"So your shall adjust the monthly rent of the terraced shop in our possession by the 20th day of every month towards the monthly interest due under this document without reference to me and also pay to me by the 20th of every month Rs. 15/-. In this manner, you can make use etc. of the said shop in lieu of interest for three years. Thereafter, if at any time I intend to get the house released, I shall inform you three months in advance and pay you the principal sum of Rs. 6,000/- in one instalment."
 The learned Judge observed in his judgment dated 19-6-1963 that, in that document cf usufructuary mortgage, it was not mentioned as to v.'hat the agreed rent of the shop was but he held, after discussing the relevant evidence, as follows :
 "On a fair reading of the deed of possessory mortgage, it appears to me that the tenancy of defendants 1 and 2 with respect to the suit shop continued even during the pendency of the usufrirctuary mortgage. They had to pay rent and out of the rent, they had to pay each month Rs. 15/- to the mortgagor and adjust the balance towards the interest payable on the principal amount secured by the mortgage. I am of the view that, as and when the mortgage is redeemed, the tenancy continues. From that time onwards the defendants 1 and 2 would have to pay the entire rent to the mortgagor or the transferee from him, the plaintiff ..... Therefore, I am unable to accept the contention of Mr. Dikshitulu that on the execution of the possessory mortgage deed, Ex. B-1 the parties themselves put an end to the tenancy."


Cheekati Kuriminaidu And Ors. vs Karri Padmanabham Bhukta And Ors. on 20 February, 1964

It will be observed that our learned brother also strongly relied for his conclusion and finding on the fact that the usufructuary mortgage provided that the mortgagee had to pay rent and that, from out of the rent, a portion had to be adjusted towards interest and another portion had lo be paid to the mortgagor.
 18. The question whether the tenancy continues after execution of a mortgage depends upon the question whether it can co-exist with usufructuary mortgage and it has to be decided with reference to the provisions in the documents, particularly the usufructuary mortgage, in that respect, we agree with the view of the learned Judge in . On the provisions contained in the documents of that case, the learned Judges in and , came to their conclusions. We have got to decide on the basis of the contents gf the documents concerned in the present case. As indicated in , the mention of a stipulated rent under a mortgage deed and provision for payment of such rent and for adjustment of interest due on the mortgage amount from out of such rent is a very strong feature. Such feature is contained in all these three documents. They do not contain any provision for sale of the mortgaged property for payment of the amount such as contained in the usufructuary mort-page concerned in .


19. Shri Raghavarao for the respondents relies on certain recitals in these documents to show that there was an implied surrender. He points out that in the document, there is mention that possession was delivered. This is not very conclusive because it is undisouted that the persons who took the mortgage were already in pos-session even up to the date of the mortgage. In the mortgage (Ex. D-2), the mortgagor mentions "I have given you possession of the lands" but, in the same sentence, later he says about the lands as "which have been in your occupation and cultivation since a very long time." further below, it is mentioned 'possession of the above-said lands was given for the stipulated annual rent of Rs. 97-8-0". Possession was held as tenant paying rent up to mortgage and possession was continued after mortgage also as a tenant paying rent. Sri Raghava Rao points out that there Is provision in these mortgages that, when the persons paid the principal amount, the mortgagee was bound to deliver possession not only of the mortgage deed as well as receipts for quit rents etc., but also the mortgaged land. This provision is not conclusive and does not prevail as against the recital that the persons, who took the land on the mortgage, had to pay stipulated rent.
 20. We find as follows: Merely because Section 111 (f) is contained In Chapter V of the Transfer of Property Act, it cannot be deemed to be based upon a principle of justice, equity and good conscience. It has to be decided whether that provision of Section 111 (f) is In fact rested on principle of justice, equity and good conscience irrespec-


tive and independent of the fact that Section 111 (f) is contained in Chapter V of the Transfer of Property Act Considering the provision in Section 111 (f) in that light, we find that it embodies a principle based on justice, equity and good conscience and applies to agricultural leases concerned in the present case. We find accordingly on the second contention.
 21. We find that on the facts and circumstances of this case and, in particular, the recitals contained in the document of mortgages [Exs. D.2, D.4 and D.5) that the taking of those mortgages by the respective lessees did not amount to an implied surrender by them of their respective leases and that the leases were capable of co-existing and did in fact co-exist with the respective mortgages. The third contention of the learned advocate for the petitioner is acceptable and we agree with it,


22. In the result, we quash the order of the Revenue Divisional Officer and restore the order of the mam Deputy Tahsildar. The writ petition is accordingly allowed with costs. Advocate's fee Rs. 100/-.


Addl. Commissioner Of Income-Tax vs S.R.Y. Ankineedu Prasad on 26 August, 1977

JUDGMENT S. Obul Reddy, C.J.


1. The assessee, S. R. Y. Ankineedu Prasad, is an individual. He purchased during the year of account ending with March 31, 1966, 48,123 equity shares of a public limited company called "Challapalli Sugars Ltd." from his brother for Rs. 6,58,804, i.e., at Rs. 13'69 per share. This purchase of equity shares in Challapalli Sugars Ltd. was made by him in order to obtain controlling interest in the said company in which he (the assessee) and his another brother had substantial shareholdings. The consideration paid by him for purchasing the shares in Challapalli Sugars Ltd. consisted partly of cash of Rs. 1,00,000 and partly by transfer of 12,724 equity shares in K. C. P. Ltd., Vuyyur, another public limited company. He transferred the equity shares in K. C. P. Ltd. at the face value of Rs. 10 per share and for the balance of consideration of Rs. 4,34,346, he executed a promissory note in favour of his brother. In the return filed for the assessment year 1966-67, the assessee declared a capital gain of Rs. 15,756 on the transfer of the shares of K. C. P. Ltd., which he himself had acquired earlier at Rs. 1,08,702. The Income-tax Officer, A-Waid, Vijayawada, having regard to the fact that the market value of a share of K. C. P. Ltd. was Rs. 22'30 issued a notice to the assessee to show cause why he should not be assessed to tax invoking Section 52(1) of the Income-tax Act. It was explained by the assessee on December 16, 1968, that the transaction was only for


explained by the assessee on December 16, 1968, that the transaction was only for the purchase of shares of Challapalli Sugars in order to acquire controlling interest of that company and for that purpose, he had also exchanged K. C. P. Ltd. shares for a value which was less than the market rate. That explanation of his was not accepted by the Income-tax Officer on the ground that there was substantial difference between the market rate and the face value of the shares of the K. C. P. Ltd. Before initiating action, the Income-tax Officer had obtained the prior approval of the Inspecting Assistant Commissioner. The Income-tax Officer determined the lair market value of 12,724 equity shares of K. C. P. Ltd. transferred by the assessee at Rs. 2,83,745 and deducting the cost of those shares, i.e., Rs. 1,08,702, determined the capital gains for the transaction at Rs. 1,75,043. That assessment order was carried in appeal and the Appellate Assistant Commissioner held that the correct provision that should have been applied to the facts of the case is Section 52(2) and not Section 52(1). In that view, he confirmed the order of the Income-tax Officer and dismissed the appeal. The assessee further carried the matter in appeal to the Income-tax Appellate Tribunal. The Tribunal, in the light of the construction put upon Sub-section (2) of Section 52 by it, held that the requirements of section 52(1) or Section 52(2) were not satisfied. In so coming to the conclusion, the Tribunal recorded a finding of fact that "there was no question of the assessee transferring the shares of K. C. P. Ltd. with the object of avoiding or reducing the liability to capital gains". It also observed that "it is not the department's case that the assessee actually received


gains". It also observed that "it is not the department's case that the assessee actually received consideration at more than Rs. 10 per share for the shares of K. C. P. Ltd. transferred to his brother". It is against the order of the Tribunal that the Additional Commissioner of Income-tax moved the Tribunal for reference under Section 256(1) of the Income-tax Act, the following question for our opinion:


"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that neither the provisions of Section 52(1) nor the provisions of Section 52(2) are applicable and that the correct amount of capital gain to be assessed was not Rs. 1,75,043 as computed by the Income-tax Officer but Rs. 15,756 declared by the assessee ?"
2. Mr. Rama Rao, the learned counsel for the revenue, contended that the Tribunal was in error in holding that Section 52(2) is not attracted. According to the learned counsel for the revenue, if the Income-tax Officer comes to the conclusion that the fair market value of a capital asset transferred by an assessee on the date of the transfer exceeds the full value of consideration declared by him in respect of the transfer and that the difference in amount is not less than 15% of the value so declared, Section 52(2) is automatically attracted. It is also his stand that the question of a bona fide transfer of an asset is irrelevant in construing Section 52(2) of the Act. According to him, even on the assessee's own showing, he would not have transferred the shares to his brother at the face value of Rs. 10 per share, but for the advantage he would gain by purchasing the shares of Challa-palli Sugars Ltd., to get the controlling interest in Challapalli Sugars Ltd. In other words, it is his case that the controlling interest, which is expected to accrue to him, makes up the difference between the face value and the market value of the assets transferred.


3. Mr. Parvatha Rao, appearing for the assessee, contended that, in view of the findings of fact recorded by the Tribunal, the case does not fall either under Section 52(1) or under Section 52(2) and that there is no warrant for interfering with the construction placed upon Sub-section (2) of Section 52 by the Tribunal.
4. So, what has to be considered by us iu this reference is whether the transfer of equity shares of K. C. P. Ltd. by the assessee to his brother was effected with a view to avoid the tax liability or to have the tax liability reduced. We have also to see whether the fair market value of the shares transferred by the assessee exceeds the full value of consideration by an amount of not less than 15% of the value so declared. In other words, we have to examine whether the case falls under Section 52(1) or Section 52(2).
5. Section 2(14) defines "capital asset" as to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include items (i) to (iv) referred to therein. Section 2(22A) defines "fair market value" and it means, in relation to a capital asset, (i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) where the price referred to in sub- Clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under the Act. Section 2(24) defines "income "to include profits and gains and any capital gains chargeable under Section 45. Section 45 is the charging section for capital gains and, to the extent relevant, it reads :


"45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in Sections 53, 54, 54B and 54D be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous-year in which the transfer took place."


6. Another section, which we may notice before we reproduce Section 52, is Section 48. It deals with the mode of computation and deductions and it reads:
 "48. The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :
 (i) expenditure incurred wholly and exclusively in connection with such transfer;
 (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto."
7. Section 52 is in these terms:
 "52. (1) Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income-tax Officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under Section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer.
 (2) Without prejudice to the provisions of Sub-section (1), if in the opinion of the Income-tax Officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer of such capital asset by an amount of not less than fifteen per cent. of the value so declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer....." (Proviso not necessary).


8. As already stated by us, the first question to be considered is whether the transactions in question were entered into for bona fide reasons on account of the relationship between the assessee and his brother and whether the assessee effected the transfer with the object of avoidance of tax or reduction of tax liability.


9. For avoidance of payment of tax, it should be shown that the assessee has tried to avoid payment of tax or to have the tax liability reduced by some device or design. The Supreme Court, while approving the decision of the Gujarat High Court in Commissioner of Income-tax v. Sakarlal Bala-bhai [1968] 69 ITR 186 (Guj), observed in Commissioner of Income-tax v. Vadilal Lallubhai , that legal fictions are only for a definite purpose ; they are limited to the purpose for which they are created and should not be extended beyond their legitimate field. The subject is not to be taxed unless the charging section clearly imposes the obligation. It is well settled lhat it is not permissible to construe any provision of a statute, much less a taxing provision, by reading into it more words than it contains. But, if a section of a statute is considered as ambiguous, it will not be inappropriate to find out the reasons which persuaded the legislature to recommend the inclusion of that section. Section 52(1) postulates two main conditions before it could be invoked: (1) the transferee should be a person directly or indirectly connected with the assessee ; and (2) the Income-tax Officer should have reason to believe that the transfer effected by the assessee was with the object of avoidance of tax or reduction of his tax liability under Section 45 on capital gains. So far as the first requirement is concerned, there is no controversy in view of the direct relationship as brothers between the transferor and the transferee. As regards the second requirement, the Tribunal has given a finding of fact that the transfer of shares was not effected by the assessee with the object of reducing the tax liability under Section 45. We are afraid we cannot interfere with this finding of fact, though Mr. Rama Rao tried to persuade us that the object of avoiding capital gains is apparent on the face of the transaction,


tried to persuade us that the object of avoiding capital gains is apparent on the face of the transaction, viz., that the assessee sought to gain advantage by getting controlling interest in Challapalli Sugars Ltd., which also formed part of the consideration for the transfer. The finding of fact recorded by the Tribunal is final. That finding of fact is open to attack only when it is erroneous in law or when there is no evidence to support it or if it is perverse. The fact that the finding of fact is an inference from other basic facts will not alter its character as one of fact (see Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax [1957] 31 ITR 28 (SC) and I.C.I. (India) Private Ltd. v. Commissioner of Income-tax . In LC.L (India) Private Ltd. v. Commissioner of Income-tax [1972] 83 ITR 710, the Supreme Court, construing Section 52 of the Act, opined that the question whether the object of the assessee in transferring assets was to avoid or reduce his liability to tax on capital gains by making the transfer, does not involve the application of any legal principles to the facts established by the evidence and that the intention with which the particular transfer is made and the object which is to be achieved by such transfer is essentially a question of fact, the conclusion relating to which is to be arrived at on a consideration of the relevant material.


10. As has been pointed out by the House of Lords in Inland Revenue Commissioners v. Brebner [1970] 76 ITR 436, where there are two ways of carrying out a genuine commercial transaction, one by paying the maximum amount of tax, and the other by paying less, it would be wrong, as a necessary consequence, to draw the inference that, in adopting the latter course, one of the main objects was, for the purposes of the section, avoidance of tax. It is, therefore, obvious from the findings recorded by the Tribunal that the case of the assessee does not fall under Section 52(1). Now, it has to be considered whether the case falls under Sub-section (2) of Section 52. It is argued by Mr. Kama Rao that Section 52(2) operates independently of Sub-section (1) and in an area not covered by Sub-section (1) and that the findings of fact recorded by the Tribunal have no place when construing Sub-section (2). All that is necessary in order to attract Sub-section (2), according to the learned counsel, is, it is enough if the Income-tax Officer forms opinion on the facts that the fair market value of the assets transferred by the assessee on the date of the transfer exceeds the full value of the consideration declared by him in respect of the transfer by an amount of not less than 15%. In support of his contention, he relied upon the statement of the assessee that he transferred the shares in question not only for the consideration of Rs. 10 per share, but also for the advantage he was to gain by getting control over the management of Challapalli Sugars Ltd. The advantage, which the assessee may get or was likely to get, depends upon several imponderable circumstances. Unless the advantage can be brought within the sweep of the definition of "capital asset" (Section 2(14)), which means property of any


of the definition of "capital asset" (Section 2(14)), which means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include the items (i) to (iv) referred to in Section 2(14), it cannot be said to come within the meaning of "fair market value" (section 2(22A)). What Sub-section (2) of Section 52 speaks of is the fair market value of a capital asset transferred by the assessee. The advantage of the controlling interest, which the assessee hoped to have, cannot be said to constitute the difference between the value of the shares declared by him on the date of the transfer and the fair market value. Therefore, for forming an opinion in accordance with the requirements of Section 52(2), the possible controlling interest in Challapalli Sugars Ltd., which the assessee hoped to secure at a future date, cannot be taken into account. It is thus manifest that the "controlling interest" cannot be construed as income chargeable under the head "Capital gains".


12. The words "full value of the consideration", which also occurred in Section 12B(2) of the 1922 Act, came to be construed by the Supreme Court in Commissioner of Income-tax v. George Henderson and Co. Ltd. [1967] 66 ITR 622. The Supreme Court said that the expression "full consideration" in the main part of Section 12B(2) cannot be construed as having a reference to the market value of the asset transferred but the expression only means the full value of the thing received by the transferor in exchange for the capital asset transferred by him and that the main part of Section 12B(2) provides that the amount of capital gain shall be computed after making certain deductions from the "full value of the consideration for which the sale, exchange or transfer of the capital asset is made". Therefore, the full value of the consideration of the capital asset, in this case, "shares", is the consideration received by the assessee for their transfer to his brother. It is not the case of the department that the assessee had received more than what was declared by him as the full value of the consideration received by him. The object of introducing Sub-section (2) in the Finance Act of 1964 was to deal with cases of transfers for less than the market value with the object of avoidance of tax or reduction of tax liability. In our view, it does not cover cases where the consideration recorded and declared for transfer of the capital asset is the same as the consideration actually received. As already adverted to by us, it is not the case of the department that anything more than what was actually declared was received by the transferor-assessee. We are unable to agree with Mr. Rama Rao that because of the opening words in Sub-section (2) of Section 52, namely, "without prejudice to the provisions of Sub-section (I)", the object of the transfer effected is irrelevant


"without prejudice to the provisions of Sub-section (I)", the object of the transfer effected is irrelevant when construing Sub-section (2) of Section 52. There is no separate marginal note for subsection (2). Both the Sub-sections, in our opinion, form one code when construed in the light of the object of inserting Sub-section (2). Sub-section (2), therefore, cannot be divorced from Sub-section (1) and construed literally. As already pointed out, Sub-section (1) deals with a case of transfer for consideration less than the market value for the avoidance of tax or reduction of the tax liability. It is with the same object in view that Sub-section (2) has also been enacted. If we are to construe Sub-section (2) literally, as contended by Mr. P. Rama Rao for the revenue, it would apply to cases where the full consideration received by the assessee is bona fide disclosed resulting in taxing on a consideration which he had not in fact and actually received. The meaning of the word "income" as stated by S. R. Das J. (as he then was) in Navinchandra Mafatlal v. Commissioner of Income-tax indicates that "its natural meaning embraces any profit or gain which is actually received". The Supreme Court while so expressing its view endorsed the observations of Lord Wright in Kamakshya Narain Singh v. Commissioner of Income-tax [1943] 11 ITR 513 (PC). This view of the Supreme Court in Navinchandra Mafatlal's case [1954] 26 ITR 758 was again affirmed by the Supreme Court in Navnit Lal C. Javeri v. K. K. Sen, Appellate Assistant Commissioner of Income-tax [1965] 56 ITR 198, that the word "income" used in Entry 54 of List I of the Seventh Schedule must be given its ordinary, natural and


used in Entry 54 of List I of the Seventh Schedule must be given its ordinary, natural and grammatical meaning and, that is, income is a thing that comes in The revenue cannot choose to tax as income ah item which in no rational sense can be regarded as a citizen's income.


13. We have also in this case a circular issued by the Central Board of Revenue. In this circular, the attention of the income-tax authorities was invited to the speech of the Finance Minister in the Lok Sabha at the time of insertion of the provisions of Section 52(2). In this circular, the Central Board of Revenue has clearly told the officers that Sub-section (2) of Section 52 is not to levy tax on perfectly bona fide transactions where the full value of consideration received has been correctly declared by the assessee. A circular like this issued by the Board is binding on the department. The speech of the Finance Minister which is extracted in the circular for the benefit of the taxing authorities reads :
  "Today practically every transaction of the sale of  property is for a much lower  figure than what is actually received.    The deed of registration mentions a particular amount; the actual money that passes is considerably more. It is to deal with these classes of sales that this amendment has been drafted..... It does not aim at perfectly bona fide transactions.....
but essentially relates to the day-to-day occurrences that are happening before our eyes in regard to the transfer of property. I think, this is one of the key Sections that should help us to defeat the free play of unaccounted money and cheating of the Government."


14. The Supreme Court has recently taken the view that the speech of a Minister may be used as an aid to correct interpretation. Justice Beg (as he then was) in Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax , after referring to the speeches in Parliament, observed at page 252 :
  "It was not just the speech of any member in Parliament. It was the considered statement of the Finance Minister who was proposing the amendment for a particular reason which he clearly indicated. If the reason given by him only elucidates what is also deducible from the words used in the amended provision, we do not see why we should refuse to take it into consideration as an aid to a correct interpretation. It harmonises with and clarifies the real intent of the words used. Must we, in such circumstances, ignore it ?"


15. The view expressed by Beg J. was again endorsed by the Supreme Court in Indian Chamber of Commerce v. Commissioner of Income-tax [1975] 101 ITR 796. Therefore, on a true construction of the language of the provisions of Section 52( 1) and (2) in the light of the Board's circular and the speech of the Finance Minister, we are of the opinion that these provisions are attracted only where the transfer of a capital asset is effected with the object of avoidance or reduction of the tax liability under Section 45 and not where the full value of the consideration received is declared.


16. The learned counsel for the revenue, however, sought to rely upon the view expressed by Gopalan Nambiyar J. (as he then was), in Income-tax Officer v. K. P. Varghese [FB] on behalf of himself and Viswanatha Iyer J. He was of the opinion that the consideration indicated by Sections 48 and 52 is one and the same, viz., the consideration for the transfer of capital assets. He so concluded on the reasoning that the heading and marginal note of a section cannot control the language in the main body of the section, and that it is not open to the court to look into the speeches of a Minister in Parliament or the instructions issued by the Board for understanding the object and purpose in enacting a particular provision of law. According to him, the instructions of the Central Board of Revenue and the speech of the Minister should not have the effect of controlling the meaning of the plain words in the section. We are unable to say that the words are so plain in Section 52(2) as to straightaway hold that the legislative intent is amply borne out by the language employed therein. Section 52 is intended only to cover cases where the assessee does not declare the full value of the consideration received or accruing to him with the object of avoidance of tax or reduction of tax liability. There is nothing in the language of Section 52(1) or 52(2) to suggest that Parliament intended to tax as income something which in no rational sense can be regarded as income by the assessee. The likely advantage which the asses-see was to gain by the transfer of the shares cannot be construed as coming within the ambit of profits and gains of business or profession. The intention of Parliament could not have been to levy tax where no right to profits or gains accrues or arises on the transfer of capital assets. Section 52, therefore, applies to cases of understatement of


on the transfer of capital assets. Section 52, therefore, applies to cases of understatement of consideration, that is to say, where consideration received is more than what was declared and not to cases of bona fide transfers of capital assets where nothing more than what was declared was received. The view expressed by us is in conformity with the view taken by the High Court of Madras in Sundaram Industries Private Ltd. v. Commissioner of Income-tax [1969] 74 ITR 243, Sivakami Company Private Ltd. v. Commissioner of Income-lax [1973] 88 ITR 311 and Commissioner of Income-tax v. Rikadas Dhuraji [1976] 103 ITR 111 and the Karnataka High Court in Additional Commissioner of Income tax v. M. Ranga Pai [1975] 100 ITR 413. For the reasons recorded, the reference is answered in the affirmative and in favour of the assessee. The revenue shall pay costs to the assessee. Advocate's fee Rs. 250.


Purushotham Haridas And Ors. vs Amruth Ghee Co. Ltd., Guntur And ... on 16 August, 1956

JUDGMENT Chandra Reddy, J.
 1. These appeals arise out of O. S. No. 45 of 1947 on the file of the Addl. Subordinate Judge, Guntur and the parties are the same. A. S. No. 118 and 173 of 1951 are by the 1st defendant and the third defendant, who is the proprietor of the 4th defendant firm, while A. S. No. 485 of 1951 is by the plaintiff. The material facts may be briefly set out.
 2. In 1946, nine merchants trading in ghee formed themselves into a private limited company called Amrut Ghee and Co., Guntur, the present plaintiff, for trading in ghee. They obtained a permit to export 330 tons of ghee to Calcutta, Kharagpur and Midnapur, on the 14th of October, 1946. As they were not acquainted with the market conditions of Calcutta etc., they sought the assistance of the 1st defendant, one Purushottam Hari Das also a ghee merchant of Guntur, who has two brothers at Calcutta, defendants 2 and 3, the 3rd defendant being the sole proprietor of the 4th defendant firm.


It was agreed between the parties that the 1st defendant should arrange for sale of the ghee to be exported to the above mentioned place on commission basis at Rs. 2/- per tin and also secure a financier who could make advances on the security of the stock sent to them, effect sales thereof on commission basis, and appropriate the sale proceeds towards their advances and take interest, commission and incidental charges etc. In accordance with these terms, the 1st defendant arranged with his brother, the 3rd defendant, who was trading in Calcutta in the name of the 4th defendant firm for advancing money with interest at 9 % per annum on the security of the ghee tins sent to the latter.
 The 3rd defendant could sell the tins for which he would be paid a commission of 1 1/2 per cent and he could apply the sale-proceeds in discharge of the amounts paid by him. As the duration of the permit originally granted was to expire on the 10th of November. 1946. the plaintiff had it extended up to 35th of December 1946. Between 14th October, 1946 and 15th December, 5604 tins of ghee were exported to Shalimar. Calcutta by the plaintiff and they were taken delivery of by the 4th defendant firm whereof the 3rd defendant was the sole proprietor as mentioned supra.


There is dispute between the plaintiff and the 1st defendant regarding the ownership of 779 tins out of these and that forms the subject-matter of A. S. 119/1951. The first consignment of these tins arrived at Shalimar on the 28th of October. Most of the ghee tins received by the 3rd defendant in the name of the 4th defendant were sold through P. Ws. 1 to 5 who were themselves commission agents between the dates of arrival and the 31st of March, 1947. It appears they sold 3167. tins of new ghee and 1258 1/2 tins of deteriorated ghee. The 3rd defendant was sending reports of sales of the ghee periodically.
 On several occasions, the plaintiff protested against the low prices at which their ghee was being disposed of by the 3rd defendant and demanded that it should be sold at not less than a particular figure mentioned by them. But the 3rd defendant did not pay any heed to the remonstrances of the plaintiff and continued to sell at prices which, according to the plaintiff, were far below the market rate.
 There was voluminous correspondence between the parties and as they could not settle the matter amicably, the plaintiff laid this action for rendition of accounts and for payment of the amounts ascertained to be due to them, and for a direction to deliver up all the unsold tins of ghee to them, on the allegations that defendants 1 to 3 who constituted members of a joint family and for whose benefit the 1st defendant took up the agency colluded with a view to make wrongful gain and to defraud the plaintiff, and the 4th defendant sent false reports about the market rates and the price for which plaintiff's ghee was sold and also made several fictitious transactions.


It was also the plaintiff's case that the 1st defendant, their authorised agent mainly responsible for accounting to the plaintiff and therefore to maintain accounts, instead of protecting their interests, conspired with his brothers and they jointly put forth sales at very low rates, while much higher price was obtained thereof, and thereby made large secret profits.
 3. The 1st defendant contested the suit by filing a written statement. His Answer was that at the request of the plaintiff he found a financial who was to be paid interest and commission at the rates mentioned in the plaint that the plaintiff's partners themselves had to deal directly with the 4th defendant through their representatives stationed on the spot and that he should he paid a commission of Rs. 2/- per tin extending the same to the entire quantity of 330 tins, that he should have no liability whatsoever for any profit or loss that the plaintiff might sustain.
 It was added that he was to keep in touch thereafter by way of general guidance and superintendence and by way of pushing up sales when it became necessary. He was merely kept informed of the various details and sales thereof by the 4th defendant and he was also in touch with the same on occasions when he had to go to Calcutta. The allegations of collusion and conspiracy or of making secret profits were denied by him. It was contended by him that he was not liable to account to the plaintiff's firm.
 4. The 2nd defendant contested his liability to the plaintiff. According to him, he had no concern with the plaintiff's transactions either with the first or 3rd defendant nor had he even knowledge thereof.


5. The defence of the 3rd defendant was that he sold the ghee tins of the plaintiff for proper price and at the rates then prevailing in the market with the knowledge of the plaintiffs representatives and under the directions and advice of the 1st defendant, their selling agent, that he acted in the best interests of the plaintiff and that neither he nor the other defendants made any profit at the expense of the plaintiff. It was also pleaded that there being no direct relations between him and the plaintiff he was not answerable to it and hence he was under no obligation to render it any account. All the three defendants were agreed that they were not members of a joint family and that the agency taken up by the 1st defendant and 3rd defendant was for their individual benefit.
 6. During the trial, there was a change of front by defendants 1 and 3 and they adopted the attitude in the witness-box as D. Ws. 1 and 4 respectively that the several ghee tins were purchased by the 3rd defendant for his firm. Some of them were sold to him by the plaintiff and some by the 1st defendant.
 7. Pending the suit, a Commissioner was appointed for the purpose of seizing the ghee tins not disposed of. He proceeded to Calcutta in May, 1947 and in spite of the opposition and obstruction caused by the 3rd defendant he could seize 786 tins of ghee, sold it for Rs. 57,801-3-6 and after deducting the poundage and other charges deposited Rs. 56,464-5-0, the balance of sale proceeds into Court.


8. The Subordinate Judge, who tried the suit, granted a decree against defendants 1, 3 and 4 jointly and severally for Rs. 1,20,218-1-6 together with interest thereon at 9 per cent per annum from 1-10-1947 which had accumulated to Rs. 36,756-10-10 up to the date of decree. Out of this decretal amount was to be deducted a sum of Rs. 60,001-2-0 made up of Rs. 56,464-5-0 deposited by the Commissioner to the credit of the suit in the circumstances mentioned above and Rs. 3,536-13-0 interest earned thereon by investment.
 The plaintiff could withdraw this amount and the balance of the decree money was to carry interest at 6 p.c. per annum. No decree was passed against the 2nd defendant as the trial Court found that the 2nd defendant was in no way concerned with the suit transactions. The Subordinate Judge found that defendants 1 to 3 were not members of a joint family and even if there could be such there was no joint business and that their trades were separate, unconnected with each other and that the agency of the 1st defendant was not a joint family concern.


In his view, the 1st defendant was to arrange for a financier, give general directions and exercise general supervision etc., and receive commission of Rs. 2/- on the tins sold, that the defendants 3 and 4 were to render account to the plaintiff, they being the substituted agents of the plaintiff and that the liability of the 1st defendant arose by reason of his conspiracy with defendants 3 and 4 in bringing about fraudulent transactions and causing loss to the plaintiff and that he was entitled to a commission at Rs. 2/.- per tin on the sale of 2,539 tins. Defendants 1 and 4 filed two separate appeals against the judgment disputing their liability to render account to the plaintiff.
 9. The plaintiff by his appeals A. S. 485/1951 assails the judgment in so far as the 2nd defendant was absolved from all liability and in so far as it allowed commission to the 1st defendant on some of the tins of ghee sold and did not allow a higher price in respect of some tins remained unsold either through P. Ws. 1 to 5 or by the Commissioner.


10. We will first take up A. S. 118 of 1951 which covers the issue relating to the liability of the 1st defendant to account to the plaintiff. In support of this appeal, it is contended for the appellant that he was only a broker who was requested to arrange a financier and a commission agent in consideration of which he would be paid a commission of Rs. 2/- per tin and the moment he had brought the plaintiff and the 3rd defendant together, he had no more obligations to the plaintiff, he had only to receive commission from the plaintiff on the basis mentioned above not only in regard to the ghee tins sold but it had to extend to the 330 tins covered by the permit.
 It was also submitted that having found that the appellant was not liable to account and that he could be made liable for the losses sustained by the plaintiff as a result of his fraudulent conduct in regard to the sale of certain number of tins, a decree should not have been passed against him for all the losses said to have been sustained by the plaintiff. The learned counsel also maintained that if as found by the trial Court the 3rd and 4th defendants were substituted agents no liability could attach to the 1st defendant assuming he joined the 3rd defendant in defrauding the plaintiff of his dues.
 11. On the other hand, the stand taken by the plaintiff is that the appellant was the chief agent, the 3rd and 4th defendants being his sub-agents and that he was primarily responsible to the principal, namely, the plaintiff for all nets of commission and omission by the sub-agents and that the sub-agents' liability arose only by reason of their fraud and wilful wrong. Counsel for the respondents has also attacked the finding of the Subordinate Judge that the 3rd and 4th defendants were substituted agents.


12. The problem thus posed has to be solved with reference to the voluminous correspondence that passed between the parties, the oral evidence and the surrounding circumstances. Before we launch 011 a discussion of the evidence and the legal position of the parties, it is useful to refer to the attitude adopted by the defendants in their written statements. While in one breath it is asserted by the 1st defendant in his statement that it was specifically agreed between him and the plaintiff in the beginning that the appellant should put the plaintiff in contact with the 4th defendant and that the former should station their own representatives to effect and supervise sales and should deal directly with the 4th defendant through his representatives stationed on the spot, the appellant beyond receiving a commission ot Rs. 2/-per tin not having any more liability in the matter, it was stated in the next breath that he had to give general guidance and supervise the sales and push up the sales when it became necessary.
 It was also admitted in the answer that he was the authorised agent for the sale of the plaintiff's ghee on the terms of his being paid a commission of Rs. 2/- per tin. There is the further recital in the written statement that he was kept informed of the various sales and details thereof by copies of letters of the 4th defendant to the plaintiff and he was also in touch with the same on occasions when he had to go to Calcutta. It is difficult to reconcile the two positions taken by him.


Further, the case of the 3rd defendant and the 4th defendant as disclosed in the written statement is inconsistent with the 1st defendant being a mere broker. The contents of paragraphs 7 and 21 of 4th defendant's written statement amply hear out the plaintiff's case that the 1st defendant was his commission agent and that defendants 3 and 4 were only sub-agents. It is stated inter alia in paragraph 7 that the goods were sold under the general guidance, advice and instructions of the 1st defendant or of some directors of the company and that they were corresponding with the plaintiff about the sales and market rates only to help the plaintiff and his direct representatives on [he spot to obtain quick sales. The last sentence occurring in paragraph 21 is thus :
 "But one thing is definite that the plaintiff represented and held out the 1st defendant as the representative under whose advice and instructions his goods sent to Calcutta may be sold."
 13. These passages leave little room for the contention of the 1st defendant that he was no more than a broker entitled to receive the commission at Rs. 2/- per tin.


14. We shall next trace the facts bearing on this issue. At the outset, it may be remembered that the case for the appellant is that it was only on the 27th or 28th of October 1946 that the main terms and conditions of the contract between the parties were settled at Calcutta after P. W. 8 and other representatives of the plaintiff went to Calcutta whereas the case for the plaintiff is that the terms of agency of the 1st defendant as well as those relating to the 3rd defendant were agreed upon at Guntur, the 1st defendant having fixed up with his brother probably by talking to the latter over the trunk-phone (as suggested by the plaintiff to the 1st defendant in his cross-examination) and it is only subsequently that the ghee tins were despatched to Calcutta.
 P. W. 8 testified to the main terms of agency having been settled at Guntur on or about the 16th of October. This version is confirmed by other witnesses for the plaintiff. It appears from the material on record that the first two consignments were sent on the 21st and 22nd of April, 611 and 772 tins respectively and they were received at Calcutta only on the 28th. It is also evident from the testimony of P. Ws. 2 to 4 that arrangements for the sale of ghee to be exported by the plaintiff were made even about ten days before the arrival of the plaintiff's goods at Calcutta. This is not in consonance with the appellant's case, but is explicable only on the hypothesis that they had already reached an understanding in respect of these sales.


It is unlikely that the plaintiff would have despatched the goods to the 3rd defendant without there being any prior engagement especially when the 3rd defendant was not acquainted with any of the directors of the plaintiff company. It is significant that the appellant was in Calcutta by the time the goods reached the place to make arrangements for the sale of the ghee and immediately he arrived at Calcutta a telegram was sent on his behalf that money was being remitted. In this connection P. W. 8 deposed that 1st defendant was there because he had to take delivery and have the goods sold. It is unlikely that these tins would have been despatched without fixing the terms and conditions upon which entrustment was to be made to the parties and the sales to be effected.
 15. We shall now turn to the correspondence that passed between the parties. The earliest letter which throws light on the jural relations between the plaintiff and defendants 3 and 4 is Ex. A-111, a letter written by the plaintiff to the 3rd defendant on 26-10-1946. It says that after the tins are taken delivery of they should be credited to the plaintiff's account and the addressee should consult the 1st defendant on his arrival at Calcutta. It is clear from this that from the inception the 1st defendant was regarded as the person responsible for the sale of the goods.


Another letter which points to the same inference is Ex. A-113. This is by the 4th defendant to the plaintiff informing the latter inter alia that a sum of Rs. 20,000/- was being sent with P. W. 8 and the balance shortly thereafter and they would try their best to sell the ghee at a high rate. A copy of this was sent to the 1st defendant, an indication that the 3rd and 4th defendants were only the sub-agents and the 3rd defendant was conscious of his duty to keep his principal, namely, the appellant informed of the particulars of the transactions.
 16. By Ex. B-195 written on 8-11-1946 the third defendant was directed inter alia by the plaintiff to consult Sri Purushottam Babu. That letter also recited that specimens were sent through Purushottam Babu. Another letter written by the plaintiff to the 3rd defendant on 13-12-1946, Ex. B-24 has the same effect. One of the recitals there was: 'We have consulted with our Purushottam Babu here about the selling of our old and new stocks with you'.


17. Copies of letters written by the 3rd defendant to the plaintiff intimating either about the sales or about the steps being taken by them in regard to the disposal of the goods or other matters touching the plaintiff's ghee tins were almost invariably sent to the 1st defendant. (See Exs. A-113, A-251, A-252, A-284, A-250, A-248, A-374, A-114, A-249, A-124, B-229, A-253, A-258, A-254, B-240, B-306, A-255, A-256, A-118, A-119, B-247, A-153, B-309, B-370 and B-311).
 In all these letters the 3rd defendant assures the plaintiff that they would do their best for sale of the latter's goods at a high price. Though the fact that the 3rd defendant furnished copies of these letters to the appellant by itself may not establish conclusively that the 1st defendant was the agent of the plaintiff and that the 4th defendant was only a sub-agent, it probablises the cases of the plaintiff.
 There are some letters written by the 4th defendant company which afford clinching material as regards the relations between the plaintiff and the 1st defendant on the one hand, the plaintiff and defendants 3 and 4 on the other. The correspondence was occasioned by the plaintiff remonstrating with the fourth defendant for selling the ghee tins at a very low price even as against their specific requests to sell them for reasonable prices.


18. As early as 8-11-1946, the 4th defendant by letter Ex. A-252 informs the plaintiff that they were trying to act according to the instructions left by Purushottam Babu. That the 3rd defendant was looking to 1st defendant for guidance is apparent from the conversation reported to have taken place between P. W. 7 and the 3rd defendant as embodied in Ex. B-223 dated 10-1-1947. That letter refers to the statement of the 3rd defendant dant that it was advisable for the 1st defendant to release stocks for sale but that so far the 1st defendant had not written to him about it. Ex. A-143 a letter dated 6th January, 1947 by the 4th defendant to the plaintiff is also useful in that it shows that it is on the advice of the 1st defendant that the third and 4th defendants were acting in regard to the sales in question. The relevant contents of this document are:
 "But, by pursuance and advice of Mr. Purushottarn Babu we have given you the above rate, i.e., Rs. 110/-."
 19. In reply to a telegram sent by the plaintiff to the 4th defendant requesting him not to sell the stocks without reference to them and calling upon him tp explain why he sold 250 old tins without a letter, this is what the 3rd defendant writes (Ex. A-153):


"On the arrival of your Mr. Purushottam Haridas we wired you on the first instant which runs as follows: 'Amruth, Guntur:-- Arrived safely. Dont draw hundi. Market very dull, 163 old 110, to which you are up to date, silent. Then we sold 100 tins old under instructions from your Purushottam Babu. Your Mr. Subbarao did not leave instructions to us while leaving Calcutta and since he left that we received your wire yesterday and the letter under reply today. We are concerned with your sailing agent here only and we are not at all concerned with your purchase price and moreover admittedly your old stack is of far inferior quality. We have every apprehension about our money lying in block after returning your hundi and as a businessman you should not stop our hands to sell the goods at imaginary higher rates for which there might be no market hereafter. When your selling agent is here we fail to understand why your are apprehending the loss to the company."


20. On the same day a telegram was sent by the 3rd defendant to the plaintiff saying that they were selling under the instructions of the 1st defendant. The contents of Ex. A-153 are consistent only with the plaintiff's case that the 1st defendant was their agent and that 3rd and 4th defendants were his sub-agents. Another significant feature of this letter is that the 1st defendant was described as the selling agent of the plaintiff which lends considerable support to the plaintiff's case. It is not as if the 1st defendant was unaware of it, because a copy of it was communicated to the 1st defendant. It is admitted by the 1st defendant as D. W. 1 that he had received it. The 1st defendant did not repudiate the part attributed to him in Ex. A-153. On the other hand, he admitted in the witness-box in his cross-examination that he did give the instructions as alleged in that document.
 21. The same position is established by Ex. A-250. (It may be mentioned here that a statement was made at the Bar by Mr. Sambasiva Sastry who appeared for the plaintiff in the lower Court that all the documents exhibited for the defendants were marked at the instance of the 1st defendant and this is not contradicted by the counsel who appeared for the 1st defendant in the trial Court and who is also present here). This letter was written by one of the directors of the company, Gangadhara Rao, to P. W. 11 in which the eon-tents of a letter written from the 3rd defendant were set out, and they are as follows:--


"At first we sent a telegram to you that the market was dull and the rate for the new stock was rupees one hundred and sixty five and for the old stock rupees one hundred and ten. But, there was no reply from you. So, as directed by your selling agent Purushotham Babu Garu, wel sold, the old stock at rupees one hundred and ten. Then as your man Suhba Rao Garu gave us Information we fixed up as high a rate as possible in the market, and after informing Purushotharn Babu Garu also, sold two hundred and fifty tins of old stock at rupees one hundred and twelve after Babu Gam consented."
 22. There is another document which has the same significance. This is a letter written by P. W, 7 to the plaintiff company on 30-11-1946 (Ex B-212). It conveys to the addressee the conversation that took place between P. W. 8 and the 1st defendant.
 "Viswanadham Garu's questions.


Purushotham Garu's answers.

We said "we have sent our 2.497 tins of ghee. Have all tins been sold or not?

You have nothing to do with our 779 tins. Your 1,112 tins excluding 271 tins sold as well as the waggon of 335 tins which arrived yestetday, in all 1,447 tins remain.

I said that the goods remaining should be sold quickly. We sent superior goods. You should Immediately sell them.

He said that old stock could not be disposed of so quickly. We are not persons who throw dust fn the eyes. You do not know what goods were put.

 one of your directors told us that, your directors themselves weigh all and filted.

If old stock is not sold quickly we will sustain loss.

It is not possible for me. I did not give guarantee to you that I would sell."


23. The talk between P. W. 8 and D. W. 1 as reported in that letter clearly indicates that it was the 1st defendant that was chiefly responsible for the sale of the goods.
 24. We may now turn to some correspondence that passed between the plaintiffs clerk P. W. 7 and plaintiff bearing on the attitude of the 1st defendant which furnishes positive evidence that the 1st defendant was directing the sales of the goods and also that he was acting in unison with the 3rd defendant in perpetrating fraud upon the plaintiff. P. W. 7 was a clerk of the plaintiff stationed at Calcutta to report to the plaintiff about the market conditions and also about the sale of the plaint ghee tins. The letters written by him disclose that he was absolutely kept in the dark, of the transactions relating to the ghee tins in question or about the persons through whom sales were being effected and that he was never informed of any of the transactions and much less consulted, Reference may be made in this context to Ex. A-144 written by him on 6-1-1947.
 25. This document was proved by P. W. 7 and the truth of the contents thereof testified to by him. There does not seem to have been any cross-examination in regard to it. It contains the following conversation purported to have taken place between the writer and the 1st defendant.


"I told Purushotham Babu Garu that if it was sold at that rate the company would fall down and that therefore he should not sell it at that rate. Purushotham Babu said that we should repay the advance paid by them and then we might sell as we liked. He further said if tomorrow we keep it without selling and thereby loss is sustained, and if after excluding the advance given by us, there should be still loss, show me the man who will pay. What does it matter to you? There is no use if you speak as you like."
 26. It was also mentioned in that letter that the 1st defendant told him that the plaintiff sent the 1st defendant a telegram questioning him as to why he sold at Rs. 110/- and that after receiving a reply from him etc., 1st defendant said "let them come. I shall talk to any one who comes.'' The author of the letter also complained that his words carried no weight and no useful purpose would be served by his remaining at Calcutta.
 27. Ex. B-308 another letter written by the same person three days earlier which also reports the talk between him and the 1st defendant is on the same lines. Ex. B-235 dated 30-10-1946 written by the plaintiff to P. W. 8 one of the directors and Ex. B-200 dated 8-11-1946 written by P. W. 14 to the plaintiff indicate that even the financial transactions which the plaintiff had with the defendants went through the 1st defendant whenever he was in Calcutta.


28. In the face of this documentary evidence, it is futile for the 1st defendant to contend that he was not the agent of the plaintiff and was there fore not liable to account to them. The several documents referred to above clearly prove that the position occupied by him in relation to these goods was that of an agent and that he cannot absolve himself of all responsibility.
 29. The oral evidence adduced by both the sides does not in any way conflict with the plaintiff's case. P. W. 6 the managing director of the company during the relevant period, deposed among other things that by the terms of the contract entered into between the 1st defendant and the plaintiff at Guntur the former was to go to Calcutta, Kharagpur and Midnapur, to sell ghee and was to be paid a commission of Rs. 2/- per tin of ghee, sold through him, and that the goods were sent in the name of the 4th defendant as per the directions of the 1st defendant and that the 1st defendant was responsible for all the goods the plaintiff parted with and also for the money advanced.


In this respect, he is supported by P. W. 8 Chairman of the Board of Directors of the plaintiff company who testified to 1st defendant stating to them that he would get the goods sold through his brother at Calcutta. This version was confirmed by P. W. 11 another member of the plaintiff company. He stated that the 1st defendant was to be paid Rs. 2/- per tin which he sold at Calcutta. He also added that he asked defendants 1 and 3 in January 1947 as to why they had stated that the price of the stock was Rs. 155/- or two rupees more than that while in fact their inquiries showed that the price was Rs. 172/- and that 1st defendant was very angry with him and stated to him "why do you talk that we are committing fraud in season and out of season."
 He at once replied and asked hint to state if this was not fraud, what else was fraud. D-1 then became angry and they then left the place. The witness also said that when Raghavayya asked defendant 1 to render an account, to state how many tins have still to be sold and what the sum was with them, 1st defendant became angry and said "Shut up. Do not talk nonsense". It also appears from his evidence that the 3rd defendant tried to explain away the outburst of temper of the 1st defendant as due to the contents of the letter written by Gangadhara Rao.


The evidence of P. W. 7 who was sent to Calcutta by the plaintiff to keep a watch over the transactions is in consonance with the version of the plaintiff. In the course of his deposition he said that he along with some others went to the 1st defendant and the 1st defendant said that he would sell plaintiff's goods properly, that on another occasion he stated that Calcutta was not Guntur for selling away rotten goods for good prices and that in Calcutta no one could be imposed, that on 6-1-1947 when he asked 1st and 3rd defendants to tell him how much stock was sold and how much money was due they did not give any reply. He also stated that defendants 1 and 3 were selling the suit stock.
 30. The oral evidence let in by the defendants does not very much advance their case. On the other hand, the admissions contained in their evidence lend support to the plaintiff's case. D. W. 1 stated that he was no more than a broker, that direct relations were established between the plain tiff and the 3rd and 4th defendants, that tie had no responsibility in the matter, but had a right to receive commission but also denied the conversation between himself and P. W. 7 and P. W. 1 as stated by the latter two. But the case of his being a broker is not consistent with portions of his deposition.


He said that by December 1946 price of ghee was going down further, that he went to Calcutta then, that 3rd defendant told him that other kinds of ghee better than plaintiff's ghee were being sold in the market and that he would see that his stock was sold and so he went on 31-12-1946. He admitted that he must have given the instructions to the 3rd defendant in respect of 100 tins on behalf of plaintiff, that the 3rd defendant described him as selling agent and that he did not repudiate this. It was further stated by him in cross-examination that he was at Calcutta on behalf of the plaintiff to give advice to plaintiff or his representatives in respect of sale of their ghee. The same result is reached by his statement that he told the plaintiff that the 3rd defendant was purchasing all these stocks.
 31. Another set of the 1st defendant which also makes the case of the plaintiff probable is the transaction relating to the sale of 1500 tins by him to the 3rd defendant. It is true that he tried to justify this alleged sale pleading that he was authorised by P. W. 11 to effect a sale of these tins to the 3rd defendant who was pressing for the re-payment of the money and who was apprehensive of his reimbursing himself the advances made by him to the plaintiff.


The case of the 1st defendant in this behalf is that on 3-3-1947 he bad a letter from the 3rd defendant complaining of the delay in the plaintiff repaying the 3rd defendant large sums of money still due to him, that he showed this letter Ex. B-311 to P. W. 11 on that very day and that thereupon P. W. 11 requested him to sell away 1500. tins to the 4th defendant and thus got the plaintiff's liability reduced and it was thereafter he sent a telegram to the 3rd defendant offering 1500 tins for sale and that this offer was accepted by the 3rd defendant. This story of the 1st defendant has to be rejected for various reasons.
 For one thing, there is no material to substantiate this case of his. If there is any truth in it, the plaintiffs themselves would have made the offer; secondly, the story of the 3rd defendant feeling apprehensive of repayment of the money is a very unconvincing one for the reason that there was ample security for any small sum of money that might be due to them from the plaintiff. Again, it appears from the evidence that the 3rd defendant was not advancing any money of his, but that he was merely passing on a substantial portion of the sums which he got from P. Ws. 1 to 3 through whom the goods of the plaintiffs were sold.


The appellant's story also is belied by the fact that the envelope which is supposed to contain the letter alleged to have been received by him and showed to P. W. 11 is stamped 4-3-1947. If that is so, it is useless to pretend that he had received a letter on the 3rd and that was responsible for the transaction relating to 1500 tins of ghee. It this case of his is rejected, the inference is that the 1st defendant acted on his own authority in offering to sell 1500 tins which means he proceeded on the assumption that it was within Ms competence to sell the goods of the plaintiff which can only be on the basis of his being a commission agent.
 32. Now, the evidence of D. W. 4 his brother completely destroys the case of the 1st defendant in this behalf, He stated among other things that the plaintiff gave a telegram on 31st December 1946 of which Ex. A-8 is a copy intimating that the 1st defendant would be coming and that the 1st defendant was sent by the plaintiff to sell the old stock of ghee, and that 250 old tins were sold by the 1st defendant on behalf ot the plaintiff. He also deposed that the 1st defendant was the selling agent of the plaintiff and that he had every right to sell the goods as plaintiffs representative.


It was in the capacity that 1500 tins of the plaintiff were sold by the 1st defendant to him. The evidence of this witness was also to the effect that some of the tins were sold to him by the 1st defendant after consulting Subbarao. The witness also added that the 1st defendant was the representative of the plaintiff and he had the right to sell the goods of the plaintiff. He further said that he was not acquainted with the plaintiff and that it was the 1st defendant that introduced the plaintiff to him.
 Thus, there is satisfactory evidence on the side of the plaintiff that the 1st defendant was employed by the plaintiff as their agent, that the former had appointed as his sub-agents defendants 3 and 4 and that the latter always looked to him for all the details as to their disposal, that they were taking orders from him and that the 1st defendant had not ceased to occupy the position of an agent at any time during the relevant period and therefore rendered himself liable for the acts and defaults committed by the 3rd and 4th defendants. The evidence also discloses that not only he was aware of the fraudulent conduct of the 3rd defendant in reporting fictitious sales but even encouraged him to do so.


In his deposition as D. W. 1, D-1 said that except 786 tins delivered Mm to the commission, (sic) the 3rd defendant purchased all other tins. This statement discloses an anxiety on the part of the 1st defendant to enable the 3rd defendant to make as much illegal gain as possible. The material on record establishes beyond doubt that the 1st defendant was acting in concert with the 3rd defendant and both of them were parties to several make-believe transactions which were calculated to deprive the plaintiff of their legitimate dues. There can therefore be little doubt that the 1st defendant was guilty of fraud as much as the 3rd defendant.
 33. This position is controverted by the counsel for the 1st defendant. It is argued that the direct correspondence between the plaintiff and the 1st defendant could only he consistent with the plaintiff treating the 3rd and 4th defendants as his agents, and this correspondence justifies the finding of the Judge that the 3rd and 4th defendants were constituted substituted agents of the plaintiff, that he was merely a broker whose only duty was to supervise and superintend the sale of the plaintiffs stock and had the right to receive remuneration at Rs. 2/- per tin. We do not think that this contention is substantial.


The mere fact that the 3rd defendant was writing directly to the plaintiff and that the latter was requesting the 3rd defendant to sell the goods at a profitable rate and not to dispose of at a low price does not create the relationship of principal and agent between the 3rd and 4th defendants and the plaintiff. As the 1st defendant was also a resident of Guntur like the members of the plaintiff's concern and for the sake of convenience and quicker despatch, this procedure must have been adopted between the parties, But the 1st defendant was appraised of all the transactions and copies of letters were sent to him of almost all the letters. The reason for the direct correspondence is also given in the written statement of the 4th defendant. The relevant passage occurring in paragraph 7 is as follows:
 "This defendant was corresponding with the plaintiff about the sales and market rates only with a view to help the plaintiff and his direct representatives on the spot to obtain quick sales and with a view to repay himself as early as possible."
 34. This factor does not in any way alter the position of the parties and the subordinate agency which the 3rd and 4th defendants held would not be converted into that of the agent and principal. The exchange of letters directly between the plaintiff and the 3rd defendant does not operate to discharge the 1st defendant from his liability to his principal. If a person is initially appointed as agent and if the latter engages his own sub-agent for carrying through certain transactions, the mere circumstance that the sub-agent corresponded not with his employer but with the main principal, does not divest the main agent of his character as such.


35. There is clear authority for this position. In Lockwood v. Abdy, (1845) 60 ER 428, the plaintiff who had real estates in the county of Essex appointed one Abdy as his agent with full power to manage his estates and with express authority to appoint proper person to act as agent under him. A solicitor by name Andrews was employed by Abdy to receive the plaintiff's rents and he in the management of the estates. A bill was filed by the principal against Abdy and also Andrews who was charged with various acts of mis-conduct in the management of the estate. The answer of Abdy was that it was not sustainable against him.
 It was laid down by the Vice-Chancellor Sir L. Shad well that Andrews was responsible to Abdy and that the bill was to be dismissed as it was unsustainable against Andrews in spite of the fact that in Andrew's books items were entered and charged as against the plaintiff and that the evidence showed that Andrews had prepared the power-of-attorney and had various interviews with the plaintiff and advised him as to the management of the affairs, that the accounts between the plaintiff and Abdy had never been settled, but they had been made Out and rendered by Andrews and were intituted as accounts between Abdy and Andrews as the agents by power-of-attorney of the plaintiff Mr. Lockwood.


36. Hugh Francis Hoole v. Royal Trust Co., AIR 1930 PC 274, also illustrates this principle. This was an appeal from a judgment of the Supreme Court of Newfoundland. A firm R entered into an arrangement with H that the latter was to act as agent to R for sale of their fish in South European countries. The remuneration payable for their services consisted of a commission of 2 per centum and a discount of one and one-fourth per centum on the proceeds of sales. By a cable and letter posted the same, day the firm H negotiated with R for a consignment of fish for Genoa per S. S. "Kriton" saying:
  "We have cabled you this morning that if you would  consign  500 casks  of Labrador to  Genoa, our  agents  will     guarantee   a  minimum price   of 88s. c.i.f., Genoa.....with an advance of 20s. on
document. We await your reply and hope we may be able to arrange this business with you."


R accepted the offer by a letter dated 21st October 1921 and sent the consignment per S. S. "Kri-ton" on 7th November 1921.


On 15th November the firm H wrote guaranteeing a minimum of 38s. c.i.f., with an advance of 15s. against documents. This was approved by the consignors as follows: Labrador minimum guarantee approved, have drawn 20s. suppose accounts food for difference", M/s. Zurlo and Co., were the agents fit Genoa referred to by the H firm. Subsequently, the firm H tried to repudiate its liability by pleading that the responsibility was that of M/s. Zurlo and Co:
 In an action by R against H the defence was that the firm H merely negotiated between the R firm and Zurlo and Co., direct and that therefore they were not liable for any receipts by M/s. Zurlo and Co., which had not in fact reached their hands. This defence was negatived and the claim of R was allowed by the Judicial Committee of the Privy Council in the view that the firm H was liable to account to the R firm for the balance of the proceeds of the God-fish consigned to Genoa.
 In the opinion of their Lordships the fact that some correspondence passed directly between the plaintiff and Zurlo and Co., or that the plaintiff asked Zurlo and Co., if the latter would guarantee a minimum price minus 1 1/4 par cent discount only and would advance 30s. cash on documents and the Zurlo and Co., replied by letter that they would guarantee 38s. minimum price, could not advance the plaintiff 30s. per hundredweight asked for, but assured them that the account sale would be remitted to them promptly did not make any difference for the determination of the jural relations between the parties.


37. The principle underlying these decisions is that if a person is employed as the agent for sale of some goods and the agent engages a third party to carry out the instructions of the principal, the mere fact that the sub-agent corresponds not with the agent but with the principal does not create any change in the relations of the parties and privity of contract does not arise between him and the principal. Therefore, the appointment of a sub-agent to put through some sales would not indicate that ipso facto privity of contract was created between the principal and the sub-agent. A passage from Bowstead's Law of Agency (11th Ed.) p. 71 is in favour of the view indicated above.
 "There is no privity of contract between a principal and sub-agent as such, whether the sub-agent was appointed with the authority of the principal or not; and the rights and duties arising out of the contracts between the principal and agent, and between the agent and sub-agent, respectively, are only enforceable by and against the immediate parties thereto. Provided, that the relation of principal and agent may be established by an agent between his principal and a third person if the agent be expressly or impliedly authorised to constitute such relation and it is the intention of the agent and of such third person that such relation should be constituted".
 38. It is illustration 3 at p. 72 that bears out the proposition stated above:
 "An agent appointed a sub-agent to manage the principal's affairs. The sub-agent took over the entire management thereof, and communicated with the principal direct. Held that the sub-agent was not liable to render an account of his agency to the principal."
 39. The authority relied on in support of this (sic) (1845) 60 ER 428 cited supra.


40. When once the position is established that a particular individual was appointed as commission agent for sale of goods and the latter arranged with a third party for carrying through the sale transaction, the agent is responsible to the principal for the negligence and other breaches of duty of the sub-agent in the course of employment. Sec Peacock v. Baijnath, ILR 18 Cat 573; Purkhit Panda v. Ananda Gaontia, 12 Cal WN 1036 and Nen-sukhdas v. Birdichand, 43 Ind Cas 699: (AIR 1917 Bom 19),


41. The rule mentioned above is stated in Section 192 of the Contract Act which enacts:
 "Where a sub-agent is properly appointed thc principal is, so far as regards third persons, represented by the sub-agent and is bound by and responsible for his acts as if he were an agent originally appointed by the principal.
 The sub-agent is responsible for his acts to the agent and the agent is responsible to the principal for the acts of the sub-agent".
 42. Another argument put forward by the counsel for the 1st defendant was that as the goods were not consigned to him but sent direct to the 4th defendant and were endorsed by the plaintiff's representatives to the 4th defendant direct and not to him he never had the custody of the goods. Therefore, there could he no scope for describing him as the agent. His position was only that of a broker.
 43. For this proposition, support is sought in the judgment of a Full Bench of the Madras High Court in Radhakrishna v. Province of Madras, 1952-1 Mad LJ 494: (AIR 1952 Mad 713) (FB). The passage on which reliance is placed by the learned counsel for the 1st defendant is found at p. 500 (of Mad LJ): (at p. 722 of AIR).


"A broker is an agent employed to make a bargain for another and receives a commission on the transaction which is usually called brokerage. He has usually neither the custody, nor the possession of the goods. It is the broker's duty to establish privity of contract between the principal and the third party. The broker cannot sell in his own name nor can he sue on the contract. A commission agent, on the other hand, of the class to which the plaintiffs belong, is not like a broker. He has almost invariably custody or possession of the goods, actually or constructively."
 44. The doctrine of the case cited above does not govern the present case, for, the 1st defendant's position cannot be equated to that of a broker for the various reasons mentioned above. A broker, when once he brings two parties together and receives his remuneration for it, (sic) nothing more to do with the transactions between the parties. That is not the case here. Even, according to the 1st defendant he "had to keep in touch by way of general guidance and supervision.'' He had also to push up sales whenever it became necessary and he was kept informed of the various sales and the details thereof by copies of letters.
 It is also admitted that he had also to go to Calcutta on some occasions in connection with the sales of the plaintiff's goods. Thus, he had not ceased his connections with the principal after putting the 3rd defendant in touch with the plaintiff. The agent's custody also can be constructive. When under His instructions, the goods are despatched to his sub-agent and the latter is having custody thereof that would be deemed to be the custody of the principal. AIR 1930 PC 274 shows it is not necessary that the goods should be placed in the physical possession of the agent.


In the nature of things, the ghee tins could not be consigned to the 1st defendant because he was himself residing at Guntur and he had no office at Calcutta. It is under his instructions and as desired by him, as per the case of the plaintiff and accepted by us, that the goods were sent to Calcutta, that the sub-agent, his brother, was always looking to him for instructions in regard to sales and that the latter refused to recognise the plaintiff as his principal. It may not be out of place to mention here that in his letter dated 30th November, 1946 to plaintiff P. W. 8 writes that he gave the passes to D- 1.
 45. An attempt was made by the counsel for the 1st defendant to bring the case within the purview of S. 194 of the Indian Contract Act which is in the following words:
 "Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but on agent of the principal for such part of the business of the agency as is entrusted to him."
 46. This section embodies the theory of what is generally known as substituted agency. What this section envisages is an agent nominating another person to act for the principal in the business of the agency with the knowledge and consent of the principal. It is applicable only where the agent names another and when that is accepted the agent has no concern thereafter with the business transactions between the principal and the person named; in other words, he walks out of the scene. The naming of the person does not amount to delegation of the duties of the principal.


In such a case, direct relations are established between the principal and the person nominated and the latter becomes an agent substituted for the person who was authorised to nominate another. But, that is not the situation in this case. As already stated the 1st defendant had not severed his connections with these transactions as indicated above in several places. Therefore, he cannot disown his responsibility to render an account to his principal, the plaintiff. To quote the words of Theslger, L. J., in Pe Bussche v. Alt, (1878) 8 Ch. D. 286 at p. 310:
 "As a general rule, no doubt, the maxim 'delegatus non potest delegare' applies so as to prevent an agent from establishing the relationship of principal and agent between his own principal and a third person but this maxim when analysed merely imports that an agent cannot, without authority from his principal devolve upon another obligations to the principal which he has himself undertaken to personally fulfil; and that, inasmuch as confidence in the particular person employed is at the root of the contract of agency, such authority cannot be implied as an ordinary incident in the contract."


47. The conduct of the parties to the original contract of agency throughout the relevant period can only lead to one inference namely that the original agent, namely, the 1st defendant in order to fulfil his obligations to his principal, had to appoint a sub-agent to sell the goods of his principal at Calcutta and there was no direct privity of contract between the plaintiff and the 3rd defendant. Nor does the mere fact that the plaintiff had accepted the terms on which the sub-agent would sell the goods and advance money against goods would ipso facto put an end to the relations between the plaintiff and the 1st defendant. Hence the 1st defendant cannot escape liability by pleading that the plaintiff had to look to the sub-agents as substituted agents.
 48. The opinion of the lower court that the 3rd and 4th defendants were substituted agents of the plaintiff is erroneous and unsustainable. The trial court held that the 1st defendant could be made liable for the sale-proceeds of the 1500 tins of ghee since he had sold them to the 4th defendant and latter had not accounted to the plaintiff for the same. Our foregoing discussion shows that this view is erroneous and unsustainable.


According to the learned Judge, by reason of the theory of substituted agency and also because fraud could not be attributed to the 1st defendant except in regard to certain transactions, his liability could not be made co-extensive with that of the 3rd and 4th defendants and he would be only responsible for the sale-price of 1500 tins and for the difference in price in regard to fictitious sales of which he had knowledge and was privy to it. He, however, thought that a decree could be passed against the 1st defendant also for a sum which represents the loss sustained by the plaintiff as a result of the fraudulent conduct of the defendants, that amount being less than what the 1st defendant would have to make good to the plaintiff on the basis indicated above.
 49. Lastly, it was submitted by Mr. Rajeswararao that no liability could he fastened on his client with regard to the sale of 1500 tins in the suit which is for a rendition of accounts on the fooling of his being an agent of the plaintiff. What is urged by him is this. The plaintiff's case is that by a resolution dated 4-3-1947 the 1st defendant was removed from the agency and this was communicated both to the 1st defendant and the 3rd defendant.
 Feeling that they have no further chance of making secret profit by indulging in fictitious sales, the 3rd and 4th defendants brought about this fraudulent transaction. If the 1st defendant had lost the character of an agent and thereafter sold the goods to the 3rd defendant, he had only committed a fort and there would be misjoinder of causes of action to claim this amount in a suit for accounts as between an agent and a principal.


50. Firstly, this is not the case of the 1st defendant either in his written statement or in his evidence. The attitude adopted by him throughout was that there was in fact no resolution to remove him from the agency, nor was any such communication sent to him. It is not necessary for us to decide whether really the resolution was passed by the directors of the plaintiff company removing him from the agency and whether copies of the resolution were sent to the 1st and 3rd defendants.
 If the agent purports to act as such and in that capacity enters into 3 transaction on behalf of the plaintiff his liability to account does not cease and he will have to render an account to the principal if the latter chooses to require him to give an account on the footing of his being an agent. This legal position cannot be disputed. For these reasons we hold that despite the appointment of the 4th defendant for the actual sale of the goods en the terms and conditions set out above, the primary liability to the plaintiff was that of the 1st defendant and his liability is co-extensive with that of the 3rd and 4th defendants. Consequently, A. S. No. 118 of 1951 is dismissed with half costs.
 A. S. No. 173 of 1951.


A. S. No. 173 of 1951.
 51. In this appeal, the conclusions of the trial court are challenged on behalf of the 3rd and 4th defendants on various grounds: (1) No decree can he granted as the plaintiff has not set out in the plaint the exact relationship that subsisted between them and the plaintiff; (2) there being no direct relations between them and the plaintiff (hey were not accountable to the plaintiff; (3) the stock of the plaintiff was purchased by them with the consent and approval of the plaintiff's representatives and this they were entitled to do as financiers; (4) they were not liable' to pay interest on the sums realised by the Commissioner by sale of 786 tins of ghee and invested in Government securities; and lastly, there should have been a preliminary decree instead of for a definite sum a decree straight way. We shall now dispose of these points seriatum.
 52. It is true that the plaint does not describe the relations that subsisted between the plaintiff and defendants 3 and 4 in legal terms. But the plaint throughout proceeds on the assumption that defendants 3 and 4 were the sub-agents of the 1st defendant. It is recited in the plaint that under the instructions of the 1st defendant, the ghee was despatched to Calcutta and delivered to the 4th defendant for being sold and the averments in the plaint are explicable - only on this basis.
 The plaint has only to state facts which constitute the cause of action against a particular defendant. It is not necessary that the legal effect thereof should be mentioned in the plaint. The plaint should only contain the recitals that would form the basis of the claim. The legal position created thereby need not he described. This contention is therefore Overruled.


53. Coming to the second objection, it is in-controvertible that a sub-agent is responsible only to his principal, namely, the agent but not to the principal. But the position is different if he is guilty of fraud or wilful wrong. This is not only on the general principles but by reason of third paragraph of Section 192 of the Indian Contract Act. The responsibility of the sub-agent to the principal to account to the latter arises only in cases where fraud or wilful wrong is attributed to him. In this case, the various acts of commission and omission committed by the 3rd defendant have given rise to this liability.
 Though it was pretended in the correspondence that passed between the 1st defendant on behalf of the 4th defendant and the plaintiff that the goods were being sold at a particular price, the 3rd defendant had to admit in the witness-box that all these goods were sold through P- Ws. 1 to 5, having regard to the overwhelming evidence furnished by these five witnesses of Calcutta, who, it appears, were originally unwilling to disclose the real state of affairs to the plaintiff or to court.
 Their evidence and the account hook filed into court reveal that the ghee tins of the plaintiff fetched a much higher price than those quoted in the letters written by the 3rd defendant. In fact, it is the accounts of P. Ws. 1 to 5 in relation to the plaintiff's goods that formed the basis of a decree against these defendants. With this background, if we consider the conduct of the defendants as disclosed in the correspondence and the attitude adopted by them in the witness-box, there can be little doubt that these defendants were guilty of fraud and wilful wrong and consequently come within the scope of paragraph 3 of Section 192 of the Contract Act.


54. In view of the evidence of P. Ws. 1 to 5 and their account books which could not be impeached by the defendants and which have completely proved the fraudulent conduct of the defendants, the latter fell back upon the theory of purchase of the whole goods in question. Here again, they have miserably failed to make out their case. Excepting the interested testimony of the 1st defendant and the 3rd defendant which is completely at variance with the correspondence, there is not a little of evidence that the 3rd defendant had purchased these goods.
 No doubt, on the 6th of August, defendants 1 and 3 sought to lay claim to 1500 tins by exchange of telegrams between 1st and 3rd defendants. That this again is not a genuine transaction appears from the account books of P. Ws. 1 to 5 and the admissions of defendants 1 and 3. As admitted by both of them, the 3rd defendant could not purchase for the 4th defendant the goods of their principal - without their consent. There is absolutely nothing to show that such consent or even ratification of the principal was given. Nor could they sell the goods to themselves at a price much lower than that prevailing in the market and to the disadvantage of the principal.


It is no doubt true that a sub-agent who is also a financier or even an agent who advances money against goods could purchase the goods with the consent and approval of the principal and there is no impediment in the way of their doing it, but it is essential that either they should be offered for sale by the principal to the agent or the offer made by the agent for purchasing the goods should be accepted by the principal. Without either of the two conditions, the agent or the sub-agent could not acquire any title to the goods. The 1st defendant admitted that without an offer from the plaintiff's representatives the 3rd defendant cannot purchase on his own accord.
 55. The question now is whether any such offer was made by the plaintiff or their representatives or whether the 3rd defendant on behalf of the 4th defendant ever offered to purchase these goods from the plaintiff and the latter agreed to the proposal. Our attention was not drawn to any piece of evidence in proof of either sale of the tins to the 4th defendant or even an offer by the plaintiff to sell them to that defendant. Nor is there any evidence of subsequent acquiescence to it. Far from there being any material to prove this claim of the 3rd defendant, the letters written by the 3rd defendant to the plaintiff clearly indicate that they sold the ghee tins of plaintiff in the market and not that they purchased them.


This is the purport of the letters, In Ex. A-113, the 4th defendant assured the plaintiff that they would do their best to sell the ghee at a high rate. See also Exs. A-114 dated 23-11-1946, B-229 dated 28-11-1946, A-145, a telegram on 15-1-1947, B-25S dated 9th December 1946, A-255, dated 21st December 1940, A-118 dated 27th December 1946, B-247 dated 31st December 1946, A-151, a telegram by the plaintiff to the 4th defendant sent 18th January, 1947, A-152 and A-153 dated 18th January 1947 a telegram and a letter respectively, B-309 and B-310 dated 2-5-1-1947; B-369 dated 31st January 1947, B-730 dated 3rd February 1947 and B-311 dated 1st March 1947.
 In all these letters, it was categorically stated by the 4th defendant that the 4th defendant had either sold or that they were trying their best to sell the plaintiffs goods at particular rates. Throughout, the expressions used were either "sell or sold" or 'dispose or disposed of'. In fact, in Ex. A-165 dated 6-2-1947, the plaintiff asked the 3rd defendant to sell the goods at a particular rate. Ex.
A-143 written by the 4th defendant on 6-1-1947 completely disproves the present case of the defendants. It was recited inter alia therein:


"Every buyer is expecting that Guntur ghee will be sold at Rs. 150/-. At present, there is no price and no sale. So we do not advise you to sell at Rs. 150/- until you can keep that ghee for some time more but you will not keep your old stock very longer which please note."
 There is not a whisper in the documents referred to above that the 3rd defendant himself was the purchaser of the goods. The various letters written by the representatives of the plaintiff at Calcutta to the plaintiff or by the plaintiff to its representatives at Calcutta are not in tune with the 3rd defendant being a purchaser. The story that either P. W. 7 or P. W. 11 sold the ghee tins to them does not merit any consideration.
 In one of the letters by the 3rd defendant to the plaintiff, it was specifically stated that P. W. 7 left the place without giving any instructions with regard to the sales, Both P. Ws. 7 and 11 deny having sold any ghee tins to the 4th defendant. D. W. 4 asserted in the witness-box that after the departure of Panakalu, P. W. 11 he purchased in small quantities and intimated the same to the plaintiff, but no evidence in support of this assertion of the intimation to the plaintiff was presented to us.


56. It was argued by Mr. Chandrasekhara Sastry for the 3rd defendant that his client used the word "sale" indiscriminately and much significance could not he attached to that expression and that it should be understood as purchase. We do not think we can give effect to this argument. The language used by him with reference to the purchase of 779 tins in Ex. A-124 in reply to Ex. A-123 wherein it was slated that 779 tins were sold to the 4th defendant does not convey any such impression.
 It is also noteworthy that when these 779 tins were sold to the 4th defendant an invoice was sent by the plaintiff to the 3rd defendant and the same procedure would have been adopted if really there were sales in regard to other tins. Even the telegram sent by the 4th defendant in regard to the alleged sale of 1500 tins by the 1st defendant does not give any support to this contention (Ex. B-352 dated 6-3-1947 which says: "accepted 1500 rate 152'').
 57. In this context, another significant circumstance is the failure of the 3rd defendant to produce the account books maintained by them. Nothing would have been easier for them to file the account books in support of their case. It was in evidence that they have been maintaining account books and if so what is the reason for the non-production of these account books if there is an iota of truth in his claim in this behalf? The inference is irresistible that the 3rd defendant did not want to bring his accounts to the court as they would not lend any colour to his theory of purchase.


There is also another flaw in their case. The written statement of the 4th defendant which was also adopted by the 3rd defendant proceeds on the assumption that the ghee tins of the plaintiff were sold through third parties. It is stated in para 7 which has also, been referred to above that the 3rd defendant was corresponding with the plaintiff about the sales etc., to obtain quick sales with a view to repay himself as early as possible. The language used in the written statement in this regard in paragraphs 8, 9 and 15 only connotes that that they were sold to third parties in the market.
 In paragraph 13, with reference to ghee tins shown in D schedule annexed to the plaint, it is stated:
 "This defendant was accordingly obliged to purchase the same from time to time when other prospective purchasers at Calcutta on inspection would not oifer proper prices" etc. These allegations contrasted with those relating to other tins make it abundantly clear that even at the time of the written statement the case of purchase by 3rd defendant was not conceived and the one set up in the witness-box was an after-thought. Surely, the advocates who drafted the written statement could not be said to have missed the distinction between sale and purchase.


Whatever might be said of the powers of the comprehension of the 3rd defendant in these respects, if really the case of purchase of all the tins was put before him, he would have certainly given effect to it by employing proper language. We are inclined to agree with the suggestion of the plaintiff that when the fraud committed by them was discovered by the plaintiff and was exposed by the evidence of P. Ws. 1 to 5 who were examined on commission and had to disgorge the illegal gains, the defendants were hard put to the necessity of coming forward with some story to escape from the situation thus created. In these circumstances, we have little hesitation in rejecting the defendants' case on this aspect of the matter.
 58. The fourth contention relates to the payment of interest on the proceeds of sales of 78G tins effected by the Commissioner and brought into court. It is maintained by Mr. Chandrasekhara Sastry that the direction in this regard is invalid since his client did not have the use of this money. We are unable to agree with this contention. It is conceded by him that his client put forward a claim to this money on the ground that these tins belong to him and that the plaintiff had no manner of right thereto and insisted that the money should be in court pending the determination of the rights of the parties to this amount.
 For this reason, the court invested it in Government securities which earned an amount of Rs. 3000/- and odd and which went in reduction of the liability of the defendants. In such a setting, it is useless to contend that the 4th defendant could not be made liable for interest that accrued on the sums in court till the date of the decree. When a person prevents another from having use of some money and is instrumental in keeping it idle in court, he is liable to pay interest on such money by way of damages.


59. Mr. Chandrasekhara Sastry pressed upon us the argument that it was not competent to the lower court to grant interest as his case does not fall within the ambit of the Interest Act. The instant case does not fall under any of the catego-
ries enumerated in Section 1 of the Act, continues the learned counsel. That being the case, there is no discretion vested in the court below to allow interest at 9 per cent on the amount deposited by the Commissioner.
 60. This argument overlooks the proviso to that section. That proviso saves cases in which interest was payable before the passing of the Act. This is made clear by Section 34, C. P. C. There if ample discretion inhering in a court to award interest by way of damages in cases where the plaintiff has to be compensated for any loss sustained by him consequent on the conduct of the defendant.
 The counsel for the appellants contends that the defendant could not be directed to pay interest by way of damages when ho had not retained money in his hands and made a profit out of it. In our opinion there is no difference between a case of that type and where by his acts he had deprived the plaintiff of the use of the money, which amounts to the defendant wrongfully withholding the money. If the plaintiff was not prevented from drawing out the money he could have put it to use.