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Jitmull-girdhari Lal Vs. Ram Gopal Bohitram - Court Judgment

LegalCrystal Citation
CourtKolkata
Decided On
Judge
Reported inAIR1923Cal419,74Ind.Cas.275
AppellantJitmull-girdhari Lal
RespondentRam Gopal Bohitram
Cases ReferredJoy Lal & Co. v. Monmothd Nath Mullik
Excerpt:
contract act (ix of 1872), section 330 - 'principal contract'--principal disclosed--broker, liability of--special custom--arbitration. - .....by some body else. in this case the contract, on tire face of it, is between the buyers and the unnamed sellers and the language is adopted accordingly, but nevertheless there is a good custom entitling the brokers to enforce the contract and the arbitration clause should be so taken as to include the brokers. there is the decision of chaudhuri, j., to that effect. that case has been often cited and its authority has never been impaired, through it has not been confirmed on appeal. i should be loath to disturb a settled practice of considerable standing, by throwing doubt of the right of the brokers to have recourse to arbitration. if the decision of chaudhuri, j., is to be interfered with, it should be by a higher court.12. a question of estoppel has been raised, based on the.....
Judgment:

Rankin, J.

1. This is one of two suits which have been brought to set aside awards of the Bengal Chamber of Commerce in respect of a contract made in the Jute Market in Calcutta. The type of contract in question is, I am satisfied by the evidence before me and by the reported cases, a well-known type. It is called by way of distinction a 'principal contract.' The contract with which I am concerned is 'dated the 19th August 1918 and it is evidenced by Bought and Sold Notes, passed: (as the phrase goes) by the firm of Ramgopal-Bohitram, who are defendants before me. The characteristic of a 'principal contract,' such as this, is that on the Sold Note, which the broker sends to the seller, the name of the sellers themselves appears but the name of the buyers does not appear; instead of the buyers name the words 'Our Principals' are inserted. In like manner on the Bought Note, which is sent to the buyers, the name of the buyers themselves appears and instead of the name of the sellers the words 'Our Principals' are inserted.

2. The brokers in the present case are between two fires. What happened in the end appears to have been, that delivery was not taken of the goods and the sellers who, in this case were 3, firm called Maturam Dalmia, proceeded to claim arbitration against the brokers and got an award against the Brokers. The brokers stoutly maintained that they were mere brokers but as they were being proceeded against for damages, they too made a claim before the Bengal Chamber of Commerce against the buyers Jitmull-Girdhari Lal. The Chamber has come 0 the conclusion that the brokers are liable under the contract to the sellers and are entitled to enforce the contract against the buyers. It has made two awards upon that footing of which one in favour of the brokers and against the buyers. I am now giving judgment in a suit brought on the 14th March 1919, by the buyers to set aside that award.

3. Apart from any question of custom, the position of the broker in such cases as this, has been laid down by this Court on appeal from the Original Side in the case of Patiram Banerjee v. Kankinarra Co. Ltd. 31 Ind. Cas. 607 : 19 C.W.N. 623 : 42. C. 1050. Following certain English cases, this Court there held that there is a difference between a broker and an agent for sale. It was of opinion that Section 230 of the Indian Contract Act did not apply and it was further of opinion that the arbitration clause in the contract was no submission on the part of the broker. This then is the position apart from any questions of custom.

4. Very soon afterwards, however, in the case of Joy Lal & Co. v. Monmothd Nath Mullik 35 Ind. Cas. 3 : 20 C.W.N. 365 the question of a custom in this particular market to the effect that in principal contracts the brokers are liable to both parties was raised and decided, Chaudhuri, J., held that a custom had been made out by which brokers are held liable upon such contracts. In the case, before him it appears to have been common ground that until a considerable time after the contract was entered into the names of the respective parties were not disclosed to the other. Coming to the conclusion that the brokers were liable for the performance and fulfilment of the contract, Chaudhuri, J., upheld the award which had been made and made in favour of the brokers upon a submission clause exactly like the clause in the contract with which I am now dealing.

5. In the present case the matter is not wholly covered by the decision in that case. Here the brokers, who are defendants in this suit, expressly admit or assert that at the time the contract was passed the name of the sellers had been disclosed that the buyers and the name of the buyers to the sellers. That is paragraph 2 of the written statement. It would appear that this question as to whether the names of the principals were disclosed at the time of the passing of the contract is one on which brokers and buyers are not in dispute. But it seems that the sellers, Maturam Dalmia & Co., deny that the buyer's name was mentioned to them. I am not concerned with the seller's contention in this suit. For the purposes of this suit I must take it that when the contract was passed the buyers and the sellers knew who the other party was. On that it is contended on behalf of the defendants that the custom in the Calcutta Hessian Market goes as far as this: That if a contract is entered into in the 'principal contract' form then whether or not the names of the parties are disclosed, the brokers are liable to the buyers and to the sellers for the due fulfilment of the contract and are entitled likewise to enforce the contract.'

6. The issues tendered and allowed were, first, as to whether there is a custom of the Market in Calcutta in respect of gunny, hessian and manufactured jute goods that the brokers are liable upon and entitled to enforce all 'principal contracts' as against both buyers and sellers even if the principals are disclosed, i.e., that the plaintiffs, the buyers, are liable to the defendants, the brokers, for whatever money they may be liable to pay to the sellers in respect of the transaction? Another issue is: Is there a custom in the Hessian Market as pleaded in paragraph 8 of the written statement

7. I framed a third issue: Was there an implied or express contract to the effect that the brokers should be entitled to enforce the said contract of the 19th August 1918? The fourth issue is: Whether the defendant is estopped from contending that he is entitled to enforce the contract by reason of his contentions before the Chamber of Commerce and of his conduct in not purporting at any time to be the sellers.

8. Now, on the evidence, I have no hesitation in coming to the conclusion that 'principal contracts' as distinguished from 'direct contracts' are a very well-known feature in this particular Market, and that to them is attached a custom of the Market as to liability for the performance of the contract resting upon the brokers and a right in them to enforce the contract I have to consider whether the evidence satisfies me that in addition to that finding, which is no more than the custom found by Chaudhuri, Jo, it is proved to my satisfaction that it makes no difference whether, at the time of the making of the contract, buyers are informed of the name of the sellers and sellers of the name of the buyers. I hold it is proved that it makes no difference according to this custom. It is established by the evidence of two witnesses that 'principal contracts' sometime come into existence not because it is desired by the parties that names should not be disclosed, but because on the brokers proposing a 'direct contract' one or other of the parties is not satisfied with the credit of the other and prefers to have the liability of the brokers with whose character and 'circumstances he may have been familiar or who may be of better standing.' Instead of passing the contract in the usual way, giving the usual Bought and Sold Notes, the transact on is concluded in a different form, according to which the name of the other party is kept off the face of the contract. That must be for a special purpose. I have no doubt that it frequently happens that it is not desired to disclose the name of the buying party to the seller. This, however, is not always so. It is a matter of strong probability that contracts in this form are made for the purpose of attaching by custom a special incident to the contract. There is no other special incident that can be suggested excepting the incident of the broker's responsibility. This is a feature which, as the Law Reports show, has occurred in many Markets and for very long periods. I have no hesitation in finding that where the 'principal contract' form is employed the custom as found by Chaudhuri, J., obtains even although the names are in fact disclosed.

9. Certain objections have been taken by Mr. Bose on behalf of the plaintiffs. The first objection is that, if the evidence of the witnesses be examined, it will be found that they say that in contracts in this form the only person liable to the buyers is the broker and the only person liable to the settlers is the broker. I agree that if that were so the evidence would be evidence of a custom that contradicts the contract. But I do not think that the evidence given is directed to mean that at all. The question in the mind of the witnesses was different. It appears that, according to them, the brokers may be let out by the buyers and sellers subsequently to the passing of the contract on their accepting each other, i.e., that the broker's liability under the contract may come to an end by the joint action of his principals on either side. The witnesses have said that the brokers and the sellers are never both liable. This is, no doubt, their experience nobody makes both principal and agent pay up. I do not think that their minds were directed or could without very special trouble have been directed to the question whether the buyers as being in fact the 'principals' mentioned in the Sold Note would not be held liable by the sellers if the wife so minded. That is a question of law. But in actual practice of these 'principal contracts' that question is very unlikely to arise because from the first the buyers have preferred to look to the brokers. The only person to whom the sellers can really be giving, credit--the only person mentioned in the contract--is the broker. Either they do not know the name of the other party, or if they do and still prefer a 'principal contract,' they prefer the brokers' credit. The evidence of business-men must be taken in the light of the fact that the whole point of a 'principal contract' is that the credit of the brokers is in the mind of the contracting parties the main thing.

10. The next objection is this. There is no doubt that if the principals on both sides accept each other, the Broker whose only interest is his commission cannot object and has every interest in favour of being allowed to drop out. There was some difference of opinion among the witnesses as to whether the brokers' liability could be determined by a mere verbal communication. There was a tendency on the part of some of the witnesses to think that, according to the custom of the Market, no important consequence could be allowed to hang on a mere verbal communication. I have no doubt that as a matter of practice and experience any one alleging mere verbal arrangements of this sort would be regarded as a vain babbler in the absence of some writing. I am not satisfied that there is anything more in what is said as to the broker's liability being brought to an end than would be operated by ordinary principles of law apart from custom. But it is not necessary for me to find whether or not the custom of this Market, in addition to the stipulations which the law ordains, requires the release of the broker's liability to be effected in writing. At present I am not satisfied that it does. But the custom is not vague and unreasonable or uncertain because there is room for a possible dispute over this.

11. I find no valid objection to the custom. The buyers have not come forward to say they did not know of it, and it is very plain that dealers in this Market using such forms of contract must have known. No objection can be taken under Section 230, of the Contract Act. That section says: that (sic) agent cannot personally enforce contracts entered into by him 011 behalf of his principal, nor is he personally bound by them.' That is in the absence of any contract to the contrary. The section leaves it open to any one to make that contract if he likes. A further provision of the section is that 'such a contract shall be presumed to exist in the following cases...'(2) where the agent does not disclose the time of his principal.' There is no negative implication in that. If the agent has disclosed the name of his principal, then there is no presumption that the agent can enforce the contract but it is open to any party by the very terms of the section to prove his contract without the aid of the presumption. In the present case such a contract is proved by the evidence of custom without the aid of that presumption.

12. The remaining question regarding the arbitration clause is covered by the decision of Chaudhuri, J. The submission clause in this case is in a somewhat ill-advised and antique form, viz.,: 'any dispute whatsoever arising on or out of this contract shall be referred to arbitration under the Rules of the Bengal Chamber of Commerce applicable for the time being for decision and such decision shall be accepted as final and binding on both parties to this contract. The award may, at the instance of either party and without any notice to the other of them, be made a Rule of the High Court of Judicature at Fort William in Bengal.' The terms of the clause are framed on the supposition that there are two parties and only two parties. It is a matter for consideration whether, assuming that by the contract the brokers in addition to their principals are liable and entitled to enforce the contract, the submission clause is so framed as to bring within its scope disputes between the brokers and a party. Cases have been cited in which the opinion has been expressed that in this class of cases the liability of the broker is, strictly speaking, attached by custom to his contract of employment. There is a good deal to be said for and there is authority in favour of that view. The rule in England I understand to be that the brokers in such cases could under the old practice be sued on an ordinary count for the price (e.g.,) of the goods sold, and whether that is quite the best logic of the matter it is a sensible and convenient course. So, too, there is everything in favour of the view that a submission clause of this sort is wide enough to cover the brokers. In this case the buyers are interested to say that the brokers should not have gone to arbitration. But put it the other way. That submission clause is a valuable clause in a contract of this class. Buyers might well rely upon it when entering into the contract. If the brokers are entitled to enforce the contract and if the brokers brought a suit arguing that the submission clause did not bind them; then the buyers would have a real grievance. It would give to the brokers a larger right than the sellers would have. It must be remembered that Section 230 of the Contract Act contemplates the case of an agent, who is allowed personally to enforce a contract entered into by him on behalf of his principal, i.e., of a person who is allowed to enforce a contract entered into by some body else. In this case the contract, on tire face of it, is between the buyers and the unnamed sellers and the language is adopted accordingly, but nevertheless there is a good custom entitling the brokers to enforce the contract and the arbitration clause should be so taken as to include the brokers. There is the decision of Chaudhuri, J., to that effect. That case has been often cited and its authority has never been impaired, through it has not been confirmed on appeal. I should be loath to disturb a settled practice of considerable standing, by throwing doubt of the right of the brokers to have recourse to arbitration. If the decision of Chaudhuri, J., is to be interfered with, it should be by a higher Court.

12. A question of estoppel has been raised, based On the proceedings before the Tribunal of Arbitration and on the correspondence. It is true that, the brokers, like persons between two fires' ran hither and thither alleging sometimes one thing and sometimes another. But I am satisfied that there is nothing to base estoppel upon. The plaintiff have given no evidence. I do not understand exactly how it can be here contended that owing to what took place before the arbitrators or owing to the letters that passed, the plaintiffs in this case have acted on the brokers' representation in. such a way as to cause any loss or harm. There is no evidence on behalf of the buyers, and the correspondence makes out no ground of estoppel.

13. I propose, therefore, to dismiss this suit with costs on scale No. 2 and uphold the award. The defendants will not be entitled to the costs of the 29th March. Plaintiffs will get the costs, if any, occasioned by reason of the suit having been heard ex parte at one time and then restored.


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