P L D 1964 Supreme Court 625 (PLP)

HAMOODUR RAHMAN, J.

‑This appeal, by special leave, by the Province of West Pakistan is directed against the judgment and decree of a Division Bench of the High Court of West Pakistan at Karachi in a Letters Patent Appeal, modifying the decree passed by a learned Single Judge of the said Court by reducing the damages granted to the appellant herein from Rs. 58,078‑6‑0 to Rs. 16,

133. The suit, out of which the said appeal arose, was filed by the appellant for the recovery of Rs. 58,078‑6‑0 as damages suffered due to the failure of the respondent to lift 700 tons of Muttar Dal which the latter had purchased from the appellant at Rs. 26‑7‑0 per bag of 2? maunds for export to destination outside Pakistan, on the 27th of June 1949., at Karachi. The terms and conditions of this purchase, as set out in the letter of confirmation sent by the Director of Civil Supplies, Government of Sind, to the respondent, were as follows: "(1) That you shall have to deposit Rs. 10,000 as earnest money immediately. (2) You shall lift the dal within 1?? months from the date of issue of this letter. (3) If you fail to lift the entire quantity of 700 tons within the stipulated period, your earnest money shall be forfeited and the stocks auctioned at your risk and cost and any loss to Government will be made good by you. (4) Muttar Dal will be issued to you in the bags in which it is contained." The export permit for this quantity was issued by the Government of Pakistan on the 7th of July 1949, in the name of the Director of Civil Supplies, Sind Government. This also was for export outside Pakistan by sea, but the goods permitted to be exported were described therein as Muttar Dal (old stuff), although in the letter of confirmation of the 27th of June there is nothing to indicate‑that the Dal sold to the respondent was old stuff, nor had the Assistant Director of Civil Supplies, Government of Sind, in the letter written to the Deputy Secretary to the Government of Pakistan, Food Ministry, on the 5th of July 1949, requesting the issue of the export licence stated that the Muttar Dal sold was `old stuff'. This permit was, furthermore, not shown to the respondent and, as such, he was not aware that the commodity described therein was Muttar Dal (old stuff). The respondent, however, was unable to lift this quantity within the stipulated period, although repeatedly called upon to do so by the department concerned and even though the time was extended for a further period of 2: months at the request of the respondent. The Government of Sind by its letter of the 5th of November 1949, therefore, informed the respondent that if it failed to lift the stocks within the said extended period which was due to expire on the 14th of November 1949, its security deposit would be forfeited and the stock sold at its risk and cost without any further reference. On receipt of this letter the respondent on the 12th of November 1949, expressed regret for its inability to arrange for the export of the said goods to buyers in India owing to the deadlock created in the export trade with that country due to the devaluation of the Indian currency and prayed, for a further extension of two months. This was refused by the Government of Sind and the Secretary to the Government of Sind, Food Division, by his letter of the 15th November 1949, called upon the respondent to lift the goods purchased by the 21st of November 1949, and also threatened that if the goods were not so lifted the security deposit of Rs. 10,000 would be forfeited and "the dal shall be sold by Government in any manner they deem fit" at the risk, and cost of the respondent. The respondent again failed to do so, hence, the stocks were sold by negotiation on the 1st of February 1950, to Messrs Dawoodi Trading Corporation of Karachi at Rs. 17‑8‑0 per bag of 24 maunds. Intimation of this sale was sent to the respondent on the 4th of February 1950, and he was called upon to make good the loss suffered by the Government by the 12th of February 1950. This was followed by a second notice of demand dated the 28th of February 1950, calling upon the respondent to pay up by the 3rd of March 1950, but the respondent having failed and neglected to comply with the said demand this suit was filed on the 21st of August 1951, in the original side of the then Chief Court of Sind at Karachi. The respondent contested the claim mainly on the ground that the contract being expressly for the purpose of export to India had become impossible of performance by reason of the deadlock created as a result of the devaluation of the Indian currency and the non‑devaluation of the Pakistan currency. In any event, it was said, the contract had been frustrated, as after such devaluation the Indian Government had totally prohibited the import of goods from Pakistan. The respondent also challenged both the bona fides and the validity of the private sale to Messrs Dawoodi Trading Corporation of the stocks of Muttar Dal. It was lastly contended that the sale by being unduly delayed had resulted in further loss which the Government should bear, as the goods must be deemed to have been retained during this period by the Government at its own risk. At the trial the Government examined one witness and the respondent three, but all the relevant documents were admitted and exhibited by consent of the parties. After the consideration of this evidence the 'learned Single Judge of the High Court came to the Conclusion that there was nothing to show that the goods were purchased specifically for export to India, although India might have been the country to which the bulk of the goods would have been in the normal course exported. In the circum?stances, the respondent could not be excused from the perfor?mance of his part of the contract merely because of the trade deadlock, if any, between India and Pakistan as a result of the devaluation of the Indian currency in September 1949. The impossibility, it was further held, was, in any event, caused by the failure on the part of the respondent itself to perform its contract within the original stipulated period of l? months which expired long before the devaluation of the Indian currency. Lastly, even after the devaluation of the Indian currency the respondent never claimed that the contract had become impossible of performance or had been frustrated as now sought to be made out, for, even in the letter written by the 'respondent to the Government on the 12th of November 1949, the respon?dent was requesting for a further extension of two months and in this it had also stated that it was "sanguine that during the prayed for time there will come into being an inter‑dominion settlement" and then it would certainly fulfil its contract by taking delivery of the dal. The evidence, as the learned trial Judge has rightly pointed out, merely indicated that certain difficulties had been created by the devaluation of the Indian currency and the non?-devaluation of the Pakistan currency, but such difficulties due to variations in the rate of exchange of currencies of different countries were the normal incidents of international trade which persons entering into contracts for export of goods should normally anticipate. It was also held that the Government of India had never prohibited the import of any commodity from Pakistan into India. Lastly, since the contract was merely for .export to destinations outside Pakistan, it could not be said that the contract had either become impossible of performance or frustrated in any manner. The failure on the part of the respondent to perform his contract was also clear. Indeed, it was admitted in its letter of the 12th of November 1949, where regret was expressed for the failure to lift the goods within even the extended period and a further extension of two months was asked for. With regard to the quantum of the damage, however, the learned Single Judge held that the goods contracted to be purchased in the present case had only a very restricted market and, as such, the sale by the Government by private negotiation amounted, in the circumstances of this case, to a sale by auction. In any event, since the market prices remained stationary from middle of November 1949, until the 1st of February 1950, when the goods were sold, it made no difference to the quantum of the damage. Even if this was calculated on the basis of the prevailing market rate, the quantum would still be the same. On this ground the suit was decreed for the full amount of loss claimed by the Government on the basis of the difference between the contract price and the actual price at which the goods were cold, after adjusting the amount of the security deposit against the said loss. Interest was also allowed on this amount at the rate of 6% from the date of the suit until recovery. The respondent was also made liable for the costs of the suit. On appeal the Letters Patent Bench agreed with the con?clusions of the learned trial Judge on the question of impossibility of performance and/or frustration of the venture for substantially the same reasons as those given by the learned Single Judge, but on the question of the quantum of the damage the Division Bench differed. According to the latter, damages for non‑performance could only be the difference between the contract price and the market price prevailing on the date of the breach for the same or similar kind of goods which were contracted to be sold. The Division Bench did not also accept that the market for the kind of goods contracted to be sold in the present case was restricted or that its market price could not be easily ascertained. The market price was taken from the local market quotations admitted in evidence and on this basis it was held that the market price prevailing on the 14th of November 1949, should be taken as the price at which the goods contracted to be purchased could have been sold in the market on the date of the breach and on this basis the difference between the contract price and the market price was calculated at Rs. 26,133 and after deducting therefrom the sum of Rs. 10,000 deposited by way of security a decree was passed for Rs. 16,133 as damages with proportionate costs and on the decretal amount interest was awarded at the rate of 6 % from the date of the institution of the suit until payment or recovery of the amount. It is from this judgment that the Government has come up on appeal by special leave, which was granted in this case onlyl.4 to consider as to whether the Letters Patent Bench had assess die damages upon correct principles. Learned counsel appearing on behalf of the Province of West Pakistan contends that this has not been done. He claims that the Government was entitled to charge the difference between the contract rate and the rate at‑which the goods were actually sold firstly, because, by its notice of the 15th November 1949 (Exh. XVI) the Government had clearly given notice that it would sell "in any manner they deem fit" at the risk and cost of the respondent. Secondly, because, there was no market at Karachi for such a huge quantity of Muttar Dal, namely, 700 tons and, thirdly, because, the commodity had in the meantime considerably deteriorated in quality being the previous year's crop stocks, In this connection reliance is also placed on the export permit, which was issued by the Government of Pakistan, wherein the commodity to be exported was described as Muttar Dal (old stuff). With regard to the first point it has to be pointed out that in the original contract (Exh. VIII) the stipulation was that upon the failure to lift the entire quantity the earnest money would be forfeited and "the stocks auctioned" at the risk of the purchaser and this position was maintained even in the notices of the 8th of August 1949 (Exh. XI) and the 27th of August 1949 (Exh. XIII). 5 In the notice of the 5th of November 1949, it was only said that the deposit will be forfeited and the stocks sold at the risk and cost of the respondent but on the 15th of November 1949, the Government unilaterally resiled from this position and maintained that it would dispose of the stocks in any manner it thought fit. The contention, therefore, that Government was entitled unilaterally to make such an alteration in the original forfeiture clause needs to be examined. It is true that in the original contract "public" auction is not provided for, neverthe?less, it is said that the stocks would be "auctioned." It is difficult, therefore, to appreciate how sale by private negotiation after contacting 2 or 3 parties only can be treated as amounting to sale by auction as held by the learned Single Judge. We are inclined to agree with the Letters Patent Bench that such sale by private treaty cannot be treated as sale by auction or as sufficient compliance with the terms of the forfeiture clause in the original contract of sale (Exh. VIII). The method provided for in the contract could not be deviated from unless it had become impracticable to adopt such a method of disposal of the goods. Whether the impossibility was present or not will depend upon the question as to whether there was any market at all for Muttar Dal at Karachi. It transpires from the evidence that there is a Grain and Seed Merchants' Association at Karachi which is recognised by Government of Pakistan and that it publishes market quotations daily and in this the rate for Muttar Dal is also quoted as will appear from Exhs. XXIV, XXV, XXVI, XXVII and XXIX. Whether prices quoted therein on the relevant dates would have been lowered or not, if the entire quantity of 700 tons had been released in the market, is a question on which there is no evidence one way or the other. In any event, it appears that Messrs Dawoodi Corporation, which purchased the entire quantity and lifted the same on the admission of the Government witness Mr. Kazi himself, not only did not export the goods so purchased but did not even make any application for permission to export the same. The only inference that can be drawn from this is that the goods were purchased for local sale and, therefore, it cannot be said that there was no market for such quantity of Muttar Dal in Karachi. Next as to the quality of the goods, the licence issued by the Government, of Pakistan, no doubt, describes the same as `old stuff' but since this licence was never communicated to the respondent, it cannot be bound by the description therein given. The evidence of Saeed Haroon: a partner of the respondent‑firm, which has not been contradicted, is that in June 1949, the crop purchased by him was new crop of Rabi 1949. If that was so, then its condition could not have deteriorated to the extent suggested by Mr. Kazi, the witness for the Government, in his evidence. He maintained that they were old and the colour of the stock had changed when it was sold to Dawoodi Trading Corporation. But apart from this statement, there is no other evidence as to the condition of the stock. In the letter of confirmation issued to Dawoodi Trading Corporation in February 1950, all that is stated is that the Muttar Dal sold is of "last year's crop stocks." There is nothing therein to chow that its condition had deteriorated to the extent suggested by Mr. Kazi or that it was not in a merchandisable condition. In any event, there is no evidence as to the condition of the stock in November 1949, the date on which the breach of the contract occurred. Now as to the principles of fixation of damages in such cases there is nothing said in the Sale of Goods Act. Section 56 of the above Act only states that where the buyer wrongfully neglects or refuses to accept and pay for goods, the seller may sue him for damages for non‑acceptance. The method of computing the damages has been omitted in this section, because, the same is provided for in section 73 of the Contract Act, which is as follows:‑ "

73. 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. When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge is entitled to receive the same compensation from the party in default as if such person had contracted to discharge it and had broken his contract. Explanation.‑In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non‑performance of the contract must be taken into account." This section embodies the same principles as those given in section 50 of the English Sale of Goods Act, where it is stated in subsection (3) that the measure of damages is to be estimated, where there is an available market for the goods in question, by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept." This rule has also been explained in the case of Barrow v. Arnaud ((1846) 8 Q B 595) as follows:‑ "Where a contract to deliver goods at a certain price is broken, the proper measure of damages in general is the difference between the contract price and the market price of such goods at the time when the contract is broken, because the purchaser, having the money in his hands, may go into the market and buy. So, if a contract to accept and pay for goods is broken, the same rule may be properly applied; for the seller may take his goods into the market and obtain the current price for them." This principle is equally applicable in this country, as has been C pointed out by the Letters Patent Bench. In the cases of Jamall v. Moolla Dawood Sons & Company (LR 43 IA 6) and Erroll Mackay v. Maharaja Dhiraj Kameshwar Singh and another (AIR 1932 PC 196) the Judicial Committee of the Privy Council followed this principle in cases from British India. Upon this rule, the Government was clearly not entitled to delay the sale for nearly another 2? months by not disposing of the commodity concerned between the 14th of November 1949, and the 1st of February 1950. During this period the goods must be deemed to have been lying at the risk of the Government. D Any fall in the market price or deterioration in the quality, which might have occurred during this period, must be born by the seller who did not take immediate and prompt steps t mitigate the loss by selling the goods on the date of the breach. As observed by the Privy Council in the case of Jamal v. Moolla Dawood Sons & Company "it is the undoubted law that the plaintiff who sues for damages owes the duty of taking. all reason?able steps to mitigate the loss consequent upon the breach and cannot claim as damages any sum which is due, to his neglect." We are also in agreement with the learned Judges of the Division Bench that there was nothing on the record to show that there was no available market for the goods of this kind in Karachi. The question as to whether there was an available market or not was a question of fact which could not b affected either by the scarcity of the commodity or the increase of demand or by any other cause. "If there was a market the law presumes", observed the Privy Council in the case of Erroll Mackay, "that the buyer can minimise his damages b, procuring substituted goods in the market, so that he is thus in the same position, apart from the difference in price, as if the seller had not made default." The same principle would apply mutatis mutandis in the case of a default by the buyer. In the circumstances, we agree with the conclusions of the Letters Patent Bench that the damages recoverable by Government had to be computed on the basis of the difference between the contract rate and the market rate prevailing on the date of the breach and on this basis the damage was rightly calculated at Rs. 26,133 which, after setting off the amount of security deposit, came to Rs. 16,

133. No just exception can, therefore, be taken to the decree passed by the Division Bench of the High Court. This appeal is, accordingly, dismissed with costs. A. H. ?????????????????????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.