Haji Mohammed Khaja vs Akber Ali and another

Taqi Bilgrami, J.—The facts which give rise to the second appeal, by one of the defendants, against the concurrent decrees of the Courts below, lie within a narrow compass and are briefly as follows:

Six plots of land belonging to respondent 2 situate in Dilaurul Mulk grounds, near the tank bund, were sold by the appellant, who is an auctioneer, in a public auction, on 25-8-1945. Two of these plots were purchased by respondent 1 for Rs. 13,800 who paid at that time Rs. 3,425 one-fourth of the price. These facts are not in dispute. Respondent 1 then instituted the suit out of which this appeal arises, against the appellant (Defendant 1) and respondent 2 (Defendant 2) before the Fourth Judge of the City Civil Court, claiming the refund of the Rs. 3,250 and Rs. 685 as interest by way of damages, on the ground that he was induced to purchase the plots, on the misrepresentation of the defendants. He has alleged that they made him believe these lands not to be subject to any restriction for constructing building, or for paying revenue, which representations turned out to be false.

The defendants filed a joint written statement in which they denied making false representations, and also the face that there was any restriction on building on these plots. They stated that the Cantonment Board of Secunderabad had granted permission for erecting buildings there, and so for as me liability to revenue is concerned the plaintiff as fully aware at the time of the purchase that these lands were subject to it.

The trial Court held that the misrepresentations alleged by the plaintiffs were proved, and he was entitled to avoid the contract, and claim refund of the advance money paid with interest at the rate of 6 per cent, per annum from the date of payment i.e., 21st Ardibehist 1354 p. Tins decision was affirmed in appeal by the Chief judge of the City Civil Court and the present second appeal has been preferred by defendant 1, the auctioneer against this decree. Defendant 2, the owner of the plots did not appeal; and has been impleaded as respondent 2. We were told that he had migrated to Pakistan, and has been declared an evacuee. Since he has not appealed, we did not think it necessary to issue a notice to the Custodian of the Evacuee Property under S. 50, Evacuee Property Act.

We are not prepared to disturb the concurrent findings of the Courts below on facts, regarding the misrepresentation by the defendants, which induced the plaintiff to purchase the plots. This, in our opinion, is fully proved by the advertisement of the auction, in which it is expressly stated that erection of buildings on the lands is permitted. That this was not true is proved by the statement of P. W. 1, the Assistant Collector of Bhagat. The question, therefore, that arises for decision in the present appeal is whether the appellant as an auctioneer, and agent of Respondent 2, is personally liable.

The learned Advocate of the appellant argues, that the appellant not being a party to the fraud is not personally liable. The advertisement, he says, was published in accordance with instructions given to him by the owner of these plots. He had no personal knowledge of the correctness of the statement made therein; nor it was his duty as an auctioneer to ascertain before publication, the truth of what he was told by the seller. In our opinion, it is not open to the appellant to take up this line of defence in view of his pleadings. He has filed a joint written statement with defendant 2, the owner, and expressly asserted therein that there was no restriction on building and that the plaintiff (Respondent 1) knew at the time of the auction that the land was subject to payment of revenue. Having failed in proving these facts, he cannot be allowed to say now that he had no personal knowledge of them.

This will not be consistent with his statement in his pleadings. He cannot be permitted to approbate and reprobate, to allege certain facts, and in the same breath deny all knowledge of them. The Calcutta High Court has in - Sultan Miya Vs. Ajibakhatoon Bibi and Others, , held that the defendant who had set up in defence a gift followed by delivery of possession, cannot, on failure to prove delivery of possession, be permitted to argue that he was a minor at the time of the gift, and the delivery of possession was not necessary. Also in -- AIR 1930 57 (Privy Council) , it was held that where a claim has never been made in defence, no amount of evidence can be looked into upon a plea which was never put forward. This was followed in - Mt. Izhar Fatma Bibi and Others Vs. Mt. Ansar Fatma Bibi and Others The point is very clear and no further authorities need be cited. If the appellant had set up this defence, the respondent might have been in a position to prove that he had knowledge of these facts.

Another contention that was advanced on behalf of the appellant is that even if he was a party to the misrepresentation, he is not personally liable because he was merely acting as an agent, and that under the provision of S. 238, Contract Act, even in case of the fraud of an agent, it is only the principal who is liable. We do not think that the aforesaid section can be construed to exonerate the agent from his personal liability. The section runs as follows:

Misrepresentations made, or fraud committed, by agents acting in course of their business for the principals, have the same effects on agreements made by such agents as if such misrepresentation or fraud had been made or committed by the principals. But misrepresentations made or frauds committed by agents in matters which do not fall within their authority do not affect their principals.

It is obvious from the words used, and the context, that the sole object which the legislation had in view while framing this section, was to provide for those circumstances under which it was intended that a principal should be liable for the acts of his agent, and nothing more. The Court cannot while applying a particular statutory provision stretch it to embrace cases, which it was never intended to govern. It cannot ignore the obvious object and the intention of the Legislature, apparent from the context, and so interpret and construe it as to enlarge the scope of its applicability by importing into it, meaning by implications, which do not necessarily arise.

The Section does not apply to the circumstances in which the personal liability of an agent may or may not arise, and which was apparently not the object, directly or indirectly, of the legislature when enacting the particular provision. To gather therefore from the silence of this section regarding the liability of an agent, an intention of the legislature that such an agent will not be liable personally, even though he be guilty of fraud, will not only be contrary to all canons of interpretation, but most unjustifiable and absurd.

In absence of any express provisions in the Contract Act, which is not a complete code, we have to fall back on the general principles of equity, and seek guidance from the decided cases. We think that an agent guilty of fraud, duress or any wrong cannot be permitted to escape personal liability, on the ground that it was his principal and not he who was benefited by such fraud or wrong. We are supported in this opinion by a number of decisions and authorities cited below.

In ''Oates v. Hudson'', (1851) 86 RR 326 (D), a will in favour of the plaintiff''s wife was in possession of the defendant as an agent and legal adviser of another person. He demanded and obtained some money from the plaintiff on behalf of his principal, for handing over this will. In the plaintiff''s suit to recover this amount on the ground that it was obtained by duress, it was held, that since the agent was a party and privy to the wrong, he was liable, though he has not benefited personally, and had obtained the money for his principal. The same principle holds good when he is a party to fraud and misrepresentation.

In ''Ex parte Edwards; Re. Chapman'', (1884) 13 QBD 747 (E), a solicitor in a bankruptcy petition received from the debtor, on behalf of the petitioner certain amount of money in consideration of the adjournment, it was held that he was personally liable, notwithstanding the fact that he paid it over to the creditor, on whose behalf he had obtained it. Also in ''Sharland v. Mildon'', (1846) 71 RR 180 (F), it was held that an agent of an executor de son tort is liable for the assets, collected by him, even though he has paid to his principal, for payment over is no defence in the case of a wrong doer.

In ''Smith v. Sleap'', (1844) 12 M & W 585 (G), it was held similarly, that where the amount sued for was received by the agent on behalf of the principal by a wrongful act to which he was a party, he is personally liable though he has paid over this amount to the principal. See also in this regard -- "Wakefield v. Newbon'', (1844) 66 RR 379 (H); -- ''Townson v. Willson'', (1808) 1, Camp 396 (I); -- ''Steele v. Williams'', (1853) 91 RR 673 (J); and -- ''Clippens Oil Co. Ltd. v. Edinburgh and District Water Trustees'', (1907) AC 291 (K).

It is true that an agent, if the money paid to him is paid under a mistake, and he has paid it over to the principal, is not personally liable, but this is no defence when he is a party to the wrong or fraud, by which the other party was induced to make the payment. The ''Pollock & Mulla Indian Contract Act, 7th Edition p. 632 and Bowstrad on Agency, 6th Edition Art. 125 (b) pp. 421-422.

Apart from this general rule, an auctioneer''s position is that of a Stake-holder, and an agent both of seller and purchaser, and consequently he is to a greater extent personally liable for the deposit he receives. In -- ''Gray v. Gutteridge'', (1828) 31 RR 343 (L), it was held that an auctioneer is both the agent of the Vendor and Vendee, and if owing to the defect of the title of Vendor, the sale could not be completed, the purchaser can recover the deposit from him, though he had paid it over to the Vendor. In -- ''Edwards v. Hadding'', (1814) 15 RR 662 (M), an auctioneer had received the deposit and paid it over to the Vendor. The sale could not be completed for want of title. It was held that he was personally liable though he had paid over the money to the Vendor, because it was his duty to hold the deposit over till the recession, or completion of the contract. A similar view was taken in -- ''Burrough v. Skinner'', (1770) 5 Burr 2639 (N); and in -- ''Fartado v. Lumely'', (1890) 6 TLR 168 (O).

The result is that even in absence of fraud on his part the auctioneer is personally liable to the vendor for the deposit received from him, even though he had paid it over to the vendor, because his position is that of a stake-holder, who is not expected to pay the deposit over to the vendor, before the sale is completed, and he becomes an agent after the auction of both the vendor and vendee. If the sale is rescinded before completion, he must pay back the deposit to the vendee. If before completion of sale, he pays it over to the vendor, he does so at his peril. It may be different if the contract is repudiated on some ground after the completion of sale, or if the notice of the payment of this amount to vendor is given by the auctioneer, but we are not called upon to consider this question. Firstly because the defects were discovered before sale deed was registered, and the sale was never completed. Secondly, because apart from his position as an auctioneer, the appellant is liable as an agent who is a party to the fraud, and in such a case whether the sale was completed, or not or whether the notice was given or not, does not make any difference.

The next question that was before us, is whether interest by the way of damages should be awarded? Reliance is placed by the learned Advocate of the appellant on -- ''Mohomed Nizamuddin v. Hanuman Das'', 26 Deccan LR 278 (P); and -- AIR 1938 67 (Privy Council) . The first case is regarding the recovery of money due on accounts, and therefore not applicable to the present case. Besides this, what has been said there, regarding the powers of the Courts to award interest, is mere obiter dicta, as interest was not awarded in the case. In the second case, their Lordships of the Privy Council have held that in absence of any express agreement, no interest prior to the institution of the suit can be awarded for detention of debt under S. 73, Contract Act.

It was also held, however, that such interest may be awarded, if payable under any other law, or if a state of circumstances were established which attract equitable jurisdiction. It must be borne in mind, that a decision is only an authority for the point it actually decides, and general propositions propounded in the judgment should be looked into in the light of the particular circumstances of that case, and they should not be applied by implication to questions which had not arisen in that case. In the case, there was no question of the contract being avoided on account of the fraud of the defendant, and therefore it is distinguishable from the present case on that ground.

The Allahabad High Court in -- Digbijai Nath Vs. Tirbeni Nath Tewari, has expressed a view, that this decision is not an authority for the proposition that interest cannot be claimed by the way of damages under S. 73, Contract Act, all that was held in that case was, that interest cannot be allowed by the way of damages for wrongful detention of debt. The Nagpur High Court in - AIR 1934 78 (Nagpur) has held that under S. 73, Contract Act, though interest cannot be given because money was withheld, it can be awarded by the way of damages.

The case no doubt was decided earlier than the Privy Council decision relied upon by the appellant''s Advocate, but what has been laid down therein, is still sound law, and does not conflict, in our view, with the Privy Council decision. We find ourselves in entire agreement with the view expressed by their Lordships of the Allahabad High Court and Nagpur High Court in the above two judgments. Moreover, in the Privy Council case relied upon by the appellant, their Lordships have adopted the view expressed in -- AIR 1929 185 (Privy Council) winch is as follows:

In order to invoke a rule of equity it is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction, as, for example, the nonperformance of a contract of which equity can be given specific performance.

This means that if circumstances exist, which can attract equitable jurisdiction, interest by the way of damages can be awarded. Fraud by the defendant in our judgment is a factor, which certainly attracts equitable jurisdiction. The Supreme Court in a recent case of - Trojan and Co. Ltd. Vs. Rm. N.N. Nagappa Chettiar, has decided that where money is obtained or retained by fraud, interest by the way of damages can be awarded. This authority decides the controversy, and leaves no force in the contention urged on behalf of the appellant.

In view of the decisions which we have referred to, the law on the point can be summed up as follows. Though no interest by way of damages can be awarded under S. 73, Contract Act, where a debt is wrongfully detained, but where the money is obtained or retained by fraud, equitable jurisdiction is attracted, and interest by way of damages can be awarded. This is a case where money was obtained by means of false representation, and, therefore, the order of the Courts below awarding interest before the judgment is correct, with the result that this contention of the appellant also fails.

In the result, this appeal is dismissed with costs.