Purushotham Das Hari Das v. Amrit Ghee Co. Ltd. & Others

The Judgment of the Court was delivered by

Chandra Reddi, J.

These appeals arise out of O.S No. 45 of 1957 on the file of the Additional Subordinate Judge, Guntur, and the parties are the same. A.S No. 118 of 1951 and 173 of 1951 are by the 1st defendant and the 3rd defendant, who is the proprietor of the 4th defendant firm, while A.S No. 485 of 1951 is by the plaintiff. The material facts may be briefly set out.

2. In 1946, nine merchants trading in Ghee formed themselves into a private limited company called Amrit Ghee & Co. Ltd., Guntur, the present plaintiff, for trading in Ghee. They obtained a permit to export 330 tons of ghee to Calcutta, Kharagpur and Midnapur, on the 14th of October, 1946. As they were not acquainted with the market conditions of Calcutta etc., they sought the assistance of the 1st defendant, one Purushottum Das Hari Das also a ghee merchant of Guntur, who has two brothers at Calcutta, defendants 2 and 3, the 3rd defendant being the sole proprietor of the 4th defendant-firm. It was agreed between the parties that the 1st defendant should arrange for sale of the ghee to be exported to the above-mentioned places on commission basis at Rs. 2/- per tin and also secure a financier who could make advances on the security of the stock sent to them, effect sales thereof on commission basis, and appropriate the sale-proceeds towards their advances and take interest, commission and incidental charges etc. In accordance with these terms, the 1st defendant arranged with his brother, the 3rd defendant, who was trading in Calcutta in the name of the 4th defendant firm or advancing money with interest at 9% per annum on the security of the ghee tins sent to the latter. The 3rd defendant could sell the tins for which be would be paid a commission of 1 1/2% and he could apply the sale-proceeds in discharge of the amounts paid by him. As the duration of the permit originally granted was to expire on the 10th of November, 1946, the plaintiff had it extended upto 15-12-1946. Between 14-10-1946 and 15th of December, 1956 tins of ghee were exported to Shalimar, Calcutta by the plaintiff and they were taken delivery of by the 4th defendant firm whereof the 3rd defendant was the sole proprietor as mentioned supra. There is dispute between the plaintiffs and the 1st defendant regarding the ownership of 779 tins out of these and that forms the subject matter of A.S No. 119 of 1951. The first consignment of these tins arrived at Shalimar on the 28th of October. Most of the ghee tins received by the 3rd defendant in the name of the 4th defendant were sold through P.Ws 1 to 5 who were themselves commission agents between the dates of arrival and the 31st of March, 1947. It appears they sold 3, 167 tins of new ghee and 1258 1/2 tins of deteriorated ghee. The 3rd defendant was sending reports of sales of the ghee periodically. On several occasions, the plaintiff protested against the low prices at which their ghee was being disposed of by the 3rd defendant and demanded that it should be sold at not less than a particular figure mentioned by them. But the 3rd defendant did not pay any heed to the remonstances of the plaintiff and continued to sell at prices which, according to the plaintiff, were far below the market rate. There was voluminous correspondence between the parties and as they could not settle the matter amicably, the plaintiff laid this action for rendition of accounts and for payment of the amounts ascertained to be due to them, and for a direction to deliver up all the unsold tins of ghee to them, on the allegations that defendants 1 to 3 who constituted members of a joint family and for whose benefit the 1st defendant took up the agency colluded with a view to make wrongful gain and to defraud the plaintiff, and the 4th defendant sent false reports about the market rates and the price for which plaintiff's ghee was sold and also made several fictitious transactions. It was also the plaintiffs' case that the 1st defendant, their authorised agent mainly responsible for accounting to the plaintiff and therefore to maintain accounts, instead of protecting their interests, conspired with his brothers and they jointly put forth sales at very low rates, while much higher price was obtained therefor, and thereby made large secret profits.

3. The 1st defendant contested the suit by filing a written statement. His answer was that at the request of the plaintiff he found a financier who was to be paid interest and commission at the rates mentioned in the plaint, that the plaintiffs partners themselves had to deal directly with the 4th defendant through their representatives stationed on the spot and that he should be paid a commission of Rs. 2, per tin extending the same to the entire quantity of 330 tons that he should have no liability whatsoever for any profit or loss that the plaintiff might sustain. It was added that he was to keep in touch thereafter by way of general guidance and superintendence and by way of pushing up sales when it became necessary. He was merely kept informed of the various details and sales thereof by the 4th defendant and he was also in touch with the same on occassions when he had to go to Calcutta. The allegations of collusion and conspiracy or of making secret profits were denied by him. It was contended by him that he was not liable to account to the plaintiff's firm.

4. The 2nd defendant contested his liability to the plaintiff. According to Him, he had no concern with the plaintiffs transactions either with the first or 3rd defendant nor had he even knowledge thereof.

5. The defence of the 3rd defendant was that he sold the ghee tins of the plaintiff for proper price and at the rates then prevailing in the market with the knowledge of the plaintiff's representatives and under the directions and advice of the 1st defendant their selling agent, that he acted in the best interests of the plaintiff and that neither he nor the other defendants made any profit at the expense of the plaintiff. It was also pleaded that there being no direct relations between him and the plaintiff he was not answerable to it and hence he was under no obligation to render it any account. All the three defendants were agreed that they were not members of a joint family and that the agency taken up by the 1st defendant and 3rd defendant was for their individual benefit.

6. During the trial, there was a change of front by the defendants 1 and 3 and they adopted the attitude in the witness-box as D.Ws 1 and 4 respectively that the several ghee tins were purchased by the 3rd defendant for his firm. Some of them were sold to him by the plaintiff and some by the 1st defendant.

7. Pending the suit, a commissioner was appointed for the purpose of seizing the ghee tins not disposed of. He proceeded to Calcutta in May, 1947, and in-spite of the opposition and obstruction caused by the 3rd defendant he could seize 786 tins of ghee, sold it for Rs. 57,801-3-6 and after deducting the poundage and other charges deposited Rs. 56,464-5-0, the balance of sale proceeds into court.

8. The Subordinate Judge, who tried the suit, granted a decree against defendants I, 3 and 4, jointly and severally for Rs. 1,20,218-1-6 together with interest thereon at 9% per annum from 1-10-1947 which had accumulated to Rs. 36,756-10-10 upto the date of decree. Out of this decretal amount was to be deducted a sum of Rs. 60,001-2-0 made up of Rs. 56,464-5-0 deposited by the commissioner to the credit of the suit in the circumstances mentioned above and Rs. 3,536-13-0 interest earned thereon by investment. The plaintiff could withdraw this amount and the balance of the decree money was to carry interest at 6% per annum. No decree was passed against the 2nd defendant as the trial court found that the 2nd defendant was in no way concerned with the suit transactions. The Subordinate Judge found that defendants 1 to 3 were not members of a joint family and even if there could be such them was no joint business and that their trades were separate, unconnected with each other and that the agency of the 1st defendant was not a joint family concern. In his view, the 1st defendant was to arrange for a financier, give general directions and exercise general supervision etc., and receive commission of Rs. 2/- on the tins sold, and that the defendants 3 and 4 were to render account to the plaintiff, they being the substituted agents of the plaintiff and that the liability of the 1st defendant arose by reason of his conspiracy with defendants 3 and 4 in bringing about fraudulent-transactions and causing loss to the plaintiff and that he was entitled to a commission at Rs. 2/- per tin on the sale of 2,539 tins. Defendants 1 and 4 filed two separate appeals against the Judgment disputing their liability to render account to the plaintiff.

9. The plaintiff by his appeal A.S No. 485 of 1951 assails the judgment in so far as the 2nd defendant was absolved from all liability and in so far as it allowed commission to the 1st defendant on some of the tins of ghee sold and did not allow a higher price in respect of some tins remained unsold either through P.Ws 1 to 5 or by the commissioner.

10. We will first take up A.S No. 118 of 1951 which covers the issue relating to the liability of the 1st defendant to account to the plaintiff. In support of this appeal, it is contended for the appellant that he was only a broker who was requested to arrange a financier and a commission agent in consideration of which he would be paid a commission of Rs. 2/- per tin and the moment he had brought the plaintiff and 3rd defendant together he had no more obligations to the plaintiff. He had only to receive commission from the plaintiff on the basis mentioned above not only in regard to ghee tins sold but it had to extend to the 330 tons covered by the permit. It was also submitted that having found that the appellant was not liable to account and that he could be made liable for the losses sustained by the plaintiff as a result of his fraudulent conduct in regard to the sale of certain number of tins, a decree should not have been passed against him for all the losses said to have been sustained by the plaintiff. The learned counsel also maintained that if as found by the trial court the 3rd and 4th defendants were substituted agents no liability could attach to the 1st defendant assuming he joined the 3rd defendant in defrauding the plaintiff of his dues.

11. On the other hand, the stand taken by the plaintiff is that the appellant was the chief agent, the 3rd and 4th defendant being his sub-agents and that he was primarily responsible to the principal, namely, the plaintiff for all acts of commission and omission by the sub-agents and that the sub-agent's liability arose only by reason of their fraud and wilful wrong. Counsel for the respondents has also attacked the finding of the Subordinate Judge that the 3rd and 4th defendants were substituted agents.

12. The problem thus posed has to be solved with reference to the voluminous correspondence that passed between the parties, the oral evidence and the surrounding circumstances. Before we launch, on a discussion of the evidence and the legal position of the parties, it is useful to refer to the attitude adopted by the defendants in their written statements. While in one breath it is asserted by the 1st defendant in his statement that it was specifically agreed between him and the plaintiff in the beginning that the appellant should put the plaintiff in contact with the 4th defendant and that the former should station their own representatives to affect and supervise sales and should deal directly with the 4th defendant through his representatives stationed on the spot, the appellant beyond receiving a commission of Rs. 2-0-0 per tin not having any more liability, in the matter, it was stated in the next breath that he had to give general guidance and supervise the sales and push up the sales when it became necessary. It was also admitted in the answer that he was the authorised agent for the sale of the plaintiff's ghee on the terms of his being paid a commission of Rs. 2/- per tin. There is the further recital in the written statement that he was kept informed of the various sales and details there by copies of letters of the 4th defendant to the plaintiff and he was also in touch with the same on occasions when he had to go to Calcutta. It is difficult to reconcile the two positions taken by him. Further, the case of the 3rd defendant and 4th defendant as disclosed in the written statement is in consistent with the 1st defendant being a mere broker. The contents of paragraphs 7 and 21 of 4th defendant's written statement amply bear out the plaintiff's case that the 1st defendant was his commission agent and that defendants 4 and 3 were only sub-agents. It is stated inter alia in paragraph 7 that the goods were sold under the general guidance, advice and instructions of the 1st defendant or of some directors of the company and that they were corresponding with the plaintiff about the sales and market rates only to help the plaintiff and his direct sales representatives on the spot to obtain quick sales. The last sentence occurring in paragraph 21 is this.—

“But one thing is definite that the plaintiff represented and held out the 1st defendant as the representative under whose advice and instructions his goods sent to Calcutta may be sold.”

13. These passages leave little room for the contention of the 1st defendant that he was no more than a broker entitled to receive the commission at Rs. 2/- per tin.

14. We shall next trace the facts bearing on this issue. At the outset, it may be remembered that the case for the appellant is that it was only on the 27th or 28th of October, 1946 that the main terms and conditions of the contract between the parties were settled at Calcutta after P.W 8 and other representatives of the plaintiff went to Calcutta whereas the case for the plaintiff is that the terms of agency of the 1st defendant as well as those relating to the 3rd defendant were agreed upon at Guntur, the 1st defendant having fixed up with his brother probably by talking to the latter over the trunk-phone (as suggested by the plaintiff to the 1st defendant in his cross-examination) and if is only subsequently that the ghee tins were despatched to Calcutta. P.W 8 testified to the main terms of agency having been settled at Guntur on or about the 16th of October. This version is confirmed by other witnesses for the plaintiff. It appears from the material on record that the first two consignments were sent on the 21st and 22nd of April, 611 and 772 tins respectively and they were received at Calcutta only on the 28th. It is also evident from the testimony of P.Ws 2 to 4 that arrangements for the sale of the ghee to be exported by the plaintiff were made even about ten days before the arrival of the plaintiff's goods at Calcutta. This is not in consonance with the appellant's case, but is applicable only on the hypothesis that they had already reached an understanding in respect of these sales. It is unlikely that the plaintiff would have despatched the goods to the 3rd defendant without there being any prior engagement especially when the 3rd defendant was not acquainted with any of the directors of the plaintiff-company. It is significant that the appellant was in Calcutta by the time the goods reached the place to make arrangements for the sale of the ghee and immediately he arrived at Calcutta a telegram was sent on his behalf that money was being remitted. In this connection P.W 8 deposed that 1st defendant was there because he had to take delivery and have the goods sold. It is unlikely that these tins would have been despatched without fixing the terms and conditions upon which entrustment was to be made to the parties and the sales to be effected.

15. We shall now turn to the correspondence that passed between the parties.

16. [Their Lordships discussed the oral and documentary evidence in the case and proceeded to observe:—]

17. Thus, there is satisfactory evidence on the side of the plaintiff that the 1st defendant was employed by the plaintiff as their agent, that the former had appointed as his sub-agents defendants 3 and 4 and that the latter always looked to him for all the details as to their disposal, that they were taking orders from him and that the 1st defendant had not ceased to occupy the position of an agent at any time during the relevant period and therefore rendered himself liable for the acts and defaults committed by the 3rd and 4th defendants. The evidence also discloses that not only he was aware of the fraudulent conduct of the 3rd defendant in reporting fictitious sales but even encouraged him to do so. In his deposition, as D.W 1, D-1 said that except 786 tins delivered by him to the commission, the 3rd defendant purchased all other tins. This statement discloses an anxiety on the part of the 1st defendant to enable the 3rd defendant to make as much illegal gain as possible. The material on record establishes beyond doubt that the 1st defendant was acting in concert with the 3rd defendant and both of them were parties to several make-believe transactions which were, calculated to deprive the plaintiff of their legitimate dues. There can therefore be little doubt that the 1st defendant was guilty of fraudas much as the 3rd defendant. This position is controverted by the counsel for the 1st defendant. It is argued that the direct correspondence between the plaintiff and the 1st defendant could only be consistent with the plaintiff treating the 3rd and 4th defendants as his agents, and this correspondence justifies the finding of the Judge, that the 3rd and 4th defendants were constituted substituted agents of the plaintiff, that be was merely a broker whose, only duty was to supervise and superintend the sale of the plaintiff's stock and had the right to receive remuneration at Rs. 2 per tin. We do not think that this contention is substantial. The mere fact that the 3rd defendant was writing directly to the plaintiff and the latter was requesting the 3rd defendant to sell the goods at a profitable rate and not to dispose of at a low price does not create the relationship of principal and agent between the 3rd and 4th defendants and the plaintiff. As the 1st defendant was also a resident of Guntur like the members of the plaintiff's concern and for the sake of convenience and quicker despatch, this procedure must have been adopted between the parties. But the 1st defendant was appraised of all the transactions and copies of letters were sent to him of almost all the letters. The reason for the direct correspondence is also given in the written statement of the 4th defendant. The relevant passage occurring in paragraph 7 is as follows:—

This defendant was corresponding with the plaintiff about the sales and market rates only with a view to help the plaintiff and his direct representatives on the spot to obtain quick sales and with a view to repay himself as early as possible.”

18. This factor does not in any way alter the position of the parties and the subordinate Agency which the 3rd and 4th defendants held would not be converted into that of the agent and principal. The exchange of letters between the plaintiff and the 3rd defendant does not operate to discharge the 1st defendant from his liability to his principal. If a person is initially appointed an agent and if the latter engages his own sub-agent for carrying through certain transactions, the mere circumstance that the sub-agent corresponded not with his employer but with the main principal, does not divest the main agent of his character as such.

19. There is clear authority for this position. In Lockwodd v. Abdy . 60 Eng. Reports 428. the plaintiff who had real estates in the country of Essex appointed one Abdy as his agent with full power to manage his estates and with express authority to appoint proper person to act as agent under him. A solicitor by name Andrews was employed by Abdy to receive the plaintiff's rents and he in the management of the estates. A bill was filed by the principal against Abdy and also Andrews who was charged with various acts of mis-conduct in the management of the estate. The answer of Abdy was that it was not sustainable against him. It was laid down by the Vice-Chancellor Sir. L. Shadwell that Andrews was responsible to Abdy and that the bill was to be dismissed, as it was unsustainable, against Andrews inspite of the fact that in Andrews books items were entered and charged as against the plaintiff and that the evidence showed that Andrews had prepared the power of attorney and had various interviews with the plaintiff and advised him as to the management of the affairs, that the accounts between the plaintiff and Abdy had never been settled, but they had been made out and rendered by Andrews and were instituted as accounts between Abdy and Andrews as the agents by power of attorney, of the plaintiff Mr. Lockwood.

20. Hoole v. Royal Trust Co.,2 also illustrates this principle. This was an appeal from a Judgment of the Supreme Court of Newfoundland. A firm R entered into an arrangement with H that the latter was to act as agent to R for sale of their fish in South European countries. The remuneration payable for their services consisted of a commission of 2 per centum and a discount of one and one fourth per centum on the proceeds of sales. By a cable and letter posted to the same day the firm H negotiated with R for a consignment of fish for Genoa per S.S “Kriton” saying: “We have cabled you this morning that if you would consign 500 casks of Labrador to Genoa, our agents will guarantee a minimum price of 38 c.i.f, Genoa with an advance of 20s on document. We await your reply and hope we may be able to arrange this business with you,” R accepted the offer by a letter dated, 21st October, 1921 and sent the consignment per S.S “Kritton” on 7th November, 1921. On 15th November, the firm H wrote guaranteeing a minimum of 38s c.i.f, with an advance of 15s against documents. This was approved by the consignors as follows:

“Labrador minimum guarantee approved, have drawn 20s, suppose accounts good for difference”. Messrs. Zurlo & Co., were the agents at Genoa referred to by the H firm. Subsequently, the firm H tried to repudiate its liability by pleading that the responsibility was that of Messrs Zurlo & Co. In an action by R against H the defence was that the firm H merely negotiated between the R firm and Zurlo & Co. direct and that therefore they were not liable to any receipts by Messrs Zurlo & Co., which had not in fact reached their hands. This defence was negatived and the claim of R was allowed by the Judicial Committee of the Privy Council in the view that the firm H was liable to account to the R firm for the balance of the proceeds of the Cod fish consigned to Genoa. In the opinion of their Lordships the fact that some correspondence passed directly between the plaintiff and Zurlo & Co., or that the plaintiff asked Zurlo & Co., if the latter would guarantee a minimum price minus 1 1/4 discount only and would advance 30s cash on documents and that Zurlo & Co., replied by letter that they would guarantee 38s minimum price could not advance the plaintiff 30s per hundredweight asked for, but assured them that the account sale would be remitted to them promptly, did not make any difference for the determination of the jural relations between the parties.

21. The principle underlying these decisions is that if a person is employed as agent for sale of some goods and the agent engages a third party to carry out the instructions of the principal, the mere fact that the sub-agent corresponds not with the agent but with the principal does not create any change in the relations of the parties and privity of contract does not arise between him and the principal. Therefore, the appointment of the sub-agent to put through some sales would not indicate that ipso facto privity of contract was created between the principal and the sub-agent. A passage from Bowstead's Law of Agency (11th edition) page 71 is in favour of the view indicated above.

“There is no privity of contract between a principal and sub-agent, as such, whether the sub-agent was appointed with the authority of the principal or not; and the rights and duties arising out of the contracts between the principal and agent, and between the agent and sub-agent, respectively, are only enforceable by and against the immediate parties thereto. Provided, that the relation of principal and a third person, if the agent be expressly or impliedly authorised to constitute such relation and it is the intention of the agent and of such third person that such relation should be constituted.”

22. It is illustration 3 at page 72 that bears out the proposition stated above.

“An agent appointed a sub-agent to manage the principal's affairs. The sub-agent took over the entire management thereof and communicated with the principal direct. Held that the sub-agent was not liable to render an account of his agency to the principal.”

23. The authority relied on in support of this is Lock Wood v. Abdy cited supra.

24. When once the position is established that a particular individual was appointed as commission agent for sale of goods and the latter arranged with a third party for carrying through the sale transaction, the agent is responsible to the principal for the negligence and other breaches of duty of the sub-agent in the course of employment. See Peacock v. Baijnath; Purkith Panda v. Anandagaontia and Nensukhdas v. Birdichand . 43 I.C 699..

25. The rule mentioned above is stated in S. 192 of the Contract Act which enacts:—

“Where a sub-agent is properly appointed the principal is, so far as regards third persons, represented by the sub-agent and is bound by and responsible for his acts as if he were an agent originally appointed by the principal.”

26. The sub-agent is responsible for his acts to the agent and the agent is responsible to the principal for the acts of the sub-agent.

27. Another argument put forward by the counsel for the 1st defendant was that as the goods are not consigned to him but sent direct to the 4th defendant and were endorsed by the plaintiff's representatives to the 4th defendant direct and not to him he never had the custody of the goods. Therefore there could be no scope for describing him as the agent. His position was only that of a broker.

28. For this proposition, support is sought in the Judgment of a Full Bench of the Madras High Court in Radhakrishna v. Province of Madras.4 The passage on which reliance is placed by the learned counsel for the 1st defendant is found at page 500:—

“A broker is an agent employed to make a bargain for another and receives a commission on the transaction which is usually called brokerage. He has usually neither the custody, nor the possession of the goods. It is the broker's duty to establish privity of contract between the principal and the third party. The broker cannot sell in his own name nor can he sue on the contract. A commission agent, on the other hand, of the class to which the plaintiffs belong, is not like a broker. He has almost invariably custody or possession of the goods, actually or constructively.”

29. The doctrine of the case cited above does not govern the present case, for, the 1st defendant's position cannot be equated to that of a broker for the various reasons mentioned above. A broker, when once he brings two parties together and receives his remuneration for it, has nothing more to do with the transactions between the parties. That is not the case here. Even, according to the 1st defendant he had “to keep in touch by way of general guidance and supervision.” He had also to push up sales whenever it became necessary and he was kept informed of the various sales and the details thereof by copies of letters. It is also admitted that he had also to go to Calcutta on some occasions in connection with the sales of the plaintiff's goods. Thus, he had not ceased his connections with the principal after putting the 3rd defendant in touch with the plaintiff. The Agents' custody also can be constructive. When under his instructions, the goods are despatched, to his sub-agent and the latter is having custody thereof, that would be deemed to be the custody of the principal. Hoole v. Royal Trust Co.,5 shows it is not necessary that the goods should be placed in the physical possession of the agent. In the nature of things, the ghee tins could not be consigned to the 1st defendant because he was himself residing at Guntur and he had no office at Calcutta. It is under his instructions and as described by him, as per the case of the plaintiff and accepted by us that the goods were sent to Calcutta, that the sub-agent his brother was always looking for him for instructions in regard to sale and that the latter refused to recognise the plaintiff as his principal.

30. It may not be out of place to mention here that in his letter dated 30-11-1946 to plaintiff P.W 8, writes that he gave the passes to D.1 An attempt was made by the counsel for the 1st defendant to bring the case within the purview of Section 191 of the Indian Contract Act which is in the following words:—

“Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.”

31. This section embodies the theory of what is generally known as substituted: agency. What this section envisages is an agent nominating another person to act for the principal in the business of the agency with the knowledge and consent of the principal. It is applicable only where the agent names another and when that is accepted, the agent has no concern thereafter with the business transactions between the principal and the person named; in other words, he walks out of the scene. The naming of the person does not amount to delegation of the duties of the principal. In such a case, direct relations are established between the principal and the person nominated and the latter becomes an agent substituted for the person who was authorised to nominate another. But, that is not the situation in this case. As already stated, the 1st defendant had not severed his connections with these transactions as indicated above in several places. Therefore, he cannot disown his responsibility to render an account to his principal, the plaintiff. To quote the words of Thesiger, L.J, in De Bussche v. Alt.

“As a general rule, no doubt, the maxim “Delegatus non potest delegare” applies so as to prevent an agent from establishing the relationship of principal and agent between his own principal and a third person; but this maxim when analysed merely imports that an agent cannot, without authority from his principal, devolve upon another obligations to the principal which he has himself undertaken to personally fulfil, and that, inasmuch as confidence in the particular person employed is at the root of the contract of agency, such authority cannot be implied as an ordinary incident in the contract.”

32. The conduct of the parties to the original contract of agency throughout the relevant period can only lead to one inference namely that the original agent, namely, the 1st defendant, in order to fulfil his obligations to his principal, had to appoint a sub-agent to sell the goods of his principal at Calcutta and there was no direct privity of contract between the plaintiff and the 3rd defendant. Nor does the mere fact that the plaintiff had accepted the terms on which the sub-agent would sell the goods and advance money against goods would ipso facto put an end to the relations between the plaintiff and the 1st defendant. Hence the 1st defendant cannot escape liability by pleading that the plaintiff had to look to the sub-agents as substituted agents.

33. The opinion of the lower court that the 3rd and 4th defendants were substituted agents of the plaintiff is erroneous and unsustainable. The trial court held that the 1st defendant could be made liable for the sale-proceeds of the 1500 tins of ghee since he had sold them to the 4th defendant and later had not accounted to the plaintiff for the same. Our foregoing discussion shows that this view is erroneous and unsustainable. According to the learned Judge, by reason of the theory of substituted agency and also because fraud could not be attributed to the 1st defendant except in regard to certain transactions, his liability could not be made co-extensive with that of the 3rd and 4th defendants and he would be only responsible for the sale-price of 1500 tins and for the difference in price in regard to fictitious sales of which he had knowledge and was privy to it. He, however, thought that a decree could be passed against the 1st defendant also for a sum which represents the loss sustained by the plaintiff as a result of the fraudulent conduct of the defendants, that amount being less than what the 1st defendant would have to make good to the plaintiff on the basis indicated above.

34. Lastly, it was submitted by Mr. Rajeswara Rao, that no liability could be fastened on his client with regard to the sale of 1500 tins in the suit which is for a rendition of accounts on the footing of his being an agent of the plaintiff. What is urged by him is this. The plaint case is that by a resolution dated 4-3-1947, the 1st defendant was removed from the agency and this was communicated both to the 1st defendant and the 3rd defendant. Feeling that they have no further chance of making secret profit by indulging in fictitious sales, the 3rd defendant and 4th defendant brought about this fraudulent transaction. If the 1st defendant had lost the character of an agent and thereafter sold the goods to the 3rd defendant, he had only committed a tort and there would be misjoinder of causes of action to claim this amount in a suit for accounts as between an agent and a principal.

35. Firstly, this is not the case of the 1st defendant either in his written statement or in his evidence. The attitude adopted by him throughout was that there was in fact no resolution to remove him from the agency, nor was any such communication sent to him. It is not necessary for us to decide whether really the resolution was passed by the directors of the plaintiff company removing him from the agency and whether copies of the resolution were sent to the 1st and 3rd defendants. If the agent purports to act as such and in that capacity enters into a transaction on behalf of the plaintiff his liability to account does not cease and he will have to render an account to the principal if he chooses to require him to give an account on the footing of his being an agent. This legal position cannot be disputed. For these reasons we hold that despite the appointment of the 4th defendant for the actual sale of the goods on the terms and conditions set out above, the primary liability to the plaintiff was that of the 1st defendant and his liability is co-extensive with that of the 3rd and 4th defendants. Consequently, A.S No. 118 of 1951 is dismissed with half costs.

A.S No. 173 of 1951.

36. In this appeal, the conclusions of the trial court are challenged on behalf of the 3rd and 4th defendants on various grounds: (1) No decree can be granted as the plaintiff has not set out in the plaint the exact relationship that subsisted bet? ween them and the plaintiff (2) there being no direct relations between them and the plaintiff they were not accountable to the plaintiff; (3) the stock of the plaintiff was purchased by them with the consent and approval of the plaintiffs representatives and this they were entitled to do as financiers; (4) they were not liable to pay interest on the sums realised by the commissioner-receiver by sale of 786 tins of the ghee and invested in Government securities; and lastly there should have been a preliminary decree instead of a decree for a definite sum straightaway. We shall now dispose of these points seriatum.

37. The fourth contention relates to the payment of interest on the proceeds of sales of 786 tins effected by the commissioner and brought into court. It is maintained by Mr. Chandrasekhara Sastry that the direction in this regard is invalid since his client did not have the use of this money. We are unable to agree with this contention. It is conceded by him that his client put forward a claim to this money on the ground that these tins belong to him and that the plaintiff had no manner of right thereto and insisted that the money should be in court pending the determination of the rights of the parties to this amount. For this reason, the court invested it in Government securities which earned an amount of Rs. 3,000/- and odd and which went in reduction of the liability of the defendants. In such a setting, it is useless to contend that the 4th defendant could not be made liable for interest that accrued on the sums in court till the date of the decree. When a person prevents another from having use of some money and is instrumental in keeping it idle in court, he is liable to pay interest on such money by way of damages.

38. Mr. Chandrasekhara Sastry, pressed upon us the argument that it was not competent to the lower court to grant interest as his case does not fall within the ambit of the Interest Act. The instant case does not fall under any of the categories enumerated id Section 1 of the Act, continues the learned Counsel. That being the same case, there is no discretion vested in the court to allow interest at 9% on the amount deposited by the commissioner.

39. This argument overlooks the proviso to that section. That proviso saves cases in which interest was payable before the passing of the Act. This is made clear by Section 34 C.P.C There is ample discretion inhering in a court to award interest by way of damages in cases where the plaintiff has to be compensated for any loss sustained by him consequent on the conduct of the defendant. The counsel for the appellants contends that the defendant could not be directed to pay interest by Way of damages, when he had not retained money in his hands and made a profit out of it. In our opinion there is no difference between a case of that type and where by his acts he had deprived the plaintiff of the use of the money, which amounts to the defendant wrongfully withholding the money. If the plaintiff was not prevented from drawing out the money he could have put it to use. As it is, the plaintiff had suffered loss by being denied the use of money for a considerable time and has therefore to be compensated in the shape of interest. Nor could any exception be taken to the award of interest at 9% because the plaintiff had to pay interest to the appellants at 9% per annum for his advances. After all, the rate of interest as damages varies with the value of money to the parties. That being the case, he cannot make a grievance in regard to this part of the decree.

40. Coming now to the last contention, there is no rule or principle of law which requires a court to pass a preliminary decree invariably in every suit for accounts. Normally, a preliminary decree is granted in such suits because it would be necessary to go into the accounts and a court may think it advisable to appoint a commissioner to ascertain the state of account between the parties. But that is not a rigid rule which should be followed in every case irrespective of its circumstances. In simple cases which do not involve much scrutiny of accounts, a court is not bound to pass a preliminary decree but could straightway give a decree for a certain amount if the material on record enables it to do so. The present case falls under this category. The statement of accounts prepared by the plaintiff with reference to the account books of P.Ws 1 to 5 which could not be impugned clearly showed what sums were paid to the 4th defendant in regard to the ghee tins entrusted to the latter by the plaintiff and sold by P.Ws 1 to 5 as commission agents. The defendants are made liable only for the sums which were actually paid by P.Ws 1 to 5 to them after deducting the commission payable to them and other incidental charges out of the sale-price of the ghee tins. The defendants have not produced their own accounts presenting a conflicting version in regard to the sale-prices. They have no case as to the rates at which ghee tins in question were disposed of, different from that revealed in the evidence of the witnesses and their account books. So, it was not a case where different versions had to be considered with different sets of account books, but a case which could be easily decided in the light of the material placed in the shape of the account books and the oral evidence of disinterested witnesses like P.Ws 1 to 5. When the accounts could be ascertained and settled without passing a preliminary decree and resorting to the procedure necessitated thereby, a court is at liberty and also well-advised in giving a decree to the plaintiff. Even before us, the defendants, could not show in what respects the Judgment is wrong or what allowable items were disallowed or what was the defect in the statements furnished by the plaintiff prepared in the light of accounts of P.Ws 1 to 5 or in what respects the account books were unacceptable. To repeat it, the defendants have not chosen to file their account books and could not also repudiate the various payments made to the 4th defendant in the account books of P.Ws 1 to 5. The trial court remarked that there was no need to pass a preliminary decree and that no purpose will be served by passing a preliminary decree by referring the matter to the commissioner for ascertainment of the amount due to the plaintiff as it was not the case of defendants 3 and 4 that they had got any account books which will show the amounts actually realised by them.

41. It was faintly argued that certain deductions have to be made by way of transport charges, from 3rd defendant's godowns to the godowns of P.Ws 1 to 5, godown charges and cooly paid at the railway station etc. There is no substance in this submission either for the reason that the 4th defendant had not placed any evidence before court as to the charges incurred under any of these heads. Nor are they able to tell us now that expenditure was incurred in that respect. The trial court allowed a lumpsum of Rs. 1,000/- by way of estimated unloading and transport charges. It does not appear that anything more was claimed. This contention also fails. In the result, this appeal is dismissed with half costs.

42. There remains the appeal A.S No. 485 of 1951 filed by the plaintiff contesting the validity of the judgment in certain respects. Two grounds of attack are put forward by the plaintiff against the judgment; firstly that the trail court ought to have allowed a higher rate in regard to 178 tins of new ghee which were not disposed of by the 4th defendant by the time the commissioner disposed of the 786 tins. The contention urged in this behalf was that at the time the commissioner went, there was a large number of tins of ghee with the 4th defendant not yet sold and with great difficulty the commissioner could seize only 786 tins and the rest of the tins amounting to 393 tins remained with the 4th defendant and which were sold subsequently for a higher price. The plaintiff appellant restricts his claim only to 178 new tins out of the lot of 364 tins. In support of this claim, reliance is placed by the plaintiff on abstract No. 2 filed on his behalf on the basis of actual realisations from P.Ws 1 to 5. What is maintained is that while an average rate of Rs. 81-4-4 for tins of new ghee was got by P.Ws 1 to 3 in the sales effected by them upto the end of March, 1947, the average price which was realised by the commissioner in regard to the 786 tins made by him subsequently was much higher and the plaintiff should have had the benefit of atleast that rate because the 4th defendant would have sold these tins later and got a much better rate.

43. This is sound logic and the argument has to be accepted if the position was as envisaged in the argument of the counsel for the plaintiff. But, this is contested by the defendants who pointed out with reference to statement No. 18 filed on behalf of the plaintiff. This statement shows that in all 5910 tins were despatched to Calcutta out of which the plaintiff sold to one Chokmal Tez Raj & Co. 306 tins. These 305 tins were subsequently obtained by the 3rd defendant and he sold 670 tins including the 306 tins to the 2nd defendant. In regard to the tins given to the 2nd defendant out of the stocks of the plaintiff, the plaintiff was allowed a rate at which P.Ws 1 to 5 sold the goods of the plaintiff. The statement No. 18 makes it abundantly clear that 364 tins were already disposed of before the commissioner went to Calcutta. Therefore, there is no force in the statement that 393 1/4 tins remained unsold. If 364 tins are thus accounted for there remains only 29 1/4 tins. There is no clear evidence with regard to these tins as to when exactly they were sold and it is profitless to pursue this matter having, regard to the trivial nature of the difference in price with regard to these 29 1/4 tins, the trial court having given for these tins also, the same rate as in regard to the others.

44. The second complaint is that the trial court allowed commission to the 1st defendant on the tins sold by the 4th defendant through P.Ws 1 to 5 except in regard to 1500 tins alleged to have been sold by the 1st defendant to the 4th defendant and 779 tins sold to the 4th defendant. The learned Subordinate Judge thought that the 1st defendant was disentitle to commission on the sale of the first item, because the 1st defendant had colluded and conspired with the 3rd defendant and on the second because it was not a sale in the agency. In his opinion, the case of the 1st defendant stood on a different footing in respect of the other tins inasmuch as there was no evidence to indicate that he had neither knowledge of nor was privy to the fraud committed by the 3rd defendant.

45. We are in disagreement with this conclusion of the learned Judge. On the foregoing discussion, there is no ground for any differentiation between one transaction and another so far as the participation of the 1st defendant in the fraudulent design of the 3rd defendant is concerned. His dealings even in regard to the other set of sales also resemble those relating to the sales in regard to which commission was disallowed by the trial court. If in fact the 1st defendant acted to the detriment of his principal, the plaintiff, throughout the transactions he is not entitled to any remuneration for the business which was conducted through him. Apart from the long chain of authority which has established this position, there is the statutory disability attaching to an agent who misconducts himself in the business of his principal and this is enacted in Section 220 of the Indian Contract Act. The section says:—

“An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.”

46. The only thing that has to be established before the agent could be put out of court in regard to the commission is that he has been guilty of misconduct in the business of the agency. The principle underlying this section is that a principal is entitled to have an honest person as his agent and not a person whose actions are calculated to prejudice his interest and it is only an honest agent who is entitled to a commission.

47. In this context, a passage in Stor's Laws of Agency, which was extracted with approval in the Judgment of Varadachari, J., who gave the opinion of the Bench in Sardar Vasantharao v. Gopalarao is pertinent:—

“It is a condition precedent to the title of the commissions, that the contemplated services should be fully and faithfully performed. If therefore the agent does not perform his appropriate duties, or if he is guilty of gross negligence, or gross misconduct, or gross unskilful ness, in the business of his agency, he will not only become liable to his principal for any damages, which he may sustain thereby, but he will also forfeit all his commissions. Slight negligence, or slight omission of duty, will not indeed, ordinarily, be visited with such serious consequences; although if any loss has occurred thereby to the principal, it will be followed by a proportionate diminution of the commissions.”

48. It is this doctrine that statutory recognition is given in Section 220. On the material on record no doubt could be entertained as regards the misconduct of the 1st defendant who throughout acted in league with his brother the 3rd defendant. Such being the case, Section 220 could be properly invoked in this case and all commission disallowed to the 1st defendant. In other words, the 1st defendant will not get any commission on the sales effected by the 3rd defendant through P.Ws 1 to 5. To that extent, A.S 485 is allowed.

49. Mr. Krishnaswamy Iyer has not pressed his appeal as against the 2nd defendant as the plaintiff has no direct evidence to prove either that the 2nd defendant was also guilty of fraudulent conduct in regard to the sales or that even knowledge of the fraud of the 3rd defendant could be attributed to him. The decree of the trial court in O.S No. 45 of 1945 is accordingly modified.

Ch. R.

Decree modified.