SHAKTI POTTERY WORKS v. VIRJIBHAI BECHARBHAI — 1979 DIGILAW 167 (GUJ)

B. K. MEHTA, G. T. NANAVATI, J. ( 1 ) THIS appeal at the instance of the original defendants is directed against the judgment and decree passed by Civil Judge (S. D. 4) Surendranagar in Special Civil Suit No. 12 of 1973 ordering the defendants to pay to the respondent plaintiff an aggregate sum of Rs. 55 0 comprising of Rs. 50 0 being the amount of security deposit and Rs. 5 0 on account of commission earned by the plaintiff as a sole selling agents of the products manufactured by the defendants. A few facts need be stated in order to appreciate the contentions urged on behalf of the appellants in this appeal. ( 2 ) THE original defendants Nos. 2 and 3 were the partners of the firm trading in the name and style of Shakti Pottery Works at Thangadh in Surendranagar district. The said firm was manufacturing potteries articles like China ware and stone ware and were selling their products in and outside the State of Gujarat. By an agreement of May 12 1967 the plaintiff was appointed sole selling agents for the products manufactured by the defendant No. 1 firm. This agreement was effective upto December 31 1970 The agreement was therefore renewed by a fresh agreement of 30 December 1970 for a period of two years. Again on 30th December 1972 a fresh agreement was executed for purposes of renewing the sole selling agency. According to the plaintiff the defendants had agreed and undertaken to pay commission at the rate of 4% on the sale price of the goods manufactured by defendant No. 1 firm. In consideration of his appointment as a sole selling agents the plaintiff had deposited a sum of Rs. 50 0 which was to be retained by the defendants till the agreement remained in force. It was the grievance of the plaintiff that in spite of the aforesaid obligation the defendants have failed to pay commission earned by him on the sales effected in the months of November and December 1972 It was his further grievance that the defendants have defaulted in payment of the commission earned on the sales effected in the months of January February and March 1973 However the defendants gave towards commission a cheque on 12-2-73 on the Thangadh branch of the State Bank of Saurashtra for Rs. 1106-56 to the plaintiff. 1106-56 to the plaintiff. The said cheque was dishonored with the result that the plaintiff had not been paid any commission on the sales effected in the months of January February and March 1973 The plaintiff was therefore entitled to recover at a time the amount of the deposit and the arrears of commission from the defendants in view of the condition contained in the agreement of sole selling agency that the defendants had to pay the amount of commission be 15th of every next month and in case of their default or failure to pay the amount of commission on account of any unexpected circumstances resulting in default having been committed for a period of more than three months the plaintiff was entitled to terminate the contract and to recover the amount of deposit as well as commission till due then at a time. The plaintiff learnt that the defendants were trying to transfer their factory with a view to defraud the creditors and therefore had by his telegram of April 2 1973 terminated the agency agreement and called upon the defendants to pay to him the deposit amount of Rs. 50 0 as well as commission due to him. Since the defendants failed to comply with the demand made in the notice he filed the suit in the Court of Civil Judge (S. D.) Surendranagar praying for a decree of Rs. 55 0 together with interest and costs of the suit. ( 3 ) THE appellant defendants resisted the suit contending inter alia that the termination was wrongful inasmuch as the defendants had not committed any default which could entitle the plaintiff to terminate the contract and claim the refund of the deposit as agreed between the parties win the agency agreement. They also joined issue with the plaintiff that he was appointed as sole selling agents of the products of the defendants since the arrangement between the parties was in effect and substance in the nature of money lending and not that of agency as alleged by the plaintiff. They also denied that the plaintiff had earned commission of Rs. 5 0 on the sales of their products as averred by him in the plaint. They also denied that the plaintiff had earned commission of Rs. 5 0 on the sales of their products as averred by him in the plaint. ( 4 ) THE learned Judge raised necessary issues on these pleadings and on consideration of the evidence oral as well as documentary adduced by the parties rejected the contentions of the defendants that the suit was premature and in alternative shall it was time barred. He also did not agree with the defendants that the arrangement between the parties was in the nature of money lending. He found positively that the plaintiff was appointed sole selling agents of the products manufactured by the defendants firm. He upheld the claim of the plaintiff that the defendants had committed three defaults which entitled him to recover at a time the deposit as well as commission amounts as prayed for. He therefore granted the decree by his judgment and order of December 31 1973 It is this judgment and order of the learned Civil Judge which is the subject matter of this appeal before us. ( 5 ) AT the time of hearing of this appeal the learned Advocate appearing on behalf of the appellant defendants raised the following three contentions: (1) The suit of the plaintiff on his own showing was premature and did not disclose any cause of action and therefore the Court ought to have rejected the plaint exfacie. (2) In any case the termination by the plaintiff of the agency agreement was wrongful and therefore the learned Judge was clearly in error in granting the decree for refund of the deposit since the plaintiff was not entitled to the return of the deposit as long as the agreement remained subsisting and effective. (3) The learned Judge has erred in granting the decree for Rs. 50g0. 00 on account of commission since there was no evidence or material worth its rename on which the claim of the plaintiff could have been upheld and more particularly when the plaintiff has failed to enter the witness box and give evidence in support of his claim. ( 6 ) WE must frankly state that so far as the first two contentions are concerned there is no merit in them. ( 6 ) WE must frankly state that so far as the first two contentions are concerned there is no merit in them. In order to justify the first contention that the learned Judge ought to have rejected the plaint under Order 7 Rule 11 (a) of the Civil Procedure Code inasmuch as it did not disclose any cause of action we have to look to the averments made in the plaint on demurrer. To enable a Court to reject the plaint under Order 7 Rule 11 (a) of the Civil Procedure Code on the ground of nondisclosure of the cause of action the Court has to look to the plaint and plaint alone. In Kanhayalal v. National Bank of India Ltd. (1913) 40 ILR (Calcutta) 598 the Judicial Committee of the Privy Council while dealing with a similar contention of the defendant that a suit as framed would not lie observed as under at page 609:". . IN asking the Court to decide an issue like the present (which is essentially a demurrer by whatever name it tray be called) the defendants must to taken to admit for the sack of argument that the allegations of the plaintiff in his plaint are true modo it forma. In so doing they reserve to themselves the right to show that these allegations are actually or partially false in the further stages of the action should the preliminary point be overruled but so far as the decision on the preliminary point is concerned everything contained in the plaint must be taken to be true as stated". We have therefore to look to the averments in the plaint for purposes of finding out whether it discloses a cause of action or not but in doing so it can be only on the demurrer of the defendants who must be taken to admit for the sake of argument that the allegations of the plaintiff in his plaint are true in manner as well as in form. The plaintiff has in paragraph 4 of his plaint set out three agreements which were executed from time to time between the plaintiff and the defendants for purposes of appointing the plaintiff as sole selling agents of the products of the defendant No. 1 firm. The plaintiff has in paragraph 4 of his plaint set out three agreements which were executed from time to time between the plaintiff and the defendants for purposes of appointing the plaintiff as sole selling agents of the products of the defendant No. 1 firm. In paragraph 5 the averment regarding the agreed rate of commission of 4% on the price of the goods sold has been set out. In paragraph 6 the fact of the deposit of Rs. 50 0 made by the plaintiff under the first agreement of 12 and the continuance of the deposit under the last agreement of 30th December 1972 has been averred. In paragraph 8 the plaintiff referred to two defaults being committed by the defendants in payment of the commission earned by him for sales effected in the months of November and December 1972 of the products of the defendants. In paragraph 9 the plaintiff alleged three defaults having been committed by the defendants in the matter of payment of the commission earned by him on the sales effected in the months of January February and March 1973 He also referred to the fact of the defendants having drawn a cheque on 12 February 1973 in favour of the plaintiff on the State Bank of Saurashtra Thangadh towards his commission and the return thereof after being dishonoured. In paragraph 10 the plaintiff averred and stated that according to the agreement between the parties the defendants were bound to pay the commission by 15th of the next month and the defendants were under obligation on strict compliance of this condition and in no circumstances the defendants had to commit any default in payment thereof. However on account of any unexpected circumstances if the defendants committed defaults in payment of interest for a period of three months the plaintiff was entitled to terminate the contract after notice to the defendants and consequently to the refund of the deposit amount and the payment of the commission amount due at a time. However on account of any unexpected circumstances if the defendants committed defaults in payment of interest for a period of three months the plaintiff was entitled to terminate the contract after notice to the defendants and consequently to the refund of the deposit amount and the payment of the commission amount due at a time. In paragraph 11 he stated that on having learnt that the defendants were trying to transfer their factory so as to deprive the creditors of their dues since a public notice was inserted on 16 2-1973 in the local daily Fulchhab of Rajkot he by his telegram of 2nd April 1973 terminated the contract and called upon the defendants to make a refund of the deposit amount of Rs. 50 0 and to pay the arrears of commission. In paragraph 14 the plaintiff stated that the cause of action of the suit had arisen on 2nd April 1973 when the contract was terminated as a result of the failure on the part of the defendants to pay the commission for five months. This is the gist of the averments made in the plaint and if these allegations are to be accepted as true in the manner and in the form in which they have been made the conclusion is inescapable that the plaint does disclose the cause of action. It may be that on trial of issues between the parties the claim of the plaintiff may not be sustained either on the interpretation of the terms and conditions of the agreements between the parties or for any other reason. in which case the suit may be liable to be dismissed. There is a clear distinction between the cases where a plaint does not disclose any cause of action and the cases where after the parties have adduced oral and documentary evidence a Court comes to the conclusion on consideration thereof that there was no cause of action. It is only in the former case that a Court will be justified in rejecting the plaint under Order 7 Rule 11 of the Civil Procedure Code whereas in the latter case where the Court finds no cause of action on consideration of the entire material placed before it obviously it will no. be case falling within the terms of the aforesaid rule. be case falling within the terms of the aforesaid rule. In this connection we may refer to a decision of the Full Bench of the Allahabad High Court in Jagannath Prasad and Others v. Smt. Chandravati and others AIR 1970 All 309 where this distinction has been brought out. In the present case in our opinion it cannot be contended without violence to the language that on the averments made in the plaint if accepted as true there is a nondisclosure of cause of action which would attract the application of Order 7 Rule 11 (a) of the Civil Procedure Code ( 7 ) THE learned Advocate for the appellant defendants therefore attempted to persuade us on the second contention that the termination of the agency agreement was wrongful inasmuch as the conditions precedent for exercise of that right were not satisfied. The conditions according to the learned advocate for the appellant defendants were in the first place there must be default in payment of commission for a period of more than three months and the notice terminating the agreement must be of 60 days. In submission of the learned Advocate for the appellant defen dants both these conditions were wanting in the present case and therefore the learned Judge ought to have held that there was no termination in fact and in law. The learned Advocate for the appellants further submitted that it is only on valid determination of the agreement that the plaintiff would be entitled to refund of the deposit. We do see some force in this condition. The only agency agreement which is placed on the record of the trial Court is one to be found at Ex. 24. The earlier two agreements namely of 12-5-1967 and 30th December 1970 have not been produced on the record of the trial Court. The relevant clause of this agency agreement Ex. We do see some force in this condition. The only agency agreement which is placed on the record of the trial Court is one to be found at Ex. 24. The earlier two agreements namely of 12-5-1967 and 30th December 1970 have not been produced on the record of the trial Court. The relevant clause of this agency agreement Ex. 24 which has a bearing on this question is clause 4 It provided that the party of the first part (that is the defendants) would send the statement of account of the sales effected every month by 5 of the next month along with the bills of the goods sold as well the credit notes for the commission amount due and calculated at the rate of 4% on the sale price and that the party of the first part would pay the said amount of commission to the party of the second part (the plaintiff) by 15th of that month. This condition was to be strictly complied with and in case of unexpected circumstances if the party of the first part was not able to pay the amount of commission resulting in default of payment for a period of more than three months the party of the second part would be entitled to terminate the contract by serving a notice of 60 days on the party of the first part and will be also entitled to the refund of the deposit amount of Rs. 50 600 and the recovery of the accrued commission amount at a time. We have therefore to see whether these conditions precedent for exercise of the right of termination of the contract were complied with. So far as the first condition is concerned of the default in payment of the commission for a period of more than three months it cannot be a matter of much debate since admittedly the appellate defendant No. 2 who was the only witness examined on behalf of the defendants clearly admitted that they have not paid the commission amount for November and December 1972 and also the commission which accrued after the agency agreement Ex. 24 became effective on 1 In other words he clearly admitted that there was a default in payment of the commission for the months of November and December 1972 and January February and March 1973 since according to the agency agreement Ex. 24 became effective on 1 In other words he clearly admitted that there was a default in payment of the commission for the months of November and December 1972 and January February and March 1973 since according to the agency agreement Ex. 24 the defendants were under obligation to pay the commission by 15th of the next month and that the defendants were still in default in payment of commission for a period of more than three months. The first condition is therefore clearly satisfied. ( 8 ) HOWEVER as regards the second condition that the contract could have been terminated by a notice of 60 days we must agree with learned Advocate for the appellant defendants that the telegraphic notice of April 2 1973 seeking to terminate the agreement was not of 60 days as agreed between the parties but it appears to be a notice forthwith revoking the agreement in question because the present suit was filed immediately within two days thereafter on 4th April 1973 The learned Advocate for the appellant defendants is therefore justified in arcing that the agency agreement has not been terminated by a proper notice. However that would not affect the ultimate findings of the trial Court where the claim of the plaintiff for refund of Rs. 50 0 has been upheld. The reason for this view of ours is obvious. The agency agreement Ex. 24 was admittedly for a period of two years with effect from 1st January 1973 and therefore the agency agreement will come to an end by efflux of the prescribed time on 31st December 1974. It is an admitted position that this agreement has not been continued thereafter for there is any provision in the agreement itself which will keep it effective unless it is put to an end to by some overt act. In the circumstances therefore if the agency agreement had come to an end which indeed it has come to it cannot be gainsaid that the defendants were not entitled to retain the amount of deposit with them and they were bound to refund the same to the plaintiff. We are entitled to take this subsequent event in consideration. In the circumstances therefore if the agency agreement had come to an end which indeed it has come to it cannot be gainsaid that the defendants were not entitled to retain the amount of deposit with them and they were bound to refund the same to the plaintiff. We are entitled to take this subsequent event in consideration. The learned Advocate for the appellant defendants however urged that the suit is to be tried at all its stages in the cause of action as it existed as on the date of the institution of the suit and the appellate Court has merely to see whether the trial Court was justified or not in granting the decree on the cause of action as averred in the plaint in the suit and if on consideration of the relevant material the plaintiff is not entitled to a relief prayed for on the cause of action averred namely the termination of the contract in the present case before us the appellate Court cannot consider any subsequent event so as to uphold the erroneous decree of the trial Court. We are afraid we cannot agree with such a spacious submission of the learned Advocate for the appellant defendants since it is always open to a Court including a Court of Appeal to take notice of the events which have happened after the institution of the suit and afford the relief to the parties in the changed circumstances where it is shown that the relief claimed originally has (1) by reason of subsequent change of circumstances become inappropriate or (2) where it is necessary to take notice of the changed circumstances in order to shorten the litigation or (3) to do complete justice between the parties (vide: Shikharchand Jain v. Digamber Jain Praband Karini Sabha and Ors. A. I. R. 1974 SC 1178 ). These principles have been reaffirmed by the Supreme Court in its subsequent decision in Pasupuleti Venkateswarlu v. The Motor and General Traders A. I. R. 1975 SC 1409 where it has been held that a revisional court is also bound to take notice of the subsequent events in disposing of rent proceedings by reason of which the landlord is disabled from seeking eviction. Krishna Iyer J. speaking for the Court referred with approval to the decision of Federal Court in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri A. I. R. 1941 PC 5 where Owyer C. J. had approvingly quoted from the decision of the Supreme Court of United States in Pattersan v. State of Alabama (1934) 294 US 600 the following passage:"we have frequently held that in the exercise of our appellate jurisdiction we have power not only to correct in the judgment under review but to make such disposition of the case as justice requires. And in determining what justice does require the Court is bound to consider any change. either in fact or in law which has supervened since the judgment was entered". Sulaiman J. in Lachmeshwaras case (supra) speaking on behalf of the Court relied on English cases and took the view that an appeal is by way of a reearing and the Court may make such order as the Judge of the first instance could have made if the case had been heard by him at the date on which the appeal was heard. Varadachariar J. reiterated the same principle succinctly in the following terms in that case: "it is also on the theory of an appeal being in the nature of a rehearing that the Courts in this country have in numerous cases recognized that in molding the relief to be granted in a case on appeal. the Court of appeal is entitled to take into account even facts and events which have come into existence after the decree appealed against". KRISHNA Iyer J thereafter observed as under: "equally clear is the principle that procedure is the hand maid and not the mistress of the judicial process. If a fact arising after the lis has come to court and has a fundamental impact on the right to relief or the manner of moulding it is brought deligently to the notice of the tribunal it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. If a fact arising after the lis has come to court and has a fundamental impact on the right to relief or the manner of moulding it is brought deligently to the notice of the tribunal it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equity justifies bending the rules of procedure where no specific provision or fairplay is violated with a view to promote substantial justice subject of course to the absence of other dissenting factors or use circumstances Nor can we contemplate any limitation on this power to take note of updated facts to confide it to the trial court. If the litigation pends the power exists absent other special circumstances repelling result to that course in law or justice. Rulings on this point are legion even as situations for applications of the equitable rule are myriad. We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities the court can and in many cases must take cautious cognisance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed". THE learned Advocate for the appellant defendants in this connection has drawn our attention to the decision of the Supreme Court in Rameshwar and others v. Jot Ram and others AIR 1976 SC 49 in support of his sub- mission that the right to relief is to be determined as on the date of the institution of the proceedings and the rights which have been crystallized in initial cause of action cannot be affected by Courts procedural delay. We have not been able to appreciate how this decision can be of any assistance to the cause of the appellant defendants since it was concerned with the question as to whether the rights which have been vested by statute can be divested by the equitable doctrine of the Court taking note of the subsequent events and moulding the relief accordingly. There is no question so far as we are concerned in the present appeal of any divesting of any right which has been crystallized. The admitted position is that the sole selling agents before us had to make a deposit of Rs. There is no question so far as we are concerned in the present appeal of any divesting of any right which has been crystallized. The admitted position is that the sole selling agents before us had to make a deposit of Rs. 50 0 with the manufacturers who were entitled to retain the same till the agency agreement remained in force and effective. If the agency agreement came to an end by the termination or revocation thereof be a party thereto or has come to an end by affiux of time the amount of deposit made thereunder must be refunded unless there are any justifying reasons to withhold it. The power of the Court to take subsequent events into consideration is not merely for purposes of moulding the reliefs granted but is to be exercised in salutary cases either for purposes of shortening the limitation or to do justice to the parties. No justifying circumstances have been pointed out by the learned Advocate for the appellant defendants which would entitle them to withhold the amount of deposit once the agency agreement came to an end. In that view of the matter therefore when it is an admitted position that the agency agreement Ex. 24 came to an end by affiux of time on 31st December 1974 the defendants were bound to make refund of the deposit which the plaintiff had made with them in consideration of his appointment as a sole selling agents. We therefore affirm the decision of the trial Court so far as it ordered the defendants to repay the deposit amount of Rs. 50 0 to the plaintiff not for the reasons stated in his judgment but for the reasons stated in this judgment by us. [rest of the judgment is not material for the reports ] Appeal partly allowed. .