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Kamal Singh Dugar Vs. Corporated Engineers (India) Pr. Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata High Court
Decided On
Case NumberSuit No. 1708 of 1959
Judge
Reported inAIR1963Cal464
ActsContract Act, 1872 - Sections 227 and 237
AppellantKamal Singh Dugar
RespondentCorporated Engineers (India) Pr. Ltd.
Appellant AdvocateSachin Sinha, Adv.
Respondent AdvocateBhola Sen, Adv.
Cases ReferredFazal Ilahi v. East Indian Railway Co.
Excerpt:
- .....cave, j. held that payment by the buyer to the broker is not a payment to the seller. if under the contract payment was to be made to the seller, the buyer who had paid the broker was bound to show that he was justified in paying the broker either because the seller had authorised him to receive payment or because the seller had so acted as to make the buyer believe that the seller had authorised the broker to receive payment. it was also held that even if in a previous contract between the same parties the seller had authorised the broker to receive payment, the broker cannot be regarded as having the authority of the seller to receive payment in the subsequent contract. in my view, the judgment of lord esher m. r. lays down the correct proposition of law in the facts of the case under.....
Judgment:

B.C. Mitra, J.

1. In this suit tile plaintiff seeks to recover from the defendant Rs. 5,236.62 nP. being the price of goods sold and delivered. The plaintiff's case as laid in the plaint is that on December 3, 1958 he supplied fabricated earth plates to the defendant. The plaintiff made the supply in his firm name, namely. 'The Electric House' in which he was carrying on business. A bill was duly submitted by the plaintiff containing particulars of the goods sold as also the price payable by the defendant. On March 16, 1953 the defendant delivered to the plaintiff a cheque for Rs. 5,236.62 nP. drawn by the defendant upon the Bank of India Ltd. payable to the Electric House. The plaintiff's case is that this cheque was not presented for payment at the request of the defendant till September t, 1959 when the cheque on being presented for payment, was dishonoured.

2. The defence is that the contract between the parties was entered into through one S. D. Sharma who acted as agent of the plaintiff. The plaintiff by his words or conduct induced the defendant to believe that the said S. D. Sharma had the authority to act and to enter into the contract on behalf of the plaintiff with the defendant and/or to receive payment, on behalf of the plaintiff from the defendant, of moneys which would be due by the defendant to the plaintiff in respect of goods supplied. It is further alleged in the written statement that the defendant was induced by the plaintiff to believe that such act to receive payment in respect of the said contract, was within the scope of the authority of the plaintiff's agent, the said S. D. Sharma. The defendant paid in cash to the said S. D. Sharma on July 16, 1959 a sum of Rs. 5236.62 nP. as the price of the goods sold and delivered to the defendant. The defendant's case is that such payment to Sharma is sufficient discharge of the entire claim of the plaintiff from the defendant. The defendant admits that it had delivered to the plaintiff a cheque for the aforesaid sum drawn by the defendant and payable to the plaintiff's firm 'Electric House'. It is denied by the defendant that at any time a request was made to the plaintiff not to present the cheque until September 1, 1959. It is further alleged that on or about July 16, 1959 S. D. Sharma approached the defendant and represented on behalf of the plaintiff that the cheque had been lost and thereupon the amount mentioned in the cheque was paid to Sharma at his request by the defendant in cash in full satisfaction of the plaintiff's claim.

3. The following facts are not disputed; (a) Supply of goods by the plaintiff to the defendant, (b) Submission of Bill by the plaintiff to the defendant. (c) Price of the goods was Rs. 5236.62 nP. (d) Cheque for the amount was drawn in plaintiff's favour on March 16, 1959. (e) Cheque presented on September 1, 1959 by the plaintiff and dishonoured.

4. On the above pleadings the following issues were raised and settled:

(a) Did one S. D. Sharma act in the matter of the contract as agent of the plaintiff as alleged in paragraph 2 (a) of the written statement?

(b) Did the plaintiff by his words and/or conduct induce the defendant to believe that the said S. D, Sharma had authority to receive payment on behalf of the plaintiff as alleged in paragraph 2(b) of the written statement?

(c) Has the defendant paid the said sum to S. D. Sharma as agent of the plaintiff?

(d) To what relief, if any, the plaintiff is entitled?

5. Admittedly, the defendant was in financial difficulties and according to Sabyasachi Mukherji, the Managing Director of the defendant, a request was conveyed to the plaintiff that the cheque should not be presented without prior consultation (Mukherji Q. 98). It is clear that the defendant knew very well that goods had been supplied by the firm Electric House. The fact that the defendant had made over to the plaintiff an account payee cheque makes it clear that it was intended that the seller, namely the plaintiff's firm 'Electric House' should get the payment and none else. Paragraph 4 of the written statement confirms this intention of the defendant. The bill (Ex. A) is in the name of the plaintiff and on the bill there is an endorsement, namely, 'customer's order No. through S. D. Sharma'. The defendant admits receipt of the bill and had therefore notice that Sharma and the plaintiff are two different persons. But curiously Mukherji in his evidence (Q. 42 and 80) says that Sharma supplied the goods and there might or might not have been a principal.

6-10. Up to the stage of the issue of the cheque by the defendant in favour of the plaintiff's firm 'Electric House' the course of events is simple to follow, but thereafter the defendant's case, as made in evidence, runs in such a tortuous course that it is both difficult to follow and still more difficult to reconcile the case made in evidence with the averments in the written statement. According to the defendant, just four months after the cheque was issued, that is, on July 16, 1959 Sharma put in an appearance and said that the cheque was lost. He does not merely stop by informing the defendant that the cheque was lost but goes on to demand payment of the amount for which the cheque was issued, in cash. Upon this demand being made by Sharma, it is stated by Mukherji and Sanyal (accountant of the defendant) that payment was made to Sharma in cash. After the payment was made a memorandum in writing (Ex- 2) was taken from Sharma by the defendant. It is very strange that although at the time when payment was made by cheque, utmost precaution was taken to sea that money went into the account of the supplier by crossing the cheque 'account payee', all precautions were thrown to the wind when Sharma demanded payment in cash and on such demand being made, cash was paid to him readily by Mukherji and Sanyal. It is still more strange that, although intimation was given to the defendant by Sharma that the cheque was lost, no step was taken either by Mukherji or by the accountant Sanyal to stop payment of the cheque -- a step which should have been taken if there was any truth in the story of the lost cheque. (After considering the evidence and watching the demeanour and manner of giving evidence of the witnesses (Sanyal and Mukherji) for the defendant his Lordship concluded:)

11. I am, therefore, of the opinion that Sharma did not act as plaintiff's agent in the matter of the contract between the parties. The onus of proving this is on the defendant and having regard to the evidence of Sanyal and Mukherji discussed earlier in this judgment I hold that the defendant has failed to discharge the onus. I am also of the opinion that the plaintiff did not induce the defendant by words or conduct to believe that Sharma had authority to receive payment on behalf of the plaintiff. On the other hand, the fact that a cheque was drawn in favour of the plaintiff in his firm name and was crossed 'account payee' and was made over to the plaintiff shows that representation, if any, was for payment to the plaintiff. The onus of proving this is also on the defendant and in my view this onus has not been discharged by the defendant. I hold that the defendant did not pay the sum of Rs. 5,236.62 nP. to Sharma as plaintiffs agent. The onus of proving this issue is also on the defendant and in my view that onus has not been discharged.

12. My conclusion on facts as set out above is enough to dispose of the suit. But reference has been made to several cases in course of argument and I will now proceed to deal with the same.

13. Mr. Sinha, appearing for the plaintiff, referred to a passage in Bowstead on Agency, 12th Edn. p. 15 for the proposition that the agent of one party to a contract is competent to act as the agent of the other party thereto, if he can do so consistently with his duty to his principal. A broker frequently acts for both the buyer and seller of goods. I do not see how this passage helps Mr. Sinha because the question involved in this case is whether Sharma acted as the agent of the plaintiff and whether he had been authorised by the plaintiff to receive payment from the defendant in cash and also whether the plaintiff had by words or conduct induced a belief in the defendant that Sharma was authorised to receive such payment. It cannot be disputed and in fact, it has not been disputed that a broker can and may act as agent of both the buyer and the seller.

14. Mr. Sinha referred to the case of Irvine and Co. v. Watson and Sons, (1880) 5 QBD 102. In this case it was held that where an agent enters into a contract for an undisclosed principal for purchase of goods, the seller may proceed against the principal though the latter has bona fide paid the agent for the goods unless the seller by his conduct has induced a belief in the buyer that he was not relying on the credit of the buyer but on that of the agent. The principle underlying this decision supports the plaintiff's case made in the pleadings and in evidence to this extent namely that even if the agent was paid lay the buyer, the seller can look to the buyer for payment unless he is precluded by his own conduct from making such a claim. The case went up in appeal and the judgment of the Court of Appeal which Is reported at p. 414 of the same report affirmed the decision of Bowen, J. The facts in Irvine and Co.'s case, (1880) 5 QBD 102, are somewhat different from the case under consideration, Inasmuch is the broker in the former case entered into a contract disclosing that he was acting for a principal but did not disclose the name of the principal. In the instant case, the broker effected the contract for a principal whose name and identity he had disclosed. Mr. Sinha then referred to the case of Davison v. Donaldson, (1832) 9 QBD 623. In that case the seller supplied goods to X who was engaged in a joint venture with Y. Y settled accounts with X and gave the latter credit for price of goods supplied. The seller applied for payment to X but did not get it. X later became insolvent and the seller sued Y for recovery of the price. It was held that there was no such conduct on the seller's parties to disentitle him to relief against Y. In my view, this case has no application to the instant case. X did not act as a broker or agent simpliciter but was also the principal. Secondly, there was no payment of the pries by Y to X as a broker or agent but there was an adjustment of account between two parties to a joint venture. The next case referred to by Mr. Sinha is Campbell v. Haasel, 171 ER 457. In this case a contract was made by the broker for both parties but the broker did not disclose the name of the seller to the buyer. It was held that a payment to broker would not be a good payment if it varied from the original terms of the contract. This case on facts is entirely different from the facts of the case under consideration and the decision does not help the plaintiff. Mr. Sinha then referred to the case of Baring v. Corrie, (1818) 20 R R 383. This was a case of sale by a broker without disclosing the name of the principal. It was held that the buyer cannot set off a debt due from the broker to him against demand for the goods made by the seller. The facts are different and the principle underlying the decision does not help the plaintiff. The next case referred to by Mr. Sinha is Drakeford v. Piercy, (1866) 147 R R 426. In this case the seller sold the goods through an agent who entered into the contract with the buyer not as an agent but on his own account as the seller. The buyer had no notice that the seller was an agent until after he had paid for the goods, bona fide believing that the agent was the seller on his own account and was entitled to receive payment. It was held that payment by the buyer to the agent is no answer to the seller's claim for price. Reliance was placed on the observation of Lush, J., at p. 431, of the report which runs as follows:

'But that an agent authorised to sell has as a necessary legal consequence authority to receive payment is a proposition utterly untenable and contrary to authority.'

This observation was made in the facts of that case which are very different from the facts under my consideration and, therefore, in my view the decision does not help the plaintiff.

15. Mr. Sinha next referred to the case of Linck Moeller and Co. v. Jameson and Co. [1885) 2 TLR 208. This is a judgment of the English Court of Appeal and Lord Esher M. R. in allowing the appeal against the judgment of Cave, J. held that payment by the buyer to the broker is not a payment to the seller. If under the contract payment was to be made to the seller, the buyer who had paid the broker was bound to show that he was justified in paying the broker either because the seller had authorised him to receive payment or because the seller had so acted as to make the buyer believe that the seller had authorised the broker to receive payment. It was also held that even if in a previous contract between the same parties the seller had authorised the broker to receive payment, the broker cannot be regarded as having the authority of the seller to receive payment In the subsequent contract. In my view, the judgment of Lord Esher M. R. lays down the correct proposition of law in the facts of the case under consideration.

16. The evidence leaves no room for doubt that Sharma acted as a broker. The defendant's case is that payment was made to Sharma in cash and this payment relieved the defendant of its admitted liability to the plaintiff. Assuming that payment was made to Sharma, this payment is no answer to the plaintiff's claim in this suit unless the defendant proves that the plaintiff authorised Sharma to receive payment or that the plaintiff had so acted as to make the defendant believe that the plaintiff had authorised Sharma to receive payment. In my opinion the defendant has failed to prove either of the above facts and therefore the payment to Sharma in cash, assuming such payment was at all made, is no answer to the plaintiff's claim in this suit.

17. In his argument on behalf of the defendant Mr. B. N. Sen referred to Section 237 of the Contract Act in support of his case that payment to Sharma by the defendant has extinguished the plaintiff's claim. This section does not help the defendant because in the first place, it deals with the case where admittedly there is a relationship of principal and agent and, in the second place, it deals with a case where the agent has acted without authority and, in the third place, this section lays down that the principal is bound by the unauthorised acts of the agent if he by words or conduct induced third parties to believe that the unauthorised acts of the agent are within the scope of the agent's authority. It is not the defendant's case that Sharma acted without authority. Mr. Sen had argued that Sharma was the agent of the plaintiff who had by words or conduct held him out as having the authority of the plaintiff to receive payment from the defendant. It is not the defendant's case that Sharma in receiving the payment acted without authority. Further, I have already recorded my conclusion on the facts of the case that Sharma was not the agent of the plaintiff and also that the plaintiff did not by words or conduct induce the defendant to believe that Sharma had authority to receive payment from the defendant. Section 237 of the Contract Act is, therefore, of no assistance to the plaintiff.

18. Mr. Sen then referred to a Privy Council decision in Ram Pertab v. Marshall, ILR 25 Cal 701 (PC). This case has nothing to do with the sale of goods through a broker or agent. The question discussed in this case was the right of third party against the principal on the contract of his agent -- where the contract was made in excess of the agent's actual authority. The question whether Sharma had authority to enter into the contract is not in dispute and in fact the contract itself and the supply of goods under it are admitted. On the facts, I have held already that the plaintiff had done nothing to induce the defendant to believe that Sharma had authority to receive payment. This case, therefore, is of no assistance to the defendant.

19. The next case referred to by Mr. Sen is Fazal Ilahi v. East Indian Railway Co., ILR 43 All 623 : (AIR 1922 All 324). The main question decided In this case is the liability of the Railway administration as a carrier for delay in delivery of goods and to what extent it is liable for non-delivery of some fire-works booked for sale before or at a festival. As the goods were booked by a Railway servant under a misapprehension for carriage by a passenger train -- the carriage by such a train which was forbidden would have involved the Railway in a breach of law but the principal viz. the Railway administration should have performed the contract of carriage by despatching the fireworks without unreasonable delay by a goods train. This case does not help the defendant at all. The facts are entirely different and the question of law discussed and laid down have no application.

20. The issues are, therefore, answered as follows:

Issue (a)...S. D. Sharma did net ant as the agent of the plaintiff alone but he was the broker in the transaction between the parties.Issue (b)...No.Issue (c)...No.

As to Issue (d) there will be a decree for Rs. 5559.35 nP. interest on judgment at 6 per cent and costs.


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