# 41S PILOO DHUNJISHAW SIDHWA v. MUNICIPAL CORPORATION OF THE CITY OF POONA

- **Citation:** [1970] 3 S.C.R. 415
- **Court:** Supreme Court of India
- **Decided:** 1970-01-15
- **Case number:** Civil Appeal No. 19 ·of 1967
- **Bench:** J. C. Shah, Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/41s-piloo-dhunjishaw-sidhwa-v-municipal-corporation-of-the-city-of-poona-5027
- **Pages:** 8

## Headnote

Con~ract-Formalities-Bornbay Provincial Municipal Corporation Act
(59 of 1949), s. 74(2)-Contract requiring seal, and affixture of seal to
be attesttZd by two me1nb.ers of Transport Committee-Members of Trans.
port Committee not elecred--Contract entered into without seal-Enforce•
ability.
Indian Contract Act (9 of 1872), s. 70-Invoice value as compensation-When allowed.
The appellant was the sole selling agent of motor spare parts for the
manufacturers in the State of Bombay. The respondent-Corporation was
constituted under the Bombay Provincial Municipal Corporations Act,
1949. Under s. 74 of Act and the Rules relating to contracts made under
the Act, a contract relating to the purchase of goods exceeding Rupees
five hundred is to be made in the name of the Corporation by the Trans·
port Manager, and, the contract has to be in writing and sealed in the
presence of two members of the Transport Committee who should sign
in token of the seal being affixed in their presence. Under s. 74(2), a·
contract not made in accordance with the provisions of .the Act and the
rules is not binding on the Corporation. The Transport Manager of the
respondent-Corporation called upon the appellant to supply certain spare
parts worth more than Rupees two lakhs. A formal contract incorporat
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ing the agreed terms w_as not and could not be executed and sealed as
required by the Act. because, at the. time when the contract was entered
into election of councillors to
the Corporation had not been held and
no Transport Committee was constituted and the powers of the C.Orpora~
tion and the Transport Committee were being exercised by the .Commis
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sioner pursuant to the, transitory provisions of the Act.. The
appellant
supplied goods from time to time and the Corporation made payments
according to the invoices. One of the invoices was. for about Rs. 49,000-00.
The invoice price consisted of an additional 12!% on the listed price by
reason of the iricrease in the price made by the manufacturers.
With
respect to that invoice, the Transport Manager was satisfied that the rates
quoted were 'proper rates' and he accepted the goods delivered on behalf
of the respondent, and appropriated them. But the respondent failed to
pay the amount and terminated the contract.
The appellant filed a suit for a decree for the invoice amount and for
dam·ages. The respondent contended that the contract was not enforce4
able, because, it was not executed in tne manner prescribed by the Act.
-On the question of the amount to which the, appellant was entitled,
, , HELD : (I) The contr~ct was not made in accordance with the provts.ions of the Act, for,
it Was
not seated, and therefore, under
s. 74(2) of the Act, the contract was not binding upon the Corporation,
There is nothing in the transitory provisions which excludes the operation
of s. 74(2). Hence. even if it was not possible to comply with the rules
until the elections were held there was no warrant _for holding that the·
-416
SUPREME COURT-REPORTS
[1970] 3 S.C.R.
-sub-section did not apply and that the Commissioner or the Transp0rt
Manager could enter into contracts without the seal of the Corperation.
·The appellant was accordingly not entitled to maintain a suit for the price
of the goods relying upon any contractual obligation, nor maintain the
claim for damages on the footing that the respondent committed a breach
·Of contract. [420 E, 421 B-DJ
(2) But the appellant was entitled to maintain bis claim for compensation
under s. 70 of the Contract Act.
Under the section compensation would
normally be the market price of the goods.
In the circumstanf<S of the present case, the invoice value was the
.Prevailing market value of the goods and the appellant was entitled to
it.
The appellant was also entitled to interest at 6% till date of pa'Yment.
"[422 E, FJ
Secretary of State v. G. T. Sarin and Co. l.L.R.
II Lah. 375,
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.approved.
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## Text

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41S
PILOO DHUNJISHAW SIDHWA
v.
MUNICIPAL CORPORATION OF THE CITY OF POONA
January 15, 1970
[J. C. SHAH AND K. S, HEGDE, JJ.]
Con~ract-Formalities-Bornbay Provincial Municipal Corporation Act
(59 of 1949), s. 74(2)-Contract requiring seal, and affixture of seal to
be attesttZd by two me1nb.ers of Transport Committee-Members of Trans.
port Committee not elecred--Contract entered into without seal-Enforce•
ability.
Indian Contract Act (9 of 1872), s. 70-Invoice value as compensation-When allowed.
The appellant was the sole selling agent of motor spare parts for the
manufacturers in the State of Bombay. The respondent-Corporation was
constituted under the Bombay Provincial Municipal Corporations Act,
1949. Under s. 74 of Act and the Rules relating to contracts made under
the Act, a contract relating to the purchase of goods exceeding Rupees
five hundred is to be made in the name of the Corporation by the Trans·
port Manager, and, the contract has to be in writing and sealed in the
presence of two members of the Transport Committee who should sign
in token of the seal being affixed in their presence. Under s. 74(2), a·
contract not made in accordance with the provisions of .the Act and the
rules is not binding on the Corporation. The Transport Manager of the
respondent-Corporation called upon the appellant to supply certain spare
parts worth more than Rupees two lakhs. A formal contract incorporat
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ing the agreed terms w_as not and could not be executed and sealed as
required by the Act. because, at the. time when the contract was entered
into election of councillors to
the Corporation had not been held and
no Transport Committee was constituted and the powers of the C.Orpora~
tion and the Transport Committee were being exercised by the .Commis
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sioner pursuant to the, transitory provisions of the Act.. The
appellant
supplied goods from time to time and the Corporation made payments
according to the invoices. One of the invoices was. for about Rs. 49,000-00.
The invoice price consisted of an additional 12!% on the listed price by
reason of the iricrease in the price made by the manufacturers.
With
respect to that invoice, the Transport Manager was satisfied that the rates
quoted were 'proper rates' and he accepted the goods delivered on behalf
of the respondent, and appropriated them. But the respondent failed to
pay the amount and terminated the contract.
The appellant filed a suit for a decree for the invoice amount and for
dam·ages. The respondent contended that the contract was not enforce4
able, because, it was not executed in tne manner prescribed by the Act.
-On the question of the amount to which the, appellant was entitled,
, , HELD : (I) The contr~ct was not made in accordance with the provts.ions of the Act, for,
it Was
not seated, and therefore, under
s. 74(2) of the Act, the contract was not binding upon the Corporation,
There is nothing in the transitory provisions which excludes the operation
of s. 74(2). Hence. even if it was not possible to comply with the rules
until the elections were held there was no warrant _for holding that the·
-416
SUPREME COURT-REPORTS
[1970] 3 S.C.R.
-sub-section did not apply and that the Commissioner or the Transp0rt
Manager could enter into contracts without the seal of the Corperation.
·The appellant was accordingly not entitled to maintain a suit for the price
of the goods relying upon any contractual obligation, nor maintain the
claim for damages on the footing that the respondent committed a breach
·Of contract. [420 E, 421 B-DJ
(2) But the appellant was entitled to maintain bis claim for compensation
under s. 70 of the Contract Act.
Under the section compensation would
normally be the market price of the goods.
In the circumstanf<S of the present case, the invoice value was the
.Prevailing market value of the goods and the appellant was entitled to
it.
The appellant was also entitled to interest at 6% till date of pa'Yment.
"[422 E, FJ
Secretary of State v. G. T. Sarin and Co. l.L.R.
II Lah. 375,
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.approved.
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 19 ·of
1967.
Appeal from the judgment and decree dated July 23, 24, and
September 26, 1963 of the Bombay High Court in Appeal
No. 801 of 1957 from Original Decree.
J. C. Bhatt, R. A. Gagrat and B. R. Agarwala, for the
appellant.
R. B. Kotwal and Naunit Lal, for the respo,n.tlent.
The Judgment of the Court was delivered by
Shah, J, Piloo Dhunjishaw Sidhwa-hereinafter called 'the
_plaintiff'-carries on business in the name and style of
Hind
Motor Corporation at Bombay.
By a letter dated February 1,
1952 the Transport Manager of the Municipal Corporation of
Poona called upon the .Plaintiff to supply "motor spare parts"
described therein of the total value of Rs. 2,71,808'12-3.
The
plaintiff by letter dated February 22, 1952 agreed to supply the
goods.
The plaintiff supplied the goods from time to time and
the Corporation made payments according to the invoices.
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July 3, 1953 the plaintiff delivered certain goods required by the
Corporation and submitted an inyoice for Rs. 49, 743-6-2.
The
Municipal Corporation failed to pay the amount of the invoice
and terminated the contract.
The plaintiff then instituted an actiOl!l .in the Court of the
Civil Judge, Senior Division, Poona for a decree for Rs. 49, 743-6-2
being the value of "motor spare parts" supplied, and for
Rs. 39,755-2-4 being damages for breach of contract. The suit
was resisted by the Corporation principally on the ground !hat
the contriict on which the plaintiff relied was not executed in the
manner prescribed by the Bombay Provincial Municipal ,Corporations Act 59 of 1949 and on that ground the contract was not
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PILOO SIDHWA V. MUNICIPAL CORP. (Shah, J.)
417
enforceable.
The Trial Court decreed the plaintiff's suit
for
Rs. 49, 743-6-2 being the invoice value of the goods supplied with
interest at 4% from the date of the suit and dismissed the claim
for damages.
The Municipal Corporation appealed to the High Court of
Bombay against the decree of the Civil Judge, Senior Division.
The plaintiff filed cross objections to the decree appealed from.
The High Court rejected the plaintiff's
claim for damages for
breach of contract and held that the plaintiff was entitled only to
the "fair price" of the goods supplied to the Corporation. In the
view of the High Court the fair price of the goods was the "landed
cost and 40% thereo_n" beside freight, insurance, packing and
forwarding charges from Bombay to Poona.
To determine the
amount due to the plaintiff the Court appointed a Commissioner.
The Commissioner reported that an amount of Rs. 38,010-59 was
due to the plaintiff.
The High Court disallowed Rs. 2,407-83
and Rs. 6,058/- being items respectively of commission paid to
the financier of the plaintiff and the customs duty for determining
the landed cost. The High Court accordingly decreed in favour
of the plaintiff Rs. 32,121-11 nP with interest, "at the rate of 6%
from ·one month after the furnishing of the bill by the plaintiff
to the Corporation after the date- of the notice", at the rate of 93
from the date of the notice upto the date of the suit, and at the
rate of 7t % from the date of the suit till the date of realization.
The plaintiff has appealed to this Court with certificate granted by
the High Court.
The Municipal Corporation of Poona was constituted on February 15, 1950 under the Bombay Provincial Municipal Corporations Act 59 of 1949. The provision.s of the Act relating to the
making of contracts are contained in ss. 73, 74 & 75 in Ch. VII
of the Act insofar as they are relevant they provide :
s. 73-"With respect to the making of contracts
under or for_ any pu!J)Ose of this Act, including contracts
relat.ing to the acquisition and disposal of immovable
property or any interest therein, the following provisions
shall have effect, namely :-
(a) every such contl:act shall be made on behalf of
the corporation by the Commissioner;
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(b) no such contractfor any purpose which, in accordance with any provision of this Act, the Commissioner
may not carry ou~ Without the approval or sanction of
some other municiP.al authority, shall be made by him
until or unless such approval or sanction has first been
duly given;
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[1970] 3 S.C.R.
( c) no contract which will involve an expenditure
exceeding five thousand rupees or such higher amount
as the Corporation may, with the approval of the Provincial Government, from time to time prescribe, shall
be made by the Commissioner unless the same is previously approved by the Standing Committee ..
(d)
( e) the foregoing provisions of this section shall, as
far as may be, apply to every contract which the Commissioner shall have occasion to make in the execution
of this Act;
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s. 74--"(1) The mode of executing contracts under
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this Act shall be as prescribed by rules.
(2) No contract which is not made in accordance
the provisions of this Act and the rules shall be binding
an the Corporation."
s: · 75-"For the purpose .of contracts relating exclusively to the Transport Undertaking the provisions of
section 73 and thos_e of Chapter V of the Schedule shall
apply as if for the word 'Commissioner' wherever it
occurs the words 'Transport Manager' and for the words
'Standing Committee' wherever they occur the words
'Transport Committee' had been substituted."
By the terms of s. 74(1) contracts with the Corporation had to be
in the manner prescribed by rules. By Ch. V of the Schedule
rules relating to contracts are prescribed. By r. I, it is provided,
insofar as it is relevant :
" (I) Every contract entered into by the Commissioner on behalf of the Corporation shall be entered into
in such maniier and form as would bind the Commissioner if such contract were on his own behalf, and may
in the like manner and form be varied or discharged :
Provided that-
(a) any such contract which would require to "be
under seal if it were entered into by the Commissioner
shall be sealed with the common seal of the Corporation; and
(b) every contract for the execution of any work or
the supply of any materials or goods which will involve
an expenditure exceeding live handred rupees or such
higher amolJllit . . . shall be in writing and be sealed
with the common seal of the Corporation in the manner presi;ribed in sub-rule ( 2) .
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P!LOO SIDHWA V. MUNICIPAL CORP. (Shah, J.)
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( 2) The common seal of the Corporation . . . .
shall be affixed in the presence of two members of the
Standing Committee to every contract or other instrument required to be under seal and such contract or instrument shall be signed by the said two members of the
Standing Commi\tee in token that the same was sealed in
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their presence.
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Rule 4 of Ch. V, insofar as it is relevant, provides :
"The provisions of this Chapter shall, so far as may
be, apply to contracts relating to the Transport Undertaking:
Provided that the functions to be performed thereunder by the Standing Committee or the members thereof
and the Commissioner shall be performed by the Transport Committee or the members thereof and the Transport Manager, as the case may be."
Transitory provisions were made in the Act for the administration
of the affairs .of the Corporation, till elections of the Councillors
were held.
By s. 15 of Appendix IV to the Act, it was provided :
"Notwithstanding anything contained in this Act, the
Commissioner sha_ll exercise the powers and perform the
duties of the Coryoration and the Standing Committee
under this Act and under any other law for the time
being in force until general ward elections shall have
been held in accordance with the provisions of this Act
and the first meeting of the Corporation shall have been
held."
By s. 23 Appendix IV the State Government was given the power
to make orders for removing difficulties. It provided :
"If any difficulty arises in giving effect to the provisions of this Act or, by reason of anything contained
in this Act, to any other enactment for the time being in
force, the State Gi;>vernm~nt may, as occasion requires,
by order do anything which appears to it necessary for
the purpose of removing the difficulty :
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Jn exercise of this power the State Government issued an order
on May 6, .1950, authorising the Municipal Commissione(' of the
City of Poona-(1) to exercise all the powers and perform all the
duties, which are exercisable and to be performed by the Transport Committee under the said Act, until the first meeting of the
Transport Committee as. constituted under the Act shall have been
held; and (2) to exercise all the powers and perform all the duties,
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[1970] 3 S.C.R.
which are exercisable or to be performed by the Corporation in
respect of a Transport Committee under the said Act, until the
general ward elections shall have been held in accordance with
r. stile provisions of the Act and the first meeting of the Corporation
shall have been held.
:~511 A contract relating to the purchase of "goods" exceeding rupees
five hundred in value is to be made in the name of the Corporation by the-Transport Manager. It has to be in writing and has to
be sealed in the presence of two members of the Transport Committee who sign in token of the seal being affixed in their presence.
A formal contract incorporating the agreed terms between the
plaintiff and the Corporation was not and could not be executed
and sealed as required by the Act, for, at the relevant time elections of councillors to the Corporation had not been held, and no
Transport Committee was constitu'ted as required by s. 25 of the
Act and the powers of the Corporation were being exercised by
the Commissioner pursuant
to the· transitory provisions.
The
Commissioner was, it is true, competent to exercise all the powers
and perform all the duties of the Transport Committee.
But
under the rules in Ch, V the seal of the Corporation must be affixed in the presence of two members of the· Transpori Committee
who signed in token of the seal having been affixed to the contract.
The Act clearly provided bys. 74(2) that the contract which was
not made in accordance with the provisions of the Act and the
rules shall not be binding on the Corporation. The contract was
not made in accordance with the provisions of the Act, for, it was
not sealed, and was by virtue of s. 74(2) of the Act not binding
upon the Corporation.
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Mr. :\!hat! urged that the formalities relating to execution of
the contract with the Corporation could not be complied with until
a Transport Committee was constituted after election of Councillors of the Corporation l!Jld on that account the provisions relating
to the form and manner of execution of the contract had no application to the contract in dispute. Any other view, counsel contended, rendercld. the Corporation incompetent to make contracts
essential for the administration of the Corporation. Counsel also
contended that the Corporation had not even a seal which could
be affixed, because the form of the seal had not been approved by
the Councillors. Counsel again said that even if the functions of
the Transport {:ommittee could be exercised by the Ccimmissioner,
a seal affixed in the preyence of the Commissioner and attested by
him would not amount to compliance with the rules. In view of
these provisions it was contended that the provisions of the Act
relating to the form an_\l manner of execution of contracts could
only apply after the elections are held and the Corporation could
comply with the provisions.
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PIIOO SIOHWA v. MUNICIPAL CORP. (S::.iil, f.)
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By s. 5 of the Act the Corporation is a body corporate having
a perpetua! succession and a common seul. Our attention has not
been invited to any provision which even by impiicacion suggests
that the Corporation may have a seal only after elections are held
and the form of the seal is approved by the members of the Corporation. But the argument whether the Corporation had at the
date of the contract a seal is not relevant. We are unable to hold
that the provisions of ss. 73 and 74 and the relevant rule• in Ch. V
did not apply before the elections were held anu the statutory
Committees were constituted. There is nothing in the transitory
provisions which excludeS the operation of s. 7 4(2) of the Act.
Granting, that it is not possible to comply with the rules, until the
elections are held, there is no warrant for holding that the provisions of s. 7 4(2) '111'.ill n.:it apply and the Commissioner or the Transport Manager may enter into contracis without seal which are enforcea'ille at law, Jll)!Witbstanding the absolute terms. of the Act.
In our judgment there was no enforceable contract between the ·
r,laintiff and the Corporation.
The claim for damages on the
•.ooting that the Corporation committed a breach of contract was,
D 'therefore, rightly rejected by the Trial Court and the High Court.
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_The plaintiff is not entitled to maintain a suit for price of the
goods relying upon any contractual obligation of the Corporation.
But theflaintiff may still maintain hjs claim for compensation under
s. 70 o the Contract Act which provides :
"Where a person lawfully does anything for another
. person, or delivers anything to him, not intending to do so
gratuitously, and such other person enjoys the benefit
thereof, the latter is bound to make compensation to the
former in respect of or to restore, the thing so done or
delivered."
That is not disputed by the Corporation. The Trial Court awarded
to the plaintiff the invoice value. of the goods delivered by him.
'.fhe learned !.udge was of the view that the plaintiff as the sole sellmg agent of motor spare parts" for the manufacturers in the Bombay State, was entitled to the listed price with 12!% thereon because of the increase notified by the manufacturer. In the view of
!he ~earned ~udge the price for which the plaintiff made out an
mv01ce was 'reasonable and prOJ:!er". The High Court held that
the plaintiff may recover compensation equal to the "fair price" of
the goods.
In our view the High Court was in error in holding that the
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plaintiff is entitled not to the invoice value of the goods but only
to "the fair price" of the goods. Under s. 70 of the ccro'.tract Act,
a person lawfully delivering goods to another, and not intending to
do so gratuitously, is entitled to demand that the goods delivered
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SUPREME COURT REPORTS
[ 1970) 3 S.C.R.
shall be returned, or that compensation for the goods shall be made.
Compensation would normally b~ the market price of the goods.
By refusing to return the goods, the person to whom the goods have
been delivered cannot improve his position and seek to pay less
than the market value of the goods. The High Court of Lahore in
Secretary of State and Another v. G. T. Sarin & Company(') held
that a person without an enforceable contract in his favour supplying goods to a Government Department is· entitled to a money
equivalent of the· goods delivered assessed at the market rate prevailing on the date on whch the supplies were made.
The plaintiff had made out an invoice in respect of the goods
delivered.
The Transport Manager accepted the goods 'on behalf
of the Corporation and appropriated them. He had satisfied himself that the rates quoted. were "proper rates". The plaintiff was
paid in respect of other goods supplied at the rates quotd in the
price-list together with incidental charges.
The plaintiff was tile
sole selling agent in the Bombay State and the additional 12t%
which the plaintiff claimed on the listed price wa~ by reason of the
increase in the price made by the manufacturers. There is no rea-
·son to hold that the invoice price was more than the market value
of the goods. If it was the contention of the Corporation that the
market rate was Jess than the invoice pricq it was open to the Corporation to lead evidence about the ruling rates at which the spare
parts were sold in India by otlier agents of the manUfacturers. But
no such attempt was made.
The plaintiff, in our judgment, was
entitled to the market value of the goods at the date of supply, and,
in our judgment, the invoice value was the prevailing market value
of the goods.
The plaintiff is also entitled to interest at the rate of 6% per
annum from "the date one month after the date of supply" till the
date of institution of the suit, and at 6 % on judgment from the
date of the suit till payment.
We accordingly set aside the decree passed· by the High Court
and restore the decree passed by the Trial Court with the modification in the rate of interest set out earlier. In view of the partial
success of the parties, . there will be no order as to costs in this
Court and in the High Court.
In the Trial Court the plaintiff
will be entitled to proportionate costs for the amount decreed and
the Corporation will bear its own costs.
R.K.P.S.
Appeal dismissed.
(I) I.L.R. 11 Lah. J7'.
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