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Ford Macdonald and Company Limited Vs. Puran Mal - Court Judgment

LegalCrystal Citation
Decided On
Reported in(1919)ILR61All635
AppellantFord Macdonald and Company Limited
RespondentPuran Mal
principal and agent - act no. ii of 1882 (indian trusts act), section 88--suit against agent for account of profits of private business--limitation--he-opening of accounts once settled between principal and agents, reasons for. - - .....discovered at some prior date puran mal's connection with, if not proprietorship of, a brick-making business in bindraban which is some six or seven miles from muttra and which could hardly fail in some respects to be adverse to the interests of his employers who were largely concerned in the brick-making| business. what he said was:we were annoyed with puran mal on his working a brick-kiln at another place, probably at bindraban, and so we dispensed with his services. we did not dismiss him. the work at delhi agency was completed or nearly so and we could not find work for puran mal at another agency. that was also one of the reasons of his services being dispensed with.2. when puran mal left, the accounts up to that date between his principals and himself were necessarily.....
1. This was a suit brought by a firm, Messrs. Ford, MacDonald & Co., Ltd., against their former agent, Puran Mal, and another man, Badri Prasad, who is not before us. The plaintiff company is now a limited liability company. It was formerly a firm of considerable standing and carried on an extensive business, a large portion of which was devoted to the making and selling of bricks. While it remained in its original form as a firm and for some two years after the formation of the limited company, the present appellant, who was sued by the plaintiff company, was their agent to manage the Saharanpur branch and others. There were, in addition to the agencies committed to his charge, other agencies, Badri Prasad being the agent for the Agra branch, which included a sub-agency at Muttra. The defendant Puran Mal worked for this firm for very many years, and it is not unimportant, having regard to the charges now made against him, to bear in mind that he was given, according to the evidence in the case, a pretty free hand, and apparently during a long period of service gave satisfaction. We mention that fact because we think that, amidst the difficulties of ascertaining the exact truth with regard to each item in the books, perhaps sufficient importance has not been given to the fact that Puran Mal was left very much with a free hand, the result of that policy being, not of course to entitle a man to rob his principal, but on the other hand, necessarily to result in a somewhat less exact and precise method of recording his transactions. Mr. Parry, who was at the material time a principal of the firm or director of the company, and who is now Municipal Engineer at Cawnpore, gave evidence in the case and said that Puran Mal left the employment of the firm in December, 1913, by mutual consent, largely on account of the firm having discovered at some prior date Puran Mal's connection with, if not proprietorship of, a brick-making business in Bindraban which is some six or seven miles from Muttra and which could hardly fail in some respects to be adverse to the interests of his employers who were largely concerned in the brick-making| business. What he said was:

We were annoyed with Puran Mal on his working a brick-kiln at another place, probably at Bindraban, and so we dispensed with his services. We did not dismiss him. The work at Delhi agency was completed or nearly so and we could not find work for Puran Mal at another agency. That was also one of the reasons of his services being dispensed with.

2. When Puran Mal left, the accounts up to that date between his principals and himself were necessarily considerable and the course of business had covered a considerable period. At that date a settlement took place between Puran Mal himself and an accredited representative of the firm. It was not drawn up in any formal document, but an entry was made in the ledger, which we have seen stating that the accounts have been checked and the cash balance in hand is ascertained and found correct. The charge was made over on that date with stock and Rs. 9-8-9 in cash, some of which was noted to consist of bad coins. These entries in the ledger were signed by Puran Mal on his own behalf and Mr. Lansbury on behalf of the plaintiff firm. Inasmuch as no other interview took place at which any suggested settlement was attempted, we are satisfied that this was, as it has been called, a settlement of accounts stated between the parties finally settling their respective claims up to that date, with the exception of a private account or bonus account in the form of commission which Puran Mal had against his employers. With respect to this latter transaction Puran Mal was eventually driven to bring a suit in the year 1914 and he claimed in that suit Rs. 40,000 and the claim was compromised at a sum of Rs. 20,000. It is not without bearing upon the general aspects of the case, that although the plaintiffs' counsel was justified in saying that the plaintiffs were not bound to bring a cross claim or a cross suit to assert the claim that they are now making, nonetheless they refrained from doing so. Subsequently a person of the name of Manphul appeared upon the scene as a kind of expert or private detective and entered the employment of the firm after having been unsuccessfully prosecuted by them through Puran Mal. And it is largely the result of his industry that the plaintiff company, the leading members of which had been replaced by some other persons who had taken an interest in the company, filed this suit, claiming against the two defendants, the present appellant and his co-defendant, Badri Prasad, (a) to re-open the settled accounts and (b) an account of profits which Puran Mal had been making in a separate brick-making business of his own at Bindraban, which Mr. Parry has mentioned as the cause of the determination of his agency. The first court dismissed the plaintiffs' claim with a certain amount of contempt. On appeal the lower appellate court has decreed against both defendants, the re-opening of their accounts with the plaintiffs' firm obviously leading to a very serious and elaborate inquiry, and also an account as against Puran Mal of the brick-making business at Bindraban. The question we have to decide is whether those decisions or either of them is right.

3. The judgment of the learned District Judge has been defended by the plaintiffs' counsel, Mr. Bradley, who argued his case with ability and gave us every assistance in the investigation of this troublesome matter. As we have stated, the claim consisted of two perfectly distinct causes of action. The first cause of action was sought to be established by six specific items which have been dealt with by the lower appellate court, being instances of cases in which it is alleged that it can now be shown that Puran Mal, to put the matter plainly, robbed his employers. In five of those instances the learned Judge has held that clear cases of fraud have been established. With regard to the sixth, he has come to the conclusion that an error of very great importance is shown.

4. The law on the question of re-opening settled accounts is not contained in India in any express enactment. Applying the ordinary rule, we have, therefore, to ascertain as best we can what are the guiding principles of the English law upon the question, which is generally considered to be the test of equity, justice and good conscience. The leading case upon the subject appears to be Williamson v. Barbour (1877) L.R., 9 Ch. D., 529, decided by the Master of the Rolls, Sir George Jessel, and the rule applicable to this class of cases which we propose to apply in this appeal is stated in these words:

Where you show a single fraudulent entry in the case of persons occupying the position of principal and agent, or trustee and cestui que trust, the court has actually opened an account extending over a greater number of years, and closed for a much longer period than the account I have before me, I mean in the case of Allfrey v. Allfrey, before Lord Cottenham. We, therefore, have this as a sort of guide without laying down any general rule, because every case must depend on its own circumstances, that where the accounts have been shown to be erroneous to a considerable extent both in amount and in the number of items, or where fiduciary relations exist and a less considerable number of errors are shown, or where the fiduciary relation exists and one or more fraudulent omissions or insertions in the account are shown, there the court opens the account and does not merely surcharge and falsify.

5. So far as India is concerned that authority has been adopted by the Bombay High Court in the case of Boo Jinatboo v. Sha Nagar Valab Kanji (1886) I.L.R., 11 Bom., 78, and we adopt that as being the law governing the courts in India.

6. Personally I would myself have thrown out a greater part of this suit, if not the suit in its entirety, upon the grounds laid down in the judgment of Lord Westbury in Parkinson v. Hanbury (1867) L.R., 2 H.L. 1, that substantially no attempt was made in the plaint to specify any single instance upon which the plaintiffs relied for opening up the whole account. It is perfectly true that the burden of requiring the plaintiffs to do that lies on the defendant, and in this case the defendant did not exercise the right which he had. But nonetheless the court cannot escape its own duty by the neglect of the parties, and in my view, at any rate, in a suit of this character nothing can illustrate more forcibly than the difficulty which we have ourselves experienced in hearing the appeal, the necessity of insisting upon the plaintiff making clear both to the court and his opponent all the precise matters relied upon. Not a single instance of the specific fraud eventually found by the lower appellate court in this case is alleged with any approach to specification or any approximation to precision or accuracy in the plaint, and the Judge of the lower appellate court has, on a good deal of plausible suggestion, which after all was really based on a superficial investigation, found these five specific cases of fraud without, in our opinion, any legal justification for such finding.

7. [His Lordship then examined each of the charges alleged.]

8. So far as I am concerned the five main charges having wholly broken down, I should, in any event, have been prepared to treat a mistake of this kind as one of little or no importance. Certainly there is no such ground as justifies the re-opening of the account within the rule of Williamson v. Barbour (1877) L.R., 9 Ch. D., 529. In our opinion the case for re-opening accounts fails and further the plaintiffs have also failed to make out a case for surcharging the defendant with any specific item. This portion of the suit must be dismissed with costs.

9. We now come to the second cause of action which, from the legal point of view, has given us a little trouble. As I have already stated the defendant in some way or another, the facts are not at all clearly found but the substance is not disputed by the defendant, became interested in, if not a proprietor of, a brick-making business in Bindraban and ran this concurrently with the agency which he was carrying on for the plaintiff, so near to Muttra that it is impossible for anybody to say that within the meaning of Section 88 of the Indian Trusts Act of 1882 his interests might not become adverse to Messrs. Ford, MacDonald and Co., Ld. To put the matter plainly, Messrs. Ford, MacDonald and Co., Ld., had a sub-branch at Muttra interested in carrying on their business as a whole, which, as I have said, included brick-making on a considerable scale, and it was the duty of the defendant as agent, not merely to do nothing to injure the interests of the firm, but to do all in his power to further them, and therefore not to place himself in a position in which his interest might be adverse. It is quite obvious that with a brick-making business belonging to the defendant at Bindraban in the same district, where prices would no doubt rule at the same rate, an order for bricks arriving addressed to him at Muttra and dealt with by one of his servants at Muttra might quite easily have been forwarded to and executed by his brick-making business at Bindraban. It is not necessary for us to look outside the provisions of the section. We think that that section made him hold any pecuniary advantage which he derived from the Bindraban brick business for the benefit of Messrs. Ford, MacDonald and Co., Ld.

10. In this respect we agree with the lower appellate court. The question which has given us trouble has been whether this really enables the plaintiffs to succeed in this action and justifies us in ordering an account of that business to be taken. We have come to the conclusion, that whichever way the thing is looked at, the present claim of the plaintiffs brought as and when it was, is barred by statute and must be dismissed. It is clear law that the liability of an agent for a specific sum in his hands such as pecuniary benefit mentioned by Section 88 of the Indian Trusts Act, or any other money earned or stolen by him in his capacity as agent and which the law makes him liable to pay over to his employer, whether fraud enters into the cause of action or not, is money which could be, in the ordinary common law courts in England, recovered from the agent as money had and received to the use of the principal. In this view of the case Article 62 of the Limitation Act applies, and the time within which the suit must be brought begins to run from the time when the money is received. This suit was brought on the 12th of December, 1916. There is no evidence that any profit had been derived from this business within three years of that date. It is not always possible to state with mathematical precision the precise scientific definition of an action of this kind. The cause of action arises out of mixed considerations, and we are not prepared to say that it may not come within the definition contained in Article 90 of the Limitation Act. It may well be described as a suit by the principal against the agent in respect of either misconduct, or at any rate neglect, of his master's interest within the meaning of that article. As a matter of fact most actions of this kind can probably be brought within at least two if not three of the definitions given in the very long schedule to the Statute of Limitation. But this alternative does not assist the plaintiffs, and it is therefore immaterial whether the view which we prefer, namely, Article 62, or the view that Article 90 is applicable, be the correct view. In the case of Article 90 the plaintiffs would have to sue within three years of the neglect or the misconduct coming to their knowledge. The notice of dismissal in this case was given on the 12th of November, 1913, more than throe years before the institution of the suit. It is admitted by the only representative of the plaintiff's who was called that that notice was largely influenced by the knowledge of this business. The action is also therefore barred by limitation under that article. The appeal must be allowed, and as regards this defendant the suit wholly dismissed here and below with costs.

Stuart, J.

11. I have very little to add. I find that none of the instances as established can bring the case within the essential conditions laid down in Williamson v. Harbour (1877) L.R., 9 Ch. D., 529. The re-opening of the account cannot be justified. I should have doubts, even if those instances had been established better than they were, whether they would be of sufficient importance to justify a re-opening of an account which had been closed, in view of the facts that the members of the firm had every opportunity of ascertaining the accuracy or inaccuracy of the entries, that the accounts had been audited by competent auditors, and that Puran Mal's conduct had not been criticized or made the subject of complaint by any of the persons entrusted with the management until some period after he had severed his connection with the firm. With regard to the question of limitation in connection with the profits of the Bindraban business, the learned Counsel for the respondents has brought to our notice the decision of their Lordships of the Privy Council in Asghar Ali Khan v. khurshed Ali Khan (1901) I.L.R., 24 All., 27 and of a Bench of the High Court of Calcutta in Shib Chandra Roy v. Chandra Narain Mukerjee (1905) I.L.R., 32 Calc., 719. In the Privy Council case their Lordships have found that Article 89 applied to a suit brought by one brother against another brother in respect of old accounts connected with profits of joint family property. They held that each brother was an agent of the other brother, and, applying Article 89 in a suit for account of profits received, they found that money was movable property within the meaning of the article. In the second case it was also clear that the amount had been received by an agent on behalf of his principal, for his principal, and in the name of his principal, and, adopting the same view that money was movable property, a Bench of the High Court of Calcutta applied the same article. But here the case is very different. If Puran Mal had received the profits of the Bindraban business as agent for Messrs. Ford, MacDonald and Co., Ltd., Article 89 would undoubtedly apply, but here the case is, that he was working against the interests of Messrs. Ford, MacDonald and Co., Ltd., and Messrs. Ford, MacDonald and Co., Ltd., in preference to suing him for damages, have chosen to claim under the provisions of Section 88 of the Trusts Act the profits which he may have made in the business. I do not see how by any possible reasoning the profits of the Bindraban business could be considered to be movable property received by Puran Mal on behalf of Messrs. Ford, MacDonald and Co., Ltd. Those profits were not received by Puran Mal for Messrs. Ford and MacDonald's use within the meaning of the word in English Law, for they were not received on their account. Therefore it is established that Article 89 would not apply in this case. It is not of importance whether Article 62 or Article 90 applies. One must apply and under either this portion of the suit is barred by limitation. I agree with the decision that the appeal must be allowed and the suit against Puran Mal dismissed with costs.

12. We allow the appeal, set aside the decree of the court below and dismiss the plaintiff's suit as against Puran Mal with costs.

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