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Harkisondas Nanjibhai Vs. Chaturbhuj Prabhudas - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 1091 of 1946
Judge
Reported inAIR1947Bom434; (1947)49BOMLR425
AppellantHarkisondas Nanjibhai
RespondentChaturbhuj Prabhudas
Excerpt:
.....seems to be a strong reason why i should not produce it. the right of a person whose money or tangible property has been wrongfully taken to trace that money or follow that property into whatever form it may have been converted is well established, but the right now claimed is a right to a charge on property which never belonged to the plaintiff but which is alleged to have come into existence as a result of the dishonest conduct of defendants nos. prevention is better than cure......shell oil, storage and distributing co of india, ltd., in respect of the supply of 100 tons of fullers earth.'2. the circumstances under which it comes to be made are, very briefly, as follows, according to the plaintiff:3. for some time before may 13 this year the plaintiff and defendants nos. 1 and 2 were in partnership. negotiations started between the firm and the assam oil company, ltd., for the sale by the former to the latter of a quantity of fullers earth. according to the plaintiff, defendants nos. 1 and 2, in fraud of the plaintiff, their partner, negotiated the sale not on behalf or in the name of the firm but in the name or on behalf of a business called 'c. bhuj goradia', a name which a very brief study reveals to have a striking resemblance to that of defendant no. 1......
Judgment:

Blagden, J.

1. This is a motion by the plaintiff in the suit against defendant No. 3 for an injunction restraining him, his servants and agents 'from recovering any moneys due by the Assam Oil Co., Ltd., or the Burmah Shell Oil, Storage and Distributing Co of India, Ltd., in respect of the supply of 100 tons of Fullers Earth.'

2. The circumstances under which it comes to be made are, very briefly, as follows, according to the plaintiff:

3. For some time before May 13 this year the plaintiff and defendants Nos. 1 and 2 were in partnership. Negotiations started between the firm and the Assam Oil Company, Ltd., for the sale by the former to the latter of a quantity of Fullers Earth. According to the plaintiff, defendants Nos. 1 and 2, in fraud of the plaintiff, their partner, negotiated the sale not on behalf or in the name of the firm but in the name or on behalf of a business called 'C. Bhuj Goradia', a name which a very brief study reveals to have a striking resemblance to that of defendant No. 1. The business, 'C. Bhuj Goradia,' and not the plaintiff's firm, actually obtained a quality of Fullers Earth and sold and delivered it to the Assam Oil Company, Ltd., as a result of which the Assam Oil Company, Ltd., owes a large sum of money to somebody. The Fullers Earth sold and delivered was not the plaintiff's Fullers Earth and was not the plaintiff's firm's Fullers Earth, but other Fullers Earth. If those facts are correct, and for the purposes of this motion-though only for those purposes-I assume that they are, it is obvious that a fraud was perpetrated on the plaintiff by defendants Nos. 1 and 2, against whom he may have a remedy in contract-whether he has or has not depends on the terms of the partnership agreement read with the dissolution agreement, and he undoubtedly has, if those facts are correct, a remedy in tort for conspiracy-but in each case the relief to which he is entitled is damages, the measure of damages being, as it seems to me, the profit which he would have made if the bargain for which the firm was in treaty had gone through. The plaintiff started his suit on June 21 this year against defendants Nos. 1 and 2, and he claimed a declaration that he, who under the dissolution agreement of May 13 was entitled to the entire property, rights and assets of the former firm, was entitled to the benefit of the order to suppiy the 100 tons of Pullers Earth, damages, an injunction, as now sought against defendant No. 3, accounts, an interim receiver, costs, and further or other relief. He moved the Court for an injunction, and defendants Nos. 1 and 2 then put up the following case:

It was not we who sold and delivered the Fullers Earth to the Assam Oil Company, Ltd., at all, but a completely independent person called Prabhudas Tribhovandas Goradia carrying on business as C. Bhuj Goradia, whose only connection with the previous firm whatsoever was that he happens to be the father of defendant No. 1.

Such being their case, there was no great generosity on the part of defendants Nos. 1 and 2, undertaking, as they did, not to receive the moneys due from the Assam Oil Co., Ltd., for they were only undertaking not to receive moneys which, according to them, were not payable to them. In any ease, they did not undertake not to receive the moneys 'or any part thereof,' with the result that if they were so minded they might possibly escape the consequences of what would really amount to a breach of their undertaking by receiving the said moneys, they letting the Assam Oil Company, Ltd., off, say, one rupee. It is consequently not very surprising that the plaintiff was not satisfied with that undertaking and proceeded to amend his plaint by adding this gentleman, Prabhudas Tribhovandas Goradia, who carries on business in a name so closely resembling that of his son, as defendant No. 3, alleging that he is a mere tool or benamidar of the first two defendants. The present motion was then taken out against defendant No. 3, asking for the injunction which I have stated, and defendant No. 3, answer to that is: 'I am a completely independent contractor and have for years and years been carrying on my own business: since August 1945 I have been doing it in the name of my son because I think it is lucky to carry on business in the name of one's son.' No useful purpose would be served, in fact harm might possibly be done, if this case goes to trial, if I were to discuss now the available evidence about this matter. Suffice it to say that I think the plaintiff has made out a prima facie case, at all events, that defendant No. 3 is a benamidar for the first two defendants. I may be quite wrong, but I propose to approach the present motion on the assumption that there is a reasonable chance that he will at the trial succeed in establishing that. But what then? The only cause of action common to all the three defendants, and consequently the only cause of action, so far as I can see, which the plaintiff has against defendant No. 3 is a claim for damages for conspiracy, that is, unliquidated damages for a naked tort. He has no contractual relationship with defendant No. 3 at all. It must be borne in mind that on any view of the matter, the first two defendants did not steal and defendant No. 3 did not receive any tangible or definable piece of property from the plaintiff, All that was done, and if it was done I am not seeking for a moment to minimise the dishonesty of it, was to abuse knowledge which it was the duty of the first two defendants to use honestly and confidentially for the purposes of the firm of which at the time they were members. The plaintiff, therefore, is not, in relation to defedant No. 3, entitled, if he establishes his claim against him, to be paid out of any specific fund, but if he establishes his claim, he will be a mere general creditor of defendant No. 3. Now, it is very clear that as a general rule a receiver is not appointed at the instance of a mere general creditor over property to which he has no specific claim merely in order that if he establishes his claim as a creditor there may be assets wherewith to satisfy it (see Kerr on Receivers, 1935 edition, at p. 46). The ease there cited is a decision of the House of Lords in Owen and Gutch v. Homan, (1853) 4 H.L.C. 997 where the question is very fully discussed. The following observations of the Lord Chancellor are almost precisely applicable, in my opinion, to the present case (p. 1036) :

The Plaintiffs here do not claim as specific appointees of any part of the Defendant's separate estate. They are merely in the nature of general creditors seeking to obtain payment by a sort of equitable action of assumpsit or debt. In such a case it is a strong exercise of authority to deprive the Defendant, on motion, of property on which the Plaintiffs have no specific claim, in order that, if they establish their claim as creditors, there may be assets wherewith to satisfy them. I do not mean to say that such a course may not be taken, though I have not discovered any authority for it. Perhaps the anomalous nature of the right, where a Plaintiff is claiming as a general creditor of a married woman, and is seeking payment out of her separate estate, and the inability of the Court to govern the proceedings in equity in such a case by rules strictly conformable to those which regulate an action at law, may warrant the interim interference by a receiver. But a chance of doing a wrong to the Defendant in such case is certainly much greater, and much more apparent, than where aright asserted is a right against some specific fund or estate.

I do not think there is any serious chance of doing at any rate any irreparable wrong to defendant No. 3 in the present ease by granting the injunction sought. It is true that it is an injunction that is sought on this motion and not a receiver, but the effect of the injunction would be to make the Assam Oil Co. receivers wihout remuneration and without security of the fund in question, and therefore the principles which govern the appointment of a receiver must, in my opinion, be applicable to the injunction sought. There are, however, in this particular case at least two distinctions from the position in Owen and Gutch v. Homan. One is that the plaintiffs here are not claiming under any sort of equitable action of assumpsit or debt as against defendant No. 3. They are, as I have pointed out, bringing an action in tort. The other is a point which was only slightly considered in the House of Lords, viz. that the rights of other creditors, if there are any, have always got to be considered on applications of this kind. Taking those two considerations together, let me suppose that defendant No. 3 became insolvent tomorrow. The plaintiff would not even have a right to prove against his estate, his claim being a claim for unliquidated damages for tort. It would indeed be strange by granting an injunction or appointing a receiver on his motion I were to translate him from the unenviable position he now occupies of not being even a creditor in insolvency into the much more fortunate one of a secured creditor, and the very strangeness of such a result seems to be a strong reason why I should not produce it. I have not been able to discover any authority for the proposition that a person who has been defrauded by the abuse of knowledge which one of the defendants ought to have treated as confidential knowledge has any right in equity to follow the proceeds of the abuse of that knowledge. The right of a person whose money or tangible property has been wrongfully taken to trace that money or follow that property into whatever form it may have been converted is well established, but the right now claimed is a right to a charge on property which never belonged to the plaintiff but which is alleged to have come into existence as a result of the dishonest conduct of defendants Nos. 1 and 2. I do not think I can at this late stage of the 20th century invent such a new right, particularly when, as I have pointed out, to do so would have the extraordinary effect of converting the plaintiff, in an action as against defendant No. 3 for unliquidated damages in tort, into a secured creditor. I fully appreciate the attraction and force of Mr. Banaji's argument inviting me to do so. In one sentence it amounts to this: Prevention is better than cure. With that proposition no one, I think, would disagree. Applied to the facts of the present case it is fallacious because it is sought to prevent a wrong by what might very likely, if defendant No. 3 is, as the plaintiff alleges, in straightened circumstances, amount to an infringement of the rights of third parties. What in fact and in effect the plaintiff is asking for is, really, attachment before judgment, and though there is evidence that the plaintiff may not get his money if the order sought is not made, even if he succeeds in the suit, there is no evidence at all that defendant No. 3 is about to dispose of the whole or any part of his property or is about to remove the whole or any part of his property from the local limits of my jurisdiction, and in the absence of such evidence I cannot grant attachment before judgment. An early date for hearing has already been fixed and consequently there is no order that I can make on the motion except that costs be reserved to the trial Judge.

4. Interim injunction pending an application to the Appeal Court up till 2 o'clock tomorrow afternoon.


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