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Karala Valley Tea Co. Ltd. Vs. Lachmi Narayan Agarwalla - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata
Decided On
Reported inAIR1939Cal14
AppellantKarala Valley Tea Co. Ltd.
RespondentLachmi Narayan Agarwalla
Cases ReferredRam Pertab v. Marshall
Excerpt:
- .....case. in that case, the defendant had been led by the conduct of the plaintiff to believe that the agent had authority. in this case, on the other hand, as far as one can see, the defendant had no reason for supposing that mahadeo who was merely the manager of the bicycle business, had authority to enter into a contract with reference to the lease of a tea garden on behalf of the plaintiff. it is clear that in this case there was no contract between the plaintiff and the defendant, it having been found that mahadeo was not the agent of the plaintiff. accordingly, it is obvious that the forfeiture clause could not take effect. there was no question of default on the part of the plaintiff in completing the contract, because there was no contract with the plaintiff. on behalf of the.....
Judgment:

Jack, J.

1. This appeal has arisen out of a suit for recovery of a sum of Rs. 1000 from three defendants. The money was paid to defendant 1 by one Mahadeo (who is the manager of the plaintiff's shop for the sale of bicycles, motor tyres and a gramophone at Jalpaiguri) as earnest money on account of a contract which he purported to enter into with defendant 1 as agent of the plaintiff for taking sub-lease of a tea garden belonging to defendant 1. In the contract it was laid down that if there was default on the part of the plaintiff in completing it, the sum of Rs. 1000 which was paid as earnest money was to be forfeited. As the plaintiff maintains that Mahadeo was not empowered to enter into this contract he repudiates the contract and claims to recover the Rs. 1000 from defendant 1 which defendant 1 maintains he is entitled to retain, the contract not having been completed by the plaintiff. In this appeal it is urged that the plaintiff is not entitled to any relief in the present suit against defendant 1 irrespective of the question whether Mahadeo acted within or beyond the scope of his authority, and that Section 65, Contract Act, was wrongly applied in this case by the Judge in the Court below. The suit has been decreed by the learned Judge on the ground that Mahadeo acted beyond the scope of his authority when he entered into the contract with defendant 1, he was not an agent of the plaintiff, and therefore any equitable relief that might be available against Mahadeo could not be claimed by defendant 1 against the plaintiff. The learned advocate for the appellant contends that defendant 1 having entered into the contract under the bona fide belief that Mahadeo was the agent of the plaintiff, he was entitled to retain the earnest money as provided in the contract. In support of this contention the appellant relies upon a decision in Ram Pertab v. Marshall (1899) 26 Cal. 701. In this case their Lordships of the Judicial Committee held:

The right of a third party against the principal on the contract of his agent, though made in excess of the agent's actual authority, was never the less enforced where the evidence snowed that the contracting party had been led into an honest belief of the existence of the authority to the extent apparent to him.

2. But that case is distinguishable from the present case. In that case, the defendant had been led by the conduct of the plaintiff to believe that the agent had authority. In this case, on the other hand, as far as one can see, the defendant had no reason for supposing that Mahadeo who was merely the manager of the bicycle business, had authority to enter into a contract with reference to the lease of a tea garden on behalf of the plaintiff. It is clear that in this case there was no contract between the plaintiff and the defendant, it having been found that Mahadeo was not the agent of the plaintiff. Accordingly, it is obvious that the forfeiture clause could not take effect. There was no question of default on the part of the plaintiff in completing the contract, because there was no contract with the plaintiff. On behalf of the respondent reference has been made to the case in Farquharson Brothers & Co. v. king & Co. (1902) A.C. 325 in which a clerk fraudulently sold timber belonging to his firm under a concealed name. It was held that the appellants were entitled to recover from the purchasers the value of the timber. In Pollock and Mulla's Contract Act (p. 665), it is laid down:

Where the property of the principal is disposed of by an agent in a manner not expressly or ostensibly authorized, the principal is entitled, as against the agent and third person, subject to any enactment to the contrary, to recover the property wheresoever it may be found.

3. On behalf of the appellant an attempt has been made to distinguish between the recovery of property and the recovery of money, and no doubt in the case of stolen property there is this distinction, but in the present case admittedly the money was the money belonging to the plaintiff-firm and there was no question of the identity of the amount. So that, the principle applicable to stolen property would apply in this case. Section 65, Contract Act, may not apply directly to the present case but the same principle would apply. In this case the money belonged to the plaintiff and was wrongly obtained by defendant, and the plaintiff not having held out Mahadeo as his agent he is certainly entitled to recover the amount. This appeal is accordingly dismissed with costs.


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