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Nazarali SamsuddIn Vs. Malwa and Co - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Judge
Reported in(1921)23BOMLR1108
AppellantNazarali Samsuddin
RespondentMalwa and Co
Excerpt:
.....and the amount due by him on the draft. - - 4. should i fail to accept or pay at maturity such draft or drafts i authorise you or your agent to dispose of the documents or goods either by private sale or public auction on my account and risk, with or without any further notice and i hereby bind myself to make good any loss or deficiency that may arise from such sale all expensesttggethei. - although today nearly seven months have elapsed still you have not as yet paid the moneys in respect of the above bill and for that we are receiving strong blamo from our party in england. we are now instructed by our clients to record that by reason of your failure to perform your part of the contract the said indent and the contract therein contained were cancelled. there was then us failure on..........470. the plaintiff had signed an indent of a very similar character as the one in suit. as the goods indented for did not arrive he sued the defendants for damages as if it were a contract for the purchase of goods. the court held that the defendants were the plaintiff's agents to place the order and that the relationship between the parties throughout was one of principal and agent. the defendants had a branch in paris to whom they transmitted the order for placing, and the court seems to have dealt with the case on the same footing as if the contract had been made by a bombay firm with a foreign firm of commission agents. sargent, c.j. said :it was contended for the plaintiff that the indent, and the letter of 4th august, 1887 (written by defendants to the plaintiff to the effect.....
Judgment:

Macleod, J.

1. The plaintiff is a hardware merchant carrying on business in Bombay. On the 1st May 1916 he signed an indent form addressed to Malwa & Co., the trade name of Ardesar Bhikajee Malwa, the defendant.

2. The important printed clauses for the purpose of the case are 1819 as follows :-

1. I hereby request you to instruct) your agents to purchase for me in Europe and Japan (if possible) the undermentioned goods on my account and risk upon the terms and limits stated below.

2. It shall be optional with your agents to execute the whole or any part of this order and if more than one report is given to me the last one to be considered as binding on me. Each kit or shipment to be considered a separate contract.

3. Terms of payment. I authorise you to draw upon me for the total amount of invoice in draft or drafts at 30 day a sight at current rate of exohange and such draft or drafts I bind myself to accept on presentation and pay at maturity. In the event of the goods arriving before the drafts become due I agree to retire the same. No claim shall be raised by me before I accept and retire the bill or bills.

4. Should I fail to accept or pay at maturity such draft or drafts I authorise you or your agent to dispose of the documents or goods either by private sale or public auction on my account and risk, with or without any further notice and I hereby bind myself to make good any loss or deficiency that may arise from such sale all expensesttggethei. 1 with usual brokerage and interest waiving all claim to any advantage thereon.

3. Then follow the particulars in writing.

4. On the 4th May the defendant wrote to the plaintiff:-

Our London House cable us that the lowest offer is 22-5 fur the C.I.Y June shipment, please confirm... therefore .the recommendation is that you should agree.

5. The plaintiff' agreed, and, on the 9th May, the defendant wrote:-

We received cable today from our London House that they booked 25 tons sheets at 22-5 for the C.I.F. Bombay shipment June.

6. A shipment of 18-J tons arrived in Bombay in August 1916. The shipping documents together with a draft for 404-5-8 drawn on the plaintiff by Messrs. Brainer, Musset & Co., the London friends of the defendants, were received by the Eastern Bank and this draft was presented to and accepted by the plaintiff on the 31st August. The defendant was drawee in case of need. The plaintiff did not retire the draft on the due date and the question of retiring the draft and taking up the goods remained in abeyance until the 14th March 1917 when the defendant wrote to the plaintiff:-

Although today nearly seven months have elapsed still you have not as yet paid the moneys in respect of the above bill and for that we are receiving strong blamo from our party in England. Do you therefore pay up soon within 24 hours the moneys is respect of this bill otherwise we shall sell off these goods on your acoount.

7. On the 15th March the Eastern Bank wrote to the plaintiff that unless he retired the bill by the end of the week they would have to obtain instructions from the drawees (sic) as to the disposal of the relative goods. The same day the defendant retired the bill and obtained possession of the shipping documents. On the 27th March, the plaintiff wrote to the Bank: -

With reference to yours of the 18th (? 15th) instant I beg to enclose here. with my cheque for Us. 1100/- as margin on account of the above bill and the balance thereof will be paid within about a fortnight.

8. The Bank replied on the 29th March that the bill had been paid by the defendants and returned the cheque.

9. The defendant's solicitors wrote to the plaintiff on the 29th March:-

As our clients were the drawees in case of need they were compelled to retire the draft which they did and took delivery of the goods and cancelled the indent and your order. We are now instructed by our clients to record that by reason of your failure to perform your part of the contract the said indent and the contract therein contained were cancelled.

10. Plaintiff's solicitors replied on the 30th March:-

Our client never disclaimed his liability to retire the draft and was always ready and willing to pay the amount of it. There was then us failure on our client's part to perform the contract and your clients were not justified in cancelling our clients' indent and contract.

11. They enclosed a blank cheque requesting defendant to fill it in for the amount of the draft and interest thereon paid by him to the Bank and further interest thereon, and to give delivery of the goods. The defendant's solicitors replied on the 4th April returning the cheque as there was no contract existing.

12. On the 30th May the defendant sold the goods at a profit of Its. 4300.

13. The plaintiff, however, was not aware of this and claimed in the suit either delivery of the goods or the sum of Rs. 3052-8-0, the difference between the market value of the goods on the 30th March 1917 and the amount due by him on the draft. And in the alternative if it was held that the property in the goods did not pass to the plaintiff he claimed the said sum as damages for breach of contract on the part of the defendant.

14. The defendant in his written statement said he was advised that Messrs. Brainer. Musset & Co. were entitled to be heard as to how the profits realised on the sale should be dealt with and they were necessary parties to the suit. They submitted that in the circumstances mentioned in the written statement the property in the goods never passed to the plaintiff and the defendant was entitled to sell the goods as he did.

15. The important issues amongst those raised were;-

(1). Whether the property in the goods had passed to the plaintiff ?

(2). Whether the defendant was not entitled to put an end to the contract?

(3). Whether the plaintiff was entitled to any and if so what damages ?

16. The answer to these depends primarily on the answer to the questions, what was the nature of the legal relationship established between the parties and what were their respective rights and liabilities under the contract created by the indent of the Its May and defendant's letter of the 9th May? Though the volume of business transacted in Bombay through indents of a similar character to the one in suit must be very great these are questions which are constantly arising between the indentor and the person accepting the indent. The difficulty in deciding them lies in the fact that though the form of indent used by various firms in Bombay may be the same in all importsnt details, the terms of the contracts entered into by reason of such indents allow for considerable variation in the manner of performance of the contract, so that a decision in one case will not necessarily be an authority for another. In my judgment in N Roy & Go. v. Surana Dalai & Co. (1919) 23 Bom. L.R. 1119. I have referred at some length to the case of Paul Beier v. Chotalal Jaiardas ILR (1904) 30 Bom. 1; 6 Bom, L.R. 948.in which there was a dispute with regard to an indent very similar in its terms to the indent in suit, and Jenkins C, J. said that the cai3e was not one to be decided by an attempt to bring the contract within the one or the other of the two categories of sale or agency.

17. In the case of Mahomedally Ebrahim Pirkhan v. Schiller Dosogne & Co. ILR (1889) 13 Bom. 470. the plaintiff had signed an indent of a very similar character as the one in suit. As the goods indented for did not arrive he sued the defendants for damages as if it were a contract for the purchase of goods. The Court held that the defendants were the plaintiff's agents to place the order and that the relationship between the parties throughout was one of principal and agent. The defendants had a branch in Paris to whom they transmitted the order for placing, and the Court seems to have dealt with the case on the same footing as if the contract had been made by a Bombay firm with a foreign firm of Commission Agents. Sargent, C.J. said :

It was contended for the plaintiff that the indent, and the letter of 4th August, 1887 (written by defendants to the plaintiff to the effect that the home firm had wired that plaintiff's order had been placed at his increased limit) constituted a contract for sale by the defendants on behalf of the manufacturer of zinc in Paris,,..and that when an agent enters into a con tract for a foreign principal, the agent is liable on the contract....

18. But the indent is in form only a letter of instructions for defendant to buy for plaintiff and in the letter of the 4th August the defendant only informs the plaintiff that the instructions have been carried out by placing his order, by which must be understood that a contract of purchase had been entered into with some manufacturers of zinc It would be a straining of language to hold that these documents amount to a contract of sale entered into by plaintiff with defendants on account of a foreign manufacturer. The indent contemplates the purchase by the defendants through their agents in Paris and the transaction, so far as the indent by itself is concerned, is the same as if the plaintiff had written to defendants at Paris instructing them to buy for them. On the authority of Ireland v. Livingston (1871) L.R. 5 H.L. 395. and Cassaboglou v. Gibb (1883) 11 Q.B.D. 797. (2) the learned Judge was of the opinion that it was concluded that the relationship between the parties continued throughout, except for special purposes, to be one of principal and agent: and the question referred by the Small Causes Court, whether the relation of vendor and purchaser was established between the defendants and the plaintiff by the letter of the 4th August 1887 whereby the plaintiff was informed that his order had been placed, was answered in the negative.

19. There seems to me to be a radical distinction between a contract made by a Bombay merchant with a firm of foreign commission agents to buy on his account and a contract made by a Bombay merchant with a Bombay importing firm to place his order in Europe. However that may be, the case is an authority for the proposition that in the first instance the firm which accepts the indent is the indentor's agent to place his order. What happens afterwards depends on the method employed by the importing firm in executing the order.

20. It was decided by the Appeal Court in an unreported case (J. Gorio v. Panduji Rotvji (1915) Appeal No. 47 of 1914. that, on the facts proved, when the order was placed privity of contract was established between the indentor and the firm in Europe with whom, the order was placed. The goods were invoiced direct to the indentor by the European provider and the relative drafts were drawn on the indentor. So in this case the defendants informed Messrs. Brainer, Musset & Co. that the order had been given by the plaintiff. Accordingly Messrs. Brainer, Musset & Co. invoiced the goods direct to the plaintiff and drew on him for the invoice amount. Therefore, it would appear that the plaintiff became the purchaser from Messrs. Brainer, Musett & Co., who at the same time held the defendants liable in case the plaintiff defaulted. Then it is necessary to determine the contractual reationship between the defendant and Brainer, Musett & Co. The defendant said that he could not produce any documents which defined this relationship. Brainer, Musett & Go. paid him a commission of 1 1/2 per cent, on all orders executed by them through his agency, while he was responsible for the drafts drawn by them being duly retired. If the indentor failed to accept the drafts drawn by Brainer, Musett & Go or accepted them and failed to retire them, he was responsible for any loss. Brainer Musett & Co., did not concern themselves after they had discounted their drafts beyond paying him his commission. The defendant evidently considered that as he was liable for losses he was also entitled, to profits and when the goods in suit were sold he did not inform Messrs. Brainer, Musett & Co. of the result of the sale nor did he credit them with the profits. He treated them as his own property. In his cross-examination he endeavoured to make out that Brainer, Musett & Co. had given him authority to sell the goods. As there was no evidence of such authority, he then said he had an implied authority to sell as he was the drawee in case of need. But he had to admit that the suggestion that Messrs. Brainer, Musett & Co. might be interested in the profits was made by his counsel who drew the written statement.

21. On the 9th November 1916 and on the 24th January 1917, Messrs. Brainer, Musett & Co. had written to the defendant asking him to see that the bill accepted by the plaintiff was paid.

22. On the 26th April 1917 they wrote:

Invoice 546 404-8-8 Steel Sheets Ex SS. Masailia we note that your dealer has not taken up this bill and that you have done so yourselves and taken possession of the goods for which we thank you.

23. Evidently, the only matter which concerned them was the taking up of the bill.

24. Then, after receiving counsel's advice, defendant wrote on the 15th March 1918 to Messrs. Brainer, Musott & Co :-.As we were drawee in cuse of need and we were responsible for the payinenb of the draft looking to your advantage we retired the whole draft and book possession of the goods with notice to the dealer that his contract was cancelled.

Our legal advisers are of opinion that in any event N. Samsuddin has absolutely no claim to the goods or the profits thereof,

Now the sum of 4000 (the profits on sale) according to the advice that wp have obtained cannot in any way belong to N. Samauddin. However, from the written statement: you will see that you may have, to be added as a party to the suit, unless you resign in our favour all your claims, if any, over the sum of 4000 and odd. Of course we submit that we became the owners of the goods as soon as we retired the draft.

We shall thank you much if you send us your letter stating that what we have done is quite fair and just giving us authority to cancel, the con- tract and take possession of the goods by retiring your bill if the dealer failed to take up the goods on due date.

25. Messrs. Brainer, Musett & Co. replied by their letter of the 1st May 1918:-

By not retiring the draft at due date N. Samsuddin forfeited all his right to the goods as they then remained in our possession to do what we liked with. We accordingly requested you to retire the draft and when you did so on or about the 15th March last year the goods immediately became your property. We have by allowing you to retire the draft relinquished all our lien on the goods and any profit thereon. In our opinion N. Samsuddin has no right whatever to either the goods or the profit. The goods were ours until he retired the bill, terms being documents against payment and when he omitted to retire the bill at due date, the goods still remained in our hands to do what we liked with and if we had liked we would have sold them to any buyer. In exercise of this right we requested you to take them up which is equivalent to selling them to you.

26. If this letter be taken as stating the terms of business previously agreed upon between the defendant and Brainer, Musett & Co. those terms are entirely different to what the defendant stated they were in his evidence and what by his conduct he considered them to be.

27. Moreover, no letter has been put in from Brainer, Musett & Co. requesting the defendant to recire the draft. He was requested to see that it was paid by the plaintiff. They were right in saying that the property in the goods remained with them as long as the draft was not taken up. In any event, they were wrong in thinking they had done anything whereby the property in the goods passed to the defendant. If the property passed from Brainer, Musett & Co., the plaintiff's vendors, to the defendant that could only have been due to what the defendant did according to the terms of the contract previously arrived at between them and Brainer, Musett & Co. with regard to the manner in which their business should be conducted. For these terms, I think I must rely on the defendant's evidence, corroborated by the passage I have underlined in his letter of the 15th March 1918, rather than on the letter of the 1st May of Messrs. Brainer, Musett & Co. which was written after the pleadings were closed for a particular purpose. I think I must take it that Messrs. Brainer, Musett & Co. were only concerned with their position as drawers of the bill, but as long as the bill was not retired, they remained owners of the goods. If both the plaintiff and defendant failed, they would have to take up the bill themselves. If either of the plaintiff or the defendant took up the bill, there was an end of the matter as far as they, the drawers, were concerned. If the defendant took up the bill, the property in the goods passed to him either directly or impliedly according to terms of business arranged between him and Messrs. Brainer, Musett & Co. and obviously he was bound to inform the plaintiff that the property in the goods had so passed

28. Defendant gave notice to the plaintiff on the 29th March 1917 that he had retired the draft, but he failed entirely to realise what was the legal position on that date under his contract with the plaintiff. The original contract of purchase and sale still existed. What he purported to cancel was the indent and contract therein contained, but he had no right to cancel that contract and retain possession of the goods as his own.

29. Now the last clause of the indent provides for the failure of the indentor to retire the draft. The defendant, therefore, was relegated to his rights under that clause and he could only take action under it. It is unnecessary to consider whether he could exercise those rights as principal or agent. By retiring the draft himself the property in the goods passed to him and he was entitled to dispose of the goods on the plaintiff a account, but until he did so the plaintiff's right as purchaser to the goods on payment existed and the deiendant had no right to refuse the tender made by the plaintiff on the 30th March.

30. The plaintiff, therefore, is entitled to the relief he claims.


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