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Suit No. 159 of 1952, decided on 10th November 1960.
Breach of contract, suit for‑--Can be tried by Court at place of communication of cancellation of contract‑Contract Act (IX of 1872), S. 4.
The suit on a breach of contract can be filed at any place where the contract should have been performed in whole or in part and so if the price of the goods are payable at K the Courts at K would have jurisdiction to entertain the suit for breach of contract. Further such a suit can be filed at the place where the communication of the cancellation of the contract reaches the plaintiff.
V. N. Naydu v. M. E. Muhammad Ghani A I R 1957 Mad. 83 and Danraj Mills v. Nursing Prasad A I R 1949 Pat. 270 rel.
Hafiz Sultan Ahmed for Plaintiffs.
Malik Muhammad Sayeed for Defendants.
Dates of hearing: 4th and 13th October 1960.
This is a suit for the recovery of Rs. 1,29,400 on account of damages and refund of deposit money. It is the plaintiff's case that the defendant No. 2 on behalf of the defendant No. 1 sold to the plaintiffs 30 wagons of Star Brand Vegetable Ghee (each wagon containing 720 tins) at the rate of Rs. 43 per tin weighing 35 lbs., F. O. R. Karachi. The terms of the contract as pleaded in the plaint on the basis of Exhs. P. 22 and P. 23 may be reproduced:
(a) The defendant No. 1 undertook to deliver to the plaintiff 2 wagons of Star Brand Vegetable Ghee in the month of February, 6 wagons in the month of March, 10 wagons in the month of April and 12 wagons in the month of May in all 30 wagons;
(b) that defendant No. 1 was given the option to supply such quantity in each of the said months as might be feasible and convenient to defendant No. 1, and the plaintiff agreed to accept any quantity delivered in any particular month;
(c) that the plaintiff undertook to deposit with defendant 1 a sum of Rs. 25,000 without interest as advance money which was to be adjusted in the last consignment at the end of all the deliveries;
(d) that the deliveries were to be made by means of Railway Receipts presented through a Bank;
(e) that the plaintiff agreed that only up to March 1951 the Ghee sent by defendant No. 1 would be sold by the plaintiff in East Pakistan and not in Karachi.
(f) that in case of breach of the above terms by the plaintiff the deposit money (Rs. 25,000) would be liable to forfeiture.
2. That the above terms were settled at Karachi between the plaintiff and the defendant No. 2 acting on behalf of defendant No. 1 and the defendant No. 2 accordingly addressed to the plaintiff letters dated the 5th February and 8th February 1951 containing the above terms; that the defendant No. 1 confirmed this transaction and accepted the said contract by his letter dated 13‑2‑51, Exh. P. 9. (Exh. P. 11 is the copy of Exh. P. 9); that in compliance with the term (c) of the contract mentioned above, the plaintiff deposited a sum of Rs. 25,000 by a cross cheque dated 9‑2‑51 drawn on the Habib Bank, Bunder Road, Karachi; that in the month of February 1951 the defendant supplied to the plaintiff only one wagon of vegetable ghee and thereafter they made no further supply and by a letter dated 28‑4‑51 cancelled the contract without any just cause or excuse; that this letter was received by the plaintiff on 1st of May 1951, on which date the market rate of vegetable ghee Star brand which was contracted to be sold to them was Rs. 48 per tin. The plaintiff therefore claimed damages at the rate of Rs. 5 per tin being the difference between the contract rate and the rate prevailing on the date of the breach amounting to Rs. 1,04,440 on 20,880 tins which would have been contained in the unsupplied 29 wagons. They further claimed the refund of Rs. 25,000 which they had deposited towards this contract.
3. The defendant No. 2 for a long time could not be served and ultimately had to be served by substituted service, but they remained absent and the case proceeded ex parte against them.
4. The defendant No. 1 contested the plaintiff's claim. They denied that there had been any contract between them and the plaintiffs and asserted that their contract was with defendant No. 2 for the supply of the Star brand vegetable ghee on the terms and conditions stated in Exhs. P. 22 and P. 23. They denied that their letter dated the 13th February 1951, Exh. 9, could be construed as confirmation or acceptance of the contract between the plaintiffs and the defendant No. 1. It was further asserted that the defend ant No. 1 only agreed to carry out the instructions of defendant No. 2 as their agents. It was further pleaded that the defendant No. 1 on the directions of defendant No. 2 agreed with the defendant No. 2 to deliver to the plaintiffs 30 wagons of Star Brand Vegetable Ghee subject to the terms and conditions of the agreement entered into between the plaintiff and defendant No. 2. They denied that the deposit of Rs. 25,000 or any other sum was credited to the account of defendant No. 1 by the defendant No. 2. With regard to the cancellation of the contract they stated that they were forced to do it because of the break‑down in the machinery for the produc tion of the ghee. The prevailing market rate at Karachi at the time of the rescission of the contract was denied. It was further alleged that the defendants are not carrying on business at Karachi and that therefore this Court had no jurisdiction to try the suit as against these defendants. The following issues were framed:‑
(1) Has this Court jurisdiction to try this suit
(2) Was there a contract between the plaintiff and the defend ant No. 1 for the sale by the said defendant to the plaintiff of 30 wagons of Star Brand Vegetable Ghee
(3) Did the defendant No. 2 act as the agent of the defend ant No. 1 If so, with what effect
(4) Was the defendant No. 1 entitled to rescind the contract on the grounds stated in para. 5 of the written statement
(5) Was a sum of Rs. 25,000 received by the defendant No. 1 in terms of the contract
(6) Who committed the breach of contract
(7) To what damages, if any, is the plaintiff entitled
(8) General, as to relief and costs.
5. Issue No. 1.‑---There is no doubt that this Court has got jurisdiction to try the suit. The contract was entered into at Karachi. The delivery was also to be made at Karachi and even though the deliveries were to be made by means of railway receipt presented through a bank, the same could be received by the plaintiffs only upon payment of money here at Karachi to the Bank. Further the rescission of the contract took place at Karachi where the communication of the cancellation of the contract reached the plaintiff. The suit on a breach of contract can be filed at any place where the contract should have been performed in whole or in part, and even in so far as the price of the goods, in the present case was payable at Karachi, the Karachi Courts would have jurisdiction to entertain the suit. It would be enough to refer to two cages in this connection. These are V. N. Naydu v. M. E. Muhammad Ghani (A I R 1957 Mad. 83) and Danraj Mills v. Nursing Prasad (A I R 1949 Pat. 270). On issue No. 1, therefore, my finding is that this Court has jurisdiction to try the suit.
6. Issues Nos. 2 and 3 may be taken up together. The terms of the contract are contained in the two letters Exhs. 22 and 23 addressed by the defendant No. 2 to the plaintiffs, copies whereof have been sent to the defendant No. 1. P. W. 1 Jan Muhammad has stated that the defendant No. 2 acting on behalf of the defendant No. 1 brought about this contract. He also stated that the defendant No. 2 had informed the plaintiffs that they will receive a confirmation of this from the defendant No. 1, and this they did receive as per Exh. 9. D. W. 2, the Manager of the defendant No. 2 has admitted that all the transactions of the defendant No. 1 in respect of vegetable ghee at Karachi were done through the defendant No. 2. Likewise D. W. 1 Mahboob Rahman, who was the Manager of defendant No. 1 at the relevant time has stated that most of the contracts of the defendant No. 1 relating to Karachi were done through the defendant No. 2. The evidence of these two witnesses also shows that a partner of the defendant No. 2 was a Director of the defendant No. 1, and the effect of their evidence is to show that the defendant No. 2 was acting for the defendant No. 1 in the transaction of sale of ghee at Karachi. It may further be noted that the conduct of the defendant No. 1, after the contract was reached is not that of an agent for the defendant No. 2. To begin with they sent a letter of confirmation of this agreement to the defendant No. 2, a copy of which was sent to plaintiffs; and when they despatched the first consignment of one wagon in pursuance of this contract they sent the invoice. Exh. P. 12, directly to the plaintiffs and not through the defendant No. 2. This invoice also contains a request for payment by the plaintiffs on the presentation of the R. R. On receipt of this one wagon the plaintiffs complained directly to the defendant No. 1 about leakage and the defendant No. 1 directly replied to the plaintiffs by their letter dated 6‑3‑51, Exh. P. 24, that in the terms of the contract the responsibility for the leakage was of the plaintiffs and that they were not responsible for it. And lastly the letter cancelling the contract was addressed by the defendant No. 1 directly to the plaintiffs as would appear from Exh. P. 17 dated 28‑4‑51. In view of this overwhelming evidence I have no hesitation in holding that the contract in question was between the plaintiff and the defendant No. 1 and in that transaction the defendant No. 2 had acted as the agent of defendant No. 1. The result of these findings would be that the liability, if any, under this contract would be that of the defendant No. 1. I answer issues Nos. 2 and 3 accordingly.
7. I shall now take up issues Nos. 3, 6 and 7 together. The case set up by defendant No. 1 in para. 5 of their written statement is that they were unable to supply the contracted goods to the plaintiffs firstly on account of the deterioration of the machinery of the mill and secondly because of heavy pressure for supplies from the Ministry of Food for defence personnel. But in the letter whereby the contract was cancelled there was no mention of these causes which are alleged in the written statement. All that was said is that the deliveries to be made according to the convenience of the sellers. There was however no mention of the fact as to when it would be convenient for them to effect these supplies. On the contrary, they accused the plaintiffs of un-business like attitude and expressed their apprehension about their payment for the supplies and then went on to say that for these reasons the "contract stands cancelled." At the trial the defendant No. 1 completely failed to substantiate their case that they had been unable to supply the goods due to the difficulties mentioned in para. 5 of the written statement. Their Manager Mahboob Rahman D. W. 1 said in examination‑in‑chief that in the months of April and May the mill was not making its full production. In cross‑examination he admitted that he would not be able to say that there was any marked difference of production between the months of February an j March on the one hand and April and May 1951, on the other. It was definitely asserted by Jan Muhammad P. W. 1 that the defendant No. 1 had supplied a large quantity of vegetable ghee to A. K. Brothers in these months and he had also given a statement bearing the wagon numbers whereby these supplies had come. D. W. 1, the defendant's Manager, was not able to contradict this position. That this defence is untrue is borne out by the contents of Exh. 17 itself which is the letter of the defendant No. 1 cancelling the contract for reasons other than those alleged in the written statement. If it had been true that their production bad decreased and that they were under pressure of other demands, the thing to do was to write to the plaintiffs asking for accommodation in this connection but nothing of the kind was done and some sort of excuse such as apprehension of not receiving their money was put forward and the contract was irretrievably cancelled. The terms of Exhs. 22 and 23 did not permit such a cancellation. I, therefore find that the defendant No. 1 were not entitled to rescind the contract and that in doing so they committed the breach thereof. I answer issues Nos. 4 and 6 accordingly.
8. The next question is as to what damages are the plaintiffs entitled to get. Upon this point there is the evidence of P. W. 1 Jan Muhammad who has stated that the rate of the vegetable ghee in question in the months of April and May 1951, at Karachi was Rs. 48 per tin. No serious attempt was made on the side of the defendant No. 1 to contradict this statement or to prove the contrary. Jan Muhammad stated that he had sold such tins of ghee at this rate at the relevant time to traders at Karachi such as A. K. Brothers and M. S. Ghulam Hussain and Abdul Sattar & Company. But more definite evidence came from Abdul Ghaffar the broker who had brought about the transaction in question. He has been working as a broker for the sale and purchase of vegetable ghee, oil cakes etc., since 1947. He maintains a book in the regular course of business in which the transactions brought about by him are entered. With reference to the entries in this book he stated that he had brought about a transaction on 18‑4‑51, for the sale of vegetable ghee at Rs. 48‑4‑0. This was ghee of Awwal Darja Brand and the price of this brand and the Star Brand of defendant No. 1 were the same. He had also brought about a transaction for the sale of 200 tins of Star Brand vegetable ghee at Rs. 48‑4‑0 and another transaction of 720 tins of Star Brand at Rs. 47‑12‑0. On 15‑5‑51, he brought about a transaction of the sale of 200 tins of Star Brand to one Abdur Rahman, Abdul Ghani and Bombay Oil Depot at Rs. 51 per tin. He produced the relevant entries of these transactions from his book and I noticed that the original was an old register and the entries of the transactions recorded therein appeared to have been regularly maintained. This witness appeared to me to be a straightforward witness and his oral evidence was supported by his books. As against this we have the evidence of the Manager of the defendant No. 1 who vaguely stated that the price of the ghee supplied to the Defence Department by the defendant No. 1 in March and April 1951, was at Rs. 35 or Rs. 36 per tin as far as he could remember and that this was exclusive of sales tax. We have only the word of this witness unsupported by any docu ment and I noticed that this witness was anxious to support his erstwhile employers and his evidence is of a very weak kind. Moreover, the sales tax, according to him, would be about 10 percent and this rate must necessarily relate to the one prevailing at Lahore. That would not be of much assistance for determining the rate at the relevant date at Karachi. The Manger of the defendant No. 2 Nasirul Hassan D. W. 2 gave the rates of certain transactions which had been entered into in January, but there is no indication as to when these supplies were to be made. This evidence therefore is of no assistance. He had been called to produce the books of the defendant No. 2 which would have shown the rates of the commodity at Karachi at the relevant time but he said that he was not able to do so as these books were at Lahore. It is plain to me that if the Karachi rate at the end of April or beginning of May 1951, was lower than Rs. 48 per tin it should certainly have been possible for this witness to prove this by the records of his firm or by some other reliable evidence. Nothing of the kind has been done. I, therefore, accept the evidence of the broker which supports the evidence of Jan Muhammad P. W. 1 on which I find that the rate of vegetable ghee of Star Brand between 28th April 1951, and 1st May 1951, was Rs. 48 per tin. In fact the evidence of the broker Abdul Ghaffar shows that the prices were going up because on 15‑5‑51, the ghee of this brand was sold at Rs. 51 per tin. I, therefore, find that the plaintiff is entitled to damages at Rs. 5 per tin which is the difference between the contract rate and the market rate prevailing on the date of the breach. At this rate the plaintiff is entitled to the sum of Rs. 1,04,400 for the 20,880 tins which, would have been contained in the remaining 29 wagons which were not supplied by defendant No. 1.
9. With regard to the issue No. 5, there is no doubt that Rs. 25,000 were paid as deposit. The cheque for this amount was handed over to the defendant No. 2 by the plaintiff who had brought about the transaction. In the view that I have taken that the defendant No. 2 had acted as the agent of defendant No. 1 in this transaction the liability for the refund of this money must be that of the defendant No. 1. In fact, the defendant No. 1 and defendant No. 2 are not strangers between themselves. They are like sister concerns. On issue No. 5, therefore, I find that the defendant No. 1 is liable to refund to the plaintiff the sum of Rs. 25,000 which had been received as a deposit towards this contract, the breach of which was caused by defendant No. 1.
10. As a result of my above findings, I decree the plaintiffs suit against the defendant No. 1 for the sum of Rs. 1,29,400 with costs. The decretal amount shall carry interest at 6 percent from the date of the decree till payment. The suit against defendant No. 2 is dismissed.
K. B. A. Suit decreed.
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