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M/S. James Machintosh And Co. And Another v. Sree Yamuna Mills Co. Ltd. And Another
Factual and Procedural Background
The appeal arises from a suit involving multiple defendants related to the short delivery of six bales of Viscose staple fibre shipped from Alexandria, Egypt, to Cochin. The first defendant owned the cargo ship ‘Man An’, the second defendant operated it as agent or charterer, the third defendant acted as the second defendant’s agent at Bombay, and the fourth defendant was the sub-agent at Cochin. The fifth defendant, later transposed as the second plaintiff, was the insurer of the goods. The plaintiff claimed damages for the short delivery of the goods at Cochin port.
The defendants 1 and 2 remained ex parte. The appellants (defendants 3 and 4), who were agents, denied personal liability and challenged the transposition of the fifth defendant as second plaintiff. The trial court granted a decree against defendants 1 to 4. During the suit’s pendency, the fifth defendant satisfied the original plaintiff’s claim and was transposed as second plaintiff. The appellants contended that this transposition was barred by limitation, but the trial court rejected this contention.
Legal Issues Presented
- Whether the trial court was correct in granting a personal decree against the appellants who were admittedly only agents.
- Whether the transposition of the fifth defendant as second plaintiff after the period of limitation was valid.
- Whether the plaintiff’s refusal to take delivery of the balance goods and alleged failure to mitigate damages affects the claim.
Arguments of the Parties
Appellants' Arguments
- The appellants denied personal liability as agents, asserting they acted only within the scope of their agency.
- They challenged the validity of the transposition of the fifth defendant as second plaintiff, arguing it was barred by limitation under Section 21 of the Limitation Act.
- They contended that no relief could be granted because the plaintiff refused to take delivery of the remaining goods and did not attempt to mitigate damages.
Plaintiff's Arguments
- The plaintiff maintained that the appellants acted beyond their agency powers by appropriating and selling the loose fibre without accounting for the proceeds.
- The plaintiff argued the transposition of the fifth defendant as second plaintiff was valid as it occurred during the pendency of the suit and did not affect limitation.
- It was asserted that the refusal to accept delivery of the loose fibre was justified due to its deficient quality and lack of proper marking.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Section 21 of the Limitation Act | Rules governing addition or substitution of parties after institution of suit and its effect on limitation period. | The court held that substitution or transposition of a party already on record during the pendency of the suit does not attract limitation provisions of Section 21(1). The fifth defendant’s transposition as second plaintiff was valid and not barred by limitation. |
| Section 239 of the Contract Act | Personal liability of an agent in contracts made on behalf of a principal. | The court applied the principle that an agent is not personally liable unless there is a contract to that effect or credit is given to the agent exclusively. Since the appellants acted beyond their agency by appropriating goods without accounting, tortious personal liability arose. |
Court's Reasoning and Analysis
The court examined the nature of the appellants’ agency and the contract of carriage represented by the bill of lading issued by the first defendant. It found no contract, actual or presumptive, making the appellants personally liable as they were customs house agents performing limited functions.
However, the appellants admitted to acting beyond their agency by selling the loose fibre and failing to account for the proceeds, which gave rise to tortious liability independent of contractual obligations.
Regarding the transposition of the fifth defendant as second plaintiff, the court analyzed Section 21 of the Limitation Act. It concluded that substitution of a party already on record during the pendency of a suit does not affect the limitation period. The fifth defendant, as insurer, satisfied the claim and stepped into the original plaintiff’s shoes, thus the suit’s original institution date governed limitation.
On the issue of mitigation, the court found no evidence that the plaintiff’s refusal to accept delivery of the loose fibre was unjustified. Accordingly, the claim was not barred on grounds of failure to mitigate damages.
Holding and Implications
The appeal is dismissed without costs.
The court upheld the trial court’s decree holding the appellants personally liable due to their tortious conduct beyond the scope of their agency. The transposition of the insurer as second plaintiff was validated as not barred by limitation. The plaintiff’s claim was not defeated by refusal to accept delivery or alleged failure to mitigate damages. This decision affirms that agents may incur personal tortious liability when acting beyond their authority and clarifies substitution of parties during suit pendency does not restart limitation.
1. The main question for consideration in this appeal filed by defendants 3 and 4 is whether the trial court was correct in granting a personal decree against the appellants who are admittedly only agents. Other questions also arise.
2. First defendant is the owner of a cargo ship ‘Man An’ and the second defendant was operating it either as his agent or as charterer. Third defendant was the agent of the second defendant at Bombay and 4th defendant was the sub-agent of the third defendant at Cochin.
3. Fifth defendant who was subsequently transposed as the second plaintiff was the insurer of Viscose staple fibre entrusted to the ship from the port of Alexandria in Egypt to be delivered to the plaintiff at Cochin. Damages claimed is for short delivery, of six bales at Cochin port.
4. Defendants 1 and 2 remained exparte. Appellants mainly denied their personal liability as agents. They also challenged the transposition of fifth defendant as second plaintiff and contended that no relief could be granted for the further reason that plaintiff who refused to take delivery of the balance goods and thereby did not attempt to mitigate damages cannot make a claim. The trial court granted a decree against defendants 1 to 4 as prayed for.
5. During the pendency of the suit fifth defendant who is the insurer satisfied the claim of the original plaintiff and got himself transposed as second plaintiff. Decree was given in favour of the second plaintiff. It is said that transposition was after expiry of the period of limitation for filing a suit and hence it is hit by S. 21 of the Limitation Act, 1 do not think that there is any merit in the contention.
6. It is true that the normal rule under S. 21 of the Limitation Act is that when a plaintiff or defendant is added or substituted after institution, the suit, so far as he is concerned, will be deemed to be instituted only when he was made a party. That will be subject to the law of limitation also. But if the court is satisfied that the substitution or addition became necessary on account of omission due to a mistake made in good faith in the matter of impleading, it is having the discretion to provide that the suit so far as he is also concerned was instituted at an earlier date. But when the addition or substitution was owing to assignment or devolution of any interest during the pendency of the suit or when what is involved is only transposition of a party already on record, even the exercise of that discretion on satisfaction of good faith is not necessary. Change of position will not affect limitation so far as a party who was already on record. That is the case with legal representatives and assignees also. So far as they are concerned, it is a continuing suit which will be deemed to have been instituted on the date of its original institution itself. Sub-section (1) of S. 21 has no application in such cases. In this case the fifth defendant who was already on the array of parties satisfied the claims of the original plaintiff during the pendency of the suit and by subrogation stepped into his shoes and got himself transposed. There is no question of limitation in doing so as long as the suit is pending. So also there is no question of considering the suit as having been instituted on the date of his transposition so far as he is concerned. It is the original institution that counts for everything including limitation.
7. Personal liability of the agent is concluded by S. 239 of the Contract Act. In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal and conversely he is not personally liable also except to the extent of the liability as agent. But a contract in favour of or against the agent entitling him to enforce the contract or making him liable will be presumed (1) where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad, (2) where the agent does not disclose the, name of the principal, or (3) where the principal, though disclosed, cannot be sued. The test in such cases is on whom the opposite party gave credit for entering into the contract or presumed to have given credit. A party cannot be supposed to rely exclusively on a foreign principal whom the agent's contract is not understood to bind, or on a person whom he does not know and whose standing and credit he had no occasion to verify or on a person who is in the face of the transaction not legally liable. Ordinarily an agent contracting in the name of his principal and not in his own name is not entitled to sue, nor can he be sued, on such contracts. When in making a contaret no credit is given to the agent, but credit is given exclusively to the principal, the agent is not personally liable.
8. In this case there was absolutely no contract with the appellants. Ext. B1 bill of lading which is the contract was issued by the first defendant. It was entered into by the first defendant and the supplier. Second defendant was the carrier. Appellants are only agents engaged for the limited purpose of carrying out customs, port and other formalities as claimed by them in para 8 of the written statement. The principles are disclosed and they are capable of being sued and actually sued. There is no contract actual or presumptive making the appellants liable. They are only customs house agents. Hence normally their plea ought to have been accepted. But in this case admittedly appellants did more than what the agency, claimed by them, permit. The short delivery was six bales. It is the case of the appellants that there was no shortage, but on account of defective packing fibres in six bales became loose and they were also available. They claim to have bundled those fibres into three bales and offered for delivery but the plaintiff refused to take delivery. Plaintiff demanded survey. Appellants were not able to do anything. Fourth defendant contacted the third defendant and the third defendant contacted defendants 1 and 2 for instructions in vain. According to the plaintiff, the loose fibre offered was of deficient quality without any mark. That contention was not repudiated.
9. Anyhow it is admitted that the appellants sold the fibre in auction and received the amount. They have not accounted for the same. They have not even disclosed the amount. They say that the sale was after, written statement and they satisfied the claims of the port including demurrage with the amount. Anyhow, so far as the plaintiff is concerned, the amount received by the appellants by sale of fibre was not accounted. Appellants say that after evidence was closed they filed a petition and produced the papers but they were not considered. So far as the plaintiff is concerned, the appellants acted beyond the powers admitted by them as agents and appropriated the goods without accounting for the same. Therefore, irrespective of the question that they are only agents, a question of tortuous liability is also there on them and hence they are having personal liability.
10. The question of the plaintiff not attempting to mitigate damages and thereby being disabled in making the claim does not arise. There is no evidence to show that his refusal to take delivery of the loose fibre is not justified or the reasons stated by him are not correct. Anyhow, that fibre was sold and the amount was not properly, accounted. Therefore the decree cannot be interfered with.
11. The appeal is dismissed without costs.
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