Gajanan Moreshwar Parelkar v Moreshwar Madan Mantri (Indemnity) (Plaintiff, at the request of the defendant, executed two mortgages in favour of Mohandas. Defendant wrote a letter promising to indemnify the plaintiff against any suits by the mortgagee, along with executing a third mortgage in place of the previous two. Plaintiff prays that the defendant obtains a release of liability from Mohandas; Issues: 1) Can the indemnified ask for performance of the contract of indemnity without suffering actual loss? ) Whether the obligation of the plaintiff was absolute. Held: S 124,125 do not apply, as said sections do not cover the transaction. ICA is not exhaustive, and principles of equity will allow the indemnified to enforce said contract of indemnity without having suffered actual loss, when the obligation of the indemnity holder is absolute. Here, obligation is absolute. RATIO: There exist contracts of indemnity, which do not fall within the ambit of S 124,125.
Contracts of indemnity can be enforced without the actual loss of the indemnified so long as there is an absolute liablity of the type covered by the contract of indemnity. ) 2. S. 124 – Lala Shanti Swarup vs Munshi Singh & Others (Indemnity) (Vendor sold an encumbered land to vendee, who promised to make required payment against a mortgage to the mortgagee; Vendee fails to do so, vendor sustains loss in the form of ? th of their property being sold; Vendor sues under implied contract of guarantee.
Issue: Is there a contract of guarantee? Is the suit barred by limitation? Held: A conveyance which contains a covenant whereby th epurchaser promises to pay off encumberances on the sold property is nothing but an implied contract of indemnity, whose cause of action arises when ACTUALLY DAMNIFIED (Mortgage decree being passed does not amount to actual damnification)) 3. S. 125 – Gray v Lewis & Parker v Lewis (Indemnity) 4. S. 26 – Mountstephen v Lakeman (Guarantee) (L, director of the Board, tells M to connect the sewer system with individual houses although the Board hasn’t asked M to do so, as a whole. L says that he will see M gets paid (“I will see you paid”). Issue: Does the above statement impose a primary of secondary obligation on L (ie is this a contract of indemnity or guarantee? ) Held: Through his statement (when given its natural meaning), L placed a primary obligation on himself to indemnify M; Lack of a principal debtor also makes this a contract of indemnity ) . S. 126 – Punjab National Bank Limited v Bikram Cotton Mills (Guarantee) ( The Company executed 3 documents (promissory note, hypothecation and a letter) in favour of its creditor, the bank; On the same day, the Managing Agent of the company executed an agreement of guarantee with the Bank; Issue: Is this an issue of guarantee or indemnity? Whether the suit filed was premature? Held: As all documents were executed on the same day, it can be inferred from the conduct and intention of the parties that the agent enetered into an agreement of guarantee.
The bank was entitled to claim at any time the money due from PD as well as from G under the promissory note and the bond. The suit could not therefore be said to be premature. Also, the binding obligation created under the composition ‘between the company and its creditors does not affect the liability of the surety unless the contract of surety-ship otherwise provides. G is liable for “ultimate balance” which should be determined) (the nature of the bond of guarantee would be that of a continuing guarantee) . S. 126 – Ramchandra B. Loyalka v Shapurji N. Bhownagree (Guarantee) (D, a broker, forms a contract with P, to be a sub-broker reponsible for certain constituencies; Said constituencies default and owe D 16,000. P and D enter into a second agreement whereby P will be liable for the above amount; Note: Sub-broker is suing broker for his commission Issue: Was the agreement whereby P will be responsible for the constituencies a contract of guarantee or indemnity?
Held: For a contract of guarantee to subsist, there must be three parties to the contract (PD-C, G-C and PD-G (this last contract can be implied (S 145) or express, and is a contract of indemnity between PD and G); (i) Here, the last contract was absent, with the constituencies being unaware of the offer of P (the sub-broker); (ii) P (sub-broker) has an interest in the transaction (which happens in contracts of indemnity and not guarantee). Thus, contract was of indemnity; Also, the fact that D sued the lients for the price and then compromised without the consent of P is immaterial as P is not a party to the contract (i. e. , not guarantor)) 7. S. 126 – U. P. State Sugar Corporation v Sumac International Limited (Bank Guarantee) (Sumac entered into a contract with Sugar Corporation wherein Sumacwould have to deliver a new wing of Sugar mills to the corporation by a certain date; Sumac had to execute five unconditional bank guarantees in favour of P(plaintiff) for delivery, advance payments, etc.
U. P. Government informed P that it was to be converted into a joint venture and hence should stop expansion of mills; P cancelled agreement with D, and sought to enforce the bank guarantees. D applied for arbitration and an interim injuction against encashing the bank guarantees. Issue: When can injuctions be granted on unconditional bank guarantees. Held: Injuctions are not easily granted as this would affect commercial transactions.
Two exceptions: (i) Fraud: must be of an egregious nature such as to vitiate the entire underlying transaction; must be that of the beneficiary, and not the fraud of anyone else. (ii) Irretrievable harm/injury caused to either party on encashing guarantee: exceptional circumstances that make it impossible for the guarantor to reimburse himself if he ultimately succeeds, will have to be decisively established; existence of any dispute between the parties to the contract is not a ground for issuing an injunction to restrain the enforcement of bank guarantees. Hence, no injuction was granted) 8. S. 26 – National Highway Authority of India v Ganga Enterprises and Another (Bank Guarantee) (P invited bids for collection of toll on a highway; D had to provide Rs 50 lakhs as bid security on issuing a bid, in case of withdrawal of bid before 120 days, and Rs 2 Cr on acceptance of the bid, as performance security; The bank guarantee was to be paid by the bank without demur on a written demand merely stating that one of those conditions has been fulfilled, D removes his bid before 120 days, and his bid is found to be the highest and is accepted, but after withdrawal of offer; Thus, no contract formed; Issue: Whether P can enforce the bank guarantee of bid security without the breach/formation of a contract?
Held: The bank guarantee was an “on demand guarantee” to be granted without demur; By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. Withdrawal of a bid and forfeiture of security are two different things. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract. Thus guarantee was enforceable, and to enforce the back guarantee the creditor doesn’t have to show any evidence to show a breach. The bid security was given to meet specific contingency i. e. withdrawal of the offer within 120 days. The contingency having arisen, Appellants are entitled to forfeit.
The existence and non-existence of an underlying contract become irrelevant when the invocation is in terms of the bank guarantee. 9. S. 126 – Mahatma Gandhi Sahakra Sakkare Karkhane v National Heavy Engineering Co-Operative Limited and Another (Bank Guarantee) 10. S. 126 – Hindustan Construction Co. Ltd v State of Bihar & Others (Bank Guarantee) (HCCL contracted with the government to contruct a dam; had to execute two bank guarantees in favour of the governement (performance and mobilisation advancement); Governement applied to encash said guarantees claiming non-performance by HCCL, who then files for interim injunctions; Issue: Whether the bank guarantee is conditional or unconditional.
Held: Bank Guarantee was conditional (terms are of material importance); Advancement guarantee can be enforced only if obligations of HCCL are not discharged or there is misappropriation (neither of which can be proved) Performance guarantee can be given only to the “chief engineer” who was not the one who applied for it; Thus, injuction granted) 11. S. 128 – Greer v Kettle (Guarantee) (An agreement was made whereby Austin Friars ( A) were to be given a loan from Mercantile Marines(MC). A was to provide MC collaterals by way of shares of Iron Industrial Company to make the transaction a secured one. The Parent Trust company (P) agreed to guarantee the secured debt , thereby becoming the surety. However, it was later found out that A had not issued any shares, and A went on to default on the loan.
Issue: Whether P is still liable as surety although the debt is no longer secured, and whether P is estopped from declining the liable of surety. Held: The shares being given as collaterals was one of the pre-requisites for the defendant (P) to become a surety. They didn’t become guarantors for any unsecured loan , thus there is no question of imposing liability for which they never consented to. Also, estoppel cannot aply as P was not in a position to gain knowledge/privy to the existence or lack thereof shares mentioned in the recital; M was in such position, thus M is estopped. RATIO: A surety can insert pre-conditions to his liability as guarantor when he enters into a contract. ) 12. S. 28, 133-139 – Charan Singh v Messrs Security Finance Pvt. Ltd. and Others (Co-extensive Liability) (Facts: Decree holder entered into a compromise with one of the judgment debtors(Principal debtor) for the payment of Rs. 10,000/- then sues the other judgment debtor(Guarantor) for the remaining Rs. 20,000/- Issue: Do sections(S 133 to 139) of ICA apply when the surety, PD, and creditor acquire the roles of decree holder and judgment debtors? Held: After a decree has been passed, the liabilities of the surety and principal debtor are that under the decree and not under the original contract. i. e. The liability of the surety is no longer co-extensive with that of the debtor.
The surety and PD become co-judgment debtors. The relevant sections of the ICA do not apply to decrees, only apply to creditor, surety and principal debtor. Thus, the creditor can get amount for surety) 13. S. 128, 134 – Syndicate Bank v Channaveerappa Beleri and Others (Co-extensive Liability) (Period of limitation for contracts of guarantee) ( The Bank (P) gives a credit loan to a company, who defaults on their payment. P sues the directors of the company (D), who are the sureties of said loan; D claims limitation period starts from when the company (ie Debtor) defaults on payment; Issue: When does the period of limitation start for a contract of guarantee, as against the surety?
Held: It runs from the time when the balance is constituted and demand is made. The Guarantee Contract mentions that there shall be payment on demand , thus a demand is a condition precedent for the liability of the guarantor. Time will start running when the contract is broken ( A. 55) or when the right to sue accrues ( A. 113) , that is when the demand is made and it is refused by the surety. This is a contract of continuing guarantee with a live account. The time period started to run from the moment the refusal by the surety was made. Thus the suit is not time barred. RATIO: Limitation period for a debtor starts when the debt is incurred , and for surety when the demand for payment is made. ) 14. S. 39 – Radha Kanta Pal v United Bank Of India Ltd. (Guarantee) (Raji Kanta (legal heir-Radha Kanta) gave a fidelity bond in favour of Nishe Kant (an employee of the bank), who then misapproprited funds and left without a notice. The bank then encashing promissory notes given by Rajni Kant as security; Radha Kant wants to stop payment as he claims the bank continued to hire Nishi Kant, even after knowlegde of dishonesty, without informing the surety (Invoking the aplicability og S 139) Issue: Does the surety’s liability get discharged under S 139? Held: The surety’s liability, for the faithful discharge by another, of his duties depends on the exact terms of that guarantee. Utmost care in supervision may not be a term in the contract; continued employment of proved dishonesty is an implied term, wherein the surety’s liability is discharged) The guarantor in such a case guarantees the fidelity and not the infidelity of the servant. He guarantees the fidelity and ensures the loss against the risk of infidelity and not the fact of infidelity. Under Section 139 the two important requirements are: (i) The act of the creditor is inconsistent against with the rights of the surety. (ii) The remedy of the surety against the principal debtor has been impaired. (ii) is lacking, thus S 139 does not apply, although the creditor continued to hire Nishi Kant after knowledge of his dishonesty, thereby violating the rights of the surety. Verdict for the Bank to encash promissory notes, and Radha can sue Nishi Kant) 15. S. 34, 137 – Aziz Ahmad v Sher Ali and Others (Time bar= barred debt, NOT extinguished debt; barred debt is still a live debt) (Facts: NA; Issue: Whether the surety is discharged when the creditor allows the execution of his decree against the principal debtor to be barred by limitation; Held: Mere omission to sue within limitation period does not discharge the surety. S 137 states that mere forbearance on part of the creditor does not discharge the surety. Debt becoming time barred does not amount to “omission” under S 134. On expiry of the period of limitation, the creditor loses the remedy but not the right to the debt, and thus omission to sue does not discharge the debtor. S 134 does not apply; The surety has argued that he will lose the right to seek remedy under s. 140 and s. 145 as the rights of the creditor cannot be enforced. (Applicability of S 139?? However the surety can guard against such contingency by including a term in the contract whereby as soon as the guaranteed debt becomes due , the surety will be invested with all the rights creditor has against the debtor after making the payment; read this case against the case of Syndicate bank) RATIO: A creditor has no duty to the surety to pursue his legal remedy against the principal debtor and his failure to take action will not discharge the surety. 16. S. 129 – Margaret Lalita Samuel v Indo Commercial Bank Limited (Continuing Guarantee) (Samuel and his wife, the appellant, exected a continuing guarantee in favour of a company which the bank had a running account with. The company ceased to operate. Issue: Was each debt a new loan, with a different cause of action, thus barred by limitation? Ie what is the limitation period of a continuing guarantee?
Held: The defendant undertook to pay any amount that may be due by the company at the foot of the general balance of its account or any other account whatever. In the case of such continuing guarantee, so long as the account is a live account in the sense that it is not settled and there is no refusal on the part of the guarantor to carry out the obligation, the period of limitation does not commence running. Limitation would only run from the date of breach (ie refusal to pay by surety). The over draft account that the bank had in the name of the company continued to be active even after the company ceased the business. The defendant also sent a letter acknowledging her liablity, thus confirming the liability for the still active account) 17. S. 133 – M. S.
Anirudhan v The Thomco’S Bank Ltd ( the Bank gave a form of guarantee, to be filled by G (Guarantor) to the PD (debtor). G put in th value of 25K, which the bank refused, stating their maximum was 20K. The PD made the value 20K, thus altering the document; Issue: Whether surety’s liability is discharged under S 133; Whether this was a material alteration (change in the nature/obligation of the contract), affecting the original contract; Whether PD acted as the agent of G, who was thus estopped from going back on granting implied authority to PD to make said changes. Held: The alteration was held to be unsubstantial, as 25K includes 20K, and it is in fact to the benefit of the guarantor.
Also, said alteration did not change the nature/obligation of the surety, it only reduced the liability. S 133 does not apply. PD was held to act as agent, had apparent authority to make such changes (due to the fact that G had handed over the form to PD to give to the Bank), and hence G was bound by the principle of estoppel. DISSENT: The original offer of 25K was rejected by the Bank, and thus, no contract was formed. ) 18. S. 129, 130 H. B. Basavaraj v Canara Bank (Continuing guarantee: In the absence of a specific written document by Basavaraj revoking the guarantee, the guarantee stands and the legal representatives of the deceased are liable to repay the loan. ) 9. S. 140, 141 – Craythorne v Swinburne (Guarantee) (CHECK BRIEF; The oral promise that John Swinburne gave was actually, collateral to facilitate the guarantee and others were not privy to the agreement and as such John Swinburne had limited his liability. Defendant was collateral security and not co-surety, and is exempt from the principles of equity (to contribute to the debt payment) as he did so through specifics in a contract) 20. S. 139, 141 – State of Madhya Pradesh v Kaluram (Security) (Facts: Auction by the Divisional Forest officer held J as the highest bidder. Four installments of payment had to be made for the sold forest produce.
As per the terms of the contract, the Government may prevent the forest contractor (J) from taking forest produce in excess of that which was paid for, w. r. t. particular installments. i. e. the forest produce not yet paid for was equivalent to security. (This could be resold). Issue: Whether S 141 of the ICA applies. I. e. whether the Government lost the principal debtor’s security without the consent of the surety, thus discharging the surety. Held: The surety is discharged from all liability as S 141 applies. The State lost the security of the forest contractor by allowing forest produce (completely under their control) to be taken without payment. Thus, the rights against the debtor that the surety acquires after the creditor is paid no longer exists, thereby discharging the surety.
Ratio: The term “security” under S 141 is not used in strictly technical terms, but refers to all rights, which the creditor possesses against the debtor/his property at the time of formation of contract. In this case, the right of re-sale of goods served as security under S 141) 21. S. 134, 139 – Mahanth Singh v U Ba Yi (Facts: Plaintiff was a building contractor employed by four trustees of ‘X’ pagoda. Respondent is the guarantor of said trustees. Plaintiff filed a suit for payment against the four trustees, then changed the suit to strike down the names of the four ex-trustees, and add eight names of present trustees. Thus, due to some procedural rule, the plaintiff is prevented from instituting proceedings against the original four trustees.
Issue: (i) whether the liability of the surety is discharged by the act of the present appellant in forgoing his claim against the principal debtors. i. e. Whether S 134, 139 apply. (ii) Whether the agreement of debt is declared void (due to inability of the creditor to file a claim) under S 2 (g), (j) under the ICA Held: (i) Surety is still liable. S 134-The principal debtor is not discharged of his debt, the creditor is merely stopped from claiming said debt due to procedural instruments. S 139-The right of the surety against the debtor is not infringed, thus this section does not apply. (ii) S 2 (g), (j) apply only to those contracts which are void by substantive law, not procedural law. Hence, the principal debtor is not discharged absolutely, and surety remains liable. ) 22. S. 33, 135, 141 – Amrit Lal Goverdhan Lalan v State Bank of Travancore ; Others (Plaintiff is partner of a firm that is the pricipal debtor of the bank. P is surety of said debt. According to facts, the Bank owned certain stocks of the firm as collateral, but admitted to being short of stocks worth Rs. 35,000 (or there abouts), through its own negligence; Issue: Is the surety’s liablity discharged by virtue of applicability of S 133, 135, 141? Held: S 133 is not applicable as the facts show that the variance referred to by P (ie, variance wrt the limit of credit to be granted) were merely internal communications, not in the form of a formal document and thus not binding on the Bank (ie no varuance took place); S 135 s not applicable as according to facts, the Bank gave time to the PD to make good the quantity of goods referred to in the monthly statement, which is not equivalent to giving time to make payments ithin the meaning of S 135; S 141 is applicable; The bank, through its own carelessness, lost some share of security for which the surety will no longer be liable, under S 141; Thus, surety has to pay amount due-35,000 (ie security lost)) 23. S. 139, 141 – State Bank of Saurashtra v Chitranjan Rangnath Raja and Another (Bank had granted credit to the limit of Rs. 75,000 to the PD, who pledged 5000 tins of groundnut oil to the Bank, who negligently lost said security; Issue: Whether the surety had knowledge of the said securtiy and whether S 141 is applicable; Held: S 141 would apply if it can be shown that the creditor had taken more than one security from the principal debtor at the time when the contract of guarantee was entered into.
Here there were two forms of security: plegde of goods and personal guarantee of the surety. Section 141 comprehends a situation where the debtor has offered more than one security one of which is the personal guarantee of the surety. The knowlegde of the surety wrt to the existence of the security is immaterial (Although, it was found that the surety granted the guarantee on the assumption that the security would be given). S 141 applied regardless of presence of knowledge on the behalf of the surety) 24. S. 148 – Trustees of the Port of Bombay v Premier Automobiles Limited (Bailment) – High Court 25. S. 148 – Trustees of the Port of Bombay v Premier Automobiles Limited (Bailment) –Supreme Court 26. S. 48 – State of Maharashtra, Bombay and Others v Britannia Biscuits Company Limited and Others (Bailment) (Facts are similar to United breweriers, except that there was a three month epriod within which the biscuit tins had to be returned, and such tins were accepted even after time limit was over. Issue: Sale or bailment? Also, was there an obligation on the purchasers to return the tins? Held: Intention (As can be seen from the accounts) of the company shows that the transaction was a composite one, resulting first in entrustment of the tins with the purchasers. If returned within three months, the trust is returned, if not, the transaction becomes one of sale. There exited no obligation to return (time was not strictly followed). Neither the endorsement on the price list nor the endorsement on the invoice can be said to create an obligation to return. ) 27. S. 48 – Messrs Kalyani Breweries Limited v State of West Bengal and Others (Bailment) (Facts: Kalyani Breweries sell beer, and the Tax Authorities claim that the amount obtained through the “forfeited deposits” for the bottles actually amount to sale of the bottles. Issue: Were the bottles sold or bailed? Held: The court held that the bottles were sold and not bailed for two reasons. (i) The company failed to issue a circular describing their bailment scheme. I. e. The terms of the bailment were not set. Also, the “bailee” had no knowledge (implied of actual) of the proposed bailment. There can be no bailment WITHOUT the knowledge of the bailee. Further, CONSENT is not equal to KNOWLEDGE (ii) The deposit amount was the same as that of the price of the bottle. This favoured an intention to sell, rather than bail. ) 28. S. 48 – State of Bombay v Memon Mahomed Haji Hasam (Bailment) (Facts: The Customs Authority requisitioned the petitioner’s trucks, and later sold said goods in an auction as unclaimed goods, while the appeal against the initial requisition was pending. The appeal was granted, and the owner demanded Issue: (i) Was there any obligation to take reasonable care of said goods? i. e. Whether the Government was in a position of bailee while the appeal was in progress. (ii) Whether bailment can take place without a contract Held: The argument of the government, which stated that bailment was absent due to the lack of a contract, was rejected, as there can exist a bailment WITHOUT a contract. The Government was under both a statutory as well as implied obligation to take reasonable care of the goods.
Also, the order of auction does not interfere with the owner’s right to his goods as said auction was procured through false representation of fact. ) 29. S. 148 – K. L. Johar and Company v Deputy Commercial Tax Officer (Bailment) (Hire-purchase agreement amounts to a sale; A was the owner and not the financial agent as the terms of the agreement say that title will remain with the A till option to purchase is exercised. A hire purchase agreement has two elements: (1) element of bailment and (2) element of sale in the sense that it contemplates an eventual sale. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement.
When all the terms of the agreement are satisfied and the option is exercised a sale takes place of the goods which till then had been hired. Tax is from the sale transaction. Also, the taxable amount will not be the final price paid at the option to sale (Re. 1) or the amount paid through hire instalations; will be determined reasonably by th etax authorities) 30. S. 148 – United Breweries Limited v State of Andhra Pradesh (Bailment) (Facts: UB are suppliers of beer. The Sales Tax authority wants to tax UB for the “sale” of the bottles and crates, while UB claims that there was no sale, but only bailment of said bottles and crates. UB charged a certain amount for the bottles and crates, providing for a refund of the said amount of the return of the bottles.
They also asked their customers to charge the consumers the same amount as a deposit for the bottles. UB also issues a circular publicizing their scheme regarding refundable deposits for bottles. Also, it must be noted that the deposit for the bottles was lesser than the actual price. Issue: Whether the bottles and crates were sold, or bailed. Held: The court looked into the INTENTION of the parties. From the circular issued by UB, it is observed that they were anxious to get the bottles back. They urged their customers to charge a deposit from the consumers so as the get the bottles back. They also stated that they would be able to gain greater business efficacy on return of the bottles.
The forfeiture of the deposited amount did not amount to the price of the bottle, but came under S 74 of the ICA as LIQUIDATED damages. Also, the argument that there was no contractual obligation on the part of the customers to return said bottles, and hence bailment cannot be proved failed. This is because bailment is possible without the presence of a contract (implied, or otherwise)). 31. S. 150 – Hyman v Nye ; Sons (Bailment) (Defendant is a jobmaster from who the plaintiff hired a pair of horses, a carriage and a driver; Carriage breaks down, P sues for damages. Issue: The degree of duty of care in the case of a hire agreement. Held: Reasonable care must be taken. NOTE:
English law says that the hirer is not liable for defects he knew nothing about (or could not have reasonably known about). S 150 negates this rule wrt India. The thing bailed must be as fit and proper as care and skill can make it for use in a reasonable and proper manner. It is not at all unreasonable to exact such vigilance from a person who makes it his business to let out carriages for hire. The defendant had to show in this case that the accident was not preventable by him by exercise of any skill. He did not show the same in the initial trial. Result: The trial judge gave too low a level of duty of care to the jury, new trial. ) 32. S. 51 – Coggs v Bernard (Gratuitous Bailment) (Check briefs) 33. S. 148 – The Pioneer Container, KH Enterprise v Pioneer Container (Sub Bailment) – Privy Council (Taiwan, Hong Kong, sub-bailment; imposition of a duty on sub-bailee outside a contract; clause regarding specific governing law applicable based on the terms which the owner had allowed to bailee to sub-bail said goods. Check brief) 34. S. 148 – Morris v C. W. Martin and Sons Ltd. (Sub Bailment) – Court of Appeal (D as sub-bailee for reward was under a duty of care and P as head-bailor could sue for breach of this duty. A common law duty exists only if there is a relationship between the parties.
One way of establishing such a relationship is by taking voluntarily into custody the goods which are the property of another. The judge held that the defendant by voluntarily accepting from Mr Beder the custody of the fur, which they knew was a property of a customer of his, brought into existence a relationship of bailor and bailee by sub bailment and created a common law duty by the defendant to the plaintiff. The common law duty was with respect to taking care of her mink stole. The other common law duty was that the mink stole should not be converted meaning that nothing should happen to it that interferes with Mrs Morris’s right to property of the mink stole.
Whether it be a contractual bailment or a tortious bailment, the bailee has reversionary rights over the goods and thus the bailee would have the liability that the goods don’t get converted. CW Marrtin held vicariously liable, exemption clause does not apply. ) 35. S. 151 – Lakshmi Narain Baijnath v Secretary of State for India (Duty of Care of Bailee) (Defendant was transporting bales of jute-caught in cyclone-allowed jute to stay in the boat during the cyclone-boat leaks, jute stays wet for 30 hours-damaged, and rejected by the Mills; Issue: To what extent is the duty of care of the bailee under S 151; Held: This is an issue of fact rather than an issue of law. Courts held that the bailee did not take reasonable care of a prudent madn u/S 151, held liable for damage caused. ) 36. S. 60, 161, 167, 171 – Coastal Oil Mills, Ongole v Andhra Pradesh Industrial Development Corporation, Vice-Chairman, Hyderabad and Others (Third Party in Bailment) (AP Ind Corp seized bailee’s goods on default of the latter in certain payments; AP wrongfully claimed the bailor’s goods and refused to give said goods (oil) back; By a petition and decree by the 2nd defendant- the bank, goods were auctioned off (however, most of the goods had perished by then); Issue: third party in bailment; Held: the Bank was held to be liable as it failed to establish its lien over the goods; The bank was also responsible for withholding and auctioning the goods; AP and bailee not liable. ) 37. S. 170 – Messrs Kalloomal Tapeshwari Prasad and Company v Messrs Rastriya Chemicals and Fertilizers Limited and Another (Particular Lien) (Bailor had contracted to send 5000 metric tons of fertilizer for storage to bailee; bailor sent more than the agreed amount; bailee incurred expenses in accomodating for the excess; Issue: Whether the bailee could exercise a particular right of lien; Held: S170 applies only to situations where labour and skill have been applied to the goods bailed so as to improve the goods bailed.
The bailee was only required to transport and store the goods and hence it was decided that no labour, skill or improvement in the goods to entitle him enforce the lien. Also, there was a clause in their bailment contract than prevented any exercise of lien by the bailee, and hence the bailee’s suit fails on this ground as well. Held that he has right to recover the extra charges by separate suit but his lien is unenforceable. ) 38. S. 170 – E. H. Parakh and Others v G. Mackenzie and Company Limited (Particular Lien) (The bailee did not do anything to improve the goods by exercise of labour or skill but only stored it, hence no lien under S170 of ICA) 39. S. 171 – R. D.
Saxena v Balram Prasad Sharma (General Lien of advocates) (The relationship of advocate and client was severed as between the plaintiff (advocate) and defendant (MD of firm); Advocate claims a right of lien over case files till general balance is paid; Issue: Does P have a right of general lien over case files/litigation paper? Held: Files containing copies of the records (perhaps some original documents also) cannot be equated with the “goods” referred to in the section. The advocate keeping the files cannot amount to “goods bailed”. In the case of litigation papers in the hands of the advocate there is neither delivery of goods nor any contract that they shall be returned or otherwise disposed of. ‘Goods’ are items as defined under the SOGA. Thus understood “goods” to fall within the purview of section 171 of the Indian Contract Act should have marketability and the person to whom it is bailed should be in a position to dispose it of in consideration of money.
In other words the goods referred to in section 171 of the Indian Contract Act are saleable goods. There is no scope for converting the case files into money, nor can they be sold to any third party. Hence, S 171 does not apply. ) 40. S. 171 – Board of Trustees of The Port of Bombay v Sriyanesh Knitters (General Lien) (Respondent settles disputes with the import authorities on import duty, and meanwhile, appellants hold the goods; A then claims right of general lien as wharfingers. Issue: Whether A falls into the category of five specified persons who have a right of general lien without the existence of an express contract (as there was no contract of bailment in this case; Held: S 171 has two parts.
Part I refers to five categories that have a statutory right of general lien, in the absence of a contract to the contrary; Part II refers to any other person not in part I, who do not have a statutory right under S 171; Court, through an analysis of fact and law, holds that A has the statutory right of general lien, as they fall under the category of wharfingers) 41. S. 172 – 176 – Central Bank of India v Siriguppa Sugars and Chemicals Limited and Others (Pledge) (Rights of the pawnee to acquire sale proceeds over the rights of any unsecured creditors; Both the Cane Commissioner and the workmen in the absence of a liquidation, stand only as unsecured creditors and their rights cannot prevail over the rights of the pawnee of the goods.
The appellant as the pawnee, is entitled to the amount in satisfaction of its debt to secure which, the goods had been pawned and to appropriate the sale proceeds towards the debt due and only if there is surplus, to make it available for disbursal to the Cane Commissioner and to the Labour Commissioner. ) 42. S. 172 – 176 – Karnataka Pawnbrokers’ Association and Others v State of Karnataka and Others (Pledge) (Right of the pawnee/plegdee to sell goods on default of pawner; Question of whether sales tax is to be imposed on the pawnee of the auctioner of resale of unredeemed goods. Held: Pawnee has special property right over pawnor’s goods. Pawnee falls under “dealer”, and conducts “business”.
The act (of selling goods) incidental and ancillary to the main business will also come under the definition of ‘business’ under the sale tax Act) 43. S. 172 – 176 – Lallan Prasad v Rahmat Ali and Another (Pledge) (Aero scraps; Whether a plegdee can sue for debt given that he denies the pledge (which, on facts was found to have taken place) and he is not in a position to return said goods. Held: But if he sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same, the pawner has the right to redeem the goods so pledged by payment of the debt. If the pawnee is not in a position to redeliver the goods he cannot have both the payment of the debt and also the goods.
Ingredients of a valid pledge: (1) that it is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the pawnee and; (2) a pawnee has only a special property in the pledge but the general property therein remains in the pawner and wholly reverts to him on discharge of the debt. 44. S. 178 – 178A – The Official Assignee of Madras v The Mercantile Bank of India (Mercantile Agent) 45. S. 178 – 178A – Morvi Mercantile Bank Limited and Another v Union of India, Through The General Manager, Central Railway, Bombay (Mercantile Agent) 46. S. 182 – Loon Karan Sohan Lal v Firm John and Co. and Others (Agency) (Difference between a person employed to do an act for another, and a person employed to do at act at the bidding of the other. Loon not agent, as the actual relationship is looked at, and not the terms of the contract) 47. S. 82 – Lakshminarayan Ram Gopaland Son v The Government Of Hyderabad (Agency) (Appellants were agents of the government; Whether remuneration given by the government to the app. Is taxable (ie whether agent ran a business or not; whether app. Was servant or agent; Held: Difference between agent and servant: An agent is just given direction regarding the nature of work, the manner of doing it is his discretion, has authority to enter into contracts. Independent contractor: only undertakes to provide a specified result; Held, app. Were agents; Did not carry out a business (trade, commerce of manufacture), rather simple received a commission, not taxable) 48. S. 182 – Kuchwar Lime And Stone Co v MS.
Dehri Rohtas Light Railway (Agency) (Authority of an agent can be implied, and a contract for agency is not required. Colliery, by sanction for the coal commissioner, acted as agent of the co. whose actios were binding. Liable for demmurrage although delivery of goods did not take place, as goods stored for the benefit of the co. Once Compnay refused to take delivery, Railway was to act as bailee of the goods, but only for a reasonable time, after which they must sell said goods. Co. not liable for 200 days, only liable for a reasonable period of a month) 49. S. 185 – Mohd. Moinuddin v Mir Ahmed Ali (Agency) (Plaintiff represents def. in suits, then sues for remuneration as consideration for agreement to represent.
Held: S 185 does not mean that P cannot sue D for the amount owed, merely states that consideration is not required for a contract of agency, does not stop the agent from claiming remuneration/commission for work done) 50. S. 186, 237 – Harshad J. Shah and Another v L. I. C. of India and Others (Case for LIC; Two types of authority: (1) Actual: a manifestation of consent that he should represent or act for the principal made by the principal to the agent himself ; Can be express (writing) or implied (by law or conduct or circumstanes of the case); (i) Incidental (ii) Usual (iii) Customary authority. (2) Apparent Authority: a manifestation made by the principal to third parties. It is the authority of an agent as it appears to others.
S 237; Held: The court holds that the mere fact that LIC accepted the premium cannot be regarded as proof for inducing the policy holders into believing that the agents have authority to do so. ) 51. S. 186 – Chairman, Life Insurance Corporation and Others v Rajiv Kumar Bhaskar (Agency) 52. S. 189 – Shanti Lal and Another v Tara Chand Madan Gopal (Agency, Agent’s authority in emergency) (R had a commission agency shop, bought grains for A, destroyed by flood. Whether R can be reimbursed by A; Application of S 151, 152, 189, 214; Held: R was not careless, complied with S 151, 152 (Duty of care of a bailee); In case of emergency, bailee has the authority to act as agent under S 189 and S 214; Held in this case that R complied with all above sections and did not breach any duty of care; Judgment for R) 53. S. 90, 194(direct application) – De Bussche v Alt (Sub Agency) (P gives a ship to be sold to a company who, with the EXPRESS authority of the principal (P), appoints D as the sub-agent/substitued agent. D must sell the ship for 90,000 cash only, but instead buys it himself, then sells for a profit. Issue: Whether D is liable to P as an agent, for derivation of profits, being a sub-agent; If this authority is exercised, privity arises between the principal and the sub-agent. The latter becomes responsible to the principal as if the principal himself had appointed him his agent. When the agreement for resale of the ship was concluded, the defendant was still an agent of the plaintiff.
Therefore, the plaintiff had a right to the benefits accrued from the sale transaction) 54. S. 190 – 194 – Nensukhdas Shivnaraen v Birdichand Anraj (Sub Agency) 55. S. 196 – Bolton Partners v Lambert (Ratification of Agency) (D withdrew offer before ratification of the agent’s unauthorised act of acceptance of sale of goods; It was held that the principle of ratification had a retrospective effect and therefore the contract would have been complete on the day the agent accepted on behalf of the company. Exceptions to Ratification: (1) Where a vested estate is divested; (2) Where there has been forgery; (3) Where the ratification is after the time when the act could be done.
Doctrine of ratification- “when a principal on whose behalf a contract has been made, though it may be made in the first instance without his authority, adopts it and ratifies it, then, whether the contract is one which is for his benefit and which he is enforcing, or which is sought to be enforced against him, the ratification is referred to the date of the original contract, and the contract becomes as from its inception as binding on him as if he had been originally a party”) 56. S. 196 – Keighley Maxsted & Co v Durant (t/a Bryan Durant & Co) (Ratification of Agency) (Agent(Corn merchant) entered into a contract (Buying of corn at a higher price than agreed upon) with D in his own name/his own interest with no intention to do otherwise given to the D. Ratification is not possible by P as they were third parties to a contrcat already formed.
The question which arises on this state of the facts is whether, where a person who has made a contract for himself without a suggestion that he is acting to any extent for another (an undisclosed principal), and without any authority to act for another, can bind a third party as principal the person with whom he contracted, by the fact that in his own mind merely he made a contract in the hope and expectation that his contract would be ratified or shared by the person as to whom he entertained that hope and expectation. The Court held that he could not. ) 57. S. 201 – Monindra Lal Chatterjee v Hari Pada (Revocation of Agency, formation of new agency with legal representatives) (Plaintiff is suing the defendant for accounts, primary contention being that the suit is barred by limitation due to the death of one principal. Held: The agency of defendant 1 under Guru Pada and Hari Pada was a separate agency.
The properties which defendant 1 was to manage were no doubt the same, viz. , the joint properties of Gokul Mohini and Guru Pada and Hari Pada, but the defendant was the agent of two sets of principals appointed at different times and by different acts. When Guru Pada dies, that specific agency was severed, while the other one with Hari Pada continued (he failed to show that they were jont principals, and not joint and several principals); A new agency was enetered into by the son of Guru Pada with the defendant, and as three years had elapsed since the formation of this agency, the claim for accounts by the son is barred by limitation. Hari Pada can still claim accounts as the agency is substisting) 58. S. 02 – Ishwarappa v Arunkumar (Irrevocable Agency) (A claims to be personally liable for the contruction of R’s house, thus claims agency cannot be termination until A is reimbursed. Whether the power of attorny granted to A is one of general agency or of the type uner S 202 (with a self-interest); Held: A is unable to establish via facts, the personal liablity he claimed to have incurred. The power of attorny granted does not give him authority to become personally laible; For power of attorny to fall uner S 202, the suit property must be given as security for person liablity, this was not the case; Appeal dismissed, R (Principal) wins) 59. S. 05 – Boulton Brothers and Company Limited, (India) v New Victoria Mills Company Limited, Cawnpore (Revocation of Agency- sufficient cause) 60. S. 205 – Drew v Nunn (Revocation of Agency) (D acts as principal, and held out his wife as his agent, having full authority to contract with P; D goes insane, notice of the same is not given to P (a prior creditor) W contracts with P; Is authority revoked on the principal’s insanity – Yes, In the present case a great change had occurred in the condition of the principal: he was so far afflicted with insanity as to be disabled from acting for himself; therefore his wife, who was his agent, could no longer act for him. Thus, anyone to whom D himself had not held out W as agent, ould only sue the agent for wrongful act, and not D; However, the defendant, by holding out his wife as agent, entered into a contract with the plaintiff that she had authority to act upon his behalf, and that until the plaintiff had notice that this authority was revoked he was entitled to act upon the defendant’s representations, and sue D for amount. ) 61. S. 212 – Pannalal Jankidas v Mohanlal and Another (Negligence of the Agent) (Go down-explosion-government ordinance-distinction between insured and uninsured; Majority: Agents were negligent, breach of duty, Mohanlal wins; Diss: Too many intervening acts (ordinace), chain of causation broken) 62. S. 213 – Narandas Morardas Gaziwala and Others v S. P. Am. Papammal and Another (R (Agent) sues A for accounts; Issue: Whether the agent can sue the principal for accounts; Held: Under equity, agent can sue for accounts, although there is no statutory right conferring the same.
There may be special circumstances rendering it equitable that the principal should account to the agent. Such a case may arise when all the accounts are in the possession of the Principal and the agent does not possess accounts to enable him to determine his claim for commission against his principal. The right of the agent may also arise in an exceptional case when his remuneration depends on the extent of dealings which are not known to him or where he cannot be aware of the extent of the amount due to him unless the accounts of his principal are gone into. ) 63. S. 215 – Gopaldas v Thakurdas (Agent Lien) ( D agent of P, invested their own money to buy goods for P; P did not pay the balance due, so D sold, without notice, P’s goods.
Issue: Extent of agent’s lien; Held : General rule: Agent has only right of retention, not sale; However, when agent in vests his own money, he acts as tacit pawnee and thus can sell the goods to claim his dues, but only after reasonable notice to the principal (akin to plegde); P entitled to loss sustained by D’s sale, as the agent wrongfully sold said goods (in excess of their authority) without any notice) 64. S. 230 – Patiram Banerjee v Kankinarra Company Limited and Another (Undisclosed Principal) (Facts: Plaitiff contracted to buy goods from X (apparently their principals) for the defendant. P gives a bought note for the same; Failure to make payment or delivery; Issue: Whether this is a case ruled by S 230 of the ICA, or is P merely a broker/intermediary of D; Held: Now there is, I think, a material difference between the words sold for you to my principals’ and ‘bought of you for my principals’.
The rule of law, no doubt, is that, if the principal is undisclosed, the broker saying ‘bought of you for my principals’ is himself liable; but this contract says ‘sold for you to my principals, i. e. , I, your broker, have made a contract for my principals, the buyers. ‘ I have already pointed out that the note in this case is in the 2nd of these two forms, and, on its true construction, I hold that the plaintiff was no more than an intermediary, and was not an agent for sale, to whom the provisions of S. 230 of the Contract Act applies, so as to make him liable as an agent who has not disclosed his principal’s name. ) INDIAN PARTNERSHIP ACT 1. S. 4 – Santiranjan Das Gupta v Dasuram Murzamull (Pliantiff owned a mill, defendant wanted to use said mill for his paddy. Issue: Was there a partnership.
Held: No partnership as only oral evidence with no factual/written/documental (common account) present; Lack of mutual agency; No record of terms and conditions; S 4 and 6 must be complied with to amount to a partnership. Not done so here. ) 2. S. 4 – Champaran Cane Concern v State of Bihar and Another (Issue: Whether the Cane Concern was a co-ownership for income tax puposes. Points of difference between co-ownership and partnership: Agreement, sharing of profits, transfer of interest (partnership-only with the consent of the other partners), mutual agency) 3. S. 4 – Deputy Commissioner of Sales Tax (Law), Board of v K. Kelukutty 4. S. 6 – Govindan ‘Tea Kadai’ Nair v Nagabhushanammal and Another (Plaitiff bought a tea shop, with defendant paying half the price amount; Leased out, sharing of profits Issue: Co-ownership or partnership; Whether he City Civil Court had the required jurisdiction (would be present if there is a partnership). Held: Mere sharing of profits/return from property held by persons with a common interest would not make them partners; No business was carried out; Essentials under S 6 and S 4 lacking) 5. S. 7 – Karumuthu Thiagarajan Chettiar and Another v E M Muthapp Chettiar (Managing agency to run Mills for a period of four years, in rotation. Sole business was management of mills; business was to pass to heirs. Issues: Was this a partnership at will? Was there fraud on part of the defendant who had purchased shares of one Mill and was now in a controlling position.
Held: Duration was implied, though uncertain (Rotation, passes to heirs); Failing which, determination was defnitely provided for – termination of the agency led to termination of the partnership; No fraud- no agreement to not buy shares. Defendant had two capacities: that of a partner and shareholder) 6. S 13(c). Bhagchand v. Kaluram (Ratio: S 13(c) is applicable unless there is a contract to the contrary, which is not so in this case. The deep provides for interest on the capital to a partner which means that the plaitiffs are entilted to interest on the capital, but said unterest is only payable out of the profits, as laid down in S 13(c), in the absence of a contract to the contrary) 7. S. 14 – Ganpati Salt Works and Another Etc. v State of Gujarat and Another 8. S. 4 – Ved Gupta v Apsara Theatres (Facts: Ved Gupta procured a license for the running of a Cinema in his name; Entered into partnership with 11 other people to run Apsara Theaters; Was expelled from the partnership; Surviving partner filed petition to state that the license was partnership property, and hence Apsara Theters could still screen films; Issue: Was the license personal or partnership property? Held: License was granted to Ved Gupta in his sole capacity; Was not incorporated into the firm, according to facts and circumstances) 9. S. 14 – Addanki Narayanappa and Another v Bhaskara Krishtappa and 13 Others (Members of two HUF form a partnership; Members of one family files for dissolution, but the other family claim dissolution has already taken place by an unregistered document which noted the relinquishment of interest in certain firm assets (immovable property) by the other family members. Issue: Do documents dealing with relinquishment of interests w. r. t immovable property of the firm need to be registered? Status of immovable and moveable property under firm property) Held: Document merely represented that the partnership came to an end. The interest of a partner in partnership assets comprising of movable as well as immovable property should be treated only as movable property. ) 10. S. 14 – Boda Narayana Murthy and Sons v Valluri Venkata Suguna and Others (Mortgagor (Boda) took a mortgage on a property where a firm of which he was partner screened movies in Minerva Theaters. Petitioner wants to obtain a mortgage decree against the firm, but this is possible only if said property is partnership property u/S. 14; Issue: Is the aforementioned property that of the firm?
Held: Firms can use property owned by others for the purpose of business; The status of any property depends of the agreement between partners; The partners co-owned the property in different shares when compared to their interests in the firm (This goes against the principle that this was firm property); No evidence to support the proposition that said property fell within S 14) 11. S. 4 and S 6 – S. K. Parthasarathy Naidu and Another v K. Rama Naidu and Others (Conflict between three persons as to whether there exists a relationship of partnership or debtor-creditor. Documents signed that gave capital of Rs. 1 L each to the respondent (R), with sharing of certain profits agreed upon.
Held: Intention of the parties must be looked at to determine whether a partnership existed or not; Sharing of profits is not the only criterion for formation of a partnership; Three ingredients: (i) Agreement (ii) Sharing of profits (iii) Mutual agency; Here, (i) and (iii) were missing; Relationship= to that of debtor-creditor) 12. S. 15 – Deoraj Divanchand Verma v State (Facts:Applicant convicted for violation of certain rules; Acknowlegdes that he is parter of shop in question. Issue related to whether or not applicant fell within the definition of “employer” under the Central Provinces Act; Held: The concept of agency is inbuilt within the IPA i. e.
Partner acts as agent of the firm in firm business (S 18); Also, u/S 15, a partner is owner of firm assets) 13. S. 16 ; 17 – Devilal Jaiswal and Another v Vidarbha Bottlers Private Limited and Others 14. S. 11(2),9 – Novartis Vaccines ; Diagnostics Inc. , United States of America v Aventis Pharma Limited (Rights and Duties of a Partner) (Facts: NV and AP enter into a JVA agreement; AP sells competing anti-rabies drugs; Issue: Was this in contravention of the JVA; Held: Contruction of partnership deeds must be done as a whole, in its entirity; Four canons of construction for commercial documents: ordinary, businesslike, commercial object, Avoid unreasonable outcome; S 11(2): validity of negative covenant.
RATIO: Just because there is no negative covenant restricting sale does not mean said sale is allowed by the agreement; Partners have an obligation and duty to act in good faith, for the benefit of the company (S 9)). 15. S. 19 – Prabhakar Traders v Veejay Traders and Others (Implied Authority) (Plaintiff claims the defendant firm purchased paddy on credit; One partner accepts the same AFTER the suit is filed; Issue: Whether the admission of this partner can bind the firm; Held: S 19 limits the scope of implied authority; This case falls within S 19 (2) (e), where a partner is restricted from making any admissions regarding a pending suit w. r. t. he firm; Distinction must be recognised between S 19 and S 23; Also, the partner cannot be held liable either as his admission was neither clear nor categorical) 16. S. 28, S 32 (Proviso) – Tower Cabinet Co v Ingram (Holding Out) (Ingran and Christmas enter into a partnership; Ingram retires, issues a notice to the banks; C uses notpaper with both their names for an order given to Tower Cabinet; T did not know I was a partner, found out after I’s retirement; Suing for holding out. Issue: Whether I “knowingly allowed himself to be represented” i. e. Whether I was “holding himself out”. Held: Use of old notepaper did not amount to I “knowingly representing himself as a partner”; Client needs to know about the status of partner before retirement thereof. ) 17. S. 8 – Scarf v Jardine (Holding Out) (Scarf and Rogers were partners, Scarf retired, and was replaced by Beech; Jardine sold goods to the new firm, as he did to the old firm, without notice of the change; On non-payment, Jardine sued B and R, and when they became insolvent, he filed a suit to sue S, B and R jointly liable; Issue: Can S, B and R be held jointly liable? If not, was there election as to whom to hold accountable? Held: The principle of estoppel applies, whereby J can sue either S and R (estoppel/holding out) OR R and B (on fact). He cannot sue all three as they are not jointly liable; By suing B and R first, he has made his election and cannot now sue S; Novation? ) 18. S. 25, 28, 32 – Ms. Glorious Plastics Ltd. (1) Laghate Enterprises and Others, (2) Andvilal Doshi and Others (Holding Out) (Bills of exchange drawn on the plaitiff; on non-payment plaitiff sues the firm and one retired partner under S 25, or under S 28; Issue: Do S 25, S 28, S 32 proviso apply? Held: S 25 applies ONLY to acts done when said person was partner of the firm; here, said transaction was done after the partner retired thus S 25 does not apply; Applicability of S 28: (i) representation (ii) reasonable belief in rep. (iii) Reliance amd faith on rep. ; here, the plaintiff did not even know of the existence of said partner; Also, the proviso of S 32 applies: lack of knowledge) 9. S. 29 – Mangilal v Bhanwarlal and Others (Rights of transferee of a partner’s interest; Facts: Assignee sued for accounts claiming the firm that dealt with cotton was dissolved. Issue: Whether said firm was dissolved. Held: Dissolution can be express or implied. Implication of dissolution cannot be determined by mere closure of business, lack og interest of partners, vacating of shop, discharge of servants. Intention has to be determined. Found that evidence was lacking to prove dissolution; assignee was suing for accounts in an undissolved firm- under S 29, claim fails. Ratio: Assignee can sue for accounts ONLY in a dissolved firm) 20. S. 0 – Narayan Prasad Vijaivargiya v Commissioner of Income Tax, West Bengal (Minor as a Partner) (The assessee-firm filed a suit again the Income Tax Officer as the latter refused to renew the registration of said firm on the basis that Mohanla (a minor) was treated as a full-fledged partner in contravence with the IPA. Issue: Status of Mohanlal, the minor. Held: The partnership deed expressly stated that the adult partners intend to give the benefits of the partnership to said minor, and when calling the minor a partner, included that “partner” included those deriving only benefits from the firm; The objective of the deed must be looked at in its entirity, and such intention shows that S 30 has been complied with) 21. S. 30 – Income Tax Officer v Messrs Sureshchand Rameshchand (Minor as a Partner) (Difference between accounting and assessing year; 3 major partners + 2 minors formed a partnership.
Income Tax Officer refused to grant registration of the firm for the assessing year of 1971-72, ‘72-73 as they claimed Sureshchand gained majority during 1970-71 as he also signed the application form; Issue: Applicability of S 30(6); Held: S turns 18 on May 4th, ’71 after the close of the accounting year for 1970-71, thus registration for 1971-72 must be granted; S 30(6) allows 6 months to pass before declaring whether said minor joins or leaves the partnership; this period had not expired by the time the accounting year 1971-72 had closed. Thus authorities should have granted registration for assessment year ’72-73 as well. ) 22. S. 30 – The Commissioner of Income tax, Bombay – Messrs Dwarkadas Khetan and Co. (Minor as a Partner) (Khetan entered into a contract with four other people, one of whom was a minor; The deed provided that said minor was a full-fledged partner with managing ability and sharing of losses.
Issue: Whether the commissioner can interpret the deed as merely a beneficiary and thus alter the deed; Held: Above cannot be done as the commissioner does nort have the power to register a firm different from that of the intention of parties. Deed invalid, registration not granted) 23. S. 30(7) – B. Anandkumar and Co. and others v Southern Petrochemicals Industries Corporation Limited, Represented by its Secretary (Minor as a Partner) (Plaintiff, seller of fertilizer, sues the defendant, a partnership firm. Two members retired, a minor elected to be a partner, suit against last aforementioned partner filed four years late. Issue: Can the retired partners and the minor who elected to be a partner be held liable?
RATIO: Retired partners liable only for those transactions that occurred while they were partners; Minor, u/S 30(7) liable retrospectively (i. e. S 31 is subject to the provisions of S 30(7)) but suit was barred by limitation) 24. S. 30 – Venkideswara Prabhu Ravindranatha Prabhu v Surendranatha Prabhu Sudhakara Prabhu and Others (Minor as a Partner) (Partnership formed out of a joint family for retention of a provision store. One minor elects to be a full-fledged partner, and one partitions his interest in the property in favour of three others. Issue: Do the last three persons mentioned become partners by virtue of being part of the Hindu Joint Family; transferees by virtue of S. 9 due to execution of the partition; beneficiaries under S 30. Held: HUF does not mean partnership, cannot be a partner by birth/status; Partition does not fall under transfer of interest as given in S 29;To be a beneficiary, two conditions must be satisfied: (i)Proof of Consent of all partners and (ii) Agreement between minor and partner, both of which are herein lacking) Partnership dealing with the concept of sub-partnership (S 29) 25. S. 31 – Meenakshi Achi and Another v P. S. M. Subramanian Chettiar and Others ( Partnership of which one partner dies and his widow is said to be partner by the plaintiff, a creditor. M tries to deny being a partenr to avoid liability wrt to payment of debts to P.
Issue: Whether M is a partner; Whether novation has taken place, and the reconstituted firm is now liable for the debt. Held: M, through examining the relationship of the parties, and the conduct thereof (M had access to accounts, management and so forth), is held to be a new partner; For novation to take place, two things have to be proved: whether the new firm has taken over liabiltiy of the old firm and whether the creditor has accepted the new firm in place of the old firm as debtor. Here, through the conduct of the creditor, novation took place and M is held to be liable. Her son is also held liable- holding out) 26. S. 32 – Paulraj v T. M. Mathalai Nadar Sons Through Its Proprietor T. M. Sadasiva Nadar No. 82, 183 Keezha Masi Street, Madurai Nagar (Plaitiff is suing the defendants for cost of goods provided; one of the defendants has retired, and according to facts, the plaintiff continued providing goods to both the new firm set up by the retired partner and the old firm; Issue: Can the retired partner be liable under S 32; Held: Although no notice of retirement was given to the thrid party, the old partner is not liable as said party can be said to have agreed to the new firm’s liablity and lack thereof the old partner through the course of conduct of the party S 32(2)(ie he dealt with the retired partner’s as well as the other firm). Thus, retired partner is not liable) 27. S. 37 – Mohanasundaram and Others v Neelambal and Others (Dissolution+profits accrued) (Two partners have a partnership dealing with hides and skins, each with initial capital of Rs. 0,000/- One partner dies, dissolving the firm; Surviving partner pays 1000 for the funeral, 10,000 to the representatives, and overdraws for 6000 after paying 7500 tax; Starts similar business under his own name, with a 5 lakh loan. Issue: S 37 applies, and the surviving partner must pay a share of profits to representatives. Held: S 37 applies only if there is CONTINUATION of the old partnership business. Starting of a similar business under one own’s name, not the old firm name, (hence, S 53 does not apply; also, S 16 does not apply as DISSOLUTION has taken place) does not fall within S 37. Also, 6000 overdraft was not used for starting the business, rather 5 lakh loan was used; Thus, S 37 does not apply, surviving partner is not liable) 28. S. 0 – Venkatlal Baldeoji Mahajan v Kanhiyalal Jankidas and Others (Partnership in continuance v. Sole proprietership) (Partnership of five members, for the running of a mill. Plaitiff failed to successfully run said mill, and hence, the management was passed to defendant who ran said mill successfully. Issue: Defendant claims that the plaintiff had abandoned his right to profits, by conduct, under S 40 of the IPA. Held: Laches (Check brief); Matter if inference from the facts and circumstances of the case in order to see whether a partner has abandoned his interest wrt the partnership; Here, it can be said that all partners agreed to the transfer of management and that plaitiff cannot be said to have abandoned any interest.
Also, it must be noted that mere cessation of interest in the business by a partner is not equal to retirement thereof, or dissolution) 29. S. 40 ; 41 – Abbasbhai K. Golwala v R. G. Shah and Others (Plaintiff and 4 other people entered into a partnership, whose deed stated that death or retirement will not dissolve the partnership; also, dissolution shall only be with the mutual consent of all partners. Issus: One partner died, and three others submitted notices for retirement to the plaitiff; the retiring partners claimed that, seeing as only one partner would be remaining, the partnership business cannot continue and the partnership is dissolved.
Held: The court held that the contentions of the defendants were wrong, and if followed would be contrary to the partnership deed (mutual consent, partnership continues in all cases of retirement/death). Also, the business of the partnership can be continued as a sole proprietership/with any other peron/s, thus partnership not dissolved) 30. S. 42 – Commissioner of Income Tax, M. P. , Nagpur and Bhandara v Seth Govindram Sugar Mills (Govindram and Gangaparsad entered into a partnership to run various mills; Gangaprasad died, Govindram and Bachulal, Ganga’s son, entered into partnership; Govind died, Nandlal and Bachulal enter into a partnership; Nandlal dies, succeeded by two minor sons, and three widows.
Bach says that there in a partnership with Nandlal’s heirs. Issue: Whether there existed a partnership or an association of people for the assessment of tax. Whether S 42, 31 applies, and whether an agreement to the contrary can be valid in a partnership of two people. Held: S 42 and S 31 (agreement to the contrary) can apply only in cases of partnerships more than 2 people. Death in a 2 member partnership dissolves the firm. Heirs cannot enter into a partnership by status, only by contract. Also, Nandlal’s widow was not found to be a partner by facts and conduct of the parties) 31. S. 43 – Ganesh Chandra Mukherji v Gopal Chandra Hazra 32. S. 4 – Rajkishore Guru Prasad Khatri, Satna and others v Jwala Prasad Bhimraj (Compulsory Dissolution) (Issue: Whether the dispute relating to the partnership (ie whetehr or not said partnership should be dissolved or not, under S 44) has to be decided by the arbitrator of the court; Held: The above issue will depend on the partnership deed, and the words of the arbitration clause; S 44 is dissolution by Courts: ie based on equity not contract, thus in most cases arbitrators will not be able to decide the matter; Judicial discretion under S 44 is, in this case, left soley to the courts) (Where the issue arose as to whether plaintiff-partner’s petition concerning dissolution of partnership mainly on just and equitable ground u/s 44(g) (here, on alleged grounds of malfeasance, misfeasance, fraud, misconduct, etc. should be referred only to arbitration as provided in partnership deed or should be filed before Court, HC, while observing that the question as to whether a partnership should be dissolved or not is a question within the arbitration clause generally (however, depending essentially on the particular terms of the arbitration clause in each case), nevertheless held that notwithstanding the partnership deed and the arbitration clause thereof, Court has jurisdiction to entertain the suit u/s 44(g) because it confers the statutory and necessary power on Court to exercise of judicial discretion on basis of equity and may appoint a receiver, if necessary. ) 33. S. 46 ; 48 – Commissioner of Income Tax, Madhya Pradesh v Dewas Cine Corporation (Two partners formed a firm for the pupose of showing films in two theaters, one of each brought into the stock og the partnership by each partner; After 4 years, the firm dissolves and the theaters are returned to the former owners; Tax has been imposed on the apparent sale of the tehaters bac to the respective partners.
Income Tax office contends that this amounts to a sale of proerty to the partner in consideration of the money value of his share in the partnership. Issue: Whether, after the dissolution of a partnership firm, the assets, after setting off the debts and fulfilling all the obligations, if retained by the partners, amount to a sale. Held: “Sale”=transfer of propery for a price; here, neither is there a transfer of property (adjustment of a partner’s rights after dissolution is not a transfer nor is it a price). Rather, The distribution of surplus is for the purpose of adjustment of the rights of the partners in the assets of the partnership; it does not amount to transfer of assets.
Hence, on dissolution of the partnership, each theatre must be deemed to be returned to the original owner, in satisfaction partially or wholly of his claim to a share in the residue of the assets after discharging the debts and other obligations) 34. S. 47 – New Bank of India v Roshan Engineering Industries and Others (Winding Up) (Bank gave a loan to the defendant firm which is later dissolved by the retirement of teo partners; The bank has notice of said retirement and opens a new account of sole proprietership for the second defendant (D2); D2 had signed an acknowledgment for payment of balances due, and the issue is whether D2 had authority to bind the retired partners, who if so would be liable.
Held: The acknowledgments were not signed during the process of winding up, rather, they were signed when the new firm was established. Thus retired partners are not liable as they are not bound by signed documents, and the suit against them for the debt is now barred by limitation) 35. S. 48 – K. R. Mallesha v Ramnath Gajanand (Settlement of Accounts) 36. S. 48 – S. Kadir Ibrahim Rowther and Another v Noor Mohammad Rowther (Settlement of Accounts) (Plaintiff was a “working partner” in the defendant’s transport concern, filed a suit for dissolution and claimed accounts; defendant wants to deduct the dpreciated value of the vehicles before giving profits; Issue: What amounts to profit.
Held: Profit depends on the agreement between the parties (express or implies; Intention must be looked at; Purpose and nature of payment of profit must be taken into account; This is a case of service agreement and not a partnership, although K can be compared to a “working partner” (Only shares profits, not losses/capital); Therefore, depreciation of the vehicles cannot be taken into account as that would amount to K (an employee of the proprieter) contributing indirectly to the capital. Thus, there cannot be an allowence for depreciation for payment of profits) 37. Registration of the firm – Dulichand Lakshminarayan v The Commissioner of Income Tax, Nagpur (Three firms and a HUF wanted to form a partnership and sent a deed in an attempt to register said partnership. Held: Firms do not have a legal/juristic identity, and hence cannot enter into partnerships with each other. One partner from each firm signed the deed, but accoring to the law, each member/partner to the partnership must sign; this was not the case; Ratio: Firms/HUFs cannot enter into partnerships) 38. S. 69(2) – Kamal Pushp Enterprises v D. R.
Construction Company (Effect of Non-Registration) (Kamal Pushp entered into a contract with DRC, and then claimed the latter (an unregistered partnership) had breached the contract; Under said contract, any dispute was referred to an arbitrator; The arbitrator ruled in favour of DRC, and Kamal then went to court stating that u/S 69(2), DRC could not assert a right against third parties. Issue: Whether the arbitration was binding in case of unregistered firms. Held: Arbitration processes are binding even in cases of unregistered partnerships as S 69 reffers only to filing a suit in a court of law. Also, the firm did not initiate any proceedings and was merely defending itself, which does not fall u/S 69. 39. S. 9 – Raptakos Brett and Company Limited v Ganesh Property (Registration) (R enetered into a contract with unregistered firm G, whereby a lease was granted by G in favour of R for five years. R failed to vacate after the period of lease expired, G filed a suit for possession. Issue: Whether G can be granted possession (ie whether the suit is sustainable in light of S 69(2); Whether G’s registration AFTER the filing of the suit has any effect thereof. Held: S 69(2) has three components: The firm must be unregistered, must be suing a third party and such a suit must be for the enforcement of a right arising from a contract of the firm with said third party.
In this case, G is using the TP act and Common Law to prove that R is under an obligation to return possession (ie right comes from statutory duty/Common law, and not contract between both parties). The court held that S 69(2) is not whooly applicable, and G can get relief based on statutory duty. Obiter: G’s registration can be used to persuade the SC (in certain cases) to do “complete justice” and review the case. (As a suit after registration can be re-filed) Verdict for G) 40. S. 69 – Rajinder Singh and Others v Kartar Singh and Others (Registration) (Facts- Appellant and Respondent were partners in an unregistered firm. Resp dies, firm dissolves and the heirs of Resp file for a share of the profits. App refuses, contending that the suit would be barred under Section 69 as the firm was unregistered.
Issue- whether claim for profits after dissolution of the firm will amount to an exception under S69(3). Judgment- S 69 is no bar to the suit as the circumstances fall under the ambit of the exceptions under S 69 (3)- S 69 will not affect proceedings arising from a right which comes from the dissolution of the partnership. ) 41. S. 69 – Valji Shamji Chheda and Others v Bhuderbhai Bajidas Patel and Others (Registration) 42. S. 69 – Ramniklal Mohanlal Chawda v Sharad Vasant Kotak and Others (Registration) 43. S. 69 – Sharad Vasant Kotak ; Others v Ramniklal Mohanlal Chawda ; Another – Supreme Court (Registration) 44. S. 69 – Shreeram Finance Corporation v Yasin Khan and Others (Registration) 45.
Saremal Punamchand v Kapurmal Punamchand SALE OF GOODS ACT 1. S. 4 – Damodar Valley Corporation v State of Bihar (Definition of Sale) ( Difference between a hire/hire-purchase agreement; Difference between an agreement to sale and sale (Transfer of propery, Right in personum/Right in rem, Damages/Cost of goods, Risk on the seller/ on the buyer); Intention of the parties- The contractor had to pay full price of equipment and once the purpose is fulfilled, the “residuary price” is given back: this is a hire with an option to purchase not just hire) 2. S 18,19,20 Ghulam Mohmmad Wani vs State of J;K (Facts- P applied for the purchase of timber from the state. This was sanctioned at.
P deposited a certain amount with the State but at the time of delivery, the price of timber increased and the P faced financial constraints. Issue- whether there was an implied promise that the timber would be sold at the rate prevailing at the time of the sanction. Judgment- The sanction did not specify the time, place or quantity of goods to be delivered and hence were not ascertained as under s 18 of the SOGA. Hence, the contract had not been concluded and there was no sale and therefore no implied promise. ) 3. S 21,23 Emperor v Kunverji Kavasji Kavarana (Facts- Def is a liquor vendor who was under licence not to sell liquor outside of his shop.
However, he started a home-delivery service of sorts and was hence held to have violated the terms of the licence. Issue- whether the sale took place outside of the shop. Judgment- Court said that s 21 of the SOGA would not cover this case as the goods were not ascertained or specific. Hence, s 23 would govern this case. The bottling of the liquor would be an act of ascertainment and appropriation. It cannot be said that the goods are ascertained until the appropriation by one party is assented to by the other. The section itself provides that the assent may be express or implied, and may be given either before or after the appropriation is made.
The question whether the assent was implied must necessarily depend upon the circumstances of each case and it appears that the customer had assented that the goods should be delivered to the shop’s servants for delivery to him. Therefore, the servant of the seller in the circumstances could be considered a bailee for the purpose of transmission to the buyer; and delivery to such servant, which admittedly took place in the licensed place, would be effective delivery to the buyer himself. Thus, sale is not completed outside the place of license and the appeal is dismissed. 4. Ramniwas Satyanarayan v Commissioner of Taxes, Assam 5. S 39 Messrs Escorts JCB Ltd v Commissioner of Central Excise, Delhi-II (Delivery to carrier as good as delivery to buyer) 6.
S 26 Multanmal Chempalal, Bellary v CP Shah and Co (Facts- App entered into a contract for the sale of cloth but paid the full price only two months after the despatch of the goods. When the app went to retrieve the goods, they had disappeared from the railway station and hence, filed a suit claiming the price of the goods. The resp countered this by using clause 7 of their contract which said that the delivery of goods would be at the buyer’s risk. The app challenged this on grounds that the goods were still the seller’s property at the time of delivery (as per some clause 8 of their contract). Issue- whether the goods were at the buyer’s or seller’s risk. Judgment- Court rejected the app’s argument and stated that clause 8 was not connected to risk and this falls under a “contract to the contrary” under s 26.
Hence, it would be at the buyer’s risk and the appeal was dismissed. ) 7. S. Rama Rao v Dasarathy Rao 8. Jacob Phillip v Union of India 9. Bibhuti Bhusan Bose v National Coal Trading Co 10. Pawan Hans Helicopters Ltd. vs Aes Aerospace Ltd. 11. Suchetan Exports Pvt Ltd (through Pankaj Ojha) v Gupta Coal India 12. S 47, 54(2) Kalka Prasad Ram Charan v Harish Chandra (Lien of unpaid seller, Right to re-sell under S 54(2)) (Buyer (A) contarcted to buy from Seller (R) 57 thans of silk, but took delivery of only 10; R re-sells remaining; Issue: When does the seller’s right of lien start? Is the seller allowed to claim difference on re-sale when no notification was provided to the buyer?
Held: Right of unpaid seller starts from the time of completion of contract (ie when buyer took delivery of 10) Seller cannot claim damages as no notice was given) 13. S 19, 22 Usha Beltron Ltd v State of Punjab (Transfer of propery takes place when intended by the parties; Mere delivery of goods does not result in transfer of ownership; Here, ownership transferred only after goods were tested, and take-over certificate is handed over) (Facts- Dept of Tel of Punjab sent out circulars for the manufacture of cables and these orders were taken to be contracts. The app manufactured these cables and sent them to the resp. The municipality claimed octroi (local tax) on these cables.
The app refused to pay on grounds that the cables belonged to the govt. Issue- whether this would be subject to s 22. Judgment- Ratio- s 22- the goods would pass into the govt’s possession only after they were tested. Also, s 19 was applied- the goods would pass only when the parties intended for them to. ) 14. S 17, 54, 56, 60 Kaluram Bhagwati Prasad v Balramdas Laxmi Narain – Sale by Sample (D sent toor dal to the P, and delivered said goods to the Railway station. P refused to take delivery, saying goods were of inferior quality when compared to the sample provided. Issue: Can the seller claim damages for non-acceptance of goods by the buyer?
Held: Goods were proved to be of inferior quality: the seller himself lowered the price, and admitted that the said goods were of lesser quality when compared to the sample. S 54(2) only applies when the buyer is in the wrong (not paid), S 17- implied condition as to quality is breached; S 56 does not apply as the buyer has to do a “wrongful” act in order to apply) 15. S 13(2), 32, 42, 59 Kailash Sharma v Patna Municipal Corporation (Facts- App bought fogging machines from the resp and the resp were to pay in one week. They did not pay in one week and called 6 months later to complain of the inefficiency of the product. The app filed a suit for the payment of the price.
Judgment- direct application of s 13 (2)- warranty can raise a claim for damages but cannot repudiate transaction, 32- concurrence of payment and delivery should take place, 42- use for a reasonable time amounts to acceptance, 59- suit for breach of warranty) 16. S 12, 15 Anthony Thomas v Ayuppunni Mani (Condition and warranty) (Facts- A contract of sale of cashew nuts took place between the appellant (seller) and the respondent (buyer). On delivery, the respondent rejected the goods on the ground that the bad nuts exceeded the stipulated (in the contract) maximum of twenty percent. Judgment- A condition is a more vital undertaking than a warranty, and that the consequences that flow from its breach are different.
It said that the breach of a condition entitles the injured party to repudiate the contract, to refuse the goods, and, if he has already paid for them, to recover the price – s 12. The only remedy for the breach of a warranty is the recovery of damages. The sale was a sale by description, and there is an implied condition that the goods shall correspond with the description –s 15. ) 17. S 11 Orissa Textile Mills Ltd v Ganesh Das Ramkishun (Stipulation as to time) (bales of cotton sold- buyer extended time for delivery- new extention stiputation as to time- of the essence; RATIO: Time as to delivery of goods, will be of essence or not based on the terms of the contract (S 11)) 18. Smt. Claude-Lila Parulekar v Messrs Sakal Papers Pvt Ltd 19. M. Abdul Sathar Sait v.
Kunjuvarkey (Ratio: Market price is as determined by the demand and supply of the market, and not what the government fixes; Contract null as it is impossible to form, due to the lack of a fixed ascertainable contract price, necessary for sale under the Sale of Goods Act) 20. Sagar Warehousing Corp; Fly Jac Forwarders v Pawan Hans Helicopters; Aes Aerospace (Facts- PH sells helicopters to AES for certain consideration. Cost of delivery etc to be borne by AES. PH gives helicopters to carrier (SW) but AES defaults on payment. SW sues for cost of carrying. Judgment- there was no completion of sale as the full price had not been paid. Also, PH did not have to pay the carriers as there was an express provision which said that AES would be responsible for payment of the carriers. ) 21.
S 5, 9 G R Parry v Union of India (Issue: Whether pledged goods can be sold by the pawnor; Whether an unascertained price of shares still amounts to a sale; Held: Plegded goods can be sold as they would ultimately be redeemable, and they were in the possession of the pawnor; S 9 states that sale of unascertainble price of goods can be made, and a reasonable price shall be paid) 22. S 18, 23 Dun Singh Bisht v Firm Janki Saran Hailash Chander Dhampur (Facts- JS was given the right to cut down trees on X’s land after they had attained a certain girth. X’s land sold to DSB who refuses to grant them rights. Suit filed on whether the agreement between JS and X was one of sale. Judgment- Not of sale as the goods were still unascertained. Only after the trees had attained a certain girth could they be cut down- there was no ascertainment and hence no sale possible under s 18 and 23. ) 23.
PSNS Ambalavana Chettiar v Express Newspapers Ltd 24. S 23(2) Birendranath Guha v State of Bihar (The petitioners had a timber business and they supplied timber to various sources and store it in godowns. To supply the timber, they would load it on trains at the Jogbani station in Nepal. Issue- whether sales tax can be levied on these goods- whether they were sold within the territory or Bihar or whether the sale was complete at the Jogbani station and only delivery was to Bihar. Judgment- The goods were unconditionally appropriated at the Jogbani station and the property passed to the buyers when they were loaded onto the train- falls under completed sale transaction under s 23(2).
There was also a clause which said that the goods would be deemed to be delivered once they were given to the carrier and the receipt given. ) 25. S 2, 4 Indian Railways Catering and Tourism Corp Ltd v Government (NCT of Delhi) (Facts- IRCTC and Indian Railways contracted that IRCTC would provide food for IR in the manner of a catering service and IR would pay them according to the number of passengers. Issue- whether sales tax should be levied- whether it was a contract of sale or of service. Judgment- it is a contract of sale as they sold them the actual good- must look into the intention of the parties- service was not greater than the sale.
The service was instead incidental to the sale. This is comparable to the sale of food in a restaurant. ) 26. S 35 Devi Lal v (Goswami Maharaj) Govind Lal ( Buyer to apply for delivery) ( That the defendant appellant Devi Lal could not insist on the payment of the price of the part of ghee supplied by him before supplying the entire quality of ghee as had been agreed upon. In this case, the defendant appellant had refused to supply the entire quantity of ghee even before the final date of delivery. No question arises in this case, therefore, of the application of Sec. 35 under which the duty has been cast upon the buyer to apply for delivery; WRT delivery by instalments: Where here is an agreement (which may be inferred) for delivery by instalments, the contract is not split up into separate contracts for each instalment; the contract is still an entire contract for the whole quantity, though it is divisible in performance. The seller is, therefore, liable if he fail to make Up the complete quantity, and cannot recover any part of the price unless there be a provision that instalments are to be separately paid for. 27. Central National Bank Ltd v United Industrial Bank Ltd 28. S 52(3)?! Classic Furniture Manufacturing Company Pvt Ltd v DHL Lemuir Logistics Pvt Ltd (Refusal on part of the carrier to redeliver goods to unpaid seller on seller exercising his right of stoppage in transit is lawful, until payment for transport of the same is received by the carrier.
Possible reasoning: Bailment: neccessity>) 29. Cochin Port Trust v Chopra (Facts- The port trust sold a crane in an auction to the highest bidder, Chopra. Chopra paid earnest but when the trust sent him an acceptance letter, he did not respond. Chopra was informed that his earnest would be forfeited and the trust re-sold the crane to another party at a loss of 43k. Issue- Whether seller could act under S 54 (4), and re-sell goods without giving notice; Mitigation of damages. Judgment- under 54 (2), notice must be given to the buyer about resale. However, under 54 (4), if the seller has reserved his right to resell, then the buyer will be liable for damages irrespective of notice.
The Court looked into the terms of the contract and concluded that there was such reservation. However, if he acts unreasonably then the doctrine of mitigation of damages will apply) Difference between S 54(2) and S 54(4) 30. S 15, 16 In re: Andrew, Yule and Co v Unknown (Facts: Andrew, buyers, contract to sell goods (bales) to sub-buyers, who accept 50/150 bales rejecting the rest, claiming the smell and thus are unfit for the purpose of purchase (packaging); Issue: Whether there was an implied condition as to the fitness of goods for the purpose of purchase; Held: The goods were held to have “disconformed substantially”. However, under S 16: (i) If the buyers expressly communicate to the sellers the purpose for which the oods are wanted (and the, other conditions are present), then there is an implied condition of fitness. (ii) Apart from express Communication, that knowledge may be imputed to the sellers by reason of the circumstances of the case. (iii) Where the goods may be utilized for a variety of purposes known to the supplier, then unless he is notified of the particular purpose for which these goods are wanted, there is no condition of fitness that they shall be fit for that particular purpose. The circumstances of this case render Rule (iii) above applicable, and there was no communication by the buyer of the particular purpose out of the several purposes for which the goods in question are used.
Therefore there was no condition for fitness in this case, that is to say, fitness for being used for the purpose of packing foodstuffs. LOSS OF RIGHT OF REJECTION for breach under S 15: There are three classes of circumstances, which may cause a loss of the right of rejection by the buyers. All these are present in this case; First of all, acts of ownership such as sub-sale, shipment, sending forward, etc. Second, delay in giving notice of rejection. Third, part retention of goods. In this case the buyers resold, received the goods F. A. S. and, without inspecting, sent forward the goods to America. They did not give notice of rejection until 4th November 1930. They, or their sub-buyers, retained 50 bales) 31.
S 16(2) Hasenboy Jetha, Bombay v New India Corporation (In the case of goods sold by description by a seller who deals in such goods, that he is always, in the absence of agreement to the contrary, responsible for latent defects in the goods which render them unmerchantable whether the buyer has examined them or not, and for all such defects whether latent or discoverable on examination in cases where the buyer has not in fact examined the goods. ) 32. S 4 Bharat Sanchar Nigam Ltd (BSNL) v Union of India (Are telecommunication connections taxable: NOT GOODS: Electromagnetic waves are neither abstracted nor are they consumed in the sense that they are not extinguished by their user. They are not delivered, stored or possessed.
Nor are they marketable. They are merely the medium of communication. What is transmitted is not an electromagnetic wave but the signal through such means. The signals are generated by the subscribers themselves. In telecommunication what is transmitted is the message by means of the telegraph. No part of the telegraph itself is transferable or deliverable to the subscribers. A subscriber to a telephone service could not reasonably be taken to have intended to purchase or obtain any right to use electromagnetic waves or radio frequencies when a telephone connection is given. There is no transfer of right to use, as “goods” were never in a deliverable state.
WRT severabiltiy of contracts of service and sale: Court followed the basic principle of Gannon Dunkerleys Case which was unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service, and impose tax on the sale. Severability: The dominant nature Test for distinguishing two types of transactions: did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is to as what is ‘the substance of the contract) 33.
S 4 State of Madras v Gannon Dunkerley and Co (construction contracts entered into by the respondent were agreements to execute work to be paid for according to measurements and quantities of the materials used at the specified rates. The contracts were, therefore, not held to be contracts for sale of the materials used, and that such works contracts were indivisible and could not be broken up into a contract for sale of materials and a contract for payment for work done. ) 34. S 2 Tata Consultancy Services v State of Andhra Pradesh (Whether canned software fell within the definition of goods for tax purposes; Held: The term ‘goods’ as defined under Art. 36 (12) of the Constitution and under this Act, are very wide and include all kinds of moveable property, whether they are tangible or intangible. (“all materials, articles and commodities”); The court was of the opinion that the copyright of the software may remain with the originator but the moment copies of the software are made and distributed, it becomes ‘goods’. The court held no distinction between the sale of music on a CD and that of software on a CD. It further stated that the media and software cannot be split. Therefore, what the buyer purchases and pays for is not the CD. In conclusion, a transaction sale of computer software is a sale of “goods” within the meaning of the term in this Act.
The term “all materials, articles and commodities” includes both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed etc. The software programmes have all these attributes. ) 35. S. 4 – Messrs. Jay Bharat Credit And Investment Co. Ltd. v Commissioner of Sales-Tax ; Another 36. S. 4 – C. C. E. Vadodara v Gujarat Narmada Valley Fertilizer Co. Ltd. 37. S. 4 – Messrs Xerox Modicorp Limited v State of Karnataka 38. S. 12 – Mathew Varkey v T. C. Abraham 39. S. 40 – (1) Suresh Kumar; (2) Rajendra Kumar v K. Assan Koya and Sons 40. S. 59 – Sha Thilokchand Poosaji v Crystal and Company By Its Authorised Agent and Manager C. Satyam