Vanguard Fire and General Insurance Company Limited v. Annamalai and Company Limited and Others
1960-12-02
P.V.RAJAMANNAR, VEERASWAMI
body1960
DigiLaw.ai
Judgment :- RAJAMANNAR C. J. - This appeal arises out of a suit, C.S, . No. 279 of 1953, instituted in this court by the respondent, Annamalai and Company Limited, against the appellant. The Vanguard Fire and General Insurance Company Ltd. After the issues were framed, the suit was transferred to the file of the City Civil Court at Madras, where it was numbered as O.S. No. 1315 of 1955. The plaintiff is a private limited company registered under the Indian Companies Act and was represented by its managing director S. RM. CT. A. Annamalai Chettiar. The defendant is a public limited company, registered under the Indian Companies Act and carrying on insurance business of Madras. On September 24, 1941, an agreement was entered into between the plaintiff and defendant. The material of this agreement are the following "1. That in consideration of the agreement with the said company hereinafter contained the said Annamalai & Co. Ltd., do hereby promise and agree to act as principal organisers of the said company on the following terms and conditions 2. That the said principal organisers will faithfully and to the best of their ability perform the duties for the purposes of carrying on to the best advantage the business of the said company at the remuneration and ups the terms and subject to the condition hereinafter mentioned and described 3. That the said Annamalai & Co, Ltd., shall be the principal organisers for a period of 25 years from the date hereof or until they shall resign by giving six months' notice to the said company in writing and during the said term shall be in charge of organisation the entire business ofthe said company and they shall use their best endeavors to promote the interest ofthe said company and shall not divulge or make known any of the secrets or affairs ofthe said company 4. The said principal organisers shall not be held liable for any loss or damage that may result to the said company from the acts or deeds of the Chief Agents or Agents or any other persons appointed by the said principal organisers or the Chief Agents 5. There shall be paid to the said principal organisers by way of remuneration five per cent of the total premia collected by the said company in respect of all its insurance business and 6 1/2 per cent.
There shall be paid to the said principal organisers by way of remuneration five per cent of the total premia collected by the said company in respect of all its insurance business and 6 1/2 per cent. ofthe net profits, earned by the company every year 7. The principal organisers shall be entitled to be paid all charges, expenses, and allowances incurred by them for journeys undertaken by them for the business or in the interest of the said company 8. The said company shall indemnify the said principal organisers against all costs, losses, damages and expenses, to which they may be put in the discharge of their duties as principal organisers 9. This appointment of the principal organisers is irrevocable for a period of 25 years Further clause (10) provided that, in the event of the defendant company being would up with the object of transferring the business to any other company, the defendant company shall make it one of the terms and stipulation in the agreement of transfer that the transferee company shall appoint the plaintiffs as the principal organisers of their company for the residue of the term of 25 years as may be outstanding at that time on t he same terms and condition as to remuneration, emoluments and otherwise as are contained in the agreement between the plaintiff and the defendant. On June 1, 1950, the Insurance Amendment Act (Act 47 of 1950), came into force. That Act inserted a new section, namely section 31A after section 31 of the original Act. Sub- section (1) of that section inter alia provided "Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (VII of 1913), or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall after the expiry of one year from the commencement ofthe Insurance (Amendment) Act, 1950......... be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the forms of commission or bonus in respect of the general insurance business of the insurer." * On September, 21, 1959, the defendant company addressed a letter (exhibit A-16) to the plaintiff, informing them that their agreement with the defendant company had become inoperative from September 1, 1950, on account ofthe restrictions imposed by the latest Insurance (Amendment) Act.
On August 20, 1953, nearly three years after the receipt of this letter, the plaintiff through their advocates called upon the defendant company to render an account ofthe total premia collected by them in respect of their insurance business and ofthe net profits earned by them from January 1, 1950, and on such rendition of accounts, to pay to them by way of remuneration 5 per cent. of the total premia collected and 6 1/2% of the net profit earned by them from January 1, 1950. In the notice, it was alleged that the contention of the defendant company that the agreement between the parties had become inoperative from September 1, 1950, was unsustainable. The defendant company refused to comply with the plaintiff's demand and the suit, out of which this appeal arises, was filed on September 1, 1953, for reliefs interims of the demands made by the plaintiffs in their notice dated August 20, 1953 The defendant company, in their written statement, pleaded that the plaintiff had done no work for the defendant during the period for which they were seeking to claim remuneration, that the agreement between the parties became superseded and void on the coming into force of the Insurance (Amendment) Act, 1950, and that consequently the plaintiffs were not entitled to any remuneration for the period from and after September 1, 1950, and prayed that the suit might be dismissedThe learned Sixth Assistant Judge of the City Civil Court passed the following decree in favour of the plaintiffs "An account be taken from January 1, 1950 up to 1-9-1950 as per the terms of exhibit A-1 and from September 1, 1950, up to the date of suit viz. 1-9-1953 on the basis of 6 1/2% of the net profits earned by the defendant insurance company every year for which purpose a commissioner shall be appointed." * The learned judge held that section 31A of the Insurance Act prohibited only that portion of the plaintiffs' remuneration which took the form of commissioner, but that the rest of remuneration which took the form of a share in the net profit ofthe defendant company was left intact and unaffected by that provision. A contention was raised on behalf ofthe defendant that, as a part of the consideration had become void, the entire contract ceased to be enforceable.
A contention was raised on behalf ofthe defendant that, as a part of the consideration had become void, the entire contract ceased to be enforceable. The learned judge overruled this objection, holding that section 31A only restricted payment by way of remuneration to an officer or nay person employed by the insurer, but it could not be said that a portion ofthe consideration had become void The learned Judge also overruled the plea of the defendant company that the plaintiff had not done any service to them during the period for which remuneration was claimed in the suit. The defendants have filed the appeal from the decrees passed against them. The plaintiffs, however, have not filed a cross- appeal or a memorandum of cross-objections, in so far as their claim had been disallowed The first question which arises in this appeal is whether the respondents fall within the mischief of sub-section (1) of section 31A of the Insurance Act. They would, if they can be held to be employed as manager or officer or in any capacity by the appellant. Mr. R, Narasimhachariar, learned counsel for the appellants, contended that having regard to the terms ofthe contract between the parties, the respondents must be deemed to be in the employ of the appellants as principal organisers. The term "employ" is wide enough to cover a person whose duties are such as are mentioned in agreement. It is not necessary that a person should be on the regular staff of a company before it can be said that he is employed by the company. He need not be a servant of the company in the popular sense. The respondents have to perform all the duties necessary for the purpose of carrying on the business ofthe appellants company to the best advantage. They are in charge of organising the entire business of the company. They are under an obligation to use their best endeavors to promote the interest ofthe company. Clause 4 of the agreement contemplates the respondents choosing the chief agents or other agents. They are expected to undertake journeys for the business or in the interest ofthe appellant company and clause 7 provides that they shall be entitled to be paid all charges and other expenses incurred by them for such journeys, Clause 8 expressly refers to the respondents' immunity frm liability for acts done in discharge of their duties.
They are expected to undertake journeys for the business or in the interest ofthe appellant company and clause 7 provides that they shall be entitled to be paid all charges and other expenses incurred by them for such journeys, Clause 8 expressly refers to the respondents' immunity frm liability for acts done in discharge of their duties. Clause 9 refers to the "appointment ofthe principal organisers" for a period of 25 years. Even if the respondents were to be treated as independent contractors, they would, nevertheless, be employed by the appellant company. So his arguments ran. He referred us to Bouvier's Law Dictionary, Volume 1, at page 1011, in support of his arguments that even an independent contractor could be a person employedOn the other hand, Mr. Mohan Kumaranmangalam for the respondents contended that the respondents could not be said be in the employ of the appellant company, because the appellant company did not exercise power of control over their actions and they could not direct the respondents to do any work in a particular way. He relied on the following passage in Halsbury's Laws of England. Third edition, vol. 25, page 498 "To distinguish between an independent contractor and a servant the test is whether or not the employer retains the power, not only of directing what work is to be done, but also of controlling the manner of doing the work." * This passage must be read with the opening passage relating to the topic "Master and Servant" at page 447, which runs thus "Whether or not, in any given case, the relationship of master and servant exists is a question of fact; but, in general, the relation ship imports the existence of power in the employer not only to direct what work the servant is to do, but also the manner in which the work is to be done." * He further contended that, inn any event, the employment must be ejusdem generis with that of a manager or an officer, though the words "in any capacity" are general and wide We accept the contention of Mr. Narasimhachariar.
Narasimhachariar. Though it is not clear what exactly is connoted by the expression "Principal organisers", it is clear from the terms of the agreement between the parties that the respondents a under an obligation to discharge certain duties and that the appellants are under he corresponding obligation to pay them remuneration. A contract to employ does not necessarily mean to find actual employment. It does not imply that the person employed has to follows a daily routine to work. Even a person who is retained to do any kind of service when occasion for such service arises would be a person employed. As Parke B. Point out in elderton v. Emmens (1) : "Medical advisers may be employed at a salary to be ready in case of illness; members ofthe the articles establishment in case labours should be needed; household servants in performance of their masters wish; in these and other similar cases, the requirement, of actual service is distinct from the employment by the party employing." * We know that almost every company has legal adviser. He would certainly be a person employed by the company, though he may not be the company's servant; likewise a doctor who is employed to look after the health of the company's servants. There are, again, persons who are called "Financial Advisers, " whose duty is to tender advice on occasions when such advice is sought. Nevertheless , they are retained by payment of fixed remuneration per month. It may be that, for several months, they might be never consulted. The test is whether they would be obliged to give their advice, when sought. Though we agree with Mr. Mohan Kumaramangalam that "in any capacity" should be construed ejusdem generis along with "a manager or an officer, " we do not agree with him that the capacity in which the respondents were employed is not in a capacity similar to that of an officer of the company.
Though we agree with Mr. Mohan Kumaramangalam that "in any capacity" should be construed ejusdem generis along with "a manager or an officer, " we do not agree with him that the capacity in which the respondents were employed is not in a capacity similar to that of an officer of the company. We therefore hold that the respondents fall within the scope of the prohibition contained in section 31A (1) of the Insurance ActWe do not think it necessary to decide the question by resorting to an application of the well known rule of construction of statues, which is thus stated in Maxwell's Interpretation of Statutes, 10th edition, page 19 "To arrive at the real meaning, it is always necessary to aged an exact conception ofthe aim, scope, and object of the whole Act; to consider, according to Lord Coke : 1. What was the law before the Act was passed ; 2. What was the mischief or defect for which the law had not provided ; 3. What remedy Parliament has appointed; and 4. The reason of the remedy." * Learned counsel referred to the statement of object and reasons published in connection with the introduction of the Insurance (Amendment) Act, 1950, to show that the object of the new provision (section 31A) was to prohibit the payment of remuneration in the shape of commission in respect of the insurance business except to chief agents and certain other agents. There is a great deal of force in contention of Mr. Narasimhachariar that, having regard to the previous state of law, the mischief sought to be prevented and the remedy contemplated, section 31A should be so construed as to strike down an agreement like the suit agreement. But, as we have already mentioned, we do not rest our decision on this ground The next question is whether the agreement can be enforced, though a part of the consideration of agreement has become illegal, that is to say, prohibility statue. Mr. Narasimhachariar contended that the entire agreement became avoid when a part of the consideration become unlawful.
But, as we have already mentioned, we do not rest our decision on this ground The next question is whether the agreement can be enforced, though a part of the consideration of agreement has become illegal, that is to say, prohibility statue. Mr. Narasimhachariar contended that the entire agreement became avoid when a part of the consideration become unlawful. He founded his arguments on section 24 of the Indian Contract Act, which says "If any part of single consideration for one more objects, or any one or any part of any one several consideration for a single object, is unlawful, the agreement is voidIllustration A promises to surprinted, on behalf of B, a legal manufacture of indigo and an illegal traffic in other article. B promises to pay to A salary of 10, 000 rupees a year. The agreement is void, the object of A's promise and the consideration for B's promise being in part unlawful He cited to us the case of Waite v. Jones in which Tindal, C. J. observed "It may be conceded that, if neither part of consideration be illegal, the whole falls to the ground : for a party cannot enforce a contract where the consideration is illegal, either in the whole or part; Featherston v. Hutchinson, is a direct authority on that point. There, a promise by defendant to pay a sheriff the debt of his prisoner, in consideration of the prisoner's being set at large and paying the defendant 2s. was held void as to the whole." * Mr. Mohan Kumaramangalam was unable to support the view taken by the court below. The learned City Civil Judge apparently thought that, though a part of the consideration has become unenforceable because of section 31A, there was th remaining part of he consideration which could be enforced. The fallacy in the reasoning is this. It may be that the respondent are willing to accept the balance of he consideration as sufficient remuneration for their services. But, suppose they are not satisfied with that only, can they be compelled by the appellants to perform their duties on payment of only a part of the remuneration agreed upon ? Mr. Mohan Kumaramangalam could not say that the appellant would be entitled to do so.
But, suppose they are not satisfied with that only, can they be compelled by the appellants to perform their duties on payment of only a part of the remuneration agreed upon ? Mr. Mohan Kumaramangalam could not say that the appellant would be entitled to do so. We hold that the entire contract has become incapable of being enforced, because part of the consideration has been rendered unlawful by section 31A of the Insurance Act In view of our above conclusions, it is not necessary to deal with the question of fact whether the respondents did not perform their duties the period for which the suit claim has been madeIn the result, we allow the appeal, set aside the decree passed by the court below, and dismiss the suit with costs throughout Appeal allowed.