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Sakarbhai Hukamchand Vs. Ramniklal Keshavlal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 306 of 1931
Judge
Reported inAIR1932Bom328; (1932)34BOMLR709
AppellantSakarbhai Hukamchand
RespondentRamniklal Keshavlal
DispositionSuit dismissed
Excerpt:
.....failed to pay taran or margin, as it is called, when called upon, and therefore they closed thetejimandi transactions on september 18,1929, and the mandi transactions on october 30, 1929, and as the result of the account there is a sum of rs. but the question which caused me some difficulty and which required a good deal of discussion was as to bow far the fluctuations in the rates of teji-mandi or premium would give a right to a commission agent to demand margin money. now, agreements like teji-mandi or similar agreements have certain incidents attached to them. but assuming that it has been referred to in the plaint,-and i may say that in his opening address the learned counsel did make some remarks about it,-it was clearly the duty of the plaintiff to ask for an issue in this..........failed to pay taran or margin, as it is called, when called upon, and therefore they closed thetejimandi transactions on september 18,1929, and the mandi transactions on october 30, 1929, and as the result of the account there is a sum of rs. 117-2-6 still due to them by the plaintiff, for which they have not counterclaimed, but reserve leave to proceed against the plaintiff to recover the sum in the small cause court. their case is, therefore, that when the plaintiff instructed them to effect a purchase of two hundred bales in february, thetejimandi and mandi transactions were not then outstanding. [after dealing with the evidence in the case his lordship proceeded:]3. the plaintiff's case is that these two transactions were outstanding in february, and he instructed the defendants.....
Judgment:

Rangnekar, J.

1. This suit is brought by the plaintiff, who carries on business in Cambay where he resides, against the defendants, his commission agents, to recover a sum of Rs. 4,672 6-3. This sum is made up of two sums of Rs. 4,512 8-0 and Rs. 1,950, the first item being, according to him, the profit in respect of ateji-mandi transaction of one hundred bales of Broach cotton of May 1, 1929, on the footing of the difference between the selling rate of Rs. 351-4-0 and the purchase rate of Rs. 251 on March 81, 1930 ; and the second item being the amount of profit on a mandi transaction of one hundred bales of May 3, 1929, being the difference between the selling rate of Rs. 300 and the purchase rate of Rs. 261 on March 81, 1930. The plaintiff's case is that there was an account between him and the defendants in respect of certain dealings since Samvat year 1979. On May 1, 1929, the plaintiff applied teji-mandi through the defendants on hundred bales of Broach cotton of April-May 1930 delivery on the rate of Rs. 351-4-0 at Rs. 53-8-0, and on May 3, 1929, he applied mandi on one hundred bales of Broach cotton of April-May 1930 delivery on the rate of Rs. 300 at Rs. 10-4-0. He alleges that these transactions were outstanding till February 1930, when he instructed the defendants to purchase 200 bales of Broach cotton of April-May 1930 delivery at the prevailing market rate to be set off against the resulting transactions from these two outstanding transactions. The defendants, however, having wrongfully closed the outstanding transactions in September and October 1929 and declined to effect the purchase, he, claims the profit which he would have made if his instructions had been carried out in February 1930.

2. The defendants say that the plaintiff failed to pay taran or margin, as it is called, when called upon, and therefore they closed thetejimandi transactions on September 18,1929, and the mandi transactions on October 30, 1929, and as the result of the account there is a sum of Rs. 117-2-6 still due to them by the plaintiff, for which they have not counterclaimed, but reserve leave to proceed against the plaintiff to recover the sum in the Small Cause Court. Their case is, therefore, that when the plaintiff instructed them to effect a purchase of two hundred bales in February, thetejimandi and mandi transactions were not then outstanding. [After dealing with the evidence in the case his Lordship proceeded:]

3. The plaintiff's case is that these two transactions were outstanding in February, and he instructed the defendants to enter into a purchase transaction against these two outstanding transactions. It is rather difficult to understand this case, and ultimately, I think, it was conceded that there was no evidence before me to show that because a teji-mandi transaction was outstanding, therefore the commission agents would be bound to effect a forward transaction to be set off against the outstanding transactions. The defendants were pakka adatias. The transaction which they were asked to enter into had no connection with the teji-mandi transactions. According to the authorities it is clear that a pakka adatia is entitled to demand margin before he enters into any transaction, whether an independent transaction or a transaction by way of a covering transaction. No authority is necessary to be stated on this point, but if one be needed, reference may be made to the decision in Bhagwandas v. Kanji I.L.R. (1905) Bom. 205 7 Bom. L.R. 611

4. The defendants, therefore, were entitled to refuse to enter into this transaction unless margin was paid to the extent of Rs. 4,000. The position would be the same whether the earlier transactions were outstanding or not. But, in fact, if my findings are correct, the outstanding transactions were closed on September 18 and October 30, 1929.

5. I think this disposes of the principal question between the parties. But this case has taken more time than it should have, because it has been difficult to understand exactly the case on behalf of the plaintiff; and there has been considerable discussion as to the nature, course and incidents attached to the teji-mandi business. I do not propose to enter into a detailed discussion of these questions. What a teji-mandi transaction is has been explained by Mr. Justice Kinkaid in Manubhai v. Keshavji (1921) 24 Bom. L.R. 60 It has also been explained by the earlier decisions of Mr. Justice Beaman. But the question which caused me some difficulty and which required a good deal of discussion was as to bow far the fluctuations in the rates of teji-mandi or premium would give a right to a commission agent to demand margin money. It was argued on behalf of the plaintiff that the position of a constituent and a commission agent remains unaffected whatever the fluctuations may be, and their respective rights can only be settled and determined on due date. Having heard the evidence of Harakchand and Chandulal, and after hearing the learned Counsel, I hare come to the conclusion that the right to demand margin unless there is a specific agreement to the contrary would depend in the ordinary course not only on the fluctuations in the rates of the commodity but also in the rates of the premium. There are three courses open to a commission agent to secure the payment of the full amount of the premium. He can insist on payment of the whole premium in advance, or he can take security for payment on the due date, or he can demand margin against the fluctuations in the rates of premium. If he does not adopt either of the first twocourses and it is not surprising that many commission agents do not follow either course as it might affect business relations with theirconstituents then if the constituent fails or is not able to pay the premium, on the due date, the commission agent is helpless. There is nothing on which he can lay his hands to reimburse himself against the payment of the same amount of premium which he may be called upon to pay to a broker through whom he in his turn had entered into a corresponding contract with a third party. It is for that purpose that he has a right to see what is the state of account between him and his constituent from time to time and to have regard to the fluctuations in the rates of premium. And if he finds that the transactions if closed as on a particular date for want of margin, his own liability to his broker would be reduced, then I do not see why he should not be entitled to call upon the constituent to pay sufficient margin so as to secure the payment of the whole of the moneys which may be due to him on the due date including the premium, and in default of payment to close the outstanding transaction.

6. In the course of the argument Mr. Bhagvati for the first time urged upon me that having regard to the nature of a teji-mandi transaction it is not open to the commission agent to close it at any time before the due date. Now, agreements like teji-mandi or similar agreements have certain incidents attached to them. These incidents have been declared judicially in several cases some of which are reported in the Law Reports. But the incident on which Mr. Bhagvati insists has not, as far as I know, yet come up for decision. It is obvious that such an incident before it is accepted must be proved by evidence, and would to some extent depend upon usage of the market. As far as I know, I think the commission agent is entitled to close such transactions for want of margin. It was open to the plaintiff to put forward the incident and to prove it. He has not done so. There is no doubt some foundation for it in para, 8 of the plaint. But, reading the plaint as a whole, the whole case seems to be not that that the defendants were not entitled to close the transactions because they were teji-mandi and mandi transactions, but that they were not entitled to close the transactions because there was no agreement to pay margin. The case which Mr. Bhagvati attempts to put forward now does not appear to me to have been set up any where; but assuming that it has been referred to in the plaint,-and I may say that in his opening address the learned Counsel did make some remarks about it,-it was clearly the duty of the plaintiff to ask for an issue in this case. No such issue was sought, and the reason is obvious. If it was the contention of the plaintiff that having regard to the nature or the incidents of a teji-mandi contract it cannot be closed at any time and must be kept open under all circumstances irrespective of the rights or liabilities of the parties until the due date, and irrespective of any fluctuations in the rates of cotton and those of premium, then it would have been open to the defendants to call evidence to show what the usage is. No question about this was put to the plaintiff in his examination-in-chief, and no question was put to the defendants in cross-examination. Under these circumstances I stopped Mr. Bhagvati from arguing this point. In my opinion, any such case if allowed to be made out at this stage would be unfair to the defendants.

7. In the course of cross-examination of Harakchand, Mr. Bhagvati attempted to make out another case, and that was that the business was done between the plaintiff and the defendants on the footing of a circular, Ex. K. I allowed him some latitude in cross-examination. I must say that he did not exceed proper limits. But it is clear to me that whatever the terms of the circular may be, whatever the practice of the defendants may be with regard to other constituents, the case before me was, according to the plaintiff, that there was a definite agreement not to charge margin, and according to the defendants, an agreement to charge margin. The question, therefore, whether the circular applied to the dealings between the parties is irrelevant, except as bearing on the probabilities about the agreement set up. I have, however, examined this aspect of the case to some extent, and the view which I take is that even if the dealings between the parties were subject to the terms of the circular, the margin moneys in the hands of the defendants were insufficient. And even if the circular applied, the defendants were entitled to call further margin moneys. Briefly, therefore, the position is this, that the claim for damages must fail. As the plaintiff has failed to pay margin, the defendants were not bound to enter into the transaction of February even on the footing of the teji-mandi or mandi transactions being outstanding. But, in fact, as I have held, the transactions were not outstanding and had been closed to the knowledge of the plaintiff long before February.

8. There is one point more, I do not see how the plaintiff can claim by way of damages the difference between the contract price and the price of the alleged transaction in February. According to the plaintiff the defendants' contract was to keep the teji-mandi and mandi transactions open till March 31, and if those transactions were wrongfully closed before the due date then the plaintiff would be entitled to damages on the footing of the difference between the contract price and the price prevailing on the due date.

9. In the result, the suit is dismissed with costs. Costs to include costs of chamber summons for directions.


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