Case: State of Kerala Vs. Goverdhan Hathibhai and Company

an agent. It, therefore, remanded the case to the Appellate Tribunal to determine the terms of the licence and whether the respondent had sold the kerosene in accordance with the terms of the licence.8. In this appeal counsel for both sides canvassed the question of the construction of the agreement. Learned counsel for the State said that the agreement was really one of sale of the kerosene by Caltex (India) Ltd. to the respondent while learned counsel for the respondent contended that the proper interpretation of the agreement was that it constituted the respondent the agent of Caltex (India) Ltd. for the sale of kerosene on its behalf.9. It must be conceded that the question is of difficulty and there is a lot to be said in favour of each of the contending views. It seems to us, however, that it is unnecessary in the present case to decide that question for even if we accept the view for which the respondent contends, it would not be entitled to exemption under section 9. It has to be remembered that the question of construction arose in order only to decide whether the respondent was entitled to exemption under that section.10. Now let us assume that the respondent is right and that under that agreement it obtained the kerosene for sale by it as agent for Caltex (India) Ltd. That alone however would not entitle it to the benefit of section 9. No doubt, in order to get exemption the respondent has to show that its sales were actually in accordance with the terms of the licence which had been granted under the section. That investigation has not yet been made and it was not found necessary to do so in the view that the authorities took. But quite apart from that it is not any and every agent who becomes entitled to the benefit of section 9. It is only an agent "who for an agreed commission ....... sells on behalf of known principals specified in his account in respect of each transaction" that may claim the benefit. Now it seems clear to us that under the agreement of June 1, 1952, the respondent, even if it were the agent of Caltex (India) Ltd., could not sell on behalf of it as its principal and specify it as the principal in its account as required by section 9 for clause 8 of the agreement prevented it from doing so. That clause is in these terms :"The distributors shall not have any right or authority to and shall not incur any debts or liability or enter into any contracts or transact any business whatsoever in the name of or for or on behalf of the company, and shall not represent himself in any way to be, the agent of the company."Under this clause the respondent could not sell expressly on behalf of Caltex (India) Ltd., nor could it enter in its account the sales as such. Under section 9 the sale would have to be on behalf of known principals, that is, a principal known to the purchaser for the agent of course knew who its principal was. In view of clause 8 the respondent could not sell by disclosing to the purchaser that it was selling for Caltex (India) Ltd. What the respondent actually did is irrelevant for if it was not an agent having the right under its agency agreement - and of course it could have no right apart from that agreement - it could not sell expressly on behalf of its principal. Under the section it has to have the right under its agency agreement to sell expressly on behalf of known principals and this it did not have. If it did not have that right, it could not get the benefit of section 9. Therefore even if the respondent was an agent of Caltex (India) Ltd. for the sale of kerosene, it would not be entitled to the exemption under section 9 in view of the terms of its agency agreement.11. Learned counsel for the respondent contended that clause 8 was only a pious declaration and that if it was held that the agreement created an agency, that clause could not be given effect to for then it would be in conflict with the creation of an agency. We are unable to accept this view. It has not been shown to us that an agency agreement cannot provide that the agent could not disclose the fact that it was acting as an agent. Therefore, it is impossible to hold that if clause 8 is an enforceable term, it would prevent the agreement from being construed as an agreement creating an agency. Nor do we find it possible to accept the contention that it contains a pious declaration. It is an operative part of the contract; it is one of the bargains made and is capable of enforcement, if necessary.12. In this view of the matter we think that the appeals must be allowed. We think it right to point out that this aspect of the matter had not struck anyone in the High Court or at any earlier stage. In our view, for the reasons earlier mentioned, this is decisive of the case. We however also think it right to point out that though we are setting aside the judgment of the High Court we express no opinion on the interpretation of the agreement of June 1, 1952, or as to the correctness of the view taken by the High Court. We find it enough to proceed on the assumption that the view for which the respondent contends that the agreement creates an agency is correct for even so, for the reasons earlier mentioned, it must be held that the respondent is not entitled to exemption under section 9 as it is not an agent of the kind contemplated by the section. We leave the question of the proper interpretation of that agreement for decision at a13

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It must be conceded that the question is of difficulty and there is a lot to be said in favour of each of the contending views. It seems to us, however, that it is unnecessary in the present case to decide that question for even if we accept the view for which the respondent contends, it would not be entitled to exemption under section 9. It has to be remembered that the question of construction arose in order only to decide whether the respondent was entitled to exemption under that section.Now let us assume that the respondent is right and that under that agreement it obtained the kerosene for sale by it as agent for Caltex (India) Ltd. That alone however would not entitle it to the benefit of section 9. No doubt, in order to get exemption the respondent has to show that its sales were actually in accordance with the terms of the licence which had been granted under the section. That investigation has not yet been made and it was not found necessary to do so in the view that the authorities took. But quite apart from that it is not any and every agent who becomes entitled to the benefit of section 9. It is only an agent "who for an agreed commission ....... sells on behalf of known principals specified in his account in respect of each transaction" that may claim the benefit. Now it seems clear to us that under the agreement of June 1, 1952, the respondent, even if it were the agent of Caltex (India) Ltd., could not sell on behalf of it as its principal and specify it as the principal in its account as required by section 9 for clause 8 of the agreement prevented it from doing so.Under section 9 the sale would have to be on behalf of known principals, that is, a principal known to the purchaser for the agent of course knew who its principal was. In view of clause 8 the respondent could not sell by disclosing to the purchaser that it was selling for Caltex (India) Ltd. What the respondent actually did is irrelevant for if it was not an agent having the right under its agency agreementand of course it could have no right apart from that agreementit could not sell expressly on behalf of its principal. Under the section it has to have the right under its agency agreement to sell expressly on behalf of known principals and this it did not have. If it did not have that right, it could not get the benefit of section 9. Therefore even if the respondent was an agent of Caltex (India) Ltd. for the sale of kerosene, it would not be entitled to the exemption under section 9 in view of the terms of its agency agreement.