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Mukundchand Balia Vs. Sobhagmal Gianmal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberSuit No. 1379 of 1921 and O.C.J. Appeal No. 60 of 1924
Judge
Reported inAIR1925Bom79; (1924)26BOMLR1097; 85Ind.Cas.613
AppellantMukundchand Balia
RespondentSobhagmal Gianmal
DispositionAppeal allowed
Excerpt:
.....mandi or forward transactions, but there is no such arrangement between the adatia and the third party in bombay, the transactions are not wagering transactions.;a kaccha adatia in bombay enters into transacting on behalf of his up-country constituent with third parties in bombay. when he enters into such transactions under instructions from his up country constituent, the third party is responsible for the losses to the up-country constituent. to the third party in bombay both the kaccha adatia and his constituent are responsible. the name of the up country constituent is not communicated to the third party in bombay, but the name of the third party with whom the kaccha adatia transacts business on behalf of the up-country constituent, is communicated to the up country constituent...........the third party is responsible for the losses to the up-country constituent. to the third party in bombay both the kaccha adatia and his constituent would be responsible. the name of the up-country constituent is not communicated to the third party in bombay, but the name of the third party with whom the kaccha adatia transacts business on behalf of the up-country constituent is communicated to the up-country constituent. the adatia enters into contracts with the third parties in bombay on behalf of his up-country constituent as an agent, the name of the principal not being disclosed. i may mention that these facts are practically admitted by the defendant. in his evidence he admits that he employed the plaintiff as his kaccha adatia at four annas commission. he admits that he.....
Judgment:

Lallubhai Shah, Ag. C.J.

1. The plaintiff in this case carried on business in Bombay as a shroff and merchant and Kaccha and Pakka Adatia at the material time. The defendant resided and carried on business at Itchhavar within the territory of the Bhopal State under the name and style of Bagmal Gianmal and Sobhagmal Thanmal. As an up-country constituent the defendant did business in Broach and Bengal cotton through the plaintiff in Bombay. He employed the plaintiff as his Kaccha Adatia to do business for him in forward transactions in cotton. The transactions commenced in Samvat 1971, but we are not concerned with the transactions of the Samvat years 1971, 1972 and 1973 directly. In Samvat 1974, there were various forward transactions and Teji Mandi transactions carried out by the plaintiff on behalf of the defendant, and there was a certain sum due by the firm of Sobhagmal Thanmal to the plaintiff, which also was included in the agency account for the Samvat year 1974.

2. The plaintiff filed the present suit in March 1921 to recover Rs. 1,83,632-5-6, inclusive of interest up to the date of the suit, on the agency account between him and the defendant for the Samvat year 1974.

3. The defendant pleaded that the sum due by the firm of Sobhag-mal Thanmal was not rightly included in this agency account, and that the plaintiff's claim in respect of that sum was barred by limitation. Further it was pleaded that the amount of the profit made in respect of jute, the plaintiff should give credit to the defendant in this account. The principal defence was that all those forward transactions and Teji Mandi transactions were wagering transactions. This defence was put in the written statement in this form:--

The defendant admits that the plaintiff acted in Bombay as the Kacoha Adatia of the said two firms in various transactions. The defendant says that the transactions in Broach and Bengal cotton and the Teji Mandi transactions in Broach cotton were all wagering and gambling. The defendant says that it was agreed and understood between the parties that as regards transactions in Broach and Bengal cotton only differences were to be paid and received and that the plaintiff should not upon the defendant's orders enter into any transactions therein with any person or firm who were likely to insist upon delivery being given or taken.

4. On these plea lings several issues were raised, and the three points of defence, which I have just mentioned, were considered by the learned trial Judge on the oral and documentary evidence in the case. The learned Judge came to the conclusion that the item of Rs. 10,521-9-6 was properly included in the agency account as between the plaintiff and the firm of Bagmal Gianmal, that it was done with the consent of the firm of Sobhagmal Thanmal, in which another partner Khemraj Maganlal was interested along with the defendant Sobhagmal Gianmal. As regards the transaction of 546 jute bales, the learned Judge held that it was a transaction on behalf of the defendant, and that as it was a joint venture of the plaintiff and the defendant, it could not form a proper item in the cotton agency account. As regards the principal defence of wager, the learned Judge came to the conclusion that there was an understanding between the plaintiff and the defendant that the plaintiff was not to call upon the defendant either to give or take delivery on any occasion, and that the transactions were in the nature of wagers, even though the actual contracts entered into by the plaintiff' with third parties in Bombay on behalf of the defendant were not wagering transactions. The learned Judge was of opinion that the nature of the contracts with the third parties entered into by the plaintiff on behalf of the defendant could not affect the question as between the plaintiff and the defendant as to the transactions being wagers. Accordingly he came to the conclusion that the forward transactions and the Teji Mandi transactions in cotton in respect of which the plaintiff claimed the various amounts, were wagering transactions, and dismissed the suit with costs, except the costs of issues Nos. 1, 2, 3, 7 and 8, which costs were ordered to be paid by the defendant to the plaintiff.

5. The plaintiff has appealed to this Court from the decree passed by Mr. Justice Kemp; and the principal question in the appeal is whether these transactions between the plaintiff and the defendant are wagering transactions. It is necessary to state at the outset the course of business between the parties It is an admitted fact that the plaintiff was employed by the defendant as his Kaccha Adatia in Bombay, and all the transactions, with which we are concerned in this suit, were carried out By him as a Kaccha Adatia. The incidents of Kacchi Adat in Bombay have been stated by Chandavarkar J. in Fakirchand v. Doolub (1905) 7 Bom. L.R. 213.

6. Though the course of business in the present case may vary in some details, in all essential particulars the course of transactions here resembles that stated in the judgment to which I have just referred.

7. It is not disputed and cannot be disputed that a Kaccha Adatia in Bombay enters into transactions on behalf of his up-country constituent with third parties in Bombay, and that when he enters into such transactions under instructions from his up-country constituent, the third party is responsible for the losses to the up-country constituent. To the third party in Bombay both the Kaccha Adatia and his constituent would be responsible. The name of the up-country constituent is not communicated to the third party in Bombay, but the name of the third party with whom the Kaccha Adatia transacts business on behalf of the up-country constituent is communicated to the up-country constituent. The Adatia enters into contracts with the third parties in Bombay on behalf of his up-country constituent as an agent, the name of the principal not being disclosed. I may mention that these facts are practically admitted by the defendant. In his evidence he admits that he employed the plaintiff as his Kaccha Adatia at four annas commission. He admits that he was responsible if the other party failed. By the expression 'other party' is meant the third party with whom the contract is entered into by the Adatia. Then in cross-examination he admits that the plaintiff was not liable for loss or the goods on these transactions, and that the plaintiff used to inform him of the persons with whom the transactions were effected.

8. Thus it is essential to remember that when under instructions from the defendant, the up-country constituent, the plaintiff entered into transactions with third parties in Bombay as his Kaccha Adatia he did so in terms on behalf of an undisclosed principal as his agent, and the privity was established on his entering into these transactions between the third parties and the defendant. Exhibit M contains entries in defendant's journal showing the names of various persons with whom the particular transactions were entered into by the plaintiff on behalf of the defendant. The defendant admits that the names of third parties were communicated to him by the plaintiff, and though Exh. M does not relate to the transactions in suit, it is clear that the course of business with reference to the transactions in suit was exactly as I have just described.

9. The defendant's case then is that he had arranged with the plaintiff that he should never call upon him to give or take delivery. He has stated in his evidence this agreement in these terms:--' I agreed to give business on terms. I was only to pay differences and not give or take delivery and so also his constituents'. Thereby he means that even the third parties with whom the plaintiff entered into transactions on defendant's behalf were not to give or take delivery.

10. It may be stated that the learned Judge has found in fact, and the record justifies the finding, that so far as the third parties in Bombay were concerned, the transactions were not wagers, and that, as between the plaintiff and the defendant on the one hand and those third parties, the transactions were such as could be enforced in law by or against them. At p. 55 of the Paper Book, Part I, the effect of the evidence is stated. The plaintiff's evidence on this point, which is practically unchallenged, is to the effect that the transactions with third parties were not wagers, that is, they did not agree to deal in diff3rences only. It may also be mentioned that the transactions in suit, like other transactions in the previous Samvat years, were arranged, at least in part, by the defendant's Munim in Bombay with third parties, and that the plaintiff's name was given as the Kachha Adatia for the defendant by the Munim of the defendant. Exhibits A, B, C and 0 are letters evidencing this course of conduct; and it is indisputable that at least some of the transactions were arranged with third parties in that way, i. e., not directly by the plaintiff, but by the defendant's Munim, and then the plaintiff was informed as the Kachha Adatia for him. The learned Judge has not read these Exhibits in the sense in which I have just described them. But those letters are typical of the manner in which some of the transactions were entered into, and clearly show that in fact several transactions were arranged in that way, that the defendant's Munim brought about the transactions, and finally effected them through the plaintiff as the defendant's Adatia, the intervention of the plaintiff being necessary as the Bombay merchants, with whom these contracts would be entered into, would ask for guarantee for the payment of losses on behalf of the up-country constituent.

11. Most of the transactions in suit were forward transactions in Broach cotton, and some were Teji Mandi transactions in cotton. In this case there is no essential difference between the Teji Mandi transactions and the forward transactions in Broach cotton, so far as the plea of wager is concerned. It is not suggested before us that there is any evidence to distinguish the Teji Mandi transactions from the forward transactions in Broach cotton. Either all these are wagering transactions or none of them is a wagering transaction according to the argument before us. It is, therefore, unnecessary for us to deal separately with the forward and Teji Mandi transactions. Though the learned Judge was rather inclined to the view that the Teji Mandi transactions would be prima facie wagering transactions, he treated both the sets of transactions practically on the same footing on the evidence; and it is a matter to be decided on the evidence in the case, as to whether all these transactions are shown to be wagering transactions. I may mention that there is no presumption as regards Teji Mandi transactions that they are wagering transactions as pointed out by this Court in Manilal Dharamsi v. Allibhai Chagla I.L.R. (1922) 47 Bom. 263, 24 Bom. L.R. 812.

12. I agree with the learned Judge in his conclusion of fact that the defendant must have pointed out to the plaintiff that he would not be in a position to give or take delivery, and that the defendant arranged with the plaintiff' that he should not be called upon to give or take delivery. I do not consider it necessary to examine in detail the evidence bearing on this point, namely, that as between the plaintiff and the defendant there was an understanding that the plaintiff would not call upon the defendant either to give or take delivery.

13. On these facts the question arises whether the transactions in suit can. be treated as wagering transactions. The learned trial Judge is of opinion that the circumstance that there was no arrangement with the third party that he should only receive or pay differences is immaterial, if there was an arrangement with the agent that the defendant would only be called upon to pay or receive differences. In coming to this conclusion the learned Judge has been influenced by the decision in Manilal Raghunath v. Radhakisson Ramjiwan I.L.R. (1920) 45 Bom. 386, 22 Bom. L.R. 1018. Apart from the decisions, where the plaintiff is employed as a Kaccha Adatia by an up-country constituent, and where transactions are entered into by the Adatia with third parties in Bombay, and where we have, as in this case, the circumstance that the intention of the third parties is not shown to be to deal in differences only, it seems to me that it is not enough for the defendant to prove an agreement between himself and his Adatia that the Adatia would so arrange business for him as not to require him to give or take delivery. In order that a transaction may be treated as a wager, it is essential that the common intention of the two parties should be to deal in differences only. The two parties to the contract in this case would be the defendant and his agent on the one hand and the third party with whom the Adatia enters into the contract on behalf of the defendant on the other hand. It is essential for the defendant to prove, not what his arrangement with the plaintiff was, but as to whether there was a common intention to wager as between him or the plaintiff on the one hand and third party on the other. In this case it is established that the contract which is entered into by the Adatia on behalf of the up-country constituent is a real contract which is enforceable against the third party by the defendant. The mere fact that as between the defendant and his agent there is an arrangement that the agent shall so arrange business as not to require the defendant to give or take delivery is a matter which does not affect the nature of the contract as between him and the third party in Bombay, but is a matter merely between him and the plaintiff, not affecting the nature of the contract. Having regard to the admitted course of business between the parties, and the law on the point, I should feel little difficulty in holding that the plea of wager is not open to the defendant, unless he is in a position to prove that the transactions entered into with third parties on behalf of the defendant were wagers, i. e., that the common intention of the defendant and the plaintiff and the third parties was to deal in differences only.

14. Coming to decided cases on this point, it seems to me that the ratio decidendi in Perosha Cursetji v. Manekji Dossabhoy I.L.R. (1898) 22 Bom. 899 supports the view which I have just mentioned. In Sassoon v. Tokersey I.L.R. (1904) 28 Bom. 616, 5 Bom. L.R. 503, it has been pointed out that in order 'that a transaction may fall within Section 30 of the Indian Contract Act, there must be at least two parties, the agreement between whom must be by way of wager, and both sides must be parties to the wager.'. Though the position of the agent in that case was not exactly the position of a Kaccha Adatia, as in this case, but in essential respects it closely resembles the position of the present plaintiff. There it was held that unless the common intention of the two parties was to deal in differences only, the contracts could not be treated as wagering transactions.

15. As regards Manilal Raghunath v. Radhakisson Ramjiwan it must be remembered that it was the case of a Pakka Adatia. The position of a Pakka Adatia is essentially different from that of a Kaccha Adatia. The incidents of Pakki Adat in Bombay have been stated in Bhagwandas v. Kanji I.L.R. (1907) 30 Bom. 205, 7 Bom. L.R. 611. and that statement has been approved by their Lordships of the Privy Council in Bhagwandas Parasram v. Bur-jorji Ruttonji Bomanji .. In Manilal Raghunath v. Radha-kisson Ramjiwan the two questions which may arise for consideration in a case of that character have been stated by the learned Chief Justice. With reference to the first question, namely, 'If the contract between the parties was one of employment for reward was it knowingly made to further or assist the entering into of agreements by way of gaming or wagering,' the learned Chief Justice proceeds to point out what the defendant would have to prove in order to succeed on that issue; and among the four points stated the last one shows that, even if the plaintiffs did not contract with third parties in pursuance of their orders, differences would be received and paid exactly as if they had. That situation could arise in the case of a Pakka Adatia, because as between the Pakka Adatia and the up country constituent both are principals with reference to the contract, and it does not matter in the least as to whether the Pakka Adatia has entered into other contracts with third parties to cover that contract or not, It is entirely a matter of his discretion and choice to enter into contracts with third parties; but the contract between the Pakka Adatia and the up country constituent is complete. In the case of a Kaccha Adatia it is not so. If the Kaccha Adatia does not enter into a contract with a third party in pursuance of the instructions given by the up-country constituent, there is no contract, and the order of the constituent remains an unexecuted order. It is only when he enters into a contract with the third party on behalf of his constituent that the contract is complete, with this additional circumstance that the Kaccha Adatia guarantees payment of losses on behalf of the up-country constituent to the third patty in Bombay. Further, in Manilal Raghunath v. Radhakisson Ramjiwan this very point has been emphasized at p. 419 of the report by the following observations:--

The parties to a contract are always principals but if the contract is one of agency, the contract which the agent enters into in pursuance of the agency may be made by him with a third party: (1) either as agent in which case he is not liable, or (2) as principal without disclosing the fact that he is an agent, in which case the third party has nothing to do with the party employing the agent until he is disclosed, or (3) the agent may be personally liable to the third party as well as the person employing the agent.

16. And the learned Chief Justice has pointed out there that the transactions in that case came under none of the three categories specified by him. In the present case, the contracts clearly fall within the first and third categories. As I have already pointed out, the contract is complete as between the defendant and the third party in all respects, with this additional circumstance that the Kaccha Adatia stands guarantee for the payment to the third party in Bombay for losses, and that the name of the up-country constituent is not disclosed to the third party, though the fact that the Adatia, is acting as an agent is undoubtedly disclosed to the third party in Bombay. In such a case the transaction may be a wagering transaction but only if the common intention of the two parties, i. e., the third party in Bombay and the up-country constituent, to deal in differences only is proved. Unless that is proved, it cannot be treated as a wagering transaction.

17. It is not necessary to refer to the evidence in this case that the contracts with third parties were real contracts and not wagering transactions. The learned Judge has accepted that view of the evidence, and that is not challenged before us on behalf of the defendant. We are unable, therefore, to agree with the learned Judge that it is immaterial in the case that the transactions with third parties were not wagering trans-actions. In order to establish his plea, it is necessary for the defendant to prove that the common intention of the defendant and the plaintiff on the one hand, and of the third parties on the other, was to deal in differences only. No doubt in the written statement, the defendant did say that the transactions with third parties were of that nature, and in his evidence no doubt, in the passage which I have already quoted, he does mean to say so. We are not clear from the judgment of the learned Judge as to whether he believed the defendant on that point. We rather think that he does not believe the defendant on the point that the intention of third parties was also to deal in differences only. However that may be, we are quite clear that on this record, the only evidence in support of the plea that the common intention of the third parties was to deal in differences is the statement of the defendant himself, which is contrary to the rest of the evidence in the case, both documentary and oral. So far as the defendant means to say that the agreement was that the contracts with third parties were to be wagering contracts, his statement cannot be relied upon. We are unable to believe the defendant if he means to say that the plaintiff agreed to do business on the terms that though he would be liable to the third parties for all the losses, he would not require the defendant to give or take delivery, and further that he would do business on lines which would not give him any legal right to recover the losses which he may have to pay to the third parties. It is difficult to believe that any party would agree to do business on those terms. In fact Mr. Campbell on behalf of the respondent contended as follows:--' We offered to do business on the terms ' heads I win, tails you lose'; and the plaintiff agreed to do business on those terms.' We do not believe that the plaintiff agreed to do business on those terms, but we believe that the plaintiff agreed to accommodate the defendant so far that he would not insist upon the defendant giving or taking delivery in any of these transactions. That by itself would not make these transactions wagering transactions.

18. We find in favour of the plaintiff on the plea of wager and hold that the plaintiff is entitled to recover the losses incurred in respect of these transactions on behalf of the defendant. In this view of the plea of wager, Bombay Act III of 1865 does not present any difficulty in the way of the plaintiff being able to recover the amounts due on the agency account. The defendant does not admit the statement of accounts as put forward by the plaintiff in respect of these transactions in his written statement. The parties do not agree before us, and a specific issue was raised in the trial Court as to what amount was in fact due on these transactions to the plaintiff. There must be an inquiry as to the amount due on the account.

19. As regards the sum which was due by the firm of Sobhagmal Thanmal, it has been urged before us that the sum has been wrongly carried into the agency account on behalf of the defendant. But on a consideration of the evidence on this point, we accept the conclusion reached by the trial Judge that the sum was properly carried ink) this account practically with the consent of the parties concerned. We do not see any sea-son to differ from that view. The fact that no demand was made on the firm of Sobhagmal Thanmal also supports the view that the sum was properly carried into this account.

20. As regards the jute transactions, though it was a joint venture, we see no objection to allow credit to the defendant in this suit. The plaintiff does not object to this suggestion of the defendant.

21. We allow this appeal, set aside the decree of the trial Court, and refer the matter to the Commissioner to ascertain what sum is due to the plaintiff on the agency account, and direct that in taking that account the sum of Rs. 10,521-0-6 should be treated as an item in the agency account, and credit may be given to the defendant for the sum due to him in respect of the transactions relating to 546 jute bales.

22. The plaintiff to have the costs of this appeal and of the suit except the costs of issues Nos. 7 and 8 in the suit. As regards costs of issues Nos. 7 and 8, we direct that each party should bear his own costs in the suit. Further costs and directions reserved.

23. The cross-objections are dismissed with costs except so far as allowed by our order as to the transactions in jute.


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