Validity and enforceability of the clause of contract between parties.

Rajamannar, C.J. -This is an appeal against the judgment and decree of Ramaswami Gounder, J., dismissing the appellant’s suit in C.S. No. 380 of 1949, for the recovery of a sum of Rs. 34,063-7-3 from the Dominion of India as the owner of the Madras and Southern Mahratta Railway represented by the General Manager of that Railway. The plaintiff claimed that amount as damages consequent on a breach of contract alleged to have been committed by the defendant. The material facts are not in dispute. In pursuance of an invitation by the Madras and Southern Mahratta Railway for tenders for the supply of jaggery to the railway grainshops the plaintiff submitted on 27th January, 1948, a tender in the prescribed form offering to supply 14,000 imperial maunds of cane jaggery, Chittore variety, first sort, during the months of February and March, 1948, at the rate of Rs. 11-4-0 per imperial maund. The defendant in a letter addressed by the Deputy General Manager of the Railway dated 20th January, 1948, accepted the plaintiff’s tender and called upon the plaintiff to remit a sum of Rs. 7,900 in cash to the paymaster and cashier of the Railway at Madras on or before 7th February, 1948, as security deposit for the proper fulfilment of the contract and intimated that on receipt of advice of such remittance the official order will be placed with him. The plaintiff accordingly paid the said amount and the defendant by letter from the Deputy General Manager of the Railway dated 16th February, 1948, placed an order with the plaintiff for the supply of the entire quantity of 14,000 maunds to be delivered in four instalments of 3,500 maunds each on 1st March, 1948, 22nd March, 1948, 5th April, 1948, and 21st April, 1948. The programme of delivery was altered later by a letter dated 28th February, 1948, as follows: 3.500 maunds between 1st and 4th March, 1948; 3,500 maunds by 22nd and 25th March, 1948; 3,500 maunds between 5th and 8th April, 1948 and 3,500 maunds between 21st and 24th April, 1948. The plaintiff supplied the first instalment of about 3,500 maunds, as required by the defendant, and the defendant accepted the same. On 8th March, 1948, the Deputy General Manager of the Railway addressed a letter to the plaintiff which runs as follows:

“Please note that the balance quantity of jaggery outstanding on date against the above order is treated as cancelled and the contract closed”.

The plaintiff protested against this action of the defendant and stated that he had invested more than a lakh of rupees to perform the contract and that he was ready., and willing to supply the goods as per the terms of the contract. But the defendant refused to reconsider the matter and stated that the defendant was well within its rights in cancelling the contract. It is common ground that at no time did the defendant explain the reason for the cancellation and that he always took the stand on the following clause in the tender:

“This Administration reserves the right to cancel the contract at any stage during the tenure of the contract without calling upon the outstandings on the unexpired portion of the contract.”

The plaintiff thereupon filed the suit out of which this appeal arises, alleging that the said clause was null and void and no effect should be given to it, as the clause was entirely repugnant to the existence of a valid contract between the parties, that the said clause would be against public policy and against justice, equity, and good conscience and further submitted that even assuming the defendant had a right of cancellation, it could be exercised only for sufficient and valid reasons and not arbitrarily. The plaintiff therefore charged the defendant with breach of contract and claimed damages for such breach in the sum of Rs. 34,063-7-3 calculated at the rate of Rs. 3-4-0 per maund, being the difference between the market rate and the contract rate on the date of breach (8th March, 1948), on the quantities still to be delivered under the contract.

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