Skip to content


Walyti Ram Ram Ditta Mal Vs. Bhagwan Dass Rajinder Kumar - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtPunjab and Haryana High Court
Decided On
Case NumberSecond Appeal No. 39-P of 1956, with cross-objections
Judge
Reported inAIR1960P& H471
ActsIndian Partnership Act - Sections 60(3) and 69; Indian Contract Act - Sections 30
AppellantWalyti Ram Ram Ditta Mal
RespondentBhagwan Dass Rajinder Kumar
Cases ReferredFirm Ram Dev Jai Dev v. Seth Kaku
Excerpt:
.....or at any rate not clearly wagering as the contract in re gieve, (1899) 1 qbd 794) was, to be a wagering contract, the court must be satisfied that the intention of the parties was in no circumstances either to give or take delivery. ..it may well be,.that the defendant was a speculator, who never intended to give delivery, and even that the plaintiff's did not expect him to deliver; if he means to invest his money in the purchase of the stock, which he orders to be bought, that undoubtedly is a perfectly legitimate and real business transaction. in this case the defendant has failed to discharge the heavy onus which lay on him of showing that the transactions were in the nature of wagers. but the important point to note is that this decision of the judicial committee, air 1917 pc..........suit of the plaintiff is maintainable? 3. whether the transactions in dispute are of the nature of wagering contracts and cannot be enforced in law? 4. whether the defendant has not received rs. 3,614/10/- from the parties concerned? 5. whether the plaintiff is entitled to any interest and if so, the what extent? 6. relief.(5) the trial court decided the first two issues against the plaintiff but the lower appellate court while concurring with the trial court's finding on the first issue, was of the view that the plaintiff's suit was maintainable as the plaintiff-firm had been dissolved prior to the institution of the suit and according to the deed of partition executed by the members of the plaintiff-firm, the assets and liabilities had vested in walaiti ram plaintiff. the suit was held.....
Judgment:

Tek Chand, J.

1. This is a regular second appeal preferred by the plaintiff from the judgment and decree of the Additional District Judge dismissing his appeal and affirming the judgment of the trial Court dismissing the suit.

(2). The plaintiff had instituted a suit for the recovery of Rs. 4,000/- alleging that he represented joint Hindu family firm known as Mohan Lal-Walaiti Ram, which was dissolved on 25th of May, 1953. This firm had entered into transactions in cotton-seed, sarson, cotton, gewara, and silver, through the commission agency of defendant-firm which in its turn had similar dealings with another firm of Mansa, and the differences of various transactions entered into by the plaintiff used to be settled and according to the bills received from the defendant-firm for the transactions done on behalf of the plaintiff between Asauj Badi 10, 2008 Bk., and Chet Shudi, 2009 Bk. there was due from the defendants-firm on account of the plaintiff's firm a profit of Rs. 3,614/10/-. The plaintiff also claimed interest and the total claim of the plaintiff for the recovery of which the suit had been instituted, came to Rs. 4,000/-.

(3) The defendant-firm contested the suit alleging that the plaintiff-firm was not a joint Hindu family firm and the suit was not competent as the firm was not registered under S. 69 of the Indian Partnership Act. The defendant also pleaded that the transaction was in the nature of a wagering agreement and was, therefore, void in view of the provisions of S. 30 of the Indian Contract Act. It was also alleged that the profit claimed by the plaintiff had not been realised by the defendant-firm from the persons with whom he entered into corresponding transactions and on this ground also the plaintiff was not entitled to recovery the amount.

(4) The pleadings gave rise to the following issues:

1. Whether the plaintiff and the defendant No. 2 constituted joint Hindu family firm styled as Mohan Lal-Walaiti Ram at the time of the dealings in dispute?

2. If issue No. 1 is not proved, whether the suit of the plaintiff is maintainable?

3. Whether the transactions in dispute are of the nature of wagering contracts and cannot be enforced in law?

4. Whether the defendant has not received Rs. 3,614/10/- from the parties concerned?

5. Whether the plaintiff is entitled to any interest and if so, the what extent?

6. Relief.

(5) The trial Court decided the first two issues against the plaintiff but the lower appellate Court while concurring with the trial Court's finding on the first issue, was of the view that the plaintiff's suit was maintainable as the plaintiff-firm had been dissolved prior to the institution of the suit and according to the deed of partition executed by the members of the plaintiff-firm, the assets and liabilities had vested in Walaiti Ram plaintiff. The suit was held vested in Walaiti Ram plaintiff. The suit was held to be maintainable in view of the provisions of S. 60(3)(a) of the Indian Partnership Act.

(6) The main controversy between the parties centers on the third issue. According to both the Courts below, the transactions in question were agreement by way of wager and therefore unenforceable at law. In this case there was no written agreement between the parties and the finding as to the nature of the transactions has been deduced from certain oral evidence and reference has also been made to the nature of the transactions.

(7) The finding being of fact would be binding on this Court, had it not been for the fact that the evidence had been misconstrued and the legal test applied for determining the nature of the transactions had been manifestly erroneous. The lower appellate Court was influenced by the fact that the plaintiff had admitted that he had not taken delivery in any of the transactions entered into by him with the defendant-firm and that his financial position was not such as to take delivery of the goods covered by the transactions in question. From these factors, the lower appellate Court concluded that the parties had never intended actual transfer of goods but had agreed to pay or receive money according to the prevailing market price on a particular date and therefore, the transactions were treated as wagers.

In this case our attention has been drawn to the statement of the defendant who appeared as his own witness in which he had stated that he acted as the commission agent of the plaintiff in connection with the transactions in question and no delivery of goods used to be taken and only profits and losses used to be determined. He, however, admitted his liability to pay the sum claimed by the plaintiff to be due to him on account of these transactions, being the amount of profits earned by him.

(8) The defendant also produced D.W. 1 Babu Ram who specifically stated that if a particular transaction was not settled then actual delivery of the goods had to be made, though ordinarily the transactions used to be settled. D.W. 2 Hans Raj had also stated that the purchaser in these transactions had the right to take delivery on the appointed date and the seller could also offer delivery of the goods. He also stated that if there was no settlement regarding profits and losses, then delivery could be made. The lower appellate Court, after referring to the statements of these witnesses, has brushed their evidence aside as it was considered that he was giving evidence with regard to the prevailing practice amount members of the Chamber of Commerce at Mansa.

(9) A careful perusal of the statements of these witnesses shows that their evidence is not confined to the practice of the particular Chamber but to the general practice prevailing amount the mercantile community. The lower appellate Court expressed the view that what is to be seen is 'whether there was any agreement's firm about the delivery of goods.' I think that in law it is an erroneous approach to the subject-matter of controversy. The learned Additional District Judge seems to think that in the absence of agreement between the parties about the delivery of goods, he was entitled to assume that the transaction between them was of a wagering character.

In all such case, law places burden of proof on the party alleging that the agreement was by way of wager and, therefore, void. The mode of transacting business may be highly speculative; 'but the contracts are not wagering contracts, unless it be the intention of both contracting parties, at the time of entering into the contracts, under no circumstances to call for, or give delivery, from or to each other.' Vide J. H. Tod v. Lakhmidas Purshotamdas, I. L. R. 16 Bom 441(445), per Farran, J.

(10) In subsequent rulings it was thought that the phrase 'under no circumstances' was perhaps an over-statement of the requirements of law, vide Motilal v. Govindram, I L R 30 Bom 83(90) and Hurmukhrai Amolukchand v. Narotamdass Gordhandass, 9 Bom. L. R. 125(136).

(11) On the other hand, Beaman J. in Mathuradas Gokuldas & Co. v. Narbadashankar Harjivan, 11 Bom. L. R. 997 (1004) said:

'I think that the dictum of Farran J., subjected to rigorous analysis, will be found to be perfectly correct. I believe that before a Court can hold a contract, on the face of it genuine, or at any rate not clearly wagering as the contract in re Gieve, (1899) 1 QBD 794) was, to be a wagering contract, the Court must be satisfied that the intention of the parties was in no circumstances either to give or take delivery.'

(12) In Kong Yee Lone and Co. v. Lowjee Nanjee, I. L. R. 29 Cal. 461 (467)(P. C.), Lord Hob-house said:

'If the circumstances are such as to warrant the legal inference that they never intended any actual transfer of goods at all, but only to pay or receive money between one another according as the market price of the goods should vary from the contract price at the given time, that is not a commercial transaction, but a wager on the rise of fall of the market.'

(13) The real question in all cases is to ascertain the real intention of the parties at the time when they entered into the contract in question. If their intention was only to pay the difference on or after the due date, the contract would be held void, being in the nature of a wager. If the agreement was to the effect that no delivery was ever to be demanded or given, the transaction is no doubt a wagering one, but from the fact that in fact no delivery had been given, it cannot follow that the original intention of the parties was not to give delivery, vide Shanti Lal v. Madan Lal, AIR 1954 All 789.

(14) In this case the terms of the contract between the parties have not been proved and reliance in the main has been placed on the fact that in the past delivery was never demanded or given. This, in my view, is not a circumstance from which a necessary inference can be drawn that the contracts were entered into upon the terms that the performance should not be demanded but the differences only should become payable. This was the view expressed by their Lordships of the Privy Council in Sukdevodoss Ramprasad v. Govindoss Chathurbhujadoss and Co., AIR 1928 PC 30. In that case, Lord Darling, while delivering the judgment of the Board, expressed the view that the mere fact that contracts are highly speculative is insufficient in itself to render them void as wagering contracts; and to produce that result there must be proof that the contracts were entered into upon the terms that performance of the contracts should not be demanded but that differences only should become payable. Reference may also be made to Firm Aya Ram Tola Ram v. Sadhu Lal, AIR 1938 Lah 781; and to Kundan Mal v. Qadir Ahmad Ali, AIR 1924 Nag 290.

(15) In Bhagwandas Parasram v. Burjoriji Ruttonji Bomanji, 1 1917 PC 101 (102), Sir Lawrence Jenkins said:

'It has not been shown that there was any bargain or understanding between the parties, either express or implied, that linseed was not to be delivered........It may well be,......that the defendant was a speculator, who never intended to give delivery, and even that the plaintiff's did not expect him to deliver; but that would not convert a contract, otherwise innocent, into a wager. Speculation does not necessarily involve a contract by way of wager, and to constitute such a contract a common intention to wager is essential. No such intention has been proved.'

(16) Reference may also be made to a decision of the Supreme Court in Gherulal Parakh v. Mahadeodas Maiya, AIR 1959 SC 781, wherein Subba Rai, J. said;

'To constitute a wagering contract there must be proof that the contract was entered into upon terms that the performance of the contract should not be demanded but only the difference in prices should be paid. There should be common intention between the parties to the wager that they should not demand delivery of the goods but should take only the difference in prices on the happening of an event.'

(17) The essential feature of a wagering contract is that the only interest which the parties have in the contract is the winning of the Stake. Sales and purchases of commodities or of stock and shares are not wagering transactions in the absence of an agreement between the parties that they should not be actually carried out but should end only in the payment of differences.

(18) In construing a contract with a view to finding out whether it is of a wagering character, the Court in arriving at its conclusion will not confine its attention to the mere words in which it is expressed, for very often a wagering contract is concealed under the guise of language which on its face constitutes a legally enforceable contract. The test in all such cases is whether, the contract, whatever its form, is in essence one whereby the parties agree merely to pay or receive the difference between the price according to the prevailing rates on a particular day. If it can be spelt out from the agreement that the purchaser has no right to claim delivery and the seller has no right to insist upon it, it will be deemed to be in the nature of a wager. Cave J., while giving direction to the jury in Universal Stock Exchange, Ltd. v. Strachan, (1896) AC 166 (167) said:

'The question which you have to try is whether these transactions were real bargains for purchase of stock, or whether they were simply gambling transactions intended to end in the payment of differences.......... A man goes to a broker and directs him to buy or sell so much stock, as the case may be. That may be, in the eye of the purchaser a gambling transaction, or it may not. If he means to invest his money in the purchase of the stock, which he orders to be bought, that undoubtedly is a perfectly legitimate and real business transaction. If he does not mean to take up his stock if he means to sell again before the settling day arrives, that may be a gambling transaction so far as he is concerned, but it is not necessarily a gambling transaction so far as the broker is concerned; and in order to be a gambling transaction such as the law points at, it must be a gambling transaction in the intention of both the parties to it.'

(19) The test of wagering contract, therefore, is whether it is on subject in which parties have no pecuniary interest. In determining a contract to be a wager, the Courts have to see whether the intention of the parties to it was that the commodity or the property sold is not to be actually delivered, but that a settlement is to be ultimately made between them upon the basis of the difference between the contract and market price. If it be so the contract, notwithstanding its form, is a wagering contract, and is void, being prohibited under S. 30 of the Indian Contract Act.

(20) After having carefully gone through the judgment of the learned Additional District Judge, the concurrent finding that the parties never intended any actual transfer of goods at all is vitiated, not only by the erroneous view of the law taken by the lower Courts, but also by misconstruction of the statements of Babu Ram and Hans Raj who were produced by the defendant himself. The real point in controversy has been misconceived by the lower appellate Court and the test that he has applied for ascertaining what is a wagering agreement within the purview of S. 30 of the Indian Contract Act is erroneous. A finding of fact suffering from these blemishes is not sacrosanct and cannot be sustained.

(21) There is no cogent evidence on the record justifying the inference that the transactions entered into by the plaintiff were of a magnitude which were not justifiable by the plaintiff's means or by the credit at his command. In this case the defendant has failed to discharge the heavy onus which lay on him of showing that the transactions were in the nature of wagers.

(22) Mr. Dalip Chand Gupta has also argued that the plea of wagering cannot be raised by the defendant whose relationship with the plaintiff is that of an agent and principal. He has relied upon the Full Bench judgment in Firm Ram Dev Jai Dev v. Seth Kaku AIR 1950 EP 92, wherein Das, C. J., observed:

'Commonly and logically the plea of wagering depends on the common intention of the parties to the contract and the plea cannot arise between a party and his agent.' (See page 95).

(23) It was further observed:

'Ordinarily, the plea of wagering cannot arise as between the principal and the agent, for the agent merely puts through the contract between the principal and a third party and therefore to establish the plea of wagering it must be proved that as between the principal and the third party there was common intention to wager. The contract of the agent is only to carry out the order of the principal and to get his remuneration...... As between a constituent and the Pucca Athia the latter has a dual capacity, namely, he is an agent in putting through the contract and he is a principal in the contract put through by him between the constituent and himself. If the constituent fails to perform his part of the contract the Pucca Arthia may base his claim on either basis, namely, as principal for damages for breach of contract or as agent for indemnity on the fiction that as agent he had to pay damages on behalf of the constituent to the other contracting party which is none other than himself. For practical purposes, it makes no difference in such a case on what basis the Pucca Arthia Makes his claim. But the important point to note is that this decision of the Judicial Committee, AIR 1917 PC 101, by holding that the rights of the Pucca Arthia are by way of indemnity clearly emphasise the relationship of principal and agent that subsists between the constituent and the Pucca Arthia even after the contract is concluded between them as principals.

(24) The contention of the learned counsel for the appellant is thus fully supported by the above Full Bench decision of this Court.

(25) The lower appellant Court did not feel called upon to decide any other issue. Issue No. 4 is to the effect, whether the defendant has not received Rs. 3614/10/- from the parties concerned. The contention of the learned counsel for the respondent has been that the contract between the parties was as between principal to principal. That being so, the fact that the defendant had not received this amount from his other constituents with whom he had entered into contracts, cannot prevent the plaintiff from recovering his dues which are based upon a claim which does not depend on the defendant receiving a similar amount from other persons. This issue must, therefore, be decided against the defendant. The plaintiff is not entitled to any interest and we decide the fifth issue against the plaintiff.

(26) In the result, the appeal is allowed with costs throughout and the plaintiff's suit is decreed for Rs. 3614/10/-. We, however, direct that the decretal amount is payable by monthly instalments of Rs. 150/- each commencing from 1st of April, 1960, and payable on the first of each succeeding month and in default of payment of any two consecutive instalments, the plaintiff will be entitled to realise the entire decretal claim at once.

(27) The cross-objections stand dismissed.

Shamsher Bahadur, J.

(28) I agree.

(29) Appeal allowed.


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