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SUPREME COURT OF INDIA
A.N. GROVER AND M.H. BEG, JJ.
M. N. Gangappa (dead) by his legal representatives, Appellants
Versus
A. N. Setty and Co. and another, Respondents.
Civil Appeal No. 205 of 1967m, D/- 21-1-1972.
Advocates appeared
Mr. G. L. Sanghi, Advocate and Mr. B. R. Agarwal, Advocate of M/s. Garat & Co., for appellants; Mr. P. Ram Reddy, Senior Advocate, (Mr. A. V. V. Nair, Advocate, with him) (for No. 1) and Mr. A. G. Ratnaparkhi, Advocate, (for No. 2), for Respondents. 697
Defence of India Rules , Rule 81(2) - Suit for Recovery Money - Breach of Contract - Suit was filed for recovery of as damages for breach of contract by plaintiff against now deceased and represented by his legal representatives - Second respondent was also joined as defendant - According to case of plaintiff defendants had entered into two contracts with him for supply of groundnut seeds - It was claimed that both were for a specified quality of groundnut seeds for specific delivery at a specified price and were not transferable - First contract was entered into on November and delivery was stipulated to be made by January - Damages relating to this contract were claimed at difference between contract rate and market rate which was stated to be per candy on date of breach January - Second contract was entered into on November - Whether two contracts - Whether groundnut seeds which were subject-matter of two contracts were being purchased before use in oil expelling business of plaintiff or whether they were intended to be transferred to third parties - Whether a particular contract was of one category or other namely transferable or non-transferable can only be decided on facts of each case - Did suit contracts not intended delivery of goods but only payment of difference in prices and hence void and unenforceable? Do suit contracts contravene provisions of Oil Seeds Order and hence void and unenforceable? What is quantum of damages to be awarded? - Whether certain contracts which were described as ready delivery contracts and were subject to rules and regulations of Veraval Merchants Association were prohibited by Saurashtra Groundnut and Groundnut Products Order - Held, High Court observed that no evidence had been led with regard to rates prevailing on dates of breach but from admissions contained in defendants evidence it was established that rate could not be less than per candy on material dates - Damages were then assessed and decree of Distt Judge was modified accordingly - Court do not consider that any interference is called for with concurrent conclusion of two courts that suit contracts were non-transferable - Question whether a particular contract was of one category or other namely transferable or non-transferable can only be decided on facts of each case and Court are unable to find any such infirmities in reasoning of two courts particularly with regard to surrounding circumstances and other evidence which showed that contracts were nontransferable - It was laid down that a contract for delivery of goods at a future date even though for a specified price and specific quality could be excluded from definition of forward contracts only if contracts were non-transferable - But from mere absence of an express stipulation as to non-transferability in contract it could not be deemed to be transferable and outside exception - Conditions of contracts and surrounding circumstances were taken into consideration in that case and it was that contracts were not transferable to third parties and could not be regarded as forward contracts within meaning of Suarashtra Order - High Court observed that no evidence had been led with regard to rates prevailing on dates of breach but from admissions contained in defendants evidence it was established that rate could not be less than per candy on material dates - Damages were then assessed and decree of Distt Judge was modified accordingly - Order to decide points which have been agitated before us Court may refer to relevant provisions of Order which was promulgated in under sub-rule (2) of Rule 81 of Defence of India Rules then in force - By clause forward contract was defined to mean a contract for delivery of oil seeds at some future date - Clause provided - No person shall after specified date for any class of oil-seeds enter into any forward contract in any of those oil-seeds - Appeal dismissed
Judgment
GROVER, J.:- This is an appeal by certificate from the judgment and decree of the Mysore High Court.
2. A suit was filed for the recovery of Rs. 22,274.4.0 as damages for breach of contract by the plaintiff (first respondent herein) against M. N. Gangappa now deceased and represented by his legal representatives. The second respondent was also joined as defendant. According to the case of the plaintiff, the defendants had entered into two contracts with him for the supply of groundnut seeds. It was claimed that both the contracts were for a specified quality of groundnut seeds, for specific delivery at a specified price and were not transferable. The first contract (Exhibit P-20) was entered into on 1st November 1950 and the delivery was stipulated to be made by 31st January, 1951. The damages relating to this contract were claimed at the difference between the contract rate and the market rate which was stated to be Rs. 224/- per candy, on the date of breach i.e. 31st January 1951. The second contract (Exhibit P-29) was entered into on 21st November1950. The damages relating to that contract were claimed on the basis of the difference between the contract rate and the market rate, namely, Rs. 218/- per candy on the date of the breach which was stated to be 28th February 1951.
3. On or about the 22nd January 1961 the plaintiff despatched 954 empty gunny bags to Bellary by Rail and sent the Railway Receipt by registered post addressed to the defendants asking them to despatch the stipulated quantity of groundnut seeds agreed to be supplied under the first contract (Ex. P-20) by Rail and to send the Railway Receipt through the Imperial Bank. It was alleged that the registered letter was returned as refused. On 27-1-1951 the plaintiff sent a telegram letter was returned as refused. On 27-1-1951 the plaintiff sent a telegram to the defendants stating that the registered cover containing the parcel Way Bill relating to empty bags had been refused by them and they were called upon to take delivery of the empty gunny bags by giving an indemnity bonds to the Railway authorities. The defendants sent a telegram in reply saying that the transaction in question was of a "satta forward contract and was illegal and unenforceable". This was followed by other telegrams which need not be mentioned. On 12-2-1951, the plaintiff sent a telegram to the defendants asking them to deliver the quantity of groundnut seeds agreed to be sold by means of the second contract (Ex. P-29). The defendants were informed that gunny bags would be sent to them on hearing from them. There was similar correspondence with regard to this contract as well. The defendants took up the position that the contract was illegal. In the written statement also it was asserted by the defendants that the contracts were void under S. 30 of the Contract Act and the Oil Seeds (Forward Contracts Prohibition) Order 1943 (hereinafter called the Order ). The material issues which arose for decision were as follows:
"1. Did the suit contracts not intended delivery of goods but only payment of difference in prices and hence void and unenforceable?
2. Do the suit contracts contravene the provisions of the Oil Seeds (Forward Contracts Prohibition) Order 1943m, and hence void and unenforceable?
3. What is the quantum of damages to be awarded?"
The Distt. Judge, Bellary, who tried the suit, held that the defendants by means of the contracts Exhibit P-20 and Exhibit P-29 had undertaken to supply groundnut seeds to the plaintiff and that those contracts were not transferable. They were thus not hit by the provisions of the order. After determining the damages, the suit was decreed for Rs. 18,759.8.0 with interest at 6% per annum from the date of the suit till the date of payment.
4. The defendants filed an appeal to the High Court gave the following findings:
(i) The groundnut seeds which were agreed to be supplied by the two contracts were of "expeller quality" which was used for extracting oi
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