1. This suit was brought by the plaintiffs, a firm of Marwari merchants, who act, inter alia, as pakka adatias, to recover from the defendant Rs. 90,763-14-6 and interest as the amount due by the defendants to the plaintiffs as his pakka adatias in respect of certain contracts in cotton and linseed.

2. The defence was that the transactions were wagering transactions and therefore the sum claimed could not be recovered; the defendant also counter-claimed re-payment of two sums of Rs. 50,600 and Rs. 10,400 deposited by him, as he alleged, as fixed deposit but as the plaintiffs alleged as margin-money or security in respect of the contrasts above mentioned.

3. The only contract in cotton was dated 30th June 1910. It was for the purchase by the defendant from the plaintiffs of 2,000 bales of Broach Cotton for March 1911. The market went in the defendant's favour and the contract was closed for Rs. 5,804-2-3 without any delivery taking place. The defendant has received credit in the account sued on for this sum. The linseed contracts are as follows:

One dated 1st July 1910, for the sale by the defendant to plaintiffs of one thousand tons of linseed at Rs. 11-5-0 per cwt. Another of 6th July 1910 for the sale by the defendant to the plaintiffs of 800 tons at rates varying from Rs. 11-10-0 to 11-10-9 per cwt. The plaintiffs further allege that the defendant orally agreed to sell them a further 2,200 tons of linseed on 10th July 1910.

4. Applying the recognized rule in all cases where the defence of wagering contract is set up, the business of the contracting parties and the surrounding circumstances of the case must be examined. The plaintiffs are Marwari Shroffs and merchants in a large way of business who deal largely in cotton as merchants and commission agents but only to a small extent in linseed. They receive from constituents for sale in Bombay on an average not more than 150 tons of linseed in the year. The defendant is a Parsi 29 or 30 years of age who has never had any regular business. In September 1909, he won a St. Ledger Sweep of about a lakh and a quarter and thereafter entered into cotton speculation on American futures and fine Broach through the agency of Messrs Bruel & Co. after depositing margin-money with them. The transactions proved unprofitable but after paying his losses be received back from Bruel & Co. the balance of his margin-money in two sums, Ss. 45,000 and Rs. 10,161. This was at the end of June 1910. At that time, it is proved that defendant and Hargopal, the plaintiffs' then Munim, used constantly to meet is the evening at Chowpatty and the defendant says Hargopal suggested he should deal in linseed in differences and settle in that way. Business eventually commenced between the parties on 80th June with the cotton contract above-mentioned. On 1st July, the defendant signed a letter stating he had given Rs. 50,600 on the prvious day and Rs. 10,400 that day to be retained at interest as security against business in cotton and linseed. On 30th August 1908, the parties went together to Mrs. Tyabji Dayabhai and Co., the plaintiffs' solicitors, where the managing clerk drafted a letter for the signature of the defendant. It ran as follows:

“With reference to the 4,000 tons of linseed sold by you as my pakka adatias for September 1910 delivery, I have to request you to purchase on my account from the bazar 250 tons of ready linseed for the present and deliver the same against the contracts made by you on my behalf. The value of the 250 tons so to be purchased on my account should be debited to my account and I will pay interest on the same at 7 annas per cent per month; all other usual charges will be allowed.”

5. The defendant, however, declined be sign it. It seems strange that a simple request to the agent to carry out a small part of a pending contract should necessitate the intervention of solicitors. There can, we think, be no doubt that the letter was intended to create evidence from which might be inferred the genuineness of the contract which would fail to be performed or settled in the following month. On the following day the solicitors were again requisitioned and produced another draft in the following terms.

“We are instructed by our clients Messrs Bhagwandas Parashram to state that they, as your pakka adatias under your instructions and orders received from you on or about the respective dates mentioned below, sold 4,000 tons of linseed as under at the rates mentioned below, 1,000 tons on Ashad Bud 9 (1st July 1910) at Rs. 11-5-0 per cwt; “800 tons on Ashad Bud 15 (6th July 1910) viz., 500 tons at Rs. 11-10-9, “100 tons at Rs. 11-10-9; “100 tons at Rs. 11-10-6 and 100 tons at Rs. 11-10-7½ and deliverable in September 1910; that the time to deliver the said 4,000 tons of linseed begins from tomorrow and according to the practice of the Bombay market the option to deliver the goods lies with sellers i.e, to deliver the goods by us issuing delivering orders from the commencement of the due date. We are therefore instructed by our said clients to call upon and require you to supply to; our clients the quantity of linseed agreed to be sold by you to enable our clients to carry out your aforesaid sales or to give our clients the necessary instructions to purchase as much quantity of ready linseed from the Bombay market and then to deliver the same against the sales effected by them on your behalf. We are also instructed to state that our clients undertake not to buy ready linseed or settle business without your mutual consultation or without your written consent in that behalf.

“Our clients also inform us that they have on 1st July last received from you Rs. 61,000 as a loan or as a deposit against the transactions and it has been agreed that interest at 7 annas per cent per mensem is to run on the account between you and them.”

6. A reply was also drafted for the defendant by the solicitors which the defendant did sign. It ran thus:

Bombay, 31st August, 1910.

Messrs Tyabji Dayabhai & Co.

Attorneys for

Messrs Bhagwandas Parashram.

Dear Sirs,

I bag to acknowledge receipt of your letter of date and in reply I confirm what is written therein subject to correction in the event of there being any mistake.

Yours faithfully.

I shall give your clients instructions in the matter for purchase of ready goods.

7. The plaintiffs thus got an acknowledgement of a sale, as pakka adatias, of 4,000 tons of linseed on account of the defendant. It is to be noted however that when the plaintiffs deal with Bombay constituents, they usually employ a broker: sea for example the evidence of the partner in Narrondas Rajaram and Co. and the agency by which the 39 contracts for sale of linseed in this case were effected. It does not seem clear that the incidents of the pakka adat relationship should be assumed to apply to the contracts of plaintiffs and defendant of which the evidence affords no trace of an agreement between the parties. The case however has been tried on the footing that the plaintiffs were pakka adatias of the defendant and we will deal with it on that footing. A correspondence was then commenced:

Bombay, 9th September 1910.

Burjorji Buttonji Bomonji Dubash, Esq.

Our clients Messrs Bhagwandas Parashram have placed in our hands copy of a letter dated 31st ultimo addressed by their former solicitors to you regarding 4,000 tons of linseed which you had instructed to sell as per particulars given in the said letter and requiring you to place our clients in a position to give delivery of the said linseed of the quantity agreed to be sold by you and your reply thereto of the same date intimating that you would give instructions to our clients for the purpose of ready goods or buying by forward contract. As our clients have not received any instructions nor any margin-money from you, we are now instructed to call upon you to furnish margin-money amounting to Rs. 80,000 which with the sum of Rs. 61,000 already deposited by you as margin-money makes the sum of Rs. 1,41,000 which is the approximate difference between the market rate of today and the price at which you have contracted to sell the goods and to give you notice that unless within four days from the receipt hereof by you our clients receive the said margin-money or sufficient quantity of goods or you make arrangements satisfactory to our clients to meet the contracts on due date, our clients reserve their right to make arrangements for closing the transaction by purchase of ready goods or by forward contracts as they may think proper holding you liable for all costs, charges and expenses incidental thereto.

Yours truly.

(Sd.) Bicknell Merwanji and Romer.

Bombay, 12th September, 1910.

Messers Bicknell Merwanji and Romer, Solicitors, Bombay.

Dear Sirs,

Re Bhagwandas Parashram and myself.

Your letter of 9th September came to my hands on Saturday evening at 7 at Chowpatty. I am afraid your clients have not laid all true facts before you, otherwise you would not have written the letter under reply. Hence I do not think it advisable to reply.

Yours faithfully,

(Sd.) Borjor B. Bomanji.

Bombay 14th September, 1910.

Burjor R. Bomanji, Esq.

Bhagwandas Parashram v. Yourself.

We have communicated the contents of your letter of the 12th instant to our clients.

Our clients state they have placed all true facts before us and have also placed the correspondence that has passed between you and them as well as their former attorneys' letter to you of the 1st ultimo and your reply thereto of the same idem. If you, however, maintain that our clients have not placed all true facts before us, will you please state what the true facts are as alleged by you?

Our clients state that our letter of the 9th instant had been addressed to you in respect of the linseed transactions only but we find from the letters addressed by you to them that you have entered into transactions of purchase of cotton for March next delivery and that at the time these transactions were entered into, you had agreed to deposit with them margin-money and had agreed to deposit further margin-money if the amounts deposited by you from time to time proved insufficient to cover the differences. That as to cotton transactions you authorized them to enter into transactions for sale of cotton for March delivery against the cotton purchased and that by reason of the counter-contracts cotton transactions resulted in profits payable to you in March next but at your request our clients have after deducting discount, brokerage and commission thereout credited to your account the balance of Rs. 5,801-2-3 and sent you an acknowledgment through broker Makanji and retained the amount with themselves with your consent as further margin on account of linseed transactions.

That when the market for linseed went up beyond the limits of the deposit, our clients asked for further deposit and you from time to time promised to pay the same but you did not do so except as to the aforesaid sum of Rs. 5,804-2-3 which you caused to be credited as aforesaid and out clients state that since you received our letter of the 9th instant you had an interview with our cliants when you informed them that you would not deposit any margin nor give any definite reply till due date of delivery and since our letter under reply our clients state that the market has gone up still further with the result that to cover them a further margin of one lakh has to be deposited by you with them under the arrangement and that they cannot wait further.

We are therefore instructed to give you this notice that unless within 24 hours from the receipt hereof by you, you deposit a further sum of rupees one lakh, or comply with the requisitions contained in our said letter of the 9th instant, our clients reserve their right to proceed in manner intimated by our said letter.

Yours truly,

(Sd.) Bicknell Merwanji and Romer.

Bombay, 28th September 1910, Messrs Bicknell Merwanji and Romer, Solicitors, Bombay.

Re Bhagwandas Parashram.

Dear Sirs,

In reply to your letter of the 14th instant, I beg to state that I am sorry that I could not reply to your letter earlier than now.

Will you let me know to what letter you refer in para. 2 of your letter?

After knowing that I shall be in a position to give a detailed reply to your letter.

Yours truly,

(Sd.) Burjorji R. Bomanji.

Bombay, 29th September 1910.

Burjorji R. Dubash, Esq.

Referring to previous correspondence addressed by us to you on behalf of our clients Messrs Bhagwandas Parashram, we are instructed by our clients to remind you that the last day for giving delivery of linseed under the contract entered into by our clients as your pakki adat agents on your behalf is the 30th instant, but that you have not yet made an arrangement for giving delivery of the said goods. Our clients hive purchased 303 tons for ready delivery on your account and risk and provision has to be made for 3,700 tons more.

We are therefore instructed by our clients to call upon you to provide for 3,700 tons of linseed to be given delivery of by the 30th instant within due time and to give notice that is defaul; of your compliance with the aforesaid requisition, our clients will, as your pikki adat agents, take such steps towards the fulfilment of the contract as they may think proper according to the mark it rate of that day.

Yours truly,

(Sd.) Bicknell Merwanji and Romer.

Bombay 1st October 1910.

Burjor R. Bomonji, Esq.

Dear Sir,

In continuation of our previous correspondence, we are instructed by our clients Messrs Bhagwandas Parashram to inform you that the contracts for 4,000 tons deliverable on your behalf yesterday were dealt with by our clients as follows:

By purchase of 300 tons at Rs. 13-15-0 as intimated in our letter of the 29th ultimo and 350 tons at Rs. 13-8-0, 2575 tons at Rs. 13-9-3, 700 tons at Rs. 13-9-0 and 75 tons at Rs. 13-8-10½ per cwt.

The account of the amount payable by you will be made up and forwarded to you in due course.

Yours truly,

(Sd.) Bicknell Merwanji and Romer.

8. On 30th September, an interview took place at defendant's house between Hargopal and a member of the plaintiff's firm and defendant and a friend in the presence of a concealed short-hand writer. From the report of the conversation on that occasion which has been proved, it appears that the plaintiffs admitted that the purchase of 300 tons ready, (which defendant denied he had authorized), was done for the purpose of the Court's proceedings. Turning now to the surrounding circumstances proved on behalf of the plaintiffs, we find that on the occasion of each contract for sale of linseed by the defendant, they employed brokers to make small contracts (39 in all) with various Marwari firms for the sale of linseed aggregating that sold by the defendant. In each case the contract was in the same form, of which one of the conditions was not to be delivered to Messrs N.R & Co.’ N.R & Co. means Narrondas Rajaram & Co. It is explained by one of the partners in this firm that they always ??? on delivery of produce contracted ??? being large exporters, and, that is, ??? the Marwaris boycott them in ??? of the class under consideration. The plaintiffs produce entries in their ??? to show that they have paid to the various Marwaris, with whom the contracts for the sale of linseed by which they covered themselves were made, the differences due on 3,700 tons, but the 300 tons was the only linseed actually delivered. Of these two main facts appearing in the plaintiff's evidence, the clause in the contracts relating to Narrondas Rajaram & Co. is in favour of the defendant's contention. The learned Judge says that the contracts both selling and buying are made in the first instance as between the pakka adatia and his client and that therefore the plaintiffs in form were the purchasers from the defendant of the whole 4,000 tons and in form it was the plaintiffs who sold to the 39 buyers under the covering contracts that amount of linseed.

9. According to the decision in Bhagwandas v. Kanji (1), which has been taken, in both Courts, as correctly stating the customary incidents of the business of a pakka adatia, the contracts of the plaintiffs with both seller and buyers must be regarded as being not only in form but also in substance independent contracts, for the pakka adatia may at any time decide to set off one set of contracts, not against those which may have been their occasion and cause, but against some other contracts altogether. The selling client can never claim as of right the benefit of any covering contracts entered into on the same day as his sales but is always bound to be content with the personal guarantee of the adatia. If then he can never claim advantage from any simultaneous contracts involving to another constituent of the adatia the reverse of his own operations, how can it in fairness be said that if he seeks to establish an intention to gamble, the existence of corresponding buyers on the other side of the adatia must always leave uncertain the issue as to the real common intention of the parties to his contract? There are in fact no parties to the selling contract but the client and his adatia who is the buyer. The adatia is not the disinterested broker. He is a party to the contract whose intention may well be known at the time of its inception. The learned Judge says that had this been a transaction between the defendant and the plaintiff's firm themselves, he should, in view of the evidence of the purchase of 300 tons of ready linseed bought for the Court's proceedings, and the virtual certainty that the plaintiffs knew exactly what the defendant had in view, have been disposed to hold that neither plaintiffs nor defendant at any time had the intention of either giving or taking delivery; but considering they immediately passed all the contracts on to numerous other purchasers, there was no room left for such a conclusion. But if, as we think it must be assumed, there was no privity between the defendant and the 39 buyers, their existence is only relevant if it affords as indication of the intension of the plaintiffs at the time of the defendant's contracts. But the condition in 39 contracts, barring delivery to Narrondas Rajaram & Co., is, we think, indication of intention that delivery should not be called for. If this is the correct inference, the payments to the 39 buyers, assuming them to have been seriously made, must be attributed to that form of sporting honour which leads Marwaris to pay up their gambling differences so long as they have money to do so. We are of opinion that the sub-contracts considering their conditions are not sufficient indication of ??? intention on the part of the plaintiffs to call for delivery from the defendant while all the other circumstances which have been alluded to point to the ??? that the common understanding was as deposed to by the defendant that he and the plaintiff should deal in differences and settle in that way.

10. We reverse the decree of the lower Court ani dismiss the suit and the counter-claim with costs.

G.P/R.K

11. Decree reversed.