# [1961] 3 S.C.R. 845

- **Citation:** [1961] 3 S.C.R. 845
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeals Nos. 314 to 316 of 1967
- **Bench:** P. B. Gajendragadkar, K. C. lJA8 UUP'J'A
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1961-3-s-c-r-845-1931
- **Pages:** 10

## Headnote

Breach of Contract-Contract for sale of goods-Supply s1<bject
to import licence-Shipping dat.e guaranteed-Failure to supptyInadequacy of seller's contract with overseas rnpptiers-Liability.
The appellant had made a contract with its Italian suppliers
for 200,000 lbs. of cotton fibre for August, 1950, shipment and
another for 300,000 lbs. for NovermberiDece1nber, 1950, shipment.
On July 2.2. 1950, tht: appellant entered into a contract with the
respondent for the sale of 40,000 lbs. of fibre, August shipment.
On August 9, 1950, it entered into another contract with the respondent for sale of 50,000 lbs. of fibre, "October/November 1950
shipment". ln the remarks column of the second contract it was
mentioned: " This contract is subject to import licence and
therefore the shipment date is not guaranteed ".
In October,
r950, 50,000 lbs. out of the first contract with the Italian
suppliers arrived; out of this 40,000 was delivered to the respondent against his first contract and Io,ooo against tl1e second, The
balance of 40,000, lbs. against the second contract was not
Jute ~-:- Guuny
!Jrohrrs Ltd.
v.
L·11io11 vj India
1Fanchoo /.
F ebruayy 17.
China Cotton
Exporters
846
8tJPREME COtJH.1
1 REPORT8
(1961)
supplied. The respondent filed a suit for damages for breach of
contract. The appellant contended that it was not liable as the
date of shipment was not guaranteed and as it had adequate
contracts with its suppliers to cover the contract with the respon11 hv . . 1 1
dent but was unable to fulfil it as the supplier failed to make
e at-i a
h d 1.
.
Ra1nchar.1n Cotton t e e iver1es.
Milts Ltd
Held, that the appellant was liable for breach of contract as
·
the date of shipment was guaranteed and as the appellant had no
adequate contracts with its suppliers to cover the contract with
the respondent. In commercial contracts time is ordinarily of
the essence of the contract. The words in the remarks column
meant that the date of shipment was not guaranteed only to the
extent that delay in obtaining the import licence stood in the
way of keeping to the shipment date.
As there was no delay in
obtaining the licence the shipment date October/November, 1950,
was guaranteed. The other terms of the contract also showed
that the date of shipment was guaranteed. The appellant had
to show that on the date of the breach i.e. on December 15, 1950,
it had a contract under which it could, provided the contract
was not broken, obtain the goods to honour its agreement to sell
October/November shipment of goods. The first contract with
the suppliers was cancelled at the end of September and the
appellant was not entitled to receive any goods under it on the
relevant date. Under the second contract it could not be said
that the suppliers were bound to deliver the goods by instalments or to supply at least 40,000 lbs. before December 15, as
the contract with the suppliers was not produced before the
Court. The appellant had failed to establish that it had an
adequate contract to cover the contract in suit. It was not
enough for the appellant to show that there was a chance of it
fulfilling its contract with the respondent.
Bilasiram Thakurdas v: Gubbay (1915) I.L.R 43 Cal. 305 and
Phoenix Mills Ltd. v. Madhavdas Rupchand (1916) 24 Born. L.R.
142, referred to.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 331 of 1956.
Appeal by special leave from the judgment and
decree dated March 11, 1955, of the Bombay High
Court iu Appeal No. 97 of 1954.
M. C. Setalvad, AttQ.rney-General for India and G. C.
Mathur, for the appellants.
Purshottam Trikumdas, S. N. f4ndley, J. B. Dadachanji and Rameshwar Nath, for the respondents.
1961. February 17. The Judgment of the Court was
delivered by
3 8.C.R.
8UPREME COURT REPORT8
847
DAS GUPTA J.-This appeal is from a judgment of
19•1
the Court of Appeal of the Bombay High Court conc;;,,a Colton
firming the decision of a single judge of th!l.t Court in
ExPo•lers
a suit for damages for breach of a contract of sale.
v.
By a contrac

## Text

'
3 S.C.l{.
SUPREME COUltT nEPOR'l'S
845
on the managing agents of the mills was effective
service on the mills as owners for the purpose of
r. 75-A (2).
In conseciuence r. 75.A (3) would apply
and the property in the goods passed to the Government of India on September 30, 1946.
The appeal of
the Union of India therefore is allowed and a declaration is granted that the goods were vali<lly requisitioned and acquired and that the orders of requisition
and notices of acquisition were valid and binding ou
the respective defendants, and the goods specified
thernin vested in the Government of India on Se.ptember 30, 1946.
As to costs, it appears that this litigation was due
entirely to the defect in the form of address of the.
requi~ltion orders and the notices of acquisition. In
the circu:nstances we order parties to bear their own
costs throughout.
Civil Appeals Nos. 314 to 316 of 1967 dismissed.
Civil Appeal No. 778 of 1957 allowed.
CHll\'A COTTOK EX.POHTERS
v.
BEHARILAL RAMCHARAX COTTO:\
MILLS LTD.
(P. B. GAJENDRAGADKAR and K. C. lJA8 UUP'J'A, JJ.)
Breach of Contract-Contract for sale of goods-Supply s1<bject
to import licence-Shipping dat.e guaranteed-Failure to supptyInadequacy of seller's contract with overseas rnpptiers-Liability.
The appellant had made a contract with its Italian suppliers
for 200,000 lbs. of cotton fibre for August, 1950, shipment and
another for 300,000 lbs. for NovermberiDece1nber, 1950, shipment.
On July 2.2. 1950, tht: appellant entered into a contract with the
respondent for the sale of 40,000 lbs. of fibre, August shipment.
On August 9, 1950, it entered into another contract with the respondent for sale of 50,000 lbs. of fibre, "October/November 1950
shipment". ln the remarks column of the second contract it was
mentioned: " This contract is subject to import licence and
therefore the shipment date is not guaranteed ".
In October,
r950, 50,000 lbs. out of the first contract with the Italian
suppliers arrived; out of this 40,000 was delivered to the respondent against his first contract and Io,ooo against tl1e second, The
balance of 40,000, lbs. against the second contract was not
Jute ~-:- Guuny
!Jrohrrs Ltd.
v.
L·11io11 vj India
1Fanchoo /.
F ebruayy 17.
China Cotton
Exporters
846
8tJPREME COtJH.1
1 REPORT8
(1961)
supplied. The respondent filed a suit for damages for breach of
contract. The appellant contended that it was not liable as the
date of shipment was not guaranteed and as it had adequate
contracts with its suppliers to cover the contract with the respon11 hv . . 1 1
dent but was unable to fulfil it as the supplier failed to make
e at-i a
h d 1.
.
Ra1nchar.1n Cotton t e e iver1es.
Milts Ltd
Held, that the appellant was liable for breach of contract as
·
the date of shipment was guaranteed and as the appellant had no
adequate contracts with its suppliers to cover the contract with
the respondent. In commercial contracts time is ordinarily of
the essence of the contract. The words in the remarks column
meant that the date of shipment was not guaranteed only to the
extent that delay in obtaining the import licence stood in the
way of keeping to the shipment date.
As there was no delay in
obtaining the licence the shipment date October/November, 1950,
was guaranteed. The other terms of the contract also showed
that the date of shipment was guaranteed. The appellant had
to show that on the date of the breach i.e. on December 15, 1950,
it had a contract under which it could, provided the contract
was not broken, obtain the goods to honour its agreement to sell
October/November shipment of goods. The first contract with
the suppliers was cancelled at the end of September and the
appellant was not entitled to receive any goods under it on the
relevant date. Under the second contract it could not be said
that the suppliers were bound to deliver the goods by instalments or to supply at least 40,000 lbs. before December 15, as
the contract with the suppliers was not produced before the
Court. The appellant had failed to establish that it had an
adequate contract to cover the contract in suit. It was not
enough for the appellant to show that there was a chance of it
fulfilling its contract with the respondent.
Bilasiram Thakurdas v: Gubbay (1915) I.L.R 43 Cal. 305 and
Phoenix Mills Ltd. v. Madhavdas Rupchand (1916) 24 Born. L.R.
142, referred to.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 331 of 1956.
Appeal by special leave from the judgment and
decree dated March 11, 1955, of the Bombay High
Court iu Appeal No. 97 of 1954.
M. C. Setalvad, AttQ.rney-General for India and G. C.
Mathur, for the appellants.
Purshottam Trikumdas, S. N. f4ndley, J. B. Dadachanji and Rameshwar Nath, for the respondents.
1961. February 17. The Judgment of the Court was
delivered by
3 8.C.R.
8UPREME COURT REPORT8
847
DAS GUPTA J.-This appeal is from a judgment of
19•1
the Court of Appeal of the Bombay High Court conc;;,,a Colton
firming the decision of a single judge of th!l.t Court in
ExPo•lers
a suit for damages for breach of a contract of sale.
v.
By a contract in writing dated August 9, 1950, entered
Hehanlal
into at Bombay, the appellantR who carry on business Humch·"."" Cotto"
t B
b
.
t
d
h
t
d
Mills Ltd.
a
om ay as 1mpor an
export mere an s agree
to sell to the respondent, a company carrying on busiv,., Gup1a J.
ness also at Bombay as a Cotton Spinning and
Weaving Mill, and the respondent agreed to purchase
50,000 lbs. of Italian Staple Fibre Cotton of the quality
mentioned therein, at Rs. 1,350/- per Candy Ex docks,
Shipment October/November 1950. Of this quantity
10,000 lbs. was delivered to and accepted by the
respondent company on October 31, 1950.
The
balance amount of 40,000 lbs. not having been deli\'ered in terms of the contract the respondent company
brought the present suit for damages on the allegati;;n
that the appellant firm had wrongfully failed and
neglected tu deliver this balance amount of the contra.ct goods. The appellant admitted failure to deliver
this amount; but pleaded that this was not wrongful
failure to deliver. The appellant averred in its written
statement that the non-supply of the goods arose by
reason of the "intermediary parties (weaning thereby
the suppliers) failing to supply and deliver goods to
the defendant and also of the circumstances beyond
their control"; and claimed that it was exempted
from any liability to the plaintiff company under
printed term 16 of the contract.
The defendant
furLher pleaded that the shipment time mentioned in
the contract was not guaranteed, and the time of
shipment was not of the essence of the contract. The
Trial Judge held that the shipment time was
guaranteed, exceJ;lL in so far as delay in shipment might
be due to delay in obtaining import licence-which
however was in the present case obtained in good
time-; that time of shipment was of the essence of
the contract; and finally that there was no case here
of any "intermediary parties" failing to supply or
deliver the goods and as the defendant firm had not
made any adequate contract which would have
848
SUPREME COURT REPowrs
[1961]
'96'
enabled it to obtain the supply of goods-if such
China Cottcu
contract had not been broken-from which it could
ro..p0,1.,,
have delivered those 40,000 lbR. ; the fort her defence
v.
that the non-supply was due to "circum~tn.nces heB•h•rilal
yond their control" also failed. Accordingly the Trial
Ramcharau Cuttou Judge held that there had been wrongful breach of
Mills Ltd.
the contract by the appellant firm anrl the plaintiff
Vas Gupta J.
company-the respondent-was entitled to damages.
The actual assessment of damages was referred to the
Commissioner.
On appeal by the defendant, the Appeal Court held
agreeing with the Trial Judge that as there was no
delay in obtaining the import licence, the obligation
to deliver to the plaintiff contract goods of October
November shipment continued. The learned judges
also pointed out that " the failure to give delivery
primarily arose because the defendants never were
ready and willing to carry out their obligation to give
delivery because they had made no arrangement to get
goods from Italy which they could have delivered at
the contract time." Therefore, the Court of Appeal
held that it was not open lo defendant to rely on any
of the clauses in the contract which condones delay
on their part or which excuses them from giving delivery. The appeal was accordingly dismissed.
It is against this order of dismissal that the present
appeal has been preferred by the defendant firm after
having obtained special leave from this Court.
Three contentions were raised before us in support
of the appeal. The first contention is that the shipment date was not guaranteed; the second contention,
which really is involved in the first, is that the sb'ipment time was not of the essence of the contrac'. ..
Lastly, it was urged that the contracts which the
defendant firm had made with its Italian suppliers,
were adequate for their obtaining supplies in good time
to enable them-if these contracts were not brokento complete the requisite deli very to the plaintiff
company in proper time.
The contract was on a printed document, with the
terms regarding quantity, quality, price, shipment,
payment, and the remarks column filled in manuscript.
'
38.C.R.
SUPREME COURT REPORTS
849
Against Shipment-we find
"October/November,
1961
1950. " In the remarks column we find the following
written : "1. Invoice weight to be accepted; 2. This
China Cotton
l:'x porteYS
contract is subject to import licence and therefore the
v
shipment date is not guaranteed."
Rclmilal
We find thus that whatever may have been said Ram,haran Co1t0>
earlier in the printed portion of the contract the
Mills Ud.
parties took care, after specifying "October/Novemk
d fi
nas.r."pta ].
ber, 1950" as the date of shipment to ma e a e nite.
condition in the remarks column, on the important
question whether the shipment date
was being
guaraT!teed or not and if so, to what extent. The
words are: "This contract is subject to import
licence, and therefore the shipment date is not
guaranteed." Remembering, as we must, that in
commercial contracts, time is ordinarily of the essence
of the contract and giving the word " therefore " its
natural, grammatical meaning, we must hold that what
the parties intended was that to the extent that delay
in shipment stands in the way of keeping to the shipment date October/November, 1950, this shipment date
was not guaranteed; but with this exception shipment
Optober/November, 1950, was guaranteed. It has been
strenuously contended by the learned AttorneyGeneral, that the parties were mentioning only one of
the many reasons which might cause delay in shipment and the conjunction "therefore" was used onlJ
to show the connection between one of the many
re~s?ns-by way of illustration and a general agreement that the shipment date was not guaranteed. We
'.,_do not consider this explanation of the use of " there-
. fore " acceptable. If the parties intended that quite
apart from delay in obtaining import licence, shipment date was not guaranteed, the natural way of
expressing such intention-an intention contrary to
the usual intention in comnwrcial contracts of treating
time as the essence of the ctintract-would be to say :
"This contract is subject to import licence and the
shipment date is not guaranteed." There might be
other ways of expressing the same intention, but it is
only reasonable to expect that anybody following the
ordinar,r rules of grammar would not μse "thereforp "
850
SUPRE~E COURT REPORTS
[1961)
r~6r
in such a context except to mean that only to the
extent that delay was due to delay in obtaining import
China C(l/fnn
F.xpa''""
licence shipment time was not guaranteed.
v.
As we have already mentioned, the remarks column
neha.ilal
was filled in manuscript and consequently even if the
llamch"a" Catton terms in print by themselves might have justified a
Mil/, Ud.
conclusion that the parties intended that the shipment
date was not guaranteed, the intention expre~sed in
,r"(I,<; r:11pJa }.
the manuscript should prevail. We are not satisfied
however that the terms in print would justify any such
conclusion.
The learned Attorney.General tried to
persuade us that the printed term 2 was inconsistent
with shipment date being guaranteed at all. The term
2 is in two parts. The first part provides that subject
to provisions of els. 7 and 9, " if the goods or any
portion of them are not shipped for any reason or
reasons other tha.n those specified in cl. 9, within the
shipment time with the fifteen days latitude provided
for in the said clause 7, the sellers shall not be responsible but shall give notice to the buyers of such
non-shipment and the buyers shall have option to
cancel the portion so overdue without claiming any
allowance or compensation or grant such extension of
time for shipment from time to time as may be
required by the sellers " at allowance as mentioned in
the second paragraph. The second paragraph of term
2 lays down graduated rates of allowance for different
periods of delay: at I!% for delay up to a month; at
2!% for delay from one month to two months; 3!%
for delay of two to three months and 7!% for delay of
more than three months.
Different rates were mentioned as regards the woollen goods.
It may be mentioned here that cl. 7 of the contract
provides for a latitude of 15 days after the shipment
while cl. 9 contains the special exemption clause where
shipment is delayed by, force rnajeμre, war or warlike
operations, strikes, lock-outs, etc. The learned AttOf·
nay-General contends that provisions of term 2 show
that the parties agreed that the time will not be of the
essence of the contract and shipment time will not be
guaranteed. It appears to us that these provisions
show just the contrary. The proviHions in the first
•
3 S.C.R.
SUPREME COURT REPORTS
851
paragraph give the seller a right to give notice to the
'96'
buyer of non-s11ipment and give the buyer an option
Chi•• Cotton
on such notice either to cancel the portion not shipped
Exporters
or to grant extension of time at allowances mentioned
•.
in the second pttragraph. Unless time was of the
Beharilal
essence of the contract and shipment time was Ramcharan Collon
guaranteed there would be no need for making such
Mills Lid.
provisions for an option for extension of time, or for
Das Gupta J.
these allowances.
The provisions of els. 7 and 9 do not affect the
question.
We are therefore of opinion that the courts below
were right in thinking that the shipment time was
guaranteed, and time was of the essence of the
contract.
,
This brings us to the question whether the defendant firm had any adequate contract with their Italian
suppliers which if not broken would have put them in
a position to supply the goods in question. It is
not disputed that if there was any such adequate contract the defendant will not be liable for damages. It
is equally clear that if there was no such contract, the
defendant cannot escape liability.
The learned Attorney-General sought to argue that
even if the contract was such that there was a chance
of the defendant obtaining the supplies in good time
that would be sufficient to exonerate it. We think
that this proposition is not sound. Before the seller
could be heard to say that the non-supply was due to
default on the part of his suppliers or some other cause
beyond his control the seller is bound to show that he
himself did all in his power to ensure timely supply.
He could do so by showing that he had made a contract under which he was entitled to obtain the
supplies in good time. If under his contract with his
own suppliers he was not so entitled but there was
merely a chance of his getting the supplies in time to
enable him to honour his contract the non-supply
would clearly be due to his own default in not making
a contract which would have so entitled him and not
to a default on the part of the supplier or to a circumstance beyond his control,
109
852
SUPREME COURT REPORTS
[1961]
r96r
Turning now to the facts of the case we find that
the defendant had made two contracts with its
China Cotton
Italian suppliers-one contract for 200,000 lbs. of
Exporlers
v.
cotton for August, 1950, shipment whfoh it is said was
Beha,ilal
later extended to September, 1950; another contract
Ramcha.an Cotton of August 4, 1950, for 300,000 lbs. for November J
Mills Ltd.
December, 1950. The defendant had also a contract
Das;;;;,. 1.
with the plaintiff company of July 22, 1950, for sale of
40,000 lbs. August shipment-later converted to
November/December shipment. In October, 1950,
50,000 lbs. out of the first contract with the Italian
suppliers arrived ; out of this 40,000 was delivered to
the plaintiff company in satisfaction of the earlier
contract and 10,000 was delivered in satisfaction of
this second contract-the contract now in suit. Under
the contract for 300,000 lbs. the buyer (the defendant)
received 70,000 lbs. of goods. Of this nothing was
given to the plaintiff company and so 40,000 lbs.
remained undelivered. The question is had the defendant a contract under which it could, provided the
contract was not broken, obtain the goods in time to
honour its agreement to sell October/November shipment of goods.
The learned Attorney-General complains that the
courts below totally left out of consideration the
sellers' (the appellants') earlier contract with Italian
suppliers and says that that, at least, was an adequate
contract. There would be force in this argument if
at the time the breach took place, that is, the last date
under which shinment could be made under the contract in suit, the defendant would have been entitled
to obtain goods, under that earlier contract. But that
is not the position. In any case the earlier contract
was cancelled at the end of September; so that at the
time of the breach the seller was not entitled to receive
any goods under that contract.
We come next to the seller's November/December
shipment contract with its Italian suppliers. The
courts below have pointed out that under Ruch a contrnct, the Italian suppliers were entitled to delay
shipmeut till the last day of December .. If that, be the
position the seller would not, on the last day by which
3 S.C.R.
SUPREME COURT REPORTS
853
the goods under its contract ought to have been
suprlied, viz., December 15, 1950, after adding 15 days
China cotton
under clause 7, have any contract under which it
Exporters
would have been entitled to receive goods in sufficient
v •.
time. The learned Attorney-General has however
Beharilacl
.
d ,, d Ramcharan
olloK
conte'IJ.ded that under the contract w h1ch the eien -
Mills Lid.
ant had with its Italian suppliers the Italian suppliers
would be bound to spread the supply over the period,
Das Gupta J.
November/December and thus bound to ship 40,000 lbs.
at least well before the December, 15.
The great difficulty in the way of this argument is
that the defendants' contract with its Italian suppliers
has not been produced and we do not know the terms
of that contract. In Bilasiram Thakurdas v. Gubbay (')
from which the learned counsel sought assistance the
terms of shipment in the contract was "shi{}ment.s to
be made by steamers during July-December 1914
-shipment in any month by one or more steamers."
This was clearly an instalment contract and on the
construction of that contract the court held that the
buyer had the right to demand delivery of goods by
separate shipments spread over the months from July
to December. In Phoenix Mills Ltd. v. Madhavdas
Rupchand (')the question arose whether the plaintiffssellers had committed a breach by not giving delivery
where the terms of deli very were : " 200 bales No. 20s
and 20!s Ring October-November 1913 and 50 bales
No. 6!sMule yarn as manufactured". It was further
mentioned in the contract that the buyers agreed to
take delivery of the bales from time to time as they
are ready. It was in view of these terms that Mr.
Justice Macleod held that " the Court can only consider the parties to have intended, when they signed
that contract, that delivery should be asked for and
given during October-November of two hundred bales,
delivery being asked for of reasonable quantities at a
time during the period of delivery."
These decisions are in line with the English law in
this matter as stated by Benjamin on Sale, 8th Edition,
at P- 724 thus:-
" Where the amount of instalments is not specified, the prima facie rule would seem to be that the
(I) (1915) I.L.R. 43 Ca!.305
(2) (1916) 24 Born. L.R. 142.
854
SUPREME COURT REPORTS
[1961]
1961
deliveries should be rateably distributed over the
contra.ct period."
China Colton
Exp°'''"
The learned author goes on to say that "if it can
v.
be gathered from the terms of the contract or the cirB•1••rilal
cumstances that rateable deliveries were not intended,
~amch_aran Cotton it then becomes a question for the jury whether the
Mill! Ltd.
d
f
d
d ,.
d }'
.
bl
ten er o or eman
ior,
e 1 very 1s a reason a e
Das Gupta].
One.,,
Quite clearly however the question whether delivery
should be spread over the period arises only in case of
instalment contracts. There is nothing however before us to show that the defendant's contract with its
Italian suppliers was an instalment contract. Even
though the proprietor of the defendant's Italian
supplier was examined he said nothing which would
even tend to show that the contract between him and
the defendant was an instalment contract. In the
absence of the contract or any other circumstances
justifying a conclusion that it was instalment contract
it is not possible to accept the contention of the
learned Attorney-General that the defendant's Italian
suppliers would be bound to spread the supply over the
period October/November, 1950.
There is thus no escape from the conclusion that
the defendant has failed to establish its case that it
had an adequate contract with its Italian suppliers,
which if not broken, would put it in possession of
40,000 lbs. of cotton fibre before December 15, 1950.
The defendant firm cannot therefore escape the
liability for the damages for breach of the contract,
by the failure to supply those goods.
The appeal is accordingly dismissed with costs.
Appeal dismissed.