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Kondayya Chetti Vs. Narasimhulu Chetti - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Judge
Reported in(1897)ILR20Mad97
AppellantKondayya Chetti
RespondentNarasimhulu Chetti
Cases ReferredJafferbhoy Ludhabhoy Chattoo v. Charlesworth I.L.R.
Excerpt:
.....that intention, being clearly indicated, is as valid and as effectual for the creation of an interest in the consignees as if it were expressly stated. if the consignees bad such an interest the authority to sell could not be revoked to the prejudice of such interest, except in accordance with an express contract reserving such power to the defendant, but of such express contract there is no proof in this case. 11. the authority to sell at the consignee's discretion, and without reference to the consignor is given in the consignment note in the widest terms, and the only limit imposed is that the price should be 'the best obtainable. the plain meaning of the words is that the consignee is to choose the time and mode of sale without reference to the consignor and obtain the best..........which deal with the right of a factor who has made advances on goods consigned to him for sale to sell them invito domino; and we are not disposed to dissent from his conclusions as to the general result of those cases. we are, however, of opinion that those cases do not decide the exact question which arises in the present case, nor do we think that the present case can be decided by a reference to the english authorities alone. the indian contract act (ix of 1872) is the law with reference to which the rights of the parties in the present case must be decided. we are not prepared to say that the law on the matter in issue, as laid down in the indian contract act, differs from the law. which prevails in england, but if it does differ we are bound to decide in accordance with.....
Judgment:

1. Plaintiff and defendant are merchants trading in Madras. The defendant used to consign goods to Messrs. Von Glehn and Co. of London for sale. The consignments were made through the plaintiff. As each consignment was shipped, the defendant drew on Von Glehn and Co. for the value in favour of the plaintiff, who negotiated the drafts with a Bank, and paid the proceeds to the defendant. The course of business was to have the goods valued and sold in London by Von Glehn and Co., who repaid themselves out of the proceeds, and in case of a shortfall, drew on defendant for the amount. If defendant failed to pay the redraft plaintiff was bound to do so. He, in fact, guaranteed Von Glehn and Co. On certain transactions of the above character which took place in 1893-94, there was a shortfall amounting in all to Rs. 4,765, Von Glehn and Co., drew on defendant for the amount, but he refused to honour the drafts, and the plaintiff then paid them. The plaintiff's present suit was to recover the sum so paid.

2. The substantial defence was that Von Glehn and Co. sold the goods under the limits imposed by the defendant, and that the latter was, therefore, not bound to pay the shortfall.

3.The learned Judge who tried the case found for the defendant on the above issue and dismissed the suit. Plaintiff appeals on the ground, inter alia, that under the terms of the contract with defendant, and in all the circumstances of the case Von Glehn and Co. had power to make the sales, notwithstanding the limits imposed by the defendant. The learned Judge has referred at some length to the English authorities which deal with the right of a factor who has made advances on goods consigned to him for sale to sell them invito domino; and we are not disposed to dissent from his conclusions as to the general result of those cases. We are, however, of opinion that those cases do not decide the exact question which arises in the present case, nor do we think that the present case can be decided by a reference to the English authorities alone. The Indian Contract Act (IX of 1872) is the law with reference to which the rights of the parties in the present case must be decided. We are not prepared to say that the law on the matter in issue, as laid down in the Indian Contract Act, differs from the law. which prevails in England, but if it does differ we are bound to decide in accordance with the Indian Act. This proposition is, indeed, self-evident, and the principle has recently been strongly affirmed by LORD HERSCHELL in Bank of England v. Vagliano (1891) A.C. 144 in these words: 'I think the proper course is, in the first instance, to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with enquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. If a statute intended to embody in a code a particular branch of the law, is to be treated in this fashion, it appears to me that its utility will he almost entirely destroyed, and the very object with which it was enacted will be frustrated. The purpose of such a statute surely was that on any point specially dealt with by it, the law should be ascertained by interpreting the language used instead of, as before, by roaming over a vast number of authorities in order to discover what the law was.' He then refers to circumstances in which a reference to prior authorities is legitimate and proper, as, for instance, where the words of the statute are of doubtful import, and adds: 'What, however, I am venturing to insist upon is, that the first step taken should be to interpret the language of the statute, and that an appeal to earlier decisions can only be justified on some special ground.'

4. It is to be observed that no evidence of the general custom of merchants in Madras in reference to the matter in issue has been given, so that we are left to decide it by applying the provisions of the Indian Contract Act to the terms of the contract entered into between the parties and the general course of their business.

5. Section 202 of the Contract Act runs as follows: Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest'; and illustration (b) shows how the rule may be applied in a concrete case, as follows: A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death.'

6. The terms of the contract between the parties, so far as those terms are express, are contained in the consignment notes, which are all worded in the same way. The following is one of them:

Madras, 10th October 1893. To Messrs. Robert Von Glehn and Sons, London.

Dear Sirs,

I have the pleasure to advise consignment to your care for sale on my account through Mr.A. Kondayya Chetti.V.N. 1/2=2 B 1 Blue Salempores. ' 29/35=7 B ' 1/5=C 1 Bees wax.per C/Macdonald against which I have valued on you at three months' sight for 205 and I beg your acceptance of my drafts.

7. I hereby authorize you to sell the above goods at the best price obtainable without reference to me and I give you full discretionary power to act on my behalf to the best of your judgment in regard to such sale, and in all matters connected with the management of this consignment.

8. Should there be any shortfall, after realization of the above consign ment, I hereby authorize you to draw on me for the amount and I engage be honour such draft and to pay it on ' presentation, without disputing the sales or the accuracy of account sale and account current rendered by you.

I further hereby declare that this letter has been read and explained to me and I fully understand its meaning.I remain, dear Sirs, Yours faithfully, V. Narasimmulu Chetti.

9. It seems to us that the reasonable interpretation of this contract is that the consignee shall have authority to sell the goods at his discretion, and repay himself the advance out of the proceeds, drawing on the consignor in the event of a shortfall. The course of business between the parties shows that Von Glehn and Go. were intended to recoup themselves out of the sale proceeds and to draw on the defendant for any shortfall.

10. Illustration (b) seems to us to be in point. The learned Judge in one passage, following a remark of Sir C. SARGENT, C.J., in Jafferbhoy Ludhabhoy Chattoo v. Charlesworth I.L.R. 17 Bom. 543 denies the applicability of the case in illustration (b) to the present case on the ground that the power to sell is, in illustration (b), given ' expressly' for the purpose of enabling the consignee of the goods to repay himself the advances made. No doubt in the illustration the authority to so appropriate the sale proceeds is expressly given, but in the Section itself there is no limitation to cases where the authority is so expressly given. In the Section itself all that is necessary is that the agent should himself have 'an interest in the property,' to ho sold, and it seems to us that such interest may be inferred from the language of the document and from the course of dealings between the parties,' and need not be expressly given. It is the existence of an interest, not the mode in which it is given, that is of importance. The terms of an illustration are not always co-extensive with the terms of the Section, or proposition of law, intended to be illustrated; and it is contrary to true principles of interpretation to cut down the scope of a Section by a reference to its illustrations. Apparently if the consignment note had said in express words 'you are to repay your self the above advance out of the sale-proceeds of the consignment' the learned Judge would have considered Section 202 applicable, and the authority to sell irrevocable, and would have decided in plaintiff's favour. As already stated ,there is nothing in the Section to show that the authority to appropriate the sale proceeds to the debt must be ' expressly ' given, nor can we find any ground in reason for such a limitation, The provision in the consignment note that the consignee is to sell at his discretion and in the event of a shortfall is to draw on the defendant, taken with the course of business between the parties, shows that it was their intention that Von Glehn and Co. should repay themselves the advances out of the proceeds. That intention, being clearly indicated, is as valid and as effectual for the creation of an interest in the consignees as if it were expressly stated. If the consignees bad such an interest the authority to sell could not be revoked to the prejudice of such interest, except in accordance with an express contract reserving such power to the defendant, but of such express contract there is no proof in this case.

11. The authority to sell at the consignee's discretion, and without reference to the consignor is given in the consignment note in the widest terms, and the only limit imposed is that the price should be 'the best obtainable. The plain meaning of the words is that the consignee is to choose the time and mode of sale without reference to the consignor and obtain the best price available in the market. It was open to the consignor to have made it a part of the contract that he might impose limits from time to time, and, had he done so the consignee who was making advances, would have been able to protect himself against the greater risk that he would have thus run. But the consignor expressly gave up to the consignee the discretion with regard to sale, and it can hardly be doubted but that his doing so enabled him to obtain better terms in regard to the advances. It seems to us unreasonable to hold that, under these circumstances, the consignor could on the next day revoke the authority to sell or that the consignee would allow him to do so without consideration. The consignor by placing too high a limit on the goods might keep the consignee out of the money he had advanced for a far longer time than that contemplated, and in the end leave him without remedy, except the slow and inadequate one of a suit to recover the advances. No doubt the letters between defendant and Von Glehn and Co., show that the former imposed limits after the consignments were sent, and neither plaintiff nor Von Glehn and Co., at first repudiated, or protested against, his right to do so. Von Glehn & Co., protested against the advisability of his holding out for impossible prices, and put off sales in deference be his wishes, but we do not think that this action amounts to an admission by Von Glehn & Co., that they were bound, in all circumstances, to obey his instructions. They were naturally anxious to please a client and to defer to his wishes but when the market continued to fall month after month, and the security in their bauds to become less and less, they at length resorted to the power of sale given to thorn and sold without regard to the limits named by the defendant. They would, no doubt, have postponed the sales still further if defendant had complied with their request to remit them a sufficient sum to cover the estimated fall in the value of the goods, so that the security in their hands might still be sufficient, but this the defendant did not do. In these circumstances it seems to us that the consignees were justified in exercising their legal right of sale, instead of allowing the security in their hands to diminish still further.

12. We must, therefore reverse the decree and give judgment for plaintiff as sued for with costs throughout.


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