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Hagami Lal Ram Prasad, a Firm and ors. Vs. Bhuralal Ram NaraIn and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Contract
CourtRajasthan High Court
Decided On
Case NumberCivil Special Appeal No. 7 of 1959
Judge
Reported inAIR1961Raj52
ActsRajasthan High Court Ordinance, 1949 - Sections 18(1); Evidence Act, 1872 - Sections 34; Contract Act, 1872 - Sections 30 and 222; Mewar Contract Act, 1942 - Sections 30B; Cotton Control Order, 1945; Cotton (Forward Contracts and Option Prohibition) Order, 1943
AppellantHagami Lal Ram Prasad, a Firm and ors.
RespondentBhuralal Ram NaraIn and ors.
Appellant Advocate Chandmal, Adv.
Respondent Advocate B.N. Chanda, Adv.
DispositionAppeal allowed
Cases ReferredKishanlal v. Bhanwar
Excerpt:
- - lodha for the appellants submits that the judgment under appeal is clearly erroneous and the findings are inconsistent. the transactions therefore could be competently proved by the plaintiff shankerlal himself whose evidence has been found reliable by the learned judge in other respects. it is well known that entries in books of account cannot by themselves be sufficient evidence to charge any person with liability but if found to have been kept in regular course of business these entries are relevant and as such admissible in evidence when they refer to a matter into which the court is called upon to inquire. as a matter of experience, the above observations may be justified on the facts of the case before them, but we are unable to subscribe to the view that in every case where.....sarjoo prosad, c.j.1. the plaintiffs have preferred this appeal against the judgment and decree of dave, j. passed on the 19th of september, 1958, reversing on appeal the decision of the civil judge, bhilwara, dated 21st december, 1953, in suit no. 10 of 1953. it arisesout of a suit for recovery of a sum of rs. 5,237/-claimed to be due by the plaintiffs from the defendants on account of various transactions of sale and purchase which they carried on for the defendants as commission agents.2. the plaintiffs' case is that the defendant no. 1 and his sons, who are members of a joint hindu family, carry on business at gangapur in madhya bharat in the name and style of bhuralah mangilal. the plaintiffs are partners of a firm known as hagamilal ramprasad, and carry on business as commission.....
Judgment:

Sarjoo Prosad, C.J.

1. The plaintiffs have preferred this appeal against the judgment and decree of Dave, J. passed on the 19th of September, 1958, reversing on appeal the decision of the Civil Judge, Bhilwara, dated 21st December, 1953, in Suit No. 10 of 1953. It arisesout of a suit for recovery of a sum of Rs. 5,237/-claimed to be due by the plaintiffs from the defendants on account of various transactions of sale and purchase which they carried on for the defendants as commission agents.

2. The plaintiffs' case is that the defendant No. 1 and his sons, who are members of a joint Hindu family, carry on business at Gangapur in Madhya Bharat in the name and style of Bhuralah Mangilal. The plaintiffs are partners of a firm known as Hagamilal Ramprasad, and carry on business as commission agents at Gulabpura in the District of Bhilwara. The defendants' business consists of purchase and sale of cotton through the plaintiffs.

During the period from Aswin Sudi 4, Samwat 2004, to Chaitra Sudi 14, Samwat 2005, the defendants under various forward contracts sold through the plaintiffs 275 bales of cotton and they also purchased an equal number of bales of cotton, as detailed in the plaint; and in these transactions the defendants sustained a loss of Rs. 6,826/11/6 including Arat and Dharmada charges, which were paid to third parties.

The plaintiffs also incurred certain other small expenses towards postage etc., and the total amount thus due against the defendants came to Rs. 6,885/ 11/6, out of which after deducting the amount in hand and some payments made by the defendants the claim was laid at Rs. 4,857/2/- for principal and Rs. 379/14/- by way of interest, at Rs. -/7/9 per cent per mensem upto the date of the suit.

3. Three of the defendants, viz., Bhurala, Mangilal and Kanak Mal, presented a joint written statement, while Magni Ram filed a separate written statement for himself. The plea of the defendants was substantially identical. They totally denied the transactions and contested the suit on various grounds.

4. The trial Court held that the transactions in question were duly proved both by oral and documentary evidence, and that the defendants were liable to pay to the plaintiffs a sum of Rs. 5,237/-including the charges for Arat, Dharmada and interest. The plea in regard to the maintainability of the suit was overruled, because the Court found that the Partnership Act was not in force ia Mewar when the suit was filed and the suit was maintainable even though the plaintiffs' firm was not registered. It was also held that the transactions were not of a wagering nature. The Court accordingly decreed the suit.

5. On appeal, the question of maintainability of the suit was not pressed before the learned Judge, but the findings of the trial Court were challenged on the remaining issues. The learned Judge of this Court held that the transactions mentioned in the plaint under heads B and C were duly proved, while the other two transactions A and D were not proved. He was of the view that in respect of the transactions proved the defendants were liable to pay only a sum of Rs. 1,265/6/9; but since on their own admission the plaintiffs had received Rs. 1,500/- from the defendants, they were not entitled to recover anything more on that account.

The finding of the learned Judge that the transactions A and D were not proved is largely onthe ground that the plaintiffs were unable to satisfy the Court that they had any authority from the defendants to enter into those transactions. At the same time the learned Judge took the view that if the accounts produced by the plaintiffs and the letters which are said to have been written by the defendants were believed implicitly, then there would be no doubt about the fact that the respondents were entitled to receive from the appellants the amount which they have claimed.

The learned Judge further thought that the transactions in question were in the nature of wagering contracts and, therefore, the plaintiffs could not recover anything in respect of those transactions even if they sustained actual loss on that account and that the transactions were hit by the Cotton (Forward Contracts and Options Prohibition) Order, 1943. The point was not raised in the trial Court and the attention of the trial Court was not drawn to the Order in question.

The learned Judge was conscious of the fact that there was nothing on record to show that the cotton about which the transactions were made in the present case was sown before or after 28th February, 1943, but since the transactions were made as late as in 1947-48, he held, that the natural inference was that they must be in relation to cotton sown long airer the end of 1943.

He, therefore, found that the transactions were hit by the said Order; and although the Order in question was subsequently repealed, the repeal thereof did not affect the defendants' right to be relieved of the consequences arising from illegal contracts. In view of these findings the learned Judge dismissed the plaintiffs' suit, but left the parties to bear their own costs throughout.

6. The preliminary question which we have to determine at the outset is whether in an appeal under Section 18(1.) of the Rajasthan High Court Ordinance (No. XV of 1949) we can interfere with the findings of fact, arrived at by the learned Judge of this Court. It is argued for the defendants-respondents that if the appeal were directed against the appellate decres of a subordinate Court, this Court in second appeal could not interfere with the findings of fact.

The same analogy should be, therefore, extended to an appeal against the judgment and decree passed by a learned Judge of the Court in appeal from the decree of a subordinate Court. If the analogy is not extended, it would lead to the anomalous situation that while the findings of a subordinate Court arrived at in appeal could not be open to question in appeal to this Court, the findings of a learned Judge of this Court under similar situation would be open to challenge.

Reliance has been placed upon a decision in Tulsiram Ramdayal v. Badriprasad Jankiprasad, AIR 1949 Nag 31, where it was observed that in an appeal under the Letters Patent the Court was bound by the findings of fact given by the first appellate Court and accepted by Bose, J. in second appeal. Such a finding must be taken as final. This would be obviouslv so. The findings of fact arrived at by the Court below were obviously binding in second appeal on the Single Judge of the Court against whose judgment the appeal under Letters Patentwas preferred and would be equally binding on the learned Judges who heard the Letters Patent appeal. The above case has, therefore, no application to the case in hand.

7. The right of appeal is a creature of the statute and depends upon the terms in which the right is expressly granted. Under Section 100 of the Code of Civil Procedure a right of appeal is provided within the limitations of the law, and it is only under those limitations that the High Court in second appeal can interfere with the judgment and decree under appeal passed by the lower appellate Court.

There are, however, no such words of limitation in Section 18(1) of the Rajasthan High Court Ordinance, which provides that an appeal shall lie to the High Court from the judgment of one Judge of that Court, subject to the exception mentioned therein. In the absence of any such limitation it cannot be argued on the analogy of section 100 of the Code ot Civil Procedure that this Court would not be entitled to examine on appeal the findings of fact arrived at by the learned Judge against whose judgment the appeal is directed.

It must be remembered that the appeal which was heard by the learned Single Judge of this Court arose out of a suit of a higher pecuniary value than the suits which ordinarily used to come up before this Court in second appeal, and, therefore, it would not be inappropriate if on appeal against the judgment of the learned Single Judge, this Court goes into facts and, where necessary, even interferes with findings based on them.

Of course in doing so the Court will always keep in view the salutary principle that ordinarily it should not interfere with findings of fact, unless the findings are manifestly erroneous and against the weight of evidence on record. Some assistance may be derived on the point from a Full Bench decision of the Calcutta High Court in Upendra Nath Bose v. Bindeshri Prosad, AIR 1916 Cal 843. In that case there was a difference of opinion between two learned Judges of that Court as a result of which the decision of the Subordinate Judge stood confirmed.

In Letters Patent appeal Chief Justice Jenkins repelled the contention that though the learned Judges who originally heard the appeal differed in opinion as to the disposal of the case, there were isolated points in the case on which they were agreed, and in so far as those points were concerned, there could be no appeal under the Letters Patent, and the decision given by those learned Judges should be held to be final. The learned Chief Justice observed: 'But this rests on a misconception of the scope of Clause 15 of the Letters Patent. The appeal sanctioned is not from any point, but from the judgment and the meaning of the word 'judgment' lends no support to the respondent's contention.' Mookerjee, J., another learned Judge, who was a party to the judgment, specifically, ruled:

'The appeal must, consequently, be deemed to have been preferred against the decree and all the points necessary to be investigated for the determination of the question of the correctness of that decree are open for consideration although the Court as a Court of Appeal would be slow to take, upona question of fact, a view contrary to the concurrent opinion of the trial Judge and of the two Judges of the Division Bench.'

This view was adopted by the Division Bench of the East Punjab High Court in Kishen Singh v. Taru, AIR 1949 EP 342. There it was contended that in Letters Patent appeal the Court should not travel beyond the facts given in the judgment under appeal; but the learned Judges rejected the contention and following the above decision held that all the points necessary to be investigated for determination of the correctness of the decree passed by the learned Single Judge of that Court were open for consideration in the appeal.

What is true of a Letters Patent appeal is substantially true also of an appeal under Section 18(1) of the Rajasthan High Court Ordinance. We, therefore, agree with the learned counsel for the appellants that in this case it is open to us to examine the findings of the learned Judge and to see if those findings are justified on the record. The judgment in the present case is one of reversal and the learned Judge has set aside the decision of the trial Court on material points involved.

Even assuming that the analogy of Section 100 of the Code of Civil Procedure is applicable to such a case, we still think, as we shall presently show, that there are certain errors of law which would entitle us to interfere with the findings of the learned Judge.

8-9. Mr. Lodha for the appellants submits that the judgment under appeal is clearly erroneous and the findings are inconsistent.

He points out that when the transactions under heads B and C have been accepted by the learned Judge to be sufficiently proved, there was no justifible reason to reject the genuineness of the other two transactions under heads A and D. Further it is submitted that the learned Judge erred in law in not accepting the account books produced by the plaintiffs which were maintained from day to day

in ordinary course of business and wherein even copies of the letters which were from time to time issued to the defendants or received from them were maintained.

(His Lordship after indicating the alleged transactions, considered the plaintiffs' evidence and held that there was overwhelming evidence to support the plaintiffs' case. His Lordship then continued).

All this overwhelming evidence was rightly believed by the trial Court who found the plaintiffs' claim duly substantiated.

10. No adequate reason has been assigned for not acting upon all the above convincing material. As against this there is the bare denial of all the transactions by the defendant Mangilal and of the communications sent by him. The other defendant Kanakmal has not ventured to appear in the witness-liox and deny his signature on some of the letters produced by the plaintiffs, for instance Exs. 30 and 32, the genuineness whereof has been accepted even by the learned Judge himself and on the basis of which the transactions 'B' and 'C' have been held to have been proved. The learned Judgefurther finds that 'a perusal of Mangilal's statement shows that he is not a witness of truth' and observes:

'I have looked into the accounts produced by the respondents and it is true that if their account books and all the letters which are said to have been written by them to the appellants are implicitly believed, then there would be no doubt about the fact that the respondents were entitled to receive from the appellants the amount which they have claimed, but in my opinion it was not proper on the part of the trial court to have decreed the claim merely on the basis of the account books.'

The main reason given by the learned Judge tor not accepting the account books is that the writers of those books have not been examined. The plaintiff Shankerlal has no doubt proved not only the transactions but also that the corresponding entries in the books were written by his Munims Harakchand, Suraj Karan and Panna Lal from time to time and identified their writings. The comment of the learned Judge is that these persons were alive and they should have been called to prove the entries made by them; in their absence it could not be held that the account books or the relevant transactions entered therein were proved according to law. We consider it necessary to observe that this is not the correct view of the law.

11. The transactions can be proved independently of the writer of the entries in the account books, as it has been done in this case by the plaintiff Shankerlal himself who had knowledge of the transactions. The transactions were carried on according to the rules of the Gulabpura Chamber of Commerce and he was the person who effected those transactions. He also says that all the entries were made in due course and has proved these entries. In many cases, the scribes may be unaware of the transactions themselves, having taken no part in them and yet they may have been directed to make the entries in the books of account in due course.

The transactions therefore could be competently proved by the plaintiff Shankerlal himself whose evidence has been found reliable by the learned Judge in other respects. It is well known that entries in books of account cannot by themselves be sufficient evidence to charge any person with liability but if found to have been kept in regular course of business these entries are relevant and as such admissible in evidence when they refer to a matter into which the court is called upon to inquire.

These books of account therefore having been proved to have been kept regularly in ordinary course of business, the entries of the transactions made therein were admissible in corroboration of the evidence of the plaintiff in proof of these transactions. The evidence of the Munims, in our opinion, would not have very much added to or subtracted from the value of the evidence already om record.

A mere look at the books of account would show that they were maintained in regular course and could not have been fabricated for the purposes of this case. They contain entries of numerous other transactions entered into by the plaintiff's firm. In deciding against the admissibility of the account books, the learned Judge relied upon the decision inGajendra Shah v. Shankar Bux, AIR 1935 Oudh 16, where the learned Judges are reported to have observed :

'The account books seem no doubt genuine and have been made use of by both parties as it suited their convenience but as they have not been duly proved as required by law, we have thought it proper to rule them out as inadmissible.'

This the learned Judges did, because the persons who wrote the accounts were alive and had not been examined by the plaintiff. The passage occurs in the penultimate part of the judgment and appears to be more or less an obiter, because in spite of their decision to exclude the accounts from consideration, the learned Judges upheld that decision of the court below, in favour of the plaintiff. As a matter of experience, the above observations may be justified on the facts of the case before them, but we are unable to subscribe to the view that in every case where the scribe of the entries though alive is not examined, the books of account must be held inadmissible, even though there is other reliable evidence to show that the entries were made in due course of business by the scribes whose writing could be duly identified.

It depends entirely upon the competence and credibility of the other evidence available which fulfils the requirements of proof and that of Section 34 of the Evidence Act and the value to be attached to the account books themselves. To lay down any hard and fast rule on the point would be to deprive the Court of a most valuable piece of evidence which may otherwise enable the Court to make up its mind In determining the questions involved in a case. In Hingu Miya v. Heramba Chandra, 13 Cal LJ 139' at p. 142, Mookerjee, J. formulated the law thus:

'The proper procedure to follow, therefore, is, as laid down by their Lordships of the Judicial Committee in Dwarka Doss v. Janki Doss, 6 Moo I. A. 88, at p. 98 (PC), to call the clerk who has kept the accounts or some person competent to speak to their genuineness, to prove that the books have been regularly kept and that they are generally accurate. But this is not all that is necessary; Section 34 makes the entries relevant if they are entries in a book of account regularly kept in the course of business. It is, therefore, not sufficient merely to prove the correctness of the book, the entries themselves have to be proved unless indeed the necessity for such proof is removed by the admission of the opposite party.'

12. We, therefore, hold in agreement with the decision of the trial court that the books of account produced by the plaintiffs were admissible in evidence and corroborated the plaintiffs' case in respect of the transactions in suit. The defendants have not produced their own books of account to show that there were no such transactions except their bare denial, which even the learned Judge was unable to accept. The defendants cannot be relieved of the obligation of producing their books of account to rebut the plaintiffs' case merely on the assertion that there were no corresponding entries of the transactions in their books.

13. What is true of the entries in those books about the transactions is equally true about the copiesof the correspondence which passed between the parties. It appears to have been the practice in the plaintiffs' firm to maintain regular copies of such correspondence in proof of the authority under which they carried on the transactions on behalf of their constituents. The trial court has taken pains to analyse and show the bearing of all that correspondence on the disputed transactions.

Even the learned Judge of this Court found some of them to be genuine. We realise that, in proving these copies, a stricter proof was necessary and perhaps it would have been better to examine the scribes who made those copies to prove that they were true copies of the originals. Even so the few originals which have been produced would be enough to support the plaintiffs' claim.

(His Lordship after discussing the letters, proceeded).

We must therefore conclude that on the above materials the transactions under the various heads A,B,C and D as mentioned in the plaint have been duly proved.

14. At this stage, we may conveniently dispose of the argument of the learned counsel for the defendants-respondents that the plaintiffs have not proved the actual profit or loss on account of the transactions in question. Much stress has been laid on the admission of plaintiff Shankerlal that he was unable to give the details as to whom the losses which amounted to Rs. 5,562/2/- and were debited to the account of the defendants in Ex. 63 were actually paid.

The argument at first sight appears to be attractive but having regard to the nature of the transactions, it is not easy to ascertain to whom the losses were paid. Many transactions take place during the course of the day and the contracts of sale and purchase are not with identical persons but with different individuals. These transactions might also relate to different constituents. The question of profit and loss, therefore, cannot be determined save with reference to the dates of transactions and rates of purchase and sale prevailing on the relevant dates and calculated on the various transactions done on behalf of a particular party.

What may be the loss of one is a profit to another and to whom actually the losses were paid cannot be easily determined. The evidence of Shankerlal is that the transactions of the defendants were all made with third parties through brokers selected by the defendants themselves and the transactions of sale were not with the same persons from whom the plaintiffs purchased the cotton bales for the defendants; and consequently, he was unable to say what losses were paid and to whom and on which dates and in respect of which transactions.

He explains that at the end of each month, the accounts of different constituents are cleared and the balance for or against the constituents is mentioned in their accounts. He further says that on the days on which there were losses incurred for the defendants, the losses were entered in their Khata on that date. Beyond that, there could be no further entries of other transactions in the defendants' Khata even if it was in respect of the same cotton bales.

In other words, the witness means that in respect of the defendants' transactions of sale and purchase the entries were duly made from day to day in their accounts and the profit or loss noted therein; but how the goods transacted for, were subsequently disposed o in favour of third parties, there could be no entries in the defendants' accounts. This evidently was the system followed.

The fact remains that the accounts have been squared up with the third parties with whom the plaintiffs had dealings and that the accounts were in due course submitted to the defendants, who do not appear to have raised any objection relating to the accounts. This is also borne out by the correspondence between the parties. That being so, we do not find any substance in this argument of the learned counsel for the defendants.

15. We may now turn to the next contention of the appellants. The trial court held that the transactions were not by way of wager and were not hit by Section 30 of the Contract Act at all. The trial court observed that a contract shall not be considered a wager unless it is established that the parties intended not to take or give delivery but to pay only the differences in prices on the basis of the fluctuating market rates. A clear agreement to that effect in which parties were ad idem had to be established in order to render it a wager which is illegal in the eye of law.

The learned Judge of this Court concedes that the court below correctly appreciated the law, but he is of the opinion that on the evidence given by the parties, the agreements must be held to be of I wagering character. He further points out that neither the plaintiffs nor the defendants produced direct evidence as to what was decided between the parties about the delivery of the goods when the contract was made. If this is so, then the defendants were bound to fail.

It was for the defendants who challenged the validity of the transactions to prove that the contracts were wagering contracts and no effect could be given to them in the eye of law. The learned Judge, however, proceeds to say that on the plaintiffs' own account-books and the statement of their witnesses, it appears that the transactions were made only for squaring up the differences and that delivery of the goods was not in contemplation of the parties.

It is of course true that in no case of the transaction impeached, there was any delivery of goods and even the persons with whom the transactions were entered into have not said that they took or gave delivery of the goods at any stage. There is, therefore, an element of speculation. It is however well settled that the mere fact that a contract is highly speculative, is insufficient in itself to render it void as a wagering contract.

To make a contract a wager there must be from the outset a common intention of both the parties to make and accept no delivery and to deal only in differences. There are various authorities which go to show that from the mere fact that delivery of the goods was not taken, no inference can be drawn that the contract was a wagering contract.

One significant fact in relation to these transac-tions is that the plaintiffs had entered into dealings with third parties to whom they did not disclose the name of the defendants. The position was that with reference to the defendants, they were acting as their agents but with reference to these third parties, they were acting as principals or agents for unnamed principals and incurred personal liabilities on themselves in respect of their privity of contract with these parties.

In such a case, it cannot be argued that the transactions were merely wagering transactions. Besides, one of the witnesses, Ramsukh (P. W. 8) to which reference has been made by the learned Judge himself clearly said that Nazrana was a deal in which it was settled between the parties as to what difference would be paid if delivery is not taken. Therefore, delivery was evidently in contemplation and only in case no delivery was taken, the difference was to be paid. One of the defendants' own witnesses, Umedram (D. W. 3) has admitted:

^^lkSnksa esa xkBsa cjkcj gkstkus ds ckn :bZ dh xkBsa rqyrh Hkh gSa] vkSj u rksys rks uQk uqdlku ys ysrsgSa A**

This also shows that the delivery of goods was not altogether beyond contemplation.

16. The facts in this case are almost parallel to the facts of the case in Sobhagmal v. Mukundchand, AIR 1926 PC 119. In that case, their Lordships explained the position of a commission agent who enters into transactions under instructions from his constituent with third parties, in the following, terms:

He makes 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 contracts entered into by him on his constituent's behalf.'

In such a case, it was held that the contracts foe sale and purchase of cotton, so far as the third parties were concerned, were genuine transactions, and not mere gambling transactions. There was no presumption that such transactions were wagers and in the absence of evidence to the contrary, they should be treated as genuine contracts. In support of the contention that as between the agent and the constituent, the contract was of a wagering nature, reliance was placed upon the facts that there was between them understanding that the respondent would not call upon the appellant either to give or take delivery. Their Lordships repelled this contention in these words:

'The respondent, as the appellant's agent, and acting in accordance with his mandate, made genuine contracts on his behalf with third parties in Bombay. Under these contracts both the appellant and the respondent were bound to the third parties either to perform their obligations or topay damages for their breach. The respondent having entered into these contracts as agent for the appellant, the latter was prima facie bound to indemnify the former against any liability incurred in respect of them. He was on the other hand, exclusively entitled to the benefit of them -- and a gain to the appellant would involve no loss to the respondent, nor would a loss to the appellant result in a gain to the respondent. The only remuneration to the respondent was his commission: See Forget v. Ostigny, (1895) A,C. 318. The understanding between them referred to above merely means that the respondent would, by covering contracts or otherwise, provide for or take the goods or pay the difference on the appellant's behalf. In all this, there is not, in their Lordships opinion, any element of wagering as between the two parties. As between them neither party stands to win from or lose to the other according to fluctuation of price or any other event. The very essence of a wager between them is thus absent'.

17. It will be needless for us to discuss the various decisions, which have been cited at the bar, because the law on the subject has been elaborately and succinctly laid down by Modi, J. in a decision o this Court in Surajmal v. Doongarmal, ILR (1958) 8 Raj 1162: (AIR 1959 Raj 27), where the authorities on the point have been amply reviewed. The decision, in our opinion, completely negatives the contention that the transactions in the present case were wagering transactions. Where the modus operandi of the business is for the defendant to put through such transactions through a broker or commission agent, the third parties not knowing the defendant fit all, then a strong inference arises against the existence of a common intention to wager though such a presumption can be rebutted in a particular case.

18. There is yet another way of looking at the matter. Where a suit is brought by an agent or a broker to recover his brokerage or commission in respect of transactions entered into by him as such, the suit can be successfully maintained even though the transactions in relation to which such claims are made are by way of wager. Such agreements being collateral to the wagering transactions cannot fall within the mischief of Section 30 of the Indian Contract Act, unless it is further established that the contracts which the commission agent or the broker entered into with third parties on behalf of his constituents were also wagering contracts as between the plaintiffs and these third parties.

The cause of action in such a suit is founded not directly upon the transactions themselves, but upon the obligation which rests upon the principal to indemnify the agent against the consequences of all lawful acts done by him in the exercise of his authority as an agent. This is based on the principle underlying Section 222 of the Indian Contract Act. Therefore, where an agent on behalf of his principal enters into a contract with a third party for the sale of certain goods, the principal cannot as against that agent plead the illegality of that contract as a defence in an action brought by the agent to recover from the principal his brokerage, commission or any money that he had to pay to the vendees on account of those transactions.

Similarly, in a converse case, where an agent receives money on behalf of his principal on wagering contract between him as such an agent and a third party, the agent cannot be allowed to set up the illegality of the contract as a defence in an action brought by the principal to recover from the agent the money so received. It thus follows that where the broker acts on behalf of his customer, even though the customer may gamble, the constituent cannot set up the plea of wager against the broker's claim. We might observe however that in view of our finding that the transactions were not in the nature of wagering contracts, these questions do not strictly arise.

19. The learned Judge in dealing with the validity of the transactions and the claim set up by the plaintiffs has also referred to Section 30-R of the Mewar Contract Act, 1942 which was in force when the transactions are said to have been made. The section is as under :

'No suit shall be allowed in any court of justice for recovering any commission, brokerage fee, or reward in respect of knowingly effecting or carrying out or of knowingly aiding in effecting or in carrying out or otherwise claimed or claimable in respect o such agreements by way of gaming or wagering or any such contract as aforesaid, whether the plaintiff in such suit be or be not a party to such last mentioned agreement or contract or for recovering any sum of money knowingly paid or payable on account of any persons by way of commission, brokerage fee, or reward in respect of any such agreement by way of gaming or wagering or contract as aforesaid.'

20. The language of the section is comprehensive enough to bar all suits even by commission agents for losses incurred by them on transactions by way of wacer made on behalf of their principals, if they knew that the transactions were of a wagering character; but the protection of this provision cannot be invoked by the defendants until it is found that the transactions were in the nature of wagers and as such even contracts collateral to those transactions could not be enforced in a Court of Law. We hold that in the circumstances of this case, Section 30-B of the Mewar Contract Act, 1942 was no bar to the plaintiffs' claim. Where the principal contracts themselves have not been established to be of wagering nature, there can be no question of collateral contracts whether of indemnity or otherwise to be assailed on that footing.

21. Lastly, the learned Judge appears to have thought that the transactions were hit by the Indian Cotton (Forward Contracts and Options Prohibition) Order, 1943 which is said to have been in force at the relevant time. To appreciate the contention, it should be noted that there were really two such Orders: one was the Cotton (Forward Contracts in Current Crops Prohibition) Order, 1943 and the other was the Cotton (Forward Contracts and Options Prohibition) Order, 1943. These Orders will be conveniently hereafter referred to as the first and the second Order respectively,

22. The learned Judge of this Court found that the first Order had no application to the case. Section 3 of the said Order prohibited persons from entering into contracts in respect of 'Current Crops'; and'Current Crops' was defined in the Order as Cotton sown before the 1st of March, 1943. Since it was nobody's case that the Cotton which was to be sold and purchased in the present case was of crop sown before the relevant date as mentioned in the Order, the inhibition of Section 3 of that Order was not attracted. The learned) Judge however, held that this Order read along with the second Order applied and vitiated the transactions in suit. Section 3 of the second Order runs as follows: 'No person shall enter into:

(a) any forward contract in respect of New Crops; or

(b) any option in cotton.'

23. 'Forward contract' was defined in the Order as a contract for delivery of cotton on some future date and 'new crop' was defined as any cotton crop sown after the 28th of February, 1943. The combined effect of the two Orders was that forward contracts were prohibited by the first Order about cotton sown before the 1st March, 1943 and by the second Order about crop sown after the 28th February, 1943. It must be conceded that it these Orders were in force at the time when the transactions in suit were made, and continued to be in force, the transactions would be illegal.

Although there is nothing on the record to show whether the cotton about which the transactions were made in the present case was sown before or after the 28th February 1943, since the transactions took place in 1947-48, the inference may be, as the learned Judge assumes though it may be somewhat speculative, that the transactions did relate to cotton sown long after the end of 1943. Even so, for the reasons which we proceed to state and some of which have been recognised by the learned Judge himself, we are unable to hold that the transactions are illegal as being opposed to the specific provisions of the Order in question.

By virtue of the notification No. 1631 of 1949 dated the 28th January, 1949, published by the Government of the United State of Rajasthan in Gazette dated 10-2-1949, the above Orders stood repealed. The said notification was issued in exercise of the powers conferred by Section 3 of the United State of Rajasthan Eassential Commodities Control Ordinance, 1948. As a further result of the notification, the Indian Cotton (Control) Order, 1945, made by the Central Government and published tinder its Notification No. 80-Tax. 1/48 dated 2nd August, 1948 together with all notifications, directions and orders, etc. issued thereunder or to be issued thereafter was applied to the whole of the United State of Rajasthan with immediate effect.

Section 7 of the Indian Cotton (Control) Order, 1945 which was brought into force abrogated and repealed the previous Orders. In this case as found by the learned Judge the transactions between the parties related to the cotton of the year 1947-48 and the dealings had taken place in October, 1947, though delivery was to be given on 24-2-1948 and 23-4-1948 respectively. The learned Judge observes that since the notification introducing the Indian Cotton (Control) Order, 1945 was published much later the previous Orders continued to operate on the date of the transactions and therefore the transactions were illegal.

This argument ingores the implications of Cl.(5) of the above Order of 1945 by which forward contracts relating to cotton of the year 1948-49 or earlier season were excluded from the provisions of the Control Order. This was in supersession of the Notification of the Textile Commissioner dated 19th January, 1946. Obviously therefore this clause of the Order had retrospective operation and rendered valid the transactions in question; but that apart, even accepting the argument that at the time when the agreements were made, they were unenforceable in a Court of Law and as such void when the inhibition was lifted they became enforceable and were validated by the operation of the Control Order ot 1945.

The agreements were not void ab initio, they became void or unenforceable due to the prohibition of the law and when the ban was removed, there was no further bar to their enforcement. We therefore hold that the transactions were no longer affected by the second Order of 1943 when the Order in question stood repealed. Besides the suit is really not one to enforce any contract relating to purchase or sale of cotton within the prohibition of the above notification or Order. It is a suit by an agent claiming indemnity against the Principal for the loss which the agent had suffered in carrying out the directions of the Principal.

The right to such indemnity, as pointed out earlier, was founded on Section 222 of the Law of Contract. The right to indemnity, which was an incident of the contract of agency was not hit by the provisions of the second Order at all and was a matter which was entirely collateral to a forward contract of purchase and sale of cotton which the provisions of the second Order aimed at prohibiting. The view of law stated above is fortified by the decision ot the Supreme Court in Kishanlal v. Bhanwar AIR 1954 SC 500.

24. The result is that the plaintiffs claim has been fully established and the various pleas in bar raised by the defendants as to the validity or enforcement of the contract have not been substantiated.

25. We accordingly allow this appeal, set aside the decision of the learned Judge and decree the plaintiffs' suit with costs throughout.


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