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PETITIONER: M/S.  MURLIDHAR CHIRANJILAL

       Vs.

RESPONDENT: M/S.  HARISHCHANDRA DWARKADAS AND ANOTHER

DATE OF JUDGMENT: 29/03/1961

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B.

CITATION:  1962 AIR  366            1962 SCR  (1) 653

ACT: Damages-Breach   of  contract.-Sale  of   goods-Measure   of damages-Foreseeable   consequence  of  breach-Knowledge   of parties-Indian Contract Act, 1872 (9 of 1872), s. 73.

HEADNOTE: The  appellant entered into a contract with  the  respondent for the sale of certain canvas at Re. 1 per yard under which the  delivery  was to be made through  railway  receipt  for Calcutta  for Kanpur.  The cost of transport from Kanpur  to Calcutta  and the labour charges in that connection were  to be  borne  by  the respondent and it  was  agreed  that  the railway  receipt would be delivered on August 5, 1947.   The appellant  was unable to deliver the railway receipt on  the due date because booking from Kanpur to Calcutta was closed, and,  therefore,  cancelled the  contract.   The  respondent instituted a suit for the recovery of damages for the breach of the contract and claimed that as the seller knew that the goods  were  to be sent to Calcutta and  must  therefore  be presumed  to know that the goods would be sold in  Calcutta, any  loss  of  profit  to  the  buyer  resulting  from   the difference  between the rate in Calcutta on the date of  the breach  and  the  contract  rate would  be  the  measure  of damages. Held:     (1)   that  it  is  well  settled  that  the   two principles  relating  to  compensation for  loss  or  damage caused  by breach of contract as laid down in s. 73  Of  the Indian  Contract  Act,  1872,  read  with  the   Explanation thereof, are (i) that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to  be  placed,  as far as money can do it,  in  as  good  a situation  as if the contract had been performed,  but  (ii) that  there is a duty on him of taking all reasonable  steps to mitigate the loss consequent on the breach and debars him from  claiming  any part of the damage which is due  to  his neglect to take such steps. British  Westinghouse  Electric and  Manufacturing  Company, Limited  v. Underground Electric Railway Company of  London, [1912] A.C. 673, relied on. (2)  that the contract in the present case was for  delivery for.   Kanpur in which it was open to the buyer to sell  the goods  where it liked, and no inference could be drawn  from

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the mere fact that goods were to be booked for Calcutta that the  seller knew that the goods were for resale in  Calcutta only.  The contract was therefore not of the special type to which the words "which the parties knew, when they made  the contract, 654 to  be likely to result from the breach of it" appearing  in s. 73 of the Indian Contract Act, 1872, would apply, but  an ordinary contract, for which the measure of damages would be such as "naturally arose in the usual course of things  from such  breach"  within  the meaning  of  that  section.   The damages would be the difference between the market price  in Kanpur on the date of breach and the contract price.  But as the  respondent  bad failed to prove the  rate  for  similar canvas in Kanpur on the date of breach, it was not  entitled to  any damages as there was no measure for arriving at  the quantum. Chao and others v. British Traders and Shippers Ltd., [1954] 1 All E.R. 779, relied on. Re.  R and H. Hall Ltd. and W.P. Pim (junior) & Co.’s  Arbi- tration, [1928] All E.R. 769 and Victoria Laundry (Winsdsor) Ltd.v.    Newman  Industries  Ltd., [1949] 1 All  E.R.  997, distinguished.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No.193 of 1958. Appeal  by special leave from the judgment and decree  dated October  3,  1955, of the High Court of  Judicature,  Madhya Bharat, Indore, in Civil First Appeal No. 58 of 1952. C.   B. Aggarwala and Bhagwan Das Jain, for the appellant. Radhey  Lal Aggarwal and A. G. Ratnaparkhi,  for  respondent No. 1. 1961.  March 29.  The Judgment of the Court was delivered by WANCHOO,  J.-This  is an appeal by special  leave  from  the judgment  of  the High Court of Madhya Bharat.  A  suit  was filed by firm Messrs.  Harishchandra Dwarkadas  (hereinafter called  the respondent) against the  appellant-firm  Messrs. Murlidhar  Chiranjilal  and one Babulal.  The  case  of  the respondent was that a contract had been entered into between the appellant and the respondent through Babulal for sale of certain  canvas at Re.  I per yard.  The delivery was to  be made  through railway receipt for Calcutta f. o. r.  Kanpur. The cost of transport from Kanpur to Calcutta and the labour charges  in  that  connection  were  to  be  borne  by   the respondent.   It  was also agreed that the  railway  receipt would be delivered on August 5, 1947.  The appellant however failed to 655 deliver  the railway receipt and informed the respondent  on August 8, 1947, that as booking from Kanpur to Calcutta  was closed  the contract had become impossible  of  performance; consequently  the  appellant  cancelled  the  contract   and returned the advance that had been received.  The respondent did  not accept that the contract had become  impossible  of performance and informed the appellant that it had committed a  breach  of the contract and was thus liable  in  damages. After  further exchange of notices between the parties,  the present suit was filed in November, 1947. Written  statements  were filed both by  the  appellant  and Babulal.   The contention of Babulal was that  the  contract had  become  incapable  of  performance  and  was  therefore rightly  rescinded.  Further Babulal contended that  he  was not in any case liable to pay any damages.  The appellant on

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the other hand denied all knowledge of the contract and  did not  admit that it was liable to pay any  damages.   Certain other  pleas were raised by the appellant with which we  are however not concerned in the present appeal. Three   main  questions  arose  for  determination  on   the pleadings of the parties.  The first was whether Babulal had acted  as  agent  of the appellant in  the  matter  of  this contract;  the  second was whether the contract  had  become impossible of performance because the booking of goods  from Kanpur to Calcutta was stopped; and the last was whether the respondent  was entitled to damages at the rate  claimed  by it. The trial court held that Babulal had acted as the agent  of the  appellant  in  the  matter  of  the  contract  and  the appellant  was therefore bound by it.  It further hold  that the  contract had become impossible of performance.   Lastly it hold that it was the respondent’s duty when the appellant had  failed  to  perform the contract to buy  the  goods  in Kanpur  and  the  respondent had failed to  prove  the  rate prevalent  in  Kanpur  on the date of  the  breach  (namely, August  5,  1947)  and therefore was  not  entitled  to  any damages.  On this view the suit was dismissed. The respondent went in appeal to the High Court 656 and  the two main questions that arose there were about  the impossibility  of  the performance of the contract  and  the liability of the appellant for damages.  The High Court held that  the contract had not become impossible of  performance as  it had not been proved that the booking  between  Kanpur and  Calcutta was closed at the relevant time.   It  further held  that  the respondent was entitled to  damages  on  the basis  of  the  rate prevalent in Calcutta on  the  date  of breach and after making certain deductions decreed the  suit for  Rs. 16,946.  Thereupon there was an application by  the appellant  for a certificate to appeal to this Court,  which was  rejected.  This was followed by an application to  this Court  for special leave which was granted; and that is  how the matter has come up before us. The same two questions which were in dispute before the High Court have been raised before us on behalf of the appellant. We  think it unnecessary to decide whether the contract  had become  impossible  of performance, as we have come  to  the conclusion  that the appeal must succeed on the other  point raised  on behalf of the appellant.  The necessary facts  in that connection are these: The contract was to be  performed by  delivery  of  railway receipt f. o.  r.  Kanpur  by  the appellant to the respondent on August 5, 1947.  This was not done  and  therefore there was undoubtedly a breach  of  the contract  on that date.  The question therefore that  arises is  whether the respondent has proved the damages  which  it claims  to be entitled to for the breach.  The  respondent’s evidence  on  this  point was that it  proved  the  rate  of coloured  canvas  in Calcutta on or about the  date  of  the breach.  This rate was Rs. 1-8-3 per yard and the respondent claimed  that  it was therefore entitled to damages  at  the rate  of  Re. 0-8-3 per yard, as the contract  rate  settled between the parties was R.s. 1 per yard, The  quantum  of damages in a case of this kind  has  to  be determined under s. 73 of the Contract Act, No. IX of  1872. The relevant part of it is as follows:- 657               "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

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             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......               "   Explanation-In  estimating  the  loss   or               damage arising from a breach of contract,  the               means   which   existed   of   remedying   the               inconvenience caused by the non-performance of               the contract must be taken into account." The  contention  on  behalf of the  appellant  is  that  the contract was for delivery f. o. r. Kanpur and the respondent had  therefore  to prove the rate of  plain  (not  coloured) canvas  at  Kanpur  on or about the date  of  breach  to  be entitled  to any damages at all.  The respondent  admittedly has  not proved the rate of such canvas prevalent in  Kanpur on  or  about the date of breach and therefore  it  was  not entitled to any damages at all, for there is no measure  for arriving  at  the quantum of damages on the record  in  this case.   Where goods are available in the market, it  is  the difference  between  the  market price on the  date  of  the breach  and  the  contract price which  is  the  measure  of damages.  The appellant therefore contends that as it is not the  case  of  the respondent that similar  canvas  was  not available  in the market at Kanpur on or about the (late  of breach, it was the duty of the respondent to buy the  canvas in  Kanpur and rail it for Calcutta and if it  suffered  any damage because of the rise in price over the contract  price on  that account it would be entitled to such damages.   But it has failed to prove the rate of similar canvas in  Kanpur on the relevant date.  There is thus no way in which it  can be  found  that the respondent suffered any  damage  by  the breach of this contract. The  two  principles  on which damages  in  such  cases  are calculated  are well-settled.  The first is that, as far  as possible, he who has proved a breach of a bargain . 83 658 to supply what he contracted to get is to be placed, as  far as  money  can  do  it, in as good a  situation  as  if  the contract had been performed; but this principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable step" to mitigate the loss consequent on  the breach, and debars him from claiming any part of the  damage which  is  due to his neglect to take such  steps:  (British Westinghouse  Electric and Manufacturing Company Limited  v. Underground Electric Railways Company of London (1)).  These two  principles also follow from the law as laid down in  s. 73  read  with  the Explanation  thereof  If  therefore  the contract   was  to  be  performed  at  Kanpur  it  was   the respondent’s  duty to buy the goods in Kanpur and rail  them to Calcutta on the date of the breach and if it suffered any damage  thereby because of the rise in price on the date  of the  breach as -compared to the contract price, it would  be entitled  to  be  reimbursed  for the  loss.   Even  if  the respondent did not actually buy them in the market at Kanpur on  the  date of breach it would be entitled to  damages  on proof of the rate for similar canvas prevalent in Kanpur  on the  date of breach, if that rate was above  the  contracted rate  resulting in loss to it.  Bat the respondent  did  not make  any  attempt  to prove the  rate  for  similar  canvas prevalent  in  Kanpur on the date of breach.   Therefore  it would  obviously be not entitled to any damages at all,  for on this state of the evidence it could not be said that  any damage naturally arose in the usual course of things.

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But  the learned counsel for the respondent relies  on  that part  of s. 73 which says that dam-ages may be  measured  by what  the  parties knew when they made the  contract  to  be likely  to  result from the breach of it.  It  is  contended that  the contract clearly showed that the goods were to  be transported to and sold in Calcutta and therefore it was the price in Calcutta which would have to be taken into  account in  arriving at the measure of damages for the parties  knew when  they made the contract that the goods were to be  sold in Calcutta.  Reliance in this connection is placed on (1)  [1912] A.C. 673. 689. 659 two  cases, the first of which is Re.  R. and H.  Hall  Ltd. and  W.  H. Pim (Junior) & Co.’s Arbitration (1).   In  that case  it  was held that damages recoverable’ by  the  buyers should  not be limited merely to the difference between  the contract  price and the market price on the date  of  breach but  should include both the buyers’ own loss of  profit  on the  resale and the damages for which they would  be  liable for  their  breach of the contract of resale,  because  such damages  must reason ably be supposed to have been  -in  the contemplation  of the parties at the time the  contract  was made  since the contract itself expressly provided for  are- sale  before delivery, and because the parties knew that  it was not unlikely that such resale would occur.  ’That was  a case  where the seller sold unspecified cargo of  Australian wheat  at a fixed price.  The contract provided that  notice of  appropriation to the contract of a specific cargo  in  a specific  ship should be given within a specified  time  and also contained express provisions as to what should be  done in  various circumstances if the cargo should be resold  one or  more times before delivery.  That was thus a case  of  a special  type  in which both buyers and seller knew  at  the time  the  contract was made that there was an  even  chance that  the buyers could resell the cargo before delivery  and not retain it themselves. The  second  case on which reliance was placed  is  Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd, (2)..  That was  a case of a boiler being sold to a laundry and  it  was held that damages for loss of profit were recoverable if  it was apparent to the defendant as reasonable persons that the delay  in  delivery was liable to lead to such loss  to  the plaintiffs.  These two cases exemplify that provision of  s. 73  of the Contract Act, which provides that the measure  of damages  in  certain circumstances may be what  the  parties knew when they made the contract to be likely to result from the breach of it.  But they are cases of a special type;  in one  case the parties knew that goods purchased were  likely to  be resold before delivery and therefore any loss by  the breach of contract eventually (1) [1928] All E.R. 763. (2) [1949] 1 All E.R. 997. 660 may  include loss that may have been suffered by the  buyers because  of the failure to honour the intermediate  contract of  resale  made  by  them; in  the  other  the  goods  were purchased by the party for his own business for a particular purpose  which the sellers were expected to know and if  any loss resulted from the delay in the supply the sellers would be  liable  for that loss also, if they had  knowledge  that such loss was likely to result. The question is whether the present is a case like these two cases at all.  It is urged on behalf of the respondent  that the seller knew that the goods were to be sent to  Calcutta; therefore it should be presumed to know that the goods would

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be  sold  in Calcutta and any loss of profit  to  the  buyer resulting  from the difference between the rate in  Calcutta on the date of the breach and the contract rate would be the measure of damages.  Now there is no dispute that the  buyer had purchased canvas in this case for resale; but we  cannot infer  from the mere fact that the goods were to  be  booked for  Calcutta that the seller knew that the goods  were  for resale  in Calcutta only.  As a matter of fact it cannot  be denied  that it was open to the buyer in this case  to  sell the railway receipt as soon at it was received in Kanpnr and there can be no inference from the mere fact that the  goods were  to be sent to Calcutta that they were meant  only  for sale in Calcutta.  It was open to the buyer to sell them any where  it liked.  Therefore this is not a case where it  can be  said that the parties knew when they made  the  contract that  the  goods were meant for sale in Calcutta  alone  and thus  the  difference between the price in Calcutta  at  the date  of  the  breach and the contract price  would  be  the measure  of  damages as the likely result from  the  breach. The contract was for delivery for Kanpur and was an ordinary contract in which it was open to the buyer to sell the goods where it liked.               We  may  in  this  connection  refer  to   the               following  observations in Chao and others  v.               British  Traders and Shippers Ltd. (1),  which               are,  apposite  to the facts  of  the  present               case:               (1)   [1954] 1 All E.R. 779,797.               661               "It is true that the defendants knew that  the               plaintiffs were merchants and, therefore,  had               bought for resale, but every one who sells  to               a  merchant knows that he has bought for  are-               sale,  and  it does not, as I  understand  it,               make any difference to the ordinary measure of               damages  where  there is a  market.   What  is               contemplated  is  that the merchant  buys  for               are-sale, but, if the goods are not  delivered               to him, he will go out into the market and buy               similar goods and honour his contract in  that               way.   If  the market has fallen  he  has  not               suffered  any damage, if the market has  risen               the  measure of damages is the  difference  in               the market price." In  these circumstances this is not a case where it  can  be said that the parties when they made the contract knew  that the  likely result of breach would be that the  buyer  would not  be able to make profit in Calcutta.  This is  a  simple case of purchase of goods for resale anywhere and  therefore the  measure of damages has to be calculated as  they  would naturally  arise  in the usual course of  things  from  such breach.   That  means that the respondent had to  prove  the market  rate  at Kanpur on the date of  breach  for  similar goods and that would fix the amount of damages, in case that rate  had  gone  above the contract rate  on  the  (late  of breach.  We are therefore of opinion that this is not a case of  the special type to which the words "which  the  parties knew,  when they made the contract, to be likely  to  result from  the breach of it" appearing in s. 73 of  the  Contract Act  apply.  This is ,in ordinary case of  contract  between traders which is covered by the words "which naturally arose in the usual course of things from such breach" appearing in s.  73.  As the respondent had failed to prove the rate  for similar  canvas  in Kanpur on the date of breach it  is  not entitled to any damages in the circumstances.  The appeal is

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therefore  allowed, the decree of the High Court  set  aside and of the trial court restored with costs to the  appellant throughout. Appeal allowed 662