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Lloyds Commercial Corporation Vs. Veeravilli Satyanarayana and Satti Rami Reddi Registered Firm, Kakinada - Court Judgment

LegalCrystal Citation
SubjectCommercial;Contract
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 1252 of 1959
Judge
Reported inAIR1966AP256
ActsIndian Contract Act, 1872 - Sections 28; Arbitration Act, 1940 - Sections 20
AppellantLloyds Commercial Corporation
RespondentVeeravilli Satyanarayana and Satti Rami Reddi Registered Firm, Kakinada
Appellant AdvocateK.B. Krishna Murty and ;M.S.R. Subrahmanyam, Advs.
Respondent AdvocateP. Ramachandra Reddy, Adv. for ;S. Venkata Reddy and ;M. Ramaiah, Advs.
DispositionAppeal allowed
Excerpt:
contract - jurisdiction - section 28 of contract act, 1872 and section 20 of arbitration act, 1940 - respondent was agent of appellant for sale of certain fertilizers in kakinada - respondent entered into agency agreement with appellant and deposited certain amount as agency deposit - agency agreement provided that all disputes arising in relation to agreement shall be referred in madras court - respondent brought suit in court of district munsif, kakinada for recovering agency deposit - held, suit could be filed only in court of madras as suit arising out of agency agreement. - - a settlement of account necessarily involves a consideration of the credit as well as the debit entries. if this claim had not been quantified, it would clearly be a claim under the agreement of agency......defendant. the suit for enforcing this claim must therefore be held to be one arising out of the agency agreement. in view of clause 7 of the agreement the suit could be filed only in the court at madras and not in a muffasil court. this is the express provision in clause 7 of the agreement. it cannot be doubted that such a provision is valid in law vide libra mining works v. baldota bros. (1962) 1 andh wr 165 : (air 1962 andh pra 452) and hossen kasam dada (india) ltd. v. motilal padampat sugar mills co. ltd., : air1954mad845 . 4. regarding the arbitration clause also, the position appears to my mind to be against the plaintiff. the arbitration clause is drawn up in very wide terms. it says that any dispute or difference or any other matter arising in relation to this agreement shall.....
Judgment:

Gopala Krishnan Nair, J.

1. This is a defendant's Second Appeal from the judgment and decree of the Subordinate Judge. Kakinada who, on appeal, reversed the decision of the District Munsif, Kakinada and decreed the suit of the plaintiff. The suit was for a stun of Rs. 2,229-13-9 which was made up of a principal sum of Rs. 1,840-2-1 and interest thereon at 12 per cent per annum. The plaintiff was the agent of the defendant for the sale of certain fertilisers in Kakinada District. The defendant was the representative of the then undivided Madras State in respect of these fertilisers. The agreement between the defendant and the plaintiff provided for payment of a sum of Rs. 10 as commission to the plaintiff for every ton of fertiliser sold by him. The plaintiff (agent) was to deposit a sum of Rupees 000 as 'agency deposit' with the defendant. He was also to deposit in advance (apart from the agency deposit) as security the approximate value of the fertilisers delivered to him for sale by the principal (defendant). The other important provisions contained in Clause 7 of the written agreement between the parties were the following: :

'Any dispute or difference or any other matter arising in relation to this agreement, shall be referred to Arbitration in Madras in accordance with the provisions contained in the Arbitration Act (X of 1940) or any statutory modification thereof. Any suit or legal proceedings arising out of this agreement should be filed in the Courts at Madras and not in any other Court in Muffasil.'

The only other clause in the agreement that needs to be mentioned is the one relating to the return of the agency and security deposits. That provision contained in the last paragraph of Clause 6 of the agreement reads:

'The amount deposited with the Principal, will not carry interest, and are returnable within one month from the date of Settlement of accounts at Madras.'

The plaintiff who is the agent brought the suit in the Court of the District Munsif, Kakinada for recovering the agency deposit of Rs. 1,000 and also another sum of Rs. 840 odd alleged to be due to him from the principal, together with interest on these amounts at the rate of 12 per cent per annum. One of the important allegations in the plaint was that accounts between the plaintiff and the defendant had been settled and that the defendant was liable lo pay the amount claimed in the plaint as the balance due from him on settlement of accounts. The defendant resisted the suit on the ground firstly that under Clause 7 of the agreement any suit or legal proceeding by the agent in respect of any matter arising out of the agreement has to be instituted only in the Court at Madras and not anywhere in the Muffasil and that therefore the suit laid at Kakinada cannot be maintained. Secondly, it was set up in the written statement that in view of the Arbitration clause in the agreement, the plaintiff was not entitled to bring the suit but only to seek arbitration proceedings for settlement of the disputes or differences or realisation of the amount due to him. The settlement of accounts set up in the plaint was expressly denied in the written statement.

2. The trial Court held that the Court at Kakinada had no jurisdiction to try the suit because under the written agreement between the parties the suit had to be instituted only in the Madras Court. The learned District Munsif also expressed the view that the arbitration clause in the agreement covered the suit claim and that therefore the suit was not maintainable. He further found that the accounts between the plaintiff and the defendant had not been settled. On these findings, he dismissed the suit. On appeal by the plaintiff, the learned Subordinate Judge, Kakinada, reversed the decision of the District Munsif and decreed the suit. The learned Subordinate Judge held that there was a settlement of accounts between the parties and that considering the view expressed by this Court in Civil Revision Petition No. 601/55 which arose out of an application filed by the defendant in the trial Court under Section 34 of the Arbitration Act it has to be held that the Court at Kakinada had jurisdiction to try the suit. It is against this judgment that the present Second Appeal is preferred by the defendant.

3. I shall first deal with the question of the jurisdiction. The amount claimed in the suit is the amount to which the plaintiff allegedly became entitled on account of the transactions performed by him as the agent of the defendant. This agency was created by a written agreement between the plaintiff and the defendant. The plaintiff became entitled to the amount only on account of the rights he obtained under the agreement. The bulk of the suit claim constitutes the 'agency deposit' of Rs. 1,000. This deposit was made in accordance with the express provision in Clause 6 of the agreement between the parties. The rest of the principal amount claimed by the plaintiff is on account of the commission and other charges due to him under the provisions of Clause 5 of the agreement. Thus, it is difficult to hold that the suit claim is not one which arises out of the agreement of agency between the plaintiff and the defendant. The suit for enforcing this claim must therefore be held to be one arising out of the agency agreement. In view of Clause 7 of the agreement the suit could be filed only in the Court at Madras and not in a Muffasil Court. This is the express provision in Clause 7 of the agreement. It cannot be doubted that such a provision is valid in Law vide Libra Mining Works v. Baldota Bros. (1962) 1 Andh WR 165 : (AIR 1962 Andh Pra 452) and Hossen Kasam Dada (India) Ltd. v. Motilal Padampat Sugar Mills Co. Ltd., : AIR1954Mad845 .

4. Regarding the arbitration clause also, the position appears to my mind to be against the plaintiff. The arbitration clause is drawn up in very wide terms. It says that any dispute or difference or any other matter arising in relation to this agreement shall be referred to arbitration in Madras. I find it extremely difficult to say that the suit claim is not a matter arising in relation to the agency agreement. Therefore, the claim in the present suit comes within the mischief of the arbitration clause in the agreement. This being so, the suit is not maintainable before steps are taken for referring the matter to arbitration. The decisions in A. M. Mair and Co. v. Gordhandas Sagarmull, : [1950]1SCR792 , Gaya Electric Supply Co. v. State of Bihar, : [1953]4SCR572 and Dhanrajmal Gobindram v. Shamji Kalidas and Co., AIR 1901 SC 1285 support this position.

5. The only point that remains to be considered is whether the finding of the Court below that accounts had been settled between the plaintiff and the defendant is legally correct or not. Such a finding is not purely one of fact. It is a matter of law in the sense that it is a legal inference drawn from certain documents and circumstances. Exhibits A-2 and A-3which are copies of the accounts of the plaintiff-agent were sent to the defendant from Kakinada to Madras. On receipt of these the defendant-principal wrote to the plaintiff-agent Ex. A-4 dated 14-8-1953 which reads:

'The detailed statements, submitted to us relating to the distribution of manure during the year 1952-53 have been checked up in this office. We enclose herewith one set of statements for your records as desired by you.'

Exhibit A-2 expressly stated that it gave only the details of debits against the defendant. It did not at all purport to deal with credits in favour of the defendant. Exhibit A-3 merely showed the quantity of fertilisers received by the plaintiff and the quantity sold by him and the amount obtained on each of the sales.

On 23-9-1953, the plaintiff wrote Ex. A-5 to the defendant asking for a sum of Rs. 1950-8-9 which was composed of three specified items, viz., Rs. 1,000 deposit, Rs. 840-2-1, amount due upto date and Rs. 110-6-8, interest to date. To this communication the defendant replied by Ex. A-7 dated 19-10-1953 in which he stated, to begin with, that the letter of the plaintiff, Ex. A-5 had been passed on to the accounts department for confirmation of the balance of the plaintiff's account. Thereafter Ex. A-7 stated as follows:

'We note from our records that a sum of Rs. 2,240-2-1 was standing to the credit of your account as at 31-3-53 against which a sum of Rs. 400 was paid to you on 19-5-1953. Please note that the amount due to you is Rs. 1840-2-1 as at this date and this amount shall be refunded soon after all other matters are settled.'

In the next paragraph the plaintiff was informed of the letter of the District Agricultural Officer, Kakinada asking for the payment towards difference of prices etc. Subsequent correspondence between the parties made it amply clear that the amount which the Agricultural Department claimed in respect of quantities of fertilisers which were sold by the plaintiff formed one of the matters which remained to be settled between the plaintiff and the defendant. Exhibits B-17 to B-23 evidence the exchange of letters between the plaintiff and the defendant relating to the amounts alleged by the defendant to be payable by the plaintiff to the Agricultural Department. In this correspondence, the defendant expressly told the plaintiff more than once that he will not be able to make any payment to the plaintiff unless this matter was settled after going through the accounts of the plaintiff.

The evidence in the case also shows that several attempts were made by the defendant to cause the plaintiff to produce his accounts so that the defendant could examine them and decide as to what amount was payable to the Agricultural Department and adjust it suitably in the accounts and pay the balance due to the plaintiff. But it appears that the plaintiff consistently refrained from producing the accounts for the examination of the defendant. Twice the defendant sent his Head Accountant from Madras to Kakinada for the purpose of settling the accounts after examining the account books of the plaintiff. On both those occasions, the plaintiff declined to produce the account books or come to a settlement regarding the precise amount payable in respect of the fertiliser sales to the Agricultural Department. Thus, the matter dragged on and eventually the suit was laid by the plaintiff.

6. The question is whether in view of the aforesaid circumstances, a settlement of accounts can be spelt out of Exs. A-4 and A-7 as the Court below has done. I do not think it is legally permissible to do so. A settlement of accounts necessarily involves an agreement to pay the balance found due on such settlement of accounts. In Ex. A-4, the defendant did not in any manner indicate his agreement to pay the amount claimed by the plaintiff according to exs. A-2 and A-3. In Exhibit A-7, the defendant expressly stated that the amount standing in his account books to the credit of the plaintiff will not be paid to the plaintiff until all other matters were settled. This letter, far from expressing any agreement to pay me balance struck on an alleged settlement of accounts, pointedly told the plaintiff that no amount wilt he paid to him until all other matters had been settled.

Thus I, find it very difficult to spell out of Exs. A-4 to A-7 an agreement by the defendant to pay any specified amount to the plaintiff as the balance due to him on a settlement of accounts. The other aspect which may be noticed is that the accounts sent by the plaintiff to the defendant contained only debit entries and not the credit entries. Even if debit entries were accepted as correct by the defendant, that would not amount to a 'settlement of accounts' because the credit entries were totally left out of consideration. A settlement of account necessarily involves a consideration of the credit as well as the debit entries. This does not appear to have taken place in this case; nor can the defendant be said to have agreed to pay the amount demanded by the plaintiff because in Ex. A-7 the defendant expressly stated that he would not pay the amount until other matters were settled. In the circumstances, I am unable to say that there was any agreement or undertaking, express or implied, by the defendant to pay the plaintiff a specified sum of money arrived at on a settlement of accounts. It is only if there was such an agreement that there would be a new contract superseding the old transactions between the parties. But as there is no such new contract or agreement in the present case, it cannot be said that an altogether new cause of action arose and the parties were concluded by the settlement of accounts and nothing anterior to it was necessary to be considered.

From this point of view also, it seems to my mind to be impossible not to have recourse to the agreement of agency between the parties in this case. Indeed, the plaintiff bas expressly mentioned in paragraph VI of the plaint that the cause of action for the suit arose from 31-3-1953 which was the date of termination of his agency. This averment necessarily relates to the agreement of agency between the parties which was for a period of one year ending on 31-3-1958.

7. There is yet another aspect. The right of the plaintiff to the return or the agency deposit and also to the amount of commission due to him under the agreement of agenoy arose out of the agreement of agenoy between him and the defendant. If this claim had not been quantified, it would clearly be a claim under the agreement of agency. Merely because the amount of the claim was quantified say, by agreement between the parties, it cannot be said that the claim did not arise out of the agreement of agency. Therefore, from more than one point of view it is difficult to say that the suit claim did not arise out of the agreement of agency or that it is not a matter arising in relation to that agreement. I am inclined to think that as a matter of Law even if there was a settlement of accounts between the parties, the plaintiff's suit would still come within the mischief of the arbitration provision in Clause 7 of the agreement and would also be hit by the provision that any suit or legal proceeding arising out of the agreement should be filed in the Court at Madras and not in any Muffasil Court.

8. In view of the above, I am of the view that the Subordinate Judge was wrong in reversing the decision of the trial Court and decreeing the suit. It follows that this appeal has to be allowed and the decision of the trial Court restored. In the circumstances of this case, I do not make any order as to costs. No leave.


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