1. This was a suit brought by a firm, Messrs. Ford and MacDonald and 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 Cawnpur, 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 complete 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.' 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. In 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 refrained from doing so. Subsequently, a parson 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 un-successfully 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 bath defendants the re opening of their accounts with the plaintiff firm, obviously leading to a very serious and elaborate enquiry, and also a rendition of 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. The judgment of the learned District Judge has been defended by the plaintiffs' Counsel, Mr. Bradley, who argued his case with great 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 bean 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 oases of fraud have been established. With regard to the sixth he has come to the conclusion that an error of very case that, although the plaintiffs' Counsel great importance is shown. 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
2. 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 as-certain 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 (1878) 9 Ch. D. 529 : 50 L.J. Ch. 147 : 37 L.T. 698 decided by the Master of the Rolls, Sir George Jessel, in 1877, and the rule applicable to this class of cases and 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 Allfery v. Allfery (1847) 10 Beav. 353 : 17 L.J. Ch. 30 : 11 Jur. 981 : 50 E.R. 618 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.' 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 11 B. 78 : 6 Ind. Dec. (N.s.) 51, and we adopt that as being the law governing the Courts in India.
3. 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) 2 H.L. 1 : 36 L. Ch. 292 : 16 L.T. 243 : 15 W.R. 642, 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 plaintiff 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 learned Judge of the lower Appellate Court hap, 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. The fundamental defeat which runs through the learned Judge's consideration of the case--I may note here that Mr. Bradley rightly urged upon us that we had no right to interfere, and we do not propose to interfere, with any specific findings of fact arrived at by the learned Judge if they are supported by any evidence--is that he overlooked the admitted fact which was common ground throughout the case that the accounts under enquiry bad been submitted to a systematic and periodical audit by one of the employees of the plaintiff Company and also the whole account had in the ordinary way of business firms been audited from time to time by a firm of professional accountants. Neither of the auditors was called to explain how these matters, which the learned Judge has found were deceits practised upon the firm, escaped the observation of the auditors themselves, In most, if not all, of the important cages we have investigated the entries in the books. They contain auditors' checks, which lead us to think that they had been properly vouched in the presence of the auditors. No material vouchers have been produced by the plaintiff Company and no body in the plaintiffs' employment, who could throw any light upon these transaction and was employed by them at the time they took place, was called. The only person who could be described as a member of the firm, and was put in the box is Mr. Parry, and his evidence as far as it went was in favour of the defendant. The whole case seems to have been built up by the investigation of this expert detective, who had no first band knowledge of the subject, with the addition of surmise and suspicion resulting, as is not unusually the case, in a good deal of misunderstanding and vague inference.
4. The first case taken by the learned Judge, and as he candidly says in his judgment it was one which substantially influenced his mind in deciding at least one if not more than one of the other cases, was an alleged fraud by the defendant in wrongfully appropriating to himself a sum of Rs. 2,000. The highest at which this case can be put in fact against the defendant, and we are by no means satisfied that even this is shown by the books, but accepting the learned Judge's finding upon it, is this that from the 8th of April 19:1 to the 31st of May 1911 the defendant kept in his own possession and used for his own purpose a sum of Rs. 2,000 which belonged to his principals. Inasmuch as the whole of the working capital was floating and considerable cross accounts were carried on between the various branches, it is by no means clear that the principals were deprived of the benefit of this sum. But if they were, all they could possibly have lost was a sum of Rs. 23 calculated as interest at the rate of eight per cent. for the use of the money during that period. Inasmuch as this money was used, whether rightly or wrongly, by Puran Mal at a time when his principals were indebted to him in a sum of at least Rs. 10,000, if not considerably more, it is difficult to understand bow anybody could have convinced himself that this was a clear case of fraud. It does not bear a scintilla of fraudulent characteristic about it, and we do not agree with the view which Mr. Bradley pressed upon us that the facts so stated would constitute an offence under the Penal Code.
5. The next finding is even more lamentable, because the conclusion seems to have been arrived at by an extremely careless view of the material evidence on the point. In the account which the plaintiffs seeks to re open was alleged to be a debt due to the firm from a man named Karehra of Rs. 230. This debt was the balance of an account earlier in date, shown to be due from the man in September 1912. The account, as we have said, was closed in December 1918. It was, therefore, necessary to show if this, as the learned Judge has said, were a clear case of fraud, that the Rs. 230 had been paid to Puran Mal and that when he carried it forward as a debt due to the firm he knew that the debtor bad discharged it before September 1913. There is not a scrap of evidence upon the point. The man went into the box and told the story, which we have no right either to believe or disbelieve and which the learned Judge accepted, that he bad at some time or another worked off this Rs. 230 with Puran Mal in labour. If that is true, it was a very improper proceeding on the part of Puran Mal, but it ought to have been obvious that if it took place after December 1913 it could have no bearing upon the account. Nobody condescended to ask him the question when the work was done in payment of this account, and it is entirely consistent with the evidence in the case that it was done in the year 1914 or even later. That being so, the case of fraud wholly breaks down.
6. As to the third item it is sufficient to say that it is not shown that the payment in question, namely Rs. 200, was not misappropriated by Badri Prasad if by any. body and the respondents' Counsel had to admit that the learned Judge himself had come to a finding on this point, namely, that the money was restored after nine months, without any evidence to justify it. It is clear that the learned Judge did not investigate this case.
7. In the fourth case a sum of Rs. 637 is alleged to have been paid in advance to a contractor. The learned Judge did not trouble to investigate whether a voucher existed for this payment although in fact it must have been vouched by the auditors, but further than that the learned Judge merely came to the same conclusion that either the defendant or somebody else must have received the money. Upon such a conclusion as this no charge of fraud can be held to be established.
8. In the fifth case, which is a small item and in which the defendant is supposed to have supplied flour to his friends at the expense of his principals, it is sufficient to say that the learned Judge assumes, we have little doubt, because of the adverse findings at which he has arrived at the earlier stage of the case, that the defendant had in fact done so. There is really not evidence worthy of the name to establish fraud.
9. The sixth item is held by the learned Judge to be a serious error. It may have been an error in the account, we are not called upon to decide one way or the other; but if it be one, it is an error of the Agra agency for which Badri Prasad would be answerable and not this defendant.
10. 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 (1878) 9 Ch. D. 529 : 60 L.J. Ch. 147 : 37 L.T. 698. 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.
11. 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 ana ran this concurrently with the agency which he was carrying on for the plaintiffs, 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 interest might not become adverse to Messrs. Ford and MacDonald and Co., Ltd. To put the matter plainly Messrs. Ford and Mac-Donald and Co., Ltd., had a sub-branch at Muttra interested in carrying on their business as a whole which, as 1 have said, inducted 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 interests 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 and Mac-Donald and Co., Ltd.
12. In this respect we agree with the lower Appellate Court. The question which has given us trouble has been whether this really gives the plaintiffs any cause of 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 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 interests 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 plaintiff, 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 three years before the institution of the suit. It is admitted by the only representative of the plaintiffs 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 the defendant the suit wholly dismissed here and below with costs including in this Court fees on the higher scale.
13. 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. Barbour (1878) 9 Ch. D. 529 : 60 L.J. Ch. 147 : 37 L.T. 698. The re-opening of the account cannot be justified. I should have doubts, even if these 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 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 criticised 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. Khurshei Ali Khan 24 A. 27 : 28 I.A. 227 (P.C.) : 3 Bom. L.R. 576 : 8 Sar. P.C.J. 142 and of a Bench of the High Court of Calcutta in Shib Chandra Roy v. Chandra Narain Mukerjee 32 C. 719 : 1 C.L.J. 232. 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 moveable 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 moveable 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 and MacDonald & Co., Ltd., Article 89 would undoubtedly apply, but here the case is that he was working against the interests of Messrs. Ford and MacDonald &Co.;, Ltd., and Messrs Ford and MacDonald & 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 moveable property received by Puran Mal on behalf of Messrs. Ford and MacDonald & Co., Ltd. Those profits were not received by Puran Mal for Messrs. Ford and Mao Donald'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.
14. We allow the appeal, set aside the decree of the Court below and dismiss the plaintiffs' suit as against Puran Mal with costs here and below. Costs in this Court will include fees on the higher scale.