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HIGH COURT OF ANDHRA PRADESH
SYED QAMAR HASSAN,KUMARAYYA, JJ.
Vishram Arjun
Versus
Irukulla Shankariah
Appeal Nos. 99/1 and 121/1 of 1954-1955 .against decree of Dist. J., Secundarabad, in original Suit No. 4/1 of 1952-53.
Decided On : 18-04-1957
CONTRACT - Novation - Substitution of new contract - Essential features - Novation in law after breach of contract - Whether possible - Sale of Goods Act (III of 1930), Ss. 6(1), (3) - Contract Act (IX of 1872), Ss. 54, 55, 62, 73 - Hyderabad Sale of Goods Act (VII of 1351, F.), S. 6(1), (3).
Fact of the Case:
The plaintiff, a contractor, entered into an agreement with the Forest Department to clear a portion of the forest area. He then sold the timber to the defendants under an agreement (Ex. P-6). Later, the plaintiff and the defendants entered into another agreement (Ex. D-7) which reduced the amount payable by the defendants and provided for payment in installments. The plaintiff failed to get the attachment of timber vacated within the time stipulated in Ex. D-7. The defendants claimed damages for the loss they sustained due to the plaintiff's non-compliance with the terms of Ex. D-7. The plaintiff brought a suit for the recovery of the amount due under Ex. P-6. The defendants contended that Ex. D-7 superseded Ex. P-6 and set up their counterclaim for damages.
Finding of the Court:
The court held that Ex. D-7 did not constitute novation as it did not extinguish all rights and liabilities under the old contract and did not operate as a new and independent agreement substituting the former contract. The court further held that novation in law after breach of contract is not permissible. The court also held that Ex. D-7 was substantially an agreement of remission and that the plaintiff was entitled to relief to the extent of the amount agreed upon in Ex. D-7, subject to the finding on the plea that even that obligation had become either diminished or extinct on account of subsequent payment or because the plaintiff, as agreed, did not get the attachment lifted within a week or reasonable time.
Issues: 1. Whether Ex. D-7 constituted novation and extinguished all rights and liabilities under Ex. P-6? 2. Whether novation in law after breach of contract is permissible? 3. Whether Ex. D-7 was substantially an agreement of remission? 4. Whether the plaintiff was entitled to relief to the extent of the amount agreed upon in Ex. D-7?
Ratio Decidendi: 1. Novation implies that there being a contract in existence some new contract has been substituted for resulting in discharge of the old contract. The essential feature of novation is that a right under the original contract is relinquished and new rights referable to new contract are created. The substituted contract therefore must be a Valid and enforceable contract to be effective as novation. 2. There can be no novation in law after the breach of contract for upon a breach of contract it will be only adjustment of remedial rights flowing from the breach rather than substitution of any subsisting contract between the parties. 3. An agreement which reduces the amount payable under a previous contract and provides for payment in installments is substantially an agreement of remission.
Final Decision: The appeal of the plaintiff was allowed, and the decree of the court below was set aside. The plaintiff was granted a decree for the recovery of the amount due under Ex. D-7, with proportionate costs of both the courts together with interest from the date of the decree. The appeal of the defendants was dismissed.
KUMARAYYA, J. :- It is intended by this Judgment to dispose of both the appeals Nos. 121 and 99 of 1954 arising out of a single judgment dated 10-7-1954 passed by the District Judge, Secunderabad. Appeal No. 99/1954 is filed by the plaintiff, Vishram Arjun, against the dismissal of his suit and appeal No. 121/ 1954 is preferred by the defendants, Yerakula Shankarayya, timber merchant of Warrangal and Muhamed Mohasin Khan, timber merchant of Chinnur against the dismissal of their counter-claims.
2. The facts of the case are simple and for the most part undisputed. It would appear from the pleadings that P. W. Department undertook Kadam Canal Project which was to run through some of the forest area in Adilabad District. The site of the canal and certain portion (space) on either side of it had therefore to be first cleared. Vishram Arjun, a contractor was given the contract of clearing the portions between miles 26 to 30 in August 1949. Ex. D-34 dated 30-8-1950 is the agreement between Vishram Arjun and the Forest Department and it embodies all the terms to which the contract of sale was subjected.
The forest produce which formed the subject matter of the agreement comprised the entire produce in existence at the time in the contract area. and also which shall come into existence in future and which might be removed from that area by the contractor between 1-6-1949 and 31-7-51. The contract for clearing the other portion between miles 21 and 25 was originally given to another contractor, Ratanji Kanji but on his withdrawal was given to the plaintiff on 28-1-1950. The plaintiff however sold the timber between miles Nos. 26 to 30 to the defendants under Ex. P-6 dated 10-11-1949 executed in duplicate. He also sold the felled timber in the area between miles 21 to 25 on the-same terms as embodied in Ex. P-6 on 10-5-1950 to the same defendants. It was agreed that the defendants would pay Rs. 1,00,000/- towards felling charges within five months besides full amount of valuation of the jungle as fixed by the P. W. D. as and when demanded from the plaintiff. The defendants paid only Rs. 40,000/- towards felling charges and though the valuation of the jungle was fixed by P. W. D. at Rs. 2,02,226-5-0 only a sum of Rs. 1,02.800/- was paid by them to the plaintiff. Some disputes arose in relation to further payment. Consequently the plaintiff applied on 2-2-1951 to the forest authorities to prevent the transfer (removal) of timber till the entire payment was made.
The forest authorities in order to ensure their amounts attached the timber and placed certain restrictions on its movement and sale. Eventually the parties settled their dispute and entered into an agreement with regard to the payment of money. This agreement is said to have been executed in two counter-parts each of which was signed by the other party.
According to the terms of this agreement the original amount as fixed was reduced and facility for payment in instalments was given to the defendants. The plaintiff was held responsible to get the attachment of timber vacated within a week and the defendants to make regular payments. The plaintiff in spite of his best efforts could not get the attachment vacated within the time stipulated. The defendants nevertheless carried on their work of transfer of timber and sale thereof subject to the restrictions placed by forest department and even made certain payments to the plaintiff.
They did not however pay the stipulated amount in full to the plaintiff and at last gave notice to the plaintiff claiming damages. The plaintiff therefore brought a suit on the basis of Ex. P-6 for the recovery of a sum of Rs. 1,34,949-5-0.
3. The defendants in their written statement disputed the right of the plaintiff to base his claim on Ex. P-6 as it was superseded by Ex. D-7 and set up their own counter claim for Rs. 75,000/- as damages for the loss they sustained due to the plaintiffs non-compliance with the terms of the agreement Ex. D-7 dated 3
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