Skip to content


Joint Family Firm of Girdharilal Prabhu Dayal Vs. Jethmal, Proprietor of Firm Chatarbhoj Jethmal, Hingoli - Court Judgment

LegalCrystal Citation
SubjectCommercial;Contract
CourtAndhra Pradesh High Court
Decided On
Case NumberC.C.C.A. No. 21 of 1959
Judge
Reported inAIR1963AP185
ActsSale of Goods Act, 1930 - Sections 45, 45(2) and 46
AppellantJoint Family Firm of Girdharilal Prabhu Dayal
RespondentJethmal, Proprietor of Firm Chatarbhoj Jethmal, Hingoli
Appellant AdvocateB.C. Jain and ;C.P. Sarathy, Advs.
Respondent AdvocateA. Satyanarayana Rao and ;Hariram Narayan, Advs.
DispositionAppeal dismissed
Excerpt:
.....dates by telegrams and letters, and these orders of purchase included not only the purchase of cotton seeds but also other goods like lac, massoor etc. 23-15-0 on 18-1-1952, the plaintiff failed to pay the amount as per the contract within the stipulated period and as per the business rules. (4) were the cotton seeds sold at the prevailing market rate on the ground of the plaintiff's failure to give instruction even on demand? it was fur- ther held by the lower court that the plaintiff failed to comply with the several demands mada by the defendant to pay the price or to pay at least such amount which would cover the expense incurred by the defendant in the matter of the purchase of these 400 pallas of cotton seeds and that, therefore, the defendant was justified in selling the stock..........to work as commission agent for purchasing and supplying as per the instructions of the plaintiff cotton seeds at hingoli. it was agreed that the price of the goods so purchased by the defendant must be paid at hyderabad on hundis drawn by the defendant. fifty per cent of the value must be paid in advance and the balance against the railway receipt forwarded along with the hundis payable at hyderabad, accordingly, as per the orders placed by the plaintiff the defendant purchased 600 pallas of cotton seeds and intimated the same to the plaintiff. as advance towards the purchase price of the cotton seeds, the defendant drew hundis on the plaintiff in a total amount of o. s. rs. 7,300/- and received the amount. by telegram dated 24-7-1952, the plaintiff instructed the defendant to despatch.....
Judgment:

Chandrasekhara Sastry, J.

1. This is an appeal by the plaintiff against the judgment and decree of the City Civil Court, Hyderabad in O. S. No. 42 of 1958 dismissing the suit. The plaintiff is a joint family firm carrying on business in grains, gram, castor seeds etc., at Siddiambar Bazar, Hyderabad. The defendant is a merchant and is carrying on business as a commission agent and a general merchant at Hingoli.

2. The case for the plaintiff is shortly as follows : -

The defendant met the plaintiff at Hyderabad and agreed to work as commission agent for purchasing and supplying as per the instructions of the plaintiff cotton seeds at Hingoli. It was agreed that the price of the goods so purchased by the defendant must be paid at Hyderabad on Hundis drawn by the defendant. Fifty per cent of the value must be paid in advance and the balance against the railway receipt forwarded along with the Hundis payable at Hyderabad, Accordingly, as per the orders placed by the plaintiff the defendant purchased 600 pallas of cotton seeds and intimated the same to the plaintiff. As advance towards the purchase price of the cotton seeds, the defendant drew Hundis on the plaintiff in a total amount of O. S. Rs. 7,300/- and received the amount. By telegram dated 24-7-1952, the plaintiff instructed the defendant to despatch the cotton seeds to Hyderabad. But, by telegram dated 25-7-1952, the defendant informed the plaintiff that there was no stock of cotton seeds standing to the credit of the plaintiff and thereby committed breach of the contract entered into by the plaintiff and the defendant. At the end of August, 1952, the market rate for cotton seeds in Hyderabad was O. S. Rs. 28-4-0 per palla and, thus, the plaintiff suffered damage to the extent of O. S. Es. 7,900/-. The plaintiff prayed for a decree ultimately for O. S, Rs. 9,555-7-3 being the total amount due with interest at 6 per cent per annum equivalent to I. G. Rs. 8,190-6-3.

In his written statement, the defendant denied that he came to Hyderabad and entered into an agreement with the plaintiff at Hyderabad. The defendant was having dealings with the plaintiff-firm even from the year 1949 and the transactions used to take place by letters and telegrams and the business was carried on for the last several years as per the business conventions and customs prevalent in this regard. It was denied that there was any agreement to despatch the goods purchased by the defendant on behalf of the plaintiff from Hingoli to Hyderabad. It is not true that there was any agreement that the price must be paid at Hyderabad. The entire price of the goods purchased was to be paid by the plaintiff to the defendant as and when the goods were purchased. It was denied that only fifty per cent of the price bas to be paid as advance and the balance against the railway receipt forwarded along with the Hundis payable at Hyderabad. The orders for the purchase of 600 pallas were placed on different dates by telegrams and letters, and these orders of purchase included not only the purchase of cotton seeds but also other goods like Lac, Massoor etc. The City Civil Court at Hyderabad had no jurisdiction to entertain the suit as no part of cause of action arose within its jurisdiction. Out of 600 pallas of cotton seeds, there is one transaction of 200 pallas of cotton seeds which related to a forward contract for which the delivery was for Phagun. Out of this, 100 pallas were purchased at the rate of Rs. 23-15-0 on 18-1-1952, The plaintiff failed to pay the amount as per the contract within the stipulated period and as per the business rules. The defendant sold the said 200 pallas on the due date at the rate of O. S. Rs. 10-11-0 per palla, the ruling market rate on 11-3-1952 which was the due date and thereby incurred a loss of O. S. Rs. 2,680-4-0 which has been adjusted in the account of the plaintiff and the same has been intimated to him along with the account. Regarding the remaining 400 pallas of cotton seeds, the plaintiff did not send the price in spite of several demands. Therefore, the defendant sold them and credited the price realised to the plaintiff. As per the account, the defendant has to pay the plaintiff only a. sum of O, S. Rs, 851-10-6 which he waa ready to pay.

On these pleadings, the following issues were framed: -

'(1) Is the plaintiff's firm, a partnership firm? If BO, is the suit liable to be dismissed on the ground that it is not registered?

(2) Was there an agreement to purchase and despatch cotton seeds from Hingoli to Hyderabad City to the plaintiff's business place on terms set out in para (3) of the plaint?

(3) Has the defendant incurred a loss of Rs. 2,890-4-0 in the transaction of zoo pallas of cotton seeds? If so, is he entitled to adjust the loss in the account of the plaintiff?

(4) Were the cotton seeds sold at the prevailing market rate on the ground of the plaintiff's failure to give instruction even on demand?

(5) Has the plaintiff suffered a loss of Es. 7.778-8-3 due to denial and clear breach of duty by the defendant?

(6) Has this Court jurisdiction to try the suit?

(7) Is the suit within limitation?

(8) Have the arbitrators given an award? Have the parties agreed to it? If so, what is its effect?

(9) What relief is the plaintiff entitled to?

On the first issue, the lower Court found that the plaintiff's firm is not a partnership firm and that, therefore, the suit is not liable to be dismissed on the ground that it is not registered. It also held that the plaintiff's case of the contract as set out in the plaint is not true and that the defendant's version that the orders were executed on intimation is true. It also held that out of the 600 pallas, 200 pallas cotton seeds were taken delivery of at Phagun and that the 400 pallas were for ready delivery.

It was further held by the lower Court that the rate of cotton seeds on 11-3-1952 was O. S. Rs. 1o-11-o per palla and that the defendant incurred a loss of O. S. Rs. 2,680-4-0 on 11-3-1952, the date of settlement for 200 pallas. It was fur- ther held by the lower Court that the plaintiff failed to comply with the several demands mada by the defendant to pay the price or to pay at least such amount which would cover the expense incurred by the defendant in the matter of the purchase of these 400 pallas of cotton seeds and that, therefore, the defendant was justified in selling the stock as he received no word from the plaintiff notwithstanding repeated intimations. On issue No. 5, the lower Court held that the defendant did not commit any breach of contract. It also held that the suit is barred with respect to the transaction relating to 200 pallas-Phagun delivery as it was filed more than three years from 11-3-1952. On the question of jurisdiction, the lower Court held that it had jurisdiction to entertain the suit as the Hundis were being drawn on bankers at Hyderabad for collection.

3. The first question for determination is whether the plaintiff's case regarding the contract which was alleged to have been entered into at Hyderabad is true. In the plaint, it is stated that the contract was entered into in the month of Poosh, 2008. The contract was not reduced to writing. (His Lordship examined oral and documentary evidence and proceeded:) For these reasons, we believe that the transaction relating to the 200 pallas of cotton seeds -- Phagun delivery was settled to the knowledge of the plaintiff and that it ended with a loss of O. S. Rs. 2,680-4-0 and that Ex. B-14 is a true copy of the letter written by the defendant to the plaintiff and that the plaintiff suppressed the original of Ex, B-14 and has falsely denied having received the same. It follows that the lower Court has rightly found Issue No. I against the plaintiff and that Issue No. 2 also must be held against the plaintiff and in favour of the defendant.

4-5. Then remain the 400 pallas of cotton seeds. It is the defendant's case that, as per the prevailing rates of cotton seeds the amount to the plaintiff's credit with the defendant, did not cover the cost price of the goods. Therefore, the defendant was repeatedly appraising the plaintiff of the situation and demanding payment of the price which was advanced by the defendant for the purchase of 400 pallas of cotton seeds or at least to send such amount as would cover the balance of the amount thus advanced by the defendant for the purchase. (His Lordship discussed the evidence and proceeded:) We confirm the view taken by the lower Court with regard to the transaction relating to these 200 pallas of cotton seeds.

6. With regard to the 400 pallas of cotton seeds, it is contended by Mr. Jain that the defendant being admittedly an agent of the plaintiff and holding the goods belonging to the plaintiff, had no right to sell them unless he was instructed by the plaintiff to do so and that, therefore, the plain- tiff is entitled to damages with regard to the same, It is admitted that the defendant is a commission agent and that he had purchased the 400 pallas of cotton seeds on the instructions of the plaintiff and for the plaintiff. The defendant himself advanced the entire price for the purchase of these cotton seeds or made himself personally liable for the same to the persons from whom he purchased. He received only part of the purchase money from the plaintiff by drawing Hundis. For the entire quantity of 600 pallas, the defendant received only an amount of Es. 7,3oo/- but with regard to _ the transaction of 200 pallas, there was a loss of O. S-Rs. 2,680-4-0. So, with respect to the amount of about O. S. Rs. 10,000/- which he paid for the purchase of remaining 400 pallas,. the defendant had with him only O. S. Rs. 7,300/- minus O. S. Es, 2,680-4-0 i. e., O. S. Rs. 4,619-12-0 and the defendant had to get the balance from the plaintiff The plaintiff would not respond to the repeated demands to pay the balance or to at least deposit some amount to cover the defendant's risk and liability. It was only then, after giving sufficient notice, that the defendant sold the 400 pallas of cotton seeds and credited the price thus realised to the plaintiff.

The question thus arises whether the defendant was justified in selling the cotton seeds in these circumstances. The position of an agent who advances money for the purchase of goods on behalf of the principal or makes himself personally liable for the value thereof is stated in Bowstead on Agency, Twelfth Edition, at page 172 as Article 76 and is as follows: -

'Rights In Respect Of Goods Bought In Own Name :

Where an agent, by contracting personally, renders himself personally liable for the price of goods bought on behalf of his principal, the property in the goods, as between the principal and agent, vests in the agent, and does not pass to the principal until he pays for the goods, or the agent intends that it shall pass, and the agent has the same rights with regard to the disposal of the goods, and with regard to stopping them 'in transitu' as he would have had if the relation between him and his principal had been that of seller and buyer.'

This passage was referred to and followed ia Harilal Chimanlal v. Pehladrai and Co., AIR 1929 Bom 260. In that case the commission agent was the plaintiff. The commission agent purchased the goods on behalf of the principals and despatched them to the principal by rail, the payment to be made against railway receipts. But the principals failed to pay and take delivery. Therefore, after the notice by telegram, the commission agent sold the goods and brought the suit to recover the difference between what the agent paid for the goods and the proceeds of the sale. Marten, C. J., held that under Section 222 of the Contract Act, the principal was bound to indemnify the agent and rejected the contention that the agent had only a lien on the goods and no power of sale. The learned Chief Justice stated that:-

'What the defendants really ask here is that their commission agents should be obliged to carry the burden of the whole of these goods for an indefinite period until it pleases the defendants to pay, or alternatively that the defendants should only pay when a suit is brought against them and a decree is obtained and executed,'

It was pointed out that great injury might he caused to the commission agent if it was to be laid down that there was no remedy open to him except to file a suit to enforce his just rights. The learned Chief Justice saw no adequate reason why this part of the law of principal and agent as it exists in England should not apply in India.

Under Section 221 of the Indian Contract Act:

'In the absence of any contract to the contrary, an agent is entitled to retain goods, papers and other property whether moveable or immovable of the principal received by him, until the amount due to himself for commission, disbursements and service in respect of the same has been paid or accounted for to him.'

The principal is bound under Section 222 of the Act to indemnify the agent against the consequences of . all lawful acts done by such agent in exercise of the authority conferred upon him. There is no section in the Contract Act which specifically provides for the right of sale by an agent, who has himself paid the price of the goods purchased for the principal or made himself personally liable for the price of the same. That was why Marten, C. J., referred to law of England on the point and stated that it is applicable also in India. This decision was given before the Indian Sale of Goods Act, 1930 was enacted.

7. The Indian Sale of Goods Act, 1930 came into force on 1st July, 1930. It is necessary to refer to some of the provisions of this Act. Under Section 45 :

'1. The seller of goods is deemed to be an 'unpaid seller' within the meaning of this Act--

(a) when the whole of the price has not been paid or tendered;'

Clause 2 of Section 45 is as follows :

'In this Chapter, the term 'seller' includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom, the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price.'

(Jnder this clause, an agent, who has himself paid, of is directly responsible for the price is included in the term ' 'seller'' within the meaning of the Indian Sale of Goods Act and he will, therefore, have all the rights of and I the remedies available to an 'unpaid seller' under the Act. The defendant, in the present case, who has himself paid or is directly responsible for tho price is to be deemed to be an 'unpaid seller'. Then, what are his rights? Under Section 46, Clause (1) (a) he has a lien on the goods for the price while he is in possession of them and under Clause (1) (c), he has a right of resale as limited by the Act. Section 54, Clause (2) provides that the unpaid seller, who gives notice to the buyer of his intention to sell, may, if the buyer does not within a reasonable time pay or tender the price, resell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the resale. These provisions of the Indian Sale of Goods Act make it clear that the defendant in the case before us is fully justified in selling the 400 pallas of cotton seeds when the plaintiff, in spiteof repeated notices, failed to pay the balance of the price, or at least to pay such amount which would cover the risk which the defendant has taken, as the prices were falling. Tho defendant sold the goods only after giving reasonable notice to the plaintiff.

8. We shall next notice some of the decisions which were given after the Indian Sale of Goods Act came into force. In Babasa Bakalo v. Hom-banna Eayappa, AIR Bom 593 this very question came to be decided by Rangnekar, J. The learned Judge referred to Section 222 of the Contract Act and the decisions in Jenkyfls v. Brown, (1849) 14 QB 496, and Imperial Bank v. London and St. Katharine Docks Co., (1877) 5 Ch D 195 and Feise v. Wray, (1802) 3 East. 03 and held that the agent has got a right to sell the goods purchased for the principal in the circumstances like the present, when the principal, in spite of reasonable notice, failed to pay the price. The learned Judge also pointed out that this principle is now expressly recognised by the Sale of Goods Act, 1930 and referred to the definition of 'seller' in Section 45, clause (2).

The same view is taken in Jagram Das v. Eanarsi Das, ILR 12 Luck. 247 : (AIR 1936 Oudh 308). In that case, the contract was entered into before the Indian Sale of Goods Act came into force. It was argued before the learned Judges, who decided that case, that under Section 221 of the Indian Contract Act, the agent is given a lien on the principal's property in his possession and that no right of resale . was given. But this argument was repelled after referring to and following the decisions in AIR 1939 Bom 260 and AIR 1932 Bora 593. It was also poinl.ed out that if that case had been governed by the Sale of Goods Act, there would be no room for argument that the agent had no right of re-sale and that the Sale of Goods Act only gave legislative approval to the view previously taken under the Indian Contract Act. It is thus, clear, that the view, which we take of the right of the commission agent to resell the principal's goods is in accord with the view taken in the above cases.

9. Mr. Jain, the learned counsel for the appellant placed reliance upon the _ decision in Mulchand Shibdhan v.. Shcomal Sheo Prashad, AIR 1929 Lah 666. That was a case under Sections 211 and 176 of the Contract Act. The price of the goods which were purchased by the agent for the principal and which were resold by the former appears to have been fully paid; but the agent resold the goods purporting to exercise that right under Section 221 of the Contract Act and that too without giving notice to the principal. It was held that the agent was only in the possession of a pledge and that he had no right to sell the goods unless he complied with the requirements of Section 176. It was under those circumstances that it was held that the plaintiffs in that case in their capacity as agents were only entitled to retain the goods until the payment of the amount due to them from their principals, but that they were not entitled to sell. In our opinion, that decision has no real bearing on the question we have to decide.

Reliance is also placed on the decision in Firm of Balla Mal Rakha Mal v. Budhu Mal Prabh Dial, AIR 1926 Lah 94. It is a decision of a single Judge of that High Court. That case arose before the Sale of Goods Act came into force. The learned Judge pointed out that Section 221 of the Indian Contract Act did not confer a right of resale on an agent and held, after referring to the statement of law in Bowstead on Agency on this point, that an agent, who has bought goods for the principal with his own money, does not stand to the principal in the position of an unpaid seller and the, therefore, no right to re-sell. We prefer to follow the view taken by the High Court of Bombay and Chief Court of Oudh. In any view, this decision cannot be held to be laying down the correct law after the Indian Sale of Goods Act came into force.

10. It follows that the lower Court has rightly rejected the claim made by the plaintiff in theplaint. But the defendant in his written statement, as already noticed earlier in the judgment,stated that, as per his accounts, he has to pay tothe plaintiff O. S. Rs. 851-10-6. Mr. Jain arguedthat at least a decree for that amount may begiven. We feel that there can be no serious objection to this Court. Therefore, we modify the decree of the Lower Court by granting a decree tothe plaintiff against the defendant for a sum ofO. S. Rs. 851-10-6. Except for this modification,the appeals fails. It is, therefore, dismissed withcosts.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //