Supreme Court: In an appeal against the judgment passed by the Madras High Court (‘the High Court’), wherein it was held that respondents were commission agents so they could not be made liable for damages for non-delivery of goods, the three judges bench of M.C. Mahajan*, S.R. Das and Ghulam Hasan, JJ, opined that the parties were not ad idem either regarding the terms of delivery of the goods or the price. The suggestion of respondents that they were entitled to commission militated against the contract being one of purchase or sale of goods. The Supreme Court opined that appellants’ claim based on breach of contract for non-delivery of waste cotton could not be sustained because appellants had failed to prove that there was a contract of sale, so that they could claim damages for non-delivery.
Further, the various expenses incurred by respondents on behalf of appellants on account of the purchase of gunny bags, cartage, freight, etc. were only consistent with their being the commission agents and not sellers of goods. The Supreme Court opined that appellants’ claim based on misfeasance was also without any substance, as respondents did their best to assist appellants in the disposal of cotton. Thus, the Supreme Court opined that it was unable to hold that respondents were guilty of negligence and dismissed the appeal.
Background
In the present case, appellants were partner in a textile mills known as Alwaye Textiles Ltd and in January 1923, Kandasami, also a partner in the managing agency of Alwaye Textiles Ltd., purchased 1852 bags of cotton case, weighing about 652 candies from Cochin Textiles Ltd. Kandasami stated that he sold these goods to respondent at Rs 65 per candy in the beginning of February 1943 and respondent paid him the full price.
On 11-5-1943, appellant sent a telegram to respondents asking them to send their man to Pukkad for making arrangements for loading of the waste cotton or for keeping it protected against rain in godown, as it was raining heavily. On 21-5-1943, appellants again wrote to respondents enquiring about godown arrangements, to which respondents wrote to appellants that 250 bags had been dispatched and pressing would be commenced the following week. Respondents also made demands for price and money spent on expenses for storing the goods and dispatching them.
Subsequently, appellants sent a letter stating that they regret that all bags had not been dispatched and stated that whatever damage or loss came in this transaction, respondents would have to hold responsibility. However, respondents sent a letter expressing their surprise as to how they could be made responsible for the stuff damaged by rain. Further, a notice was issued to respondents demanding delivery of 1450 bags within a week in good condition as they were on the date of sale and failing that to make the value of goods at Rs. 80 per candy by way of damages on account of misfeasance, malfeasance and gross neglect.
However, respondents denied the alleged contract of purchase and pleaded that in the second week of March 1943, Appellant 1 instructed them to buy on their behalf this quantity of cotton waste lying in Cochin Textiles Ltd. from Kandasami. It was understood between the parties that respondents were not really to be the principals in the transaction, but Alwaye Textiles Ltd. were to be the purchasers, respondents being only agents entitled to the agreed brokerage and the usual indemnity.
Thus, a suit was filed by appellant claiming Rs. 39,633-12-4 as damages with six percent per annum from the date of plaint till payment. The Trial Court, on finding that respondents had sold the goods to appellants and failed to deliver to them, decreed appellants’ suit in the sum of Rs. 14,808-12-0. Subsequently, an appeal was filed, and the High Court held that respondents were in this contract as commission agents and they endeavoured to carry out the changing instructions of their principals to the best of their ability, and on no possible basis they could be made liable for damages. Thus, the present appeal was filed.
Analysis, Law, and Decision
The Supreme Court referred to the letters passed between the parties and from which their relationship had to be inferred and opined that from these letters it could not be inferred that any contract of purchase and sale was concluded between the parties. The Supreme Court opined that the parties were not ad idem either regarding the terms of delivery of the goods or the price. The suggestion of the respondents that they were entitled to commission militated against the contract being one of purchase or sale of goods.
The Supreme Court opined that the claim based on breach of contract for non-delivery of waste cotton could not be sustained because appellants had failed to prove that there was a contract of sale, so that they could claim damages for non-delivery. The Supreme Court noted that respondents in their letters had clearly asserted that they were buying these goods on account and risk of Alwaye Textiles Ltd., from Kandasami. This assertion by respondents remained uncontradicted and was wholly inconsistent with appellants’ case.
The Supreme Court opined that if respondents were not acting as commission agents in the sale by Kandasami of these goods to Alwaye Textiles Ltd., it was difficult to see how appellants were entitled to the credit of the sale price of those bales. The Supreme Court further opined that this circumstance strongly reflected mitigated against appellants case, and this credit of sale price could only be reconciled with respondents’ case that they were acting as commission agents in this transaction. Further, the various expenses incurred by respondents on behalf of appellants on account of the purchase of gunny bags, cartage, freight, etc. were only consistent with their being the commission agents and not sellers of goods.
The Supreme Court opined that appellants’ claim based on misfeasance was also without any substance, as respondents did their best to assist appellants in the disposal of cotton by either selling it to others or by railing the goods on their instructions. Respondents did whatever they could do in the circumstances of the case to protect the goods against being damaged by rain. Further, regarding appellants contention that they should have arranged for tarpaulins, the Supreme Court opined that tarpaulins could not have protected the goods from being damaged by heavy rains. The Supreme Court opined that the appellants having entered a bargain in the hope of making profit, were unable to find purchasers for the waste cotton and were thus bound to suffer loss as the cotton was lying outside in the open. Having suffered loss, appellants want to foist it on to respondents. Thus, the Supreme Court opined that it was unable to hold that respondents were guilty of negligence and dismissed the appeal.
[S. Krishindas v. G.M. Vyas and Co., (1953) 1 SCC 157, decided on 28-01-1953]
Note: Damages for non-delivery of goods
Section 57 of the Sales of Goods Act, 1930 (‘the Act’) deals with damages for non-delivery. As per the provision, where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery. However, to ascertain damages for non-delivery, there must be a contract of sale. Section 5 of the Act provides that a contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such an offer. The contract might either provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. Section 31 of the Act further provides that it is the duty to 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.
*Judgment authored by- Justice M.C. Mahajan
Advocates who appeared in this case :
For the Appellants: K. Veeraswami, Advocate;
For the Respondent: N. Rajagopala Iyengar, Advocate.
