Bombay High Court
Allcargo Logistics Ltd. Formerly ... vs Mr. Dhanesh B. Jain And Ors on 28 September, 2022
Bench: N. J. Jamadar
FA417-2015.DOC
Santosh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
SANTOSH
SUBHASH
KULKARNI FIRST APPEAL NO. 417 OF 2015
Digitally signed by
Allcargo Logistics Ltd.
SANTOSH SUBHASH
KULKARNI
Date: 2022.09.28
18:37:11 +0530
Formerly known as (Allcargo Movers
(India) Pvt. Ltd. A company incorporated
in India under the Companies Act, 1956,
having its office at 6th floor, Avashya
House, CST Road, Kalina, Santacruz
(East), Mumbai 400 098 ...Appellant
Versus
1. Dhanesh B. Jain
an adult, Indian Inhabitant, carrying on
business as sole proprietor in the name
and style of Mahavir Apparels at and
from 304, 404, Abhijeet Building,
Mithakhali Six Roads, Ahmedabad 380 (Ori. Plaintiff)
006, Gujarat, India
2. M/s. Walford Meadows Ltd.
a company incorporated under Foreign
Laws having his office at 1st American
Bank Building, 2nd Floor, Moi Avenue, (Ori.Def.No.4)
Mombassa
3. ACE Lines
a company incorporated under Foreign
Laws having its office at 29 Bis Mere
Bathelemy Street, Port Louis, Mauritius (Ori.Def.No.1)
4. Allcargo Container Lines Ltd.
a company incorporated under Foreign
Laws having its office at 29 Bis Mere (Ori.Def.No.2)
Bathelemy Street, Port Louis, Mauritius ...Respondents
Mr. Rajesh Shah, a/w Nirav Barot, i/b Maneksha and Sethna,
for the Appellant.
Ms. Hiral Thakkar, a/w Naresh Ratnani, i/b Ashwin Ankhad
& Asso., for Respondent no.1.
1/37
FA417-2015.DOC
CORAM: N. J. JAMADAR, J.
RESERVED ON: 8th APRIL, 2022
PRONOUNCED ON: 28th SEPTEMBER, 2022
JUDGMENT:-
1. This appeal is directed against a judgment and decree
dated 18th October, 2014, passed by the learned Judge, City
Civil Court, Bombay in SC Suit No.7175 of 1997 (the High Court
Suit No.1861 of 1997).
2. For the sake of convenience and clarity, the parties are
hereinafter referred to in the capacity in which they were
arrayed before the trial Court.
3. Respondent no.1 (plaintiff) is a proprietary concern. It
was engaged in the business of apparels. Respondent no.3
(defendant no.1) is an entity operated by respondent no.4
(defendant no.2), Allcargo Container Lines Ltd., a company
registered under foreign laws. Appellant (defendant no.3)
Allcargo Logistics Limited (Formerly known as Allcargo Movers
(India) Pvt. Ltd.), is a company incorporated under the
Companies Act, 1956. Respondent no.2 M/s. Walford Meadows
Ltd. (defendant no.4) was the agent of defendant nos.1 to 3. The
plaintiff asserted that defendant nos.1 to 3 are
FA417-2015.DOC
interrelated/sister companies and/or belong to and/or
managed by the same group of companies.
4. In or about July, 1996, the plaintiff entered into contracts
with M/s. Universal Apparel (EPZ) Ltd. Kenya ("M/s. Universal")
for the sale of Cotton Knitted fabrics and other allied
accessories valued US$ 98,715.29. The plaintiff entrusted the
goods to defendant nos.1 to 3 for carriage and delivery, from the
Port of Bombay to Mombassa. Defendant no.3 issued six Bills
of Lading. Each of those six Bills of Lading were made out, "TO
ORDER" signifying that the delivery of the six consignments
shipped thereunder was to be given only upon production and
surrender of the original Bills of Lading to the defendants.
5. The ships carrying the consignments arrived at the Port of
Mombassa. The plaintiff learnt that, in breach of express
condition of the delivery of the consignments only upon
production of the original Bills of Lading, two consignments
shipped through "CMBT TANA" and "CMBT KILIMANJARO"
were delivered to the consignee without production of the Bills
of Lading. The plaintiff immediately called upon defendant no.3
to look into the matter and make amends as the delivery was
effected in breach of express term of the Bills of Lading. The
plaintiffs were given to understand that two of the rest of the
FA417-2015.DOC
consignments were under clearance. Defendant no.3 instructed
defendant no.4, its agent at Mombassa, not to deliver the
consignments without production of the original Bills of Lading.
The plaintiff lodged a formal claim with defendant no.3 for
damages in the sum of US$ 84,353.00 for wrongful delivery of
the goods vide communication dated 14 th September, 1996.
6. In the meanwhile, on 19th September, 1996, defendant
no.4 addressed a communication to M/s. Universal, the
consignee, inter alia, confirming that four consignments were
delivered to the consignee without presentation of the original
Bills of Lading. Thereupon the plaintiff's addressed a legal
notice on 30th September, 1996 to the defendant nos.2 to 4
calling upon them to pay a sum of US$ 1,00,000 being the
damages suffered by the plaintiff on account of breach of the
terms of contract. The defendants did not apprise the plaintiff
about the fate of the rest of the two consignments as well.
Thus, the plaintiff was constrained to presume that the rest two
consignments were lost. In any event, the goods shipped under
rest two consignments were an intergral part of, and
complementary to, the four consignments, which were
wrongfully delivered and, thus, the goods in the last two
consignments had also lost their utility. The plaintiff avers the
FA417-2015.DOC
defendants took an incorrect stand that the plaintiff had
advised M/s. Universal to re-deliver the goods to M/s.
Fashionette Industries Ltd.
7. The plaintiff asserts the defendants were duty bound to
deliver the consignments covered under the Bills of Lading only
upon presentation of the original Bills of Lading under the
terms of the contract. However, the defendants committed
breach of express term of contract of carriage by wrongfully and
illegally delivering the consignments sans presentation of
original Bills of Lading. In addition, according to the plaintiff,
the defendants have committed breach of duty under the
provisions of the Carriage of Goods by the Sea Act and also
their duty as bailees. Hence, the plaintiff was constrained to
institute the suit for the value of the goods along with interest
at the rate of 24% p.a. which became payable, after 90 days
from the date of the invoice.
8. M/s. Walford, defendant no.4, did not appear despite
service. Hence, the suit proceeded ex parte against defendant
no.4.
9. Defendant nos.1 and 2 resisted the suit by filing written
statement. At the outset the tenability of the suit was assailed
FA417-2015.DOC
on the ground of misjoinder of the parties on the premise that
ACE Lines, defendant no.1, was not a legal entity and just a
trade name of defendant no.2. Defendant nos.1 and 2
categorically denied that defendant nos.1 to 3 are
interrelated/sister companies and/or belong to and/or
managed by the same group of companies. Secondly, it was
contended that the Civil Court at Bombay had no territorial
jurisdiction to entertain, try and decide the suit qua defendant
nos.1 and 2, who were not residing and/or carrying on business
within the jurisdiction of the Court. Nor any part of the cause
of action accrued within the territorial limits of the Court at
Bombay. Thirdly, it was contended that the plaintiff was put to
notice by defendant no.3 as early as 9 th October, 1996 itself that
the plaintiff had agreed to hand over the consignment by M/s.
Universal, the original consignee, to Fashionette. Yet, the
plaintiff did not controvert the said position. Therefore the said
silence constituted an admission of the contents of defendant
no.3's letter dated 9th October, 1996. Resultanlty, the plaintiff
had no cause of action against the defendants. Lastly, the
plaintiff suppressed the vital fact that M/s. Universal, the
consignee, had rejected the goods and called upon the plaintiff
to take back the delivery of those defective goods and yet the
FA417-2015.DOC
plaintiff failed to take steps to mitigate the loss. Therefore, the
plaintiff is not entitled to the value of the goods.
10. Defendant nos.1 and 2 have also contested the value of
the goods claimed by the plaintiff. According to defendant nos.1
and 2, the alleged wrongful delivery was of four consignments
only. The plaintiff could not have claimed the value of the goods
shipped in six consignments. In any event, M/s. Universal, the
consignee, had rejected the goods for being of inferior/defective
quality. Thereupon, the plaintiff arranged another buyer
Fashionette to whom the goods were redelivered by the
consignee. Therefore, the plaintiff is not entitled to claim
damages.
11. Defendant no.3 also contested the suit by filing written
statement. The substance of the resistance put forth by
defendant no.3 was that defendant no.3 was an agent of its
disclosed principal i.e. defendant no.2. Thus, in view of the
provisions contained in Section 230 of the Indian Contract Act,
1872, no liability could be fastened on defendant no.3 for the
alleged wrongful act of M/s. Walford, defendant no.4, another
agent of defendant no.2 at Mombassa. It was further contended
that, on the own showing of the plaintiff, the alleged wrongful
delivery was only of four out of six consignments. According to
FA417-2015.DOC
defendant no.3, the plaintiff is not entitled to raise any claim as
regards the value of the balance two consignments. It was
denied that the goods in the rest two consignments were
rendered useless as they were an integral part of, and
complementary to, the goods in the first four consignments.
Defendant no.3 contended that the defendants were never put
to notice about the said facts and, therefore, the plaintiff cannot
claim damages on the said count.
12. Defendant no.3 categorically contended that being an
agent of the disclosed principal, defendant no.3 was entrusted
with the task of shipping goods at the Mumbai Port. Defendant
no.3 had performed the said obligation by duly shipping the
goods at Mumbai Port and also specifically instructing the
agent of defendant no.2, at the port of discharge, to deliver the
consignments only upon the production of original Bills of
Lading. Therefore, there was no breach of any contractual or
statutory duty on the part of defendant no.3.
13. On the basis of the aforesaid rival pleadings, issues were
settled by the City Civil Court. In order to substantiate his
case, the plaintiff examined Badarmal Modiram Jain (PW-1) and
tendered documents including the Bills of Lading and the
copies of the correspondence exchanged between the plaintiff
FA417-2015.DOC
and defendants, inter se, and with M/s. Universal the
consignee. In the rebuttal defendant no.3 examined Rajan
Randhive (DW-1), the Assistant General Manager of defendant
no.3. A number of documents were also tendered on behalf of
the defendants.
14. After appraisal of the oral evidence and the documents
tendered for his perusal, the learned Judge, City Civil Court,
was persuaded to partly decree the suit directing, inter alia,
defendant nos.1 to 4 jointly and severally pay the amount of
US$ 84,353.31 along with interest at the rate of 24% p.a. from
the date of the institution of the suit till realization. The
learned Judge was of the view that the City Civil Court had
jurisdiction to entertain, try and dispose of the suit; the
plaintiff succeeded in establishing that the value of the goods
consigned was US$ 84,353.31 and the defendants were guilty of
breach of contract in as much as the goods were delivered to the
consignee in violation of the terms of the contract and,
therefore, the defendants were liable to pay the damages.
Conversely, the learned Judge held, defendant nos.1 and 2
failed to establish that the plaintiff had agreed for re-delivery of
the goods by M/s. Universal, the original consignee to another
FA417-2015.DOC
buyer Fashionette, and defendant no.3 failed to establish that it
had acted only as an agent of the disclosed principal.
15. Being aggrieved by and dissatisfied with the impugned
decree, appellant - defendant no.3, has preferred this appeal.
Rest of the defendants have not assailed the decree.
16. I have heard Mr. Shah, the learned Counsel for the
appellant and Ms. Thakkar, the learned Counsel for respondent
no.1 - original plaintiff, at length. The learned Counsels have
taken me through the pleadings, oral evidence adduced before
the Court and the documents filed in support of the rival
claims. I have also carefully perused the impugned judgment.
17. At the outset, Mr. Shah, the learned Counsel for the
appellant, would urge that though during the course of the trial
defendant nos.1 to 3 were represented by the same Advocate,
the defence of defendant no.3 is quite distinct from that of
defendant nos.1 and 2. The fact that defendant nos.1 and 2
have not assailed the decree would not impinge upon the
defence of defendant no.3 as it rests on an established principal
of law that being an agent of the disclosed principal defendant
no.3 could not have been held liable for the alleged wrongful
delivery of the goods by another agent of the disclosed principal
FA417-2015.DOC
18. Mr. Shah strenuously submitted that the learned Judge,
City Civil Court, committed a manifest error in recording a
finding that the plaintiff succeeded in establishing the value of
the goods despite there being a clear disclaimer in the Bills of
Lading that 'the weight, measure, quantity, condition, contents
and the value of the goods were unknown to the carrier'.
According to Mr. Shah, the learned Judge misdirected himself
in construing the communication addressed by defendant no.3
to the consignee M/s. Universal that on the basis of the claim of
the plaintiff, defendant no.3 had debited a sum of US$
82,353.31 to the account of the consignee. Since there was
neither proof of the value of the goods nor anything to indicate
that defendant no.3 had debited the said amount in the
account of M/s. Universal, the learned Judge could not have
answered the said issue in favour of the plaintiff.
19. Mr. Shah further submitted that the trial Court grossly
erred in not appreciating the jural relationship between
defendant no.3 and defendant no.2, on one part, and defendant
no.2 and defendant no.4, on the other part. It was all along the
case of defendant no.3 that it was an agent of the disclosed
principal. In this view of the matter, even if the case of the
plaintiff is taken at par that there was wrongful delivery of the
FA417-2015.DOC
goods by the agent of defendant no.2, at the port of discharge,
defendant no.3 could not have been fastened with any liability.
20. By the impugned judgment, according to Mr. Shah,
defendant no.3 is made liable for the wrongful act of another
agent of the principal of defendant no.3, sans any vicarious
liability, which is legally impermissible. In fact, according to
Mr. Shah, defendant no.3 had fully performed its duty by
loading the consignments at the Port of Bombay on board the
ships named by the principal and issued the Bills of Lading,
with specific instructions that the delivery was to be made, "TO
ORDER". Moreover, defendant no.3 had addressed
communications on 31st August, 1996 and 2nd September, 1996
specifically informing the agent at the Port of discharge to
deliver the goods only upon the production of the original Bills
of Lading. In the circumstances, neither breach of duty nor
negligence could have been attributed to defendant no.3.
Therefore, the impugned decree qua defendant no.3 - appellant
deserves to be set aside.
21. Mr. Shah would urge that, in any event, as the plaintiff
did not make any effort to mitigate the loss despite having been
apprised by M/s. Universal that it had rejected the goods, the
plaintiff is not entitled to damages. Failure to mitigate the loss,
FA417-2015.DOC
in the facts and circumstances of the case, according to Mr.
Shah, materially impairs the plaintiff's claim for damages.
22. Lastly, Mr. Shah would urge, there is material to indicate
that the plaintiff had availed the benefit of duty drawback under
Section 75 of the Customs Act. Duty drawback implies that the
plaintiff had received entire price of the goods. The learned
Judge, City Civil Court, according to Mr. Shah, failed to properly
appreciate consequence of duty drawback, which was clearly
admitted by PW-1.
23. In opposition to this Ms. Thakkar, the learned Counsel for
respondent no.1 - plaintiff, stoutly submitted none of the
grounds urged on behalf of defendant no.3 are worthy of
consideration. Ms. Thakkar laid emphasis on the fact that the
wrongful delivery of the consignments by defendant no.4 to
M/s. Universal is borne out by the correspondence exchanged
between the defendants inter se and with M/s. Universal. It is
also indisputable that the plaintiff did not receive the
consideration. In the face of these twin facts, the defences
sought to be raised by the defendants, especially defendant
no.3, are creatures of afterthought. Contemporaneous record,
according Ms. Thakker, would indicate that at no point of time
defendant no.3 raised any dispute about the fact that defendant
FA417-2015.DOC
no.3 acted in the capacity of the agent of defendant no.3. On
the contrary, there are documents wherein not only defendant
no.3 had acknowledged defendant no.4 to be its agent at
Mombassa, but even the latter conceded that defendant no.3
was its principal. With a view to extricate itself from the
liability, the defendant no.3 has taken a palpably false defence
that defendant no.4 was the agent of defendant no.2 and
defendant no.3 had no concern with defendant no.4. The said
stand defence is clearly belied by the evidence, urged Ms.
Thakkar.
24. The endeavour of the defendants to assail the decree on
the ground that value of the goods has not been independently
proved, according to Ms. Thakkar, also does not merit
countenance for reasons more than one. First, there is no
material to show that the defendants ever contested the value of
the goods, till the written statement came to be filed. Second,
defendant no.3 claimed to have debited the account of
defendant no.4 with the sum of US$ 84,000, which the plaintiff
had claimed from defendant no.3.
25. Ms. Thakkar further submitted that the challenge to the
impugned decree on the ground that the plaintiff took no
measures to mitigate the loss is wholly misconceived.
FA417-2015.DOC
Indisputably, the plaintiff had parted with the goods and was
not in a position to exercise any control over the goods. In such
a situation, where there is no shred of material which
establishes that, M/s. Universal had allegedly rejected the
goods, the defence based on failure to mitigate the loss can only
be said to be a figment of imagination.
26. On the aspect of the duty drawback, Ms. Thakkar
canvassed a two-pronged submission. One, there is no
admission, as alleged by defendant no.3, that the plaintiff had
in fact received the duty drawback benefit. Even otherwise,
there is no prohibition in law to avail duty drawback even if the
consideration remains unpaid. In any event, according to Mr.
Thakkar, the duty drawback, even if assumeed to have been
availed of, does not lead to an escapable inference that
consideration has been duly received by the plaintiff, which the
defendant no.3 wants the Court to believe. In the totality of the
circumstances, the impugned decree is impeccable, submitted
Ms. Thakkar.
27. I have given anxious consideration to aforenoted rival
submissions. In the backdrop of these submissions, the
challenge to the impugned decree can be conveniently evaluated
in four parts.
FA417-2015.DOC
(1) Whether the value of the goods consigned by the
plaintiff is proved?
(2) Is defendant no.3 liable for wrongful delivery of the
goods by defendant no.4 to the consignee?
(3) Whether the plaintiff's alleged failure to mitigate the
loss dis-entitles the plaintiff from seeking damages?
(4) What consequences flow from the benefit of duty
drawback allegedly availed by the plaintiff?
Point No.1:
28. Before adverting to consider the aforesaid contentious
issues it may be apposite to note that upto the point of delivery
of goods by defendant no.4 to M/s. Universal, there is no
element of controversy between the parties. The fact that the
Bills of Lading were made "TO ORDER" is not at all in issue.
Nor the fact that defendant no.4 delivered the consignments to
the M/s. Universal without production of original Bills of
Lading. Wrongful delivery of the goods in breach of express term
of the contract is thus indubitable. The controversy between the
parties revolves around the consequences which emanate from
such wrongful delivery, the party who should suffer the
consequences and the effect of the subsequent events, which
allegedly occurred.
FA417-2015.DOC
29. To retain emphasis and narrow down the controversy, it
may be expedient to extract the contents of letter dated 19 th
September, 1996, Exhibit-E-2 addressed by defendant no.4 to
the consignee. With reference to the four original Bills of
Lading, under which the goods were consigned, defendant no.4
wrote as under;
"The above shipment were released and delivered to you
without your surrendering to us the original bills of lading.
The procedure of the through bills of lading or house bills of
lading are that no cargo should be released to the importer
without presentation of the original bills of lading. However,
this favour was extended to you because:-
1, You are our regular customer
2. To save you from heavy port storage charges which you
would have incurred if you were to wait until you got the
original bill from your supplier.
3. You needed the material very urgently as you were out
of stock.
We have now been adviced by our Principals Allcargo
that your supplier MAHAVIR APPAREALS is demanding US
Dollers 84,353.31 from us as we releansed the goods in
absence of the original B/L.
[ILLBGIBLE] the original Bills of Lading, please treat
this as our formal claim to you for US Dollers 84,353.31
being the amount we have been debited with by allcargo
movers (India) Pvt. Ltd.
Please revert no as we have to advise our Principals in
India before close of business today.
In the meantime, we are holding all your shipments until
this matter is resolved."
30. A copy of the aforesaid letter was sent to defendant no.3
with the following endorsement:
"cc. All Cargo India, Mumbai
Attn: Vivek Kele -
FA417-2015.DOC
We shall come back to you with full details upon
receiving reply from Universal Apparels, Cargo was
released without bank guarantee.
31. A bare perusal of the aforesaid letter leads to following
inferences. Firstly, goods mentioned in Bills of Lading were
received by defendant no.4. Secondly, those consignments were
delivered to M/s. Universal without the consignee surrendering
to defendant no.4 original Bills of Lading. Thirdly, defendant
no.4 was fully alive to the fact that under the terms of Bill of
Lading goods could not have been released without presentation
of original Bill of Lading. Fourthly, the said delivery was effected
in deviation of standard practice and express term of the
contract, on account of the special relations which defendant
no.4 shared with M/s. Universal and the request made by the
latter. Fifthly, the principals of defendant no.4 apprised
defendant no.4 that the consignor - plaintiff had lodged a
demand for US$ 84,353.31 for release of the goods in breach of
contract. Sixthly, defendant no.3 had debited the account of
defendant no.4 with the said sum of US$ 84,353.31. Lastly,
M/s. Universal was called upon to revert as defendant no.4 was
to advice its principal in India. As is evident, a copy of the said
communication was also marked to defendant no.3.
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32. It would be contextually relevant to note the
communication dated 17th September, 1996 (Exhibit-D) which
appears to have forced defendant no.4 to address the aforesaid
communication to M/s. Universal.
"WITH REF TO OUR MESSAGE DTD SEPT 2, 1996 ADD TO
MR. DARIUS MCHARD (ENCL) AND ALSO MSG DTD SEPT
12, 1996 ADD TO MR. NDUNDU (ENCL) SHIPPER 13 IN
POSSESSION OF ALL ORIGINAL BILLS OF LADING AND
THE CARGO HAS BEEN RELEASED WITHOUT
ACCOMPLISHING THE SAME.
KINDLY HAVE THE SAME CHECKED AND REVERT, PLEASE
ALSO ADVISE IF THIS CARGO WAS RELEASED AGAINST
BANK GUARANTEE, PLS FAX US THE COPY OF THE SAME,
NOTE THIS IS VERY SERIOUS CASE AND WE REQUEST
FOR YOUR IMMEDIATE REPLY.
ALSO THE SHIPPER HAS PUT A CLAIM OF USD 84,353.31
WHICH WILL BE FORWARDED TO YOU IN CASE THE
CARGO HAS BEEN DELIVERED W/O THE ORIGINAL B/L
OR PROCEDURES IN ABSENCE OF THE SAME."
33. The aforesaid communication, in turn, was in response to
the letter dated 14th September, 1996 (Exhibit-C3) addressed by
the plaintiff to the defendant. The following contents of the said
letter bear upon the controversy at hand.
"THIS IS IN CONTINUATION OF OUR LETTER DTD 13TH SEPTEMBER, 1996, WE
WOULD LIKE TO INFORM YOU THAT THE TOTAL AMOUNT INVOLVED IN
RESPECT OF FOLLOWING BILL OF LADING AMOUNTING TO USD 84,353.31
(APPX RS.29,87,795/-
B/L DATE VESSEL VOY INV DT AMOUNT
USD
BOM/B- 09/07/96 CMBT 24/111 MA 07/96 04/07/96 19721.12
6/302179 TANA
BOM/B- 26/07/96 KILIMANJR 1/113 MA 22/96 22/07/96 11731.46
6/302506 O
BOM/B- 08/08/96 ORBIT 5/116 MA 14/96 31/07/96 13452.12
6/302683
--DD-- MA 13/96 31/07/96 1750.00
BOM/B- 14/08/96 ORBIT 5/116 MA 18/96 08/08/96 15994.73
FA417-2015.DOC
6/302816
BOM/B- 28/08/96 CMBT 25/119 MA 23/96 24/08/96 21723.88
6/303093 TANA
TOTAL US $ 84353.31
PLEASE TREAT THIS AS OUR FORMAL CLAIM FOR RS.29,97,795/-
INVOLVED IN THIS CONSIGNMENT. YOU ARE HEREBY ADVISED TO
LOOK INTO THE MATTER AND GIVE US THE EXACT STATUS OF THE
ABOVE CARGOES IMMEDIATELY.
34. A conjoint reading of the aforesaid communications, in a
reverse order, would indicate that in the wake of wrongful
delivery of the goods under the six Bills of Lading, the plaintiff
had categorically asserted that the total amount of the goods
consigned under the six Bills of Lading was US$ 84,353.31
equivalent to Rs.29,87,795/- approximately at the then
prevailing rate of exchange. The plaintiff had lodged a formal
claim for wrongful delivery of the goods without surrendering
the original Bills of Lading. Thereupon, defendant no.3, on its
part, lodged the claim with defendant no.4 for the wrongful
delivery of the goods. Defendant no.4, in turn, claimed the said
amount of US$ 84,353.31 from M/s. Universal.
35. On the aspect of the value of goods which were wrongfully
delivered, the learned Judge observed that the plaintiff had not
adduced evidence aliunde in proof of the value of the goods
consigned. However, on the strength of the aforesaid
correspondence, the learned Judge was persuaded to hold that
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the value of the goods was, in a sense, admitted by defendant
nos.3 and 4.
36. Assailing the aforesaid approach, Mr. Shah would urge
that in the absence of evidence in proof of the value of the goods
it could not have been a matter of inference. Mr. Shah
submitted that the plaintiff did not prove the invoices which
were raised to evidence the sale and delivery of the goods.
37. In my view, the aforesaid approach of the learned Judge,
City Civil Court is justifiable. It is only after the institution of
the proceedings, the defendant made an endeavour to contest
the claim of the plaintiff as regards the value of the goods. In
contrast, in response to the communication dated 14 th
September, 1996, wherein the plaintiff had claimed the specified
value of the goods consigned, defendant no.3 sought to hold
defendant no.4 liable for the said amount and professed to
debit the account of defendant no.4 for the said amount and
defendant no.4, in turn, claimed the said amount from M/s.
Universal.
38. Mr. Shah made an endeavour to persuade the Court not to
attach much value to the aforesaid correspondence as the fact
that the defendant no.4's account was debited with the said
FA417-2015.DOC
sum of US$ 84,353.31 has not been proved independently. I am
afraid to accede to this submission. The fact that immediately
after the claim was lodged by the plaintiff defendant nos.3 and
4, went on to claim the amount from the person, whom they
held liable, detracts materially from the defence now sought to
be raised. Undoubtedly, the Bills of Lading contain a disclaimer
as regards the quantity, contents and value of the goods
consigned. However, the plaintiff's claim is not rested on the
value of goods mentioned on the Bills of Lading only. Post
disclosure of wrongful delivery of the goods, the plaintiff
instantaneously alleged and firmly claimed damages
commensurating with the value of the goods, as assessed by the
plaintiff. In this view of the matter, the defendants cannot seek
to draw any mileage from the fact that there is no evidence
aliunde to establish the value of the goods. From this stand
point, in my view, the learned Judge, City Civil Court committed
no error in returning an affirmative finding in favour of the
plaintiff.
Point No.2 :
39. The principal plank of the challenge to the impugned
decree was that defendant no.3 being an agent of a disclosed
principal i.e. defendant no.2, could not have been sued for the
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alleged wrongful delivery of the consignments by the another
agent of defendant no.2. As a corollary, it was urged that there
was no privity of contract between defendant nos.3 and 4 and,
therefore, defendant no.3 could not have been held liable for the
alleged wrongful delivery by defendant no.4.
40. Mr. Shah banked upon the provisions contained in
Section 230 of the Indian Contract Act, 1872 to bolster up the
submissions that the defendant no.3 being an agent of the
disclosed principal could not have been held personally liable.
Section 230 of the Contract Act, 1872 reads as under:
"S.230. Agent cannot personally enforce, nor be bound by,
contracts on behalf of principal.--In the absence of any
contact to that effect an agent cannot personally enforce
contracts entered into by him on behalf of his principal, nor
is he personally bound by them. --In the absence of any
contact to that effect an agent cannot personally enforce
contracts entered into by him on behalf of his principal, nor
is he personally bound by them." Presumption of contract to
contrary.--Such a contract shall be presumed to exist in the
following cases:--
(1) where the contract is made by an agent for the sale or
purchase of goods for a merchant resident abroad;
(2) where the agent does not disclose the name of his
principal;
(3) where the principal, though disclosed, cannot be sued."
41. From the text of Section 230, it becomes clear that in the
absence of contract to the contrary an agent can neither
personally enforce the contract entered into by him on behalf of
his principal nor can he be made personally liable for the
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obligation which emanates therefrom. A contract to the contrary
is, however, presumed to exist in the situations enumerated
therein, namely, (i) contract by an agent for the sale or purchase
of goods for a merchant resident abroad, (ii) non-disclosure of
the name of the principal, (iii) disclosed principal cannot be
sued.
42. In the context of the facts of the case, the effect of
disclosure of the principal by defendant no.3 is pressed into
service on behalf of the defendant no.3. On first principles,
where the contract is entered into by an agent contracting on
behalf of the foreign principal who is named or disclosed, the
agent cannot be sued personally nor made personally liable.
43. The real issue that comes to the fore is whether the
situation at hand is governed by the provisions contained in
Section 230 of the Act in the context of the juridical status of
defendant no.3 qua defendant no.4. Whether defendant nos.3
and 4 were simply co-agents of defendant no.2 or the jurial
relationship between defendant nos.3 and 4 transcended the
status of independent co-agents, is the moot question for
consideration.
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44. Mr. Shah, endeavoured to impress upon the Court that
Bills of Lading unequivocally disclose the status of defendant
no.3 as an agent of the named principal i.e. defendant no.2.
With this disclosure, the wrongful delivery of the goods by
defendant no.4 could not have been made a foundation for the
liability of defendant no.3, was the thrust of the submission of
Mr. Shah.
45. Ms. Thakkar submitted that the material on record clearly
shows that defendant no.4 was in fact the agent of defendant
no.3. Attention of the Court was invited to the contents of the
afore-extracted documents and further correspondence between
the defendants inter se and with M/s. Universal. It is imperative
to note, in the letter dated 13th September, 1996 addressed to
M/s. Harilal Bhawanji, in response to a grievance made by the
plaintiff about wrongful delivery of the goods (by letter dated
11th September, 1996), defendant no.3 made an effort to alleviate
the grievance of the plaintiff by asserting inter alia "we have
instructed our office in Mombassa to release the cargo till so
time the original B/L's for all 3 consignments are
accomplished."
46. The relationship between defendant nos.3 and 4, in the
contemplation of defendant no.4, also assumes critical
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significance. In the letter dated 19 th September, 1996, extracted
above, at more than one places, defendant no.3 was referred to
as the principal of defendant no.4. Firstly, M/s. Universal was
informed that defendant no.4's Principals Allcargo had informed
defendant no.4 that the plaintiff had lodged a claim. Secondly,
M/s. Universal was called upon to reveal before the close of
business on that day as defendant no.4 was to advise its
principals in India. Thirdly, the said communication was
addressed to defendant no.3 only and not to defendant no.2.
47. Mr. Shah made a faint attempt to wriggle out of the
situation by canvasing a two-fold submission. One, a mere
reference in the letter dated 13 th September, 1996 to defendant
no.3 as "our office in Mombassa" is not sufficient to establish
the jural relationship. And in the letter dated 19 th September,
1996 the use of the expression, "our Principals Allcargo" is to
defendant no.2 alone. It is true that it may not be safe to draw
an inference about the nature of relationship by the choice of
words in business correspondence, only. However, in the case
at hand, reference to such relationship at multiple places in the
correspondence exchanged between the parties betrays the true
nature of the relationship. It is pertinent that neither
defendant no.2 ever addressed any letter to defendant no.4 nor
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defendant no.4 gave any explanation to defendant no.2. On the
contrary, defendant no.4 expressly referred defendant no.3 as
its principal in India. To add to this, in none of the
communications by defendant no.3 preceding the institution of
the suit defendant no.3 ever controverted the claim of the
plaintiff that defendant no.4 was the agent of defendant no.3.
Contemporaneous conduct, therefore, militates against the
defence sought to be urged on behalf of the defendant no.3.
48. It would be contextually relevant to appreciate the manner
in which the defendant - Rajendra Randhive (DW-1) fared in
cross-examination on the aspect of the inter se relationship
between defendant nos.2 and 3. Mr. Randhive (DW-1) conceded
in the cross-examination that the written statement on behalf of
defendant nos.1 and 2 is signed by Mr. Sashikiran Shetty. He
conceded in unequivocal terms that Mr. Shetty is the Director of
Allcargo Movers, defendant no.3. To a pointed question as to
who were the other directors of defendant no.3, Mr. Randhive
(DW-1), replied that, to his knowledge, only Mr. Shetty was the
Director of defendant no.3. He feigned ignorance as to whether
there were any common directors of defendant nos.2 and 3. It
would be relevant to note that Mr. Randhive (DW-1) conceded
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that Mr. Shetty was (then) still working with defendant no.3 and
was also available in Mumbai.
49. Defendant nos.1 to 3 chose not to examine Mr. Shetty. If
the evidence of Mr. Randhive (DW-1) is to be believed, Mr.
Shetty, who signed and verified the written statement on behalf
of the defendant nos.1 and 2 was the Director of defendant no.3
and controlled the affairs of defendant no.3. This factor cannot
be said to be immaterial or inconsequential. If the contents of
the documents, extracted above, reflecting upon the
relationship between defendant nos.3 and 4 are considered in
juxtaposition with the aforesaid nature of the controlling
influence over the affairs of defendant nos.1 to 3 by one and the
same individual, an inference becomes irresistible that the
status of defendant no.3 cannot be construed to be that of a
mere agent of a disclosed principal. If defendant no.3 wanted to
dispel the position, it was incumbent upon the defendant no.3
to examine Mr. Shetty to clear the air and establish that
defendant no.3 was a mere agent of a disclosed principal.
50. The manner in which defendant no.4 was selected as an
agent at the port of delivery also bears upon the controversy.
Mr. Randhive (DW-1) admitted in no uncertain terms that when
defendant no.3 got Bill of Lading, it had no stamp of the agent
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at the port of discharge i.e. Walford, defendant no.4. Mr.
Randhive (DW-1) further conceded that the stamp of Walford
was put by defendant no.3 at the time of issue of Bill of Lading
to the plaintiff. As to at whose instructions defendant no.4 was
selected as the agent at the port of delivery, Mr. Randhive
(DW-1) claimed that a list of agents was provided by defendant
no.2.
51. Laying emphasis on the aforesaid assertion that defendant
no.4 was the handling agent of defendant no.2, at the port of
destination, Mr. Shah would urge that the absence of nexus
between defendant nos.3 and 4 is crystal clear. If the evidence
is read as a whole, the inference which Mr. Shah wants the
Court to draw does not commend itself. Defendant no.3 had
both the authority and choice, to select the agent at the port of
destination. Defendant no.3, in the totality of the
circumstances, cannot be permitted to wriggle out of the
situation by simply contending that defendant no.4 was an
agent of defendant no.2 at the port of destination.
52. The aspect of the liability of the defendants, in the case at
hand, is required to be appreciated in the light of undisputed
wrongful delivery of the goods, in breach of an express term of
contract. In this backdrop, Ms. Thakkar was justified in placing
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reliance on a judgment of the Supreme Court in the case of
Dhian Singh Sobha Singh and Anr. vs. Union of India 1 wherein
the liability of the carrier for wrongful delivery of the goods was
expounded as under:
"15. It would be relevant to consider what is the exact scope
of the two forms of action, viz., action for wrongful
conversion and action for wrongful detention, otherwise
known as action in trover and action in detinue. A
conversion is an act of willful interference, without lawful
justification, with any chattel in a manner inconsistent with
the right of another, whereby that other is deprived of the
use and possession of it. If a carrier or other bailee
wrongfully and mistakenly delivers the chattel to the wrong
person or refuses to deliver it to the right person, he can be
sued as for a conversion. Every person is guilty of a
conversion, who without lawful justification deprives a
person of his goods by delivering them to some one else so
as to change the possession. (Salmond on Torts, 11th
Edition, pages 323, 324, 330).
16. The action of detinue is based upon a wrongful
detention of the plaintiff's chattel by the defendant,
evidenced by a refusal to deliver it upon demand and the
redress claimed is not damages for the wrong but the return
of the chattel or its value. If a bailee unlawfully or
negligently loses or parts with possession he cannot get rid
of his contractual liability to restore the bailor's property on
the termination of the bailment and if he fails to do, he may
be sued in detinue. (Clerk & Lindsell on Torts, 11th Edition,
pages 441 and 442: paras. 720 & 721)."
53. In the case of Government of Goa through Commissioner
and Secretary (Finance) vs. Goa Urban Co-operative Bank Ltd.
& ors.2 a Division Bench of this Court enunciated the liability of
the principal for the act of the agent as under:
"9. From the press communique as well as from the terms
of the loan it is clear that the RBI was to act as manager for
1AIR 1958 SC 274.
22011(2) Mh.L.J. 37.
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the loan. The RBI in a sense was, an agent of the appellant,
the State of Goa, for the purpose of managing the issue of the
loan. Designated branches of the Sbi which were to receive
the applications for the loan, were also to act as agents of the
appellant State of Goa and/or sub-agents of the RBI which
was the manager to the issue. In our view, the principal is
responsible for the negligence of the agent during the course
of his employment as an agent. The liability of the principal
for the negligence and/or wrongful act of the agent is on the
ground that the principal is a person who has selected the
agent and the principal having delegated the performance of
certain class of acts to the agent, the principal should bear
the risk. Al that is necessary for holding the principal liable
is that the acts should have been committed by the agent in
the course of his employment. Although the principal did not
authorise the agent to act negligently, the principal cannot
escape the liability for the negligence of the agent.
10. In Kailas Sizing Works vs. Municipality of Bhivandi
and Nizampur, 1968, Mh. L.J. 916 = AIR 1969 Bom. 127, a
Division Bench of this Court in para 47 has held:
47. The defendants contended that they had
engaged qualified engineers and experienced
contractors and, therefore, they could not be guilty of
negligence. With regard to the contractors however
much experienced, they would merely carry out the
work according to the plans prepared by the
Municipality. If the engineers are negligent, the
defendants would be liable. The liability of principal
for the wrongful act of his agent rests on the grounds
that the principal is a person who has selected the
agent and that the principal having delegated the
performance of a certain class of acts to the agents;
the principal should bear the risk. All that is necessary
is that the act should have been committed by the
agent in the course of his employment, although the
principal did not authorise, or justify, or participate in
the act or even if he forbade it or disapproved of it. The
liability of the principal for the wrongs of his agent is a
joint and several liability with the agent. The injured
party may sue either or both of them."
We respectfully agree with the observations quoted
hereinabove."
(emphasis supplied)
54. In the aforesaid view of the matter, I am not inclined to
accede to the submission on behalf of the appellant that it
could not have been fastened with the liability for the wrongful
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delivery of the goods by defendant no.4 as defendant no.3 was
an agent of the disclosed principal.
Point No.3:
55. The challenge to the impugned decree based on failure on
the part of the plaintiff to mitigate the loss, in strict sense, does
not emerge from the facts of the case and evidence adduced by
the parties. Edifice of this submission was sought to be built
on the alleged rejection of the goods by M/s. Universal, the
consignee. It was sought to be urged on behalf of defendant
no.3 that after M/s. Universal addressed a communication on
19th September, 2018 that it had rejected the goods, no steps
were taken by the plaintiff to take back the goods and mitigate
the loss.
56. Ms. Thakkar was justified in advancing a criticism that
the said fact of the alleged rejection of the goods has not been
established. The two communications; first, dated 19 th
September, 1996 purported to be addressed by M/s. Universal
to Walford and, second, the reply to the legal notice dated 2 nd
April, 1997 on behalf of M/s. Universal, which record the
alleged rejection of goods, were not proved in evidence.
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57. Even otherwise, it is imperative note that in the
contemporaneous correspondence exchanged with the
plaintiff and defendants inter se, there was no reference to the
fact that the goods were allegedly rejected by M/s. Universal. On
the contrary, the defendants banked upon correspondence
indicating that the plaintiff had allegedly instructed M/s.
Universal to redeliver the goods to M/s. Fashionette Industries
Ltd.. It is a different matter that the said correspondence also
appears to be in the nature of an unilateral offer without any
acceptance by or confirmation from the plaintiff.
58. The defence of rejection of goods by M/s. Universal is
required to be considered in the backdrop of indisputable
position of wrongful delivery of the goods to M/s. Universal. At
the very moment of the wrongful delivery, the defendants were
guilty of breach of contract. The plaintiff had already parted
with the possession of the goods. There is no contemporaneous
material to indicate that the alleged rejection of the goods by
M/s. Universal was brought to the notice of the plaintiff. An
abstract submission that the plaintiff ought to have taken steps
to mitigate the loss in the light of these hard facts, is unworthy
of acceptance.
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59. Reliance placed by Mr. Shah on the judgment of the
Supreme Court in the case of M. Lachia Setty and Sons Ltd. vs.
Coffee Board, Bangalore3, does not seem to advance the cause
of the defendant no.3. In fact, the observations in paragraph 14
in the case of M. Lachia Setty (supra), underscore the fact that
the principle of mitigation of loss does not arm a party in
default with an instrument to avoid the claim for damages.
Paragraph 14 reads as under:
"14. At the outset it must be observed that the principle of
mitigation of loss does not give any right to the party who is
in breach of the contract but it is a concept that has to be
borne in mind by the Court while awarding damages. The
correct statement of law in this behalf is to be found in
Halsbury's Laws of England (4th Edn.) Vol. 12, para 1193 at
page 477 which runs thus:
"1193. Plaintiff's duty to mitigate loss. The plaintiff
must take all reasonable steps to mitigate the loss
which he has sustained consequent upon the
defendant's wrong, and, if he fails to do so, he cannot
claim damages for any such loss which he ought
reasonably to have avoided."
Again, in para 1194 at page 478 the following statement
occurs under the heading 'Standard of conduct required of
the plaintiff:
"The plaintiff is only required to act reasonably, and
whether he has done so is a question of fact in the
circumstances of each particular case, and not a
question of law. He must act not only in his own
interests but also in the interests of the defendant and
keep down the damages, so far as it is reasonable and
proper, by acting reasonably in the matter In cases of
breach of contract the plaintiff is under no obligation
to do anything other than in the ordinary course of
business, and where he has been placed in a position
of embarrassment the measures which he may be
driven to adopt in order to extricate himself ought not
to be weighed in nice scales at the instance of the
3(1980) 4 SCC 636.
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defendant whose breach of contract has occasioned
the difficulty."
Point No.4:
60. The issue of duty drawback allegedly availed by the
plaintiff, even if taken at par, does not advance the cause of the
submission to the extent desired by the appellant. Mr. Shah
banked upon an admission in the cross-examination of
Badarmal Modiram Jain (PW-1) that the plaintiff might have
received the benefit of duty drawback. On this premise, an
endeavour was made to bolster up a case that the plaintiff can
be assumed to have received the consideration and, therefore,
the plaintiff cannot again seek damages.
61. Plainly, the submission is against the weight of the
evidence on record. It is nobodies case that either M/s.
Universal, the consignee, or any other party had paid the value
of the goods consigned under the Bills of Lading to the plaintiff,
much less any evidence. An inferential submission that availing
of benefit of duty drawback implies receipt of consideration is
simply far fetched. Conversely, from the perusal of the
provisions contained in Section 75 of the Customs Act, 1962
such an inference cannot be said to be automatic. The second
proviso to sub-section (1) of Section 75 envisages a situation
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where any duty drawback has been allowed but the sale
proceeds in respect of such goods are not received by or on
behalf of the exporter in India and empowers the Central
Government to specify the procedure for recovery or adjustment
of the amount of such drawback.
62. The conspectus of aforesaid consideration is that none of
the exceptions taken on behalf of the appellant to the impugned
decree merits acceptance.
63. An aspect, which, however, warrants consideration is the
justifiability of the relief granted by the learned Judge, as
regards the currency in which the damages are quantified and
the rate at which interest has been awarded thereon. As
indicated above, when the plaintiff first lodged the claim for
damages with defendant no.3 vide communication dated 14 th
September, 1996 (Exhibit-C3), the plaintiff had quantified the
damages at US$ 84,353.31 equivalent to Rs.29,87,795/-, at the
then prevailing rate of exchange. Nay, in the concluding part of
the said communication, the plaintiff expressly asserted that it
should be treated as a claim for Rs.29,87,795/-. The claim for
damages thus stood crystalized at Rs.29,87,795/- as of 14 th
September, 1996. In this view of the matter, a decree for
damages on the basis of the value of the goods, as assessed by
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the plaintiff, ought to have been passed in Indian currency
instead of US Dollar.
64. Secondly, the award of interest at the rate of 24% also
appears to err on the side of excessiveness. Undoubtedly, the
underlying transaction was purely commercial. Yet, award of
interest at the rate of 24% p.a. appears to be a little harsh and
exorbitant. I am, therefore, inclined to modify the impugned
decree by awarding interest at the rate of 18% p.a.
65. Resultanly, the appeal deserves to be partly allowed.
Hence, the following order:
:ORDER:
(i) The appeal stands partly allowed.
(ii) The impugned decree stands modified as under:
(a) The suit stands partly decreed.
(b) Defendant nos.1 to 4 do jointly and severally pay a
sum of Rs.29,87,795/- along with interest at the rate of
18% p.a. from the date of the institution of the suit till
payment and/or realization.
(iii) The appellant shall pay the costs of the appeal to
respondent no.1 - plaintiff and bear its own.
(iv) Decree be drawn accordingly.
[N. J. JAMADAR, J.]
