Dominion of India v. Raj Bahadur Seth Bhikhraj Jaipuria

Dominion of India v. Raj Bahadur Seth Bhikhraj Jaipuria

AIR 1957 Pat 586

(Time, Frustration, Section 299 (1) and 175 (3))

FACTS:

Three contracts were entered into by the plaintiff (P) with the Railway (R) for supply of food-grains. Deliveries were to be made at any station of ER[1] in Bihar.[2] These three identical contracts were to be performed within a stipulate time period. P failed to supply within time. R, by notice extended the time, but P still did not supply in time. On refusal of acceptance by R, after the extended time, P sold the goods at auction. P realised far less value (AP) for it and claimed for the difference of price.[3]Later P modified his claim and asked for the difference price w.r.t market price (MP).[4]

ISSUES:

1. Whether the contracts between P and the Div.Superintendent, was valid?
2. Whether these contracts can be regarded as mercantile contracts?
3. Whether time was the essence of the contracts? If so, were they waived?
4. Was there any breach of contract as alleged by P?
5. Whether the contracts have been frustrated by reason of the order of the Sadar Sub-Divisional Magistrate
6. Can the acceptance by R constitute ratification so as to override the mandatory provisions of Article 299(1)?

CONTENTIONS:

Plaintiff

1. No fixed date, only a period of one month was provided. Time was not of the essence of the contract, and even if it was it had been waived.
2. The supply was essential and the contracts did not authorise R to refuse delivery of the goods if effected after the expiration of the stipulated date. The refusal by R was wrongful and in breach of the contracts.
3. P would have supplied, within a reasonable time, but for the impediments, deliberately put by the railway officials. R having undertaken to supply the wagons[5] delayed it. The word ‘despatch’ and the payment to be made on presentation of the railway receipt showed that the food grains had to be loaded into wagons. R had no sufficient space in their godown.
4. The control orders did not apply to contracts made before, and even if they did apply the contracts in question are not hit by them.
5. Defence of Section 175(3)[6] was not available to R because this point was not raised. Also this section did not govern contracts made on behalf of the railway administration and in any case S175(3) rendered the contracts not void but voidable and were therefore capable of ratification. R ratified the contracts by accepting the goods tendered by P and paid for them.

Railways

1. By extending the time limit on mutual consent[7], time was made essence of the contract. The contract being mercantile one Time was anyway the essence.
2. Contract was void ab initio and not binding because the Div. Superintendent (DS) had no authority to enter into contracts on behalf of R.
3. There was frustration of the contracts because of the order.[8] S.56 of ICA[9] applicable.
4. The fact that he is a partner of the mill is sufficient evidence to show that he was a proprietor of that mill.
5. Defence under s.175(3) was evident from the plaint itself and DS was not acting on the behalof of R.

HELD:

Subordinate Judge (Reduced P’s claim and gave him a modified decree)

1. Time was not of essence and even if it was, it had been waived. There was no extension of time.
2. DS had authority to make the contracts.[10]
3. No substantial proof as to MP≈ bahis untrustworthy, so difference between the contractual price (SP) and the price as mentioned in the control price (CP) list was the correct measure of damages.
4. Accepted 3^rd contention of P.

HIGH COURT (Patna) (Plaintiff lost)

Kanhaiya Singh. J.

(w.r.t 2^nd issue) The grains were needed for consumption of the railway staff. The railway was not dealing in grains nor it had been purchased for the purposes of, trade or commerce therefore it was not case of mercantile transaction.

(w.r.t 3^rd issue) As per S. 55 of ICA[11]& S.11 of SOGA[12], if it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time. Considering the urgency of R for food-grains and R’s suggestion of alternative arrangement[13] it can be inferred that time was of the essence.

(w.r.t 3^rd contention of P) The very terms of the contracts repel this contention. The goods were stipulated to be delivered at any station[14] and R could not possibly have kept wagons at every station in anticipation of the arrival of the goods. Paucity of wagons[15]did not create any obligation on R to supply wagons as provision for wagons by R was not a condition precedent to the performance of the contracts. P.O.R[16] contract does not imply that the goods must be loaded in the wagons. It is a question of contract or of usage of the railway concerned. The word despatch does not necessarily imply movement of the wagons. P could get railway receipt immediately after the delivery of the goods irrespective of whether it was loaded into wagons or not. There was no obligation on R to supply wagons.

(w.r.t 1^st contention of R&P) Where time is not originally of the essence or where it has been waived, time may be made of the essence, where there is unreasonable delay, by a notice from the party who is not in default. But the time fixed must be reasonable. R allowed barely two days’ time to P to complete the delivery of the goods, which was unreasonable. Extension of time was not agreed to by P and hence was not legally valid so as to bind him. After receiving the notice all that P did was to speed up the supply which does not mean that he acted upon that. Thus the time limit was actually waived by R.

(w.r.t 4^th contention of P) Rejected; Control orders apply to all sales taking place after their enforcement no matter whether those sales were brought about in pursuance of the contracts or prior to their promulgation.

(w.r.t Notification & 4^th contention of R) The notification stipulated the conditions that the sale must have taken place at the primary source of supply[17], or the sale must be by a person who is a proprietor, manager or employee of a mill.[18] P was an independent supplier[19] of grain and not a proprietor of a mill. It is likely that there was no mill or factory, and only the firm of which the plaintiff happens to be a partner has been given the name Jaipuria Mills. There is a clear distinction between a mill and a firm known as Jaipuria Mills. On facts it is clear that aforesaid notification does not apply.

(w.r.t 5^th issue & 3^rd contention of R) The order does not at all affect the sales by P. It had no operation beyond the territorial jurisdiction of the Sadar Sub-Divisional Magistrate. Contracts gave P very wide discretion to deliver the goods at any station. P had option to deliver goods at stations other than those lying within the jurisdiction. If the law, subsequently enacted, does not affect the contracts and the contracts could be legally performed despite the change in law, S.56 of ICA is not attracted, and there is, strictly speaking no frustration of the contracts. Unless the subsequent change in law rendered the entire contract illegal, the question of frustration does not arise at all.

(w.r.t 5^th contention & 6^th issue) The provisions of S115(3) of the Government of India Act[20] are mandatory and must be strictly complied with in order to constitute a valid contract. In this case, the contracts were not executed in strict conformity with the provisions of Section 175(3) and were therefore wholly unenforceable against the Government with the result that P could not recover anything from the Govt. by way of damages even if R was responsible for the breach of the contracts.

(w.r.t 2^nd contention of R) DS had no authority by the Gov-Gen. to execute such contracts on his behalf. Even if DS had been duly authorised, it was not enough to entitle P to recover damages on the strength of these contracts, because the other conditions of S.175(3) of the Act have not been fulfilled.[21]

(w.r.t 6^th issue & 5^th contention of P) No ratification. In such cases, the ordinary principles governing ratification by individuals do not apply. If that were so, then the provisions of that Article which were designed to protect the people from the vagaries of the government servants will be easily abrogated. Further acceptance of the benefit by the Govt. is not sufficient in point of law to constitute ratification.

(w.r.t 3^rd observation of subordinate Judge) P could have claimd only the difference between the contractual prices and the prices ruling the market on the date of the breach. In the absence of proper evidence to the price[22], P must be uns

unsuited, because the basis of assessment of damages is leaking.

Ramaswami, C.J. (Agreed with Kanhaiya Singh. J.)

Estoppel is only a rule of evidence and cannot be availed in such a case to release P from a statutory obligation to obey such a statute. If the formalities under S.175(3) are not complied with, the contract is void and the plea of ratification or estoppel cannot be admitted. The effect of admitting such a plea of estoppel or ratification would be tantamount to the repeal of a constitutional provision, and that is why the plea of estoppel or ratification cannot be permitted.

 

LAW POINTS:

1. Mercantile Contract: The sole object of making time the essence of a mercantile contract is that the parties may know their position and take steps towards fulfillment of their respective parts of the contract.
2. P.R.O & f.a.s: Under a ‘free alongside’ contract (f.a.s.) the seller undertakes to deliver the goods alongside the ship at his own expense, and under a free on rail contract (P.R.O) the seller undertakes to deliver the goods into railway wagons or at the station (depending on the practice of the particular railway) at his own expense.
3. Rule 2 of Order VIII of the Code of Civil Procedure provides that the defendant must raise by his pleading all matters.
4. The acts of a Government officer bind the Government only when he is acting in the discharge of a certain duty within the limits of his authority or if he exceeds that authority, when the Government in fact, or in law, directly or by implication, ratifies the excesi.