Ram Avatar vs Ramjivan

Manohar Pershad, J.—Ram Avatar, the Plaintiff-Appellant before us filed a suit for the recovery of Rs. 6498-5-4 against |the Defendant-Respondent Ramjivanlal, alleging that Hiralal, the head-munim of the Defendant's firm sold 11000 bags of sang dana at the rate of Rs. 47-4-0 on 26th Bahman, 1356-F. agreeing to deliver the same within 15 days, that accordingly Hiralal wrote a Cabala (chit) in the name of the Plaintiff's firm; that in pursuance of the agreement, the Plaintiff sent his munim Ram Kunwar to the Defendant after the expiry of one week for the supply of the goods, but the Defendant did not supply the goods and evaded the supply as the market-price of the sang dana had gone up. The Plaintiff however issued a notice but the Defendant did not supply the goods. The Plaintiff therefore suffered a loss of Rs. 8/- per palla which he is entitled to get from the Defendant. The Plaintiff further claims interest at the rate of 8 annas per cent on this amount.

The Defendant denied that Hiralal was his head-munim and stated that he was appointed only a writer of the accounts. It was further stated that Hiralal had no power to enter into any contract for the purchase or sale of goods on his behalf and if Hiralal had entered into any agreement with the Plaintiff, lie: is not bound by the same. The Defendant inter alia denied that the market price of the sang dana had risen to Rs. 55-4-0.

A legal objection was also raised that the alleged agreement is satta and is void u/s 31, Hyderabad Contract Act. The Plaintiff in reply denied the allegations of the Defendant. The trial Court on these pleadings framed 6 issues, the parties led evidence both documentary and oral, and on the evidence- produced the trial Court dismissed the suit holding that the Plaintiff has failed to establish that Hiralal was die munim of the Defendant's firm and that he entered into an agreement for the supply of 1000 bags of sang dana. Aggrieved by the judgment and decree this first appeal is preferred on behalf of the Plaintiff.

Shri Ramaswami Iyengar, the learned advocate on behalf of the Appellant urges that the court below has fallen into an error in coming to the conclusion that Hiralal was not competent to enter into any contract on behalf of the Defendant's firm. It is urged that the Defendant himself admits that Hiralal was his servant and from the deposition of D.W. 2 Gopilal it is clear that he was the head- munim and the Plaintiff has produced evidence to show that he was not only looking after the business but was totally in charge, that is, he used to make payments and receive monies, purchase and soil goods in the normal course of business, which is sufficient to establish his competency unless the Defendant shows that Hiralal had limited powers, which has not been proved. It is lastly argued that the court below has erred in coming to the conclusion that the agreement for the supply of 1000 bags has not boon proved when there is sufficient evidence on record. On behalf of the Respondent, it is contended that from the evidence of the Plaintiff himself it is clear that the transaction was with the firm of the Plaintiff, but the present suit is not by the firm, but by one pf the partners of the firm and as such the suit is liable to be dismissed. It is argued further that the evidence produced on behalf of the Plaintiff is not at all sufficient to establish that Hiralal was the munim of the Defendant, and that he entered into an agreement on his behalf that the court below was right in coming to that conclusion and that there is no reason why this Court should come to a different conclusion.

In order to appreciate the arguments of the learned advocates of the parties, a reference to the evidence is necessary, but before discussing it, we would like to mention some of the admitted facts. It is admitted that the Defendant owns factories and carries on business in cloth, oil, groundnuts, etc., in Hyderabad, Jedeherla and various other places.

The fact that Hiralal was working with the Defendant at the Jedeherla shop is also admitted. It is also admitted that Hiralal was in service from the opening of the jedeherla shop, that is, from Diwali to Magbudh 11, that is, 52. days after the suit contract. The point in dispute between the parties is whether Hiralal was a munim and whether he entered into any contract with the Plaintiff.

We shall discuss the arguments ad seriatim but before discussing the arguments of the Appellants, we would like to decide the objection of the Respondent which relates to whether the suit as it is can proceed. The learned advocate for the Respondent relying on the deposition of P.W. 4 Ramkunwar contended that from his deposition, it is clear that there are other partners of the Plaintiff's firm and when the contract is with the firm, the suit cannot proceed unless the other partners are parties to the suit.

We may at the outset point out that no such objection vas raised on behalf of the Defendant in his written statement. It is contended that as this is a legal point it can be raised in appeal. We do not dispute this proposition, but in our opinion it is not a pure question of law, but a mixed question of law and fact. Had the, Defendant raised this objection, the Plaintiff might have produced evidence to show that there is no partnership and the other partners are not his partners, but merely servants.

It is urged that Ramkunwar, P.W. 4, admits that he, Bhagwandas and the Plaintiff are the partners of. the firm and his share is to the extent of two annas in the profits and that is sufficient to con stitut partnership. We do not in toto agree with this contention.

Partnership has been defined in Section 4, Partnership Act in the following words:

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

This definition contains three elements. Firstly, there must be an agreement entered into by all the persons concerned, secondly the agreement must be to share the profits of a business, and thirdly, the business must be carried on by all or any of the persons concerned acting for all. Participation in the profits of a business by a person is a prima facie and at times strong evidence of partnership, but the true test for determining whether the per son receiving shares of profits of a business is or is not a partner is whether the business was carried on by others acting for him or whether the relation ship of the principal and agent subsisted between them.

There is nothing on record to show this, The mere statement of P.W. 4 that he gets 2 annas share in the profits would not be in itself sufficient to constitute a partnership. Shri Ramaswami Iyengar has rightly pointed out that had the Defendant taken this objection the Plaintiff would have filed his khata to show that he (Ramkunwar) was his servant. As the Defendant had not taken any objection and there is no evidence on record, we can not at this stage allow the Respondent to take this objection which is a mixed question of fact and law the result, this objection fails.

The next point that falls for consideration is whether Hiralal was a munim. P.W. 1 Sunder lal, P.W. 2 Bansilal and P.W. 4 Rawkunw depose to the fact that Hiralal was the munim of the Defendant's firm. P.W. 4 further states that Hiralal used to look after the business of the Jedcherla shop of the Defendant and was entirely responsible for the shop, and used to make purchases and sell goods on behalf of the Defendant.

This fact is supported to a great extent by the depositions of D. Ws. 1 and 2. D.W. 1 says that Hiralal used to write account books and supply goods. D.W. 2 Gopilal states that Hiralal was the he of the jedeherla shop. Further support is lent to this by the deposition of the Defendant himself who also admits that Hiralal used to do the business, make purchases and sell goods hut states that he used to do all this with his express permission.

From this evidence, it is clear therefore that Hiralal was not a mere, servant but a head-munim of the Defendant. From the Plaintiff's evidence, it is further clear that Hiralal was not an ordinary munim, but a person who was in charge of the entire Jedcherla shop, he used to make purchases, sell goods, receive monies and give monies. The question that arises is whether he had the authority to enter into any contract on behalf of the Defendant.

It is not denied that the authority may be express or implied. In the present case the Defendant alleges that he had given written authority, but the same has not been produced. Thus there is no question of any express authority. Now we have to see whether this authority can be inferred from the circumstances of the case, and the ordinary course of dealing.

The business of the shop consisted also in the purchase and sale of goods. The Defendant in his deposition has dearly admitted that usually the munims have the powers to purchase and buy goods, to raise loans, to accept payments and do such other things that are necessary for the conduct of the business, but as regards Hiralal he says that he has not been given any such powers.

When Hiralal is actually looking after his business, he buys, and sells goods, he receives monies and gives money, a third person dealing with him will have every reason to believe that he has the authority that munims in a similar business usually have, which is also admitted by the Defendant himself. In the case of- Vasant Kasiah v. Mancherla 27 D LR 1007(A) by a Division Bench of this Court, it has been held that when the principal does not give express powers to the agent, the third person has every reason to believe that the agent has these powers. Coming to this conclusion their Lord- ships held that the principal was bound. Section 188, Contract Act deals with the extent of the agent's authority, which runs thus:

An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do such act.

An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business.

It is however clear that an agent having an authority to carry on business has authority to do ever lawful thing necessary for the purpose or usually done in the course of conducting such business, are of the opinion that Hiralal was competent enter into a contract. The other question that mains to be considered is whether as a matter fact Hiralal entered into any agreement with Plaintiff. (His Lordship on consideration of the dence held that Hiralal entered into an agreement with the Plaintiff. His Lordship proceeded:)

The court below has dismissed the suit, deciding issue No. 2 against the Plaintiff and has not decided the other issues. We were inclined to remand the case for the findings on those issues, hut the learned advocates for the parties requested that as the record was complete and no further inquiry necessary, the case need not be remanded to court below, but be decided here alone.

We accordingly heard the arguments. Issue No. 1 is whether the court had jurisdiction, issue No. 3 relates to the quantum of damages, issue No. 4 refers to whether the transaction is in nature of satta and unenforceable, issue No. 5 (sic) lates to the right of the Plaintiff to claim inter(sic) and issue No. 6 is the general issue. Issue No. not pressed. We would like first to discuss - issue No. 4 which relates to satta, for if this issue is decided in favour of the Defendant, it would not be necessary for us to consider the remaining issues.

So far as this issue is concerned, the burden of proof was on the Defendant but there is absolutely no evidence in this regard. What is urged on behalf of the Respondent is that goods have not been delivered and difference in the market price and the agreed price is claimed which is nothing but a speculation and is void being in the nature of satta. We do not agree with this contention.

In the case of ''Ganpath v. Lachminarayan 23 D LR 277 (B), a Division Bench of this Court has held that the transactions of the nature where parties speculate on the varying rate of the goods are not satta and do not come within the purview of Section 31, Contract Act to be declared void. This view has been approved and followed in the case of ''Sitaram v. Chamanlal'' AIR 1952 Hyd 95 v. 39(C) by Shripat Rao J. (now Chief Justice) before whom the case had come up as a third Judge owing to a difference of opinion between the Judges of the Division. Bench.

It has been held that "mere speculation does not render a contract into a wager. A common intention to wager is essential." In this case, a reference has been made to the Privy Council decision in the case of "Bhagwandas Parasram v. Burjorji Ruttonji" AIR 1917 PC 101 v. 4(D). In that case their Lordships observed at page 102:

Speculation does not necessarily involve a contract by way of wager and to constitute such contract a common intention to wager is essential." It was further observed that even if one party to a contract were a speculator who never intended to give delivery and that fact was known to the other party, yet in the absence of any bargain or understanding, express or implied, that the goods were not to be delivered, it would not convert a contract, otherwise innocent, into a wager, nor would the mere fact that as to the greater part of the goods there was not delivery but an adjustment of claim, vitiate the transaction.

In the light of these observations if we were to consider the present, case we find that there is no evidence to show that the parties never intended to deliver goods. In view of this, the mere fact that difference in the market price and the agreed price is claimed would not make the transaction a satta. The next issue relates to the quantum of damages. The Plaintiff claims Rs. 5733-4-0 as damage at Rs. 8/- per palla. (His Lordship considered the evidence on the point and proceeded:)

In our opinion, the Plaintiff would only be entitled to the rate of Rs. 6/8/- per palla. The contract was for supply of 1000 bags. It is admitted that each bag contains 86 seers which comes to 716 pallas and 2 maunds calculating at the rate of Rs. 6/8/- per palla, the Plaintiff would be entitled to Rs. 4658-5-6 (O.S.). The Plaintiff has claimed interest on this amount. The amount claimed is by way of damages. No authority is shown as to how the Plaintiff can claim interest on the damages. Further there is no evidence that there was any such agreement. What is urged is that the Plaintiff is a businessman and being deprived of the use of the money he is entitled to interest. We do not agree with this either. In the absence of any contract, we cannot award interest on this amount.

The appeal is therefore allowed. The Plaintiff's suit to the extent of Rs. 4658-5-6 O.S. is decreed against the Defendant. Parties would be entitled to proportionate costs throughout.