1. The plaintiffs, here respondents, obtained a decree against the two defendants, 2nd defendant being the petitioner in this Court, for Rs. 400 in the following circumstances: Plaintiffs, it is not disputed, owed 1st defendant Rs. 400 and, it is proved, paid it to 2nd defendant, 1st defendant's agent, as such. Second defendant, however, did not account to the 1st defendant for the money, misappropriating it. First defendant then obtained a decree for it against the plaintiffs who did not appear or plead discharge. On these facts the lower Court dismissed the plaintiff's suit against the 1st defendant; but gave a decree against the 2nd defendant; and the question in this revision petition is, whether it was right in law in doing so.
2. It is clear, that if it was not, plaintiffs will have paid what they owed twice. But that result cannot affect the decision because it is entailed, not by anything in the legal relation between the parties before me, plaintiffs and 2nd defendant, but by the failure of the former to take advantage in the previous suit against them of the plea of discharge, which was open to them. It was no doubt suggested on their behalf during the hearing of this petition that they should now be allowed to making defendant a party to it and claim a reversal of the lower Court's decree in his favour. But it would have been useless to allow this in the absence of any possibility that their contention would succeed. The case must be dealt with as between them and 2nd defendant alone on the issue whether, in the circumstances, they are entitled to recover from him in consequence of his failure to account to his principal.
3. Under Section 233, Indian Contract Act, in cases where an agent is personally liable, a person dealing with him may hold either him or his principal or both of them liable. But t is not shown how, under any provision of law or in virtue of any principle, 2nd defendant was under any liability to plaintiffs in respect of the money received by him from, them. This was the basis of the decision in Ellis v. Goulton (1893) 1 Q.B. 350 : 62 L.J.Q.B. 232 : 4 R. 267 : 68 L.T. 144 : 41 W.R. 411. Lord Esher and Smith, L.J., dealing with and rejecting seriatim the various heads of liability which could conceivably be relied on; and so also, although the reasons are given more shortly, in Bamford v. Shuttleworth (1840) 11 A. & E. 926 : 52 R.R. 542 : 113 E.R. 666 and Stephens v. Badcock (3). Against these authorities, plaintiffs have relied first, on the dictum of Blackburn, J., in Pollard v. Bank of England (1871) 6 Q.B. 623 : 40 L.J.Q.B. 233 : 23 L.T. 415 : 19 W.R. 1168 and Taylor v. Metropolitan Railway Co. (1906) 2 K.B. 55 : 75 L.J.K.B. 735 : 95 L.T. 149 : 32 T.L.R. 470 in which that dictum is quoted with approval. 'Where money has been paid under a mistake of fact to an agent, it may be recovered back from him unless he has in the meantime paid it to his principal or done something equivalent to payment to him, in which case the recourse...is against the principal only,' But in the present case, as in Ellis v. Goulton (1893) 1 Q.B. 350 : 62 L.J.Q.B. 232 : 4 R. 267 : 68 L.T. 144 : 41 W.R. 411 and the cases cited with it, there was no question of mistake, the absence of any being referred to explicity in Stephens v. Badcock (1832) 3 B. & Ad. 354 : I.L.J. (N.S.) K.B. 751 :37 R.R. 448 : 110 E.R. 133 and the two cases last referred to must be distinguished on that ground.
4. Plaintiffs, however, rely on' the fact that these are not cases in which fraud or dishonesty on the part of the agent was relied on and have referred to two of the headings under which the liability of the agent to refund money paid to him is classified in Bowstead on Agency, Article 125(b) and (c), p. 421, But of these the first 'when the money is obtained by duress or by means of any fraud or wrongful act to which the agent is party or privy' is not relevant. For it is not alleged that plaintiffs made their payment to 1st defendant otherwise than in the ordinary course, in discharge of what they owed his principal; and the lower Court was in fact inclined to find that he originally received the money honestly, failing to credit it correctly only through inadvertence. As regards the other head of liability referred to 'When the money is paid under a mistake of fact or under duress or in consequence of some fraud or wrongful act and re-payment is demanded of the agent before he has in good faith paid the money over to or otherwise dealt to his detriment with the principal in the belief that the payment was a good and valid payment,' it is sufficient that, as already observed, there is here no question of mistake of fact and there is none of duress or other misconduct on the part of the principal to which alone the learned author can be supposed to be referring, since he has already dealt with the cases of misconduct on the part of the agent. It is then immaterial that a demand may be taken to have been made in the present case on the former before he paid to the latter since the other conditions postulated are not fulfilled.
5. The plaintiff's reference to this authority in fact calls for notice mainly because the second citation from it purports to be founded on the old case of Gary v. Webster 1 Str. 480 : 93 E.R. 647. That case actually decided only that a clerk receiving money for his principal and paying it over to him although without making any entry in his account is not liable to the person who made the payment and the portion now relevant is only an accompanying obiter dictum that if the clerk had not made the payment over, he or his principal would have been liable at the plaintiff's option. No reason for this opinion is given and nothing later in the same sense has been shown and it is, therefore, unnecessary to regard the decision, in spite of the high authority of Lord Camden who gave it, as extending in any degree the two headings of liability based on the misconduct of either agent or principal above referred to. That failing, I follow the decision in Ellis v. Goulton (1893) 1 Q.B. 350 : 62 L.J.Q.B. 232 : 4 R. 267 : 68 L.T. 144 : 41 W.R. 411 and the two cases mentioned in it. In the absence of such misconduct in connection with the receipt of the money, of which refund is claimed, the basis of those decisions, the absence of privity between the agent and the person who paid him, would have been available equally, whatever the circumstances in which the former retained it. Shortly, 2nd defendant received it as his principal's money and plaintiff's who could have pleaded against 1st defendant that he did so, cannot by their failure so to plead enable themselves to recover from him.
6. The petition must be allowed, the lower Court's decree being modified as regards 2nd defendant by the dismissal of the suit against him with costs throughout.