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Civil Appeals Nos. 1 and 2 of 1980, decided on 21st May; 1986.
(On appeal from the judgment dated 7‑11‑1979, in R.F.A. No. 58 of 1976, of the Lahore High Court).
‑‑‑ S. 73‑Sale of Goods Act (III of 1930), Preamble, Ss. 2 (10) & 4 --Barter contract‑A contract executory on both sides‑Breach of con tract‑‑Damages‑Measures of‑"Sale", "barter" or "exchange" Implications of distinction.‑[Words and phrases].
The Sale of Goods Act, 1930 as such of its own force is not attracted to barter contracts because in its section 4 sale of goods has been defined as "a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price"; and according to section 2 (10) "price" means the money consideration for a sale of goods. As the consideration in a barter agreement is goods exchanged for goods on either side, obviously there is no monetary consideration involved. Thus, in Sale of Goods Act monetary consideration is the sine qua non in case of a sale of goods. Even in the English Jurisdiction the law on barter contracts is as yet undeveloped.
The implications of distinction between "sale" and "barter" or "exchange" have not been fully explored. It is of course clear that the Sale of Goods Act has no direct application to contracts of barter; exchange. There is reasonable agreement among the authorities that it not open to a disappointed party, who has parted with his own good without receiving the expected return, to sue for ,the value of the goods delivered as a price; his remedy is to claim unliquidated damages for non delivery of the goods promised in exchange or possibly to sue the other party in tort on the basis that the property in such goods has passed to him. Iv would seem, on principle, that be should be debarred from claiming a price even when the goods have beets valued for the purpose of the bargain, unless the transaction can be construed as two reciprocal sales, or a sale with a subsidiary agreement for payment in kind. He may, however, claim a liquidated sum when this is agreed to be paid as, part of the exchange, or when, after goods have been exchanged for goods on a running account a cash balance is agreed to be due.
The law relating to contracts of exchange or barter is undeveloped but the Courts seem inclined to deal with such a contract as analogous to two contracts of sale, although the statutes relating to sales would have no application to a transaction by way of barter.
In contracts which are executory on both sides, where one of the parties refuses to perform or puts it out of his power to perform, the other party may, if there is no default on his part, recover substantial damages, but damages which are not within the contemplation of both parties at the time the contract is made, as a probable result of the breach, are not usually recoverable. The measure of damages is the difference in value between the respective properties which are to be exchanged less any liens on such property. As a general rule the value at the time of the breach will govern, and the actual value and not the price named in the contract will govern where it appears that the price was specified merely for trading purposes, but where property is to be taken on the exchange at a fixed price such price will be considered in determining the damages.
Exchange of property is distinguishable from sale of property but the rights and liabilities of the parties to the transaction are governed by the rules and principles applicable to ordinary sales. Also in case of breach of such a contract the rules of law of contract control the determination of the question of breach and performance thereof.
The damages recoverable for breach of an executory contract for the exchange of property are determined by the general principle of compensa tion for the natural and proximate consequences of the breach. When one of the parties to a contract for the exchange of real property causes a breach before the property upon either side is transferred, the other party is entitled to recover the difference in value between the property he was to convey and that which he was to receive, and a like rule applies to contracts for the exchange of personality.
The distinction as regards the measure of damages between cases of sale and exchange of goods is that while, on breach of contract for sale of goods prima facie the measure of damages for non‑acceptance or non- delivery is the estimated loss directly or naturally resulting in the ordinary course of events from the breach. In such cases where there is an available market the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been accepted or delivered. On the other hand, as there is no money price involved in the transaction of barter or exchange, the measure of damages for non‑delivery of goods promised in exchange would be the difference in value between the goods the aggrieved party was to convey and those he was to receive. This seems to be on principle to be a rational and just rule of law applicable in such cases.
It is no doubt correct that the plaintiffs could recover compensation for loss which arose in usual course of things but the measure of damages in a case like this would not be relatable to the date of contract.
The correct measure applicable would be the difference between the value of the goods the aggrieved party had to receive and those he had to part with in exchange at the date of the breach of contract. Compensation for loss or damage for, breach of contract which a party to the contract is entitled to receive from the party who has broken the contract is governed by section 73 of the Contract Act. The general rule as to damages is con tained in this section and this provision of law is declaratory of the right to damages arising out of the breach of contract. A barter agreement is also a contract and hence its breach obviously at racts this provision of law. This section also prescribed the method of assessing the compensation due to an aggrieved party. Such compensation is recoverable for loss and damage as was caused to the aggrieved party by the alleged breach and which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be. likely to result from the breach. Remote or indirect damages are not to be taken into account. Therefore, it follows that the amount of damages recoverable is, as a general rule governed by the extent of the actual damages sustained in consequence of the defendant's act. In cases admitting of proof of such damages the amount must be established with reasonable certainty. This does not mean that absolute certainty is required. Nor in all cases is there necessity for direct evidence as to the amount.
Benjamin on Sale of Goods, 1974 Edn., p. 29 ; Corpus Juris Sacundum, Vol. 33, p. 14 and American. Jurisprudence, Vol. 52 quoted.
‑‑‑ S. 73‑Barter contract‑Breach‑Loss sustained by party as a result of breach by other‑Onus would be on plaintiff to establish by evidence‑ the difference between value of his goods that he had to supply and value of goods that he bad to receive in exchange at date of breach.
--S. 73‑Barter contract‑Breach‑Damages‑Measure of Evidence to be relied upon where market price at date of beach by seller .was not available.
Where normal proof of the market price at the date of the seller's breach is not available, other evidence may be relied upon, e.g the price at which a sub‑buyer had agreed to take the goods from the buyer, or the price in an offer to buy from a third party, or the amount paid by the buyer in compromising disputes relating to the market value of similar goods at the relevant time. But the price Under a sub‑sale with a different place of delivery from that in the sale may not be sufficient evidence of the market price relevant to the sale nor will the price under .the sub‑sale be relevant if its terms were different from those in the sale.
If there was no available market for goods of the contractual descrip tion at the time and place of the seller's failure to deliver (e.g. because the goods were to be specially manufactured) the buyer's damages must be assessed under the general rule. The measure of damages is the estimated loss directly and naturally resulting. in the ordinary course of events, from the seller's breach of contract. The 'assessment must be made on the basis of the value of the contract goods at the time and place of the breach, which may be ascertained by any relevant evidence, such as the cost of the nearest equivalent, of a resale price, or the profits which the buyer would have made had he acquired the goods and manufactured them into other articles, as the seller knew that he intended to do. Offers made to the plaintiff for resale of the goods can, therefore, be taken as valid basis for ascertainment of the value of the goods.
The age of the goods and any deterioration affecting their value is out of consideration. This tends to take back the present value of the goods to correspond with the book value.
‑‑ S. 73‑Barter contract.‑Breach‑Damages‑Measure of‑Loss or damage recoverable for breach of contract is the one which naturally arose to usual course of things from such breach or which the parties knew when they made contract to be likely to result from the breach of it.
‑‑‑ S. 73‑Barter contract‑Breach‑Damages‑Measure of‑Princi ples to be followed where there was no available market to ascertain price of goods at relevant time for type of goods involved in case.
If there was no available market at the time of the breach, it may in some circumstances be permissible to look at sub‑contracts, but usually the main rule must be relied on viz., the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's (or seller') breach of contract.
Loss of profit on a resale is recoverable by the buyer upon the seller's default only if the seller knew that the buyer would (or would probably) resell; normally if there: is a market, such profit will not be allowed, since the buyer should buy in the market in order to fulfil his resale obligation.
The evidence of sub‑sales produced by the plaintiffs as to market price of the goods in absence of available market for the goods of the description under the contract, furnishes a valid basis for determining the quantum of damages.
S. 73‑Barter contract‑Breach‑Damages‑Measure of‑Know ledge of defendant that breach must necessarily result in loss Proof‑Doctrine of imputed knowledge as against actual knowledge.
In order to make a particular loss recoverable, it was not necessary to prove that upon a given state of knowledge the defendant could, as a reasonable man, foresee that a breach must necessarily result in that loss. It is enough if he could foresee it was likely so to result. This is the doctrine of imputed knowledge as against actual knowledge.
"What reasonable businessmen must be taken to have contemplated as the natural and probable result if the contract was broken. As reason able businessmen, each must be taken to understand the ordinary practices and exigencies of the other's, trade or business". The defendant's know ledge of the type of business conducted by the plaintiff may be a ground for imputing knowledge.
Hadley v. Baxendale (1854) 9 Exch. 341; Victoria Laundry (Windsor) Ltd. v. Newman Industries, Ltd. (1949) 2 K B 528 ; Chitty on Contracts and Patric v. Russo‑British (grain Export Co. (1927) 2 KB 535 ref.
---S. 73‑ Barter contract‑Breach.‑--Damages‑Measure of ‑ No available market for goods of the kind involved in the contract‑ , Effect.
Where a seller of goods fails to deliver, he should pay to the buyer the value of the goods at the time when they should have been delivered. This is the normal measure of damages. If at the date of the breach there is an open market for goods of that kind, then the market price is obviously the value to the buyer. If there is no market the value must be otherwise ascertained, and a resale price may be some evidence of such value.
------S. 73‑Barter contract‑Breach‑Damages‑Measure of‑Doctrine of imputed knowledge‑Application of.
--------S.73‑Contract between Government and private party‑Vali dity‑Official document‑In absence of any evidence to the contrary official document is sufficient to prove that contract was duly sanc tioned and approved, for presumption in law was that official document was issued in official course of business.
----S.73 Civil Procedure Code (V of 1908), S. 34‑Barter contract Breach‑Damages‑Measure of‑Interest on damages.
Generally in the absence of an express or implied contract to pay interest, or usage of trade interest cannot be allowed on damages for breach of contract.
Under section 34, C. P. C grant of pendente lite interest is within the discretion of the Court.
‑‑ Ss. 34 & 96‑‑Contract Act (IX of 1872), S. 73‑‑Contract‑Breach‑ Damages‑Interest ‑ Appellate Court, held, would not ordinarily interfere in exercise of discretion by lower Court in matter of interest.
‑‑ S. 73‑Contract‑Breach‑Damages ‑ Interest‑Contract between Government and private party‑Government though repudiated con tract by denying its liability but did not cancel same‑Fraud and collusion was pleaded for the first time in written statement although much correspondence was exchanged between parties before case came to Court‑No evidence was led at trial in support of allega tions of fraud and collusion and Courts below concurrently held against Government ‑ Suit remained pending for about 12 years before it could be decided‑Since claim of plaintiffs date of suit was for an unascertained sum, as damages for breach of contract, which had to be determined by Court, there would. held, be no justification to burden Government with payment of interest when they did not know what their liability in terms of money as principal amount towards damages was‑Once Court determined a sum certain and passed a decree, plaintiff being deprived of amount due and payable to them on that date, was required to be compensated by award of interest.
Fakhruddin G, Ebrahim, Senior Advocate Supreme Court, A. Hafeez Lakho, Advocate Supreme Court and Muhammad Afzal Siddiqi, Advocate- on‑Record for Appellant.
Maqbool Ahmad, Advocate Supreme Court and‑ Ch. Akhtar Ali, Advo cate‑on‑Record for Respondent.
Maqbool Ahmad, Advocate Supreme Court and Ch. Akhtar Ali, Advo cate‑on‑Record for Appellant.
Fakhruddin G. Ebrahim, Senior Advocate Supreme Court, Abdul Hafeez Lakho, Advocate Supreme Court and Muhammad Afzal Siddiqui. Advocate -on‑Record for Respondent:
Dates of hearing : 11th and 12th February, 1986.
These two appeals as of right are directed against the judgment, dated 7th November, 1979, by a Division Bench of the Lahore High Court and would accordingly be disposed of by this common judgment.
2. These appeals arise out of Suit No. 22/64 filed by M/s. A. Ismailjee & Sons Limited against the Government of Pakistan (hereinafter called the "Government") in the Court of the Senior Civil Judge, Rawalpindi. M/s. A. Ismailjee & Sons Limited whom we shall call the plaintiffs in this judgment, were at the ‑material time iron merchants doing their business at Rawalpindi City. According to them a stock of 14,85,886 Rft. of tubings, of two different descriptions owned by the Government was lying as an inactive item in rusty condition in waterlogged area at C.M.S.D., Lahore. The tubing was of two different diameters and proportions as under:
"(a) Tubings MS Victaulic
(grooved) ID 4" OD 4 " = 11,00,071 Rft.
(b) Tubings MS Victaulic
(grooved 2D 6" OD 6‑5' 8"= 385,815 Rft."
The Government wished to dispose of the said stock of tubings for which purpose they invited tenders. The plaintiffs submitted a tender offering to enter into a barter contract in return for the tubings with a supply of steel products. On 5th May, 1962, a written deed of agreement was signed and executed by the plaintiffs and the President of Pakistan through Brig. T.A. Wahadi, Director of Ordnance Services. It was stipulated in this contract that the plaintiffs were to receive the tubings as aforesaid and in exchange were to supply 3,333 tons of steel bars and angles, details and particulars of which were enumerated in the written agreement. The exchange of the total quantity was stipulated to he completed within one year from the date of the contract.
3. The Government delivered to the plaintiffs by August, 1962, the following quantity of goods
(1) 20,406.10 Rft. of 4" din and
(2) 24,330.4 Rft. of 6" dia
However, after this the supply was stopped. According to the plaintiffs a quantity of 29 Ions, 12 Cwt.,. 2 Qr. and 90 Lbs. of M. S. Bars supplied to the Government in excess under a previous contract was treated as supplies made under this contract. As far as the balance quantity is concerned, a substantial quantity was kept ready for inspection and several requests were made in writing for its inspection but the Government neither arranged for inspection of the goods nor accepted the delivery. Eventually finding no response from the Government, the plaintiffs called upon them to fulfil their contractual obligations by means of legal notice. Ultimately on 30th June, 1963, the Deputy Secretary to the Government of Pakistan addressed a letter to the plaintiffs stating that the Government was under no obligation to perform the contract, nor was it liable for damages claimed by the plaintiffs.
4. On 29th January, 1964, the plaintiffs filed a civil suit in the Court of the Senior Civil Judge, Rawalpindi, seeking specific performance of the contract and in the alternative for damages to the tune of the Rs. 70,00,000 with interest at the rate of 6 % per annum from the date of suit until rea lization. In the plaint the break up of the sum claimed as damages for breach of contract was itemwised as under:
"(i) Price of pipe line made of the said tubings joined with the said special couplings lying with the plaintiffs,‑
(a) 3,85,815 Rft @ Rs. 10 Rs. 38,58,150.00
per Rft. for 6" tubings.
11,00.071 Rft. @ Rs. 7 Rs.77,00,497.00
per Rft. for 4" tubings. ‑‑‑‑‑‑‑‑ --------
Rs. 1,15, 58,647.00
Price of the said special couplings
if disposed of in their present Rs. 13,40,000.00
state. ‑--------------‑‑‑
Difference : Rs. 1,02,18,647.00
Deduct value of Bars, flats
and angles that were to be Rs. 32,18,647.00
supplied by the plaintiffs
Net Loss of Profit. Rs. 70,00.000.00
(Rupees Seventy Lacs)."
5. The Government resisted the suit on the main plea that the alleged contract for exchange was invalid and not binding on the Government as the same was not entered into competently and with lawful authority. It was further pleaded that the contract for exchange of stores was the result of fraud and collusion between certain Officers of the Government and the plaintiffs particularly in view of the fact that the tubings far exceeded the value of the M.S. Bars and Angles which were to be supplied by the plain tiffs. After hearing the evidence of the parties on the issues framed, the trial Court decreed the suit for damages for a sum of Rs. 48,59,795 with 6% simple interest from 1st May, 1963, vide judgment and decree, dated 19th January, 1976: The trial Court on the issue of the validity of the contract of exchange, bold that on the documentary evidence it was established that sanction for execution of the contract was granted by the President and the Director of Ordnance Services, G.H.Q was authorized to sign the contract on behalf of the President of Pakistan. Accordingly since the contract was sanctioned and executed with proper and lawful authority, it was a valid contract binding on the Government. The plea of fraud and collusion was also repelled by the trial Court for want of evidence. On the evidence adduced before it the Court came to the conclusion that the Government of Pakistan was guilty of the breach of contract. As the goods undertaken by the Government to be supplied to the plaintiffs were already utilized and were not available for delivery, the Court held that the contract was not capable of specific performance. As to the quantum of damages the trial Court adopted the principle of difference in valuation of the goods that the plaintiffs were to receive and the goods that they were to supply on the date of the breach of the contract and worked out the loss suffered accor dingly. The relevant part of the trial Courts judgment dealing with this aspect is as under :‑
"The above statement shows general variations in the prices of goods, which were to be supplied by the plaintiff to the defendant. From the above figures I hold that on the average Rs. 975 per ton, was the price of M.S. Bars fiats and angles. Price of 3,333 tons, therefore, comes to Rs. 32.49675.
The plaintiff was to receive 11,00,071 Rft. of 4 inch tubings and 38,58,16 Rft. 6 inch tubings from the defendant under the said contract. Plaintiff has already received 20,406 Rft. of 4‑inch size tubings and 24,330 Rft. of 6‑inch tubings. Exh. P. 4, shows that the price of M.S. victaulic pipe of 8‑inch size was Rs. 19.50 per Rft. Exh. P. 11 shows that the price of 4‑inch din pipe was Rs. 7.75 per Rft. Exh. P.W. 1011 shows that the price of 6‑inch din of victaulic pipe was Its. 10 per Rft. However, these prices pertained to the new pipes and not to the old pipes. The pipes to be supplied by the defendant were admittedly very old. The price of old material cannot be equal to the price of new pipes. Considering the dates of transactions shown in Exh. P. 4, Exh. P. 11 and Exh. P. W. 1011, I come to the conclusion that the price pipes to be supplied by the defendant were as under :‑
4‑inch dia ‑ Rs. 5.00 per ft.
6‑inch dia ‑ Rs. 7.50 per ft.
The price of undelivered 4" din victaulic pipes comes to Rs. 53,98,325 (Rupees fifty‑three lacks ninety eight thousand three hundred and twenty‑five only). The price of undelivered 6" din tubings comes to Rs. 27,11,145 (Rupees twenty‑seven lacks eleven thousand one hundred and forty‑five only). Total price of undeli vered goods of the defendant comes to Rs. 81,09,470 (Rupees eighty‑one lac nine thousand four hundred and seventy only). The net loss suffered by the plaintif comes to Rs. 48,59,795 and the plaintiff is entitled to get this amount as damages."
6. Aggrieved by the judgment and decree passed by the trial Court the Government of Pakistan filed an appeal before the Lahore High Court, and raised two contentions it was first contended that the contract between the parties on which the suit was based was not validly executed and was otherwise collusive. The other contention was that as the plaintiffs did not part with the goods that they had to deliver to the Government but on the other hand had received 40,737 Rft. of tubings without paying for them, they had suffered no loss. The learned Judges who heard the appeal found no substance in both these contentions and held that the contract in suit was validly executed and was binding on the Government. They further held that the plaintiffs had suffered loss as a result of breach of contract on the part of the Government, However, after applying the principles laid down by section 73 of the Con tract Act, 1872, they did not agree with quantum of damages awarded by the trial Court. It was pointed out by them that in calculating the amount of loss sustained by the plaintiffs the trial Court had erred on two counts, Firstly in evaluating the goods of the Government, the Court had wrongly taken into consideration finished product which would have come into existence by providing finish and couplings etc. by the plaintiffs themselves. The correct principle to be applied was to evaluate the goods in the condition they were to be at the time of delivery, before the stage of the finished product ready for marketing was reached. Accordingly the learned Judges deducted the value of finishing and special couplings amounting to Rs. 13,40,000 from the total price of the goods determined at Rs. 81,09,470. The second error pointed out by the learned Judges was based upon the application of the rule contained in section 73 of the Contract Act, 1872, which provides that the compensation for any loss or damage caused to a party to the contract by breach, shall be such which "naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract to be likely to result from the breach of it". The learned Judges found on the evidence on record,, that the fact that the plaintiffs alone were in possession of the special couplings which were not available any where in the country, was not brought to the notice of the Government at the time of the contract. Therefore, the loss resulting from non‑delivery of unfinished goods, did not contemplate the special loss that resulted on account of the plaintiffs being deprived of enhanced value of the goods after the aforementioned finish and special couplings were applied to them. After pointing out these errors, the learned Judges took into consideration the fact that the tubings to be supplied by the Government were purchased in 1940 and were lying in stock until the year 1962 and the evidence disclosed that on account of non user and waste by weather conditions the value of the goods had deteriorated, On the other hand this deterioration in value was to be set off against the market price of the goods having gone up during this period. In view of all these' circumstances the learned Judges came to the conclusion that the reasonable price of the goods to be supplied by the Government would range between the value of the goods contracted to be supplied by the plaintiffs, viz. Rs. 32,18,647 and the book value of the goods owned by the Government, namely, Rs. 54,59,51.6. Of these two figures the learned Judges worked out the mean as Rs. 43,39,081 to be the fair and just price of the goods which were to be supplied by the Govern ment under the contract on the date of the contract. After reaching this figure the value of one unit of 4'' din tubing was worked out as Rs. 28,294 and that of 6' tubing at Rs. 31,791. Accordingly the total value of the goods supplied by the Government to the plaintiffs was assessed at Rs. 1,35,087.06. On this calculation the learned Judges found that the goods that remained to be supplied and in respect of which the Government had committed the breach of contract were worth Rs. 42,03,994. From this the value of the goods that the plaintiff had to supply to the Government amounting to Rs. 32,18,647 was deducted and the balance of Rs.9,85,347 was found to be the approximate loss suffered by the plaintiffs. Accordingly the learned Judges modified the quantum of damages and reduced it from Rs. 48,59,759 awarded by the trial Court to Rs. 9,85,347. On this simple interest at Rs. 6 % per annum from the date of decree until the realization of the amount was also awarded.
7. Mr. Fakhruddin G. Ebrahim learned counsel appearing for the appellants (plaintiffs) in Civil Appeal No. 1 of 1980 contended that the Court had erred in reducing the value of the goods to be supplied to the plaintiffs as determined by the trial Court. He raised no objection to the value fixed by the Court in respect of goods contracted to be supplied 'by the plaintiffs. The main emphasis by the learned counsel was placed upon the fact that in the written statement the Government itself had asserted that the value of the tubings to be supplied to the plaintiffs far exceeded their original book value of Rs. 54,59,516. The submission of the counsel was that although it is ordinarily expected that the value of such goods would have appreciated during the course of 20 years that the same were lying in stock but in any case the Court ought not to have reduced the value to less than the purchase price. In this connection learned counsel tried to seek support from document Exh. P. 22 which incorporated the arrange ment between the parties for release of goods to the plaintiffs against a bank guarantee of Rs. 5,00.000. It was pointed out that this arrangement also took into account the book value of the goods at a certain percentage to be adjusted against the bank guarantee.
8. Although no elaborate argument was addressed on either side as to the question of the real nature of a transaction of barter or exchange and the proper law applicable to cases of breach of such contracts, we consider it necessary to make some observations in this regard. The reason is to initiate the process for the development of law on the subject in this country, for it appears to us that while the law on the sale of goods has been codified in the form of a special statute known as the Sale of Goods Act, 1930, there is no such statute or case‑law to guide the Courts in respect of barter contracts. The Sale of Goods Act as such of its own force is not attracted to such contracts because in its section 4 sale of goods has been defined as "a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price"; and according to section 2 (10) "price" means the money consideration for a sale of goods. As the consideration in a barter Agreement is goods exchange for goods on either side, obviously there is no monetary consideration involved. Thus, in our law monetary consideration is the sine qua non in case of a sale of goods. Even in the English Jurisdiction the law on barter contracts is as yet undeveloped. Thus, Benjamin in his book on Sale of Goods (1974 Edition at page 29) has referred to the fluid state of law on this subject and emphasising the distinction between sale and barter or exchange observed ;
"The implications of this distinction have not been fully explored. It is of course clear that the Sale of Goods Act has no direct application to contracts of barter or exchange. There is reasonable agreement among the authorities that it is not open to a disappointed party. a who has parted with his own goods without receiving the expected return, to sue for the value of the goods delivered as a price ; his remedy is to claim unliquidated damages for non‑delivery of the goods promised in exchange or possibly to sue the other party intort on the basis that the property in such goods has passed to him. It would seem, on principle, that he should be debarred from claiming a price even when the goods have been valued for the purpose, of the bargain, unless the transaction can be construed as two reciprocal sales, or a sale with a subsidiary agreement for payment in kind. He may, however, claim a liquidated sum when this is agreed to be paid as part of the exchange, or when, after goods have been exchanged for goods on a running account a cash balance is agrees to be due." Halsbury's Laws of England in its commentary on the sale of goods has also stated that the law relating to contracts of exchange or barter is un developed but has pointed out that the Courts seem inclined to deal with such a contract as analogous to two contracts of sale, although the statutes relating to sales would have no application to a transaction by way of barter.
10. It seems that the law on the subject has developed to a much greater extent in the Courts of United States of America, dealing with various situations arising in respect of contracts of exchange or barter. The following extract from Corpus Juris Secondum (Vol. 33 at p. 14) is of particular significance for our present purposes:
"Contract executory on both sides. Where one of the parties refused to perform or puts it out of his power to perform, the other part may, if there is no default on his part, recover substantial damages, but damages which are not within the contemplation of both partie at the time the contract is made, as a probable result of the breach, are not usually recoverable The measure of damages is the difference in value between the respective properties which are to be exchanged less any liens on such property. As a general rule the value at the time of the breach will govern, and the actual value and not the price named in the contract will govern where it appears that the price was specified merely for trading purposes, but where property is to be taken on the exchange at a fixed price such price will be considered in determining the damages (emphasis provided)."
Similarly in the American Jurisprudence Volume 52, it has been observed that exchange of property is distinguishable for sale of property but the rights and liabilities of the parties to the transaction are governed by the rules and principles applicable to ordinary sales. Also in case of breach of such a contract the rules of law of contract control the determination of the question of breach and performance thereof. In paragraph 17 at page 742 the authors have made the following observations :‑
"The damages recoverable for breach of an executory contract for the exchange of property are determined by the general principle of compensation for the natural and proximate consequences of the breach. When one of the parties to a contract for the exchange of real property causes a breach before the property upon either side is transferred, the other party is entitled to recover the difference in value between the property he was to convey and that which he was to receive and a like rule applies to contracts for the exchange of if personality."
11. In the light of the above principles enunciated by the Courts in the aforesaid jurisdictions, the distinction as regards the measure of damages between cases of sale and exchange of goods seems to us to be this. While on breach of contract for sale of goods prima facie the measure of damages for non‑acceptance or non‑delivery is the estimated loss directly or naturally resulting in the ordinary course of events from the breach. In such cases where there is an available market the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the tam or times when they ought to have been accepted or delivered. On the other hand, as there is no money price involved in the transaction o barter or exchange. the measure of damages for non‑delivery of good promised in exchange would be the difference in value between the good the aggrieved party was to convey and those he was to receive. This seem to us on‑principle to be a rational and just rule of law applicable in sue: cases.
12. The learned Judges of the High Court while assessing the damages stated the rule of law applicable as under :‑
"The plaintiff could claim damages only for loss which arose in usual course of things'. This would require calculation of the value of the undelivered goods as those were at the time of contract."
It is no doubt correct that the plaintiffs could recover compensation for loss which arose in usual course of things but we do not agree with the High Court that the measure of damages in a case like this would relatable to the date of contract.‑ From the principles of law that govern the ascertainment of loss in cases of this nature as discussed to the foregoing part of this judgment, the correct measure applicable would the difference between the value of the goods the aggrieved party had to receive and those he had to part with in exchange at the date of the breach of contract. As rightly enunciated by the High Court compensa tion for loss or damage for breach of contract which a party to the contract is entitled to receive from the party who has broken the contract is governed by section 73 of the Contract Act. The general rule as to damages is contained in this section and this provision of law is declaratory of the right : to damages arising out of the breach of contract. A barter agreement is also a contract and hence its breach obviously attracts ibis provision of law. This section also prescribed the method of assessing the compensation due to an aggrieved party. Such compensation, is recoverable for loss and damage as was caused to the aggrieved party by the alleged breach and which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach Remote or indirect damages are not to be taken ant account. Therefore, it follows that the amount of damages recoverable is, as a general rule governed by the extent of the actual damage sustained in consequence of the defendant's act. In cases admitting of proof of such damages the amount must be established with reasonable certainty. This does not mean that absolute certainty is required. Nor in all cases is there necessity for direct evidence as to the amount.
13. Now the admitted position taken by the Government that the contract was repudiated as being one entered into without authority and not binding on it, clearly leads to the inference that if the contract was valid and binding, the breach occurred on the part of the Government. Therefore, in the light of the legal principles discussed above the next question is as to what is the extent of loss sustained by the plaintiffs as a result of the breach. In this regard the onus was on the plaintiffs for establish by evidence the difference between the value of their good that they had to supply and the value of the goods that they had to receive in exchange at the date of the breach. The Government admitted repudiated the contract on 12th April, 1963 which is the relevant date for this purpose. There could be no evidence of the actual loss sustained by the plaintiffs because admittedly the tubings which they had to receive were not available in Pakistan, so that they could have purchased the goods from the market which would have furnished concrete evidence of the value of the goods in order to work out the difference between the value of respective goods of the parties. The only other mode of proof of the goods available to the plaintiffs was the evidence of transactions they had entered into fur the sale of such goods with third parties. In this regard, as would appear from the judgment of‑ the trial Court the plaintiffs were able to prove that the market value of tubings of the size of 8'' dig was Rs. 19.50 per aft., the price of tubings 6'' dig was Rs. 10 per Rft. and the price of tubings of 4'' dig was Rs. 7.75. It must, however, be noted that these prices related to the tubings including the couplings. As the plaintiffs own case was that the tubings under the contract were lying in "an extremely rusted condition", the trial Court held that the aforesaid rates were for the good in brand new condition and therefore, the approximate market value of the goods that were in rusted condition would be Its. 5 and Rs. 7.50 per Rft. for the 4'' and 6'' dig tubings respectively. The Government made no attempt to repudiate this evidence as to the market pr ice of the disputed goods. The issue had, therefore, to be decided on unrebutted evidence produced in this behalf by the plaintiffs. It may be useful at this stage to refer to the relevant observations made by Benjamin in his book on sale of goods :‑
"Where normal proof of the market price at the date of the seller's breach is not available, other evidence may be relied upon, e.g. the price at which a sub‑buyer had agreed to take the goods from the buyer, or the price in an offer to buy from a third party, or the amount paid by the buyer in compromising disputes relating to the market value of similar goods at the relevant time. But the price under a sub‑sale with a different place of delivery from that in the sale may not be sufficient evidence of the market price relevant to the sale; nor will the price under the sub‑sale relevant if its terms were different from those in the sale."
The author has also commented on the situation where there is absence of an available market as under :‑
"If there was no available market for pods of the contractual descrip tion at the time and place of the teller's failure to deliver (e.g. because the goods were to be specially manufactured) the buyer's damages must be assessed under the general rule of section 51(2) The measure of damages is the estimated loss directly an naturally resulting, in the ordinary course of events, from the seller's breach of contract.' The assessment must be made on the basis of the value of the contract goods at the time and place of the breach, which may be ascertained by any relevant evidence, such as the cost of the nearest equivalent, or a resale price, or the profit which the buyer would have made had he acquired the goods and manufactured them into other articles, as the seller knew that he intended to do."
There is, therefore, authoritative support for taking the offers made to the plaintiffs for resale of the goods as the valid basis for ascertainment of the value of the goods. We need go no further in this question as no substantial argument was raised on the other side challenging this basis for determining the value of the goods that the plaintiffs had to receive on the date of the breach.
14. The only question that requires consideration is whether the two Courts below were right in determining the value of the goods to be supplied by the Government by taking into consideration the fact that the goods were rusted and not in brand new condition. It is for this reason that the trial Court having regard to the price of the tub ings disclosed in the evidence of the plaintiffs reduced the same in order to give allowance for the fact that they were not new. On the other hand the High Court was of the view that the appreciation of the value of the goods during the period of 20 years since their purchase by the Government would be set off by the deterioration resulting from non‑use and wastage by weather conditions. This appears to be just and reasonable method of determining the effect of factors mentioned. Therefore, the age of the goods and any deterioration affecting their value is out of consideration. This tends to take back the present value of the goods to correspond with the book value As already observed the High Court considered that the price established in the evidence led at the trial cannot be the basis for ascertaining the value of the goods because the said price related to the goods in the improved condition alongwith the couplings etc. and, therefore, the cost involved in manufacturing the finished goods by the plaintiffs after using the tubings, to be received by them under the contract, was to be, deducted from the price offered to them for such finished goods. Learned counsel for the plaintiffs does not dispute that the value of the couplings etc. is liable to be deducted from the price offered for the finished goods. However, as already mentioned his submission was that the High Court was not justified to reducing the value of the undelivered goods below the book value of the same. The High Court expressed the view that the plaintiffs were not entitled to the loss of profits that they would have received by mounting the special couplings to the tubings, as this fact was not proved to be within the knowledge of the Government. On purely legal plane this proposition is in accord with the principle recognized in section 73 of the Contract Act that the loss or damage recoverable for breach of contract is the one which naturally arose in the usual court of things from such breach or which the parties knew when they made the contract to be likely to result from the breach of it. The question therefore is whether in the facts of this case the Government could be deemed to have known that this loss of profit in respect of manufactured goods from the goods to be supplied to the plaintiffs, was likely to result in case they committed a breach of contract.
15. In so far as there was no available market of the type of goods involved in this case and the fact that the evidence led at the trial only indicates the market price of finished goods in which the goods under the contract were used, the case presents the difficult question of determining the reasonable price of the original goods to fix their value. The High Court resolved this difficulty by workings out the mean price between the value of the goods to be supplied by the plaintiff and the book value of the goods of the Government. In doing this the Court no doubt resorted to pure guess work and Ignored completely the evidence produced by the plaintiffs as regards the market price, which although not an exact measure of the value, as discussed above, did provide some tangible basis for reaching a conclusion as to the value of the goods. This is so because there appears no principle of law invoked by the High Court in adopting this mode of decision. The question is whether the High Court was right in resolving the issue by applying the rule of thumb in the circumstances of this case, or whether there exists any recognised principle of law postulated by the Courts to meet a situation like this Surely, this is not an unprecedented situation, as books do contain as to what principles to follow when there is no available market to ascertain the price of goods at the relevant time for the type of goods involved in a case. Thus, Chitty on Contracts (1961 Edition) at page 1360 observes:
"If there was no available market at the time of the breach, it ma in some circumstances be permissible to look at sub‑contracts, but usually the main rule must be relied on viz. the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's (or seller's) breach of contract'."
It is further stated:
"Loss of profit on a resale is recoverable by the buyer upon the seller's default only if the seller knew that the buyer would for would probably) resell ; normally if there is a market, such profit will not be allowed, since the buyer should buy in the market in order to fulfil his re‑sale obligation.
16. The learned Judges of the High Court refused to accept the evidence of re‑sale of goods produced by the plaintiffs, as they found that price established on record did not pertain to the goods comprising the tubings which were undertaken to be supplied to‑the plaintiffs, but related to improved version of goods after the plaintiffs mounted couplings in their own factory. They, therefore, thought that rule laid down in Hadley v. Boendale ((1854) 9 Exch 341) that damages not reasonably within the contemplation of the parties at the time they made the contract, as the probable result of breach, cannot be recovered was attracted in this case and according to the learned Judges the Government was not aware of the fact that the couplings were available with plaintiffs nor was this fact brought to the notice of the Government at the time of the contract. Therefore, the learned Judges proceeded on the basis of want of actual knowledge of the special circumstances which would have enabled the other party to the contract to use the goods by affixing the couplings and re‑sell such finished goods in the market. However, it may be stated that the rules laying down the measure of damages on the breach of a contract, as expounded in Hadley v. Boendale have been further restated and expanded in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. ((1949) 2 K B 528) in which it was laid down that "it suffices that, if he had considered the question, he would as a reasonable man have concluded that the loss in question was liable to result". It was also held that in order to make a particular loss recoverable, it was not necessary to prove that upon a given state of knowledge the defendant could, as a reasonable man, foresee that a breach must necessarily result in that loss. It is enough if he could foresee it was likely so to result. This is the doctrine of imputed knowledge as against actual knowledge. In this connection Chitty on Contracts refers to the test to determine the question o imputed knowledge as under:
"The test for imputed knowledge has been said by Lord Wright to be 'what reasonable businessmen must be taken to have contemplated as the natural and probable result if the contract was broken, As reasonable businessmen, each must be taken to understand the ordinary practices and exigencies of the other's trade or business.' The defendant's knowledge of the type of business conducted by then plaintiff may be a ground for imputing knowledge."
In the light of the principles discussed above it is not difficult to see that the learned Judges fell into an error in confining their consideration to actual knowledge of the consequences of breach by the Government. Now, in the present case, there is evidence on record that the Government was aware that the plaintiffs were iron merchants and looking to the nature of goods involved can at least be imputed the knowledge that the goods would be resold by the plaintiffs and not utilized as a melting material or scrap. Therefore. it is reasonable to hold that it was within the contempla tion of the parties that the breach of contract was likely to result in loss of profits to the plaintiffs that may accrue on re‑sale of the goods, parti cularly. when admittedly there was no available market for the type of contracted goods. In Patric v. Russo‑British Grain Export Co. ((1927) 2 K B 535), the buyers, merchants bought Russian wheat of a certain description for delivery on a named date, and before that date resold the wheat to a third party at a profit The sellers failed to deliver. On that date and subsequently there was no market for Russian wheat of the said description. At the time of sale the sellers knew that the buyers were buying for resale. It was held that the buyers were entitled as damages to the difference between the contract price and the resale price. In holding so, the learned Judges analysed the rules laid down in leading case of Hadley v. Baxendale and the implication of these rules as elucidated by judicial interpretation in sub sequent cases. The effect of there being no available market for the goods of the kind involved in the contract, was stated as under :‑
"Where a seller of goods fails to deliver, he should pay to the buyer the value of the goods at the time when they should have delivered. This is the normal measure of damages. It is the measure prescribed by the first branch of the rule in Hadley v. Baxendale, and enacted in section 51 of the Sale of Goods Act, 1893. If at the date of the breach there is an open market for goods or that kind, then the market price is obviously the value to the buyer. If there is no market the value must be otherwise ascertained, and a re‑sale price may be some evidence of such value. "
This case is a good example of the application of the doctrine oft imputed knowledge, as the finding was not to the effect that the buyer's intention to re‑sale was expressly brought to the notice of the sellers at the time of the contract, but proceeded on the basis that the buyers would probably resale as it was within the knowledge of the seller that buyers were millers. The following observations from the judgment are relevant:
"The arbitrators find that both parties contemplated that the buyers would probably resell. I think I must take this as meaning that they would probably resell at a profit. Hammond v. Bussey is authority' for holding that it is not necessary, in order to entitle the buyer to recover loss of profit on re‑sale, that the seller should have known', when, he sold, that the buyer was buying to implement a contract already made, or that, the buyer would certainly resell it is enough if both parties contemplate that the buyer will probably resell and the seller is content to take the risk. I think, therefore, that the arbitrators' finding is sufficient to support a claim for loss of profit on re sale.
That this knowledge can be imputed to the Government is, in our view fully borne out, from the circumstances appearing in the evidence on record. It is in the evidence of Tahir .All (P. W. 11), Chairman of the appellant‑Company, that couplings which could be employed for the use of tubings, were also purchased by the plaintiffs from the Government. This fact is not rebutted or challenged by the Government. From this it follows that Government was aware of the fact that plaintiffs were in possession of couplings which could be used to employ the tubing profitably. From the cross‑examination of this witness it" also appears quite clearly that the Government of Pakistan in its Ministry of Defence, Ordnance Services, G. H. Q, Rawalpindi, had, prior to the contract in this case, dealings with the plaintiffs. Document Exh. P. 2ts being a letter dated 21st June, 1962, from the Director of Ordnance Services also proves that the Government had awarded a contract to the plaintiffs prior to the contract in dispute. This evidence is sufficient to hold that the relevant Government department was aware of the nature .of business done by the plaintiffs. Coupled with this are other circumstances that an effort was made by the concerned department to utilize tae tubings departmentally. but no success was achieved because the rubber rings, which were used to connect two pieces of tubings had become unserviceable. An effort to adopt a substitute coupling also failed. All these circumstances couplet with the fact that necessary expert's advice is available to the Government in its own department, lead to the inference that the Government was aware or can be imputed the knowledge, that the plaintiffs. were acquiring the tubings for the purpose of further sale by using the special couplings already sold to them. Therefore, we are unable to agree with the view taken by the learned Judges of the High Court that the loss sustained by the plaintiffs on account of non‑supply of contract goods will not include the special use of goods by improvements by mounting the special couplings on positive evidence the conclusion of the learned Judges that "possession of these couplings with the plaintiff alone and their use by him was, admittedly not brought to the notice of the defendant" is not correct. On the principles enunciated in the foregoing‑part of this judgment, the loss in relation to use of the contracted tubings alongwith special couplings, must, therefore, be deemed to be within the contemplation of the parties at the time of the contract. It also follows from this that the evidence of sub‑sales produced by the plaintiffs as to the market price of the goods in absence of available market for the goods of the description under the contract, furnishes a valid basis for determining the quantum of damages. We are accordingly unable to agree with the High Court that in this case the damages could be determined by the rule of thumb. As already observed the plaintiffs produced evidence to show that the price of 6" dia tubing alongwith coupling offered to them was Rs. 10 per Rft and that of 4" dia was Rs 7.75 per Rft. This evidence has gone unrebutted at the trial as no evidence regarding the market price of the goods to be supplied by the Government was produced by them. On applying the principle of preponderance of evidence, which is the well established rule of decision in civil cases, we hold that the aforesaid prices represent the true value of the goods on the date of breach. The quantum of damages to which the plaintiffs would have been entitled as compensation for the breach of contract on this basis would be far in excess of the amount awarded by the High Court or even the trial Court. This is because total value of the goods to be supplied by the Government would be Rs. 1,15,58,647. This is also the basis on which the plaintiffs have in their plaint calculated the value. But in his arguments the learned counsel of the plaintiffs as already observed, argued and stated at the bar that the plaintiffs would be satisfied if the book value of the tubings in the record of the Gov ernment is taken to be the value for purposes of working out the damages. Accordingly we adopt this basis by the consent of the plaintiffs themselves. It is in the evidence as confirmed by the High Court that the book value of the goods was Rs. 54,59,516. As discussed in the foregoing part of this judgment, the value of the goods to be supplied in exchange by the plaintiffs was Rs. 32,18,647 and since the plaintiffs were obliged under the contract to part with this value, this amount has to be deducted. Additionally the value of the goods partly delivered, by the Government under the contract, has also to be deducted. According to the book value of the goods the rate of tubings of 4'' did meter work out at Rs. 3.56 per Rft and that of 6'' did at Rs. 4 Rft. The Government supplied to the plaintiffs 4'' did tubings measuring 20,407 Rft worth''k‑.Rs. 72,648.92 and 6' did tubings measuring 24,330 Rft. worth Rs. 97,320N .,Accordingly the total value of the goods received. by the plaintiffs under the contract was Rs. 1,69,968.92. It was further pointed out on behalf of. ,the plaintiffs that the Courts below did not take into consideration 29. tons of M. S. Bar supplied by theta to the Government on an earlier occasion which were by agreement of the ,parties treated as supplies under the contract in question. In this connection reference was made to a letter of the Chief Ordnance Officer, addressed to the plaintiffs on 22nd March, 1963 (Exh. P/4l at page 133 of the printed record), which shows that the said quantity supplied in excess under a previous contract between the parties was adjusted against the contract in suit by the approval of G. H. Q This fact had not been disputed by the learned counsel for the Government The value of this quantity was Rs. 29,500 for which the credit has to be given to the plaintiffs. Having regard to the items mentioned above the final calculations are as under : ---
Value of the total quantity of goods to be
delivered by the Government Rs. 54.59,516
Value of the goods supplied by plaintiffs... Rs. 29,500
Total value Rs. 54,89,016
Deduct value of the goods to be supplied
by the plaintiffs Rs. 32,18,647
Balance Rs. 22,70,369
Deduct value of goods received by the
Plaintiffs Rs. 1,69,968.92
Net loss suffered Rs. 21,00,400.08.
It is accordingly held that the compensation to which the plaintiffs are entitled as damages for breach of contract comes to round figure of Rs. 21,00.400.
17. Mr. Maqbool Ahmad, learned counsel appearing for the Govern ment has, however, reiterated the contention which was pleaded by way of defence before the Courts below that the contract in suit, having been entered and executed without proper authority, was void and incapable of creating any binding legal obligations on the Government. The plea of the Government in their written statement was that the alleged offer of the plaintiffs for exchange of goods was not "accepted by the defendant or anybody else, having lawfully authority on its behalf to do so". In their evidence the Government admitted that Brig. Wahadi had signed the original contract on behalf of them. It was also stated that the contract was sanctioned by Mr. Akhtar Ali, Deputy Secretary Ministry of of Defence. The Government witness Mr. F.H. Farooqi, Executive Engineer and Deputy Assistant Director, Ordnance Services, G. H. Q., has affirmed that the contract was approved by the Government and such approval was conveyed by a letter under the signature of the Section Officer (Exh. D/I ). This witness further disclosed that the contract was brought within the notice of the Government, Commander‑in‑Chief, Defence Secretary, and the Law Secretary, and the Government of Pakistan. In the cross‑examination the witness admitted that before the execution of the contract, the draft agreement was examined by the Law Ministry and duly approved. Not only that but it was also admitted that the Financial Adviser of the Director‑General, Defence Purchase, G. H. Q., who holds the rank of Joint Secretary, had also approved the contract before its finalization. There is on record Letter No. 48/434;61/NG/OS‑8‑355‑SM/D9(b) from the Ministry of Defence (Army Branch), dated 6th April, 19r,2 (Exh. P/A) conveying the sanction of the President to the acceptance of the tender of the plaintiffs for exchange and authorizing the Director Ordnance Services to sign the contract documents. In view of the overwhelming evidence referred to the High Court rightly held that the contract was entered into with the sanction and authorization of the competent authority. It was further pointed out that the contract was acted upon and the Government not only accepted the bank guarantee from the plaintiffs but also delivered part of the goods stipulated to be supplied. In addition reference was made to correspondence exchanged between the parties on the subject of the contract, during the course of which no such objection was raised that the contract lacked proper authority. Learned counsel for the Government endeavoured to question the validity of the contract with reference to the Government of India Act, 1935 and relied on the Rules of Business, 1950, which continued in force until their substitution by the Rules of 1962 on 8th June, 1962. He has referred to rule 7 relating to the Officers who may authenticate by signature the orders and instruments made or executed in the name of Governor‑General. In Schedule 3 to these rules there is given a list of Officers authorised to execute orders and instruments on behalf of the Governor‑General which inter alia, include the Joint Secretary, Deputy Secretary and the Assistant Secretary to Govern ment of Pakistan. Therefore, in view of the evidence discussed above, even these rules do not support the contention of the learned counsel. Exh. P/A (page 67 of the printed record) is the letter, dated 6th April, 1962 from the Ministry of Defence, Government of Pakistan addressed to the Master General of Ordnance. G H. Q., which states that the President bad sanctioned the acceptance of the tender of the plaintiffs in connection with the contract in suit. This is an official document and there is a presumption in law that it was issued in official course of business. Therefore in absence of any evidence to the contrary this document is sufficient to prove that the contract was duly sanctioned and approved. The argument of the learned counsel for the Government is accordingly repelled.
18. The only remaining question is whether the plaintiffs are entitled to the award of interest on the decretal amount. Plaintiffs claim interest froth the date of suit, namely, 28th January, 1964. Relying on Union of India v. W. P. Factories (AIR 1966 S C 395) and Swat Corn Products Ltd. v. Firm Mir Wali Khan do Company and others (1984 S C M R 630), it was contended on behalf of the Government that interest cannot be awarded by wav of damages for the period up to the date of suit However, the plaintiffs are not claiming interest as damages up to the date of the suit, but pendente lite interest from the date of suit. This Court in Messrs A. Z. Company v. Messrs S. Mauls Bukhsh Muhammad Bashir (P L D 1965 S C 505), on an extensive review of case‑law held that "generally in the absence of an express or implied contract to pay interest, or usage of trade, interest cannot be allowed on damages for breach of contract." Therefore, there is no ques tion of awarding interest on an unascertained claim for damages. However, it is well‑settled that under section 34, C. P. C. grant of pendente lite interest is within the discretion of the Court Sourendra Mohan Sinha and others v. Hari Prasad Sinha and others (AIR 1925 P C 280). This is also the view taken in the Indian Supreme Court decision relied upon by the learned counsel for the Government. The other case from this Court on which reliance has been placed is not relevant in the facts of the present case as that proceeds on section 61 of the Sale of Goods Act.
19. The trial Court had awarded interest on the amount decreed from First May, 1963 until the realization of the decretal amount. The High Court had on the other hand modified the decree awarding interest from the date of decree of the trial Court. Both Courts below, however, did not assign any reasons for their respective decision as regards interest. The question, therefore, arises whether the High Court exercised its discretion properly and judicially or in the alternative whether it is reason able to allow interest from the date of suit. Now it is also well‑settled that the appellate Court will not ordinarily interfere in the exercise of discretion by the lower Court in the matter of grant of interest. On behalf of the plaintiffs it has been argued that pendente lite interest would be justified, in view of the conduct of the Government. In this connection reference was made to the fact that the Government repudiated the contract denying their liability but did not cancel the contract. It was stated that for the first time fraud and collusion was pleaded in the written statement, although much correspondence was exchanged between the parties before the case came to the Court. Even so no evidence was led at the trial in support of these allegations and the Courts concurrently held against the s Government. It was further pointed out that the suit was pending for about 12 years before it could be decided. These are indeed weight submissions but they ignore the fact that on the date of suit the claim of the plaintiffs was for an unascertained sum, as damages for breach of contract, which had to be determined by the Court. There would, there fore, be no justification to burden the Government with the payment of interest when they did not know what their liability in terms of money as the principal amount towards damages was. Whether the pleas taken by the Government were vexatious was a matter for the trial Court to comment upon and there is no such observation by that Court. However, once the Court determined a sum certain and passed a decree, obviously the plaintiffs being deprived of the amount due and payable to them on that date, required to be compensated by award of interest. Although the High Court did not expressly assign this reason for refusing the pendent lite interest, we feel that the discretion exercised by it is reasonable and consistent with equitable principles. No interference with the decision of the High Court that interest be allowed from the date of the decree passed by the trial Court is, therefore, warranted.
20. For the foregoing reasons wet modify the decree passed by the High Court and grant the plaintiffs a decree for a sum of Rs. 21,00,400 and further direct that the plaintiffs shall be entitled to simple interest at the rate of 6 % per annum on the aforesaid amount from 19‑1‑1976 (the date of decree passed by the trial Court) until realization. In the result Civil Appeal No. 1 of 1980 is allowed with costs in the above terms and Civil Appeal No. 2 of 1980 is dismissed with costs.
M. B. A. Order accordingly.
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