VARSHA ENGINEERING PVT. LIMITED v. VIJAY TRADERS — 1982 DIGILAW 98 (GUJ)

A. P. RAVANI, S. L. TALATI, J. ( 1 ) VARSHA Engineering Private Ltd. was a partnership Concern in the year 1967. Messrs. Vijay Traders was also a partnership Concern Both. partnership concerns had their offices at Baroda. They both entered into an agreement Exhibit 112 on 17/09/1967 Varsha Engineering Co. wrote a letter to Vijay Traders and by that letter an agreement between the parties came into existence. M/s. Vijay Traders defendant No. 1 came to be appointed as Distributors of Varsha Diesel Engines for the territories of Nasvadi Tilakwada Sankheda Chhota Udepur and Jambu Gam talukas of Baroda District. We will refer to the terms and conditions as and when it would be necessary. ( 2 ) ). It appears that on 2-2-1972 by notice Exh. 109 the plaintiff claimed a sum of Rs. 51 486 plus interest at 12% and according to the plaintiff that was the amount due in the running account by the the purchases made by the defendant. Thereafter on 3-3-1972 suit was filed to recover a sum of Rs. 69476-89. According to the plaintiff a sum of Rs. 51 486 was due and that was the principal amount while Rs. 17 990 interest calculated at the rate of 12% Defendants Nos. 2 to 5 were joined as according to the plaintiff they were the partners of defendant No. 1. According to the plaint filed reference was made to the fact that defendant No. 1 was appointed as Distributors and in paragraph 4 of the plaint it was stated that on various occasions by putting orders defendant No. 1 had purchased the goods worth Rs. 51 486 and that amount was due together with interest. It was further stated in the plaint that the defendants agent had written a letter dated 17-3-1969 and by that letter payment was made and therefore the suit was within limitation. ( 3 ) ). Defendants Nos. 1 to 4 filed written statement at Exh. 20. That written statement was filed on 6-4-1972. Defendant No. 5 filed written statement at Exhibit 22. That written statement was also filed on 6-4- 1972 Defendant No. 5 had taken up the contention that he was not the partner of defendant No. 1. Defendants Nos. 1 to 4 denied their liability and also stated that the suit was time barred. That written statement was filed on 6-4-1972. Defendant No. 5 filed written statement at Exhibit 22. That written statement was also filed on 6-4- 1972 Defendant No. 5 had taken up the contention that he was not the partner of defendant No. 1. Defendants Nos. 1 to 4 denied their liability and also stated that the suit was time barred. According to the written statement filed no amount was paid by any partner by letter dated 17-3-1969 and according to the defendants the plaintiff had wrongly credited Rs. 2 500 on 17-3-1969 as if paid by some person and by such an unauthorised entry the plaintiff according to the defendants tried to bring the suit within limitation. Thereafter the plaintiff filed two applications for amending the plaint. The first application is Exhibit 35. That was presented on 20-9-1972. Another application. was presented for amending the plaint and that is Exhibit 42. That application was presented on 27-11-1972. The learned Civil Judge by an order dated 26-2-1973 allowed plaint to be amended. We may state here that some of the amendments were carried out. However by amendment application Exh. 42 though paragraph 7a was to be added that amendment was not carried out. By the amendment the plaintiff tried to make out a case that the relationship between the parties was that of principal and agent. Ultimately the learned Civil Judge (S. D.) framed issues at Exhibit 51. He came to the conclusion that the suit was barred by law of limitation. He also came to the conclusion that defendant No. 1 did not act as commission agent and he was not liable to render accounts. He also came to the conclusion that it was not established by the plaintiff that the defendants had to pay a sum of Rs. 51 486 as principal and Rs. 17 990 interest. In view of these findings the learned Civil Judge dismissed the suit. The plaintiff has filed the appeal. ( 4 ) ). The learned advocate Miss Shah for the appellant first submitted that the agreement between the parties brought about the relationship of principal and agent as contemplated by sec. 182 of the Indian Contract Act. ( 5 ) ). In order to examine this question it would be necessary to refer to the agreement which the parties entered into on 17-9-1967 and which is produced at Exhibit 112. 182 of the Indian Contract Act. ( 5 ) ). In order to examine this question it would be necessary to refer to the agreement which the parties entered into on 17-9-1967 and which is produced at Exhibit 112. In paragraph 1 it is stated that there was personal discussion which was being confirmed by that letter which was written by the plaintiff firm to the defendant firm. Now that therefore there was no scope for anything which was left orally. Whatever was discussed was being confirmed in writing by a letter. That was done after the discussion as mentioned in that letter. The letter says that the defendant was appointed as Distributor for the territories of Nasvadi Tilakwada Sankheda Chhota Udepur and Jambu Gam Talukas of Baroda district for the sale of Varsha Diesel Engines Pumps and Pumpsets. In paragraph 2 it is stated that the retail price list together with a particular circular in which the prices for the distributors only are mentioned were enclosed. In paragraph 3 it is stated that a set of the circulars which were discussed were personally handed over to them. Thereafter it is mentioned that the defendant will take care and see that the maximum number of Varsha Diesel Engines are sold in the area allotted to them. Thereafter follows the agreement which is described as Distributorship. The appointment terms are mentioned. Term No. 2 is in regard to Insurance and risk in transit. Term No. 3 is regarding the terms of payment. The other terms are usual terms which say that the orders placed shall be treated as firm orders and shall not be subject to any cancellation. The other important term is that the defendant will not take interest in selling other similar engines to those of the plaintiff. It is also mentioned that all inquiries from the territory will be normally referred to the defendant. However the plaintiff reserved the sale in regard to the tenders remitting from the Government Semiovernment or the Equipment Manufacturers. That Distributorship agreement is followed by the Terms of Business which were attached. As one reads it is in regard to price date of delivery general lien guarantee disputes and specification. The question before us is as to whether by reading the agreement Exh. That Distributorship agreement is followed by the Terms of Business which were attached. As one reads it is in regard to price date of delivery general lien guarantee disputes and specification. The question before us is as to whether by reading the agreement Exh. 112 with all its accompaniments can we come to a conclusion that there was relationship between the parties by which the plaintiff could be termed as Principal and defendant No. 1 could be termed as Agent as contemplated by sec. 182 of the Indian Contract Act? Sec. 182 of the Indian Contract Act reads as under:"182. An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done or who is so represented is called the principal. " The test for determination whether a person has or has not been constituted as an agent is required to be applied. We have to find out whether defendant No. 1 had the power to do any act for the plaintiff or whether defendant No. 1 could represent the plaintiff in dealing with the third persons making the plaintiff answerable. The terms show that defendant No. 1 had to purchase diesels Engines at a price to be fixed by the plaintiff. That price might vary on different occasions but that price would be the price at which the Distributors would get diesel engines. The price by another circular is fixed so far as the third person is concerned. That price is higher. Defendant No. 1 is expected to sell at that particular price. The difference naturally would be his profit. The question would be as to whether the title to the goods passed when defendant No. 1 made purchase from the plaintiff. or the title to the goods remained with the plaintiff. The question would be if the goods are stolen who would suffer that loss. The test would be as to whether defendant No. 1 would be able to represent the plaintiff while dealing with the third party in the sense as to whether if defendant No. 1 made any contract with any of the third parties would the plaintiff be bound by that contract or in the alternative whether the third parties would be bound to carry out that contract so far as the plaintiff is concerned. The question would be whether the plaintiff would be able to sue the third parties directly and the next question would be whether any of the third parties could file the suit against the plaintiff. By merely giving a guarantee for a particular period in regard to carrying out the repairs one can never say that the title to the goods ever passed. In all Makes which are sold say motorcars Refrigerators Fans motor bicycles there is always guarantee period during which the manufacturer binds himself to carry out the repairs but all the distributors or all persons who purchase for resale of such goods can never be considered or termed as agents as contemplated by section 182 of the Indian Contract Act. The reliance was tried to be put on certain rulings. ( 6 ) ). The first case referred to us was a case of ABDULLA AHMED V. ANIMENDRA KISSEN MITTER REPORTED IN A. I. R. 1950 SUPREME COURT AT PAGE 15. The observations are as under:"contracts with commission agents do not follow a single pattern and the primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under discussion. " It is further observed as under:"extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning Evidence of the acts done under it is a guide to the intention of the parties in such a case and particularly when acts are done shortly after the date of the instrument. "we may only say that the only term which is varied by the conduct is that though in writing it was mentioned that a particular amount of deposit will be paid at the time of putting orders and that the remaining amount shall be paid at F. O. R. Baroda on presentation of the R. R. it appears that the case of the plaintiff is that the goods were sent as and when ordered and the payments were received as and when defendant No. 1 could make arrangements and ultimately a running account is produced by the plaintiff. From this alone one cannot say that the defendant was not purchasing diesel engines but he was storing them on behalf of the plaintiff. ( 7 ) ). From this alone one cannot say that the defendant was not purchasing diesel engines but he was storing them on behalf of the plaintiff. ( 7 ) ). The second case to which reference was made was the case of THE PUNJAB STATE CO-OP. SUPPLY AND MARKETING FEDERATION LTD. CHANDIGARH V. COMMISSIONER OF INCOME-TAX PATIALA REPORTED IN 1980 TAX LAW REPORTS AT PAGE 1029. In paragraph 18 of the judgment what is observed is as under:"it is well settled that while interpreting the terms of the agreement the Court has to look to the substance rather than the form of it. The mere fact that the words agent or agency or sole distributor or the words buyers or sellers are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties in fact intended that such status would be confirmed. Thus mere formal description of a person as an agent or sole distributor or buyer is not conclusive unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent. " In our view this authority does not help the appellant. In any case it does not carry the case of the appellant any further. ( 8 ) ). On behalf of the respendents the learned Advocate Shri Majmudar relied upon a case of GANESH EXPORT AND IMPORT CO. V. MAHADEOLAL NATHMAL REPORTED IN A. I. R. 1956 CALCUTTA AT PAGE 188. In that case it was observed as under:"in order to constitute the relation of agency it is essential that goods should be sold to customers introduced by the agent not on behalf of the agent but on behalf of the principal. If the goods are sold on behalf of the alleged agent and if the alleged agent is to be treated as the purchaser he ceases to be an agent and becomes a principal. " in this particular case the defendant was always treated by agreement as a purchaser. ( 9 ) ). It is also necessary to refer to a case of GORDON WOODROFE AND MADRAS LTD. V. SHAIK M. A. MAJID AND CO. REPORTED IN A. I. R. 1967 SUPREME COURT AT PAGE 181. Paragraph 3 of the judgment is important for the purpose of deciding this case. ( 9 ) ). It is also necessary to refer to a case of GORDON WOODROFE AND MADRAS LTD. V. SHAIK M. A. MAJID AND CO. REPORTED IN A. I. R. 1967 SUPREME COURT AT PAGE 181. Paragraph 3 of the judgment is important for the purpose of deciding this case. In that paragraph it is observed as under:"the first question presented for determination in this case is whether the defendants were acting as del credere agents of the plaintiff or whether the defendants were outright purchasers of the goods supplied to them by the plaintiff. In the approach to this question it is necessary to notice the distinction between a contract of sale and a contract of agency. The essence of sale is the transfer of the title to the goods for price paid or to be paid. The transferee in such case becomes liable to the transferer of the goods as a debtor for the price to be paid and as not as an agent for the proceeds of the sale on the other hand the essence of agency to sell is the delivery of the goods to a person who is to sell them not as his own property but as the property of the principal who continues to be the owner of the goods and who is therefore liable to account for the proceeds. " In this case the diesel engines were always purchased by defendant No 1 for the price to be paid. Even according to the case of the plaintiff part of the price was immediately paid and the rest was paid in the due course. A regular account was maintained according to the plaintiff and on the basis of that account the suit is filed. We are conscious of the fact that the plaint was amended thereafter and alternative case of the agency was tried to be made out. The amendment of the plaint did not change the facts of the case. We may here say that the suit was filed on the basis of the bills and the ledger and a particular amount was claimed. After filing of the written statement by the defendants the plaintiff thought that there was difficulty in getting the decree because on the basis of the account the suit was clearly barred by law of limitation. We may here say that the suit was filed on the basis of the bills and the ledger and a particular amount was claimed. After filing of the written statement by the defendants the plaintiff thought that there was difficulty in getting the decree because on the basis of the account the suit was clearly barred by law of limitation. The reason was that all transactions were completed between the two dates. The first transaction is dated 26-9-1967 and the last bill is dated 28 We may here say that the suit was filed on 3-3-1972 and therefore except for the last three bills which were dated 20-3-1969 17 and 28-10-1969 all other items were barred by law of limitation. The last three items were small items. They are of Rs. 53-56 Rs. 98-80 and Rs. 96-66. So out of a total amount claimed which was Rs. 51 486 except the above three items the whole amount was timebarred. Clearly to obviate this difficulty another notice was given and that notice is Exhibit 113. That notice is dated 21-11-72. It is given after many months after the suit was filed and thereafter two amendment Applications Exhibits 35 and 42 were filed. Now in order to substantiate the case which is tried to be put Civil application No. 2291 of 1975 was given by which the plaintiff desired to lead additional evidence. The additional evidence which the plaintiff desired to produce the plaintiff attached the copies thereof with that application. We have gone through the entire bunch of papers which are tagged with this Civil Application The question which is required to be considered is whether this application was required to be 8ranted. The law on the point is laid down in Order XLI Rule 27 of the Civil Procedure Code where it is laid down as under:"27. (1) The parties to an appeal shall not be entitled to produce additional evidence whether oral or documentary in the Appellate Court. The law on the point is laid down in Order XLI Rule 27 of the Civil Procedure Code where it is laid down as under:"27. (1) The parties to an appeal shall not be entitled to produce additional evidence whether oral or documentary in the Appellate Court. But if (a)the Court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted or (aa) the party seeking to produce additional evidence establishes that notwithsta nding the exercise of due diligence such evidence was not within his knowledge or could not after the exercise of duedi ligence be produced by him at the time when the decree appealed against was passed or (B) the Appellate Court requires any document to be produced or any witness to be examined to enable it to pronounce judgment or for any other substantial cause the Appellate Court may allow such evidence or document to be produced or witness to be examined. " It is not the case of the appellant that Civil Court refused to admit the evidence and? therefore they had come here with a request to lead additional evidence. It is also not the case of the appellant that the documents which are being produced were not in their possession at the time when the suit was filed. What has been stated in this petition is that the petitioner did not produce extract from the cash book and the sale register through oversight. We have examined this aspect of the case and we only say that the witnesses examined on behalf of the appellant stated in clear terms that the sale register cash book etc. were being maintained by the plaintiff firm. In fact therefore no case is made out for producing additional evidence. We have thereafter examined the matter from the aspect as to whether the documents could be of any use for the purpose of deciding this matter or as to whether there was sufficient cause apart from what the appellant stated and we may only say that if we had allowed the production of these documents it would not have led the case of the appellant any further and the documents would not have been of any use for the purpose of deciding this matter. ( 10 ) ). ( 10 ) ). It may be stated that the plaintiff had absolutely no cause of action to ask for any accounts so far as the defendants are concerned. The defendants were purchasing the diesel engines for which part payment was being made and the plaintiff was maintaining regular account books for diesel engines which were supplied to the defendants. The accounts were therefore with the plaintiff and the plaintiff had not to ask for any accounts from the defendants. If the plaintiff directly sold diesel engines to third parties in the territories for which distributorship was given to the defendants the accounts were with the plaintiff for which the plaintiff was liable to give commission to the defendants. The defendants could only ask for the accounts so. far as such transactions are concerned. We are not concerned with this aspect because the defendants had not filed any crossclaim. But we can only say that a suit for accounts so far as the defendants are concerned was not maintainable against them; firstly because defendant No. 1 was not agent appointed under the agreement Exh. 112. There was no liability attached to defendant No. 1 for submitting any accounts. He was outright purchaser of diesel engines and he was selling to third parties on his own risks; secondly the defendants had no accounts which the plaintiff had not got. In fact the plaintiff had all accounts with them and they said so when they examined several witnesses and inspite of that fact they chose to produce only bills and the ledger and therefore the learned Civil Judge came to the conclusion that the plaintiff did not establish their claim. Civil Court rightly came to the conclusion that all items prior to 3-3-1969 were barred by law of limitation. The conclusion reached that defendant No. 1 was not an agent is also correct. On these conclusions the only alternative was to dismiss the suit of the plaintiff and therefore in our opinion the suit of the plaintiff was rightly dismissed by the learned Civil Judge (S. D) Baroda. No interference is called for. The appeal therefore stands dismissed. .