ALLIANCE MILLS (LESSEES) PVT. LTD v. INDIA CEMENTS LTD.
1988-01-15
BABOO LALL JAIN
body1988
DigiLaw.ai
BABOO LALL JAIN, J. ( 1 ) THIS is an application on behalf of Nanalal M. Varma and Co. Ltd. the defendant No. 2 in this suit, made under O. 7, R. 11 of the Code of Civil Procedure, praying that the suit be permanently stayed as against them or alternatively the name of the defendant No. 2 Nanalal M. Varma and Co. Ltd. be deleted from the suit and/or the suit register. The case of the petitioner, in substance is that the plaint does not disclose any cause of action against the petitioner. According to the petitioner, it is not the case of the plaintiff, in the plaint, that the contracts, contain any provision enabling the petitioner to enforce the said contracts or to be personally bound by it. According to the petitioner the plaintiff has stated in the plaint, that the petitioner, was acting as agent of the defendant No. 1 and as such, the principal referred to in the plaint has been sued as defendant No. 1. According to the petitioner the suit as against the petitioner, the defendant No. 2 is barred under the provisions of S. 230 of the Contract Act, 1872 in so far as the defendant No. 2 is concerned. In the affidavit in opposition filed on behalf of the plaintiff/respondent, the plain-tiff/respondent states that the petitioner is liable under the contracts and he has relied on the contents of the several contracts, copies whereof have been annexed to the said affidavit. It is unfortunate that the petitioner though it annexed a copy of the plaint, to its petition yet, it did not annex copies of the said contracts, which are in fact annexures 'a 'to 'g' to the plaint, and which form part of the plaint. The said copies of the contracts, show that in the said contracts, the defendant No. 2, has been shown as the purchaser. ( 2 ) ACCORDING to the plaintiff it will appear from the said contracts, that the defendant No. 2 entered into the said contracts in its firm name as the purchaser.
The said copies of the contracts, show that in the said contracts, the defendant No. 2, has been shown as the purchaser. ( 2 ) ACCORDING to the plaintiff it will appear from the said contracts, that the defendant No. 2 entered into the said contracts in its firm name as the purchaser. The said contracts are in the prescribed forms of the East India Jute and Hessian Exchange Ltd. Though the said contracts were entered into through the brokers, the said contracts specifically mention that by the said agreements the plaintiff agreed to sell and deliver to the defendant No. 2 and the defendant No. 2 agreed to purchase from the plaintiff diverse quantities of goods at the rates mentioned in the contracts. So, according to the plaintiff the defendant No. 2 was in any event personally entitled to enforce the same and/or was personally bound by it. ( 3 ) MR. P. K. Mallick, learned counsel appearing on behalf of the petitioner submitted that the plaintiff has pleaded in the plaint that his client, the defendant No. 2, was the agent of the defendant No. 1. If that is so then, according to Mr. Mallick, by virtue of S. 230 of the Contract Act, the plaint does not disclose any cause of action as against his client the defendant No. 2 petitioner herein and that his client will succeed even if all the allegations made in the plaint are accepted and the suit as against his client is bound to fail, under all circumstances. Section 230 of the Contract Act reads as follows :"230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal : in the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them. Such a contract shall be presumed to exist in the following cases :- (1) where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad; (2) where the agent does not disclose the name of his principal; (3) where the principal, though disclosed, cannot be sued. " ( 4 ) MR.
Such a contract shall be presumed to exist in the following cases :- (1) where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad; (2) where the agent does not disclose the name of his principal; (3) where the principal, though disclosed, cannot be sued. " ( 4 ) MR. Mallick submits that the reading the plaint as a whole, it cannot be said that his client had agreed to be bound by the contract personally or to enforce the contract personally. Mr. Mallick has further contended that there is no pleading of any alternative case against his client, that in case it is contended and/or held that his client is not an agent then and in that event his client can be made liable personally for breaches of or violations of the said contracts. For this purpose Mr. Mallick relied on Atkin's Court Forms, Second Edition, Vol. 4 (1976 Issue) at p. 124 -- Form No. 52. That is a 'statement of claim by third person against principal and agent'. This is a form relating to a case where an alternative claim is made against the agent to hold him liable for breach of warranty of his authority. Mr. Mallick has also relied on Ghosh on Principles and Forms of Pleadings, Third Edition at p. 1042 - Form No. 508. There, also an alternative claim has been made against the agent for breach of warranty of authority. It is to be noted that in this form the only allegation in the pleading is that the agent represented himself to be an agent and that the plaintiff acted on the basis of the said representation and advanced the amount. The pleadings in the form, do not make any alternative claim as against the agent but, relief had been claimed firstly against the principal and alternatively against the agent. These are however the cases where the agent is made liable for breach of warranty of authority. These pleadings do not relate to cover cases where the agent, in spite of being agent, can be made personally liable. Section 230 of the Contract Act, is intended to cover cases where the agent though an agent, cannot be made personally liable. The section starts with the words " in the absence of any contract to that effect". . . . . . .
Section 230 of the Contract Act, is intended to cover cases where the agent though an agent, cannot be made personally liable. The section starts with the words " in the absence of any contract to that effect". . . . . . . . . an agent cannot etc. etc. Therefore, if there is a contract to the effect that the agent, is liable, S. 230 of the Contract Act does not stand in the way. The section thereafter proceeds to say that such contract, shall be presumed to exist in the following cases namely, merchant resident abroad, non-disclosure of the name of the principal by the agent, where principal though disclosed cannot be sued. This does not mean that these are the only three cases or categories. There may be any number of other categories or cases, where it can be shown that the agent agreed to be personally liable. According to the plaintiff-respondent one of such categories is the one where the agent enters into a contract in his own name. ( 5 ) MR. Mallick also relied on a judgment in the case of Ramcharan Mahto v. Custodian of Evacuee Property, Bihar reported in AIR 1964 Pat 275 wherein the Division Bench of the Patna High Court held that where no notice was served under S. 80 of the Code of Civil Procedure, to one of the defendants, who was a Public Officer and where the other defendant was not a Public Officer then in that case the plaint as a whole should not be rejected under O. 7, R. 11 (d) but that the name of the Public Officer should be expunged from the action and the suit should proceed against the other defendant. ( 6 ) IN the case of Shankarrao Balaji v. Shambihari reported in AIR 1951 Nag 419, it was held that in considering the nature of the case and the cause of action, the Court is limited to the averments in the plaint. It further held that it was clearly not possible to reject a plaint as a whole, which discloses a cause of action against certain defendants and none against the rest. The only feasible course in such a case is to discharge the defendant against whom no cause of action is disclosed and have his name struck off from the plaint.
It further held that it was clearly not possible to reject a plaint as a whole, which discloses a cause of action against certain defendants and none against the rest. The only feasible course in such a case is to discharge the defendant against whom no cause of action is disclosed and have his name struck off from the plaint. ( 7 ) SIMILARLY in the case of P. B. Shah and Co. v. Chief Executive Officer, reported in AIR 1962 Cal 283 , a Division Bench of this Hon'ble Court held as follows :"the order rejecting the plaint is in any event erroneous. On the finding that the suit was not maintainable against the defendant No. 1, the suit would have been dismissed against him, but the plaint as a whole could not be rejected. It may be that in the absence of the defendant No. 1, the suit would become defective for non-joinder of necessary parties, and if so, the suit will have to be dismissed against the other defendants also. "on the basis of the aforesaid judgments, it was submitted, that if it appears that the plaint does not disclose any cause of action, as against the defendant No. 2 then the defendant No. 2 alone can be discharged and the suit should be allowed to remain as against the defendant No. 1 alone. I also think that in view of the aforesaid judgments, O. 7, R. 11 of the Code of Civil Procedure, can be made operative in favour of one or more of the defendants, provided of course, if the court holds that the plaint does not disclose any cause of action against the defendant or defendants concerned and the suit can be allowed to proceed as against the rest of the defendants. However, the question still remains, as to whether the plaint does or does not disclose any cause of action, against the defendant No. 2 in this suit. ( 8 ) MR. Tibrewal appearing on behalf of the plaintiff, relied on a judgment in the case of Abdul Karim Basma v. Gladys Muriel Weekes, reported in (1950) 54 Cal WN 770. In that case their Lordships of the Privy Council held as follows :"an agent who enters into an agreement in his own name is contractually bound, though the other party knew when the contract was made that he was acting as agent.
In that case their Lordships of the Privy Council held as follows :"an agent who enters into an agreement in his own name is contractually bound, though the other party knew when the contract was made that he was acting as agent. The agreement in such an event did not cease to contain the names of the contracting parties and did not cease to satisfy the Statute of Frauds. Accordingly, the agent could sue on the agreement and so could the principal. "their Lordships further held at p. 776 :"an agent who contracts in his own name does not cease to be contractually bound, because it is proved that the other party knew when the contract was made that he was acting as agent. So the agreement which is made in his name does not cease in that event to contain the names of contracting parties and, therefore, does not cease to satisfy the statute. Their Lordships are satisfied that in the present case the terms of the agreement of 29th Nov. are such that Mr. Wright was contractually bound, and, therefore, the agreement satisfies the Statutes of Frauds. So Mr. Wright could have sued on the agreement and if he could sue, so can his principal the appellant. "the plaintiff has further relied on the following observations in the case of Alagappa Corporation v. United Brokers, reported in AIR 1948 Mad 216 :"as stated already, the main point taken by the defendants is, that the action does not lie because the plaintiffs and the defendants were both brokers for third parties and the purchases were made by the plaintiffs in their capacity as brokers. In other words, the plaintiffs bought the shares from the defendants as their agents for the purpose of being sold on their behalf to third parties and that therefore they had no right to sue in their own name in respect of these contracts. It is also urged that the plaintiffs knew perfectly, well, as would be seen from the correspondence, that the defendants themselves were in their turn agents of their customers for selling these shares. I am however of the opinion that there are no merits in this defence which is not sustainable either in law or on facts.
It is also urged that the plaintiffs knew perfectly, well, as would be seen from the correspondence, that the defendants themselves were in their turn agents of their customers for selling these shares. I am however of the opinion that there are no merits in this defence which is not sustainable either in law or on facts. In the first place; while it is perfectly true that in the correspondence, mention is made of the fact that the shares which the defendants sold to the plaintiffs were not got by them from the sellers and that the plaintiffs in their turn were taxing them with delay in delivery, stating that the buyers from them, who wanted the shares, could not be put off any longer, both the parties to the contracts proceeded in the formation of the contracts as if they were the principals and not as if they were the agents of any one else. The principals, were not disclosed on either side. The contracts do not refer to the existence of any such principals or to the fact that the parties signed the contracts as agents on behalf of some others. D. W. 1 stated : 'i looked to the plaintiff for payment of price and not to any buyer or buyers from him. Because he had not disclosed the price he must make good the transaction. If he does not pay the price, I would ask him to pay in whatever manner he may adjust with his buyers. These answers show how the parties dealt with each other. Where the agent does not disclose the name of his principal, there is a presumption that the agent can personally enforce the contracts entered into by him and that he is personally bound by them. There is nothing in this case to displace this presumption. The facts that the defendants were asking for time stating that their sellers did not deliver the shares, or the plaintiffs were pressing for the delivery of the shares stating that buyers from them would not brook further delay, does not alter the intrinsic nature of the contracts themselves. "of course so far the above referred Madras case is concerned, that was a case of an undisclosed principal. However the fact remains that the presumption could be rebutted by oral evidence.
"of course so far the above referred Madras case is concerned, that was a case of an undisclosed principal. However the fact remains that the presumption could be rebutted by oral evidence. ( 9 ) IN a case where the agent enters into the contract in his own name, without disclosing, in the contract note, that he is acting as agent and without disclosing in the contract note, the name of his principal, the agent himself is described as the purchaser or seller as the case may be. The contract note itself costs all obligations and/or rights on the purchaser or the seller named in the note. Therefore in my opinion there is contract to the effect that the seller or purchaser mentioned in the note itself will be entitled to enforce the contract and shall be bound by it. ( 10 ) IN a case of this nature mere pleading of the contract, the breaches thereof and of damages, is a sufficient cause of action against the purchaser mentioned in the contract, irrespective of the fact that he acted as agent or that the fact was disclosed to the other parties or that the name of the principal was disclosed to the other party. If it is further pleaded and proved by the plaintiff that he acted as agent for particular principal, then the principal also will be held liable. In a case like this it is for the agent to plead and prove that the agreement was such that he was not to be held personally liable or that he could not enforce the contract. ( 11 ) IN the present case the plaintiff has annexed written contracts to the plaint which are in the printed form of East India Jute and Hessian Exchange Ltd. , Calcutta. The said contracts were issued by a broker by the name of Jagannath and Co. The said Jagannath and Co. writes to the plaintiff that they had sold to Nanalal M. Varma and Co. Ltd. (the defendant No. 2) the diverse quantities of goods as specified at the rates as specified in the respective contract notes. On the basis of the said contract notes, the plaintiff is the seller and Nanalal M. Varma and Co. , is the purchaser. In other words, Nanalal M. Varma and Co.
Ltd. (the defendant No. 2) the diverse quantities of goods as specified at the rates as specified in the respective contract notes. On the basis of the said contract notes, the plaintiff is the seller and Nanalal M. Varma and Co. , is the purchaser. In other words, Nanalal M. Varma and Co. Ltd. had entered into the said contracts describing itself as purchaser i. e. , in their own name without disclosing in the contract notes the name of their principals. May be that they disclosed the name of their principal to the plaintiff at any other point of time but the fact remains that the contract is as between the plaintiff and the defendant No. 2, on principal to principal basis. As per the contract notes the respective obligations are to be discharged by the buyer and/or seller mentioned in the contract notes. This in itself is sufficient to bring it in the category of contracts, where there is a contract to the effect that the purchaser shall be entitled to enforce and/or shall be bound to carry out the obligations. It is a case where an agent has entered into a contract in his own name. As per the judgment of the Privy Council in the case of Abdul Karim Basma, (1950 (54) Cal WN 770) (supra) an agent who enters into an agreement in his own name though the other party knew that he was acting as agent, the agent can enforce the contract. In my opinion, in a case like this, an agent as well as the principal can sue or be sued. The contract note states that the plaintiff is the seller and the defendant No. 2 is the purchaser. There is a presumption in a case like this that the agent agreed to be personally bound by the terms of the contract. At best in case like this the defendant can plead and prove by evidence, that the defendant, the agent, had not agreed to be bound by the contract. On the face of the contract, the person bound by the contract, is the constructing party who in this case is the defendant No. 2.
At best in case like this the defendant can plead and prove by evidence, that the defendant, the agent, had not agreed to be bound by the contract. On the face of the contract, the person bound by the contract, is the constructing party who in this case is the defendant No. 2. If the plaintiff has pleaded the contract and its breaches and damages, it cannot be said that there is absence of contract to the effect that the defendant No. 2, is liable, or that the plaint does not disclose a cause of action as against the agent/defendant. If the case of the defendant No. 2 is that he did not agree to be personally bound by the terms of the contract then and in that event he can take such a point in his written statement and the said issue can be heard and decided in the suit. How far such a defense will be permissible, is not for me to decide in this case. An agent who has entered into a contract in his own name without disclosing in the contract note the name of his principal and describing himself as purchaser in the contract note, cannot come before the court and say that he is not bound by the contract himself. That will be contradictory to the terms of the contract note. It may well be that the agent's representation to the plaintiff to the effect that he was acting on behalf of the principal, may ultimately fail and the alleged principal may ultimately prove before the court that the agent was not factually an agent or that he was acting beyond the scope of his authority. In either case the agent who had entered into a contract in his own name without disclosing in the contract note the name of the principal cannot be allowed to say that he is not personally bound by the terms of the contract, which he has entered into in his own name with the plaintiff. ( 12 ) THE cases relied on by Mr. Mallick are cases where the plaint did not disclose any cause of action as against one of the defendants and as such the provisions of O. 7, R. 11 could be relied upon and the defendant concerned was discharged. Here there is a pleading that there was a contract.
( 12 ) THE cases relied on by Mr. Mallick are cases where the plaint did not disclose any cause of action as against one of the defendants and as such the provisions of O. 7, R. 11 could be relied upon and the defendant concerned was discharged. Here there is a pleading that there was a contract. The contract on the face of it is with the defendant No. 2 and it cannot be said that the defendant No. 2 did not agree to be personally bound by the said contract. On the other hand the entire purport and terms of written contract note is otherwise, as stated hereinbefore. Taking the reverse case also if the defendant No. 2, would have had the occasion to enforce the said contracts, the defendant No. 2 could do so, as was held in case before the Privy Council, referred to hereinabove. ( 13 ) FURTHERMORE and in any event, the defendant No. 2 will have ample opportunity to raise an issue in the suit itself, to establish that he did not agree to be personally bound by the said contracts. Peculiarly enough, the defendant No. 2, has stated in his petition that he in fact acted only as agent on behalf of the defendant No. 1. Taking the pleadings and the contracts into account, I do not think that this is a fit case where the Court will exercise its powers under O. 7, R. 11 of the Civil Procedure Code, which was the only provision of law relied on by Mr. Mallick in support of his case. ( 14 ) THERE is another point that has been taken on behalf of the plaintiff/respondent. The relative notice of motion is directed towards both the plaintiff and the defendant No. 1. When I asked the learned counsel, appearing on behalf of the petitioner, as to whether the defendant No. 1, who is the respondent No. 2 mentioned in the relative notice was served, it was submitted that they did not serve the defendant No. 1, who is the respondent No. 2 because they did not think if necessary. I also asked whether any affidavit of service was filed in this case and it was submitted on behalf of the petitioner that no such affidavit of service has been filed. Mr.
I also asked whether any affidavit of service was filed in this case and it was submitted on behalf of the petitioner that no such affidavit of service has been filed. Mr. Tibrewal appearing on behalf of the plaintiff respondent relied on a judgment and/ or order dated Dec. 3, 1986 in Appeal from original Order No. 226 of 1986 (Britannia Industries Ltd. v. Punjab National Bank) and submitted that if the petitioner has not served all the parties to the proceedings then the application is liable to be rejected on this ground alone. I also agree that the petitioner was bound to serve all the parties to the suit and if he has taken the liberty not to serve any of the parties to the suit, then this application is liable to be rejected on that ground also. It is not for the litigant petitioner to pick and choose as between the parties to the proceeding. The normal rule is that he has to serve the notice on all the parties to the suit and if he has not done so his application is liable to be rejected on that ground alone. ( 15 ) MR. Mallick also submitted that if the court is of the view that it is necessary to serve the defendant No. 1, then his client, if given time, will serve the defendant No. 1. But that is not the spirit of the rules relating to service of the notice of motion. The petitioner has to serve all the parties at the appropriate time and to file affidavit of service with regard thereto. If the petitioner has not done, so, he cannot at the time of the first hearing, turn round and say that the court should give its verdict first and only thereafter he will serve the concerned party to the suit whom he thought to be an unnecessary party. In my opinion, this application is liable to be rejected on that ground also. ( 16 ) THIS application, is, therefore, dismissed with costs. All interim orders are vacated. Application dismissed.