w w w . L a w y e r S e r v i c e s . i n



The Cotton Corporation of India Ltd. v/s Chakolas Spinning and Weaving Mills Ltd.


Company & Directors' Information:- P A S COTTON MILLS PRIVATE LIMITED [Active] CIN = U17111TN2005PTC058104

Company & Directors' Information:- K D R SPINNING AND WEAVING MILLS LIMITED [Active] CIN = U17110DL1981PLC012864

Company & Directors' Information:- V R A COTTON MILLS PRIVATE LIMITED [Active] CIN = U15311PB1997PTC020061

Company & Directors' Information:- C A V COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1987PTC002014

Company & Directors' Information:- V K S M COTTON MILLS LIMITED [Active] CIN = U17111TZ1998PLC008682

Company & Directors' Information:- P K COTTON MILLS PRIVATE LIMITED [Active] CIN = U17111DL2004PTC130281

Company & Directors' Information:- S K WEAVING PRIVATE LIMITED [Active] CIN = U17115DL2004PTC129457

Company & Directors' Information:- S K WEAVING PRIVATE LIMITED [Not available for efiling] CIN = U17119GJ1998PTC034952

Company & Directors' Information:- K G COTTON SPINNING MILLS PRIVATE LIMITED [Active] CIN = U17219PB1997PTC019422

Company & Directors' Information:- R K WEAVING PRIVATE LIMITED [Active] CIN = U01711TZ2002PTC010192

Company & Directors' Information:- K P G COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1993PTC004509

Company & Directors' Information:- D B V COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1982PTC001145

Company & Directors' Information:- CHAKOLAS SPINNING AND WEAVING MILLS PRIVATE LIMITED [Active] CIN = U17119KL1957PTC001750

Company & Directors' Information:- P K WEAVING MILLS PRIVATE LIMITED [Active] CIN = U51311RJ2000PTC016748

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- M P SPINNING AND WEAVING MILLS PRIVATE LIMITED [Active] CIN = U17120MH1974PTC017191

Company & Directors' Information:- V G WEAVING PRIVATE LIMITED [Active] CIN = U74899DL1994PTC063738

Company & Directors' Information:- S S COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115PB1997PTC019918

Company & Directors' Information:- J R COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TN1996PTC034302

Company & Directors' Information:- P P WEAVING MILLS PRIVATE LIMITED [Strike Off] CIN = U17115TZ2003PTC010602

Company & Directors' Information:- D C H COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TZ1997PTC008130

Company & Directors' Information:- L D COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17291MH2014PTC256832

Company & Directors' Information:- A D COTTON MILLS PVT LTD [Active] CIN = U99999MH1970PTC014837

Company & Directors' Information:- R P K SPINNING AND WEAVING MILLS PVT LTD [Strike Off] CIN = U17119CH1987PTC007371

Company & Directors' Information:- D S R WEAVING MILLS PRIVATE LIMITED [Strike Off] CIN = U29262TZ1988PTC002255

Company & Directors' Information:- J S COTTON SPINNING MILLS PRIVATE LIMITED [Amalgamated] CIN = U17111TZ1990PTC002643

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- V K K SPINNING & WEAVING MILLS PRIVATE LIMITED [Strike Off] CIN = U18101TN1979PTC007760

Company & Directors' Information:- N H SPINNING AND WEAVING PVT LTD [Strike Off] CIN = U17119PB1995PTC015906

Company & Directors' Information:- V P K COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TZ2000PTC009530

Company & Directors' Information:- K R WEAVING MILLS PRIVATE LIMITED [Active] CIN = U17291UP2015PTC068120

Company & Directors' Information:- INDIA SPINNING AND WEAVING COMPANY LIMITED [Dissolved] CIN = U99999MH1919PTC000580

    Suit No.1813 of 1980

    Decided On, 15 December 2008

    At, High Court of Judicature at Bombay

    By, THE HONOURABLE MRS. JUSTICE ROSHAN DALVI

    For the Plaintiff: Rajesh Shah, U. Mahajan i/by M/s.Divekar & Co., Advocates. For the Defendants : Pradeep Sancheti, Sandeep Shreekumar i/by Mulla & Mulla, Advocates.



Judgment Text

1. The Plaintiffs are the canalizing agents of the Government of India for import and supply of foreign cotton to several Indian Textile Mills. The Defendants carry on business of a textile mill.


2. Pursuant to the circular issued by the Plaintiffs in respect of availability of cotton from various countries which would be shipped to India, the Defendant s registered their offer to purchase cotton from Mexico, Guatemala, Nicaragua and Brazil. The Plaintiffs issued their permission /quot a letter for specified bales of cotton to the Defendants. The parties entered into a contract bearing No.G- 444 in respect of the shipment import and supply of the cotton from the aforesaid 4 countries specified therein. The parties similarly entered into another contract in respect of further offer of the Defendants for certain cotton from Turkey, of which specified bales were permitted under the Plaintiffs' Contract No.G- 511. Both the contracts are identical. They are marked Exhibits D and H in evidence. The rights and obligations of the parties under those two written contracts would have to be considered upon interpretation of the contracts admittedly executed by the parties.


3. The goods under the said contract arrived at the Port of Cochin except in respect of 1 shipment which arrived at the Port of Mumbai instead. The Defendants were informed by the Plaintiffs to retire their documents and clear the consignment. The arrival of the shipment is admitted by the Defendants. The goods were not cleared.


4. It is contended by the Plaintiffs that despite correspondence through letters and telegrams in that behalf, the Defendants failed to clear the goods, due to which the Plaintiffs incurred demur rage charges and thereafter were constrained to themselves to clear the goods and store the goods until they were sold to another party. The Plaintiffs accordingly incurred carrying charges in respect of the storage. The Plaintiffs sold the goods at the price which could be obtained upon a private treaty after a tender in that behalf as the sale by auction did not yield any offer.


5. The Defendants contend that 2 of the shipments arrived late and in view of delay in the shipments they incurred a loss in their business and were not bound to take delivery of any of the shipments.


6. Each party has accordingly alleged breach of the contract by the other. Whereas the Defendant s have not sued the Plaintiffs on the breach, if any, committed by the Plaintiffs, the Plaintiffs have sued the Defendant s for damages for the loss suffered by the Plaintiffs upon a breach by failure to take delivery of the consignment s that arrived in respect of the contract material.


7. Based upon the respective pleadings of the parties which sets out essentially the breaches of one another and the right to claim damages, if any, by the Plaintiffs Justice A.B.Palkar, as he then was, framed the following issues on 11.4.2000 which are answered as follows:-


Issues


(1)Whether the Plaintiffs prove that the Defendant s committed breach of the Contract by not taking delivery of the cotton under the two contracts. .. .. Yes


(2)Whether the Defendant s prove that the Plaintiffs committed breach of the contract by causing delay in delivery of the suit cotton. And if so, whether the Defendant s are entitled to


cancel the contract and not to take delivery of the suit cotton. .. .. No


(3)Whether the Defendants prove that the Plaintiffs have not taken steps to mitigate the loss and thereby the Defendants stood discharged of any loss caused to the Plaintiffs. .. .. .. .. Partly Yes. Partly No (as per reasons) .


(4) Whether the Plaintiffs prove that the Plaintiffs suffered loss of Rs.25,62,471.41 or for any other amount and that the Plaintiffs are entitled to interest thereon as claimed in the Suit. .. .. .. Yes ? as per reasons .


(5) What reliefs ? .. .. As per final order .


8. The parties have essentially led evidence of one of their respective officers. Though the Plaintiffs have led evidence of PW2 and 3 in respect of certain corrections and in deposing how certain documents cannot be produced, that evidence has proved to be immaterial and need not be considered.


9. All the documents relating to the contract being essentially the correspondence that were entered into by and between the parties in respect of the shipment and the delivery of the consignment which was required to be taken are admitted documents. They are relied upon by both the parties in their respective Affidavits of documents. The Plaintiffs' document s have been marked Exhibits alphabetically. Certain document s other than those relied upon by the Plaintiffs produced by the Defendant s have been marked Exhibits numerically.


10. The essential contention of breach alleged by both the parties shall have to be determined upon interpretation of the document s relating to the suit contracts relied upon by both the parties. It would be material to consider which party committed breach of the suit contracts. If the Plaintiffs committed breach of the suit contracts by delay in delivery entitling the Defendants to cancel the contract and not to take delivery the entire action of the Plaintiffs would fail and other issues would not be required to be decided. If it is seen that there is no breach committed by the Plaintiffs, it would have to be seen whether any breach was committed by the Defendant s in not taking delivery of the consignment under the suit contracts and its consequences.


11. It may be mentioned that the fact that the goods arrived and the Defendants were asked to take delivery but failed to take delivery is admitted. The Defendant s have justified why they would not take delivery of the suit consignments. For such justification the written documents between the parties alone would have to be considered and interpreted. Any oral evidence inconsistent with such documentary evidence would stand excluded under the elementary principle of exclusion of oral by documentary evidence contained in Section 91 of the Indian Evidence Act.


12. If breach of the contract by not taking delivery of the consignment is seen on the part of the Defendants, then further aspect with regard to the entitlement of the Plaintiffs to claim damages for the loss suffered by the Plaintiffs on account of the breach would have to be considered. In that event the mitigation of damages, if any, by the Plaintiffs would further have to be considered.


13. To that end, the Plaintiffs have sought to resell the consignment under the contract to a third party. The Plaintiffs have issued a tender / tenders for sale of the goods by public auction. Since the Plaintiffs failed to have any offers in respect of the articles to be auctioned, the Plaintiffs sold the consignment s under the suit contracts by private treaty. P.W.1 , a retired officer of the Plaintiffs, who was serving with the Plaintiffs at the time of the suit contract and resale, has led evidence of the resale. He has produced copies of 4 invoices in respect of the consignment s under the contract as well as other consignment s containing the goods of the contract description to show the sales effected.


14. The Plaintiffs have produced documents in respect of the charges incurred by the Plaintiffs for demur rage etc. Such document s carry a presumption of correctness for considering their admissibility under the Commercial Document s Evidence Act and are accordingly not disputed by the Defendants.


15. The Plaintiffs have also relied upon other private documents of their Clearing Agents to prove the further expenses incurred by them, but which documents have not been taken on record as they have not been proved by direct or secondary evidence. The Plaintiffs have fairly given up their claim in that regard.


16. The Plaintiffs have claimed interest as well as carrying charges as per the contract between the parties.


17. Up on giving credit for the amount s received by the Plaintiffs on the resale, the Plaintiffs have calculated the loss incurred by them initially as per the Particulars of Claim, Exhibit- A to the Plaint. It would have to be seen whether the Plaintiffs are entitled to be reimbursed the loss claimed by them as damages upon resale of the consignment s not accepted by the Defendant s under the suit contracts.


18. Issue No.1 : Pursuant to the Circular dated 21.2.1971, Exhibit- A in evidence, issued by the Plaintiffs showing the various types of cotton available for allocation to the Textile Mills, the Defendant s registered their requirements in respect of 4 types of cotton under their letter dated 7.3.1977, Exhibit- B in evidence. The Defendants specified the time of delivery; they required the cotton for May, June, July and August shipment. The Defendants also specified the quantity required by them; they required 500 bales of each of the 4 varieties specified in their aforesaid letters. They further specified that they were to avail of credit facilities offered by the Plaintiffs and they would arrange to secure the required guarantee upon the Plaintiffs confirming the grant of credit. The Defendant s applied for 500 bales each of Mexican, Guatemala, Nicaraguan and Brazilian cotton. The Textile Commissioner, by his letter dated 18.3.1977, Exhibit- C in evidence, granted to the Defendants 85 bales of Mexican cotton, 50 bales of Guatemala cotton, 500 bales of Central American cotton, 500 bales of Nicaraguan cotton and 500 bales of Brazilian cotton. These were to be imported by the Plaintiffs and were available for immediate contracting and shipment not later than 30.6.1977.


19. The parties however entered into a written Contract No.G- 444 on 18 th March 1977 for supply of 50 bales Guatemala cotton, 85 bales of Mexican cotton, 500 bales of Nicaraguan cotton and 500 bales of Brazilian cotton. Central American and Nicaraguan cotton has not been supplied and the parties are not at dispute with regard to that aspect. The other three types of cottons were to be shipped in May, June and July 1977, respectively. As per the modification of the contract made by the Defendants, the shipments were to be made in ?approximately equal quantities ? in the aforesaid months. The Defendants have not pressed the said mode of shipment except for requesting approximately equal quantities.


20. The parties entered into a further Contract No.G-511, Exhibit- H on 28th March 1977 for 58 bales of Turkish cotton, which was to be shipped in April /May 1977. The specific requirement for the time of shipment set out in the contract was ?If possible in April 1977, otherwise in May 1977. ?


21. The Defendants have contended that the goods arrived late and hence they are not bound to accept the delivery. It may be mentioned that the contract specifies the months of shipment and not the dates of arrival. It is an admitted position between the parties that the date of the shipment of Turkish cotton was 1.6.1977. Contract No.511 shows that shipment was to be made if possible in April 1977, and otherwise in May 1977. It was made on 1.6.1977, a day after the shipment period expired. Brazilian cotton was shipped on 12.8.1977. Under Contract G-444 the months of shipment of Brazilian cotton was June / July 1977. It was, therefore, shipped 12 days later than the period of shipment specified in the contract.


22. Guatemala cotton and the Mexican cotton were admittedly shipped during the period of shipment specified in the contract. The parties have no dispute with regard to the time of shipment or arrival of those consignment s and none are shown to Court.


23. It is contended on behalf of the Defendants that the Turkish cotton arrived on 26.7.1977 and Brazilian cotton arrived on 21.9.1977. It is contended that, therefore, the shipment was long delayed. Time, which is ordinarily of the essence in the contract for sale of the movable goods, was important to the Defendants and was of essence of this contract and the Defendants were not obliged to take delivery of any of the goods after the contract period.


24. Time is presumed to be essence of contract for movables because in a contract for sale of movable goods there are various other inter- connecting contracts ? the Defendant s would have to process the cotton, manufacture material and sell it to a third party. The Defendant s would have such contracts already entered into and because of delay of one contract the others would be delayed exposing the Defendants to needlessly defend claims for damages in various actions in law. It is upon such a scenario for contracts of movable properties that time which is ordinarily taken to be of essence or even presumed to be of essence, can be shown to be otherwise, expressly or impliedly.


25. The time of shipment is specifically mentioned in the suit contract s, though the fact that time is of essence is not mentioned. It would have to be seen whether time was indeed of essence in the suit contracts or whether the clause relating to the period of shipment denoting time for the performance of the contract, indicated and specified otherwise.


26. The circular of the Plaintiffs, Exhibit-A and the quota letter/permission of the Textile Commissioner, Exhibit- C, show initially the availability of certain varieties of cotton which would be imported in shipments specified in certain months. The registration of the Defendants for the cotton bales required by them under their letter dated 7.3.1977 shows that they would require the cotton bales specified by them for May, June, July and August shipments at the rate of 500 bales each in every shipment. Hence, the Defendant s wanted to put up the time- limit for the performance of the contract within a 4-month period. They would require 500 bales each month beginning May 1977. They required similar quantities of cotton each month, including the last installment of cotton in August 1977. It need hardly be mentioned that the Defendants would be required to make payment at the time of shipment. Hence, the requirement for payment would be to the extent of the price of 500 bales each month. The Defendants' letter specifying the time of shipment in the aforesaid 4 months further specified the requirement of credit facilities to be offered by the Plaintiffs. A reading of the first offer of the Defendants, therefore, shows that they required the consignment of cotton over a period of 4 months when they would take delivery and make payment.


27. Since the cotton was in short supply and the extent of the supply was to be allowed by the Government, the Textile Commissioner granted to the Defendants lesser quantities of certain cotton than what they applied for. Those consignments were available for immediate contracting and shipment. Shipment was to be not later than 30.6.1977. The quota letter /permission showed that no extension of date would be allowed. Hence, the Government required the Defendants not to spread over the contract period as much as the Defendants would have wanted or desired. This would apply specially in respect of the August shipments.


28. Ultimately, the parties entered into the written contract and the terms of that contract would govern the parties. The original contract, Exhibit- D in evidence, shows the relevant blanks being filled upon a typewriter specifying the months of shipment. The original contract No.G-444 has been sent to the Defendants. The original contract has been produced by the Defendant s in their Affidavit of documents. Copy of the contract containing carbon copy of the typewritten portion which is also signed in original by both the parties is produced by the Plaintiffs. That has been marked Exhibit- D in evidence. The original contract produced by the Defendant s is marked Exhibit D-1 in evidence so as to read the two documents together.


29. The typewritten portion at the bottom of the first page of the contract showing the bales actually to be delivered to the Defendant s under the contract sets out the period of the shipment . The period is between May and July. The Defendant s have put added specifications in black pen in the duplicate copy of the contract, Exhibit- D in evidence. [That portion has been typewritten in the original contract produced by the Defendants marked Exhibit D-1 in evidence.] The added portion against the months of shipment in case of shipment of Guatemala, Mexican as well as Brazilian cotton shows ?approximately equal quantities ?. This addition is made by the Defendants with the same ball pen with which the contract is signed by their representative. Hence, a reading of the entire clause relating to the time of shipment shows the Defendants' desire to obtain only part of the consignment of each variety of cotton at one time. Half consignment is, therefore, neither wanted nor expected by the Defendant s in first month of the period of shipment.


30. It is contended by Mr.Sancheti on behalf of the Defendant s that the quota letter /permission of the Textile Commissioner, Exhibit- C, is issued under the Essential Commodities Act, 1955 for cotton which is an essential commodity under Section2(a) thereof. The permission is granted for import contracting and shipment not later than 30.6.1977. The permission shows that no extension would be allowed. He, therefore, contends that this is a specified obligation making the time of the shipment of the essence in addition to the presumption under the Sale of Goods Act. The permission /quota letter dated 18.3.1977 which is a cyclostyled letter, would have to be read along with the initial letter of the Plaintiffs themselves dated 21.2.1977, Exhibit- A, showing the availability of cotton for allocation during the specified months of shipment and the later contract specified the periods of shipment extending upto 2 months. It is argued on behalf of the Defendants that such extension would be void. The provisions of the Essential Commodities Act do not show this aspect, though it shows that contravention of any order made under the Essential Commodities Act would be punishable under Section 7 thereof. The fact that the Plaintiffs, who are the canalizing agents of the Government in respect of cotton itself, have shown the period of shipment in their initial letter as well as in the later contract, the specific time of contracting and shipment mentioned in the Textile Commissioner's order, Exhibit- C, would be taken to be modified in terms of the contracts, Exhibits D & H, by which alone the parties are governed, provided that it is to the extent of the quantity granted.


31. It is also contended that in the letter of the Defendants dated 18.4.1977 immediately after the contract the time was specifically made of the essence. My attention is drawn to the specific paragraph of that letter in that behalf. It is thus:-


32. So far as contract No.G- 511, Exhibit- H in evidence, is concerned, it specifies the time of the contract to be ?April /May shipment - buyer?s option? and further specifies that if it was possible, it would be in April 1977, otherwise it could be in May 1977. A reading of this clause relating to the time of shipment shows that the Defendants did not want delivery urgently or within a specified time- frame. The Defendants were amenable to obtaining delivery within a span of 2 months.


33. The aforesaid two clauses in the aforesaid 2 contracts relating to the time of shipment does not show the last date on which the shipment is expected or required. In fact, it does not mention the date of shipment ? it mentions the months of shipment . Shipments could be made within 30/31- day period at any time. The aforesaid contract s, therefore, show that though time may be presumed to be of essence in the contracts of this kind, it was specifically made not of essence in the suit contracts. The shipment on 1.6.1977 may be hours after the technical expiry of the month of May 1977.


34. Had the time been of essence and were the Defendants to be put to any loss only upon delay in the shipment, even by a single day, the Defendants would be expected to have inquired from the Plaintiffs and stated their position with regard to the consequences of late delivery immediately after the last date of shipment expired and the goods failed to arrive. The consignment s under the contract are stated to have arrived on 26.7.1977 with regard to Turkish cotton and 21.9.1977 with regard to Brazilian cotton, the two consignments in respect of which the Defendants have taken exception. The conduct of the Defendants upon the arrival of the consignments is, therefore, required to be seen. That conduct is reflected in the admitted correspondence between the parties by letters and telegrams.


35. The Turkish cotton was shipped on 1.6.1977. This shipment is shown to be delayed by one day. It is shipped a day after the period of shipment mentioned in contract No.G- 511. The Plaintiffs issued the shipment advice to the Defendants on 9.6.1977, Exhibit- J in evidence. Mexican cotton was shipped on 12.6.1977. The Plaintiffs issued their shipment advice on 17.6.1977, Exhibit- K in evidence. There is no dispute that this shipment is delayed. The Guatemala cotton was shipped admittedly within the contract period (though the date of shipment is not provided by both the parties). The Plaintiffs issued their shipment advice on 30.6.1977, Exhibit- L in evidence, showing that it was shipped in June 1977 itself. The Brazilian cotton was shipped on 12.8.1977. The Plaintiffs issued their shipment advice on 16.8.1977, Exhibit- P in evidence. Hence the shipment was 12 days after the period of shipment mentioned in contract No.G- 444.


36. The Plaintiffs issued their invoices upon the Defendant s under their forwarding letters soon after the shipping advice was shipped.


37. The Plaintiffs issued their invoice dated 8.7.1977, Exhibit- M, in respect of Turkish cotton under their forwarding letter dated 16.7.1977, Exhibit M-1, setting out the name of the ship and the particulars of the shipment, claiming a sum of Rs.1,72,310.37 from the Defendants. The Turkish shipment, which is stated to be delayed by one day, is stated to have arrived in India on 26.7.1977. The Defendants have not refused to accept delivery. They have not taken exception to the delivery. They have not raised any dispute before or at the time of the arrival of the shipment also. They have simplicitor failed to take delivery.


38. The Plaintiffs issued their invoice dated 9.7.1977, Exhibit- N, in respect of Guatemala cotton under their forwarding letter dated 19.7.1977, Exhibit N-1, setting out the name of the ship and the particulars of the shipment claiming a sum of Rs.1,40,311.30 from the Defendants. The Guatemala shipment is not delayed and hence there is no dispute with regard to the time of shipment.


39. Similarly the Plaintiffs issued their invoice dated 20.7.1977, Exhibit-O in respect of Mexican cotton under their forwarding letter dated 1.8.1977, Exhibit O-1, setting out the name of the ship and the particulars of the shipment claiming a sum of Rs.2,35,934.22 from the Defendants. This shipment is also not stated to be delayed and hence there is no dispute with regard to the time of shipment.


40. Similarly the Plaintiffs issued their invoice dated 23.8.1977, Exhibit- Q, in respect of the Brazilian cotton under their forwarding letter dated 13.9.1977, Exhibit Q-1, setting out the name of the ship and the particulars of the shipment claiming a sum of Rs.14,08,815.81 from the Defendants. The date of this shipment is 12.8.1977. Hence it is stated to be delayed by 12 days. The shipment advice itself is dated 16.8.1977. The shipment advice is, therefore, delayed about by a fortnight. The date of the arrival of the ship is stated to be 21.9.1977. The Defendants have however not refused to accept delivery. They have not taken exception to the delivery. They have not raised any dispute or at the time of the arrival of the shipment also. They have simplicitor failed to take delivery.


41. The positive conduct of the Defendants prevailed during the period of shipment, at the end of the contract period, soon after the contract period expired and the shipment was delayed and at the time the Defendants were advised about the shipment and when they were sent the invoice showing the amount under the shipment claimed from them. That conduct is reflected in the communication initially contained in the telegrams sent by the Plaintiffs and replied by the the Defendants forming a chain of such correspondence between the parties, Exhibit- U (collectively).


42. The initial telegram of the Plaintiffs, which is in respect of the Brazilian cotton, inquires of the Defendants ?whether you received original documents and when payments to be made ? sent on 21.9.1977.


43. The Defendant s never replied to the said telegram until 4.10.1977. Their reply telegram, addressed to the Managing Director of the Plaintiffs Mr.N.S. Kulkarni, mentions about the bales of foreign cotton booked by the Defendants due for shipment in April / June. [Contract No.G-444 shows the consignments due in May / July .] The Defendants have stated that they had programmed consumption in August /September /October and their advance planning has been totally upset by the delay. They further state that the Defendants? Mill was under lockout from 15th August and hence they cannot avail of the consignment. They have also stated that they have large export orders pending for 100% staple fibre fabrics under an order from United Kingdom so that their Mills would be employed for several months in export production of those goods. They have further specified that they are a small unit having only 300 looms and the Plaintiffs would appreciate that it would not be possible for them to take the late consignments which were yet to be received though scheduled in April / June. [The shipments were scheduled between April to July 1977 .] Consequently they requested to treat the contract as cancelled as per force majeure (beyond their control). They called for confirmation of the position. It can be seen that the Defendants were reluctant to take delivery not only because the consignments had arrived late and they had suffered any loss thereby, but because of various other factors at their end. Similarly though they claimed that shipments were due between April to June, the contracts show otherwise ? the shipments could have arrived until the end of July 1977. The shipment for Turkish, Guatemala and Mexican cotton were made in June 1977 itself. The Brazilian cotton, though delayed, was shipped on 12.8.1977. The initial two shipments had reached by July 1977. That was even before the Defendants? Mills were under lockout. The only real reason for avoiding the contract by taking delivery of the shipments as late as in October 1977 is the Defendant s? contract with United Kingdom of staple fibre fabrics.


44. The Defendants have produced their documents relating to the said contract, Exhibit- 12 (collectively) in evidence. The contract s are shown to be bearing Nos.SF1 /77, SF2 /77 and SF3/77. These contracts are shown to have been entered into in May 1977. The contracts, Exhibit- 12 (collectively), dated 9.5.1977 are in respect of staple fibre unprocessed cloth and mentions the delivery period to be June /August 1977. Hence from the Defendants? own documents, it can be seen that after entering into the contract with the Plaintiffs in March 1977 for purchase of the aforesaid varieties of cotton, the Defendants entered into contract with the third party for supplying /delivery of other goods in May 1977. Whereas the Defendants were to take delivery between May and July 1977 under the Plaintiffs? contact, the Defendant s were to effect delivery between June and August 1977 under their later contracts with the third party. These the Defendants found themselves unabled to do, they being a small unit having only 300 looms. Consequently on account of their own business position they made a breach of their contract s with the Plaintiffs ? they themselves requested cancellation on account of ?force majeure?, which is directly contradictory to their case of delayed shipment.


45. In the Plaintiffs? telegram dated 4.10.1977 itself, the Plaintiffs refused treating the suit contracts as cancelled and called upon the Defendants to arrange to take delivery and make payment immediately.


46. In the later telegram of the Defendants dated 7.10.1977 addressed to the Plaintiffs? Managing Director Mr.Kulkarni they again mentioned about the lockout, the delayed delivery, the delayed shipment as also the Defendants? other contracts of staple fibre and called upon the Plaintiffs to cancel the contract on the ground of force majeure. The Plaintiff?s reply is dated 19th October 1977. They mentioned about their inability to arrange clearance at their end and requested the Defendant s to take the consignment s against payment and warned that otherwise consequences would be on their account. In a further telegram dated 22.10.1977, the Defendant s reiterated their position in view of the


?unprecedently peculiar and most unfortunate circumstances ? and not in view of the delayed shipments alone. The parties have thereafter corresponded through their Advocates reiterating their position in the letters Exhibit- V (collectively), which need not be repeated.


47. How the terms of the contract between the parties have been interpreted to ascertain the real intention of the parties with regard to making time the essence of the contract has been considered in the case of D.W. Roberts vs. Shaikh Hyder, AIR 1923 Nagpur 140 . A contract of a similar kind was held not to have the time the essence of the contract. In that case a relevant part of the contract runs thus:


? The whole work will be completed in 4 months from the date of getting permission in writing from Mr.D.W. Roberts. A fine of Rs.5 per day will be exacted for every day after that date that the work is not completed within the above noted time.?


It was held that time was not essence of the contract in that case. The very fact that penalty was stipulated in case of failure to complete the contract within the time indicated in the contract. It would not result in avoidance of contract but acceptance of performance after the stipulated time subject to payment of damages which were fixed.


48. Hence a reading of the whole contract and the conduct of the parties thereupon have to be seen to conclude whether time which is ordinarily of essence of a commercial contract was of essence of the suit contract.


49. It is contended on behalf of the Defendants that the time is essence of the contract of movables. That broad statement per se is incorrect. Time is ordinarily of the essence of a contract of movables. It may be presumed to be so. The presumption is rebuttable. It can be rebutted by the parties expressly or impliedly. The expression as well as the implication of the party?s intention can be reflected in contract itself. The suit contract shows no urgency on the part of the Defendants. The contract shows the Defendants' requirement for delivery in 2 installments. In fact the Defendants wanted to spread out the delivery and consequently the payment required to be made upon delivery. The second contract No.G- 511 shows the laxity of performance. It depends upon when the exporter would find it possible to send the goods - it could be sent in April or in May, 1977. It does not require delivery on one specific day. Hence delay of one day is completely inconsequential. Nothing is shown by the Defendants that such delay of one day caused them prejudice, harm or injury.


50. The case of M/s. China Cotton Exporters Vs. Beharilal Ramcharan Cotton Mills Ltd., A.I.R. 1961 S.C. 1295 was a case in which shipment date was stated to be not guaranteed. The contract stated that the shipment was to be in October ? November 1950. In that case import license could not be obtained. Hence it was stated that ?therefore? the shipment date is not guaranteed. It was held that that was only for the reason of obtaining the import license, otherwise the shipment period stood guaranteed by virtue of the word ?therefore ?. Hence the contract has to be read as a whole. The intention of the parties in the suit contract is not to have shipment on any specific date. Hence, time, which is ordinary of the essence, is not of the essence in this case.


51. In the case of Andard Mount (supra) also time was of essence. That case was for delivery of human albumin within one year with initial delivery commencing by a particular month. It was held that time was the essence of the contract and in any case it had to be performed within a reasonable time. If there is no fixed time, a party can make time the essence later by giving notice in that behalf. If time is not of the essence, the contract has to be performed within a reasonable time. Whether or not, time is the essence can be inferred from what passed between the parties before and not after the contract. In this case the contracts had to be performed within a period of 2 months. They had to be performed within a reasonable time thereafter, since no specific date was required or fixed. The shipment effected one day or even 12 days after the period which has not caused any prejudice to the Defendants show that the contract was performed within a reasonable time. The Defendants cannot breach such contract by non- acceptance of goods on a plea as to the essence of the contract taken much later without proof of the prejudice caused to them.


52. The aforesaid correspondence unmistakably shows that the reason for the Defendant s? failure to take delivery was not the delay in shipment . The consignments were delayed ? one by one single day and the other by 12 days. That was not inordinate delay. Since time is seen not to have been the essence of the contract and a date of the actual delivery was not agreed upon and over a period of 2 months the shipments could be effected, a delay of mere 12 days would not be enough to avoid the contract between the parties. The shipments could have been made within a reasonable time. Since the intention of the parties was not to make time the essence, upon initial delay the Defendants did not make any dispute. The very first telegram is only on 4th October 1977 when the Defendants? hands were full thanks to their later contract executed on 9.5.1977 which drove the Defendant s to dishonour their contract with the Plaintiffs.


53. The conduct of the Defendants in not clearing the consignment of each type of cotton is specifically shown from the admitted correspondence between the parties by Mr.Shah on behalf of the Plaintiffs. The most material documents relating to each of the consignments separately need to be seen.


Turkish cotton:


(i) The consignment was shipped on 1.6.1977, a day after the 2-month period mentioned in Contract No.511 expired. [The contract period being ?If possible in April 1977 otherwise in May 1977 ?.].


(ii) The Plaintiffs had sent the shipping advice on 9.6.1977 to the Defendants.


(iii) The Plaintiffs sent an invoice on 8.7.1977 under their forwarding letter dated 16.7.1977 to the Defendants.


(iv) The Defendants sent their document s in respect of the consignment of 57 bales of Turkish cotton to their clearing agents on 19.7.1977.


(v) The clearing agents accepted the Defendant s? letter and noted the instructions under their letter dated 21st July 1987, part of Exhibit- 2 (collectively).


(vi) The goods arrived in India on 21.7.1977.


(vii) The Defendants directed their clearing agents to stop forthwith further processing of copies of document s and all clearance work in respect of the consignment on 3.8.1977 under their letter, Exhibit- 11.


It can, therefore, be seen that though the goods were shipped late (by one day), the Defendant s accepted to take delivery in the first instance. The Defendant s even directed their clearing agents to clear the goods by sending their duplicate copies of the documents for processing. It is only much later and for the first time on 3.8.1977 that they changed their instructions and directions to the clearing agents. It was only then that they breached the contract, once accepted by them.


I. The Defendants having breached the contract by not clearing the goods, the Plaintiffs wrote to them on 3.7.1977, Exhibit- 6, that the documents were already sent to the bank and they were informed by the Cochin Port Trust of the accumulation of bales due to non- clearance. They further requested the Defendant s to retire the document s and clear the consignment to avoid further demur rage.


II. The Defendants failed and neglected to clear the goods.


III. The Plaintiffs reminded the Defendant s again to clear the goods by their letter dated 17.1.1978, Exhibit- 7.


IV. The Plaintiffs required the duplicate set of document s of the Defendant s to clear the goods.


V. The Defendants sent their copies of document s to the Plaintiffs? clearing agents only on 4.7.1978 under their letter, Exhibit- 10.


VI. Upon having received the documents, the Plaintiffs cleared the goods on 21.7.1978 as reflected in the Dock documents being bill of the Cochin Port Trust dated 21.7.1978, part of Exhibit- S (collectively).


Guatemala cotton :


(i) No delay in shipment or arrival of the goods is alleged in case of this transaction. 43 bales of Guatemala cotton were to be shipped during the period June / July 1977.


(ii) The Plaintiffs sent their shipping advice to the Defendant s on 30.6.1977, Exhibit- L.


(iii) The Plaintiffs sent their invoice on 9.7.1977 under their forwarding letter dated 19.7.1977, Exhibits N and N-1.


(iv) The goods admittedly arrived on time.


(v) The letter of the Defendants? clearing agents dated 21st July 1977, part of Exhibit- 2 (collectively), shows the copy documents relating to the said consignment received by them. This was received during the period of shipment itself.


(vi) Despite that the Defendants instructed their clearing agents to stop further processing of copies of documents and all clearance work even in respect of the said consignment under their letter dated 3.8.1977, Exhibit- 11.


In case of this consignment for want of any delay whatsoever, the non- clearance by the Defendant s of the 33 said consignment shows the failure of the Defendant s? duties as the buyer under Section 31 of the Sale of Goods Act.


I. The Defendants failed and neglected to clear the goods.


II. The Plaintiffs sent their reminder to the Defendants to clear the goods on 17.1.1978, Exhibit- 7.


III. The Defendants sent their duplicate copies of the documents to the Plaintiffs? clearing agents only on 4.7.1978 under their letter, Exhibit- 10.


IV. The Plaintiffs cleared the goods on 21.7.1978 along with the consignment of Turkish cotton. The Plaintiffs however have not produced any Dock documents to show precisely on which day this consignment was cleared.


Mexican cotton :


(i) There is admittedly no delay in the shipment or arrival of this consignment also. The period of shipment in the Contract No.G-444, Exhibit- D, is May/ June 1977 shipment


(ii) The date of shipment is 12.6.1977.


(iii) The Plaintiffs sent their shipment advice on 17.6.1977,Exhibit- K.


(iv) The Plaintiffs sent their invoice dated 20.7.1977 under their forwarding letter dated 1.8.1977, Exhibits- O and O-1 to the Defendants.


(v) The goods arrived in India on 26.8.1977. By this time, the Defendant s had sent their telegram, Exhibit- U (collectively) to the Plaintiffs refusing to clear the goodsunder any of the consignment s.


(vi) The Defendant s had instructed their clearing agents not to clear the first two consignment s of Turkish cotton and Guatemala cotton on 3.8.1977. Hence the Plaintiffs cleared this consignment on 30.8.1977 themselves without further reminders and correspondence. This is shown in the Dock documents being the Import Application of the Bombay Port Trust and the Bill of Entry, part of Exhibit- R (collectively). In case of this consignment for want of any delay whatsoever, the non- clearance by the Defendant s of the said consignment shows the failure of the Defendant s? duties as the buyer under Section 31 of the Sale of Goods Act .


Brazilian cotton :


(i) This consignment was to be shipped during the period June/July 1977. It was shipped on 12.8.1977, after a delay of 12 days.


(ii) The Plaintiffs sent the shipment advice to the Defendants on 16.8.1977, Exhibit- P. The Plaintiffs sent their invoice dated 23.8.1977 under the forwarding letter dated 13.9.1977, Exhibits Q and Q-1 to the Defendant s. The consignment arrived in India on 21.9.1977.


(iii) The Plaintiffs, by their telegram to the Defendants sent on 21.9.1977, inquired of the Defendants whether they received the original document s and when payments were to be made. The Defendants however never cleared the goods and never made payment.


(iv) The Plaintiffs cleared the goods on 10.1.1978 without further correspondence as reflected in the copies of the Dock documents of this consignment being the Import Application and the bill for demur rage charges of the Cochin Port Trust, part of Exhibit- T (collectively).


(v) The Plaintiffs made further payment of the fumigation charges, removal charges, etc. on 14.1.1978 and 23.1.1978 as reflected in the documents, Exhibit- T (collectively).


54. The Defendant s? conduct can also be further seen from the correspondence with regard to the place of delivery of the goods. The contracts specify that the goods would be delivered at Cochin Port. The Defendants had mentioned this aspect specifically in their letters dated 18.4.1977, Exhibits E and I (collectively) that the shipment s were required at Cochin Port. The first shipment was made on 1.6.1977, which was informed to the Defendants by the Plaintiffs? shipment advice 9.6.1977, Exhibit- J. Thereafter the second shipment of Mexican cotton, which was made, was informed to the Defendants by the Plaintiffs? shipping advice dated 17.6.1977, Exhibit-K. That shipping advice erroneously mentioned that the goods were to arrive in Mumbai. Hence, by the Defendants? letter dated 25.6.1977, Exhibit- 4, the Defendants informed the Plaintiffs of the error and requested them to effect the shipments of foreign cotton to Cochin Port. That letter states :


?In any case we want the cotton to be shipped to Cochin Port only. You will, therefore, see that 69 bales of Mexican cotton are diverted and shipped to Cochin Port under advice to us .?


Again, by their telegram dated 1.8.1977, part of Exhibit- 3 (collectively), the Defendant s again informed the Plaintiffs that those bales were to be shipped to Cochin Port only. The Plaintiffs, by their telegram dated 2.8.1977, part of Exhibit- 3 (collectively), affirmed that they had arranged to deliver the documents of 69 bales shipped to Cochin instead of Bombay and requested the Defendant s to make arrangement for clearance at the Cochin Port and inform the mode of payment to the Plaintiffs? Account Section. Hence it can be seen that the Defendant s were willing to take the delivery of the consignments, whether they were delayed or not, until 2.8.1977. It is for the first time on 3.8.1977 that the Defendants informed their clearing agents by their letter dated 3.8.1977, Exhibit- 11 not to clear the consignment of Turkish and Guatemala cotton and by their telegram dated 4th October 1977, part of Exhibit- U (collectively), they for the first time mentioned about the delay in shipping alleging that their planning was upset, stated about the lockout of their Mill as well as about other orders from United Kingdom and requested the Plaintiffs to treat the contract with them as cancelled. - The shipment of Guatemala cotton was not even delayed.


55. It may be mentioned that though the initial Contract No.G- 444, Exhibit- D, was sent by the Plaintiffs to the Defendant s also mentioning about the shipment of 500 bales of Central American cotton to be delivered in May/ June 1977, the Defendant s did not want that delivery. Hence the Defendants scored out that entry in the original contract itself. By their letter dated 18.4.1977, they informed the Plaintiffs about the said cancellation and returned the duplicate copy of the contract to the Plaintiffs showing the cancellation. Hence by letter dated 25.4.1977, Exhibit- 5, the Plaintiffs accepted the cancellation and confirmed having treated the booking of 500 bales of Central American Cotton as cancelled. Similarly Nicaraguan cotton has not been shipped. Both parties have had no issue on these consignments. The Defendants have not claimed damages for non- delivery. This shows that both the parties accepted changed circumstances and co-operated with one another.


56. It is seen that despite being ready and willing to take delivery and also corresponding with the Plaintiffs with regard to the place of delivery the Defendants changed their mind and breached the contract on and from 3.8.1977. At the time of the breach, the Defendants never mentioned the reason for the breach to be only the delay in shipment. The delay in shipment of one of the consignment s is of but one day. The delay in the shipment of the other consignment is of 12 days. The other two consignments have arrived on or before time. Despite the said fact upon receipt of the Plaintiffs? Advocate?s Notice dated 18th November 1977, Exhibit- V (collectively), the Defendants, by their Advocate?s Reply dated 14.1.1978, Exhibit- V (collectively), contended that because of the delay in shipment of one of the consignments by a fortnight, the Defendants were not obliged to take delivery of any of the shipments. They also contended that as the time was the essence of the contact, the Plaintiffs committed a breach of the contract and the Defendants were not bound to take delivery of any of the goods consigned.


57. The terms of the contract and law with regard to the Sale of Goods Act would, therefore, have to be considered. The duties of the sellers and buyers of goods under the Sale of Goods Act, 1930, are set out in Section 31 thus:


?It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale .?


The Plaintiffs delivered the goods as contracted albeit with a slight delay in two of the consignments. The Defendants failed to accept delivery of any of the consignment s and failed to make payment in respect of each of them.


58. Clauses 5, 6, 17, 28 and 29 of the Contract set out the terms of the contract between the parties thus:-


(a) Under Clause- 5 if the Defendants fail to pay the price, the Plaintiffs were to be entitled to clear and take delivery of the goods at the costs and risks of the Defendants.


(b) Under Clause- 6 if the Defendants fail to take delivery, the Plaintiffs would be entitled to sell the goods and recover the loss suffered on that account.


(c) Under Clause -17 if the Defendants fail to take delivery and make payment they were to be liable for all charges and expenses, including insurance, demur rage and interest at 20% per annum on monthly rest basis.


(d) Under Clause- 28, the Defendants were not entitled to cancel or revoke the agreement once made, except upon pain of payment of damages.


(e) Under Clause- 29, no cotton after shipment was liable to rejection.


59. The parties entered into a commercial contract. The Plaintiffs signed the contract and sent it in two parts to the Defendant s on 18 th March 1977. The Defendants returned the duplicate copy of the contract signed by them on 18th April 1977. The Defendants made corrections as well as additions in the contract signed and sent by the Plaintiffs. The Defendants are bound by what they sign. The Defendants? liability to pay the price and take the delivery is clear and absolute. The contract does not specify time to be of essence. A reading of the contract more specially the specific clause relating to the shipment corrected and added to by the Defendants shows that time was not of the essence. Such were the terms of the contracts G-444 and G-511 between the parties.


60. Section 36(2) of the Sale of Goods Act, 1930, which deals with rules as to delivery, runs thus :-


?Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time .?


It is seen that no time for sending the goods is fixed under the contract except for a 2-month shipment period in which bales of approximately equal quantities were to be dispatched. The entire consignment was dispatched in one bulk with regard to each of the 4 types of cotton. No exception thereto has been taken. Nothing is reflected in the contract to show that the goods were urgently required at any specified time. The presumption that time is the essence of the contract of sale of movables is dispelled by the suit contract mentioning laxity of the time of shipment and the quantities thereto; Contract No.G- 511 had to be shipped ?if possible in April 1977 or otherwise in May 1977 .? The other contract s were broken up for delivery in 2 equal installments.


61. Section 42 of the Sale of Goods Act, 1930 deals with acceptance of goods as follows:-


?The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them .?


It can be seen that until 2.8.1977, the Defendant s had accepted the consignment s which had until then arrived, including the consignment of Mexican cotton which arrived before time and the consignment of Turkish cotton which had arrived but one day late. These facts show the initial acceptance of the goods and hence the ownership in them by the Defendants. These acts of the Defendants are inconsistent with the ownership of the Plaintiffs.


62. There is, therefore, no delay in the delivery of the consignment under the suit contracts such as to cause a breach on the part of the Plaintiffs. The admitted refusal to take delivery by the Defendant s without proper course shows a breach on the part of the Defendants of the suit contracts. Hence Issue No.1 is answered in the affirmative and Issue No.2 is answered in the negative.


63. Issue Nos.3 & 4 : Once it is seen that the Defendant s have committed a breach of the contract by not taking delivery of the consignment under the two suit contracts, the Plaintiffs would be entitled to damages and recovery of their expenses and charges.


64. The liability of the Defendants for neglecting and refusing to take delivery of the goods is incurred by them under Section 44 of the Sale of Goods Act . Section 44 runs thus:-


? When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods .?


Similarly under Section 56 of the Sale of Goods Act , the buyer, who has broken the contract by neglect and refusal to accept the goods and pay the price can be sued for damages for non- acceptance. Section 56 runs thus:-


?Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance .?


The Plaintiffs, as the party who suffered the breach committed by the Defendant s, would have to show the expenses incurred in clearance and storage of the goods as those which naturally arose in the usual course of things from such breach being the Dock charges paid by them under the Dock documents, Exhibits R, S & T (collectively) and reasonable charge for the care and custody of the goods as specified in Section 44 of the Sale of Goods Act. The Defendants are required to pay all the expenses incurred by the Plaintiffs for clearance of the goods at the Docks. The suit contracts mention the charges payable for demurrage, taxes, and other expenses at the Docks with interest thereon @ 20% p.a. with monthly rests under Clauses 17 of each of the 2 contracts, Exhibits D & H. Hence the Plaintiffs would be entitled to interest on the aforesaid charges and expenses at the contractual rate. The Plaintiffs also had to take care and custody of goods under Clauses 13 of each of them. The Defendants are required to pay carrying charges at 2? % per 30 days from the date of the arrival of the steamer if they fail to make payment immediately on arrival. Therefore, it can be seen that the parties themselves have contracted as to the amount of charge that the Plaintiffs would be constrained to incur for the storage of the goods.


65. The Plaintiffs? Suit is for recovery of compensation for the loss and damage caused by the breach of the contract by the Defendants under Section 73 of the Indian Contract Act, 1872 which deals with consequences of such breach. Section 73 runs thus:-


?When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him, thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.


Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.?


66. Under Section 74 of the Indian Contract Act, the extent of compensation allowable where a penalty is stipulated in a contract is laid down thus :-


?74. Compensation for breach of contract where penalty stipulated for. - When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.


Explanation.- A stipulation for increased interest from the date of default may be a stipulation by way of penalty .?


67. Damages For Loss:


The Plaintiffs would have to show the loss incurred by them upon the value of the consignment . Of course, the Plaintiffs would have to mitigate the loss. For such mitigation the Plaintiffs would have to resell the goods within a reasonable time to a third party before the goods devalue or perish by deterioration of quality of the goods. If the Plaintiffs fail to show mitigation of damages by actual resale of the goods within a reasonable time, the Defendant s cannot be held liable for the net loss suffered by the Plaintiffs.


68. Resale is the contractual entitlement of the Plaintiffs.


Clause 6 of the Contract specifically states that if the Defendants fail to take delivery of the consignment , the Plaintiffs will be entitled to sell to any party by private sale or by auction and any loss suffered by the Plaintiffs will be on account of the Defendant s and they would be liable to pay the same on demand to the Plaintiffs. This right of resale is claimed by the Plaintiffs as per the provisions of Section 54(4) of the Sale of Goods Act, 1930 . The said Section runs thus:-


?Where the seller expressly reserves a right of resale in case the buyer should make default , and, on the buyer making default , re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages .?


69. The Plaintiffs are required to mitigate their loss or damage. They would mitigate their loss by resale of the consignment. They must do so within a reasonable time. The Plaintiffs have resold the consignments to third parties. It is contended on behalf of the Defendant s that resale is far too delayed. The goods are liable to perish and deteriorate with age. Hence the price recovered on resale would consistently devalue. The longer the delay, the lesser would be the price recovered and consequently the more would be the loss suffered by the Plaintiffs. The Plaintiffs, therefore, would not be entitled to delay the resale and must sell the goods as expeditiously as possible.


70. The Plaintiffs must initially prove their effort at resale. The Plaintiffs have produced copies of the tender notice issued by them in respect of the suit consignments along with various other consignment s of cotton received from various countries of various types available at various Ports of India. Exhibit-W (collectively) are the tenders dated 24th June 1978 and 2nd September 1978. The tender Noticedated 24 th June 1978 is in respect of, inter alia, Mexican, Guatemala, Brazilian and Turkish cottons. The tender Notice dated 2nd September 1978 is, inter alia, in respect of Mexican, Guatemala and Brazilian cottons. The Brazilian cotton in that tender Notice was available only at Mumbai and it does not deal with the suit consignment. Turkish cotton was not put up for sale in the second tender.


71. It is the evidence on behalf of the Plaintiffs that several other parties like the Defendant s defaulted in taking delivery and making payment of their respective consignments. The Plaintiffs, therefore, have to collect the consignment of several parties to be able to issue their tenders. Paragraph- 26 of the examination- in- chief of the Plaintiffs? witness shows how the Plaintiffs invited offers from Indian Textile Mills under their tenders. The tenders were published.


72. The evidence of the Plaintiffs' witness in paragraph 26 of the examination- in- chief shows the publicity required to be given to All India Federal South Indian Godown Mills Association to make offers upon Indian Cotton Mills to purchase the consignment s uncleared by the defaulting importers.


73. The Plaintiffs? witness has proved the issue of the tender Notice dated 24.6.1978. The Plaintiffs received offers only for Turkish cotton. They were considered to be low by the Plaintiffs? purchase and sale committee. The offer was rejected as per the Minutes of the meeting of that Committee dated 10.7.1978, Exhibit- Z. Thereafter the Plaintiffs issued a further tender notice similarly. That was on 2nd September 1978. The Plaintiffs sold, inter alia, the Defendant s' consignment s. The Plaintiffs? contracts are under 4 separate invoices for Turkish, Guatemala, Central American /Gu a temala and Brazilian cottons. The Plaintiffs have produced copies of the invoices reflecting the sales from their files and the xerox copies of those copies made by them upon comparison in cases of two of the resales when their file copies are misplaced. These 4 invoices are marked Exhibits AA, BB, CC and DD, respectively.


74. Since the tender notice was for several consignment s of several purchasers of cotton who had defaulted, the resale invoices do not show the specific description or extent of the Defendants? consignments. The oral evidence of the Plaintiffs? witness in paragraphs 27 and 31 of his examination- in- chief show how the Plaintiffs have sought to prove the resale by the copies of the invoices by adducing secondary evidence.


75. The Defendants have not accepted as correct the resale invoices. Mr.Sancheti on behalf of the Defendants drew my attention to several inconsistencies in the documents to show that the Defendant s? consignments could not have been sold under these invoices. The Plaintiffs? witness has been cross- examined extensively on this score.


76. It is the Plaintiffs' case that the Plaintiffs have resold interalia the Defendants? goods under 4 separate transactions to 4 parties in India and abroad. The invoices raised by the Plaintiffs upon those parties are in respect of Guatemala cotton, Brazilian cotton, Turkish cotton and Mexican /Gu a temala type cotton. The Plaintiffs have to prove these contracts of resale. The original invoices have been sent to the respective buyers. The Plaintiffs are expected to have their file copies. The Plaintiffs would be required to prove these Documents by secondary evidence. Under the provisions of Section 63(2) of the Indian Evidence Act, 1872 the Plaintiffs would be required to produce the copies made from the original of such invoice by mechanical process (for eg., the carbon copies of typewritten Documents) which in themselves ensure the accuracy of the copies or copies compared with such copies. The copy made at the time of the execution of that contract for which the invoice is typed and sent to the buyer is the precise copy required to be produced by the Plaintiffs to serve as secondary evidence of the contract of resale. If such a copy is not produced, a copy compared with such a copy would be the one which would constitute secondary evidence.


77. Under Section 65 of the Indian Evidence Act secondary evidence is allowed to be given of the existence, conditions, or contents of the Documents when the original is shown to be in the possession of another person and when that person does not produce it despite notice. The exception is under Section 66(6) of the Evidence Act , when the person in possession of such a Document is out of reach or not subject to the process of the Court. The buyers of the resold cotton are foreign buyers or firms outside the jurisdiction of this Court. Hence the Plaintiffs would be entitled to rely upon their file copies which would be prepared at the time the original invoice for resale of the aforesaid types of cottons sold to third parties or copies compared with such copies by the Plaintiffs. The original need not be got produced by the Plaintiffs, if the parties are out of reach or not amenable to the process of the Court. The 4 invoices are made out in the names of parties in Coimbatore, Zurich, Geneva and Hong Kong and these parties are out of the reach of the Court and not subject to the process of the Court.


78. The evidence of the Plaintiffs? witness in paragraphs 20, 27 to 30 of the examination- in- chief show the execution of the Documents for resale, file copies as well as Xerox copies of such file copies being produced, stated to have been compared with the originals by the witness. Upon suchcompliance with Section 66(2) and 66(6) the Documents becomes admissible and are accordingly marked Exhibits-


AA to Exhibit- DD in evidence.


79. The credibility and acceptance of such document s, admitted in evidence and marked Exhibits is subject to the truth of the contents of the Document s being proved by the Plaintiffs and subject to the necessary cross examination.


80. The Plaintiffs have sold the aforesaid 4 varieties of the cotton being different bales to different parties on different dates. Each of them may be considered in chronological order for ascertaining the proof of the truth of their contents.


81. The invoice date 5th December 1978, which constitutes the first resale by the Plaintiffs stated to be inter alia of the Defendants? consignment, is marked Exhibit- AA. It shows the sale of 86 bales of Guatemala cotton. The contract between the parties was for 50 bales of Guatemala cotton. 43 bales were supplied and cleared by the Plaintiffs. The consignment was shipped within the period of contract. The goods are stated to have been cleared in July, 1978. (There are no supporting Document s of any Port to show the clearance of the goods). The tender notice which is stated to have been issued by the Plaintiffs for resale of the goods initially by public auction, a part of Exhibit-W (colly) is dated 24 th June, 1978. The Plaintiffs not having fetched a reasonable price upon the offers made by the buyers pursuant to the tender notice, the Plaintiffs have sought to resell the goods on 5th December, 1978, about 6 months after the issue of the tender notice to the Textile Mills.


82. The clearance of the consignment of Guatemala cotton is not shown by the Plaintiffs at all. No Documents with regard to that consignment are produced. Mr. Shah tried to contend that these were shipped and cleared along with the Turkish cotton and hence may be taken to be cleared on 21 st July, 1978. That is impermissible. The damages and losses claimed by the Plaintiffs would have to be seen upon taking into account the prices, dates of clearance of goods as well as resale of goods. Needless delay in any of those would dis- entitle the Plaintiffs from claiming damages. Besides if this consignment was cleared on 21st July, 1978, these goods could not have been put up for auction under the auction notice dated 24th June, 1978 part of Exhibit-W (colly).


83. The content s of the Document would require to be considered to appreciate the truthfulness of the case of the Plaintiffs with the Defendants? consignment was sold amongst the 86 bales sold under the said invoice. Paragraph 28 of the examination- in- chief of the Plaintiffs? witness shows in passive voice the trans action that took place as is obviously reflected in the Document itself. The Plaintiffs' witness has sought to identify the signature of the Officer of the Plaintiffs on the copy of the original invoice. The signature on the Document s produced by the Plaintiffs is in the original. The witness has also deposed to identify an endorsement on the top of the Document showing ?43 ex86b/ s a/c chakolas Spg?. In the examination- in- chief the witness has explained the endorsement to mean that bales of cotton out of 86 bales were of the Defendants. In the cross examination the witness has agreed with the suggestion that he had no personal knowledge why another person had made an endorsement on the top of the Document. The bill bears no mark, type or lot numbers.


84. Mr. Sancheti, on behalf of the Defendants, drew my attention to a copy letter relied upon by the Plaintiffs dated 22 nd November, 1979 giving notice to the Defendants regarding the resale of the goods under their contract No.G-444, Exhibit- D. The said letter is inter alia in respect of 50 bales of Guatemala cotton shipped to the Defendants. The said letter states about how the Defendant s failed to retire the Documents and take delivery of the cotton. The Plaintiffs, therefore, until the date of that letter sold 334 bales of Brazilian cotton out of 485 bales of Brazilian cotton shipped to the Defendants. The Defendant s' Advocate has justifiably contended that this letter, written about a year after the resale reflected in the invoice Exhibit- AA, shows that until November, 1979 the Plaintiffs had not sold any bales of Guatemala cotton from out of the Defendants? consignment . Though the Plaintiffs need not have shown the particulars of the contract, under which the consignment was shipped to the Defendants at the time of resale to the third party, (as is the tenor of the cross examination), the Plaintiffs are required to show by some intrinsic evidence how the consignment sold to the 3rd party under the invoice Exhibit- AA contains inter alia the consignment of the Defendants. Rather than showing that fact, the later circumstantial evidence shows otherwise. The cross examination of the Plaintiffs? witness further shows that he had no knowledge of the storage or shipping of the Defendants? consignment. Though that is natural and the witness need know each aspect of the contract with the Defendants, his lack of evidence to connect the Defendants? goods with the resale Document , despite deposing that he had personal knowledge of the resale when the invoice is signed by another Officer, shows failure to prove the truth of the contents of the invoice produced by secondary evidence.


85. The second resale by the Plaintiffs is of Brazilian raw cotton under invoice dated 11th September, 1979 to a party in Zurich, Switzerland. The invoice is marked Exhibit- BB upon the Plaintiffs? evidence in paragraph 30 of the examination- in- chief. The contract between the parties was for 500 bales of Brazilian cotton. 485 bales were shipped and supplied to the Defendants. The Defendants failed to clear any of those. The Plaintiffs cleared the consignment on 10th January, 1978 as reflected in the Documents of Cochin Port Trust Exhibit- T (colly). The invoice produced by the Plaintiffs is the Xerox copy of the file copy of the original invoice sent to the party in Switzerland. Paragraph 30 of the examination- in- chief shows that the office copy of the resale invoice is not traceable. Hence the initial evidence under Section 63(2) is not produced. A copy compared with the office copy is stated to be produced. P.W.1 has deposed that


?The himself compared Xerox copy of the resale invoice?.


He has not deposed that they were compared with the office copies. His evidence shows that the office copy was available at the time of the filing of the Suit when he took out the Xerox copy of the office copy of the resale invoice. He presumably compared a Xerox copy with the office copy. It would have to be adjudged whether the evidence of a witness not producing even the copy of the original Document made by the mechanical process which would ensure its accuracy is to be accepted in evidence upon the witness stating that he had compared the Xerox copy at the time of the filing of the suit. Section 61 of the Evidence Act requires Documentary evidence to be proved by either of the two modes. Primary evidence is to be led under Section 62 of the Evidence Act. If any Document can be proved by primary evidence by production of the Document itself, it is the initial mode of proof and deserves immediate acceptance.


Secondary evidence is allowed under Section 63 of the Evidence Act, if primary evidence is not produced. Section 63 is, therefore, in the nature of an exception to Section 62 as the secondary mode of proof of Documents. Secondary evidence is allowed in the 5 modes set out in Section 63 of the Evidence Act. Under the circumstances mentioned in Section 65, and subject to the procedure laid down in Section 66, secondary evidence is to be led. A copy of the original Document is, therefore, required to be the copy taken out at the time the original Document came to be executed. Such copy could have been taken out as a holograph copy by manuscript as was the usual copying in olden times, or the copy made by a mechanical process which could be by typewriting, a computer printout or a Xerox copy as would ensure accuracy of the original Document . A copy of a copy of a Document made at a later stage does not fall within the parameters of Section 63(2) unless the witness shows how a copy could have been taken of the initial copy of the Document at a later stage and how he has compared them with the initial copy which could be a holograph copy, a typewritten copy etc. The evidence of the Plaintiffs? witness is casual and cursory. It does not set out how and when the copy of the copy was made and how and when the original copy was lost though it was available at the time of the filing of the Suit. The evidence is seen to be given merely to fit into the last portion of Section 63(2). Despite admissibility of the Document being seen by such evidence, the credibility of the Document is not established. Hence, the evidence falls short to prove the truth of the content s of the Document on this score itself. If such evidence simplicitor is accepted there would be no evidence that cannot be pushed into any record in the name of proof of Documents. The witness has admittedly prepared a copy of the copy of the Document after filing of the Suit. The witness has not produced the copy of the Document made by the mechanical process as would ensure accuracy i.e. the typewritten copy of the original invoice which is the file copy/office copy of the Plaintiffs.


86. The Xerox copy of the invoice Exhibit- BB shows a very unclear signature at the foot of the Document. That signature is different from the other signatures on the other resale Document s. Deposition simplicitor that the witness identifies the signature as of another Officer from an otherwise illegible signature on the Xerox copy cannot also be accepted.


87. The invoice shows certain lot numbers, mark numbers and type of the goods. These are naturally not put by the witness. The marks are different, and naturally so, from the marks on the Defendants? consignment at the time of shipment and storage. The goods which are sold under this invoice are the Defendants? goods as well as other goods. Marks of the defaulting importers are not required to be put on the invoice of a third party. The Plaintiffs? witness has explained in re- examination that the marks are bound to be different as the lot numbers and other details given by the foreign suppliers are different from the lot numbers and other details given by the Plaintiffs as the exporter of the goods.


88. It is the Plaintiffs evidence in paragraph 30 of the examination- in- chief that the consignment of the Defendants was of 2 parts containing 151 bales and 334 bales though sold to the same party in Switzerland. The damages and other charges were also paid for the goods in 2 lots. Only one resale invoice is however, produced. The evidence shows that the invoice dated 11th September, 1979 Exhibit- BB is in respect of 151 bales from the Defendants consignment along with the other bales of other similar defaulting importers by the Plaintiffs to the third party. The letter dated 22nd November 1979 part of Exhibit- FF (colly) shows the sale of 334 bales of Brazilian cotton out of the Defendants' consignment of 485 bales. The invoice with regard to those 334 bales is not produced. Since 334 bales of cotton were only sold before the date of that letter, the Brazilian cotton to a Swiss buyer of 151 bales as deposed by the Plaintiffs would not prove the truth of the contents of the Document produced by the Plaintiffs. However it may be a case of a clear error on the part of the Plaintiffs' witness since Brazilian cotton is stated to be sold in 2 lots. The Plaintiffs' witness having specifically deposed about sale of the Brazilian cotton in 2 lots. The Brazilian cotton shown to be sold under the invoice Exhibit- BB consists of 1401 bales. The Plaintiffs could have passed off the entire shipment of the Defendants of 485 bales under the said invoice. The Plaintiffs have not done so. The Plaintiffs have sought to produce Documents only with regard to a part of the Defendants' consignment stated to have been sold under the invoice. The Document would reflect the price prevalent of the Brazilian raw cotton on the given date, whether or not, the entire consignment was resold by the Plaintiffs. The Defendant s would be entitled to rebate to the extent of the market price on that day with regard to the entire consignment purchased, but not cleared by them to compute the loss suffered by the Plaintiffs upon resale.


89. The third resale by the Plaintiffs is of Turkish cotton under invoice dated 13th February, 1980 Exhibit- CC made to a party in Geneva, Switzerland. The contract between the parties No.G-511 is in respect of 58 bales of Turkish cotton. 57 bales have been shipped and cleared. The invoice Exhibit- CC is for 370 bales of Turkish cotton. It is the Plaintiffs evidence in paragraph 27 of the examination- inchief that the Plaintiffs have sold inter alia the 57 bales of Turkish cotton which was the Defendants' consignment. The Tender Notice part of Exhibit-W(colly) has been issued on 24th June, 1978. The Defendant s' consignment is shown to have been cleared on 21st July, 1978 as per the Document s of the Dock Exhibit- S (colly). If these goods are cleared only on 21st July, 1978 they could not have been put up for auction a month before on 24th June, 1978. Hence what is contained in the tender notice dated 24th June, 1978 Exhibit-W with regard to Turkish cotton does not include the Defendants' consignment. Consequently if the deposition of the Plaintiffs' witness, that the invoice Exhibit- CC includes the 57 bales of Turkish cotton of the Defendants' consignment, is correct, it shows that the Plaintiffs never put up the said consignment for any public auction and only sought to sell it by private treaty 1? years after its clearance. Consequently the Plaintiffs' evidence under answer 74, that he was personally a party to the sale or resale, is itself a matter of doubt. The evidence is, therefore, neither credible nor clinching. Aside from showing the market value of the Turkish cotton on the date of resale, the document appears to be an otherwise unrelated document tried to be pushed into the record as the document relating to the resale of the Defendants' consignment.


90. The last resale of the Defendants' consignment is made out to be under a copy of the invoice dated 5th May 1980, Exhibit- DD. The document is really a xerox copy of the office copy of the original invoice. It has no signature of the Accountant at the place meant for signature. It, however, shows the xerox copy of an initial and signature at another place at the bottom of the document. There is no means of knowing whether such a document would be a copy compared with the original copy made by a mechanical process such as to ensure its accuracy. It is precisely, therefore, that the xerox copy of a copy of the document taken out at a date later than the date of the execution of the document cannot be admitted as secondary evidence despite a deposition of the witness that he had made the copy at the time of or after the filing of the Suit. Such direct evidence is merely given to fall within the provisions of law relating to proof of documents by secondary evidence without there being any truth in such deposition.


91. Further the copy of the invoice Exhibit- DD shows the sale of Central American cotton equivalent to type Guatemala. The Defendant s' consignment was of Mexican cotton and not Central American cotton. The Dock Documents showing the shipping as well as the clearance of the Defendants' consignment also show Mexican raw cotton. The contract between the parties itself shows inter alia 85 bales of Mexican cotton to be imported and shipped to the Defendants. No resale of Mexican cotton is shown. The tender notice shows separately a notice for Mexican cotton as well as Central American cotton. The 2 types are therefore, completely different. Sale of Central American cotton which is equivalent to Guatemala cotton cannot be shown to contend that the Defendants' consignment of Mexican cotton is sold under the said invoice. The evidence of the Plaintiffs' witness that this was the same cotton must, therefore, be rejected. However the Plaintiffs have contended that only 2 bales out of 85 bales of the Mexican cotton shipped to the Defendants have been sold under this invoice. The Plaintiffs have claimed various charges under the particulars of claim also in respect of only 2 bales of Mexican cotton.


92. The consignment of Mexican cotton is shown to be cleared on 21 st July, 1978 as per the Dock Documents Exhibit- R(colly). The Defendants' consignment is stated to have been put up for auction under the Plaintiffs' tender notice issued on 24th June, 1978 about a year after the clearance of the consignment . 2 bales out of this consignment only are sought to be resold under the invoice Exhibit- DD as per the oral evidence of the Plaintiffs' witness in paragraph 29(i) of the examination- in- chief. There is no documentary evidence produced for the remaining bales of Mexican cotton sold by the Plaintiffs as per the oral evidence contained in paragraph 29(iii) of the Plaintiffs' examination-in- chief.


93. The entire exercise and effort of the Plaintiffs in producing certain copies (office copies or xerox copies of certain other copies) produced by the Plaintiffs has gone only thus far. The consignment of Guatemala cotton which was cleared in July, 1978 could never have been put up for tender in June, 1978. It is specifically shown in the letter dated 22nd November, 1979 of the Plaintiffs Exhibit- FF that no Guatemala cotton was sold until that date. Hence, the invoice Exhibit- AA is of no use to compute any damages suffered by the Plaintiffs for the consignment of the Guatemala cotton. The invoice Exhibit- BB is seen to be not an admissible Documents as has emerged from the Plaintiffs' evidence which cannot be accepted as credible secondary evidence. The Plaintiffs' oral evidence of resale of 151 bales under the invoice Exhibit- BB runs contrary to their letter dated 22nd November, 1979. There is no Document for the other lot of 334 bales of Brazilian cotton. The Turkish cotton stated to be resold under the invoice Exhibit- CC also cannot be that of the Defendant s as the consignment of Turkish cotton was cleared on 21 st July, 1978 and hence the tender notice of 24th June 1978 could not have had the Defendants' consignment put up for resale. Even 2 bales of Mexican cotton are not shown to have been resold under the invoice Exhibit- DD since that shows resale of Central American cotton which is distinct from Mexican cotton. The resale value sought to be shown by the Plaintiffs remains at that.


94. The Plaintiffs are required to prove the truth of the contracts of the invoices. The Plaintiffs have sought to prove the truth of the contents of the invoices by secondary evidence. If secondary evidence is successfully led, as per the provisions of the Law of Evidence in this behalf, cited above, the document s can be taken to be proved. If proved, their contents can be considered in evidence. Such consideration in this case would be to show mitigation of the damages incurred by the Plaintiffs.


95. Mitigation of damages in a suit for recovery of the loss suffered upon the default of the Defendants in accepting delivery of the goods is imperative. The resale is required to be made within a reasonable period. What is reasonable period has been laid down in a number of cases.


96. In the case of Harichand and Co., Vs. Gosho Kabushiki Kaisha Ltd., A.I.R. 1925 Bombay 28 , which was also a case of sale of bales (presumably cotton) for computation of damages for the breach of contract, a period of 3 months taken by the Plaintiffs for resale of the goods between 5th February, 1921 when the goods arrived and 29th May, 1821 when the goods were sold was taken to be unreasonable delay. It was observed that since it was the Plaintiffs' duty to take all reasonable steps to mitigate the damages the Plaintiffs' Solicitor's notice of 26 th April to resell the goods unless the Defendant s took the bales within 2 days was itself held to be delayed without sufficient justification. It was seen that the market prices were falling and hence there should not have been such delay.


97. In the case of M/s Hirji Bharmal Vs. Bombay Cotton Ltd., A.I.R. 1958 Bombay 411 Justice Chagla, as he then was, held that even 5 days that elapsed for resale of the goods was unreasonable. That was a case of resale of cotton which was observed to be an extremely marketable commodity for which there would not be slightest difficulty in resale. In that case the notice of sale was given on 22nd May, 1953. Pursuant to the notice, the right to resale arose 5 days after 7th July, 1953 viz. 12 th July, 1953. It was held that the goods should have been sold on 15th July, 1953 and that having not been done, there was an unreasonable delay in the sale. Hence, though the claim for damages was rejected carrying charges claimed by the Plaintiffs were granted up to 15 th July, 1953 (paragraph 21) which was stated to be the proper date for considering the damages to which the Plaintiffs were entitled.


98. In the case of Nikku Mal-Sardari Mal Vs. Gur Parshad & Brothers, A.I.R . 1931 Lahor 714 delay of more than a year was held unreasonable and in the case of Mysore Sugar Co. Ltd. Vs. Manohar Metal Industries, A.I.R . 1982 Karnataka 283 delay of 3 months was considered to be long delay though the goods to be resold were copper scraps and ingots which are not perishable.


99. Mexican cotton was cleared on 29th August 1977.Brazilian cotton was cleared on 19th January 1978. Turkish cotton was cleared on 21st July 1978. The date of clearance of the consignment of Guatemala cotton is not known. The goods are stated to have been resold (though not proved to have been resold) on 5th December 1978, 11th September 1979, 13th February 1980 and 5th May 1980 respectively. Each of these sales is too far delayed. The Plaintiffs cannot be held entitled to damages upon the Defendants' default since they have not shown mitigation of such damages by expedient resale i.e. Within a reasonable period, given the fact that cotton is a perishable as well as a highly marketable commodity. The fact that the Plaintiffs are the Government undertaking and hence they collected the consignments of various defaulting importers and put them up for auction after which they sold by private treaty cannot give the Plaintiffs time much further than what would be reasonable time dependent upon market situation for mitigation of their damages. Though the Plaintiffs would be entitled to some more time for the additional requirement of conducting a public auction before sale by private treaty, the Plaintiffs' acts to that end and the time consumed in that exercise would require to be seen.


100. The Plaintiffs have contended that after all the consignment s were cleared they sought to put it up under the aforesaid 2 tender notices dated 24th June 1978 and 2nd September 1978. Thereafter on 4 different dates beginning 5th December 1978 the Plaintiffs have resold inter alia the Defendants' consignments (though the resale has not been proved as aforesaid). It may be stated that the initial copy of the tender notice produced by the Plaintiffs show it to be. ?The Foreign Godown Tender No.2? relating to ?sale of imported ready global cot ton? . The Plaintiffs have not produced the tender notice shown to be tender No.1. The second tender notice produced by the Plaintiffs is titled ?Foreign Godown Tender No.3? relating to ?Sale of imported ready global godown? . It is seen that 2 of the 4 consignments of the Defendants were cleared after the first of the aforesaid 2 tender notices and hence could not have been a part of that notice. The second tender notice does not show Turkish cotton being put up for sale. Hence the consignment of Turkish cotton is not even put up under the second tender notice. Mr. Sancheti drew my attention to the fact, that there are no goods available at Cochin Port where the Defendants' consignment s had arrived, which were put up for auction under the second tender notice. Hence the Defendants' consignment if at all were only put up for auction under the first tender notice. This would apply at best to the remaining 2 of the 4 consignments viz: Brazilian cotton and Mexican cotton. Mexican cotton is not shown to be resold; instead Central American cotton is shown to be resold. Brazilian cotton shown to be resold in 2 lots of which the invoice Exhibit- BB, which is for one of them, is shown to be resold 18 months after the consignment was cleared. Even the part of the Brazilian cotton so resold is after an unreasonable delay.


101. The Plaintiffs' case of resale fails on numerous grounds aforesaid. The Plaintiffs have not even shown the market price of the goods rejected by the Defendants for which damages are claimed soon after the date of the defaults. Cotton was in short supply and hence was an essential commodity under the Essential Commodities Act sold under the cotton control order issued under the notification dated 13th October, 1955 which was in force on the date of the shipment. There was, therefore, expected to be a high demand for the goods which were in short supply and regulated by the Government. The Plaintiffs could have resold them immediately upon clearance. The Plaintiffs having failed to do that, they are dis-entitled from claiming any damages for the loss, if any, suffered by them upon resale, if any, of the Defendants' consignment.


Recovery of Expenses And Charges:


102. It is seen that the Plaintiffs have not breached the contract by non- delivery of the goods. The Defendants have breached the contract by non-acceptance of the goods i.e., by refusing to take delivery of the shipment which arrived in India. It is also seen that there is no dispute with regard to the time of shipment of the consignment of the Guatemala cotton and Mexican cottons. These shipments admittedly arrived within the period of the shipments mentioned in the contract. The consignment of Turkish cotton was delivered but one day after the shipment period and arrived on 26th July, 1977. The consignment of Brazilian cotton was delayed by 12 days after the period of shipment and arrived in India on 21 st September, 1977. It is also seen that the Plaintiffs have sent the shipment advice as soon as the goods were shipped by the Foreign Exporters and before they arrived in Indian Port. The Plaintiffs have also raised the invoices which were sent under their forwarding letter to the Defendants before the dates of the arrival of the shipment. It is further seen that the Defendants have had correspondence with their own Clearing Agents for directing them to take delivery of the shipments and have sent their copies of the documents to them to that end. It is seen that till 2nd August, 1977 the Plaintiffs were ready and willing to accept the shipments and gave directions in that behalf to their Clearing Agents. It is only on and from 3rd August 1977 that the Defendants sought to commit default in clearing the shipment and informed their Clearing Agents to clear the shipments and the next day on 4th October 1977 requested the Plaintiffs to cancel the contract for the 4 reasons mentioned therein. It is also seen that between the period of shipment and the request for cancellation of the contract the Defendants had entered into another contract with an U.K. Party for export of Staple Fiber Fabrics, in which the entire infrastructure including their labour was to be utilised. It is further seen that the Plaintiffs did not accept the cancellation of the contract at that late stage and called upon the Defendants to clear the goods or bear the consequences of the contract by non- acceptance as per their telegrams sent so soon as the Plaintiffs received the Defendants' initial request for cancellation i.e., on 4th October 1977 itself and later on 19th October 1977. It is also seen that the Plaintiffs sent the legal notice on 18th November 1977 calling upon the Defendants to perform their contract by retiring the Document s making payment and clearing the goods to avoid demurrage and other charges and also for claiming damages upon the Plaintiffs themselves taking delivery by clearing the goods and making the full payment. It is further seen that the Defendants sent the Plaintiffs' Clearing Agents copies of their Documents relating to the shipment of Guatemala and Turkish cottons under their letter dated 4th July, 1978 Exhibit- 10. This letter has been received by the Plaintiffs' Clearing Agents on 6th July 1978. This enabled the Plaintiffs to clear the goods in the place and stead of the Defendants. The Plaintiffs cleared these goods on 21st July 1978 within a fortnight of the document s having been sent by the Defendants. The Plaintiffs have produced Dock Documents showing clearance of the consignment of the Turkish cotton. It is argued on behalf of the Plaintiffs that since the Documents relating to the consignments of Guatemala as well as Turkish cotton were sent to the Plaintiffs Clearing Agents by the Defendant s together on 6th July 1978 both the consignments were cleared together on the same day i.e., on 21st July 1978.


103. Having had prior experience of the Defendants approach by non-acceptance of the consignment, the Plaintiffs cleared the next 2 consignments which arrived in India in the next 2 months i.e. August and September 1977 soon after the arrival of the consignments. Consequently the consignment of Mexican cotton which arrived on 26th August 1977 was cleared by the Plaintiffs without involving the Defendants, entering into further needless correspondence, issuing further legal notice or calling for the documents of the Defendants. It is pertinent to note that the Plaintiffs? letters to their own Clearing Agents dated 19th July 1977 Exhibit- 1 and 3rd August 1977 Exhibit- 11 are in respect of the consignments of only Turkish and Guatemala cottons. There is no correspondence between the Plaintiffs and the Defendants as also between the Defendants and their Clearing Agents with regard to the consignments of Mexican and Brazilian cottons which arrived in India later. Accordingly Plaintiffs acted more expeditiously and cleared the goods expeditiously after having had the initial experience of the Defendants. The consignment of the Mexican cotton arrived on 26th August 1977 and was cleared by the Plaintiffs on 14th September 1977. The consignment of Brazilian cotton which arrived in India on 21st September 1977 was cleared by the Plaintiffs on 10th January 1978.


104. Under Clause 4 of the agreement between the parties Exhibit- D and Exhibit- H the

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Defendants were to pay the price of the consignments against the tender by the Plaintiffs of the bills of lading, insurance policy, invoice, delivery challans of the shipping company and other document s. If the Defendants failed to pay such price, under clause 5 of the aforesaid contracts the Plaintiffs were entitled to clear the goods and take delivery of the goods at the cost of the Defendants. The cost and expenses that Plaintiffs incurred would be the demur rage, insurance charges and all taxes as applicable made out in the Dock Documents. 105. The fact of clearance of goods by the Plaintiffs is not denied. The dates of clearance are reflected in the Dock Documents Exhibits- R, S and T (colly). The initial clearing on 21 st July 1978 of the Turkish and Guatemala cottons is after the initial requests and communications contained in the telegrams Exhibit- U (colly) and the correspondence between the Advocates upon the Plaintiffs? legal notice Exhibit- V (colly). The clearance of the Documents of the last 2 consignments is rather expeditious. 106. The Plaintiffs have relied upon documents of the Cochin Port Trust and the Bombay Port Trust (in view of one consignment having erroneously arrived in Bombay and later arranged to be shipped to Cochin) to show the expenses incurred by them by way of demurrage, insurance, fumigation charges and other charges whilst the goods remained in the Dock upon failure of the Defendants to take delivery despite repeated requests in writing. The Plaintiffs have produced documents with regard to three of the consignments. The Plaintiffs have failed to produce the documents with regard to one consignment. The expenses incurred by the Plaintiffs for demur rage etc. cannot be presumed or imagined. The Plaintiffs would be entitled to recovery of the precise total amount shown to be incurred by them under the documents. Such Dock documents are specified in Item- 3 of Part- II of the Schedule to the Commercial Documents Evidence Act, 1939, which raises a presumption of genuineness of those documents. These document s have not been disputed or countered. The documents are produced in evidence as Exhibits R, S and T (collectively). The Plaintiffs had warned the Defendant s by their telegram dated 19.10.1977, part of Exhibit- U (collectively), to lift the goods, for failure of which all consequences would be on account of the Defendants. The Plaintiffs have given notice to the Defendant s that they would clear the goods at the risks and costs of the Defendant s under their Attorney?s Notice dated 14th January 1978, part of Exhibit- V (collectively). Hence the Plaintiffs are entitled to the receipt of the amount spent by them under such Dock documents as soon as those expenses were incurred by the Plaintiffs to clear the goods which was seminal liability of the Defendants. 107. Under Clause- 17 of the suit contracts, the Defendants are liable for payment of interest charges in addition to the charges and expenses incurred by the Plaintiffs for insurance, demurrage, taxes, etc. Since the contractual rate of interest is specified and is payable upon failure to take delivery of the shipping documents or the delivery order and to effect payment under Clauses- 17 of the suit contracts, the liability towards payment of interest also commences from the date of the breach itself at the rate specified in the contract. 108. It is argued on behalf of the Defendant s that there would be no interest payable in a suit for damages prior to the filing of the Suit. Though this broad statement would be correct in the case of computation of damages suffered by a party eg., loss caused by breach of contract or damages for mental agony, it would not apply in case of damages which are really by way of recovery of actual expenses incurred after notifying the Defendants of the likely breach of the consequences. The damages incurred is per se would require an action to be filed forthwith. Expenses incurred can be recovered in an action filed within the period of limitation. This is more so where a legal notice in that behalf has been issued claiming interest at a specified amount warning the Defendants of the consequences. 109. Mr. Sancheti has drawn my attention to the Supreme Court judgment in the case of M/s. Mahabir Prashad Rungta Vs. Durga Datt AIR 1961 S.C. 990 in which there is a passing reference with regard to the claim of interest onpage 646 thus :- ?Learned counsel for Durga Datt claimed interest as damages but it is well settled that interest as damages cannot be awarded .? 110. This case has been followed in the case of Andard Mount (London) Ltd. Vs. Curewel (India) Ltd., A.I.R. 1985 Delhi 45 in which also it has been held that interest cannot be allowed by way of damages. However, in that case there was no express contract between the parties regarding payment of interest. No mercantile usage to that end was seen. The damages which were claimed by the Plaintiffs was not for a certain amount so that the Interest Act did not apply. Hence it was held that ordinarily no interest was allowed on the amount of damages arising out of a breach of contract. The judgment in the case of Andard (Supra) considers other judgment s of the Appeal Court in the case of Chatham & Dover Railway Co. Vs. South Eastern railway Co. 1893 A.C.429 and B.N.Railway Co. Ltd. Vs. Ruttanji Ramji A.I.R. 1938 P.C.67 . The former case was the case of damages for wrongful detention of debt and the latter was for payment of interest at a fixed rate which was held payable under the Interest Act, 32 of 1839. 111. In this case the Plaintiffs are entitled to the expenses incurred by them for clearing the goods under the Dock Documents. The Plaintiffs are entitled to claim that amount within a period of 3 years. The Plaintiffs have given notice to the Defendant s to clear the goods which the Defendants have failed to heed. The Plaintiffs have sent telegrams in that behalf. Thereafter, the Plaintiffs have given legal notice, warning the Defendants that they would clear the goods upon incurring the expenses, the consequences of which the Defendants will have to bear and claiming interest on the expenses incurred by them at the rate specifically notified. The Defendants are bound to make payment of the clearing charges incurred by the Plaintiffs. The immediate consequences of failure to pay such expenses, as is specifically incurred by the Plaintiffs being a liquidated amount, attracts payment of interest thereon. Such claim of the Plaintiffs is essentially for recovery of the expenses and not only the damages suffered by the Plaintiffs which ordinarily does not carry interest. Besides the contractual rate of interest precisely for these charges and expenses is fixed under Clause 17, and the Defendant s, therefore, are taken to have agreed to pay interest at that rate if the charges are incurred by the Plaintiffs upon the Plaintiffs being constrained to incur them for clearing the goods upon the Defendant s? breach by nonacceptance of the goods. The Plaintiffs are, therefore, entitled to recover all the charges incurred by them along with interest thereon at the contractual rate from the date of clearance of the goods till the filing of the Suit and thereafter under Section 34 of the C.P.C from the filing of the Suit till realisation. 112. Upon clearance of the goods the Plaintiffs would be constrained to store the goods in any godown. It, therefore, follows as a matter of corollary that the charges and expenses incurred by the Plaintiffs, for such storage would also be recoverable by the Plaintiffs. Under clause 13 of the contract Exhibits- D & H the Plaintiffs would be entitled to carrying charges at 2? % per 30 days from the date of the arrival of the steamer after the Defendant s fail to make payment s and take delivery of the goods immediately on arrival. That having admittedly not been done, the Plaintiffs would be entitled to such carrying charges at the contractual rate for the reasonable period after the goods were cleared to enable the Plaintiffs to sell the goods to mitigate the damages and claim the loss from the Defendant s. 113. Drawing an analogy from the Division Bench judgment in the case of Hirji Bharmal (supra) carrying charges, as granted by Justice Chagla in that case are required to be granted to the Plaintiffs for a reasonable period after the goods were cleared. Given the fact that the Plaintiffs are the Government Agency, judicial notice is required to be taken of the fact that the Officers of the Plaintiffs are required to follow reasonable procedure for sale initially by public auction, and following it for sale by private treaty. This, therefore, would not take as short a time as was expected from the private party in the case of Hirji Bharmal (supra). Mr.Rajesh Shah's contention that the Plaintiffs are expected to collect the goods of all such defaulting importers to put them up for public auction stands to reason and can be accepted. A period of one month of storage of goods would be a reasonable period expected of the Plaintiffs before they resell the Defendant s' consignment along with the consignment s of the other similar defaulting importers. Hence, though the Plaintiffs would not be entitled to the price of goods less the resale price by mitigation of damages caused to them, they would be entitled to the expenses incurred by them for clearance of the goods with interest thereon as also the carrying charges for the storage of the goods. Issue Nos.(4) & (5) are answered accordingly. 114. Hence the following order: Order The Suit is decreed in a sum of Rs.12,43,482.31 made up off carrying charges at the rate of 2.5% per month for 30 days on the value of the invoices, aggregating to Rs.48934.79 , shipping and fumigation charges shown in the documents, Exhibits R, S and T (collectively) of Rs.152440.78 with contractual interest at the rate of 20% per annum on monthly rest basis from the dates of these documents until 3.10.1980 being the date of the Suit, aggregating to Rs.152862.27 and further interest at the rate of 12% per annum from the date of the Suit until the date of the judgment i.e. 15.12.2008, aggregating to Rs.804199.23 . The Defendants shall pay further interest at the rate of 12% per annum from the date of the judgment until payment / realization. 115. No order as to costs. 116. The original documents shall be returned to the respective parties who produced them.
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