BOOTHALINGA AGENCIES Vs. V T C PORIASWAMI NADAR

JUDGEMENT

(1.) This appeal is brought, by certificate, from the judgment of the Madras High Court dated March 16, 1962 in A. S. No. 367 of 1958.

(2.) The appellant carries on business in the manufacture and sale of coffee powder. He was for this purpose importing chicory under actual user's licence issued by the Government. The consignment of chicory in question was a consignment of 24-3/4 tons - 495 cases which arrived at Madras port by "S.S. Alwaki" in December, 1955. Exhibit B-9 was the licence under which the consignment was imported. The goods were cleared by the appellant on December 20, 1955. The case of the respondent was that the appellant agreed to sell the consignment to him under Ex. A-1 dated November 26, 1955 after taking an advance of Rs. 7,500. The contract was, however, entered into in the name of the find defendant and P. W. 2 acted as a broker in the transaction. The respondent paid another sum of Rs. 20,00 on December 23, 1955 after the goods arrived and were cleared on the representation that the delivery would be given in one month. Defendant No. 1 executed a letter, Ex. A-2 in this connection but thereafter owing to rise in prices the appellant committed a default. The suit was contested by the first defendant on the found that the contract was illegal an therefore void. The case of the second defendant was that he had nothing to do with the contract entered into between the plaintiff and the first defendant and, in any case, the contract for sale of chicory was illegal and void ab initio us contravening provisions of the licence granted to him or the import of chicory. The trial Court held, upon examination of the evidence, that both defendants 1 and 2 undertook with the plaintiff to fulfil the terms of the contract. On the question of legality of the contract the Court held that as the contravention of the terms of the licence by the sale of the imported goods would entail only an administrative penalty, the sale cannot be held to be prohibited by law and the contract was therefore a legal contract binding on both the parties. The trial court found that the date of the breach of the contract was February 14, 1956 and granted a decree in favour of the plaintiff against both the defendants for a sum of Rs. 35,640. Two appeals were filed in the Madras High Court against the judgment of the trial court-A. S.No. 367 of 1958 by the second defendant and A. S. No. 363 of 1959 by the first defendant. The appeals were heard together by the High Court which by its judgment D/-16-3-1962 allowed the appeal of the first defendant A. S. No.363 of 1959 and dismissed the suit as against him. As regards the appeal filed by the 2nd defendant the High Court reduced the amount of damages to the sum of Rs. 23,265. The High Court agreed with the finding of the trial Judge that the contract for the sale of imported chicory was entered into by the respondent directly with the second defendant and the second defendant was liable for its breach. As regards the legality of the contract, the High Court took the view that it could not be regarded as a contract prohibited by any law and so it was valid and binding between the parties and the plaintiff could properly sustain an action for damages for its breach. The High Court further held that the real contract which the plaintiff had entered into was with the second defendant and the first defendant was only a dummy in whose name the contract was entered into for ulterior reasons.

(3.) The first question to be considered in this appeal is whether the contract was in violation of the restrictions placed by the Imports and Exports (Control) Act,1947 and the notifications issued thereunder and in consequence whether it was void and illegal and whether a claim for breach of such a contract is maintainable.