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Judgment
Krishnan, J.—This appeal arises froma suit brought by the plaintiffs in the Subordinate Judge''s Court at Madura on a Hundi or Bill of
Exchange executed by one Pasimuthu Pillai on behalf of the firm of one Kuppuswami Aiyar, now deceased, in Madura, whose agent he was. The
Hundi was drawn in favour of one Kolandavelu Pillai, the 2nd plaintiff, as representing the 1st plaintiff''s firm on the 23rd of August, 1918, and is
for a sum of Rs. 22,066. It was drawn on the 1st defendant''s firm in Madras and is marked Ex. A in the case. It was dishonoured when presented
to the Madras firm ; notice was given of it to the 1st defendant who was called upon to pay but failed to do so. Hence this suit was brought.
Kuppuswami Aiyar died leaving the 2nd and 3rd defendants as his sons and heirs who succeeded to their father''s estate and his trade. The 2nd
plaintiff has been joined as a plaintiff to avoid any objection as to parties.
The circumstances under which this Hundi was executed are briefly these:
The 1st defendant''s firm carried on trade in Madura in yarn and cotton thread and, in the course of that trade, the agent of the firm, Pasimuthu
Pillai, who was looking after the business, entered into seven contracts with Kolandavelu Pillai, the agent of the 1st plaintiff''s firm about the middle
of August, 1918, for the purchase of 229 bales of yarn to be manufactured by the Madura Mills of certain counts at certain stated prices. Of these
contracts we are concerned in the suit only with four of them relating to 153 bales. The contracts were originally made orally, but at the request of
the 1st defendant''s agent, they were reduced to writing on the 7th of September, 1918. They are called Varthamanam letters Nos. 21, 22, 23 and
24 and are filed in the case as Exs. B, BI, BII and BIII. The terms of the contracts are fully set out in these letters. It appears from them that the
suit Hundi amount was made up of advances agreed to be paid under the contract towards the purchase-moneys at the rate of Rs. 150 per bale,
for 25 bales under Ex. B, 20 bales under Ex. BI and 10 bales under Ex. BII, and at the rate of Rs. 142 per bale for 98 bales under Ex. BIII, less
Rs. 100 paid in cash, which is the subject-matter of the suit--O.S.No. 12 of 1920--brought by the 1st defendant against the 1st plaintiff and tried
along with this suit. Only two bales were actually taken delivery of and paid for by the 1st defendant under the contracts. Plaintiffs assert in their
plaint that the contracts were broken by the 1st defendant and not by themselves. They claim the amount due under the Hundi with interest and
costs.
The defendants pleaded that the plaintiffs committed breach of contract and were not therefore entitled to claim the Hundi amount and further
that the Hundi, having been passed in part payment of the stipulated price for goods to be manufactured, and no goods having been sold or offered
for sale to 1st defendant was not enfirceable. In reply to 1st defendant''s pleas, plaintiffs contended that the suit being one on a negotiable
instrument, a collateral enquiry could not be held in this suit into the question as to who committed the breach of contract, as such an enquiry is
barred by Section 45 of the Negotiable Instruments Act, even though as the payee he was a holder standing in immediate relation to the 1st
defendant,the drawer. They also contended that if the question of breach could be gone into, the 1st defendant committed the breach, and the
damages they are entitled to being more than the Hundi. amount, there was no failure of consideration on the Hundi.
The Subordinate Judge overruled the objection u/s 45 and holding that the breach was committed by the plaintiffs dismissed their suit except to
the extent of Rs. 284 of the Hundi amount, which had been taken into consideration in paying the price of the two bales delivered, for which he
gave a decree. He also decreed O.S. No. 12 of 1920 for Rs. 100. 1st plaintiff''s legal representatives have appealed to us against the decrees in
both these cases, the latter by way of a revision petition u/s 25 of Act IX of 1887.
As regards the objection raised by the plaintiffs against the defence u/s 45, I think the Subordinate Judge is right in overruling it. That section is
based on the English law on the point which is stated by Chalmers in his book on "" Bills of Exchange,"" 8th Edition, page 115, to be as follows:
Partial failure of consideration is a defence pro tanto against an immediate party when the failure is an ascertained and liquidated amount but not
otherwise,"" that is, when a collateral enquiry becomes necessary for the purpose. IIIustration I given on the same page explains what a collateral
enquiry is. Illustration 2, however, shows that where a bill is drawn for the price of 2 bales and only one is delivered, the defence that consideration
has failed to the extent of one half bale is available. That position is supported by the case of Agra and Masterman''s Bank, Ltd. v. Leighton
(1866) 2 Ex 56. Now in the present case, as I have already stated, the Hundi amount represents the advance price paid for the 153 bales, the
advance towards each bale being definite and fixed. The consideration for the Hundi can thus be pleaded to have failed with refer-ence to all the
undelivered bales and that is a sum that could be computed without any inquiry. In this view it will be the plaintiffs that will suffer if their objection is
upheld. But it seems to me that the case should not be disposed of in that manner but the question of who committed the breach should be
considered without driving the parties to another suit and thereby multiplying litigation. In England it is open now to the parties to raise the question
as to breach in a suit on a bill by counter-claiming. In the present case the question as to who committed the breach has been raised in the
pleadings each party charging the other with the breach and it has been fully tried out by the Lower Court and dealt with by it in its judgment. In
these circumstances it seems to me that we should deal with the case as if it were one for damages for breach of contract. If the breach is on the
plaintiffs'' part as held by the Lower Court its decree will be right ; if it is on the 1st defendant''s part as contended for by the plaintiffs, there is no
reason why plaintiffs should not be allowed to recover the Hundi amount as damages in this suit. No further amendment of the pleadings seems to
be necessary for the purpose.
6 The question then is who committed the breach in this case. As the contracts referred not to ready goods, but to goods to be manufactured
hereafter by the Madura Mills and to be allotted by them to the purchasers from whom plaintiffs'' vendors, Ramachar & Brothers were to get them
and the plaintiffs themselves were to get them from the latter firm it was naturally arranged that plaintiffs were to give notice in the first instance to
the 1st defendant when the bales were issued by the Mills and finally allotted to the plaintiffs by their vendors. The contracts provide that on the
day after receiving such notice 1st defendant was to pay the price deducting the advance on them and take delivery. The first two bales of which
notice was given by Ex. C-I to the 1st defendant under contract No. 24 were paid for and taken delivery of according to the terms of Ex. B-I1I.
About five days after the 1st defend-ant was again given notice by Ex. C-IV of a lot of three bales of 22 1/2 counts being ready for delivery. The
market seems to have fallen for these goods in the meanwhile. The 1st defendant instead of taking delivery as before, the next day after Ex. C-IV
was received, as he was bound to do under his contract, Ex. B-III, raised objections and sent his letter Ex. I and asked whether the Mill had
delivered the above-mentioned goods at the prices stated in Ex. B-III, the Varthamanam letter, and also said the Mill invoice should be shown to
him. The contract, Ex. B-III, does not speak of any Mill price but only of the price at which P. S. Latchmana Aiyar & Sons bought the bales and
there is no provision in it to show the Mill invoice. In fact, it is stated to us that the Mill invoice remains with the original purchaser from the Mill and
it is not passed on to the subsequent purchasers of smaller lots. Even if the Mill price were mentioned in Ex. B-III it does not seem to be a part of
the description of the goods and is not essential for the identification of the goods purchased. The goods are here identified as being 22 1/2 counts
of yarn manufactured by the Madura Mills and sold by them to Tholasi Aiyar & Sons and by them through the intermediary sellers to the plaintiffs.
On receiving Ex. I, plaintiffs sent Ex. II to say that they were not bound under their contract to answer the questions asked, or to produce the Mill
invoice; they offered to show Ramachar''s letter of intimation and called upon 1st defendant to pay the price with interest for the period of the
Belay and take delivery at once. About five days after 1st defendant sent another letter Ex. III in which he insisted on being shown the Mill invoice
and the bale number and stated that, on default, he would hold the plaintiffs liable in damages. Further correspondence passed between the parties,
Exs. D, G, D I, II, IV and V but they made no difference in the position taken up by the parties. The contents of those letters are set out fully by
the Subordinate Judge and need not be repeated here. It was argued that because in the last paragraph of Ex. G the plaintiffs still offered to deliver
the bales, they condoned the previous breach, if any, and kept the contracts alive ; but this is of no importance as 1st defendant took no advantage
of it but treated the contracts as broken even after Ex. G and called back the whole of his advance. (See Ex. H.) As the 1st defendant failed to
take delivery, plaintiffs failed to take the bale from their vendors and in consequence Ramachar & Brothers gave them notice that they had sold
away the goods in public auction and this fact is mentioned in Ex. IV ; with that the controversy as regards these three bales came to an end.
In spite of the conduct of the 1st defendant plaintiffs again gave him notice Ex. X of two bales of Madura Mill Yarn No. 24 being ready for
delivery, and asked him to pay for them and take delivery. This notice was also under Ex. B-III. The 1st defendant again adopted the same tactics
as before and instead of paying and taking delivery wrote the letter Ex. XI in similar terms to Ex. I. The plaintiffs wrote Ex. XII offering to give 1st
defendant all facilities to inspect the goods, as well as the "" papers, etc., "" which they had; but he did nothing except to send a lawyer''s notice, Ex.
XII, calling for a return of his advance with interest on the footing that the contracts were off.
With that the correspondence ended. The plaintiffs failed to get the 1st defendant to pay and take delivery of the goods or even to inspect them
to satisfy himself that the bales were those contracted for, if he really doubted their identity. There is evidence to show that the market was falling
and it was not to the 1st defendant''s interest to perform the contracts, he was clearly trying tp get out of his contracts. It is true, as the Sub-Judge
remarks relying on the observation in Bowes v. Shand (1877) 2 AC 455. that if the 1st defendant thought he was going to be a loser by accepting
the goods, there was nothing to prevent him from trying to escape from a losing bargain, if he could do so lawfully. But he can do so only for a
legal and proper reason but not on mere subterfuges.
The bales about which plaintiffs gave notice of readiness to deliver are asserted by them to be bales contracted for. They were buying from
Ramachar & Brothers and they got notices from that firm which are produced. There seems to be no reason to doubt that the bales about which
notices were given were the bales contracted for. An attempt was made by the defendants to prove that there were no bales of the contract
description to which the notices, Exs. C-I.V and X could apply by calling the Mill clerk, the only witness examined in the case, but the attempt has
failed. He admitted by reference to the Mill ledgers that before 25th September, 1918, 2 bales of 24 counts and 15 bales of 22 1/2 counts
Madura Mills yarn was delivered to Tholasi Aiyar & Brothers. He mentions different prices for these bales but I do not think that that matters as I
have already explained above. The bales of which notice was given by the plaintiffs were evidently part of those bales; there is nothing to show the
contrary.
The learned Subordinate Judge has held that the plain-tiffs committed breach of contract because in his opinion the ""plaintiffs failed to discharge
the obligation cast upon them by Section 38 of the Contract Act in regard to the identity of the goods."" It is contended that because the plaintiffs
did not answer the questions put to them in Exs. I and II and did not produce the Mill invoice or otherwise prove to the 1st defendant''s satisfaction
the identity of the bales they offered to deliver with the bales contracted for, they committed breach of contract. Section 38, Clause (3) does not,
in my opinion, lay such a heavy burden on the seller as is claimed. It only requires that the promisee must have a reasonable opportunity of seeing
that the thing offered is the thing which the promisor is bound by his promise to deliver. The promisor is under no obligation to prove the identity of
the thing offered to the promisee''s satisfaction. It is the promisee''s duty to take the steps necessary to satisfy himself. The promisor has only to
give him an opportunity for it. In this case, the goods could have been inspected if the 1st defendant had applied to the plaintiffs to enable him to do
so, and to see the count and the number of the bales which, according to the Mill clerk, are marked on the outside of the bale. If he wanted to see
the Mill invoice, he could have applied to Tholasi Aiyar through plaintiffs or directly. But the 1st defendant took no steps for these purposes but
contented himself with writing letters with a view to raise a defence subsequently. Plaintiffs offered to place all their ""goods and papers, etc. "" in 1st
defendant''s hands by Ex. XII, but he did not accept the offer. In these circumstances I have come to the conclusion that plaintiffs did all that they
were bound to do under their contracts and that there is no default on their part.
It was further argued that the plaintiffs should have reduced the goods to actual physical possession before giving notice and not having done
so, the notices were bad. I am unable to accept this argument. The goods were under the control of the plaintiffs and they were able and willing to
deliver if the price was paid as they did in the case of the 2 bales which were taken delivery of by the 1st defendant at the beginning.
That is all that Section 38, Clause (2) requires. Actual physical possession of the goods is not necessary. Delivery is often given on delivery
orders in the trade.
Having come to the conclusion that the plaintiffs committed no default, I must hold that 1st defendant committed breach by refusing to take
delivery and calling back his advance and that he is liable in damages. Ordinarily an enquiry will have to be held to ascertain the amount of
damages but as plaintiffs have sued for the Hundi amount'' and as it is conceded that damages are likely to exceed the amount, I think, we are
justified in giving the 1st plaintiff a decree for the Hundi amount. I would reverse the decree of the Lower Court and give 1st plaintiff a decree for
Rs. 22,066 with interest at 6 per cent. from the date of the Hundi to the date of payment and costs in both this and the Lower Court against the
estate of the 1st defendant, including the shares of his minor sons. O.S. No. 12 of 1920 will be dismissed with costs in this and the Lower Court.
Phillips, J.
I agree with the order proposed. I am satisfied for the reasons given by my learned brother that it was 1st defendant who committed the
breach of the contract and therefore plaintiffs are entitled to damages. As plaintiffs only claim the amount of the plaint Hundi, which is less than the
amount of damages claimable, it is unnecessary to decide the question of whether Section 45 of the Negotiable Instruments Act is applicable to the
facts of this case, and therefore, on that point, I reserve my opinion.