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Mirza Najm Effindi Vs. Firm Kohinoor Footwear Co. - Court Judgment

LegalCrystal Citation
Subject Contract; Civil
CourtAllahabad
Decided On
Reported inAIR1946All489
AppellantMirza Najm Effindi
RespondentFirm Kohinoor Footwear Co.
Excerpt:
.....commission was calculated at 5 per cent, was signed by both the plaintiffs it clearly indicated that they had agreed to receive commission at the reduced rate. i am therefore clearly of opinion that section 92 was no bar. as i have held that the plaintiffs are not partners that principle of law would not apply, but taking them as such, the signing of the accounts by shakoor ahmad rana may not amount to an admission of discharge but it would clearly show that the correctness of accounts was admitted by one of the plaintiffs unless, his plea is accepted that he signed the accounts merely for the purposes of income-tax. they could have of course inspected the account books kept by the defendants for that purpose, but having failed to do that their suit was bound to fail......('27) 14 a.i.r. 1927 lah. 701 jai lal j. held:an agent is not ordinarily entitled to institute a suit for accounts against his principal. his suit must be for the recovery of the specific amount alleged to be due to him from the principal.9. this is not contested by the learned counsel for the plaintiffs and they concede that there is no statutory right conferred on an agent to sue his principal for rendition of accounts. it is urged however that the circumstances of this case were such that a decree for rendition of accounts should have been passed in favour of the plaintiffs. reliance is placed on a ruling reported in rikhikesh v. mela ram ('23) 10 a.i.r. 1923 lah. 483 in which tapp j., while holding that the principal was under no statutory obligation to render accounts to his.....
Judgment:

Mathur, J.

1. These two second appeals arise out of one and the same suit brought by the plaintiffs appellants for rendition of accounts. There is a shoe and boots manufacturing firm at Agra known as the Kohinoor Footwear Company. By an agreement dated 16th September 1983, the said firm appointed Mirza Najm Effindi and Shakoor Ahmad Rana, the two appellants in the two appeals before me, as their sole agents for sale of its goods. The agreement was for a term of five years and after the expiry of that term the agents instituted the suit out of which these appeals arise on 11th September 1939, in the Court of the Munsif at Agra for rendition of accounts. The suit was originally brought by Mirza Najm Effindi in his name and Shakoor Ahmad Rana was made a pro forma defendant, but at a Subsequent stage Shakoor Ahmad Rana was also transposed to the array of the plaintiffs. It was alleged in the plaint that all the accounts, vouchers and correspondence relating to the business of agency were in possession of the defendant company and were in Gujrati characters with which the plaintiffs were unfamiliar. The plaintiffs prayed that accounts be taken and a decree be passed in favour of the plaintiffs for the amount that may be found due to them in respect of their commission.

2. The defence among other things was that the plaintiffs were agents, and as such, they were not entitled to sue the defendant company for rendition of accounts, that the accounts were settled year after year and were signed by the plaintiffs, and that a large amount was really due to the defendant from the plaintiffs as the latter had taken advance from time to time far in excess of the commission that they earned. The learned Munsif who tried the suit framed a number of issues and finding that in the special circumstances of the case the plaintiffs were entitled to sue for rendition of accounts and that there was no proper settlement of accounts at least after 6th November 1934, he gave the plaintiffs a decree directing that accounts be taken of all transactions beginning from 6th November 1984. At a later stage the defendants made an application before the learned Munsif taking up a legal plea that the plaintiffs constituted a firm and as it was not registered they were debarred by Section 69, Partnership Act, from bringing the suit. The learned Munsif, however, held that this plea had no force. As against this decree the defendants filed an appeal to the District Judge and it was heard and decided by the Judge, Small Cause Court, exercising the powers of a Civil Judge. The learned Civil Judge agreed with the learned Munsif that in the circumstances of this case, the plaintiffs were entitled to bring a suit for rendition of accounts. He further held that Mirza Najm Effindi was bound by the admission of Shakoor Ahmad Rana which he made by signing the accounts year after year. He disagreed with the learned Munsif on the legal point and held that the plaintiffs being partners in a firm which was unregistered could not bring the suit. In the course of the arguments before the learned Civil Judge it was argued that under Section 92, Evidence Act, no oral evidence could be adduced to show any variation in the rate of commission, but it was not accepted by the learned Civil Judge.

FINDINGS.

3. On the question whether Section 69, Partnership Act, was a bar to the suit, I agree with the learned Munsif and think that the learned Civil Judge did not come to a right conclusion on that point. In order to apply Section 69, Partnership Act, it shall have to be determined whether the plaintiffs were partners within the meaning of that Act. In Section 4 of the said Act it is laid down:

'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with, one, another are called individually 'partners' and collectively 'a firm', and the name under which their business is carried on is called the 'firm name'.

4. A mere reading of this section would show that in order to create a partnership there must be an agreement entered into by all the parties concerned to share the profits of the business. The matter is made further clear in Section 5 which lays down:

The relation of partnership arises from contract and not from status.

5. In this case there is not an iota of evidence to show that there was any such agreement Or contract between the plaintiffs, and therefore they could not be partners as defined in the Act, and could not be members of a firm. Section 69 would not thus be applicable. Even if the plaintiffs are held to be partners, the suit Would not be barred as provided in Clause (3) of the same section. Clause (3) lays down:

The provisions of Sub-sections (1) and (2)...shall not affect (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm.

6. The learned Civil Judge has in my opinion fallen into an error when he observed:

Section 69, Clause (3), Sub-clause (a) means turning the property into money by sale and will not cover the question of taking accounts from a partner to be followed by a final decree.

7. The learned Civil Judge thought that the words 'power to realise the property of a dissolved firm' meant turning the property into money by sale. With all respect, I would point out that the outstandings of a firm are property and a suit to recover such outstandings will be a suit to realise the property. The partnership having come to an end by expiry of the term fixed, it will be deemed to have been dissolved as provided in Section 42, Partnership Act, and the plaintiffs would be entitled to realise their outstanding commission even if they were partners and members of a firm.

8. On the second legal question whether the plaintiffs were entitled to bring a suit for rendition of accounts, I cannot see my way to agree with the conclusion of the two lower Courts. It is a settled law that ordinarily an agent cannot bring a suit for rendition of accounts against hi3 principal. In Hanuman Baksh v. Balmukand Kanhaiyalal ('27) 14 A.I.R. 1927 Lah. 701 Jai Lal J. held:

An agent is not ordinarily entitled to institute a suit for accounts against his principal. His suit must be for the recovery of the specific amount alleged to be due to him from the principal.

9. This is not contested by the learned Counsel for the plaintiffs and they concede that there is no statutory right conferred on an agent to sue his principal for rendition of accounts. It is urged however that the circumstances of this case were such that a decree for rendition of accounts should have been passed in favour of the plaintiffs. Reliance is placed on a ruling reported in Rikhikesh v. Mela Ram ('23) 10 A.I.R. 1923 Lah. 483 in which Tapp J., while holding that the principal was under no statutory obligation to render accounts to his agent, came to the conclusion that in the case before him as the plaintiffs were insurance agents and were to be remunerated by a commission calculated on the premia paid on all policies effected or introduced through them they were entitled to call on the defendants for rendition of accounts as they could not certainly know which of those policies had lapsed, matured or been forfeited. With all respects to the learned Judge I cannot fall in with his view. In a case like that it would certainly be open to an agent to serve interrogatories on the principal or to apply for discovery and inspection of his accounts, but the mere fact that the accounts are complicated would not entitle him to sue for rendition of accounts for which a principal is not legally liable. This was the view taken in the case reported in Narmada Chandra v. Maharaja Bahadur Singh : AIR1937Cal359 . The following observations find a place in this judgment:

There cannot be in law a suit for accounts, unless the defendant in the suit is under an obligation to render accounts to the plaintiff.

Every bill for an account must be founded upon an obligation to render an account. (Langdale's Survey of Equity Jurisdiction, page 74).

Under Section 213, Contract Act, the obligation is upon the agent to render accounts to the principal. The principal has no obligation to render accounts to the agent. Hence an agent such as the plaintiff is, cannot maintain a suit for accounts against the principal as defendant. The mere fact that in ascertaining the sum due to the plaintiff it would be necessary to investigate accounts, does not in any way alter the nature of the suit.

10. In view of the clear law and authorities quoted I have no doubt in my mind that the plaintiffs misconceived their remedy and were ill-advised in bringing a suit for rendition of accounts. The suit as such was liable to be dismissed on this ground alone. On the facts it appears that both the plaintiffs Mirza Najm Effindi and Shakoor Ahmad Rana entered into an agreement with the defendants to serve as their sole agents. The period of agency was fixed as five years, and it was further provided that the sole agents should get 10 per cent, commission on all goods except Hero and Cycle brands on which a commission at the rate of 6 1/4 per cent, only was chargeable. There was a further provision that by mutual agreement, having regard to the business terms of the factory and the interest of the parties, the rate of commission could be reduced. It is urged on behalf of the defendants that during the very first year of agency this rate of commission was reduced to 5 per cent, and as the accounts at the end of that year in which the commission was calculated at 5 per cent, was signed by both the plaintiffs it clearly indicated that they had agreed to receive commission at the reduced rate. The plaintiffs from time to time took advances from the defendants and it seems obvious that if the commission is calculated at 5 per cent, the balance will be found against the plaintiffs. On the other hand, if it is calculated at the rate originally fixed, there may be some balance in their favour. The learned Counsel for the plain, tiffs have urged that as the agreement to reduce the rate of commission from 10 per cent, to 5 per cent, was not in writing registered, it could not be proved by oral evidence. They take their stand on Section 92, Evidence Act, which provides:

When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to the last section, no evidence of any oral agreement or statement shall be admitted, between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying adding to or subtracting from, its terms.

11. Proviso (4) to the said section runs thus:

The existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant or disposition of property, may be proved, except in cases in which such contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents.

12. It is urged that the agreement to reduce the commission from 10 per cent. to 5 per cent, was a distinct subsequent oral agreement modifying the terms of the contract, and therefore it could only be proved if it were by a registered document. The argument is no doubt very ingenious, but on a closer examination I find that it has got no substance. As I have already pointed out that there was an agreement in the deed dated 16th September 1933 itself that the parties would be at liberty to reduce the rate of commission by mutual consent, so what was done in pursuance of that agreement cannot be said to have the effect of modifying the terms of the original agreement. It was as a matter of fact compliance of the terms of that agreement. I am therefore clearly of opinion that Section 92 was no bar.

13-14. I would here refer to the conduct of Mirza Najm Effindi which would throw a considerable light on the facts of the case. It is not denied that after the end of the first year Mirza Najm Effindi took no active interest in the work of the agency and accepted an employment in Hyderabad. Shakoor Ahmad. Rana alone carried on the work and is said to have signed account books kept by the defendants year after year. The agency started on 16th September 1933, and on 6th November 1984, the accounts were made up and were signed by both the plaintiffs according to which a sum of Rs. 2567-5-6 was due to the defendants from the plaintiffs. After that year Mirza Najm Effindi disappeared from the scene and all subsequent accounts were signed by Shakoor Ahmad Rana alone. Although Mirza Najm Effindi does not appear to have any interest, it was he who filed the suit impleading Shakoor Ahmad Rana as defendant. It seems clear to me that this ruse was adopted in order to avoid the effect of the signing of accounts by Shakoor Ahmad Rana. In the plaint not a word was said about the subsequent signing of accounts by Rana alone. Shakoor Ahmad Rana filed a written statement in the course of which he alleged that the defendants used to get their books signed by him for purposes of income-tax. This defence appears to me to be absurd on the very face of it, as it was not necessary for the purposes of income-tax to obtain any-body signature. It would have been more to advantage of defendants to show a higher commission and consequently a lower return in order to avoid the income-tax. Soon after filing his written statement Shakoor Ahamd Rana had to apply for being made a plaintiff, which prayer of his was granted, and he was made a plaintiff. After that Mirza Najm Effindi again disappeared and Shakoor Ahmad Rana carried on the entire show. It has been argued with great force that one of the partners could not give discharge and therefore the accounts as signed by Shakoor Ahmad Rana were not binding on Mirza Najm Effindi. As I have held that the plaintiffs are not partners that principle of law would not apply, but taking them as such, the signing of the accounts by Shakoor Ahmad Rana may not amount to an admission of discharge but it would clearly show that the correctness of accounts was admitted by one of the plaintiffs unless, his plea is accepted that he signed the accounts merely for the purposes of income-tax. I have already rejected this latter plea, and I have no ground for holding that the accounts were not genuine. According to the accounts nothing appears to be due to the plaintiffs. There is also one other phase of the case, namely this, that if the plaintiffs were not entitled to bring a suit for rendition of accounts there could be no preliminary decree for accounts. The plaintiffs were bound to prove during the trial of the suit as to what was the amount due to them. They could have of course inspected the account books kept by the defendants for that purpose, but having failed to do that their suit was bound to fail. In any aspect of the case the plaintiffs' suit could not succeed, and has been rightly dismissed.

15. Both the appeals are accordingly dismissed, and the plaintiffs' suit is dismissed with costs in all the Courts though on, different grounds from those given by the learned Civil Judge. On behalf of Ibrahim Bhai, Mr. Chaturvedi made a statement that be had severed his connection with the defendants' firm. As the suit has been dismissed the matter has got no significance. On a substitution application an order was made that the costs of that application will be adjudged when the appeal is decided. I think the costs of that application shall be borne by the parties. Leave to appeal under the Letters Patent is refused.


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