Thiruvenkidam v. Quilon Pencil Factory — 1990 DIGILAW 229 (KER)

JUDGMENT : Respondent-defendant is a firm manufacturing and selling pencils. Appellant-plaintiff was engaged by the firm as its agent for selling pencils on commission basis in Tamil Nadu and Karnataka. The arrangement with him was ultimately terminated. He filed the suit for rendition of accounts and realisation of the commission due to him as well as for injunction to restrain the respondent from appointing anybody else in his place. 2. Appellant says that he is an employee. But the respondent’s contention is that he is only a commission agent and the agency could be terminated at any time. Trial court accepted the contention of the respondent and held that the termination is valid and proper. The prayer for injunction was refused. That part of the decree is not under challenge and has become final. 3. For each year, upto the end of 1976, there was a written agreement incorporating the terms evidenced by Exts.A12 and Bl. Rate of commission agreed was 5% for Kerala Pencils and 6 1/4% for other pencils. While the case of the appellant is that it was enhanced by a subsequent oral agreement to 7% and 7 1/2% respectively, respondent says that there was no such agreement and the same rate continued. The appellant’s contention that his services were terminated when he refused to accept reduction of commission back to 5% and 61/4% was denied and it is said that termination was only because he unauthorisedly rejected the statement of accounts furnished to him. The plea that there was a subsequent agreement by which commission was increased was also rejected by the trial court, which further held that the plea is not available on account of S.92 of the Evidence Act. 4. Respondent had a contention that it has no liability to account and the suit for settlement of accounts is not maintainable. It is said that appellant could have sued only for realisation of the account due to him. That contention was rejected and the suit was found maintainable. But, even after finding that the statements of accounts furnished by the respondent are incorrect, the trial court did not pass a preliminary decree for rendition of accounts. Instead, those accounts were accepted and a decree for realisation of Rs. 8,990.84 with interest alone was passed. Respondent filed a memorandum of cross objection challenging the finding that the suit for rendition of accounts is maintainable. 5. Instead, those accounts were accepted and a decree for realisation of Rs. 8,990.84 with interest alone was passed. Respondent filed a memorandum of cross objection challenging the finding that the suit for rendition of accounts is maintainable. 5. The finding that S.92 of the Evidence Act is a bar in proving the subsequent agreement does not appear to be correct. It is true that S.92 places an interdict on the admissibility of parole evidence in variance or in contradiction of the terms of a document in writing. But, unlike S.91, S.92 deals only with those matters which the law requires to be reduced to the form of a document, and which are contracts, grants or other disposition of property. When there is no law requiring a written document, the Section has no application. The Section will be complete only if it is read along with the provisos. Proof of the existence of any distinct subsequent oral agreement to rescind or modify the contract, grant or disposition of property is prohibited under Proviso (4) only in cases where the contract, grant or disposition is required by law to be in writing or has been registered according to the law in force for the time being as to the registration of contracts. In other cases, existence of a distinct subsequent oral agreement to rescind or modify the contract can be proved. The agreements involved in this case are not required by any law to be in writing and they were not registered according to any law in force. Therefore, proof of a distinct subsequent oral agreement to rescind or modify the contract is not prohibited, but permitted. But that legal position will not help the appellant because there is absolutely no evidence of any distinct subsequent oral agreement to rescind or modify the contract covered by Exts.B1 and A12. It is true that a higher percentage of commission was paid in 1974 and 1975 at the rates mentioned by the appellant. Parties are relations. The evidence and admission of the appellant is that those payments were by way of concession when the respondent got higher profits. Therefore, the rate of commission found by the trial court also does not require interference. 6. The contention in the memorandum of cross objection to be considered is whether the suit for settlement of accounts is maintainable. The evidence and admission of the appellant is that those payments were by way of concession when the respondent got higher profits. Therefore, the rate of commission found by the trial court also does not require interference. 6. The contention in the memorandum of cross objection to be considered is whether the suit for settlement of accounts is maintainable. This objection was sought to be supported by the decision in Narandas v. Papammal ( AIR 1967 SC 333 ). I do not think that this decision, which was considered by the trial court also, is helpful to the respondent. Contention is that the appellant was only an agent and a suit for settlement of accounts by the agent against the principal will not lie. S.213 of the Contract Act specifically provides that an agent is bound to render proper accounts to his principal on demand. The principal’s right to sue an agent for rendition of accounts is thus recognised by Statute. There is no corresponding provision in favour of the agent. But the Contract Act cannot be taken as exhaustive. The right of the agent to sue the principal for accounts is not statutory, but equitable arising under special circumstances. There are usually exceptions to all rules. Where the principal has kept the accounts between him and his agent and the transactions in the course of the agency are within the peculiar knowledge of the principal or the agent is not having any records with him to quantify the amounts, he may ask for accounting. The same is the position in cases where the accounts are so complicated that a suit for a definite sum of money is not possible. In cases where settlement of accounts alone could do complete justice between the parties, the agent can sue the principal for accounting even if he is having some evidence of the transactions with him. The agent’s right to sue the principal is thus recognised and it is accepted even in the above decision relied on by the respondent. What I have stated above are only illustrative and not exhaustive. The right must depend upon the facts and circumstances of each case. 7. This is a case in which the amount due to the plaintiff depends on the extent of his dealings which are not known to him fully. What I have stated above are only illustrative and not exhaustive. The right must depend upon the facts and circumstances of each case. 7. This is a case in which the amount due to the plaintiff depends on the extent of his dealings which are not known to him fully. He is entitled to commission on sales made by the respondent directly to the customers in Tamil Nadu and Karnataka, besides commission for the orders booked by him in these two States. These are matters within the exclusive knowledge of the respondent, who alone is in possession of the entire evidence. Appellant cannot arrive at the correct figure unless accounts are rendered by the respondent, who is the principal. Accounts and records are in the possession of the respondent. The trial Judge was, therefore, fully justified in holding that this suit for rendition of accounts by the agent is maintainable. The cross objection must fail. 8. Then the only surviving contention is that of the appellant. According to him, trial court went wrong in deciding the suit without passing a preliminary decree for rendition of accounts. I agree with the appellant in this respect, especially in view of the finding of the trial court that appellant is entitled to rendition of accounts and the statement of accounts furnished by the respondent are wrong. There are certain types of suits in which the law requires decisions by stages. Suit for settlement of accounts is one among them. It is true that Order XX R.16 of the Code of Civil Procedure does not contain a mandate that in all cases of rendition of accounts there must be a preliminary decree followed by a final decree. The court need pass a preliminary decree for rendition of accounts and then go into the accounts in the final decree in cases in which the plaintiff has no right to a rendition of accounts from the defendant only if it is necessary that an account should be taken in order to ascertain the amount due to or from any party. The rule is only one of procedure. It does not confer any substantive right. The right has to be determined with reference to the relationship between the parties. The purpose of the preliminary decree in such suits is merely to ascertain whether the defendant is liable to account to the plaintiff. The rule is only one of procedure. It does not confer any substantive right. The right has to be determined with reference to the relationship between the parties. The purpose of the preliminary decree in such suits is merely to ascertain whether the defendant is liable to account to the plaintiff. When the court found that the defendant is liable to account to the plaintiff, it is the duty of the court to pass a preliminary decree directing an account to be taken of the transactions between the parties. That was not done. 9. Exts. A9, A10, A13, All, A34, A14, B2, B2(a) and A15 are the statements of accounts for 1974, 1975 and 1976. As DW 1, respondent admitted that these accounts were not accepted by the appellant though sent to him. Trial Judge found ‘that these statements of accounts are not correct and that the appellant is entitled to get rendition of accounts. For the years 1977 and 1978, no statements of accounts were given, but they were only produced in court. They are Exts.B10 to B13 and B20. Correctness of the statements of accounts for 1974, 1975 and 1976 was challenged by the appellant by filing Ext.A4 series. Trial was closed on 5-12-1980. Thereafter, respondent filed a statement explaining the mistakes in the accounts. Appellant filed objections. It is clear that the parties did not have the opportunity and the court also did not go into the accounts properly. Proper course was to pass a preliminary decree directing accounts to be taken and settled in the final decree. 10. Decree of the trial court to the extent it found the suit maintainable and that the commission of the appellant was at 5% and 6 1/4% respectively subject to the enhancement to 7% and 7 1/2% on concession for 1974 and 1975 is confirmed. But the decree fixing the quantum and allowing it to be realised is vacated. Instead, there will be a preliminary decree in favour of the appellant directing the respondent to render accounts. Accounts will be gone into and decided in the final decree. No costs. To this extent, the appeal is allowed and it is dismissed in other respects. The cross objection is also dismissed without costs. Allowed.