nce. They further requested the Defenda nt s to retire the docume nt s and clear the consignme n t to avoid further demur rage.
II. The Defenda nt s failed and neglected to clear the goods.
III. The Plaintiffs reminded the Defenda nt s again to clear the goods by their letter dated 17.1.1978, Exhibit- 7.
IV. The Plaintiffs required the duplicate set of docume nt s of the Defendan t s to clear the goods.
V. The Defendant s sent their copies of docume n t s to the Plaintiffs' clearing agents only on 4.7.1978 under their letter, Exhibit- 10.
VI. Upon having received the document s, the Plaintiffs cleared the goods on 21.7.1978 as reflected in the Dock documen t s being bill of the Cochin Port Trust dated 21.7.1978, part of Exhibit- S (collectively).
Guate mala cotto n :
(i) No delay in shipment or arrival of the goods is alleged in case of this transaction. 43 bales of Guatem ala cotton were to be shipped during the period Ju ne / J u l y 32
(ii) The Plaintiffs sent their shipping advice to the Defenda nt s on 30.6.1977, Exhibit- L.
(iii) The Plaintiffs sent their invoice on 9.7.1977 under their forwarding letter dated 19.7.1977, Exhibits N and N-1.
(iv) The goods admittedly arrived on time.
(v) The letter of the Defenda nt s' clearing agents dated 21 st July 1977, part of Exhibit- 2 (collectively), shows the copy documen t s relating to the said consignme nt received by them. This was received during the period of shipment itself.
(vi) Despite that the Defenda nt s instructed their clearing agents to stop further processing of copies of docume nt s and all clearance work even in respect of the said consignme nt under their letter dated 3.8.1977, Exhibit- 11.
In case of this consignment for want of any delay whatsoever, the non- clearance by the Defendant s of the 33
said consignment show s the failure of the Defendant s' duties as the buyer under Section 31 of the Sale of Goods Act .
I. The Defendant s failed and neglected to clear the goods.
II. The Plaintiffs sent their reminder to the Defendant s to clear the goods on 17.1.1978, Exhibit- 7.
III. The Defenda nt s sent their duplicate copies of the docume nt s to the Plaintiffs' clearing agents only on 4.7.1978 under their letter, Exhibit- 10.
IV. The Plaintiffs cleared the goods on 21.7.1978 along with the consignmen t of Turkish cotton. The Plaintiffs however have not produced any Dock docume nt s to show precisely on which day this consignmen t was cleared.
Mexican cott o n :
(i) There is admittedly no delay in the shipment or arrival of this consignme nt also. The period of shipment in the Contract No.G- 444, Exhibit- D, is May/ J u n e 1977 shipment.
(ii) The date of shipmen t is 12.6.1977.
(iii) The Plaintiffs sent their shipmen t advice on 17.6.1977, Exhibit- K.
(iv) The Plaintiffs sent their invoice dated 20.7.1977 under their forwarding letter dated 1.8.1977, Exhibits- O and O-1 to the Defenda nt s.
(v) The goods arrived in India on 26.8.1977. By this time, the Defendant s had sent their telegram, Exhibit- U (collectively) to the Plaintiffs refusing to clear the goods under any of the consignment s.
(vi) The Defenda nt s had instructed their clearing agents not to clear the first two consignme n t s of Turkish cotton and Guatem ala cotton on 3.8.1977. Hence the Plaintiffs cleared this consignme nt on 30.8.1977 themselves without further reminders and corresponde nce. This is shown in the Dock docume n t s being the Import Application of the Bombay Port Trust and the Bill of Entry, part of Exhibit- R (collectively).
In case of this consignment for want of any delay whatsoever, the non- clearance by the Defendant s of 35
the said consignment show s the failure of the Defenda nt s' duties as the buyer under Section 31 of the Sale of Goods Act .
Brazilian cott on :
(i) This consignme n t was to be shipped during the period June / J u l y 1977. It was shipped on 12.8.1977, after a delay of 12 days.
(ii) The Plaintiffs sent the shipment advice to the Defenda nt s on 16.8.1977, Exhibit- P. The Plaintiffs sent their invoice dated 23.8.1977 under the forwarding letter dated 13.9.1977, Exhibits Q and Q- 1 to the Defenda nt s. The consignme nt arrived in India on 21.9.1977.
(iii) The Plaintiffs, by their telegram to the Defenda nt s sent on 21.9.197 7, inquired of the Defenda nt s whether they received the original docume nt s and when payments were to be made. The Defenda nt s however never cleared the goods and never made payment.
(iv) The Plaintiffs cleared the goods on 10.1.1978 without further correspon de nce as reflected in the copies of the Dock docume nt s of this consignme nt being the Import 36
Application and the bill for demurr age charges of the Cochin Port Trust, part of Exhibit- T (collectively).
(v) The Plaintiffs made further payment of the fumigation charges, removal charges, etc. on 14.1.1978 and 23.1.1978 as reflected in the docume nt s, Exhibit- T (collectively).
54. The Defenda nt s' conduct can also be further seen from the corresponde nce with regard to the place of delivery of the goods. The contract s specify that the goods would be delivered at Cochin Port. The Defenda nt s had mentioned this aspect specifically in their letters dated 18.4.1977, Exhibits E and I (collectively) that the shipment s were required at Cochin Port. The first shipment was made on 1.6.1977, which was informed to the Defendant s by the Plaintiffs' shipme nt advice 9.6.1977, Exhibit- J. Thereafter the second shipment of Mexican cotton, which was made, was informed to the Defenda nt s by the Plaintiffs' shipping advice dated 17.6.1977, Exhibit- K. That shipping advice erroneously mentioned that the goods were to arrive in Mumbai. Hence, by the Defenda nt s' letter dated 25.6.1977, Exhibit- 4, the Defendant s informed the Plaintiffs of the error and requested them to effect the shipment s of foreign cotton to Cochin Port. That letter states :
"In any case we want the cotton to be shipped to Cochin Port only. You will, therefore, see that 69 bales of Mexican cotton are diverted and
shipped to Cochin Port under advice to us ."
Again, by their telegram dated 1.8.1977, part of Exhibit- 3 (collectively), the Defendan t s again informed the Plaintiffs that those bales were to be shipped to Cochin Port only. The Plaintiffs, by their telegram dated 2.8.1977, part of Exhibit- 3 (collectively), affirmed that they had arranged to deliver the documen t s of 69 bales shipped to Cochin instead of Bombay and requested the Defenda nt s to make arra ngeme nt for clearance at the Cochin Port and inform the mode of payment to the Plaintiffs' Account Section. Hence it can be seen that the Defenda nt s were willing to take the delivery of the consignme nt s, whether they were delayed or not, until 2.8.1977. It is for the first time on 3.8.1977 that the Defenda nt s informed their clearing agents by their letter dated 3.8.1977, Exhibit- 11 not to clear the consignme nt of Turkish and Guatem ala cotton and by their telegram dated 4 th October 1977, part of Exhibit- U (collectively), they for the first time mentioned about the delay in shipping alleging that their planni ng was upset, stated about the lockout of their Mill as well as about other orders from United Kingdom and 38
requested the Plaintiffs to treat the contract with them as cancelled. - The shipment of Guatemala cotton was not even delayed.
55. It may be mentioned that though the initial Contract No.G- 444, Exhibit- D, was sent by the Plaintiffs to the Defenda nt s also mentioning about the shipme nt of 500 bales of Central American cotton to be delivered in May / J u n e 1977, the Defendant s did not want that delivery. Hence the Defenda nt s scored out that entry in the original contract itself. By their letter dated 18.4.1977, they informed the Plaintiffs about the said cancellation and returned the duplicate copy of the contract to the Plaintiffs showing the cancellation. Hence by letter dated 25.4.197 7, Exhibit- 5, the Plaintiffs accepted the cancellation and confirmed having treated the booking of 500 bales of Central American Cotton as cancelled. Similarly Nicaragua n cotton has not been shipped. Both parties have had no issue on these consignme nt s. The Defenda nt s have not claimed damages for non- delivery. This shows that both the parties accepted changed circum st a n ce s and co- operated with one another.
56. It is seen that despite being ready and willing to 39
take delivery and also correspondi ng with the Plaintiffs with regard to the place of delivery the Defenda nt s changed their mind and breached the contract on and from 3.8.1977. At the time of the breach, the Defenda nt s never mentioned the reason for the breach to be only the delay in shipmen t. The delay in shipment of one of the consignme nt s is of but one day. The delay in the shipment of the other consignme nt is of 12 days. The other two consignme n t s have arrived on or before time. Despite the said fact upon receipt of the Plaintiffs' Advocate's Notice dated 18 th November 1977, Exhibit- V (collectively), the Defenda nt s, by their Advocate's Reply dated 14.1.1978, Exhibit- V (collectively), contended that because of the delay in shipment of one of the consignme nt s by a fortnight, the Defenda nt s were not obliged to take delivery of any of the shipment s. They also contended that as the time was the essence of the contact, the Plaintiffs committed a breach of the contract and the Defenda nt s were not bound to take delivery of any of the goods consigned.
57. The terms of the contract and law with regard to the Sale of Goods Act would, therefore, have to be considered.
The duties of the sellers and buyers of goods under the 40
Sale of Goods Act, 1930, are set out in Section 31 thus:
"It is the duty of the seller to deliver the
goods and of the buyer to accept and pay for
them, in accordance with the terms of the
contract of sale ."
The Plaintiffs delivered the goods as contracted albeit with a slight delay in two of the consignmen t s. The Defenda nt s failed to accept delivery of any of the consignme nt s and failed to make payment in respect of each of them.
58. Clauses 5, 6, 17, 28 and 29 of the Contract set out the terms of the contract between the parties thus:-
(a) Under Clause- 5 if the Defendan t s fail to pay the price, the Plaintiffs were to be entitled to clear and take delivery of the goods at the costs and risks of the Defenda nt s.
(b) Under Clause- 6 if the Defendan t s fail to take delivery, the Plaintiffs would be entitled to sell the goods and recover the loss suffered on that account.
-(c) Under Clause -17 if the Defenda nt s fail to take delivery and make payment they were to
be liable for all charges and expenses, including insura nce, demurrage and interest at 20% per ann u m on monthly rest basis.
(d) Under Clause- 28, the Defenda nt s were not entitled to cancel or revoke the agreement
once made, except upon pain of payment of
(e) Under Clause- 29, no cotton after shipment was liable to rejection.
59. The parties entered into a commercial contract. The Plaintiffs signed the contract and sent it in two parts to the Defenda nt s on 18 th March 1977. The Defenda nt s retur ne d the duplicate copy of the contract signed by them on 18 th April 1977. The Defendant s made corrections as well as additions in the contract signed and sent by the Plaintiffs. The Defenda nt s are bound by what they sign. The Defenda nt s' liability to pay the price and take the delivery is clear and absolute. The contract does not specify time to be of essence. A reading of the contract more specially the specific clause relating to the shipment corrected and added 42
to by the Defenda nt s shows that time was not of the essence. Such were the terms of the contracts G-444 and G-511 between the parties.
60. Sectio n 36(2) of the Sale of Goods Act, 193 0 , which deals with rules as to delivery, runs thus :-
"Where under the contract of sale the seller is bound to send the goods to the buyer, but no
time for sending them is fixed, the seller is bound to send them within a reasonable time ."
It is seen that no time for sending the goods is fixed under the contract except for a 2- mont h shipme nt period in which bales of approximately equal quantities were to be dispatched. The entire consignme nt was dispatched in one bulk with regard to each of the 4 types of cotton. No exception thereto has been taken. Nothing is reflected in the contract to show that the goods were urgently required at any specified time. The presu m p tion that time is the essence of the contract of sale of movables is dispelled by the suit contract mentioning laxity of the time of shipment and the quantities thereto; Contract No.G- 511 had to be shipped "if possible in April 1977 or otherwise in May 1977 ." The other contract s were broken up for delivery in 2 equal installment s.
61. Sectio n 42 of the Sale of Goods Act, 193 0 deals with accepta nce of goods as follows:-
"The buyer is deeme d to have accepted the goods when he intimates to the seller that he has
accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them ."
It can be seen that until 2.8.1977, the Defenda nt s had accepted the consignmen t s which had until then arrived, including the consignme nt of Mexican cotton which arrived before time and the consignment of Turkish cotton which had arrived but one day late. These facts show the initial accepta nce of the goods and hence the ownership in them by the Defenda nt s. These acts of the Defenda nt s are inconsistent with the owners hip of the Plaintiffs.
62. There is, therefore, no delay in the delivery of the consignme nt under the suit contracts such as to cause a breach on the part of the Plaintiffs. The admitted refusal to take delivery by the Defenda nt s without proper course shows 44
a breach on the part of the Defendan t s of the suit contracts. Hence Issue No.1 is answered in the affirmative and Issue No.2 is answered in the negative.
63. Issue Nos.3 & 4 : Once it is seen that the Defenda nt s have committed a breach of the contract by not taking delivery of the consignme nt under the two suit contract s, the Plaintiffs would be entitled to damages and recovery of their expenses and charges.
64. The liability of the Defenda nt s for neglecting and refusing to take delivery of the goods is incurred by them under Sectio n 44 of the Sale of Goods Act . Section 44 runs thus:-
" When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods ."
Similarly under Secti o n 56 of the Sale of Goods Act , the buyer, who has broken the contract by neglect and refusal to accept the goods and pay the price can be sued for damages for non- accepta nce. Section 56 runs thus:-
"Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damage s for non- acceptance ."
The Plaintiffs, as the party who suffered the breach committed by the Defenda nt s, would have to show the expenses incurred in clearance and storage of the goods as those which nat ur ally arose in the usual course of things from such breach being the Dock charges paid by them under the Dock docume n t s, Exhibits R, S & T (collectively) and reasona ble charge for the care and custody of the goods as specified in Section 44 of the Sale of Goods Act. The Defenda nt s are required to pay all the expenses incurred by the Plaintiffs for clearance of the goods at the Docks. The suit contracts mention the charges payable for demurr age, taxes, and other expenses at the Docks with interest thereon @ 20% p.a. with monthly rests under Clauses 17 of each of the 2 contracts, Exhibits D & H. Hence the Plaintiffs would be entitled to interest on the aforesaid charges and expenses at the contract u al rate. The Plaintiffs also had to take care and custody of goods under Clauses 13 of each of them. The Defenda nt s are required to pay carrying charges at 2½ % per 30 days from the date of the arrival of the steamer if they fail to make payment immediately 46
on arrival. Therefore, it can be seen that the parties themselves have contracted as to the amou n t of charge that the Plaintiffs would be constrained to incur for the storage of the goods.
65. The Plaintiffs' Suit is for recovery of compen s a tion for the loss and damage caused by the breach of the contract by the Defenda nt s under Secti on 73 of the Indian Contract Act, 18 7 2 which deals with conseque nces of such breach. Section 73 runs thus:-
"When a contract has been broken, the party
who suffers by such breach is entitled to
receive, from the party who has broken the
contract, compens ation for any loss or damage caused to him, thereby, which naturally arose in the usual course of things from such breach, or which the parties kne w, when they made
the contract, to be likely to result from the breach of it.
Such compens ation is not to be given for any remote and indirect loss or damage sustained
by reason of the breach."
66. Under Sectio n 74 of the Indian Contract Act , the extent of compens a tion allowable where a penalty is stipulated in a contract is laid down thus :-
"74. Compen s a t i o n for breac h of contr a c t where pena l t y stipul a t e d for. - When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compens ation not exceeding the amount so named or, as the case may be, the penalty stipulated for .
Explanation.- A stipulation for increased interest from the date of default may be a stipulation by wa y of penalty ."
67. DAMAGES FOR LOSS :
The Plaintiffs would have to show the loss incurred by them upon the value of the consignme nt. Of course, the Plaintiffs would have to mitigate the loss. For such mitigation the Plaintiffs would have to resell the goods within a reason able time to a third party before the goods devalue or perish by deterioration of quality of the goods. If the Plaintiffs fail to show mitigation of damages by actual resale of the goods within a reasona ble time, the Defenda nt s cannot be held liable for the net loss suffered by the Plaintiffs.
68. Resale is the contract u al entitlement of the Plaintiffs. 48
Clause 6 of the Contract specifically states that if the Defenda nt s fail to take delivery of the consignme nt, the Plaintiffs will be entitled to sell to any party by private sale or by auction and any loss suffered by the Plaintiffs will be on account of the Defenda n t s and they would be liable to pay the same on deman d to the Plaintiffs. This right of resale is claimed by the Plaintiffs as per the provisions of Section 54(4) of the Sale of Goods Act, 193 0 . The said Section runs thus:-
"Where the seller expres s l y reserves a right of re- sale in case the buyer shoul d ma k e defa ul t , and, on the buyer ma k i n g defaul t , re-sells the goods, the origin a l contr a c t of sale is thereb y rescin d e d , but wit hou t prejudi c e to any claim which the seller ma y have for da m a g e s ."
69. The Plaintiffs are required to mitigate their loss or damage. They would mitigate their loss by resale of the consignme nt. They must do so within a reason able time. The Plaintiffs have resold the consignme nt s to third parties. It is contended on behalf of the Defenda nt s that resale is far too delayed. The goods are liable to perish and deteriorate with age. Hence the price recovered on resale would consistently devalue. The longer the delay, the lesser would be the price recovered and conseque ntly the more would be the loss suffered by the Plaintiffs. The Plaintiffs, therefore, would not be entitled to delay the resale and must sell the goods as 49
expeditiously as possible.
70. The Plaintiffs must initially prove their effort at resale. The Plaintiffs have produced copies of the tender notice issued by them in respect of the suit consignme n t s along with various other consignmen t s of cotton received from various countries of various types available at various Ports of India. Exhibit- W (collectively) are the tenders dated 24 th Ju ne 1978 and 2 nd September 1978. The tender Notice dated 24 th Ju ne 1978 is in respect of, inter alia, Mexican, Guatem ala, Brazilian and Turkish cottons. The tender Notice dated 2 nd September 1978 is, inter alia, in respect of Mexican, Guatem ala and Brazilian cottons. The Brazilian cotton in that tender Notice was available only at Mumbai and it does not deal with the suit consignme n t. Turkish cotton was not put up for sale in the second tender.
71. It is the evidence on behalf of the Plaintiffs that several other parties like the Defenda nt s defaulted in taking delivery and making payment of their respective consignme nt s. The Plaintiffs, therefore, have to collect the consignme nt of several parties to be able to issue their tenders. Paragraph- 26 of the examination- in- chief of the Plaintiffs' witness shows how the Plaintiffs invited offers from Indian Textile Mills under their tenders. The tenders were 50
72. The evidence of the Plaintiffs' witness in paragrap h 26 of the examination- in- chief shows the publicity required to be given to All India Federal South Indian Godown Mills Association to make offers upon Indian Cotton Mills to purcha se the consignme n t s uncleared by the defaulting importers.
73. The Plaintiffs' witness has proved the issue of the tender Notice dated 24.6.1978. The Plaintiffs received offers only for Turkish cotton. They were considered to be low by the Plaintiffs' purch a se and sale committee. The offer was rejected as per the Minutes of the meeting of that Committee dated 10.7.1978, Exhibit- Z. Thereafter the Plaintiffs issued a further tender notice similarly. That was on 2nd September 1978. The Plaintiffs sold, inter alia, the Defenda n t s' consignme nt s. The Plaintiffs' contracts are under 4 separate invoices for Turkish, Guatem ala, Central American / G u a t e m al a and Brazilian cottons. The Plaintiffs have produced copies of the invoices reflecting the sales from their files and the xerox copies of those copies made by them upon comparison in cases of two of the resales when their file copies are misplaced. These 4 invoices are marked Exhibits AA, BB, CC and DD, respectively.
74. Since the tender notice was for several consignme n t s of several purcha se rs of cotton who had defaulted, the resale invoices do not show the specific description or extent of the Defenda nt s' consignment s. The oral evidence of the Plaintiffs' witness in paragrap h s 27 and 31 of his examination- in- chief show how the Plaintiffs have sought to prove the resale by the copies of the invoices by adducing secondary evidence.
75. The Defenda nt s have not accepted as correct the resale invoices. Mr.Sancheti on behalf of the Defenda nt s drew my attention to several inconsiste ncies in the docume nt s to show that the Defenda nt s' consignme nt s could not have been sold under these invoices. The Plaintiffs' witness has been cross- examined extensively on this score.
76. It is the Plaintiffs' case that the Plaintiffs have resold interalia the Defenda nt s' goods under 4 separate trans actions to 4 parties in India and abroad. The invoices raised by the Plaintiffs upon those parties are in respect of Guatem ala cotton, Brazilian cotton, Turkish cotton and Mexican / G u a t e m al a type cotton. The Plaintiffs have to prove these contracts of resale. The original invoices have been sent to the respective buyers. The Plaintiffs are expected to have 52
their file copies. The Plaintiffs would be required to prove these Document s by secondary evidence. Under the provisions of Sectio n 63(2) of the Indian Eviden c e Act, 187 2 the Plaintiffs would be required to produce the copies made from the original of such invoice by mecha nical process (for eg., the carbon copies of typewritten Docume nt s) which in themselves ensure the accuracy of the copies or copies compared with such copies. The copy made at the time of the execution of that contract for which the invoice is typed and sent to the buyer is the precise copy required to be produced by the Plaintiffs to serve as secondary evidence of the contract of resale. If such a copy is not produced, a copy compared with such a copy would be the one which would constit ute secondary evidence.
77. Under Sectio n 65 of the Indian Eviden c e Act secondary evidence is allowed to be given of the existence, conditions, or content s of the Document s when the original is shown to be in the possession of another person and when that person does not produce it despite notice. The exception is under Sectio n 66(6) of the Eviden c e Act , when the person in possession of such a Documen t is out of reach or not subject to the process of the Court. The buyers of the resold cotton are foreign buyers or firms outside the jurisdiction of this Court. Hence the Plaintiffs would be 53
entitled to rely upon their file copies which would be prepared at the time the original invoice for resale of the aforesaid types of cottons sold to third parties or copies compared with such copies by the Plaintiffs. The original need not be got produced by the Plaintiffs, if the parties are out of reach or not amenable to the process of the Court. The 4 invoices are made out in the names of parties in Coimbatore, Zurich, Geneva and Hong Kong and these parties are out of the reach of the Court and not subject to the process of the Court.
78. The evidence of the Plaintiffs' witness in paragrap h s 20, 27 to 30 of the examination- in- chief show the execution of the Document s for resale, file copies as well as Xerox copies of such file copies being produced, stated to have been compared with the originals by the witness. Upon such compliance with Section 66(2) and 66(6) the Documen t s becomes admissible and are accordingly marked Exhibits- AA to Exhibit- DD in evidence.
79. The credibility and acceptance of such docume n t s, admitted in evidence and marked Exhibits is subject to the trut h of the content s of the Docume nt s being proved by the Plaintiffs and subject to the necessary cross examination. 54
80. The Plaintiffs have sold the aforesaid 4 varieties of the cotton being different bales to different parties on different dates. Each of them may be considered in chronological order for ascertaining the proof of the trut h of their content s.
81. The invoice date 5 th December 1978, which constitutes the first resale by the Plaintiffs stated to be inter alia of the Defenda nt s' consignme n t, is marked Exhibit- AA. It shows the sale of 86 bales of Guatemala cotton. The contract between the parties was for 50 bales of Guatem ala cotton. 43 bales were supplied and cleared by the Plaintiffs. The consignment was shipped within the period of contract. The goods are stated to have been cleared in July, 1978. (There are no supporting Document s of any Port to show the clearance of the goods). The tender notice which is stated to have been issued by the Plaintiffs for resale of the goods initially by public auction, a part of Exhibit- W (colly) is dated 24 th Ju ne, 1978. The Plaintiffs not having fetched a reasona ble price upon the offers made by the buyers purs u a n t to the tender notice, the Plaintiffs have sought to resell the goods on 5 th December, 1978, about 6 month s after the issue of the tender notice to the Textile Mills.
82. The clearance of the consignmen t of Guatem ala cotton is not shown by the Plaintiffs at all. No Document s 55
with regard to that consignme nt are produced. Mr. Shah tried to contend that these were shipped and cleared along with the Turkish cotton and hence may be taken to be cleared on 21 st July, 1978. That is impermissible. The damages and losses claimed by the Plaintiffs would have to be seen upon taking into account the prices, dates of clearance of goods as well as resale of goods. Needless delay in any of those would dis- entitle the Plaintiffs from claiming damages. Besides if this consignme nt was cleared on 21 st July, 1978, these goods could not have been put up for auction under the auction notice dated 24 th Ju ne, 1978 part of Exhibit- W (colly).
83. The content s of the Document would require to be considered to appreciate the trut hful nes s of the case of the Plaintiffs with the Defenda nt s' consignme nt was sold amongst the 86 bales sold under the said invoice. Paragrap h 28 of the examination- in- chief of the Plaintiffs' witness shows in passive voice the trans action that took place as is obviously reflected in the Documen t itself. The Plaintiffs' witness has sought to identify the signat ur e of the Officer of the Plaintiffs on the copy of the original invoice. The signat u re on the Document s produced by the Plaintiffs is in the original. The witness has also deposed to identify an endorseme n t on the top of the Documen t showing "43 ex 56
86b/ s a/c cha ko l a s Spg". In the examination- in- chief the witness has explained the endorseme nt to mean that 43 bales of cotton out of 86 bales were of the Defenda nt s. In the cross examination the witness has agreed with the suggestion that he had no personal knowledge why another person had made an endorseme n t on the top of the Document. The bill bears no mark, type or lot numbers.
84. Mr.Sancheti, on behalf of the Defendant s, drew my attention to a copy letter relied upon by the Plaintiffs dated 22 nd November, 1979 giving notice to the Defendant s regarding the resale of the goods under their contract No.G- 444, Exhibit- D . The said letter is inter alia in respect of 50 bales of Guatem ala cotton shipped to the Defenda nt s. The said letter states about how the Defenda nt s failed to retire the Docume nt s and take delivery of the cotton. The Plaintiffs, therefore, until the date of that letter sold 334 bales of Brazilian cotton out of 485 bales of Brazilian cotton shipped to the Defenda nt s. The Defenda nt s' Advocate has justifiably contended that this letter, written about a year after the resale reflected in the invoice Exhibit- AA, shows that until November, 1979 the Plaintiffs had not sold any bales of Guatem ala cotton from out of the Defenda nt s' consignme nt. Though the Plaintiffs need not have shown the particular s of the contract, under which the consignment 57
was shipped to the Defenda n t s at the time of resale to the third party, (as is the tenor of the cross examination), the Plaintiffs are required to show by some intrinsic evidence how the consignmen t sold to the 3 rd party under the invoice Exhibit- AA contains inter alia the consignme nt of the Defenda nt s. Rather than showing that fact, the later circumst a n ti al evidence shows otherwise. The cross examination of the Plaintiffs' witness further shows that he had no knowledge of the storage or shipping of the Defenda nt s' consignmen t. Though that is natu r al and the witness need know each aspect of the contract with the Defenda nt s, his lack of evidence to connect the Defendan t s' goods with the resale Document, despite deposing that he had personal knowledge of the resale when the invoice is signed by another Officer, shows failure to prove the trut h of the content s of the invoice produced by secondary evidence.
85. The second resale by the Plaintiffs is of Brazilian raw cotton under invoice dated 11 th September, 1979 to a party in Zurich, Switzerland. The invoice is marked Exhibit- BB upon the Plaintiffs' evidence in paragrap h 30 of the examination- in- chief. The contract between the parties was for 500 bales of Brazilian cotton. 485 bales were shipped and supplied to the Defenda n t s. The Defendant s failed to clear any of those. The Plaintiffs cleared the consignme n t on 58
10 th Jan u a ry, 1978 as reflected in the Document s of Cochin Port Trust Exhibit- T (colly). The invoice produced by the Plaintiffs is the Xerox copy of the file copy of the original invoice sent to the party in Switzerland. Paragrap h 30 of the examination- in- chief shows that the office copy of the resale invoice is not traceable. Hence the initial evidence under Section 63(2) is not produced. A copy compared with the office copy is stated to be produced. P.W.1 has deposed that "he him self comp a r e d Xerox copy of the resal e invoice" . He has not deposed that they were compared with the office copies. His evidence shows that the office copy was available at the time of the filing of the Suit when he took out the Xerox copy of the office copy of the resale invoice. He presu m a bly compared a Xerox copy with the office copy. It would have to be adjudged whether the evidence of a witness not producing even the copy of the original Docume nt made by the mecha nical process which would ensure its accuracy is to be accepted in evidence upon the witness stating that he had compared the Xerox copy at the time of the filing of the suit. Section 61 of the Evidence Act requires Document a ry evidence to be proved by either of the two modes. Primary evidence is to be led under Section 62 of the Evidence Act. If any Documen t can be proved by primary evidence by production of the Document itself, it is the initial mode of proof and deserves immediate acceptance. 59
Secondary evidence is allowed under Section 63 of the Evidence Act, if primary evidence is not produced. Section 63 is, therefore, in the nat ure of an exception to Section 62 as the secondary mode of proof of Documen t s. Secondary evidence is allowed in the 5 modes set out in Section 63 of the Evidence Act. Under the circum st a n ce s mentioned in Section 65, and subject to the procedure laid down in Section 66, secondary evidence is to be led. A copy of the original Docume nt is, therefore, required to be the copy taken out at the time the original Documen t came to be executed. Such copy could have been taken out as a holograph copy by man u script as was the usual copying in olden times, or the copy made by a mecha nical process which could be by typewriting, a computer printout or a Xerox copy as would ensure accuracy of the original Document . A copy of a copy of a Document made at a later stage does not fall within the parameters of Section 63(2) unless the witness shows how a copy could have been taken of the initial copy of the Document at a later stage and how he has compared them with the initial copy which could be a holograph copy, a typewritten copy etc. The evidence of the Plaintiffs' witness is casual and cursory. It does not set out how and when the copy of the copy was made and how and when the original copy was lost though it was available at the time of the filing of the Suit. The evidence is seen to be 60
given merely to fit into the last portion of Section 63(2). Despite admissibility of the Document being seen by such evidence, the credibility of the Document is not established. Hence, the evidence falls short to prove the truth of the content s of the Document on this score itself. If such evidence simplicitor is accepted there would be no evidence that cannot be pushed into any record in the name of proof of Document s. The witness has admittedly prepared a copy of the copy of the Documen t after filing of the Suit. The witness has not produced the copy of the Document made by the mecha nical process as would ensure accur acy i.e. the typewritten copy of the original invoice which is the file copy /office copy of the Plaintiffs.
86. The Xerox copy of the invoice Exhibit- BB shows a very unclear signat u re at the foot of the Documen t . That signat u re is different from the other signat ure s on the other resale Docume nt s. Deposition simplicitor that the witness identifies the signat ur e as of another Officer from an otherwise illegible signat u re on the Xerox copy cannot also be accepted.
87. The invoice shows certain lot num bers, mark number s and type of the goods. These are nat ur ally not put by the witness. The marks are different, and natur ally so, 61
from the marks on the Defenda nt s' consignment at the time of shipmen t and storage. The goods which are sold under this invoice are the Defenda nt s' goods as well as other goods. Marks of the defaulting importers are not required to be put on the invoice of a third party. The Plaintiffs' witness has explained in re- examination that the marks are bound to be different as the lot numbers and other details given by the foreign suppliers are different from the lot num bers and other details given by the Plaintiffs as the exporter of the goods.
88. It is the Plaintiffs evidence in paragrap h 30 of the examination- in- chief that the consignme n t of the Defenda nt s was of 2 parts containing 151 bales and 334 bales though sold to the same party in Switzerland. The damages and other charges were also paid for the goods in 2 lots. Only one resale invoice is however, produced. The evidence shows that the invoice dated 11 th September, 1979 Exhibit- BB is in respect of 151 bales from the Defenda nt s consignme n t along with the other bales of other similar defaulting importers by the Plaintiffs to the third party. The letter dated 22 nd November 1979 part of Exhibit- FF (colly) shows the sale of 334 bales of Brazilian cotton out of the Defenda nt s' consignme nt of 485 bales. The invoice with regard to those 334 bales is not produced. Since 334 bales of cotton were 62
only sold before the date of that letter, the Brazilian cotton to a Swiss buyer of 151 bales as deposed by the Plaintiffs would not prove the trut h of the content s of the Docume nt produced by the Plaintiffs. However it may be a case of a clear error on the part of the Plaintiffs' witness since Brazilian cotton is stated to be sold in 2 lots. The Plaintiffs' witness having specifically deposed about sale of the Brazilian cotton in 2 lots. The Brazilian cotton shown to be sold under the invoice Exhibit- BB consists of 1401 bales. The Plaintiffs could have passed off the entire shipment of the Defenda nt s of 485 bales under the said invoice. The Plaintiffs have not done so. The Plaintiffs have sought to produce Documen t s only with regard to a part of the Defenda nt s' consignme nt stated to have been sold under the invoice. The Document would reflect the price prevalent of the Brazilian raw cotton on the given date, whether or not, the entire consignme nt was resold by the Plaintiffs. The Defenda nt s would be entitled to rebate to the extent of the market price on that day with regard to the entire consignme nt purcha sed, but not cleared by them to compute the loss suffered by the Plaintiffs upon resale.
89. The third resale by the Plaintiffs is of Turkish cotton under invoice dated 13 th Febru ary, 1980 Exhibit- CC made to a party in Geneva, Switzerland. The contract between the 63
parties No.G- 511 is in respect of 58 bales of Turkish cotton. 57 bales have been shipped and cleared. The invoice Exhibit- CC is for 370 bales of Turkish cotton. It is the Plaintiffs evidence in paragrap h 27 of the examination- in- chief that the Plaintiffs have sold inter alia the 57 bales of Turkish cotton which was the Defenda nt s' consignment. The Tender Notice part of Exhibit- W(colly) has been issued on 24 th Ju ne, 1978. The Defenda nt s' consignme nt is shown to have been cleared on 21 st July, 1978 as per the Document s of the Dock Exhibit- S (colly). If these goods are cleared only on 21 st July, 1978 they could not have been put up for auction a month before on 24 th Ju ne, 1978. Hence what is contained in the tender notice dated 24 th Ju ne, 1978 Exhibit- W with regard to Turkish cotton does not include the Defenda nt s' consignmen t. Conseque ntly if the deposition of the Plaintiffs' witness, that the invoice Exhibit- CC includes the 57 bales of Turkish cotton of the Defenda nt s' consignme nt, is correct, it shows that the Plaintiffs never put up the said consignmen t for any public auction and only sought to sell it by private treaty 1½ years after its cleara nce. Conseque ntly the Plaintiffs' evidence under answer 74, that he was personally a party to the sale or resale, is itself a matter of doubt. The evidence is, therefore, neither credible nor clinching. Aside from showing the market value of the Turkish cotton on the date of resale, 64
the docume nt appears to be an otherwise unrelated docume nt tried to be pushed into the record as the docume nt relating to the resale of the Defenda nt s' consignme nt.
90. The last resale of the Defenda nt s' consignme n t is made out to be under a copy of the invoice dated 5th May 1980, Exhibit- DD . The document is really a xerox copy of the office copy of the original invoice. It has no signat u re of the Accounta n t at the place meant for signat ure. It, however, shows the xerox copy of an initial and signat u re at another place at the bottom of the docume nt. There is no means of knowing whether such a docume nt would be a copy compared with the original copy made by a mecha nical process such as to ensure its accuracy. It is precisely, therefore, that the xerox copy of a copy of the documen t taken out at a date later than the date of the execution of the docume nt cannot be admitted as secondary evidence despite a deposition of the witness that he had made the copy at the time of or after the filing of the Suit. Such direct evidence is merely given to fall within the provisions of law relating to proof of docume nt s by secondary evidence without there being any trut h in such deposition.
91. Further the copy of the invoice Exhibit- DD shows the 65
sale of Central American cotton equivalent to type Guatem ala. The Defenda nt s' consignment was of Mexican cotton and not Central American cotton. The Dock Document s showing the shipping as well as the cleara nce of the Defendant s' consignme nt also show Mexican raw cotton. The contract between the parties itself shows inter alia 85 bales of Mexican cotton to be imported and shipped to the Defenda nt s. No resale of Mexican cotton is shown. The tender notice shows separately a notice for Mexican cotton as well as Central American cotton. The 2 types are therefore, completely different. Sale of Central American cotton which is equivalent to Guatem ala cotton cannot be shown to contend that the Defenda n t s' consignmen t of Mexican cotton is sold under the said invoice. The evidence of the Plaintiffs' witness that this was the same cotton must, therefore, be rejected. However the Plaintiffs have contended that only 2 bales out of 85 bales of the Mexican cotton shipped to the Defendant s have been sold under this invoice. The Plaintiffs have claimed various charges under the particular s of claim also in respect of only 2 bales of Mexican cotton.
92. The consignme nt of Mexican cotton is shown to be cleared on 21 st July, 1978 as per the Dock Documen t s Exhibit- R (colly). The Defendant s' consignme nt is stated to 66
have been put up for auction under the Plaintiffs' tender notice issued on 24 th Ju ne, 1978 about a year after the clearance of the consignme nt. 2 bales out of this consignme nt only are sought to be resold under the invoice Exhibit- DD as per the oral evidence of the Plaintiffs' witness in paragrap h 29(i) of the examination- in- chief. There is no docume nt a ry evidence produced for the remaining bales of Mexican cotton sold by the Plaintiffs as per the oral evidence contained in paragrap h 29(iii) of the Plaintiffs' examination- in- chief.
93. The entire exercise and effort of the Plaintiffs in producing certain copies (office copies or xerox copies of certain other copies) produced by the Plaintiffs has gone only thus far. The consignme nt of Guatem ala cotton which was cleared in July, 1978 could never have been put up for tender in Ju ne, 1978. It is specifically shown in the letter dated 22 nd November, 1979 of the Plaintiffs Exhibit- FF that no Guatem ala cotton was sold until that date. Hence, the invoice Exhibit- AA is of no use to compute any damages suffered by the Plaintiffs for the consignme nt of the Guatem ala cotton. The invoice Exhibit- BB is seen to be not an admissible Documen t s as has emerged from the Plaintiffs' evidence which cannot be accepted as credible secondary evidence. The Plaintiffs' oral evidence of resale of 151 bales 67
under the invoice Exhibit- BB runs contrary to their letter dated 22 nd November, 1979. There is no Documen t for the other lot of 334 bales of Brazilian cotton. The Turkish cotton stated to be resold under the invoice Exhibit- CC also cannot be that of the Defenda nt s as the consignme nt of Turkish cotton was cleared on 21 st July, 1978 and hence the tender notice of 24 th Ju ne 1978 could not have had the Defenda nt s' consignme nt put up for resale. Even 2 bales of Mexican cotton are not shown to have been resold under the invoice Exhibit- DD since that shows resale of Central American cotton which is distinct from Mexican cotton. The resale value sought to be shown by the Plaintiffs remains at that.
94. The Plaintiffs are required to prove the trut h of the contract s of the invoices. The Plaintiffs have sought to prove the trut h of the content s of the invoices by secondary evidence. If secondary evidence is successfully led, as per the provisions of the Law of Evidence in this behalf, cited above, the document s can be taken to be proved. If proved, their content s can be considered in evidence. Such consideration in this case would be to show mitigation of the damages incurred by the Plaintiffs.
95. Mitigation of damages in a suit for recovery of the loss suffered upon the default of the Defendan t s in accepting 68
delivery of the goods is imperative. The resale is required to be made within a reasona ble period. What is reasona ble period has been laid down in a num ber of cases.
96. In the case of Harichand and Co., Vs. Gosho Kabushiki Kaisha Ltd., A.I.R. 192 5 Bombay 28 , which was also a case of sale of bales (presum a bly cotton) for comput a tion of damages for the breach of contract, a period of 3 mont hs taken by the Plaintiffs for resale of the goods between 5 th February, 1921 when the goods arrived and 29 th May, 1821 when the goods were sold was taken to be unreason a ble delay. It was observed that since it was the Plaintiffs' duty to take all reasona ble steps to mitigate the damages the Plaintiffs' Solicitor's notice of 26 th April to resell the goods unless the Defenda nt s took the bales within 2 days was itself held to be delayed without sufficient justification. It was seen that the market prices were falling and hence there should not have been such delay.
97. In the case of M/s Hirji Bharmal Vs. Bombay Cotton Ltd., A.I.R. 195 8 Bombay 411 Justice Chagla, as he then was, held that even 5 days that elapsed for resale of the goods was unreason a ble. That was a case of resale of cotton which was observed to be an extremely marketable commodity for which there would not be slightest difficulty 69
in resale. In that case the notice of sale was given on 22 nd May, 1953. Purs u a n t to the notice, the right to resale arose 5 days after 7 th July, 1953 viz. 12 th July, 1953. It was held that the goods should have been sold on 15 th July, 1953 and that having not been done, there was an unreaso n a ble delay in the sale. Hence, though the claim for damages was rejected carrying charges claimed by the Plaintiffs were granted up to 15 th July, 1953 (paragrap h 21) which was stated to be the proper date for considering the damages to which the Plaintiffs were entitled.
98. In the case of Nikku Mal-Sardari Mal Vs. Gur Parshad & Brothers, A.I.R . 193 1 Lahor 714 delay of more than a year was held unreaso n a ble and in the case of Mysore Sugar Co. Ltd. Vs. Manohar Metal Industries, A.I.R . 19 8 2 Karnataka 283 delay of 3 mont hs was considered to be long delay though the goods to be resold were copper scraps and ingots which are not perishable.
99. Mexican cotton was cleared on 29 th August 1977. Brazilian cotton was cleared on 19 th Jan u a ry 1978. Turkish cotton was cleared on 21 st July 1978. The date of clearance of the consignme nt of Guatem ala cotton is not known. The goods are stated to have been resold (though not proved to have been resold) on 5 th December 1978, 11 th September 70
1979, 13 th Febru ary 1980 and 5 th May 1980 respectively. Each of these sales is too far delayed. The Plaintiffs cannot be held entitled to damages upon the Defendant s' default since they have not shown mitigation of such damages by expedient resale i.e. Within a reason able period, given the fact that cotton is a perishable as well as a highly marketa ble commodity. The fact that the Plaintiffs are the Governme nt undert a ki ng and hence they collected the consignme nt s of various defaulting importers and put them up for auction after which they sold by private treaty cannot give the Plaintiffs time much further than what would be reasona ble time depende nt upon market situation for mitigation of their damages. Though the Plaintiffs would be entitled to some more time for the additional requirement of conducting a public auction before sale by private treaty, the Plaintiffs' acts to that end and the time consu me d in that exercise would require to be seen.
100. The Plaintiffs have contended that after all the consignmen t s were cleared they sought to put it up under the aforesaid 2 tender notices dated 24 th Ju ne 1978 and 2 nd September 1978. Thereafter on 4 different dates beginning 5 th December 1978 the Plaintiffs have resold inter alia the Defendan t s' consignme nt s ( though the resale has not been proved as aforesaid). It may be stated that the 71
initial copy of the tender notice produced by the Plaintiffs show it to be. "The Foreign Godow n Tender No.2" relating to "sale of impor t e d read y global cotton" . The Plaintiffs have not produced the tender notice shown to be tender No.1. The second tender notice produced by the Plaintiffs is titled "Foreign Godow n Tender No.3" relating to "Sale of impor t e d rea d y global godo w n" . It is seen that 2 of the 4 consignme nt s of the Defenda nt s were cleared after the first of the aforesaid 2 tender notices and hence could not have been a part of that notice. The second tender notice does not show Turkish cotton being put up for sale. Hence the consignme nt of Turkish cotton is not even put up under the second tender notice. Mr. Sancheti drew my attention to the fact, that there are no goods available at Cochin Port where the Defendant s' consignme nt s had arrived, which were put up for auction under the second tender notice. Hence the Defenda nt s' consignme nt if at all were only put up for auction under the first tender notice. This would apply at best to the remaining 2 of the 4 consignme n t s viz: Brazilian cotton and Mexican cotton. Mexican cotton is not shown to be resold; instead Central American cotton is shown to be resold. Brazilian cotton shown to be resold in 2 lots of which the invoice Exhibit- BB, which is for one of them, is shown to be resold 18 months after the consignme nt was cleared. Even the part of the Brazilian cotton so resold is after an 72
unreason a ble delay.
101. The Plaintiffs' case of resale fails on numero u s grounds aforesaid. The Plaintiffs have not even shown the market price of the goods rejected by the Defenda nt s for which damages are claimed soon after the date of the defaults. Cotton was in short supply and hence was an essential commodity under the Essential Commodities Act sold under the cotton control order issued under the notification dated 13 th October, 1955 which was in force on the date of the shipment. There was, therefore, expected to be a high demand for the goods which were in short supply and regulated by the Governme n t. The Plaintiffs could have resold them immediately upon clearance. The Plaintiffs having failed to do that, they are dis- entitled from claiming any damages for the loss, if any, suffered by them upon resale, if any, of the Defendant s' consignme nt.
RECOVERY OF EXPENSES AND CHARGES:
102. It is seen that the Plaintiffs have not breached the contract by non- delivery of the goods. The Defendant s have breached the contract by non- acceptance of the goods i.e., by refusing to take delivery of the shipme nt which arrived in 73
India. It is also seen that there is no dispute with regard to the time of shipme nt of the consignment of the Guatem ala cotton and Mexican cottons. These shipme nt s admittedly arrived within the period of the shipmen t s mentioned in the contract. The consignment of Turkish cotton was delivered but one day after the shipment period and arrived on 26 th July, 1977. The consignmen t of Brazilian cotton was delayed by 12 days after the period of shipme nt and arrived in India on 21 st September, 1977. It is also seen that the Plaintiffs have sent the shipment advice as soon as the goods were shipped by the Foreign Exporters and before they arrived in Indian Port. The Plaintiffs have also raised the invoices which were sent under their forwarding letter to the Defenda nt s before the dates of the arrival of the shipment. It is further seen that the Defendan t s have had corresponde nce with their own Clearing Agents for directing them to take delivery of the shipme nt s and have sent their copies of the docume nt s to them to that end. It is seen that till 2nd August, 1977 the Plaintiffs were ready and willing to accept the shipment s and gave directions in that behalf to their Clearing Agents. It is only on and from 3 rd August 1977 that the Defenda nt s sought to commit default in clearing the shipment and informed their Clearing Agents to clear the shipment s and the next day on 4 th October 1977 requested the Plaintiffs to cancel the contract for the 4 reasons 74
mentioned therein. It is also seen that between the period of shipment and the request for cancellation of the contract the Defenda nt s had entered into another contract with an U.K. Party for export of Staple Fiber Fabrics, in which the entire infrastr uct u re including their labour was to be utilised. It is further seen that the Plaintiffs did not accept the cancellation of the contract at that late stage and called upon the Defenda nt s to clear the goods or bear the conseque nces of the contract by non- accepta nce as per their telegram s sent so soon as the Plaintiffs received the Defenda nt s' initial request for cancellation i.e., on 4th October 1977 itself and later on 19 th October 1977. It is also seen that the Plaintiffs sent the legal notice on 18 th November 1977 calling upon the Defenda nt s to perform their contract by retiring the Document s making payment and clearing the goods to avoid demurr age and other charges and also for claiming damages upon the Plaintiffs themselves taking delivery by clearing the goods and making the full payment. It is further seen that the Defendan t s sent the Plaintiffs' Clearing Agents copies of their Documen t s relating to the shipment of Guatem ala and Turkish cottons under their letter dated 4 th July, 1978 Exhibit- 10 . This letter has been received by the Plaintiffs' Clearing Agents on 6th July 1978. This enabled the Plaintiffs to clear the goods in the place and stead of the Defenda n t s. The Plaintiffs cleared 75
these goods on 21 st July 1978 within a fortnight of the docume nt s having been sent by the Defenda nt s. The Plaintiffs have produced Dock Docume nt s showing clearance of the consignmen t of the Turkish cotton. It is argued on behalf of the Plaintiffs that since the Document s relating to the consignment s of Guatem ala as well as Turkish cotton were sent to the Plaintiffs Clearing Agents by the Defendan t s together on 6 th July 1978 both the consignmen t s were cleared together on the same day i.e., on 21 st July 1978.
103. Having had prior experience of the Defenda nt s approach by non- accepta nce of the consignmen t, the Plaintiffs cleared the next 2 consignme n t s which arrived in India in the next 2 months i.e. August and September 1977 soon after the arrival of the consignme nt s. Conseque n tly the consignme nt of Mexican cotton which arrived on 26 th August 1977 was cleared by the Plaintiffs without involving the Defenda nt s, entering into further needless corresponde nce, issuing further legal notice or calling for the docume nt s of the Defenda nt s. It is pertinent to note that the Plaintiffs' letters to their own Clearing Agents dated 19 th July 1977 Exhibit- 1 and 3 rd August 1977 Exhibit- 11 are in respect of the consignmen t s of only Turkish and Guatem ala cottons. There is no corresponde nce between the Plaintiffs and the Defenda nt s as also between the Defenda nt s and their 76
Clearing Agents with regard to the consignmen t s of Mexican and Brazilian cottons which arrived in India later. Accordingly Plaintiffs acted more expeditiously and cleared the goods expeditiously after having had the initial experience of the Defenda nt s. The consignme nt of the Mexican cotton arrived on 26 th August 1977 and was cleared by the Plaintiffs on 14 th September 1977. The consignme nt of Brazilian cotton which arrived in India on 21 st September 1977 was cleared by the Plaintiffs on 10 th Jan u a ry 1978.
104. Under Clause 4 of the agreement between the parties Exhibit- D and Exhibit- H the Defendan t s were to pay the price of the consignmen t s against the tender by the Plaintiffs of the bills of lading, insur a nce policy, invoice, delivery challans of the shipping company and other docume nt s. If the Defenda nt s failed to pay such price, under clause 5 of the aforesaid contracts the Plaintiffs were entitled to clear the goods and take delivery of the goods at the cost of the Defenda nt s. The cost and expenses that Plaintiffs incurred would be the demurr age, insura n ce charges and all taxes as applicable made out in the Dock Document s.
105. The fact of clearance of goods by the Plaintiffs is not denied. The dates of cleara nce are reflected in the Dock Document s Exhibits- R, S and T (colly). The initial clearing 77
on 21 st July 1978 of the Turkish and Guatemala cottons is after the initial request s and commu nications contained in the telegrams Exhibit- U (colly) and the corresponde nce between the Advocates upon the Plaintiffs' legal notice Exhibit- V (colly). The clearance of the Document s of the last 2 consignmen t s is rather expeditious.
106. The Plaintiffs have relied upon docume n t s of the Cochin Port Trust and the Bombay Port Trust (in view of one consignme nt having erroneously arrived in Bombay and later arra nged to be shipped to Cochin) to show the expenses incurred by them by way of demurr age, insura nce, fumigation charges and other charges whilst the goods remained in the Dock upon failure of the Defenda nt s to take delivery despite repeated request s in writing. The Plaintiffs have produced docume nt s with regard to three of the consignme nt s. The Plaintiffs have failed to produce the docume n t s with regard to one consignment. The expenses incurred by the Plaintiffs for demurr age etc. cannot be presu me d or imagined. The Plaintiffs would be entitled to recovery of the precise total amou nt shown to be incurred by them under the docume nt s. Such Dock documen t s are specified in Item- 3 of Part- II of the Schedule to the Commercial Documen t s Evidence Act, 1939, which raises a presu m p tion of genuinene s s of those docume nt s. These document s have not been disputed or 78
countered. The docume nt s are produced in evidence as Exhibits R, S and T (collectively). The Plaintiffs had warned the Defenda nt s by their telegram dated 19.10.1977, part of Exhibit- U (collectively), to lift the goods, for failure of which all conseque nces would be on account of the Defenda nt s. The Plaintiffs have given notice to the Defenda nt s that they would clear the goods at the risks and costs of the Defendan t s under their Attorney's Notice dated 14 th Jan u a ry 1978, part of Exhibit- V (collectively). Hence the Plaintiffs are entitled to the receipt of the amoun t spent by them under such Dock docume nt s as soon as those expenses were incurred by the Plaintiffs to clear the goods which was seminal liability of the Defenda nt s.
107. Under Clause- 17 of the suit contracts, the Defenda nt s are liable for payment of interest charges in addition to the charges and expenses incurred by the Plaintiffs for insura nce, demurr age, taxes, etc. Since the contract u al rate of interest is specified and is payable upon failure to take delivery of the shipping docume nt s or the delivery order and to effect payment under Clauses- 17 of the suit contracts, the liability towards payment of interest also commences from the date of the breach itself at the rate specified in the contract.
108. It is argued on behalf of the Defenda nt s that there 79
would be no interest payable in a suit for damages prior to the filing of the Suit. Though this broad stateme nt would be correct in the case of comput a tion of damages suffered by a party eg., loss caused by breach of contract or damages for mental agony, it would not apply in case of damages which are really by way of recovery of actual expenses incurred after notifying the Defenda nt s of the likely breach of the conseque nces. The damages incurred is per se would require an action to be filed forthwith. Expenses incurred can be recovered in an action filed within the period of limitation. This is more so where a legal notice in that behalf has been issued claiming interest at a specified amou nt warning the Defenda nt s of the consequences.
109. Mr. Sancheti has drawn my attention to the Supreme Court judgment in the case of M/s. Mahabir Prashad Rungta Vs. Durga Datt AIR 196 1 S.C. 990 in which there is a passing reference with regard to the claim of interest on page 646 thus :-
"Learne d counsel for Durga Dat t clai m e d
intere s t as da m a g e s but it is well set t l e d tha t intere s t as da m a g e s canno t be aw a r d e d ."
110. This case has been followed in the case of Andard Mount (London) Ltd. Vs. Curewel (India) Ltd., A.I.R. 198 5 80
Delhi 45 in which also it has been held that interest cannot be allowed by way of damages. However, in that case there was no express contract between the parties regarding payment of interest. No mercantile usage to that end was seen. The damages which were claimed by the Plaintiffs was not for a certain amou nt so that the Interest Act did not apply. Hence it was held that ordinarily no interest was allowed on the amoun t of damages arising out of a breach of contract. The judgment in the case of Andard (Supra) considers other judgment s of the Appeal Court in the case of Chatha m & Dover Railway Co. Vs. South Eastern railway Co. 18 9 3 A.C.42 9 and B.N.Railway Co. Ltd. Vs. Ruttanji Ramji A.I.R. 19 3 8 P.C.67 . The former case was the case of damages for wrongful detention of debt and the latter was for payment of interest at a fixed rate which was held payable under the Interest Act, 32 of 1839.
111. In this case the Plaintiffs are entitled to the expenses incurred by them for clearing the goods under the Dock Documen t s. The Plaintiffs are entitled to claim that amou nt within a period of 3 years. The Plaintiffs have given notice to the Defenda nt s to clear the goods which the Defenda nt s have failed to heed. The Plaintiffs have sent telegrams in that behalf. Thereafter, the Plaintiffs have given legal notice, warning the Defenda nt s that they would clear the goods upon 81
incurring the expenses, the consequences of which the Defenda nt s will have to bear and claiming interest on the expenses incurred by them at the rate specifically notified. The Defendant s are bound to make payment of the clearing charges incurred by the Plaintiffs. The immediate conseque nces of failure to pay such expenses, as is specifically incurred by the Plaintiffs being a liquidated amount, attracts payment of interest thereon. Such claim of the Plaintiffs is essentially for recovery of the expenses and not only the damages suffered by the Plaintiffs which ordinarily does not carry interest. Besides the contract u al rate of interest precisely for these charges and expenses is fixed under Clause 17, and the Defenda n t s, therefore, are taken to have agreed to pay interest at that rate if the charges are incurred by the Plaintiffs upon the Plaintiffs being constrai ned to incur them for clearing the goods upon the Defenda n t s' breach by non- accepta nce of the goods. The Plaintiffs are, therefore, entitled to recover all the charges incurred by them along with interest thereon at the contract u al rate from the date of clearance of the goods till the filing of the Suit and thereafter under Section 34 of the C.P.C from the filing of the Suit till realisation.
112. Upon clearance of the goods the Plaintiffs would be constrained to store the goods in any godown. It, therefore, follows as a matter of corollary that the charges and expenses 82
incurred by the Plaintiffs, for such storage would also be recoverable by the Plaintiffs. Under clause 13 of the contract Exhibits- D & H the Plaintiffs would be entitled to carrying charges at 2½ % per 30 days from the date of the arrival of the steamer after the Defenda nt s fail to make payment s and take delivery of the goods immediately on arrival. That having admittedly not been done, the Plaintiffs would be entitled to such carrying charges at the contract u al rate for the reasona ble period after the goods were cleared to enable the Plaintiffs to sell the goods to mitigate the damages and claim the loss from the Defenda n t s.
113. Drawing an analogy from the Division Bench judgment in the case of Hirji Bharmal (supra) carrying charges, as granted by Ju stice Chagla in that case are required to be granted to the Plaintiffs for a reason able period after the goods were cleared. Given the fact that the Plaintiffs are the Governme nt Agency, judicial notice is required to be taken of the fact that the Officers of the Plaintiffs are required to follow reasona ble procedure for sale initially by public auction, and following it for sale by private treaty. This, therefore, would not take as short a time as was expected from the private party in the case of Hirji Bharmal (supra). Mr.Rajesh Shah's contention that the Plaintiffs are expected to collect the goods of all such defaulting importers to put them up for public 83
auction stands to reason and can be accepted. A period of one month of storage of goods would be a reasona ble period expected of the Plaintiffs before they resell the Defenda nt s' consignme nt along with the consignmen t s of the other similar defaulting importers.
Hence, though the Plaintiffs would not be entitled to the price of goods less the resale price by mitigation of damages caused to them, they would be entitled to the expenses incurred by them for clearance of the goods with interest thereon as also the carrying charges for the storage of the goods. Issue Nos.(4) & (5) are answered accordingly.
114. Hence the following order:
The Suit is decreed in a sum of Rs.12,43,482.31 made up off carrying charges at the rate of 2.5% per month for 30 days on the value of the invoices, aggregating to Rs.48934.79 , shipping and fumigation charges shown in the documen t s, Exhibits R, S and T (collectively) of Rs.152440. 78 with contract u al interest at the rate of 20% per ann u m on monthly rest basis from the dates of these docume nt s until 3.10.1980 being the date of the Suit, aggregating to Rs.152862.27 and further interest at the rate of 12% per ann u m from the date of the Suit until the date of the judgment i.e. 15.12.2008, 84
aggregating to Rs.804199.23 . The Defendan t s shall pay further interest at the rate of 12% per ann u m from the date of the judgment until payment / r e alization.
115. No order as to costs.
116. The original documen t s shall be returned to the respective parties who produced them.
(SMT.ROSHAN DALVI, J.)