Maheswari Metals and Metal Refinery vs Tamil Nadu Small Industries Corporation Limited

Ratnam, J.—These two appeals are at the instance of Maheswari Metals Refinery, a registered partnership firm, having its registered office

in Bangalore and arise out of two suits, vis., O.S. No. 7679 of 1971 and O.S. No. 3216 of 1968, on the file of the Fifth Assistant Judge, City

Civil Court, Madras, wherein the appellant, figured as the defendant and as the plaintiff respectively., O.S. No. 3216 of 1968 was instituted by the

appellant on 21st June, 1968 for the recovery of a sum of Rs. 5,000 with interest thereon at 6 per cent, per annum from the date of plaint till date

of realisation and also for costs. O.S. No. 7679 of 1971 was instituted by the respondent herein on 10th June, 1971 against the appellant for the

recovery of a sum of Rs. 34,291.58 stated to be the loss that has been sustained by the respondent as a result of breach committed by the

appellant, of a contract entered into by the appellant with the respondent. The appellant as stated already is a registered partnership firm carrying

on business at Bangalore, while the respondent is Tamil Nadu Small Industries Corporation Limited, which is a company wholly owned by the

Government of Tamil Nadu and incorporated under the Companies Act, 1956. On or about 6th April, 1967, the respondent issued a tender notice

inviting offers for the purchase of zinc dross and zinc ash available for sale with the respondent ex-Mettur Dam. Amongst others one of the terms

of the tender notice was that the price to be offered by the intending purchaser should be on the basis of 1,000 kilograms ex-Mettur Dam, without

racking, sales-tax and other taxes being extra. Yet another term was that the tender should be accompanied by a deposit of Rs. 5,000 as earnest

money with the condition that the same would be refunded to the. unsuccessful tenderer within reasonable time and that if the tenderer failed to

adhere to the terms and conditions prescribed in the tender or backed out when his tender was accepted, the deposit was liable to be forfeited as

per clause 9 of the tender conditions. A further term was to the effect that in the event of the contractor failing to take delivery then also the deposit

amount was liable to be forfeited as a penalty and the material would be disposed of and the defaulting party will be held liable for the shortfall, if

any. On 24th April, 1967, according to the appellant it made an offer for the purchase of zinc dross at Rs. 2,705 per metric tonne. There was

according to the appellant on 9th May, 1967 a counter-offer made by the respondent for the entire zinc dross and zinc ash at Rs. 2,715 and Rs.

1,225 ner metric tonne respectively for the period from 1st April, 1967 to 31st March, 1968, but there was no stipulation that the contract was

likely to be split up or that the respondent wag at liberty to give it to any other person of its choice. The appellant complained that after the

counter-offer made by the respondent was accepted by the appellant and confirmed, the respondent split up the contract and informed the

appellant, by letter, dated 31st May, 1967, that the contract has to be shared by the appellant along with another party. Thereafter, the appellant

wrote to the respondent pointing out that there was no stipulation or right reserved to the respondent to split up the contract and that the appellant

would not share the contract with anyone close. By letter, dated 30th June, 1967, addressed to the appellant, the respondents stated that there

was a breach of contract by the appellant and that the deposit amount of Rs. 5,000 stood forfeited and also called upon the appellant to show

cause against the forfeiture. This was replied to by the appellant by its lawyer notice, dated 1st July, 1967 informing the respondent that the

respondent had committed breach and that the sum of Rs. 5,000 could not be forfeited and demanded a refund of the sum of Rs. 5,000 from the

respondent. A reply was sent by the respondent refusing to return the sum of Rs. 5,000. The appellant therefore, laid the suit for the recovery of a

sum of Rs. 5,000 with interest at 6 per cent, per annum from the date of suit till the date of realisation on the ground that even if there was a

breach, the respondent, had no right to forfeit the earnest deposit as the only remedy of the respondent is to sue for damages actually suffered by

it.

By its written statement, dated 17th September, 1968, the respondent, while admitting the issue of a tender notice, disputed the correctness of

the terms and conditions of the said tender as mentioned in the plaint. According to the respondent under clause (4) of the tender terms the

Managing Director of ''the respondent-Corporation had the right to reject any tender and also to split up the tender as he deemed fit. The counter-

offer, reference to which was made by the appellant in the plaint, was admitted by the respondent and it was the further case of the respondent that

the appellant accepted the offer made by the respondent by letter, dated 11th May, 1967; The counter-offer by the respondent and the splitting up

of the tender was dene, accordingto the respondent, under clause (4) of the tender terms which empowered the splitting up of the tender and

therefore, the respondent informed the appellant by letter, dated 31st May, 1967, that the appellant will have to lift zinc dross an''d zinc ash

alongwith Calcutta Industrial Corporation in equal proportion. Though by letter, dated Sth June, 1967, the appellant according to the respondent

asked the respondent to take further action in the matter, yet subsequently, by letter, dated 21st June, 1967, the appellant went back on the

contract and informed the respondent that it will be difficult for it to share the contract/ with another party and that it can accept the contract for

zinc dross only. On 21st June, 1967, the respondent informed the appellant that if the appellant should go back on the contract, its earnest money

deposit will be forfeited as per the conditions of the tender terms and also a further claim for damages will be made against them. Alleging that the

appellant lyis committed breach of contract the respondent. claimed that the appellant is not entitled to a refund of the earnest deposit as it is liable

to be forfeited according to clause (9) of the tender terms,. On these grounds the respondent prayed for the dismissal of the suit.

In the first additional written statement, dated 15th December, 1970, the respondent stated that consequent to the breach of contract by the

appellant it had to call for fresh tenders for the lifting of zinc dross and zinc ash and accept the offers of M/s, Agarwal Metal Company for zinc

dross at the rate of Rs. 3,366.66 per metric tonne and M/s. Gayudin Algu Metal Refinery for zinc ash at the rate of Rs. 406-25 per metric tonne.

Having regard to the total accumulation of zinc dross and zinc ash for the year 1967-68 at 58.70 tonnes and 71.02 tonnes respectively, the

quantity that should have been lifted by the appellant, according to the respondent was one-half of the said quantity, namely, 29.35 tonnes and

35.51 tonnes respectively and consequent to the failure of the appellant to so lift the said quantity the respondent claimed it had suffered a loss of

Rs. 39,291-55, owing to the breach of contract by the appellant. In paragraph 4 of that additional written statement, the respondent reiterated its

right to forfeit the deposit of Rs. 5,000 made by the appellant as earnest money, as the said amount was a reasonable estimate of damages suffered

by the respondent. Therein the respondent also reserved its right to file a suit against the appellant for the balance of the amount of loss suffered by

it on account of the breach of contract by the appellant.

In yet another additional written statement dated 30th November, 1972, the respondent herein merely repeated paragraphs 1 to 3 of the earlier

first additional written statement dated 15th December, 1970. In paragraph 4 of this additional written statement, the respondent claimed to have

suffered a loss of Rs. 39,291-55 and stated that it was entitled to equitably set-off damages suffered by it to the extent of Rs. 5,000 as against the

amount paid by the appellant as earnest money. In addition it was also stated therein that the respondent had already filed a suit in O.S. No. 7679

of 1971, for the recovery of the balance of the damages suffered by it. Ultimately the respondent pleaded that it may be allowed to set-off against

the amount claimed by the appellant a sum of Rs. 5,000 being'' the part of the damages and prayed for the dismissal of the suit. Tt may also be

mentioned that the respondent had paid court-fee on the plea of set-off raised by it.

O.S. No. 7679 of 1971, was filed by the respondent herein on 10th June, 1971, for the recovery of a sum of Rs. 34,291-58 from the appellant

with interest thereon at 12 per cent, per annum from the date of suit till realization and for other incidental reliefs, The respondent, after referring to

the issue of the tender notice for the purchase and removal of zinc dross and zinc ash from the Galvanising Plant at Mettur Dam on the terms and

conditions mentioned therein, stated that the appellant accepted to purchase and remove zinc dross and zinc ash at the rate of Rs. 1,225 and Rs.

2,175 respectively, exclusive of sales-tax and packing charges; per 1,000 kilograms ex-works, subject to the conditions set out in the instructions

to the tenderers after accepting the counter offer of the respondent as per its letter, dated 11th May, 1967. The respondent further stated that by

letter, dated 31st May, 1967, the appellant was informed that zinc dross and zinc ash can be removed by it along with another party in equal

proportions. By letter, dated 21st June, 1967, the, respondent charged the appellant for having gone back on the concluded contract and by

another letter, dated 28th June, 1967, the respondent informed the appellant that because the appellant went back on the contract, the earnest

money was forfeited. Inasmuch as the appellant had informed its unwillingness to pay for and remove the zinc dross and zinc ash during the period

in question in accordance with the terms agreed to, the respondent claimed that it had to call for fresh tenders and sell the zinc dross and zinc ash

to M|s. Agarwal Metals Company and Mjs. Gayudin Algu Metal Refinery at the rate of Rs. 2,366-66 per metric tonne and Rs. 406-25 per metric

tonne respectively calculatingon the basis of the total accumulation of zinc dross and zinc ash at the Galvanising Plant at Mettur Dam during the

year 1967-68, the quantity that should have been lifted by the appellant was arrived at 29.35 metric tonnes and 35.5 metric tonnes respectively

and as a result of the breach of contract by the appellant, the respondent claimed that it had suffered a loss of Rs. 39,291-58 as the respondent

had to sell the zinc dross and zinc ash at prices lower than that contracted by the appellant. The respondent claimed that the loss on the sale of

29.35 metric tonnes of zinc dross at Rs. 348-44 per metric tonne was Rs. 10,226.71 and the loss by the sale of zinc ash of 35.51 metric tonnes at

Rs. 818-78 per metric tonne worked out to Rs. 29,064-87 totalling to Rs. 39,291-58. Deducting from this a sum of Rs. 5,000 paid by the

appellant as earnest deposit the loss sustained by the respondent was fixed at Rs. 34,291-58 which was claimed by the respondent against the

appellant.

The appellant in its written statement contended that there was no concluded contract between the parties as there was no cansensus-ad-idem

and the offer and acceptance were not on identical terms. The appellant also claimed that though there were offers and counter offers there was no

unconditional acceptance between the parties. The appellant charged the respondent with breach even assuming that there existed a concluded

contract between the parties. The splitting up of the offer after its acceptance was also objected to by the appellant. The claim of the respondent to

forfeit the deposit of Rs. 5,000 made by the appellant was also disputed. The quantity, quality and the cost of materials adverted to in paragraph 5

of the plaint were all disputed. The suit itself was characterised as a counter-blast to the suit in O.S. No. 3216 of 1968, filed by the appellant

against the respondent. The alleged sustaining of damages by the respondent was questioned by the appellant. The appellant, besides craving leave

to refer to the plaint in O.S. No. 3216 of 1968 as part of the written statement, raised an objection as regards the jurisdiction of the Court to

entertain the suit, as the appellant carried on business at Bangalore and there was no contract at Madras and in any event, since the acceptance

was only at Bangalore, no suit would lie within the jurisdiction of the Courts at Madras. The appellant also disputed the binding nature of the

conditions of the tender as they had not been signed by a partner. A plea that the suit is barred by limitation was also raised by the appellant.

On these rival contentions, the following issues were framed for trial:

(1) Whether the defendant committed breach of contract?

(2) Was there contract concluded and if, so, what are relevant terms?

(3) Whether the Court has no jurisdiction?

(4) To what relief? and

(5) Whether the suit is barred by limitation?

Since the suits arose between the same parties and out of the same transaction, the Principal Judge, City Civil Court, Madras by his order,

dated 29th March, 1973 in C.M.P. No. 281 of 1973 directed that these suits should be tried and disposed of together and by consent evidence in

both these suits had been recorded in O.S. No. 3216 of 1968. The suit, viz., O.S. No. 3216 of 1968 was earlier decreed on 26th October, 1968,

and on appeal therefrom in A.S. No. 424 of 1969, the decree was set aside and the suit was remanded for further trial. A.A.O. No. 462 of 1971,

was preferred against the remand order passed in A.S. No. 424 of 1969 and Venkataraman, J., confirmed the remand order on 27th October,

1972, and the Judgment is reported in Maheswari Metals and Metal Refinery, Bangalore Vs. The Madras State Small Industries Corporation Ltd.,

. A reference to the conclusions arrived at therein will be made later in the course of this judgment. Meanwhile, the respondent instituted the other

suit in O.S. No. 7679 of 1971 on 10th June, 1971, against the appellant. Pursuant to the directions of this Court in A.A.O. No. 462 of 1971, the

respondent had filed an additional written statement in O.S. No. 3216 of 1968 pleading an equitable set-off in respect of Rs. 5,000 and paying

court-fee also thereon, as referred to earlier. In O.S. No. 3216 of 1968, originally, the evidence consisted of Exhibits B-l to B-14 with no oral

evidence. But at the joint trial after remand of O.S. No. 3216 of 1968, Exhibits A-l and B-15 to Ii-19 were marked and D.W. 1 was examined.

On a consideration of the oral as well as the documentary evidence the learned V Assistant Judge, City Civil Court, Madras held that in view of

the findings given in A.A.O. No. 462 of 1971, it is not open to the parties to agitate the point as to who committed the breach as it had been

already held that the appellant committed breach and that the respondent would, therefore, be entitled to recover damages sustained by it by

reason of the default of the appellant It was also further held that it is open to the respondent to adjust the sum of Rs. 5,000 towards damages and

that this procedure is one which would fall under the rule of equitable, set-off and permitting such a set-off would also be well within time on the

date of the suit instituted by the appellant. The loss sustained by the respondent on account of the breach of contract was fixed at Rs. 34,291-58.

Dealing with the objection of the appellant that no notice was given to the appellant regarding the re-sale of the goods and therefore it cannot be

held liable for damages, the trial Court held that this is a case in which the goods had been disposed of by calling for tenders again after the breach

and therefore, it cannot be contended by the appellant that it could not be made liable for damages for want of notice. The objection raised by the

appellant that the claim in O.S. No. 7679 of 1971 is barred by Order 2, Rule 2(3), Civil Procedure Code, was negatived. A finding was also given

that the cause of action for recovery of damages arose only on 1st May, 1968, and since the Court was closed on 1st May, 1971, the suit which

was filed on the re-opening day would not be barred by limitation under Article 55 of the Limitation Act, 1953. The Court at Madras was held to

have jurisdiction, as part of the, cause of action had arisen at Madras, where the office of the respondent is situate. Consequent to these findings

O.S. No. 3216 of 1968 was dismissed and in O.S. No. 7679 of 1971 a decree was granted in favour of the respondent against the appellant in a

sum of Rs. 34,291-58 with costs. Against the dismissal of the suit in O.S. No. 3216 of 1968, A.S. No. 436 of 1976 has been preferred, while

against the decree in O.S. No. 7679 of 1971, A.S. No. 24 of 1975 has been filed and like the suits, the, appeals have also been heard together as

the parties are common and the evidence also is the same.

Before, proceeding to consider the arguments urged by the learned Counsel on both sides, it is necessary to advert to the conclusions arrived at

by this Court earlier, while disposing of A.A.O. No. 462 of 1971 on 27th October, 1972, as by such a course, the controversy between the

parties gets considerably narrowed down. Venkataraman, J., on a consideration of the correspondence that passed between the parties held

towards the end of paragraph 18 of the Judgment that whan under Exhibit B-10, dated 27th |-31st May, 1967, the defendant (respondent)

expressed its acceptance of the rate of Rs. 2715 and Rs. 1,225 and split up the tender between the plaintiff (appellant) and another party, though

unnamed, there resulted a contract in law. Again in paragraph 21 of the Judgment the learned Judge further held that the conclusion that with the

acceptance of the tender under Exhibit B-10, dated 27th131st May, 1967, a contract resulted carries with it the consequence that the plaintiff

(appellant) committed breach of the contract, because it was not prepared to share the business with another. ''This refusal of the appellant to

share the contract with another person a? suggested by the respondent is contained in Exhibit B-l2, dated 21st June, 1967. The sum of Rs. 5,000

deposited by the appellant was held to be earnest money, but that it was not open to the respondent to automatically forfeit this amount without

proof of damages. After referring to several decisions touching the question of equitable ""set-off"" this Court held that it cannot interfere with the

discretion exercised by the learned appellate Judge in allowing the defendant (respondent) to raise the plea of equitable set-off to the, extent of the

plaintiff''s (appellant''s) claim but subject to three matters. The first was that the defendant (respondent) must pay court-fee on the equitable set-off.

The second was that the defendant (respondent) must be put on terms. After pointing out that in the additional written statement filed in December,

1970, the defendant (respondent) has stated that the total damages suffered by it was Rs. 39,291.55 and that it is entitled to forfeit the deposit of

Rs. 5,000 and it is ready to file a suit against the plaintiff (appellant) for the balance of the amount of loss suffered by it on account of the plaintiff''s

(appellant''s) breach the subsequent filing of O.S. No. 7679 of 1971 on 10th June, 1971 was taken into account and after extracting one

paragraph from a written statement to be filed to the effect that the defendant (respondent) may be permitted to set-off against the plaintiff

(appellant) the sum of Rs. 5,000 being the part of damages suffered by them, this Court pointed out that though a contention was raised that the

subsequent suit would be barred by the principle of Order 2, Rule 2(3), Civil Procedure Code, yet that question was not decided. But, this Court

recorded that neither before the appellate Judge nor before this Court any leave has been asked on behalf of the defendant (respondent) for filing

such a suit and neither the Judgment of the appellate Judge nor this Court should be construed in any way as giving or granting any such leave. The

Additional written statement already filed in the City Civil Court in December, 1970 was directed to be eschewed as it did not plead any equitable

set-off and-proceeded on the basis of a right to forfeit the deposit of Rs. 5,000. Thirdly, a draft additional written statement filed before this Court

was directed to be filed before the City Civil Court, on condition that the defendant (respondent) pays a sum of Rs. 300 to the plaintiff (""appellant)

or his counsel within three, weeks from that day and subject to the further condition that the defendant (respondent) pays the requisite court-fee on

the claim of Rs. 5,000. Subject to these the order of remand was confirmed and the appeal was dismissed, in view of the findings arrived at by this

Court referred to above it follows that there was a concluded contract on the acceptance, of the tender under Exhibit JJ-10, dated 27th 131st

May, 1967 and that the appellant committed breach and the respondent will be entitled to recover damages which it sustained by reason of the

fault of the appellant and part of which was allowed to be pleaded as a set-off by the respondent by an additional written statement. In view of

these conclusions, it is no longer open to the. parties to these appeals to agitate these questions over again.

The first submission of the learned Counsel for the appellant Mr. Vedantam Srinivasan is that even on the footing that the contract was

concluded and the appellant was the defaulting party as found by this Court, the breach thereof occurred on 21st June, 1967 and the suit O.S. No.

7679 of 1971 having been filed on 10th June, 1971, more than three years from 21st June, 1967, is barred under Article 55 of the Indian

Limitation Act, 1963. On the other hand, the learned Counsel for the respondent contends that the quantum of damages incurred by the

respondent as a result of the breach of the contract by the appellant in the instant case, could not be ascertained till the re-sale of the goods as per

the offers under Exhibits B-15 and B-16 by the respondent in favour of third parties after calling for tenders and as such an event did not happen

till 1st May, 1968, limitation would start only from that date and since the Court was closed in May, 1971, the institution of the suit on 10th June,

1971 in the reopening Court would be well within time.

The, date of breach has therefore, to be first ascertained from the pleadings and the relevant documents which is bound to be the same both

for the appellant and the respondent though that breach may give rise to a cause of action to the parties to pursue such remedies as are open to

them within the time allowed. In the plaint in O.S. No. 7679 of 1971 filed by the respondent in paragraph 4 pointed reference is made by the

respondent to the appellant having gone back on the concluded contract by its letter, dated 21st June, 1967 and it is also admitted that the

respondent informed the appellant by letter, dated 28th June, 1967, that the appellant had gone back on the concluded contract and therefore, the

earnest money was forfeited. Paragraph 5 of the plaint sets out the steps stated to have been taken by the respondent for the sale of zinc dross and

zinc ash by calling for fresh tenders and paragraph 6 gives details of the loss stated to have been incurred by the respondent as a result of the

breach of contract by the appellant. In paragraph 8 of the plaint which sets out the cause of action for the institution of the suit, mention is made by

the respondent of the acceptance of the counter offer made by the respondent by the appellant on 11th May, 1967, the going back by the

appellant on the contract on 21st June, 1967 and the removal of the zinc dross and zinc ash on 1st May, 1968 as having furnished the cause of

action for the institution of the suit. In the written statement filed by the appellant the existence of the contract and its breach by the appellant are

denied. The particulars of the cause of action are also disputed in paragraph 11 in addition to questioning the jurisdiction of the Court t.o entertain

the suit. In paragraph 13 of the written statement, the plea that the suit is barred by limitation has also been taken. The invitation for tenders for the

purchase of zinc dross and zinc ash has been made under Exhibit B-l, dated 6th April, 1967.

In so far as the present controversy is concerned, clauses 4, 7 and 9 would be relevant. Clause 4 states:

The Managing Director of ''Madras State Small Industries Corporation reserves the right of rejecting all or any part of the tenders without giving

any reason for the same and split up the tender as he may deem fit.

Clause 7 says:

Each tender must be accompanied by a deposit of Rs. 5,000 earnest money in the. form of cash or demand draft in favour of Senior Accounts

Officer (cash) of this Corporation.

Clause 9 provides as follows:

If (he tenderer fails to adhere to the terms and conditions prescribed in the tender or backs out when his tender is accepted, his deposit mentioned

above will be forfeited to the Corporation in full. If the tenderer fails to take delivery of the materials within the time-limit prescribed the earnest

money deposit will be forfeited to the Corporation in full as a penalty. Besides, the materials will then be disposed of otherwise, and loss, if any, in

total value between the accepted tender rates and the value realized on such disposal will be made good from the defaulting tenderers.

By Exhibit B-2, dated 24th April, 1967, the appellant made a tender of Rs. 2,705 per metric tonne of zinc dross and Rs. 360 per metric tonne of

zinc ash. On 9th May, 1967, the respondent under Exhibit B-3 sent a letter enquiring whether the appellant is prepared to lift both Zinc dross at

Rs. 2,715 per metric tonne and zinc ash at Rs. 1,225 per metric tonne, subject to other tender conditions. To thisj the appellant sent a reply under

Exhibit B-5, dated 10th May, 1967 requesting time till 17th May, 1967 for confirmation. But, on 11th May, 1967 the appellant sent a telegram

followed by the letter Exhibit B-6 signifying its willingness to accept the rates for zinc dross, zinc ash at Rs. 2,715 and Rs. 1,225 per metric tonne

respectively. Exhibit B-7, dated 13th May, 1967 and Exhibit B-9, dated 26th May, 1937 were merely reminders sent by the respondent

reiterating the same and asking for confirmation from the appellant. Thereafter under Exhibit B-10, dated 27|31st. May, 1967, the respondent

while accepting the rates offered by the appellant for zinc dross at Rs. 2,715 per metric tonne and zinc ash at Rs. 1,225 per metric tonne, stated

that that acceptance was subject to all the conditions laid down in the instructions to the tenderer. In addition it was also stated that the zinc dross

and zinc ash actually accumulated during the period of contract will have to be, removed by the appellant at the above rates, alternatively with

another party more or less in equal consignments. To this, the appellant sent a reply under Exhibit B-ll, dated 5th June, 1967 acknowledging the

receipt of the letter dated 31st May/1967 and awaiting further action. But the appellant wrote on 21st June, 1967, Exhibit B-12 to the respondent

as follows, after referring to Exhibit B-10:

In our original tender submitted to you we quoted the highest rate of Rs. 2,705 per metric tonne for zinc dross. We were under the impression that

we would be given the contract for zinc dross at our highest rate.

But subsequently you have given us a counter-offer for both zinc dross at Rs. 2,715 and zinc ash at Rs. 1,225 per metric tonne and asked us to

offer our willingness to accept the above counter-offer. We have accepted your counter-offer for both zinc dross and ash at the, above rates under

the impression that you would award the full contract to us.

From your confirmation letter quoted above, we came to know that the contract has been split up to two parties and that we will have to share the

quantity of zinc dross and ash equally with the other party.

We would therefore, like to mention that practically it is difficult to share with the other party and that we are not prepared to accept this split up

contract unless the contract is completely awarded to us.

(Italics Ours).

We therefore request you to go through our above points and request you to be kind enough to award us with the full contract to enable us to lift

the entire quantity of zinc dross and ash that will accumulate during this year, without sharing with the other party. Even we are prepared to accept

the contract for full quantity of zinc dross alone at the rate of Rs. 2,715 per metric tonne as we are the highest tenderer for zinc dross quoted in our

quotation.

To this, the respondent appears to have sent a letter, dated 28th June, 1967 received by the, appellant on 30th June, 1967 stating that the contract

was finalised by the letter, Exhibit P.-10, dated 27th 131st May, 1967 and it was neither possible to award the contract completely to the

appellant nor to entrust the contract for the zinc dross alone. It also appears that the respondent further pointed out that the deposit amount of Rs.

5,000 was liable to be forfeited and asked the appellant to show cause why the amount should not be forfeited. Exhiijbit. R-13, is the reply sent by

the appellant stating that the respondent has no right to forfeit the deposit. Exhibit R-14 is the further reply that has been sent by the respondent to

the appellant pointing out that the respondent has no other alternative but to forfeit the deposit of Rs. 5,000 in accordance with clause 9 of the

instructions to the tenderers. Exhibit R-14 finally winds up by stating that if the appellant fails to write to the respondent within a week of receipt of

that letter, the deposit of Rs. 5,000 will be forfeited and steps will all be taken to dispose of the materials.

The correspondence referred to above would clearly and unmistakably point out that though even initially there was a term that the offer may

be split up, (sic) the condition that the appellant should share the lifting of zinc dross and ash with a third party was introduced by Exhibit B-10,

dated 27th 131st May, 1967 and this was in accordance with clause 4 of the tender conditions which reserved the right to the Managing Director

of the respondent to split up the tender as he may deem fit. Consequently, the appellants were not in order when they objected to the splitting up of

the contract by letter, Exhibit R-12, dated 21st June, 1967. This letter did not merely stoip with a protest by the appellant for having split up the

contract between two parties, but it clearly proceeded to express the inability of the appellant to accept and perform the split up contract and

paragraph 4 of Exhibit R-12 extracted above clearly mentions this. In our view, this constitutes a repudiation by the appellant of the concluded

contract under Exhibit R-10 and a definite expression of its inability to adhere to and perform its terms. Prima facie therefore, in the instant case the

contract has been broken by the appellant by its letter Exhibit R-12, dated 21st June, 1967. The further correspondence exchanged between the

parties and referred to above also discloses that in so far as the appellant is concerned it had treated the contract as having come to an end and the

respondent also was only anxious to give effect to the other conditions of the tender arising on breach or non-fulfilment of the terms of the contract.

This is established by Exhibit R-13 where, there is a reference to the receipt of a letter, dated 28th June, 1967 from the respondent by the

appellant on 30th June, 1967 stating that the alternative proposals set out by the appellant were not acceptable to the respondent, but I hat (lie

respondent will be entitled to forfeit the sum of Rs. 5,000. The question of for feiting any deposit amount would arise only in the event of default in

the performance of the terms and conditions or there being a breach of the contract. Clause 9 of the tender conditions also states that if the

tenderer fails to take delivery of the materials within the time-limit prescribed or if he fails to adhere to the terms and conditions prescribed in the

tender, or if he backs out when his tender is accepted then the deposit will be forfeited to the Corporation in full. The circumstance that the

respondent had addressed a letter on 28th June, 1967 indicatingthat the amount of Rs. 5,000 will be forfeited shows that even the respondent had

treated that the appellant had backed out of the contract and had also failed to adhere to its terms and conditions and therefore the respondent will

be in order in giving effect to clause 9 of the, tender conditions and forfeiting the deposit made by the appellant, ft is, therefore, clear that the

respondent also understood Exhibit B-12 dated 21st June, 1967, as a clear repudiation by the appellant of its obligations under the concluded

contract under Exhibit B-10, dated 27/131st May,- 1967; as otherwise, there was really no occasion for the respondent to have entertained the

idea of forfeiture of the amount deposited by the appellant. In addition, in the course of the Judgment in Maheswari Metals and Metal Refinery,

Bangalore Vs. The Madras State Small Industries Corporation Ltd., : Venkataraman, J., has stated thus at page 214:

The conclusion that with the accptance of the tender under Exhibit B-10, dated 27|31st May, 1967, a contract resulted carries with it the

consequence that the plaintiff committed breach of contract because it was not prepared to share the business with another.

Obviously, the reference is to Exhibit B-12, dated 21st June, 1967, and the learned Judge felt inclined to hold that the breach was committed by

the appellant by its communication expressing its inability to share the business with another person. From the above it follows that the breach of

contract by the appellant had taken place on 21st June, 1967, when the appellant clearly communicated under Exhibit B-12 its inability to share the

contract with another and also its unprepared-ness to accept the split up of the contract.

The next question that has to be considered is whether notwithstanding the refusal of the appellant under Exhibit B-12 such refusal would

amount to repudiation giving a right to the respondent to put an end to the contract u/s 39 of the Indian Contract Act, or whether the respondent

wanted to keep alive the cpntract for the benefit of both parties. The scope of Section 39 of the Indian Contract Act, came to be considered by a

Division Bench in V.K. Kumaraswami Chettiar and Others Vs. P.A.S.V. Karuppuswami Mooppanar, . Dealing with the scope of Section 39 of

the Indian Contract Act, Venkata-rama Aiyar, J., observed at page 791 thus:

Where a contract is to be performed at a future date and before the time for performance arrives one of the parties gives notice to the other party

that he is not willing to perform his part of the agreement then there is what has been called an ""anticipatory breach"" of the contract by him. This

expression was characterised by Lord Wren-bury as unfortunate in Bradely v. Newsotm (1919) A.C. 16 because strictly speaking, there can be

no breach in praesenti of an obligation which is to be performed in future. The substance of the matter however, is that when a party refuses to

perform his part of the agreement before the due date, he in effect throws up the contract; and then the question is what the other party might then

do. He might either accept the repudiation and treat the contract as broken then and there and proceed to claim damages or he might

notwithstanding the repudiation by the other party get ready for performing his part of the contract in due course, offer performance when the time

for it arrives and the refusal by the other parly claim damages for breach of the contract by him. In that case he keeps the contract alive for the

benefit of both the parties

As seen earlier, the appellant had refused to perform any part of the agreement and had in effect thrown up the contract. Thereafter, it was

certainly open to the respondent, to have elected one of two courses, namely, either to have accepted the repudiation and treat the contract as

broken then and there or to offer performance when the time for it arrives and on the refusal by the appellant to claim damages from him. In the

present case it has already been seen that on receipt of the letter of repudiation, Exhibit B-12, sent by the appellant to the respondent, the

respondent had understood it on 28th June, 1967, as a breach and there was not even the slightest indication that the respondent thereafter wanted

to keep the contract alive for the benefit of both parties. Indeed there has been a manifestation of a contrary intention by the respondent when it

referred to the immeiate forfeiture of the amount that was deposited by the appellant in a sum of Rs. 5,000. This is certainly not consistent with the

idea of keeping alive the contract for the benefit of both parties. Besides, in spite of the repudiation by the appellant it has not been established that

the respondent offered performance as and when the time for performance arrived and that there was a refusal on the part of the appellant. This

again would indicate that on receipt of the letter of repudiation under Exhibit B-12, dated 21st June, 1967, the respondent had also decided to

treat the contract as broken then and there. Even in this view, the breach of contract must be. held to have taken place on 21st June, 1967. It is

needless to point out that when once a contract has been broken, it is dead and there is nothing that can keep it alive thereafter. Under these

circumstances, the contract in question entered into between the parties had been broken by the appellant on 21st June, 1967 and breach had

been accepted by the respondent and thereafter there was no attempt whatever on the part of the respondent to keep the contract alive for the

benefit of both parties. We are therefore, of the, view that in so far as the claim for damages against the appellant is concerned the cause, of action

arose on the date of breach namely 21st June, 1967.

That Article 55 of the Indian Limitation Act of 1963, will be applicable to the, present case is not in. dispute. That provides that a suit for

compensation for breach of any contract, express or implied has to be instituted within three years from the date of breach or (where there are

successive breaches) when the breach in respect of which the suit is instituted occurs or (where the breach is continuing) when it ceases. It is not

anybody''s case that the instant case is one where there are successive breaches or the breach is a continuing one. It has already been held that the

contract in the present case was broken on 21st June, 1967, by the appellant and consequently, the respondent would have had three years time

from that date to institute a suit and to recover damages. That would mean that any such suit instituted by the respondent claiming damages after

21st June, 1970, would be barred. It is in this connection the learned Counsel for the respondent strenuously contends that the loss incurred

became known by the sale of the zinc dross and zinc ash to third parties on 1st May, 1968, and therefore, till the loss so incurred is known or

ascertained there is really no cause of action for the institution of a suit against the appellant.

In the plaint in O.S. No. 7679 of 1971, the respondent has not set out the basis on which it claims that on 1st May, 1968, the cause of action,

arose though it is stated that on that day the accumulated zinc dross and zinc ash were removed by fresh contractors. The question therefore, is

whether even after a breach of contract to the knowledge of both'' parties, the circumstance that one party takes considerable time to call for

tenders and sell the goods to third parties would extend in any manner, the period of limitation for the institution of a suit for recovery of damages

or suspend the cause of action which had already arisen during such interval. It is at once obvious that if this argument on behalf of the respondent

is accepted, it will be certainly open to a person in the position of the, respondent to remain quiet for quite a long number of years and then purport

to call for tenders and sell the goods and thereafter claim that the cause of action for the recovery of damages arose only on the date of sale. It is

even conceivable that such a period might well be beyond three years and therefore, to accept such a contention would be to render the period of

three years from the date of breach occurring in the third column of Article 55 of the limitation Act a dead-letter. This argument now pressed by

the learned Counsel for the respondent was not accepted by the Division Bench in Soundararajan and Co. Ltd. Vs. K.P.A.T. Annamalai Nadar, .

In repelling this contention Anantanarayanan, J. (asi he then was), observed thus:

It (the claim) ought to have been instituted within three years of the, date of the breach of the contract and it is no defence to this objection to urge

that it was only the occasion of re-sale which enabled the defendant firm to ascertain exactly the degree of damages or the precise amount which

would represent the injury suffered by them. The occasion for ascertainment will have to be distinguished from the date upon which the cause of

action arose, and from which limitation began to run

Reliance was also placed in this connection by learned Counsel for the respondent on Sections 22 and 23 of the limitation Act:, We fail 1o see

how those sections can have any application to the present case. There is no question of any continuing breach as contemplated in Section 22 on

the terms of the contract in the instant case, when the breach has taken place, on 21st June, 1967 and the cause of action also accrued on that

date. Section 23 contemplates suits for compensation for an act which does not give rise to a cause of action unless some specific injury actually

results therefrom. In the present case the breach of contract by itself, affords a cause of action for the suit and the respondent need not wait for

some other specific injury resulting therefrom. Therefore, sec-lions 22 and 23 of the limitation Act. can have no aooiication to the present case. Tn

Rajagopala Naidu Vs. Aiyyaswamy Chettiar and Others, Ramamurthi, J., after referring to the observations of Ananatnarayanan, T. (as he then

was), in Soundararajan and Co. Ltd. Vs. K.P.A.T. Annamalai Nadar, referred to already, observed this:

The acceptance of the contention urged by learned Counsel for the appellant would be completely opposed to the scheme of Article 115 and

Sections 23 and 24 of the limitation Act. In every case of a breach of contract for the sale of goods, the plaintiff who comes to Court, has a duty to

mitigate the damages and he may have to take certain steps with regard to the goods in question and it is only after such steps are taken by way of

re-sale that the damages could be ascertained. That does not mean that the running of time is postponed till the damages are actually ascertained

and after re-sale.

We may add that when once the cause of action for a suit had arisen on breach of contract, the running of time cannot be arrested nor can such a

cause of action be kept in a state of suspension as it were till such time as the damages are ascertained after a leisurely re-sale at the convenience

of one of the parties. We are, therefore, unable to accept the contention of the learned Counsel for the respondent that the cause of action for

instituting O.S. No. 7679 of 1971 arose only on 1st May, 1968, when the goods were re-sold after inviting fresh tenders and removed and when

the damages were actually ascertained. The suit should have been brought within three years from 21st June, 1967, the date of breach and having

been brought on 10th June, 1971, the claim of the respondent for damages against the appellant is barred by limitation.

The next contention of the learned Counsel for the appellant is that the suit O.S. No. 7679 of 1971 is barred by the principle of Order 2, Rule

2(3), Civil Procedure Code. The learned Counsel submits that having regard to the breach which was committed in June, 1967, it was the duty of

the respondent when the appellant sought the recovery of the sum of Rs. 5,000 paid by it as a deposit to have pleaded that it was not only not

liable to the appellant for the claim made in O.S. No. 3216 of 1968 but that it had also incurred damages as claimed in O.S. No. 7679 of 1971

and in the absence of such a claim for damages or leave from Court enabling the respondent to institute a separate suit for the recovery of such

damages the suit as instituted by the respondent does not lie. The learned Counsel for the respondent on the other hand points out that in the

written statement filed by the appellant in O.S. No. 7679 of 1971, no such plea had been raised in this regard and consequently, the appellant

should not be permitted to raise, such a plea. A perusal of the written statement filed by the appellant in O.S. No. 7679 of 1971, no doubt

discloses that this objection was not specifically and pointedly raised. But even so, no prejudice has been caused to the respondent because it is

found that even before this Court and the trial Court this legal plea had been raised by the appellant, though that was decided against the appellant

and consequently it cannot be said that the point was not raised earlier by the appellant. The objection in this regard raised by the learned Counsel

for the appellant has to be considered in its twin aspects, viz., whether on the facts and circumstances of the present case any duty, at all was laid

on the respondent to set up its entire claim for damages as against the appellant in the course of the written statement filed by it in O.S. No. 3286

of 1968 and what is the effect of a failure, in this regard. In the present case, it had already been seen that in O.S. No. 3216 of 1968, three written

statements were filed by the respondent. The first is dated 17th September, 1968 and therein nothing has been stated about the set off in relation to

the claim of Rs. 5,000 made by the appellant or about the damages stated to have been sustained by the respondent as a result of the breach of

contract committed by the appellant. In the second written statement, dated 15th December, 1970 in paragraphs 3 and 4 the respondent had

attempted to state that it had suffered a loss of Rs. 39.291.55 and (hat therefore it is entitled to forfeit the deposit of Rs. 5,000 made by the

appellant. Besides, it has also been stated, that the respondent reserves its right file a suit, against the appellant for the recovery of the balance of

the amount of loss suffered by the respondent owing to the breach committed by the appellant. Unfortunately for the respondent, in the earlier

order of the High Court in A.A.O. No. 462 of 1971, there is a definite direction that this additional written statement must be eschewed because it

does not plead an equitable set-off, but it proceeds on the basis of a right in the respondent to forfeit the deposit of Rs. 5,000. In the third written

statement dated 30th November, 1972 filed pursuant to the directions of the. High Court in A.A.O. No. 462 of 1971, in paragraph 3 after setting

out the details of the loss suffered by the respondent, the respondent in paragraph 4 claims that it is entitled to equitably set-off damages suffered

by it to the extent of Rs. 5,000 against the amount paid by the appellant as a deposit. In addition, it is also stated that the respondent had already

filed a suit in O.S. No. 7679 of 1971 for the recovery of the balance of the damages suffered by it.

It is seen that O.S. No. 7679 of 1971 had been instituted on 10th June, 1971, that is, even long before the additional written statement was

filed. It is also significant to note that a court-fee of Rs. 350 had been paid by the respondent on the relief of equitable set-off in a sum of Rs. 5,000

claimed by it. Under Order 8, Rule 6(1), Civil Procedure Code, where a set-off is claimed by the defendant in a suit in an ascertained sum of

money legally recoverable by the defendant from the plaintiff, the defendant may, at the first hearing of the suit, but not afterwards unless permitted

by the Court, present a written statement containing the particulars of the set-off sought. The effect of such, a claim of set-off is stated in Order 8,

Rule 6(2), Civil Procedure Code. Such a claim shall have effect according to that rule, as a plaint in a cross-suit, so as to enable the Court to

pronounce a final judgment in respect of both the original claim and the set-off. In the present case the equitable set-off to the tune of Rs. 5,000

was permitted to be raised by this Court, in the additional written statement and therefore, the set off claimed should be held to be unexceptionable

and in order. In the same written statement, the institution of another suit in O.S. No. 7679 of 1971 for the recovery of the balance by the

respondent is also stated. The effect of a conjoint reading of the, first and the third written statements permitted to be filed by this Court eschewing

the second is that in relation to the total claim of damages by the respondent against the appellant; in a sum of Rs. 39,251.88 a sum of Rs. 5,000 is

pleaded as a set-off to the claim of the appellant against the respondent in U.S. No. 3216 of 1968, while for the recovery of the balance of Rs.

34,251.88, O.S. No. 7679 of 1971 had been instituted. In other words the entire damages recoverable from the appellant, according to the

respondent has been set forth and claimed excepting that a part of it was pleaded as a set-off to the claim of the appellant and the rest formed the

subject-matter of the suit O.S. No. 7679 of 1971.

The learned Counsel for the, respondent, pointed out that a claim for damages which may properly form the subject-matter of a set-off even in

the larger sense of a combination of defence and counter-claim could as well be agitated by the independent suit and consequently, it is not

necessary that the respondent should always raise such a claim by way of defence only. For this purpose, the learned Counsel for the respondent

invited our attention to Meenakshinada Deikshtar Vs. Murugesa Nadar and Another, . At page 479, Ramaprasada Rao, J. (as he then was), while

dealing with the question as to what is required to be done by A defendant who opposes a claim for refund of deposit pointed out that the

defendant had to plead and prove the damages suffered upon which the Court will adjudicate as to what may be the reasonable compensation to

which the defendant is entitled and deduct the same and award a decree in favour of the plaintiff only for the balance. The procedure which a

defendant had to follow in such circumstances has also been indicated by the learned judge as a plea of set-off or a counter-claim against the

plaintiff for damages for breach of contract. The learned judge further observed that no doubt an independent suit for the same purpose is also

maintainable.

In P. Venugopala Pillai Vs. Thirugnanavalli Ammal, , the question which arose was whether the failure of a plaintiff who had instituted a suit for

recovery of kist paid by him to claim, a set-oil in that amount in an earlier suit for damages against him, would preclude him from maintaining an

independent suit. The Bench pointed out that it would be open to such a person to maintain an action for the recovery of the amount paid. At page

850, the Bench observed thus:

It may also be open to him to set-off the amount in a suit for damages and what could be set-off could always be claimed in an independent action

and the fact that a set-off was not claimed against a demand in a prior action would not preclude the claim being agitated in an independent action.

From the above it is clear that it is certainly open to a person in the position of the respondent to agitate its claim for damages in a separately

constituted and independent action as has been done in this case and not necessarily only by way of set-off. There is thus, no omission in our

opinion, by the respondent to sue for all the relies without the leave of Court.

However, the learned Counsel for the appellant invited our attention to the decision reported in Nawbutt Palhak v. Mahesh Narayan Lal

(1905) ILR 32 Cal. 654. In that case in a previous suit brought by A against B, the latter had claimed a set-off in respect of a portion of the sum

due to him upon adjustment of accounts between the parties, and had omitted to claim a set-off in respect of the remainder. In a subsequent suit

brought by B against A for the remainder, an objection was raised that the suit was not maintainable. The Calcutta High Court after referring to the

relevant provisions held that a claim to set-off does stand in several respects, in the same position as a claim by the defendant against the plaintiff in

a separate suit. The learned Counsel for the appellants also placed strong reliance upon the decision in Katkersa Rowlher v. Abdul Rahim Sahib

(1942) MLJ 43 : 55 LW 407 : I.L.R.(1942) Mad.836 : AIR 1942 Mad. 580. In that case the question arose whether a defendant who pleads a

set-off under Order 8, Rule 6, Civil Procedure Code, is to be deemed to be a plaintiff within the meaning of Order 2, Rule 2, Civil Procedure

Code, and consequently, has to suffer the consequences of an omission. The Division Bench, after referring to the provisions of the CPC observed

at 45 thus:

Order 8, Rule 6(1) states that where in a suit for the recovery of money the defendant claims to set-off against the plaintiff''s demand an

ascertained sum of money legally recoverable by him from the plaintiff not exceeding the pecuniary limits of the jurisdiction of the Court, and both

parties fill the same character as in the plaintiff''s suit the defendant may present a written statement containing the particulars of the debts sought tp

be set-off. Sub-rule (2) says that this written statement shall have the same effect as a plaint in a cross suit so as to enable the Court to pronounce

a final judgment in respect of both the original claim and the set-off. Therefore, the defendant who pleads a set-off is in the position of a plaintiff.

Moreover his written statement has to be stamped according to the value of the relief he claims.

Order 2, Rule 2(2) says that every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action,

but he may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court. Sub-rule (2) says that when a plaintiff

omits to sue in respect of, or intentionally relinquishes any portion of his claim, he shall not afterwards sue in respect of the portion omitted or

relinquished. Sub-rule (3) states that when a person is entitled to more than one relief in respect of the same cause of action he may sue for all or

any relief but if he omits any, except with the leave of the Court, he shall not be allowed to sue later for the relief omitted. This rule makes it quite

clear that a cause of action cannot be split up although reliefs may be if the Court agrees. If the plaintiff omits part of the claim which he is entitled

to make in respect of the cause of action he has for ever lost his right to the part of the claim omitted.

The question whether the defendant who pleads a set-off is bound by Order 2, Rule 2 was discussed by a Bench of the Calcutta High Court in

Nawbull Pathdk v. Mahesh Narayan Lal (1905) ILR 32 Cal. 654 and it was held that he was. The position was discussed at length by

Mookerjee, J., whose judgment Abdul Rahman, J,, accepted as embodying a correct statement of the law. We agree. Order 8, Rule 6(2) requires

the written statement put in by a defendant pleading a set-off to be such as to enable the Court to pronounce a final judgment both in respect of the

plaintiff''s claim and of the defendant''s claim.

The above observations clearly indicate that the Bench had purported to follow the principles of the decision of the Calcutta High Court already

referred to. Nor does the principle of the decision in Ameenammal v. Meenakshi (1920) 12 L.W. 173, based on res judicata apply to the present

case as there has been no omission to make a claim as such. We are of the opinion that these decisions do not in any manner assist the appellant as

the present case is not one of partial claim by a set-off and a total omission to claim the, remainder or balance. On the facts and circumstances of

this case noticed earlier, it cannot be said that there has been any intentional relinquishment of a portion of the claim by the respondent or an

omission on its behalf to sue in respect of the entire amount. Consequently, the bar under Order 2, Rule 2(2), CPC is not attracted in the present

case.

The next contention of the learned Counsel for the appellant is based on Section 54 of the Indian Sale of Goods Act and he contends that the

respondent is not entitled to recover damages as claimed by it. On the other hand, the learned Counsel for the respondent contends that the

appellant was fully aware of Clause 9 of the tender conditions and having known about it, it was certainly not open to the appellant to complain

that the respondent is not entitled to recover damages arising on resale. In the present case the contract which had been concluded merely enables

the appellant to life zinc dross at Rs. 2,715 per metric tonne and zinc ash at Rs. 1,225 per metric tonne. Even in the letter of acceptance under

Exhibit B-10, dated 27th| 31st May, 1967, it is stated that the quantity of zinc dross and ash may be fluctuating and the quantity of both zinc dross

and zinc ash actually accumulated has to be removed with another party in more or less equal consign-''ments. The statutory power of re-sale u/s

54(2) of the Indian Sale of Goods Act, would arise, if the property in the goods has passed to the; tmyer, subject to the lien of the unpaid seller.

However, where the property in the goods has not passed to the, buyer the seller has no right of re-sale u/s 54(2).

This position is clearly laid down by the Supreme Court in P.S.N.S. Ambalavana Chettiar and Co. Ltd. and Another Vs. Express Newspapers

Ltd., Bombay, . Therein the scope of Section 18 of the Sale of Goods Act has also been dealt with and it is pointed out that Section 18 of the Sale

of Goods Act provides that where there is a contract for the sale of unascertained goods, (namely, 300 tonnes of newsprint out of 415 tonnes lying

in the respondent''s godown in that case) no property in the goods is transferred to the buyer unless and until the goods are ascertained and that it

is a condition precedent to the passing of property under a contract of sale that the goods are ascertained. It was held that the condition had not

been fulfilled in that case where there is a contract for sale of a portion of a specified larger stock and therefore, till the portion is identified and

appropriated to the contract, no property passes to a buyer. Reference has also been made by the Supreme Court to the following passage in

Gillet v. Hilt (1949) E.R. 871 at 873:

where there is a bargain for a certain quantity ex-greater quantity and there is a power of selection in the vendor to deliver which he thinks fit, then

the right to them does not pass to the vendee until the vendor has made his selection, and trover is not maintainable before that is done. If I agree

to deliver a certain quantity of oil as ten out of eighteen tons, no one can say which part of the whole quantity I have agreed to deliver until a

selection is made. There is no individuality until it has been divided.

In this view, the Supreme Court held that no portion of 415 tonnes of the newsprint was appropriated under the contract by the respondent with

the appellant''s consent before the re-sale and consequently, the property in the goods bad not passed to the buyer and therefore, the respondent

has no right of resale u/s 54(2).

In the present case it is not known as to what quantity is likely to be available and how much out of that quantity, the appellant will be entitled

to lift after appropriation by the respondent towards the fulfilment of the terms of the contract in its favour. Apart from the circumstances that even

the larger stock has not been specified even the quantity out of such a larger stock remains unidentified and unappropriated. If the property had not

passed Section 54(2) of the Sale of Goods Act can have no application as no power of re-sale is required to enable a person to sell his own

goods. Such a power is required only when the property in the goods has passed to the buyer, subject to the lien of the unpaid seller and it is to

this class of cases that Section 54(2) would apply. Sub-section (2) of Section 54 of the Sale of Goods Act states that where the unpaid seller who

has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not

within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any

loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notice is not

given the unpaid seller shall not be entitled to recover such damages and the buyer shall not be entitled to the profit, if any, on the re-sale. Indeed,

in the present case it is doubtful whether the requisites for exercise of the right of re-sale as per the tender conditions were available at all. The law

on this subject has been discussed in Pollack and Mulla on the Sale, of Goods Act, Third Edition at page 215 thus:

The question whether a seller of goods has the right of re-sale is important, for where he has such a right he is entitled to claim as damages the

difference between the contract price and the amount realised on the re-sale less the costs of the re-sale, while if he has no such rights he is entitled

to the difference between the contract price and to market price on the date of the breach. The power to re-sell may be either statutory or it may

be conferred on the seller by the terms of the contract of sale; in the former case it can be exercised only if the property in the goods has passed to

the buyer, as is implied by the words of this section; in the latter case it can be exercised even if the property in the goods has not passed to the

buyer. Thus if it is provided in a contract of ''indent'' that on default oh the part of the buyer to pay for and take delivery of the goods within a

specified time, the seller should be at liberty to re-sell the goods and the) buyer should pay all the loss arising on the contract with interest the seller

is entitled to re-sell the goods on default on the part of the buyer even if the property in the goods has not passed to the buyer and to sue the buyer

for the loss on re-sale but it is necessary to the exercise of this power that the goods contracted for should at least have been appropriated, for the

purposes of the contract. If these has been no such appropriation, there is nothing to which the power of re-sale under the contract could attach

and the seller is not entitled in such a case to the loss on re-sale, but to the difference between the contract price and the market price at the date

of the breach.

It is clear from the above that in the circumstances of the present case the respondent is not entitled statutorily nor even contractually to claim the

difference between the price fetched on re-sale and that contracted for but would be entitled, if at all, to claim as damages the difference between

the contract price and the market price on the date of the breach as pointed out by the Supreme Court in P.S.N.S. Ambalavana Chettlar arid Co.

Lid, v. Express Newspapers Ltd., Bombay (1968) 2 S.C.J. 259 : (1968) 2 S.C.R. 239 : AIR 168 S.C. 741.

The next submission of the learned Counsel for the appellant is that there is no evidence of the market rate as on the date of the breach. It has

already been found that the breach took place on 21st June, 1967. Exhibit B-15, dated 10th April, 1.968 shows thai the cost of zinc dross in

April, 1968 was Rs. 2,366.66 per metric tonne. Exhibit B-16 is, dated 3rd October, 1968 and is a tender quotation submitted by M/s. Gayuddin

Algu Metal Refinery for the purchase of zinc dross and zinc ash at Rs. 2,181.25 and Rs. 406.25 per metric tonne respectively. Those rates have

been mentioned in Exhibit B-16 to be firm till 13th October, 1968, only. Exhibit B-17 is the letter, dated 17th October, 1968 sent by the

respondent to M/s. Gayuddin Algu Metal Refinery, and it says that the offer made by M/s. Gayuddin Algu Metal Refinery for the purchase of 100

metric tonnes of zinc asfe at Rs. 406.25 per 1000 kilograms was accepted. Exhibit B-18, dated 25th October, 1968 is the reply sent by M/s.

Gayuddin Algu Metal Refinery to the respondent agreeingto the terms and conditions set out in Exhibit B-18 and also enclosing a draft for Rs.

10,156. Exhibit B-19 is a report, dated 9th December, 1970 which furnishes the accumulation of zinc ash and dross and for 1967-68, the quantity

of zinc dross has been mentioned at 58.7 and the quantity of zinc ash at 71.02 metric tonnes. The basis of the suit laid by the respondent is that the

difference between the rate offered by the appellant and that evidenced by Exhibits B-15 and B-16 should be made available to it as and by way

of damages. Unfortunately, Exhibits B-15 and B-16 relate to April, 1968 and October, 1968 long after the expiry of the period of the contract and

have nothing whatever to do with the price of zinc dross or ash at or about the time of the breach. There is thus no evidence whatever that Has

been let in by the respondent to establish the quantum of damages sustained by it. Consequently, the quantum of damages as claimed by the

respondent has not been established at all.

That however, does not mean that the respondent did not sustain any damages at all. Indeed, it was the argument of the learned Counsel for

the appellant that the damages sustained by the respondent cannot in any case exceed the sum of Rs. 5,000 and this, according to him, is on the

basis of the Judgment of the Supreme Court in Madamsetty Satyanarayana Vs. G. Yellogi Rao and Others, The Supreme Court in that case

pointed out thus:

Section 74, declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-deter-mined, or where

there is a stipulation by way of penalty.

But, the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a

special benefit upon any party, it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for

forfeiture of any property by way of penalty, the Court will award to the party aggrieved only reasonable compensation not exceeding the amount

named or penalty stipulated.

The jurisdiction Of the Court is not determined by the accidental circumstance of the a party in default being a plaintiff or a defendant in a suit. Use

of the expression ''to receive from the party who has broken the contract'' does not predicate that the jurisdiction of the Court to adjust amounts

which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The

Court has to adiudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach'' of the contract. Such

compensation has to be ascertained haying regard to the conditions existing on the date of the breach.

As pointed out already, in the present case, there is absolutely no evidence of take market rate as on the ""date of the breach'' and

conseauently, a precise assessment of the damages sustained by the respondent is not possible. In our view, the conduct of the appellants amounts

to a failure on its part to adhere to the terms and conditions of the tender and backing out of it after acceptance for which the parties have

themselves agreed or stipulated Rs. 5.000 by the first part of Clause 9 of the tender conditions. In the absence, therefore, of any proof of. the

market rate as on the date of breach we are of the opinion that the amount of Rs. 5,000 with has been forfeited would be sufficient and reasonable

compensation to the respondent.

The last objection that has been faintly raised by the learned Counsel for the appellant is one of jurisdiction. According to him the appellant is a

firm carrying on business at Bangalore and the respondent made the offer from Madras and the performance of the terms of the contract should be

at Mettur and consequently, the Court at Madras will not have any jurisdiction. On the other hand, the learned Counsel for the respondent

contends that the receipt of the acceptance of contract by the appellant, in Madras would afford part of the cause of action within the meaning of

Section 20(c) of the Civil Prd-cedure Code and therefore, the Court at Madras will have jurisdiction. It is unnecessary to further pursue this matter

since in paragraph 20 of the Judgment of the trial Court it has been clearly stated that issue No. (3) touching the jurisdiction of Court had not been

argued before it. Consequently, it is unnecessary to go into this question. No other point was urged before us.

For the aforesaid reasons the dismissal of the suit O.S. No. 3216 of 1968 has to be upheld and consequently, A.S. No. 436 of 1976 is

dismissed. Since the other suit instituted by the respondent, namely O.S. No. 7679 of 1971, has been held to be barred by limitation, that has also

to be dismissed and consequently, A.S. No. 24 of 1975 is allowed. Each party is directed to bear its costs In the suits as well as the appeals.