Tutika Basavaraju v. Parry & Co.

JUDGMENT

The appellant sues the respondents for recovery of Rs. 1,000 deposited with them on a sugar contract, with interest on the same and for damages to the extent of Rs. 2,375 alleged to have been sustained by him by reason of the respondents' breach of contract. The respondents' plead that, they are only the managing agents for the East India Distilleries and Sugar Factories, Limited, that they are not liable to be sued on the contract, and that the suit should have been brought against the latter company. They also plead that the appellant (plaintiff) refused to take delivery of the goods, and that in consequence they have sustained damages to the extent of Rs. 1,600, and that they are entitled to retain the deposit amount of Rs. 1,000 and to a judgment against the appellant (plaintiff) for the balance of Rs. 600.

The District Judge gave judgment in favour of the plaintiff for Rs. 500 and disallowed his claim in other respects. The plaintiff prefers this appeal for recovery of the balance of Rs. 3,215 disallowed by the District Judge, and the defendants take objection, under section 561, Civil Procedure Code, to the decree appealed against on the grounds that they are not liable to be sued on the contract, and that, if they were liable, they were entitled to judgment against the plaintiff on their counter-claim.

In our opinion the objection taken by the defendants (Messrs Parry & Co.) that they are not liable to be sued on the contract and that the suit ought to have been brought against their principal, the East India Distilleries Company (Limited), is well founded in law, and that being so, it follows that is not competent to the defendants to prefer a counter-claim.

It is clear that the contract, for the alleged breach of which the action has been brought, is the contract which has been formally reduced to writing in exhibit XXXVII, dated the 6th September 1899—which purports to be a memorandum of sale made by the East India Distilleries and Sugar Factories, Limited, to the plaintiff and which is signed by the defendants as managing agents. This memorandum contains all the terms of the contract—the principal terms, viz., the quality and the quantity of sugar to be supplied, the price and the time for shipment having been settled on the 5th September, by telegraphic communication between the plaintiff and the defendants under the name and style of Messrs Parry & Co. (exhibits XXXII, XXXIII and XXXIV). The defendants in their letter (exhibit XXXV), dated the 5th September 1899, enclosing copies of the telegrams exchanged and confirming their telegram, describe themselves both at the top of the letter and below their signature as mansging agents, the name of the East India Distilleries and Sugar Factories, Limited, also appearing at the top of the letter above the date. This letter was followed by another letter (exhibit XXXVI), dated the 6th September (with similar heading and signature), enclosing the memorandum of sale (exhibit XXXVII) already referred to. No objection was taken to it by the plaintiff. Two previous contracts for sale of sugar to the plaintiff, which, as in this case, had been also settled by telegraphic communication between the plaintiff and the defendants, had been formally reduced to writing in similar memoranda of sale and sent to the plaintiff [exhibits XXIX and XXX(f), dated the 29th June and the 31st August 1899, respectively]. In paragraph 3 of the plaint, the plaintiff refers to the sale-note (exhibit XXXVII) as embodying the terms of the contract, and the only exception he takes to it is as to the addition “at foot of two new clauses, one as to shipments and the other as to strikes, to which clauses, however, they (the defendants) did not draw plaintiff's attention.” He does not there take any exception to the name the East India Distilleries Company appearing as that of the party contracting to sell the sugar, or to the defendants signing the sale-note merely as managing agents. Under these circumstances it is manifest that; he defendants cannot be held to be personally bound by the contract,—vide section 230 of the Indian Contract Act,—unless the plaintiff can rely on any of the presumption referred to in clauses 1, 2, and 3 of the section. The learned pleader for the appellant relies on clause 1 of section 230 on the ground that the principal company is a “merchant resident abroad” within the meaning of that clause. The learned counsel for the respondents, while admitting that the East India Distilleries Company (Limited) is a company registered in England under the English Companies Acts (1862 to 1890) having its registered office in England, contends that the company must be regarded as residing here, where its manufacturing business (of sugar making) is carried on, and in support of this contention cites the case of Taylor v. Crowland Gas & Coke Company. We are decidedly of opinion that this contention is untenable. According to the opinion of most recent writers on Private International Law and the decisions of English Courts [Adams v. ??? W. Railway Co.(2). Shields v. G.N Ry. Com.(3), Minor v. L. & N.W Ry.(4), Corbett v. The General Steam Navigation Company(5), Le Tailleur v. S.E Ry. Com.(6), and Keynshnm Blue v. Barker(7)], the residence and domicile of an incorporated trading company is its principal place of business i.e, the place where the administrative business of the company is conducted, which may not be the place where its manufacturing or other business operations are carried on (Lindley on Companies, 6th edition page 1223). In illustration of this doctrine, Dicey in his Conflict of Laws' observes as follows (at page 155):—“Thus if a company incorporated under the Companies Acts, 1862 to 1890, for the carrying on of manufactures in India, has a registered office in England and its affairs are conducted in England, the company is domiciled in England mt in India.” The case of Taylor v. Crowland Gas & Coke Company cited by respondents' counsel—in which it was held that a corporation must be considered, as dwelling at the place where it carries on its business—is really against his contention, for the place of business therein referred to is the place where the administrative business of the corporation is carried on.

This question was fully considered [in Calcutta Jute Mills Company v. Nicholson(8)], in connection with the liability of the Calcutta Jute Mills Company (Limited) — a company registered and incorporated in England but earning profits abroad—to pay income-tax under the English Income-tax Act. The following extract from the judgment of Kelly, C.B, presents the matter in a very clear light and is conclusive on the question:— “The question is whether this company can be held liable to the income-tax upon the entirety of its profits. It is a company incorporated in England, under the laws of England, by virtue of the Joint Stock Companies Acts, and therefore its first origin and existence are in England alone……Now, it signifies little whether the office in which the very important business of holding meetings at which everything, that is, or may be, done by the company is determined is an office rented from any other person in the city, or whether it is a place lent for that purpose by one of the directors for the use of the company and at the disposition of the company. Here, then is their location—their residence, if I am to apply the terms of the statute—here the directors meet when they have occasion, and the company meets, that is, the general body of the shareholders or such as choose to attend, hold their general and their special meetings here the company transacts its business, and exercises the extensive powers with which it is invested by Act of Parliament……………. It is true that… in fact there is one Calcutta director. It is not that there exists by virtue of the constitution of the company a director having power himself to act and conduct the affairs of the company in India; but it is that the governing body, the directors in England, have power to appoint one or more persons and have appointed one to be the resident director and manager, the governor, as it were, of the company in India. It is he who directs and controls the whole conduct of the business in India, but he is merely the appointee and agent of the directors in England. We find that all the buying, selling and manufacturing, and the whole of the property in which the capital of the company is invested, are in India alone………. Then arises the question. What is the meaning of the word ‘residing’ as applied to a Joint Stook Company and to this case?” The answer is—whether there may or may not be more than one place at which the same Joint Stock Company can reside, I express no opinion at present a Joint Stook Company resides where its place, of incorporation is, where the meetings of the whole company or those when represent it are held, and where its governing body meets in bodily presence for the purposes of the company and exercises the powers conferred upon it by statute and by the articles of association. That acts of the highest importance affecting the well-being of the company, the operation of its business, the realizing and disposing of its, funds, are done in India is perfectly true; but they are all done by mere agents—whether they he directors or not—appointed under the sole authority of the governing body in this country.…………There is no shadow of authority to show that a place in which the governing body, the directors, meet, and where the shareholders at large hold their general and their special meetings and exercise their power of transacting the business is not the principal seat of business, and the place at which, in the language of the statute, the company may he said to reside…. But the appellants say that the whole business of the company is transacted in India alone…. All that is true, but every act done, the working of the mills, the realizing of the profits, the transmission of the proportion of the profits in question to England, and the distribution of the rest of the profits in the form of dividends to the different shareholders—all that, if not done by the company directly in India, is clone by them indirectly, because it is done by the person appointed by them, whom they may recall at their pleasure, and who has no authority to interfere in any way in the affairs of the company except the authority conferred on him by the governing body at home…. In contemplation of law, the money [profits, etc.] is theirs, and, if they choose, they clearly have the power to order the acting director in India to remit the two-thirds in question to England, for them to remit it back to India to him to distribute to the Indian shareholders, and it is only because that proceeding would he expensive, useless and hazardous that it is not done” (pages 444 to 447).

We, therefore, hold that the East India Distilleries Company (Limited) is a corporate company resident abroad, and that there fore it must be presumed that the defendants, though agents of that company, are personally liable upon the contract. But this presumption of law is one that can be rebutted, and we are constrained to hold that this presumption is rebutted, when the foreign principal himself is, in writing, made the contracting party, and the contract is made directly in his name—as in the present case. In the foot-notes to paragraph 268 of Story on Agency (9th edition, page 327) it is laid down (quoting from a judgment of Bigelow, C.J) that “the more reasonable and correct doctrine is that when goods are sold to a domestic agent or a contract is made by him, the fact that he acts for a foreign principal is evidence only that the agent and not the principal is liable. It is in reality in all cases a question to whom the credit was in fact given. Where goods are sold, it is certainly reasonable to suppose that the vendor trusted to the credit of a person residing in the same country with himself, subject to laws with which he is familiar and to process for the immediate enforcement of a debt, rather than to a principal residing abroad, under a different system of laws and beyond the jurisdiction of the domestic forum. But even in such a case the fact that the principal is resident in a foreign country is only one circumstance entering into the question of credit and is liable to be controlled by other facts” [see also per Coleridge, J., in Lennard v. Rabinson].

In Mahony v. Kekule, in which it was held that where a contract a writing is made by an agent, which is in form with the foreign principal and not with the agent, the latter is not liable although the contract was signed by him “for and on account of” the foreign principal—Jervis, C.J, observed as follows (at page 398):—“Ordinarily where an English agent contracts on behalf of a principal residing abroad, the agent is primâ facie considered to pledge his own credit, because it is highly improbable that the person he is contracting with would give credit to the foreigner. But that is not like this case. Here is a written contract, the meaning of which is to be collected from the face of it. It is expressed to be a contract be ween Vacher and Tilly and Mahony. But it is said that because it is signed at the end by Kekule ‘as agent for Vacher and Tilly,’ therefore he is to be held liable. That, however, by no means follows. That is nothing more than an assertion that he had authority to make the contract for them. Could it have been contended that Kekule would have been liable, if he had signed the contract (having authority so to do) with the names of Vacher and Tilly?…. Here Kekule makes no contract at all. The contract professes to be between Vacher and Tilly and the plaintiff, Kekule merely representing Vacher and Tilly.”

In Gadd v. Houghton, the agents (brokers) of a certain company resident abroad gave a sold-note running thus:— “Sold to you on account of James Morand & Co., etc., etc.”—and signed by them with their own name “J.C Houghton & Co.” without any addition. In an action by the purchaser against the agents for non-delivery, the Court of Appeal held (reversing the decision of the Exch. Div.) that the words “on account of James Morand & Co.” showed an intention to make the foreign principal (and not the brokers) liable, and that the brokers were not liable on the contract. The case of Paice v. Walker was commented upon and distinguished. In that case, though the agent purported to contract, on behalf of a foreign principal, yet they signed the contract in their own name without any addition. But the defendants in the present case having signed as “managing agents,” they cannot be held personally liable even according to that decision—which has, however, been practically over-ruled by the decision in Gadd v. Houghton.

Notwithstanding that the defendants raised the objection, in their written statement itself, that they were not personally liable and offered to defend the suit on behalf of their principal company if the plaint was amended and the latter substituted as defendants in their place, the plaintiff, without adopting this course, raised the first and second issues in the case as to the maintainability of the suit against the defendants themselves and prosecuted the suit against them. We cannot, therefore, now allow the suit to be converted into one against the East India Distilleries Company, Limited, and deal with the case on such footing. We may add that section 27, Civil Procedure Code, applies only to cases in which a suit has been instituted in the name of a wrong person as plaintiff, and not to cases in which a suit has been instituted against a wrong person as defendant.

It now becomes unnecessary to consider and decide the various other questions that were raised and argued at considerable length in the appeal.

The result is that the appeal fails and is dismissed with costs; the memorandum of objections (to the decree) on behalf of the respondents is allowed, except in respect of their counter-claim, with proportionate costs, and, reversing the decree of the District Judge, the suit is dismissed with costs.

Attorneys for respondents—Messrs Barclay, Orr. & David.