1. This is a suit for a declaration that a hire-purchase agreement dated 19th April 1937 has been determined by breach on the part of the defendant, and for an order that the defendant do make over to the plaintiffs certain machinery, the subject-matter of the agreement. The defendant admits having entered into the hire-purchase agreement, but he denies that the machinery which is the subject-matter of that agreement belonged to the plaintiffs. He also sets up an agreement entered into between the plaintiffs and himself and two other persons for the flotation of a limited company. He denies having committed any breach of the hire-purchase agreement, and contends that that agreement came to an end by reason of this alleged agreement for the flotation of a company.
2. The defendant spent some time in Japan and while there he ordered machinery for tin printing, tin varnishing and zinc grinding, amongst other machinery, and intended to set up a factory on his return to India. He had not the funds to pay the balance of the purchase price on the machinery, and he therefore came to plaintiff 1, Mr. Satyendra Nath Sinha, to put him in funds and finance these purchases. Mr. Sinha apparently took considerable interest in the proposed business and made various advances to the defendant. Plaintiff 2 also advanced money, but apparently his arrangement was a private arrangement with Mr. Sinha, though he was aware that the money that he was putting up was being used by Sinha to finance the defendant. The hire-purchase agreement was made on 19th April 1937.
3. On 12th December 1936 the defendant calling himself the 'managing director' of the Hindusthan Sheet and Metal Works wrote to the first plaintiff, Sinha, stating that he had sent a letter of authority to the Oriental Machinery Supplying Agency Limited to deliver machinery to the plaintiff on his payment of the money which would fall due. The Oriental Machinery Supplying Agency were apparently in direct communication with the Japanese firm of manufacturers, and they wrote to the present plaintiffs on 18th December referring to the letter of the Hindusthan Sheet and Metal Works, to which I have just referred, stating that they were agreeable to indent for the machinery on the plaintiffs advancing Rs. 1000 on that day, Rs. 500 on 21st December, and Rs. 1000 or so on arrival of the consignment. They also gave notice that they would charge a commission of one per cent. on the total value of the machinery which they stated to be about Rs. 7500. That was the value which had been placed upon the machinery by Mr. Bagchi, the defendant, both to the Oriental Machinery Supplying Agency Ltd. and to the plaintiffs.
4. The plaintiffs paid the Rs. 1000 on 18th December, and they made further payments of Rs. 300 on 1st January, Rs. 315 on 16th April, Rs. 1050 on 19th April and Rs. 30 on 26th April. Owing to their financing the transaction the machinery came to Calcutta, but from the correspondence and from the evidence it appears that the defendant had informed them that he had made advances to the manufacturers in Japan of Rs. 5000. From the defendant's evidence it appears that he had made advances to manufacturers in regard to other machinery in addition to the machinery with which we are now concerned. But it seems clear to me that he deliberately deceived the plaintiffs as to the extent of the advances that he had made in regard to this particular machinery. When the invoice was received from Japan it appeared that the total value of this particular machinery was 3250 yen, and the evidence is that the exchange value of the yen at that time was Rs. 77-8.0 per 100 yen. It also appears from that invoice that the only amount which the defendant had advanced with regard to this particular machinery was 700 yen or about Rs. 540. The machinery was delivered, and on 5th May the Oriental Machinery Supplying Agency Ltd. sent in their bill to the present plaintiffs showing the commission which had been charged on the invoice value rather less than Rs. 2800 and also showing the advances which had been made by the plaintiffs of Rs. 2695.
5. The so-called hire-purchase agreement was entered into between the plaintiffs and the defendant Bagchi. Mr. Bose, who is one of the partners of the firm of the Managing Agents of the Oriental Machinery Supplying Agency Ltd., has given evidence and says that Mr. Bagchi instructed him to hand over the delivery orders to the plaintiffs, as the plaintiffs would finance the transaction. Clause 2 of the hire-purchase agreement provides that the defendant, who is there called the 'hirer,' shall pay to the plaintiffs, who are called the 'owner', on the execution of the agreement, Rs. 500 and further provides that the hirer shall punctually pay to the owner, without previous demand, the sum of Rs. 2700 only by way of rent for the hire of the machinery. The clause continues, 'the first payment to be made on the thirty-first day of May one thousand nine hundred and thirty seven', and it is provided that the tin printing machinery shall form and be the property of, and the property in the said goods shall be in the 'owner', (that is to say in the plaintiffs), until all the instalments aforesaid are paid by the hirer as aforesaid in full, and in the meantime the hirer will be trustee of the tin printing machinery for the preservation and maintenance thereof for the benefit of the owner.
6. It would appear then that the transaction contemplated that payment should be made in instalments, although only one date for payment is given, namely 31st May 1937, and this view again is supported by a reference to Clause 6 which provides, 'if the hirer shall make default in payment of any monthly sum.' It is clear, however, from the final paragraph of the agreement that all that the parties contemplated was the payment of one single sum of Rs. 2700 on 31st May 1937. The other clauses have apparently been introduced by the draftsman without considering whether they are applicable to the particular document which he is drawing. It is noteworthy that the sum of Rs. 2700 is within Rs. 5 of the money advanced to the Oriental Machinery Supplying Agency Ltd. by the plaintiffs.
7. Clause 6 provides that if the hirer shall allow a decree against him to remain unsatisfied or if the hirer make default in payment of what is called the monthly sum payable under the document, then the owner shall have the right to retake and? resume possession of the machinery. The plaintiffs allege that there have been-breaches of both these promises. There-was a decree on 8th January 1937 in favour of the Central Bank against the defendant and that decree has been executed, but satisfaction has not yet been entered. The defendant contends that this is not a breach of the agreement because the agreement does not state how long any decree should remain unsatisfied. The decree was, in any event, unsatisfied for several months and it appears to me that that was an unreasonable time considering,; the other financial commitments of the defendant which have been brought to light in the evidence. It is sufficient however for the plaintiffs to rely on the other breach, viz. that the sum of Rs. 2700 has not been paid on 31st May 1937, as provided in para. 9.
8. The defendant then tries to avoid the consequences of his breach by setting up an agreement which he says was entered into on 27th May 1937 for the flotation of a company to utilize the machinery which is the subject-matter of the hire-purchase agreement. The plaintiffs and the defendant and two other persons Nagendra Bhusan Beed and Naresh Chandra Mazumdar were to float a private limited company with a capital of Rs. 50,000. A document purporting to be the agreement has been tendered in evidence but it is signed only by the defendant and by Mr. Mazumdar. The first page was initialed by Mr. Mazumdar and by plaintiff 1 and the defendant, but the other two parties had not even initialled it. It is quite absurd to suggest that this is a binding, document or that it is a concluded agreement. The defendant himself in his evidence stated that the plaintiff said to him that the hire-purchase agreement was to-be executed as security for the re-payment of the loan of Rs. 2700 but that as soon as the company was floated the hire-purchase agreement might be torn up. It is admitted that the company never has been floated, and it is also clear from the evidence that this agreement to float the company was never concluded because of the financial condition of the defendant. The defendant's contention apparently is that he has been instrumental in procuring certain machinery from Japan, but that the people who have financed him are now going to get possession of that machinery and use it without admitting the defendant into partnership or as a share-holder in any company that may be floated. The mentality of the defendant is well illustrated by the letters that he wrote as 'Managing Director' of the Hindusthan Sheet and Metal Works. His letter-paper apparently was headed 'Mr. A. C. Bagchi, Expert in Printing, Japan', 'Mr. N. C. Mazumdar, Expert in Toy-Making, Japan.' Although there was no company he signs himself as Managing Director. He then gives evidence that there was a partnership between him and Mr. Mazumdar, called Hindusthan Sheet and Metal Works, and he has invariably signed as 'Managing Director' of that partnership. He suggested that Mr. Mazumdar also signed as Managing Director but the only document which has been produced, Mr. Mazumdar signed, 'for Managing Director'. His difficulty was that he himself could not finance the grandiloquent schemes which he had contemplated, and now that the people who have financed him wish to exercise their rights under the agreement which they have made for financing him; Mr. Bagchi uses every device that he can think of, in order to prevent them from getting what they are entitled to under their agreement.
9. In addition to the defences which have been set up on behalf of the defendant, his counsel took the objection that the agreement of the 19th April which bears a one-rupee stamp was insufficiently stamped. The question as to whether such a plea should be taken by a member of the English Bar was discussed in a decision which is reported in Gulzari Lal v. Ram Gopal : AIR1937Cal765 where Lort-Williams J. pointed out that:
According to the rules laid down by the general council of the English Bar, it is considered to be unprofessional conduct for counsel to raise an objection on the admissibility of a document on the ground that it is not stamped, but that there is no such objection to counsel raising an objection to the validity of a document which is by law rendered invalid owing to the absence of stamps. The distinction clearly is that in one case counsel is taking an objection which is merely in the interest of the revenue authorities and does not touch the merits of the case, where as in the other case the objection to the validity of a document strikes at the root of the matter and is clearly relevant.
10. The fact that this document was insufficiently stamped has not been established, but even if it were so, the document would not in my opinion be invalid, although an objection might be taken to its admissibility in evidence. On 11th June 1937, an order was made by this Court appointing the Official Receiver, Receiver of the machinery, subject-matter of this suit, and on 5th July 1937 an order was made on the application of the defendant that the Official Receiver was to be discharged on payment of the sum of Rupees 2700. That payment has not been made and the Official Receiver is still in possession. The issues were as follows:
(1) Are the plaintiffs owners of machinery in suit?
That issue is answered in favour of the plaintiffs. They have always been spoken of as owners throughout the agreement and the evidence is that the delivery orders for the documents were handed over to them by and on behalf of the defendant to enable them to deal with the goods as owners.
(2) The second Issue is-'Was the alleged hire-purchase agreement rescinded by reason of the agreement dated 27th May 1937 referred to in para. 4 of the written statement?' I have already held that there was no concluded agreement on 27th May 1937 nor has that alleged agreement been acted upon.
(3) The third Issue is- 'Has the defendant committed a breach of the hire-purchase agreement as alleged in paras. 5 and 6 of the plaint?' The answer is in the affirmative.
11. There will be a declaration that the hire-purchase agreement of 19th April 1937 has been determined by breach on the part of the defendant and that the Official Receiver do make over the machinery, subject-matter of the suit, mentioned in prayer (b) to the plaint, to the plaintiffs. The decree to be drawn up expeditiously. The defendant must pay to the plaintiffs their costs of the suit.