Skip to content

Raja Ram Jaiswal Vs. Ganesh Prasad and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad High Court
Decided On
Case NumberLetters Patent Appeal No. 53 of 1951
Reported inAIR1959All29
ActsContract Act, 1872 - Sections 10, 43, 182, 219, 230 and 235; Code of Civil Procedure (CPC) , 1908 - Order 8, Rule 2; Companies Act, 1956 - Sections 252; Evidence Act, 1872 - Sections 91
AppellantRaja Ram Jaiswal
RespondentGanesh Prasad and ors.
Appellant AdvocateS.C. Khare, Adv.
Respondent AdvocateG.N. Kunzru, Adv.
DispositionAppeal dismissed
Excerpt: not necessarily his agent - director entering into contract in his personal capacity - in suit two co-directors also impleaded - suit against co-directors dismissed - liability of director entering into contract not effected. (ii) evidence - necessity of evidence - section 91 of evidence act, 18872 - party to contract fulfilled his part of contract - party entitled to amount - evidence as to any compensation or loss in the circumstances - entirely unnecessary. (iii) contract - interpretation - section 10 of contract act, 1872 - interpretation of contract by court - primary source - document creating contract - secondary source - circumstances of contract, drafting ability of parties, intention sought to be conveyed and act of parties under the contract. - cantonments..........directors had the required authority. otherwise they would not have deputed him to arrange for the sale. the sale if arranged could be made only by the directors or some other person authorised on behalf of the company. the agent himself was not given any authority to execute the sale deed or to get it registered. nothing was mentioned in the letter about the way in which the consideration was to be paid or about the other terms that were to be entered in the document of sale. it is therefore obvious that the parties did not contemplate that the sale was to be made by the plaintiff-respondent himself. the word 'bechenge' was therefore used not in its literal sense meaning 'will sell', but to mean 'will arrange for the sale of or 'will secure a ready and willing prospective purchaser'. in.....

A.P. Srivastava, J.

1. This is a defendant's appeal. The Jawahar Palace Cinema including its building, furniture and machine belonged to defendant No. 1, a limited Company known as Allahabad Theatres Ltd. The appellant Sri Raja Ram Jaiswal, Sri Radhey Shyam Jaiswal and Sri Nand Kishore Chaudhari were the directors of the Allahabad Theatres Ltd, The plaintiff is a broker. According to him, the abovomention-cd three directors of the Allahabad Theatres Ltd. deputed him to find a purchaser for the property and Sri Raja Ram Taiswal wrote a letter to him on 22-12-1941 in which he said that

'Ap Jawahar Palace Cinema building Rs. 54,000/-mai furniture machine ke ko bechainge to ap ko Rs. 2,000/- commission dilavien gay. Kharcha kul ap ka rahega magar Jawab jald ana chahiye.'

Armed with this letter the plaintiff started making efforts to Ret a purchaser for the property and succeeded in persuading one Sri K. S. Gandhi to agree to purchase it for Rs. 55,000/- Sri Gandhi wrote a cheque for Rs. 1,000/- on account of earnest money in favour of Sri Raja Ram Jaiswal and gave it to the plaintiff so that the deal may be settled. The plaintiff handed over the cheque to Sri Radhey Shyam Jaiswal and to Sri Nand Kishore Chaudhari as Sri Uaja Ram Jaiswal was not available at the time for some reason.

Those two gentlemen accepted the cheque and executed a receipt for the amount in which they mentioned that the property would be sold to Sri Gandhi as agreed and that Rs. 1,000/- was being taken as earnest money. Subsequently the sale did not materialise as the directors refused to carry out the sale on the ground, that they had no authority on behalf of the Allahabad Theatres Ltd. to sell the property, Sri K. S. Gandhi subsequently brought a suit lor the specific performance of the contract.

The suit was dismissed by the trial court but it is alleged that it was compromised in appeal. The plaintiff served notice on the Company as well as the three directors calling upon them to pay him his agreed commission of Rs. 2,000/- because he had carried out his part of the contract. As the amount was not paid he filed a suit to recover it and impleaded in that suit the Allahabad Theatres Ltd. as well as the three directors.

2. The suit was contested by the defendants on various grounds the main defence being that the three directors had no authority on behalf of the Company to sell the property, and that the plaintiff was not entitled to any commission as the sale had never been effected.

3. The trial court dismissed the suit. The plaintiff went up in appeal and the first appellate court decreed the suit against Raja Ram Jaiswal only. It took the view that Raja Ram Jaiswal having written the letter dated 22.12-1941 had undertaken personal liability for the payment of the commission. The plaintiff had done everything that he could do in the circumstances and if the sale could not be effected it was no fault of his. The suit was dismissed as against the other defendants. Sri Raja Ram Jaiswal then filed a second appeal in this Court and the appeal was heard by V. Bhargava, J. Before him it was argued that as the sale did not finally take place, on the terms of the agreement between the parties the plaintiff could not claim any commission.

It was also urged that Sri Raja Ram Jaiswal could not be made personally liable for the plaintiffs' commission as he had all along been acting for and on behalf of the Company. Both these contentions were rejected by the learned Single Judge and the appeal of Sri Raja Ram Jaiswal was dismissed. Permission to file an appeal to a Division Bench was, however, granted and the present appeal has been filed as a result.

4. Before us, the learned counsel for the appellant Sri Raja Ram Jaiswal has put forward four contentions. They are:

(1) The learned Single Judge has not correctly interpreted the letter written by the appellant on 22-12-1941. According to its true interpretation the plaintiff could claim commission only if the property had actually been sold. If the sale could not be effected for any reason the commission could not be claimed. The learned counsel laid stress on the word 'bechenge' used in the letter as also on the word 'dilayenge' used with reference to the commission. He relied in this connection on Jones v. Lowe, (1945) 1 All ER 194 (A).

(2) According to the plaintiff's own case the contract with him had been made by the three directors jointly. No decree could, therefore, have been passed against the appellant alone when the suit was dismissed against the other defendants.

(3) It was not clear from the plaint whether the plaintiff was claiming Rs. 2,000/- on the basis of. the express terms of the contract contained in the letter dated 22-12-1941, or whether he was claiming compensation for breach of contract or remuneration for his services on a quantum meruit basis. None of the three courts which had dealt with the case had considered the question or recorded any definite finding in respect of it. No evidence was. produced by the plaintiff to prove the actual loss he has suffered. If he was claiming the amount on the basis of the agreement itself he could not get it because he had not succeeded in actually selling the property. If he was claiming the amount as compensation or on a quantum meruit basis he could not get it because he had not proved the actual amount of loss he had suffered.

(4) That the position of the appellant according to the proved facts of the case was that of an agent of a disclosed principal who had exceeded his authority. That being the case the suit of the plaintiff was clearly barred by Sections 230 and 235 of the Indian Contract Act.

5. Sections 230 and 235 Indian Contract Act could apply only if the appellant had instructed the plaintiff to arrange for the sale in the capacity of an agent of the company and not in his personal capacity. The pleadings show that it was not the case of either party that the position of the appellant was that of an agent. The plaintiff did not allege in the plaint that the appellant was an agent and the appellant too did not plead in his written statement that he had acted in the Capacity of an agent. A director of a company is not necessarily the agent of the company or its share-holders.

If, therefore, the appellant wanted to set up the case that he had acted in this transaction not in his personal capacity but as agent he ought to have raised the plea specifically in his written statement, The learned Civil Judge definitely found that 'In my opinion the defendant No. 2B. Raja Ram Jaiswal is personally liable for the payment of the commission which he agreed in his letter of 22-12-1941.' Before the learned Single Judge it was sought to be argued that the appellant was only an agent and was not liable on that account but the contention was repelled and the learned Judge observed:

'This argument has no force at all because, the language of the letter dated 22-12-1941 makes it clear that the defendant-appellant had made himself responsible for the payment of the Commission, in his own personal capacity. There was no mention at all that the promise was being made on behalf of the company as an agent. The defendant appellant took the liability for the commission of the plaintiff-respondent on himself personally and the decree against him is, therefore, fully justified.'

In the circumstances it is not open to the appellant to contend before us that as he had instructed the plaintiff in his capacity as agent the plaintiffs suit was barred by Sections 230 and 235 of the Indian Contract Act. The liability which the plaintiff sought to enforce and for the enforcement of which the decree against the appellant was passed was the appellant's personal liability.

6. The plea about the nature of the plaintiff's claim also does not appear to have been raised at any earlier stage of the suit. In our opinion it cannot be allowed to be raised for the first time in the letters patent stage. It may, however, be observed that from the plaint it appears to be clear that the plaintiff claimed the amount in dispute by enforcement of the contract entered into between the parties. There was, therefore, no question of any compensation being claimed for the breach of any implied term or of any remuneration being required on the principle of quantum meruit. As is laid down in Halsbury's Laws ot England, 3rd Edn. Vol. I at page 196.

'Where the parties have made an express contract for remuneration, the amount of remuneration and the conditions under which it will become payable must be ascertained by reference to the terms of that contract; no implied contract can be set up to add to or vary such terms'. The same principle was laid down by Hilbery, J. in (1945) 1 All EH 194 (A) when he said:'The plaintiff has reduced into writing the terms of the offer and those terms were accepted by the conduct of the defendant; those terms having been reduced into writing. I think the authorities are overwhelming that there is no room left for the implication of any term other than those expressed, or of any such implied term to pay a reasonable remuneration as could be implied in law to give the plaintiff a claim upon quantum meruit.'

7. If, therefore, the plaintiff had complied with the terms of the contract and fulfilled his part of it he was entitled to the entire amount payable to him under the contract. If, on the other hand, the conditions of the contract had not been fulfilled and the plaintiff had not done all that he ought to have done under it, the plaintiff was not entitled to any amount. Evidence about compensation or actual loss was in the circumstances entirely unnecessary and the plaintiff's suit cannot fail for want of it.

8. An answer to the second contention of the learned counsel for the appellant will be found in Section 43 of the Indian Contract Act and particularly illustration 'a' appended to that section. If the appellant alone appointed the plaintilf his agent and entered into the contract dated 22-12-1941 he could certainly be made liable on its basis and the fact that the other two co-directors had also been im-pleaded and the suit had been filed against them could not in any way affect the appellant's liability. If, on the other hand, the three directors including the appellant had jointly appointed the plaintiff their agent and the letter dated 22-12-1941 had been written by the appellant on behalf of all the three (this was the case with which the plaintiff came to Court) the three persons were joint promisors and it was open to the plaintiff to enforce the terms against any of them.

If for some reason the claim failed against the other co-promisors the fact could not affect the appellant's liability. There is, therefore, no force in the contention because the suit had not succeeded against the other two directors it should have failed against the appellant too. Learned counsel laid stress in this connection on the point that the cheque for the earnest money, which had been written by Sri. Gandhi had been given not to the appellant but to the other two directors and the receipt for it had been taken from them alone. This fact, however, appears to be entirely immaterial. All the three being joint promisors, the cheque could be accepted by any of them on behalf of all and if it was so accepted the acceptance would be binding on all three,

9. The principal contention of the learned counsel for the appellant is, however, the first contention which relates to the interpretation of the: letter dated 22-12-1941. There can be no doubt that the plaintiff was an agent of the appellant who had been commissioned to attempt to dispose of the property which the appellant wanted to sell for a specified remuneration. Such contracts with commission agents are not all of one kind and it is necessary in each instance before the terms can be enforced to find out with certainty what the actual terms settled between the parties are. Exceptional cases containing unusual terms may for the moment be left out of account. Generally speaking, as pointed out by Viscount Simon L. C., in Luxor (East Bourne) Ltd. v. Cooper, 1941 AC 108 at p. 120 (B), such contracts can fall in three classes :

(1) The first is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate oficr usually an offer of not less than the stipulated amount.

(2) The second class is of cases in which the property is put into the hands of the agent to dispose of for the owner and the agent accepts the employment, and, it may be, expends money and time in endeavouring to carry it out.

(3) The third class is of cases where the agent. is promised his commission only upon completion of the transaction which he has endeavoured to bring about between the offeror and his principal.

10. In the cases falling under the first class the only thing which the agent undertakes is to introduce to his principal a person who is ready, willing and prepared to take the property for the stipulated amount. He does not undertake to do anything further and if he periorms what he has undertaken to do he earns his commission, In such cases it is laid down in Halsbury's Laws of. England 3rd Edn. Vol. I page 197:

'In order to entitle the agent to receive his remuneration, he must have carried out that which he bargained to do, and all conditions imposed by the contract must have been fuliillcd. He is not, however, deprived of his right to remuneration where he has done all he undertook to do, by the fact that the transaction is not beneficial to the principal, or that it has subsequently fallen through, whether by some act or default of the principal, or otherwise, unless there is a provision of the contract, express or implied to that efiect, or unless the agent was himself the cause of his services being abortive; nor does he necessarily lose his right to remuneration through making a bona fide mistake even if it amounts to a breach of duty.'

The offer which he secures must however be a firm offer which if accepted will give rise to a binding contractual relationship. The offer must not be subject to contract or subject to a condition of whose fulfilment the offerer is the sole arbiter or subject to some uncertain event. If the offer is of that kind the agent will not be considered to have carried out his part of the contract. If the offer he procures is a firm one he will be entitled to get Ms commission even if the sale is not fully effected.

As instances of this class of cases reference may bo made to English as well as Indian cases. Some of the English cases will be found reported in Giddys v. Horsfall, (1947) 1 AH ER 460 (C), E. H. Benett and Partner v. Millett, (1948) 2 AH ER 929 (D), E. P. Nelson and Co. v. Rolfe, (1949) 2 All ER 584 (E) and Fowler v. Bratt, (1950) 1 All ER 662 (F). Two Indian cases will be found in Roopji and Sons v. Dyer Meaken and Co. Ltd. : AIR1930All545 and Farid Baksh v. Hargulal Singh : AIR1937All46 . In Graham and Scott (South Gate) Ltd. v. Oxlade (1950) 1 All ER 856 (I) and McCallum v. Hicks, (1950) 1 All ER 864 (J) the contracts were of this kind, but the otter brought by the agent being a conditional one he was not found entitled to his commission.

11. In the second class of cases the agent is given full authority to transfer the property after he has found a possible purchaser. He has accepted to expend time and money in carrying Out his part of the work and there is a sort of implied term that, the principal will not withdraw the authority he has given after the agent has succeeded m finding a possible purchaser. In such cases if the principal withdraws his instructions after the agent has found a purchaser, the commission will still be payable. An instance of this class of eases will be found in the Inchbald v. Western Neilgherry Coffee Co., (1864) 17 CB (NS) 733 (K). According to Mr. Justice Mahajan's interpretation of the contract which was the subject matter of dispute in Abdulla Ahmed v. Animendra Kissen : [1950]1SCR30 the contract in that case too belonged to this class. of the interpretation put on it by Mr. Justice Patan-jali Shastri is accepted it will fall in the first.

12. In the third class must be put contracts by which a person instructs an agent to arrange for the transfer of a property and promises to pay a sum of money only in case the agent succeeds in getting the transfer completed. The intention is to pay the amount of the consideration of the transfer when it is received by the principal. It is in respect of this class of cases that it appears to have been laid down in Halsbury's Laws of England, 3rd Edn. Vol. 1 page 198 :

'It is not a contract of employment in the ordinary meaning of those words for the agent is under no obligation to do anything, and consequently no term ean be implied in such a contract that the principal will not so act as to prevent the agent from earning his commission, as by disposing of the property himself or through another agent or by breaking of negotiations before the happening of the specified event. What the event is, on the happening of which the money is payable, must depend upon the construction of the contract. Normally, when that event is the finding of a purchaser, no claim for commission can arise until the purchase price has been received or would have been received but for the default of the principal; but if the principal enters into a binding contract with the purchaser, and the latter is able and willing to complete, a fact which the agent must establish, and the principal refuses to complete, the commission is payable. But if the sale is not completed owing to the default of the purchaser, no commission is payable, even though the deposit has been paid and forfeited for the principal is not bound to bring an action against him.'

It is obvious (hat in this class of cases the commission will be payable only if the agent succeeds in having the transaction completed. Till that event happens he has no claim. The classic instance of this class of cases will be found in 1941 AC 108 (B), (1945) 1 All ER 104 (A) and Dennis Reed Ltd. v. Goody, (1950) 1 All ER 919 (M) arc other instances of this class.

13. It is contended on behalf of the appellant that the contract in the present case falls within the third class and as the plaintiff could not get the sale of the property in dispute effected he was not entitled to claim any commission. For the respondent, however, it is urged that the present case falls within the first of the three classes mentioned above and as the respondent did what he had contracted to do he could not be deprived of the commission simply because for some reason the actual sale could not be effected.

14. The question depends on the construction which has to be put on the letter dated 22-12-1941. For the correct interpretation of the document we have to look primarily to the document itself, but must also take into consideration the circumstances in which it was written, the drafting ability of the parlies, the intention which the writing was to convey and how the parties acted under it.

15. The learned Single Judge did not accept the interpretation which the appellant sought to put on the letter and after giving our best consideration to every thing which the learned counsel for the appellant has urged we have come to the conclusion 'that the interpretation which the learned Single Judge has put on die document is the correct one.

16. It is true that the word 'bechenge' has been used in the letter and in respect of the sum of Rs. 2,000/- which was to be paid as commission the word 'dilayenge' has been employed. It is however not possible to interpret these two words literally and in the circumstances of the case it can hardly be said that they were intended to be so interpreted. The property which was to be sold belonged to a limited company. The appellant and the defendants Nos. 3 and 4 were only directors of the company. There is nothing to show that when the plaintiff was asked to arrange for the sale of the property the directors gave him any information as to what had transpired between them and the company and how far their authority in the matter extended.

When, therefore, the respondent No. 1 was asked to arrange for the sale of the property he naturally took it that the directors had the required authority. Otherwise they would not have deputed him to arrange for the sale. The sale if arranged could be made only by the directors or some other person authorised on behalf of the company. The agent himself was not given any authority to execute the sale deed or to get it registered. Nothing was mentioned in the letter about the way in which the consideration was to be paid or about the other terms that were to be entered in the document of Sale. It is therefore obvious that the parties did not contemplate that the sale was to be made by the plaintiff-respondent himself. The word 'bechenge' was therefore used not in its literal sense meaning 'will sell', but to mean 'will arrange for the sale of or 'will secure a ready and willing prospective purchaser'. In the circumstances the only thing which the plantiff could do or could be expected to do was to persuade some One to take the property for the minimum price of Rs. 54,000. If he succeeded in doing that, he had done his part of the work.

Had it been the intention that the plaintiff would get his commission only it the sale was completed, the language used in the letter would, in our opinion have been different. The letter did not even say that the plaintiff would have his commission only if the offer brought by him was accepted. In fact, the remuneration payable to him was not made dependent on any act or omission of the directors of the company. The only thing stipulated was that if he succeeded in getting a person who was prepared to have the property for Rs. 54,000 ho would be entitled to the agreed commission of Rs. 2,000/- we are also unable to attach much importance to the use of the word 'dilayenge'. The form in which the word is used only signifies that the amount will be got paid to the plaintiff or in other words he would be entitled to nave it. The writer of the letter was not an experienced or expert draftsman and the letter was not intended to be a formal document. It was only meant to roughly convey what had been settled between the parties.

Had the intention been that the plaintiff would be entitled to get the commission only it the offer brought by him was formally accepted in a regular meeting of the Board of directors of the company and a sale deed was subsequently executed and registered on its basis, the plaintiff would in all probability have never undertaken the task because in that case the earning of the remuneration would have depended on a number of conditions which were entirely beyond his control. An inkling of what the intention of the parties was can also be had from the conduct of the parties which immediately followed the writing of the letter. The plaintiff tried and succeeded in persuading Sri Gandhi to have the property for Rs. 55,000/-. A cheque for Rs. 1,000 as earnest money was given to him by. Sri Gandhi.

The cheque was accepted by two of the directors who executed a formal receipt and mentioned an the receipt that the amount was being accepted by them as earnest money and that they would execute the sale within the period mentioned in the receipt. No such receipt could have been written had it been in the contemplation of the parties at the time of the writing of the letter of 22-12-1941 that the offer of the plaintiff will be subject to acceptance by the Board of Directors of the company,

One of the directors, Sri Radhey Shyam Jais-wal, defendant No. 3, even wrote a letter on 12-3-1942 (Ex. K, paper No. 80/C) in which he actually promised to pay the commission of Rs. 2,000 to the plaintiff. No such letter would have been written had it been the intention that the commission would be payable to the plaintiff only after the completion of the sale.

17. It therefore appears to us that the learned Single Judge correctly interpreted the terms of the contract between the parties when he held that its true intention was that the plaintiff would become entitled to his commission when he had introduced a person willing to make the purchase for the stipulated price, His right to receive the commission was not dependent on the completion of the sale. The prospective purchaser whom the plaintiff procured made a formal offer which was not subject 'to any condition. He stuck to his offer till the end and even filed a suit for the specific performance of the contract which was ultimately compromised. The contract in the present case, therefore, fell within the first of the three classes of contracts discussed already and not within the third of those classes.

18. The only thing which the plaintiff therefore undertook to do was to procure a prospective purchaser of the property for Rs. 54,000 and as he performed his part of the contract he was entitled to the remuneration which had been stipulated to be paid to him. As Bowestead observes in his Law of Agency, 6th Edn. at page 201:

'Where the remuneration of an agent is payable upon the performance by him of a definite undertaking, be is entitled to be paid that remuneration as he has substantially done what he undertook to do, even if the principal secures no benefit from his services.'

The plaintiff could not be deprived of his remuneration simply because for some reason over which he had no control and for which he or the purchaser procured by him were not responsible the sale could not be effected.

19. The case of (1945) 1 All ER 194 (A) can be of no help to the appellant as the case in band belongs to a class different from the class in which that case fell.

20. The suit of the plaintiff thus appears to have been rightly decreed. The learned counsel for the appellant has not succeeded in persuading us to take a view different from that taken by thelearned Single Judge. The appeal must thereforefail and it is dismissed with costs.

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