SCOTT AND HODGSON LIMITED V/S KESHAVLAL-NATHUBHAI SHAH ON 3 APRIL,1930

FACTS OF THE CASE

The plaintiffs are appealing against the judgment of the learned First Glass Subordinate Judge of Ahmedabad on the ground that he has wrongly decided in the negative the point of law involved in issue No. 1, namely, whether the agreement between the parties that the property in the suit goods should not pass until the whole of the purchase price had been paid, was valid and effective having regard to Sections 83 and 77 of the Indian Contract Act of 1872. There were several other issues raised in the case all of which were decided in favour of the plaintiffs and there are cross-objections before us in respect of them. But we have taken first this point of law because it is the decisive issue in the suit in certain events.

The contract which was made in India is contained in three letters of February 1, 9 and 9, 1923. By the first letter, Ex. 42, the plaintiffs were to supply an engine and a boiler therein specified for in all 3,480 packed and delivered for shipment f o. b. Manchester or Birkenhead on the terms that one third of the total value was to be paid on signing the order and the balance against shipping documents through Banks in England and subject to usual strikes, lock outs, etc Delivery was to be given within from five to six months after the receipt of full particulars by the makers in England. By the second letter, Ex. 41, the time for delivery was fixed to be about the end of July 1923.”

3. The third letter, Ex 127, varied the contract materially as to payment and is relied on by the plaintiffs as resulting in the property not passing It stated:

We beg to confirm the following terms of payment, as agreed between us this afternoon namely:

Rs. 5,000 (say five thousand rupees) on signing this order.

Rs. 5,000 (say five thousand rupees) immediately we cable shipment. To wit say July 31, 1923.

Rs. 3,000 (say three thousand rupees) on the last day of each month by post dated cheques on a recognised Bank.

All the sums paid by you in rupees will be finally converted in pounds sterling at the rate of exchange ruling on the date of each cheque. It is to be understood that the complete plant as supplied by us is to remain our property and to be completely covered by insurance by you until the final payment is made; and further that you are to expedite payments if at ail possible. The insurance policies and the premium receipts to be in our possession until the final payment is made. Kindly confirm this agreement and enclose your first instalment.

ISSUES

• Contract Act (IX of 1872) – Sections 77 and 88

JUDGEMENT

Now this contract being made in India it is not disputed that the legal rights of the parties are governed by the Indian Contract Act so far as applicable, and in particular by Sections 77 and 83. Section 77 runs:

‘Sale’ is the exchange of property for a price. It involves the transfer of the ownership of the thing sold from the seller to the buyer.

Section 78 deals with ascertained goods. It is clear that in the present case the goods were not ascertained. So I pass to Section 83 which deals with unascertained goods, viz.:

Where the goods are not ascertained at the time of making the agreement for sale but goods answering the description in the agreement are subsequently appropriated by one party for the purpose of the agreement, and that appropriation is assented to by the other, the goods have been ascertained, and the sale is complete.

As regards their Lordships’ view that the property passed on delivery, that would, I think, be because the appropriation and assent thereto would on the facts of that particular case be on delivery, for delivery would coincide with the assent to the appropriation under Section 83, viz., when the scrip was tendered to and accepted by the buyer, But even if the respondent’s view is correct that the Board were really relying on Section 78, yet it is equally clear that their Lordships held that the question as to the property passing must be determined by the provision of the Indian Contract Act which in that particular case had a certain statutory effect. There is not one word in that decision to show that underlying the Indian Contract Act there was in the opinion of the Board any such general exception of the intention of the parties to the contrary as is alleged by the appellants in the present case.

Moreover, it is noticeable that, there are clauses which go to show that where the Act intends that any particular provision is to be subject to any intention of the parties, it is expressly provided so. Thus, as regards a vendor’s lien, Section 95 provides:

Unless a contrary intention appears by the contract, a seller has a lien on sold goods as long as they remain in his possession and the price or any part of it remains unpaid.

So, too, Section 121 runs:

When goods sold have been delivered to the buyer, the seller is not entitled to rescind the contract on the buyer’s failing to pay the price at the time fixed unless it was stipulated by the contract that he should be so entitled

In saying this I appreciate the strength of the opening argument of the learned Advocate- General supplemented by that of his learned junior Mr. Banaji, who has today put the case for the appellant with clearness and force, namely, that prior to the Indian Contract Act of 1872, the law in India would follow that in England in subordinating everything to the intention of the parties. Moreover, by reason of the Indian Sale of Goods Act, 1930, which is to come into force on July 1, 1930, Chap. VII of the Act of 1872 dealing with sale of goods has been repealed, and in its place substantially the provisions of English Law have been substituted. And as regards this new Act no argument could arise, because it is framed in a totally different manner from the Act of 1872, and expressly provides that the rules for ascertaining whether the property passes in any particular case are to be subject to the intention of the parties. This applies to ascertained goods as well as to unascertained goods as will be seen on reading Sections 19 to 23 of the Act.

So, too, if one turns to the English Sale of Goods Act, Section 18, one finds that though the paramount question is the intention of the parties, yet under certain rules laid down for discovering that intention the property in unascertained goods passes to the buyer when the goods are appropriated to the contract with the assent of the buyer, unless a different intention appears. So that provision illustrates that, there is nothing against mercantile usage in construing Section 83 of the Indian Act in the way I have, because the same rule exists in England with this difference that English Law allows the exception of the parties making a bargain to the contrary.

It is also pointed out by the appellants that under English Law there is nothing against public policy in allowing parties to enjoy this freedom of contract. Thus, in McEntire v. Crossley Brothers (1895) Article 6, 457, Lord Herschell. L.C. says (page 463 Page of (1895) A.C.–[Ed.]):

If that was really the intention of the parties, I know of no rule or principle of law which prevents its being given effect to

We were also referred to Abdul Aziz Bepari v. Jogendra Krishna Roy 36 Ind. Cas. 119: 44 C. 98: 20 C.W.N. 1224, but in that case the Court found that the alleges contract was not proved, and it, accordingly decided the case on what was the local usage. But, as pointed out by Counsel for the respondents before us, the provisions on the Indian Contract Act do not affect any usage or custom of trade: see Section 1.

We were also referred to the authorities which show that the Indian Contract Act, 1872, is not a complete Code, and that if there is a clear omission in the Act to provide for a particular matter one may refer to the law prevailing before the Act and in general apply English Law on the point. The recent case from this Court, Jwaladutt Pillani v. Raja Bahadir Bansilal-Motilal(l2) illustrates that contention very well. It was a partnership case in which, confirming the decision of this Appellate Court, the Privy Council held that the particular point was not precisely covered by an appropriate section of the Indian Contract Act, and that, therefore, the English Law on the point prevailed.

Lastly, I would like to add a word of respectful appreciation of the industry and care which the learned Subordinate Judge has shown in dealing with the numerous points of fact before him and this difficult and important question of law. Its importance, however, is not now so great as it would have been but for the new Act which will presently be in operation, and, therefore, as regards future contracts if there is any such hardship as is alleged by the appellants, it will be obviated after the new Act comes into operation.

In my judgment the conclusion which the learned Judge arrived at on this part of the case is correct, and accordingly these appeals must fail.

Under these circumstances, it is unnecessary for us to go into the other points in the case on which the respondents rely against the appellants. I am aware of the convenience of an Appellate Court deciding all matters in dispute when a case comes up in appeal, but having regard to the wholly insufficient number of Judges to do the increasing work of this Court, it is impracticable for the Court to go into any questions which are not absolutely necessary for the disposal of an appeal.

As regards the. costs of the appeal, we think the appellant must pay the costs. We think there must be three sets of costs, namely, one for respondents Nos. 1 and 2, the liquidators of the Company; another set payable to respondents Nos. 4, 5, 7, 8 and 9, the receivers and the representatives of the deceased mortgagee; and a third set of costs for respondent No. 6, the purchaser at the auction-sale. They all had separate interests and we cannot see how they could fairly be required to appear by the same Pleader.

Then as regards the cross-objections of defendant No. 6 against the order of the learned Judge making no order as to costs, we are not prepared to disturb that order. There were a large number of points raised in the trial Court all of which were decided in favour of the present appellants including the point raised by defendant No. 6 that he was a bona fide purchaser for. value without notice. That point was found against defendant No. 6 by the trial Judge, though it may be that it was his co defendants who raised the other defences. We think that the learned Judge’s order was a fair one in the special circumstances of this case. Consequently, the cross-objections will be dismissed with costs.

REFERENCES

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This Article is written by Vaibhav Vishwakarma of swami Vivekananda University Sagar, 10th semester Intern at Legal Vidhiya.

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