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Petitioner: MESSRS D. B. WALKER & Co. LTD., Karachis VS Respondent: NOOR ELAHI AND ANOTHER
Court Name: Sindh High Court Judge(s): Noorul Arfin, Z. A. Channa Title: MESSRS D. B. WALKER & Co. LTD., Karachis vs NOOR ELAHI AND ANOTHER Case No.: Second Appeal No. 414 of 1966 Date of Judgment:1973-09-17 Reported As: PLD 1974 Karachi 50 Result: Appeal accepted
JUDGMENT
JUDGMENT ZIAULHAQUE A. CHANNA, J.----This second appeal under section 100, C. P. C. By Messrs D. B. Walker & Company, a limited liability company carrying on business at Karachi, is directed against the judgment and decree of the Additional District Judge, Karachi, whereby he not only maintained the decree passed by the Had Civil Judge, First Class, Karachi for the award of damages to the extent of Rs. 7,481.25 to respondent No. 2, but further decreed the suit in favour of respondent No. 1 also. The suit out of which the appeal arose was filed by the two respondents for recovery of damages in consequence of the failure by the appellant to deliver, as agreed by it, 100 bales of-cotton to respondent No. 1. 2. The two respondents, which are said to be partnership concerns, as well as the appellant are carrying on cotton business at Karachi. On 14-12-1959, the appellant entered into an agreement with respondent No. 2 for the sale to it of 100 bales of Desi Bahawalnagar cotton December/January delivery at the rate of Rs. 73-4-0. On the same date, respondent No. 2 entered into an agreement to sell similar quantity and quality of cotton to respondent No. 1, at Rs. 74 per maund. Another agreement was entered into on the same day between the appellant and respondent No. 1, for the delivery of a similar quantity and quality of cotton within the same delivery period. This last contract, however, was not the subject-matter of the suit and mention thereof is made only to complete the picture and as reference to this contract is also made in the correspondence between the parties. Mention of all these three contracts has been made in the daily cotton market report of the Karachi Cotton Association Limited for 15-12-1959. It appears that the appellant was, for certain reasons, unable to make delivery of the cotton to the two
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respondents within the contracted period and therefore went on asking for time for making the delivery. 3. Ultimately, the parties appear to have entered into an arrangement whereby the appellant was to make direct delivery to respondent No. 1 from its ready stock of the quantity of cotton (100 bales) which it had contracted to sell to respondent No. 1 at the price to respondent No. 2 of Rs. 72-4-0 instead of the contracted price of Rs. 73-4-0, as apparently the quality of the cotton to be delivered under the said arrangement was inferior. Respondent No. 2 thereupon wrote a letter on 8-3-1960 to the appellant, with a copy to respondent No. 1, asking the appellant to confirm the arrangement and authorising it to make the delivery to respondent No. 1. Acting on this letter, the appellant wrote a letter to respondent No. 1 on 17-3-60 intimating that 100 bales of cotton, account of Messrs Hussaini Trading Company (respondent No. 1) had been examined and sample approved, and requiring respondent No. 1 to take delivery of the cotton within 48 hours and to issue cheque at 90% of the invoice value. It appears that on that very day tender of cotton was made by the appellant to respondent No. 1 but as appears from the letter dated 18-3-1960, which respondent No. 1 wrote to the appellant, the former rejected the tender on the ground that "on examination of the lot more than 50 % of the bales were found to be seriously damaged in up -country and contained false packed cotton which could not be taken delivery of even with allowance for damage". By the same letter, respondent No. 1 called upon the appellant to "to tender us another lot for oar approval and do so without further delay as we need the cotton for shipment." Respondent No. 1, wrote another letter on 16-4-1960 to the appellant inviting its attention to the earlier letter of 17th March and requiring the appellant to deliver a fresh lot for their approval by 18th instant, the latest. As this letter too had no effect, a third letter was sent by respondent No. 1 on 18-4-1960 to the appellant, requiring it to deliver the contracted quantity of cotton within 48 hours, else they will purchase the goods from the market on the account of and the risk of the appellant. The appellant thereupon wrote a letter to respondent No. 1 on 19-4-1960, denying that there was any agreement or arrangement with them for delivery of 100 bales of cotton by the appellant to respondent No. 1. The said letter also referred to the direct contract between the appellant and respondent No. 1, and stated that in accordance with that contract 100 bales of cotton had already been delivered to respondent No. 1. 4. The two respondents thereupon instituted a suit on 18-4-1963 for damages against the appellant, claiming the difference in the price of 100 bales of cotton as prevailing on 8-3-1960, the date of contract, and on 19-4-1960, when the appellants wrote to respondent No. 1, repudiating the arrangement entered into between the parties. The defence taken by the appellant in its written statement was that apart from the contract for sale of 100 bales of cotton to respondent No. 1, delivery whereof was duly given to the said respondents, there was no other contract for delivery of cotton by the appellant to the respondent No. 1, but since respondent No. 2 had to deliver some cotton to respondent No. 1, and in order to help respondent No. 2, the appellant, at the request of respondent No. 2, agreed to deliver to respondent No. 1 purely out of friendship, 100 bales of cotton to respon--dent No. 1, as soon as their cotton arrived, and further also agreed to reduce the price of the cotton to be tendered to respondent No. 1. It is further averred in the plaint that on arrival of the appellant's cotton it was tendered to respondent No. 1, but he refused to take delivery of the same. It was contended that the suit was barred by time as well as under the Partnership Act. 5. On the pleadings of the parties, the following issues were framed by the trial Court: "(i) Is the suit barred by time as well as under the Partnership Act? (ii) Is the suit barred by the principles of res judicata? (iii) Was there any privity of contract between the plaintiffs or any of them and the defendants? If so, who has committed the breach of contract ?
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(iv) To what damages are the plaintiffs entitled if it is held that the defendant committed the breach of contract? (v) What should the decree be? (vi) General. 6. On the first part of issue No. 1, the trial Court held that so far as respondent No. 1 is concerned, it was a partnership concern, which was registered on 2-4-1957 for a period of 4 years from 1-11-1956, and as the firm had not been registered after 1960, it was an unregistered firm at the date of the suit and therefore not entitled to sue. In support of this view,. The learned trial Court relied on the decision of this Court in the case of United Cotton Factory, Hyderabad v. Ahmed Khan (PLD 1960 Kar. 774). So far as respondent No. 2 is concerned, the trial Court held that as it was a partnership- at-will and as the plaint had been filed by a partner, the suit had been properly instituted by it. So far as the question of limitation was concerned, according to the judgment of the trial Court, the appellant's Advocate conceded that the suit was in time. Issue No. 2 was also conceded by the appellant. On issue No. 3, the finding of the trial Court was that the defendant had committed a breach of contract. Its finding on issue No. 4 was that the amount of damages to which respondent No. 2 was entitled was the difference of price between the contracted price of Rs. 43-4-0 and the market rate of Rs. 89 per maund, prevailing on 19-4-60 when the defendant (the present appellant) committed breach of the contract. On issues Nos. 5 and 6, the trial Court held that the suit of plaintiff No. 2 (the present respondent No. 2) succeeds and that he was entitled to the damages against the appellant of Rs. 7,481.25 with costs and interest at 6 % from date of suit till realization. 7. In the appeal preferred by the appellant against the decree of the trial Court, the main points raised on behalf of the appellant were: (1) that the registration of the firms of the two respondents was not in order and the suit should therefore have been dismissed on that account; (2) that there was no written contract between the parties; (3) that no loss had actually accrued to the plaintiffs and (4) that the suit was not in time and the learned counsel for the appellant had not conceded this issue in the lower court. The learned Additional District Judge held that not only the registration of respondent No. 2 was in order, but further held, relying on two post-Partition rulings of the Madras High Court, that despite the fact that the registration of respondent No. 1 had expired, the suit by it or on its behalf was in order as the plaint was filed by a partner of the dissolved firm, who was entitled to enforce the contract on behalf of the firm. The learned Additional District Judge repelled the contention raised that there was no contract between the appellant and respondent No. 1 in view of the correspondence between the parties, specially the letter (Exh. 17) written by the appellant on 17-3-1960 to respondent No. 1, asking it to take delivery of the cotton. He also held that there was a clear breach on the part of the appellant and that the measure of damages to which the respondents were entitled was the difference in price between the contracted rate and the rate prevailing on the date of breach. On the question of limitation, the learned Additional District Judge held that the breach of contract was committed when the appellant wrote the letter on 19-4-1960, repudiating the contract, and as the suit was filed on 18-4-1963, it was within time. The learned Additional District Judge accordingly dismissed the appeal and decreed the suit in favour of both the respondents. 8. The first point raised by Mr. Abbas Farooqui, the learned counsel for the appellant, is that quite apart from the fact that after the expiry of the period of its registration, the suit by respondent No. 1, was not competent, in view of the provisions of section 69 of the Partnership Act,. 1932, since the lower Court had dismissed the suit of this respondent and it had not filed any appeal against the dismissal of its suit, it was not competent for the Additional District Judge in appeal to decree the suit in: its favour. The latter objection is basic and unsurmountable and. Mr. Mahmoodi, who appears for both the respondents, has candidly conceded this position.
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9. The main point, however, which falls to be determined in the instant case is whether the suit was instituted within time. Since the suit was for damages for breach of a contract, which was not a registered one, it is governed by Article 115 of the Limitation Act, 1908. The said Article prescribes a period of limitation of three years commencing from the date of the breach of contract and in the case of successive breaches, the limitation is to commence from the date of the last breach. It has, therefore, to be determined: (1) on what date the breach of the contract occurred and (2) whether there was more than one breach, and if so, what was the date of the last breach. The second point would arise only if the contract can be shown to have survived the first breach. 10. There are three possible dates each of which could lay some pretence to being the date of breach of the contract. These dates are (1) 8-3-1960, when respondent No. 2 wrote the letter to the appellant requesting it to deliver 100 bales of cotton to respondent No. 1; (2) 17-3-1960, when respondent No. 1 rejected the cotton tendered by the appellant and (3) 19-4-1960, when the appellant wrote the letter to respon--dent No. 1, repudiating the arrangement indicated in the letter of 8-3-1960. The contention of Mr. Farooqui is that the date of breach should be taken as 8-3-1960. According to him, the letter of that date, written by respon--dent No. 2, ,constituted an unconditional contract for sale of specific cotton, and was accordingly governed by the provisions of section 20 of the Sale --of Goods Act. The argument proceeds that the property in the goods passed to respondent No. 1 on that date, though weighment was to be made later, and the failure of this respondent to take immediate delivery constituted a breach on their part. The contention thus was that not, only by the said letter the property in the goods immediately passed to, respondent No. 1 but further the date of breach has to be fixed with reference to the date of that letter. Since reliance has been placed by both parties on this letter it would be appropriate to reproduce it in extenso. It reads as under:-- 7/D Messrs D. E. Walker & Co.,"8th March 1960 Near Qamar House, Bunder Road, Karachi. Dear Sirs, Re: Our purchase of 100 bales Dessi Bahawalpur at the rate of Rs. 73-4-0 on 14-12-59 for December/January delivery. After giving you many delivery extensions, we are indeed very much pleased to understand through Mr. Maqbool, your Cotton Broker, that our buyers Messrs Noor Illahi Export Co. Have approved in our account 100 bales Dessi Invoice No. 69 Bahawalnagar from your ready stock on an allowance of Re. 1 per maund and that you have agreed to deliver them the said 100 bales in our account on the said condition. Your price to us will now be Rs. 72-4-0 instead of Rs. 73-4-0. We shall thank you to please confirm immediately by return. We hereby authorise you to deliver the said 100 bales to our buyers Messrs Noor Elahi Export Co., in our account on full payment from them at Rs. 72-4-0. Thanking you, Yours faithfully, for Husseini Trading Co. (Sd.) Illegible Partner. c. c. Messrs Noor Elahi Export Co., Shams Building, Marriot Road, Karachi, for information with a request to confirm the contents of this letter and to take delivery. Price difference will be collected by us directly."
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11. The said letter, in our opinion, cannot be considered to be an unconditional sale of specific goods. In the first place, the letter itself indicates that respondent No. 2 had learnt of the arrangement or agreement between respondent No. 1 and the appellant through a third party and required the appellant and respondent No. 1, to confirm the said arrange--ment. No letter in confirmation appears to have been sent either by the appellant or respondent No. 1. In fact, by its letter of 19-4-1960 the appellant denied the existence of any such agreement or arrangement. Even in its written statement, the appellant took the position that there was no agreement between it and respondent No. 1, for sale of cotton, apart from the contract of 14-12-1959 (which is not the subject-matter of this suit), and contended that the defendant "purely out of goodwill and in order to help a friend in need but without the least obligation, expressed his willingness to sell the required quantity on arrival of the consignment at Karachi." Thus, according to the case of the appellant, as set out in its written statement, there was no contract of sale much less an unconditional contract for sale of specific goods in a deliverable state, and the goods in question according to its own pleadings had neither been received by it as yet nor inspected by respondent No. 1. The appellant cannot, at this late stage of second appeal, be permitted to set up an altogether different case. Secondly, the provisions of section 20 of the Sale of Goods Act, on which Mr. Farooqui has based his case, have to be read subject to the provisions of section 19 of the said Act. The latter section provides that the property in specific or ascertained goods, in respect of which there is a contract of sale, is transferred to the buyer at such time as the parties to the contract intended it to be transferred. There is nothing in this letter from which it can be inferred that the parties intended that the property in the goods should pass forthwith to the buyers. The reference to "ready stock" in the letter, merely indicates that the goods were then in stock with the appellants and cannot be construed as indicative of an intention on the part of the parties that the property in the goods was to immediately pass to the buyers. In fact this letter was in the nature of a query in regard to the new arrangement, concurrence to which, as already indicated, was denied by the appellant. Finally, the question of damages claimed by the respondents is not dependent upon the date when the property in the goods passed or was to pass to the buyers but on the date when the appellant was required to deliver the cotton and failed to do so. The letter of 8-3-1960 specifically refers to agreement on the part of the appellant to "deliver" the cotton to respondent No. 1. Since even the said letter, which further was based on the information given to respondent No. 2 by a third party, neither indicated that delivery of the cotton was to be made on that very day or even specified a specific date for delivery, it cannot be said that the date of the letter was the date of breach of contract. 11-A. The second important date is 17-3-60, on which date two important events relating to the case occurred. The first is that the appellant wrote a letter to respondent No. 1 requiring them to take delivery of the cotton within 48 hours. The second is that a representative of respondent No. 1 went to take delivery of the cotton, but rejected the same on the plea that it was of inferior quality, damaged and false-packed. It was contended by Mr. Abbas Farooqui that the breach occurred at least on this date, as incorrect tender was made by the appellant to respondent No. 1, who accordingly rejected the same. It was not disputed by the appellant that the cotton tendered by it to respondent No. 1 was either damaged or false-packed. Its only contention in this behalf was that the same had been previously approved by respondent No. 2. Support for this contention was sought from the letter of 8-3-1960, which has already been reproduced, and the letter dated 18-3- 1960 from respondent No. 1 to the appellant. The first letter merely states that respondent No. 1 had approved in the account of respondent No. 2,100 bales of desi cotton from the ready stock of the appellant. The letter was therefore merely referring to the approval of the arrangement by respondent No. 1 and not the approval of the specific cotton itself by this respondent. The letter of 18-3-1960 by respondent No. 1 also supports this inference, for it makes it clear that 100 bales of
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cotton were approved by it "in the account of Messrs Husseini Trading Co. On the express condition that cotton was in perfectly good condition and the allowance of Re. 1 was in discount of inferior quality". The matter, however, does not rest on mere inference or the possible construction to be placed on the two above letters. The contention that respondent No. 1 had approved the cotton is repelled by the testimony of the appellant's own witness. Muhammad Abbas Jaffery, who is their accountant, and who has deposed that it was plaintiff No. 2 (the present respondent No. 2), who had approved the cotton. 12. Respondent No. 1, who in our opinion had not previously inspected or approved the goods, was thus entitled, in view of the provisions of section 41 of the Sale of Goods Act, to "a reasonable opportunity of examining them for the purposes of ascertaining whether they were in conformity with the contract", and if they were not, to reject the same. We have already shown that the appellant has not disputed the claim of the respondents that the cotton tendered by it was damaged and false-packed. It is settled law that if the goods offered are different in quality from those contracted for, or do not conform to the contracted description, or, if any condition, express or implied, of quality be broken, the buyer has the right to refuse them. A defective delivery stands on the same footing as a non-delivery, and the buyer is entitled to recover damages accordingly. Mr. Mahmoodi understandingly, however, did not wish to base his claim on this breach, for it occurred more than three years prior to the filing of the suit by the respondents and the claim of the respondents based on such breach would be clearly barred by limitation. 13. It was contended by Mr. Mahmoodi that the breach of the contract occurred on 19-4-60, as found by the two Courts below, when the appellant wrote the letter (Exh. 21) repudiating the contract. This contention involves the following three points: (1) when was the contract to be performed; (2) did the contract survive the defective delivery on 1; -3-60 and (3) was respondent No. 1, after rejecting the cotton contracted, entitled to ask for tender or delivery of a fresh lot and thereby extend the period for the performance of the contract. 14. As the agreement between the parties did not specify the date o or the period within which the contract was to be performed, it was required to be performed within a reasonable time. What is "reasonable" time must necessarily depend upon the facts and circumstances of each case, including in the case of a commercial contract for the sale of goods, the C usage of the trade, the nature of goods, the place and mode of delivery and whether the goods are already available with the seller and in a deliverable state or have to be manufactured or acquired by the seller or put in a deliverable state. In the instant case, the contract was for delivery of cotton from ready stock. There was no condition that the buyer was to apply for delivery or the seller was to give notice. Furthermore, it was a commercial contract. Under the circumstances the delivery of the cotton had to be made and taken, subject to any usage of trade, as soon as possible or to put it in somewhat different words, as soon as the parties were in a position to give and take delivery. The fact that the contracts of 14-12-59 between the three parties were recorded in the daily cotton report of the Karachi Cotton Association clearly suggests that at least one of them was a member of the said Association, and as such guidance may perhaps be sought from the said by-laws, though they may not be strictly applicable to the instant case. By-law 105 of the said Association, as originally framed, contemplated, in the case of ready transactions, immediate delivery against each and the buyer was required (in the absence of any other agreement with the seller) to begin to take delivery not later than the second working day after the date of purchase and to continue to do so at the rate of not less than 100 bales per day. The said by-law was sub--sequently amended (the date of the amendment has, however, not been indicated) and under the amended by-law also immediate delivery against cash was contemplated and the buyer (in the absence of any other agreement with the seller) is required to complete taking delivery within "seven clear working days of the day on which the transaction was concluded". We are thus inclined to the view that the date
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of delivery in the circumstances should be considered to be the date of purchase or at best within a few days thereof. We may refer on this point to a decision of a Division Bench of the Bombay High Court reported as Dinkarral v. Sukhdayal (AIR 1947 Bom. 293). The facts of the case were that on 26-6-1943 the defendants sold to the plaintiffs 33 bales of piece goods. The contract was for sale of ready goods and the parties contemplated that they should be despatched as early as possible. No time, however, was fixed for delivery of the goods. It was held that taking all the evidence into consideration, reasonable time in that case would be a fortnight after 26-6-1942 and deliveries made after the expiry of that period were not referable to the contract in the suit but to a different transaction. In another Bombay case, reported as Phoenix Mills Ltd. v. Madhavdas Rupchand (24 B L R 149), which was also a case of sale of piece---goods, it was held that one week was a reasonable time for delivery of the goods. 15. There is another fact with reference to which the time for the performance of the contract may be fixed. This is the letter (Exh. 17) written by the appellant to respondent No. 1, calling his attention to the letter of respondent No. 2 of 8-3-60 and requiring respondent No. 1 to take delivery "within 48 hours". It was urged by Mr. Faruqui that by this notice the time for the performance of the contract was effectively fixed. Mr. Mahmudi disputed this position and contended that it is not permissible, in cases where the contract itself has not fixed the time for its…
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