Whether copy of a copy of a Document made at a later stage can be admitted as secondary evidence?

Section 61 of the Evidence Act requires
Documentary evidence to be proved by either of the two
modes. Primary evidence is to be led under Section 62 of the
Evidence Act. If any Document can be proved by primary
evidence by production of the Document itself, it is the initial
mode of proof and deserves immediate acceptance.

Secondary evidence is allowed under Section 63 of the
Evidence Act, if primary evidence is not produced. Section 63
is, therefore, in the nature of an exception to Section 62 as
the secondary mode of proof of Document s. Secondary
evidence is allowed in the 5 modes set out in Section 63 of
the Evidence Act. Under the circumstances mentioned in
Section 65, and subject to the procedure laid down in
Section 66, secondary evidence is to be led. A copy of the
original Document is, therefore, required to be the copy
taken out at the time the original Document came to be
executed. Such copy could have been taken out as a
holograph copy by manuscript as was the usual copying in
olden times, or the copy made by a mechanical process
which could be by typewriting, a computer printout or a
Xerox copy as would ensure accuracy of the original
Document . A copy of a copy of a Document made at a later
stage does not fall within the parameters of Section 63(2)
unless the witness shows how a copy could have been taken
of the initial copy of the Document at a later stage and how
he has compared them with the initial copy which could be a
holograph copy, a typewritten copy etc. The evidence of the
Plaintiffs’ witness is casual and cursory. It does not set out
how and when the copy of the copy was made and how and
when the original copy was lost though it was available at
the time of the filing of the Suit. The evidence is seen to be

given merely to fit into the last portion of Section 63(2).
Despite admissibility of the Document being seen by such
evidence, the credibility of the Document is not established.
Hence, the evidence falls short to prove the truth of the
content s of the Document on this score itself. If such
evidence simplicitor is accepted there would be no evidence
that cannot be pushed into any record in the name of proof
of Document s. The witness has admittedly prepared a copy
of the copy of the Document after filing of the Suit. The
witness has not produced the copy of the Document made
by the mechanical process as would ensure accuracy i.e. the
typewritten copy of the original invoice which is the file
copy/office copy of the Plaintiffs.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
Suit No.1813 of 1980
The Cotton Corporation of India Ltd. ... Plaintiffs
Versus
Chakolas Spinning and Weaving Mills Ltd. ... Defendant s

CORAM : SMT.ROSHAN DALVI, J.
Dated : 15 th December 2008
Citation; 2009 (2) ALLMR117
Read original judgment here; click here

1. The Plaintiffs are the canalizing agents of the Government of
India for import and supply of foreign cotton to several
Indian Textile Mills. The Defendant s carry on business of a
textile mill.
2. Pursuant to the circular issued by the Plaintiffs in respect of
availability of cotton from various countries which would be
shipped to India, the Defendant s registered their offer to
purchase cotton from Mexico, Guatemala, Nicaragua and
Brazil. The Plaintiffs issued their permission /q uot a letter for
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specified bales of cotton to the Defendant s. The parties
entered into a contract bearing No.G- 444 in respect of the
shipment import and supply of the cotton from the aforesaid
4 countries specified therein. The parties similarly entered
into another contract in respect of further offer of the
Defendant s for certain cotton from Turkey, of which specified
bales were permitted under the Plaintiffs' Contract No.G-
511. Both the contracts are identical. They are marked
Exhibits D and H in evidence. The rights and obligations of
the parties under those two written contracts would have to
be considered upon interpretation of the contracts
admittedly executed by the parties.
3. The goods under the said contract arrived at the Port of
Cochin except in respect of 1 shipment which arrived at the
Port of Mumbai instead. The Defendant s were informed by
the Plaintiffs to retire their document s and clear the
consignment . The arrival of the shipment is admitted by the
Defendant s. The goods were not cleared.
4. It is contended by the Plaintiffs that despite correspondence
through letters and telegrams in that behalf, the Defendant s
failed to clear the goods, due to which the Plaintiffs incurred
demur rage charges and thereafter were constrained to
themselves to clear the goods and store the goods until they
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were sold to another party. The Plaintiffs accordingly
incurred carrying charges in respect of the storage. The
Plaintiffs sold the goods at the price which could be obtained
upon a private treaty after a tender in that behalf as the sale
by auction did not yield any offer.
5. The Defendant s contend that 2 of the shipment s arrived late
and in view of delay in the shipment s they incurred a loss in
their business and were not bound to take delivery of any of
the shipment s.
6. Each party has accordingly alleged breach of the contract by
the other. Whereas the Defendant s have not sued the
Plaintiffs on the breach, if any, committed by the Plaintiffs,
the Plaintiffs have sued the Defendant s for damages for the
loss suffered by the Plaintiffs upon a breach by failure to
take delivery of the consignment s that arrived in respect of
the contract material.
7. Based upon the respective pleadings of the parties which
sets out essentially the breaches of one another and the right
to claim damages, if any, by the Plaintiffs Justice A.B.Palkar,
as he then was, framed the following issues on 11.4.2000
which are answered as follows:-
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ISSUES
(1)Whether the Plaintiffs prove that the Defendant s committed
breach of the Contract by not taking delivery of the cotton
under the two contracts. .. .. Yes
(2)Whether the Defendant s prove that the Plaintiffs committed
breach of the contract by causing delay in delivery of the suit
cotton. And if so, whether the Defendant s are entitled to
cancel the contract and not to take delivery of the suit
cotton. .. .. No
(3)Whether the Defendant s prove that the Plaintiffs have not
taken steps to mitigate the loss and thereby the Defendant s
stood discharged of any loss caused to the Plaintiffs. ..
.. .. .. Partly Yes. Partly No (as per reasons) .
(4) Whether the Plaintiffs prove that the Plaintiffs suffered
loss of Rs.25,62,471.41 or for any other amount and that the
Plaintiffs are entitled to interest thereon as claimed in the
Suit. .. .. .. Yes – as per reasons .
(5) What reliefs ? .. .. As per final order .
8. The parties have essentially led evidence of one of their
respective officers. Though the Plaintiffs have led evidence of
PW2 and 3 in respect of certain corrections and in deposing
how certain document s cannot be produced, that evidence
has proved to be immaterial and need not be considered.
9. All the document s relating to the contract being essentially
the correspondence that were entered into by and between
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the parties in respect of the shipment and the delivery of the
consignment which was required to be taken are admitted
document s. They are relied upon by both the parties in their
respective Affidavits of document s. The Plaintiffs' document s
have been marked Exhibits alphabetically. Certain
document s other than those relied upon by the Plaintiffs
produced by the Defendant s have been marked Exhibits
numerically.
10. The essential contention of breach alleged by both the
parties shall have to be determined upon interpretation of
the document s relating to the suit contracts relied upon by
both the parties. It would be material to consider which
party committed breach of the suit contracts. If the Plaintiffs
committed breach of the suit contracts by delay in delivery
entitling the Defendant s to cancel the contract and not to
take delivery the entire action of the Plaintiffs would fail and
other issues would not be required to be decided. If it is
seen that there is no breach committed by the Plaintiffs, it
would have to be seen whether any breach was committed by
the Defendant s in not taking delivery of the consignment
under the suit contracts and its consequences.
11. It may be mentioned that the fact that the goods arrived
and the Defendant s were asked to take delivery but failed to
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take delivery is admitted. The Defendant s have justified why
they would not take delivery of the suit consignment s. For
such justification the written document s between the parties
alone would have to be considered and interpreted. Any oral
evidence inconsistent with such documentary evidence
would stand excluded under the elementary principle of
exclusion of oral by documentary evidence contained in
Section 91 of the Indian Evidence Act.
12. If breach of the contract by not taking delivery of the
consignment is seen on the part of the Defendant s, then
further aspect with regard to the entitlement of the Plaintiffs
to claim damages for the loss suffered by the Plaintiffs on
account of the breach would have to be considered. In that
event the mitigation of damages, if any, by the Plaintiffs
would further have to be considered.
13. To that end, the Plaintiffs have sought to resell the
consignment under the contract to a third party. The
Plaintiffs have issued a tender / t e nder s for sale of the goods
by public auction. Since the Plaintiffs failed to have any
offers in respect of the articles to be auctioned, the Plaintiffs
sold the consignment s under the suit contracts by private
treaty. P.W.1 , a retired officer of the Plaintiffs, who was
serving with the Plaintiffs at the time of the suit contract and
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resale, has led evidence of the resale. He has produced
copies of 4 invoices in respect of the consignment s under the
contract as well as other consignment s containing the goods
of the contract description to show the sales effected.
14. The Plaintiffs have produced document s in respect of the
charges incurred by the Plaintiffs for demur rage etc. Such
document s carry a presumption of correctnes s for
considering their admissibility under the Commercial
Document s Evidence Act and are accordingly not disputed
by the Defendant s.
15. The Plaintiffs have also relied upon other private document s
of their Clearing Agents to prove the further expenses
incurred by them, but which document s have not been taken
on record as they have not been proved by direct or
secondary evidence. The Plaintiffs have fairly given up their
claim in that regard.
16. The Plaintiffs have claimed interest as well as carrying
charges as per the contract between the parties.
17.Upon giving credit for the amount s received by the Plaintiffs
on the resale, the Plaintiffs have calculated the loss incurred
by them initially as per the Particulars of Claim, Exhibit- A to
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the Plaint. It would have to be seen whether the Plaintiffs
are entitled to be reimbursed the loss claimed by them as
damages upon resale of the consignment s not accepted by
the Defendant s under the suit contracts.
18. Issue No.1 : Pursua nt to the Circular dated 21.2.1971,
Exhibit- A in evidence, issued by the Plaintiffs showing the
various types of cotton available for allocation to the Textile
Mills, the Defendant s registered their requirement s in
respect of 4 types of cotton under their letter dated 7.3.1977,
Exhibit- B in evidence. The Defendant s specified the time of
delivery; they required the cotton for May, June, July and
August shipment. The Defendant s also specified the
quantity required by them; they required 500 bales of each
of the 4 varieties specified in their aforesaid letters. They
further specified that they were to avail of credit facilities
offered by the Plaintiffs and they would arrange to secure the
required guarantee upon the Plaintiffs confirming the grant
of credit. The Defendant s applied for 500 bales each of
Mexican, Guatemala, Nicaraguan and Brazilian cotton. The
Textile Commissioner, by his letter dated 18.3.1977, Exhibit-
C in evidence, granted to the Defendant s 85 bales of Mexican
cotton, 50 bales of Guatemala cotton, 500 bales of Central
American cotton, 500 bales of Nicaraguan cotton and 500
bales of Brazilian cotton. These were to be imported by the
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Plaintiffs and were available for immediate contracting and
shipment not later than 30.6.1977.
19. The parties however entered into a written Contract No.G-
444 on 18 th March 1977 for supply of 50 bales Guatemala
cotton, 85 bales of Mexican cotton, 500 bales of Nicaraguan
cotton and 500 bales of Brazilian cotton. Central American
and Nicaraguan cotton has not been supplied and the
parties are not at dispute with regard to that aspect. The
other three types of cottons were to be shipped in May, June
and July 1977, respectively. As per the modification of the
contract made by the Defendant s, the shipment s were to be
made in “approximately equal quantities ” in the aforesaid
months. The Defendant s have not pressed the said mode of
shipment except for requesting approximately equal
quantities.
20. The parties entered into a further Contract No.G-511,
Exhibit- H on 28 th March 1977 for 58 bales of Turkish cotton,
which was to be shipped in April /May 1977. The specific
requirement for the time of shipment set out in the contract
was “If possible in April 1977, otherwise in May 1977. ”
21. The Defendant s have contended that the goods arrived late
and hence they are not bound to accept the delivery. It may
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be mentioned that the contract specifies the months of
shipment and not the dates of arrival. It is an admitted
position between the parties that the date of the shipment of
Turkish cotton was 1.6.1977. Contract No.511 shows that
shipment was to be made if possible in April 1977, and
otherwise in May 1977. It was made on 1.6.1977, a day
after the shipment period expired.
Brazilian cotton was shipped on 12.8.1977. Under Contract
G-444 the months of shipment of Brazilian cotton was
June / J uly 1977. It was, therefore, shipped 12 days later
than the period of shipment specified in the contract.
22.Guatemala cotton and the Mexican cotton were admittedly
shipped during the period of shipment specified in the
contract. The parties have no dispute with regard to the time
of shipment or arrival of those consignment s and none are
shown to Court.
23. It is contended on behalf of the Defendant s that the Turkish
cotton arrived on 26.7.1977 and Brazilian cotton arrived on
21.9.1977. It is contended that, therefore, the shipment was
long delayed. Time, which is ordinarily of the essence in the
contract for sale of the movable goods, was important to the
Defendant s and was of essence of this contract and the
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Defendant s were not obliged to take delivery of any of the
goods after the contract period.
24. Time is presumed to be essence of contract for movables
because in a contract for sale of movable goods there are
various other inter- connecting contracts – the Defendant s
would have to process the cotton, manufacture material and
sell it to a third party. The Defendant s would have such
contract s already entered into and because of delay of one
contract the others would be delayed exposing the
Defendant s to needlessly defend claims for damages in
various actions in law. It is upon such a scenario for
contract s of movable properties that time which is ordinarily
taken to be of essence or even presumed to be of essence,
can be shown to be otherwise, expressly or impliedly.
25. The time of shipment is specifically mentioned in the suit
contract s, though the fact that time is of essence is not
mentioned. It would have to be seen whether time was
indeed of essence in the suit contracts or whether the clause
relating to the period of shipment denoting time for the
performance of the contract, indicated and specified
otherwise.
26. The circular of the Plaintiffs, Exhibit- A and the quota
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letter /permi s sion of the Textile Commissioner, Exhibit- C,
show initially the availability of certain varieties of cotton
which would be imported in shipment s specified in certain
months. The registration of the Defendant s for the cotton
bales required by them under their letter dated 7.3.1977
shows that they would require the cotton bales specified by
them for May, June, July and August shipment s at the rate
of 500 bales each in every shipment. Hence, the Defendant s
wanted to put up the time- limit for the performance of the
contract within a 4-month period. They would require 500
bales each month beginning May 1977. They required
similar quantities of cotton each month, including the last
installment of cotton in August 1977. It need hardly be
mentioned that the Defendant s would be required to make
payment at the time of shipment. Hence, the requirement for
payment would be to the extent of the price of 500 bales
each month. The Defendant s' letter specifying the time of
shipment in the aforesaid 4 months further specified the
requirement of credit facilities to be offered by the Plaintiffs.
A reading of the first offer of the Defendant s, therefore,
shows that they required the consignment of cotton over a
period of 4 months when they would take delivery and make
payment.
27. Since the cotton was in short supply and the extent of the
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supply was to be allowed by the Government , the Textile
Commissioner granted to the Defendant s lesser quantities of
certain cotton than what they applied for. Those
consignment s were available for immediate contracting and
shipment . Shipment was to be not later than 30.6.1977. The
quota letter /permi s sion showed that no extension of date
would be allowed. Hence, the Government required the
Defendant s not to spread over the contract period as much
as the Defendant s would have wanted or desired. This
would apply specially in respect of the August shipment s.
28.Ultimately, the parties entered into the written contract and
the terms of that contract would govern the parties. The
original contract, Exhibit- D in evidence, shows the relevant
blanks being filled upon a typewriter specifying the months
of shipment . The original contract No.G-444 has been sent to
the Defendant s. The original contract has been produced by
the Defendant s in their Affidavit of document s. Copy of the
contract containing carbon copy of the typewritten portion
which is also signed in original by both the parties is
produced by the Plaintiffs. That has been marked Exhibit- D
in evidence. The original contract produced by the
Defendant s is marked Exhibit D-1 in evidence so as to read
the two document s together.
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29. The typewritten portion at the bottom of the first page of the
contract showing the bales actually to be delivered to the
Defendant s under the contract sets out the period of the
shipment . The period is between May and July. The
Defendant s have put added specifications in black pen in the
duplicate copy of the contract, Exhibit- D in evidence. [That
portion has been typewritten in the original contract
produced by the Defendant s marked Exhibit D-1 in
evidence.] The added portion against the months of
shipment in case of shipment of Guatemala , Mexican as
well as Brazilian cotton shows “approximately equal
quantities ”. This addition is made by the Defendant s with the
same ball pen with which the contract is signed by their
representative. Hence, a reading of the entire clause relating
to the time of shipment shows the Defendant s' desire to
obtain only part of the consignment of each variety of cotton
at one time. Half consignment is, therefore, neither wanted
nor expected by the Defendant s in first month of the period
of shipment .
30. It is contended by Mr.Sancheti on behalf of the Defendant s
that the quota letter /pe rmi s sion of the Textile
Commissioner, Exhibit- C, is issued under the Essential
Commodities Act, 1955 for cotton which is an essential
commodity under Section2(a) thereof. The permission is
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granted for import contracting and shipment not later than
30.6.1977. The permission shows that no extension would
be allowed. He, therefore, contends that this is a specified
obligation making the time of the shipment of the essence in
addition to the presumption under the Sale of Goods Act.
The permission /q uota letter dated 18.3.1977 which is a
cyclostyled letter, would have to be read along with the initial
letter of the Plaintiffs themselves dated 21.2.1977, Exhibit- A,
showing the availability of cotton for allocation during the
specified months of shipment and the later contract specified
the periods of shipment extending upto 2 months. It is
argued on behalf of the Defendant s that such extension
would be void. The provisions of the Essential Commodities
Act do not show this aspect, though it shows that
contravention of any order made under the Essential
Commodities Act would be punishable under Section 7
thereof. The fact that the Plaintiffs, who are the canalising
agents of the Government in respect of cotton itself, have
shown the period of shipment in their initial letter as well as
in the later contract, the specific time of contracting and
shipment mentioned in the Textile Commissioner's order,
Exhibit- C, would be taken to be modified in terms of the
contract s, Exhibits D & H, by which alone the parties are
governed, provided that it is to the extent of the quantity
granted.
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31. It is also contended that in the letter of the Defendant s
dated 18.4.1977 immediately after the contract the time was
specifically made of the essence. My attention is drawn to
the specific paragraph of that letter in that behalf. It is
thus:-
“You may please arrange to effect shipment of the
1135 bales foreign cotton (50 B/ s . Guatemala, 85
bales Mexican, 500 Bales Nicaragua & 500 bales
Brazilian) to Cochin Port as per shipment periods laid
down in the contract. ”
It may be mentioned that the said paragraph repeats the
shipment s for the purpose of specifications as to the
description of the goods, the quantity, the Port of delivery as
well as the “periods” laid down in the contract. It will have to
be seen whether a period of 2 months specified in the contract
would show the intention of the parties to make the time of the
essence.
32. So far as contract No.G- 511, Exhibit- H in evidence, is
concerned, it specifies the time of the contract to be
“April /May shipment - buyer’s option” and further specifies
that if it was possible, it would be in April 1977, otherwise it
could be in May 1977. A reading of this clause relating to
the time of shipment shows that the Defendant s did not
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want delivery urgently or within a specified time- frame. The
Defendant s were amenable to obtaining delivery within a
span of 2 months.
33. The aforesaid two clauses in the aforesaid 2 contracts
relating to the time of shipment does not show the last
date on which the shipment is expected or required. In
fact, it does not mention the date of shipment – it
mentions the months of shipment . Shipment s could be
made within 30/31- day period at any time. The aforesaid
contract s, therefore, show that though time may be
presumed to be of essence in the contracts of this kind, it
was specifically made not of essence in the suit contracts.
The shipment on 1.6.1977 may be hours after the
technical expiry of the month of May 1977.
34.Had the time been of essence and were the Defendant s to
be put to any loss only upon delay in the shipment , even by
a single day, the Defendant s would be expected to have
inquired from the Plaintiffs and stated their position with
regard to the consequences of late delivery immediately after
the last date of shipment expired and the goods failed to
arrive. The consignment s under the contract are stated to
have arrived on 26.7.1977 with regard to Turkish cotton and
21.9.1977 with regard to Brazilian cotton, the two
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consignment s in respect of which the Defendant s have taken
exception. The conduct of the Defendant s upon the arrival
of the consignment s is, therefore, required to be seen. That
conduct is reflected in the admitted correspondence between
the parties by letters and telegrams.
35. The Turkish cotton was shipped on 1.6.1977. This
shipment is shown to be delayed by one day. It is shipped a
day after the period of shipment mentioned in contract
No.G- 511. The Plaintiffs issued the shipment advice to the
Defendant s on 9.6.1977, Exhibit- J in evidence. Mexican
cotton was shipped on 12.6.1977. The Plaintiffs issued their
shipment advice on 17.6.1977, Exhibit- K in evidence. There
is no dispute that this shipment is delayed. The Guatemala
cotton was shipped admittedly within the contract period
(though the date of shipment is not provided by both the
parties). The Plaintiffs issued their shipment advice on
30.6.1977, Exhibit- L in evidence, showing that it was
shipped in June 1977 itself. The Brazilian cotton was
shipped on 12.8.1977. The Plaintiffs issued their shipment
advice on 16.8.1977, Exhibit- P in evidence. Hence the
shipment was 12 days after the period of shipment
mentioned in contract No.G- 444.
36. The Plaintiffs issued their invoices upon the Defendant s
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under their forwarding letters soon after the shipping advice
was shipped.
37. The Plaintiffs issued their invoice dated 8.7.1977, Exhibit-
M, in respect of Turkish cotton under their forwarding letter
dated 16.7.1977, Exhibit M-1, setting out the name of the
ship and the particulars of the shipment, claiming a sum of
Rs.1,72,310.37 from the Defendant s. The Turkish shipment,
which is stated to be delayed by one day, is stated to have
arrived in India on 26.7.1977. The Defendant s have not
refused to accept delivery. They have not taken exception to
the delivery. They have not raised any dispute before or at
the time of the arrival of the shipment also. They have
simplicitor failed to take delivery.
38. The Plaintiffs issued their invoice dated 9.7.1977, Exhibit-
N, in respect of Guatemala cotton under their forwarding
letter dated 19.7.1977, Exhibit N-1, setting out the name of
the ship and the particulars of the shipment claiming a sum
of Rs.1,40,311.30 from the Defendant s. The Guatemala
shipment is not delayed and hence there is no dispute with
regard to the time of shipment .
39. Similarly the Plaintiffs issued their invoice dated 20.7.1977,
Exhibit- O in respect of Mexican cotton under their
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forwarding letter dated 1.8.1977, Exhibit O-1, setting out the
name of the ship and the particulars of the shipment
claiming a sum of Rs.2,35,934.22 from the Defendant s. This
shipment is also not stated to be delayed and hence there is
no dispute with regard to the time of shipment.
40. Similarly the Plaintiffs issued their invoice dated 23.8.1977,
Exhibit- Q, in respect of the Brazilian cotton under their
forwarding letter dated 13.9.1977, Exhibit Q-1, setting out
the name of the ship and the particulars of the shipment
claiming a sum of Rs.14,08,815.81 from the Defendant s.
The date of this shipment is 12.8.1977. Hence it is stated to
be delayed by 12 days. The shipment advice itself is dated
16.8.1977. The shipment advice is, therefore, delayed about
by a fortnight. The date of the arrival of the ship is stated to
be 21.9.1977. The Defendant s have however not refused to
accept delivery. They have not taken exception to the
delivery. They have not raised any dispute or at the time of
the arrival of the shipment also. They have simplicitor failed
to take delivery.
41. The positive conduct of the Defendant s prevailed during the
period of shipment, at the end of the contract period, soon
after the contract period expired and the shipment was
delayed and at the time the Defendant s were advised about
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the shipment and when they were sent the invoice showing
the amount under the shipment claimed from them. That
conduct is reflected in the communication initially contained
in the telegrams sent by the Plaintiffs and replied by the the
Defendant s forming a chain of such correspondence between
the parties, Exhibit- U (collectively).
42. The initial telegram of the Plaintiffs, which is in respect of
the Brazilian cotton, inquires of the Defendant s “whether
you received original document s and when payment s to be
made ” sent on 21.9.1977.
43. The Defendant s never replied to the said telegram until
4.10.1977. Their reply telegram, addressed to the Managing
Director of the Plaintiffs Mr.N.S. Kulkarni, mentions about
the bales of foreign cotton booked by the Defendant s due for
shipment in April / J u ne. [Contract No.G-444 shows the
consignment s due in May / July .] The Defendant s have stated
that they had programmed consumption in
August /September /Oc tober and their advance planning has
been totally upset by the delay. They further state that the
Defendant s’ Mill was under lockout from 15th August and
hence they cannot avail of the consignment . They have also
stated that they have large export orders pending for 100%
staple fibre fabrics under an order from United Kingdom so
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that their Mills would be employed for several months in
export production of those goods. They have further
specified that they are a small unit having only 300 looms
and the Plaintiffs would appreciate that it would not be
possible for them to take the late consignment s which were
yet to be received though scheduled in April / J u ne. [The
shipment s were scheduled between April to July 1977 .]
Consequently they requested to treat the contract as
cancelled as per force majeure (beyond their control). They
called for confirmation of the position. It can be seen that
the Defendant s were reluctant to take delivery not only
because the consignment s had arrived late and they had
suffered any loss thereby, but because of various other
factors at their end. Similarly though they claimed that
shipment s were due between April to June, the contracts
show otherwise – the shipment s could have arrived until the
end of July 1977. The shipment for Turkish, Guatemala and
Mexican cotton were made in June 1977 itself. The
Brazilian cotton, though delayed, was shipped on 12.8.1977.
The initial two shipment s had reached by July 1977. That
was even before the Defendant s’ Mills were under lockout.
The only real reason for avoiding the contract by taking
delivery of the shipment s as late as in October 1977 is the
Defendant s’ contract with United Kingdom of staple fibre
fabrics.
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44. The Defendant s have produced their document s relating
to the said contract, Exhibit- 12 (collectively) in evidence.
The contract s are shown to be bearing Nos.SF1 /77,
SF2 /77 and SF3/77. These contract s are shown to have
been entered into in May 1977. The contract s, Exhibit- 12
(collectively), dated 9.5.1977 are in respect of staple fibre
unprocessed cloth and mentions the delivery period to be
June /Augus t 1977. Hence from the Defendant s’ own
document s, it can be seen that after entering into the
contract with the Plaintiffs in March 1977 for purchase of
the aforesaid varieties of cotton, the Defendant s entered
into contract with the third party for supplying /delivery of
other goods in May 1977. Whereas the Defendant s were to
take delivery between May and July 1977 under the
Plaintiffs’ contact, the Defendant s were to effect delivery
between June and August 1977 under their later
contract s with the third party. These the Defendant s
found themselves unabled to do, they being a small unit
having only 300 looms. Consequently on account of their
own business position they made a breach of their
contract s with the Plaintiffs – they themselves requested
cancellation on account of “force majeure”, which is
directly contradictory to their case of delayed shipment.
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45. In the Plaintiffs’ telegram dated 4.10.1977 itself, the
Plaintiffs refused treating the suit contract s as cancelled
and called upon the Defendant s to arrange to take
delivery and make payment immediately.
46. In the later telegram of the Defendant s dated 7.10.1977
addressed to the Plaintiffs’ Managing Director Mr.Kulkarni
they again mentioned about the lockout, the delayed
delivery, the delayed shipment as also the Defendant s’ other
contract s of staple fibre and called upon the Plaintiffs to
cancel the contract on the ground of force majeure. The
Plaintiff’s reply is dated 19 th October 1977. They mentioned
about their inability to arrange clearance at their end and
requested the Defendant s to take the consignment s against
payment and warned that otherwise consequences would be
on their account. In a further telegram dated 22.10.1977,
the Defendant s reiterated their position in view of the
“unprecedently peculiar and most unfortunate circumstances ”
and not in view of the delayed shipment s alone. The parties
have thereafter corresponded through their Advocates
reiterating their position in the letters Exhibit- V (collectively),
which need not be repeated.
47.How the terms of the contract between the parties have
been interpreted to ascertain the real intention of the parties
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with regard to making time the essence of the contract has
been considered in the case of D.W. Roberts vs. Shaikh
Hyder, AIR 1923 Nagpur 140 . A contract of a similar kind
was held not to have the time the essence of the contract. In
that case a relevant part of the contract runs thus:
“ The whole work will be completed in 4 months
from the date of getting permission in writing from
Mr.D.W. Roberts.
A fine of Rs.5 per day will be exacted for every day
after that date that the work is not completed
within the above noted time.”
It was held that time was not essence of the contract in that
case. The very fact that penalty was stipulated in case of
failure to complete the contract within the time indicated in
the contract. It would not result in avoidance of contract but
acceptance of performance after the stipulated time subject
to payment of damages which were fixed.
48.Hence a reading of the whole contract and the conduct of
the parties thereupon have to be seen to conclude whether
time which is ordinarily of essence of a commercial contract
was of essence of the suit contract.
49. It is contended on behalf of the Defendant s that the
time is essence of the contract of movables. That broad
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statement per se is incorrect. Time is ordinarily of the essence
of a contract of movables. It may be presumed to be so. The
presumption is rebut table. It can be rebut ted by the parties
expressly or impliedly. The expression as well as the
implication of the party’s intention can be reflected in contract
itself. The suit contract shows no urgency on the part of the
Defendant s. The contract shows the Defendant s' requirement
for delivery in 2 installment s. In fact the Defendant s wanted to
spread out the delivery and consequently the payment required
to be made upon delivery. The second contract No.G- 511
shows the laxity of performance. It depends upon when the
exporter would find it possible to send the goods - it could be
sent in April or in May, 1977. It does not require delivery on
one specific day. Hence delay of one day is completely
inconsequential. Nothing is shown by the Defendant s that
such delay of one day caused them prejudice, harm or injury.
50. The case of M/s. China Cotton Exporters Vs.
Beharilal Ramcharan Cotton Mills Ltd., A.I.R. 1961 S.C.
1295 was a case in which shipment date was stated to be
not guaranteed. The contract stated that the shipment was
to be in October – November 1950. In that case import
license could not be obtained. Hence it was stated that
“therefore” the shipment date is not guaranteed. It was held
that that was only for the reason of obtaining the import
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license, otherwise the shipment period stood guaranteed by
virtue of the word “therefore ”. Hence the contract has to be
read as a whole.
The intention of the parties in the suit contract is not to have
shipment on any specific date. Hence, time, which is
ordinary of the essence, is not of the essence in this case.
51. In the case of Andard Mount (supra) also time was of
essence. That case was for delivery of human albumin
within one year with initial delivery commencing by a
particular month. It was held that time was the essence of
the contract and in any case it had to be performed within a
reasonable time. If there is no fixed time, a party can make
time the essence later by giving notice in that behalf. If time
is not of the essence, the contract has to be performed within
a reasonable time. Whether or not, time is the essence can
be inferred from what passed between the parties before and
not after the contract.
In this case the contracts had to be performed within a
period of 2 months. They had to be performed within a
reasonable time thereafter, since no specific date was
required or fixed. The shipment effected one day or even 12
days after the period which has not caused any prejudice to
the Defendant s show that the contract was performed within
a reasonable time. The Defendant s cannot breach such
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contract by non- acceptance of goods on a plea as to the
essence of the contract taken much later without proof of the
prejudice caused to them.
52. The aforesaid correspondence unmistakably shows that
the reason for the Defendant s’ failure to take delivery was not
the delay in shipment . The consignment s were delayed – one
by one single day and the other by 12 days. That was not
inordinate delay. Since time is seen not to have been the
essence of the contract and a date of the actual delivery was
not agreed upon and over a period of 2 months the shipment s
could be effected, a delay of mere 12 days would not be enough
to avoid the contract between the parties. The shipment s could
have been made within a reasonable time. Since the intention
of the parties was not to make time the essence, upon initial
delay the Defendant s did not make any dispute. The very first
telegram is only on 4th October 1977 when the Defendant s’
hands were full thanks to their later contract executed on
9.5.1977 which drove the Defendant s to dishonour their
contract with the Plaintiffs.
53. The conduct of the Defendant s in not clearing the
consignment of each type of cotton is specifically shown from
the admitted correspondence between the parties by Mr.Shah
on behalf of the Plaintiffs. The most material document s
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relating to each of the consignment s separately need to be
seen.
Turkish cotton :
(i) The consignment was shipped on 1.6.1977, a day after
the 2-month period mentioned in Contract No.511
expired. [The contract period being “If possible in April
1977 otherwise in May 1977 ”.].
(ii) The Plaintiffs had sent the shipping advice on 9.6.1977
to the Defendant s.
(iii) The Plaintiffs sent an invoice on 8.7.1977 under their
forwarding letter dated 16.7.1977 to the Defendant s.
(iv) The Defendant s sent their document s in respect of the
consignment of 57 bales of Turkish cotton to their
clearing agents on 19.7.1977.
(v) The clearing agents accepted the Defendant s’ letter and
noted the instructions under their letter dated 21st July
1987, part of Exhibit- 2 (collectively).
(vi) The goods arrived in India on 21.7.1977.
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(vii) The Defendant s directed their clearing agents to stop
forthwith further processing of copies of document s
and all clearance work in respect of the consignment
on 3.8.1977 under their letter, Exhibit- 11.
It can, therefore, be seen that though the goods were
shipped late (by one day), the Defendant s accepted to take
delivery in the first instance. The Defendant s even
directed their clearing agents to clear the goods by sending
their duplicate copies of the documents for processing. It is
only much later and for the first time on 3.8.1977 that they
changed their instructions and directions to the clearing
agents. It was only then that they breached the contract,
once accepted by them.
I. The Defendant s having breached the contract by
not clearing the goods, the Plaintiffs wrote to
them on 3.7.1977, Exhibit- 6, that the document s
were already sent to the bank and they were
informed by the Cochin Port Trust of the
accumulation of bales due to non- clearance.
They further requested the Defendant s to retire
the document s and clear the consignment to
avoid further demur rage.
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II. The Defendant s failed and neglected to clear the
goods.
III. The Plaintiffs reminded the Defendant s again to
clear the goods by their letter dated 17.1.1978,
Exhibit- 7.
IV. The Plaintiffs required the duplicate set of
document s of the Defendant s to clear the goods.
V. The Defendant s sent their copies of document s to
the Plaintiffs’ clearing agents only on 4.7.1978
under their letter, Exhibit- 10.
VI. Upon having received the document s, the
Plaintiffs cleared the goods on 21.7.1978 as
reflected in the Dock document s being bill of the
Cochin Port Trust dated 21.7.1978, part of
Exhibit- S (collectively).
Guatemala cotton :
(i) No delay in shipment or arrival of the goods is alleged
in case of this transaction. 43 bales of Guatemala
cotton were to be shipped during the period June / J u ly
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1977.
(ii) The Plaintiffs sent their shipping advice to the
Defendant s on 30.6.1977, Exhibit- L.
(iii) The Plaintiffs sent their invoice on 9.7.1977 under
their forwarding letter dated 19.7.1977, Exhibits N and
N-1.
(iv) The goods admittedly arrived on time.
(v) The letter of the Defendant s’ clearing agents dated 21st
July 1977, part of Exhibit- 2 (collectively), shows the
copy document s relating to the said consignment
received by them. This was received during the period
of shipment itself.
(vi) Despite that the Defendant s instructed their clearing
agents to stop further processing of copies of
document s and all clearance work even in respect of
the said consignment under their letter dated
3.8.1977, Exhibit- 11.
In case of this consignment for want of any delay
whatsoever, the non- clearance by the Defendant s of the
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said consignment shows the failure of the Defendant s’
duties as the buyer under Section 31 of the Sale of
Goods Act .
I. The Defendant s failed and neglected to clear the goods.
II. The Plaintiffs sent their reminder to the Defendant s to
clear the goods on 17.1.1978, Exhibit- 7.
III. The Defendant s sent their duplicate copies of the
document s to the Plaintiffs’ clearing agents only on
4.7.1978 under their letter, Exhibit- 10.
IV. The Plaintiffs cleared the goods on 21.7.1978 along
with the consignment of Turkish cotton. The Plaintiffs
however have not produced any Dock document s to
show precisely on which day this consignment was
cleared.
Mexican cotton :
(i) There is admittedly no delay in the shipment or arrival
of this consignment also. The period of shipment in
the Contract No.G-444, Exhibit- D, is May/ J u ne 1977
shipment .
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(ii) The date of shipment is 12.6.1977.
(iii) The Plaintiffs sent their shipment advice on 17.6.1977,
Exhibit- K.
(iv) The Plaintiffs sent their invoice dated 20.7.1977 under
their forwarding letter dated 1.8.1977, Exhibits- O and
O-1 to the Defendant s.
(v) The goods arrived in India on 26.8.1977. By this time,
the Defendant s had sent their telegram, Exhibit- U
(collectively) to the Plaintiffs refusing to clear the goods
under any of the consignment s.
(vi) The Defendant s had instructed their clearing agents
not to clear the first two consignment s of Turkish
cotton and Guatemala cotton on 3.8.1977. Hence the
Plaintiffs cleared this consignment on 30.8.1977
themselves without further reminders and
correspondence. This is shown in the Dock document s
being the Import Application of the Bombay Port Trust
and the Bill of Entry, part of Exhibit- R (collectively).
In case of this consignment for want of any delay
whatsoever, the non- clearance by the Defendant s of
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the said consignment shows the failure of the
Defendant s’ duties as the buyer under Section 31 of the Sale
of Goods Act .
Brazilian cotton :
(i) This consignment was to be shipped during the period
June / J uly 1977. It was shipped on 12.8.1977, after a
delay of 12 days.
(ii) The Plaintiffs sent the shipment advice to the
Defendant s on 16.8.1977, Exhibit- P. The Plaintiffs sent
their invoice dated 23.8.1977 under the forwarding
letter dated 13.9.1977, Exhibits Q and Q-1 to the
Defendant s. The consignment arrived in India on
21.9.1977.
(iii) The Plaintiffs, by their telegram to the Defendant s sent
on 21.9.1977, inquired of the Defendant s whether they
received the original document s and when payments
were to be made. The Defendant s however never
cleared the goods and never made payment.
(iv) The Plaintiffs cleared the goods on 10.1.1978 without
further correspondence as reflected in the copies of the
Dock document s of this consignment being the Import
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Application and the bill for demur rage charges of the
Cochin Port Trust, part of Exhibit- T (collectively).
(v) The Plaintiffs made further payment of the fumigation
charges, removal charges, etc. on 14.1.1978 and
23.1.1978 as reflected in the document s, Exhibit- T
(collectively).
54. The Defendant s’ conduct can also be further seen
from the correspondence with regard to the place of delivery of
the goods. The contract s specify that the goods would be
delivered at Cochin Port. The Defendant s had mentioned this
aspect specifically in their letters dated 18.4.1977, Exhibits E
and I (collectively) that the shipment s were required at Cochin
Port. The first shipment was made on 1.6.1977, which was
informed to the Defendant s by the Plaintiffs’ shipment advice
9.6.1977, Exhibit- J. Thereafter the second shipment of
Mexican cotton, which was made, was informed to the
Defendant s by the Plaintiffs’ shipping advice dated 17.6.1977,
Exhibit- K. That shipping advice erroneously mentioned that
the goods were to arrive in Mumbai. Hence, by the
Defendant s’ letter dated 25.6.1977, Exhibit- 4, the Defendant s
informed the Plaintiffs of the error and requested them to effect
the shipment s of foreign cotton to Cochin Port. That letter
states :
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“In any case we want the cotton to be shipped
to Cochin Port only. You will, therefore, see that
69 bales of Mexican cotton are diverted and
shipped to Cochin Port under advice to us .”
Again, by their telegram dated 1.8.1977, part of Exhibit- 3
(collectively), the Defendant s again informed the Plaintiffs
that those bales were to be shipped to Cochin Port only.
The Plaintiffs, by their telegram dated 2.8.1977, part of
Exhibit- 3 (collectively), affirmed that they had arranged to
deliver the document s of 69 bales shipped to Cochin
instead of Bombay and requested the Defendant s to make
arrangement for clearance at the Cochin Port and inform
the mode of payment to the Plaintiffs’ Account Section.
Hence it can be seen that the Defendant s were willing to
take the delivery of the consignment s, whether they were
delayed or not, until 2.8.1977. It is for the first time on
3.8.1977 that the Defendant s informed their clearing
agents by their letter dated 3.8.1977, Exhibit- 11 not to
clear the consignment of Turkish and Guatemala cotton
and by their telegram dated 4th October 1977, part of
Exhibit- U (collectively), they for the first time mentioned
about the delay in shipping alleging that their planning
was upset, stated about the lockout of their Mill as well
as about other orders from United Kingdom and
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requested the Plaintiffs to treat the contract with them as
cancelled. - The shipment of Guatemala cotton was not
even delayed.
55. It may be mentioned that though the initial
Contract No.G- 444, Exhibit- D, was sent by the Plaintiffs
to the Defendant s also mentioning about the shipment of
500 bales of Central American cotton to be delivered in
May/ J u ne 1977, the Defendant s did not want that
delivery. Hence the Defendant s scored out that entry in
the original contract itself. By their letter dated
18.4.1977, they informed the Plaintiffs about the said
cancellation and returned the duplicate copy of the
contract to the Plaintiffs showing the cancellation. Hence
by letter dated 25.4.1977, Exhibit- 5, the Plaintiffs
accepted the cancellation and confirmed having treated
the booking of 500 bales of Central American Cotton as
cancelled. Similarly Nicaraguan cotton has not been
shipped. Both parties have had no issue on these
consignment s. The Defendant s have not claimed damages
for non- delivery. This shows that both the parties
accepted changed circumstances and co-operated with
one another.
56. It is seen that despite being ready and willing to
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take delivery and also corresponding with the Plaintiffs
with regard to the place of delivery the Defendant s
changed their mind and breached the contract on and
from 3.8.1977. At the time of the breach, the Defendant s
never mentioned the reason for the breach to be only the
delay in shipment. The delay in shipment of one of the
consignment s is of but one day. The delay in the
shipment of the other consignment is of 12 days. The
other two consignment s have arrived on or before time.
Despite the said fact upon receipt of the Plaintiffs’
Advocate’s Notice dated 18th November 1977, Exhibit- V
(collectively), the Defendant s, by their Advocate’s Reply
dated 14.1.1978, Exhibit- V (collectively), contended that
because of the delay in shipment of one of the
consignment s by a fortnight, the Defendant s were not
obliged to take delivery of any of the shipment s. They also
contended that as the time was the essence of the contact,
the Plaintiffs committed a breach of the contract and the
Defendant s were not bound to take delivery of any of the
goods consigned.
57. The terms of the contract and law with regard to
the Sale of Goods Act would, therefore, have to be
considered.
The duties of the sellers and buyers of goods under the
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Sale of Goods Act, 1930, are set out in Section 31 thus:
“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 .”
The Plaintiffs delivered the goods as contracted albeit
with a slight delay in two of the consignment s. The
Defendant s failed to accept delivery of any of the
consignment s and failed to make payment in respect of
each of them.
58. Clauses 5, 6, 17, 28 and 29 of the Contract set
out the terms of the contract between the parties thus:-
(a) Under Clause- 5 if the Defendant s fail to pay the
price, the Plaintiffs were to be entitled to clear
and take delivery of the goods at the costs and
risks of the Defendant s.
(b) Under Clause- 6 if the Defendant s fail to take
delivery, the Plaintiffs would be entitled to sell
the goods and recover the loss suffered on that
account.
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-(c) Under Clause -17 if the Defendant s fail to
take delivery and make payment they were to
be liable for all charges and expenses, including
insurance, demur rage and interest at 20% per annum
on monthly rest basis.
(d) Under Clause- 28, the Defendant s were not
entitled to cancel or revoke the agreement
once made, except upon pain of payment of
damages.
(e) Under Clause- 29, no cotton after shipment
was liable to rejection.
59. The parties entered into a commercial contract. The
Plaintiffs signed the contract and sent it in two parts to the
Defendant s on 18 th March 1977. The Defendant s returned
the duplicate copy of the contract signed by them on 18th
April 1977. The Defendant s made corrections as well as
additions in the contract signed and sent by the Plaintiffs.
The Defendant s are bound by what they sign. The
Defendant s’ liability to pay the price and take the delivery is
clear and absolute. The contract does not specify time to be
of essence. A reading of the contract more specially the
specific clause relating to the shipment corrected and added
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to by the Defendant s shows that time was not of the essence.
Such were the terms of the contracts G-444 and G-511
between the parties.
60. Section 36(2) of the Sale of Goods Act, 1930 ,
which deals with rules as to delivery, runs thus :-
“Where under the contract of sale the seller is
bound to send the goods to the buyer, but no
time for sending them is fixed, the seller is
bound to send them within a reasonable time .”
It is seen that no time for sending the goods is fixed
under the contract except for a 2-month shipment period
in which bales of approximately equal quantities were to
be dispatched. The entire consignment was dispatched in
one bulk with regard to each of the 4 types of cotton. No
exception thereto has been taken. Nothing is reflected in
the contract to show that the goods were urgently
required at any specified time. The presumption that
time is the essence of the contract of sale of movables is
dispelled by the suit contract mentioning laxity of the
time of shipment and the quantities thereto; Contract
No.G- 511 had to be shipped “if possible in April 1977 or
otherwise in May 1977 .” The other contract s were broken
up for delivery in 2 equal installment s.
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61. Section 42 of the Sale of Goods Act, 1930
deals with acceptance of goods as follows:-
“The buyer is deemed to have accepted the goods
when he intimates to the seller that he has
accepted them, or when the goods have been delivered to
him and he does any act in relation to them which is
inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time, he
retains the goods without intimating to the seller that he
has rejected them .”
It can be seen that until 2.8.1977, the Defendant s had
accepted the consignment s which had until then arrived,
including the consignment of Mexican cotton which
arrived before time and the consignment of Turkish
cotton which had arrived but one day late. These facts
show the initial acceptance of the goods and hence the
ownership in them by the Defendant s. These acts of the
Defendant s are inconsistent with the ownership of the
Plaintiffs.
62. There is, therefore, no delay in the delivery of the
consignment under the suit contracts such as to cause a
breach on the part of the Plaintiffs. The admitted refusal to
take delivery by the Defendant s without proper course shows
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a breach on the part of the Defendant s of the suit contracts.
Hence Issue No.1 is answered in the affirmative and Issue
No.2 is answered in the negative.
63. Issue Nos.3 & 4 : Once it is seen that the
Defendant s have committed a breach of the contract by not
taking delivery of the consignment under the two suit
contract s, the Plaintiffs would be entitled to damages and
recovery of their expenses and charges.
64. The liability of the Defendant s for neglecting and
refusing to take delivery of the goods is incurred by them
under Section 44 of the Sale of Goods Act . Section 44
runs thus:-
“ When the seller is ready and willing to deliver the
goods and requests the buyer to take delivery, and the
buyer does not within a reasonable time after such
request take delivery of the goods, he is liable to the
seller for any loss occasioned by his neglect or refusal
to take delivery and also for a reasonable charge for
the care and custody of the goods .”
Similarly under Section 56 of the Sale of Goods Act , the
buyer, who has broken the contract by neglect and refusal to
accept the goods and pay the price can be sued for damages
for non- acceptance. Section 56 runs thus:-
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“Where the buyer wrongfully neglects or refuses to
accept and pay for the goods, the seller may sue
him for damages for non-acceptance .”
The Plaintiffs, as the party who suffered the breach
committed by the Defendant s, would have to show the
expenses incurred in clearance and storage of the goods
as those which naturally arose in the usual course of
things from such breach being the Dock charges paid by
them under the Dock document s, Exhibits R, S & T
(collectively) and reasonable charge for the care and
custody of the goods as specified in Section 44 of the Sale
of Goods Act. The Defendant s are required to pay all the
expenses incurred by the Plaintiffs for clearance of the
goods at the Docks. The suit contracts mention the
charges payable for demurrage, taxes, and other expenses
at the Docks with interest thereon @ 20% p.a. with
monthly rests under Clauses 17 of each of the 2
contracts, Exhibits D & H. Hence the Plaintiffs would be
entitled to interest on the aforesaid charges and expenses
at the contractual rate. The Plaintiffs also had to take
care and custody of goods under Clauses 13 of each of
them. The Defendant s are required to pay carrying
charges at 2½ % per 30 days from the date of the arrival
of the steamer if they fail to make payment immediately
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on arrival. Therefore, it can be seen that the parties
themselves have contracted as to the amount of charge
that the Plaintiffs would be constrained to incur for the
storage of the goods.
65. The Plaintiffs’ Suit is for recovery of compensation for
the loss and damage caused by the breach of the contract by
the Defendant s under Section 73 of the Indian Contract
Act, 1872 which deals with consequences of such breach.
Section 73 runs thus:-
“When a contract has been broken, the party
who suffers by such breach is entitled to
receive, from the party who has broken the
contract, 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.
Such compensation is not to be given for any
remote and indirect loss or damage sustained
by reason of the breach.”
66. Under Section 74 of the Indian Contract Act , the
extent of compensation allowable where a penalty is stipulated
in a contract is laid down thus :-
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“74. Compensa t ion for breach of contrac t
where penal t y stipula t e d for. - When a contract has
been broken, if a sum is named in the contract as the
amount to be paid in case of such breach, or if the
contract contains any other stipulation by way of
penalty, the party complaining of the breach is
entitled whether or not actual damage or loss is
proved to have been caused thereby, to receive
from the party who has broken the contract
reasonable compensation not exceeding the amount
so named or, as the case may be, the penalty
stipulated for.
Explanation.- A stipulation for increased interest
from the date of default may be a stipulation by
way of penalty .”
67. DAMAGES FOR LOSS :
The Plaintiffs would have to show the loss incurred by
them upon the value of the consignment . Of course, the
Plaintiffs would have to mitigate the loss. For such
mitigation the Plaintiffs would have to resell the goods
within a reasonable time to a third party before the goods
devalue or perish by deterioration of quality of the goods.
If the Plaintiffs fail to show mitigation of damages by
actual resale of the goods within a reasonable time, the
Defendant s cannot be held liable for the net loss suffered
by the Plaintiffs.
68. Resale is the contractual entitlement of the Plaintiffs.
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Clause 6 of the Contract specifically states that if the
Defendant s fail to take delivery of the consignment , the
Plaintiffs will be entitled to sell to any party by private sale or
by auction and any loss suffered by the Plaintiffs will be on
account of the Defendant s and they would be liable to pay the
same on demand to the Plaintiffs. This right of resale is
claimed by the Plaintiffs as per the provisions of Section 54(4)
of the Sale of Goods Act, 1930 . The said Section runs thus:-
“Where the seller expres s ly reserves a right of resale
in case the buyer should make defaul t , and,
on the buyer making defaul t , re-sells the goods,
the original contrac t of sale is thereby rescinded,
but without prejudice to any claim which the
seller may have for damage s .”
69. The Plaintiffs are required to mitigate their loss or
damage. They would mitigate their loss by resale of the
consignment. They must do so within a reasonable time. The
Plaintiffs have resold the consignment s to third parties. It is
contended on behalf of the Defendant s that resale is far too
delayed. The goods are liable to perish and deteriorate with
age. Hence the price recovered on resale would consistently
devalue. The longer the delay, the lesser would be the price
recovered and consequently the more would be the loss
suffered by the Plaintiffs. The Plaintiffs, therefore, would not
be entitled to delay the resale and must sell the goods as
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expeditiously as possible.
70. The Plaintiffs must initially prove their effort at resale.
The Plaintiffs have produced copies of the tender notice
issued by them in respect of the suit consignment s along
with various other consignment s of cotton received from
various countries of various types available at various Ports
of India. Exhibit-W (collectively) are the tenders dated 24th
June 1978 and 2nd September 1978. The tender Notice
dated 24 th June 1978 is in respect of, inter alia, Mexican,
Guatemala, Brazilian and Turkish cottons. The tender
Notice dated 2nd September 1978 is, inter alia, in respect of
Mexican, Guatemala and Brazilian cottons. The Brazilian
cotton in that tender Notice was available only at Mumbai
and it does not deal with the suit consignment. Turkish
cotton was not put up for sale in the second tender.
71. It is the evidence on behalf of the Plaintiffs that
several other parties like the Defendant s defaulted in taking
delivery and making payment of their respective
consignment s. The Plaintiffs, therefore, have to collect the
consignment of several parties to be able to issue their
tenders. Paragraph- 26 of the examination- in- chief of the
Plaintiffs’ witness shows how the Plaintiffs invited offers from
Indian Textile Mills under their tenders. The tenders were
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published.
72. The evidence of the Plaintiffs' witness in paragraph 26
of the examination- in- chief shows the publicity required to
be given to All India Federal South Indian Godown Mills
Association to make offers upon Indian Cotton Mills to
purchase the consignment s uncleared by the defaulting
importers.
73. The Plaintiffs’ witness has proved the issue of the
tender Notice dated 24.6.1978. The Plaintiffs received offers
only for Turkish cotton. They were considered to be low by
the Plaintiffs’ purchase and sale committee. The offer was
rejected as per the Minutes of the meeting of that Committee
dated 10.7.1978, Exhibit- Z. Thereafter the Plaintiffs issued
a further tender notice similarly. That was on 2nd September
1978. The Plaintiffs sold, inter alia, the Defendant s'
consignment s. The Plaintiffs’ contracts are under 4
separate invoices for Turkish, Guatemala, Central
American /Gu a temala and Brazilian cottons. The Plaintiffs
have produced copies of the invoices reflecting the sales from
their files and the xerox copies of those copies made by them
upon comparison in cases of two of the resales when their
file copies are misplaced. These 4 invoices are marked
Exhibits AA, BB, CC and DD, respectively.
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74. Since the tender notice was for several consignment s
of several purchasers of cotton who had defaulted, the resale
invoices do not show the specific description or extent of the
Defendant s’ consignment s. The oral evidence of the
Plaintiffs’ witness in paragraphs 27 and 31 of his
examination- in- chief show how the Plaintiffs have sought to
prove the resale by the copies of the invoices by adducing
secondary evidence.
75. The Defendant s have not accepted as correct the
resale invoices. Mr.Sancheti on behalf of the Defendant s drew
my attention to several inconsistencies in the document s to
show that the Defendant s’ consignment s could not have been
sold under these invoices. The Plaintiffs’ witness has been
cross- examined extensively on this score.
76. It is the Plaintiffs' case that the Plaintiffs have resold
interalia the Defendant s’ goods under 4 separate transactions
to 4 parties in India and abroad. The invoices raised by the
Plaintiffs upon those parties are in respect of Guatemala
cotton, Brazilian cotton, Turkish cotton and
Mexican /Gu a temala type cotton. The Plaintiffs have to prove
these contracts of resale. The original invoices have been sent
to the respective buyers. The Plaintiffs are expected to have
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their file copies. The Plaintiffs would be required to prove
these Document s by secondary evidence. Under the provisions
of Section 63(2) of the Indian Evidence Act, 1872 the
Plaintiffs would be required to produce the copies made from
the original of such invoice by mechanical process (for eg., the
carbon copies of typewritten Document s) which in themselves
ensure the accuracy of the copies or copies compared with
such copies. The copy made at the time of the execution of
that contract for which the invoice is typed and sent to the
buyer is the precise copy required to be produced by the
Plaintiffs to serve as secondary evidence of the contract of
resale. If such a copy is not produced, a copy compared with
such a copy would be the one which would constitute
secondary evidence.
77. Under Section 65 of the Indian Evidence Act
secondary evidence is allowed to be given of the existence,
conditions, or content s of the Document s when the original
is shown to be in the possession of another person and when
that person does not produce it despite notice. The exception
is under Section 66(6) of the Evidence Act , when the
person in possession of such a Document is out of reach or
not subject to the process of the Court. The buyers of the
resold cotton are foreign buyers or firms outside the
jurisdiction of this Court. Hence the Plaintiffs would be
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entitled to rely upon their file copies which would be
prepared at the time the original invoice for resale of the
aforesaid types of cottons sold to third parties or copies
compared with such copies by the Plaintiffs. The original
need not be got produced by the Plaintiffs, if the parties are
out of reach or not amenable to the process of the Court.
The 4 invoices are made out in the names of parties in
Coimbatore, Zurich, Geneva and Hong Kong and these
parties are out of the reach of the Court and not subject to
the process of the Court.
78. The evidence of the Plaintiffs’ witness in paragraphs
20, 27 to 30 of the examination- in- chief show the execution
of the Document s for resale, file copies as well as Xerox
copies of such file copies being produced, stated to have
been compared with the originals by the witness. Upon such
compliance with Section 66(2) and 66(6) the Document s
becomes admissible and are accordingly marked Exhibits-
AA to Exhibit- DD in evidence.
79. The credibility and acceptance of such document s,
admitted in evidence and marked Exhibits is subject to the
truth of the content s of the Document s being proved by the
Plaintiffs and subject to the necessary cross examination.
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80. The Plaintiffs have sold the aforesaid 4 varieties of the
cotton being different bales to different parties on different
dates. Each of them may be considered in chronological
order for ascertaining the proof of the truth of their content s.
81. The invoice date 5th December 1978, which
constitutes the first resale by the Plaintiffs stated to be inter
alia of the Defendant s’ consignment, is marked Exhibit- AA.
It shows the sale of 86 bales of Guatemala cotton. The
contract between the parties was for 50 bales of Guatemala
cotton. 43 bales were supplied and cleared by the Plaintiffs.
The consignment was shipped within the period of contract.
The goods are stated to have been cleared in July, 1978.
(There are no supporting Document s of any Port to show the
clearance of the goods). The tender notice which is stated to
have been issued by the Plaintiffs for resale of the goods
initially by public auction, a part of Exhibit-W(colly) is dated
24 th June, 1978. The Plaintiffs not having fetched a
reasonable price upon the offers made by the buyers
pursuant to the tender notice, the Plaintiffs have sought to
resell the goods on 5th December, 1978, about 6 months after
the issue of the tender notice to the Textile Mills.
82. The clearance of the consignment of Guatemala
cotton is not shown by the Plaintiffs at all. No Document s
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with regard to that consignment are produced. Mr. Shah
tried to contend that these were shipped and cleared along
with the Turkish cotton and hence may be taken to be
cleared on 21 st July, 1978. That is impermissible. The
damages and losses claimed by the Plaintiffs would have to
be seen upon taking into account the prices, dates of
clearance of goods as well as resale of goods. Needless delay
in any of those would dis- entitle the Plaintiffs from claiming
damages. Besides if this consignment was cleared on 21st
July, 1978, these goods could not have been put up for
auction under the auction notice dated 24th June, 1978 part
of Exhibit-W (colly).
83. The content s of the Document would require to be
considered to appreciate the truthfulnes s of the case of the
Plaintiffs with the Defendant s’ consignment was sold
amongst the 86 bales sold under the said invoice. Paragraph
28 of the examination- in- chief of the Plaintiffs’ witness
shows in passive voice the trans action that took place as is
obviously reflected in the Document itself. The Plaintiffs'
witness has sought to identify the signature of the Officer of
the Plaintiffs on the copy of the original invoice. The
signature on the Document s produced by the Plaintiffs is in
the original. The witness has also deposed to identify an
endorsement on the top of the Document showing “43 ex
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86b/ s a/c chakolas Spg”. In the examination- in- chief the
witness has explained the endorsement to mean that 43
bales of cotton out of 86 bales were of the Defendant s. In
the cross examination the witness has agreed with the
suggestion that he had no personal knowledge why another
person had made an endorsement on the top of the
Document. The bill bears no mark, type or lot numbers.
84. Mr.Sancheti, on behalf of the Defendant s, drew my
attention to a copy letter relied upon by the Plaintiffs dated
22 nd November, 1979 giving notice to the Defendant s
regarding the resale of the goods under their contract No.G-
444, Exhibit- D. The said letter is inter alia in respect of 50
bales of Guatemala cotton shipped to the Defendant s. The
said letter states about how the Defendant s failed to retire
the Document s and take delivery of the cotton. The
Plaintiffs, therefore, until the date of that letter sold 334
bales of Brazilian cotton out of 485 bales of Brazilian cotton
shipped to the Defendant s. The Defendant s' Advocate has
justifiably contended that this letter, written about a year
after the resale reflected in the invoice Exhibit- AA, shows
that until November, 1979 the Plaintiffs had not sold any
bales of Guatemala cotton from out of the Defendant s’
consignment . Though the Plaintiffs need not have shown the
particular s of the contract, under which the consignment
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was shipped to the Defendant s at the time of resale to the
third party, (as is the tenor of the cross examination), the
Plaintiffs are required to show by some intrinsic evidence
how the consignment sold to the 3rd party under the invoice
Exhibit- AA contains inter alia the consignment of the
Defendant s. Rather than showing that fact, the later
circumstantial evidence shows otherwise. The cross
examination of the Plaintiffs’ witness further shows that he
had no knowledge of the storage or shipping of the
Defendant s’ consignment. Though that is natural and the
witness need know each aspect of the contract with the
Defendant s, his lack of evidence to connect the Defendant s’
goods with the resale Document , despite deposing that he
had personal knowledge of the resale when the invoice is
signed by another Officer, shows failure to prove the truth of
the content s of the invoice produced by secondary evidence.
85. The second resale by the Plaintiffs is of Brazilian raw
cotton under invoice dated 11th September, 1979 to a party
in Zurich, Switzerland. The invoice is marked Exhibit- BB
upon the Plaintiffs’ evidence in paragraph 30 of the
examination- in- chief. The contract between the parties was
for 500 bales of Brazilian cotton. 485 bales were shipped
and supplied to the Defendant s. The Defendant s failed to
clear any of those. The Plaintiffs cleared the consignment on
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10 th Janua ry, 1978 as reflected in the Document s of Cochin
Port Trust Exhibit- T (colly). The invoice produced by the
Plaintiffs is the Xerox copy of the file copy of the original
invoice sent to the party in Switzerland. Paragraph 30 of the
examination- in- chief shows that the office copy of the resale
invoice is not traceable. Hence the initial evidence under
Section 63(2) is not produced. A copy compared with the
office copy is stated to be produced. P.W.1 has deposed that
“he himsel f compar ed Xerox copy of the resale invoice”.
He has not deposed that they were compared with the office
copies. His evidence shows that the office copy was available
at the time of the filing of the Suit when he took out the
Xerox copy of the office copy of the resale invoice. He
presumably compared a Xerox copy with the office copy. It
would have to be adjudged whether the evidence of a witness
not producing even the copy of the original Document made
by the mechanical process which would ensure its accuracy
is to be accepted in evidence upon the witness stating that
he had compared the Xerox copy at the time of the filing of
the suit. Section 61 of the Evidence Act requires
Documentary evidence to be proved by either of the two
modes. Primary evidence is to be led under Section 62 of the
Evidence Act. If any Document can be proved by primary
evidence by production of the Document itself, it is the initial
mode of proof and deserves immediate acceptance.

Secondary evidence is allowed under Section 63 of the
Evidence Act, if primary evidence is not produced. Section 63
is, therefore, in the nature of an exception to Section 62 as
the secondary mode of proof of Document s. Secondary
evidence is allowed in the 5 modes set out in Section 63 of
the Evidence Act. Under the circumstances mentioned in
Section 65, and subject to the procedure laid down in
Section 66, secondary evidence is to be led. A copy of the
original Document is, therefore, required to be the copy
taken out at the time the original Document came to be
executed. Such copy could have been taken out as a
holograph copy by manuscript as was the usual copying in
olden times, or the copy made by a mechanical process
which could be by typewriting, a computer printout or a
Xerox copy as would ensure accuracy of the original
Document . A copy of a copy of a Document made at a later
stage does not fall within the parameters of Section 63(2)
unless the witness shows how a copy could have been taken
of the initial copy of the Document at a later stage and how
he has compared them with the initial copy which could be a
holograph copy, a typewritten copy etc. The evidence of the
Plaintiffs’ witness is casual and cursory. It does not set out
how and when the copy of the copy was made and how and
when the original copy was lost though it was available at
the time of the filing of the Suit. The evidence is seen to be
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given merely to fit into the last portion of Section 63(2).
Despite admissibility of the Document being seen by such
evidence, the credibility of the Document is not established.
Hence, the evidence falls short to prove the truth of the
content s of the Document on this score itself. If such
evidence simplicitor is accepted there would be no evidence
that cannot be pushed into any record in the name of proof
of Document s. The witness has admittedly prepared a copy
of the copy of the Document after filing of the Suit. The
witness has not produced the copy of the Document made
by the mechanical process as would ensure accuracy i.e. the
typewritten copy of the original invoice which is the file
copy/office copy of the Plaintiffs.
86. The Xerox copy of the invoice Exhibit- BB shows a
very unclear signature at the foot of the Document . That
signature is different from the other signatures on the other
resale Document s. Deposition simplicitor that the witness
identifies the signature as of another Officer from an
otherwise illegible signature on the Xerox copy cannot also
be accepted.
87. The invoice shows certain lot numbers, mark
number s and type of the goods. These are naturally not put
by the witness. The marks are different, and naturally so,
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from the marks on the Defendant s’ consignment at the time
of shipment and storage. The goods which are sold under
this invoice are the Defendant s’ goods as well as other goods.
Marks of the defaulting importers are not required to be put
on the invoice of a third party. The Plaintiffs’ witness has
explained in re- examination that the marks are bound to be
different as the lot numbers and other details given by the
foreign suppliers are different from the lot numbers and
other details given by the Plaintiffs as the exporter of the
goods.
88. It is the Plaintiffs evidence in paragraph 30 of the
examination- in- chief that the consignment of the Defendant s
was of 2 parts containing 151 bales and 334 bales though
sold to the same party in Switzerland. The damages and
other charges were also paid for the goods in 2 lots. Only
one resale invoice is however, produced. The evidence shows
that the invoice dated 11 th September, 1979 Exhibit- BB is in
respect of 151 bales from the Defendant s consignment along
with the other bales of other similar defaulting importers by
the Plaintiffs to the third party. The letter dated 22nd
November 1979 part of Exhibit- FF (colly) shows the sale of
334 bales of Brazilian cotton out of the Defendant s'
consignment of 485 bales. The invoice with regard to those
334 bales is not produced. Since 334 bales of cotton were
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only sold before the date of that letter, the Brazilian cotton to
a Swiss buyer of 151 bales as deposed by the Plaintiffs would
not prove the truth of the content s of the Document
produced by the Plaintiffs. However it may be a case of a
clear error on the part of the Plaintiffs' witness since
Brazilian cotton is stated to be sold in 2 lots. The Plaintiffs'
witness having specifically deposed about sale of the
Brazilian cotton in 2 lots. The Brazilian cotton shown to be
sold under the invoice Exhibit- BB consists of 1401 bales.
The Plaintiffs could have passed off the entire shipment of
the Defendant s of 485 bales under the said invoice. The
Plaintiffs have not done so. The Plaintiffs have sought to
produce Document s only with regard to a part of the
Defendant s' consignment stated to have been sold under the
invoice. The Document would reflect the price prevalent of
the Brazilian raw cotton on the given date, whether or not,
the entire consignment was resold by the Plaintiffs. The
Defendant s would be entitled to rebate to the extent of the
market price on that day with regard to the entire
consignment purchased, but not cleared by them to compute
the loss suffered by the Plaintiffs upon resale.
89. The third resale by the Plaintiffs is of Turkish cotton
under invoice dated 13 th February, 1980 Exhibit- CC made to
a party in Geneva, Switzerland. The contract between the
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parties No.G-511 is in respect of 58 bales of Turkish cotton.
57 bales have been shipped and cleared. The invoice
Exhibit- CC is for 370 bales of Turkish cotton. It is the
Plaintiffs evidence in paragraph 27 of the examination- inchief
that the Plaintiffs have sold inter alia the 57 bales of
Turkish cotton which was the Defendant s' consignment. The
Tender Notice part of Exhibit-W(colly) has been issued on
24 th June, 1978. The Defendant s' consignment is shown to
have been cleared on 21 st July, 1978 as per the Document s
of the Dock Exhibit- S (colly). If these goods are cleared only
on 21 st July, 1978 they could not have been put up for
auction a month before on 24th June, 1978. Hence what is
contained in the tender notice dated 24th June, 1978
Exhibit-W with regard to Turkish cotton does not include
the Defendant s' consignment. Consequently if the
deposition of the Plaintiffs' witness, that the invoice Exhibit-
CC includes the 57 bales of Turkish cotton of the
Defendant s' consignment, is correct, it shows that the
Plaintiffs never put up the said consignment for any public
auction and only sought to sell it by private treaty 1½ years
after its clearance. Consequently the Plaintiffs' evidence
under answer 74, that he was personally a party to the sale
or resale, is itself a matter of doubt. The evidence is,
therefore, neither credible nor clinching. Aside from showing
the market value of the Turkish cotton on the date of resale,
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the document appears to be an otherwise unrelated
document tried to be pushed into the record as the
document relating to the resale of the Defendant s'
consignment .
90. The last resale of the Defendant s' consignment is
made out to be under a copy of the invoice dated 5th May
1980, Exhibit- DD. The document is really a xerox copy of
the office copy of the original invoice. It has no signature of
the Accountant at the place meant for signature. It, however,
shows the xerox copy of an initial and signature at another
place at the bottom of the document. There is no means of
knowing whether such a document would be a copy
compared with the original copy made by a mechanical
process such as to ensure its accuracy. It is precisely,
therefore, that the xerox copy of a copy of the document
taken out at a date later than the date of the execution of the
document cannot be admitted as secondary evidence despite
a deposition of the witness that he had made the copy at the
time of or after the filing of the Suit. Such direct evidence is
merely given to fall within the provisions of law relating to
proof of document s by secondary evidence without there
being any truth in such deposition.
91. Further the copy of the invoice Exhibit- DD shows the
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sale of Central American cotton equivalent to type
Guatemala. The Defendant s' consignment was of Mexican
cotton and not Central American cotton. The Dock
Document s showing the shipping as well as the clearance of
the Defendant s' consignment also show Mexican raw cotton.
The contract between the parties itself shows inter alia 85
bales of Mexican cotton to be imported and shipped to the
Defendant s. No resale of Mexican cotton is shown. The
tender notice shows separately a notice for Mexican cotton
as well as Central American cotton. The 2 types are
therefore, completely different. Sale of Central American
cotton which is equivalent to Guatemala cotton cannot be
shown to contend that the Defendant s' consignment of
Mexican cotton is sold under the said invoice. The evidence
of the Plaintiffs' witness that this was the same cotton must,
therefore, be rejected. However the Plaintiffs have contended
that only 2 bales out of 85 bales of the Mexican cotton
shipped to the Defendant s have been sold under this invoice.
The Plaintiffs have claimed various charges under the
particular s of claim also in respect of only 2 bales of Mexican
cotton.
92. The consignment of Mexican cotton is shown to be
cleared on 21 st July, 1978 as per the Dock Document s
Exhibit- R(colly). The Defendant s' consignment is stated to
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have been put up for auction under the Plaintiffs' tender
notice issued on 24 th June, 1978 about a year after the
clearance of the consignment . 2 bales out of this
consignment only are sought to be resold under the invoice
Exhibit- DD as per the oral evidence of the Plaintiffs' witness
in paragraph 29(i) of the examination- in- chief. There is no
documentary evidence produced for the remaining bales of
Mexican cotton sold by the Plaintiffs as per the oral evidence
contained in paragraph 29(iii) of the Plaintiffs' examinationin-
chief.
93. The entire exercise and effort of the Plaintiffs in
producing certain copies (office copies or xerox copies of
certain other copies) produced by the Plaintiffs has gone only
thus far. The consignment of Guatemala cotton which was
cleared in July, 1978 could never have been put up for
tender in June, 1978. It is specifically shown in the letter
dated 22 nd November, 1979 of the Plaintiffs Exhibit- FF that
no Guatemala cotton was sold until that date. Hence, the
invoice Exhibit- AA is of no use to compute any damages
suffered by the Plaintiffs for the consignment of the
Guatemala cotton. The invoice Exhibit- BB is seen to be not
an admissible Document s as has emerged from the Plaintiffs'
evidence which cannot be accepted as credible secondary
evidence. The Plaintiffs' oral evidence of resale of 151 bales
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under the invoice Exhibit- BB runs contrary to their letter
dated 22 nd November, 1979. There is no Document for the
other lot of 334 bales of Brazilian cotton. The Turkish cotton
stated to be resold under the invoice Exhibit- CC also cannot
be that of the Defendant s as the consignment of Turkish
cotton was cleared on 21 st July, 1978 and hence the tender
notice of 24 th June 1978 could not have had the Defendant s'
consignment put up for resale. Even 2 bales of Mexican
cotton are not shown to have been resold under the invoice
Exhibit- DD since that shows resale of Central American
cotton which is distinct from Mexican cotton. The resale
value sought to be shown by the Plaintiffs remains at that.
94. The Plaintiffs are required to prove the truth of the
contract s of the invoices. The Plaintiffs have sought to prove
the truth of the content s of the invoices by secondary
evidence. If secondary evidence is successfully led, as per
the provisions of the Law of Evidence in this behalf, cited
above, the document s can be taken to be proved. If proved,
their content s can be considered in evidence. Such
consideration in this case would be to show mitigation of the
damages incurred by the Plaintiffs.
95. Mitigation of damages in a suit for recovery of the loss
suffered upon the default of the Defendant s in accepting
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delivery of the goods is imperative. The resale is required to
be made within a reasonable period. What is reasonable
period has been laid down in a number of cases.
96. In the case of Harichand and Co., Vs. Gosho
Kabushiki Kaisha Ltd., A.I.R. 1925 Bombay 28 , which was
also a case of sale of bales (presumably cotton) for
computation of damages for the breach of contract, a period
of 3 months taken by the Plaintiffs for resale of the goods
between 5th February, 1921 when the goods arrived and 29th
May, 1821 when the goods were sold was taken to be
unreasonable delay. It was observed that since it was the
Plaintiffs' duty to take all reasonable steps to mitigate the
damages the Plaintiffs' Solicitor's notice of 26 th April to resell
the goods unless the Defendant s took the bales within 2
days was itself held to be delayed without sufficient
justification. It was seen that the market prices were falling
and hence there should not have been such delay.
97. In the case of M/s Hirji Bharmal Vs. Bombay
Cotton Ltd., A.I.R. 1958 Bombay 411 Justice Chagla, as
he then was, held that even 5 days that elapsed for resale of
the goods was unreasonable. That was a case of resale of
cotton which was observed to be an extremely marketable
commodity for which there would not be slightest difficulty
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in resale. In that case the notice of sale was given on 22nd
May, 1953. Pursuant to the notice, the right to resale arose
5 days after 7th July, 1953 viz. 12 th July, 1953. It was held
that the goods should have been sold on 15th July, 1953 and
that having not been done, there was an unreasonable delay
in the sale. Hence, though the claim for damages was
rejected carrying charges claimed by the Plaintiffs were
granted up to 15 th July, 1953 (paragraph 21) which was
stated to be the proper date for considering the damages to
which the Plaintiffs were entitled.
98. In the case of Nikku Mal-Sardari Mal Vs. Gur
Parshad & Brothers, A.I.R. 1931 Lahor 714 delay of more
than a year was held unreasonable and in the case of
Mysore Sugar Co. Ltd. Vs. Manohar Metal Industries,
A.I.R. 1982 Karnataka 283 delay of 3 months was
considered to be long delay though the goods to be resold
were copper scraps and ingots which are not perishable.
99. Mexican cotton was cleared on 29th August 1977.
Brazilian cotton was cleared on 19th Janua ry 1978. Turkish
cotton was cleared on 21st July 1978. The date of clearance
of the consignment of Guatemala cotton is not known. The
goods are stated to have been resold (though not proved to
have been resold) on 5th December 1978, 11 th September
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1979, 13 th February 1980 and 5th May 1980 respectively.
Each of these sales is too far delayed. The Plaintiffs cannot
be held entitled to damages upon the Defendant s' default
since they have not shown mitigation of such damages by
expedient resale i.e. Within a reasonable period, given the
fact that cotton is a perishable as well as a highly
marketable commodity. The fact that the Plaintiffs are the
Government undertaking and hence they collected the
consignment s of various defaulting importers and put them
up for auction after which they sold by private treaty cannot
give the Plaintiffs time much further than what would be
reasonable time dependent upon market situation for
mitigation of their damages. Though the Plaintiffs would be
entitled to some more time for the additional requirement of
conducting a public auction before sale by private treaty, the
Plaintiffs' acts to that end and the time consumed in that
exercise would require to be seen.
100. The Plaintiffs have contended that after all
the consignment s were cleared they sought to put it up
under the aforesaid 2 tender notices dated 24th June 1978
and 2nd September 1978. Thereafter on 4 different dates
beginning 5th December 1978 the Plaintiffs have resold inter
alia the Defendant s' consignment s ( though the resale has
not been proved as aforesaid). It may be stated that the
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initial copy of the tender notice produced by the Plaintiffs
show it to be. “The Foreign Godown Tender No.2” relating
to “sale of impor te d ready global cot ton” . The Plaintiffs
have not produced the tender notice shown to be tender
No.1. The second tender notice produced by the Plaintiffs is
titled “Foreign Godown Tender No.3” relating to “Sale of
impor te d ready global godown” . It is seen that 2 of the 4
consignment s of the Defendant s were cleared after the first
of the aforesaid 2 tender notices and hence could not have
been a part of that notice. The second tender notice does not
show Turkish cotton being put up for sale. Hence the
consignment of Turkish cotton is not even put up under the
second tender notice. Mr. Sancheti drew my attention to the
fact, that there are no goods available at Cochin Port where
the Defendant s' consignment s had arrived, which were put
up for auction under the second tender notice. Hence the
Defendant s' consignment if at all were only put up for
auction under the first tender notice. This would apply at
best to the remaining 2 of the 4 consignment s viz: Brazilian
cotton and Mexican cotton. Mexican cotton is not shown to
be resold; instead Central American cotton is shown to be
resold. Brazilian cotton shown to be resold in 2 lots of which
the invoice Exhibit- BB, which is for one of them, is shown to
be resold 18 months after the consignment was cleared.
Even the part of the Brazilian cotton so resold is after an
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unreasonable delay.
101. The Plaintiffs' case of resale fails on numerous
grounds aforesaid. The Plaintiffs have not even shown the
market price of the goods rejected by the Defendant s for
which damages are claimed soon after the date of the
defaults. Cotton was in short supply and hence was an
essential commodity under the Essential Commodities Act
sold under the cotton control order issued under the
notification dated 13 th October, 1955 which was in force on
the date of the shipment. There was, therefore, expected to
be a high demand for the goods which were in short supply
and regulated by the Government. The Plaintiffs could have
resold them immediately upon clearance. The Plaintiffs
having failed to do that, they are dis- entitled from claiming
any damages for the loss, if any, suffered by them upon
resale, if any, of the Defendant s' consignment .
RECOVERY OF EXPENSES AND CHARGES:
102. It is seen that the Plaintiffs have not breached the
contract by non- delivery of the goods. The Defendant s have
breached the contract by non- acceptance of the goods i.e., by
refusing to take delivery of the shipment which arrived in
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India. It is also seen that there is no dispute with regard to
the time of shipment of the consignment of the Guatemala
cotton and Mexican cottons. These shipment s admittedly
arrived within the period of the shipment s mentioned in the
contract. The consignment of Turkish cotton was delivered
but one day after the shipment period and arrived on 26th
July, 1977. The consignment of Brazilian cotton was
delayed by 12 days after the period of shipment and arrived
in India on 21 st September, 1977. It is also seen that the
Plaintiffs have sent the shipment advice as soon as the goods
were shipped by the Foreign Exporters and before they
arrived in Indian Port. The Plaintiffs have also raised the
invoices which were sent under their forwarding letter to the
Defendant s before the dates of the arrival of the shipment. It
is further seen that the Defendant s have had correspondence
with their own Clearing Agents for directing them to take
delivery of the shipment s and have sent their copies of the
document s to them to that end. It is seen that till 2nd
August, 1977 the Plaintiffs were ready and willing to accept
the shipment s and gave directions in that behalf to their
Clearing Agents. It is only on and from 3rd August 1977 that
the Defendant s sought to commit default in clearing the
shipment and informed their Clearing Agents to clear the
shipment s and the next day on 4th October 1977 requested
the Plaintiffs to cancel the contract for the 4 reasons
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mentioned therein. It is also seen that between the period of
shipment and the request for cancellation of the contract the
Defendant s had entered into another contract with an U.K.
Party for export of Staple Fiber Fabrics, in which the entire
infrastructure including their labour was to be utilised. It is
further seen that the Plaintiffs did not accept the
cancellation of the contract at that late stage and called
upon the Defendant s to clear the goods or bear the
consequences of the contract by non- acceptance as per their
telegrams sent so soon as the Plaintiffs received the
Defendant s' initial request for cancellation i.e., on 4th
October 1977 itself and later on 19th October 1977. It is also
seen that the Plaintiffs sent the legal notice on 18th
November 1977 calling upon the Defendant s to perform their
contract by retiring the Document s making payment and
clearing the goods to avoid demurrage and other charges and
also for claiming damages upon the Plaintiffs themselves
taking delivery by clearing the goods and making the full
payment. It is further seen that the Defendant s sent the
Plaintiffs' Clearing Agents copies of their Document s relating
to the shipment of Guatemala and Turkish cottons under
their letter dated 4th July, 1978 Exhibit- 10 . This letter has
been received by the Plaintiffs' Clearing Agents on 6th July
1978. This enabled the Plaintiffs to clear the goods in the
place and stead of the Defendant s. The Plaintiffs cleared
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these goods on 21 st July 1978 within a fortnight of the
document s having been sent by the Defendant s. The
Plaintiffs have produced Dock Document s showing clearance
of the consignment of the Turkish cotton. It is argued on
behalf of the Plaintiffs that since the Document s relating to
the consignment s of Guatemala as well as Turkish cotton
were sent to the Plaintiffs Clearing Agents by the Defendant s
together on 6th July 1978 both the consignment s were
cleared together on the same day i.e., on 21st July 1978.
103. Having had prior experience of the Defendant s
approach by non- acceptance of the consignment, the
Plaintiffs cleared the next 2 consignment s which arrived in
India in the next 2 months i.e. August and September 1977
soon after the arrival of the consignment s. Consequently the
consignment of Mexican cotton which arrived on 26th August
1977 was cleared by the Plaintiffs without involving the
Defendant s, entering into further needless correspondence,
issuing further legal notice or calling for the document s of
the Defendant s. It is pertinent to note that the Plaintiffs’
letters to their own Clearing Agents dated 19th July 1977
Exhibit- 1 and 3rd August 1977 Exhibit- 11 are in respect of
the consignment s of only Turkish and Guatemala cottons.
There is no correspondence between the Plaintiffs and the
Defendant s as also between the Defendant s and their
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Clearing Agents with regard to the consignment s of Mexican
and Brazilian cottons which arrived in India later.
Accordingly Plaintiffs acted more expeditiously and cleared
the goods expeditiously after having had the initial
experience of the Defendant s. The consignment of the
Mexican cotton arrived on 26th August 1977 and was cleared
by the Plaintiffs on 14 th September 1977. The consignment
of Brazilian cotton which arrived in India on 21st September
1977 was cleared by the Plaintiffs on 10 th Janua ry 1978.
104. Under Clause 4 of the agreement between the parties
Exhibit- D and Exhibit- H the Defendant s were to pay the
price of the consignment s against the tender by the Plaintiffs
of the bills of lading, insurance policy, invoice, delivery
challans of the shipping company and other document s. If
the Defendant s failed to pay such price, under clause 5 of
the aforesaid contracts the Plaintiffs were entitled to clear
the goods and take delivery of the goods at the cost of the
Defendant s. The cost and expenses that Plaintiffs incurred
would be the demur rage, insurance charges and all taxes as
applicable made out in the Dock Document s.
105. The fact of clearance of goods by the Plaintiffs is not
denied. The dates of clearance are reflected in the Dock
Document s Exhibits- R, S and T (colly). The initial clearing

on 21 st July 1978 of the Turkish and Guatemala cottons is
after the initial request s and communications contained in
the telegrams Exhibit- U (colly) and the correspondence
between the Advocates upon the Plaintiffs’ legal notice
Exhibit- V (colly). The clearance of the Document s of the last
2 consignment s is rather expeditious.
106. The Plaintiffs have relied upon document s of the
Cochin Port Trust and the Bombay Port Trust (in view of one
consignment having erroneously arrived in Bombay and later
arranged to be shipped to Cochin) to show the expenses
incurred by them by way of demurrage, insurance, fumigation
charges and other charges whilst the goods remained in the
Dock upon failure of the Defendant s to take delivery despite
repeated request s in writing. The Plaintiffs have produced
document s with regard to three of the consignment s. The
Plaintiffs have failed to produce the document s with regard to
one consignment . The expenses incurred by the Plaintiffs for
demur rage etc. cannot be presumed or imagined. The Plaintiffs
would be entitled to recovery of the precise total amount
shown to be incurred by them under the document s. Such
Dock document s are specified in Item- 3 of Part- II of the
Schedule to the Commercial Document s Evidence Act, 1939,
which raises a presumption of genuinenes s of those
document s. These document s have not been disputed or
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countered. The document s are produced in evidence as
Exhibits R, S and T (collectively). The Plaintiffs had warned the
Defendant s by their telegram dated 19.10.1977, part of
Exhibit- U (collectively), to lift the goods, for failure of which all
consequences would be on account of the Defendant s. The
Plaintiffs have given notice to the Defendant s that they would
clear the goods at the risks and costs of the Defendant s under
their Attorney’s Notice dated 14th Janua ry 1978, part of
Exhibit- V (collectively). Hence the Plaintiffs are entitled to the
receipt of the amount spent by them under such Dock
document s as soon as those expenses were incurred by the
Plaintiffs to clear the goods which was seminal liability of the
Defendant s.
107. Under Clause- 17 of the suit contracts, the
Defendant s are liable for payment of interest charges in
addition to the charges and expenses incurred by the Plaintiffs
for insurance, demur rage, taxes, etc. Since the contractual
rate of interest is specified and is payable upon failure to take
delivery of the shipping document s or the delivery order and to
effect payment under Clauses- 17 of the suit contracts, the
liability towards payment of interest also commences from the
date of the breach itself at the rate specified in the contract.
108. It is argued on behalf of the Defendant s that there
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would be no interest payable in a suit for damages prior to the
filing of the Suit. Though this broad statement would be
correct in the case of computation of damages suffered by a
party eg., loss caused by breach of contract or damages for
mental agony, it would not apply in case of damages which are
really by way of recovery of actual expenses incurred after
notifying the Defendant s of the likely breach of the
consequences. The damages incurred is per se would require
an action to be filed forthwith. Expenses incurred can be
recovered in an action filed within the period of limitation.
This is more so where a legal notice in that behalf has been
issued claiming interest at a specified amount warning the
Defendant s of the consequences.
109. Mr. Sancheti has drawn my attention to the Supreme
Court judgment in the case of M/s. Mahabir Prashad
Rungta Vs. Durga Datt AIR 1961 S.C. 990 in which there
is a passing reference with regard to the claim of interest on
page 646 thus :-
“Learned counsel for Durga Dat t claimed
interes t as damage s but it is well set t led that
interes t as damage s cannot be awarde d .”
110. This case has been followed in the case of Andard
Mount (London) Ltd. Vs. Curewel (India) Ltd., A.I.R. 1985
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Delhi 45 in which also it has been held that interest cannot
be allowed by way of damages. However, in that case there
was no express contract between the parties regarding
payment of interest. No mercantile usage to that end was
seen. The damages which were claimed by the Plaintiffs was
not for a certain amount so that the Interest Act did not
apply. Hence it was held that ordinarily no interest was
allowed on the amount of damages arising out of a breach of
contract. The judgment in the case of Andard (Supra)
considers other judgment s of the Appeal Court in the case of
Chatham & Dover Railway Co. Vs. South Eastern railway
Co. 1893 A.C.429 and B.N.Railway Co. Ltd. Vs. Ruttanji
Ramji A.I.R. 1938 P.C.67 . The former case was the case of
damages for wrongful detention of debt and the latter was for
payment of interest at a fixed rate which was held payable
under the Interest Act, 32 of 1839.
111. In this case the Plaintiffs are entitled to the expenses
incurred by them for clearing the goods under the Dock
Document s. The Plaintiffs are entitled to claim that amount
within a period of 3 years. The Plaintiffs have given notice to
the Defendant s to clear the goods which the Defendant s have
failed to heed. The Plaintiffs have sent telegrams in that
behalf. Thereafter, the Plaintiffs have given legal notice,
warning the Defendant s that they would clear the goods upon
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incurring the expenses, the consequences of which the
Defendant s will have to bear and claiming interest on the
expenses incurred by them at the rate specifically notified.
The Defendant s are bound to make payment of the clearing
charges incurred by the Plaintiffs. The immediate
consequences of failure to pay such expenses, as is specifically
incurred by the Plaintiffs being a liquidated amount , attracts
payment of interest thereon. Such claim of the Plaintiffs is
essentially for recovery of the expenses and not only the
damages suffered by the Plaintiffs which ordinarily does not
carry interest. Besides the contractual rate of interest
precisely for these charges and expenses is fixed under Clause
17, and the Defendant s, therefore, are taken to have agreed to
pay interest at that rate if the charges are incurred by the
Plaintiffs upon the Plaintiffs being constrained to incur them
for clearing the goods upon the Defendant s’ breach by nonacceptance
of the goods. The Plaintiffs are, therefore, entitled
to recover all the charges incurred by them along with interest
thereon at the contractual rate from the date of clearance of
the goods till the filing of the Suit and thereafter under Section
34 of the C.P.C from the filing of the Suit till realisation.
112. Upon clearance of the goods the Plaintiffs would be
constrained to store the goods in any godown. It, therefore,
follows as a matter of corollary that the charges and expenses
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incurred by the Plaintiffs, for such storage would also be
recoverable by the Plaintiffs. Under clause 13 of the contract
Exhibits- D & H the Plaintiffs would be entitled to carrying
charges at 2½ % per 30 days from the date of the arrival of
the steamer after the Defendant s fail to make payment s and
take delivery of the goods immediately on arrival. That having
admittedly not been done, the Plaintiffs would be entitled to
such carrying charges at the contractual rate for the
reasonable period after the goods were cleared to enable the
Plaintiffs to sell the goods to mitigate the damages and claim
the loss from the Defendant s.
113. Drawing an analogy from the Division Bench
judgment in the case of Hirji Bharmal (supra) carrying
charges, as granted by Justice Chagla in that case are required
to be granted to the Plaintiffs for a reasonable period after the
goods were cleared. Given the fact that the Plaintiffs are the
Government Agency, judicial notice is required to be taken of
the fact that the Officers of the Plaintiffs are required to follow
reasonable procedure for sale initially by public auction, and
following it for sale by private treaty. This, therefore, would
not take as short a time as was expected from the private party
in the case of Hirji Bharmal (supra). Mr.Rajesh Shah's
contention that the Plaintiffs are expected to collect the goods
of all such defaulting importers to put them up for public
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auction stands to reason and can be accepted. A period of one
month of storage of goods would be a reasonable period
expected of the Plaintiffs before they resell the Defendant s'
consignment along with the consignment s of the other similar
defaulting importers.
Hence, though the Plaintiffs would not be entitled to the price
of goods less the resale price by mitigation of damages caused
to them, they would be entitled to the expenses incurred by
them for clearance of the goods with interest thereon as also
the carrying charges for the storage of the goods. Issue Nos.(4)
& (5) are answered accordingly.
114. Hence the following order:
O R D E R
The Suit is decreed in a sum of Rs.12,43,482.31 made
up off carrying charges at the rate of 2.5% per month for 30
days on the value of the invoices, aggregating to Rs.48934.79 ,
shipping and fumigation charges shown in the document s,
Exhibits R, S and T (collectively) of Rs.152440.78 with
contractual interest at the rate of 20% per annum on monthly
rest basis from the dates of these document s until 3.10.1980
being the date of the Suit, aggregating to Rs.152862.27 and
further interest at the rate of 12% per annum from the date of
the Suit until the date of the judgment i.e. 15.12.2008,
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aggregating to Rs.804199.23 . The Defendant s shall pay
further interest at the rate of 12% per annum from the date of
the judgment until payment / r e alization.
115. No order as to costs.
116. The original document s shall be returned to the
respective parties who produced them.
(SMT.ROSHAN DALVI, J.)
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[
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