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PETITIONER: P.S.N.S. AMBALAVANA CHETTIAR AND CO. LTD AND ANR.

       Vs.

RESPONDENT: EXPRESS NEWSPAPERS LTD., BOMBAY

DATE OF JUDGMENT: 10/11/1967

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. WANCHOO, K.N. (CJ) MITTER, G.K.

CITATION:  1968 AIR  741            1968 SCR  (2) 239

ACT: Indian   Sale  of  Goods  Act  (3  of  1930),  ss.  18   and 54(2)--Sale    of   unascertained    goods--When    property passes--Repudiation  of  contract-Vendor’s right  of  resale when arises. Indian  Contract Act (9 of 1872), ss. 73 Illus. (c) and  176 --Scope of.

HEADNOTE: On 13th November 1951, the respondent agreed to sell to  the appellants  a stock of 415 tons of newsprint in sheets  then lying  in  the respondent’s godown.  On 26th  November,  the parties varied the contract by agreeing that the  appellants would buy only 300 tons out of the. stock of 415 tons. After taking  delivery of a part of the newsprint, the  appellants refused  to take delivery of the balance and repudiated  the contract on 29th March 1952.  On 21st April the  respondent, after  notice  to the appellants. resold the  balance  at  a lesser rate.  The suit flied by the respondent claiming from the appellants the deficiency on resale was decreed. In appeal to this Court, Held: (1) The claim was unsustainable. (a) As the respondent was not a pledge of the newsprint, the respondent  had no right to sell the goods under s.  176  of the Indian Contract Act. 1872.  [242H] (b) A seller can claim as damages the difference between the contract  price  and the amount realised on  resale  of  the goods  where he has the right of resale under s.. 54-(2)  of the Indian Sale of Goods Act. 1930. But this statutory power of  resale  arises  only if the property in  the  goods  has passed  to  the  buyer subject to the  lien  of  the  unpaid seller.   Under  s.  18 of the Sale of Goods Act.  it  is  a condition  precedent  to  the passing of  property  under  a contract  of  sale that the goods are ascertained.   In  the present case, when the contract was originally entered  into for the sale of 415 tons there was an unconditional contract for  the sale of specific goods in a deliverable  state  and the  property in those goods then passed to the  appellants. But  the  effect  of  the variation  was  not  to  make  the appellants  and respondent joint owners of the stock of  415 tons.   Nor  was it merely to relieve  the  appellants  from

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their  liability to take 115 tons.  The effect was to  annul the  passing  of  the  property.  so  that.   as  from  26th November  the  property  in the entire  stock  of  415  tons belonged to the respondent.  The result was that in place of the original contract for sale of specific goods a  contract for sale of unascertained goods was substituted.  No portion of the stock of 415 tons was appropriated to the contract by the  respondent  with  the appellants’  consent  before  the resale.  Therefore, on the date of resale. the  property  in the goods had not passed to the buyer  (appellants) and  the respondent had no right to  resell.1243A. E. F-H; 244A-B] Gillett v.Hill,, (1834) 2 C & M 535; 149 E.R. 871, applied. (2)  As  no time was fixed under the contract  of  sale  for acceptance of the goods, under s. 73 of the Indian  Contract Act,  the respondent was entitled to the difference  between the contract price and the market price on 29th March  1952, the date of repudiation, as damages.  [244E-C] 240

JUDGMENT: CIVIL  APPELLATE JURISDICTION:  Civil Appeals Nos.  165  and 166 01 1965.     Appeals  from the judgment and decree dated May 7,  1960 of the Madras High Court in O.S.A. Nos. 25 and 52 of 1956.     S.V.  Gupte,  Naunit  Lal and R.  Thiagarajan,  for  the appellants (in both the appeals).     N.C. Chatterjee, S. Balakrishnan for R. Ganapathy  lyer, for the respondent (in both the appeals).     The Judgment of the Court was delivered by                   Bachawat, J.  The dispute arises out of  a               contract   between  the  appellants  and   the               respondent entered into on November 13,  1951.               The  terms of this contract were  recorded  in               writing in the form of a letter written by the               respondent  to  appellant No. 1  and  set  out               below:                   "Messrs. P.S.N.S. Ambalavana Chettiar  and               Company Ltd.,                    260, Angappa Naicken Street, Madras.               Dear Sirs,                     We  confirm  having purchased  from  you               and   the  Madras  Paper  Marketing   Company,               Madras, 500 tons of Russian Newsprint  as  per               the  following description :--                   About.70  per cent in reels of  34  inches               width.                     "   15  per cent in reels of  22  inches               width.                     "    15  per cent in reels of 36  inches               width.               at annas 9 per lb. Ex-Wharf Bombay duty, etc.,               paid.  The buyers are to take delivery  within               four  days  of  the offer  of  delivery.   Any               wharfage,  etc., up to the fourth day  of  the               offer of delivery will be on seller’s  account               and thereafter on buyer’s account.                     We have also sold you about 415 tons  of               Russian  newsprint   in  sheets  in   size  of               about  30"X 42" (760 mm X 1085 mm)  ex-godown,               Madras  at Re. 0-9-6 per lb.                     We will keep the stock of sheets in  our               godown on your account free of rent.                     We shall advance you moneys against this

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             newsprint at annas 8 per lb. This advance will               carry  interest at 5 per cent per  annum.   We               will  also  charge  you the  exact  amount  of               insurance  which  we  pay  to  our   Insurance               Company against the goods. 241                     We  shall  pay  Rs.  5,60,000   to  your               Bankers in Bombay and take delivery of the 500               tons of newsprint from the harbour in  Bombay.               Accounts  wilt  be made on the  basis  of  the               above  arrangement and whatever one  party  is               liable  to pay to the other will  be  adjusted               subsequently.               Thanking you,                                Yours faithfully,                         For Express Newspapers Limited                                     Director." The  document shows that the respondent agreed to  buy  from the  appellants 500 tons of Russian newsprint in reels at  9 annas per lb., ex-wharf Bombay, and to take delivery of  the goods  on  payment of Rs. 5,60,000.  At the same  time,  the appellants  agreed to buy from the respondent 415  tons   of Russian  newsprint   in  sheets then lying in  a  godown  in Madras  at  9 annas 6 pies per lb. upon the  term  that  the appellants would pay the insurance charge and also  interest at 5 per cent per annum on an amount equivalent to the price of the goods calculated at 8 annas per lb. The understanding was that the appellants would within a reasonable time  take delivery of the goods bought by them in  instalments and the accounts  would  be finally adjusted on the  completion  the deliveries.   It  may  be mentioned  that  appellant  No.  2 carried on business under the name and style of Madras Paper Marketing Company.     On  November  26, 1951, the parties orally  agreed  that instead  of  500 tons the respondent would buy 300  tons  of newsprint  in  reels  and  that instead  of  415  ’tons  the appellants would buy 300 tons of newsprint in sheets and the terms  of the contract dated November 13, 1951  would  stand varied accordingly.     On December 5, 1951, the respondent took delivery of 300 tons  of newsprint in reels on payment of Rs.  3,18,706-9-10 and a sum of Rs. 57,816-13-2 remained due to the  appellants on  account of the price of these goods.  From November  29, 1951  up to February 27, 1952, the appellants took  delivery of  122324  lbs. of newsprint in sheets  on  payment  of.Rs. 63,032-15-9 to the respondent.  Subsequently, the appellants refused  to  take ’delivery of the balance  547501  lbs.  of newsprint in sheets.  Counsel for the parties agreed  before us  that  March 29, 1952 was the date  when  the  appellants repudiated  the  contract.  On April 21, 1952  after  giving notice to the appellants the respondent  resold  the balance goods to one G.R. Lala at 61/2 annas per lb. On April 18, 1952, the appellants filed in the High Court of Madras C.S. No. 175 of 1952 claiming from  the  respondent 242 Rs. 57,816-13-2 on account of the balance price of 300  tons of newsprint in reels and interest thereon.  The  respondent admitted the claim for the balance price.  On July 30, 1952, the  respondent filed in the High Court of Madras  C.S.  No. 262 of 1952 claiming a decree for Rs. 62,266-13-2 on account of  the  balance price of 122324 lbs.,  the  deficiency  ’on resale  of 547501 lbs. of the newsprint in sheets,  interest and  insurance  charges  after setting off the  sum  of  Rs. 57,816-13-2 due to the appellants.  The principal defence of the appellants was that the contract with regard to 415 tons

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of  newsprint in sheets was cancelled in November, 1951  and that  appellant No. 2 was not a party to this contract.  The appellants  also  denied  the factum  and  validity  of  the resale. The two suits were tried. by Rajagopala Ayyangar, J. He  dismissed C.S. No. 175 of 1952 and decreed C.S. No.  262 of  1952. From these two decrees, the appellants  filed  two appeals  in the High Court of Madras.  A Division  Bench  of the  High  Court  dismissed the two  appeals.   The  present appeals have been filed on certificates granted by the  High Court.     The  two Courts concurrently found that (1  )  appellant No.  was a party to the contract of purchase of 415 tons  of newsprint  in sheets, (2) on November 26, 1951  the  parties orally agreed that instead of 415 tons the appellants  would buy  300  tons  of  the  newsprint  and  (3)  there  was  no cancellation of the contract  as alleged by the  appellants. These   findings   are  not  challenged.  The   two   Courts concurrently  found that the resale held on April  21,  1952 was genuine and was effected at a proper price on due notice and  after  proper advertisement.  Mr.  Gupte  attempted  to challenge these findings, but we see no reason to  interfere with them.  The principal argument advanced by Mr. Gupte was that the property in the goods resold on April 21, 1952  had not passed to the appellants and the resale was consequently invalid.  We are inclined to accept this argument.     It  is to be noticed that the contract did not  envisage any  loan of money by ,the respondent to the  appellants  on the security of the newsprint in sheets.  The payment of Rs. 3,18,706-9-10   was  made  by the  respondent  towards  part discharge of its liability for the price of the newsprint in reels.   No. doubt, the contract stated: "We  shall  advance you  moneys against this newsprint at annas 8 per lb.   This advance  will carry interest at 5 per cent per  annum."  But the real import of this clause was that the appellants would pay interest at 5 per cent per annum on an amount equivalent to  the  price of the newsprint in sheets  calculated  at  8 annas  per  lb.  The  respondent was not  a  pledge  of  the newsprint in sheets and had no right to sell the goods under s. 176 of the Indian Contract Act, 1872.  The real  question is whether the respondent had the right to resell the  goods under s. 54(2) of the Sale of Goods Act, 1930. 243     The  seller can claim as damages the difference  between the contract price and the amount realised on resale of  the goods where he has the right of resale under s. 54(2) of the Sale  of Goods Act. The statutory power of resale  under  s. 54(2) arises if the property in the goods has passed to  the buyer  subject to the lien of the unpaid seller.  Where  the property  in  the  goods has not passed to  the  buyer,  the seller has no right of resale under s. 54(2).  The  question is  whether  the property in the 300 tons  of  newsprint  in sheets had passed to the appellants  before  the resale.     On  November 13, 1951, the respondent agreed to sell  to the appellants tile stock of 415 tons of newsprint in sheets then lying in the respondent’s godown in Madras.  There  was an unconditional contract for the sale of specific goods  in a  deliverable  state  and the property in  the  goods  then passed  to  the appellants. But on November  26,  1951,  the contract was varied  in  a material particular. The parties, agreed  that the appellants would buy only 300 tons  of  the stock   of  415  tons  of  newsprint  then  lying   in   the respondent’s  godown.  The result was that in place  of  the original contract for sale of specific goods a contract  for sale of unascertained goods was substituted.     Rajagopala  Ayyangar,  J. held that the  effect  of  the

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variation of the contract on November 26, 1951 was that  the appellants  and  the respondent became joint owners  of  the stock  45  tons.  In our opinion, this was not  the  correct legal  position.  The  parties  did  not  intend  that   the appellants  would  buy   undivided  share  in  415  tons  of newsprint.   On  November 26, 1951 the bargain  between  the parties   was   that   the   appellants   would   buy    and the  respondent would sell 300 tons out of the larger  stock of 415 tons.     The  appellate  Court  held that  the  property  in  the entire   415  tons  passed  to  the  appellants   who   were subsequently reviewed from their liability to take 115  tons and that the respondent could resell any 300 tons out of the larger  stock  of 415 tons.  We are unable to  accept  ’this line  of  reasoning.   It  is  true  that   originally   the property   in  the  entire  415  tons  had  passed  to   the appellants.  But the result of the variation of the contract was  to  annul the passing of property in  the  goods.   The effect  of  the bargain on November 26, 1951  was  that  the respondent would sell and deliver to the appellants any  300 tons  out of the larger stock of 415 tons. As from  November 26,  1951,  the  property in the entire stock  of  415  tons belonged to the respondent.  The parties did not intend that as  from  November 26, 1951 the property in  any  individual portion of the stock of 415 tons would remain vested in  the appellants. 244     Section 18 of the Sale of Goods Act provides that  where there  is a contract for the sale of unascertained goods  no property  the goods is transferred to the buyer  unless  and until  the  goods  are  ascertained.   It  is  a   condition precedent  to the passing property under a contract of  sale that  the  goods  are  ascertained.  The  condition  is  not fulfilled  where there is a contract  for sale of a  portion of a specified larger stock.  Till the portion is identified and appropriated to the contract, no property passes to  the buyer.  In Gillett v. Hill(1), Bayley, B. said:               "Where  there  is  a bargain  for  a   certain               quantity extra greater quantity, and there  is               h power of selection in the vendor to  deliver               which  he thinks fit, then the right  to  them               does  not pass to the vendee until the  vendor               has  made  his selection, and  trover  is  not               maintain able before that is done.  If I agree               to  deliver a certain quantity of oil  as  ten               out  of  eighteen tons, on one can  say  Which               part  of the whole quantity I have  agreed  to               deliver  until a selection is made.  There  is               no individuality until it has been divided." No  portion  of  415  tons of the  newsprint  lying  in  the respondent’s godown was appropriated to the  contract by the respondent with the appellants’s consent before the  resale. On  the date  of the resale, property in  the goods had  not passed  to. the  buyer Consequently, the respondent  had  no right  to  resell  the  goods under s. 54(2). The  claim  to recover the deficiency on resale is not suitable. The  respondent to claim as damages the  difference  between the  contract price and the market price on the date of  the breach.  Where no time is fixed under the contract  of  sale for  acceptance   of the goods, the measure  of  damages  is prima  facie the  difference between the contract price  and the  market price on the date of the refusal by the buyer to accept  the  goods,  see Illustration (c) to s.  73  of  the Indian Contract Act.  In the present case, no time was fixed in  the contract for acceptance of the-goods.  On March  29,

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1952,  the  appellants  refused to accept  the  goods.   The respondent  is  entitled  to  the  difference  between   the contract  price  and the market price on  March  29,   1952. Counsel  for  both  parties requested  us  that  instead  of remanding  the matter we should assess the damages  on  this basis  and  finally  dispose of the matter.   We  have  gone through the materials on the record and with the  assistance of  counsel,  we  assess the market  price  of  the  Russian newsprint  in  sheets on March 29, 1952 at 8 annas  per  lb. Counsel  on both sides agreed to this assessment. The  claim of  the respondent for Rs. 6,7)8-5-1 on account of  interest and Rs. 1,119-6-0 for insurance charges is admitted (1) (1834) 2 C&M. 535:, 149 E.R. 871,873. 245 before  us by Mr. Gupte.  On this basis, the final  position is as follows:                                                     (Rupees) Price of 122324 lbs. at 91 1/2 annas per lb. less Rs. 63,032-15-9                                   9,596-14-3 Difference on 547051 lbs.at 11/2 annas per lb.    51,286-0-6 Interest                                           6,795-5-1 Insurance charges . . .  . .                       1,119-6-0                                                 ------------ Total amount due to the respondent  .. ..        68,797-9-10 Deduct amount due to the appellants .. ..        57,816-13-2                                                 ------------- Balance due to the.respondent  ..... ..          10,980-12-8                                                 -------------     In  the result, Civil Appeal No. 165 of 1965 is  allowed in  part, the decrees passed by the Courts below are  varied by  substituting  therefore  a  decree  in  favour  of   the respondent   against  the  appellants  for  a  sum  of   Rs. 10,980-12-8  with interest thereon at 6 per cent  per  annum from  July 30, 1952.  The decrees for ’costs passed  by  the Courts  below  are affirmed.  There will be no order  as  to costs  in  this  Court.  Civil Appeal No.  166  of  1965  is dismissed.  No order as to cost thereof. V.P.S.                     C.A. 165 of 1965 allowed in part.                                  C.A. 166 of 1965 dismissed. 246