Jethmal Madanlal Jokotia And Others v. Nevatia & Co., And Others

Krishna Rao, J.:-

(1) Defendants 1 to 4 are the appellants. The plaintiffs brought the suit to recover from the assets of the first defendant - firm and from defendants 2 to 4 personally, a sum of rs. 28,991 out of which rs. 27,742 - 12 - 6 was the prinicipal and the balance of rs. 1,248 - 3 - 6 was the interest thereon at 6 per cent per annum from 1st july, 1950, to the date of plaint. The sum was claimed as due on dealings betessn the parties, in respect of which the plaintiffs had sent statements of accounts to the defendants on various dates between 7th december, 1949 and 9th november, 1950, and sent also a notice of demand on 16th january, 1951. The plaintiffs' firm was doing business at adoni, as merchants and commission agents in repsect of groundnut seeds, groundnut oil and other commodities. Defendants 2 to 4 are brothers, who were carrying on a similar business at vijayawada in the firm name of the first defendant. The plaintiffs' case is that they acted as pakka adatias for the defendants and carried out a number of orders placed with them by the defendants between december, 1949 and june, 1950, for forward purchases and sales of groundnut seeds and groundnut oil. The orders were given by the defendants either on the telephone or by telegrams or by letters. The plaintiffs, after carrying out each order, intimated the fact by letters to the defendants. As the purchases and sales turned out to be of equal quantities each month, the contracts were settled for the differences in the prices.

(2) The items in the accounts consisted of these differences together with the agreed commission, brokerage and incidental expenses and the payments made by one party or the other from time to time. There is now no dispute as to the correctness of the figures in the accounts. The defence, so far as it is material to the appeal, was firstly that the transactions were wagering contracts and as such were void under section 30 of the indian contract act ; and secondly that the transactions were forward contracts, which were illegal and unenforceable, by reason of the oil seeds (forward contracts prohibition) order, 1943 and the vegetable oils and oil - cakes (forward contracts prohibition) order, 1944. On both these issues, the learned subordinate judge held against the defendants. He found that the contracts entered into between the parties were not wagering contracts, as it was not their intention that there should be no actual delivery of the goods. He also found that the contracts came within the exemptions notified under the provisions of the two prohibition orders, because the concerned delivery orders, railway receipts or bills of lading were not transferable. A dispute was raised before him with regard to the interest claimed. He found that the rate of 6 per cent was not unreasonable and that as the principal amount had fallen due by 1st july, 1950, the defendants were liable to pay the interest. As a result of these findings, he decreed the suit in its entirety. The correctness of the findings is assailed in the appeal.

(3) The first question that falls for our consideration is whether the contracts for purchases and sales, on which the suit claim is based, were of a wagering character, hit by section 30 of the indian contract act. The relevant portion of section 30 runs as follows : -

" agreements by way of wager are void ; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made."

The expression ' by way of wager ' used in the section has the same meaning as the expression ' gaming and wagering ' used in the english gaming act, 1845 - kong tee lone and co. V. Lowjee nanjee, (1901) l. R. 28 i. A. 239 : i. L. R. 29 cal. 461 at 467 in halsbury's laws of england, third edition (simonds) volume 18, pages 169 - 170, quoting from hawkins, j. , in carlil v. Carbolic smoke ball co. , l. R. (1892) 2 q. B. 484 at 490. A wagering contract is defined as

"one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of such event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake ; neither of the contracting parties having any other interest in that contract than the sum or stake which he will so win or lose, there being no other real consideration for the making of such contract by either of the parties."

(4) The main point of difference between the english and the indian law on the subject is that under the english gaming act, 1892, agreements collateral to wagering contracts are also void, while there is no similar provision in india, except bombay act iii of 1865 enacted for the state of bombay. Wagering contracts, dependent on the future rise or fall in the market for commodities, are often cloaked in the form of forward contracts for the sale or purchase of the commodity. The court will look at the substance and not the mere form of the transaction and for this purpose will take into consideration not only the terms of the contract but also all the surrounding circumstances including the conduct of the parties - motilal v. Govindram, (1901) i. L. R. 30 bom. 83. The test for distinguishing such forward contracts of a wagering nature from ordinary commercial transactions is by ascertaining whether neither of the parties intended actual transfer of the goods. In kong tee lone and co. V. Lowjee nanjee, (1901) l. R. 28 i. A. 239 : i. L. R. 29 cal. 461 lord hobhouse said :

"two parties may enter into a formal contract for the sale and purchase of goods at a given price, and for their delivery at a given time. But, if the circumstances are such as to warrant the legal inference that they never intended any actual transfer of goods at all, but only to pay or receive money between one another according as the market price of the goods should vary from the contract price at the given time, that is not a commercial transaction, but a wager on the rise or fall of the market."

(5) In b. And g. Exchange ltd. V. State of punjab, (1961) 1 s. C. J. 241 : a. I. R. 1961 s. C. 268 das gupta, j. , said :

"when two parties enter into a formal contract for the sale and purchase of goods at a given price, and for their delivery at a given time, it may be that they never intended an actual transfer of goods at all but they intended only to pay or receive the difference according as the market price should vary from the contract price. When such is the intention, it has been held that that is not a commercial transaction but a wager on the rise or fall of the market, which comes within the connotation of "gambling". It is the fact that though in form an agreement for sale purports to contemplate delivery of the goods and the payment of the price, neither delivery nor payment of the price is contemplated by the parties and what is contemplated is merely the receipt and payment ofthe difference between the contract price and the price on a later day that makes the contract a wagering contract. "

(6) It is, however, important to remember that the intention not to transfer goods must be not merely of one but of both the parties to the contract. The mere fact that one of the parties was a speculator and arranged the transactions so that only differences became payable, would not render the contracts void as wagering contracts if the other party intended to transfer the goods. The point of time material to the common intention is the time of entering into the particular contract, though as a matter of evidence in order to ascertain that intention the subsequent conduct of the parties would also be relevant. In bhagwandas parasram v. Burjorji ruttonji, (1918) i. L. R. 42 bom. 373 at 378. Sir lawrence jenkins said :

" it may well be, as suggested in the evidence of hargopal, that the defendant was speculator, who never intended to give delivery, and even that the plaintiffs did notexpect him to deliver; but thatwouldnotconverta contract, otherwise innocent, into a wager. Speculation does not necessarily involve a contract by way of wager, and to constitute such a contract a common intention to wager is essential. The mere fact that as to the greater part of the linseed there was no delivery, but an adjustment of claims, cannot alone vitiate the transactions."

(7) In sukdevdoss ramprasad v. Govindoss chathurbhujadoss and co. , (1928) 54 m. Lj. 130 at 134 : l. R. 55 i. A. 32 : i. L. R. 51 mad. 96. Lord darling said :

"there can be no doubt that these various contracts were in character highly speculative but as was pointed out by the trial judge and by the judges on appeal, that is insufficient in itself to render them void as wagering contracts. The authorities cited show that to produce that result there must be proof that the contracts were entered in to upon the terms that performance of the contract should not be demanded, but that differences only should become payable."

(8) The burden of proving that the contract is a wagering one, is on the party asserting it - jureddy kannayya v. Yandamuri lakshmi devi, 182 i. C. 416 (p. C.) the law as to wagering was recently considered and these principles were laid down by one of us (umamaheswaram, j.) in chakka narasimhaiah chetty v. Chandramouleswara (pandurangiah v. Hanumanthiah) , (1961 a. L. T. (n. R. C.) 13. (since fully reported in (1961) 2 an. W. R. 304.) sri n. M. Sastry, the learned counsel for the respondent - plaintiffs argues that the relationship of the defendants and the plaintiffs was merely that of principal and agent and that no question of wagering between them can arise. It is true that a contract of agency cannot by itself be a wager. As observed by s. R. Das, g. J. , in ram dev jai dev v. Seth kaku, a. I. R. 1950 e. Punj. 93 (f. B.).

" commonly and logically, the plea of wagering depends on the common intention of the parties to the contract and the plea cannot arise between a party and his agent. The agent merely puts through the contract between the principal and a third party and therefore to establish the plea of wagering it must be proved that as between the principal and the third party there was common intention to wager. The contract of the agent is only to carry out the order of the principal and to get his remuneration."

(9) Here, p. W. 3, motilal mavji, who was a partner of the plaintiffs' firm at the material tune, said

" exhibits a - 66 to a - 23o are contracts entered into by us with our constituents against contracts by the defendants"

and his evidence in this respect was not challenged at all in cross - examination. Sri n. M. Sastry submits that some of the written contracts entered into by the plaintiffs with third parties are missing, probably because they were seized by the police in connection with a prosecution for contravention of the forward contracts prohibition orders, which ultimately ended in an acquittal by the judgment in ramachandra gupta, in re, (1957) 1 an. W. R. 279. He strongly relies on the circumstance that the defendants raised no dispute at the trial, as to the fact of the plaintiffs having put through the defendants' orders by entering into corresponding contracts with third parties. He urges that on the evicdence here, the plaintiffs are proved to have acted merely as agents of the defendants in respect of the latter's orders. It has been authoritatively held that even a pakka adatiya, in so far as he is an agent of his employer, may successfully maintain a suit to recover the loss sustained by him by virtue of his right to indemnity under section 222 of the contract act - bhagwandas parasram v. Burjorji ruttonji, (1918) i. L. R. 42 bom. 373. Kishan lal v. Bhanwar lal. , (1954) s. C. J. 542 : a. I. R. 1954 s. C. 500.

(10) Sri n. M. Sastry accordingly contends that the plaintiffs' claim to the differences is merely by way of enforcing their right to be indemnified and that the defence based on section 30 of the contract act is irrelevant. The effective answer of sri a. Bhujanga rao, the learned counsel for the appellants, is that the plaintiffs have not formulated their claim in the suit as a claim for indemnity. We are inclined to agree with him having regard to the plaint and the evidence. There is no allegation in the plaint that the plaintiffs paid or became liable to pay the losses on account of the sale prices falling short of the purchase prices. On the other hand, the plaint proceeds on the footing that by reason of the plaintiffs carrying out the defendants' orders as pakka adatias, they became entitled to the differences. The montly settlement bills (exhibits b - 5 to b - 14) sent by the defendants merely calculate and credit or debit the differences and do not disclose that they were received from or paid to third parties. P. W. 2, kishen gopal, who was a constitutent of the plaintiffs in 1949 - 50 reiterated in his examination - in - chief the plaint averment that plaintiffs are pakka adatias. The defenceelicited in his cross - examination,

" i am not concerned with the contracts which plaintiffs entered as ' pucca adatias ' with others to fulfil my contracts."

p. W. 10, dharmadhikari, the ex - manager of the plaintiff's firm said even in his examination - in - chief:

" i was working as pucca adatia. The contracts were taken in my name. The plaintiffis were responsible to both the seller and the defendants. There was no contract between the defendants and the purchasers or the sellers."

(11) Obviously, it was common ground at the trial that the defendants had no concern with contracts like exhibits a - 66 to a - 23o entered into by the plaintiffs by way of putting through the defendants' orders. This explains the absence of any cross - examination of p. W. 2 on the point. We have no doubt that the suit claim was based not on an agent's right to indemnity but on the special terms imported by trade usage into contracts between a pakka adatia and his constituents. The leading case as to the customary inc idents of the business with a pakka adatia is bhagwandas v. Kanji, (1908) i. L. R. 30 bom. 205 at 215. After discussing the evidence which was adduced there regarding the dealings between pakka adatias and their constituents, sir lawrence jenkins, g. J. ; said : -

" the evidence then appears to me to establish the following propesitioms in connection with pakka adatia dealings in cricumstances such as we have in this case : (1) that the pakka adatia has no authority to pledge the credit of the up - country constituent to the bombay merchant, and that no contractual privity is established between the up - country constituent and the bombay merchant. (2) that up - country constituent has no indefeasible right to the contract (if any) made by the pakka adatia on receipt of the order, but the pakka adatia may erter into cross contracts with the bombay merchant either on his own account or on account of another constituent, and thereby for practical purposes cancel the same. (3) the pakka adatia is under no obligation to substitute a fresh contract to meet the order of his first constituent. I think the contract between the parties was one of employment for reward, and the incidents proved appear to me to converge to the conclusion that the contract of pakka adatia in the circumstances like the present is one whereby he undertakes, or - to the use word in its non - technical sense as businessmen on occasion do use it (see baker v. M. Andrew, ( 1865) 34 l. J. C. P. 191 at 194.). Guarantees that delivery should, on due date, be given or taken at the price at which the order was accepted, or differences paid : in effect he undertakes or guarantees to find goods for cash or cash for goods or to pay the difference."

(12) This statement of the legal position was accepted as correct in subsequent bombay cases. They were also reviewed by a full bench of the east punjab high court in ram dev jai dev v. Seth kaku, a. I. R. 1950 e punj. 92 (f. B.). And s. R. Das, c. J. , summarised his conclusions (at page 102) thus : (3) when a pucca adatia under instructions of the constitutent puts through a contract, in such contract the constituent and the pucca adatia are the contracting parties as principals and a new relationship as between principals arises between the constitutent and the pucca adatia with respect to the individual contracts so concluded. (4) a pucca adatia may or may not cover himself by entering into contracts with third parties but if he does he does so entirely on his own account and no privity is established between the constituent and the third parties and the constituent has no concern with such covering contracts with third parties and cannot call upon the pucca adatia to account for those contiacts. The profits or losses arising out of these contracts with third parties are entirely the concern of the pucca adatias. (6) the pucca adatia stands in a dual relationship with the constituent, namely, he is an agent for the purpose of quoting market price and putting through contracts under instructions of his constituent although he may allocate the contract to himself and he is also a principal with respect to the contract he as agent actually concludes with himself. The two distinct relationships subsist side by side. " sri a bhujanga rao has drawn out attention to a series of cases decided by the allahabad high court, harcharan das v. Jai jai ram firm, a. I. R. 1940 all. 182, firm ram krishna das v. Firm mutsaddi lal, a. I. R. 1942 all. 170, firm sagarmal v. Bishambar sahai, a. I. R. 1947 all. 14, sheo narain v. Bhallar, a. I. R. 1950 all. 352. And shanti lal v. Madan lal. , a. I. R. 1954 all. 789. We do not consider it necessary to deal with these in any detail because, in our opinion, they do not take a different view of the matter. It may be noted that the evidence of p. Ws. 2 and 10, to which we have already referred above, is entirely consistent with the position enunciated in bhagwandas v. Kanji, (1906) i. L. R. 30 bom. 205. And ram dev jai dev v. Seth kaku.

(13) The plaintiff's claim in the present suit has to be regarded as being based on their right to recover the difference between the purchase and sale prices, which was due to them as principals under the contracts with the defendants in terms of the orders which the plaintiffs put through. In the words of sir lawrence jenkins in bhagwandas v. Kanji, (1905) i. L. R. 30 bom. 205. The plaintiffs undertook to find goods for cash or cash for goods or to pay the differences under the contracts. If it was the common intention of the plaintiffs and the defendants that there should be no delivery of goods but only that the differences should be paid, the contracts would be of wagering nature and would be void under section 30 of the contract act. This question has to be answered mainly on a consideration of the correspondence between the parties and the connected documents, because there was no written contract signed by both the parties in respect of dealings.

(14) Sri n. M. Sastry has argued that the defendants were genuinely interested in the groundnut seeds and groundnut oil which they ordered, that the plaintiffs were in a position to actually purchase or sell these commodities because adoni was an important market for them and that the defence under section 30 of the contract act is a pure invention. P. W. I who has been from 1947 the manager of the adoni groundnut seeds and oil merchants' association said :

"adoni is one of the biggest markets for groundnuts and oil. The annual arrivals in the market will be about one lakh tons of coramandal type of groundnuts."

the plaintiffs ' capacity to find goods for cash or cash for goods in fulfilment of the defendants ' orders was not disputed before us. It appears further from the evidence that defendants 2 to 4 were running not only the first defendant firm under the name ' jethmal madanlal jokotia, vijayawada ' but also five other businesses - messrs. Madanlal jakhotia and co. , calcutta ; messrs. Himavanta rice and groundnut oil mill, vijayawada ; messrs. Sitaram rice and groundnut oil mill, vijayawada ; messrs. Dhanalaxmi rice and gin. Oil mill, nandigama ; and messrs.

(15) Brijilal javar, rajahmundry. Therefore, it is probable, as urged by sri n. M. Sastry, that they were operating in several markets in order to ensure supplies for their several oil mills and the export business at calcutta. Exhibit a - 275 dated 29th march, 1950, is a letter from the defendants to the plaintiffs, enquiring various particulars about the market conditions at adoni and exhibit a - 62 dated 1st april, 1950, is the plaintiffs ' reply giving the information. In their letters, exhibit a - 273 (a) dated 22nd may, 1950 and exhibit a - 36 (a) dated 9th july, 1950, the defendants mentioned how their stocks and materials were held up in different places. These illustrate that to all appearance, the defendants were genuine dealers in groundnut seeds and groundnut oil and that the plaintiffs need not have been put on enquiry, even when the defendants gave cross orders for purchases and sales of equal quantities of commodities every month during the relevant period. The very existence of the cross orders, which is not disputed, is a circumstance indicating that the common intention could not have been to dispense with delivery and settle only by the payment of differences. If the intention had been merely to pay the differences, the plaintiffs would have been entitled to close these transactions on the dates fixed for delivery on the basis of the differences between the contract prices and the market prices and there would have been no necessity for the defendants to send cross orders.

(16) Sri a. Bhujanga rao has relied on the oral evidence of defendants 3 and 4, who said that the agreement was that there should be no delivery and that the contracts have to be adjusted only by settlements. But the 4th defendant, as d. W. 1, also said towards the end of his examination - in - chief, " we have entered into the contracts hoping that they will deliver. " then he immediately corrected himself and added " there was no agent either to ask for delivery or to give. " the third defendant, as d. W. 2, admitted in his cross - examination " at no time we wrote to them that they should neither demand nor give delivery. " obviously nd reliance can be placed on the interested and self - serving statements of d. Ws. 3 and 4 in the witness box as to the terms of the agreement. Sri a. Bhujanga rao urges that the following circumstances support the inference that the parties stipulated only for the payment of differences and agreed not to give or ask for delivery: (1) in exhibit a - 15 dated 15th november, 1950, the deed of dissolution of the partnership between the and plaintiff and the 5th defendant (p. W. 3) , the suit debt was included as the 8th item in the list of ' bad debts ' appended ; (2) p. W. 3 admitted in the witness box " in none of the contracts entered into with defendants i to 4 were actual deliveries given or taken by them. All the contracts ended in settlements. " p. W. 10 also spoke to the same effect; (3) in the plaintiff's letter to the defendants (exhibit b - 43 dated 13th may, 1950) they said : "we have to request you not to disclose the extent and nature of your business at adoni to anybody at bezwada " ; (4) in another letter (exhibit a - 64 dated 18th may, 1950) the plaintiffs requested the 31 d defendant to send an amount of rs. 25,000 by a draft, as the existing amount of risk at the ruling rates inclusive of the plaintiffs' commission amounted to over rs. 45,000 by june - july ; (5) there were several orders for sale before purchases ; (6) the defendants in their orders specified limits of the prices and the plaintiffs agreed to keep within those limits ; (7) the forms of the bills used by the plaintiffs in regard to contracts of actual delivery, such as exhibits b - 277 to b - 279 were different from the settlement bills, exhibits b - 5 to b - 14 and (8) salestax was not charged in respect of any of the transactions.

(17) With regard to the first circumstance, as pointed out by sri n. M. Sastry, the debts due by the other five businesses run by the defendants were also included in the list of 'bad debts ' and were items 9 to 13. The 4th defendant admitted in the witness box that no forward business was done through these five businesses. Apparently items 9 to 13 were lawful debts although they were classed as bad debts. Therefore, the inclusion of the suit debt as item 8 in the list of bad debts would not indicate a consciousness on the part of the plaintiffs that it was an unlawful debt. P. W. 3's explanation that the suit ldebt was included in the list simply because the defendants did not pay quickly seems quite natural and probable. As to the second circumstance, p. W. 3 has explained in re - examination that no question of taking deliveries arose because the quantities purchased and sold every month were equal. As we have already noticed, the very fact that the defendants placed cross orders for purchases and sales of equal quantities in respect of each month's delivery shows that there could not have been an initial agreement to settle by differences. The next point that the plaintiffs wanted the extent and nature of the transactions to be kept a secret does not, in our opinion, lead to any adverse inference.

(18) As with many others entering into perfectly lawful transactions, it must have been the business policy of the plaintiffs to keep their quotations and dealings with each customer confidential. Similarly, with regard to the mention of the risk in exhibit a - 64. These are equivocal circumstances. As pointed out by sri n. M. Sastry, there was a ready market at adoni and the goods themselves were security for the amounts of the prices until actual delivery. The plaintiffs did not want to lock up their funds and therefore asked the defendants to send rs. 25,000 to cover the differences. The fifth point that the defendants placed orders for sales before they had acquired stocks by purchases is sufficiently explained by the fact that the defen dants had dealings in other markets besides adoni, and would have desired to acquire stocks in the cheapest market. In any event, assuming that they were speculators, that fact by itself did not involve the plaintiffs in wagering. The instruction to keep within certain specified limits is natural, when a principal places forward orders with his agent. Similarly, the use of different forms for the bills and the nonpayment of sales tax were natural having regard to the shape that the transactions ultimately took. It has to be mentioned that the transactions between the parties were closed on 26th june, 1950, as seen from the letter, exhibit a - 283 (a) , written by the 4th defendant and signed by the 3rd defendant. There is no indication in exhibit a - 283 (a) that the defendants challenged the legality of the transactions. In out opinion, none of the circumstances pressed into service by sri a. Bhujanga rao advances the appellants ' story that there was an agreement by which delivery of goods was dispensed with and differences only were paid. We therefore see no reason to differ from the lower court's conclusion that the contracts were not hit by section 30 of the contract act.

(19) The next question which falls for consideration is whether the contracts wer illegal by reason of the forward contracts prohibition orders or whether they were saved by the exemptions to them. Authorised texts of the orders were not made available to us. But copies were furnished by the learned counsel for the appellants. The oil seeds (forward contracts prohibition) order, 1943, was promulgated on 29th may, 1943. Clause 1 (ii) defined a ' forward contract' as a contract for delivery of oil - seeds at some future date and groundnut was one of the oil - seeds specified in the schedule to that order. Under the provisions of clause 3, no person shall, after 31st may, 1943, which was the specified date, enter into any forward contract in groundnut. Clause 5 authorised the central government by notification to exclude any contract or class of contracts from the provisions of the order. There was a notification dated 31st may, 1943, under this clause which ran :

"forward contracts for groundnut, linseed, mustard seed, rape seed or toria seed of specified qualities or types and for specified delivery at a specified price not transferable to third - parties are excluded from the provisions of this order."

(20) We have to mention that this is the concerned notification furnished to us by the learned counsel. The reported decisions infra mention a later notification no. 1161, dated 16th february, 1944, but the difference is not material to the argument. The vegetable oils and oil - cakes (forward contracts prohibition) order, 1944 was promulgated on 8th january, 1944. The expression 'forward contract' was defined in clause 2 (iii) as a contract for delivery at some future date of any article to which the order applied. Clauses 3 and 5 were in pari materia with clauses 3 and 5 of the aforementioned order of 1943. The notification of the government of india dated 8th january, 1944, provides as follows : -

" in exercise of the powers conferred by clause 5 of the vegetable oils and oil - cakes (forward contracts prohibition) order, 1944, the central government is pleased to exclude the following class of contracts from the provisions of the said order, namely : forward contracts for specific qualities or types of any article to which the said order applies and for specific delivery at a specified price, delivery orders, railway receipts or bills of lading against which contracts are not transferable to third parties."

(21) The scope of the exemption under the vegetable oils and oil - cakes (forward contracts prohibition) order, 1944, came up for consideration in firm hansraj v. Vasanji, (1948) 4 d. L. R. Bom. 7. Negativing the contention that the order did not apply to cases where no delivery orders or railway receipts or bills of lading were contemplated, desai, j. , said :

"the only classes of cases of forward contracts which were exempted were those which contained in them the guarantee against speculation by reason of a provision that the delivery orders, railway receipts or bills of lading (which were contemplated by the contracts and would be issued) should not be transferable to third parties. In other words, the persons in whose favour the delivery orders, railway receipts or bills of lading were issued were to be the very persons who should get those goods and that would check speculation. The property in such cases would not pass by the negotiation of the documents nor delivery be made possible to any person who becomes the holder of the documents. In my opinion, if delivery orders were contemplated under these contracts, they were llegal as the delivery orders were not made non - transferable. If delivery orders, railway receipts r bills of lading were not contemplated under the contracts, the exemption (which deals with cases where delivery orders, railway receipts or bills of lading are issued) , has no application."

This view was followed by two division benches of the madras high court in satyanarayanamurthy v. Sitaramayya and co. , (1950) 1 m. L. J. 557. And seetharamaswami v. Bhagavathi oil co. , (1951) 1 m. L. J. 147. It was held that there must be an express prohibition on the contract itself preventing the parties from transferring the delivery orders, railway receipts, and the bills of lading. The same construction was adopted by a division bench of this court in the east coast food products, ltd. , madras v. Messrs. D. S. Narayana and co. , vijayawada, appeal no. 867 of 1953 decided on 17th april, 1958. The scope of the exemption under the oil seeds (forward contracts prohibition) order, 1943, was construed by chandra reddy, j. (as he then was) in venkataswami v. Hanura noor md. Begum, 1955 an. W. R. 91. And by viswanatha sastri, j. , in krishna rao, etc. , co. V. G. A. Khan, etc. , co. , (1956) an. W. R. 941. And it was held that the document itself must in terms provide that the contract should be nono - transferable.

(22) There can be no doubt that in the present case the orders placed by the defendants with the plaintiffs were forward contracts, prohibited by the two orders aforesaid, unless they were saved by the exemption notification. They satisfy the condition of being for specific qualities or types of the commodities and for specific delivery at specified prices. The point taken by sri a. Bhujanga rao is that the terms of the contracts did not expressly provide for their non - transferability and for the non - transferability of delivery orders, railway receipts or bills of lading. There is an express term of such non - transferability in exhibits a - 66 to a - 230, the contracts which the plaintiffs entered into with third parties, and it reads thus :

"this contract and/or any document of title to the goods or any of them therein referred to shall not be assignable or transferable by seller or buyer to any third party."

but the contention of sri a. Bhujanga rao is that under the customary incidents of the dealings between a pakka adatia and his constituents, the pakka adatia becomes the principal qua his constituents in respect of the orders which he puts through ; and therefore either the orders of the defendants or the letters of their acceptance by the plaintiffs should have in express terms mentioned the non - transferability.

(23) We see no force in this contention. The orders and their acceptances do not themselves express the contracts to which the plaintiffs or the defendants were the principals. When the defendants' order was to buy, the plaintiffs' reply was that they ' bought' on defendants ' behalf. Similarly, when the defendants' order was to sell, the plaintiffs' reply was that they ' sold' on defendants' behalf. An express term as to non - transferability as between the defendants and plaintiffs would have been wholly inappropriate in this form of the correspondence. So far as the relationship between the parties became that of principals, by reason of the customary incidents of the business of a pakka adatia, it would be against all principles to annex an implied term which would be illegal and destructive of itself. The customary incident must be taken to survive only in so far as it is lawful, in other words, only in so far as it is not prohibited by the two orders. In paragraph 6 of their written statement, the defendants themselves took up the position that on the plaintiffs ' representation they believed the transactions to be perfectly legitimate and valid. The correct view of the unexpressed term, which is annexed by trade usage into contracts between pakka adatias and their constituents at the period of the orders must naturally be that when they become principals by virtue of the term, it was subject to the contracts and the concerned delivery orders, railway receipts and bills of lading being non - transferable to third parties. The appellants' contention based on the forward contracts prohibition orders also therefore fails. Sri a. Bhujanga rao has finally taken a point with regard to the award of interest from 1st july, 1950, to the date of plaint. The relevant allegation in paragraph 10 of the plaint was that "the defendants are liable to pay interest at 6 per cent per annum as per agreement between the parties, custom of trade and in law. " this allegation was traversed as being false in paragraph 4 (c) of the written statement. The learned subordinate judge dealt with the matter in paragraph 15 of his judgment under the general issue "to what relief?" he observed that the plaintiffs claimed interest at 6 per cent according to trade usage and that there was no documentary evidence bnt only oral evidence regarding it and regarding the defendants having agreed to pay that rate of interest. He did not discuss the evidence but held that as interest was claimed only from 1st july, 1950 which was due date and as the rate was not unreasonable, the defendants are liable to pay the same.

(24) In view of the pleadings, we have only to consider whether the existence of an agreement or of a trade usage to pay interest at 6 per cent is proved. So far as the general provisions of law are concerned, the learned counsel have not drawn our attention to any written demand under the interest act (xxxii of 1839) giving notice that interest would be claimed. In such circumstances, unless there is an agreement or usage giving a right to the interest, interest cannot be decreed and the plaintiffs cannot call in aid section 73 of the contract act, kamalammal v. Peeru meera lebbai rowthen, (1897) ilr 20 mad. 481 : 7 mlj 263. This is not a case of money obtained by fraud as in trojan and co. V. Nagappa, (1953) s. C. J. 345: (1953) 1 m. L. J. 629 : a. I. R. 1953 s. C. 235. Sri a bhujanga rao also points out that no oral evidence of trade usage giving right to interest has been adduced. Thus the short question is whether an agreement to pay interest at 6 per cent has been proved.

(25) P. W. 3, the ex - partner of the plaintiffs' firm, said in his examination - in - chief that interest was agreed at 6 per cent. He was not cross - examined at all on the point. P. W. 10, who was the manager of the plaintiffs' firm till april, 1955,similarly said that when he went to vijayawada in june, 1950 to close the transactions with the defendants as per exhibit a - 283, the defendants agreed to pay interest at 6 per cent. It was elicited in his cross - examination that this was not mentioned in exhibit a - 283 and that he did not remember whether he mentioned it to the plaintiffs' lawyer. As against this, the 4th defendant, as d. W. 1, asserted that there was no agreement to pay any interest. But his cross - examination disclosed that he had little regard for truth, as for instance by his denial of a remittance of rs. 20,000 in part payment towards the suit transactions. We are inclined to believe p. W. 3's evidence on the point as his version that interest at 6 per cent was agreed by the defendants at the outset of the transactions was not attacked in cross - examination.

(26) We therefore see no grounds to interfere with the award of interest. The appeal fails and is dismissed with costs. Appeal dismissed.