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Karunakumar Datta Gupta Vs. Lankaran Patwari - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1933Cal759
AppellantKarunakumar Datta Gupta
RespondentLankaran Patwari
Cases ReferredManilal Raghunath v. Radhakisson Ramjiwan
- ameer ali, j.1. this is a suit to set aside an award of the indian chamber of commerce upon certain contracts for the sale and purchase jute entered into by the plaintiff. a case, very similar on facts and in principle, was decided by panckridge, j., in chong wong v. brijmohan dhandhania suit no. 187 of 1929 decided on 11th february 1930. the facts in outline are as follows:2. the plaintiff is a retired district engineer. in september 1928, he was introduced by one shisirkumar ray to the defendant firm represented by sobhachand. sobhachand was and is a member of an association called the east india jute association, limited, which was formed in 1927. according to the plaintiff and shisir, the plaintiff wanted to do 'fatka' business. there were meetings between the, plaintiff and.....

Ameer Ali, J.

1. This is a suit to set aside an award of the Indian Chamber of Commerce upon certain contracts for the sale and purchase jute entered into by the plaintiff. A case, very similar on facts and in principle, was decided by Panckridge, J., in Chong Wong v. Brijmohan Dhandhania Suit No. 187 of 1929 Decided on 11th February 1930. The facts in outline are as follows:

2. The plaintiff is a retired District Engineer. In September 1928, he was introduced by one Shisirkumar Ray to the defendant firm represented by Sobhachand. Sobhachand was and is a member of an association called The East India Jute Association, Limited, which was formed in 1927. According to the plaintiff and Shisir, the plaintiff wanted to do 'fatka' business. There were meetings between the, plaintiff and Sobhachand, at one of which, at any rate, Shisirkumar Ray was present. There is some dispute between the parties as to whether the first interview between the plaintiff and Sobhachand took place outside the offices of the East India Jute Association or at the plaintiff's house. It is not disputed that there wore interviews between the plaintiff and Sobhachand, subsequently at the plaintiff's house. It is the plaintiff's case that the matter was discussed between himself and Sobhachand and that it was agreed that no deliveries should be given or taken. According to the plaintiff, this discussion ensued upon the receipt by him of the first contract note, on 12th September 1928. In all eleven contracts ware passed between 12th September 1928, and 11th October 1928, all being for the delivery date at the end of December. On these eleven contracts, a sum of about Rs. 929 became duo from the plaintiff to the defendant and by reason of the last three contracts Nos.(320, 326 and 331 a lot of one thousand bales was left on hand as a sale by the plaintiff, i.e., one thousand bales were to be bought by him to close the contracts then open.

3. It is the plaintiff's case that on 12th October, he telephoned to the defendant firm to buy in this outstanding one thousand bales, that his request or order was not carried out, that he insisted upon having them bought in at the opening rate, that the defendant firm would not give him that rate, and that therefore he refused to go on with the transaction and repudiated liability for any loss which might ensue. According to Sobhachand, there was no such telephone conversation; the plaintiff would not give instructions to close, so that he had to close according to the system of the association on 16th October 1928, and that did so at a rate which resulted in a loss of Rs. 2,043. This sum together with the sum I have already mentioned is due upon the eleven contracts. Rs. 2,968-12-0 in all was claimed by the defendant firm. On the plaintiff's refusal to pay, the defendant firm submitted the dispute to the arbitration of the Indian Chamber of Commerce, in accordance with one of the clauses of the contract, It is conceded that the plaintiff had notice of the arbitration. He ignored it. On 12th April 1929, an award was made against the plaintiff for Rs. 2,847-4-5 and costs and on 28th June 1928, this suit was filed. I need not refer to the pleadings. The essential questions involved are as follows:

(1) Does the award comprise or include matters not referred? (1)(a) If so, can the award be set aside on that ground? (2) Are the defendants entitled to enforce the contracts, having regard to the provisions of Section 23G, Contract Act? (2)(a) If not, is the plaintiff entitled to have the award set aside on this ground? (3) Were the contracts by way of wager? (3)(a) If so, is the plaintiff entitled to have the award set aside?

4. That I think, covers the whole ground. With regard to question (1) and (1)(a), I hold that the award is not bad. With regard to question (2)(a), I should be prepared to hold the award to be in any event binding.

5. Question (2) is answered in the affirmative, i.e., the point under Section 236 fails. The reasons will appear from the discussion on the last two questions. I will deal with questions (3) and (3)(a) in the reverse order. 1. Can the plaintiff sue to set aside the award on the ground that the contracts were wagering contracts? 2. If so, were the contracts in fact wagering contracts? 1. It has been contended by the defendant that the matter having been decided by the arbitrators, the Court has no jurisdiction to re-open the matter. It is conceded that, where the formation of the contract is challenged, e.g., where it is said that one party did not sign, there a suit lies. Again, it is conceded that where the plaint alleges that the contract is voidable on the ground of fraud, coercion, or misrepresentation, there again a suit lies. But it is contended that, where the formation of the contract is admitted where it is admitted that there is a contract, but is argued that the contract is void by reason of want of consideration, mistake, illegality or any other provision of law, there the parties remain bound by the agreement to arbitrate.

6. In support of this contention Mr. Ghose relied upon certain passages in Baijnath v. Mansukrai Pannalall AIR 1919 Cal 826 read with the argument of counsel. I do not, however read the passage in Baijnath v. Mansukrai 'Pannalall AIR 1919 Cal 826, as meaning any more than that the Court will not assist the party setting up a case of wager by granting him equitable relief by way of injunction restraining arbitration proceedings. Rankin, J., in Sardarmull Jessraj v. Agar Chand Mehata & Co. AIR 1919 Cal 89, took the same view. I see nothing in these cases, which negatives the right of a party to a wagering contract to sue to set aside an award made upon a submission contained in the contract;. In Auberi v. Maze (1801) 2 Bos & P 371, such an award was set aside, but there the matter had been referred to the Court by the arbitrators. In Smith, Coney and Barrett v. Becker, Grey & Co. (191C) 2 Ch 86, the principle is clearly acknowledged that if the contract is challenged as being void on the ground of illegality, the arbitration clause contained in the contract is also avoided. The authority, to which I was referred by Mr. Roy, Joe Lee, Ltd. v. Lord Dalmeny (1927) 1 Ch 300, although dissimilar on facts, is, I think, an authority for the proposition that the arbitration clause contained in any wagering contract is a part of the contract and not to be treated as a covenant distinct from the wagering contract and is, therefore equally unenforcible with the contract of wager itself.

7. I consider that the same result follows from an analysis of the Contract Act. By Section 2(g) of the Act, an agreement, which is not enforceable by law, is void. By Section 2(h), it is only an agreement enforceable by law that is a 'a contract.' By Section 30, an agreement by way of wager is a void agreement. It is no more a contract than an agreement affected by Sections 20, 23 or Section 25. I, therefore, agree with the view expressed tentatively by Panckridge, J., in Chong Wong's case Suit No. 187 of 1929 Decided on 11th February 1930, to the effect that such a suit lies.

2. Were the contracts in suit by way of wager?

8. It will be convenient at once to summaries Mr. B.C. Ghose's argument on this question.

1. He contends, in the first place, that it matters not if the contracts were by way of wager, because his client was in the transactions in question an agent, and that as an agent ho is entitled to his commission and also to an indemnity on account of loss incurred in entering into other contracts upon the mandate of his employer, the plaintiff; 2. He contends, secondly, that the very possibility of 'common intention' to wager is in this case excluded by the relationship of the parties and the system under which business was transacted; 3. Thirdly, he, contends that in point of fact 'common intention' has not been established as between the plaintiff and defendant, far less between the plaintiff and any other person.

1. The answer to point (1) depends upon whether the defendant was, in fact, and, in law, an agent and not a principal. In the former case, the plaintiff, apart from any special statute, would be entitled to his indemnity whether the contract he procured was not of a wagering nature; 2. Mr. B.C. Ghose's second point may be illustrated by the following example. By contract No. 326, the plaintiff (whom I will call A) bought 250 bales. The defendants, Lankaran Patwari (whom I will call B) gave A a bought note at the rate of Rs. 67-13-0. B, in turn, entered into a transaction with Santokchand Singhi, another modi (whom I will call C) at the same rate of Rs. 67-13-0. C had an order to sell from Ramcharan Panchiram (whom I will call D). The order was, in point of fact, to sell 1,750 bales. Mr. B.C. Ghose was first inclined to suggest that the two principals in the transaction were A and D and that was also, as far as I recollect, the contention put forward in Chong Wong's case Suit No. 187 of 1929 Decided on 11th February 1930. But his real contention before me has been that A and C were the two principals in the contract of sale, and I deal with the case on that basis. Mr. Ghose's point is this, that, B being the agent, A, being the buyer, and 0, being the seller, the chain or circuit of intention is interrupted. In other words, A and C cannot be connected in a common intention to wager. Before proceeding to the law, I propose to discuss the materials on this point under the following heads: (a) the system; (b) the oral evidence; (c) the contract itself.

(a) With regard to the system, I propose merely to give what appear to me to be its principal features.

9. The East India Jute Association, Ltd., was founded in 1927. There had been a previous association, which came to an untimely end, but that has no bearing on present matter. The secretary of the association is Mr. Jewanram Pandit, who gave evidence, a voluble and impressive gentleman. The association has elaborate rules. They were most carefully drawn in accordance with legal advice. The association consists of about 200 members or modis. These form what is in the vernacular referred to as the 'bhitar bazar' and may be called the inner ring. The year is divided up into four three monthly periods, all contracts within any one period being made deliverable at a special date fixed by the association towards the end of the period. There is a weekly rate fixed by the association and weekly adjustments between the modis carried out by the association by methods similar to those of a clearing house, that is to say, each week, the modis amongst themselves pay such margins as accrue to each other until the delivery date arrives, when the matter is again adjusted by payment of difference, if any difference remains, or, it is said, by delivery if delivery is insisted on. There is a corresponding weekly adjustment between the modi and his outside customer, the member of the outer ring. Brokerage is charged by the modi against the outside customer, at three annas per bale, upon contracts of sale, it being understood that in the normal course, the contract of purchase will be covered by a contract of sale through the same broker. The modi does not receive brokerage as between himself and the other modi, that is to say, in the inner ring no brokerage is charged. The transaction is effected by the modi, who deals with the outsider by bought and sold notes, in the form of Ex. A. He deals with the other modis on entirely different forms. In his transaction with the other modi, he may split up the amount sold by his outside customer and vice versa. It is not necessary that the other modi should have, at his back, another outside customer, that is to say, taking the symbols I have given, it is not necessary that C should have a corresponding outside customer D. It does not happen, and the illustration I have given is an instance, but as I read the evidence, the other form of transaction A, B, C is quite as common, if not more common. The transactions in suit are of both kinds. It will appear therefore that the modi does more than one kind of business. In one transaction he will be earning only brokerage (in the position of B). In another transaction he will be standing to gain or lose (in the position of C). The same man may have a number of transactions of each kind in one day.

10. For the details of the system reference must be made to the evidence of Mr. Pandit. Mr. Pandit is naturally proud of the rules of his association. He is convinced of their efficacy as a preventive for gambling. According to him it is quite impossible, having regard to the system in force, for any person, however anxious to gamble, to enter into a gambling transaction with any modi who is a member of the association. His reasons are of two kinds. First of all he points to the amount of deliveries actually made by members as they appear from the statistics. Secondly, he was at pains to show that one modi, when he makes his contract with another modi in the inner ring, business is done in such a manner that the two parties cannot possibly have a common intention. In my opinion what Mr. Pandit was really doing in the witness box was to argue, that, having regard to the requirements of the law as to wager, it would be difficult, if not impossible for any party setting up a case of wager to establish common intention. In other words he was anticipating the argument on this point put forward by Mr. B.C. Ghose, with which I am now dealing. (b) With regard to oral evidence, it is, in my opinion of limited value. Witnesses when asked whether they were principals or agents, are in point of fact asked the very question which I have to decide. Sobhachand, when asked was clearly at a loss how to describe himself and certainly did not wish to be tied down: see questions 16, 18 and 21:

In all these contracts were you acting as broker?'

' In those contracts I was acting in accordance with the rules of the Association.'

11. On the other hand one matter of importance is clear from his evidence, i.e., that he regarded the transaction between himself and the other modi as that of principal and principal. Indeed Mr. Ghose did not contend in otherwise:

Q. 193 'Will you tell us which of these five men?'

' That refers to the five modis who had between them bought a certain lot sold by the plaintiff.'

' Can you tell us which of these five was the other party to this contract?'

' I would be the other party.'

' And you in turn sold to five other people similar amount in separate lots?' 'Yes, to five modis.'

Q. 129. 'As regards these transactions, these direct dealings between modis, there is no question of principal or agent or anything else?'


As regards Pandit, Q. 'He (the outsider) is never concerned with any other party but broker he is dealing with?'


And Q. 161. 'My members perform a dual function. So far as outside parties are concerned, they are brokers. While between themselves as members and members they are in the capacity of principals.'

12. As regards Karuna, all he says as to the relationship between himself and the defendants is:

Q. 'If it was only a paper transaction, you did not care whether they are brokers or what they wore?'

'Of course I did not care what they were but they represented themselves to me as brokers.'

Q. 'But you would not expect them to have another principal behind them?'

'I think there were.'

(c) Lastly there is the contract itself. I have already explained that as between the broker B and the outsider A, the transactions are carried out in rather a peculiar manner. A bought or sold note of a formidable nature with 27 clauses is passed by B to A, but no corresponding note is passed to C. The bulk of the printed matter in these notes is purely appropriate to an ordinary mercantile contract made through a broker. Except for the clause, I am about to quote, there is nothing to indicate that B is other than a broker in the strict sense of the term. Clause 26 reads as follows:

The contract will be performed between you and ourselves and you will not be entitled to inquire with whom the corresponding contract has been entered into or to require the performance thereof No contractual privity is established with the person with whom the corresponding contract is entered into,

13. It goes on to talk of delivery. The contract between B and C in the inner circle consists merely of a slip in a counterfoil book in the following terms:

Subject to the bye-laws of the East India Jute Association, we have this day bought from you, etc.

14. I have already mentioned that A sells 1,000 bales, B may split up and sell in any quantities he pleases, e.g., 250 to Cl, C2, C3, C4 and vice versa.

15. Mr. B.C. Ghose when confronted with this clause, contended that A and C can be principals in a contract of sale without privity of contract. In other words, that B can remain agent notwithstanding that he is the other party to the contract of sale under Clause 26 of this contract. For this propositions he relies on the observations of Lord Blackburn in Robinson v. Mollett (1875) 7 HL 802 and in Ireland v. Livingston (1872) 6 HL 395. That brings me to the law. The proposition for which Mr. B.C. Ghose contends has already, in this Court, been subjected to the most searching criticism by the present Chief Justice of Rangoon in Holmes Wilson & Co, Ltd. v. Bata Kristo De : AIR1927Cal668 . It is not possible however to appreciate the precise significance of that decision and its bearing upon the point in issue without some knowledge of its inner history. On 28th March 1924, Page, 'J., gave judgment in MoLeod & Co. v. Ivan Jones & Co. AIR 1926 Cal 189. The plaintiffs McLeod & Co., had imported from America a large number of motor cars upon the order of the defendants (Ivan Jones & Co.). Ivan Jones & Co. had refused to accept delivery on the ground of defect or difference from description. The plaintiffs had sued as principals upon documents similar or analogous to an indent.

16. During the case, the plaintiffs, in order to circumvent the defence, sought to amend by pleading in the alternative that they were agents and therefore notwithstanding any default by the shippers entitled to an indemnity. Mr. Pugh for the plaintiffs propounded the view for which Mr. Ghose is now contending and relied on observations of Lord Blackburn in the two cases mentioned and also upon the judgment of Sir Lawrence Jenkins in Paul Beier v. Chotalal Javerdas (1904) 30 Bom 1. Page, J., rejected the proposition and, in the course of the discussion, gave expression, in unmistakable terms, to the following sentiments-that Lord Blackburn was wrong and that Brett, L.J., was right, that Sir Lawrence Jenkins in Paul Beier v. Chotalal Javerdas (1904) 30 Bom 1 was tainted with Blackburnian heresy, and that Page, J., had long awaited an opportunity of chastising these errors and incidentally of settling once and for all the law as to indent contracts. The amendment was disallowed. The plaintiffs were held to their original case of sellers and lost.

17. Page, J., however in his judgment adverted to the other aspect of the case, in a passage, which I have caused to be annexed to this judgment in the form of a footnote. The opportunity sought for by Page, J., arose in the suit of Holmes-Wilson & Co., Ltd. v. Bata Kristo De : AIR1927Cal668 , then pending. This was a suit similar to Paul Beier v. Chotalal Javerdas (1904) 30 Bom 1. The defendant (indentor) had ordered through the plaintiffs, merchants, quantities of metal goods upon an indent giving fixed price and providing no commission to the merchant;. The merchant had entered into a contract with the 'suppliers' at a price below that mentioned in the indent. They had handed to the indentors 'a placement report.' The suit was originally framed as one by sellers against buyers for damages on account of failure to take delivery. Before the hearing however the plaintiffs' advisers, in view of the warning received in McLeod & Co. v. Ivan Jones & Co. AIR 1926 Cal 189 and, apprehending heavy weather from that quarter, took the precaution to amend by pleading in the alternative that, if agents, the plaintiffs had acted in accordance with mercantile custom known to the defendant who had consented to their so acting. At the hearing counsel for the defendant abandoned all defences on the merits and-if I may use the expression struck canvas and ran before the wind with Robinson v. Mollett (1875) 7 HL 802.' A further result was however that the argument which Page, J., proceeded to demolish was not that advanced by counsel for the plaintiffs, but was the one which Page, J., had so long sought an opportunity to demolish. This he effectively did at pp. 562 and 563 (of 54 Gal. in Holmes Wilson & Co's, case : AIR1927Cal668 :

Page 562 (of 54 Cal.) 'In other words, in effecting the contracts by which the defendant purchased the goods, were the plaintiffs to be regarded vis-a-vis the defendant as agents or principals? Learned counsel for the plaintiffs during the course of the trial was disposed to argue upon the authority of certain passages in the judgment of Blackburn, J. In Ireland v. Livingston (1872) 6 HL 395 that in respect of these sales the relationship of the plaintiffs to the defendant was that both of agent and principal, but, in my opinion, these passages do not support the proposition for which they were cited. In Robinson v. Mollett (1875) 7 HL 802, Blackburn, J., in expressing an opinion contrary to that of Brett, J., and other learned Judges, appeared to think that an agent might purchase goods for his principal without himself being the vendor or creating privity of contract between his principal and a third person. But the view that found favour with Blackburn,J., as I understand Rohinson v. Mollett (1875) 7 HL 802, was not accepted by the House of Lords, and I am clearly of opinion that under the contracts of sale by which the defendant purchased the goods in suit the plaintiffs inevitably must have been either principals or the agents of the defendant, and in the eye of the law cannot be regarded as filling at the same time both capacities'.

page 563 (of 54 Cal.) 'In my opinion where goods are purchased through A by B, A inevitably must either have sold the goods to B on his own account as a principal, or as agent for B have created privity of contract between B and a third person: Veise v. Wray (1802) 3 East 93, Ireland v. Livingston (1872) 6 HL 395, Robinson v. Mollett (1875) 7 HL 802 Cassia boglou v. Gibb (1883)11 QBD 797.'

18. These passages should be compared with the first portion of the judgment in MeLeod & Co. v. Ivan Jones & Co. AIR 1926 Cal 189 The argument, which the plaintiffs attempted to put forward, was not that the merchant was both seller and agent in the contract of sale but that (i) the merchant was from the outset a seller of the goods with certain of the rights and liabilities of an agent, appending to him, or (ii) that, assuming the merchant to be, at the inception, an agent, as soon as a supplier was found, the contract placed and the indentor notified, a contract of sale between indentor and merchant developed naturally from the indent nucleus (i.e., without any fresh consent by the indentor). That from that point of time at any rate the merchant was a seller, notwithstanding that certain agency rights and liabilities might continue to operate. In other words, that there were in the transactions two parallel relationships in contact With each other-in terms of biology-that conditions indicated not a hybrid, but two organisms symbolically combined. In the end Rage, J., held:

(a) that under the former indents in suit the relationship of principal and agent was created between the defendant and the plaintiffs: See p. 564; (b) That by usage in the case of indents as described, the merchant is entitled to buy from the supplier at one price and sell to the indentor at another-price: See p. 759; (c) That the defendant consented to the plaintiffs performing the contracts in suit in the manner-sanctioned by the said usage.' See pp. 579 and 582.

19. It will appear from the report that Page, J., did not, in so many words, determine that the plaintiffs wore sellers. This question became of practicable importance during the inquiry as to damages ordered by Page, J. The defendant contended that the plaintiffs were entitled to an indemnity only: Cassaboglou v. Gibb (1883)11 QBD 797. The view taken by the plaintiffs was that the case had travelled in a complete circle and that the effect of the decision was to hold that

quoad the contract of sale, the contract between the plaintiff and the defendant was one of vendor and purchaser: see p. 563.

20. On an application to Page, J., he declined to express any further opinion but in fact directed that the inquiry should ascertain the difference between the contract and market price on the dates when the defendant should have taken delivery. Having regard to Cassaboglou v. Gibb (1883) 11 QBD 797, it appears to me that the conclusion is inevitable, that Page, J., held the plaintiffs to be sellers and that the real effect of the case is to decide that when a merchant or agent is authorized at the outset to create a contract of sale between the buyer and himself and not between the buyer and the supplier, that merchant or agent is, in the transaction of sale which follows, in fact and in law a seller. Before proceeding to discuss the Indian authorities other than Holmes Wilson & Co., Ltd. v. Bata Kristo De : AIR1927Cal668 , I desire to make certain observations with regard to the three English cases which have been referred to. As regards Ireland v. Livingston (1872) 6 HL 395, I desire to express a doubt whether Lord Blackburn ever intended to convey that an agent qua agent can be a principal in a contract of sale. Did he mean any more than this: taking indentor A, merchant and commission agent B and supplier 0, that B qua contract of employment is always an agent. That B qua contract of sale may bo (a) an agent without any liability; (b) an agent with liability as guarantor, or (e) the seller; and that in case (c) the two contracts, the one of employment and the other of sale, may continue to exist side by side. As regards Robinson v. Mollett (1875) 7 HL 802, I desire to suggest; that perhaps too much has been made of this case and that the whole result may be summarized as follows:

When there is only the relation of broker and customer the broker cannot satisfy the terms of his employment by selling his own goods to the customer. Apart from the special circumstances of the case Robinson v. Mollett Suit No. 187 of 1929 Decided on 11th February 1930 establishes no more than this. Lord Halsbury in May v. Angeli (1898) 14 TLR 551.

21. As regards Cassaboglou v. Gibb (1883)11 QBD 797, I have found this case as difficult to appreciate as to pronounce. In that case B the merchant and commission agent had sued their buyer A for failure to take delivery. It was held that B had not created privity of contract between A and 0 the foreign supplier, yet it was held that B could not recover against A except on the basis of indemnity. This result appeals to me difficult to reconcile with the view taken by the same learned Judge, Brett, L.J., of the position of a commission agent with foreign principal, e.g., in Ex parte Myles. In re Isaacs (1885) 15 QBD 39:

Now, what is the meaning of sending such an order to a 'commission agent'? (B) It means that Morrice & Co. (A) direct or request Elkin & Co. (B) to buy the goods as principals from Turner & Co. (C) and to sell them again as principals to Morrice & Co. (A), but subject to this, that Elkin & Co. (B) bind themselves to sell to Morrice & Co. at the same price that they pay to Turner & Co., adding only to that price the agreed commission between themselves and Morrice & Co.

22. It will be seen that, in Cassaboglou v. Gibb (1883) 11 QBD 797, the merchant and commission agent was executing the order on a commission basis and therefore would, in no event, be entitled to more than the agreed commission plus protection against any loss suffered by him in carrying out the transaction. Had the commission agent been working on difference in price the result would possibly have been otherwise. I now turn to Indian authorities other than Holmes Wilson & Co., Ltd. v. Bata Kristo De : AIR1927Cal668 . These arise out of transactions of two kinds, foreign or indent trade [of which Holmes Wilson & Go., Ltd. v. Bata Kristo De : AIR1927Cal668 is an example] and provincial trade known as pukki and kutchi adat business, in particular that carried on from Bombay. It so happens that in Vol.30 of I.L.R. Bom. both classes of cases are represented: both being decisions of Sir Lawrence Jenkins on appeal. At p. 1 is reported the case of Paul Beier v. Chotalal Javerdas (1904) 30 Bom 1, a suit on Indent Contract which has already been referred to. In that case Sir Lawrence Jenkins proceeded upon the usage proved (p. 23). He was careful not to decide whether the merchant was or was not a principal.

Page 24. 'Moreover the argument assumes that the contract between the parties was that of agency.',

Page 25. 'In the view however that I take of the case it is not necessary nor is it desirable that we should decide whether on the acceptance of the indent the relations of the parties became crystallised into those of vendor and purchaser pure and simple.'

23. In other words, Sir Lawrence Jenkins took the line of least resistance. He took the same line in Bhagwandas Narotamdas v. Kanji Deoji (1905) 30 Bom 205. This was a case of pukki adat contract. It was held that by established usage no privity of contract is created between the up country constituent and the Bombay Merchant. Both look to the pukka adatia alone (pp. 213-215) and that the contract is solely between pukka adatia and the Bombay merchant, who is not entitled to any contract with the up country constituent.

Page 216. 'The evidence does not (in my opinion) show that the relations between the pukka adatia and the up country constituent is that of mere seller and buyer.... On the other hand I do not think there was the relation of principal and agent pure and simple.'

Page 217. 'I do not say that there is no relation of principal and agent between the parties at any stage.... So here there may have been that relationship in its common meaning for the purpose of ascertaining the price at which the order was to be completed, and to this point of the transaction all the obligations of that relation perhaps apply. But when that stage is passed, I think the relation is not that of principal and agent, but of the nature I have indicated.'

24. In this case, the pukka adatia had sued as principals and the defendant had set up liability to account. In Burjorji Buttonji Bomanji v. Bhagwandas Parashram AIR 1914 Bom 319, the point in question arose in direct relation to the question of wager. The result of the decision was that the contract being between pukka adatia and Bombay merchant on the one hand and pukka adatia and up country constituent on the other, in a suit by pukka adatia the defence of wager would be established by proving common intention on the part of pukka adatia and the party sued. It would not be necessary to establish common intention between Bombay merchant and up country constituent, there being no privity of contract between them. The plaintiff appealed to the Judicial Committee. Unfortunately the defendant was not represented and the appeal was allowed ex parte. The ruling of the Board through Sir Lawrence Jenkins is to be found in Bhagwandas Parasram v. Burjorji Ruttonji Bomanji AIR 1917 PC 101. Except for the finding that, in the circumstances of that case, common intention was in fact absent, I share the difficulty expressed by McLeod, C.J., in Manilal Baghunath v. Radhakisson Ramjiwan AIR 1921 Bom 238 in discovering what legal principle was intended to be laid down. In Manilal Raghunath v. Radhahisson Ramjiwan AIR 1921 Bom 238, the whole matter came again before the Bombay Court in appeal and so far as matters of principle are concerned this is the authority which I propose to follow. At p. 406 (of 45 Bom.) it is pointed out that:

If the contract between the two is a contract of employment, such a contract can never by its very nature come within the definition of a wagering contract and the pukka adatia must win unless the constituent can bring the contract within the provisions of Bombay Act 3 of 1865.

25. At p. 419 (of 45 Bom.) it is pointed out that the pukka adatia by reason of the fact that he creates no contract between Bombay merchant and up country constituent is excluded from any class of mercantile agent. In other words he is a seller. At p. 424 (of 45 Bom.) the Court found an understanding that all transactions should be closed by payments of differences not only between plaintiffs and defendants but also between the plaintiffs (pukka adatia) and the persons with whom the plaintiffs had made covering contracts. The passage appears to me to relate to a condition of affairs very similar to those disclosed by the evidence in the present case. Finally in Chong Wong v. Brijmohan Dhandhania's case Suit No. 187 of 1929 Decided on 11th February 1930, Panckridge,J. inclined to the view that, by reason of Clause 26, Ex. A, the se-called broker was in fact a principal. For reasons above explained, with this view I agree. In other words, the ingenious attempt of the East India Jute Association, Ltd., to devise a system whereby the whole transaction could be confined to A, B yet reserving to B the privilege of immunity from the effects of the law as to wager fails. (3) There remains the question, whether there was common intention in fact. Now, I agree with everything that has been said as to the necessity of adequate proof of common intention, subject to this, that in the normal affairs of life one cannot expect common intention to be declared in writing, sealed signed and delivered. I agree that there must be enough to make the inference certain the parties agreed not to give or take delivery. I agree also that the distinction between speculation and wager must be borne in mind. First, as regards common intention, between plaintiff A and the defendant B. Of the two, other things being equal, I do not for a moment say that I should prefer Karuna's evidence. The defendant Sobhachand seemed to me a perfectly respectable business man, carrying on a business which he regards as respectable, and doing business so far as this case is concerned in a perfectly respectable manner.

26. But I do hold that enough was said and done between the parties to make it perfectly clear that there was to be no giving or taking delivery and that was the agreement. I think that Shishirkumar Ray is to be believed to this extent, that he did explain the whole system to the plaintiff. Sobhachand himself states that he did so (questions 147 and 267). I have no doubt that the plaintiff stated that he wished to do 'fatka business' and that the parties agreed to do such business to which they attach a common meaning, 'wager.' Secondly, as regards common intention between A and C, the other broker, I take the view that if A proposes to wager and 0 proposes to wager, there being no meeting between the two, if the two parties are brought into relationship by some intervening machinery common intention would exist. That is to say, if you can regard these transactions as contracts between A and C, as I do not, then assuming the conditions above described the contract between A and C would be by way of wager. In this case, although there is no direct evidence, I would be prepared to draw the inference that in all the transactions in suit the other modis' with whom the defendant made covering contracts, also had the intention never to give or take delivery: See for a similar finding Manilal Raghunath v. Radhakisson Ramjiwan AIR 1921 Bom 238. The whole system and evidence points to such a conclusion. I do not intend that anything I have said should be regarded as a finding against the East India Jute Association, Ltd., or as to the transactions of the association. On the contrary, it appears to me that its system is admirably adapted to various classes of business, substantial trade, speculative trade, and wagering. My decision is solely a decision that the plaintiff was gambling with Sobhachand. The plaintiff is entitled to have the award set aside.

27. As regards costs, I take a definite view. The plaintiff considers that he has some grievance in regard to his directions to sell on 12th October. As far as I am concerned, that is not established to my satisfaction. I do not say the system as it has been described could not lead to abuses. But in this case Sobhachand struck me as an honest man. The plaintiff has set up a case of fraud. He has set up a case under Section 236,. Contract Act, which on my finding, that he knew perfectly well what Sobhachand was going to do and what position he was occupying fails. This Court does not enforce wagering contracts, and according to my view, will set aside awards based on wagering contracts. But it seems to me to allow people to wager as long as they win and to repudiate their losses when they lose is not discouraging but rather encouraging persons who wish: to gamble. I therefore propose to make no order as to costs. I have heard Mr. Roy on the question of costs. Right or wrong, the view which I have already expressed is the one that appeals to me.

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