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The South Indian Industrials Limited formerly known as the Arbuthnot's Industrials Vs. Mindi Rama Jogi and Ors. (17.09.1914 - MADHC) - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1915Mad509; (1914)27MLJ501
AppellantThe South Indian Industrials Limited formerly known as the Arbuthnot's Industrials
RespondentMindi Rama Jogi and Ors.
Cases ReferredGeorge v. Cleggett
Excerpt:
- - the defendant's family had been the firm's dubashes at masuli patam for many years and so continued until the failure. i dated 11-3-05 which was in force at the date of the failure. the special provision that the security should be for the due performance of all transactions including the purchase of gunny bags or other merchandise shows clearly that it was intended that business connected with the chittivalasa mill was to be done under this agreement, one of these agreements between the firm and the dubashes ex. 3. in the present suit the plaintiff company sues as principals to recover from the defendants the firm's dubashes the amount of the defendant's indebtedness at the date of the firm's failure on contracts entered into with the firm in respect of the chittivalasa mill which.....sir edward power wallis, kt. officiating c.j.1. it will be convenient in the first place to state briefly the facts which have given rise to this litigation. messrs. arbuthnot & co., herein after referred to as the firm, carried on business for a great many years in madras as bankers and general merchants until they were adjudicated insolvents on their own petition in october 1906. the firm for many years had an agency at bimilipatam,and according to the usual method of business made their purchases from local traders there through dubashes who guaranteed the transactions for a commission and gave security for the guarantee. the defendant's family had been the firm's dubashes at masuli patam for many years and so continued until the failure. purchases were made through them of other.....
Judgment:

Sir Edward Power Wallis, Kt. Officiating C.J.

1. It will be convenient in the first place to state briefly the facts which have given rise to this litigation. Messrs. Arbuthnot & Co., herein after referred to as the firm, carried on business for a great many years in Madras as Bankers and General Merchants until they were adjudicated insolvents on their own petition in October 1906. The firm for many years had an agency at Bimilipatam,and according to the usual method of business made their purchases from local traders there through dubashes who guaranteed the transactions for a commission and gave security for the guarantee. The defendant's family had been the firm's dubashes at Masuli patam for many years and so continued until the failure. Purchases were made through them of other produce besides jute such as indigo and gingelly seeds but of late years nearly all the purchases were of Jute to be used in the Jute Mill at Chittivalasa.

2. The conditions of business between the firm and the dubashes were governed by written agreements, which were renewed from time to time in consequence of changes in the dubashes' family, see Ex. II, dated 23-2-03 and Ex. I dated 11-3-05 which was in force at the date of the failure. Under these agreements, the dubashes were prohibited from transacting business as agents or dubashes for any other firm except Arbuthnot & Co. They were to guarantee delivery of all goods contracted for through them, and pay 121/2% of the value of the goods as liquidated damages for non-delivery, they were also to guarantee the repayment of advances made by the firm to.themselves or through them to local dealers, advances which are incidental to the sort of business. As security for the due performance of the terms and the conditions of the agreement and for the due performance of all present and future transactions between the dubashes and the firm 'including the purchase by the dubashes of gunny bags or other merchandise ' it was recited that the dubashes had deposited fifty thousand rupees with the firm which was to carry interest at 5 per cent.; in other words the defendants were to keep Rs. 50,000 on fixed deposit in the firm's bank as security for the liabilities they might incur as the firm's dubashes. In the last clause it was provided that the agreement was intended to operate, as an agreement between the dubashes and the firm of Arbuthnot & Co. whether it should continue as then constituted, or consist of other persons. The special provision that the security should be for the due performance of all transactions including the purchase of gunny bags or other merchandise shows clearly that it was intended that business connected with the Chittivalasa Mill was to be done under this agreement, One of these agreements between the firm and the dubashes Ex. II was entered into after the Chittivalasa Mill had been transferred to a limited company, the Chittivalasa Spinning and Weaving Company Limited owned by the firm, and the other (Ex, I) after that company had sold the mill to the present plaintiff's company, brought into existence in October 1906 to take over the industrial undertaking carried on by the firm. The firms were the managing Agents of both these companies and it may be added though it is not perhaps very material, that the firm had a very large interest in the Industrials as may be gathered from the order made by the Insolvency court Ex. 16 (a) and also from the allusion in the plaintiff's evidence to the sale of the Industrials by the Official Assignee.

3. In the present suit the plaintiff company sues as principals to recover from the defendants the firm's dubashes the amount of the defendant's indebtedness at the date of the firm's failure on contracts entered into with the firm in respect of the Chittivalasa Mill which contracts it is alleged were made by the firm as agents of the plaintiff Company. The main defences raised were that the defendants had never contracted with the plaintiff company; that they were unaware before the failure that the firm in these transactions were acting for the plaintiff company and were entitled to set off against the plaintiff's claim the greater sum of Rs. 50,000 deposited by them with the firm under Ex. 1 and that in any event in the circumstances of the case the plaintiff company should be allowed to sue the defendants without giving credit for Rs. 50,000 which the defendants had deposited with the firm as security for the performance of these as well as other transactions with the firm. The Subordinate Judge in a very lengthy judgment has upheld the last contention and has dismissed the plaintiff's suit.

4. It may be said at once that the defendant's contention that they did not know the firm were acting as agents of the plaintiff company in the suit transactions until after the failure in October 1906 is demonstrably false and is so found by the Subordinate Judge. The defendants from their intimate acquaintance with the affairs of the Mill must have known of its transfer to the Chittivalasa Spinning and Weaving Company, and also of its subsequent transfer by the latter to the plaintiff company; and their correspondence with the plaintiff company and the firm soon after the plaintiff company came into existence. Ex. I. series proves conclusively that they did. The plaintiff Company which was registered in January 1905 was to take over from 1st October 1904. The defendants were responsible for short deliveries on that year's contracts and applied to the firm that they might be allowed to complete these deliveries in the coming year, Ex. 12 dated 26th January 1905. From Ex. I, dated 10th February 1905, a letter from the firm's Bimilipatam Agent to the firm as managing agents of Arbuthnot's Industrials, Madras, it may be gathered that the firm had passed on L 2 to themselves as managing agents of the Industrials and that as managing Agents of the Industrials they sent a reply addressed to the defendants dated the 3rd February which was handed to them by the firm's Bimilipatam Agent. It is significant that the defendants do not produce this letter of the 3rd from the Industrials to themselves, but we have their answer to it Ex. L, dated 10th February 1905 addressed. 'The Managing Agents, Arbuthnot's Industrials Ltd.' in which they thank the Industrials for allowing them to deliver in next November and December 'the unfulfilled portion of Contracts of jute of the present crops.' This is the clearest proof that they knew that the firm was acting in these jute transactions as the Agents of the Industrials and indeed, as already observed, they could not have been unaware of it. Nonetheless all along down to the date of the firm's failure the contracts with the defendants for the sale and purchase of jute and advances were made in the name of the firm, and the defendant's account appears in the account books of the firm, and with the exception of Ex. L, the defendants are not shown to have directly corresponded with the firm, though the correspondence between the firm and the Industrials goes to show that communications may have passed verbally through the firm's Agent at Masulipatam. The appellants case was that in these transactions the firm acted as agents for the plaintiff company to the knowledge of the defendants, and were therefore disentitled to avail themselves of the defence of set off or any other equitable defence under Section 226 of the Contract Act. This of course assumes that in these transactions with the defendants the firm were acting as agents for the plaintiff company and not as principals.

5. Assuming that the firms are to be considered as having acted as Agents for the plaintiffs in their dealings with the defendants, which seems to have been the view taken in the Lower Court, still having entered into these contracts in writing in their own name, and without mentioning their Agency, they ' could sue and be sued upon by them because, as ruled in Higgins v. Senior (1841) 8 M.& W. 334, to hold otherwise would be to vary the terms of the written contract.

6. Secondly, it seems clear that in such a suit on these contracts by the firm against the defendant, the defendants would have been entitled to rely on the 50,000 Rs. deposited by them with the firm as bankers to secure their performance of these and other contracts with the firm, as the amount of the deposit is largely in excess of the sum sued for and there are no other claims against it on the part of the firm. Where the Agent enters into a written contract in his own name there is a contract enabling him to sue and be sued on it within the meaning of Section 230 of the Indian Contract Act,

7. None the less of course, the plaintiff Company as Principals would ordinarily be entitled under Section 226 to sue on Contracts and entered into by the firm as their agents in the same way as if the contracts had been entered into by the plaintiff company itself and if the defendants neither knew nor had reasonable ground for suspecting that in the contracts sued on, the firm had been acting as agents, the plaintiff Company could only have succeeded, subject to the rights and obligations subsisting between the firm and the defendants, and in the circumstances of the case the latter would in my opinion have been entitled to set up their claim to the Rs. 50,000, by way of equitable set off.

8. But, as already stated it is clearly proved that the defendants well knew of the relations between the firm and the plaintiff company and if so, they (defendants) are not entitled to rely on such a defence. The Subordinate Judge has held I think rightly with reference to this section that the defendants are not entitled to set off their claim against the firm the Agent, but has held further the deposit of Rs. 50,000 by the defendants with the firm as security for the performance of this and other contracts with the firm creates an equity in favour of the defendants which justifies the dismissal of the suit. That would be so, if Section 232 applied, but as I have held, it has no application, seeing that the defendants knew of the relations between the firm and the plaintiff company and in these circumstances it seems to me that the defendants are not entitled in a suit by the plaintiff company as principals to rely on any defence resting on the rights and obligations subsisting between the firm (the agent) and the defendants, whether the defence be set off or any other equity.

9. For these reasons I am unable to uphold the action of the Subordinate Judge in dismissing the suit on the ground of an equity subsisting between the plaintiff's agents, that is to say the firm and the defendants.

10. Mr. S. Srinivasa Aiyangar has however contended that in this case the plaintiff Company have no right to sue at all as the transactions which gave rise to the suit were intended to be exclusively between the firm and the defendants. Such a defence would undoubtedly be available if proved in English Law. In Story on Agency Article 413 it is observed 'Another exception is where an exclusive credit is given to and by the Agent; and, therefore, the principal cannot be treated as in any way a party to the contract, although he may have authorized it or may be entitled to the benefit of it.' And in the Montgomerie's case (1891) 1 Q. B. 370. Wright J. laid down and applied the same rule. ' In all cases the parties can by their express contract provide that the Agent shall be the person liable either concurrently with or to the' exclusion of the principal, or that the Agent shall be the party to sue either concurrently with or to the exclusion of the principal.' See also Nevill's case (1887) 19 Q. B. D. 110 and Leslie's case (1887) 22 Q. B. D. 722.

11. Under the Indian Contract Act the Principal's right to enforce a contract entered into by his Agent rests on Section 226, which does not contain the words 'in the absence of a contract to the contrary' which are to be found in Section 230, negativing the Agent's right to sue and be sued in the absence of a contract to the contrary. Even so, I am not prepared to hold that a Principal might not contract himself out of his right to sue on the contract under Section 226 on the principle unique licet remuntiara Juri prosee introducto their being no provision against contracting out. It would of course be necessary to prove such an agreement unless the relation of the defendants, to the firm was that of sub-agents in which case there would clearly be no privity between the plaintiff company and the defendants. See Section 192 of the Indian Contract Act.

12. Putting aside the question of sub-agency for the moment, I think the evidence on record is sufficient to prove an agreement disentitling the plaintiffs to sue of the kind referred to in Mr. Bowstead's Digest of the Law of Agency, Article 90.

13. It is admitted by Mr. O. Hearar the plaintiff's only witness and abundantly proved by the documents exhibited that business between the firm and the Dubashes went on in exactly the same after the creation of the Chittivalasa and Industrial Companies as before. The suit contracts for the purchase of Jute, A series, and the sale of gunnies E series were in turn between the defendants and the firm. K. series are delivery orders of gunny bags to the defendants by the firm's Agents. According to the evidence of witnesses the firm's Agent was not asked to change the mode of correspondence or make any change in the modes of dealing after the Industrials were opened. Exhibits IV and VI series are contracts between the firm's agent and the defendants. Exhibit V dated 10-1-03 during the time of the Chittivalasa Company is from the firm's agent to the defendants 'enclosing your Jute account with Messrs. Arbuthnot and Co.' Exhibit VIII dated 23rd July 1906 is from the firm's agent to the Defendants enclosing a memo of gunnies purchased for them and of their commission as to which reference is made to the firm's letter dated 7th December 1894. Exhibit IX series are orders for gunnies between the firm's agent and the defendants. X series are the gunny contracts and XI series the receipts by the firm's agent for the price of the gunnies and XII series are delivery orders issued by the firm's agents to the defendants.

14. Formerly therefore the suit contracts the accounts and the correspondence were all along between the firm and the defendants and the formation of the Chittivalasa and the plaintiff companies made no difference at all.

15. Then as to matters of substance it is perfectly clear that the suit contracts were intended to come under the provisions of the agreement between the firms and the defendants Exhibit I, which was entered into in removal of former contracts at a time when the plaintiff company had come into existence just as the earlier agreement in the same terms. Exhibit II was entered into between the same parties in the time of the Chittivalasa Spinning and Weaving Company.

16. Secondly, it is clea that these agreements Exhibits I and II were entered into by the firm as principals because they cover other business of the firm with which the plaintiff company was hot concerned. These contracts expressly stipulate at the contract, that the defendants were not to transact business either as agents for or Dubashes of any individual or firm other than the firm of Messrs. Arbuthnot and Co. and of this the plaintiff company were aware as Messrs. Arbuthnot and Co. were their managing Agents. Further in all the documents the defendants are addressed as Messrs, Arbuthnot and Co. as Dubashes.

17. On the above facts it seems to me that the reasonable inference is that the suit dealings of the Dubashes were intended to be with their firm exclusively in accordance with Exhibit I and I, may further refer to Exhibit IV filed by the plaintiffs dated 24th May 1900, in which the defendants say that 'they were tied hand and foot and prevented from having any sort of dealing with any other firm.' I do not think the fact formed by Exhibit E series that the defendants knew the firm were the Agents of the Plaintiff company and that in one instance LI they answered a letter addressed to them by the plaintiff company and the fact that the terms of the contract were settled in correspondence with the firm's agent at Bimilipatam and the plaintiff company (Exhibit J series) even if brought home to the defendants are sufficient evidence to show that they intended to depart from the terms of Exhibit I and deal with any one but the firm of Arbuthnot & Co.

18. It seems to me however that the right view of the case on the above facts is that the defendants were the sub-agents of the firm of Arbuthnot & Co. who were the Agentsof the Plaintiff Company and that under Section 192 of the Indian Contract Act and the decisions there was no privity between the Plaintiff Company and the defendants and that on this ground the present suit should have been dismissed. In all these transactions the defendants acted and were addressed as Messrs. Arbuthnot & Co. Dubashes, that is to say, as intermediaries between the firm and local dealers and guarantors of the firm's transactions.

19. The position of Dubashes in this part of India is much the same as that of Banians in Northern India which was considered in Peacock v. Baijnath I.L.R. (1891) C. 573, by Wilson and Cunningham JJ. in a passage of their Judgment at p. 586 which was subsecquently approved by the Privy Council on appeal.

20. The observations of Sir Lawrence Peel in Orr Ewing's case (1853) Bowl. 534, that a Banian is a sub-agent of a peculiar kind wasquoted with approval and the learned fudges observed; 'This case is really much stronger than the many cases in England in which it has been held that no privity existed between the foreign Principals and English Sub-agents, such as the New Zealand and Australian Land Company v. Watson (1881) L.R. 7 Q. B.D. 374, and Kaltenback v. Lewis (1885) 10 A.C. 627, because the Banian is in.the permanent employment of the Calcutta firm.' Here it may be added that such employment of the defendants by the firm was not only permanent but conclusive.

21. The conclusion I have come to is that the defendants acted as the Sub-Agents of Arbuthnot & Co., who were the managing agents of the plaintiff company that there was no privity between the plaintiff and the defendants and that both on this ground and on the ground already stated the present suit fails,-and the appeal must be dismissed with costs.

22. The memorandum of objections is dismissed.

Seshagiri Iyer, J.

23. I entirely agree with the conclusion at which the, learned Chief Justice has arrived. The questions involved are of some importance, I shall state my own reasons for the conclusion.

24. The late firm of Arbuthnot & Co. had a gunny factory at Chittivalasa. They had also a spinning and weaving mill there. The defendants and their father were the agents and dubashes of the Company since 1890. A sum of Rs. 50,000 was deposited by them with the Company in fixed deposit as security for the due performance of their duties as agents and dubashes. This deposit was being renewed from time to time, It remained with the Company until their insolvency in 1906. These facts are not disputed.

25. In January 1905, Arbuthnot & Co. converted the business in Chittivalasa into a limited Company known as Arbuthnot's Industrials, Plaintiffs are the successors in title of this new Company. It is in evidence that this new Company was worked by Arbuthnot & Co., as managing agents. I do not think this fact admits of any doubt. I am also satisfied that the defendants were aware of the starting of the Industrials. Exhibits L and LI are clear on this point. I do not think, however, these documents establish that the defendants undertook to transact their business in future with the new Company. It is true that they received a letter from the Industrials informing them of the extension of time for performance of their contract, and they addressed their reply to them; but I am not satisfied that this communication fixes them with an undertaking to deal thenceforward with the new Company. In the view that I have taken of the subsequent contract, this may not be material; but I think it right to state my conclusion upon the contention raised by Mr. Richmond that, it is proved by Exhibit LI that the defendants accepted the plaintiffs prede-cessor-in-title in the place of Arbuthnot & Co.

26. Exhibit LI was in February 1905. On the 11th of March 1905, Arbuthnot & Co., entered into a new agreement with the defendants (Exhibit I). The object of this agreement was much commented upon at the bar on both sides and as my decision rests to a great extent upon the view I take of it I shall deal with it in some detail. Mr. Richmond says that this agreement was not entered into by Arbuthnot & Co., as managing agents of the Industrials. I think he is right. At the same time, I feel no doubt that it was under this agreement that jute wag supplied by the defendants and that gunny bags were purchased by them. Paragraph 2 of the agreement refers to 'the due delivery of all goods contracted for.' This includes contracts for the supply of jute. It is not pretended that the defendants contracted to deliver jute to Arbuthnot & Co., prior to the formation of the Industrials under any other contract. The previous contracts renewed by Exhibit I contained the same terms. There is no force in the contention of the learned Counsel for the appellant that the contract to supply jute was dehors this instrument. Clause 7 of Exhibit I refers to the purchase of gunny bags. Clause 6 provides for the deficit due from the defendants being met from the security amount. Thus it is clear that after the floating of the Industrials and after Exhibit LI, defendants contracted with Arbuthnot & Co., not as age/its of the Industrials, but admittedy as principals to supply jute to them to purchase gunny bags from them and to the deposit of Rs. 50,000 being held as security for the due performance of these contracts. It is not alleged or proved that these defendants supplied to Arbuthnot & Co., any jute or purchased bags other than those relating to the subject matter of this suit. Prima facie therefore, the plaint transactions were with Arbuthnot & Co., as principals. One very good reason why Arbuthnot & Co., dealt with the defendants in their own name is, otherwise they would have had to refund the deposit amount.

27. It has been argued that the contracts sued for were under Exhibits A and E series which have no reference to Exhibit I.

The language of these A and E series contracts does not hold the appellant. They are entered into by the defendants as Dubashes and Agents of Arbuthnot & Co., with Arbuthnot & Co., without indicating that the latter were Agents for others. It is conceded that the defendants were not the Dubashes of the Industrials at any time; but it is said that the defendants knew that Arbuthnot & Co., were the managing Agents of the Industrials, and that the evidence establishes that it is only as such Agents they entered into the contracts with the defendants.

28. Mr. Srinivasa Aiyangar objects to the admission of this parol evidence. He relies upon Section 92 of the Evidence Act and quotes an obiter dictum of Wilson J. in Soopromoniam Chetti v. Heilgers I.L.R. (1879) C.71 in support of his position. As pointed out in Venkata Subiah Chetty v. Govindara julu Naidu I.L.R. (1907) M. 45 the question whether one of the contracting parties was acting for himself or on behalf of a principal does not relate to the terms of the contract. Bateman v. Phillips (1812) 15 East 272 : S.C. 104 E. R 847 is a direct authority in favour of the admissibility of parol evidence under such circumstances. See also Bowstead on Agency, Article 90 and the cases quoted under it. But there can be no doubt that prima facie a contract by a person in his own name without more is a contract by him as principal. The authorities quoted by Mr. Srinivasa Aiyangar fully bear out this proposition. Vide Dutten v. Marsh I.L.R. (1871)S.Q.B. 361. The case of Parker v. Winlow (1857) 7 E.B 1942. : 27 L.J. Q. B. 405 : 119 E.R. 1497 is an extreme case. Even though the principal was disclosed, the personal liability of the Agent was upheld on the ground that he did not sign as Agent. There is nothing in Section 230 of the Indian Contract Act which makes a departure from the rule of English law, as contended for by Mr. Richmond. That section is not exhaustive of the rules of evidence. There is no authority for the position that only in the cases mentioned in the section, presumption as to the nature of the liability of the contracting party arises. In the case before us the Principal's name is not disclosed and the person signs for himself. The presumption is therefore strong that the contract was with Arbuthnot & Co., as Prinsipals.

29. Mr. Richmond relies upon Exhibit J. series to rebut this presumption. It appears from these documents that Arbuthnot & Co., debited the Industrials with the advances made to the defendants under the contracts. These adjustments have not been shewn to have been done with the knowledge and consent of the defendants. On the other hand this correspondence (Exhibit J. series) reads as if the contracting party was still Arbuthnot & Co., and that they were transferring the purchases and sales made by them to the account of the Industrials. There is no satisfactory evidence that the defendants were aware of the correspondence contained in J. series. The fact that large sums of money were advanced to the defendants shows that it was on the strength of the security lodged by them as Dubashes that it was done. As practically no other business was done by the defendants with Arbuthnot & Co., if the intention was to enable the Industrials to start business with the defendants on a new footing, the deposit would have been returned or transferred to the new company. Neither of these things was done and I have no hesitation in holding that the defendants did contract and believed they were contracting only with Arbuthnot & Co., in supplying jute and in purchasing the gunny bags. This position is rendered clearer still by a reference to Exhibit VIII. That document shows that for the A series contracts, the defendants received a commission of one per cent, as Dubashes. Under A series, there is no right to any commission; and it was admitted that there was no separate agreement for any commission with the Industrials. As I said before, the defendants were never the Dubashes of the Industrials. It is clear to my mind from these facts that the defendants transacted the plaint business only with Arbuthnot & Co., as their Dubashes. It was argued that as the jute was to be supplied at Chittivalasa and the gunny bags were to be taken from there, it fixed the defendants with the knowledge that the contract was with the new Company. I do not see any force in this. These articles were sold and purchased even before the floating of the Industrials at Chittivalasa and the place of performance of the contracts continued to be the same.

30. Mr. Ohearan who gave evidence as plaintiff's first witness makes admissions which shows that there was absolutely no change in the mode of transacting business at Chittivalasa in consequence of the formation of the Industrials. This is what he says:

I do not remember whether any change was made in the modes of dealing after that spinning and weaving company was formed. We were not asked to change the mode, of correspondence or make any change in the modes of our dealings after the Industrials were floated. We received intimation to change the mode of accounts. I have not produced that intimation paper in Court; separate accounts in the name of the Industrials were opened. It is that account book. In II there is nothing to show that it was opened or kept in the name of Industrials. I see the book shown to me (III). There is no separate katha in it opened in the name of Arbuthnot Industrials prior to the insolvency of Artbuthnot & Co. Ill is the account book of Industrials itself. There was no change in the mode of corespondence between Arbuthnot and Co., and the defendants after the Industrials was floated. This is a letter sent by the Agent Mr. Greenfield to the defendants (VIII), The same commission was being allowed to the defendants although from 1895. The system of advances of monies under contracts for jute has been enforced althrough both prior and subsequent to the floatation of the Industrials. These are the letters that passed between the Agent of Arbuthnot & Co., and the defendants (IX Series). There was no change in the mode of correspondence. These are the gunny contracts (X). They were in the same form althrough. These are the receipts granted by the Agent for the value of the gunnies' received from the defendants (XI Series). The receipts were in the same form althrough.

31. My conclusion on the facts are (a) that the business of Arbuthnct & Co., in Chittivalasa was transferred to the Industrials in 1905; (b) that the defendants were aware of this; (c) that even after this Arbuthnot & Co., continued their dealings with the defendants as Principals and not as Agents of the Industrials; (d) that the defendants had no reason to believe that Arbuthnots were acting in the sale and purchase of jute and gunny bags only as Agents of the Industrials and not for themselves; and (e) the appropriations of the plaintiff's company of the jute supplied by the defendants and debiting them with the price of the bags purchased must have been in pursuance of an understanding between Arbuthnot and Co., and the plaintiffs of which the defendants had no knowledge. I am. inclined to think that Arbuthnot & Co., never severed the relationship subsisting between themselves and the defendants and that the plaintiffs were aware of this.

32. On these findings of fact, it follows that as the plaintiffs knew that the defendants and Arbuthnot & Co. were independent contracting parties, they can have no right of action. Even granting that the plaintiffs were not aware that Arbuthnot & Co., were dealing with the defendants with their own interests, the Industrials cannot put themselves in a more favourable position than their managing Agents. The principle of Section 231 of the Contract Act is this-As against the Agent transacting business in his own name, the Principal can claim the full benefit of the contract; as against the party contracting with the Agent, the Principal is bound by the equities subsisting between the Agents and contracting party. Even as against the Agent, it has been rightly remarked that the Principal must take the benefit with the burden. He cannot both approbate and reprobate with refer, ence to the ordinary incidents arising out of the contract. See Joachinson v. Meghjee Vallabhdas I.L.R. (l909) B 292. In claiming the benefit of ' a contract from a stranger the principle applies with greater force. The Principal, if he wants to enforce the contract must stand in the shoes of the Agent and practically sue sub modo. The observations of Lord Campbell (The Lord Chancellor) in Bristowe v. Witmore (1861) 9 H.L.C. 891 applies to this case. His Lordship said ' the principle which must, I think, govern this case is one of universal application, namely, that where a contract has been entered into by one man as Agent for another the person on whose behalf it has been made cannot take the benefit of it without bearing its burthens. The cantract must be performed in its integrity. Here the appellant, as agent for the owner now represented by the respondents, stipulated for certain benefits in consideration of certain burthens which he undertook to bear, and certain labours which he undertook to perform. If he had authority to enter into such a contract the principal is of course bound. If he had not authority, then the Principal may repudiate the contrast; but he cannot take that part of it which is beneficial to him without performing that which is onerous.' Wright J. in Montgomerie v. United Kingdom Mutual Steamship Association (1891) 1 Q. B. 370. points out that ' where the Principal is an undisclosed Principal, he must, if he sues, accept the facts as he finds them at the date of his disclosure, so far as those facts are consistent with reasonable and proper conduct on the part of the other party.' The decision of the Court of Appeal in ex parte Dixon : in re Henley (1876) L.R. 4 Ch. D. 133 shows that if the third party had no reason to believe that the Agent was not transacting business in his own name, the principal is bound by the obligations he had subjected himself to in the course of the transaction. The same principle is laid down in Borrics v. Imperial Ottoman Bank (1873) L.R. 9 C.P. 38 accepting as well established the dictum of Willis J, Semenza v. Brinslay (1865) 18 C. B.N. S.S.C. : 31 L.J.C.P. 161, to the effect 'In order to constitute a valid defence with in the rule in George v. Cleggett : (1797) 7 Term. Rep. 359101 E.R. 1019, the plea should show that the contract was made by a person whom the plaintiff has intrusted with the possession of the goods, that the person sold them as his own goods in his own name as principal with the authority of the plaintiff, that the defendant dealt with him as and believed him to be, the principal in the transaction, and that before the defendant was undecieved in that respect the set-off accrued.' The facts I have found bring this case within the above rule.

33. In the Cyclopedia of Law and Procedures Volume XXXI page 1598, the proposition is thus succinctly stated 'And where a Principal accepts a contract made by the Agent, he takes it as the Agent made it, and subject to all equities and defencesarising out of the conditions thereof, and the means and instrumentalities bywhich the Agent procured, even though the Agent acted without authority or inexcess of his powers.' See also I Halsbury Section 447. In the present case it is admitted that the amount of the plaintiff's claim can be met fully from the money deposited in Arbuthnot & (Co.; consequently plaintiffs are not entitled to any decree against the defendants.

34. For all those reasons, I am of opinion that the suit fails I would dismiss the appeal with costs.


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