Case: Bharat Suryodaya Mills Company Limited Vs. Shree Ram Mills

Shah, J.1. This appeal raises a dispute between two limited liability companies which have factories for manufacturing cotton textiles. The plaintiffs Shree Ram Mills Ltd. are a private limited company having their registered office in Bombay. The defendants are the Bharat Suryodaya Mills Co. Ltd., having their registered office at Ahmedabad.2. The plaintiffs filed Jurisdiction Civil Suit No. 65 of 1951 in the Court of the Civil Judge, S.D., at Ahmedabad, against the defendants for a decree for Rs. 34,139 being the price of 50 bales of cotton with costs and interest at the rate of 4 per cent, per annum from the date of the suit. The plaintiffs claimed that they had sold to the defendants 50 bales of Sudan Scarto cotton at the rate of Rs. 1,287 per candy of 784 lbs. F.O.R., Ahmedabad, and that the plaintiffs were entitled to recover from the defendants Rs. 30,698/6/0 as price of cotton bales and Rs. 3,440-10-0 as interest thereon which the defendants had failed and neglected to pay and accordingly, the plaintiffs claimed a decree for an aggregate amount of Rs. 34,139 being (the price of 50 bales of cotton and interest till the date of the suit) with future interest and costs.3. The suit was resisted by the defendants contending inter alia that the defendants had purchased the cotton bales from a firm carrying on business in Ahmedabad in the name of Messrs. Eastimex that there was no contractual relation between them and that the plaintiffs and the latter therefore, could not sue for the price of cotton bales. Alternatively, it was contended that even if Messrs, Eastimex were the agents of the plaintiffs as contended by the latter the liability to pay the price had been discharged by making payment as directed by Messrs. Eastimex and, therefore, also the plaintiffs could not sue for the price of goods. The learned trial Judge negatived the contention of the defendant and decreed the plaintiffs suit with costs and future interest on the principal amount at Rs. 30,698-6-0 till payment. Against that decree, this appeal has been preferred.4. The plaintiffs purchased sometime in the year 1948, a quantity of Sudan Scarto cotton. It was found that the cotton was unsuitable for manufacture of cloth in the plaintiffs factory. Accordingly, the plaintiffs asked Messrs. Bombay Cotton Export Import Company, which we will hereafter refer to as the Bombay Cotton, to find out a customer for that cotton. The Bombay Cotton contacted one Souvajogm, a Greek national carrying en business in Ahmedabad in cotton and other commodities in the name and style of Messrs. Eastimex, to find a customer for the plaintiffs cotton. In the first week of October 1948, Souvajoglu met Seth Gwdharlal Mohatta the then Managing Agent of the defendant Mills and negotiated the terms on which 50 bales of Sudan Scarto cotton were to be purchased by the defendant mills. The contrast was not reduced to writing. In the year 1948, risers was in operation the Foreign Cotton Control Order of 1945, issued by the Central Government in exercise of the powers conferred by sub-rule (2) of Rule 81 of the Defence of India Rules. By clause 4 of that Order, a licence from the Textile Commissioner for purchase and sale of foreign cotton was required to be obtained. Sudan Scarto which was the subject-matter of the agreement of sale was admittedly foreign cotton and licence was required to be obtained from the Textile Commissioner both for purchasing and selling that cotton. On 13-10-1948, the plaintiffs submitted an application to the Textile Commissioner for a licence to sell 50 bales of Sudan Scarto cotton. In that application (Exhibit 137), it was stated by the plaintiffs Managing Director that the sale was effected in favour of Messrs. Bharat Suryodava Mills Ltd., at the rate of Rs. 1,287 pet candy F.O.R., Ahmedabad. The reason for sale mentioned in the application was that the cotton bales had been imported for consumption by the plaintiff Mills, but the cotton was found to be "a slightly inferior type of cotton" and unsuitable for the plaintiffs purposes. On 14-10-1948, Messrs. Eastimex addressed a letter to the defendant Mills confirming the order for 50 bales of Sudan Scarto cotton sold by Messrs. Eastimex to the defendants on behalf of the plaintiffs at the rate of Rs. 1,287 per candy. It was also stated in the fetter that Messrs. Eastimex understood that the defendants had already applied to the Textile Commissioner for a necessary licence and that the plaintiffs had done likewise. Messrs. Eastimex requested the defendants to send the licence to the plaintiffs to enable them to "rail the cotton." On this letter there was an endorsement recorded in the handwriting of someone in the employment of the defendant company to the foil owing effect : "Accepted subject to terms and conditions as laid down in the enclosed letter, dated 15-10-1948." On 15-10-1948, the defendants addressed a letter to Messrs. Eastimex acknowledging receipt of the letter, dated 14-10-1948 and a contract form for sale of 50 bales of African Sudan Scarto, and stating that the defendants were applying to the Textile Commissioner, Bombay, for the requisite licence. The letter proceeded to state that the weighment was to be made at their (defendants) Mills and the payment was to be made on receipt of actual goods in their Mill premises. On 19-10-1948, the defendants Managing Agents, Messrs. Mohatta Brothers, applied to the Textile Commissioner application Exhibit 128 for a licence authorising the defendants to purchase from the plaintiffs 50 bales Sudan Scarto cotton at the rate mentioned therein. A copy of the letter was also forwarded to the plaintiff Mills through Messrs. Bombay Cotton. The plaintiffs received the requisite licence Exhibit 85 on 29-10-1948. By that licence, the Deputy Assistant Director (Cotton) authorised the plaintiffs, in exercise of authority Winder clause 4 of the Foreign Cotton Control Order, 1945, to sell 50 bales Sudan Scarto at the rate specified to the defendants for the consumption by the latter. It appears that a similar licence was also issued to the defendant Mills authorising them to purchase cotton but that licence has not been produced in this case.5. In and after the month of October, 1948, there was difficulty in securing wagons for transporting the cotton bales to Ahmedabad. Ultimately, in the month of April, 1949, the cotton bales were transported to Ahmedabad by rail. Exhibit 52 is a letter addressed by the Bombay Cotton to the United Commercial Bank Ltd., enclosing the Railway receipts and a draft for Rs. 42,000 together with the invoice for 50 bales of cotton. By that letter, the Bombay Cotton requested the Bank to present the draft to the addressee at the risk of the plaintiff and to credit the proceeds to their account in Bombay after deducting the necessary charges. A similar letter was also posted on 6-4-1949 (Exhibit 53) to the defendant company and office copies of the invoices and the weighment notes of 50 bales of Sudan Scarto cotton and 50 bales of Jarilla cotton were enclosed therewith. The defendants were also intimated that the documents in original will be presented by the United Commercial Bank Ltd. The defendants were requested to honour the draft for Rs. 42,000 on presentation. Similar information was also given to Messrs. Eastimex by letter Exhibit 208. The defendants, on presentation of the documents declined to return the game and addressed a letter (Exhibit 164) to the Bombay Cotton informing them that their bargain was with Messrs. Eastimex, Ahmedabad, and as such the documents pertaining to the despatch of 50 bales of Sudan Scarto cotton may be drawn on Messrs. Eastimex, Ahmedabad. and not on the defendants. A copy of that letter was sent to Messrs. Eastimex at Ahmedabad. On receipt of this letter, the Bombay Cotton wrote to the United Commercial Bank Ltd. by their letter, dated 13-4-1949 (Exhibit 56), asking the Bank to hand over the documents to Messrs. Eastimex, Ahmedabad, without any payment. It was stated in the letter that there was arrangement between the Bombay Cotton and "the buyers" regarding payment. Intimation was also given by Exhibit 55 to Messrs.Eastimex to take over the documents from the United Commercial Bank Ltd., and to collect payment from the defendants. Messrs. Eastimex were informed by the letter that there should be no delay in remitting the price and were also told that the remittance should be made by T.T. or by draft payable in Bombay and it should not be by a cheque on any Ahmedabad Bank. Thereafter, Messrs. Eastimex took delivery of the goods and delivered them at the Mill premises of the defendants on or about 19-4-1949. Some dispute was raised by the defendants about the quality of cotton delivered, but it was not persisted in. On 4-5-1949, Messrs. Eastimex called upon the defendants to pay the amount due for the 50 bales of cotton Sudan Scarto delivered to the defendants. The defendants were informed that a. representative of Messrs. Bombay Cotton was in Ahmedabad with the object of seeing that all the outstandings with the defendants should be squared up without delay. Messrs. Eastimex acknowledged receipt of Rs. One Lakh and called upon the defendants to pay the balance. In the last paragraph of the letter, it was stated : "We have been putting off daily Messrs. The Bombay Cotton Export Import Company but we regret we cannot shoulder this responsibility any longer." On 6-5-1949, Messrs. Eastimex addressed a letter to the defendants stating that Rs. 92,000 were due by the defendants for goods supplied and requested the defendants to credit the amount to the account of Messrs. Kishanprasad and Co. Ltd., Bombay, subject to the understanding that the amount will not be made available to Messrs. Kishanprasad and Co. Ltd., prior to 6-6-1949. It was stated that the instructions for payment for Messrs. Kishanprasad and Co. Ltd., "were irrevocable and payment may be made accordingly to that Company." By their letter dated 6-5-1949 addressed to Messrs. Eastimex, the defendant company agreed to abide by the instructions of Messrs. Eastimex and to make the payment of Rs. 92,000 on 6-6-1949- Thereafter, by letter, dated 7-5-49, Messrs. Eastimex modified the instructions regarding payment to Messrs, Kishanprasad and Co. Ltd. They requested the defendants to pay Rs. 92,000 before the due date, i.e. 6-6-1949, or forthwith. On 7-5-1949, a representative of Messrs. Eastimex called upon the defendant company and the management of the defendant company obtained a receipt for Rs. 92,000 reciting that the amount of Rs. 92,000 had been debited to the account of Messrs. Eastimex and credited to the account of Messrs. Kishanprasad and Co. Ltd., Bombay. The defendants also posted entries consistently with the instructions given by Messrs. Eastimex and in their books of account credited an amount of Rs. 92,000 to Messrs. Kishanprasad and Co., Ltd.6. The Bombay Cotton sent their representative, one Potnis, with instructions to ascertain why the value of 50 bales of cotton was not received by the plaintiffs or by them. On 1-12-1949, the plaintiffs addressed a telegram Exhibit 115 to the defendants calling upon them to pay the price of 50 bales of cotton. This telegram was replied to by the defendants by telegram, dated 1-7-1949, in which they expressed surprise at the demand and stated that they had already made payment to Messrs. Eastimex. The plaintiffs then wrote a letter to the defendants on 4th July, 1949, asking to be supplied copies of the invoice on the basis of which payment was made to Messrs. Eastimex, the particulars regarding the payment and enquiring whether the payment was made by cheque for cash to that firm. Thereafter, there was further correspondence between the plaintiffs and the defendants, which it is unnecessary to set out in detail because it has no material bearing on the dispute between the parties. Ultimately, the plaintiffs filed the suit on 4-4-1951 out of which this appeal arises.7. As we have already observed, it was the contention of the defendants that they had been dealing throughout with Messrs. Eastimex and they purchased the goods from Messrs. Eastimex and they had nothing whatever to do with the plaintiffs. The defendants suggested that the 50 bales of cotton belonging to the plaintiffs may have been sold to Messrs. Eastimex and that is why Messrs. Eastimex agreed to sell and sold the same to the defendants.8. The first question which falls to be determined in this appeal is whether the contract between the defendants and Messrs. Eastimex was as between principal to principal or whether Messrs. Eastimex acted as the agents of the plaintiffs. As we have already observed, there is no written contract for the sale of 50 bales of cotton. Again, direct oral evidence as to what transpired at the meeting between Seth Girdharlal Mohatta, Managing Agent of the defendant Company, and Souvajoglu, owner of Messrs. Eastimex is also not available. Neither Souvajoglu nor Seth Girdharlal Mohatta have been examined. It is true that one Rasiklal Krislmalal Mehta who claims that he was present at the meeting between Souvajoglu and Seth Girdharlal Mohatta gave evidence and he deposed to the conversation which took place between Souvajoglu, and Seth Girdharlal Mohatta and the subsequent correspondence between the parties. It may at once be observed that the learned trial Judge was not impressed by the testimony of this witness. In his view, the witness persisted in denying facts which he had ultimately to admit "under stress of cross-examination." The witness also appeared unwilling to give answers to questions put to him if they were inconvenient. The learned trial Judge has observed, it was only after "if great higgling" that the witness had ultimately to admit certain facts which have previously been denied by him. Evidently, the learned trial Judge was not impressed by the testimony of Rasiklal Krishnalal Mehta. We will presently deal with that part of the oral evidence of the witness Rasiklal Krishnalal Mehta and other witnesses which has a bearing on this part of the case, but in our view the documentary evidence and the circumstances of the case establish it beyond doubt that Messrs. Eastimex were merely acting as agents of the plaintiffs and were not acting as principals in the sale transaction relating to cotton bales. We have referred to the application submitted by the defendants Exhibit 128, dated 19-10-1948 to the Textile Commissioner for a licence to purchase the cotton bales from the plaintiffs. Similarly, in the letter, dated 15-10-1948, Ex. 51 there is a reference to an agreement to purchase the bales from the plaintiffs. Exhibit 137 which is an application submitted by the plaintiffs to the Textile Commissioner also states that the defendants had agreed to purchase cotton from the plaintiffs. Even from the letter Exhibit 89, dated 14-10-1948, written by Messrs. Eastimex to the defendants, it is clear that Messrs. Eastimex were acting for and on behalf of the plaintiffs and not on their own behalf. As we have already observed, the licence for purchasing the scales granted by the Textile Commissioner has not been produced by the defendant Company. Under Cl. 4 of the Foreign Cotton Control Order, 1945, prohibition was imposed upon all persons against selling or otherwise disposing of or purchasing or otherwise acquiring any foreign cotton of the description mentioned in the Schedule except under and in accordance with the terms, of a licence granted by the Textile Commissioner or in pursuance of a direction given under cl. 5. It is evident, that both for purchasing and selling foreign cotton, a licence was required and if the defendants, submitted an application to the Textile Commissioner expressly reciting that cotton was to be purchased from the plaintiffs, it would be difficult to accept the explanation given by the defendants that the statement in the application was untrue. Contravention of the Foreign Cotton Control Order, 1945, having been by the provision of R. 81(2) of the Defence of India Rules penalised, the Court will not easily be prepared to accept that when two business houses were entering into a formal contract for purchase and sale of cotton, which could only be purchased and sold subject to and in accordance with the terms of licence granted by the Textile Commissioner, they intended to infringe the provisions of the law of the land.9. Rasiklal Krishnalal Mehta (Exhibit 157) the Secretary of the defendant Mills, stated at first that he did not know anything about the application Exhibit 128 submitted to the Textile Commissioner, but he asserted that the statement contained therein that cotton was to be purchased from the plaintiffs mill was untrue. He then asserted that M/s. Eastimex might have purchased cotton bales from the plaintiffs and hence at his instance the defendants had made the statement. The witness then turned round and stated that Souvajoglu had told Mm that he had purchased cotton bales from the plaintiff company, but he did not tell him that the bales had been purchased through the Bombay Cotton. The witness became bolder and stated that Messrs. Eastimex had purchased cotton bales from Shree Ram Mills. He even stated that on the day on which Souvajoglu came to take the signature on the application, he had stated that he had purchased the bales from the Shree Ram Mills. If the cotton bales had been purchased by Messrs. Eastimex from the plaintiff Mills and Messrs. Eastimex were selling that cotton as owners to the defendants, it passes understanding why the management of the defendant Mills should have submitted an application in the form Exhibit 128 and should also have written letter Exhibit 51 on 15-10-1948, stating that cotton bales were purchased from the plaintiff. All the documentary evidence of October 1948 goes to show that the contract relating to the sale and purchase of cotton was between the plaintiffs on the one hand and the defendants on the other, and we are unable to accept the statement made by the witness Rasiklal Krishnalal Mehta that Souvajoglu had told him that the goods had been purchased by him from the plaintiffs and he was selling the same. We are also unable to accept the statement made by witness Rasiklal that the application Exhibit 128 was made "in order to give convenience to Messrs. Eastimex," stating that the defendants had purchased the bales from Shree Ram Mills.10. Mr. Advani on behalf of the defendants contended that Messrs. Eastimex had a licence for the sale of cotton, but as under the provisions of the Foreign Cotton Control Order, foreign cotton could only be sold by an importer to a consumer or by a consumer to a consumer and Messrs. Eastimex not being consumers nor importers of this particular variety of cotton, it was necessary for Messrs. Eastimex to enable them lawfully to sell cotton purchased by them to the defendants, to give the name of an importer or consumer, and that is why Messrs. Eastimex gave the name of the plaintiffs as the vendors when in fact Messrs. Eastimex were the real vendors. In other words, the argument is that Messrs. Eastimex had purchased cotton from the plaintiffs and thereafter they desired to dispose of the same to the defendants, but as in law they were unable to do so, without infringing the provisions of the Foreign Cotton Control Order, 1945, Messrs. Eastimex, the plaintiffs and the defendants adopted the expedient of giving the name of the plaintiffs as owners of the cotton bales and the name of the defendants as the purchaser. If there be any substance in that contention, evidently the arrangement was to defeat the provisions of the Foreign Cotton Control Order, 1945 and involved the parties concerned in serious penalties for breach of the provisions of the order. It may suit the defendants now to set up a plea that they were willing to commit an offence by infringing the provisions of the Foreign Cotton Control Order but we do not think that the respectable parties who were concerned in this transaction in the year 1948 were deliberately willing to commit an offence by procuring a licence in the name of a person who was not the owner of the goods as the vendor thereof.11. There is on the record no reliable evidence to show that the bales of cotton in dispute were sold by the plaintiffs to Messrs. Eastimex, and even the letters written by Messrs. Eastimex and to Messrs. Eastimex, to which we have already made reference, clearly indicate that Messrs. Eastimex were acting as agents and not as principals. We may briefly refer to some correspondence on which Mr. Advani strongly relied in support of the case that notwithstanding the contents of the documents Exhibits 137, 89, 51 and 128, Messrs. Eastimex were the real vendors of the goods. Exhibit 1164 is the letter, dated 8-4-1949, written by the defendants to the Bombay Cotton. In that letter, the defendants had called upon the Bombay Cotton to make out the documents in the name of M/s. Eastimex and not in the name of the defendants. We are unable to appreciate how that intimation leads to the inference that Messrs. Eastimex were the owners of the goods especially having regard to the contents of the earlier documents to which the defendants were parties. The next letter relied upon is Exhibit 54, dated 11-4-1949 which is addressed by the Bombay Cotton to the United Commercial Bank in which the Bombay Cotton requested the United Commercial Bank to present the documents to Messrs. Eastimex instead of the defendants. We have already set out the circumstances in which letter dated 6-4-1949 came to be written. Then there is letter Exhibit 55 dated 13-4-1949 which is written by the Bombay Cotton to Messrs. Eastimex which we have already set out in extenso. This letter, if at all, destroys the contention of the defendants that Messrs. Eastimex were the owners of the goods. At more places than one in this letter Messrs. Eastimex were called upon to send the amount due in respect of the sale of goods by T.T. or by draft payable to the Bombay Cotton in Bombay. If Messrs. Eastimex were the purchasers of the goods, it is difficult to see how the Bombay Cotton could have called upon Messrs. Eastimex to send the amount received by sale of the goods to the defendants. There is also the letter Exhibit 56 dated 13-4-1949 by the Bombay Cotton to the United Commercial Bank Ltd., in which it is stated that the documents may be handed over to Messrs. Eastimex having regard to some arrangement between "ourselves and the buyers." Relying upon this statement, Mr. Advani contended that the arrangement which must have been referred to by the Bombay Cotton was an arrangement of the sale of goods to Messrs. Eastimex and not of Messrs. Eastimex being made the agents for the sale of goods. We are unable to hold that by the reference to "the buyers" in letter Exhibit 56 it was intended to refer to Messrs. Eastimex. The next letter on which reliance was placed was Exhibit 59, dated 12-5-1949 by which Messrs. Eastimex informed the Bombay Cotton that they (Messrs. Eastimex) may be debited with interest at the rate of 6 per cent, "for the actual duration during which the payment was delayed." Strong reliance was sought to be placed by Mr. Advani upon this statement in support of the contention that M/s. Eastimex were the purchasers and had not paid the value of the goods purchased by them. But, evidently, the third paragraph of that letter is inconsistent with that inference. By the third paragraph of their letter, M/s. Eastimex protested against the Bombay Cotton having sent the invoices to the defendant Mills directly. Messrs. Eastimex had evidently negotiated the contract and they insisted upon the contract being earned out through their agency. That does not, however, lead to the inference that they were the owners of the goods which were agreed to be sold. Messrs. Eastimexs offer to pay interest is consistent with their being mere agents of the plaintiffs. The last letter relied upon by Mr. Advani is Exhibit 170 dated 1-7-1949. By that letter Messrs. Eastimex informed the defendants that they had sent a telegram to the Bombay Cotton informing the latter firm that they would make payment according to their convenience and that they need not consult their solicitors about any proposed action, and that the defendant Mills did not owe anything to the Bombay Cotton nor did they owe anything to Messrs. Eastimex. It is evident that by the time this telegram was sent, the plaintiff Mills had demanded the amount due and under the direction given by Messrs. Eastimex, that amount was appropriated towards, a liability to Messrs. Kishanprasad and Co. Ltd. and Messrs. Eastimex were trying to make out that the defendant Mills were not liable to the plaintiffs nor to them and that they (Messrs. Eastimex) promising to pay the amount received by them at their convenience. This letter also and the contents of the telegram quoted therein do not, in our judgment, lead to the inference that Messrs. Eastimex were acting as principals or as owners of the goods. As we have already pointed out, the two contracting parties have not appeared before the Court and the terms of the contract had to be ascertained by making inferences from documentary evidence. In our judgment, the documentary evidence overwhelmingly leads to an inference in favour of the plaintiffs and against the defendants. Mr. Advani placed strong reliance upon the circumstance that there was nothing in the books of account of the plaintiffs to show that Messrs. Eastimex were paid any commission nor were the terms of which Messrs. Eastimex were appointed agents of the plaintiffs disclosed. It is true that the plaintiffs books of account do not show on what terms M/s. Eastimex were employed for the sale of goods. But evidently the name of Messrs. Eastimex appears to have been suggested by the Bombay Cotton, who were asked to find an agent for the sale of the cotton bales, and from the books of the Bombay Cotton an account of commission is paid by Bombay Cotton to Messrs. Eastimex through the agency of the latter has been produced. It is equally important to note that there is no entry in the books of account of the plaintiffs which has been disclosed in his case showing that the goods were sold to Messrs. Eastimex. Having carefully considered all the evidence and the arguments advanced before us, we agree with the view of the learned trial Judge that Messrs. Eastimex were acting as Agents of the plaintiffs and not as purchasers of the goods from the plaintiffs nor did they act as Principals to Principals in the matter of the contract between the defendants company and themselves.12. The second question which falls to be determined is whether the direction given by M/s. Eastimex to the defendant company to pay the amount to Messrs. Kishanprasad and Co. Ltd. discharges the defendant company from liability to pay to the plaintiffs the price of goods sold. Some argument was advanced in the trial Court and before us on the question whether any payment in fact was made to Messrs. Kishanprasad and Co. Ltd, by the defendant company. It appears, however from the entries posted in the books of account of the defendants that an amount of Rs. 92,000 was credited on 7-5-1949 in the account of Messrs. Kishanprasad and Co. Ltd. debited in the account of Messrs. Eastimex. Rasiklal Krishnalal Mehta, the Secretary of the defendants, has stated that on 6-5-1949 Souvajoglu had come personally with a letter and had requested to make payment by adjustment and that Souvajoglu had told the witness that he had to make payment of some amount to Messrs. Kishanprasad and Co. Ltd., and the witness, should make payment of the amount due for cotton supplied by havala in the Khata of Messrs. Kishanprasad and Co. Ltd. The witness then stated that he consulted Balgovindas, the Director, and on the next day, under the direction of the Director, necessary adjustment entries were posted as requested by Messrs. Eastimex and a receipt was taken from M/s. Eastimex for the amount of Rs. 92,000 of which a havala was given.13. Our attention was invited to the account of Messrs. Eastimex and also of Messrs. Kishanprasad and Co., Ltd., which showed that large amounts were credited and debited to Messrs. Eastimex in the year 1949, in the defendants books of account and also corresponding entries were posted in the name of M/s. Kishanprasad and Co. We do not think it necessary for the purpose of this case to enter into a detailed discussion of the question whether the amount of Rupees 92,000/- has really "gone back to the defendants" as contended by the plaintiffs. It appears that in the year 1950, the management of defendant Company was changed and Messrs. Mohatta Brothers gave up the management under an agreement whereby they undertook in favour of the new management that they will discharge liability to the extent of Rs. Five laks in respect of the dealings of Messrs. Mohatta Brothers. Rasiklal Mehta has in his evidence admitted that on 31-7-1950, Messrs. Mohatta Brothers ceased to be the Managing Agents and a havala was given whereby Messrs. Mohatta Brothers took over the debt due to Messrs. Kishanprasad and Co. Ltd. from the defendant Mills. He stated that the whole amount outstanding and due to Messrs. Kishanprasad and Co. from the defendant Mills was taken over by Messrs. Mohatta Brothers some two months prior to the date when the old Managing Agents ceased to act on behalf of the defendant company. The accounts of M/s. Mohatta Brothers and of B.R. Harman Mohatta Co. Ltd. with which they are intimately connected have not been produced in this case. As we have already observed, the question whether in fact the amount of the havala was received by Messrs. Kishanprasad and Co. Ltd. or by the defendants loses significance in view of the fact that the payment even on the instructions given by Messrs. Eastimex and Co. could not discharge the defendants from the liability to pay the value of the goods purchased by them to the plaintiffs.14. On the view we have taken, the plaintiffs were the owners of the cotton bales and they had sold the same to the defendants and Messrs. Eastimex were the agents for the sale thereof. As observed by Halsbury in Halsburys Laws of England, 3rd Edition, Vol. I, at p. 165, Art. 387, "an agent authorised to sell does not necessarily have implied authority to receive payment for his principal. Where it is in the ordinary course of business for the agent to receive payment for his principal, such payment should, generally speaking, be received in cash. To restrict the authority of an agent authorised to receive payment to a particular form of payment other than cash, i.e. by a crossed cheque payable to the principal, there must be plain intimation to the third party. In general the agent has no implied authority to receive payment by cheque, by bill, by other goods, or before it becomes due, nor may be give credit." Similarly, in Bowsteads Digest of the Law of Agency, 11th Edition, at p. 210, it is observed : "Where an agent who is known to be such is so authorised, the payment must be in cash in order to bind the principal, unless he authorised the agent, or held him out as having authority, to receive payment in some other form." In this case, there is no plea that the plaintiffs had authorised the defendants to make payment of the price of the goods in any form other than cash. Admittedly, the defendants have not paid the price of the goods to Messrs. Eastimex in cash. Even the books of account of the defendants which have been produced show that there was a havala entry of Rs. 92,000 which amount it is stated included the value of the goods sold by the plaintiffs to Messrs. Kishanprasad and Co. Ltd. Payment not having been made in cash, it could not, in our judgment, bind the plaintiffs. It is true that Messrs. Eastimex were agents for receiving the price of the goods. From the letter Exhibit 51 which is signed by the defendants and addressed to Messrs. Eastimex, on receipt of the goods at the Mill promises, payment was to be made. Evidently, Messrs. Eastimex were authorised to receive payment from the defendant Mills, but as the law requires that the payment must be made in cash unless, otherwise directed by the Principal, the defendants had to show that the payment of the price was made in cash or that the plaintiff company had authorised the defendants to make payment otherwise. As we have already observed, the payment has not been made in cash and no authority to the defendant to make payment otherwise than in cash has been pleaded or proved. Therefore, the amount for which a havala entry was made in favour of M/s. Kishanprasad and Co. made at the instance of M/s. Sastimex, unless it is ratified by the plaintiffs cannot bind them. It is true that there was some delay on the part of the plaintiffs in making a demand of the price payable to them. But there, is no evidence on the record again to show that the plaintiffs had knowledge that at the instance of Messrs. Eastimex, a havala was given in favour of Messrs. Kishanprasad and Co. Ltd. and they acquiesced in that havala. The debt due to Messrs. Kishanprasad and Co. Ltd. by Messrs. Eastimex was not a debt with which the plaintiffs were in any manner concerned. It was a debt due by M/s. Eastimex personally to Messrs. Kishanprasad and Co. and if for that debt a havala was seven for an amount due to the plaintiffs, in our judgment, in liability of the defendants cannot be regarded as discharged.15. Mr. Advani contended that it was of Messrs. Eastimex to receive payment in cash thereafter to apply it by paying it over to Messrs. Kishanprasad and Co. If Messrs. Eastimex had received payment in cash and the defendants were thereby discharged from liability, and the amount by Messrs. Eastimex was misappropriated the defendants would still stand discharged of their liability. But in this case, a havala entry has been made at the instance of Messrs. Eastimex in favour of Messrs. Kishanprasad and Co. Ltd. When M/s. Eastimex requested the defendants to make a havala entry, it was the duty of the defendants to obtain instructions from the plaintiffs whether the directions of Messrs. Eastimex should be complied with. The defendants having failed to do so and having acted according to the direction of Messrs. Eastimex and without consulting the plaintiffs, we think that the havala entry cannot discharge them from liability to pay the amount due by them to the plaintiffs.16. Mr. Advani referred us to the letters Exhibit 51, dated 15-10-1948, Exhibit 55, dated 13-4-1949, Exhibit 75, dated 15-4-1949, Exhibit 76, dated 20-4-1949 Exhibit 88, dated 3-5-1949, Exhibit 177, dated 4-5-1949, Exhibit 59, dated 12-5-1949, and the receipt Exhibit 69, dated 10-5-1949 and the cheque Exhibit 166, dated 6-5-1949, for Rupees 60,000 in support of the contention that some authority must have been given by the plaintiffs to M/s. Eastimex to receive payment otherwise than in cash. It is unnecessary for us to set out these documents in detail because there is no direction given either expressly or even by implication winch would suggest that the plaintiffs had either initially or at a subsequent stage authorised the defendants not to pay the amount in cash and to apply for discharging the debts of Messrs. Eastimex to other persons. It is true that the terms of employment of Messrs. Eastimex have not been produced. But the burden of proving that Messrs Eastimex had the right to receive payment otherwise than in cash or to direct satisfaction of the amount due to the plaintiffs by obtaining a havala towards discharging their own liability lay heavily upon the attendants and, in our judgment, that burden has not been discharged by any reliable evidence in this case.

Decision:
0[ds]As we have already observed, there is no written contract for the sale of 50 bales of cotton. Again, direct oral evidence as to what transpired at the meeting between Seth Girdharlal Mohatta, Managing Agent of the defendant Company, and Souvajoglu, owner of Messrs. Eastimex is also not available. Neither Souvajoglu nor Seth Girdharlal Mohatta have been examined. It is true that one Rasiklal Krislmalal Mehta who claims that he was present at the meeting between Souvajoglu and Seth Girdharlal Mohatta gave evidence and he deposed to the conversation which took place between Souvajoglu, and Seth Girdharlal Mohatta and the subsequent correspondence between the parties. It may at once be observed that the learned trial Judge was not impressed by the testimony of this witness. In his view, the witness persisted in denying facts which he had ultimately to admit "under stress ofThe witness also appeared unwilling to give answers to questions put to him if they were inconvenient. The learned trial Judge has observed, it was only after "if great higgling" that the witness had ultimately to admit certain facts which have previously been denied by him. Evidently, the learned trial Judge was not impressed by the testimony of Rasiklal Krishnalal Mehta. We will presently deal with that part of the oral evidence of the witness Rasiklal Krishnalal Mehta and other witnesses which has a bearing on this part of the case, but in our view the documentary evidence and the circumstances of the case establish it beyond doubt that Messrs. Eastimex were merely acting as agents of the plaintiffs and were not acting as principals in the sale transaction relating to cotton bales. We have referred to the application submitted by the defendants Exhibit 128, datedto the Textile Commissioner for a licence to purchase the cotton bales from the plaintiffs. Similarly, in the letter, datedEx. 51 there is a reference to an agreement to purchase the bales from the plaintiffs. Exhibit 137 which is an application submitted by the plaintiffs to the Textile Commissioner also states that the defendants had agreed to purchase cotton from the plaintiffs. Even from the letter Exhibit 89, datedwritten by Messrs. Eastimex to the defendants, it is clear that Messrs. Eastimex were acting for and on behalf of the plaintiffs and not on their own behalf. As we have already observed, the licence for purchasing the scales granted by the Textile Commissioner has not been produced by the defendant Company. Under Cl. 4 of the Foreign Cotton Control Order, 1945, prohibition was imposed upon all persons against selling or otherwise disposing of or purchasing or otherwise acquiring any foreign cotton of the description mentioned in the Schedule except under and in accordance with the terms, of a licence granted by the Textile Commissioner or in pursuance of a direction given under cl. 5. It is evident, that both for purchasing and selling foreign cotton, a licence was required and if the defendants, submitted an application to the Textile Commissioner expressly reciting that cotton was to be purchased from the plaintiffs, it would be difficult to accept the explanation given by the defendants that the statement in the application was untrue. Contravention of the Foreign Cotton Control Order, 1945, having been by the provision of R. 81(2) of the Defence of India Rules penalised, the Court will not easily be prepared to accept that when two business houses were entering into a formal contract for purchase and sale of cotton, which could only be purchased and sold subject to and in accordance with the terms of licence granted by the Textile Commissioner, they intended to infringe the provisions of the law of the land.Rasiklal Krishnalal Mehta (Exhibit 157) the Secretary of the defendant Mills, stated at first that he did not know anything about the application Exhibit 128 submitted to the Textile Commissioner, but he asserted that the statement contained therein that cotton was to be purchased from the plaintiffs mill was untrue. He then asserted that M/s. Eastimex might have purchased cotton bales from the plaintiffs and hence at his instance the defendants had made the statement. The witness then turned round and stated that Souvajoglu had told Mm that he had purchased cotton bales from the plaintiff company, but he did not tell him that the bales had been purchased through the Bombay Cotton. The witness became bolder and stated that Messrs. Eastimex had purchased cotton bales from Shree Ram Mills. He even stated that on the day on which Souvajoglu came to take the signature on the application, he had stated that he had purchased the bales from the Shree Ram Mills. If the cotton bales had been purchased by Messrs. Eastimex from the plaintiff Mills and Messrs. Eastimex were selling that cotton as owners to the defendants, it passes understanding why the management of the defendant Mills should have submitted an application in the form Exhibit 128 and should also have written letter Exhibit 51 onstating that cotton bales were purchased from the plaintiff. All the documentary evidence of October 1948 goes to show that the contract relating to the sale and purchase of cotton was between the plaintiffs on the one hand and the defendants on the other, and we are unable to accept the statement made by the witness Rasiklal Krishnalal Mehta that Souvajoglu had told him that the goods had been purchased by him from the plaintiffs and he was selling the same. We are also unable to accept the statement made by witness Rasiklal that the application Exhibit 128 was made "in order to give convenience to Messrs. Eastimex," stating that the defendants had purchased the bales from Shree Ramthere be any substance in that contention, evidently the arrangement was to defeat the provisions of the Foreign Cotton Control Order, 1945 and involved the parties concerned in serious penalties for breach of the provisions of the order. It may suit the defendants now to set up a plea that they were willing to commit an offence by infringing the provisions of the Foreign Cotton Control Order but we do not think that the respectable parties who were concerned in this transaction in the year 1948 were deliberately willing to commit an offence by procuring a licence in the name of a person who was not the owner of the goods as the vendor thereof.There is on the record no reliable evidence to show that the bales of cotton in dispute were sold by the plaintiffs to Messrs. Eastimex, and even the letters written by Messrs. Eastimex and to Messrs. Eastimex, to which we have already made reference, clearly indicate that Messrs. Eastimex were acting as agents and not asare unable to appreciate how that intimation leads to the inference that Messrs. Eastimex were the owners of the goods especially having regard to the contents of the earlier documents to which the defendants werewe have already pointed out, the two contracting parties have not appeared before the Court and the terms of the contract had to be ascertained by making inferences from documentary evidence. In our judgment, the documentary evidence overwhelmingly leads to an inference in favour of the plaintiffs and against theis true that the plaintiffs books of account do not show on what terms M/s. Eastimex were employed for the sale of goods. But evidently the name of Messrs. Eastimex appears to have been suggested by the Bombay Cotton, who were asked to find an agent for the sale of the cotton bales, and from the books of the Bombay Cotton an account of commission is paid by Bombay Cotton to Messrs. Eastimex through the agency of the latter has been produced. It is equally important to note that there is no entry in the books of account of the plaintiffs which has been disclosed in his case showing that the goods were sold to Messrs. Eastimex. Having carefully considered all the evidence and the arguments advanced before us, we agree with the view of the learned trial Judge that Messrs. Eastimex were acting as Agents of the plaintiffs and not as purchasers of the goods from the plaintiffs nor did they act as Principals to Principals in the matter of the contract between the defendants company andappears, however from the entries posted in the books of account of the defendants that an amount of Rs. 92,000 was credited onin the account of Messrs. Kishanprasad and Co. Ltd. debited in the account of Messrs. Eastimex. Rasiklal Krishnalal Mehta, the Secretary of the defendants, has stated that onSouvajoglu had come personally with a letter and had requested to make payment by adjustment and that Souvajoglu had told the witness that he had to make payment of some amount to Messrs. Kishanprasad and Co. Ltd., and the witness, should make payment of the amount due for cotton supplied by havala in the Khata of Messrs. Kishanprasad and Co. Ltd. The witness then stated that he consulted Balgovindas, the Director, and on the next day, under the direction of the Director, necessary adjustment entries were posted as requested by Messrs. Eastimex and a receipt was taken from M/s. Eastimex for the amount of Rs. 92,000 of which a havala wasdo not think it necessary for the purpose of this case to enter into a detailed discussion of the question whether the amount of Rupees 92,000/has really "gone back to the defendants" as contended by the plaintiffs. It appears that in the year 1950, the management of defendant Company was changed and Messrs. Mohatta Brothers gave up the management under an agreement whereby they undertook in favour of the new management that they will discharge liability to the extent of Rs. Five laks in respect of the dealings of Messrs. Mohatta Brothers. Rasiklal Mehta has in his evidence admitted that onMessrs. Mohatta Brothers ceased to be the Managing Agents and a havala was given whereby Messrs. Mohatta Brothers took over the debt due to Messrs. Kishanprasad and Co. Ltd. from the defendant Mills. He stated that the whole amount outstanding and due to Messrs. Kishanprasad and Co. from the defendant Mills was taken over by Messrs. Mohatta Brothers some two months prior to the date when the old Managing Agents ceased to act on behalf of the defendant company. The accounts of M/s. Mohatta Brothers and of B.R. Harman Mohatta Co. Ltd. with which they are intimately connected have not been produced in this case. As we have already observed, the question whether in fact the amount of the havala was received by Messrs. Kishanprasad and Co. Ltd. or by the defendants loses significance in view of the fact that the payment even on the instructions given by Messrs. Eastimex and Co. could not discharge the defendants from the liability to pay the value of the goods purchased by them to the plaintiffs.14. On the view we have taken, the plaintiffs were the owners of the cotton bales and they had sold the same to the defendants and Messrs. Eastimex were the agents for the salethis case, there is no plea that the plaintiffs had authorised the defendants to make payment of the price of the goods in any form other than cash. Admittedly, the defendants have not paid the price of the goods to Messrs. Eastimex in cash. Even the books of account of the defendants which have been produced show that there was a havala entry of Rs. 92,000 which amount it is stated included the value of the goods sold by the plaintiffs to Messrs. Kishanprasad and Co. Ltd. Payment not having been made in cash, it could not, in our judgment, bind the plaintiffs. It is true that Messrs. Eastimex were agents for receiving the price of the goods. From the letter Exhibit 51 which is signed by the defendants and addressed to Messrs. Eastimex, on receipt of the goods at the Mill promises, payment was to be made. Evidently, Messrs. Eastimex were authorised to receive payment from the defendant Mills, but as the law requires that the payment must be made in cash unless, otherwise directed by the Principal, the defendants had to show that the payment of the price was made in cash or that the plaintiff company had authorised the defendants to make payment otherwise. As we have already observed, the payment has not been made in cash and no authority to the defendant to make payment otherwise than in cash has been pleaded or proved. Therefore, the amount for which a havala entry was made in favour of M/s. Kishanprasad and Co. made at the instance of M/s. Sastimex, unless it is ratified by the plaintiffs cannot bind them. It is true that there was some delay on the part of the plaintiffs in making a demand of the price payable to them. But there, is no evidence on the record again to show that the plaintiffs had knowledge that at the instance of Messrs. Eastimex, a havala was given in favour of Messrs. Kishanprasad and Co. Ltd. and they acquiesced in that havala. The debt due to Messrs. Kishanprasad and Co. Ltd. by Messrs. Eastimex was not a debt with which the plaintiffs were in any manner concerned. It was a debt due by M/s. Eastimex personally to Messrs. Kishanprasad and Co. and if for that debt a havala was seven for an amount due to the plaintiffs, in our judgment, in liability of the defendants cannot be regarded asMessrs. Eastimex had received payment in cash and the defendants were thereby discharged from liability, and the amount by Messrs. Eastimex was misappropriated the defendants would still stand discharged of their liability. But in this case, a havala entry has been made at the instance of Messrs. Eastimex in favour of Messrs. Kishanprasad and Co. Ltd. When M/s. Eastimex requested the defendants to make a havala entry, it was the duty of the defendants to obtain instructions from the plaintiffs whether the directions of Messrs. Eastimex should be complied with. The defendants having failed to do so and having acted according to the direction of Messrs. Eastimex and without consulting the plaintiffs, we think that the havala entry cannot discharge them from liability to pay the amount due by them to theis unnecessary for us to set out these documents in detail because there is no direction given either expressly or even by implication winch would suggest that the plaintiffs had either initially or at a subsequent stage authorised the defendants not to pay the amount in cash and to apply for discharging the debts of Messrs. Eastimex to other persons. It is true that the terms of employment of Messrs. Eastimex have not been produced. But the burden of proving that Messrs Eastimex had the right to receive payment otherwise than in cash or to direct satisfaction of the amount due to the plaintiffs by obtaining a havala towards discharging their own liability lay heavily upon the attendants and, in our judgment, that burden has not been discharged by any reliable evidence in this case.