J. Ayyadurai vs J.S. Baliah Nadar

Sengottuvelan, J.—S.A. 1065 of 1980 is filed by the plaintiff in O.S. 282 of 1978, challenging the legality and correctness of the findings of

both the courts below, in A.S. 350 of 1979 on the file of the District Judge, Tirunelveli and O.S. 282 of 1978 on the file of the Subordinate Judge,

Thirunelveli, that the monthly salary of the appellant is Rs. 75 and not Rs. 150 as claimed by the appellant. S.A. 1066 of 1980 is filed by the first

defendant in the suit O.S. 177 of 1977, challenging the legality and correctness of the findings of both the courts below that the appellant is an

agent in respect of the maligai business carried on by the respondent in Thisayanvilai and that the appellant is liable to account for the same to the

respondent.

The facts concerned in these two cases are briefly as follows: The suit O.S. 117 of 1977 in respect of which S.A. 1066 of 1980 has been

preferred, was filed by the respondent for accounting in respect of the maligai business conducted by the respondent at Thisayanvilai. According to

the plaint allegations, the appellant, who is the agent of the respondent, ran the shop. The respondent gave the appellate authority to purchase and

sell on cash alone and not to purchases and sales on credit. The appellant suddenly left the job in December, 1976 and sent the key of the shop to

the respondent after three days. On scrutiny it was found that the appellant bad misappropriated a lot of amounts and hence the respondent filed

the above suit for accounting.

The respondent contended that he was only a servant and not an agent and that he only wrote the chittas. As a servant he looked after the shop

and the respondent used to go to the shop and collect the moneys from the shop, and the respondent took the money for constructing a house and

the marriage of his daughter. The chittas, and the ledgers were prepared by one Johnson. The further contention of the appellant is that he is only

an employee and not an agent liable to account.

So far as the other suit O.S. 282 of 1978 is concerned, the appellant contended that he was employed by the respondent on a monthly salary of

Rs. 150, per mensem from May, 1970 which was subsequently reduced to Rs. 100 in December, 1976. The appellant was sent out of the shop

on 5.1.1977. After adjusting what was received by the appellant the respondent should pay Rs. 1,935 by way of arrears of salary with interest

from 5.1.1977. The contention of the respondent is that the appellant was employed only on a monthly salary of Rs. 75 and not Rs. 150 and that

the appellant himself voluntarily left the employment. On scrutiny it was found that the appellant had mis appropriated a lot of amount and hence no

amount is due from the respondent.

The trial court, viz, the learned Subordinate Judge of Tirunelveli, on a consideration of the evidence, oral and documentary, came to the

following conclusions:

The appellant is an agent of the respondent in respect of the conducting of the shop and as such he is liable to account to the respondent.

The monthly salary of the appellant is Rs. 75 and not Rs. 150 as alleged by the appellant.

As against the findings of the trial Court in O.S. 117 of 1977, the appellant filed A.S. 349 of 1978 and as against the findings in O.S. 282 of

1978, he filed A.S. 350 of 1979 on the file of the District Judge of Tirunelveli. The learned District Judge on a consideration of the evidence and

the judgment of the lower Court, came to the same conclusion and confirmed the findings of the trial Court. The above said two second appeals

are filed challenging the legality and correctness of the findings of the learned District Judge in the said two appeals.

The main point that arises for determination in these second appeals is whether the appellant is only an employee of the respondent or the

appellant is also an agent of the respondent in addition to his being an employee.

The evidence in the case shows that the respondent is the owner of the grocery shop at Thisayanvilai in Tirunelveli District and that the

respondent is a habitual resident of Kerala State, The appellant was in charge of the business in the grocery shop at Thisayanvilai. The appellant

used to buy and sell groceries and keep accounts and also withdraw a salary. Both the Courts below construed an implied agency by which the

appellant had acted as the agent of the respondent. The correctness or otherwise of the said finding will have to be examined with reference to the

principles relating to agency.

S. 182 of the Indian Contract Act lays down the definition of an agent as follows?

An ''agent'' is a person employed to do any act for another or to represent another in dealing with third persons. The person for whom such act is

done, or who is represented is called the ''principal''.

An agent has to be distinguished on the one hand from a servant and on the other from an independent contractor. A servant acts under the direct

control and supervision of his master, and is bound to conform to all reasonable orders given to him in the course of his work; an independent

contractor, on the other hand, is entirely independent of any control or interference and merely undertakes to produce a specified result, employing

his own means to produce that result. An agent, though bound to exercise his authority in accordance with all lawful instructions which may be

given to him from time to time by his principal, is not subject to the direct control or supervision of the principal. An agent, as such, is not a servant,

but a servant is generally for some purposes his master''s agent, the extent of the agency depending upon the duties or position of the servant. An

independent contractor also may be an agent in certain circumstances.

In order to ascertain whether any agency exists, the true nature of the contract and the scope of the relationship between the alleged principal

and agent will have to be considered. In Lakshminarayana Ramgopal and Sons v. Govt. of Hyderabad AIR 1954 S.C. 364, the Supreme Court

considered the distinction between an agent and a servant and observed thus:

The difference between the relations of master and servant and of principal and agent may be said to be this: the principal has the right to direct

what work the agent has to do; but a master has the further right to direct how the work is to be done.

The Supreme Court proceeded further to elucidate the difference between an agent and a servant by quoting Powell''s Law of Agency, thus?

The distinction between a servant and an agent is thus indicated in Powell''s Law of Agency, at page 16-''(a) Generally a master can tell his

servant what to do and how to do it; (b) Generally a principal cannot tell his agent how to carry out his instructions. (c) A servant is under more

complete control than an agent'';

and also at page 20?

(a) Generally, a servant is a person who not only receives instructions from his master but is subject to his master''s right to control the manner in

which he carries out those instructions. An agent receives his principal''s instructions, but, is generally free to carry out those instructions according

to his own discretion"".

(b) Generally, a servant, qua servant has no authority to make contracts on behalf of his master. Generally, the purpose of employing an agent, is to

authorise him to make contracts on behalf of his principal.

(c) Generally, an agent is paid by commission upon effecting the result which he has been instructed by his principal to achieve. Generally, a servant

is paid by wages or salary"".

Applying the above principles, a Bench of the Madras High Court in K.R. Kothandaraman Vs. Commissioner of Income Tax, Madras, has held

thus (vide head-note-A).

A master is one who not only directs what and when a thing is to be done but how it should be done. That is a principle often applied in

distinguishing between an employee or a servant and an independent contractor, particularly in the field of Industrial law. But this test is not

necessarily the only test in deciding whether the relationship of master and servant exists, for, one has to take note of various changing factors in

human and industrial relationships which regulate and change or alter the concept of the relationship of master and servant. The concept of a

servant may, in a sense, involve on element of agency but on that account, a servant is not to be regarded as an agent, and an agent is never a

servant.

The above principles laid down will have to be applied to the facts of the present case in order to see whether the conclusion arrived at by the

Courts below on the question whether the appellant is an agent of the respondent in addition to his being a paid employee, is correct or not. The

evidence indicates that the respondent habitually resides in Kerala State, and it is the appellant who carries on the business of the grocery shop at

Thisayanvilai. It is the appellant who purchases all grocery articles and sells the same in the shop of the respondent. The day-to-day business is not

being controlled by the respondent, that it is to say, the respondent is not supervising the purchases and the sales. It is left to the sweet will and

pleasure of the appellant to buy the grocery articles and sell the same. The respondent has not exercised any supervision in the manner of

purchases or sales. It is also the evidence of the respondents that he had not authorised the appellant to effect credit purchases or credit sales.

Taking into consideration the fact that the purchases and sales are not done under the specific instructions of the respondent, but by the appellant

himself exercising his discretion in the matter, the conclusion of both the Courts below that there is an element of implied agency in addition to the

appellant being a paid employee is correct. There are no grounds to interfere with the concurrent findings of facts recorded by the courts below.

So far as the claim made by the appellant towards his salary is concerned, both the courts below, on the evidence, came to the conclusion that

the salary of the appellant is only Rs. 75 per month and not Rs. 150 as claimed, and this conclusion was based upon the entries in the account

books EXS.A2 to A12 and A27 to A29. The case of the appellant is that he was compelled to make an entry of Rs. 75, but he was paid a higher

salary. The salary paid cannot be different from what is mentioned in the account books. Under these circumstances, the conclusion arrived at by

both the courts below that the salary of the appellant was only Rs. 75 per month is correct and there are no grounds to interfere with the same. In

the result, both the second appeals are dismissed. There will be no order as to costs.