TMI Blog1994 (4) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... erparts of the two units of the firm - National Sugar Industries at Madras and Meerut city, Uttar Pradesh. The plaintiff wanted the machinery for the sugar factory to be established and for that purpose, he placed orders with the defendants to supply the machinery at a total cost of ₹ 2,34,715/-. The defendants agreed to supply the machinery to the plaintiff for the said purpose. The terms of the agreement appear to be that out of the total cost of the machinery, the plaintiff was to pay 25% amounting to ₹ 58,000/- initially and the balance at the time of delivery of the machinery by the defendants. The plaintiff paid ₹ 40,000/towards the agreed 25% of the total cost by means of a Bank demand draft and he was to pay the balance of ₹ 18,000/-. It appears that the defendants sent a letter to the plaintiff dated 27-10-1969 seeking the remittance of the balance outstanding towards the advance of 25%. In the meanwhile, the plaintiff having not able to establish the Khandasari Sugar Factory, intimated the first defendant by telegram dated 27/28-10-1969 to keep the order pending and not to proceed with the said order. Defendant No. 1 replied to the letter of the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance of the cost-price was also payable at Madras. As a whole, the defendants sought for the dismissal of the suit with costs. 4. The following issues were settled : 1. Whether the suit contract is irrevocable? 2. Whether the plaintiff agreed to pay ₹ 58,000/- as advance and failed to pay ₹ 18,000/- and thus committed breach of contract? 3. Whether the defendants were always ready admitting to perform their part of the contract? 4. Whether the defendants can claim set off towards loss and damages without paying court fee? 5. Whether the advance of ₹ 40,000/- is forfeited? 6. Whether this court has on jurisdiction to try this suit? 7. To what relief? 5. Parties went to trial whereby two witnesses were examined for the plaintiff and one witness for the defendants and nine documents were got marked by the plaintiff as per Exs. Al to A9 and six documents were got marked by the defendants as per Exs. Bl to B6. After hearing both the sides and on the basis of the materials placed before him, the learned District Judge held issues 1 to 3 in favour of the plaintiff and issues 4 to 6 against the defendants and consequently decreed the suit as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efrom. (3) Who committed breach of their obligations under the transaction and who has to be remedied? (4) Whether the defendants can forfeit or withhold ₹ 40,000/- paid by the plaintiff? (5) Whether the findings of the trial court warrant interference to any extent? (6) Whether the judgment and decree of the trial court deserve to be set aside, altered or modified to any extent? 10. feint No. 1:- Both from the pleadings and the evidence the matter arises out of an agreement to supply machinery by the defendants to the plaintiff at a cost of ₹ 2,34,715 / - with a stipulation to pay 25% of the cost immediately and the balance at the time of delivery of the machinery. Neither the full amount of 25% was paid by the plaintiff at any time (only ₹ 40,000.- were paid) nor the transaction was completed nor carried out by the parties for their own justifiable reasons. The plaintiff is a resident of Nirmal and wanted to establish Khandasari Sugar Factory at Mancherial in Adilabad district. Defendant No. 1 has its principal place of business at Madras and defendant No. 2 at Meerut city in Uttar Pradesh. The parties have conceived a suit based on an agreement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have (been) performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else. In suits for agency actions the cause of action arises at the place where the contract of agency was made or the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the Court where the suit is filed and that contract is found to be invalid, such part of cause of the action disappears. The above are some of the connecting factors. The Supreme Court cautiously added the concluding words' The above are some of the connecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a clear admission and evidence in the case that ₹ 40,000/- were paid by the plaintiff to the defendants by means of two bank drafts (one for ₹ 35,000/- and another for ₹ 5,000/-) which were handed over to one Krishnaswami at Nirmal and it is not denied by the defendants that they received the drafts from Krishnaswami at Madras. P.W.1. has testified about it in emphatic terms. The learned Advocate for the defendants has seriously contended that Krishnaswami was a broker and representing the plaintiff and he had been even paid the brokerage and therefore, the non-examination of Krishnaswami is fatal to the case of the plaintiff regarding the question of jurisdiction. This Krishnaswami has been consistently referred to in the pleadings and evidence by both the parties and his playing some important role in the transaction, cannot be thus ignored in whatever capacity he did it. The examination or non- examination of Krishnaswami is a matter which may have some consequences to prove or not to prove a particular fact much less the question of jurisdiction. When the fact remains that Krishnaswami received the two drafts at Nirmal from the plaintiff through P. W.1. wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the defendants made to the plaintiff. Even assuming that Ex. A-6 stipulated certain terms between the parties either concluded or to be approved, it spells out as many as 17 parts of the machinery were to be manufactured by the defendants at Madras and to be transported to Manchiryal where they were to be erected by the Expert Engineers of the defendants under their supervision. Therefore, the delivery of so many items of machinery in whatever manner the parties spell out whether they were to be lifted by the plaintiff or the defendants, it only means that the delivery was to be effected by the defendants at Manchiryal and it was not completed (sic) the erection was completed. In fact, it appears to this court that the erection, of the machinery by the defendants at Manchiryal for the plaintiff is a main part of the contract or agreement without which there was no conclusion of the contract. P.W.I has emphatically stated in his testimony that the machinery was to be delivered at Manchiryal regarding which there was neither cross-examination nor denial by the defendants on oath. Therefore, Manchiryal being the place of delivery of machinery by the defendants for the plaintiff, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ething that is owed, especially money or state of obligation to pay something owed . (Page 298 left column of Concise Oxford dictionary. New edition of 1990). Therein the debtor is explained to be a person who owes a debt especially money. Perhaps the commercial world may not differentiate a debtor or a creditor in such a situation and may import the same meaning. It may not be forgotten that whatever be the nature of the form of transaction between the parties, prima facie it was a clear transaction of sale of goods within the meaning of Section 2(1), (3), (7), (10) and (13) of the Sale of Goods Act, 1930, because it has the components of buyer, seller and goods in addition to the price. It also appears to be a case of recovery of the part of the sale price paid by the plaintiff to the defendants on failure of the transaction since the plaintiff could not establish the sugar factory. If we read Section 61(1) of the Sale of Goods Act, one can visualise a clear suit by a seller to recover the money paid where the consideration for the payment of it has failed. In such a situation, Section 61(2) contemplates that in the absence of contract to the contrary the court may award interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the question of jurisdiction, the District Court of Adilabad was rightly held to be a court having jurisdiction to try the suit and the learned District Judge was right in recording the finding in favour of the plaintiff which should be affirmed. 15. Even assuming that Adilabad Court has no jurisdiction to try the suit, it is still open under Section 21 of the Code of Civil Procedure to consider whether the objection as to place of suing has been taken in the trial Court and whether there has been a consequent failure of justice as a whole due to the reason that the said Court had no territorial jurisdiction to try the suit. The law is settled that both the conditions mentioned supra must exist, but the last is all important, for unless there is failure of justice there will be no interference by the appellate Court even if the other condition is present, (page 91 of Sarkar on C.P.C. supra). Undoubtedly, the first part of Section 21(1) of the Code of Civil Procedure has been complied with since the objection to the place of suing had been taken by the defendants in the trial Court. .Now the question is whether there is consequent failure of justice for want of territorial j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g which tine loss or benefit by way of interest would be ₹ 60,000 /-. However, without going into the niceties of the merits, prima facie having due regard to the facts and circumstances of the case, there is no failure of justice in the case so far as the defendants are concerned. Even on that count, the plea of want of jurisdiction for the trial Court to try the suit raised by the defendants, deserves to be rejected. 16. Point No. 2:- There appears to be no controversy between the parties that in the nature of the transaction between them, it was for the sale of machinery, by the defendants to the plaintiff for the purpose of establishing Khandasari sugar factory, for a known sum. As already pointed out it was a simple transaction of sale of goods. The parties are known, the machinery is known, the sale price is known and the stipulations are also known. In substance, the defendants agreed to supply the machinery to the plaintiff at a cost of ₹ 2,34,715/- and out of which 25% was to be paid in advance and the balance was to be paid at the time of delivery of the machinery. This is spelt out both in the pleadings, in the testimony of plaintiff and his witness P.W.I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative factor whether the transaction would be a contract of sale or an agreement to sell. In the former, the goods is transferred from the seller to the buyer whereas in the latter, the transfer of the property will take place at a future time or subject to some condition thereafter to be fulfilled. Neither the delivery of the goods nor the payment of the price may be an important ingredient to constitute the contract of sale within tine meaning of Section 5 of the Sale of Goods Act. Because the subject matter of the transaction of sale of goods may be either existing goods, future goods or perishable goods. There may not be any difficulty in regard to the existing goods or the goods which may be perished after the contract is concluded. It is only in case of future goods, the question arises whether there would be a concluded contract within the meaning of Section 4 or whether it would be still an agreement to sell till the future goods come into existence. In view of Section 21 of the Sale of Goods Act, where there is contract for the sale of specific goods and the seller is bound to do something for the goods for the purpose of putting them into deliverable state, the property d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendants have not produced any satisfactory evidence to prove that the machinery was manufactured or brought into deliverable state at any stage, much less, at the stage when the plaintiff went back from the transaction. D.W.1 a Supervisor working under the defendants is examined to discharge such a burden. His evidence is found to be unreliable and uncorroborated from required materials. His testimony that one person belonging to plaintiff's company came to the defendants' company and machinery parts were shown to him and that ₹ 30,000/- had been invested on the raw material and ₹ 30,000/- were spent for labour charges, finds no corroboration or support from documents. The learned Advocate for the defendants did not for a moment suggest at any stage of the arguments that the defendants factory is such small so as to accept not to maintain any documents either for investment of money for manufacture or for showing the stock of the machinery at any particular point of time. No such documents are produced or attempted to be produced by the defendants. The whole testimony of P.W.I opens the defendants for adverse inference that either there are no such documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso subject to various vagaries and the conditions. Therefore, even on the date of Ex.A-6 neither the full amount agreed to be paid by way of advance was paid nor the machineries were in existence. The learned Advocate for the defendants has drawn the attention of this Court to Ex.A-3 which is already extracted as above to contend that the defendants were unable to start the work rapidly, meaning that, they had already commenced the work of manufacturing the machinery. In the first place, the author of Ex.A-3 is not examined by the defendants to give such a meaning and consequently it is difficult to read such a meaning into such an expression. In the circumstances, if we read Ex.A-3 it means that unless the agreed part of the sale price was paid fully, the work of manufacturing the machinery could not be expedited or fulfilled quickly as per the expectation. The fact that even the drawings were not ready at the time of Ex.A-3, is inconsistent with the stand taken by the defendants that the work of manufacturing of the machinery had already begun. Even in Ex. A-4 the defendants insisted the payment of the balance of the sale price out of 25% and did not appreciate the stand of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if immediately or even few days after placing the order, the defendants would not have hesitated to refund the amount after taking some compensation and after such a long time, it was not possible to refund the amount. It is also mentioned therein that the drawings are prepared and the raw materials had been purchased by the defendants. The details of the compensation are also calculated in Ex.A-4. Therefore, it was a clear case of repudiation of the agreement by the plaintiff before the contract was concluded and the defendants alleging breach of concluded contract by the plaintiff. In so far as the plaintiff is concerned, there could not have been any breach of contract since Khandasari Sugar Factory could not be established for the reasons best known to him. Neither the plaintiff has alleged the breach of contract by the defendants nor the defendants committed such a breach of contract as it became infructuous due to nonpayment of full advance of the sale price much less due to the plaintiff not pursuing the same. On a careful examination of the materials in the case, this Court is of the considered opinion that not only there was a mere agreement of sale in the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods from the buyer under Section 55 or for damages for non- acceptance of the goods under Section 56 of the Act. The buyer may sue the seller for damages for non-delivery of the goods under Section 57 of the Act. Both the parties are entitled to file suits for specific performance under Section 58 of the Act to enforce the respective terms of the contract. There is also remedy for breach of warranty either by the seller or buyer under Section 59 of the Act. In this case if there was a concluded contract Sections 55 - 57 would have come into effect for the respective remedies, but since the plaintiff repudiated the contract before it could be performed, there was no scope for such remedies. It was only a suit for specific performance under Section 58 which was open for the defendants, or to file a suit for damages for breach of con tract by the plaintiff. Section 60 of the Sale of Goods Act contemplates that where either of the parties of the sale repudiates the contract before the date of delivery, the other may either treat the contract as subsisting and wait till the date of delivery or he may treat the contract as rescinded and sue for damages for the breach. The plaintiff ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract or agreement, Exs.A-5 and A-6, there is no stipulation for forfeiture of the part payment of 25% of the sale price by the plaintiff. Admittedly there was a stipulation to pay 25% advance of the sale price of the order and only ₹ 40,000/- was paid by the plaintiff at the time of the order and the rest was not at all paid thereafter. Assuming that there was breach of contract on the part of the plaintiff, the law has to settle whether the defendants are entitled to forfeit ₹ 40,000/-. The learned Advocate for the plaintiff has contended that notwithstanding the quantum of the advance sale price agreed between the parties, it represented earnest money left with the defendants by the plaintiff for the due performance of the terms of the contract by the plaintiff and therefore, the defendants were entitled to forfeit the same. As against this the learned Advocate for the defendants has contended that it was not earnest money, but it was a simple deposit. Both the sides have depended upon an authoritative pronouncement of the Supreme Court in Maula Bux v. Union of India, [1970]1SCR928 in support of their respective stands. The distinction between the earnest money a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of the same by way of counter claim or set off, there was no reason for decreeing the suit by the learned District Judge. Obviously, the learned Advocate for the plaintiff has strongly repelled such a contention. Such a contention appears to be lacking any merit both in law and on facts. Except using the words set off in para 14 of the written statement, they have not done anything to lay such a claim of set off in accordance with the procedure. Order VIII Rule 6 and Rules 6-A to 6-G and 7 of the Code of Civil Procedure regulate both substantial and procedural rights of a person claiming set off or counter claim in a suit. In the first place, such a claim should be set up in the written statement by giving all the particulars and the cause of action, as such a claim would be in the nature of a complaint regarding which the plaintiff will be entitled to file a reply which will be considered as a written statement and all the Rules relating to such set off, counter claim etc., would be governed by the rules of the pleadings and the Court will also after enquiring into the same would pass a decree either in favour of the plaintiff or in favour of the defendants in regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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