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  • Order VII, Rule 11 of the Code of Civil Procedure
  • section 230 of the Indian Contract Act.
  • SECTION 230 CONTRACT ACT
  • Order VII, Rule 11 of the Code
  • Order VII, Rule 11
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Citation Codes
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citation codes
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  • Order VII, Rule 11 of the Code of Civil Procedure
  • section 230 of the Indian Contract Act.
  • SECTION 230 CONTRACT ACT
  • Order VII, Rule 11 of the Code
  • Order VII, Rule 11
Smart Summary

Factual and Procedural Background

This revisional application challenges Order No. 17 dated 31 March 2014 of the Civil Judge (Senior Division), 4th Court, Alipore, which rejected an application under Order VII, Rule 11 C.P.C. The plaintiff filed a suit for specific performance of a contract of carriage (by Bill of Lading) for delivery of goods at the discharge port, a permanent injunction restraining exercise of a lien under Clause 13 of the Bill of Lading, and recovery of Rs. 2,56,00,000 with interest. The plaint alleges that the plaintiff contracted with a Singapore buyer for cold rolled coils, requisitioned 19 containers from the defendants for stuffing at its Serampore plant, and that the goods were transported for shipment. By letter dated 18 October 2013 the plaintiff was informed that 14 containers were damaged and required refurbishment; the defendants purportedly threatened disposal to recover refurbishment costs. Defendant No. 2 (petitioner) moved under Order VII, Rule 11 for rejection of the plaint, principally contending that, under Section 230 of the Indian Contract Act, an agent of a disclosed foreign principal cannot be personally sued when the principal is sued. The Trial Court dismissed that application as raising a mixed question of fact and law.

Legal Issues Presented

  1. Whether a suit can be maintained against an agent personally where the agent has acted for and on behalf of a disclosed foreign principal who is also sued, in view of Section 230 of the Indian Contract Act.
  2. Whether the plaint should be rejected under Order VII, Rule 11 C.P.C. insofar as it names the agent (defendant No. 2) as a defendant.

Arguments of the Parties

Petitioner (Defendant No. 2) — Mr. Thakkar

  • Contended that a suit against the agent of a disclosed foreign principal is not maintainable under Section 230 of the Indian Contract Act.
  • Submitted that where the disclosed principal is sued and the contract does not make the agent personally liable, the agent cannot be personally liable; relied on Nicholas Schinas v. Nemazie (AIR 1952 Cal 859), Steel Authority of India Ltd. v. Transworld Marine Ltd. (AIR 1982 Cal 161), and Midland Overseas v. M.V. "CMBT Tana" (AIR 1999 Bombay 401).

Plaintiff / Opposite Party — Mr. Sabyasachi Chowdhury

  • Submitted that a statutory presumption may arise where a contract relates to sale/purchase of goods entered into by an agent for a merchant resident abroad and that the Bill of Lading was signed by defendant No. 2 for defendant No. 1 (a disclosed foreign principal), permitting proceedings against both.
  • Argued that the cause of action extends beyond the Bill of Lading to the supply of containers for stuffing (allegedly damaged), making both defendants responsible; characterized the document as a multi-modal transport Bill of Lading.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Nicholas Schinas v. Nemazie. AIR 1952 Cal 859 Held that a suit against an agent must fail on preliminary grounds where both the principal (resident abroad) and the agent are sued on the same contract. Cited as authority for the proposition that both principal and agent cannot be sued in the same suit where the principal is a disclosed foreign principal; court treated the decision as supporting dismissal of action against the agent.
Steel Authority of India Ltd. v. Transworld Marine Ltd. AIR 1982 Cal 161 Affirmed that a plaintiff cannot circumvent Section 230 by suing both principal and agent where there is no express contract making the agent personally liable. Relied upon for the principle that absence of an express contract binding the agent personally precludes maintaining a suit against the agent when the foreign principal is sued; quoted and followed in ordering deletion of agent.
Midland Overseas v. M.V. “CMBT Tana”. AIR 1999 Bombay 401 Applied Section 230 to reject plaint against agent where the principal was disclosed and named and no personal liability of agent was pleaded. Used as supporting authority that, where the principal is disclosed and named, the agent cannot be made personally liable unless the contract shows personal liability; court applied same reasoning here.
P.B. Shah and Co. v. The Chief Executive Officer (As cited) Authority for striking out the name of a defendant from the cause list where appropriate. Followed in directing that the name of defendant No. 2 be struck out and deleted from the cause title of the plaint.

Court's Reasoning and Analysis

The Court quoted Section 230 of the Indian Contract Act and explained that, ordinarily, an agent is not personally bound by contracts entered into on behalf of a principal unless there is a contract to that effect. The provision creates a statutory presumption to the contrary only in the specific contingencies listed (sale/purchase by agent for a merchant resident abroad; undisclosed principal; principal disclosed but cannot be sued). The Court observed that the present argument rests on the first contingency but noted that the Bill of Lading here was signed by defendant No. 2 as agent for defendant No. 1, whose name is disclosed. The plaint contains no clause or allegation showing that the agent agreed to be personally liable (no contract coupled with interest, no express personal liability, and no pleaded facts to invoke the contrary presumption). Relying on authorities (Nicholas Schinas; Steel Authority; Midland Overseas), the Court held that where the disclosed foreign principal is sued and the contract does not make the agent personally liable, the agent is relieved of liability. Applying these principles, the Court found the plaint unsustainable as against defendant No. 2 and concluded the agent's name should be deleted from the suit.

Holding and Implications

Holding: The revisional application is allowed; the suit against defendant No. 2 (the agent/petitioner) is dismissed and the name of defendant No. 2 is to be deleted from the cause title. The suit shall proceed against defendant No. 1 (the disclosed foreign principal).

Consequences for the parties: the agent (defendant No. 2) is removed as a defendant; proceedings continue only against the disclosed foreign principal (defendant No. 1). The Court made no order as to costs.

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    Chakiat Shipping Services (P) Ltd. v. Bhusan Power & Steel Ltd. & Anr.

    Harish Tandon, J.:— This revisional application is directed against Order No. 17 dated March 31, 2014 passed by the learned Civil Judge (Senior Division), 4th Court, Alipore in Title Suit No. 28598 of 2013 by which an application under Order VII, Rule 11 of the Code of Civil Procedure is rejected.

    2. The attack to the impugned order is basically restricted on the point that the suit against an agent of a disclosed principal is not maintainable under section 230 of the Indian Contract Act. The other point taken in an application under Order VII, Rule 11 of the Code relating to the exclusion of jurisdiction of Indian Court and non-disclosure of cause of action against the defendant No. 2 have not been agitated and, therefore, are treated to have been abandoned. The plaintiff/opposite party filed a suit for specific performance of the contract of carriage through Bill of Lading by delivery of goods at the discharge port, permanent injunction restraining the defendants from exercising lien under Clause 13 of the Bill of Lading and decree and recovery of a sum of Rs. 2 crore 56 lakhs with interest.

    3. In the plaint, it is averred that the plaintiff entered into a contract with a buyer at Singapore for supply of prime cold rolled full hard coils and requisitioned 19 containers from the defendant for stuffing the goods at the plant of the plaintiff at Serampore in Hooghly District, West Bengal. The paragraph 2 of the plaint contains the statement that the defendant No. 1 provides service for carriage of cargo stuffed in the container owned and operated by it under the name and style Regional. Container Lines. The Goods were stuffed in the said 19 containers and were transported by the plaintiff from its plant at Serampore, Hooghly for onward shipment to the destination through the vessel. The freight for carriage of the goods has been paid and therefore, it is a statutory obligation of the defendant to carry the cargo safely with liability against any damage to the cargo in course of voyage. By letter dated 18th October, 2013, the plaintiff was communicated that the 14 containers were damaged requiring refurbish before becoming fit for onward transshipment and called upon the plaintiff to appoint a representative to inspect the cargo and to arrange for reworking the damaged containers indicating the estimated costs. The plaintiff reminded of the defendants of their responsibility and liability to make good the damaged containers at their costs which was followed by the reply convened the intention to dispose of the goods to recover all expenses in relation to refurbish of the containers on failure to deposit the cost therefor. The defendant No. 2.pettiioner filed an application under Order VII, Rule 11 of the Code for rejection of the plaint on various grounds including that he cannot be arraigned as a party or be responsible for any claim against a disclosed principal because of the embargo created under section 230 of the Contract Act.

    4. The said application is dismissed by the Trial Court on the ground that the point agitated therein is a mix question of facts and law arid can only, be decided after recording the evidence of the respective parties.

    5. Mr. Thakkar, the learned Advocate for the petitioner submits that suit against the agent of a disclosed principal who is also impleaded as a party is not maintainable under section 230 of the Indian Contract Act as held in case of Nicholas Schinas v. Nemazie . AIR 1952 Cal 859.. He further submits that if the disclosed principals have been sued and there is no reference in the contract that agent would be personally liable for any damages or breach of the terms and conditions embodied therein, the suit against both the disclosed principal and the agents is not maintainable and placed reliance upon a judgment of this Court in case of Steel Authority of India Ltd. v. Transworld Marine Ltd. . AIR 1982 Cal 161.. By placing reliance upon a judgment of the Bombay High Court rendered in case of Midland Overseas v. M.V “CMBT Tana” . AIR 1999 Bombay 401., Mr. Thakkar submits that if the contract is entered into by the agent for and on behali of the disclosed foreign principal and the terms and conditions incorporated therein does not make the agent responsible for any breach thereof, the agent cannot be sued personally. He thus submits that both the disclosed foreign principal and its agent cannot be sued and, therefore, the plaint against the defendant No. 2.petitioner is liable to be rejected.

    6. Mr. Sabyasachi Chowdhury, the learned Advocate appearing for the plaintiff/opposite party submit that the statutory presumption can be drawn if the contract relates to sale or purchase of goods entered into by an agent for a merchant resident abroad for existence of a contract. He further submits that the Bill of Lading is signed by the defendant No. 2.petitioner for the defendant No. 1 who is admittedly a foreign principal and, therefore, there is no impediment in proceeding against both the principal and the agent. He strenuously submits that the cause of action is not restricted to a Bill of Lading but the supply of container by the defendants which later on alleged to have been damaged during the carriage of the goods and, therefore, both the defendants are responsible and liable for the claims made in the plaint. He thus submits that it is not a simple case entrusting the goods to the carrier on issuance of Bill of Lading but based on certain other facts pertaining to supply of the containers for stuffing the goods for its shipment to the destination and, therefore, is Multi Model Transport Bill of Lading.

    7. Before proceeding to deal with the points agitated above, it would be relevant and convenient to quote section 230 of the Indian Contract Act which runs thus:

    “Section 230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal.— In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

    Presumption of contract to contrary.— Such a contract shall be presumed to exist in the following cases:

    (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.”

    8. The meaningful reading of the aforesaid provision makes amply clear that ordinarily the agent cannot be personally bound by any action of the principal in absence of any specific contract to that effect. The second part of the said section raises a statutory presumption of contract to the contrary in case the contract relates to sale or purchase of a goods made by the agent for the disclosed foreign principal or for and on behalf of the undisclosed principal or where the principal though disclosed cannot be sued. The entire argument is based upon the first contingency and according to the opposite party, the defendant No. 1 being the disclosed foreign principal resident abroad can be sued alongwith the agent. Admittedly the Bill of Lading is signed by the defendant No. 2.petitioner as an agent of the defendant No. 1 who is resident abroad. There is no indication therein to the effect that the agent would be bound by the contract entered into or on behalf of its principal. The plaint does not disclose any facts that the said contract is coupled with interest. The defendant No. 2.petitioner may be working as an agent on commission but there is no indication in the contract that he would be personally responsible and liable for any breach thereof. In case, the name of the principal is disclosed the agent can no more be responsible or liable unless the case is made out within the later part of section 230 of the Act raising presumption for existence of contract.

    9. In case of Nicholas (supra), an identical point arose whether both the principals and the agent can be sued in a same suit when admittedly the principal is a resident abroad. The facte emanates from the said report is that a Greek seller was selling the vessel under Spanish American Master flying the flag of Republic of Panama was admitted in the hospital having suffered from bronchitis and asthma when the vessel reached the port of Calcutta and was under treatment for 22 days. The owner of the vessel abandoned him after admitting in the hospital and the seller has to bear the expenditure for his treatment and sued for unpaid salary and such expenses both against the foreign principal and the agent. In Paragraph 8 of the said report, it is held that the suit against the agent must fail on a preliminary grounds as both the principal and the agent cannot be sued in a same suit based on contract.

    10. The other judgment rendered in case of Steel Authority of India (supra), Justice Dipak Kumar Sen (as His Lordship then was) was considering a matter where the plaintiff therein shipped the consignment of mild Steel Plates with the defendant No. 1 incorporated under the laws of Taiwan for carriage from port of Taiwan to Calcutta which sank near the sandheads at Diamond Harbour and were lost. The monetary relief was claimed in the suit filed against both the disclosed foreign principal and its agent at Calcutta. His Lordship dismissed the plaint against the agent holding that the plaintiff therein cannot get over the mischief of section 230 of the Act by suing both the foreign principal and the agent in these, words:

    “9. Learned Advocate for the plaintiff contended to the contrary. In the facts and circumstances of and on the pleadings the plaintiff in my view cannot get over the mischief of section 230 and sue both the principal and the agent. It is not the case of the plaintiff that by an express contract the defendant No. 2 made itself liable for the contract of carriage. The plaintiffs cause of action is founded on certain representations which, according to the plaintiff, create some sort of estoppel in his favour. Nothing further has been disclosed in the affidavit filed in opposition on behalf of the plaintiff on which the plaintiff can be given a chance to amend its plaint and make out a cause of action against the defendant No. 2

    11. For the reasons stated above, the defendant No. 2 succeeds in its application. The plaint however cannot be struck out in its entirety. Following the decision of the Division Bench in P.B Shah and Co. v. The Chief Executive Officer. It is directed that the name of the defendant No. 2 be struck out and deleted from the cause list of the plaint in this suit.”

    12. The plaint against the agent was rejected in case of Midland Overseas (supra) applying the provisions laid down under section 230 of the Act as both the principal and the agent cannot be sued unless the contract clearly provides, a personal liability of the agent. It is relevant to quote Paragraph 7 of the said report which runs thus:

    “7. The plaintiffs claim is founded on non-delivery of the container containing plaintiffs cargo to the consignees at Durban allegedly attributable to negligence and breach of contract of carriage. Under section 230 of the Act before the Agent can be sued it must he pleaded and shown that the principal is undisclosed and the contract, the breach of which is sued on was entered into by the Agent as having contracted personally. Where the contract is entered into by agent contracting on behalf of a foreign principal who is named and disclosed, the agent cannot be sued personally nor made personally liable. From the pleaded facts in the plaint it is amply clear, therefore, that no cause of action has arisen against the 3rd defendants and plaint is liable to be rejected under Order VII, Rule 11 of the C.P.C as against 3rd defendants.”

    13. From the Bill of Lading, it is apparent that the same was issued by the defendant No. 2.petitioner as an agent of the defendant No. 1 whose name is disclosed therein. None of the clauses incorporated in the Bill of Lading nor the learned Advocates could place any clause which makes the defendant No. 2.petitioner personally liable under the Contract. The foreign principal, the defendant No. 1 herein has been made a defendant in the suit and, therefore, when the plaintiff has chosen to sue the foreign principal, the agent is automatically relieved of its responsibility so far as it relates to dealings and transactions between the plaintiff and the principal.

    14. This Court, therefore, finds that the suit against the defendant No. 2.petitioner is not maintainable when the defendant No. 1 being the foreign principal have been made a party therein and there is no express contract which binds the agent personally or responsible personally liable.

    15. Accordingly the suit is dismissed against the defendant No. 2.petitioner. The concerned office of the Trial Court is directed to delete the name of the defendant No. 2.petitioner from the cause title of the plaint and the suit shall be proceeded against the defendant No. 1. The revisional application succeeds.

    16. However, there shall be no order as to costs.

    17. Application Allowed.

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    Chakiat Shipping Services (P) Ltd. v. Bhusan Power & Steel Ltd. & Anr.
    (Aug 17, 2015)