Full Judgment Text
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PETITIONER:
PILOO DHUNJISHAW SIDHWA
Vs.
RESPONDENT:
MUNICIPAL CORPORATION OF THE CITY OF POONA,
DATE OF JUDGMENT:
15/01/1970
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
HEGDE, K.S.
CITATION:
1970 AIR 1201 1970 SCR (3) 415
1970 SCC (1) 213
CITATOR INFO :
F 1973 SC1174 (7)
RF 1973 SC2724 (12)
ACT:
Contract-Formalities-Bombay Provincial Municipal Corporation
Act (59 of 1949), s. 74(2)-Contract requiring seal, and
affixture of seal to be attested by two members of Transport
Committee-Members of Transport Committee not elected-
Contract entered into without seal-Enforceability.
Indian Contract Act (9 of 1872), s. 70-Invoice value as
compensation-When allowed.
HEADNOTE:
The appellant was the sole selling agent of motor spare
parts for the manufacturers in the State of Bombay. The
respondent-Corporation was, constituted under the Bombay
Provincial Municipal Corporations Act, 1949. Under s. 74 of
Act and the Rules relating to contracts made under the Act,
a contract relating to the purchase of goods exceeding
Rupees five hundred is to be made in the name of the
Corporation by the Transport Manager, and, the contract has
to be in writing and in sealed in the presence of two
members of the Transport Committee who should sign in token
of the seal being affixed in their presence. Under s.
74(2), a contract not made in accordance with the provisions
of the Act and the rules is not binding on the Corporation.
The Transport Manager of the respondent-Corporation called
upon the appellant to supply certain spare parts worth more
than Rupees two lakhs. A formal contract incorporating the
agreed terms was not and could not be executed and sealed as
required by the Act, because, at the time when the contract
was entered into election of councillors to the Corporation
had not been held and no Transport Committee was constituted
and the powers of the Corporation and the Transport
Committee were being exercised by the Commissioner pursuant
to the transitory provisions of the Act. The appellant
supplied goods from time to time and the Corporation made
payments according to the invoices. One of the invoices was
for about Rs. 49,000-00. The invoice price consisted of an
additional 12-1/2% on the listed price by reason of the
increase in the price made by the manufacturers. With
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respect to that invoice, the Transport Manager was satisfied
that the rates quoted were ’proper rates’ and he accepted
the goods delivered on behalf of the respondent, and
appropriated them. But the respondent failed to pay the
amount and terminated the contract.
The appellant filed a suit for a decree for the invoice
amount and for damages. The respondent contended that the
contract was not enforceable, because, it was not executed
in the manner prescribed by the Act.
On the question of the amount to which the; appellant was
entitled,
HELD : (1) The contract was not made in accordance with the
provisions of the Act, for, it was not sealed, and
therefore, under s. 74(2) of the Act, the contract was not
binding upon the Corporation, There is nothing in the
transitory provisions which excludes the operation, of s.
74(2). Hence. even if it was not possible to comply with
the rules until the elections were held there was no warrant
for holding that the-
416
sub-section did not apply and that the Commissioner or the
Transport ,Manager could enter into contracts without the
sea of the Corporation. The appellant was accordingly not
entitled to maintain a suit for the price of the goods
relying upon any contractual obligation, nor maintain the
claim for damages on the footing that the respondent
committed a breach -of contract. [420 E, 421 B-D]
(2) But the appellant was entitled to maintain his claim
for compensation under s. 70 of the Contract Act. Under the
section compensation would normally be the market price of
the goods.
In the circumstances of the; present case, the invoice value
was the _prevailing market value of the goods and the
’appellant was entitled to it. The appellant was also
entitled to interest at 6% till date of payment. [422 E, F]
Secretary of State v. G. T. Sarin and Co. 1. L. R. 11 Lah..
375, approved.
JUDGMENT:
CIVIL APPELLATE JURISDICTION Civil Appeal No. 19 of 1967.
Appeal from the judgment and decree dated July 23, 24, and
September 26, 1963 of the Bombay High Court in Appeal No.
801 of 1957 from Original Decree.
J. C. Bhatt, R. A. Gagrat and B. R. Agarwala, for the
appellant.
R. B. Kotwal and Naunit Lal, for the respondent.
The Judgment of the Court was delivered by
Shah, J. Piloo Dhunjishaw Sidhwa--hereinafter called ’the
plaintiff’-carries on business in the name and style of Hind
Motor Corporation at Bombay. By a letter dated February 1,
1952 the Transport Manager of the Municipal Corporation of
Poona called upon the plaintiff to supply "motor spare
parts" described therein of the total value of Rs. 2,71,808-
12-3. The plaintiff by letter dated February 22, 1952
agreed to supply the goods. The plaintiff supplied the
goods from time to time and the Corporation made payments
according to the invoices. On July 3, 1953 the plaintiff
delivered certain goods ’required by the Corporation and
submitted an invoice for Rs. 49,743-6-2. The Municipal
Corporation failed to pay the amount of the invoice and
terminated the contract.
The plaintiff then instituted an action in the Court of the
’Civil Judge, Senior Division, Poona for a decree for Rs.
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49,743-6-2 being the value of "motor spare parts" supplied,
and for Rs. 39,755-2-4 being damages for breach of contract.
The suit was resisted by the Corporation principally on the
ground that the contract on which the plaintiff relied was
not executed in the manner prescribed by the Bombay
Provincial Municipal Corporations Act 59 of 1949 and on that
ground the contract was not
417
enforceable. The Trial Court decreed the plaintiff’s suit
for Rs. 49,743-6-2 being the invoice value of the goods
supplied with. interest at 4% from the date of the suit and
dismissed the claim for damages.
The Municipal Corporation appealed to the High Court of
Bombay against the decree of the Civil Judge, Senior
Division. The plaintiff filed cross objections to the
decree appealed from. The High Court rejected the
plaintiffs claim for, damages for breach of contract and
held that the plaintiff was entitled only to; the "fair
price" of the-goods supplied to the Corporation. In the
view of the High Court the fair price of the goods was the
"landed cost and 40% thereon" beside freight, insurance,
packing and forwarding charges from Bombay to Poona. To
determine the amount due to the plaintiff the Court
appointed a Commissioner. The Commissioner reported that an
amount of Rs. 38,010-59 was due to the plaintiff. The High
Court disallowed Rs. 2,407-83 and Rs. 6,058/- being items
respectively of commission paid to the financier of the
plaintiff and the customs duty for determining the landed
cost. The High Court accordingly decreed in favour of the
plaintiff Rs. 32,121-11 with interest, "at the rate of 6 %
from one month after the furnishing of the bill by the
plaintiff to the Corporation after the date of the notice",
at the rate of 9% from the date of the notice upto the date
of the suit, and at the rate of 7-1/2 % from the date of the
suit till the date of realization. The plaintiff has
appealed to this Court with certificate granted by the High
Court.
The Municipal Corporation of Poona was constituted on Febru-
ary 15, 1950 under the Bombay Provincial Municipal Corpora-
tions Act 59 of 1949. The provisions of the Act relating to
the making of contracts are contained in ss. 73, 74 & 75 in
Ch. VII of the Act insofar as they are relevant they
provide :
s. 73-"With respect to the making of contracts under or
for any purpose of this Act, including contracts relating to
the acquisition and disposal of immovable property or any
interest therein, the following provisions shall have
effect, namely:-
(a) every such contract shall be made on behalf of the
corporation by_ the Commissioner;
(b) no such contract for any purpose which, in accordance
with any provision of this Act, the Commissioner may not
carry out without the approval or sanction of some other
municipal authority, shall be made by him until or unless
such approval_ or sanction has first been duly given;
418
(c) no contract which will involve an expenditure exceeding
five thousand rupees or such higher amount as the
Corporation may, with the approval of the Provincial
Government, from time to time prescribe, shall be made by
the Commissioner unless the same is previously approved by
the Standing Committee.
(d)
(e) the foregoing provisions of this section shall, as far
as may be, apply to every contract which the Commissioner
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shall have occasion to make in the execution of this Act;
S. 74-"(1) The mode of executing contracts under this Act
shall be as prescribed by rules.
(2) No contract which is not made in accordance the
provisions of this Act and the rules shall be binding on the
Corporation."
S. 75-"For the purpose of contracts relating exclusively
to the Transport Undertaking the provisions of section 73
and those of Chapter V of the Schedule shall apply as if for
the word ’Commissioner’ wherever it occurs the words
’Transport Manager’ and for the words ’Standing Committee’
wherever they occur the words ’Transport Committee’ had been
substituted."
By the terms of s. 74(1) contracts with the Corporation had
to be in the manner prescribed by rules. By Ch. V of the
Schedule rules relating to contracts are prescribed. By r.
1, it is provided, insofar as it is relevant
"(1) Every contract entered into by the Commissioner on
behalf of the Corporation shall be entered into in such
manner and form as would bind the Commissioner if such
contract were on his own behalf, and may in the like manner
and form be varied or discharged
Provided that-
(a) any such contract which would require to be under seal
if it were entered into by the Commissioner shall be sealed
with the-common seal of the Corporation; and
(b) every contract for the execution of any work or the
supply of any materials or goods which will involve an
expenditure exceeding five hundred rupees or such higher
amount ... shall be in writing and be sealed
with the common seal of the Corporation in the
manner prescribed in sub-rule (2) . . . . . .
419
(2) The common seal of the Corporation . . . . shall be
affixed in the presence of two members of the Standing
Committee to every contract or other instrument required to
be under seal and such contract or instrument shall be
signed by the said two members of the Standing Committee in
token that the same was sealed in their
presence.............
Rule 4 of Ch. V, insofar as it is relevant, provides
"The provisions of this Chapter shall, so far as may be,
apply to contracts relating to the Transport Undertaking :
Provided that the functions to be performed thereunder by
the Standing Committee or the members thereof and the
Commissioner shall be performed by the Transport Committee
or the members thereof and the Transport Manager, as the
case may be."
Transitory provisions were made in the Act for the
administration of the affairs of the Corporation, till
elections of the Councillors were held. By s. 15 of
Appendix IV to the Act, it Was provided
"Notwithstanding anything contained in this Act, the
Commissioner shall exercise the powers and perform the
duties of the Corporation and the Standing Committee under
this Act and under any other law for the time being in force
until general ward elections shall have been held in
accordance with the provisions of this Act and the first
meeting of the Corporation shall have been held."
By s. 23 Appendix IV the State Government was given the
power to make orders for removing difficulties. It provided
:
"If any difficulty arises in giving effect to the provisions
of this Act or, by reason of anything contained in this Act,
to any other enactment for the time being in force, the
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State Government may, as occasion requires, by order do
anything which appears to it necessary for the purpose of
removing the difficulty :
In exercise of this power the State Government issued an
order on May 6, 1950, authorising the Municipal Commissioner
of the City of Poona-(1) to exercise all the powers and
perform all the duties, which are exercisable and to be
performed by the Transport Committee under the said Act,
until the first meeting of the Transport Committee as
constituted under the Act shall have been held; and (2) to
exercise all the powers and perform all the duties,
420
which are exercisable or to be performed by the Corporation
in respect of a Transport Committee under the said Act,
until the general ward elections shall have been held in
accordance with the provisions of the Act and the first
meeting of the Corporation shall have been held.
A contract relating to the purchase of "goods" exceeding
rupees five hundred in value is to be made in the name of
the Corporation by the Transport Manager. It has to be in
writing and has to be sealed in the presence of two members
of the Transport Committee who sign in token of the, seal
being affixed in their presence.
A formal contract incorporating the agreed terms between the
plaintiff and the Corporation was not and could not be
executed and sealed as required by the Act, for, at the
relevant time elections of councillors to the Corporation
had not been held, and no Transport Committee was
constituted as required by s. 25 of the Act and the powers
of the Corporation were being exercised by the Commissioner
pursuant to the transitory provisions. The Commissioner
was, it is true, competent to exercise all the powers and
perform all the duties of the, Transport Committee. But
under the rules in Ch, V the seal of the Corporation must be
affixed in the presence of two members of the Transport
Committee who signed in token of the seal having been
affixed to the contract. The Act clearly provided by s.
74(2) that the contract which was not made in accordance
with the provisions of the Act and the rules shall not be
binding on the Corporation. The contract was not made in
accordance with the provisions of the Act, for-, it was not
sealed, and was by virtue of s. 74(2) of the Act not binding
upon the Corporation.
Mr. Bhatt urged that the formalities relating to execution
of the contract with the Corporation could not be complied
with until a Transport Committee was constituted after
election of Councillors of the Corporation and on that
account the provisions relating to the form and manner of
execution of the contract had no application to the contract
in dispute. Any other view, counsel contended, rendered the
Corporation incompetent to make contracts essential for the
administration of the Corporation. Counsel also contended
that the Corporation had not even a seal which could be
affixed, because the form of the seal had not been approved
by the Councillors. Counsel again said that even if the
functions of the Transport Committee could be exercised by
the Commissioner, a seal affixed in the presence of the
Commissioner and attested by him would not amount to
compliance with the rules. in view of these provisions it
was contended that the provisions of the Act relating to the
form and mariner of execution of contracts could only apply
after the elections are held and the Corporation could
comply with the provisions.
421
By s. 5 of the Act the Corporation is a body corporate
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having a perpetual succession and a common seal. Our
attention has not been invited to any provision which even
by implication suggests that the Corporation may have a seal
only after elections are held and the form of the seal is
approved by the members of the Corporation. But the
argument whether the Corporation had at the date of the
contract a seal is not relevant. We are unable to hold that
the provisions of ss. 73 and 74 and the relevant rule:; in
Ch. V ,did not apply before the elections were held and the
statutory Committees were constituted. There is nothing in
the transitory provisions which excludes the operation of s.
74(2) of the Act. Granting that it is not possible to
comply with the rules, until the elections are held, there
is no warrant for holding that the provisions of s. 74(2)
will not apply and the Commissioner or the Transport Manager
may enter into contracts without seal which are enforceable
at law, Notwithstanding the absolute terms of the Act. In
our judgment there was no enforceable contract between the
plaintiff and the Corporation. The claim for, damages on
the footing that the Corporation committed a breach of
contract was, therefore, rightly rejected by the Trial Court
and the High Court.
The plaintiff is not entitled to maintain a suit for price
of the goods relying upon any contractual obligation of the
Corporation. But the plaintiff may still maintain his claim
for compensation under s. 70 of the Contract Act which
provides
"Where a person lawfully does anything for another person,
or delivers anything to him, not intending to do so
gratuitously, and such other person enjoys the benefit
thereof, the latter is bound to make compensation to the
former in respect of or to restore, the thing so done or
delivered."
That is not disputed by the Corporation. The Trial Court
awarded to the plaintiff the invoice value_of the goods
delivered by him. The learned Judge was of the view that
the plaintiff as the sole selling agent of "motor spare
parts" for the manufacturers in the Bombay State, was
entitled to the listed price with 12-1/2% thereon because of
the increase notified by the manufacturer. In the view of
the learned Judge the price for which the plaintiff made out
an invoice was "reasonable and proper". The High Court held
that the plaintiff may recover compensation equal to the
"fair price" of the goods.
In our view the High Court was in error in holding that the
plaintiff is entitled not to the invoice value of the goods,
but only to "the fair price" of the goods. Under s. 70 of
the Contract Act, a person lawfully delivering goods to
another, and not intending to do so gratuitously, is
entitled to demand that the goods delivered 7 Slip. Cl
(NP)70-12
422
shall be returned, or that compensation for the goods shall
be made Compensation would normally be the market price of
the goods. By refusing to return the goods, the person to
whom the goods have been delivered cannot improve his
position and seek to pay less than the market value of the
goods. The High Court of Lahore in Secretary of State and
Another v. G. T. Sarin & Company(1) held that a person
without an enforceable contract in his favour supplying
goods to a Government Department is entitled to a money
equivalent of the goods delivered assessed at the market
rate prevailing on the date on which the supplies were made.
The plaintiff had made out an invoice in respect of the
goods -delivered. The Transport Manager accepted the goods
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on behalf of the Corporation and appropriated them. He had
satisfied him-self that the rates quoted were "proper
rates". The plaintiff was paid in respect of other goods
supplied at the rates quoted in the _price-list together
with incidental charges. The plaintiff was the sole selling
agent in the Bombay State and the additional 12-1/2 % which
the plaintiff claimed on the listed price was by reason of
the -increase in the price made by the manufacturers. There
is no reason to hold that the invoice price was more than
the market value of the goods. If it was the contention of
the Corporation that the market rate was less than the
invoice price it was open to the Corporation to lead
evidence about the ruling rates at which the spare -parts
were sold in India by other agents of the manufacturers.
But no such attempt was made. The plaintiff, in our
judgment, was ,entitled to the market value of the goods at
the date of supply, and, in our judgment, the invoice value
was the prevailing market value -of the goods.
The plaintiff is also entitled to interest at the rate of 6%
per annum from "the date one month after the date of supply"
till the date of institution of the suit, and at 6% on
judgment from the ,date of the suit till payment.
We accordingly set aside the decree passed by the High Court
and restore the decree passed by the Trial Court with the
modification in the rate of interest set out earlier. In
view of the partial success of the parties, there will be no
order as to costs in this ,Court and in the High Court. In
the Trial Court the plaintiff will be entitled to
proportionate costs for the amount decreed and the,
Corporation will bear its own costs.
R.K.P.S. Appeal dismissed.
(1) I.L.R. 11 Lah. 375.
423