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Sorabshah Pestonji Vs. the Secretary of State for India - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberFirst Appeal No. 35 of 1924
Judge
Reported inAIR1928Bom17; (1927)29BOMLR1535
AppellantSorabshah Pestonji
RespondentThe Secretary of State for India
DispositionAppeal dismissed
Excerpt:
.....a distance of about five miles). but on the representation of the old licensee of the khokarwada shop, government had permitted him to shift the shop to khareghat (which was much nearer to zamanyar and which was an inhabited place) before the date of the auction; but this fact was not mentioned in the statement. the plaintiffs protested against the shifting of the khokarwada shop to the collector, who informed them, on july 31, 1918, that the objected shop would bo moved back to khokarwada at the termination of the monsoon. on january 1), 1919, the plaintiffs applied to the collector pointing out the loss they had sustained by the location of a rival shop at khareghat and some other causes; and the collector, on august 4, 1920, informed the plaintiffs that their license fee was reduced..........which is the subject of the agreement.'3. now, here, the vendor put forward a statement as to the liquor shops. he was under no obligation to do so. but if he did so, then prima facie that statement ought not to be misleading. it is said, therefore, that the case comes within section 18(2), and that in any event it comes within section 18(3) because the plaintiffs thereby made 'a mistake as to the substance of the thing' they were contracting for, viz., that they thought they were buying a liquor shop whose nearest rival was some six miles away in an unfavourable locality, whereas the liquor shop they in fact bought had a rival placed in much more favourable circumstances than that. whether there was such a misrepresentation it is unnecessary for us to hold. but for the sake of argument.....
Judgment:

Amberson Marten, Kt., C.J.

1. [His Lordship after setting out the facts of the case, proceeded ] This brings me back then to what are the strict legal rights of the plaintiff Mr. Thakor very frankly in.his opening said that he did not think he could properly put his case as one of fraud. We have looked at the definition of fraud in some of the authorities, and it seems to us that that submission of Mr. Thakor was only a right and proper one to make. It is but fair to say that there is not before us the slightest evidence that any officer of Government deliberately put forward this statement about the shops with the intention to deceive the plaintiff's, or in any other but the honest belief that the statement was correct. At most it amounts to this that there was an omission to state a material fact.

2. The consequences of that omission I will now consider. Here I wish to repeat that we have not thought it necessary to call on the pleader for the respondent, and therefore anything that I may say must be taken subject to that fact. But it seems to me that the Only remedy now oPen to the plaintiffs is one under Section 19 of the Indian Contract Act on the ground of misrepresentation. Section 18 defines misrepresentation as inter alia '(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him? by misleading another to his prejudice or to the prejudice of any one claiming under him; (3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.'

3. Now, here, the vendor put forward a statement as to the liquor shops. He was under no obligation to do so. But if he did so, then prima facie that statement ought not to be misleading. It is said, therefore, that the case comes within Section 18(2), and that in any event it comes within Section 18(3) because the plaintiffs thereby made 'a mistake as to the substance of the thing' they were contracting for, viz., that they thought they were buying a liquor shop whose nearest rival was some six miles away in an unfavourable locality, whereas the liquor shop they in fact bought had a rival placed in much more favourable circumstances than that. Whether there was such a misrepresentation it is unnecessary for us to hold. But for the sake of argument only I will assume that there was misrepresentation within the meaning of Section 18.

4. What then are the consequences under Section 19 That provides that 'when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation may, if he thinks fit, insist that the contract shall be perform/id, and that he shall be put in the position in which he would have been if the representations made had been true.' So there are two remedies: (1) avoidance or rescission, and (2) completion and the enforcement of the representation.

5. In the events which have happened, we think that it is not open now to the plaintiff to avoid the contract. The term of three years provided by the contract had actually expired before this action was ever brought. The auction was on March 9, 1918. The suit was brought on September 26, or October 1, 1.921. Even if it could be said that the reply of the Collector of July 31, 1918, induced the plaintiffs to alter their position to the end of monsoon of 1918, still they knew at that later date in, say, October 1918 that the shop had not been removed. It was accordingly open to them to avoid the contract then if they so desired. And if they were uncertain as to their legal position, then they could have brought a fruit claiming certain declarations that they were entitled to rescind and so on. They could thus have had the matter determined. But as they chose to wait for that long period after October 1918, we do not see how we can possibly deal with the matter as if the contract had been rescinded ab initio.

6. Their main case was really put to us on the other branch of Section 18, viz., that they must be put in the same position in which they would have been if the representation made had been true, In the present case that involves, I think, this that they are to be put in the same position as if the liquor shop No. 85 had never been removed to Khareghat. Now the learned District Judge has gone at length into various figures connected with the sales of liquor at the shops. But this much at any rate has to be conceded by counsel for the appellant, viz., that even if the plaintiffs allocate to their own shop the whole increase of liquor in their rival's shop resulting from the removal to Khareghat as compared with the original position at Khokarwada, that increase alone will not amount to the Rs. 3,000 a year already allowed by Government. If then their case rests on that they are out of Court.

7. But they contend that that is not the true position. They say that here after the removal there were two competing shops, and so each might have sold their liquor at a lower price than they otherwise would have done, and that consequently the true measure of damages is not merely the increased sale in the rival shop. But supposing one takes the case on that alternative view, and one calls the annual sales at the plaintiffs' shop in gallons to be X, and the increased sales at the rival shop, viz., those after removal as compared with those before removal to be Y per annum, what evidence is there here to show that taking the fair average of profit in the district of West Khandesh for a consumption of X +Y gallons over three years, (the term of this contract), the resultant loss to the plaintiffs is more than the Rs. 3,000 a year which Government have already allowed. It has to be conceded that in fact there are no figures before us on which the plaintiffs can substantiate any alternative claim of that sort. After all the onus is on them to make out their case on the quantum of damages, and in the result I am quite unable to find that the alleged misrepresentation at the auction has in fact caused them any greater loss than the Rs. 3,000 a year already allowed them.

8. In this connection I draw particular attention once more to their own letter of January 11, 1919, to the Collector. I think all of us who were in India during the years 1918-1919 will remember the terrible pestilences that swept over the country resulting in a huge death roll from influenza and cholera and so on. I appreciate that we are dealing here with a particular locality and not necessarily with Bombay where the death rate amounted at one time to 600 or 700 a day. But on the plaintiffs' own admission there was pestilence and famine which theY put in the foreground of their letter as the reason for the loss of the profit they had anticipated. And one thing more. The plaintiffs had been so sanguine as actually to bid some 3 1/2 times the amount of the previous license. The evidence is that at this auction Government obtained on an average four or five times the amount of preceding years' licenses. But even if the bidders were of a sanguine disposition, it is at least questionable whether there were any real grounds for these apparently inflated biddings. This then is another matter to be considered in weighing what was the real loss which the plaintiffs suffered by the closer proximity of this other shop, It would be utterly wrong of course to visit the vendor with the consequences of the bad times which fell upon the plaintiffs and which had nothing whatever to do with the removal of the liquor shop.

9. On the facts, therefore, before us I would hold that any legal remedy open to the plaintiffs fails at law, because Government have already given them as much as they are entitled to at law and even more.

10. That being so, it really becomes unnecessary to deal with the other points in the case. I would only mention one or two which have been opened to us because they have undoubtedly caused us some difficulty. The true construction, for instance, of the terms of the license, Exihibit No. 73, is to my mind far from free from doubt. What, for instance, does Clause 8 mean Does it mean that Government may move a liquor shop from a particular site in the area for which that particular license is granted to another place within that particular area Or does it mean that Government can compel a licensee to move to some totally different district Or does it mean that they may move him into another area for which a license has been given to some other bidder The learned District Judge appears to have thought that this clause gave power to Government to bring a rival into an area already covered by a particular license, and that neither party could complain. This view of Clause 8 is at least questionable. And it may well be, particularly having regard to the evidence of the head clerk to the Collector himself, that all that was intended was that Government should have power to move a liquor shop within a particular area. I would only add for the consideration of others that a clause like this could be made perfectly clear by an alteration in the drafting, and that if it is really intended to give any such wide power as the learned District Judge thought, it would seem a matter of common fairness that, the intention of the vendor should be expressed in unambiguous terms.

11. As regards the arguments as to the circumstances under which damages could be recovered under English law, the leading case on damages for fraud is Derry v. Peek. (1889) 14 App. Cas. 337 There is a subsequent case of Nocton v. Lord Ashburton [1914] A.C. 932, where it was held that relief may be granted where there has been a breach of duty arising from fiduciary relationship, even though fraud is not proved. And I may here refer to one passage in Derry v. Peek, where Lord Herschell says at p. 360 :-

There is another class of actions which I must refer to also for the purpose of putting it aside, I mean those cases where a person within whose special province it lay to know a particular fact, has given an erroneous answer to an inquiry made with regard to it by a person desirous of ascertaining the fact for the purpose of determining his course accordingly, and has been held bound to make good the assurance he has given.

12. Then Low v. Bouverie [1891] 3 Ch. 82 deals with a somewhat similar question as to what obligations lie upon a trustee who is asked questions about the trust by a third party dealing with a cestui que trust.

13. It is, however, unnecessary for us to go into authorities on English law for it all comes back to this that under Section 19 of the Indian Contract Act the plaintiffs at most can only be entitled to be put in the same position as if the representation that was made had been true, supposing, as here, rescission is no longer open to them. In my judgment the plaintiffs had already been put in that position by Government before this suit, was ever brought. Consequently it follows that in ray judgment the conclusion arrived at by the learned District Judge was correct, and that this appeal must be dismissed with costs.

Crump, J.

14. I agree with the judgment pronounced by the learned Chief Justice, and I have very little to add. I would, however, draw the attention of the District Judge to the somewhat unsatisfactory nature of the judgment in this case. First as to condition 8 in the conditions of sale, it is by no means clear from his judgment what construction he has precisely put upon it. He 'merely says :-' Condition No. 8 of the Yadi reserved power to the Collector to change the location of any shop.' Whether he meant to hold that there was power to change the shop from one village to another, or whether he meant that there was merely power to change the site of the shop from one place in the village to another place in the same village, he has not discussed. That would be a most important matter to decide in considering the misrepresentation alleged in the present case.

15. Another point to which I would also draw his attention is his finding as to the knowledge of the plaintiff that at the time of the auction the removal of the Khokarwada shop from Khokarwatda to Khareghat had already been sanctioned. Really that is a very important matter, and one which a Court of first instance should not have left in any doubt. Yet all that the learned District Judge says upon the point is this :-' It seems highly probable, therefore, that the plaintiff was aware of the proposed change at the time of the sale.' It is impossible to take that as a definite finding that the plaintiff knew of the proposed change, and yet if he did know that, clearly there would be an end of his case. It is very embarrassing to an appellate Court to find questions of such importance as these dealt with in so indecisive a manner. It is of course the duty of the Court of first instance to record in clear and definite language its findings upon all material questions of fact in the case. It is unnecessary for us to pursue that matter any further. For I agree, as explained in the judgment of the learned Chief Justice, that even if there be a misrepresentation, which would give the plaintiff a ground for action, still it would only be under the second para of Section 19 of the Indian Contract Act that he can obtain relief, and that relief would be by putting him in the position which he would have occupied had the other shop remained at Khokarwada and not been removed to Khareghat.

16. I also agree upon that portion of the case that the plaintiff has failed to establish that he would have been in no better position than he is now by virtue of the allowance of Rs. 3,000 that has been made to him by Government.


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