PETITIONER:
KESHAVLAL LALLUBHAI PATEL AND OTHERSAND OTHERS
Vs.
RESPONDENT:
LALBHAI TRIKUMLAL MILLS LTD.
DATE OF JUDGMENT:
21/03/1958
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
BHAGWATI, NATWARLAL H.
KAPUR, J.L.
CITATION:
1958 AIR 512 1959 SCR 213
ACT:
Contract-Extension of time for performance-Agreement of
Parties-Requirements of Proof-Agreement, vague and
uncertain Binding nature-Indian Contract Act, 1872 (IX of
1872), SS. 29, 63.
HEADNOTE:
The appellants entered into a contract with the respondent
mills for the purchase of certain goods in which the time
for delivery was fixed for the months of September and
October, 1942. Before the expiry of the time fixed there
was a strike in the mills and the respondent wrote a letter
to the appellants on August 15, 1942, that in view of the
strike and the political situation, the delivery time of all
the pending contracts should be automatically understood as
extended for the period the working of the mills was stopped
and until the normal state of affairs recurred. Though the
strike came to an end the respondent declined to give
delivery of the goods on the ground that the contracts were
void. In the suit filed by the appellants on January 9,
1946, for damages for breach of the contract the respondent
pleaded that there was no agreement between the parties with
regard to the extension of time and so the suit was barred
by limitation. The appellants' case and their evidence
which was consistent with the conduct of the parties at the
relevant time only showed definitely that they had orally
agreed to the proposal made by the respondent for extension
of time for the period during which the mills would remain
closed, and as regards the second condition referred to in
the respondent's letter dated August 15, 1942, " till the
normal state of affairs recurs (which was vague and
uncertain), the evidence did not show that there was an
acceptance by the appellants of the said condition. The
question was whether there was an enforceable agreement for
extension of time for performance of the contract within the
meaning of the Indian Contract Act :
Held, (1) An extension of time for the performance of the
contract Under s. 63 of the Indian Contract Act must be
based upon an agreement between the parties, and it would
not be open to the promise by his unilateral act to extend
the time for performance of his own accord for his own
benefit. Such an agreement need not necessarily be reduced
to writing and can be proved by oral evidence or by evidence
of conduct.
(2) The respondent's proposal for extension of time
contained in the letter dated August 15, 1942, was subject
to two conditions, and the fact that the second condition
was vague and
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uncertain does not necessarily show that it was intended to
be treated as a meaningless surpluses. As there was no
acceptance by the appellants of the second condition there
was no valid or binding agreement for extension of time
under s. 63 of the Indian Contract Act.
Nicolene Ld. v. Simmonds, [1953] 1 Q. B. 543, distinguished.
(3) In any event as the conditions were so vague and uncer-
tain that it was not possible to ascertain definitely the
period for which the time for the performance of the
contract was really intended to be extended, the agreement
for extension was void under S. 29 Of the Indian Contract
Act.
Scammel (G.) and Nephew, Ld. v. Oustom (H. C. and 1. G.)
Queston, [1941] A. C. 251, relied on.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 78 of 1954.
Appeal from the judgment and decree dated April 17, 1950, of
the Bombay High Court in Appeal No. 642 of 1949, arising out
of the judgment and decree dated July 30, 1949, of the Court
of Civil Judge, Senior Division, Ahmedabad in Suit No. 10 of
1946.
Purshottam Tricumdas, M. H. Chhatarpati and S. S. Shukla,
for the appellants.
H. N. Sanyal, Additional Solicitor-General of India and I.
N. Shroff, for the respondent.
1958. March 21. The Judgment of the Court was delivered by
GAJENDRAGADKAR J.-This is an appeal by the plaintiffs
against the decree passed by the High Court of Bombay
dismissing their suit to recover from the defendant Rs.
1,52,334-8-9 as damages for breach of contract for non-
delivery of certain cotton goods. The plaintiffs’ claim had
been decreed by the trial court but on appeal it has been
dismissed.
The appellants are the partners of M/S. Navinchandra & Co.
This partnership had placed an order with the respondent for
251 bales of printed chints on or about July 4, 1942, and
the said order had been accepted by the respondent by its
letters dated July 1 1 and July 20, 1942. The delivery
period for the said goods was fixed for the months of
September and October, 1942. Another order was placed by
the
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appellants with the respondent for 31 bales of printed
chints on July 24, 1942, and this order was accepted by the
respondent on July 25, 1942. The delivery of these goods
was to be given in the month of October 1942.
On August 9, 1942, the workers in the respondent mills went
on strike in sympathy with the Quit-India, movement which
had then commenced. In consequence, the respondent wrote to
the appellants’ firm on August 15, 1942, and stated that, in
view of the strike and the political situation, the delivery
time of all the pending contracts should be automatically
understood as extended for the period the working of the
mills was stopped and until the normal state of affairs
recurred. The strike came to an end and the mills resumed
working on November 22, 1942. On December 5, 1942,
Jasubhai, who was then in charge of the management of the
mills was approached by the appellants, Keshavlal and
Ratilal, for obtaining delivery of the goods. He, however,
told them that the appellants’ contracts were void and so no
delivery could be claimed or given. On December 6, 1942,
the said Jasubhai wrote to the appellants informing them
that their contracts were not binding on the mills as they
were null and void. It may be mentioned at this stage that,
when the contracts were made between the appellants and the
respondent, Chinubhai Lalbhai was in charge of the managing
agency of the mills. Subsequently, on September 18, 1942,
as a result of the compromise between Chinubhai and his
brothers Jasubhai and Babubhai, this managing agency of the
mills fell to the share of Jasubhai and Babubhai.
On December 17, 1942, the appellants wrote to the respondent
that, as the respondent had extended the time of delivery of
all goods by its letter dated August 15, 1942, the
respondent was bound to deliver the contracted goods and
that if the respondent did not do so, the appellants would
be compelled to take legal proceedings against the
respondent. In reply, the respondent repeated its earlier
contentions by its letter dated December 20, 1942. The
appellants then formally demanded the delivery of goods in
January
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and again in February 1943, and, since the demand was not
complied with, the appellants filed the present suit on
January 9, 1946, claiming damages to the extent of Rs.
1,52,334-8-9 with interest and costs.
In the plaint, it was alleged that the suit was in time because
the request made by the respondent for extension of time had been
accepted by the appellants. ‘The suit was resisted by the
respondent on several grounds. In particular, the respondent
urged that there was no agreement between the parties with regard
to the extension of time and so the suit was barred by
limitation. The learned trial judge framed several issues with
two of which the present appeal is concerned. These two issues
related to the question of extension of time for the performance
of the contract and the plea of limitation. On both these
points, the learned judge found in favour of the appellants. In
the result the appellants’ claim was decreed. The respondent
then preferred an appeal in the High Court at Bombay and his
appeal was allowed. The learned Judges of the High Court have
held that the oral evidence led by the appellants to show the
acceptance of the respondent’s proposal for the extension of time
could not be treated as true or reliable. They also rejected the
appellants’ case on the ground that the conduct of the appellants
subsequent to the stoppage of the respondent’s mills did not show
acceptance of the respondent’s proposal for extension of time.
Besides, in the opinion of the High Court, even if acceptance had
been proved, it was not possible to ascribe any certain or
definite meaning to the words used by the respondent in its
letter dated August 15, 1942 (Ex. P. 78), and so this agreement
to extend time was void since it wag vague and uncertain. That
is why it was held that the appellants’ suit was barred by time.
It is these findings which are challenged before us by the
appellants in the present appeal. It is obvious that the value
of the claim in the trial court as well as before us is more than
Rs. 20,000 and the judgment of the High Court under appeal has
reversed the decree passed by the learned trial judge. The
appellants are thus entitled to agitate
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both questions of fact and of law before us in this appeal.
The first point which has been urged before us by the
appellants is in respect of the finding made by the High
Court against the appellants on the question of the
extension of time for the performance of the contract. The
argument is that the learned Judges of the High Court were
in error in rejecting the oral’ evidence led by the
appellants. It would, therefore, be necessary to consider
the material evidence bearing on this point. The proposal
to extend time was made by the respondent by its letter (Ex.
P. 78) on August 15, 1942. Ratilal P. W. I stated that,
four or five days after this letter was received, he went to
Ahmedabad where he met and consulted Keshavlal. Then he saw
Chinubhai at the mills and told him that he accepted the
extension of time as per the said letter. In cross-
examination, Ratilal added that he met Chinubhai at the
office in his mills. I He also stated that, besides the
subject of extension of time, no other matter was discussed
between them at the said meeting. He admitted that no
letter had been written by the appellants confirming their
acceptance of the respondent’s proposal to extend time. The
evidence given by Ratilal is corroborated by the testimony
of Keshavlal. It appears on the evidence of both these
witnesses that, after the mills reopened, they had gone to
Jasubhai and demanded delivery of the bales according to the
contracts. The appellants argued that there is really no
reason why the evidence of these two witnesses should be
disbelieved. It is significant that the main plea raised by
the respondent against the appellants’ claim in the present
suit was that the contract itself was invalid and not bind-
ing on it and that the letter written by Laxmidas on August
15, 1942, was likewise unauthoirised and not binding on it.
These pleas have been negatived in the courts below. It is
fairly clear from the record that the attitude adopted by
the respondent in the present dispute was actuated more by
Jasubhai’s prejudice against Chinubhai and it may be safely
28
218
asserted that some of the pleas taken by the respondent were
known to the respondent to be untenable. The appellant,%
rely upon this conduct of the respondent and suggest that
the oral testimony of Ratilal and Keshavlal is consistent
with probabilities and should be believed. Chinubhai also
gave evidence in the case. He stated that the proposal to
extend time had ‘been conveyed by Laxmidas under his
instructions. It is common ground that similar request was
made to all the constituents of the mills both in Ahmedabad
and outside Ahmedabad. Chinubhai did not remember whether
he had got any written reply to the letter of August 15,
1942, from the appellants but the effect of some of the
statements made by him would generally appear to be that lie
had received oral acceptance of the said proposal from the
appellants. However, in answer to further questions put to
him in cross-examination, Chinubhai stated that he did not
remember whether the appellants accepted the offer or not.
It is, however, clear that the evidence of Chinubhai is not
at all inconsistent with the statements made by Ratilal and
Keshavlal. It is common ground that the prices of the goods
were rising at the material time and so it is more likely
that the appellants were willing to extend time because they
would naturally be keen on obtaining delivery of the goods
under the contract. In both the courts below an argument
appears to have been urged by reference to the sauda books
kept by the respondent. Shri Dharamasi Harilal had brought
the sauda books in the court but neither party got the books
exhibited in the case. The learned trial judge took the
view that, since the sauda books were not produced and
proved by the respondent, it led to the inference that, if
the books had been produced, they would have shown an
endorsement made against the suit contracts that the
extension of time had been agreed upon by the appellants.
On the other hand, the learned Judges of the High Court were
inclined to draw the inference that, since the appellants
did not want the said sauda books to be exhibited, it would
appear that the said books did not contain any note about
the extension. In our opinion, it would be
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unsafe to draw either of these two inferences in the present
case. Therefore, the decision of the question would depend
upon the appreciation of oral evidence considered in the
light of probabilities and other relevant circumstances in
the case. On the whole, we are disposed to take the view
that the evidence given by Ratilal and Keshavlal is true.
Besides, the conduct of the parties also points to the’ same
conclusion. If the period for the delivery of the goods had
not been extended by mutual consent, we would normally have
expected the appellants to make a demand for delivery of the
goods on due dates as fixed under the original contracts.
It is conceded that no such demand was made. On the other
hand, it is only after the mills reopened that Ratilal and
Keshavlal saw Jasubhai and discussed with him the question
about the delivery of the goods. This is admitted by the
respondent in its letter dated December 6, 1942, (Ex. P.
62). The appellants were, however, told by the respondent
that the saudas of their firm were not binding on the
respondent and that the same were void. It is somewhat
remarkable that though this document disputes the validity
of the sauda, even alternatively it does not suggest that
the period of extension had not been agreed to by the
appellants. It may be that, since Jasubhai then wanted to
challenge the validity of the contracts themselves, he did
not care to make any alternative plea. But however that may
be, the conduct of the appellants is, in our opinion,
consistent with their case that they had agreed to the
extension of time.
The true legal position in regard to the extension of time
for the performance of a contract is quite clear under s. 63
of the Indian Contract Act. Every promise, as the section
provides, may extend time for the performance of the
contract. The question as to how extension of time may be
agreed upon by the parties has been the subject-matter of
some argument at the Bar in the present appeal. There can
be no doubt, we think, that both the buyer and the seller
must agree to extend time for the delivery of goods. It
would not be open to the promise by his unilateral act to
extend
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the time for performance of his own accord for his own
benefit. It is true that the agreement to extend time need
not necessarily be reduced to writing. It may be proved by
oral evidence. In some cases it may be proved by evidence
of conduct. Forbearance on, the part of the buyer to make a
demand for the delivery of goods on the due date as fixed in
the original contract may conceivably be relevant on the
question of the intention of the’ buyer to accept the
seller’s proposal to extend time. It would be difficult to
lay down any hard and fast rule about the requirements of
proof of such an agreement. It would naturally be a
question of fact in each case to be determined in the light
of evidence adduced by the parties. Having regard to the
probabilities in this case, and to the conduct of the
parties at the relevant time, we think the appellants are
entitled to urge that their oral evidence about the
acceptance of the respondent’s proposal for the extension of
time should be believed and the finding of the learned trial
judge on this question should be confirmed.
The finding in favour of the appellants on this point is
not, however, decisive of the dispute between the parties in
the present appeal. It still remains to be considered
whether the agreement between the parties about the
extension of time suffers from the infirmity of uncertainty
and vagueness. The learned Judges of the High Court have
come to the conclusion that the letter of August 15, 1942,
which is the basis of the agreement for the extension of
time is so vague and uncertain that the agreement as to
extension of time itself becomes void and unenforceable.
The correctness of this conclusion must now be considered.
The basis of the agreement is the letter and so it is the
construction of this letter which assumes considerable
importance. This is how the letter reads:
Dear Sirs,
Your good selves are well aware of the present political
situation on account of which entire working of our Mills is
closed.
At present, it is difficult to say as to how long this state
of affairs will continue and as such we regret
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we cannot fulfil the orders placed by you with us in time.
Under the circumstances, please note that the delivery time
of all your pending contracts with us shall be automatically
understood as extended for the period the working is stopped
and till the normal state of affairs recurs.”
It would be noticed that the letter begins by making a
reference to the current political situation which led to
the closure of the mills and it adds that it was vary
difficult to anticipate how long the said state of affairs
would continue. It is common knowledge that, at the
material time, the whole country in general and the city of
Ahmedabad in particular was in the grip of a very serious
political agitation and nobody could anticipate how long the
strike resulting from the said, agitation would last. It
‘is in that atmosphere of uncertainty that the respondent
requested the appellants to note that the time for delivery
would be automatically extended ” for the period the working
is stopped and till the normal state of affairs recurs “.
The first condition does not present any difficulty. As
soon as the strike came to an end and the closure of the
mills was terminated, the first condition would be
satisfied. It is the second condition that creates the real
difficulty. What exactly was meant by the introduction of
the second condition is really difficult to determine. So
many factors would contribute to the restoration of the
normal state of affairs that the satisfaction of the second
condition inevitably introduces an element of grave
uncertainty and vagueness in the said proposal. If the
normal state of affairs contemplated by the second condition
refers to the normal state of affairs in the political
situation in the country that would be absolutely and
patently uncertain. Even if this normal state of affairs is
construed favourably to the appellants and it is assumed
that it has reference to the working of the mills, that
again does not appreciably help to remove the elements of
uncertainty and vagueness. When can normal working of the
mills be deemed to recur? For the normal working of the
mills several factors are essential. The full complement of
workmen should be
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present. The requisite raw material should be available and
coal in sufficient quantities must be in stock. Some other
conditions also may be necessary to make the working of the
mills fully normal. Now, unless all the constituent
elements of the normal working of the mills are definitely
specified and agreed upon, the general expression used in
the letter in that behalf cannot be construed as showing
anything definite or certain. Therefore, even if the
appellants’ evidence about the acceptance is believed, that
only shows in a very general and loose way the acceptance of
the proposal contained in the letter. It does not assist us
in determining what was understood between the parties and
agreed upon by them as constituting the normal state of
affairs mentioned in the letter. In this connection, it
would be relevant to refer to the material allegations in
the plaint itself. In para. 7, the plaint has averred that
the plaintiffs agreed to the said extension of time for the
delivery of the said goods as suggested by the defendant,
that is by a period during which the said mills would remain
closed. In other words, the whole of the plaint proceeds on
the assumption that the extension of the period for the
delivery of goods had reference only to the stoppage of the
mills. Indeed, it was sought to be argued at one stage that
the second condition in the letter should be treated as a
meaningless surplusage and the extension of time agreed upon
between the parties should be read in the light of the first
condition alone. In support of this argument reliance was
placed on the decision in Nicolene Ld. v. Simmonds (1). In
that case, a contract for the sale of a quantity of
reinforcing steel bars was expressed as subject to ” the
usual conditions of acceptance “. The seller repudiated the
contract whereupon the buyers claimed and were awarded by
the trial judge damages for the breach of contract. On
appeal, the seller contended that the contract was not
concluded there being no consensus ad item in regard to the
conditions of acceptance. It was held that, there being no
” usual conditions of acceptance “, the condition was
meaningless and should be ignored, and that the
(1) [1953] 1 Q. B. 543, 552.
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contract was complete and enforceable. Dealing with the
relevant clause, Denning L. J. observed, “that clause was so
vague and uncertain as to be incapable of any precise
meaning. It is clearly severable from the rest of the
contract. It can be rejected without impairing the sense or
reasonableness of the contract as a whole, and it should be
so reacted. The contract should be held good and the clause
ignored “. Then’ the learned Lord Justice pointed out that ”
the parties themselves treated the contract as subsisting.
They regarded it as creating binding obligations between
them and it would be most unfortunate if the law should say
otherwise “. ” You would find “, observed the learned Lord
Justice, ” defaulters all scanning their contracts to find
some meaningless clause on which to ride free “. In our
opinion, this decision can be of no assistance to the
appellants’ case before us. The second condition in the
letter in question constitutes a clause which had to be
agreed upon by the parties since it formed one of the
conditions of the respondent’s proposals for the extension
of time. The respondent’s proposal was to extend time for
the performance of the contract subject to two conditions
and unless both the conditions were agreed upon between the
parties there would be no valid or binding extension of time
under s. 63 of the Indian Contract Act. The fact that the
second condition introduced by the respondent is vague and
uncertain, does not necessarily show that the said condition
was intended by the respondent to be the addition of a
meaningless surplusage. If that be the true position, then
the material allegations in the plaint itself demonstrably
prove that there has been no acceptance by the appellants of
the second condition mentioned by the respondent in its
proposal to extend time for the performance of the contract.
Besides, as we have already indicated, it is really
difficult to hold that the respondent had a clear and
precise notion as to the constituent elements of the second
condition mentioned in its letter and that the appellants
were duly apprised of the said constituent elements and
agreed with the said condition with that knowledge. In this
connection, we may usefully refer to the decision
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of the House of Lords in Scammel (G.) And Nephew, Ld. v.
(Ouston) (H. C. And J. 0.) (1). In this case, the
respondent had agreed to purchase from the appellant a new
motor-van but stipulated that this order was given on the
understanding that the balance of purchase price can be had
on the hire-purchase terms over a. period of two years. The
House of Lords held that the clause as to hire-purchase
terms was so vague that no precise meaning could be
attributed to it and consequently there was no enforceable
contract between the parties. In his speech, Lord Wright
observed that ” the object of the court is to do justice
between the parties, and the court will do its best, if
satisfied that there was an ascertainable and determinate
intention to contract, to give effect to that intention,
looking at substance and not at mere form…… But the test
of intention is to be found in the words used. If these
words, considered however broadly and untechnically and with
due regard to all the just implications, fail to evince any
definite meaning on which the court can safely act, the
court has no choice but to say that there is no contract “.
Then the learned Law Lord added that his reason for thinking
that the clause was vague was not only based on the actual
vagueness and unintelligibility of the words used but was
confirmed by the startling diversity of the explanations
tendered by those who think there was a bargain of what the
bargain was. We would like to add that, when the appellants
attempted to explain the true meaning of the second
condition, it was discovered that the explanations given by
the appellants’ counsel were diverse and inconsistent. We
must, therefore, hold that the learned Judges of the High
Court were right in coming to the conclusion that the
conditions mentioned by the respondent in its letter asking
for extension of time were so vague and uncertain that it is
not possible to ascertain definitely the period for which-
the time for the performance of the contract was really
intended to be extended. In such a case, the agreement for
extension must be held to be vague and
(1) [1941] A.C. 251.
225
uncertain and as such void under s. 29 of the Indian
Contract Act.
There is one more point which must be considered. It was
strongly urged before us by the appellants that, in the
trial court, no plea had been taken by the respondent that
the agreement for the extension of time was vague and
uncertain. No such plea appears to have been taken even in
the grounds of appeal preferred by the respondent in the
High Court at Bombay; but apparently the plea was allowed to
be raised in the High Court and the appellants took no
objection to it at that stage. It cannot be said that it
was not open to the High Court to allow such a plea to be
raised even for the first time in appeal. After all, the
plea raised is a plea of law based solely upon the
construction of the letter which is the basis of the case
for the extension of time for the performance of the
contract and so it was competent to the appeal court to
allow such a plea to be raised under 0. 41, r. 2, of the
Code of Civil Procedure. If, on a fair construction, the
condition mentioned in the document is held to be vague or
uncertain, no evidence can be admitted to remove the said
vagueness or uncertainty. The provisions of s. 93 of the
Indian Evidence Act are clear on this point. It is the
language of the document alone that will decide the
question. It would not be open to the parties or to the
court to attempt to remove the defect of vagueness or
uncertainty by relying upon any extrinsic evidence. Such an
attempt would really mean the making of a new contract
between the parties. That is why we do not think that the
appellants can now effectively raise the point that the plea
of vagueness should not have been entertained in the High
Court.
The result is we confirm the finding of the High Court on
the question of vagueness or uncertainty of the agreement to
extend time and that must inevitably lead to the dismissal
of the present appeal.
We are, however, free to state that we have reached this
conclusion with some reluctance because we are satisfied
that there are no bona fides in the attitude
29
226
adopted by the respondent in the present litigation. The
main pleas raised by the respondent against the binding
character of the contracts themselves as well as against the
authority of Laxmidas to write the letter for extension of
time have been rejected by both the courts below, and the
only ground on which the respondent succeeds before us was
made on behalf of the ,respondent for the first time in
appeal. Under these circumstances we think the fair order
as to costs would be that parties should bear their own
costs throughout. The result is the appeal fails and is
dismissed but there would be no order as to costs
throughout.
Appeal dismissed.