Suit No.256 of 1978

6th July, 1994

Cases Cited:
AIR 1983 All 381 [Para 10]
AIR 1966 Punj 303 [Para 11]
AIR 1963 Punj 120 (Rel. on) [Para 12]
AIR 1960 SC 335 [Para 16]
AIR 1960 Mad 480 (Rel. on) [Para 9]
AIR 1956 Punj 230 [Para 10]
AIR 1930 PC 270 [Para 9]

JUDGMENT

JUDGMENT :-This is suit filed by the plaintiff for compenstion for breach of contract. The defendant has contested the suit by filing written statement. Issue have been framed. By consent, arguments are heard on the question of limitation covered by Issue No.1. I have heard both the Counsel.

2. The plaintiff's case is that it had sold 499 bales of cotton to the defendant as per contract dated 23rd July 1973. The goods were ready for being delivered to the defendant. The defendant's agent came and approved the goods after inspection of 199 bales on 1st August 1973. As per the contract, the defendant was to make payment before lifting the goods. But in spite of request of the plaintiff, defendant did not lift the goods by paying the amount. Then plaintiff wrote a letter dated 17th December, 1973 calling upon the defendant to lift the goods and make the payment. But defendant replied by letter dated 20th December, 1973 stating that it has already rejected the goods as per the letter dated 2nd August, 1973. But is alleged that plaintiff has never received the said letter dated 2nd August, 1973. Then plaintiff wrote three more letters dated 26th December, 1973, 8th January, 1994 and 14th January, 1994. The defendant replied by letter dated 21st January, 1974 asserting that it has already rejected the goods. Then plaintiff sent a telegram dated 15th March, 1974 calling upon the defendant to lift the goods within 72 hours, failing which, it would be liable to pay compensation, but there was no response by the defendant. Then it is stated that plaintiff sold the said 199 bales of cotton in open market on 6th August 1974 and as a result incurred a loss of Rs. 73,922/-. Then plaintiff got issued a lawyer's notice dated 3rd February 1975 claiming the said loss with interest. The defendant sent a reply dated 20th February, 1975 denying its liability. Hence the plaintiff has filed the suit praying for a decree for a sum of Rs. 1,11,653.02 P.

3. The defence is that though the contract is admitted, it is stated that the goods were not approved by the defendant's agent on 1st August, 1973. On the other hand, it is asserted that the defendant rejected the goods by writing a letter dated 2nd August, 1973. The various correspondence mentioned in the plaint are admitted. The defendant has denied its liability and has asserted rejection of goods in every one of its letters. It is alleged that the suit is barred by limitation, that the defendant is not liable to pay any compensation to the plaintiff and that the defendant is not liable to any amount as claimed in the plaint. Hence it is prayed that the suit be dismissed with costs.

4. Issue No.1 framed in this case is as follows :-

Whether the present suit is barred by the Law of Limitation?

5. Most of the facts in this case are admitted. Admittedly, there was a contract between the plaintiff and defendant for supply of cotton bales. It is also not disputed that the plaintiff had kept ready 199 bales. The dispute is as to whether the defendant's agent came to plaintiffs regional office, inspected and accepted the goods or not. For the purpose of deciding the question of limitation that point is immaterial. Then there is one more disputed fact whether the defendant rejected the goods by writing a letter dated 2nd August, 1973. According to the plaintiff it has not received any such letter dated 2nd August 1973. We will ignore this disputed fact also since it is not necessary for our present purpose.

The plaintiff issued a letter dated 17th December, 1973 calling upon the defendant to take delivery of the goods.

The defendant sent its reply as per its letter dated 20th December, 1973 informing that it had already rejected the bales as per its letter dated 2nd August, 1973. Again, the plaintiff wrote another letter dated 26th December, 1973 stating that it has not received the letter dated 2nd August, 1973 and further called upon the defendant to lift the goods by making payment. This was followed by two reminders by the plaintiff viz. dated 8th January, 1994 and 14th January, 1974. The defendant under a reply dated 21st January, 1974

again asserted that it has already rejected the goods. The relevant recital in this letter dated 21st January, 1974 is as follows :-

"We can only request you to please, refer to our letter of 2-8-1973, we had informed you that the bales were rejected. We had also informed to Shri Balmukand Chokhani, regarding the rejection."

It is, therefore, seen that at every stage the defendant has asserted that it has already rejected the goods. The plaintiff has gone on requesting the defendant to lift the goods, but the defendant has gone on asserting that it has already rejected the goods.

6. Next we come to the second event viz. that the plaintiff sold the goods in open market on 6th August 1974. As a result of this sale, the plaintiff suffered a loss of Rupees. 73,922/-.

Then the plaintiff got issued a lawyer's notice dated 3rd February, 1975 demanding this amount which was denied by defendant's reply letter dated 20th February, 1975.

7. According to the plaintiff, the suit is filed within three years from the date of defendant's refusal to pay the compensation amount by its reply notice dated 20th February, 1975. But according to the defendant limitation starts running once the defendant rejected the goods to the knowledge of the plaintiff in December, 1973 or latest by 6th August, 1974 when plaintiff suffered alleged loss due to sale of the goods in open market. There is no dispute that the period of limitation is three years. The only question is tin to when the cause of action arose for this suit?

8. In my view, the, suit is governed by Article 55 of the Indian Limitation Act, 1963. It provides for a suit for compensation for breach of contract and the period of limitation is three years. It is provided that the time begins to run when the contract is broken or when there is a breach of contract.

The learned Counsel for the plaintiff submitted that the suit is governed by the residuary article viz. Article 113 of the Limitation Act. Even there the period of limitation is three years and the time begins to run when the right to sue accrues.

In my view, it is immaterial whether the suit is governed by Article 55 or Article 113, but the only question is as to when exactly the time begins to run.

The learned Counsel for the plaintiff submitted that even though there was a breach of contract in defendant not lifting the goods in spite of notice, plaintiff could not have filed the suit immediately unless it sustained loss as a result of this transaction, and therefore, plaintiff could wait till it sold the goods and sustained loss. Reliance is placed on Section 23 of the Limitation Act. In my view Section 23 is applicable only when the cause of action arises when specific injury is caused. But in a suit for breach of contract, cause of action arises as soon as the contract is breached.

9. Before considering the facts of this case on this point, let me refer to some of the decisions cited at the bar.

In a case reported in AIR 1960 Madras 480, which was an identical case where loss had been sustained after sale of goods, it was held that the suit should be filed within three years from the date of the breach of contract. The High Court rejected the defence contention that the suit can be filed within three years from the date of re-sale of the goods. The High Court pointed out that when once breach occurred, the right to sue accrued to the plaintiff. In that case, it was held that the suit is governed by Article 115 of the Limitation Act of 1908 which corresponds to Article 55 of the Limitation Act, 1963.

Then we have another reported case in AIR 1963 Punjab 120 where also on identical facts it was held that the suit for compensation should be filed within three years from the date the defendant failed or refused to take delivery of the goods.

Both the above decisions really support the case of the defendant that suit should be filed within three years from the date of refusal to lift the goods.

10. As against this, the learned Counsel

for the plaintiff relied on some authorities viz. AIR 1930 PC 270, AIR 1983 Allahabad 381, AIR 1960 SC 335 and AIR 1956 Punjab 230 where it has been held that a plaintiff need not rush to Court whenever his right is threatened and he can come to Court only when his possession is interfered with or some positive injury is caused. In my view, these decisions have no bearing on the facts of the present case. Even assuming for a moment that these decisions are attracted to this case we find that right from December, 1973 in three letters the defendant has rejected the goods. Therefore, this is not a mere case of some vague denial there being no threat to the, plaintiffs right. When once defendant refused to lift the foods, there is a breach of contract. The cause of action is immediately attracted for filing a suit for breach of contract under Article 55 of the Limitation Act.

11. Then the learned Counsel for the plaintiff relied on AIR 1966 Punjab 303. This was also a case of compensation for breach of contract regarding sale of goods. It was held that Article 115 of the Limitation Act, 1908 applies which corresponds to Article 55 of the new Limitation Act, 1963. In that case, the High Court pointed out that plaintiff gets a cause of action to file a suit only when loss is occasioned to him by resale of the property, and therefore, reliance was placed on the old Section 24 which now corresponds to Section 23 of the new Act and it is therefore held that since the goods had been disposed of only in 1948, the suit was within time having been filed within three years from that date.

12. Normally, a suit for breach of contract should be filed within three years from the date when the contract is broken as mentioned in Article 55 of the Limitation Act. Even if we apply the ratio the decision in AIR 1966 Punjab 303 a suit should be filed within three years from the date when the plaintiff sustained a loss viz. when he sold the goods in open market, which in this case is 6th of August, 1974.

13. Therefore, we find on a plain reading of Article 55 that the suit should be filed within three years from December, 1973 when defendant informed the plaintiff that it has rejected the goods or at least within three years from January, 1974 when defendant confirmed the rejection of goods again. But the suit was filed on 23rd December, 1977.

14. Even agreeing with alternative contention urged on behalf of the plaintiff that the plaintiff got a cause of action to claim the amount only after re-sale of the goods in open market, we find that the foods were sold in open market on 6th August, 1974. Then the suit should be filed within three years viz. on or before 6th August, 1977. But the suit is filed in December, 1977. Hence even if Section 23 of the Limitation Act is attracted, the suit should have been filed within three years from 6th August, 1974.

15. The learned Counsel for the plaintiff then contended that the suit is filed within three years from the denial of liability by the defendant through his lawayer's notice which is dated 20th February, 1975, and therefore, the suit is in time. In my view, this argument cannot be accepted for more than one reason.

As pointed out above, even if we ignore the disputed letter dated 2nd August, 1973, right from December, 1973 defendant has been consistently asserting that it has rejected the goods. The denial of the defendant is unequivocal and once defendant stated that it has rejected the goods in its letters in December, 1973, there was a breach of contract. The plaintiff cannot go on writing fresh letters and getting fresh replies and then say that the suit can be filed within three years from the fresh replies received.

Now admittedly according to the plaintiff the goods were sold in open market on 6th August, 1974. Since defendant had denied its liability and had asserted rejection of goods in previous letters, there was no necessary for the plaintiff to make any further demand after 6th August, 1974. Even taking for a moment that one more notice or one more demand was necessary after selling the goods on 6th August, 1974, the plaintiff could have issued a demand notice on the next day viz. 7th August, 1974 or at least within reasonable time viz. within one-two or ten days. Hence even if we give a margin of 10 or 15 days or

15 days or even a month from 6th August, 1974 to enable the plaintiff to issue one more demand notice, the suit should have been filed within three years from August or September, 1974. But the suit came to be filed only in December, 1977.

What the plaintiff has done is that even after it sold the goods on 6th August, 1974, it did not make any fresh demand for months together and kept quiet till 3rd February, 1975. That means for six months the plaintiff kept quiet and then issued a demand notice dated 3rd February, 1975 and then when the defendant sent a reply on 20th February, 1975, the plaintiff wants to plead this reply as the cause of action for the suit. Why plaintiff waited for six months to make a demand after selling the goods on 6th August, 1974 has nowhere been made clear in the plaint. A party cannot keep quiet indefinitely and then write a letter and invite a denial reply and then file a suit within three years from that date.

It was argued that .the defendant has not replied to the telegram sent by the plaintiff. When defendant has asserted rejection of goods in two letters in December, 1973 and January, 1974, there was no necessity for the plaintiff to send a telegram, much less a necessity for the defendant to send a reply. Since the defendant informed the plaintiff about rejection of goods in letters written in December, 1973 and January, 1974, plaintiff should have taken immediate steps to sell the goods in open market. But again from January, 1974 plaintiff kept quiet for eight months to sell the goods in open market on 6th August, 1974 without assigning any reason as to why it waited for such a long period. Even after selling the goods on 6th August, 1974, plaintiff waited for another six months to send a lawyer's notice and then based its cause of action on defendant's reply sent in February, 1975. Plaintiff cannot create cause of action like this. There is no legal basis for such a conduct on the part of the plaintiff.

If plaintiffs argument is accepted, then instead of waiting for six months plaintiff could have waited for two or three years and then issued a notice. Defendant may or may not reply that letter. Then the suit can be filed after another few months or one year. The law does not permit such a course of action. When once limitation has begun to run from 6th August, 1974 by invoking Section 23 of the Limitation Act, it cannot be arrested by issuing one more notice and that too after a lapse of six months. In the first instance, there was no necessity for issuing one more demand notice after the sale of goods in open market. Even if it is conceded that one more demand notice was necessary before rushing to the Court, the plaintiff should have issued a demand notice within one or two weeks or within a month but cannot wait for months together.

16. From the above discussion, we find that the suit is governed by Article 55 of the Limitation Act. The first cause of action arose to the plaintiff when defendant rejected the goods by asserting the same in its reply letter in December, 1973. Therefore it was in December, 1973 that the cause of action accrued to the plaintiff to file a suit for breach of a contract. Even assuming that plaintiff could invoke Section 23 of the Limitation Act, then plaintiff should have filed this suit within three years from 6th August, 1974 as held in AIR 1966 Punjab 303 which is relied on by the learned Counsel for the plaintiff himself. Whether we invoke Article 55 of the Limitation Act as contended on behalf of the defendant or whether we invoke Article 113 of the Limitation Act as contended on behalf of the plaintiff, the suit has to be filed within three years. It should have bee"-filed within three years from December, 1973 or latest within three years from August, 1974. But in this case the suit is filed in December, 1977 long after the expiry of period of three years. Hence I am constrained to hold that the suit is barred by limitation. Issue No.1 is answered in the affirmative. As result of my finding on Issue No.1, the suit is liable to be dismissed.

17. In the result, the suit is dismissed as barred by limitation. In the circumstances of the case, there will be no order as to costs.

Suit Dismissed