1. This First Appeal by plaintiff. Seth Raghunath Prasad is directed against the decree of the Civil Judge, Agra (who was also exercising powers of Judge, Small Cause Court. Agra) dated 2-6-1956, dismissing his suit.
2. There is also before us a cross-objection by the defendant who claims that the trial court, while dismissing the suit, erred in refusing to award costs in its favour.
3. Plaintiff, Sri Raghunath Prasad, filed civil suit No. 6 of 1946 in the court of Civil Judge, Agra praying that the defendant Firm Sewa Ram Tikam Das, be ordered to render true and correct account of all the transactions entered into through its Commission. Agency from Katik Badi 15 Sambat 2001 corresponding to 16th October, 1944 to Bhando Badi 15 Sambat 2002 corresponding to 6th September, 1945, and claimed a decree for such amount as may be found due to him from the defendant with pendents lite and future interest. He estimated the value of his claim at Rs. 2,31,000/-.
4. Briefly stated the allegations on which the plaintiff brought the suit were, that the defendant Firm did Commission Agency business of Bullion at Bombay. A few days before Diwali, Sambat 2001, Seth Ram Chand of defendant's firm came to Agra and discussed the matter with the plaintiff. It was decided that the plaintiff would do business in the Commission Agency of the defendant on following terms and conditions :--
1. That the defendant would render the account of all sales, purchases and other transactions to the plaintiff at Agra.
2. That the defendant would be responsible to the plaintiff for the solvency of the persons with whom he will do the transactions on behalf of the plaintiff and for realisation of the amount found due from such persons.
3. That the defendant would act according to the instructions of the plaintiff.
4. That the defendant would charge annas 2 per Rs. 100/- on the transactions as his commission, but on the plaintiff's objection it was suggested by the defendant that if the volume of business of the plaintiff was larger the defendant would charge less commission. Thereafter the plaintiff did considerable amount of business through the defendant Seth Ram Chand of the defendant firm revisited, Agra in May, 1945 and the question of commission was again discussed with him. The parties agreed that the defendant would be charging commission at the rate of 1 anna per tola of Gold and 2 annas per 100 tola of Silver in respect of the transaction entered into through the defendant. However, in order to avoid a demand being made by other clients of the defendant for reduction of commission, it was agreed that the defendant would show in the Bijak, the higher rate of commission, namely, 2 annas per Rs. 100/-, and would pay the difference in commission later on a separate bijak by showing this difference in commission as part of plaintiff's profit. The lesser rate of commission was agreed upon between the parties in respect of their dealings relating to Waida No. 24 of Silver and Waida No. 31 of Gold and the transactions entered into thereafter. After the aforesaid agreement, the plaintiff continued to do business in the commission agency of the defendant and a large number of transactions in Gold and Silver were done from Diwali Sam-bat 2001 to August, 1945. Subsequently, there was a difference between the parties in respect of a particular transaction viz. that entered into by the defendant on 19-8-1945, which the plaintiff claimed was not authorised, and the dealings between them came to an end. According to him at that time a sum of Rs. 3,84,569.62 was due on account of the transactions, mentioned by him in Schedule 'A' to the plaint and he asked the defendant to render true and correct account of all those transactions as also other transactions from Diwali Sambat 2001. However, the defendant, did not admit correctness of the claim made by the plaintiff and remitted a sum of Rs. 2,59,876-62 to him, which according to it was the amount due to the plaintiff. The plaintiff cashed the cheque sent by the defendant towards part satisfaction of the claim made by him and alleged that approximately a sum of Rs. 2,31,000/- more was due to him. As the defendant did not render the accounts, the plaintiff had no other option but to file the suit which has given rise to the present appeal.
5. The defendant contested the suit and alleged that it never had any dealing with plaintiff Raghunath Prasad. According to it, to begin with the defendant received a letter from Lala Amar Nath, brother of the plaintiff on 18-10-1944, saying that Lala Amar Nath had been trading under two different names i.e. Makhan Lal Radhey Lal and Makhan Lal Narain Dass and that he wanted all his transactions to be carried on under the aforementioned two names. Subsequently, Lala Amar Nath instructed the defendant to put down another set of transaction in the name of Ram Narain Agarwal. As the defendant did not have any transaction with Seth Raghunath Prasad, he was not liable to render any account to him and that the suit for accounting filed by him was not maintainable. Firm Sewa Ram Tikam Dass was a joint Hindu family firm of which Tikam Dass Sewa Ram was the 'Karta', and that the said firm had been wrongly. impleaded through Seth Ram Chand son of Tikam Dass Sewa Ram. The defendant, further pleaded that the transactions between Lala Amar Nath, carrying on busines in the assumed name of Makhan Lal Radhey Lal, was settled at Bombay and that the accounts as between the parties were also to be settled at Bombay. It, therefore, claimed that the Agra Court had no jurisdiction to try the suit. The defendant denied that it had at any stage agreed to, as claimed by the plaintiff, reduce the commission chargeable by it, and asserted that the transaction entered into by it on 19-3-1945 was fully authorised. On correct accounting a sum of Rs. 2,59,876-6-6 only was due from it to Makhan Lal Radhey Lal which it remitted by means of cheque in full and final settlement of its liability. Now as the said cheque has been cashed, it is not open to any one to claim any account from the defendant.
6. On the pleadings of the parties, the trial court framed a number of issues, some of which including the issue with regard to the jurisdiction of Agra Court to try the suit, were not pressed by the concerned parties. After going through the evidence produced in this case, the trial Court held, that the transactions in question had been entered into between Lala Amar Nath acting on his own behalf and not on behalf of the plaintiff, and the defendant acting as kuccha arhtia on terms and conditions mentioned in the plaint, and that there was no subsequent agreement between the parties for reduction of the commission payable to the defendant. After taking into consideration the correspondence between the parties, the trial court came to the conclusion that no further amount was due from the defendant. In the result, it dismissed the suit, but in the circumstances of the case it declined to make any order with regard to costs.
7. At the hearing of this first appeal, learned counsel for the respondent requested us to, before touching any other controversy raised by the parties, deal with following two questions:--
1. Whether there was any privity of contract between the plaintiff and the defendants entitling him to claim accounts in respect of transactions which had been entered into in the name of Makhan Lal Radhey Lal and,
2. Whether after the plaintiff Lala Amar Nath had cashed the cheque sent to him in full and final settlement of his claim, he can still maintain a suit for accounts.
As according to him if the answer to either of the two questions mentioned above goes in defendant's favour, it will not at all be necessary to go into any other question involved in the appeal, Learned counsel for the appellant did not object to this and addressed us on the aforementioned two questions.
8. However, as after hearing counsel for both the parties we have come to the conclusion that answer to the first of the two questions mentioned above goes in favour of the defendant, the appeal filed by Sri Raghunath Prasad would fail, it is not necessary for us to go into any other question involved in the appeal.
9. It is not disputed that the plaintiff is seeking accounting in respect of the business transacted with the defendant, in the name of Makhan Lal Radhey Lal. At the time when the said business was transacted the business in the name of Makhan Lal Radhey Lal was being carried oh by Lala Amar Nath and that it was not a partnership business. The terms on which the business of Makhan Lal Radhey Lal was carried on in the commission agency of the defendant were settled with Lala Amar Nath, and that it was he who had carried on the correspondence with the defendant in relation to the said business. Whereas the case of the plaintiff is that this proprietary business which was being run in the name of Makhan Lal Radhey Lal was being run by Amar Nath on plaintiff's behalf, the case of the defendant is that it had entered into transactions with Amar Nath on the understanding that the business carried on by him in the name of Makhan Lal Radhey Lal, was Amar Nath's proprietary business and that the plaintiff had nothing to do with it.
10. In case, the case set up by the defendant is accepted it would be obvious that there would, in relation to relief claimed in the suit, not be any privity of contract between the plaintiff and the defendant, and the plaintiff's claim for accounting is liable to be rejected on this very ground. However, we will proceed to examine the question with regard to the right of the plaintiff to claim accounts from the defendant on the assumption that Lala Amar Nath had been running the business, Makhan Lal Radhey Lal for and on behalf of the plaintiff.
11. According to Sri Jagdish Swarup, learned counsel for the appellant, while Lala Amar Nath carried on the business run in the name of Makhan Lal Radhey Lal, he did so as the agent (as defined in Section 182 of the Contract Act) of the plaintiff. Section 226 of the Contract Act lays down that contracts entered into through an agent, and obligations arising from the acts done by an agent, may be enforced in the same manner and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person. It, therefore, follows that the agreement which had been entered into between Amar Nath and the defendant was an agreement which had been' entered into between the plaintiff and the defendant. Accordingly by a legal fiction there came into existence a privity of contract between the plaintiff and the defendant, and the plaintiff is fully competent to claim accounts from the defendant.
12. Sri Swami Dayal, learned counsel for the defendant, on the other hand, urged that even if it be accepted that the position of Amar Nath was that of an agent of the plaintiff, it is obvious that the plaintiff had authorised Amar Nath to carry on the business in any manner that he liked including that by employing any other person for doing the act which he had been authorised to do in connection with the carrying of that business. Sri Amar Nath appointed the defendant as an agent on payment of commission, and the position of the defendant, therefore, was that of a sub-agent.
13. Section 192 of the Contract Act runs thus:--
'Where a sub-agent is properly appointed the principal is, so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent originally appointed by the principal.
The agent is responsible to the principal for the acts of the sub-agent.
The sub-agent is responsible for his acts to the agent, but not to the principal, except in case of fraud or wilful wrong.'
Accordingly even if, it might be possible for the third parties, with whom the defendant had entered into the transactions, to file a suit against the plaintiff, the plaintiff cannot seek any relief against the defendant who is answerable to Lala Amar Nath alone.
14. A perusal of Sections 192 and 226 of the Contract Act shows that whereas Section 192 defines the rights and obligations as between the principal, agent, sub-agent and the third parties in respect of a transaction entered into through a sub-agent, Section 226 deals with the case where a transaction is entered into between two principals through an agent but without the intervention of a sub-agent.
15. According to Sri Jagdish Swarup, the defendant was puccka arhtia, and as such the dealings between it and the plaintiffs were as between two principals through the agency of Amar Nath. The instant case therefore, was covered by Section 226 of the Contract Act and the plaintiff could sue and claim accounting from the defendant.
16. Contention of Sri Swami Dayal, teamed counsel for the defendant, on the other hand, is that the defendant had entered into the transactions in question, as a cutcha arhtia appointed by Amar Nath. His position was that of a sub-agent and the case was squarely covered by Section 192 of the Contract Act where-under the defendant has not at all been made responsible for his acts, to the plaintiff.
17. Crucial question therefore, that arises for consideration is whether in this case the defendant entered into the transactions with Lala Amar Nath as a puccka arhtia or in his capacity of a cutcha arhtia. The incidence of a cutcha arhtia vis-a-vis an up-country constituent has been described by their Lordships of Privy Council in the case of Sobhagmal Gianmal v. Mukundchand Balia (AIR 1926 P. C. 119) thus :--
'There is no dispute that as regards cutcha arhtia transaction the course of business and the relative positions of the parties are as follows: when a cutcha arhtia enters into transactions under instructions from and on behalf of his up-country constituent with a third party in Bombay he makes a privity of contract between the third party and the constituent, so that each becomes liable to the other; but also he renders himself responsible on the contract to the third party. He does not ordinarily communicate the name of his constituent to the third party, but he informs the constituent of the name of the third party. The position, therefore, as between himself and the third party, is that he is agent for an unnamed principal with personal liability on himself. His remuneration consists solely of commission, and he is in no way interested in the profits or losses made by his constituent on the contract's entered into by him on his constituent's behalf.'
The difference between a cutcha arhtia and puccka arhtia was very clearly brought out by Agarwala, J. in the case of Sheo Narain v. Bhallar, : AIR1950All352 thus:--
'The basic distinction between a kutcha and a puccka arhtia is that a kutcha arhtia acts as an agent on behalf of his constituent and never acts as a principal to him. The person with whom he enters, into a transaction on behalf of his constituent is either brought into contact with the constituent or at least the constituent is informed of the fact that the transaction has been entered into on his behalf with such and such other person. Although the kutcha arhtia may not communicate the name of his constituent to the third party, he informs the constituent of the name of the third party, In the case of a puccka arhtia, the agent makes himself liable upon the contract not only to the third party, but also to his constituent and he does not inform his constituent as to the person with whom he has entered into a contract on his behalf.'
18. It will thus, be seen, that the question whether the defendant was, in regard to the transaction entered into at the instance of Lala Amar Nath acting as puccka arhtia or as a cutcha arhtia, depends on the nature and terms of the contract entered into between it and Lala Amar Nath and in absence of any evidence with regard to such nature and terms of contract it will depend upon the custom of the trade as prevailing in the market. It is significant to note that in this case while the plaintiff came to court with the case that the defendant had been appointed as a commission agent, he did not plead that the defendant was a puccka arhtia. There is absolutely no evidence whatsoever on the record to show that there was some custom or usage of the trade according to which such dealings as between the constituent and the commission agent were to be treated as dealings between two principals.
19. According to plaintiff's own case, as set up in the plaint, the defendants had been appointed as a commission agent on following terms:--
A. That the defendant was to render the account of all sales and purchases and other transactions to its constituent at Agra and would pay whatever dues may be found to the constituent at Agra.
B. That the defendant was responsible to its constituent for solvency of the person with whom it will do the transactions on behalf of the constituent and for realisation of amounts due from such persons.
C. That the defendant would act according to the instructions of its constituent and,
D. That the defendant gave out that he would charge 2 annas per Rs. 100/-on the above transactions as his commission, but on constituent's objection it was suggested by the defendant what if the volume of business of the constituent was large, the defendant would charge less commission.
In case the real intention of the parties was that the defendant was to deal either with Lala Amar Nath or with the plaintiff as principal, there was no point in the agreement providing that the defendant would render the accounts of sales and purchase which were to be entered through its commission agency. The provision in the agreement that the defendant was to be responsible to its constituent for the solvency of the persons with whom it was to do the transactions on constituent's behalf also indicates that the defendant was not dealing with its constituents as principal. The provision| that the defendant was to enter into transactions on behalf of its constituents, clearly indicates that the relationship between the two was to be that of principal and agent and not that of principal and principal. In case the defendant was to act as puccka arhtia i.e. as principal to principal, there was no point in the agreement providing that the defendant was to act in accordance with the instructions of the plaintiff. Last covenant in the agreement indicates that in respect of the transactions entered into by the defendants the defendant has to be concerned only with its commission and that it had nothing to do with the profits and loss accruing as a result of those transactions. The terms and conditions on which the defendant had been appointed as a commission agent as disclosed in the plaint, clearly indicate that the position of the defendant could not be that of a puccka arhtia. In our opinion the terms and conditions enumerated in the plaint are indicative of the fact that the defendant was to act as a kutcha arhtia and not as a puccka arhtia.
20. Sri Jagdish Swarup, learned counsel for the appellant, relying upon certain observations made by the Privy Council in the case of Sobhagmal Gianmal v. Mukundchand Balia (supra) urged that if the defendant had been acting as a cutcha arhtia he would have disclosed the names of the persons with whom he had entered into the transactions on behalf of the plaintiff to the plaintiff. He invited our attention to certain bijaks and contended that the name of the person with whom those transactions had been entered into had not been disclosed therein, and as such the defendant cannot be considered to be a cutcha arhtia. The Privy Council in the case of Sobhagmal Gianmal v. Mukundchand Balia (supra) while, taking notice of the fact that in Bombay a cutcha arhtia does not ordinarily communicate the names of his constituent to the third party but it observed that he informs the constituent about the name of the third party with whom he enters into such transaction. The question whether in the instant case, the defendant had been informing Lala Amar Nath about the names of the third parties with whom he had been transacting, is essentially a question of fact which had to be pleaded and proved by the plaintiff. The plaint neither contains an averment that the defendant was a puccka arhtia nor does it contain any allegation indicating that in its dealing with third parties the defendant was not informing their names either to the plaintiff or to Amar Nath.
Sri Jagdish Swarup, invited our attention to certain bijaks sent by the defendant which do not disclose the names of the third parties and urged that this shows that the defendants were not expected to disclose the names of such third parties to the plaintiff and that it could not be considered to be of a cutcha arhtia. There are a number of documents on the record, namely, Ext. 108 dated 31-10-1944, Ext. 111 dated 26-6-1945. Ext. 112 dated 3-7-1945, Ext. 478 dated 20-7-1945, Ext. 103 dated 17-8-1945, which shows that the defendant had been mentioning the names of the parties with which it had been dealing on its constituent's behalf. If the defendant had been acting as a puccka arhtia, there was no point in its indicating the names of the third parties to its constituent. In view of the terms and conditions on which the defendant had been employed as a commission agent, as disclosed in the plaint, as also the fact that the defendant had been indicating the names of the third parties with which it had entered into the transactions on behalf of its constituent, its position vis-a-vis Amar Nath could not be anything else but that of a cutcha arhtia. Consequently, if Lala Amar Nath had employed the services of the defendant as a cutcha arhtia for carrying on the business on behalf of the plaintiff, the position of the defendant was that of a sub-agent and the case would be covered by Section 192 and not Section 226 of the Contract Act. As a sub-agent, the defendant is not answerable to the plaintiff.
21. Accordingly, in any view of the matter, the plaintiff is not entitled to seek any relief from the defendant.
22. In this view of the matter, it is not necessary for us to express any opinion either on the 2nd question on which learned counsel for the parties made their submissions before me or on any other controversy that had been raised in the suit.
23. Before parting with the case, we may, observe that Sri Swami Dayal did not advance any arguments in support of the cross-objection filed by him.
24. In the result, both the appeal and the cross-objection fail and are dismissed with costs.