K. Muneyya And Co. v. K. Varadarajulu

Kumarayya, J.:— This is plaintiffs' appeal. Their suit for recovery of Rs. 13,494-10-3 against the defendant has been dismissed with costs by the Principal Subordinate Judge, Eluru. Their claim consists of two amounts and interest thereon. One represents the amount paid by plaintiffs on behalf of the defendant for the purchase of 301 bags for him. The other is cash advance by plaintiffs to Armugam at his request on behalf of the defendant.

2. The facts of the case raise for determination only two questions: one, a question of fact and the other, a question of law. The question of fact is, whether the plaintiffs, in the transaction of supply of 301 bags of boiled rice to the defendant, held the capacity of sellers or mere agents on commission basis, and further, whether the plaintiffs did advance a sum of Rs. 600/- to V. Armugam, as the agent of the defendant. The second question which is of law, is, whether the plaintiffs have lost their right to the purchase money paid by them by reason of loss of goods in the looting after they were booked in the railway waggon. In order to appreciate the points raised, a brief statement of facts is expedient. Plaintiffs are a registered firm of merchants and commission agents at Eluru. The defendant is a trader doing business at Madras. The case of the plaintiffs is that Armugam, as the representative of the defendant, gave them, in pursuance of telephone directions' received by him from the defendant, instructions for the purchase of 301 bags of boiled rice and the plaintiffs accordingly purchased the same for and on behalf of the defendant on 13-12-1952 at Sri Jayalakshmi Rice Mill at Tadepalligudem. The purchased goods were loaded the same forenoon in waggon No. B.N 32485 at Tadepalligudem railway station. On both the occasions i.e, of purchase as well as booking, Armugam, on behalf of the defendant, was with the plaintiff's man. The invoice thereafter was prepared in his presence. He duly made his signature thereon. In fact, the same evening, he communicated about these to the defendant, who approved of the same.

3. Armugam required a sum of Rs. 600/- which at his request on behalf of the defendant, was advanced to him under his signature in the account book. Then under the instructions of Armugam as also in pursuance of the usual practice a hunt for the amount paid to the seller and also for the money advanced to Armugam was drawn on 15-12-1952 on the Central Bank, Eluru and was sent along with the R.R to the said Bank. The defendant refused to honour the hundi and receive the R.R as he came to know of the loot and loss of goods. The plaintiffs then, instructed the bank to give free delivery of the R.R duly endorsed to the defendant. The defendant refused to take delivery of the same. The plaintiffs then sent the R.R to the defendant himself and demanded payment of the amount in the invoice dated 13-12-1952. The defendant refused payment and returned the R.R The plaintiffs then brought the present claim.

4. The defendant resisted the claim on the grounds inter alia that Armugam, his employee, was not instructed to request the plaintiffs to purchase the goods, nor did he ask the plaintiffs to do so. The contract was entered into directly between the plaintiffs and defendant on phone a about 9-30, p.m on 13-12-1952 when the plaintiffs made the offer and the defendant accepted it and confirmed the contract of sale of the suit goods. As the contract itself was made in the night on 13-12-1952 all allegations, about Armugam's presence at the place of purchase and railway station prior to that are entirely false.

5. The next contention is that the property in the goods did not pass to the defendant before the goods were lost. According to the railway receipt, the consignor was not the plaintiffs but their vendor and consignee was “self” and the goods were consigned at railway risk. The consignment thus did not concern the defendant at all. This mode of despatch was further in contravention of the terms of the agreement. As it was intended thereby not to part with the property, no obligation could be attached to the defendant. In relation to the alleged cash advance of Rs. 600/-, the defendant categorically denied both the factum and liability created thereby. He affirmatively stated that this amount together with Rs. 125-13-0 shown as commission represented the total profit of the plaintiffs in respect of the suit transaction.

6. After due inquiry, the learned Subordinate Judge came to the conclusion that the plaintiffs did not purchase the rice in question from Jayalakshmi Rice Mill either on 12-12-1952 or 13-12-1952, that it is not proved that the goods in question were purchased in pursuance of any order placed by any one on behalf of the defendant, that the relationship between the plaintiffs and the defendant in respect of the suit transaction was that of a seller and purchaser, that the title in the goods did not pass to the defendant before the said goods were lost and that the defendant therefore is not liable for the suit claim. As regards the cash advance of Rs. 600/- he observed that in the absence of proof as to the purpose for which the said sum was borrowed by Armugam, it cannot be held that Armugam had received the said sum and the defendant is liable therefor. He was inclined to believe that probably that amount represented in fact part of profits for the plaintiffs in respect of the suit consignment which they could not show as such for trade reasons. In these premises, the learned Subordinate Judge dismissed the suit of the plaintiffs with costs.

7. The correctness of these findings has been challenged on behalf of the plaintiff-appellants. We therefore proceed to examine how far his criticism is justified. (After examining the evidence on record, their Lordships proceeded).

8. Thus we turn to the evidence adduced in this behalf. D.W 2 Armugam in his deposition stated that this amount was not a cash advancement but represented the expenses and profit of the plaintiffs in the transaction. This statement is inconsistent with his signed entry in the account book which clearly recites that he was paid a cash of Rs. 600/-. He does not show how this amount could possibly be the profit in the transaction. He admits that he did not tell his master about this. This inexplicable silence and his version in clear conflict with Ex. A.51 renders his story wholly incredible. A person is bound by his admission in the document he has executed. The normal presumption is that his recitals in the document are true. If he seeks to displace this presumption the onus is heavy on him to show that the document signed by him was tainted with illegibility or that an untrue statement was obtained with set purpose. It is not alleged that his signature is a product of fraud of misrepresentation. There is therefore no reason to believe that the apparent state of things is not the real state or that the amount shown as borrowings in Ex. A. 51 is so entered in order to defraud the income-tax authorities. The defendant in spite of being put on notice never, within a reasonable time, sought to explain away the admission of Armugam. His belated explanation as already shown, is unsatisfactory and unacceptable. The Court below erred in not granting the claim of the plaintiffs in this behalf.

9. Now, we turn to the other item of claim. It turns largely upon the question, what was the true relationship between the plaintiffs and the defendant.

10. (After discussing the evidence on record their Lordships concluded).

11. It follows the plaintiffs were the agents of the defendant in making purchase, paying the amount to the Mill, and booking the goods at the railway station.

12. Having come to the conclusion that the plaintiff was an agent on commission basis in relation to the suit transaction, the next question for determination is, whether the plaintiffs are liable in law for the loss resulting from the loot of the goods in the railway custody after they had duly booked them. It is argued that since the agent, under the contract of purchase, rendered himself personally liable for the price of the goods to the Mill, and thereafter got the goods consigned to the destination showing the consignee as themselves and not the defendant, it should necessarily follow that the property in the goods as against the principal was vested in the plaintiffs and the latter did not intend that it shall pass to the defendant till the payment of the money and that in consequence, the plaintiffs must bear the loss of the goods. In this behalf, we are referred to Babasa Bakale…Defendant v. Hombanna Rayappa Hombannavar…Plaintiff ., AIR 1932 Bom 593. We are also referred to a passage in Howstead on “Agency” (12th edition) at page 172, Article 76, which reads thus:

“Where an agent, by contracting personally, renders himself personally liable for the price of goods brought on behalf of his principal, the property in the goods as between the principal and agent, vests in the agent, and does not pass to the principal until he pays for the goods, or the agent intends that it shall pass, and the agent has the same rights with regard to the disposal of goods, and with regard to stopping them in transit as he would have had if the relation between him and his principal had been that of seller and buyer.”

13. Indubitably the loss of the goods must fall on the owner or the person in whom the property in the goods is vested. The title in the property is not the same as the lien thereon. The question whether an agent who made the purchase on behalf of his principal without disclosing his name agreeing to pay the money himself, though in reality as a money-lender of his principal and books the goods with a demand draft or hundi for the money advanced by trim can be deemed to have intended that the property in the goods should not pass must depend upon the terms and nature of the contract, the surrounding circumstances, including any binding custom. The circumstances of the present case place it beyond the region of doubt that the plaintiffs herein acted as agents in the transaction of purchase and booking of goods and money lender of the defendant and what they wanted to reserve for themselves in sending the R.R to the Bank for collection of the hundi amount was only a right of lien for the money paid not the property in the goods, which they never intended to have for themselves.

14. No doubt, Ex. A.6, the credit bill of the goods bears the name of the plaintiffs as purchasers, without revealing the name of the principal. The goods purchased had to be sent by the vendors from Tadepalligudem to Saltkothars with plaintiffs as consignee. In fact they were booked so in a wagon selected by the senders showing the consignee as the plaintiff. It is also a fact that the entire amount was paid on 15-12-1952 by the plaintiffs to Sri Jayalakshmi Rice Mill and a receipt was obtained accordingly. But it may be noticed that the endorsement on the railway receipt was to the effect that these goods were to be delivered to the defendant and the railway receipt had been sent to the Central Bank for delivery to the defendant. The Central Bank in fact had paid the money in advance in anticipation of collection. It is this amount that was paid to the vendors by the plaintiffs as the purchase money. It may further be noticed that the defendant's representative was with the plaintiffs” man both at the time of purchase and also at the time of booking. In fact, the invoice duly signed by him to which a reference has already been given, bears reference to the goods bought and the booking made with due reference to the invoice and wagon number.

15. What is more significant is that the despatch was agreed to be made at the risk of the principal. That should give a clue to the intention of the parties that even though the goods might have been purchased in the name of the plaintiffs and the purchase amount was paid by them, their capacity was in this matter, that of agent and as these specified goods belonged in fact to the defendant, it was agreed by the representative of the defendant that they may be despatched to the destination at the risk of the principal. As the purchase money was not paid by the principal and the defendant was liable to pay the same, according to the established course of transactions between the parties, R.R was sent to the Central Bank with due endorsement with the result that the bank provided the money in anticipation of collection and the plaintiffs made paymem with the help of the same on 15-12-1952 to the vendor. In fact, according to Ex. A. 12(a) the defendant was awaiting the R.R so that he may pay off the money.

16. It is thus clear that though the transaction of sale purports to have been entered into personally and the amount was paid by the plaintiffs as per the understanding between the plaintiffs and the defendant, it was in fact a transaction on behalf of the defendant and the payment was also made on his behalf. The intention was that the title in this specific goods would never vest with the plaintiffs but should pass to the defendant immediately and all that the plaintiffs were entitled to during the course of transit or before the goods are actually delivered is a lien on the goods for the money and in no sense property in the goods. That is why it was agreed as per the recitals in the invoice that the goods were to be despatched at principal's risk. The plaintiff nevertheless as a prudent agent in his anxiety to safeguard the interests of the principal got the goods at railway risk

17. On the facts of the present case, it is plain the agent who made purchase for the defendant and paid the money out of the money provided by the Bank in anticipation of the proceeds of the hundi accompanied by R.R did not intend to have property in the goods for himself and at all relevant times the parties to the suit were fully aware that the property in the goods was with the defendant and never with the plaintiffs and that all that the plaintiffs were entitled to is the money advanced and paid on behalf of the defendant. That is the reason why the defendant agreed to the despatch of goods in the manner it was done and at his own risk. The plaintiff-appellants thus in the suit transaction, had not only acted as agents for the defendant on commission basis for purchasing goods for him under the instructions given by his representative but also acted as a money-lender. They paid the price of the goods and also paid a sum of Rs. 600/.- required by the agent of the defendant.

18. As agents, they were entitled to commission. They were also entitled to the money which they paid for the price of goods. Indeed they had an agent's lien on the principal's property within the meaning of Section 221 of the Contract Act. If the goods are lost in transit under the circumstances beyond control while their lien continues, what they will lose is merely the (loss of) lien and the loss of goods will be the loss of the owner. The plaintiffs who are entitled as an agent to the money paid on behalf of the principal and also the commission, cannot lose their right to recover the same even though the property be lost. That apart, as we have already observed, there was an agreement between the parties as revealed by the invoice that the delivery of goods to the railway for being despatched was at the risk of the defendant. In spite of such clear agreement, the defendant cannot impose liability or loss on the plaintiffs.

19. We are referred to various decisions on the point of law raised in this case. We find that the decision of the Patna High Court in Kishun Das v. Ganesh Ram, AIR 1950 Pat 481 is quite on the point. The facts of that case are on all fours with the present one. The learned Judges came to the conclusion that the plaintiffs therein acted in a dual capacity they acted as commission agents for the purchaser and as money lenders they advanced the money for paying the goods purchased and that they were therefore entitled to the commission and also the money paid by them. They had an agent's lien on the principal's property. At page 483, the observations run thus:

“It is, I think, well settled that the lien of an agent being a mere right to retain possession of the property subject thereto is as a general rule, lost by his parting with possession. If possession is given to a bailee for safe custody or for some other purpose consistent with the continuance of the lien, and the circumstances are such as to show that the agent intends to retain his rights, his lien will not be prejudiced by his parting with the possession. But if the goods themselves are lost, the agent loses his lien, and the proprietor or owner loses the goods. The loss of the goods must fall on the owner, or the person in whom the property in the goods is vested. Such a loss cannot fall on the agent. If the agent had paid for the price as a moneylender, he cannot lose his lien as also the money which he had paid for his principal. There is a well understood distinction in law between a lien on property and a title to property. The agent holds the lien, but the principal owns the title. When the goods are lost, the agent loses the lien and the principal loses the goods. That, in my opinion, is the correct position in law. Therefore, when the goods in this case were lost in transit, due to circumstances beyond the control of the parties, the plaintiffs respondents lost their lien as agents when they wanted to retain till the demand draft was paid, and the appellants lost their property in the goods. The loss of the price of the goods etc. paid for the plaintiffs-respondents, must fall on the appellants.”

20. We find ourselves in respectful agreement with these observations. It is no doubt true that the goods Were booked showing the plaintiffs as consignee and the R.R after, endorsement was not delivered to him direct. So then, if the goods had reached the destination, the defendant could not take delivery of these goods unless he made payment against the hundi and took delivery of the R.R but that seems to be the course agreed upon between the parties in view of their mutual rights and obligations as principal and agent. If this course was deemed expedient for the enforcement of the agent's lien, it does not follow that the property in the goods which under the arrangement had already vested in the defendant was held in abeyance or that the loss of goods during transit implied loss of the right of the plaintiffs to recover back the money advanced, in our opinion, the trial Court was in error in holding that the property in the goods had not yet passed to the defendant when the goods were lost. The suit ought to have been decreed in full. We therefore allow this appeal, decree the claim of the plaintiffs for recovery of the sum of Rs. 13,256/- with future interest from the date of the suit to the date of full satisfaction at 6% per annum and with costs of both the Courts.

GG/O/D.V.C

21. Appeal allowed.