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PETITIONER: CHINA COTTON EXPORTERS

       Vs.

RESPONDENT: BEHARILAL RAMCHARAN COTTONMILLS LTD.

DATE OF JUDGMENT: 17/02/1961

BENCH: GUPTA, K.C. DAS BENCH: GUPTA, K.C. DAS GAJENDRAGADKAR, P.B.

CITATION:  1961 AIR 1295            1961 SCR  (3) 845

ACT: Breach of Contract-Contract for sale of goods-Supply subject to import licence-Shipping date guaranteed-Failure to supply Inadequacy  of  seller’s contract with  overseas  suppliers- Liability.

HEADNOTE: The appellant had made a contract with its Italian suppliers for 200,000 lbs. of cotton fibre for August, 1950,  shipment and  another for 300,000 lbs. for  Novermber/December,  950, shipment.   On July 22, 1950, the appellant entered  into  a contract with the respondent for the sale Of 40,000 lbs.  of fibre,  August shipment.  On August 9, 950, it entered  into another contract with the respondent for sale of 50,000 lbs. of  fibre,  "I  October/November 1950  shipment  ".  In  the remarks  column of the second contract it was  mentioned:  " This contract is subject to import licence and therefore the shipment  date is not guranteed ". In October, 1950,  50,000 lbs.  out of the first contract with the  Italian  suppliers arrived;  Out Of this 40,000 was delivered to  the  respon-, dent  against  his  first contract and  10,000  against  the second  The  balance  Of 40,000,  lbs.  against  the  second contract was not 846 supplied.   The  respondent  filed a suit  for  damages  for breach of contract.  The appellant contended that it was not liable as. the date of shipment was not guaranteed and as it had  adequate  contracts  with its suppliers  to  cover  the contract with the respondent but was unable to fulfil it  as the supplier failed to make the deliveries. Held,  that the appellant was liable for breach of  contract as the date of shipment was guaranteed and as the  appellant had  no adequate contracts with its suppliers to  cover  the contract with the respondent.  In commercial contracts  time is ordinarily of the essence of the contract.  The words  in the  remarks column meant that the date of shipment was  not guaranteed  only to the extent that delay in  obtaining  the import  licence stood in the way of keeping to the  shipment date.   As there was no delay in obtaining the  licence  the shipment  date October/November, 1950, was guaranteed.   The other  terms  of the contract also showed that the  date  of shipment was guaranteed.  The appellant had to show that  on

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the  date of the breach i.e. on December 15, 1950, it had  a contract under which it could, provided the contract was not broken,  obtain  the goods to honour its agreement  to  sell October/November shipment of goods.  The first contract with the suppliers was cancelled at the end of September and  the appellant was not entitled to receive any goods under it  on the  relevant date.  Under the second contract it could  not be  said that the suppliers were bound to deliver the  goods by  instalments  or to supply at least  40,000  lbs.  before December  15,  as the contract with the  suppliers  was  not produced  before  the Court.  The appellant  had  failed  to establish  that  it had an adequate contract  to  cover  the contract  in suit.  It was not enough for the  appellant  to show  that there was a chance of it fulfilling its  contract with the respondent. Bilasiram Thakurdas v. Gubbay (1915) I.L.R. 43 Cal. 305  and Phoenix  Mills  Ltd. v. Madhavdas Rupchand  (1916)  24  Bow. L.R. 142, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 331 of 1956. Appeal  by special leave from the judgment and decree  dated March 11, 1955, of the Bombay High Court in Appeal No. 97 of 1954. M.   C.  Setalvad,  Attorney-General  for India  and  G.  C. Mathur, for the appellants. Purshottam  Trikumdas,  S. N. Andley, J. B.  Dadachanji  and Rameshwar Nath, for the respondents. 1961.   February;  17.   The  Judgment  of  the  Court   was delivered by 847  DAS GUPTA J.-This appeal is from a judgment of the Court of Appeal of the Bombay High Court confirming the decision of a single judge of that Court in a suit for damages for  breach of  a  contract  of sale.  By a contract  in  writing  dated August  9,1950, entered into at Bombay, the  appellants  who carry  on business at Bombay as import and export  merchants agreed  to  sell to the respondent, a  company  carrying  on business  also  at Bombay as a Cotton Spinning  and  Weaving Mill,  and the respondent agreed to purchase 50,000 lbs.  of Italian  Staple  Fibre  Cotton  of  the  quality   mentioned therein,  at  Rs.  1,350/-  per  Candy  Ex  docks,  Shipment October/November  1950.   Of this quantity 10,000  lbs.  was delivered  to  and  accepted by the  respondent  company  on October  31,  1950.  The balance amount of 40,000  lbs.  not having   been  delivered  in  terms  of  the  contract   the respondent  company brought the present suit for damages  on the allegation that the appellant firm had wrongfully failed and neglected to deliver this balance amount of the contract goods.   The  appellant  admitted failure  to  deliver  this amount;  but -pleaded that this was not wrongful failure  to deliver.   The  appellant averred in its  written  statement that  the non-supply of the goods arose by reason of  the  " intermediary parties (meaning thereby the suppliers) failing to supply and deliver goods to the defendant and also of the circumstances beyond their control"; and claimed that it was exempted  from any liability to the plaintiff company  under printed  term  16 of the contract.  The  defendant  ,further pleaded that the shipment time mentioned in the contract was not  guaranteed,  and the time of shipment was  not  of  the essence  of  the contract.  The Trial Judge  held  that  the shipment  time was guaranteed, except in so far as;delay  in shipment might be due to delay in obtaining import  licence-

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which however was in the present case obtained in good time- ; that time of. shipment was of the essence of the contract; and   finally  that  there  was  no  case  here  of  any   " intermediary  parties  " failing to supply or  -deliver  the goods  and as the defendant firm had not made  any  adequate contract which would have 848 enabled  it to obtain the supply of goods-if  such  contract had not been broken-from which it could have delivered those 40,000 lbs. ;the further defence that the non-supply was due to  "  circumstances  beyond their control  "  also  failed. Accordingly  the  Trial  Judge  held  that  there  had  been wrongful  breach of the contract by the appellant  firm  and the   plaintiff  company-the  respondent-was   entitled   to damages.   The actual assessment of damages was referred  to the Commissioner. On  appeal by the defendant, the Appeal Court held  agreeing with the Trial Judge that as there was no delay in obtaining the  import  licence,  the  obligation  to  deliver  to  the plaintiff  contract  goods  of  October/  November  shipment continued.   The learned judges also pointed out that "  the failure  to  give  delivery  primarily  arose  because   the defendants  never were ready and willing to carry out  their obligation  to  give  delivery  because  they  had  made  no arrangement  to get goods from Italy which they  could  have delivered  at  the contract time." Therefore, the  Court  of Appeal held that it was not open to defendant to rely on any of the clauses in the contract which condones delay on their part or which excuses them from giving delivery.  The appeal was accordingly dismissed. It  is  against  this order of dismissal  that  the  present appeal has been preferred by the defendant firm after having obtained special leave from this Court. Three  contentions were raised before us in support  of  the appeal.  The first contention is that the shipment date  was not  guaranteed;  the  second contention,  which  really  is involved in the first,, is that the shipment time was not of the essence of the contract.  Lastly, it was urged that  the contracts  which  the  defendant firm  had  made  with  its: Italian   suppliers,  were  adequate  for  their   obtaining supplies  in  good time to enable, them-if  these  contracts were  not broken to complete the requisite delivery  to  the plaintiff  company, in proper time. The  contract  wag  on a printed document,  with  the  teems regarding quantity,: quality, price, shipment, payment,  and the remarks column. filled in manuscript. 849 Against Shipment-we find " October/November, 1950.  " In the remarks  column we find the following written: " 1.  Invoice weight to be accepted ; 2. This contract     is  subject  to import licence and therefore the shipment    date   is   not guaranteed." We find thus that whatever may have been said earlier in the printed portion of the contract the parties took care, after specifying  "  October/November,  1950  "  as  the  date  of shipment to make a definite condition in the remarks column, on  the  important question whether the  shipment  date  was being  guaranteed  or not and if so, to  what  extent.   The words are: "This contract is subject to import licence,  and therefore the shipment date is not guaranteed." Remembering, as we must, that in commercial contracts, time is ordinarily of  the  essence  of  the contract and  giving  the  word  " therefore  " its natural, grammatical meaning, we must  hold that  what the parties intended was that to the extent  that delay in shipment stands in the way, of keeping to the ship-

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ment date October/November, 1950, this shipment date was not guaranteed;    but    with    this    exception     shipment October/November,   1950,  was  guaranteed.   It  has   been strenuously contended by the learned Attorney-General,  that the  parties  were mentioning only one of the  many  reasons which  might cause delay in shipment and the  conjunction  " therefore " was used only to show the connection between one of  the  many reasons-by way of illustration and  a  general agreement that the shipment date was not guaranteed.  We  do not  consider this explanation of the use of "  therefore  " acceptable.   If the parties intended that quite &part  from delay  in  obtaining import licence, shipment date  was  not guaranteed, the natural way of expressing such  intention-an intention  contrary  to the usual  intention  in  commercial contracts  of treating time as the essence of the  contract- would  be  to  say: ,,This contract  is  subject  to  import licence  and the shipment date is not guaranteed.   "  There might be other ways of expressing the same intention, but it is  only  reasonable to expect that  anybody  following  the ordinary rules of grammar would not use " therefore" 850 in  such  a context except to mean that only to  the  extent that  delay  was due to delay in  obtaining  import  licence shipment time was not guaranteed. As we have already mentioned, the remarks column was  filled in manuscript and consequently even if the terms in print by themselves  might  have  justified  a  conclusion  that  the parties intended that the shipment date was not  guaranteed, the  intention expressed in the manuscript  should  prevail. We  are not satisfied however that the terms in print  would justify  any such conclusion.  The learned  Attorney-General tried   to  persuade  us  that  the  printed  term   2   was inconsistent  with  shipment date being guaranteed  at  all. The  term 2 is in two parts.  The first part  provides  that subject to provisions of cls. 7 and 9, ,if the goods or  any portion  of them are not shipped for any reason, or  reasons other  than  those specified in el. 9, within  the  shipment time with the fifteen days latitude provided for in the said clause  7,  the sellers shall not be responsible  but  shall give  notice  to  the buyers of such  non-shipment  and  the buyers  shall have option to cancel the portion  so  overdue without claiming any allowance or compensation or grant such extension  of time for shipment from time to time as may  be required  by the sellers " at allowance as mentioned in  the second paragraph.  The second paragraph of term 2 lays  down graduated rates of allowance for different periods of delay: at 2 1/2 % for delay up to a month; at 2-1/2% for delay from one  month to two months; 3-1/2% for delay of two  to  three months  and  7-1/2%  for delay of more  than  three  months. Different rates were mentioned as regards the woollen goods. It may be mentioned here that cl. 7 of the contract provides for  a  latitude of 16 days after the shipment while  cl.  9 contains  the  special exemption clause  where  shipment  is delayed  by  force  majeure,  war  or  warlike   operations, strikes,  lock-outs,  etc.   The  learned   Attorney-General contends  that  provisions of term 2 show that  the  parties agreed  that  the time will not be, of the  essence  of  the contract  and  shipment  time will  not.be  guaranteed.   It appears to us that these provisions show just the  contrary. The provisions in the first 851 paragraph  give  the seller a right to give  notice  to  the buyer  of non-shipment and give the buyer an option on  such notice either to cancel the portion not shipped or to  grant extension  of  time at allowances mentioned  in  the  second

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paragraph.   Unless time was of the essence of the  contract and  shipment time was Ramces guaranteed there would  be  no need for making such provisions for an option for  extension of time, or for these allowances. The provisions of cls. 7 and 9 do not affect the question. We are therefore of opinion that the courts below were right in thinking that the shipment time was guaranteed, and  time was of the essence of the contract. This  brings us to the question whether the  defendant  firm had any adequate contract with their Italian suppliers which if  not broken would have put them in a position  to  supply the  good,-, in question.  It is not disputed that if  there was  any  such adequate contract the defendant will  not  be liable  for damages.  It is equally clear that if there  was no such contract, the defendant cannot escape liability. The  learned Attorney-General sought to argue that  even  if the  contract  was  such  that there was  a  chance  of  the defendant obtaining the supplies in good time that would  be sufficient to exonerate it.  We think that this  proposition is not sound.  Before the seller could be heard to say  that the  non-supply  was  due  to default on  the  part  of  his suppliers or some other cause beyond his control the  seller is  bound  to show that be himself did all in his  power  to ensure timely supply.  He could do so by showing that he had made  a contract under which he was entitled to  obtain  the supplies  in good time.  If under his contract with his  own suppliers  he  was not so entitled but there  was  merely  a chance of his getting the supplies in time to enable him  to honour  his contract the non-supply would clearly be due  to his own default in not making a contract which would have so entitled  him  and  not  to a default on  the  part  of  the supplier or to a circumstance beyond his control. 852 Turning  now  to  the facts of the case  we  find  that  the defendant had made two contracts with its Italian suppliers- one  contract for 200,000 lbs. of cotton for  August,  1950, shipment  which it is said was later extended to  September, 1950; another contract  Of August 4, 1950, for 300,000  lbs. for  November/  December, 1950.  The defendant  had  also  a contract  with the plaintiff company of July 22,  1950,  for sale  of  40,000 lbs.  August  shipment-later  converted  to November/December  shipment.  In October, 1950, 50,000  lbs. out  of  the  first  contract  with  the  Italian  suppliers arrived;  out of this 40,000 was delivered to the  plaintiff company  in satisfaction of the earlier contract and  10,000 was  delivered in satisfaction of this  second  contract-the contract  now in suit.  Under the contract for 300,000  lbs. the buyer (the defendant) received 70,000 lbs. of goods.  Of this  nothing  was  given to the plaintiff  company  and  so 40,000  lbs. remained undelivered.  The question is had  the defend.  ant a contract under which it could,  provided  the contract was not broken, obtain the goods in time to  honour its agreement to sell October/November shipment of goods. The learned Attorney-General complains that the courts below totally   left  out  of  consideration  the  sellers’   (the appellants’)  earlier  contract with Italian  suppliers  and says  that that, at least, was an adequate contract.   There would  be force in this argument if at the time  the  breach took  place,  that is, the last date  under  which  shipment could  be made under the con. tract in suit,  the  defendant would have been entitled to obtain goods, under that earlier contract.   But that is not the position.  In any  case  the earlier  contract was cancelled at the end of September;  so that at the. time of the breach the seller was not  entitled to receive any goods under that contract.

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We  come  next to the  seller’s  November/December  shipment contract with its Italian suppliers.  The courts below  have pointed  out  that  under  such  a  contract,  the   Italian suppliers were entitled to delay shipment till the last  day of December.  If that be the position the seller would  not, on the last day by which 853 the  goods under its contract ought to have  been  supplied, viz.,  December 15, 1950, after adding 15 days under  clause 7, have any contract under which it would have been entitled to receive goods in sufficient time.  The learned  Attorney- General has however contended that under the contract  which the defend-’ ant had with its Italian suppliers the  Italian suppliers  would  be  bound to spread the  supply  over  the period, November/December and thus bound to ship 40,000 lbs. at least well before the December, 15. The great difficulty in the way of this argument is that the defendants’ contract with its Italian suppliers has not been produced and we do not know the terms of that contract.   In Bilasiram  Thakurdas  v. Gubbay (1) from which  the  learned counsel  sought  assistance  the terms of  shipment  in  the contract was " shipments to be made by steamers during July- December 1914 -shipment in any month by one or more steamers This   was  clearly  an  instalment  contract  and  on   the construction of that contract the court held that the  buyer had  the  right  to demand delivery  of  goods  by  separate shipments spread over the months from July to December.   In Phoenix  Mills Ltd. v. Madhavdas Rupchand (2)  the  question arose whether the plaintiff’s sellers had committed a breach by  not giving delivery where the terms of delivery were:  " 200 bales No. 20s and 20-1/2s Ring October-November 1913 and 50  bales  No. 6-1/2s Mule yarn as manufactured  ".  It  was further mentioned in the contract that the buyers agreed  to take  delivery  of the bales from time to time as  they  are ready.   It  was  in view of these terms  that  Mr.  Justice Macleod held that " the Court can only consider the  parties to  have  in-tended, when they signed  that  contract,  that delivery  should  be  asked for and  given  during  October- November  of two hundred bales, delivery being asked for  of reasonable  quantities  at  a  time  during  the  period  of delivery." These  decisions  are in line with the English law  in  this matter as stated by Benjamin on Sale, 8th Edition, at P. 724 thus :- "  Where  the amount of instalments is  not  specified,  the prima facie rule would seem to be that the (1) (1915) I.L.R. 43 Cal. 305. (2) (1916) 24 Bom.  L.R. 142. 854 deliveries should be rateably distributed over the  contract period." The  learned  author  goes on to say that "  if  it  can  be gathered from the terms of the contract or the circumstances that rateable deliveries were not intended, it then  becomes a question for the jury whether the tender of or demand for, delivery is a reasonable one." Quite  clearly however the question whether delivery  should be spread over the period arises only in case of  instalment contracts.  There is nothing however before us to show  that the  defendant’s contract with its Italian suppliers was  an instalment  contract.   Even though the  proprietor  of  the defendant’s  Italian supplier was examined he  said  nothing which would even tend to show that the contract between  him and  the  defendant  was an  instalment  contract.   In  the absence   of  the  contract  or  any   other   circumstances

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justifying  a conclusion that it was instalment contract  it is  not  possible to accept the contention  of  the  learned Attorney-General  that  the  defendant’s  Italian  suppliers would  be  bound  to  spread  the  supply  over  the  period October/November, 1950. There  is  thus  no  escape from  the  conclusion  that  the defendant  has failed to establish its case that it  had  an adequate  contract with its Italian suppliers, which if  not broken, would put it in possession of 40,000 lbs. of  cotton fibre  before December 15, 1950.  The defendant firm  cannot therefore escape the liability for the damages for breach of the contract, by the failure to supply those goods. The appeal is accordingly dismissed with costs.                                       Appeal dismissed. 855