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Kanhaiyalal v. Kasturchand
Factual and Procedural Background
The plaintiff and defendant entered into an agreement on 1-3-1954 for the sale and purchase of ten bags of tobacco from Gujrat at Rs. 160 per maund, to be delivered at Ujjain. The plaintiff arranged to import the tobacco, which was received at Ujjain on 3-5-1954. The plaintiff sent a telegraphic notice to the defendant to take delivery within 24 hours, warning that failure to do so would lead to resale at the defendant's risk. The defendant did not take delivery, and the plaintiff resold the goods on 8-5-1954 at Rs. 120 per maund, claiming a loss of Rs. 470-0-6 and filed suit to recover this amount. The defendants denied the contract, receipt of goods, and the resale, and alleged they had cancelled the contract due to the plaintiff's failure to supply goods within a reasonable time. The trial court found the contract proved, held the defendants had no right to cancel, and awarded damages to the plaintiff. The defendants filed this revision application challenging the decree.
Legal Issues Presented
- Whether the contract was for ten bales of tobacco as claimed by the plaintiff, given the original agreement's silence on quantity.
- Whether Section 54 of the Sale of Goods Act applies to the case, particularly regarding the requirements for resale and recovery of damages.
- Whether the plaintiff was entitled to damages based on the resale of goods.
Arguments of the Parties
Defendant's Arguments
- The agreement dated 1-3-1954 was silent on the number of bales to be purchased, thus the trial court erred in awarding damages based on ten bales.
- Section 54 of the Sale of Goods Act does not apply, and there is no basis for awarding damages claimed by the plaintiff.
- Denied the alleged contract, receipt of goods, and the resale.
- Alleged cancellation of contract due to plaintiff's failure to supply goods within reasonable time, causing loss to defendants.
Plaintiff's Arguments
- Oral evidence and a notice (Ex. P/6) support that the contract was for ten bales.
- Claimed damages based on resale under Section 54(2) of the Sale of Goods Act.
- Sent telegraphic notice to defendant to take delivery, warning of resale and liability for loss.
- Argued for normal damages based on difference between contract price and resale price.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court examined the evidence and found the oral statement by the plaintiff supported by notice Ex. P/6 sufficient to establish the contract for ten bales of tobacco, making it a factual finding not to be disturbed.
The court then analyzed the applicability of Section 54(2) of the Sale of Goods Act, which requires that property in goods must have passed to the buyer, goods be in possession of the unpaid seller, the buyer fail to pay or tender price within reasonable time after notice, and resale occur within reasonable time after notice.
It found these conditions unmet: the contract was not for specific ascertained goods at the time of agreement, the plaintiff was not in possession of the goods but had to import them, and there was no appropriation of goods to the contract. The notice sent (Ex. P/3) was a call to take delivery, not a notice to pay or tender price within reasonable time as required under Section 54(2).
Since ownership had not passed and the statutory notice requirements were not met, Section 54 was inapplicable, and the resale was not binding on the defendants. Consequently, the defendants could not be held liable for the plaintiff’s loss on resale.
The court also rejected the claim for normal damages due to lack of proof of the difference between contract and prevailing market rates on the date of breach.
Accordingly, the court set aside the trial court's decree and dismissed the plaintiff's suit, ordering parties to bear their own costs.
Holding and Implications
The court's final decision was to ALLOW THE REVISION and SET ASIDE THE TRIAL COURT'S DECREE, dismissing the plaintiff’s suit against the defendants.
The direct effect is that the plaintiff cannot recover damages based on the resale under Section 54 of the Sale of Goods Act or on normal damages due to insufficient proof. The decision does not establish a new legal precedent but clarifies the strict conditions under Section 54 for resale and damages in sale of goods contracts.
1. This revision application is filed by the defendant against a decree passed by the Small Cause. Judge Ujjain.
2. The plaintiff's case briefly stated is that on 1-3-1954 the defendant (petitioner) entered into an agreement to purchase from him ten bags of tobacco from Gujrat at the rate of Rs. 160 per maund. It was provided in the agreement that the tobacco would be imported from Gujrat and delivered to the buyer at Ujjain. It is alleged in the plaint that pursuant to this agreement the plaintiff arranged to purchase and import tobacco to Ujjain. According to the plaint the bags of tobacco were despatched from Virsaad Railway Station and the consignment was actually received at Ujjain on 3-5-1954.
3. It is further alleged that on the same day the plaintiff sent a telegraphic notice to the defendant asking him to take delivery within 24 hours and intimating to him that in case he failed to take delivery, the goods would be sold at his risk; that the defendant did not take delivery and the plaintiff re-sold the goods on 8-5-1954 at the rate of Rs. 120 per maund. The plaintiff has contended that in the resale he suffered a loss of Rs. 470-0-6 and has filed this suit for recovering this sum with incidental charges.
4. The defendants denied the claim. They denied the alleged contract and the receipt of goods at Ujjain on 3-5-1954. They admitted having received intimation from the plaintiff to take delivery but averred that as there was no subsisting contract to be performed, there was no question of taking delivery. The defendants denied the re-sale and all knowledge about it.
5. In their special pleadings, the defendants further alleged that the plaintiff had failed to supply goods within 15 days, which was a reasonable time for doing so, and therefore the defendants cancelled the contract by their letter dated 30th March 1954 and by subsequent telegraphic notice on 31-3-1954. The defendants alleged that by reason of the plaintiffs default in supplying the goods within time, they themselves were put to a loss amounting to Rs. 300.
6. The trial Court recorded evidence which the parties tendered and ultimately decreed the plaintiff's claim. It held that the contract as alleged by the plaintiff was proved; that the defendants had no right to cancel it and it was therefore binding on them. The trial Court also held that the plaintiff had proved re-sale and the damages sustained by him. Aggrieved by this decree, the defendants have preferred this revision application.
7. Two contentions were raised by Mr. Oza, learned counsel for the petitioner. He firstly submitted that the agreement dated 1-3-1954 was silent as regards the number of bales to be purchased by the defendants and the trial Court had gone wrong in awarding damages to the plaintiff believing that the defendants had agreed to buy ten bales. Mr. Oza secondly contended that Section 54 of the Sale of Goods Act did not apply to this case and there was no basis for awarding damages claimed by the plaintiff.
8. It is true that the original contract dated 1-3-1954, copy of which is produced at Ex. P/1 is silent as regards the number of bales to be sold by the plaintiff and purchased by the defendants. But the plaintiff had stated in his evidence that four or five days after the written agreement was made, the defendant agreed to buy ten bales. This oral statement of the plaintiff is supported by the notice Ex. P/6 sent by him. The finding that the contract was for ten bales of tobacco is a finding of fact and I do not think there are any sufficient grounds to interfere with it in revision.
9. The second question is however important. The plaintiff has claimed damages on the basis of resale effected under the provisions of Section 54(2) of the Sale of Goods Act. In order to apply these provisions it is necessary (1) that the property in goods; sold should have passed on to the buyer; (2) that; the goods sold should be in actual possession of the unpaid seller; (3) that the buyer should have failed, to pay or tender the price within reasonable time from being called upon to do so; and (4) that the; goods should be resold within reasonable time from the date of the notice.
10. These conditions are not at all satisfied in the present case. In the first place the contract is not proved to be for specific ascertained goods. The agreement Ex. P/1 itself shows that on 1-3-1954 the plaintiff was not in possession of the goods and he had to import them in order to supply them to the defendants.
11. The plaintiff's witness Himmatlal has stated is his examination-in-chief that the plaintiff had received 23 bags of tobacco from Gujrat, out of which ten were intended to be given to the defendants. From this statement it is clear that not only there was no contract for specific ascertained goods, but the ten bags to be supplied to the defendants were also not ascertained and there was no appropriation of goods towards the contract in suit.
12. There is again no clear notice of resale as contemplated by Section 54 of the Sale of Goods Act. The notice on which reliance is placed on behalf of the plaintiff is Ex. P/3 which is a telegraphic-notice sent by the plaintiff to the defendants on 4-5-1954. Page: 170By this notice the defendants are informed that the goods have arrived and they have been asked to take delivery within 24 hours. It is no doubt stated in the notice that in case the defendants failed to taken delivery, the goods will be sold and the defendants will be held liable for damages and costs.
13. Under Section 54 of the Sale of Goods Act the unpaid seller must give a notice intimating to the buyer that if he does not within a reasonable time pay or tender the price, the goods will be re-sold and the loss arising from the re-sale would be recovered from him. The notice in the present case, by which the defendants are called upon to take delivery of the goods is therefore not a notice as required by S. 54(2).
14. As neither the ownership in the goods was transferred to the buyer on the date on which Ex. P/3 was served, nor did the notice call upon the buyer to pay or tender the price within reasonable time, S. 54 cannot be applied to this case. The resale is therefore not binding on the defendants, nor can they be held liable for the loss suffered by the plaintiff on account of it.
15. It was then urged on behalf of the plaintiff-opponent that normal damages may be awarded to the plaintiff. The basis on which normal damages can be awarded is the difference between the contract rate and the rate prevailing on the date of the breach, which in the present case was 5th May 1954, are not proved. Under the circumstances, I am of the opinion that the decree for damages as awarded by the trial Court cannot be supported. I set aside the decree passed by the lower Court and dismiss the plaintiff's suit as against both the defendants. In the circumstances of the case I have the parties to bear their own costs throughout.
16. Revision allowed.
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