Case: M.N. Gangappa (Dead) By L. Rs Vs. Atmakur Nagabhushanam Setty &amp; Company &amp; Another

2. A suit was filed for the recovery of Rs. 22,0 as damages for breach of contract by the plaintiff (first respondent herein) against M. N. Gangappa now deceased and represented by his legal representatives. The second respondent was also joined as defendant. According to the case of the plaintiff, the defendants had entered into two contracts with him for the supply of groundnut seeds. It was claimed that both the contracts were for a specified quality of groundnut seeds, for specific delivery at a specified price and were not transferable. The first contract (Ex.) was entered into on November 1, 1950, and the delivery was stipulated to be made by January 31, 1951. The damages relating to this contract were claimed at the difference between the contract rate and the market rate which was stated to be Rs. 224/per candy, on the date of breach, i.e., January 31, 1951. The second contract (Ex.) was entered into on November 21, 1950. The damages relating to the contract were claimed on the basis of the difference between the contract rate and the market rate, namely, Rs. 218/per candy on the date of the breach which was stated to be February 28, 19513. On or about January 22, 1951, the plaintiff despatched 954 empty bags to Bellary by rail and sent the Railway Receipt by registered post addressed to the defendants asking them to despatch the stipulated quantity of groundnut seeds agreed to be supplied under the first contract (Ex.) by rail and to send the Railway Receipt through the Imperial Bank. It was alleged that the registered letter was returned as refused. On January 27, 1951, the plaintiff sent a telegram to the defendants stating that the registered cover containing the parcel Way Bill relating to empty bags had been refused by them and they were called upon to take delivery of the empty gunny bags by giving an indemnity bond to the Railway authorities. The defendants sent a telegram in reply saying that the transaction in question was of a "satta forward contract and was illegal and unenforceable." This was followed by other telegrams which need not be mentioned. On February 12, 1951, the plaintiff sent a telegram to the defendants asking them to deliver the quantity of groundnut seeds agreed to be sold by means of the second contract (Ex.. The defendants were informed that gunny bags would be sent to them on hearing from them. There was similar correspondence with regard to this contract as well. The defendants took up the position that the contract was illegal. In the written statement also it was asserted by the defendants that the contracts were void under Section 30 of the Contract Act and the Oil Seeds (Forward Contracts Prohibition) Order, 1943 (hereinafter called the Order). The material issues which arose for decision were as follows :"1. Did the suit contracts not intend delivery of goods but only payment of difference in prices and hence void and unenforceable ?2. Do the suit contracts contravene the provisions of the Oil Seeds (Forward Contracts Prohibition) Order, 1943, and hence void and unenforceable ?3. What is the quantum of damages to be awarded ?"The District Judge, Bellary who tried the suit, held that the defendants by means of the contracts Ex.0 and Ex.9 had undertaken to supply groundnut seeds to the plaintiff and that those contracts were not transferable. They were thus not hit by the provisions of the order. After determining the damages, the suit was decreed for Rs. 18,0 with interest at 6% per annum from the date of the suit till the date of payment4. The defendants filed an appeal to the High Court. The High Court gave the following findings :(i) The groundnut seeds which were agreed to be supplied by the two contracts were of "expeller quality" which was used for extracting oil, the other variety being "company quality" which was used for the purpose of export to foreign countries(ii) The plaintiff carried on the business of extracting groundnut oil and sending the same. Although the plaintiff did not produce his books of account, but there was no reason to disbelieve his evidence that he had entered into the suit contracts for the purpose of obtaining groundnut seeds for his oil extracting business(iii) The fact that the plaintiff had sent empty gunny bags to the defendants asking for despatch of groundnut seeds in those bags supported the plaintiffs case that actual delivery of goods was contemplated(iv) There was overwhelming evidence that the contracts were genuine and true transactions intending delivery of goods and that the defendants plea that the parties intended only to pay or receive the difference in prices was clearly an) It wasd that the mere fact that there was no express mention in the contracts that they weree was not sufficient to treat them as transferable contracts(vi) The express mention in the contracts that the goods sold were loose showed that it was contemplated by the parties that the groundnut seeds were to be put in the bags which were to be supplied by the plaintiff(vii) Under the contracts two obligations were imposed on the plaintiff one to supply empty bags and the other to pay the price of goods against delivery by the Railway Receipt(viii) Looking at the surrounding circumstances, it was established that the plaintiff required the groundnut seeds for use in his own mills and he had no intention of transferring them5. On the above findings the view of the District Judge was upheld with regard to the nature of the contracts. As regards the quantum of damages, the High Court observed that no evidence had been led with regard to the rates prevailing on the dates of breach but from the admissions contained in the defendants evidence, it was established that the rate could not be less than Rs. 210/per candy on the material dates. The damages were then assessed and the decree of the District Judge was modified accordingly.

Court's reasoning:
8. After a careful consideration of the contentions of both sides and the findings of the courts below, we do not consider that any interference is called for with the concurrent conclusion of two courts that the suit contracts were. The question whether a particular contract was of one category or the other, namely, transferable or9. The only other question which has been agitated relates to the quantum of damages.It is common ground that no evidence was produced with regard to the actual rates prevailing on the date of breach but it was fully established by Ex., the validity and genuineness of which has not been disputed, that on January 13, 1951, the rate was Rs. 210/per candy. Again on February 3, 1951, the rate was Rs. 224/per candy vide Exs.1 and. It was admitted by the defendant in his evidence that the price was rising from the month of November 1950, to March 1951, the rate finally going up to Rs. 220/per candy. The High Court, therefore, took the lowest rate, namely, Rs. 210/per candy which prevailed on January 13, 1951, as the rate for computing the damages. We do not find anything illegal or unreasonable about the process by which the damages were computed.