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Saleha Bi and ors. Vs. A. Hajee Abdul Rahim Saheb and Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported in(1969)1MLJ557
AppellantSaleha Bi and ors.
RespondentA. Hajee Abdul Rahim Saheb and Co. and ors.
Cases ReferredWillis v. Jeernegan
Excerpt:
- r. srinivasan, j.1. m/s. quaium and company, by its partners, laid a suit against m/s. haji abdul rahim saheb and company, by its partners, for accounts. the latter company sued the former and sought to recover a certain sum as due to them as per the accounts in respect of the business conducted as between them. in what follows, m/s. quaium and company will be referred to as the principals and m/s. haji abdul rahim saheb and company as the agents. the principals carry on the business of tanning in mel visharam, north arcot district and the agents are engaged in doing commission business at madras, selling the tanned hides of the principals as also of other tanners. a broad statement of the opposing contentions would suffice for dealing with the points raised in these appeals. it is not in.....
Judgment:

R. Srinivasan, J.

1. M/s. Quaium and Company, by its partners, laid a suit against M/s. Haji Abdul Rahim Saheb and Company, by its partners, for accounts. The latter company sued the former and sought to recover a certain sum as due to them as per the accounts in respect of the business conducted as between them. In what follows, M/s. Quaium and Company will be referred to as the principals and M/s. Haji Abdul Rahim Saheb and Company as the agents. The principals carry on the business of tanning in Mel Visharam, North Arcot district and the agents are engaged in doing commission business at Madras, selling the tanned hides of the principals as also of other tanners. A broad statement of the opposing contentions would suffice for dealing with the points raised in these appeals. It is not in dispute that the agents were selling goods of the principals during the period June, 1954 to July, 1957. It was alleged by the principals that the agreed commission was 2 per cent. of the realisations, besides such customary allowances incidental to the trade. It was further claimed that the agents undertook to assort the goods of the principals and after intimation to the principals sell the goods as the goods of the principals and also to submit a true account of each sale so effected. The principals alleged that the monthly statements received from the agents were defective in material particulars, but it was not till July, 1957, that any suspicion arose. Thereafter, they stopped the despatch of further goods to the agents and the agency was terminated. The principals claim that they looked into the accounts of the agents during the period of one year August, 1956 to July, 1957, and they purport to have realised thereby that the agents had misconducted themselves throughout the period of the agency. It was stated that the agents converted the goods consigned to them as their own and were selling them on their own account without the buyers being acquainted with the source of the goods or the principals being informed of the identity of the buyers and other material circumstances connected with the sales. It was claimed by the principals in their suit that contrary to the agreement, the agents Were debiting commission at the rate of 2 1|2 per cent. It was further alleged that there was a difference in the weight of the goods despatched to the agents and the Weight acknowledged by them. For these reasons, they contended that the agents were liable to render a true and proper account for the period in question.

2. The defence by the agents was that they were not constituted as the agents for the principals. The arrangements was only that the principals consigned their goods to the agents for sale in Madras and the United Kingdom. The principals were invariably taking moneys in advance far in excess of the value of the goods supplied. Though the original agreement was that the commission was to be 2 per cent., in view of the large sums of the agents locked up with the principals, the rate of commission was raised to 2 1|2 per cent. from January, 1955 onwards. The agents also stated that the practice in this line of trade was not to sell the goods of any particular person as the goods of that person. In order to get the best price, the goods Were assorted into recognised grades or qualities and tanned hides of a particular grade or quality belonging to several constituents of the commission agents were sold in one or more lots as was convenient or possible. This practice which obtains in the trade, according to the agents, served the best interests of the tanners themselves. The agents further claimed that they had been submitting monthly statements during this entire period of three years and to no statement was any objection taken at any point of time. They were not called upon to submit any explanation with regard to the statements of accounts. They denied the alleged conversion of the goods. They stated that one or more of the partners of the principals were present on every occasion when the goods were assorted and sold in lots along with other goods of like quality. The shortgage in weight put forward by the principals was also denied.

3. This suit by the principals was dismissed, the learned III Assistant Judge of the City Civil Court holding against the principals on all the issues raised by the above contentions. He expressed himself categorically by stating that agents had rendered proper accounts to the principals and that the principals had not succeeded in surcharging and falsifying the accounts of the agents. He also stated that the pleadings of the principals were ' wholly fictitious and dishonest' and were clearly meant to ' harass the agents.'

4. Practically simultaneously with the suit filed by the principles, the agents themselves filed a suit, O.S. No. 1867 of 1958. In that suit, the claim was made that according to the accounts which had been submitted by the agents periodically and not objected to by the principals a sum of Rs. 17,956-8-5 was due to them from the principals. The defence to this action was virtually what the principals put forward as the basis of their claim to accounting in the earlier suit. The trial Judge found in favour of the agents and granted a decree against the principals.

5. The two appeals are accordingly by the principals. In one, objection is taken to the dismissal of the action, it being broadly contended that the Court, after a decision on the questions affecting the liability to account, should have passed a preliminary decree for accounts and left the other matters relating to the ascertainment of the liability in terms of money to be determined on an examination of the accounts; and in the other, the same contention was presented in a different form viz., that in the absence of an account properly rendered by the agents, there can be no decree in their favour for any specific amount.

6. Mr. Chalapathi Rao, learned Counsel for the principals-appellants, put forward three grounds as justifying the claim of the principals to a decree for accounting. According to him, the rate of commission originally agreed to has been unauthorisedly enhanced by the agents and the monthly statements of accounts submitted by the agents did not disclose the rate at which the commission had been deducted. The principals could not, on a . cursory glance of these statements, become aware that the rate of commission charged was higher than what was originally agreed to. This itself, according to Mr. Chalapathi Rao, is sufficient to show that the accounts submitted were not true and certainly had not been accepted by the principals. Secondly, it was argued that the principals' goods had been unauthorisedly mixed up with the goods of other customers and had not been sold as the principals' goods, which was the understanding between the parties. If, therefore, the agents had committed a breach of the terms of the agreement with regard to the mode of sale, the effect of such a breach could be determined only on an examination of the accounts by the Court on the appointment of a Commissioner. Thirdly, it was urged that the customary charges debited against the principals are not sanctioned by the agreement between the parties. But, we may state here itself that this ground was given up in the course of the arguments. The contention thus is that the Court should have passed a preliminary decree and left the determination of the liability of the one against the other to final decree proceedings.

7. The principal question that we propose to address ourselves to is whether the agents had rendered an account periodically within the scope of their liability under Section 213 of the Indian Contract Act. This in turn involves an examination of the two contentions outlined by Mr. Chalapathi Rao, viz., that the commission had been improperly enhanced without any notice to the principals, and secondly, that the mode of sale of the principals' goods was contrary to what was [[agreed upon.

8. Mr. Chalapathi Rao contended that the first partner of the principal firm was the one who provided the capital and that the other two persons, who are the second and third plaintiffs in O.S. No. 1905 of 1957, are related to the partners and employees in the agency firm. The second plaintiff is said to be the father-in-law of one of the partners of the agency firm, while third plaintiff is the father-in-law of the cashier of the agency firm, who gave evidence as D. W. 1. It was claimed that the first plaintiff, who is now dead, was residing nearabouts Nagpur and was an absente partner, so that the business at Mel Visharam of the principal firm was conducted by the second and third plaintiffs. He virtually charged these two partners with having colluded with the members of the agency firm in defrauding the first plaintiff. We may at once say that this charge was wholly unsubstantiated. It would appear that early in January, 1957, the first plaintiff of the principal firm executed a power-of-attorney in favour of his brother, who was examined as P. W. 1. This power, which is Exhibit A-372, authorized P. W. 1 to take the first plaintiff's place in sofar as the principal firm's business was concerned. It appears that as the first plaintiff had fallen ill, he thought it necessary to send his brother down south to look after the business. It was suggested that this was done because the first plaintiff was not satisfied with the conduct of the business, particularly with the agents. Except for the execution of this power, there is really nothing in the evidence which supports the claim that at that point of time any suspicion was entertained by the deceased Quaium Saheb, the first plaintiff. What P. W. 1 stated was merely that as the tannery business was showing losses, he was sent by his brother to find out where the mischief lay. His evidence does not show that there was any suspicion as against the conduct of the other two partners of the principal firm. In fact, he stated that the other partners helped him by looking through the accounts of the agents. The large statement made by Mr. Chalapathi Rao at the opening that the second and third plaintiffs were colluding with the agents or that any suspicion was felt in that regard is not borne out by the evidence of P. W. 1 himself. P. W. 1 who does not know Tamil, attempted to obtain a picture of the transactions with the agents and claims to have asked for and obtained the examination of the accounts maintained by the agents from January, 1956 onwards, and he pretends to have noticed some differences. There is no letter proceeding from the first plaintiff in which any objection to the monthly statements or to the claims of the agents was ever taken. P. W. l's version that accounts were not settled or that the agents claimed an excess commission of 2 1/2 % or that they took the goods as sold to themselves and were not giving an equal distribution of the price obtained are all matters about which he has no personal knowledge whatsoever. He has admitted, however, that his deceased brother, the first plaintiff, was visiting Madras between 1954 and 1957. P. W. 1 is himself a. resident of Kanpur and carries on a business there. He could not even say when his brother Quaium fell ill and was unable to attend to his affairs personally. He admitted that the other two partners, that is, plaintiffs 2 and 3, were explaining the accounts to him. He admitted also that he himself inspected the assortment of the goods in the months immediately preceding the termination of the agency, but did not claim that the assortment was made improperly. It would suffice to say that P. W. 1 has no personal knowledge of any of the incidents relating to the agreement between the principals and the agents and his evidence hardly serves to advance the contentions of the principals.

9. Mr. Ghalapathi Rao claims that certain admissions have been made by D. W. 1, who was examined on behalf of the agents, which establish the principal's contentions. D. W. 1 is a cashier of the agency firm. As stated already, the third plaintiff partner of the principal's firm is his father-in-law. It would suffice to scrutinise his evidence only in so far as the two points we have set out above are concerned, namely, the dispute regarding the commission and that regarding the assortment and the sale of goods. Before we examine his evidence, we may refer to one admitted feature. Right from June, 1954, down to August, 1957, the principals have been in receipt of two sets of statements furnished by the agents, month after month. One set of statements is what is called ' Jodip ' statement. This statement,, it is admitted on both sides, is a statement which explains the manner in which the goods consigned by the principals to the agents are assorted into various grades, such as second, third, fourth, fifth and rejects. The other set of statements are what are called ' Dab ' statements. They have been furnished by the agents at the end of every month. These statements deal with the entirety of the transactions during the month, how the various grades of assorted goods belonging to the principals were sold and for what value. Taking one statement, that relating to December, 1955, marked as Exhibit A-182, it shows that during the month, goods were sold to the value of Rs. 48,776-7-3. Debiting certain expenses, the balance to the credit of the principals is shown as Rs. 47,090-0-9. Then follows a statement of the various amounts paid on behalf of the principals and various expenses incurred on behalf of the principals, and the total works out to Rs. 68,561-1-10. The result of the transactions is shown at the end as balance in favour of the agents, that it is to say, that the plaintiffs were liable to pay the difference to the agents. It appears accordingly that month after month, a statement of this kind clearly indicating the liability of the principals to the agents in a particular sum as arrived at, as a result of the month's transactions was being forwarded to the principals and it is virtually conceded that at no point of time was there any objection taken to these statements.

10. In so far as the ' Jodip ' statements, that is, the statements furnishing particulars of the assortment of the goods and informing the principals that the goods consigned by them in one lot consisted of so many items of this or that variety, are concerned, they are not challenged, and Mr. Chalapathi Rao concedes that there is no dispute on the point. What we have to assess now is how far, despite the fact that these monthly statements were being rendered and passed unquestioned by the principals, the claim is tenable that there was no settlement of account and that the principals are now entitled to ask for a decree for an account.

11. We entirely agree with the proposition that an agent is not discharged from his duty to render an account merely by the submission of a set of written accounts. His duty also consists in explaining them wherever necessary and in producing vouchers and the like in respect of any expenditure that may have been incurred for and on behalf of the principals. Though, no doubt, this part of the duty cannot be avoided, it would still be a question of fact in each case whether the accounts submitted are not self-explanatory or at least whether, in the absence of any demand for an explanation, one can still say that the agents' duty has not been discharged. Mr. Chalapathi Rao referred to the decision of the Privy Council in Harinath Roy v. Krishnakumar Bhakshi I.L.R. (1887) Cal. 147. That was a case, where the Judicial Committee laid it down that where the pleadings established that the suit was essentially one for account, the regular course is to order an account to be taken of the defendants' dealings with the plaintiffs' money. The Judicial Committee, however, expressed no opinion whether in a suit for an account an issue could not be raised even at the outset so clearly as to be ready for decision, that is to say, whether a decree in the nature of a final decree could not be made even at that stage. That was a case, however, where a person employed as a Dewan for the purpose of drawing and expending the money of the principal was sued for accounts, the principal alleging that more had been drawn than was expended and that a specific sum had been misappropriated by the agent. The agent denied any kind of accountability and it was found that the relationship of agency existed. The appellate Court dismissed the suit on the ground that it was impossible to decide at the hearing how much of the principal's money was unaccounted for, though an attempt was made to prove the balance due. It is this method of disposal of a suit for accounts that the judicial Committee deprecated. They pointed out that when the relationship of agency was established, the determination of the actual liability in any particular amount should be as a result of an order to take an account, that is to say, the preliminary decree would be the proper one to pass in such a suit. This decision is certainly not of much help, for, an agent may well take the ground that an account had already been furnished and accepted, which is precisely the ground taken in this case. Madhusudan Sen v. Rakhlalchandradas Basak I.L.R. (1916) Cal. 248, lays down that the duty of an agent does not end by merely submitting the papers when accounts are demanded, and that a failure to explain them when called upon to do so will amount to a refusal. The learned judges observe at page 259:

Finally, we have to deal with the question of the mode in which accounts should be rendered. On behalf of the defendant, the position has been maintained that as soon as the defendant, as the agent of the plaintiffs submitted his account papers, his duty was discharged and that the plaintiffs are under no obligation to examine these papers without his assistance....We are unable to agree in the view put forward on behalf of the appellant. The duty of an agent when he is called upon to render accounts to his principal was explained by the judicial Committee in the case of Harinath Roy v. Krishnakumar Bhakshi I.L.R. (1887) Cal. 147. This principle has been recognised in a long series of cases.

12. Kiruppiah Pillai v. Pichiah Pillai : (1958)1MLJ396 , docs not advance the appellants' arguments. It appears that a suit for accounts was dismissed solely for the reason that the account-book which had been submitted by the agent to his principals were not produced by the principals, who were withholding them. The learned Judge held that that would not suffice to discharge the liability to account, and when once, the agency relationship was proved and it was not shown that the accounts had been settled, the proper course was to pass a preliminary decree for the taking of accounts.

13. We shall now proceed to examine the evidence with regard to the two matters we have set out earlier. As we have already said, on the side of the principals plaintiffs, there is no evidence to establish what the precise terns of the agreement between the principals and agents were. There is no written document evidencing such an agreement. Normally, in the absence of any oral testimony on this head, the Court would be justified in looking into the conduct of the parties in ascertaining the true scope and nature of the agreement. If we do so and if we take the fact that voluminous sets of accounts had been submitted by the agents at the end of each month, which statements were not questioned on any ground whatsoever, one may justifiably presume that the parties agreed to such terms as those statements would indicate. It is not easy to accept the claim made by the principals that they never looked into the accounts or that they merely kept them by. On the other hand, it is admitted that these accounts were virtually adopted and passed into the principals' own accounts without any item being kept in suspense as under question or as liable to an explanation from the agents. It is true the agent's duty is not discharged by merely submitting some written accounts, there is the further duty upon him to attend and explain any matter in controversy. But, where no matter appears to have been in controversy, we fail to see how merely by the principal not signifying anything with regard to the account submitted, this additional duty can be deemed to be still hanging over the head of the agent for an unconscionable length of time. It is noteworthy that it was not merely statement of the sales of the goods of the principals that was submitted. Several large amounts unconnected with the sales of the goods had been disbursed on behalf of and on account of the principals, which sums had been debited against the principals in those accounts. When, in acknowledging the liability for a certain sum as due to the principals by the sale of the principals goods, the agent debits the principals with the charges relating to certain transactions carried out on their behalf, the view might very properly be taken that at the end of each month, there was a stated account which in the absence of any objection from the principals must be deemed to have been accepted by them. The fact that the recurring debit or credit, as the case may be, was carried on from month to month, would not by itself be sufficient to counter such a conclusion.

14. It was argued on behalf of the principals that the plea with regard to the rate of commission has been inconsistent. In the written statement of the agents, in the suit filed by the principals, it was' claimed that the commission was at 2 per cent up will December, 1954, and 212 per cent. from January, 1955, on what words, while, in the suit filed by the agents for recovery of an ascertained amount, it was said that the agreement was that the commission was to be 2 12 per cent. We do not think that this discrepancy, as it is called, is of any great moment. It is a fact that in the monthly accounts between June and December, 1954, the commission was deducted at 2 per cent and in all the subsequent months from January, 1955, onwards, it was deducted at 2 12 per cent. The fact that in the account statement the percentage was not specified is of no consequence either. The explanation for the alteration in the rate was given by D. W. 1 in his evidence. D. W. 1 claimed to have been present when the agency agreement was entered into. It appears that prior to his employment in the agents' firm, he was more or less an apprentice learning the business and doing part-time work in the agency firm. As we said, he is also related to one of the partners of the principals firm. It was not unlikely that he was present when the agreement was come to. He stated in his evidence that the commission originally agreed upon was 2 per cent. on sales. It was also agreed that the agents should advance whatever amounts the principals required in respect of the goods consigned and that such advance were to be interest-free. He stated that a large number of merchants do business on such terms, but as the principals started to take heavier advances, the agents stipulated for a higher commission of 2| per cent and that all the three partners agreed thereto. Though the learned trial Judge did not look favourably upon his evidence, we see no reason to reject it, principally because no cross-examination was directed in respect of this part of the evidence of D. W. 1. We are accordingly satisfied that there was no unauthorised variation of the rate of commission. When to the knowledge of the principals commission was being deducted at 2 1/2% every month over a period of two and a half years, it can hardly be maintained that there was a dispute at any point of time in this connection.

15. Though the learned Counsel for the principals appellants conceded even at the outset that there was no dispute regarding the assortment of the goods into various grades, he however argued that the manner in which the goods of the principals were sold was contrary to the understanding between the parties. As we have already stated, there is no written agreement or any correspondence which would reveal the terms of the agreement' between the parties. It is also manifest from the 'Dab' statement that were submitted by the agents that the goods of the principals Were sold as consisting of various qualities or grades. We have already referred to the evidence of D. W. 1 that both on the occasion of the assortment and on later occasions of sale, the partners of the principals' firm were present on several occasions. They should accordingly have been fully aware of the fact that the goods of the principals were not sold separately from the rest of the goods handled by the agents. Even P. W. 1 stated that when he made the enquiries in the market, he was told that some people mix the goods and some others do not mix. He asserted that without the instructions of the principals, the goods of the principals could not be mixed with those of the others. He specifically claimed that he had written letters to the agents objecting to the mixing, but these letters were apparently written on 1st of August, 1957, practically during the last week before the agency was terminated. From his own statement, therefore, it is clear that no objection had been taken on earlier occasions to the mixing of the principals' goods with those of other tanners. P. W. 1 himself is a dealer in hides and skins and he was dealing with one Obiedulla and Company as their agents. He admitted that those agents were consigning him assortment statements and 'Dab' statements ' giving full particulars.' He did not however produce those statements in order to make out his claim that selling agents do not generally mix the goods with those of others. He does not claim, it must be stated, any extensive knowledge of the mode in which transactions in hides and skills are conducted locally.

16. Turning now to the evidence of D. W. 1, he asserted that when the three partners of the principals firm came to the agents firm and settled the terms of the agency, the instructions were that the principals would consign their goods, which on receipt would be assorted into a seconds, thirds, fourths, fifths and rejects. There were no firsts. Assortments 2 to 5 are called lots and are based upon the quality of the goods. As soon as the assortments were made, assortment slips were sent to the principals. The goods would be sold locally. Rejections, which appear to be the most inferior sort, would sometimes be sent to the foreign market. After sales, the principals would be informed about the sales of their lots and the monthly ' Dab ' statement showing the assortment charges, cartage, dharmam, weighing cooly, lorry freight and other commissions would be furnished to the principals. He gave particulars of the various charges on these heads. According to him, it was agreed that whatever amounts were required by the principals would be paid to them in respect of the goods consigned, obviously even in advance of the sales He swore definitely that a large number of merchants do business on these terms of agency and the principals agreed to these terms, as they were also fully aware of the usual terms prevailing in the market. He further stated that exporters would usually purchase the goods in bulk consisting of 1,000 or more pieces from the seconds to fifths. Goods received from the tanners would have to be disposed of early, as. they would change colour if kept too long. He stated that goods from all customers would be collected for a period of over 4 or 5 days and when the total reached about 1,500 pieces, lots would be made according to the variety. The weight of the lots belonging to each principal would be noted so as to facilitate apportionment of the sale price received. A certain per centage is allowed in the weight in order to meet the shortage due to dryage.

17. That this is the mode of doing business in this line of trade was also spoken to by D.W. 2, who has been doing business in hides and skins. In answer to a specific question as to how this commission business was being done by the firms generally, he stated:

Tanners send goods to commission mundies. They would receive advance from the mundi. The mundi will charge 2 per cent. commission. If the tanners have been taking advance in excess of the value of the goods sent, mundi will charge 2 1/2 per cent. commission. The goods would be assorted into seconds to fifths, then rejects....They arrange to sell it to exporters. The mundi will inform the tanners about the assortment even before the sale. Mundi will charge thiruppam, dharmam, assortment charges....Some tanners will send about 500 pieces, some about 1,000 pieces and so on. In most of the mundies, they mix goods of different tanners and sell them. In some mundies, they sell without mixing. In the case of mixing, the price will be distributed among the tanners. The sale will be notified to the tanners....The purchasers will check the assortments and reassort them. If the assortment is inferior, the price would be less.

No cross-examination was directed on this aspect of the evidence of this witness, who spoke to the general features of the trade. The witness, however, could not say in what circumstances goods will be mixed up and in what circumstances they will be sold separately. He stated however in cross-examination that the commission mundi would sell separately if there were over 100 pieces, possibly of one variety.

18. It appears from the evidence of both D.Ws 1 and 2, therefore, that the normal method of carrying on business by these commission agents is to assort the goods of any customer into various categories and inform the customer immediately of the position. Thereafter, when it comes to sales, they sell various lots of the categories of goods, irrespective of to whom the goods belong. Goods of the same variety and of similar quality would be mixed up and sold in one lot. It is easy to conceive that a business in this line of goods cannot be done in any other manner, for if a tanner sends a lot consisting of say 100 pieces, in which there are perhaps a dozen skins of one variety, the sale of only this dozen skins is hardly likely to interest the purchasers, who mostly work for the exporters and for the foreign market and prefer to buy goods in bulk. That has been brought out clearly in the evidence of D.W. 1. It is true that D.W. 1 admitted that if there are specific instructions to the contrary where a principal directs the sale of his goods separately, the commission agents would be bound to follow such instructions. In the absence of such specific instructions, the customary practice in the trade would be followed. If any one thing is made clear in the whole of the evidence, it is that there were no such specific instructions proceeding from the principals. Mr. Chalapathi Rao purported to rely upon one sentence in the evidence of D.W. 1, wherein D.W. 1 stated : ' The plaintiffs have been sending always primes and best tanners. It is called Bangalore quality.' From this, he sought to deduce that the goods produced by the principals were o such excellence that they could be sold without any assortment and separately without being mixed with other goods. What the witness meant is however brought out in the preceding and the following sentences in his evidence. He stated, ' Prime tannage is the highest quality of tannage. Best tannage is next to prime. Coastal tannage is done in coastal districts, which are generally inferior. That is done only in Andhra. Plaintiffs have beer, sending always prime and best tanners It is called Bangalore quality.' What the witness was speaking to in this connection appears to have reference to the various methods of tanning employed in different areas and not to the grades into which the goods are subsequently classified. Whatever that might be, it appears to us that in the absence of proof that any specific instructions were given by the principals with regard to the mode of selling their goods, the agents were fully entitled to follow the customary practice in the trade.

19. After disputes arose between the parties, some letters passed between them. Apparently, after the principals stopped sending goods to the agents, the latter complained, and in reply P.W. 1 wrote Exhibit B-51 on 31st July, 1957. In this he stated:

Your complaint that goods are not sent to you but to others is correct. But we have noted that no some little difference but a great gulf yawns between your mundi's assortment and sales and those of others. The extent of loss we have sustained by sending goods to your mundy could be guaged by us only on looking into the sales effected to others....First and foremost, we want to have particulars of our goods sold by you. Please furnish us particulars supported by bills as to which all parties our goods have been sold to from January, 1956, onwards upto date so that we may understand the position. Until then, we do not deem it feasible to pack more goods to your mundi....

This appears to be the first letter wherein a specific complaint was made to the agents against the assortment of the goods and the sales. We have already referred to the fact that the complaint with regard to the assortment, which was taken in the pleadings, has now been given up. This was followed by another letter, Exhibit B-52, dated 1st August, 1957, in which the same demand as in the earlier letter is reiterated. In reply, the agents wrote Exhibit A-369, dated 2nd August, 1957. Portions of this letter are of some importance and are extracted below. The agents say here:

You have asked us to furnish particulars as to who are the parties to whom, goods are sold since 1956. Your question is most improper because the goods that were being sent to us for a very long period used to be goods not very well tanned. There would be a shortage of seconds. These goods by themselves alone would not be purchased by anybody. If they are to be sold alone separately they could be sold at a lesser price in terms of annas only. In case sales were effected at these rates, the work of your shop will suffer seriously and great loss would result thereby. With a view to benefit you, we have been mixing up your goods with better quality goods that were being received by us from other customers and selling them with a view to secure a better price for you. It is only after P.W. l's return from Kanpur that the work of your shop has been set right by him to a certain extent. Notwithstanding this, your goods are still of a somewhat inferior quality compared to those of other customers....P.W. 1 would visit Madras every week and would keenly observe your goods as well as the goods of other customers and understand the difference. We have been apprising you of every particular in detail every time he visits us....Besides, from the commencement of our business, to this date, we have been mixing up the goods received from all customers and selling them at a price in accordance with weight and in due consideration of seconds....Prior to P.W. l's coming, your company people would invariably visit Madras. There was not the slightest objection to our sales then. Even after P.W' l's arrival, we have been doing our business as usual as per our mamool. Even he did not raise any objection....Because your goods could not be sold by themselves alone, we are helpless in being unable to furnish accounts to you....

In this letter, there is a categorical statement that the manner in which the principals' good : Were being sold did not vary from the practice that was being followed, a practice which was Well within the knowledge of the principals and had not been objected to by them. In the last sentence of the above extract, what the agents say is that they Were unable to give particulars of the persons to whom the principals' goods were sold, for the principals' goods had been mixed up and sold in circumstance stated earlier. Mr. Chalapathi Rao's arguments, which seeks to take this statement out of context and interpret it to mean that the agents had not rendered any account and confessed their inability to furnish any accounts cannot be accepted.

20. To restate the factual position, the agents had been submitting 'Jodip' statements immediately on the receipt of the goods from the principals. These 'Jodip' statements acknowledged the receipt of so much weight of the goods and showed also the various grades into which the goods had been classified This assortment was not and is not now objected to. The agents would thereafter consolidate the goods of the same variety belonging to their several customers and sell them in one lot. The custom in the trade has sanctioned this practice. Moreover, since the skins are exported almost entirely for the foreign market, the sales are effected in bulk and not in small quantities or a few pieces. There was no direction proceeding from the principals to deal with their goods in any other way. At the end of each month the agents submitted accounts to the principals. These accounts not only showed the realisations on account of the sales of the goods of the principals, but also debited the principals with various amounts which the agents had expended for and on behalf of the principals, sums which ran into tens of thousands. At the end of each month, therefore, the ' Dab ' statements clearly showed that the principals were liable to pay so much amount to the agents, or the agents were liable to pay so much amount to the principals, depending upon whether the balance was adverse to or in favour of the principals. It is admitted again that the result of these statements was taken over into the principals' own accounts without any reservation When the business has gone on, in this manner for a period of three years, without any detail of these transactions being questioned and without any objection take to the statement of the liability of the principals in even one of these statements, the question arises how far we can still say that solely for the reason that the relationship of agency existed, the agents should now render an account, or whether in this state of things, one cannot reasonably conclude that accounts had been rendered and accepted by the principals from time to time.

21. In a decision of the Bombay High Court in Maneklal v. Jhwala Dutt : AIR1947Bom135 , Chagla, J. dealt with this question. He referred to Section 213 of the Contract Act and observed:

Now, every principal has a right, which has received the statutory recognition in Section 213, Contract Act, to claim accounts from his agent, and Section 213, says that an agent is bound to render proper accounts to his principal on demand. But it is clear that this right to claim accounts is subject to one qualification and. that qualification is that the accounts between the principals and the agent are settled or stated. Just as accounts between a principal and principal can be stated or settled, equally so, they can be stated or settled between a principal and an agent.

Proceeding further:

Now, what are stated or settled accounts? If accounts are submitted and if they are accepted as correct by the other side to whom, the accounts have been rendered, then in law you have stated or settled accounts. It is not necessary that the statement of accounts need be in writing, nor is it necessary that parties should sit down, compare the accounts and call for vouchers, etc. All that the Court has got to ascertain is whether in fact the party to whom accounts were rendered has accepted those accounts as correct. The acceptance need not be express. It can be inferred from conduct....

And the learned Judge proceeded to deal with certain decisions. Referring to Willis v. Jeernegan (1741) 2 Atk. 251, he pointed out that in that decision, the Lord Chancellor, who was dealing with a similar question, observed that there was no absolute necessity that the accounts should be signed by the parties who had mutual dealings to make it a stated account, for even where there were transactions, suppose between a merchant in England and a merchant beyond the sea, and an account transmitted to England from the person who was abroad, it was not the signing which would make it a stated account but the person to whom it was sent keeping it by him for a length of time without making any objection which should bind him and prevent his entering into an open account afterwards. The learned Judge also referred to another English case, where the view was taken that it was the rule of the Court that where a merchant kept an account by him for about two years without objection, the Court would consider that the accounts were settled or stated. The principle of these decisions seems to have been followed by the Bombay High Court in certain other cases to which it is not necessary to refer. In the present case, both for the reason that the principals never took any objection to the accounts submitted by the agents from time to time, but went further and incorporated the effect of these accounts into their own accounts, the conclusion seems to be irresistible that it was regarded by both parties as a stated or settled account at the end of each month. We are unable to agree with Mr. Chalapathi Rao that the observations of Chagla, J.. in the above case are very wide. No decision has been cited before us wherein the principles upon which it has to be determined whether accounts have been stated or settled have been differently expressed.

22. It follow? that the principals-appellants have failed to establish that accounts remain unsettled. On the other hand, the agents-defendant have shown to our complete satisfaction that the accounts were accepted as settled by the principals themselves. It follows that the decision of the Court below dismissing the principals' suit for an account is correct. A.S. No. 189 of 1962 is accordingly dismissed with costs.

23. For the very same reasons that we have given earlier, it is manifest that the claim of the agents to the sum of Rs. 17,000 and odd, which has been decreed by the Court below, cannot be denied. If the account had been stated or settled, it follows that the party in whose favour the account as settled stands is entitled to a decree for the amount. In the circumstances of the case, it was not necessary that there should have been a preliminary decree to be followed by a determination of the actual liability. The principals' appeal against the judgment of the Court below granting the agents a decree for the sum claimed on the basis of the accounts accordingly fails and is also dismissed with costs. Counsel's fee one set.


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