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Madhya Pradesh High Court · body

2012 DIGILAW 928 (MP)

Zakiuddin v. Rajendra Kumar

2012-09-25

ALOK ARADHE

body2012
Judgment This appeal is by the defendant No. 1, which was admitted on the following substantial question of law :- "Whether the payment made by the debtor to the agent of the Principal absolves the debtor from the liability of payment to the Principal and the agent alone is liable and responsible to his Principal?" 2. Facts giving rise to filing of the appeal briefly stated are that plaintiff filed the suit on the ground that he had deposited a sum of Rs. 5000/- with defendant No. 1, who had agreed to pay interest at the rate of 2% per month on the aforesaid amount and had executed a receipt. However, the defendant No. 1 did not make payment of the amount of interest. Thereupon, the plaintiff sent a notice on 26-10-1979 and filed a suit for recovery of an amount of Rs. 7650/-. The defendant No. 1 filed the written statement in which the transaction in question was denied. It was stated that defendant No. 1 had received a sum of Rs. 5000/- from one Mangaldas and had returned the amount to aforesaid Mangaldas. It was further stated that on receipt of the amount, the aforesaid Mangaldas had duly executed the receipt in favour of defendant No. 1 i.e. Ex.D/1. Thereupon, the plaintiff impleaded the aforesaid Mangaldas as defendant No. 2, who was proceeded ex parte. 3. The trial Court vide judgment and decree dated 30-1-1985 inter-alia held that defendant No. 2 had deposited a sum of Rs. 5000/- on behalf of the plaintiff with defendant No. 1 and defendant No. 1 had agreed to pay interest on the aforesaid amount. Accordingly, the trial Court directed the defendant No. 1 to pay an amount of Rs. 7650/- to plaintiff and to pay interest at the rate of 6% per annum on the Principal amount i.e. Rs. 5000/- from 1-5-1980 i.e. the date of filing of the suit till its realisation. Being aggrieved by the aforesaid decree, the defendant No. 1 preferred an appeal. The lower Appellate Court vide impugned judgment and decree dated 30-1-1985 inter alia held that defendant No. 1 had paid back the amount to defendant No. 2 which is apparent from Ex.D/1. However, it was not proved that the amount in question was paid to the plaintiff. Being aggrieved by the aforesaid decree, the defendant No. 1 preferred an appeal. The lower Appellate Court vide impugned judgment and decree dated 30-1-1985 inter alia held that defendant No. 1 had paid back the amount to defendant No. 2 which is apparent from Ex.D/1. However, it was not proved that the amount in question was paid to the plaintiff. Accordingly, lower Appellate Court modified the decree of the trial Court and directed that defendants No. 1 and 2 shall pay a sum of Rs. 7650/- to plaintiff and shall pay interest on the Principal amount from the date of institution of the suit till its realisation. It was further directed that the amount shall first be recovered from defendant No. 2 and in case the amount is not recovered from defendant No. 2, the same shall be recovered from defendant No. 1 and in case the amount is recovered from defendant No. 1, the defendant No. 1 shall be at liberty to institute a separate suit for the recovery of the amount in question against defendant No. 2. 4. Learned counsel for the appellant submitted that the Courts below have grossly erred in fastening the liability on the defendant No. 1. It was further submitted that both the Courts have concurrently found that defendant No. 1 had paid back the amount to defendant No. 2 and therefore, in view of section 218 of the Indian Contract Act, 1872, the liability on the appellant/defendant No. 1 to pay the amount in question could not have been fastened. In support of his submissions, learned counsel for the appellant has placed reliance in the cases of Firm Murlidhar Banwarilal vs. Firm Kishorelal Jagannath Prasad and others, AIR 1960 Rajasthan 296 and Babulal Swarupchand Shah vs. South Satara (Fixed Delivery) Merchant's Association Ltd. and another, AIR I960 Bombay 548. On the other hand, learned counsel for respondent No. 2 submitted that the judgment and decree passed by the lower Appellate Court is perfectly just and legal and does not call for any interference. 5. I have considered the respective submissions made by learned counsel for the parties and have perused the record. Agency in its broadest sense include every relation in which one person acts for or represents another by his authority. 5. I have considered the respective submissions made by learned counsel for the parties and have perused the record. Agency in its broadest sense include every relation in which one person acts for or represents another by his authority. In the more restricted sense, in which the term is used in the law of principal and agent, agency may be defined as the relation which results where one party, called the principal, authorities another, called the agent, to act for him in business dealing with third persons. The agent is the substitute or representative of his principal and derives his authority from him. The relationship contemplates dealings by the agent with third persons. See : Advanced Law Lexicon 3rd edition at page 3714. The relationship of agency arises when A (the principal) authorises B (the agent) to act on his behalf in making a contract with C (the third party). B may be liable or entitled under that contract because he contracts personally, or as co-principal, or acts for a principal who is undisclosed. See : Fourth Edition of Halsbury's Laws of England, Volume 9 Para 336. Section 218 of the Indian Contract Act, 1872 provides that subject to such deductions, the agent is bound to pay to his Principal all sum received on his account. An agent who has received an amount on behalf of his Principal is accountable to the Principal for the payment of the amount and he is under an obligation to do so subject to provisions of sections 217 and 221 of the Indian Contract Act. In other words, the Principal is the owner of the amount in the hands of his agent subject to latter's statutory rights enumerated in sections 217 and 221 of the Act. Also See: Firm Murlidhar Banwarilal and Babulal Swarupchand Shah (supra). In last paragraph of the statement, the plaintiff has admitted that the transaction in question took place through defendant No. 2 and that it was agreed between the parties that defendant No. 1 would deposit the amount with defendant No. 2 and the defendant No. 2 would pay back the amount to the plaintiff. The defendant No. 2 who has been examined as DW-1 in para 3 of his statement has admitted that defendant No. 1 had paid the amount in question to him and a receipt in this regard Ex-D/1 was executed. The defendant No. 2 who has been examined as DW-1 in para 3 of his statement has admitted that defendant No. 1 had paid the amount in question to him and a receipt in this regard Ex-D/1 was executed. In view of the admission of the defendant No. 2, the defendant No. 1 could not have been held liable for payment of the amount in question. For the aforementioned reasons, the substantial question of law framed by this Court is answered in the affirmative and in favour of the appellant. 6. The judgment and decree passed by the trial Court as well as the lower Appellate Court are set aside. The claim of the plaintiff is decreed as against defendant No. 2. It is directed that plaintiff shall be entitled to recover an amount of Rs. 7650/- from defendant No. 2 and shall also pay interest on the Principal amount i.e. Rs. 5000/- from the date of filing of the suit till its realisation at the rate of Rs. 6% per annum. 7. In the result, the appeal is allowed with costs. Appeal allowed.