Rhotas Industries Ltd. vs Maharaja of Kasimbazar China Clay Mines

Sarkar, J.—This is a suit for recovery of damages for breach of contract. The suit was filed on May 8, 1944 and originally there was only one Defendant, namely, The Maharaja Kashimbazar China Clay Mines, described as a firm, whom I will hereinafter refer to as the Defendant firm. On December 22, 1944, the plaint was amended and Suhash Kumar Ray, whom I will hereinafter refer to as S.K. Ray, was added as Defendant No. 2.

The Plaintiff''s case is that by a contract in writing dated July 5, 1941 and by correspondence made in July, 1941, the Defendant firm agreed to supply to the Plaintiff five wagons of China clay monthly, for a period of one year beginning from July 1, 1941, up to June 30, 1942. Only two wagons had been delivered under the contract. The Plaintiff says that the time for delivery of the goods was extended from time to time. The Defendant firm, however, wrongfully purported to cancel the contract by a letter dated May 14, 1942. Later on the Defendant firm promised to deliver the remaining quantity by June 30, 1942. The Defendant firm, however, did not deliver the remaining 58 wagons inspite of the promise. This suit is brought on this wrongful failure to deliver. The Plaintiff further stated that the Defendant No. 2, S.K. Ray, entered into the contract for and in the name of the Defendant firm and the Defendant firm permitted S.K. Ray to carry on business in its name and to represent to the Plaintiff that he had authority to enter into the said contract on its behalf and that the Defendant firm, having held out S.K. Ray as its agent, is now estopped from denying such agency and is bound by the contract. There is an alternative claim against S.K. Ray for breach of warranty of authority, should it be held that he was not the agent of the Defendant firm and a claim against him in the further alternative on a breach of contract on the basis that it was made between him and the Plaintiff.

A written statement was filed on behalf of the Defendant firm by Maharaja Sri Chandra Nandy of Kasimbazar as the sole proprietor of the Defendant firm. In this written statement it is admitted that the Defendant firm was at all material times a business belonging to the Maharaja. It is stated that the business consisted of working certain China clay quarries in Bihar which the Maharaja held under a lease from the Government of Bihar. The Maharaja''s case is that he stopped this business from before 1935 and up to January, 1943 and during part of this period, namely, up to December, 1940, the quarries were in the possession of S.K. Ray, the Defendant No. 2 and another person called Khagendra Kumar Ray and thereafter of S.K. Ray alone, as licensees and they worked the quarries on their own account. The Maharaja has also denied that S.K. Ray was his agent or had any authority to make any contract on his behalf or that he ever held out S.K. Ray as his agent.

S.K. Ray also filed a written statement in which he took up the position that he had made the contract on behalf of the Defendant firm. Both the written statements also contained various defences as to the merits of the claim on the breach of contract.

The main dispute in this suit has been whether the Maharaja is liable on the contract. The contract is in writing and is comprised in several documents. Each of these documents is signed on behalf the suppliers by the Defendant No. 2, S.K. Ray, in one or other of the following manners: "Maharaja of "Kasimbazar''s China Clay Mines, S.K. Ray Licensee" or "S. K. Ray, Licensee, Maharaja of Kasimbazar China Clay "Mines" or "S.K. Ray, Licensee" and in each case on a letter paper with the following letter head, Maharaja of Kasim bazar China Clay Mines. Licensees: S.K. Ray and "K.K. Ray." S.K. Ray and K.K. Ray are respectively the Defendant No. 2 and Khagendra Kumar Ray whom I have already mentioned. It may also be noted that in the correspondence some time the word "of" in the name "Maharaja of Kasimbazar China Clay Mines" is dropped but nothing turns on this omission and no point has been made of it. The contract, therefore, is signed by S.K. Ray, as is indeed the case in the plaint, but, it is said, he signed it as the Maharaja''s agent and the Plaintiff seeks to prove by oral evidence that S.K. Ray was the Maharaja''s agent. That is where the difficulty arises.

Parol evidence is admissible to show who is the real principal in order to charge him on a contract, but such evidence would not be admissible if the contract is in writing and the evidence would contradict that writing. See Bowstead on Agency, (10th Ed.), Article 91, pp. 185-6. This follows from the general rule of inadmissibility of parol evidence to contradict a written document. So Lord Parmoor said in Dunlop Pneumatic Tyre Company, Limited, v. Selfridge and Company Limited (1915) A.C. 847, 864--

But it is also well established law that a person cannot claim to be a principal to a contract, if this would be inconsistent with the terms of the contract itself.

If he cannot so claim, neither can any body claim in similar circumstances to make him liable on the contract. That is what the Plaintiff seeks to do in this case.

The contract has been signed by S.K. Ray in the name, "Maharaja Kasimbazar''s China Clay Mines." But in what capacity does he sign that name? That appears from the word "Licensee" added to his signature. Now, a licensee is a person to whom rights have been given by a license and when a person, acts as the licensee, he acts in the exercise of those rights and hence on his own account. In this case, therefore, when S.K. Ray signed the name "Maharaja of Kashimbazar China "Clay Mines, S.K. Ray, Licensee" he really signed on his own account as the licensee of the mines bearing that name. The contract which he thus signed is hence a contract, on the face of it, with him in his personal capacity. To allow parol evidence to be given to show that this contract, which is in writing, is really not with him in his personal capacity but as agent of another would be to contradict the writing. This evidence is inadmissible. In Humble v. Hunter (1848) 12 Q.B. 310 : 116 E.R. 885, the words of a contract of charter party were, "It is" "mutually agreed "between C.J. Humble, Esq., owner of the good ship or vessel "called the Ann" "and Jameson Hunter", (the charterer). Grace Humble, the mother of C.J. Humble, who was the real owner of the ship, brought a suit on this contract against Hunter, claiming that C.J. Humble had made the contract as her agent. It was held that oral evidence was inadmissible to show that C.J. Humble had not made the contract as the owner of the ship Ann, but only as agent of the real owner, his mother Grace Humble. A similar case is that of Formby Brothers v. Formby (1910) 102 L.T. 116, where the signature was as proprietor. Evidence was not allowed to be given to show that the person signing as proprietor was not the proprietor but had signed as the agent of another person who was the real proprietor. I am unable to distinguish these cases from the case before me. It is, therefore, not open to the Plaintiff to show by oral evidence that the contract had been made with it by S.K. Ray as agent for any other person.

Mr. Amiya Bose, who appeared for the Plaintiff, drew my attention to various letters written to the Plaintiff which had been signed by S.K. Ray as mines superintendent. These letters, however, do not form any of the documents constituting the contract and are, therefore, irrelevant for deciding its terms or who are the parties to it. It may be stated that each of these letters bore the letter head that I have mentioned and therefore, the mines superintendent signing them must have been the superintendent under the licensees. Mr. Bose also contended that the description of S.K. Ray as licensee showed that he was acting as the agent of the licensor, namely, the Maharaja and he relied on the case of Kuchwar Lime and Stone Company v. Secretary of State for India in Council (1936) ILR 15 Pat. 460, in support of his contention. In that case one Bose had been put in possession of a mine by the lessee of the mine with power to work the same under an agreement which provided that his possession would only be as the agent of the lessee. Bose had not been described in the agreement as a licensee and no question of a licensee being the agent of the licensor arose in that case. In fact it was held there that Bose worked the mine on his own account and was, therefore, strictly speaking, not an agent of the lessee and his position might be that of a licensee. In my view, this case supports what I have said already, namely, that a licensee is a person who works on his own account and not as the agent of another.

Mr. Bose drew my attention to the line of cases arising out of passenger tickets, where the onus of proving that reasonably sufficient steps had been taken to bring home the conditions on the ticket to the passenger, has been put on the authority issuing the ticket. He relied in particular on the case of Richardson, Spence and Co. v. Minnie Rowntree (1894) A.C. 217. He urged that the onus of proving that the word "licensee" in the correspondence and the contract had been brought to the notice of the Plaintiff was on the Defendants and as they had not discharged the onus, that word must be left out of consideration. In the result, he argues that the contract becomes one between the Maharaja and the Plaintiff. The principle relied on by Mr. Bose has no application in the present case as it only applies where the contract is unsigned, e.g., a passenger ticket. Where a person signs a contract he is bound by the conditions contained in it whether he reads them or not. Parker v. South Eastern Railway Company (1877) 2 C.P.D. 416, 421. I may add that I have no doubt that the Plaintiff had been aware of the word "licensee" in the contract and the letters.

Mr. Bose also argued that as the contract stated, "we have "pleasure in confirming having entered into a contract with "you", so there must have been a previous oral contract and that was the real contract and the written contract did not matter. I should have thought that when parties reduce their bargain into writing, the writing is the only evidence of the contract whether a previous verbal contract had been made or not. But it is unnecessary to discuss this matter, for the suit is admittedly on the written contract and I have, therefore, no concern with any verbal contract.

This view of the matter is sufficient to decide the question of the Maharaja''s liability on the contract as the principal on whose behalf it had been made. It is right, however, that I should also decide the questions of fact that have been raised. These questions are, whether the Maharaja was in fact the principal of S.K. Ray or had held the latter out as his agent.

[The Learned Judge then discussed the evidence on the question whether S.K. Ray was the Maharaja''s agent and proceeded:]

I, therefore, hold that it has not been proved that S.K. Ray was the Maharaja''s agent at the date that the contract sued upon was made and that in fact he was not then such agent.

It remains now to decide whether the Maharaja had held out S.K. Ray as his agent to make the contract on his behalf. The law as to agency by holding out is contained in Section 237 of the Contract Act, which is in the following terms:

When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent''s authority.

There has, therefore, to be some word or conduct of the Maharaja and such word or conduct must have induced a belief in the Plaintiff as to S.K. Ray''s authority to act for the Maharaja and it has to be further established that relying thereon the Plaintiff entered into the contract.

In order that a person may be bound by an unratified conduct of an agent without real authority it must appear that his supposed authority was ostensible to the other contracting party and relied on by him when he made his contract.

Halsbury''s Laws of England (2nd Ed.), Vol. 13, Article 556, p. 489. I wish to stress the words--"relied on by him when he "made the contract."

The Plaintiff in this case is a company and the contract had been made on the Plaintiff''s behalf by its Calcutta manager, a man called Bajoria. It has, therefore, to be shown that Bajoria was induced by the Maharaja''s words or conduct to believe that S.K. Ray was his agent and relying on the belief so induced made the contract. The onus of proving this is entirely on the Plaintiff.

Now, there were admittedly no words, written or spoken, used by the Maharaja which could have induced any belief in Bajoria''s mind that S.K. Ray was the Maharaja''s agent. Indeed, Bajoria and the Maharaja never met nor did the Maharaja ever write to Bajoria or the Plaintiff.

Was there then any conduct of the Maharaja which led Bajoria to the necessary belief and induced him to make the contract? The Plaintiff says there was. First, it is said that the Maharaja permitted S.K. Ray to carry on business in the name "Maharaja of Kasimbazar China Clay Mines," which admittedly is his own business name. Then it is said that the Maharaja permitted S.K. Ray to be in charge of the mines and to work them for him. Assume that the Maharaja did all this. Was Bajoria induced by these acts to believe that S.K. Ray was the Maharaja''s agent and was he thereby induced to make the contract? There is no evidence of this. Indeed, Bajoria''s evidence is that,--and of course he is the only person who could give evidence on the point--during the negotiations preceding the contract one Majumdar came and told him that the Defendant firm was the business of the Maharaja and upon such representation he was induced to enter into the contract. His evidence in his own words is as follows:

When Mr. Majumdar thus mentioned the name of the Maharaja Bahadur and also stated that the output was large and that the supply would be made regularly I entered into a contract.

The acts of the Maharaja, which are alleged to constitute holding out, did not, therefore, have any such effect. Bajoria did not say that. On the contrary, he said that he was induced to make the contract by what Majumdar told him. As Lord Halsbury said in Farquharson Brothers and Co. v. C. King and Co. (1902) A.C. 325, 333:

But, say learned Counsel far the Respondents, not only was he a delivery clerk, but sometime he had power and authority to make a contract. Suppose he had--what then? Was anybody misled by that? Did anybody act in that belief? No one. Therefore, any notion of anybody acting upon something that was held out and represented is entirely out of the question.

It is impossible, therefore, to say that Maharaja is liable on the contract by reason of these acts on the principle of holding out.

I have so long discussed the matter on the assumption that the Maharaja did permit S.K. Ray to use his business name and to work his mines. The Maharaja denies having done this and I propose presently to discuss these questions of fact. Before doing that I like to state my views as to the representations alleged to have been made by Mr. Majumdar.

[The learned Judge then discussed the evidence and held that no representations had been made by Majumdar as stated by the Plaintiff''s witness Bajoria.]

I come now to the questions of fact whether the Maharaja had permitted S.K. Ray to use his business name or to work his mines. I will take the last question first. The Maharaja does not dispute that S.K. Ray was working the mines but he says that in 1941 S.K. Ray worked the mines under a license from him and on his own account and therefore, such working did not make S.K. Ray his agent.

[The learned Judge then discussed the evidence and proceeded.]

It cannot, therefore, be held that the Maharaja put S.K. Ray in charge of the mines as his representative in 1941 and thereby held out that S.K. Ray had authority to bind the Maharaja by a contract made in respect of the working of the mines.

I come now to the other question whether the Maharaja permitted S.K. Ray to carry on the business in his business name. It seems that S.K. Ray did not in fact carry on business in the name of the Maharaja''s firm. What he did was to carry on business in the name "Maharaja Kasimbazar China Clay "Mines, Licensees: S.K. Ray and K.K. Ray." This is a different thing altogether and can only mean, for the reasons that I have already stated, that he was carrying on the business of the mines on his own account as the licensees. That being so, no question of the Maharaja permitting S.K. Ray to carry on business in his name arises. But, even if such a question did arise, there is no evidence of any such permission by the Maharaja. The terms of the license would show that S.K. Ray should not have used the Maharaja''s business name, for under the license the Maharaja was not to be liable for any contract that S.K. Ray made in respect of the business carried on by him as licensee of the mines. I am unable to see how an unauthorised use of the Maharaja''s name by S.K. Ray can amount to a holding out by the Maharaja. Suppose it can be said that the Maharaja knew of an unauthorised use by S.K. Ray of his business name (I ought to note that there is no evidence of this either) and stood by without taking any steps to prevent such user by S.K. Ray. But that is not enough to make the Maharaja liable on the principle of holding out. For, it has been said that--

Mere silence or inaction is not, in the absence of a duty to speak, such conduct as amounts to a representation" and "a duty to speak arises whenever a person knows that another is acting on an erroneous assumption of some authority given or liability undertaken by the former.

Halsbury''s Laws of England (2nd Ed.), Vol. 13, Article 566, pp. 495-6.

In this case there is no evidence that the Maharaja had any knowledge that S.K. Ray was using his business name or that Bajoria was making this contract relying on such use and therefore, the Maharaja had no duty to speak. Hence, again, he is not liable on the principle of holding out.

[The learned Judge then discussed the evidence and held that there was nothing in the license which entitled S.K. Ray to use the Maharaja''s business name.]

There is only one other thing I like to say before I leave the question of agency. There is no evidence that Bajoria had any knowledge of any permission by the Maharaja to S.K. Ray to use his business name or to be in charge of his mines and to work the same. In such circumstances all questions of such permission may be put aside altogether, for,--

for the purpose of considering whether there was an ostensible agency, all matters which never come to the knowledge of the person dealing with the alleged agent may be disregarded.

Per Fletcher Moulton L.J. in Burgis v. Constantine (1908) 2 K.B. 484, 499 The position cannot be better put than by quoting what Lord Lindley said in Farquharson Brother''s case (already cited) at p. 341 of the report:

It was pointed out by Parke J., afterwards Lord Wenslydale, in Dickinson v. Valpy (1829) 10 B. and C. 128 (140-141) : 109 E.B. 399 (403-4) that "holding out to the world" is a loose expression ; the "holding out" must be to the particular individual who says he relied on it, or under such circumstances of publicity as to justify the inference that he knew of it and acted on it. The same principle must be borne in mind in dealing with cases like the present. I do not myself see on what ground a person can be precluded from denying as against another an authority which had never been given in fact and which the other has never supposed to exist.

Looked at from any point of view, therefore, it becomes impossible in this case to make the Maharaja liable on the contract on the ground that he held out S.K. Ray as his agent for making it.

I now proceed to discuss the questions of breach of contract.

The terms of the contract are contained in a written document dated July 5, 1941. By subsequent correspondence variations were made in the terms as to the modes of delivery and of payment. It appears to have been agreed by the variation that the supplies would be made through S.K. Ray''s selling agents, Industrial Chemical Corporation. Originally payment was agreed to be made within a month of the receipt of the consignments, subsequently it was agreed that the Plaintiff would accept the suppliers'' bills on 45 days'' sight.

It was contended on behalf of the Defendants that Clause 8 of the contract, which gave the Plaintiff power to alter or postpone deliveries or to cancel any balance which might remain undelivered at the end of the contract period, rendered the contract uncertain and so void u/s 29 of the Contract Act, I am unable to accept this contention. I do not see any uncertainty. The clause means that the Plaintiff can say that the goods deliverable in one month will be deliverable the next month and that if at the end of the contract period any goods in respect of which it had given despatching instruction remained unsupplied, it was not bound to take them. So read there is no uncertainty.

* * * *

Next is the question as to whether there was breach of contract. Admittedly, deliveries had not been made except for two wagons. I have also held that dispatching instructions had been duly given. So, prima facie, there was breach. The Defendants contend that as it was a term of the contract that payment would be made against each delivery, within 45 days and as no such payment was made within the 45 days the Plaintiff itself had repudiated the contract and was, therefore, not entitled to delivery. This repudiation would depend on an express or implied term, i.e., the contract must be capable of this interpretation that it was the intention of the parties that the failure to pay for any one delivery would mean a breach of the whole contract. I am unable to interpret this contract in that way. This is all the more so as the term as to payment has been subsequently varied independently. In any event, it is not necessary to go into this question for S.K. Ray treated the contract as subsisting, even after the Plaintiff had failed to pay for the goods delivered, by accepting the Plaintiff''s despatching instructions and promising to deliver. Burn and Co. Ltd. v. H.H. Thakur Saheb Sree Lukhdirjee (1928) 28 C.W.N. 104 : on appeal (1925) 30 C.W.N. 145. S.K. Ray, not having himself delivered the goods in terms of the contract, was not entitled to treat the Plaintiff''s failure to pay as repudiation. There is no evidence either that any demand for payment had been made on the Plaintiff or that the bill, if any, was presented for payment.

The next question is whether any portion of the claim is barred by limitation against S.K. Ray. S.K. Ray was added as a party to this suit on December 22, 1944. It is admitted that all causes of action arising against S.K. Ray before three, years from this date, i.e., before December 22, 1941, would be barred. Now, as I have already said, there was no extension of the due dates of delivery. So, by December 22, 1941, five monthly deliveries had become due and not made. The question is, did the causes of action in respect of the breaches of contract for failure to deliver in the months July to November, 1942, arise at the end of each of these months or at the end of the contract period. If the former, admittedly the claim in respect of these causes of action against S.K. Ray is barred. Barningham v. Smith (1874) 31 L.T. 640 is an authority for the proposition that, in contracts like the one before me, a breach of contract is committed as often as a month expires without the proper quantity having been delivered. If the breach is committed at the end of each month, the cause of action in respect of such breach must then have accrued. I, therefore, hold that the claim for damages for non-delivery in the months July to November, 1941 is barred against S.K. Ray.

The last question is as to damages. The Defendants argue that the Plaintiff is, in any event, not entitled to any damages, as its only right on breach of contract is as mentioned in Clause 9 of the contract, that is to say, a right to purchase in the market and claim the difference. It is contended that since the Plaintiff has not proved any such purchase by it, it is not entitled to any damages. This argument is based on the maxim expressio unius est exclusio alterius. It has been said that this maxim should be applied with great caution: Gregg v. Richards (1926) Ch. 521. The maxim operates, in proper cases, to exclude the implication of provisions similar to those for which express provision had been made. The right to ask for damages on the basis of the market is not a provision which the Plaintiff seeks to imply in the contract. It is a right which the law gives. I do not think the maxim operates to take away such a right. In the case of Mathew v. Blackmore (1857) 1 H&N. 762 : 156 E.R. 1409, the maxim was applied to prevent a contract by parol for repayment being implied in law as there was an express contract under seal about repayment and the two were contradictory. Here, no contract is being sought to be implied in law and no contradiction at all is involved in the claim for damages at the market rate. The right to claim damages on the basis of the market rate, which right the Plaintiff is claiming here, can hardly be said to have been taken away because a greater right had been given by Clause 9. If this be so, then the maxim has no application. It was argued that the second part of Clause 9 was exclusive and therefore, the first part must also be so. The second part of course is not exclusive and this argument, therefore, is unsustainable. Even if it were, to say that a right to get what might be greater than ordinary damages having been given, the right to the latter damages must be taken to have been abandoned seems to me to be an untenable argument. I am unable to read in the contract any intention to exclude the right to ordinary damages. I, therefore, hold that there is no scope here for applying the principle expressio unius est exclusio alterius. In any event, Bajoria has said in his evidence that on the Defendant''s failure to deliver he bought in the market at rates between Rs. 60 and Rs. 70 per ton. At this rate the damages would be much more than on the basis of the market rates. Hence also this contention fails.

[Then His Lordship dealt with the question as to the quantum of damages and proceeded.]

The total sum due to the Plaintiff, therefore, is Rs. 6,150. The Plaintiff is liable to pay for the goods supplied which amounts to Rs. 780. The Plaintiff is, therefore, entitled to the net sum of Rs. 5,370 and in the view that I have taken of the Maharaja''s liability he is entitled to this sum from the Defendant S.K. Ray only.

There will be a decree for Rs. 5,370 against the Defendant S.K. Ray.

The Plaintiff will pay the Defendant Maharaja his costs of the suit. The Defendant S.K. Ray will pay the Plaintiff its costs of this suit. Certified as a fit case for the employment of two counsel.

It remains to note one argument made on behalf of the Plaintiff on the question of costs. It was urged that if the Defendant S.K. Ray was held liable on the principle of breach of warranty of authority, he should pay the costs that the Plaintiff might be directed to pay to the Defendant Maharaja. As I have held that the contract was actually between the Plaintiff and the Defendant S.K. Ray no question of breach of warranty of authority arises. The argument made on behalf of the Plaintiff with regard to costs, therefore, does not apply.