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H. Muhamed Sultan Vs. R.J. Mohamed Yakub - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported in(1970)2MLJ443
AppellantH. Muhamed Sultan
RespondentR.J. Mohamed Yakub
Cases ReferredMuncherji Bomanji Panthaki v. Dorabji Jehangir Randiva I.L.R.
Excerpt:
- .....: air1940mad504 , on which the lower appellate court has relied, is in support of the view that a suit for accounts by an agent against the principal is not maintainable. the main question that arose for consideration in that case was whether the district munsif exercising jurisdiction under the provincial small cause courts act, 1887, was right in entertaining the suit in that case. the plaintiff was the agent of the defendant and his duty was to collect the rent due to the estate of the defendant. he was dismissed and thereupon he filed a suit to recover a specific sum, which according to him was due after taking into account what he had collected as rent, what he had expended and the salary due to him. the objection raised was that in effect the suit was one for rendition of.....
Judgment:

K.S. Palaniswamy, J.

1. The plaintiff having failed in both the Courts below has come up with this second appeal. The suit is to direct the defendant for rendition of accounts in respect of the moneys said to have been received by him from and on behalf of the plaintiff from 1946 till date of suit and to pay the plaintiff such amount as may be determined by the Court. Tentatively, the plaint is valued at Rs. 5,100. Both the Courts below held that the plaintiff had failed to establish any liability on the part of the defendant to render accounts.

2. The facts are these : The defendant is the maternal uncle of the plaintiff. The plaintiff lost his father when he was just a lad of three years. The plaintiff's mother died within 3 years thereafter. The plaintiff has five sisters, one of whom is married by one Abdul Razack. The said Abdul Razack was looking after the properties of the plaintiff. The defendant is doing mundy business at Erode. The plaintiff's case is that in about 1946, the defendant suggested to him to transfer all his cash with him, so that he could invest the cash at favourable terms for the benefit of the plaintiff for the purpose of augmenting the income, that the plaintiff agreed with the suggestion and made over certain amounts to the defendant in 1946, that subsequently in 1949, bigger amounts were transferred to the management of the defendant, that the defendant took up complete management of the plaintiff's affairs, collected rent from the properties of the plaintiff and credited the income to his account and met expenses, that in 1949, the defendant employed the plaintiff in his mundy business on a salary of Rs. 150 per month and that the salary and bonus due to the plaintiff were credited in the plaintiff's account from time to time and the plaintiff was being maintained and fed by the defendant himself in his house. The plaintiff further alleged that he reposed complete confidence and trust in the defendant, his maternal uncle, that in June, 1957, when the plaintiff got married, large presents were received which also were entrusted with the defendant and that the defendant was thus acting in a fiduciary capacity in respect of the affairs of the plaintiff and of his assets in the position of a trustee. The plaintiff further alleged that in 1958, misunderstandings arose between him and the defendant, that with a view to defraud him the defendant attempted to make false and fraudulent entries in his accounts and that thereupon he set the criminal law in motion which ended in conviction by the Sub-Magistrate, Erode. The conviction was confirmed by the Sub-Divisional Magistrate, Erode, but was set aside by this Court in revision.

3. The defendant denied that he managed the plaintiff's affairs and contended that Abdul Razack, brother-in-law of the plaintiff managed the plaintiff's properties and collected rent, that he employed the plaintiff who was in indigent circumstances, that the relationship between him and the plaintiff was that of master and servant or that of employer and employee and that there was no fiduciary relationship. He denied liability to render accounts and contended that even if any amount was due to the plaintiff, the proper suit to be filed was one for recovery of a definite amount and not one for rendition of accounts.

4. The trial Court framed a number of issues. In C.R.P. No. 1187 of 1959, this Court recast one of the issues which was issue No. 5 and the issue as recast ran thus:

Whether the defendant is liable to render accounts as trustee or in any other fiduciary capacity as alleged by the plaintiff in respect of the management of the property and receipt of assets by the defendant ?

5. This issue was as per the orders of this Court heard as a preliminary issue. The plaintiff examined himself as P.W. 3 and examined two witnesses. But the defendant did not let in any oral evidence. The trial Court found that the defendant did collect the rent from the properties of the plaintiff and was managing the plaintiff's properties. But nevertheless, the trial Court found that such management and collection of rent could not make out a case of trust. The trial Court found that the relationship between the plaintiff and the defendant was only that of debtor and creditor, that there was no declaration of trust, so as to make the defendant liable to render accounts and that the remedy of the plaintiff was to sue for ascertained sum. The lower appellate Court concurred with these views.

6. The principal question that arises for consideration is whether there existed such fiduciary relationship between the plaintiff and the defendant as to render the defendant liable to account to the plaintiff. Both the Courts below have proceeded upon the view that an employee or an agent has no right to call for accounts from the principal or employer and that his only remedy is to sue for a specific amount. It is contended for the plaintiff that both the Courts below have not properly appreciated the scope of the suit, that the plaintiff has not sought for relief merely on the basis that he is an agent or employee of the defendant and that relief is sought for on the basis that all the circumstances and dealings between the parties and the conduct of the defendant taken together should lead to the inference that the defendant occupied a fiduciary position in regard to the affairs of the plaintiff. It is further contended that even as an employee, the plaintiff is entitled to call upon the defendant to render accounts in the peculiar circumstances that have been established in this case. Before adverting to the evidence upon which reliance is placed to show that there existed fiduciary relationship, it will be useful to advert to the position of law regarding the liability of a principal or employer to render accounts to the agent or employee. So far as the liability of the agent to render accounts to the principal is concerned, it is given statutory recognition in Section 213 of the Contract Act. But so far as the liability of the principal to render accounts to the agent is concerned, there is no provision either in the Contract Act or in any other statute either conferring such a right or denying such a right. But as a principle of equity, Courts have recognised the right of the agent or employee to call upon the principal or employer to render accounts in certain exceptional circumstances.

7. In Halsbury's Laws of England Volume 1, 3rd edition, at page 196 the right of the agent to call for accounts is put thus:

An agent has a right to have an account taken, and where the accounts are of a simple nature they can be taken in an ordinary action in the Queen's Bench Division.

8. Reference is made to the decision in Padwick v. Hurst (1854) 18 Beav. 575, in support of the above view.

9. Bowstead, in his book on Agency has pointed out the position thus at pages 173 and 174:

Where the accounts between a principal and agent are of so complicated a nature that they cannot be satisfactorily dealt with in an action at law, the agent has a right to have an account taken in equity; but the relation of principal and agent is not alone sufficient to entitle an agent to an account in equity, when the matter can be dealt with in an action at law.

10. In support of the above, the learned author has also referred to Padwick v. Hurst (1854) 18 Beav. 575.

11. In In re Fazalbhai Mills Ltd. (in liquidation) : AIR1936Bom296 , a provident fund was constituted by a company with the object of making provision for the employees and their family on the death of each member or on his leaving service. The company contributed its share equally with the members. One of the rules of the fund provided that although a member forfeited his claim because of certain events, the lapsed amount did not belong to the company but continued to remain with the company for the benefit of the members. The company was ordered to be wound up and the members of the provident fund claimed to rank as preferential creditors for the amounts standing to their credit. The question arose whether there existed a fiduciary relationship between the company and the employees. On a construction of the rules, subject to which the provident fund was constituted Kania, J. (as he then was) held that a person may become a trustee by his own acts and conduct and that the company stood in fiduciary relationship so as to entitle the members to rank as preferential creditors. In reaching that conclusion, the learned Judge has referred to Gee v. Liddell No. 1 (1866) 35 Beav. 621, in which case there was a provision under which the trustee was permitted to retain the money in his own hands and pay interest at a specified rate to the beneficiary. The question arose whether the mere payment of interest prevented the transaction from being a trust. It was held that notwithstanding the payment of the interest, the transaction was one of trust. This aspect of the matter has bearing on the facts of this case under consideration in which also there are several credit entries relating to interest due to the plaintiff by the defendant, in the defendant's accounts. This circumstance appears to have weighed with the Courts below in coming to the conclusion that the relationship between the plaintiff and the defendant was only that of creditor and debtor. This view is not correct.

12. In Suryanarayana v. Raja of Vizianagaram : AIR1932Mad565 , the plaintiff was in the employment of the defendant as a revenue inspector. He was accused of having misappropriated certain collections. Under threat of criminal prosecution, he paid certain amounts to cover the alleged defalcations. He alleged in the plaint that at the time of each payment, it was agreed that such amount as may be due from him may be adjusted and the balance paid over to him and that the defendant was liable to render an account in respect of the several payments made by him and to pay back to him what remained as balance after making credit for the alleged defalcations. The trial Court held that the suit was one for money and Court-fee was payable as such. But in revision, it was held that the suit was one for accounts. It was taken as undisputed that such a suit by an employee was maintainable.

13. In dealing with the right of an agent to sue the principal for accounts, it was held by Abdur Rahman, J., in Ramachandra Madhvaddoss & Co. v. Birankutli and Bros. : AIR1938Mad707 as follows:

How could the agent sue his principal for accounts It is only in exceptional cases where his remuneration depends on the extent of dealings which are not known to him or where he cannot be aware of the extent of the amount due to him unless the accounts of his principal are gone into that a suit by an agent for accounts against his principal might be competent. But where the exact sum of money which the agent claims from his principal is known to him, the only form in which a suit can be filed is the one adopted by the plaintiff here.

14. This decision thus recognises the right of an agent to sue the principal for accounts in exceptional cases. What the exceptional cases are, would naturally depend upon the circumstances of each case.

15. In Devar & Co. v. Radhakrishna Naidu (1952) 2 M.L.J. 308, the question arose whether there existed a trust between the employer and employee. In that case, the employer credited the employees in his account books with the dearness allowances and bonuses and represented to the Income-tax Department that those amounts so set apart had been paid over to the employees from year to year. The accounts also showed that loans had been debited against the employees, and repayments of loans and also salaries were credited in favour of the employees in their accounts. Having regard to these circumstances, it was held that a trust had been constituted in favour of the employees and that the employer stood in fiduciary relationship to the employees.

16. That in special and exceptional circumstances an employee can call upon the employer to account has been recognised in Sivasubramania v. Panruti Industrial Co., Ltd. : AIR1957Mad21 .

17. An observation in Mahadevi v. Sankar Menon : AIR1940Mad504 , on which the lower appellate Court has relied, is in support of the view that a suit for accounts by an agent against the principal is not maintainable. The main question that arose for consideration in that case was whether the District Munsif exercising jurisdiction under the Provincial Small Cause Courts Act, 1887, was right in entertaining the suit in that case. The plaintiff was the agent of the defendant and his duty was to collect the rent due to the estate of the defendant. He was dismissed and thereupon he filed a suit to recover a specific sum, which according to him was due after taking into account what he had collected as rent, what he had expended and the salary due to him. The objection raised was that in effect the suit was one for rendition of accounts. Overruling this contention, the trial Court decreed the suit. In revision, it was held that the suit was not one for accounts but was one for a specific sum. In the course of the discussion, there is a casual observation that an employer can call upon his agent for an account but an agent cannot call upon his employer for an account. The question whether a suit by an ex-employee against his master for accounts was or was not maintainable did not arise for decision. It would be seen from the authorities referred to above that in exceptional circumstances, a suit for accounts by an agent against the principal or by an employee against an employer is maintainable.

18. In Dorabji Jehangir Randiva v. Muncherji Bomanji Panthaki I.L.R.(1894) Bom. 352, the plaintiff's mother with a view to create a fund which would be of use to the plaintiff when he grew up, placed it in the hands of her father so that he might use the same for the purpose of his business and credit it in his accounts in his grandson's name with compound interest every year. There was no trust for any specific purpose. It was evidently intended that the grandfather would be at liberty to use the money in his business. The question arose whether there was mere relationship of creditor and debtor or whether there was creation of any trust. Candy, J., held that there was a trust which made the transaction something more than loan and that the grandfather stood in fiduciary relationship to the plaintiff. This view was upheld in appeal by Farran, G. J., and Tyabji, J., in Muncherji Bomanji Panthaki v. Dorabji Jehangir Randiva : AIR1947Bom255 , one Deoram had made certain deposits with the defendant and on his death, his sons and widow sued for rendition of accounts. Among the several defences put forward, one was that the suit for account was not maintainable. The question came up for consideration before the Bombay High Court in appeal, Likur, J., following the decision in Muncherji Bomanji Panthaki v. Dorabji Jehangir Randiva I.L.R.(1895) Bom. 775, held that the money had been deposited in confidence, and not because the defendant was in need of money and borrowed it from Deoram, that the transaction was a deposit in trust and that the defendant stood in fiduciary relationship with the plaintiffs and was liable to render account.

20. Keeping the above principles in view, the facts of this case should be examined. The contention urged on behalf of the appellant-plaintiff is that both the Courts below failed to take into consideration several circumstances, which, according to the learned Counsel, would cumulatively lead to the inference that the defendant occupied a fiduciary position. The first and foremost circumstance is that the defendant is the maternal uncle of the plaintiff. It is true that mere relationship would not bring about a fiduciary relationship. But this should undoubtedly be kept in view in appreciating the effect of the dealings between the parties. The plaintiff came under the employment of the defendant and was for sometime being fed by the defendant himself. The defendant brought about the marriage of the plaintiff in 1957 and the defendant's accounts show that he met the expenses of the marriage though he debited the expenditure against the plaintiff. Though the plaintiff was employed in the defendant's shop on salary basis the salary was not paid to the plaintiff every month. The accounts of the defendant show that small amounts were paid to the plaintiff now and then evidently for his pocket expenses and lump sums were credited in the defendant's accounts in favour of the plaintiff representing salary and bonus. Separate accounts were maintained in the name of the plaintiff and the account was carried over from year to year. The rents collected from the buildings belonging to the plaintiff have been credited in the plaintiff's name in the defendant's accounts. The expenses met in connection with the repair and construction of buildings have been debited against the plaintiff. Amount realised by sale of certain jewels has also been credited in favour of the plaintiff--vide Exhibit A-30 against the date 28th September, 1949. Amounts due to the plaintiff from third parties were collected and credited in the defendant's accounts--vide entries dated 25th April, 1951 and 10th August, 1951, in A ledger (No. 17) page 42. Interest on the outstanding balance was being calculated and credited in favour of the plaintiff from time to time. These facts are indisputably established by the defendant's accounts, which luckily for the plaintiff were secured by the police on the complaint given by him.

21. In para. 6 of his written statement, the defendant has attempted at an explanation regarding the entries in his account standing to the credit of the plaintiff. This is what he has alleged:

Excepting the personal relationship the plaintiff was in no manner under the protection of this defendant as alleged. On the other hand, he had full knowledge of the defendant's business and his affairs and had even written the accounts. During this period of the plaintiff's employment with the defendant, certain amounts belonging to the defendant himself were credited in the plaintiff's account and certain payments due by the defendant were debited in the plaintiff's accounts. This was occasioned in order to keep certain amounts collected by the defendant and not connected with the business in a separate account.

22. If the above version were true, it would mean that the defendant, with a view to achieve some ulterior object in an improper manner, maintained his accounts in a particular manner. But the defendant studiously avoided the witness box and one is left only to conjecture as to the reason for making several credit and debit entries in the name of the plaintiff. The allegation in the written statement is not proved. The case of the plaintiff as put forward in the plaint and as spoken to consistently in his evidence is that the moneys which he received were handed over to the defendant and that the defendant himself collected the rents, met the expenses connected with the maintenance of the buildings and retained all the rent collections and all his other amounts and that he (the plaintiff) had no occasion to scrutinise the accounts as he reposed confidence and trust in the defendant. The entries in the defendants accounts amply bear out this case of the plaintiff, and as there is no contra evidence it is not open to the defendant to ask the Court to hold that he maintained his accounts in such a way with a view to achieve some other ulterior object and that the accounts do not reflect what they ostensibly purport to show.

23. After the plaintiff got married in 1957, the relationship between him and the defendant became strained and thereupon the plaintiff had to leave the services of the defendant. Apprehending that the defendant was going to fabricate the accounts with a view to deprive him of his legitimate dues, the plaintiff sent a telegram Exhibit A-12 to the defendant on 30th July, 1957, stating that the defendant was attempting to fabricate accounts and would be liable in civil and criminal Courts. To this telegram, the defendant sent a reply, Exhibit A-10, stating that the allegations were false and calling upon the plaintiff to return the jewels and records which were said to be with him. The plaintiff sought the help of the police stating that the defendant was fabricating accounts and requesting them to seize the accounts. On 31st July, 1957, the plaintiff complained to the police and thereupon the police seized the accounts from the defendant's firm. On 30th July, 1957, several debit entries have been made against the plaintiff in the defendant's accounts. In Exhibit A-22, several debit entries are made on that date in such a way as to tally the accounts. The entries read as if large amounts were paid in cash. But curiously, the signature of the plaintiff was not obtained as regards any of the alleged payments. The question whether these entries represent true transactions or not is a matter which should be invest gated at the stage of taking accounts.

24. It will be seen from the foregoing discussion that apart from the close relationship between the plaintiff and the defendant and also apart from the fact that the plaintiff was employed in the defendant's shop, the conduct of the defendant himself in crediting the plaintiff with Various amounts unmistakably establish that the defendant occupied a fiduciary position and was in management of the affairs of the plaintiff. Both the Courts below, in my view, did not give due consideration to the several circumstances the cumulative effect of which unmistakably establishes the existence of fiduciary relationship. The relationship was not merely that of employer and employee or creditor and debtor. The relationship was something more, namely, trustee and beneficiary. In my view, the plaintiff has succeeded in establishing that the defendant is under an obligation to render accounts to him during the period of the management of his affairs. In as much as the suit has been disposed of on this preliminary issue and as the view taken by the Courts below on this aspect is unsustainable, the suit has to go back to the trial Court for disposal on the other issues.

25. In the result, the decree of the lower appellate Court confirming the dismissal by the trial Court is set aside and the suit is remanded to the trial Court for disposal in the light of observations made above. The Court-fee paid on the Memorandum of appeal should be refunded to the appellant. The cost of this appeal shall abide and follow the result after remand. No leave.


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