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PETITIONER: MAHABIR PRASHAD RUNGTA

       Vs.

RESPONDENT: DURGA DATT.

DATE OF JUDGMENT: 31/01/1961

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SHAH, J.C.

CITATION:  1961 AIR  990            1961 SCR  (3) 639  CITATOR INFO :  RF         1972 SC1507  (28)  D          1979 SC 852  (3,5)

ACT: Contract--Commercial  transaction--Breach--Time, if  of  the essence of the contract--Aggrieved Party, if can rescind the contract--Interest--Rate--Awarding     of--Principle--Indian Contract Act, 1872 (IX of 1872), s. 55.

HEADNOTE: The respondent had agreed to transport coal from the  appel- lant’s  colliery to the railway station.  The appellant  had to keep the road in repair and arrange for petrol and had to make the payment for the actual coal despatched by the  10th of  the following month.  The appellant complained  that  he was  suffering  loss as the respondent had slowed  down  the work and the respondent complained that by not arranging for the  petrol, not keeping the road in repairs and not  making payments of amounts due the appellant had made it impossible to  fulfil the contract.  The quantity of  coal  transported was  a  fact within the knowledge of the appellant  and  the agreement  merely provided for payment of the bills by  10th of  the following month, without stating expressly that  the presentation  of  bill  was a  condition  precedent  to  the payment.  The appellants contended that time was not of  the essence  of the contract and in any case the payment of  the bills  depended upon the presentation of bills in  time  and also challenged the award of the interest. Held, that in commercial transactions time is ordinarily  of the essence of the contract and was made so in the  contract and  when  this  important condition of  the  agreement  was broken, s. 55 of the Indian Contract Act could be invoked by the  aggrieved  party  and he was entitled  to  rescind  the contract. In the present case by withholding the payment of the  bills cl. (5) of the contract was breached by the appellant. Held, further, that interest for a period prior to the  com- mencement of suit is claimable either under an agreement  or usage  of trade or under a statutory provision or under  the Interest Act for,% sum certain where notice is given These 640

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conditions not being satisfied and this being not a case  in which  Court  of Equity grants interest,  interest  was  not awardable as damages. Held,  further,  that interest pendente lite  being  in  the discretion of Court, should be fixed in accordance with  the circumstances  and practice of the Court and should  not  be too high. Bengal  Nagpur  Railway Co. Ltd. v. Ruttanji  Ramji,  (1937) L.R. 65 I.A. 66, referred to.

JUDGMENT: CIVIL  APPELLATE JURISDICTION: Civil Appeals Nos. 54 and  55 of 1957. Appeals  from the judgment and decree dated March 11,  1953, of the Judicial Commissioner’s Court, Rewa, in First Appeals Nos. 104 and 116 of 1952. B. C. Misra, for the appellant. Tarachand Brijmohan Lal, for the respondent.  1961.  January 31.  The Judgment of the Court was delivered by HIDAYATULLAH, J.-Mahabir Prashad Rungta, appellant in  these two appeals, was plaintiff in his own suit and defendant  in a counter-suit filed by Durga Datt, the respondent.  The two appeals  have  been  filed on certificates  granted  by  the Judicial  Commissioner,  Vindhya Pradesh  against  a  common judgment and decree of the Judicial Commissioner’s Court  in four  appeals filed by the rival parties, two in each  civil suit.   Certificate was also granted to the respondent;  but he did not take steps in that behalf, and we are, therefore, concerned only with the appeals of Mahabir Prashad Rungta. The  two  suits were filed in the  following  circumstances: Rungta  owns  a  colliery at Budhar in  Madhya  Pradesh.  On October 30, 1950, an agreement was executed  between  Rungta and  the  respondent,  Durga Datt.   Durga  Datt  agreed  to transport  coal from the colliery to the railway station  at the  rate  of Rs. 2-8-0 per ton for a period  of  two  years commencing  from  November 11, 1950, to November  10,  1952. That  agreement  is Ex.  P-1.  The case of Rungta  was  that Durga  Datt  broke  the  contract from  July  29,  1951,  by stopping  the work of transport.  Durga Datt in his suit  on the other hand, averred that Rungta had 641 broken  the agreement and work of carriage as a  result  was stopped from July 30, 1951.  The difference of a day between them  is  of no consequence.  Rungta’s case was  that  as  a result  of the breach of the contract on the part  of  Durga Datt,  he was required to employ other carriers and  to  pay them at Rs. 3 per ton, and he incurred demurrage and damages to  his constituents for delay in supplies.  He,  therefore, claimed a sum of Rs. 60,000 as damages, including Rs. 20,000 as  general damages for loss of business, credit  and  repu- tation.   He admitted that a sum of Rs. 15,087-5-0 was  owed by  him  to  Durga Datt on account of coal  carried  by  the latter, and he thus claimed Rs. 44,912-11-0, after  allowing credit for that sum. Durga Datt, in his suit, asked for a decree for Rs.  49,544- 12-0.   This included Rs. 26,139-11-0 on account of  arrears of  bills  and Rs. 905-1-0 as interest on the  amount.   The balance  (Rs.  22,500) was claimed as damages  for  loss  of business and profits of the unexpired period of the contract at  Rs. 1,500 per month.  In giving the particulars for  Rs. 26,139-11-0,  Durga  Datt  stated that  he  had  transported 15,844 tons 2 Cwts. of coal to the end of July, 1951,  which

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were  loaded in the wagons and despatched.  He also  claimed Rs.  7,500  in respect of 3,000 tons of coal  which  he  had transported  to  the railway yard, but which  had  not  beed loaded  in the wagons.  After adjusting sundry  amounts  and allowing   credit  for  Rs.  21,861-7-6,  he   claimed   Rs. 26,139-11-0,  as  stated  above.  Durga  Datt  alleged  that Rungta was guilty of breach of the contract, particularly of cls.  (4),  (5)  and (8) thereof,  which  compelled  him  to rescind the contract.  These clauses may be quoted here:               "(4) Petrol :-It will be arranged by party no.               1 himself but party no. 2 will help in time of               need to get the petrol; the expenses  incurred               by  party no. 2 for securing such petrol  will               be  borne  by party no. 1. If party no.  2  in               spite  of his best efforts cannot arrange  for               petrol then in such case party no.  1 will not               be  responsible  for  any loss  in  regard  to               transportation of coal.               642               (5)   Payment of Bills:-Party no. 2 will  make               payment  of Bills of party no.  1  for  actual               despatch of coal on the 10th of the  following               months;  (8) The  road will be kept in repair by party no.  2."  The two suits were consolidated by the trial Judge, and evidence was partly recorded separately and partly for the two  suits together.   The  trial  Judge held that the  breach  of  the contract  proceeded from Durga Datt, and the suit of  Rungta was decreed in the sum of Rs. 12,900 as damages due to  him. In the other suit, the trial Judge held that Durga Datt  was entitled to a payment of Rs. 26,695-6-6 and a decree for Rs. 13,795-6-6  was passed in his favour after setting  off  the two  amounts against each other.  The rest of the claims  in the two suits were dismissed. The  parties  were dissatisfied with the decrees,  and  four appeals  were  filed.   The  learned  Judicial  Commissioner reversed  the  decision of the trial Judge.   He  held  that Rungta was guilty of the breach of the contract, because  he had not made payments to Durga Datt as laid down by el.  (5) of  the agreement and had not kept the road in  repair.   He ordered the dismissal of Rungta’s suit in its entirety,  and reducing  the amount decreed in Durga Datt’s favour  by  Rs. 918-6-0  for  which there was a double charge, he  passed  a decree  for Rs. 25,113-4-0 awarding interest at 6 per  cent. per  annum on the amount from August 1, 1951, till  date  of realisation. In these two appeals, Rungta challenges (a) the dismissal of his  suit for damages based on the finding that  the  breach proceeded  from  him;  (b) the inclusion  of  Rs.  7,500  in respect of 3,000 tons of coal said to have been  transported to  the railway yard but not loaded in the wagons;  and  (c) the award of, and in the alternative the rate of, interest. The  main question in these appeals is, who was  responsible for  the breach of the contract ? The admitted  position  is that work stopped about the end of July, 1951.  Previous  to the  closure  of  work, each party had  written  letters  of protest to the other, Rungta complaining that Durga Datt had slowed his work and he was suffering loss, and Durga Datt 643 complaining that lack of arrangements for petrol, failure to repair the road and the withholding of the money due to  him were  making it impossible for him to fulfil  the  contract. The  trial  Judge did not accept the case set  up  by  Durga Datt,  and  held  that he had wilfully  stopped  work.   The learned Judicial Commissioner, on the other hand, held  that

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Rungta  had  unreasonably and in breach  of  the  agreement, withheld  large  payments and had left the road  in  a  poor state of repair and thus caused the breach of the  contract. He  did not attach much importance to the  controversy  over the  supply  of  petrol, which controversy  was  not  mooted before us again. of the two reasons on which Rungta was held responsible  for the  breach  of  the contract, the  important  one  was  the withholding   of  payment.   Learned  counsel   for   Rungta contended that time was not of the essence of the  contract, and  that, in any case, the payment of bills to  Durga  Datt depended  upon the presentation of the bills in time.   From the  evidence, it appears that when the trucks were  loaded, coal  was not weighed.  It was weighed at the  bridge  where the  wagons were loaded, details of which were  either  with the railway company, or with the representative of Rungta at the  station.   Durga  Datt  was  required  to  obtain   the information  from one source or the other, before  he  could make his bills.  How much coal was transported by Durga Datt was  a  fact also within the knowledge of  Rungta,  and  the clause quoted above merely provided for payment of the bills by  the  10th  of  the  following  month,  without   stating expressly  that  the presentation of bill  was  a  condition precedent to the payment.  The learned Judicial Commissioner held,  on  both  the  points, against  Rungta,  and  in  our opinion, rightly.  Even if the presentation of the bills  be regarded  as a condition precedent to payment, it  is  clear enough  that  Rungta paid not the whole of the  amounts  due under  the  bills but, only small sums from  time  to  time. Learned  counsel  for Rungta contended that Durga  Datt,  by receiving such payments and by not insisting on his  rights, must  be deemed to have waived payment in a lump  sum  under cl. (5).  But no case of waiver 644 was  pleaded by him,, and the evidence, if any, cannot    be looked  into.  In any event, an examination of the  accounts between  the parties discloses that payments were, in  fact, withheld.   Under the agreement, 10 per cent. of  the  bills was  to  be withheld to build up a security deposit  of  Rs. 2,000,  and an amount in excess of this was withheld by  the end of May.  No doubt, the bills were not presented by Durga Datt at the end of each month; bills for April and May  were submitted  on July 16, 1951 and bills for June and July,  on August 6 and 12 respectively.  Even so, the indebtedness  of Rungta to Durga Dutt stood as follows:      16th July, 1951     about     Rs. 7,835      27th July, 1951     "          Rs. 6,790      6th August, 1951    "          Rs. 11,170      12th August, 1951   "          Rs. 15,590 These  sums  were in addition to a security deposit  of  Rs. 2,038.   Whatever  might be the intent and  purpose  of  the clause  in  question,  it is clear enough  that  Rungta  was withholding  substantial  amounts over a  very  long  period without any reasonable cause.  To Durga Datt, the receipt of money in time was a vital consideration if he was to  fulfil his  contract  at all.  It was not to be  expected  that  he would  go  on carrying thousands of tons of  coal  from  the colliery without receiving payments.  In our opinion,  these facts speak for themselves, and amply support the finding of the  learned  Judicial Commissioner that Rungta  was  really responsible  for hamstringing the work of Durga  Datt.   Why Rungta did so is not very clear from the record of the case, though  an  ’attempt was made to show that the  quantity  of coal  transported  from  month to  month  was  falling.   An abstract of the quantities transported does not support this

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allegation.   This  abstract is of the  quantity  loaded  in wagons.   The  figures are almost constant,  except  in  one month  (April).   There were, of course, variations  in  the quantity  of coal loaded in the wagons from month to  month; but the evidence shows that some coal remained at the siding in  heaps and was not loaded immediately.  The variation  in the quantity also might have been due as much to Durga  Datt as to the colliery and its output.  In our judgment, no 645 inference  can  be  drawn from  the  abstract,  showing  the quantities  of coal loaded into the wagons, that Durga  Datt had  slackened work after May.  Learned counsel  for  Rungta cited some cases in which time was not considered as of  the essence  of  the contract.  Most of these  cases  deal  with immovable  property,  where a different  rule  applies.   In commercial transactions, time is ordinarily of the  essence, and  in  the  agreement, with which we  are  concerned,  the payment  of  bills  by  a  particular  date  was   expressly mentioned.   The intention, obviously, was that  Durga  Datt would  receive  payments for work executed as  soon  as  the amounts became due.  Rungta did not pay these amounts, which were also within his own knowledge either by the 10th of the following  month or even within a reasonable time after  the presentation  of the bills.  In these circumstances, we  are of opinion that cl. (5) was breached by Rungta. In  addition  to this, there were difficulties of  the  road being in a bad state during the rainy season.  The  evidence shows that the wheels of the trucks used to sink in the  mud frequently  and the trucks had to be dragged out.  For  this state  of affairs, Rungta was mainly responsible  under  cl. (8).   The inclusion of the clause in the  agreement  itself shows  that  the  parties  realised  that  there  might   be hindrance to, the trucks, if the road was not repaired.  The finding  of  the Judicial Commissioner on this part  of  the case  is,  therefore’ sound, though that  reason  by  itself might  not  have  been  sufficient  for  stopping  the  work altogether and rescinding the contract. The  case  is thus covered by s. 55 of the  Indian  Contract Act,  and Durga Datt was entitled to rescind  the  contract, when  the  very  important condition of  the  agreement  was broken  by Rungta.  We confirm the finding of  the  Judicial Commissioner on this part of the case. This  brings us to the inclusion of Rs. 7,500 on account  of 3,000  tons of coal alleged to have been  transported.   The evidence   on.   this   part  of  the   case   is   somewhat unsatisfactory.   Fortunately  for Durga Datt, some  of  the witnesses of Rungta admitted that besides coal 646 which was loaded in the wagons, there were three large heaps of coal lying in the yard and that this coal was transported by  Durga Datt.  The estimate of Durga Datt was 3,000  tons. That  is no more than a mere guess.  A railway official  was examined  in  the case, and he stated that  loose  coal  was sufficient  to fill " 100 or 50 wagons ". From the  schedule filed,  it  appears that a wagon carries on  an  average  20 tons.  Taking the number of wagons as 75, the quantity could not  exceed 1,500 tons.  A sum of Rs. 3,750 as  payment  for 1,500 tons at Rs. 2-8-0 per ton ought to have been included, instead of Rs. 7,500.  To that extent, the decree in  favour of Durga Datt would be modified. There  remains  the question of interest.   Interest  for  a period  prior  to the commencement of suit  is  claim.  able either  under  an agreement, or usage of trade  or  under  a statutory  provision  or under the Interest Act, for  a  sum certain where notice is given.  Interest is also awarded  in

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some  cases by Courts of equity. (Bengal Nagpur Railway  Co. Ltd.  v.  Ruttanji  Ramji  (1)).  In  the  present  case  no agreement  about interest was made, nor was it implied:  The notice  which  was given did not specify the sum  which  was demanded,  and, therefore, the Interest Act does not  apply. The  present case also does not fall within those  cases  in which Courts of equity grant interest.  Learned counsel  for Durga  Datt  claimed interest as damages; but  it  is  well- settled   that  interest  as  damages  cannot  be   awarded. Interest  up to date of suit, therefore, was not  claimable, and  a  deduction shall be made of such  interest  from  the amount decreed.  As regards interest pendente lite until the date of realisation, such interest was within the discretion of  the Court.  The rate fixed is 6 per cent. which, in  the circumstances  and  according  to the  practice  of  Courts, appears  high.  Interest ,shall be calculated at 4  percent. per annum instead of at 6 per cent., and the decree shall be modified accordingly. Except for reduction in the amount decreed by Rs. 3,750  and of  interest up to the date of the filing of the suit  which has been disallowed arid of the rate of (1)  (1937) L.R. 65 1.A. 66. 647 interest pendente lite until realisation, the appeals  shall stand dismissed.  In view of the substantial failure of  the appeals,  the appellant shall pay the costs in  this  Court. One hearing fee.