JUDGMENT
Sreedharan, J.
1. Defendant in O.S. No. 61 of 1977 on the file of Subordinate Judge’s Court, Cochin is the appellant in this appeal. The suit was one for recovery of a sum of Rs. 82,405.08 as damages on account of breach of contract for the sale of certain quantity of rice. According to plaintiff the defendant contracted to purchase rice worth Rs. 3,44,786.35 that the defendant committed breach of that contract, that the said quantity of rice could fetch only Rs. 2,74,649.38 on resale, that on account of the above breach and resale they suffered a loss of Rs. 70,489.98 and that they are entitled to storage charges amounting to Rs. 11,915.10 for the 2942 bags of rice from 8-11-1975 up to 22-3-1976. The learned Subordinate Judge granted a decree to the plaintiffs allowing them to realise a sum of Rs. 81,522.48 together with interest @ 6% per annum from the date of suit from the defendant with proportionate costs. Defendant challenges the said decree in this appeal.
2. The material averments made by the plaintiffs in the plaint which are germane for the decision of this appeal are as follows : Plaintiffs invited tenders on 8-10-1975 for the disposal of broken rice stocked in their godowns at Cochin. Defendant among others submitted tender on 22-10-1975. As per the condition of the tender which was accepted by the defendant he has to remit the entire price together with sales tax thereon within 7 days of the issue of confirmation of acceptance of tender by the first plaintiff. It was further agreed that on the failure of the defendant to make the aforesaid payment, the plaintiff will be free to forfeit the security deposit and resell the stock at the risk and cost of the defendant. The plaintiff while accepting the tender of the defendant issued a registered letter on 31-10-1975 requiring the defendant to remit the costs of the goods and sales tax thereon and to lift the stock in terms of the tender. The defendant failed to lift the goods within the said time on paying the price agreed upon. On 12-11-1973 the plaintiff sent a reminder requesting the defendant to lift the stock at least by 18-11-1975 failing which it was stated that the plaintiff would be constrained to retender the goods at the risk and cost of the defendant. The defendant did not comply with that request. On 17-11-1975 defendant wrote a letter stating that the rice was of substandard quality. The plaintiff on 19-11-1975 replied stating that they had tendered (for) the rice only after satisfying themselves about the quality and requested the defendant once again to pay the price and lift the stock. The plaintiff also made it clear that if the stocks are not lifted before 25-11-1975 the same would be retendered at the defendant’s risk and cost. The selfsame article was later sold to M/s. Meghjee Malsec and Sons. Defendant was carrying on correspondence putting forth untenable grounds to avoid their legal responsibility. After few correspondence, on 7-12-1976 the defendant stated that they are not bound to lift the stock at the rate quoted three months back. The delay of three months was solely caused on account of the laches of the defendant. On the defendant’s breach of the agreement the plaintiffs called for fresh tenders on 12-3-1976 and 13-3-1976, Five persons put in tenders on 22-3-1976. The amounts offered were very low and so they
were not accepted. The offer submitted by M/s. Meghjee Malsee and Sons, Cochin for the purchase at Rs. 107/- per lot was accepted on 30-3-1976 as this would considerably reduce the loss. Hence the suit for the amount as stated earlier.
3. The defendant contested the suit by filing a written statement raising inter alia the following contentions. Defendant did not subscribe to the terms and conditions appended to the tender notice. The tender was not accompanied by the security deposit of 10% of the value of goods as required by the tender notice. There was no proper or valid acceptance of the tender. The very object of the tender was unlawful as it turned out that the plaintiffs wanted to sell broken rice which was unfit for human consumption. The refusal by the plaintiffs to issue warranty disclosed their knowledge and connivance that the very sale was of a prohibited category of goods. Plaintiffs acted in contravention of the provision of the Prevention of Food Adulteration Act. The rice for which the defendant had sent the tender and which was subsequently sold to M/s. Meghjee Malsee and Sons was confiscated by the Government Authorities and the purchasers were prosecuted for violation of the provisions of Prevention of Food Adulteration Act. In spite of the specific time limit fixed in the tender for performance of the agreement, the plaintiffs unilaterally went on extending the time limit. That act of the plaintiff will exonerate the defendant from all liabilities. The breach of the contract was committed by the plaintiffs and not by the defendant. The defendant was not liable to take delivery of the broken rice on account of the refusal by the plaintiffs to give warranty regarding the quality and fitness of the rice. The defendant had not inspected the rice as alleged by the plaintiffs. The correspondence between the parties brings out non-conclusion of the contract, the void or voidable nature of contract and the vain exercises by the plaintiffs for novation or alteration of contract. The plaintiffs are not entitled to forfeit or retain the earnest money deposit of Rs. 1000/- made by the defendant. That amount is to be refunded. The plaintiff is not entitled to claim Rs. 70,489.98 as their loss on account of the defendant’s breach of contract. Nor are they entitled to realise Rs. 11,915.10 towards storage charges from this defendant. The plaintiffs are not entitled to any relief in the suit. The suit has only to be dismissed.
4. P.Ws. 1 and 2 were examined and Exts. Al to A13 were marked on the side of the plaintiffs. D.W. 1, a partner of M/s. Meghjee Malsee and Sons was examined on the side of the defendant. After considering the above evidence the learned Subordinate Judge came to the conclusion that there was a concluded contract between the plaintiff and the defendant, that it was not void on the ground that the article sought to be sold was one the sale of which was prohibited by law, that the defendant committed breach of the contract, that the plaintiff is entitled to forfeit the amount paid as earnest money, and that the plaintiff is entitled to get Rs. 81,522.48 as damages on account of breach of the contract and by way of storage charges.
5. The learned counsel appearing for the defendant-appellant firstly contended that there was no concluded contract between the plaintiff and the defendant for the sale of broken rice. The basis for putting forward this contention is the absence of making the security deposit by the defendant. Ext. A1 is the invitation to tender and instructions to tenderer for the disposal of broken rice lying at Food Corporation of India, godown at Cochin-3. Appendix A to Ext. Al contains the terms and conditions of the sale. Clause (ii) of this appendix enjoins upon the tenderer to pay by way of security for the due performance of the contract, 10% of the value of goods for which the offer has been made. It also provides that tenders which are not accompanied by the required amount of security deposit are liable to be rejected summarily. On the basis of this provision it is argued that unless and until the security deposit is made by the tenderer, there cannot be a valid contract. The defendant has not made the security deposit. Therefore it is contended that there is no concluded contract. We are not impressed with this argument. What the above clause states is : “Tenders not accompanied by the required amount of security deposit are liable to be rejected summarily.” This provision shows that the Food Corporation of India has got the option to waive the security deposit. In the instant case the plaintiffs accepted the rates quoted by the defendant. Ext. A2 communication sent by the plaintiff to the defendant establishes the acceptance of the tender. In other words, Ext. A2 will go to show that the plaintiffs have not summarily rejected the tender on account of the non-compliance in making the security deposit. Thus we overrule the contentions raised by the learned counsel that there was no valid contract between the parties.
6. The next question that arises for consideration is whether the defendant committed the breach of the contract. As per condition 7 of Ext. Al the successful tenderer after acceptance of his tender should deposit the balance amount within 7 days from the date of issue of the acceptance letter and to remove the stocks within a specified date of issue of release order. Clause (g)(1) of Appendix A to Ext. Al makes it mandatory for the successful tenderer whose tender has been accepted to make the payment within 7 days and get the delivery order. Sub-clause (ii) of Clause (g) further states that the failure to complete the payment within 7 days will entail the forfeiture of the security amount and that the Food Corporation of India will resell the stock at the risk and cost of the buyer and recover the loss suffered by the Corporation. While accepting the tender by Ext. A2 the plaintiffs required the defendant to make the remittance of the price due under the contract and to lift the stock immediately as per the terms and conditions of the tender. The defendant was therefore bound to effect the payment and lift the stock as per the conditions incorporated in Ext. Al. Since the defendant did not perform his part of the contract the plaintiff reminded the defendant by letter Ext. A3 to arrange for the payments and to take delivery of the stock on or before 18-11-1975. In reply to Ext. A3 the defendant sent Ext. A4 letter on 17-11-1985. In that letter they have specifically stated their unwillingness to lift the goods and asked for refund of the earnest money deposit of Rs. 1000/-. Ext. A4 categorically brings out the defendant’s decision of giving a go-bye to the agreement. The demand for the return of the earnest money and the expression of their unwillingness to lift the goods is nothing but a repudiation of the agreement. It therefore follows that the defendant committed the breach of the contract on 7-11-1975. Now the point to be considered is that is the quantum of damages to which the plaintiffs are entitled to. In Jamal v. Moola Dawood Sons and Co., (1916) ILR 43 Cal 493 : (AIR 1915 PC 48), their Lordships of the Privy Council had to consider the question as to how the measure of damages is to be fixed in the case of breach of contract for sale of shares. In that decision it is observed :
“Upon breach by the purchaser his contractual right to the shares fell to the ground. There arose a right to damages, and the stipulation in question was, in their Lordships’ opinion, only a stipulation that the seller might, if he thought fit, liquidate the damages by ascertaining the value of the shares at the date of the breach by an auction sale as specified.”
So the loss or damages that is to be made good must be ascertained with reference to the date of the breach. In P.S.N.S. Ambalavana Chettiar and Co. Ltd. v. Express Newspapers Ltd., AIR 1968 SC 741, their Lordships held :
“The seller can claim as damages the difference between the contract price and the amount realised on resale of the goods where he had the right of resale under Section 54(2) of the Sale of Goods Act. The statutory power of resale under Section 54(2) arises if the property in the goods has passed to the buyer subject to the lien of the unpaid seller. Where the property in the goods has not passed to the buyer the seller has no right of resale under Section 54(2).”
In that particular case the property in the goods had not passed to the buyer and consequently the seller had no right to resell the goods under Section 54(2) of the Sale of Goods Act. While declining the seller’s claim to recover the deficiency on resale their Lordships went on to observe :
“The respondent (seller) is entitled to claim as damages the difference between the contract price and the market price on the date of the breach. Where no time is fixed under the contract of sale for acceptance of the goods, the measure of damages is prima facie the difference between the contract price and the market price on the date of the refusal by the buyer to accept the goods.”
Thus it is seen that the loss to be ascertained is the loss on the date of breach, if there is no right of resale for the seller. In the case where the property in the goods have passed, the seller can resell the goods under Section 54(2) of the Sale of Goods Act and claim the difference between the contract price and the price fetched in the resale. So also in a case where the property in the goods has not passed, the seller can resell the goods and claim the difference as damages if the contract gives the seller such a right. If such a right is available to the seller can he wait indefinitely and resell the goods at a low price and claim the difference ?
7. One of the fundamental principles of law of damages is that the person entitled to claim damages must do all that is within his power to mitigate damage. In case where there is no right to the difference in price on resale available to the seller as per the contract he can claim only the difference between the contract price and the market price on the date of the breach. Where the seller has got such a right the resale must nevertheless be conducted within a reasonable time from the date of breach. The damages must have relation to the market price on the date of breach whether or not the contract empowers the vendor to resell and claim the difference. In other words, the resale can only be taken as a step to enable the party to establish the market price on the date of the breach. Viewed in this manner the resale must be within a reasonable time from the date of breach so that there may not be much variance in market price between the date of resale and the dale of the breach.
8. As observed earlier, by Ext. A4 letter dated 7-11-1975 the defendant committed a breach of the contract. By that letter he has expressed his inability to lift the goods and wanted the return of the earnest money deposit of Rs. 1000/-. From Ext. Al tender notification it is abundantly clear that time was an essence of the contract. Various clauses in the tender notification and Appendix A, terms and conditions, go to show that the successful tenderer is to lift the goods within 7 days of the acceptance of the tender. The lender filed by the defendant was accepted by Ext. A2 letter dated 31-10-75. The defendant ought to have paid the amount and lifted the goods on or before 7-11-1975. Since the defendant did not lift the goods before that date, by Ext. A3 the plaintiff directed the defendant to lift the stock on or before 18-11-1975. By the said letter the defendant was also told that on his failure to lift the goods on or before 8-11-975 the plaintiff will arrange for retender at the risk and cost of the defendant. Ext. A3 provided : “If you fail to lift the stock on or before 18-11-1975 retender will be arranged at your risk and cost.” Before the expiry of the period fixed in Ext. A3 the defendant sent Ext. A4 letter repudiating the contract. On receipt of Ext. A4 the plaintiff informed the defendant by Ext. A5 letter dated 19-11-1975 that the stock will be disposed of on or before 25-11-1975 and that the earnest money deposit will be forfeited. The last paragraph of Ext. A5 reads :
“Therefore you are requested to please note that if you violate the terms and conditions of the tender the stock will be disposed of otherwise at your risk and cost on or before 25-11-1975 and your Earnest Money Deposit of Rs. 1000/- will be forfeited.”
Coming to know of the breach of the contract by the defendant from Ext. A4 the plaintiff has fixed 25-11-1975 as the date for disposal of the stock. The plaintiff has not disposed the stock on that date. They waited till 30-3-1976; on which day it was sold to M/s. Meghjec Malsee and Sons, Cochin. The question now to be considered is whether the plaintiffs are entitled to the difference in the contract price and the price fetched on the resale ? The answer to this question must be in the negative.
9. As found earlier the measure of damages must be with reference to the date of the breach of the contract. More so, is the case here because time was the essence of the contract. Breach was committed on 17-11-1975 and stock resold on 30-3-1976 i.e. more than 4 1/2 months after the date of breach. This according to us can, by no stretch of imagination, be said to be a reasonable period.
10. Even after Ext. A5 intimating that the stock will be disposed of at the defendant’s
risk and cost on or before. 25-11-1975, the defendant agreed to lift the stock by his tetter dated 7-12-1975 if the plaintiff is prepared to give an assurance that the goods sold are fit for human consumption. This shows that till 7-12-1975 there was” no noticeable fall in the price of broken rice. The plaintiff was not prepared to give any warranty or certificate showing that the rice offered for sale is fit for human consumption till 21-1-1976. Ext. A7 dated 21-1-1976, sent after 1 1/2 months of Ext. A6 states :
“With reference to your letter cited this is to inform you that the stocks of broken rice offered for sale is fit for human consumption. They were sold to you on ‘as is where is’ basis.”
This change of stand taken by the plaintiff can only go to establish that there was fall in price and so somehow or other they wanted to dispose of the goods. This conclusion is supported by Ext. A8 fetter dated 7-2-76 sent by the defendant. It shows that had the plaintiff issued such a letter earlier the defendant would have taken delivery of it and that it is now too late for the defendant to lift the goods because the price has gone down. What the defendant has stated :
“If you would have issued us the said fitness certificate in time, we would have lifted and disposed the stock profitably. Now as the market have gone down, we are unable to lift the same at the prices quoted earlier.”
The plaintiffs waited till the market crashed and it is only after that fall in market they arranged for resale. The plaintiffs cannot be allowed to take advantage of their laches. As observed by the Supreme Court in Bungo Steel Furniture v. Union of India, AIR 1967 SC 378 the normal rule for computing damages would be the difference between the contract price and the market price of such goods at the time when the contract is broken. If there is no available market at the place of delivery the market price at the nearest place or the price prevailing in the controlling markets may have to be taken into consideration. There is no evidence in this case to show the market price of broken rich as on the date of breach namely 17-11-1975. Though the plaintiffs fixed 25-11-1975 as the date for resale they had not let in any evidence to show what was the market price on that date. Since the defendant expressed his willingness to take delivery of the stock on condition of getting a warranty from the plaintiffs on 7-12-1975 we are of the view that there was no fall in the price till 7-12-1975. Therefore the plaintiff can claim only nominal damages on account of the breach committed by the defendant. The earnest money deposit of Rs. 1000/- can be taken as a genuine and reasonable assessment of the damages due to the plaintiffs.
11. The loss that has now been occasioned to the plaintiffs is the result of the callous indifference shown by the officers of this public sector undertaking. Rice is an article of food. As per Section 7 of the Prevention of Food Adulteration Act no person shall manufacture for sale, or store, sell or distribute any adulterated food. Under Section 14 of the said Act no manufacturer or distributor of, or dealer in any article of food shall sell such article to any vendor unless he also gives a warranty in writing int he prescribed form about the nature and quality of the article. Some of the rice sold by the plaintiffs were seized by the aurhorities of the Calicut Corporation on the ground of its being unfit for human consumption. So the defendant by his letter dated 17-11-1975 demanded by his letter dated 17-11-1975 demanded a warranty from the plaintiffs. The plaintiffs were not prepared to issue any such warranty till 21-1-1976 by Ext. A7, by which time the market price had fallen down.
12. On coming to know of the breach committed by the defendant the plaintiffs fixed 25-11-1975 as the date for resale of the stock. The relevant portion of Ext. A5 quoted earlier in this judgment clearly goes to show that the plaintiffs wanted to have the entire stock disposed of on or before 25-11-1975 at the risk and cost of the defendant. The plaintiffs in paragraph 5 of the plaint had given a wrong interpretation to that letter when they state : “It was also pointed out that if stocks were not lifted before 25-11-1975 the same would be retendered at the defendant’s risk and cost.” This according to us is an averment made without any regard for truth. Had the plaintiffs taken prompt action to resell the goods as stated in Ext. A5 this loss amounting to Rs. 80.000/- and odd would not have been caused to the plaintiffs. The plaintiffs alone are responsible for the same. The defendant cannot be made liable for the said laches on their part.
13. As stated earlier in this judgment there has been unreasonable delay on the part of the plaintiffs in effecting resale especially so when the market price was falling. Therefore the value realised on resale does not afford a reasonable ground to fix the damages. The plaintiffs, as stated earlier have not produced any evidence to show the prevalent price of broken rice at the time when the defendant committed the breach namely 17-11-1975. We have found that the defendant had committed the breach of the contract. Therefore he is liable to pay damages, which can in the instant case be only nominal damages. We fix the same at Rs. 1000/- which is the earnest money deposit made by the defendant.
14. In the result, we allow the appeal and set aside the judgment and decree passed by the Court below. We pass a fresh decree allowing the plaintiff to appropriate Rs. 1000/-deposited by the defendant as earnest money while placing the tender. The parties are directed to suffer their costs throughout.
