NUNE SIVAYYA vs MADDU RANGANAYAKULU (DEFENDANTS)

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1935 Supreme(SC) 6

PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD THANKERTON, LORD ALNESS, AND SIR SHADI LAL.
NUNE SIVAYYA - Appellant
Versus
MADDU RANGANAYAKULU (DEFENDANTS) - Respondents
On Appeal from the High Court at Madras.
Decided On : Feb. 12. 1935

Important Points

Under Section 93 of the Indian Contract Act, a seller is not obligated to deliver goods until the buyer applies for delivery, unless a "special promise" exists. An obligation to notify the buyer of readiness does not constitute such a promise, making the buyer's failure to apply a breach.

Subject

Civil Law - Contract Law

Act Referred

CONTRACT ACT: S.93
SALE OF GOODS ACT: S.35

Headnote

(A) Indian Contract Act, 1872 - Section 93 (now Section 35 of the Sale of Goods Act, 1930) - Sale of goods - Delivery - Obligation of buyer to apply for delivery - In the absence of any special promise, the seller is not bound to deliver goods until the buyer applies for delivery - A "special promise" indicates an express stipulation as to delivery which relieves the buyer from the obligation to apply for delivery, or a necessary implication of such a stipulation from the nature of the contract, or usage of trade - An obligation on the seller to inform the buyer when the goods are in a deliverable state is not a "special promise" within the meaning of Section 93, though it may postpone the obligation of the buyer to apply for delivery.

(B) Repudiation of Contract - Justification - A party treating a contract as repudiated is entitled to justify such repudiation on any ground which existed at the time of the repudiation, regardless of whether such grounds were specifically relied upon in the communication of repudiation.

(C) Evidence - Auction Sales - To establish that an auction sale is a sham, there must be evidence that the seller retained the goods; the mere fact that the seller advanced the purchase price to the buyer does not, by itself, prove that the sale was a sham.

Facts of the case:
The appellants (sellers) and respondents (buyers) entered into contracts for the sale of yarn where no specific time for delivery was stipulated. After partial delivery, the sellers required the buyers to take delivery of the remaining goods. The buyers refused, asserting that a reasonable time for delivery had expired and that the contracts were therefore cancelled. The sellers treated this refusal as a wrongful repudiation, sold the ready goods by public auction, and sued for damages for the breach of the contracts.

Findings of Court:
The court found that the buyers had failed to fulfill their statutory obligation to apply for delivery. Consequently, the buyers were not entitled to treat the contracts as cancelled on the ground of unreasonable delay. The court also found that there was insufficient evidence to prove that the auction sales conducted by the sellers were a sham.

Issues: Whether the buyers were justified in treating the contracts as cancelled due to the lapse of a reasonable time for delivery, or whether the sellers were entitled to treat the buyers' refusal as a wrongful repudiation under the requirement that the buyer must apply for delivery.

Ratio Decidendi: Under Section 93 of the Indian Contract Act, the seller is not bound to deliver goods until the buyer applies for delivery unless a "special promise" exists. The court held that the nature of the contracts and the course of business did not create a special promise exempting the buyer from this duty. Since the buyers did not apply for delivery, they could not claim the sellers were in default, and their subsequent refusal to take delivery constituted a wrongful repudiation of the contracts.

Result: Judgment and decrees of the lower courts set aside and suits remanded for ascertainment of damages.

Legal Category Hierarchy

Advocates:
Solicitors for plaintiff-appellants :Hy. S. L. Polak & Co. Solicitors for defendant-respondents: Douglas Grant & Dold.

Judgement

Consolidated Appeal (No. 64 of 1930) from two decrees of the High Court (September 22, 1927) affirming two decrees of the Subordinate Judge at Bapatla (March 31, 1923).

The appeal arose out of two suits, but in substance related only to a suit (No. 86 of 1919) brought by the appellants, as sellers, against the respondents, as buyers, claiming damages for the breach of contracts made in August, 1918, for the sale of yarn. The contracts, which specified no time for delivery, had been partly performed, but on January 3, 1919, the buyers had refused to take further deliveries on the ground that an unreasonable time had elapsed since the date of the contracts. Both Courts in India had dismissed the suit, holding that a reasonable time for delivery had expired at latest by the end of November, 1918.

The facts of the case appear from the judgment of the Judicial Committee.

1935. Jan. 21, 22, 24. Dunne K. C. and Subba Row for the appellants. Although under s. 46 of the Indian Contract Act performance of the contracts had to be within a reasonable time, the appellants, under s. 93, were not bound to deliver until the respondents applied for delivery. As they had not done so there was no default by the appellants on December 19, 1918, when they required the respondents to take delivery. There was no ground for treating the contracts as cancelled or abandoned so as to make s. 93 inapplicable Jones v. Gibbons (( 1853) 8 Ex. 920.); Pearl Mill Co. v. Ivy Tannery Co. ([ 1919] 1 K. B. 78.); Hartley v. Hymans . ([ 1920] 3 K. B. 475.) The respondents letter of January 3, 1919, was a repudiation entitling the appellants to sue for damages. The letter having been treated as a repudiation, the respondents cannot now rely upon grounds for repudiation not relied on therein Braithwaite v. Foreign Hardwood Co. ([ 1905] 2 K. B. 543.); British & Benningtons, Ld. v. N. W. Cachar Tea Co. ([ 1923] A. C. 48.) That principle has been applied in India Nannier v. Rayalu Iyer (( 1925) I. L. R. 49 M. 781.); Ganesh Das-Ishar Das v. Ram Nath . (( 1927) I. L. R. 9 L. 148.)

Upjohn K.C. and Narasimham for the respondents. Both Courts in India held that a reasonable time for performance expired in November, 1918. As the contracts did not provide for delivery " as required" the appellants could not on December 19, 1918, rely upon the fact that delivery had not been applied for Pearl Mill Co. v. Ivy Tannery Co. ([ 1919] 1 K. B. 78.); Hartley v. Hymans . ([ 1920] 3 K. B. 475.) The appellants thereupon could not on December 19, 1918, require the respondents to take delivery. Further, as held by the High Court, s. 93 did not apply, because the contracts were for goods which the appellants had to obtain from distant mills and the respondents could not know when the goods were available ; the course of business and the pleadings estopped the appellants from relying upon the section. Moreover, the High Court rightly found that the absence of deliveries after October was due to the appellants failure to take delivery from the mills and that in December they were not in a position to deliver any goods except those sold by auction. The respondents are entitled to rely upon any ground for repudiation existing on January 3, 1919. Having regard to the judgment of Lord Sumner in the British 6- Benningtons Ld. case ([ 1923] A. C. 48, 70-72.), Braithwaites case ([ 1905] 2 K. B. 543.) is not an authority to the contrary. Subba Row replied.

Feb. 12. The judgment of their Lordships was delivered by

LORD THANKERTON. This is a consolidated appeal from a judgment and two decrees of the High Court of Judicature at Madras, dated September 22, 1927, which affirmed a judgment and two decrees of the Court of the Subordinate Judge, Bapatla, dated March 31, 1923, and made in original suits Nos. 86 of 1919 and 83 of 1922.

In original suit No. 86 of 1919, the appellants sue the respondent No. 1, in appeal No. 64 of 1930, and his minor son, to whom he is guardian ad litem, respondent No.