# M/S. MURLIDHAR CHIRANJILAL v. M/S. HARISHCHANDRA DW ARKADAS AND ANOTHER

- **Citation:** [1962] 1 S.C.R. 653
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeal No. 193 of 1958
- **Bench:** P. B. Gajendragadkar, K.N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-murlidhar-chiranjilal-v-m-s-harishchandra-dw-arkadas-and-another-2157
- **Pages:** 9

## Headnote

Damages-Breach of contract-Sale of goods-Measure of
damages-Foreseeable consequence of breach-Knowledge of parties
-Indian Contract Act, r872 (9 of r872), s. 73.
The appellant entered into a contract with the respondent
for the sale of certain canvas at Re. I per yard under which the
delivery was to be made through railway receipt for Calcutta
f. o. r. Kanpur. The cost of transport from Kanpur to Calcutta
and the Jabour charges in that connection were to be borne by
the respondent and it was agreed that the railway receipt would
be delivered on August 5, 1947. The appellant was unable to
deliver the railway receipt on the due date because booking
from Kanpur to Calcutta was closed, and, therefore, cancelled
the contract. The respondent instituted a suit for the recovery
of damages for the breach of the contract and claimed that as
the seller knew that the goods were to be sent to Calcutta and
must therefore be presumed to know that the goods would be
sold in Calcutta, any loss of profit to the buyer resulting from
the difference between the rate in Calcutta on the <late of the
the breach and the contract rate would be the measure of
damages.
Held:
(r) that it is well settled that the two principles
relating to compensation for loss or damage caused by breach of
contract as laid down ins. 73 of the Indian Contract Act, J872,
read with the Explanation thereof, are (i) that, as far as possible, he who has proved a breach of a bargain to supply what
he contracted to get is to be placed, as far as money can do it,
in as good a situation as if the contract had been performed, but
(ii) that there is a duty on him of taking all reasonable steps to
mitigate the loss consequent on the breach and debars him from
claiming any part of the damage which is due to his neglect to
take such steps.
British Westinghouse Electric and Manufacturing Company,
Limited v. Underground Electric Railway Company of London,
[1912] A.C. 673, relied on.
(2) that the contract in the present case was for delivery
f. o. r. Kanpur in which it was open to the buyer to sell the
goods where it liked, and no inference could be drawn from the
mere fact that goods were to be booked for Calcutta that the
seller knew that the goods were for re-sale in Calcutta only.
The contract was therefore not of the special type to which the
words "which the parties knew, when they made the contract,
March 29.
Murlidhar
Chiranjilal
v
H arishchandra
Dwarkadas
654
SUPREME COURT REPORTS
[1962]
to be likely to result from the breach of it" appearing in s. 73
of the Indian Contract,Act, 1872, would apply, but an ordinary
contract, for which the measure of damages would be such as
"naturally arose in the usual course of things from such breach"
within the meaning of that section. The damages would be the
difference between the market price in Kanpur on the date of
breach and the contract price. But as the respondent had failed
to prove the rate for similar canvas in Kanpur on the date of
breach, it was not entitled to any damages as there was no
measure for arriving at the quantum.
Chao and others v. British Traders and Shippers Ltd., [1954]
l All E.R. 779, relied on.
Re.Rand H. Hall Ltd. and W.P. Pim (Junior) & Co.'s Arbitration, [1928] All E.R. 769 and Victoria Laundry ( W insdsor) Ltd.
v. Newman Industries Ltd., [1949] r All E.R. 997, distinguished.

## Text

-
>
1 S.C.R. SUPREME COURT REPORTS
653
M/S. MURLIDHAR CHIRANJILAL
v.
M/S. HARISHCHANDRA DW ARKADAS
AND ANOTHER
(P. B. GAJENDRAGADKAR and K.N. WANCHOO, JJ.)
Damages-Breach of contract-Sale of goods-Measure of
damages-Foreseeable consequence of breach-Knowledge of parties
-Indian Contract Act, r872 (9 of r872), s. 73.
The appellant entered into a contract with the respondent
for the sale of certain canvas at Re. I per yard under which the
delivery was to be made through railway receipt for Calcutta
f. o. r. Kanpur. The cost of transport from Kanpur to Calcutta
and the Jabour charges in that connection were to be borne by
the respondent and it was agreed that the railway receipt would
be delivered on August 5, 1947. The appellant was unable to
deliver the railway receipt on the due date because booking
from Kanpur to Calcutta was closed, and, therefore, cancelled
the contract. The respondent instituted a suit for the recovery
of damages for the breach of the contract and claimed that as
the seller knew that the goods were to be sent to Calcutta and
must therefore be presumed to know that the goods would be
sold in Calcutta, any loss of profit to the buyer resulting from
the difference between the rate in Calcutta on the <late of the
the breach and the contract rate would be the measure of
damages.
Held:
(r) that it is well settled that the two principles
relating to compensation for loss or damage caused by breach of
contract as laid down ins. 73 of the Indian Contract Act, J872,
read with the Explanation thereof, are (i) that, as far as possible, he who has proved a breach of a bargain to supply what
he contracted to get is to be placed, as far as money can do it,
in as good a situation as if the contract had been performed, but
(ii) that there is a duty on him of taking all reasonable steps to
mitigate the loss consequent on the breach and debars him from
claiming any part of the damage which is due to his neglect to
take such steps.
British Westinghouse Electric and Manufacturing Company,
Limited v. Underground Electric Railway Company of London,
[1912] A.C. 673, relied on.
(2) that the contract in the present case was for delivery
f. o. r. Kanpur in which it was open to the buyer to sell the
goods where it liked, and no inference could be drawn from the
mere fact that goods were to be booked for Calcutta that the
seller knew that the goods were for re-sale in Calcutta only.
The contract was therefore not of the special type to which the
words "which the parties knew, when they made the contract,
March 29.
Murlidhar
Chiranjilal
v
H arishchandra
Dwarkadas
654
SUPREME COURT REPORTS
[1962]
to be likely to result from the breach of it" appearing in s. 73
of the Indian Contract,Act, 1872, would apply, but an ordinary
contract, for which the measure of damages would be such as
"naturally arose in the usual course of things from such breach"
within the meaning of that section. The damages would be the
difference between the market price in Kanpur on the date of
breach and the contract price. But as the respondent had failed
to prove the rate for similar canvas in Kanpur on the date of
breach, it was not entitled to any damages as there was no
measure for arriving at the quantum.
Chao and others v. British Traders and Shippers Ltd., [1954]
l All E.R. 779, relied on.
Re.Rand H. Hall Ltd. and W.P. Pim (Junior) & Co.'s Arbitration, [1928] All E.R. 769 and Victoria Laundry ( W insdsor) Ltd.
v. Newman Industries Ltd., [1949] r All E.R. 997, distinguished.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
193 of 1958.
Appeal by special leave from the judgment and
decree dated October 3, 1955, of the High Court of
Judicature, Madhya Bharat, Indore, in Civil First
Appeal No. 58 of 1952.
C. B. Aggarwala and Bhagwan Das Jain, for the
appellant.
Radhey Lal Aggarwal and A.G. Ratnaparkhi, for
respondent No. 1.
1961. March 29. The Judgment of the Court was
delivered by
Wanchoo J.
W ANCHOO, J.-This is an appeal by special leave
from the judgment of the High Court of Madhya
Bharat. A suit was filed by firm Messrs. Harishchandra Dwarkadas (hereinafter called the respondent)
against the appellant-firm Messrs. Murlidhar Chiranjilal and one Babula!. The case of the respondent was
that a contract had been entered into between the
appellant and the respondent through Babula! for sale
of certain canvas at Re. 1 per yard. The delivery was
to be made through railway receipt for Calcutta f. o. r.
Kanpur. The cost of transport from Kanpur to Calcutta and the labour charges in that connection were
to be borne by the respondent. It was also agreed
that the railway receipt would be delivered on
August 5, 1947. The appellant however failed to
I S.C.R. SUPREME COURT REPORTS
655
deliver the railway receipt and informed the respondent on August 8, 1947, that as booking from Kanpur
to Calcutta was closed the contract had become impossible of performance; consequently the appellant cancelled the contract and returned the advance that had
been received.
The respondent did not accept that
the contract had become impossible of performance
and informed the appellant that it had committed a
breach of the contract and was thus liable in damages.
After further exchange of notices between the parties,
the present suit was filed in November, 1947.
Written statements were filed both by the appellant
and Babulal. The contention of Babula] was that
the contract had become incapable of performance and was therefore rightly rescind<;id.
Further
Babulal contended that he was not in any case liable
to pay any damages.
The appellant on the other
hand denied all knowledge of the contract and did not
admit that it was liable to pay any damages. Certain
other pleas were raised by the appellant with which
we are however not concerned in the present appeal.
Three main questions arose for determination on
the pleadings of the parties. The first was whether
Babulal had acted as agent of the appellant in the
matter of this contract; the second was whether the
contract had become
impossible of performance
because the booking of goods from Kanpur to Calcutta was stopped; and the last was whether the respondent was entitled to damages at the rate claimed
by it.
The trial court held that Babulal had acted as the
agent of the appellant in the matter of the contract
and the appellant was therefore bound by it. It further held that the contract had become impossible of
performance. Lastly it held that it was the respondent's duty when the appellant had failed to perform
the contract to buy the goods in Kanpur and the respondent had failed to prove the rate prevalent in Kanpur
on the date of the breach (namely, August 5, 1947)
and therefore was not entitled to any damages. On
this view the suit was dismissed.
The respondent went in appeal to the High Court
Murlidhar
Chiranjilal
v.
H arishchandra
Dwarkadas
lVanchoo ].
I96r
Mutlidhar
Chiranjilal
v.
F-Iarishchandra
Dwa1kadas
Wanchoo ],
656
SUPREME COURT REPORTS
[1962]
and the two main questions that arose there were
about the impossibility of the performance of the contract and the liability of the appellant for damages.
The High Court held that the contract had not
become impossible of performance as it had not been
proved that the booking between Kanpur and Calcutta was closed at the relevant time.
It further
held that the respondent was entitled to damages on
the basis of the rate prevalent in Calcutta on the date
of breach and after making certain deductions decreed
the suit for Rs. 16,946.
Thereupon there was an
application by the appellant for a certificate to appeal
to this Court, which was rejected. This was followed
by an applicatiou to this Court for special leave which
was granted; and that is how the matter has come up
before us.
The same two questions which were in dispute
before the High Court have been raised before us on
behalf of the appellant.
We think it unnecessary to
decide whether the contract had become impossible of
performance, as we have come to the conclusion that
the appeal must succeed on the other point raised on
behalf of the appellant. The necessary facts in that
connection are these: The contract was to be performed by delivery of railway receipt f. o. r. Kanpur
by the appellant to the
respondent on August
5, 1947.
This was not done and therefore there
was undoubtedly a breach of the contract on that
date.
The question therefore that arises is whether the respondent has proved the damages which it
claims to be entitled to for the breach. The respondent's evidence on this point was that it proved the
rate of coloured canvas in Calcutta on or about the
date of the breach. This rate was Rs. 1-8·3 per yard
and the respondent claimed that it was therefore
entitled to damages at the rate of Re. 0-8-3 per yard,
as the contract rate settled between the parties was
Re. 1 per yard.
The quantum of damages in a case of this kind has
to be determined under s. 73 of the Contract Act,
No. IX of 1872.
The relevant part of it is as follows:-
•
'
-
1 S.C.R. SUPREME COURT REPORTS
657
"When a contract has been broken, the party
who suffers by such breach is entitled to receive,
from the pa.rty who ha.s broken the contra.ct, com.
pensation 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 ..... .
"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."
The contention on behalf of the appellant is that
the contract was for delivery f. o. r. Kanpur and the
respondent had therefore to prove the rate of plain
(not coloured) canvas at Kanpur on or about the date
of breach to be entitled to any damages at all. The
respondent admittedly has not proved the rate of
such canvas prevalent in Kanpur on or about the
date of breach and therefore it was not entitled to any
damages at all, for there is no measure for arriving at
the quantum of damages on the record in this case.
Where goods are available in the market, it is the
difference between the market price on the date of the
breach and the contract price which is the measure of
damages. The appellant therefore contends that as
it is not the case of the respondent that similar canvas was not available in the market at Kanpur on or
about the date of breach, it was the duty of the respondent to buy the canvas in Kanpur and rail it for
Calcutta and if it suffered any damage because of the
rise in price over the contract price on that account it
would be entitled to such damages. But it has failed
to prove the rate of similar canvas in Kanpur on the
relevant date. There is thus no way in which it can
be found that the respondent suffered any da.mage by
the breach of this contract.
The two principles on which damages in such cases
are calculated are well-settled. The first is that, as far
as possible, he who has proved a breach of a bargain
83
r96c
Murlidhar
Chiranjilal
v.
H arishchandra
Dwarkadas
Wanchoo ].
I96I
Murlidhar
Chiranjilal
v.
Harishchandra
Dwarkadas
rv anchoo ].
658
SUPREME COURT REPORTS
[1962]
to supply what he contracted to get is to be placed, ::ts
far as money can do it, in as good a situation as if the
contract had been performed; but this principle 1s
qualified by a second, which imposes on a plaintiff the
duty of taking all reasonable steps to mitigate the loss
consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect
to take such steps: (British Westinghouse Electric and
Manufacturing Company Limited v. Underground Electric Railways Company of London (1)).
These two
principles also follow from the law as laid down in
s. 73 read with the Explanation thereof. If therefore
the contract was to be performed at Kanpur it was
the respondent's duty to buy the goods in Kanpur and
rail them to Calcutta on the date of the breach and if
it suffered any damage thereby because of the rise in
price on the date of the breach as compared to the
contract price, it would be entitled to be re-imbursed
for the loss. Even if the respondent did not actually
buy them in the market at Kanpur on the date of
breach it would be entitled to damages on proof of the
rate for similar canvas prevalent in Kanpur on the
date of breach, if that rate was above the contracted
rate resulting in loss to it. But the respondent did not
make any attempt to prove the rate for similar canvas
prevalent in Kanpur on the date of breach. Therefore it would obviously be not entitled to any damages
at all, for on this state of the evidence it could not be
said that any damage naturally arose in the usual
course of things.
But the learned counsel for the respondent relies on
that part of s. 73 which says that damages may be
measured by what the parties knew when they made
the contract to be likely to result from the breach of it.
It is contended that the contract clearly showed that
the goods were to be transported to and sold in
Calcutta and therefore it was the price in Calcutta
which would have to be taken into account in arriving
at the measure of damages for the parties knew when
they made the contract that the goods were to be sold
in Calcutta. Reliance in this connection is placed on
(1) (1912] A.C. 67]. 689.
•
I S.C.R. SUPREME COURT REPORTS
659
two cases, the first of which is Re. R. and H. Hall Ltd.
1
'9 6'
and W. H. Pim (Junior) & Co.'s Arbitration (1). In that
Murlidhar
case it was held that damages recoverable by the
Chiranjilal
buyers should not be limited merely to the difference
v.
between the contract price and the market price on
Harishchandra
the date of breach but should include both the buyers'
Dwarkadas
own loss of profit on the re-sale and the damages for
rvanchoo ].
which they would be liable for their breach of the
contract of re-sale, because such damages must reasonably be supposed to have been in the contemplation
of the parties at the time the contract was made since
the contract itself expressly provided for re-sale before
delivery, and because the parties knew that it was not
unlikely that such re-sale would occur. That was a
case where the seller sold unspecified cargo of
Australian wheat at a fixed price.
The contract
provided that notice of appropriation to the contract
of a specific cargo in a specific ship should be given
within a specified time and also contained express
provisions as to what should be done in various circumstances if the cargo should be re-sold one or more
times before delivery. That was thus a case of a
special type in which both buyers and seller knew at
the time the contract was made that there was an
even chance that the buyers could re-sell the cargo
before delivery and not retain it themselves.
The second case on which reliance was placed is
Victoria Laundry (Windsor) Ltd. v. Newman Industries
Ltd. (2). That was a case of a boiler being sold to a
laundry and it was held that damages for loss of profit
were recoverable if it was apparent to the defendant
as reasonable persons that the delay in delivery was
liable to lead to such loss to the plaintiffs. These two
cases exemplify that provision of s. 73 of the Contract
Act, which provides that the measure of damages in
certain circumstances may be what the parties knew
when they made the contract to be likely to result
from the breach of it. But they are cases of a special
type; in one case the parties knew that goods purchased were likely to be re-sold before delivery and therefore any loss by the breach of contract eventually
(t) [1928] All E.R. 763.
(2) [1949] 1 All E.R. 997.
1961
]l1urlidhar
Chiranji.lal
v.
H arishchandra
Dwarkadas
TVanchoo ].
660
SUPREME {JOURT REPORTS
[1962]
may include loss that may have beeu suffered by the
buyers because of the failure to honour the intermediate contract of re-sale made by them; in the other
the goods were purchased by the party for his own
business for a particular purpose which the sellers
were expected to know and if any loss resulted from
the delay in the supply the sellers would be liable for
that loss also, if they had knowledge that such loss
was likely to result.
The question is whether the present is a case like
these two cases at all. It is urged on behalf of the
respondent that the seller knew that the goods were
to be sent to Calcutta; therefore it should be presumed
to know that the goods would be sold in Calcutta and
any loss of profit to the buyer resulting from the
difference between the rate in Calcutta on the date of
the breach and the contract rate would be the measure
of damages. Now there is no dispute that the buyer
had purchased canvas in this case for re.sale; but we
cannot infer from the mere fact that the goods were
to be booked for Calcutta that the seller knew that
the goods were for re-sale in Calcutta only.
As a
matter of fact it cannot be denied that it was open to
the buyer in this case to sell the railway receipt as
soon at it was received in Kanpnr and there can be no
inference from the mere fact that the goods were to be
sent to Calcutta that they were meant only for sale in
Calcutta. It was open to the buyer to sell them any-
. where it liked. Therefore this is not a case where it
can be said that the parties knew when they made the
contract that the goods were meant for sale in Calcutta
alone and thus the difference between the price in
Calcutta at the date of the breach and the contract
price would be the measure of damages as the likely
result from the breach. The contract was for delivery
f.o.r. Kanpur and was an ordinary contract in which
it was open to the buyer to sell the goods where it
liked.
We may in this connection refer to the following
observations in Chao and others v. British Traders and
Shippers Ltd.('), which are apposite to the facts of the
present case:
(I) [r954] r All E.R. 779, 797•
/j,
•
'·
'
j
I S.C.R. SUPREME COURT REPORTS
661
"It is true that the defendants knew that the
plaintiffs were merchants and, therefore, had bought
for re-sale, but every one who sells to a merchant
knows that he has bought for re.sale, and it does
not, as I understand it, make any difference to the
ordinary measure of damages where there is a
market. What is contemplated is that the merchant buys for re-sale, but, if the goods are not
delivered to him, he will go out into the market and
buy similar goods and honour his contract in that
way. If the market has fallen he has not suffered
any damage, if the market has risen the measure of
damages is the difference in the market price."
In these circumstances this is not a case where it can
be said that the parties when they made the contract
knew that the likely result of breach would be that
the buyer would not be able to make profit in Calcutta.
This is a simple case of purchase of goods for re-sale
anywhere and therefore the measure of damages has
to be calculated as they would naturally arise in the
usual course of things from such breach. That means
that the respondent had to prove the market rate at
Kanpur on the date of breach for similar goods and
that would fix the amount of damages, in case that
rate had gone above the contract rate on the date of
breach. We are therefore of opinion that this is not a
case of the special type to which the words "which
the parties knew, when they made the contract, to be
likely to result from the breach of it" appearing in
s. 73 of the Contract Act apply. This is an ordinary
case of contract between traders which is covered by
the words "which naturally arose in the usual course
of things from such breach" appearing in s. 73.
As
the respondent had failed to prove the rate for similar
canvas in Kanpur on the date of breach it is not
entitled to any damages in the circumstances. The
appeal is therefore allowed, the decree of the High
Court set aside and of the trial court restored with
costs to the appellant throughout.
Appeal allowed.
I96I
Murlidhar
ChiranJilal
v.
Harishchandra
Dwarkadas
Wanchoo ].