MADDALA THATHIAH Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS is an appeal against the judgment and decree of Ramaswami Gounder J. dismissing the appellant's suit, C. S. No. 380 of 1949, for the recovery of a sum of rs. 34,063-7-3 from the Dominion of India as the owner of the Madras an southern Maharatta Railway represented by the General Manager of that railway. The plaintiff claimed that amount as damages consequent on a breach of contract alleged to have been committed by the defendant. The material facts are not in dispute. In pursuance of an invitation by the Madras and Southern Maharatta Railway for tenders for the supply of jaggery to the railway grainshops, the plaintiff submitted on 27-1-1048 a tender in the prescribed form offering to supply 14,000 imperial maunds of cane Jaggery, Chittoore variety, first sort during the months of february and March 1948 at the rate of Rs. 11-4-0 per imperial maund. ' the defendant in a letter addressed by the Deputy General 'manager of the railway dated 20-1-1948 accepted the plaintiff's tender and called upon the plaintiff to remit a sum of Rs. 7,900 in cash to the paymaster and cashier of the railway at madras on or before 7-2-1948 as security deposit for the proper fulfillment of the contract and intimated that on receipt of advice of such remittance the official order will be placed with him. The plaintiff accordingly paid the said amount and the defendant by letter from the deputy General Manager of the railway dated 16-2-1948 placed an order with the plaintiff for the supply of the entire Quantity of 14,000 maunds to be delivered in four installments of 3,500 maunds each on 1-3-1948, 22-3-1948, 5-4-1948 and 21-4-1948. The programme of delivery was altered later by a letter dated 28-21948 as follows: 3500 maunds bet-ween 1 and 4-3-1948, 3,500 maunds by 22 and 25-3-1943, 3,500 maunds between 5 and 8-4-1948 and 3,500 maunds between 21 and 24-4-1948. The plaintiff supplied the first instalment of about 3500 maunds as required by the defendant, and the defendant accepted the same. On 8-3-1948 the Deputy general Manager of the railway addressed a letter to the plaintiff which runs as follows : "please note that the balance of quantity of jaggery outstanding on date against the above order "is treated as cancelled and the contract closed:" the plaintiff protested against this action of the defendant and stated that he had invested more than a lakh of rupees to perform the contract and that he was ready and willing to supply the goods as per the terms of the contract. But the defendant refused to reconsider the matter and stated that the defendant was well within its rights in cancelling the contract. It is common ground that at no time did the defendant explain the reason for the cancellation and that he always took the stand on the following clause in the tender: "this Administration reserves the right to cancel the contract at any stage during the tenure of the contract without calling upon the outstand-ings on the unexpired portion of the contract. " the plaintiff thereupon filed the suit out of which this appeal arises, alleging that the said clause was null and void and no effect should be given to it, as the clause was entirely repugnant to the existence of a valid contract between the parties that the said clause would be against public policy and against justice, equity and good conscience and further submitted that even assuming the defendant had a right of cancellation, it could be exercised only for sufficient and valid reasons and not arbitrarily. . The plaintiff therefore charged the defendant with breach of contract and claimed damages for such breach in the sum of Rs. 34063-7-3 calculated at the rate of Rs. 3-4-0 per maund. being the difference between the market rate and the contract rate on the date of breach (8-3-1948), on the quantities still to be delivered under the contract. The defendant denied that the clause in question was for any reason invalid or unenforceable and stated that the defendant was not guilty of any breach of contract and the plaintiff had no cause of action to sustain the suit. The defendant also disputed the quantum of damages. Two issues were framed, namely, 1. Is the reservation clause in para 2 of the suit contract enabling the defendant railway to cancel the suit contract without assigning any reason legally enforceable, and

(2.) TO what damages, if any, is the plaintiff entitled? the suit was tried by Ramaswami Gounder J. who held that the clause in question was valid and enforceable and that there was nothing to compel the railway to exercise the power of cancellation conferred by that clause only for valid and sufficient reasons. On this finding he dismissed the suit with costs. Hence this appeal by the plaintiff. 2. Mr. V. Thiagarajan. learned counsel for the appellant, contended that the clause above mentioned, if it is construed as nullifying the rights and obligations of parties under a concluded contract, was null and void, that such a term was not supported by consideration, and that in any event the clause must be justly and reasonably applied. He conceded that the clause would be valid if it is understood to apply to a case where the defendant had not placed an order for the supply of a definite quantity. He referred in this connection to passages from leading test books on contract law which distinguish two classes of tender. Cashire discussed the two classes with the following preface:

(3.) IN the present case the tender can be read as implying an open offer of 14,000 imperial maunds ' of jaggery at a particular rate for delivery during the months of february and March 1948. The mention of the quantity would then only mean that upto that limit the plaintiff must be prepared to supply. It would not impose a corresponding obligation on the railway to place an order for the entire quantity. "the railway may place an order for say 6000 or 6000 maunds and subsequently refrain from placing any further orders. The plaintiff then can have no legal grievance. , The acceptance of the tender contained in the letter from the railway dated 29-1-1948 should be understood only as an acceptance of the terms, that is, the rate per maund etc. If nothing further had happened after that letter, the railway would have been well within their rights even if they had not placed an order for a single maund. Actually, however, by their letter dated 16-2-1948 the railway placed a definite order for the entire quantity of 14,000 maunds to be delivered on particular dates. Though subsequently there was a variation as to the dates of delivery, the order for the entire quantity remained. In law there was a concluded contract between the plaintiff and the defendant for the supply of 14,000 maunds. The contention of the appellant is that if the effect of the disputed clause is to confer on the defendant the right to cancel such a concluded contract before the contract was performed in its entirety, the clause would be repugnant to the contract and should be disregarded. In support of his contention learned counsel for the appellant referred us to the well known rule of construction that where there are two clauses in a contract so totally repugnant to each other, the former is to be received and the latter rejected, thus: "if there be a personal covenant and a proviso that the covenantor shall not be personally liable under the covenant, the proviso is repugnant and void". . . . Vide Chitty on Contracts, p. 162.