1. The facts of this case are no longer in dispute. In June 1913 the plaintiff advanced a large sum of money to one Bansidhar Mungtumal on the security of 2,000 shares in the Specie Bank. As the market rate for the shares was falling the plaintiff called upon Bansidhar to pay margin. On 6th October 1913, Rs. 12,000 were paid as margin and in November, 295 shares of the bank were handed to the plaintiff by way of further margin. These shares were not transferred into the plaintiff's name. The plaintiff sold 185 shares which were transferred into the name of the purchasers. Transfers signed by the Bombay Merchants Bank as vendors and by the plaintiff as purchaser for 100 shares were lodged with the bank so that the shares might be transferred to the plaintiff's name. Transfers for the remaining 10 shares were not signed by the plaintiff.
2. On 29th November 1913, an order was made for the winding-up of the bank. On 6th February 1914, the plaintiff filed a suit against Bansidhar for the amount due on the account between them and for a declaration that the said Bansidhar was bound to indemnify the plaintiff against all liability in respect of the uncalled amount of capital on the shares pledged. On 20th February, Bansidhar was adjudicated insolvent. On 9th June a decree was passed in plaintiff's favour for Rs. 82,924-8-7 with costs and further interest and the defendant was ordered to indemnify the plaintiff against any calls that might be made by the Official Liquidator on the said 2,000 shares. No dividend has been declared or is likely to be declared by Official Assignee on the estate of Bansidhar. After this decree had been passed, the plaintiff discovered that Bansidhar had been acting as the agent for the present defendant 1. He had also had to pay to the Official Liquidator the sum of one lakh in respect of a call made on the contributories of the Bank under an order of the Court. He filed this suit on 23rd December 1915 against Birdichand Jivraj and the Official Assignee praying (1) that defendant 1 might be ordered to pay the said sum of Rs. 82,924-8-7 with interest from 9th June 1914 and the costs of the suit filed against Bansidhar; (2) that defendant 1 might be ordered to pay the said sum of one lakh with interest; (3) that dedefendant 1 might be order to indemnify him in respect of all calls he might be required to pay in respect of the 110 shares; (4) that defendant 1 might be ordered to pay the costs of an order made by the Insolvency Court granting leave to join the Official Assignee as a party to the suit. Defendant 1 in his written statement denied that Bansidhar was his agent.
3. However it was proved, in a similar suit filed by the Standard Bank against Birdichand, that Bansidhar was acting as defendant 1's agent; and defendant 1's Counsel when issues were raised conceded this. It was held by the Appeal Court in that case that in the absence of a contract the Standard Bank was not entitled either to an indemnity in respect of calls to be made or to a decree for the amount actually paid in respect of a call. I, must therefore hold that the plaintiff is not entitled either to recover from defendant 1 the said sum of one lakh or to an indemnity in respect of any amount he may have to pay in respect of the said 110 shares. The real issue in the case is whether the plaintiff, having sued Bansidhar to judgment in Suit No. 172 of 1914, is entitled to maintain this suit against defendant 1. The same point was raised in the suit filed by the Standard Bank. But it was proved in that case that the Standard Bank had before obtaining judgment asked Birdichand whether Bansidhar had been acting-as his agent and he had replied in the negative. I held that Birdichand, having by a false denial prevented the Standard Bank from making their election, could not then claim that the bank had made their election and my decision has been confirmed in appeal: Birdichand Jivraj v. Standard Bank (1). I also expressed an opinion on the true construction of Section 233 of the Contract Act, in favour of the Standard Bank but the question has been very much more elaborately argued before me and I shall deal with it without regard to that opinion. S. 233, which comes under the heading “Effect of Agency of Contracts with Third Persons” says:
“In cases where the agent is personally liable a person dealing with him may hold either him or his principal, or-both of them liable.
Illustration
A enters into a contract with B to sell him 100 bales of cotton, and afterwards discovers that B was acting as agent for C. A may sue either B or C, or both, for the price of the cotton.”
4. Under S. 230 an agent is not personally liable in the absence of any contract to that effect. Such contract is presumed to exist 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 his principal; 3, where the principal though disclosed cannot be sued. Mr. Jinnah has argued that S. 233 codified what was the law in England and in this connexion it may be noted that Messrs Pollock and Mulla in their commentary on the Contract Act do not even suggest that the section enacts anything different from the Common law of England, while Messrs Cunningham and Shephard dismiss the suggestion as improbable. If the legislature intended to codify the Common law the wording of the section taken together with the illustration is most unhappy, but I am not concerned with what the legislature intended to do. The question is, what have they done? In Norendra Nath Sarcar v. Kamalbasini Dasi (2), the following passage from the judgment of Lord Herschell in Bank of England v. Vagliano (3) was quoted with approval:
“The proper course is in the first instance to examine the language of the Statute and to ask what is its natural meaning uninfluenced by any considerations derived from the previous state of the law, and mot to start with inquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view.”
5. It may also be noted that the Contract Act does not profess to be a complete code dealing with the law relating to contracts. It purports to do no more than to define and amend certain parts of that law: Irrawaddy Flotilla Co. v. Bugwandas (4). Now the natural meaning of the words:
“a person dealing with him (the agent personally liable) may hold both of them (agent and principal) liable,”
6. Is to create a joint liability so that judgment may be obtained against both principal and agent. The illustration only goes so far as to show that the agent and the principal may be joined in one suit, but an illustration ought never to be allowed to control the plain meaning of the section itself, and certainly it ought not to do so when the effect would be to curtail a right which the section in its ordinary sense would confer: Ameer Ali, p. 100. It must be remembered that it was only under O. 16, R. 4, of the Supreme Court Rules framed after the passing of the Judicature Act that it became permissible to join defendants alternatively liable in the same suit. That rule was reproduced in section 29 of the cpc of 1882, and is now represented by O. 1, R. 3 of the CPC of 1908. S. 233 enacts substantive law, laying down who shall be held liable, and not adjective law, defining the procedure by which the liability may be enforced. But it has been argued that the section follows the words of Willes, J., in Caldar v. Dobell (5) decided in 1871, which was the leading case on the subject when the Contract Act was passed and must, no doubt, have been before the minds of the framers of the Act. The plaintiff had entered into a contract with a broker called Cherry whom he knew to be acting as agent for a principal. Under pressure Cherry disclosed the name of his principal Dobell but put his own name to the contract at the plaintiff's request. In a suit on the contract against Dobell it was contended that Cherry having signed the contract, parole evidence could not be admitted to show that there was a principal behind him, or in the alternative that the plaintiff had elected to hold Cherry liable by getting him to sign the contract. Both these contentions were overruled. On the second Willes, J., said:
“I do not agree with Mr. Holker that two persons cannot be severally liable on the same contract. The question is whether there was anything in the circumstances of this case to negative or exclude the liability of both principal and agent, or to substitute the liability of the latter for that of the former… There is nothing to prevent the seller from insisting upon having both principal and agent liable to him at the same time, with the additional advantage of knowing the principal's name at the time.”
7. On appeal, Kelly, C.B, said:
“The contract was made in the name of Cherry, the agent; but the case shows that it was made on behalf of a principal who was named at the time. I think the plaintiffs had a right to sue either the agent or the principal at their election. No doubt the election being once determined, there is an end of the matter; as where the agent has been sued to judgment”.
8. From this it would appear that a suit against Cherry and Dobell would have been bad. A suit against one would have been a bar to a suit against the other and so far an election but until judgment was obtained the election was not determined, it would I have been open to the plaintiff to file a suit against the other if the first suit was either dismissed, see Raman v. Vairavan (6), or discontinued: Priestly v. Fernie (7). In Morel Brothers v. Earl of Westmoreland (8) the plaintiffs sued husband and wife for the value of goods supplied to the wife. The wife confessed judgment under O. 14, and the plaintiffs were held to be debarred from proceeding against the husband. Lord Davey said:
“I am disposed to think that if the proof had established a joint liability, the plaintiffs would not have been prejudiced by signing judgment, under O. 14, against one of the joint debtors…. But if the proof which they tendered at the trial shows, not a joint debt by the two, but an alternative claim against one or the other, then I think that by signing judgment against one they have, on the principle of Scarf v. Jardine (9), elected to take their remedy against that, one, and cannot afterwards sue the other who is not jointly but alternatively liable.”
9. Lord Halsbury said:
“The plaintiffs might have sued either the agent or the principal…. The result was that the plaintiffs got judgment against the agent. They cannot get judgment against the principal also. It is an alternative remedy; it cannot be made available against the two.”
10. Now the illustration to S. 233, shows that the words “hold them both liable” mean that the party dealing with the agent can join both the agent and the principal in one suit, and there is no suggestion that if he does so he is only entitled to a decree against one or the other and not against both. There is all the difference between saying that the party-dealing with the agent can have the-principal liable at the same time so that he can sue either the one or the other which was the only procedure available in 1872, and saying that he may hold both agent and principal liable and sue-both together. Whatever the legislature may have intended, it appears to me that words “may hold both of them liable” mean that both may be sued to judgment in one suit. But Mr. Desai wishes me to go further than this: he has argued that the words “may hold both, of them liable” place the agent and the principal in the position of joint promisors and therefore that under S. 43, the party dealing with the agent may sue either the agent or the principal to judgment and if the judgment is unsatisfied proceed against the other. This brings me to that most debated question whether S. 43 did place joint promisors in the same position as joint and several-promisors or whether it merely took away the right of a joint debtor to be-sued jointly. In Hemendro Coomar Mullick v. Rajendrolall Moonshee (10), it was held that a decree obtained against one of several joint makers of a promissory note was a bar to a subsequent suit against others. This was followed by the High Court of Madras in Gurusami Chetti v. Samurti Chinna Manner Chetty (11). In Mahommad Askari v. Radhe Ram Singh (12) however Strachey, C.J, held that a judgment obtained against some of several mortgagors and remaining unsatisfied was not a bar to a second suit against other joint mortgagors. Previous to that the Bombay High Court had assumed the doctrine in King v. Hoare (13) to be applicable in Lukmidas Khimji v. Purshotam Haridas (14) and L. Devshankar v. Vishnuram (15), and in Dick v. Dhunji Jaitha (16) the decision of Strachey, C.J, was considered by Crowe, J., who came to the conclusion that S. 43 merely took away the right of a joint debtor to be sued jointly and to plead in abatement. On the other band there is an obiter dictum of Farran, J., in Motilal Bechardas v. Ghellabhai Hariram (17) that S. 43 appears to make all contracts joint and several. As Court therefore of first instance, I should not be prepared to differ from previous decisions of this Court. Strachey, C.J, came to the conclusion that i;he rule in King v. Hoare and Kendall v. Hamilton (18) was not applicable to India because its basis was the right of a joint debtor to have all his contractors joined in a suit to enforce the joint obligation, and as that right was excluded by S. 43 the basis of the doctrine was absent and the rule became inapplicable. But with due respect that was not the ground given for his decision by Parke, B., in King v. Hoare for he said at p. 503:
“The matters of form being disposed of, the question is reduced to one of substance, whether a judgment recovered against one of two joint contractors is a bar in an action against another. It is remarkable that this question should never have been actually decided in the Courts of this country…. If there be a breach of contract, or wrong done, or any other cause of action by one against another, and judgment be recovered in a Court of Record, the judgment is a bar to the original cause of action, because it is thereby re-educed to a certainty, and the object of the suit attained, so far as it can be at that stage; and it would be useless and vexatious to subject the defendant to another suit for the purpose of obtaining the same result. Hence the legal maxim, “transit in rem judicatum,”—the cause of action is changed into matter of record, which is of a higher nature, and the inferior remedy is merged in the higher. This appears to be equally true where there is but one cause of action whether it be against a single person or many.”
11. And at p. 505:
“If there be a judgment against one of two joint contractors and the other is sued afterwards, can he plead in abatement, or not? If he cannot, he would be deprived of a right by the act of the plaintiff, without his privity or concurrence, in suing and obtaining judgment against the other. If he can, then he may plead in bar the judgment against himself, and if that be not a bar the plaintiff might go on, either to obtain a joint judgment against himself, and his co-contractor, so that he would be twice troubled for the same cause, or the plaintiff might obtain another judgment against the co-contractor, so that there would be two separate judgments for the same debt.”
12. In Kendall v. Hamilton , Wilson & McLay and Hamilton were partners. Kendall had contracted with Wilson unaware of the existence of a third partner and having sued Wilson and McLay to judgment, that judgment was held to be a bar to a suit against Hamilton. It was certainly the opinion of a majority of their Lordships that the question was one of law and not of procedure. Lord Hatherley said:
“The remark was quoted as having been made by a very eminent Judge, that this rule which was adopted in King v. Hoare was entirely a rule of procedure. I do not take that view….”
13. The basis of the decision in King v. Hoare was still more forcibly pointed out by Lord Blackburn:
“But King v. Hoare proceeded on the ground that the judgment being for the same cause of action, that cause of action was gone. Transit in rem judicatum, which was a bar, partly on positive decision, and partly on the ground of public policy, that there should be an end of litigation, and that there should not be a vexatious succession of suits for the same cause of action. The basis of the judgment was that an action against one on a joint contract was an action on the same cause of action as that in an action against another of the joint contractors, or in an action against all the joint contractors on the same contract.”
14. Lord Selborne said:
“Upon the legal question, I understand it to be the opinion of all your Lordships, that a second action cannot be maintained upon a cause of action which has once passed in rem judicatum; and that this principle is not affected by any of the changes of procedure introduced by the Judicature Acts.”
15. The judgement of Strachey, C.J, appears to be founded on a dictum of Bowen, L.J in Hodgson, In re Beckett v. Ramsdale (19):
“The common law principle that a judgment recovered against a joint debtor is a bar to a farther action to be prosecuted against another joint debtor is explained at length in the case of King v. Hoare . There is in the cases of joint contract and joint debt, as distinguished from the cases of joint and several contract and joint and several debt, only one cause of action….. The rule is by no means a technical rule. It is based, rightly or wrongly, on the idea that a joint debtor has right to demand, if lie pleases, that he shall be sued at one and the same time with all his co-debtors. To enforce this right he is only entitled to plead in abatement, but the right is one of considerable business value, and is so recognized by the law.”
16. With the greatest respect it appears as if this dictum is at variance with the passages I have just cited from the judgments in Kendall v. Hamilton . It would seem that the occasion for the rule being laid down was the failure of the first joint debtor on being sued to exercise his right to plead in abatement, with the result that the cause of action was merged in the judgment. There was no cause of action left on which the second joint debtor could be sued. How the second joint debtor on being sued could raise the defence of merger would be one of procedure. He might plead in abatement, and as the joint debtor could not be joined owing to the joint creditor having proceeded to judgment this plea would be successful, or as stated by Parke, B., he might plead the previous judgment in bar of judgment against himself.
17. In my opinion the real effect of S. 43 was to deprive a co-contractor sued alone of his right to have his co-contractor joined with him in the action and it enabled the plaintiff to get a decree against the one if he did not wish to or would not join the other; it did not enable him to file separate actions against both. It could not have been intended to deprive the second co-contractor of his right to plead the previous judgment, or to split up one cause of action into as many causes of action as there were joint contractors. But even assuming it did, I very much doubt whether the same argument could be applied to S. 233 which, if my construction is correct, appears to give the party dealing with an agent who is personally liable a double form of election. He can choose between suing both principal and agent jointly or electing to sue one of them. So that in any case if he sued one to judgment a suit against the other would be barred. But if he sued them both and one consented to judgment, that would not be a bar to his continuing the suit against the other: Dick v. Dhunji Jaitha and Morel Brothers v. Earl of Westmoreland . Finally it has been argued that the plaintiff, not being aware of the existence of a principal whom he could hold liable, could not be said to have had a chance of making an election. This appears to be conclusively answered by the decision in Kendall v. Hamilton , the only difference in the facts of that case being that Wilson and McLay were agents for the undisclosed principals, namely, themselves and Hamilton and not for Hamilton only. Lord Cairns said:
“I think that when the appellants sued Wilson and McLay, and obtained judgment against them, they adopted a course which was clearly within their power, and to which Wilson and McLay could have made no opposition, and that, having taken this course, they exhausted their right of action, not necessarily by reason of any election between two courses open to them, which would imply that, in order to an election, the fact of both courses being open was known, but because the right of action which they pursued could not, after judgment obtained, co-exist with a right of action…… against another person. If Wilson and McLay had been the agents, and Hamilton alone the undisclosed principal, the case could hardly have admitted of a doubt; and I think it makes no difference that Wilson and McLay were the agents and the undisclosed principals were Wilson, McLay and Hamilton.”
18. Adopting Lord Cairns, words, it is only by the fortunate accident of Birdichand being a solvent party that the plaintiff finds that he has a solvent principal of whom he was unaware. He did not contract with Birdichand except as an undisclosed principal, and this undisclosed person, with whom he entered into no agreement that he knew of, turns out afterwards to be liberated in consequence of the plaintiff not having taken steps to ascertain who were the contracting parties when he was bringing the action. The plaintiff having advanced the moneys looked to Bansidhar as the man who should repay, but he has since discovered another person whom he thinks he may sue. As regards defendant 2, I think he should not have been joined. I find all the issues in favour of defendant 1. The plaintiff must pay the costs of defendant 1, except the costs of the issue whether defendant 1 was the principal. Defendant 1 must pay the costs of the plaintiff on this issue.
G.P/R.K
19. Suit dismissed.