JUDGMENT
J.A. Patil, J.
1. This is a suit for recovery of the refund amount and damages together with Interest thereon. The plaintiff is a sugar factory and a co-operative society. The defendant is a partnership firm dealing in electrical materials, ball bearings, hardwares, etc. The plaintiff factory was in need of certain alloy brass sugar tubes. The defendant, therefrore, submitted its quotation on 6-7-1974 for the sale of alloy brass sugar tubes of four different specifications. By its order No. 259 dated 9-7-1974, the Plaintiff placed an order With the Defendant for the supply of Item Nos. (ii) and (iv) as follows :
(ii) 400 pieces 70/30 Alloy brass sugar tubes K brand Size 98 m.m. x 102 m.m. x 1100m.m. long.
(iv) 2000 pieces 70/30 Alloy brass sugar tubes K brand Size 47 m.m. x 50 m.m. x 1800 m.m. long.
The Plaintiff offered to pay for the supply of the said 400 pieces of sugar tubes at the rate of Rs.67/- per Kg. and for the said 2000 pieces of sugar tubes at the rate of Rs. 65/- per kg. It was specifically provided in the said order that the said price Included all the duties except sales tax. It was also provided in the said order that the defendant would supply the said goods from ready stock within two weeks. It was further agreed that the plaintiff shall forward a cheque for 30 per cent of the value of the said goods towards the advance after knowing the weight of the tubes from the defendant. The defendant agreed to transport the said goods and delivered the same to the Plaintiff at its factory.
2. By a telegram dated 14-7-1974, the defendant acknowledged the receipt of the order and informed the plaintiff that the approximate weight of the sugar tubes would be 11 tonnes. By the said telegram, the defendant requested the plaintiff to send a bank draft for the amount of advance. The plaintiff, however, by its letter dated 22-7-1974 cancelled its order for 400 pieces of sugar tubes of K brand as described above. The plaintiff informed the defendant that it was proposing to use steel tubes in place of brass tubes. The plaintiff requested the defendant to inform the weight of 2000 pieces of sugar brass tubes. It was also stated in the said letter that the plaintiff would forward the advance to the defendant after knowing the weight of the 2000 pieces of brass tubes. According to the plaintiff, the defendant accepted the said order for sale of 2000 pieces of brass sugar tubes as per the details set out in order No. 259 dated 9-7-1974. The plaintiff averred that it was thereafter agreed that it was not necessary for the plaintiff to send the amount of advance to the defendant and that the plaintiff would make payment of the agreed amount against the delivery of the goods.
3. On 30-7-1974, the plaintiff handed over two cheques to the defendant, one of which was of the same date and for an amount of Rs. 1,56,000/-. The other cheque was a post-dated cheque of 31-7-1974 for a sum of Rs. 3,64,000/-. According to the plaintiff, the defendant encashed the second cheque on 31-7-1974 itself and the first cheque on 2-8-1974. The defendant asked the plaintiff to take delivery of the said goods after about a week. Accordingly, the plaintiff approached the defendant on 7-8-1974 to take delivery of the 2000 brass tubes as per the defendants promise. But the defendant delivered only 1300 brass tubes and deliberately refused and failed to deliver the balance 700 brass tubes as per the agreement and thus committed breach of the same. The plaintiff has averred that the suit transaction had taken place before the supplementary budget which came into force on 1-8-1974 and, therefore, the defendant is not entitled to claim any increase in the excise duty. The plaintiff has paid a total sum of Rs. 5,20,000/- to the defendant, whereas the defendant has supplied the goods of the value of Rs. 2,95,250/-. According to the plaintiff, by mistake, an advance payment of Rs. 5,20,000/- was made to the defendant though the order in respect of 400 pieces of brass sugar tubes had already been cancelled. The defendant, however, demanded the price at the rate of Rs. 74/- per kg. In view of the increase in the excise duty and refused to deliver the balance of 700 pieces of brass tubes.
4. Thereafter there was an exchange of correspondence between the parties. The defendant requested the plaintiff to make further payment of Rs. 1,20,000/- before the remaining 700 pieces of brass tubes could be delivered. According to the plaintiff, it was not liable to pay any amount due on account of increase in the excise duty and that the defendant was liable to supply 2000 brass tubes at the agreed rate. It is further contended by the plaintiff that it is entitled to the sum of Rs. 65,000/-, which had been paid in excess and also a sum of Rs. 1,59,250/-. Thus. In all a sum of Rs. 2,24,250/-. The plaintiff has alleged that the defendant committed breach of the contract, as a result of which it has suffered loss. The market price of the contract goods at the time of the said breach was Rs. 86/- per kg. and the difference between the market price and the contract price of Rs. 65/- per kg. was Rs. 21/-. The plaintiff, therefore, contends that it has suffered a total loss of Rs. 51,450/- due to defendants failure to supply 700 brass tubes weighing about 2450 kgs. In addition, the plaintiff has contended that its daily crushing work was affected to the tune of 60 metric tonnes per day and the loss for the whole of the season was approximately to the tune of 10,000 metric tonnes. The plaintiff has calculated the loss to the extent of Rs. 10/- per bag and thus claimed Rs. 1,00,000/-. Thus, the total claim made by the plaintiff is Rs. 3,99,022/-, which includes the amount of Rs. 2,24,250/- and the Interest amount of Rs. 23,322/-.
5. The defendant has not only denied the plaintiffs claim but also has made counter-claim against the plaintiff to the tune of Rs. 1,54,439.72. The defendant admits the suit contract in respect of supply of sugar brass tubes to the plaintiffs factory within two weeks from ready stock. It is further submitted that earlier the plaintiff had Indicated to place an order for four different sizes of brass sugar tubes and that in view of the said indication given by the plaintiff, the defendant had quoted low rates in respect of items 2 and 4 mentioned in the quotation. The defendant has emphasized the fact that the plaintiff had agreed to place the order along with a cheque for advance for forward delivery goods. It is contended that it was pointed out that the plaintiff should arrange to take delivery of the goods from the ready stock before 30-7-1974 and that in case the plaintiff failed to do so, it would have to pay any increase in the excise duty which might be-imposed by the Government in the interim budget which was to be announced on the evening of 31-7-1975. It is also submitted that the plaintiff Informed the defendant that it would take all the entire quantity of 2000 pieces of brass tubes by 30/31-7-1974 and that it would pay the full amount before any increase in the excise duty was announced. The defendant has admitted the receipt of the postdated cheque dated 30-7-1974 towards the 30 per cent advance but pointed out that when presented the said cheque was dishonoured by the Bank with a request to present the same again on 2-8-1974. According to the defendant, the Plaintiffs representative was, therefore, informed that on account of the dishonouring of the said cheque, delivery of goods could not be made on 31-7-1974. The defendant has pointed out that with effect from 1-8-1974, the Government of India increased the excise duty ad valorem on copper and alloy copper by 10 per cent. Therefore, in the circumstances. the Plaintiff became liable to pay the increase in the excise duty and the defendant was not obliged to deliver the said goods except on payment by the Plaintiff of the increased excise duty. According to the defendant, the price of Rs. 65/- per Kg. was valid only up to 31-7-1974. The defendant has also referred to Section 64 of the Sale of Goods Act and contended that if the Government imposes any increase or reduction in duty after a contract for sale of goods is entered into and if the contract did not disclose any contrary intention, the buyer is required to pay the increased duty of become entitled to a reduction in rate, as the case may be. The defendant has admitted the receipt of the second cheque dated 31-7-1974 for Rs. 3,64,000/-. The defendant has contended that on account of the rise in the excise duty. it was justified in demanding a further sum of Rs. 1,20,000/- from the plaintiff before the delivery of the balance goods was made. According to it, the Plaintiff committed breach of the contract, since it refused to pay the said amount. The defendant has submitted that it was ready and willing to perform its part of the contract. According to the defendant, the total price of the goods at the rate of Rs. 74/- per kg. came to Rs. 5,99,161.24, but the plaintiff paid a sum of Rs. 5,20,000/- only, leaving a balance of Rs. 79,161.24. The defendant has alleged that on account of the breach of contract by the Plaintiff, it had to suffer loss. The defendant has, therefore, made a counter-claim against the Plaintiff for a sum of Rs. 1,54,439.72 as detailed in Exhibits 7 and 8 annexed to the counter-claim and prayed for a decree in that sum together with future interest at the rate of 12 per cent per annum.
6. The Plaintiff has filed its written statement to the defendants counter claim and denied the same. It is contended that the defendant has not given any particulars of its claim and that the same is, therefore, liable to be dismissed with costs.
7. On the above pleadings of the parties, the following issues came to be framed. I have recorded my findings against each issue as under :
Sl. No.
ISSUES
My findings are :
1.
Does plaintiff prove that it were to pay the price set out in the suit contract dated 9-7-1974 only if the goods were delivered and full payment made or before 31-7-1974?
In the
affirmative.
2.
Whether the plaintiff was liable to pay the difference in increase in duties
or taxes if delivery and payment were extended beyond 30/31-7-1974?
In the
negative.
3.
Whether on 5-8- 1974 the plaintiff specifically agreed that defendant supply
the contracted goods, the price thereof be enhanced to include the increase
in the excise duty?
In the
affirmative.
4.
Whether the defendant committed breach of the contract
In the
affirmative.
5.
Is
the defendant liable to make a refund of
Rs. 2.24.250/- with or without interest and, if, so. the rate of such
interest ?
Rs.
1.18.394/-
6.
Is
the plaintiff entitled to damages under the two heads to the extent of Rs. 51,
450/- and Rs. 1,000,000/-
Rs.
25,000/-
7.
Does
defendant prove that
the plaintiff committed breach of the contract ?
In the
negative.
(a)
Has the defendant suffered any loss of profit?
In the
negative.
(b)
What is the extent of the aforesaid loss and is the plaintiff liable to
compensate the defendant for the same ?
In the
negative.
8.
Reliefs and costs :
As per
the order.
8. In support of its case, the Plaintiff factory has examined its Superintendent Ramchandra Kokate, who claims to have the knowledge of the suit transaction. On behalf of the defendant-firm, its partner S.C. Shah, has made his oral statement. In addition to the above, both the parties have led documentary evidence to which reference will be made in due course of this judgment as and when necessary.
9. Pursuant to the enquiry made by the Plaintiff, the defendant submitted its quotation dated 6th July, 1974 (Exhibit P-1) and agreed to sell and supply to the Plaintiff four types of alloy brass sugar tubes of different specifications. We are concerned only with item Nos. 2 and 4. for which, the defendant quoted the price at Rs. 67/- and Rs. 65/-respecttvely per kg. The quotation makes it clear that the rates are ex godown, Bombay and that packing and forwarding charges will be extra. It further states that sales tax will be charged as additional charge and T” Form against G.T. The third condition is regarding payment of 30 per cent of advance against the order. Insurance charges were to be borne by the Plaintiff. The fourth condition is regarding delivery and it states that Item Nos. 2 and 4 will be supplied within two weeks from ready stock. At the foot of the quotation, it is mentioned : The above price includes all duties except S.T.” There is no dispute of the fact that the Plaintiff accepted the price quoted by the defendant and other conditions mentioned in the quotation. The Plaintiff placed an order for purchasing 400 pieces of Item No. 2 and 2000 pieces of Item No. 4 at the quoted rate. As regards the advance, the purchase order dated 8/9-7-1974 (Exhibit P-2) states : “Advance — 30 per cent of the value is being sent separately by cheque. Please let us know the weight of the tubes so that we may arrange to send you the advance.” It is not in dispute that the defendant by its telegram dated 14-7-1974 informed the Plaintiff that the approximate weight of the goods for which order was placed was 11 tonnes. The Plaintiff, however, did not stick up to its original order and by its letter dated 22-7-1974 (Exhibit D-3) informed the defendant to cancel the order. In respect of 400 pieces of the brass tubes described at Item No. 2. The Plaintiff further requested the defendant to treat the order only for 2000 tubes of the specifications noted in Item No. 4 and asked the defendant to inform the weight thereof to enable it to send the amount of advance to the defendant. It is nobody’s case that the defendant thereafter Informed the Plaintiff about the approximate weight of 2000 tubes.
10. Before turning to see as to what happened thereafter, it is necessary to point out that there was a concluded contract between the parties in respect of the purchase and sale of 2000 brass tubes. The terms of the contract which are disclosed by the quotation letter (Exhibit P-1) and the order letter (Exhibit P-2) lay down the sequence in which the parties were to perform their part of the contract and obligations under the contract. The defendant was first to let the Plaintiff know the weight of the goods for which order was placed. It is true that the defendant did inform the plaintiff the approximate weight of the goods ordered to be supplied. However, the said weight was in respect of 2400 pieces of brass tubes. The defendant did not specify separately the weight of the brass tubes described in Item Nos. 2 and 4. This became necessary in view of the fact that subsequently the Plaintiff cancelled its order in respect of 400 brass tubes described in Item No. 2. Therefore, the Plaintiff was at a loss to know as to what was the approximate weight of the 2000 pieces of brass tubes described in Item No. 4. This information was necessary for the Plaintiff in order to discharge its obligation regarding the payment of 30 per cent of the amount by way advance.
11. After the defendant informs the Plaintiff about the weight of the tubes to be supplied to the Plaintiff, the latter was to be under an obligation to send 30 per cent of the amount as advance to the defendant. Then, it was the turn of the defendant to give delivery to the Plaintiff of agreed quantity of the brass tubes. Since the delivery was to be made within two weeks, it goes without saying that the Plaintiff was under an obligation to pay the amount of advance before two weeks. The balance amount along with the other charges and taxes were obviously to be paid later on and the contract does not prescribe any time limit for paying the balance amount.
12. Although no information regarding the weight of 2000 tubes was supplied by the defendant, the plaintif issued to the defendant two cheques one dated 30-7-1974 for Rs. 1,56,000/- and the other dated 31-7-1974 for Rs. 3,64,000/-. The first cheque of Rs. 1,56,000/- is said to have been made towards the 30 per cent advance. The second cheque dated 31-7-1974 of Rs. 3,64,000/- was. however, towards the payment of the price of the tubes. The defendant has tried to place much emphasis on the fact that the first cheque of Rs. 1,56,000/- was dishonoured by the Bank when it was presented for encashment on the same date i.e. 30-7-1974. It is, however, not in dispute that the said cheque was again presented to the Bank on 2-8-1974 and it was honoured. It is an admitted fact that the cheque dated 31-7-1974 which was for Rs. 3,64,000/- was encashed on the same date. Thus, before the end of July, 1974, the defendant received a sum of Rs. 3,64,000/- from the Plaintiff which was obviously far more than the 30 per cent amount of advance of the price of 2000 tubes. By 2-8-1974, the defendant received a total sum of Rs. 5,20,000/-.
13. Under the contract, two weeks time was stipulated for giving delivery of the 2000 tubes. The said period expired on 23-7-1974. The defendant could not give delivery of any goods to the plaintiff unless and until it had received the 30 per cent amount of advance, because delivery was to be made against the receipt of the said amount. There is no indication in the contract that time was to be the essence of the contract. The delivery of the goods was to be made by the defendant from the ready stock but it was dependent on the Plaintiffs paying 30 per cent of the amount of advance. But once the Plaintiff paid that amount to the defendant, the latter was obliged to make delivery of the entire quantity of 2000 tubes. It is not in dispute that the Plaintiff was given delivery of only 1300 brass tubes and that on 2-8-1974 though five days before that the defendant had realised more than the actual price of the tubes supplied. The delivery challan dated 7-8-1974 (Exhibit P-3) mentions that 1300 pieces of brass tubes, totally weighing 5816 Kgs. were supplied to the Plaintiff. As per the agreed rate, i.e. Rs. 65/- per Kg., the price of 1300 brass tubes comes to Rs, 3,78,040/-. This is exclusive of the other taxes and charges payable by the Plaintiff. As already pointed out. the actual amount received from the Plaintiff was Rs. 5,20,000/-. The delivery challan contains a note which reads : The necessary additional increase in rate will be charges in invoice due to increased in excise, as agreed by your M.D. at Bombay on 5-8-1974.” The Plaintiff, therefore, addressed two letters dated 9-8-1974 and 5-9-1974 (Exhibit No. 4 Collectively) to the defendant, making it clear that it had never agreed to pay any increase in the rate due to increase in excise duty. The Plaintiff, therefore, called upon the defendant to supply the remaining 700 pieces of brass tubes immediately. The defendant replied on 16-9-1974 (Exhibit P-5) and raised a contention that on account of increase in the excise duty by 10 per cent, the Plaintiff was liable to pay the price at Rs. 74/- per Kg. instead of Rs. 65/- per Kg. The defendant also stated that the rate of Rs. 747- per Kg. was exclusive of the Sales Tax and packing and forwarding charges. By the same letter, the defendant called upon the Plaintiff to send a further cheque of Rs. 1,20,000/- to enable it to give delivery of the remaining brass tubes.
14. The dispute between the parties thus started in connection with the alleged increase in the excise duty. According to the defendant, on 31-7-1974, the Government of India announced an interim budget and increased the excise duty ad valorem on copper and alloy copper by 10 per cent with effect from 1-8-1974. The learned Advocate for the defendant submitted that the plaintiff took delivery of goods after the announcement of interim budget. According to him, there was delay on the part of the Plaintiff in taking delivery and, therefore, the Plaintiff was liable to pay additional excise duty of Rs. 56,532/-. In this respect, Shri Vhatkar, the learned Advocate for the defendant relied upon the provisions of Section 64-A of the Sale of Goods Act. 1930, which reads as under :
“64-A. In contracts of sale, amount of increased or decreased taxes to be added or deducted.– (1) Unless different intention appears from the terms of the contract, in the event of any tax of the nature described in Sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax paid where tax was chargeable at that time.–
(a) if such imposition or increased so takes effect that the decreased tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to be contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction.
(2) The provisions of Sub-section (1) apply to the following taxes, namely :
(a) any duty of customs or excise on goods;
(b) any tax on the sale or purchase of goods.”
Shri Ghanekar, the learned Advocate for the Plaintiff, however, countered this argument by submitting that the defendant’s claim in this respect is totally misconceived and that Section 64-A cannot have any application to the present case. He pointed out that except the endorsement made on the delivery challan (Exhibit P-3), there is no evidence that excise duty was agreed to be paid by the Plaintiff. Therefore, according to Shri Ghanekar, there is no question of the Plaintiffs paying increased rate on account of the alleged Increase in the excise duty. In this connection, it is pertinent to note that the quotation (Exhibit P-1) submitted by the defendant as well as the order (Exhibit P-2) placed by the Plaintiff uniformly stated that the prices included all duties except sales tax. Therefore, assuming for a moment that the Plaintiff was liable to pay excise duty, the same was already included in the price as is evident from the note made in Exhibit P-1 and Exhibit P-2. The contract between the parties evidenced by these two documents does not at all give any indication that the prices agreed were liable to be changed on account of increase in tax or duty. On the contrary, the intention of the parties, as spelt out by the contract, is to be effect that the price was inclusive of all dues except the sales tax.
15. What is submitted further by Shri Ghanekar is more relevant and important. He submitted that excise duty is payable on goods manufactured. He pointed out that the defendant is not a manufacturer but a distributor and, therefore, the defendant itself is not liable to pay the excise duty. In this respect, it is helpful to make a reference to what S.C. Shah, the partner of the defendant firm admitted in para 13 of his cross-examination: “In respect of the suit goods, we were not the manufacturers but distributors. It is true that the excise duty is payable by the manufacturer and by the distributor.” in view of this clear-cut admission, it is not understandable how the defendant can increase the agreed price on account of rise in the excise duty, which, it was not liable to pay as a distributor.”
16. There is yet another good reason for rejecting the defendant’s claim in this respect. As already seen, the delivery of the goods was agreed to be given from ready stock. This fact obviously means that the goods in question were already manufactured before the parties entered into contract on 9-7-1974 or at any rate before 31-7-1974. The increase in the excise duty, if at all there was any, would be in respect of the goods which would be manufactured after 1-8-1974. Therefore, there was no question of making any payment on account of the rise in the excise duty when the goods in question were ready for delivery before the said rise came into effect. The relevant date for charging excise duty is the date of manufacture or production.
17. In this respect, Shri Ghanekar relied upon the Full Bench decision of the Supreme Court, in re Sea Customs Act (1878) AIR 1963 SC 1760, which lays down, inter alia, that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. Pointing out the contrast between the excise duty and sales tax, it was observed that both are levied with reference to goods, the two are very different imposts. In one case the imposition is on the act of manufacture of production, while in the other, it is on the act of sale. In Indian Rayon Corporation Ltd. v. Union of India , it was pointed out that the excise duty being a tax levied on manufacture or production of goods, the material time for liability of excise duty under Section 3 of the Central Excise Act will be the date of manufacture or production. If at the time of the manufacture, the goods were not subject to duty, a duty imposed later cannot be levied on such goods because this would result in a tax imposed either on storage of goods or on movements of goods on theft clearances. It was observed that such a view militates against the true nature of excise duty. Merely because the goods remain uncleared after their manufacture cannot make the goods exigible to excise duty.
18. In the instant, case, both the relevant documents Exhibits P-1 and P-2 which contain the terms and conditions of the suit contract clearly state that the agreed price includes all duties except sales tax. It is, therefore, obvious that that price of Rs. 65/- per Kg. agreed on 9-7-1974 was inclusive of the excise duty also since the goods were already manufactured. Therefore, any increase or reduction in the excise duty after 9-7-1974 is irrelevant and Section 61 of the Sale of Goods Act has no application. The defendant was bound to supply the brass tubes at the rate of Rs. 65/- per Kg. and was not justified in demanding a higher rate of Rs. 74/- per Kg. The fact that the delivery of the brass tubes was made after the alleged increase in the excise duty on 1-8-1974 is of no consequence since the defendant, was not required to pay the increased excise duty. Firstly, it is not a manufacturer of the said brass tubes and secondly the brass tubes agreed to be sold and supplied to the Plaintiff were from the ready stock, that is, the stock already manufactured prior to the alleged increase in the excise duty. Thirdly, the alleged increase could not have retrospective application. The defendant’s witness Suresh Shah tried to explain in his cross-examination that in a meeting at Mumbai with the Managing Director of the Plaintiff-factory, it was agreed that the Plaintiff would pay increase in the excise duty. But he admitted that there were no minutes of the said meeting. According to him, this fact is noted in the delivery challan (Exhibit P-3). Needless to say that the delivery challan prepared by the defendant is not a contract but evidence of performance of contract. Suresh Shah further tried to explain in his re-examination that the increase in the rate was demanded as the defendant was required to pay the increase in the excise duty to the manufacturer. This explanation cannot be accepted for two reasons. Firstly, the Plaintiff is not concerned with or bound by what was agreed between the defendant and the manufacturer and secondly there is no evidence except these bare words to show that the defendant itself paid any amount of difference to the manufacturer on account of rise in the excise duty.
19. Shri Vhatkar, learned Advocate for the defendant, contended that the Plaintiff accepted short or part delivery of goods i.e. 1300 brass tubes in place of 2000 brass tubes and, therefore, the Plaintiff is liable to pay for the same. The Plaintiff does not dispute its liability to pay for the 1300 brass tubes. In fact, it has already paid for the same. The dispute between the parties is about the rate. The agreed rate was Rs. 65/- per Kg. but on account of the alleged increase in the excise duty, the defendant demanded rate of Rs. 74/- per Kg. and withheld further delivery of the remaining 700 brass tubes unless a sum of Rs. 1,20,000/-more was paid by the Plaintiff. I have already pointed out above that the defendant’s claim for increased rate of Rs. 74/- per Kg. Is not legal and justified. Consequently, its insistence on Plaintiffs paying additional amount of Rs. 1,20,000/- was not proper. So also withholding the delivery of the remaining 700 tubes. Under Section 31 of the Sale of Goods Act, it is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Shri Vhatkar made a reference to Section 37 and contended that the Plaintiff was bound to pay the price of the entire goods since it accepted the delivery of part of the goods. He emphasised the fact that the Plaintiff did not reject the delivery. Section 37(1) states that where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered, he shall pay for the same. The Plaintiff does not dispute its liability to pay for the goods delivered to it as per the delivery challan dated 7-8-1974 (Exhibit P-3). In fact, prior to that, the Plaintiff had made an overpayment to the defendant. Admittedly, the Plaintiff had made a total payment of Rs. 5,20,000/- (Rs. 1,56,000 + Rs. 3,64,000/-). whereas the price of 1300 pieces of brass tubes weighing 5816 Kgs. delivered by the defendant, at the contractual rate of Rs. 65/- per Kg. was Rs. 3,78,040/-. The Plaintiffs witness Kokate has tried to say that the total weight of 1300 brass tubes was 4550 Kgs. But that cannot be accepted for the simple reason that in the plaint no dispute about the weight of those tubes is raised though it is contended that the brass tubes supplied were worth Rs. 2,95,750/-. Therefore, the price of the said tubes will have to be taken at Rs. 3,78,040/-. Even adding to it the packing charges and sales tax, the total price of the goods supplied was much lesser than Rs. 5,20,000/-. The delivery challan bears a note that additional increase in rate on account of Increase in excise duty will be charged as allegedly agreed by the Managing Director of the Plaintiff. The Plaintiff, however, by that letter dated 9-8-1974 (Exhibit P-4) made it clear that it did not agree to any such increase. It will thus be seen that the Plaintiff had never repudiated its liability to pay for the goods supplied to it. In these circumstances, the Plaintiff must be deemed to have been ready and willing to perform its part of the contract. Therefore, the Plaintiff cannot be said to have committed breach of the contract. On the contrary, it is the defendant, which wrongfully Insisted on plaintiffs paying the alleged increase in the excise duty and withheld the delivery of the remaining 700 brass tubes. The defendant did not make full delivery of the quantity of brass tubes for which the Plaintiff had placed its order. This conduct on the part of the defendant clearly shows that it was not ready and willing to perform its part of the contract as per the agreed terms. In these circumstances, it is the defendant who must be held to have committed breach of the contract. Consequently, the Plaintiffs claim for refund of the overpaid amount/price will have to be allowed and the defendant’s counter-claim for damages will have to be rejected.
20. According to the Plaintiff, the amount overpaid to defendant is Rs. 2,24,000/-. The Plaintiff has charged interest thereon at 12 per cent per annum for the period from 1-8-1974 to 13-6-1975 (date of the suit) i.e. Rs. 23,322/- and totalled its claim at Rs. 2,47,572/-. However, the claim appears to have been miscalculated. The proper and correct amount which the Plaintiff can claim is as under :
Rs. 5, 20.000/-
Paid to defendant under two cheques dated 30-7-1974 and 31-7-1974 (Rs. 1, 56,000/- + Rs. 3,20,000/-).
Minus
i) Rs. 3.78.040/-
Being the price of 1300 brass tubes at the contractual rate of Rs. 65/-per Kg. (Rs. 65/- X 5816 Kgs.).
ii) Rs. 30.848/-
Sales tax at 5 per cent, and General Tax at 3 per cent.
iii) Rs. 7.560/-
Packing charges at 2 per cent.
Rs. 4,16,448/-
Therefore, the amount overpaid by the Plaintiff to the defendant is Rs. 1,03,552/-and not Rs. 2,24,000/- as claimed. The Plaintiff will be entitled to claim interest at the rate of 12 per cent per annum from the date of payment till the date of filing of the suit (1-8-1974 to 13-6-1975 = 10 months and 13 days) and it comes to Rs. 14,842/-. Thus, the total amount to which the Plaintiff is entitled by way of refund with interest thereon comes to Rs. 1,03,552 + Rs. 14,842 = Rs. 1,18,394/-.
21. The Plaintiff has further claimed damages of Rs. 1,00,000/- on account of breach of the contract by the defendant. In Para 12 of the plaint, it is averred that dueto non-delivery of 700 brass tubes, the Plaintiff could not make use of 1300 brass tubes supplied to it and that affected the crushing work to the tune of 60 metric tonnes. The Plaintiff has calculated the loss at the rate of Rs. 10/- per bag. Before the Court, its witness Ramchandra Kokate stated :
“Since we could not fit the said brass tubes in the pan, there was a loss of around 60 tonnes per day in manufacturing process which resulted in less production of around 10,000 bags of sugar in the season. We have claimed Rs. 1,00,000/- towards damages i.e. liquidated damages on account of breach of contract.”
This evidence is not consistent with what is averred in the plaint. The case made out in Para 12 of the plaint is that “the plaintiff could not even use the 1300 brass tubes in the absence of 700 brass tubes by the defendants and the said part supply could not be of use to the plaintiff.” Witness Ramchandra Kokate has not explained in his evidence why those 1300 brass tubes could not be used or fitted in the pan. He does hot say that for want of remaining 700 brass tubes, the 1300 brass tubes supplied could not be used. It is neither pleaded nor proved that the 1300 brass tubes supplied were not as per the specifications given in the quotation and purchase Order (Exhibits P-1 and P-2) and, therefore, they could not be fitted in the pans.
23. The Plaintiffs claim for the liquidated damages is also not maintainable under Section 74 of the Indian Contract Act which Contemplates payment of stipulated penalty in case of breach of contract. The purchase order (Exhibit P-2) contains the following printed term:
“Period of supply….. The material is to be supplied before….. In default, the order would stand automatically cancelled and you would be held responsible for the damage.”
The fact that the blank space in the format of the term was not filled in does not matter much since it is specifically mentioned in the said purchase order :
“Delivery — Immediately from ready stock within two weeks.”
In short, the contract does not stipulate any specific penalty in the event of breach of contract. The essence of liquidated damages is a genuine covenanted pre-estimate of damage. (Vide Bridge v. Campbell Discount Co. Ltd., (1962 (1) All England Law Reports 385 and K. C. Thaper v. H. H. Jethanandani. (1971-72) 76, C.W.N. 338 : (1973 Lab IC 336). The Plaintiff cannot, therefore; claim Rs. 1,00,000/- by way of liquidated damages. The fact, however, remains that the defendant committed breach of the contract. Section 73 contemplates compensation for loss or damage caused by breach of contract. These are what may be called as unliquidated damages. A party who suffers on account of breach of contract is entitled to claim “compensation for any loss or damage caused to him thereby which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.” in the instant case, the evidence of Ramchandra Kokate about the alleged less production of 10,000 bags of sugar may not be acceptable for want of details substantiating the said claim. But, to my mind, three cannot be any doubt that the breach of contract by nondelivery of 700 brass tubes must have affected the Plaintiffs production of sugar during the relevant season. Therefore, I am inclined to award damages of Rs. 25,000/-to the Plaintiff.
24. As regards the third item of damages of Rs. 51,450/-, Ramchandra Kokate has stated in his evidence that the Plaintiff does not press that claim. Hence, it need not be granted.
25. The net result of the foregoing discussion is that the Plaintiff partly succeeds in establishing its claim. My findings on issue Nos. 1, 3 and 4 are in the affirmative and those on issue Nos. 2, 7, 7(a) and 7(b) are in the negative. My finding on issue No. 5 is Rs. 1,18,394/- and that on issue No. 6 is Rs. 25,000/-. The defendant’s counterclaim has to be dismissed,
26. In the result, I pass the following order:
ORDER
I) The suit is partly decreed with proportionate costs on the decreed claim.
II) The defendant firm do pay to the Plaintiff factory refund amount of Rs. 1,18,394/-and damages of Rs. 25,000/-; in all Rs. 1,43,394/- (Rupees One Lakh Fortythree Thousand Three Hundred Ninetyfour only) with future interest at the rate of 12 per cent per annum from the date of the suit (i.e. 13-6-1974) till the date of the decree and at the rate of 6 percent per annum from the date of the decree till realisation.
III) The counter-claim made by the defendant firm is dismissed. Both the parties
to the counter-claim to bear their respective costs.
IV) Decree be drawn accordingly.
Certified copy and authenticated copy by the Associate of this Court allowed.