Case: Radhakrishna Sivadutta Rai And Ors Vs. Tayeballi Dawoodbeai

The three appellants are respectively the Firm Radhakishan Shivdutt Rai which carries on business at Banaras and Ramkumar Lal for himself and as karta of his joint family as well as Madan Gopal for himself and as karta of his joint family, the latter two being the partners in the first-mentioned Firm Radhakishan Shivdutt Rai; for convenience we will refer to the partnership firm hereafter as the appellant. The respondent Tayabali Dawoodbhai is a partnership firm which carries on business at Calcutta. The appellants case was that the appellant and the respondent had entered into a contract in the first instance on December 18, 1950 through brokers named T. N. Mehrotra and Co., Calcutta. This contract was later confirmed by two letters written respectively on January 3 and 15, 1951 by the appellant to the respondent and replied to by the respondent. By this contract the respondent agreed to sell 1000 bales of Banaras Hemp particulars of which were set out in the plaint. According to the appellant, by letter written on March 14, 1951, the appellant in part performance of the said contract accepted delivery of 110 bales of Banaras Hemp No. 1 and 50 bales of Banaras Hemp No. 2; this delivery was made by the respondent to L. N. Poddar and Co., who acted as the agent of the appellant and paid the price of the said 160 bales. In this transaction the respondent realised Rs. 3,840 from the said L. N. Poddar, and Co., in excess of the actual price of the goods delivered to the said company. In spite of the repeated demands made by the appellant the respondent failed to deliver the balance of the goods contracted for and thus committed breach of the contract. That is how the appellant claimed Rs. 79,800 as difference between the market rate on March 31, 1951 and the contract rate of the balance deliverable under the contract in suit. This amount was claimed as damages for the breach of contract. In addition an amount of Rs. 3,840 was claimed as having been paid in excess of the value of 160 bales delivered to L. N. Poddar and Co. on behalf of the appellant.2. This claim was resisted by the respondent on several grounds. The principal contention urged by the respondent, however, was that in relation to the contract in suit the appellant had acted as agent for its disclosed principal Messrs. Khaitan and Sons Ltd., and as such it was not entitled to bring the present suit. The respondent further alleged that the said disclosed principal Messrs. Khaitan and Sons had settled all their rights and claims under the suit contract with their agent and so the present claim for damages was not maintainable. In regard to the claim for Rs. 3,840 the respondent pleaded that the appellants case was untrue. Several other pleas were also raised but with the said pleas we are not concerned in the present appeal.3. Mr. Justice Bose who tried the suit framed twelve issues. On the principal point in controversy between the parties the learned judge found that the appellant had entered into the contract with the respondent on its own account and not on account of the disclosed principal as alleged by the respondent. According to the learned judge the reference to Messrs. Khaitan and Sons Ltd., made in the bought and sold notes on which the respondents plea was based had been inserted by the brokers by mistake or due to some misconception". The learned judge also found that the respondent had committed a breach of the contract as alleged by the appellant. The appellants case with regard to the excess payment of Rs. 3,840 made by L. N. Poddar and Co. was, however, held not to have been proved. In the result a decree was passed in favour of the appellant for Rs. 79,800 along with interest as stipulated in the decree.4. Against this decree the respondent preferred an appeal; and the main point which was urged on its behalf was directed against the finding of the trial judge that the contract had been entered into by the appellant for itself and not on account of the disclosed principal. This contention was based in the Court of Appeal, as in the trial Court, on the bought and sold notes; and it was urged that the bought and sold notes clearly showed that the appellant had entered into the contract on account of the disclosed principal Messrs. Khaitan and Sons Ltd. Before the Appellate Court the respondents case was that the said bought and sold notes constituted the terms of the contract and no other evidence was relevant and admissible in order to determine the said terms. Das Gupta, J. upheld this plea. In his opinion the bought and sold notes issued by the brokers constituted the sole basis for the terms of the contract and the two letters subsequently written on January 3 and 15, 1951 were inadmissible and irrelevant for the purpose of determining the said terms of the contract. The learned judge, however, considered the matter also on the alternative basis that the said letters could be considered for ascertaining the norms of the contract and came to the conclusion that on reading the said letters and the bought and sold notes together the result was the same, namely, that the contract had been entered into by the appellant on behalf of the disclosed principal. Bachawat, J. differed from Das Gupta, J. on the question about the relevance and admissibility of the two subsequent letters. According to him the two bought and sold notes and the two letters between them constituted the terms of the contract. He was inclined to take the view that the letters could not be regarded as inadmissible or irrelevant. Reading the four documents together the learned judge, however, agreed with the conclusion alternatively recorded by Das Gupta, J., and held that the four documents supported the respondents plea that the appellant had entered into the contract on behalf of the disclosed principal. Both the learned judges agreed in holding that there was no evidence to support the appellants plea that the reference to the principal made in the bought and sold notes was a result of any mistake. On these findings the decree passed by the trial court was reversed and the appellants suit was ordered to be dismissed. In regard to the costs, however, the Appellate Court took the view that the point raised before the Appellate Court about the effect of the bought and sold notes had not been specifically mooted before the trial court and that several other pleas raised by the respondent were found by the trial court to be false and so the proper order as to costs would be that each party should bear its costs throughout.5. After this judgment was delivered the appellant applied for and obtained a certificate from the High Court and it is with the said certificate that the present appeal has been brought before this Court.

Court's reasoning:
For the purpose of deciding this point we propose to assume in favour of the appellant that the terms of the contract may be gathered from the two bought and sold notes on which the respondent relies as well as the two subsequent letters on which the appellantare not impressed by this argument. In regard to these notes we have the evidence of Trilokinath and Gopinath on behalf of the brokers which negatives the theory of mistake or misconception. Trilokinath has stated on oath that when he got the offer from the respondent he telephoned to his brother Gopinath who is a broker in respect of hemp of the firm of Sewnath Gopinath and he told him about the offer. Gopinath then informed Trilokinath that the offer was closed either on the 16th or on the morning of the 17th. This information was received by Trilokinath from Gopinath on the telephone. Trilokinath was then asked about the information that his brother gave him, and he stated that his brother told him that the offer which he had communicated to him in respect of 1000 bales at Rs. 165 and Rs. 145 had been sold by him to Khaitan Sons and Co., Fibre Ltd. He also added that he received another message from his brother either on the 18th or on the night of the 17th to prepare a contract so that it will be Khaitan and Sons through the appellant. Thus, it is clear that the evidence of Trilokinath, if believed, clearly shows that there could be no mistake or misappreciation on the part of the brokers, when the notes referred to Khaitan and Sons as principal in respect of the transaction. Gopinath substantially corroborated the evidence given by Trilokinath. He stated that when he got the offer from his brother Trilokinath he went to Deokinandan who was working for Khaitan and Sons and it was after discussion with Deokinandan that the souda was closed as one on behalf of Khaitan and Sons. Having thus closed this contract with Deokinandan, who represented the principal Khaitan and Sons, Gopinath told Trilokinath to close the offer and asked him to prepare the note showing that the appellant was acting as agent for the disclosed principal Khaitan and Sons. Reading the evidence of the two brothers who worked as brokers in respect of the transaction in suit it is clear that any possibility of a mistake or misappreciation is whollyis obvious that Gopal Lals evidence which otherwise suffers from the infirmity that it is full of contradictions cannot be accepted on the question of mistake because his explanation about his conduct in signing the confirmation slips considered by itself is wholly unsatisfactory. Therefore, in our opinion, the Appellate Court was fully justified in reversing the finding of the trial court on this point and in coming to the conclusion that the reference to Khaitan and Sons which the notes made was not the result of any mistake orthe suit itself a faint attempt was no doubt made to challenge the identity of the firm Khaitan and Sons, but Mr. Pathak has very fairly not attempted to raise that point before us. It would thus be noticed that the principal point made by the appellant in the arbitration proceedings before the Chamber in respect of the reference to Khaitan and Sons in the notes was entirely frivolous; no case of mistake appears to have been set out at that stage. Besides, as we have already pointed out, there is no evidence on which a finding of mistake can be reasonably made in favour of the appellant. Therefore, we must proceed to consider the question about the construction of the relevant documents on the basis that the reference to Khaitan and Sons which the notes make is not the result of any mistake and has been made in the ordinary course of business by theare inclined to accept thisdecision shows that the mercantile usage of entering into contracts evidenced by the bought and sold notes issued by the brokers was treated by the Privy Council as well recognised.It is in the light of this legal position that we must consider the effect of the bought and sold notes in the present case. The notes referred to the appellant and added "A/C Khaitan and Sons Ltd.". There is no disparity in the notes at all; and so the two notes can be safely taken to evidence the terms of the contract. When along with the name of the appellant the notes specifically refer to "Khaitan and Sons Ltd. with the preceding words "A/c", there can be no doubt that the appellant is shown by the notes to be acting on account of the disclosed principal. The appellant realised that the effect of the reference to Khaitan and Sons in the notes would inevitably be to support the plea of the respondent that it was not entitled to bring the present action and so it pleaded that the said reference was the result of a mistake. Therefore, there can be no doubt that if the material question had to be considered in the light of the bought and sold notes alone the appellant was acting on behalf of the disclosed principal and, on the contract thus entered into, it had no right to sue and can claim no cause of action in itshave referred to these observations made by Mellish, L. J., because as we will presently point out they would be of material assistance in deciding the point which Mr. Pathak has raised on the strength of the two subsequent letters. Thus, the bought and sold notes in this case unambiguously indicate that the appellant was acting for a disclosed principal and the contracting party was the disclosed principal and nohave already seen the sequence of the documents. First, the notes were delivered by the brokers to the appellant and the respondent. Then the respective parties filed confirmation slips and then followed the two letters exchanged betweenis no doubt, and indeed it is a matter of common-ground before us, that the letters do not constitute all the terms of the contract, and all that is urged by Mr. Pathak is that they should be considered along with the notes. The notes refer to the fact that if any dispute arises in the deal it is subject to the arbitration by the Bengal Chamber of Commerce. They also refer to the sales tax number which is to be furnished by the buyers, otherwise they would be charged. These terms undoubtedly constitute terms of the contract; but the argument is that in the correspondence which took place between the parties there is no reference to the principal and indeed the correspondence proceeds on the basis that the appellant acts for itself and not for a disclosed principal, and that should be borne in mind in deciding whether the appellant was acting for the disclosed principal orwe are not prepared to hold that the decision in the case of H. C. Brandt and Co. (1917) 2 KB 784 lays down an unqualified rule of construction on which the appellant canobservation shows that reference to the disclosed principal was not given its full effect in considering the question about the liability of the agent because it was held by the majority decision that the said reference was primarily, if not exclusively made for the purposes; of disclosing the destination of theobservations do not carry the appellants case very far because all that they show is that in determining the question as to whether the agent has entered into the contract on behalf of the principal or not the way he has signed the document has to be considered along with the other recitals made in the relevant documents.18. What then would be the effect of the relevant recitals in the letter on which Mr. Pathak relies? In this connection it is necessary to recall that we are reading these letters along with the brought and sold notes, and that the bought and sold notes have unequivocally and clearly indicated that the appellant was acting on behalf and on account of the disclosed principal Khaitan and Sons. If we read the letters in the light of the bought and sold notes it would be clear that the signature of the appellant will not have much significance, nor would the use of the word "we by the appellant or "you" by the respondent make any difference. Parties knew that the appellant was acting on behalf of the disclosed principal. It is not suggested that in such a case everytime the agent has to sign expressly stating that he is acting on behalf of the disclosed principal. Therefore, if the appellant was acting for the disclosed principal the fact that he did not add the relevant description to his signature, or used the word "we" in the operative portion of the letter would not materially alter the fact spoken to by the notes that the appellant was acting on behalf of the disclosed principal. It cannot be suggested that these letters intended to alter the position disclosed by the notes. The letters, like the confirmation slips, are, and must be, presumed to be consistent with the notes; and so it would be unreasonable to attach undue importance to the signature and to the use of the relevant words "we" and "you" on which reliance has been placed. In our opinion, therefore, the Appellate Court was right in holding that even if the bought and sold notes are read along with the confirmation slips and the two letters of January 3, 1951 and January 15, 1951, the conclusion is inescapable that the appellant entered into the contract on behalf of the disclosed principal Khaitan and Sons Ltd. If that be so, it follows as a matter of law that the appellant is not entitled to bring the presenthave, however, not allowed, Mr. Pathak to argue this point. It was conceded by the appellant before the Appellate Court that if it was held that the plaintiff firm was acting as agent for Khaitan and Sons Ltd., the suit was not maintainable. This concession was made in view of the provisions of S. 236 of the Contract Act. Besides, the alternative plea which Mr. Pathak wanted to raise does not appear to have been expressly pleaded or considered in the trial court.