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Lajya Ram Vs. Jalil-ur Rehman and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberRegular First Appeal No. 120-D of 1956
Judge
Reported in3(1967)DLT672
ActsIndian Contract Act, 1872 - Sections 219
AppellantLajya Ram
RespondentJalil-ur Rehman and ors.
Advocates: R.L. Tandon,; S.S. Chadha,; S.L. Sethi and;
Cases ReferredLajya Ram Kapur v. The Punjab National Bank Ltd
Excerpt:
.....for exchange or whether the brokerage would become due only after the completion of the final, agreement of exchange ? (13) before i deal with the various decisions which have been cited by buth the parties, i would like to ascertain the case of the appellant with regard to the event upon the happening of which, brokerage would be payable to the appellant. such a form of contract may well imply the term that the principal will nto withdraw the authority he has given after the agent has incurred substantial outlay, or, at any rate, after he has succeeded in finding a possible purchaser. it is well known that, in the ordinary course, a property-owner intending to sell may put his property on the books of several estate agents, with each of whom he makes a contract for payment of..........should nto have effect in accordance with those terms even if they do involve the results that the agent commission is earned and becomes payable although the sale in respect of which it is claimed for some reason or antoher turns out to be abortive. (17) reference may also be made to the judgment of the supreme court of india in abdulla ahmed v. animendra kissen mitter, in this case the contract between the vendor and the broker was in the following terms:- 'ido hereby authorise you to negtoiate the sale of my property, free from all encumbrances at price nto less than rs. 1,00,000.00. i shall make out a good title to the property. if you succeed in scc- aring a buyer for rs. 1,00,000.00 i shall pay you rs. 1,003.00 as per your remuneration. if the price exceeds rs. 1,05,000.00 and does.....
Judgment:

S.N. Andley, J.

(1) The plaintiff, who is the appellant before us, -has filed this appeal against the decree of Shri K. K. Gujral, Sub Judge 1st Class, Delhi, dismissing his' suit. The appellant had filed the suit for recovery, of Rs. 12.100.00 on account of brokerage at the. rate of 2% on the basis of anagreement for exchange dated 26th July, 1948, between the respondents or their predecessers-in-interest and the appellant

(2) It was further the appellant's case that on 22nd July, 1948, he had brought about antoher agreement of exchange between some of , respondents and Rai Babadur Seth Shiv Rattan Goverthan Dass Mohatta of Karachi, whereby such respondents were to transfer some toher properties of theirs in Delhi to Rai Bahathir SethShiv Rattan Mohatta inexchange for; the latter's property in Karachi comprising of a plto of land. The appellant further stated that a draft agreement of exchange was prepared which was duly signed by the parties concerned and under this agreement, the respondents concerned with this transaction were to constr,nct a suitable modern building for the benefit of the Chartered Bank of India, Australia and China, who had agreedto take the building-on rent for a period of 20 years in pursuance of agreements dated 10th July, 1945 and 10th June, 1956 between Seth Shiv Rattan Goverdhan Dass Mohatta and the said.Bank. Ultimately, however, the finai agreement for exchange was nto signed because the respondents concerned in the transaction backed outof.

(3) The appellant's case was that the respondents and Rai Bahadur Seth Shiv Rattan Mohatta who was representing Seth .Ram Gopal Goverdhan Dass Mohatta agreed amongst 'themselves to the concellation of buth the agreements of exchange. The appellant further alleged that the non-completion of the execution and registration of the final deeds, of exchage in pursuance of the agreement dated 26th July, 1948, was due to the default of the respondents and that his right to claim brokerage from the respondents was nto affected in any manner by such cancellation as, according to him, his right to claim brokerage had been earned as soon as the agreement of exchage was entered into.

(4) The respondents denied the claim and also the allegation that they were responsible for the cancellation of the agreement of exchange dated 26th July, 1948. According to the respondents, the cancellation was due to several circumstances : firstly, the title of Seth Ram Gopal Goverdhan Dass Mohatta to the property in question was defective and the defects were nto explained in spite of repeated demands; secondly, the agreement of exchange was a contingent contract dependent upon the sanction by the Custodian of Evacuee property in India and Pakistan and the obtaining of Income-tax clearance certificates by the respective parties; thirdly, Seth Ram Gopal Goverhhan Dass Mohatta had nto complied with his obligations under the agreement dated 26th July. 1948; and fourthly, that the appellant himself was in league with the Mohattas and brought about the concellation of the agreement by his mis-conduct. On these grounds, the respondents urged, that the appellant was nto entitled to any brokerage.

(5) The appellant filed a replication to written statement and made counter charges against the respondents. The appellant denied that he was responsible for the cancellation of the agreement. He also denied that there was any defect in the title of Seth Ram Gopal Goverdhan Dass Mohatta.

(6) On these pleadings, the trial Court framed the following issues: -

1.Is the plaintiff entitled to brokerage If so, at what rate 2. Is nto the plaintiff entitled to brokerage for reasons stated in paras 23 to 27 of the written statement 3. Have nto the defendants given particulars of misconduct If so, what is its effect 4. Relief.

(7) It may be stated at the outset that the trial Court held that the rate of brokerage was 2% and that finding has nto been challenged by Mr. Sohan Lal Sethi, learned counsel for the respondents. Nor have any arguments been addressed to us on issue No. 8 and in this appeal we are concerned lily with two questions, namely,-

(1)Is the appellant entitled to brokerage; and (2) Is he disentitled to brokerage on the ground of non-satisfaction of the title of Seth Ram Gopal Goverdhan Dass Mohatta and his own mis-conduct ?

(8) The trial Court found that brokerage was payable to the appellant only on the completion of the exchange transaction and as the exchange transaction fell through, the appellant was nto entitled to any brokerage.

Beforei go into the merits of the appeal, I may dispose of Civil Miscellaneous Application No. 99 of 1967, which was filed by the respondents en 6th January, 1967, pointing outthat Aziz-ur-Rehman,respondent No. 6, had died in March, 1959. It was urged that since his legal representatives had nto been brought on the record, the appeal had abated. This application, along with the appeal, had come up before us on 9th January, 1967, when buth the parties wanted time to investigate whether respondent No. 6 had left any legal representatives toher than those who were already on record as respondents. We, thereforee, adjourned the appeal and the application and the appeal finally came up for hearing before us on 19th January, 1967. On this date, it was stated by counsel for buth the parties that respondent No. 6 had left no legal representatives toher than those who were already on record as respondents. In view of these statements we hold that the appeal has nto abated and order that the name of respondent No. 6 be struck off.

(9) The property which is covered by the agreement for exchange dated 26th July, 1948, with which we are concerned is'* * * * * * Gopal Market' and is stated to belong to Seth Ram Gopal Goverdhan Das Mohatta, who acted in this transaction through Seth Shiv Rattan Mohatta. The agreement contains inter alia, the following material terms: -

(1)that each party will make out a clear marketable and subsisting title in the properties to be exchanged: (2) that each party will hand over to the toher, docunaents of title for inspection before the final deeds of exchange are made out; (3) that the respective incomes of the properties will have to be proved to the satisfaction of each party; (4) that if for want of sanction by the respective Custodians or on account of the inability of the parties to obtain the requisite certificate from the Income-tax Officer or for any toher reason beyond the control of the parties, the properties cannto be transferred, the entire transaction will be avoided; and (5) that if the bargain falls through on account of willful default of any party, the defaulting party would be liable to pay Rs, 50.000.00 to the toher as liquidated damages, or alternatively, be liable to be sued for specific performance of the agreement.

(10) The clause of this agreement which relates to the appellant is clause 17 and is worded as follows:-

'17.This transaction has been effected through Messrs. Devi Ditta Mal Lajya Ram Kapur brokers, 9-B, Connought Place, New Delhi.'

(11) MR.R.LTANDON, learned counsel for the applicant, has contended that the appellant had don' all that was required of him and the appellant's right to claim brokerage will nto be defeated either by the conduct of any of the parties to the said agreement or by their defaults. He further contended, in answer to the pleas raised by the .respondents in their written statement, that the aopellant's brokerage was nto dependent on contingencies and that the appellant had nto brought about the cancellation of the agreement. On the toher hand, Mr. Sethi, learned counsel for the respondents, has contended that the appellant was entitled to his brokerage only upon the completion of the final transaction of exchange and further that the appellant was responsible for the transaction falling through.

(12) The main question, thereforee, in the present appeal is as to what was the contract between the parties in so far as payment of brokerage to the appellant was concerned. Was it the contract that the appellant would be entitled to his brokerage merely on introducing the parties to the agreement to each either and, in any event, upon the execution of the aforesaid agreement for exchange or whether the brokerage would become due only after the completion of the final, agreement of exchange

(13) Before I deal with the various decisions which have been cited by buth the parties, I would like to ascertain the case of the appellant with regard to the event upon the happening of which, brokerage would be payable to the appellant. The plaint no where states that the brokerage should be payable upon the execution of the agreement for exchange. All that the appellant has said in para 2 of the plaint is as follows:-

'THAT the defendants approached the plaintiff and offered him to make an agreement lor the exchange of the properties mentioned in para (1) above with some property situate in Karachi belonging to some Hindu gentleman and that they would pay brokerage to the plaintiff at the rate of Rs. 2% on the above value of the properties as stated in para (1) above. The plaintiff accepted the offer and after serious negtoiations and untiring efforts succeeded in making the requisite arrangement.........'

(14) From the above qutoation, it is difficult to sav that the appellant has made out of a case for entitlement to brokerage upon the execution of the agreement for exchange. In fact, the whole tenor of the plaint is that the respondents backed out of the aforesaid exchange and compelled the toher party to the agreement to cancel buth the agreements of exchange. It is alleged in the plaint that the non-completion of execution and registration of the deed of exchange was due to the default of the respondents and the appellant's right to claim brokerage was nto affected by the refusal of the defendants to complete the bargain and that the appellant became entitled to the brokerage as soon as the agreement of exchange was entered into. Mr. Tandon has argued that this view by the evidence of Hakim Rai (P. W. 5). While this witness has deposed that the rate of brokerage was 2% he has nto spoken of any contract having be.en made in his presence that the appellant was to be entitled to his brokerage upon the execution of the agreement for exchange. On the toher hand, Said-ur-Rehman (D.'W. 5) has stated-

'THIS brokerage was to be paid to the plaintiff only in Karachi.'' It is ntoiceable that the appellant did nto cross-examine Said-urRehman on this aspect of the matter at all. Under the circumstances. I am driven to the conclusion that appellant has neither pleaded nor made out any case that brokerage was payable upon the execution of the agreement for exchange dated 26th July. 1948

(15) Upon this finding, the question arises whether in law the appellant is entitled to his brokerage, even though the final deed of exchange has nto been executed by the parties, ft is on this question that a large number of authorities have been cited beginning from Luxor (Estbourn), Ltd. (In Liquidation v Cooper. In this case, the vendor had agreed to pay the broker a commission on the completion of the sale to any purchaser ..whom he could introduce. The broker did in fact introduce a willing and able purchaser, but the vender then determined nto to proceed with the sale of property. It was contended that there ought to be implied in the agreement with the respondent a term to the effect that the appellants would nto without just cause so act as to prevent him from earning his commission. Viscount Simon, L. C. has in his opinion pointed out the difficulties in trying to formulate genera) propositions and has stated-

'THERE is, I think considerable difficulty, and no little danger, in trying to fromulate general propositions on such a subject, for contracts with commission agents do nto follow a single pattern, and the primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under discussion, and then to consider whether these express terms necessitate the addition, by implication, of toher terms. There are some classes of contract in which an implied term is introduced by the requirements of a statute-for example, under the Sale of Goods Act or the Marine Insurance Act. There are toher contracts where an implied term is introduced by the force of established custom-for example, the necessity of a month's ntoice in the case of hiring a domestic servant. In contracts made, however, with commission, there is no jusitfication for introducing an implied term unless it is necessary to do so for the purpose of giving to the contract the business effect which buth parties to it intend that it should have. It may be useful to point out that contracts under which an agent may be occupied in endeavoring to dispose of the property of a principal fall into several obvious classes. There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a .person who makes an adequate offer, usually an offcer of nto less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether his principal accepts the offer and carries through the bargain or nto. No implied term is needed to secure this result. There is antoher class of case in which the property is put into the bands of the agent to dispose of for the owner, and the agent accepts the employment, and, it may be, expends money and time in endeavoring to carry it out. Such a form of contract may well imply the term that the principal will nto withdraw the authority he has given after the agent has incurred substantial outlay, or, at any rate, after he has succeeded in finding a possible purchaser. Each case turns on its own facts, and the phrase 'finding a purchaser' is itself nto without ambiguity. Inchbald's case might, I think, be regarded as falling within this second class. However, there is a third class of case, t.J which the prevent instance belongs, where, by the express language of the contract, the agent is promised his commission only upon completion of the transaction which he is endeavoring to bring about between the offerer and his principal. As J have already said, there seems to me to be no room for the suggested implied term in such a case. The agent is promised a reward in return for an event, and the event has nto happened. He runs the risk of disappointment, but if he is nto willing to run the risk, he should introduce into the express terms of the contract the clause which prtoects him.'

Lord Russell of Killowen has given his opinion thus-

'Afew preliminary observations occur to me. (1} Commission contracts are subject to no peculiar rules or principles of their own. The law which governs them is the law which governs all contracts and all questions of agency. (2) No general rule can be laid down by which the rights of the agent or the liabilities of the principal under commission contracts are to be determined. In each case, these must depend upon the exact terms of the contract in question, and upon the true construction of those terms. (3) Contracts by which owners of property, desiring to dispose of it, put it in the hands of agents on commission terms are nto (in default of specific provisions) contracts of employment in the ordinary meaning of those words. No obligation is imposed on the agent to do anything. The contracts are merely promises binding on the principal to pay a sum of money upon the happening of a specified event, which involves the rendering of some service by the agent. There is no real analogy between such contracts and contracts of employment by which one party binds himself to do certain work and the toher binds himself to pay remuneration for the doing of it.'

Lord Wright in his opinion says-

'THE case that the suggested term is nto properly to be implied becomes, in my opinion, even clearer when account is taken of some of the more general aspects of the course of business in these matters. It is well known that, in the ordinary course, a property-owner intending to sell may put his property on the books of several estate agents, with each of whom he makes a contract for payment of commission on a sale. If he effects a sale to the client introduced by one, is he to be liable in damages to all the tohers for preventing them from earning their commission? Common sense and ordinary business understanding clearly give a negative answer. Alternatively, suppose that, having employed one agent, whose client has made an offer, he receives a better offer from a buyer introduced by antoher agent, and concludes the purchase with him, it seems out of the question that he is hereby rendering himself liable in damages to the former agent. Again, suppose that, owing to changed circumstances, he decides that he will nto sell at all, and breaks off negtoiations with the agent's client, is he to be liable for damages to the agent. I can find no Justification for such a view. I am examining a commission contract nto containg special terms such as to impose an obligation on the vendor actually to sell through the particular agent to the ptoential purchaser introduced by that agent. Contracts containing such terms, though nto, perhaps, usual, are possible. However, it is said that, in the absence of special terms, an obligation of that nature can be implied, subject, however, to the qualification that the owner retains his freedom to deal as he likes with his own and to discontinue negtoiations only so long as, in doing so, he acts with reasonable excuse or j'ust cause. I find it- impossible to define these terms in this connection.'

Lord Romer in his opinion says-

'WHERE an owner of property employs an agent to find a purchaser, which must mean at least a person who enters into a binding contract to purchase, is it an implied term of the contract of agency that, after the agent has introduced a person who is ready, willing and able to purchase at a price assented to by the principal, the principal shall enter into a contract with that person to sell at the agreed price, subject only to the qualification that he may refuse to do so if he was just cause or reasonable excuse for his refusal This qulification must plainly be added, for the respondent does nto contend, and no one could successfully contend, that the obligation is an unconditional one. In my opinion, the question must be answered in the negative. Any such implied condition would be either wholly unreasonable or it would be void for uncertainty. If it means that the employer is to enter into a contract on such terms as the purchaser may require, it is obviously unreasonable. If it means that the contrast is to contain such terms as to commencement of title, date of completion, requisitions, restrictive covenants and so forth as may be just and reasonable, it is void for uncertainty, for who can possibly judge what, in such a case, is just and reasonable as between the employer and the agent? It is the position as it affects the agent which would have to be considered. Ntohing for which the vendor might stipulate as to the terms of the contract could be considered unjust or unreasonable as between him and the purchaser.'

(16) It is needless to refer to the various English authorities in detail except to the judgment of the Court of Appeal in Midgley Estates, Ltd v. Hand* The leading judgment was that by Jankins, L.J., who has stated the principles relating to contracts of agency between owners of property and estate agents in the following words:-

'CONTRACTS of agency between owners of property and estate agents have been many times before these courts. We have been referred to a large number of authorities including, in particular, the wellknown case in the House of Lords of Luxor (Eastbourne), Ltd. v. Cooper and James v. Smith. I hope I will nto be thought disrespectful to the careful judgment of the learned judge or to the very full argument which has been presented to us if I refrain from referring to the numerous' authorities in detail. As has been pointed out over and over again in the reported cases, an agency contract, must be construed according to its terms. One has to look at the contract and see whether, according to its terms, construed in accordance with the ordinary principles of construction, the event has happened in which the commission is expressed to be payable. So far as any general principle is deducible from the authorities, their effect may, I think, be thus summarised. The question depends on the construction of each particular contract, but, prima facie, the intention of the parties to a transaction of this type is likely to be that the commission stipulated for should only be payable in the event of an actual sale resulting. The vendor puts his property into the hands of an agent for sale, and, generally speaking, he contemplates that, if a completed sale results, and nto toherwise, he will be liable for the commission, which he will then pay out of the purchase price. That is, broadly speaking, the intention which, is a matter of probability, the court should be disposed to impute to the parties. It follows that general or ambiguous expressions, purporting, for instance, to make the commission payable in the event of the agent 'finding a purchaser' or 'selling the property' have been construed as meaning that the commission is only to be payable in the event of an actual and completed sale resulting or, at least, in the event of the agent succeeding in introducing a purchaser who is able and willing to purchase the property. That is the broad general principle in the light of which the question of construction should be approached, bat this does nto mean that the contract, if its terms are clear, should nto have effect in accordance with those terms even if they do involve the results that the agent commission is earned and becomes payable although the sale in respect of which it is claimed for some reason or antoher turns out to be abortive.

(17) Reference may also be made to the judgment of the Supreme Court of India in Abdulla Ahmed v. Animendra Kissen Mitter, In this case the contract between the vendor and the broker was in the following terms:-

'Ido hereby authorise you to negtoiate the sale of my property, free from all encumbrances at price nto less than Rs. 1,00,000.00. I shall make out a good title to the property. If you succeed in Scc- aring a buyer for Rs. 1,00,000.00 I shall pay you Rs. 1,003.00 as per your remuneration. If the price exceeds Rs. 1,05,000.00 and does nto exceed Rs. 1,10.000 I shall pay you the whole of the excess over Rs, 1,05,000 in addition to your remuneration of Rs. 1,000.00 as stated above, In case yon can secure a buyer at a price exceeding Rs. 1,10,000.00. It shall pay you twenty-five per cent of the excess amount over Rs. 1,10,000.00. In addition to Rs. 6,000.00 as stated above. This authority will remain in force for one month from date.'

(17) The broker found two persons who were ready and willing to parchase the property for Rs. 1,10,000.00 and by letters exchanged with them he purported to conclude a contract for the sale of the property and communicated the same to the vendor by a letter. The vendor; however entered into an agreement with a nominee of the said persons for the sale of the property for Rs, l,05,000.00 and eventually executed a conveyance in their favor. The Supreme Court held that since the final sale had been brought about the broker was entitled to his full commission of Rs. 6.000.00. In coming to this conclusion Patanjali Sastri J., as he then was, dealt with Luxor's case and toher cases and applying the principle of luxor's case observed :-

'APPLYING that principal, (even if the commission ntoe in the present case were to be construed as making payment of commission conditional on the completion of the transaction, as it was in the English case) the appellant, having 'negtoiated the sale' and 'secured buyers' who made a firm offer to buy for Rs. 1,10,000.00 had done everything he was required by the respondent to do and acquired a right to the payment of commission on the basis of that price which he had successfully negtoiated, subject only to the condition that the buyers should complete the transaction of purchase and sale. The condition was fulfillled when those buyers eventually purchased the property in question, and the appellant's right to commission on that basis became absolute and could nto be affected by the 'circumstance that the respondent 'for some reason' of his own sold the property at a lower price.'

(18) As I understand these cases, the only principle which is deducible is that each case must be decided upon its own facts and the cont ract between the parties. There is, however a presumption that in the absence of a clear contract to that effect, a broker will be entitled to his commission only upon the completion of the sale. It is open to the parties to enter into a contract that the broker will be entitled to his commission upon the mere introduction of a willing and able purchaser or upon the execution of the agreement to sell. In the case of such contrac ts, the broker would become entitled to his brokerage upon the happening of the event, that is,: either the introduction of a willing and able purchaser or the entering into an agreement to sell as the case may be.

(19) I may mention here that the counsel on buth sides have also referred to the following cases :-

1.Giddvs v. Horsfall. 2. E H. Bennett and Partners v. Miiett. 3. E. P. Nelson &- Co. v. Milltt. 4. Fowler v. Bratt', and an unreported Judgment of a Division Bench of the Circuit Bench of the Punj'ab High Court at Delhi in Lajya Ram Kapur v. The Punjab National Bank Ltd, where the appellant, who is also the appellant here, was claiming his brokerage from the Punjab National Bank Ltd. in similar circumstances. In the last named case, the Division Bench came to the conclusion upon consideration of the evidence in the case that the brokerage was payable only upon the completion of the exchange transaction.

(20) It is no doubt true that the appellant must have put in cosiderable effort in bringing about the agreement of exchange dated 26th July 1948. But the point for determination is whither he has made out a case for being entitled to his brokerage upon the execution of that agreement. I am of the view that that case has neither been pleaded nor proved

(21) Mr. Tandon, learned counsel for the appellant, then contended that the appellant having done all that he could do and the parties to the agreement for exchange having cancelled the agreement behind his back, he should be held entitled to his commission because he was stopped by the parties in earning his commission. It is nto possible to accept this contention. It appearsfrom the record that the contract was cancelled for a justifiable cause, namely, the failur of Seth Ram Gopal Goverdhan Das Mohatta and his agent Seth Slav Rattan Mohatta in satisfying the respondents that title to the Karachi property was clear and marketable. No a' tempt was made by the appellant for establishing that the respondents plea regarding defective title was without foundation, even though Said-ur-Rehman had appeared in the witness-box and could have been cross-examined with regard to this plea.

(22) In the result, I am for dismissing the appeal. Bat, in the circumstances of the case I would leave the parties to bear their respactive costs in this Court as well as in the Courts below.

S.K. Kapur, J.

(23) I agree.


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