Hira Lal and Another vs Ram Rakha and Another

Passey, J.—This is an appeal by the Plaintiffs against the judgment and decree of the District Judge Barnala, dated 11-6-2006 dismissing their suit for the recovery of Rs. 13,000/- against the defendants. The Plaintiffs Hira Lal and Sekhar Chandar are the proprietors of the firm ''Hari Chand Hira Lal'' carrying on business at Nahan (Himachal Pradesh) and the defendants Ram Rakha and Dev Raj carry on commission agency business at Barnala under the name of Patram Mehar Chand. The Plaintiffs had been purchasing and selling various commodities including cotton and grains through the defendants and their account with the latter showed a credit balance of Rs. 2,285/- on Magha Badi 12,1999. The Plaintiffs on Magh Badi 12,1999 purchased through the defendants 110 bales of cotton to be weighed in January 1943 at the rule of Rs. 17/8/21 per maund and the total outlay came to Rs. 10,310/9/6. A part payment of the price, in addition to Rs. 2,285/- outstanding to their credit, Rs. 4,000/- were paid in cash by the Plaintiffs thus making a total advance of -Rs. 6,285/- and leaving a balance of Rs. 4,025/9/6 due by them. During the time that this cotton remained unsold there were various other transactions between the parties and except with regard to Rs. 1,136/14/- with which the account of the Plaintiffs was debited on Katik Shudi 7,2000 there is no dispute between them regarding the correctness of the entries in the books of account of the defendants. The Plaintiffs alleged that the defendants without any authority from them dishonestly and in order to make wrongful gain had sold their cotton (110 bales) on 25-11-1944 for Rs. 6,296/10/9 at the rate of Rs. 8/8/- per maund and thereby represented that a loss of Rs. 4013/15/- had been sustained. The defendants, on the other hand, urged that the price of cotton had considerably fallen and had a downward tendency and that as there was no margin money with them with which the impending risk could be covered; they notified to the Plaintiffs that unless some more money was sent to them for covering the apprehended loss, their cotton would be sold. They added that as the Plaintiffs failed to remit the money as demanded, and there was a sharp decline in prices, they had no alternative but to sell the cotton at the Plaintiff''s risk. The amount realised by the sale was credited to Plaintiff''s account which thus showed a debit balance of Rs. 348/14/- on the date of the sale, After some heated correspondence in which each side tried to justify its stand and claim, the defendants were the first to rush to the Court and they instituted a suit on 15-12-01 in the Court of the Sub-Judge 2nd Class Barnala for the recovery of Rs. 348/14/- stated to be due to them. The suit was dismissed and an appeal against that decree also remained unsuccessful. The defendants have now moved this Court on the revision side. The Plaintiffs on the other hand filed a complaint in the first instance under Sections 409 and 420, I.P.C. against the defendants on 26-10-2001 but that charge failed and the accused were acquitted. They then filed the present suit on 19-12-2003 for the recovery of Rs. 13,800/- giving details of how the amount became due to them. It was alleged by them that the rate of cotton prevailing on the date of the institution of the suit was Rs. 35/- per maund and that at that rate the price of the cotton in dispute and the interest on that price after making certain deductions came to Rs. 13,800/-, which they were entitled to recover from the defendants.

Several issues were framed by the trial Judge but those that have been contested be-, fore us and which have been decided in favour of the defendants are the following:

Whether the Plaintiffs bought cotton November, 1943 through the firm of the defendants and thereby sustained a loss of Rs. 1136/4/-? O.D.

Whether the price of cotton had fallen below the amount due to the defendants'' firm from Plaintiffs'' firm and therefore the defendants were well within their right to sell 110 bales of cotton? If so, what is the loss sustained by them? O.D.

In case issue No. 5 is decided against the defendants, what amount are the Plaintiffs entitled to on account of the profit from the transaction of 110 bales of cotton? O.P.

It would be useful to give here a statement of the Plaintiffs'' account with the defendants as on 25-11-1944, the date on which the cotton in question is alleged to have been sold.

CREDIT DEBIT (1) Magh Badi 12, 1999 (1) Rs. 10310-9-6 price of Rs. 2,285 (Balance of 110 bales Magh. Badi previous account.) 12,1999.

(2) Magh Badi 12, 1999 (2) Rs. 39-4-6 loss of Rs. 4,000 (Paid in Gowara Magh Badi cash.) 12, 1999.

(3) Har Badi 9, 2000 (3) Rs. 21 cash Baisakh Rs. 230 (Profit of Shudi Ashtmi, 2,000. Cotton May, 2000.)

(4) Bhadon Shudi 12, 2000 (4) Rs. 1-10 0 cost of tele- Rs. 100 in cash, at gram Jeth Badi 1, Barnala.) 2000.

(5) Assoj Badi 15, 2000 (5) Rs. 12-9-6 loss of cotton Rs. 1536-10-0 (Profit May, Har Badi 9, of Cotton September.) 2000.

(6) Katik Shudi 10, 2001 (6) Re. 1 telegram Har RS. 55 through Hundi. Badi 10, 2000.

(7) Re. 1 telegram Har Shudi 8, 2000. (8) Rs. 1600 through Hundi Sawan Badi 9, 2000.

(9) Rs. 78-12-0 loss in Bajra Poh, Assoj Badi 15,2000.

(10) Rs. 1136-14-0 loss cotton November, Katik Shudi 7, 2000.

(11) Rs. 488-2-0 on account of insurance rent and interest, Baisakh Badi 4, 2001,.

(12) Rs. 261 interest, rent telegrams and letters Poh Budi 7, 2001. ______________ ______________ Rs. 8,206-11-0 Rs. 13,852 2-6 8,200-11-0

The Plaintiffs as observed above do not dispute the correctness of this account except) with regard to Rs. 1136/14/- which is item No. 10 of the debit side and pertains to the loss alleged to have been suffered by the Plaintiffs on Katik Shudi 7, 2000 in respect of cotton November transactions. This item does not find place in the books of the Plaintiffs. According to the defendants and the statement of account mentioned above, Rs. 8206/11/- stood to the credit of the Plaintiffs on 25-11-1944, whereas their liability extended to Rs. 13,852/- leaving a debit balance of Rs. 5,645/5/6. The price of the cotton in dispute calculated at the rate said to be prevailing on 25-11-1944 came to Rs. 6296/10/6. In order to see whether the defendant''s version that on the date of the sale of the cotton, they had no money of the Plaintiffs left with them, which they called margin money, their account needs be referred to. It would show that if the disputed debit entry of Rs. 1136/14/- were not found to be genuine, the defendants had no cause to be perturbed by the fall in the price of 110 bales (sic) was to be calculated at the rate of Rs. 8/8/- per maund, there was still something more in the hands of the defendants as assurance money than what they claimed to be due to them on the running account. Fifty five bales of cotton at prices ranging between Rs. 18/14/- and Rs. 19/- per maund are alleged to have been sold by the Plaintiffs on Bhadon Badi 12,2000 and these were all November 1943 contracts. These contracts are alleged to have been settled on Assauj Shudi 11, 2000/9-10-1943 at Rs. 21/- per maund, as there was a Government Notification on 7-10-1943 that forward transactions in cotton must come to an end and no such transactions would be considered to be valid in future. The existing contracts in which the cotton was actually to be delivered at some future date were directed to be. settled at the market rate. It is stated by the defendants that the traders of Barnala called a Panchayat for the purpose and that Panchayat fixed the rate of cotton at Rs. 21/- per maund for settling up those transactions in which were included the contracts relating to the 55 bales of the Plaintiffs sold on Bhadon Badi 12, 2000. To prove the relevant contracts by the Plaintiffs on that date the defendants have produced their books of account and examined one Jagan Nath of M/s Sadhu Ram Shiv Ram of Barnala. The transactions were seven in number and the entries in respect of them have not been individually proved by any evidence whatsoever. The name of the scribe of those entries has not been disclosed. Ram Rakha Defendant when he appeared as his own witness did not allege that the Plaintiff Hira Lal had entered into those transactions, regarding November cotton or some of them with Jagan Nath. Jagan Nath has on the contrary stated that Hira Lal had on Bhadon Badi 12, 2000/27-8-1943 sold eight teeps of cotton (one teep is equal to 24 maunds) to him at different rates. In his own books of account, however, the name of the Plaintiffs as sellers, does not appear nor do they indicate that the transactions had been entered into directly with him. There is no separate entry in his Bahis about the eight teeps of cotton alleged to have been purchased by him from Hira Lal Plaintiff. His evidence makes it clear that in the year 1943 he had dealings with the defendants with respect to 29 teeps and the eight teeps regarding the November cotton alleged to have been sold to him by the Plaintiff are included in those 29 teeps. He has further stated that he could not say whether the remaining 21 teeps were sold and purchased ,by the defendants for themselves or for somebody else. The evidence of Jagan Nath instead of supporting Ram Rakha Defendant is in conflict with the position-taken up by the latter. Ram Rakha has stated that on Magh Badi 12, 2000 only 10 bales of cotton were sold by the plain tiff to Sadhu Ram Shiv Ram of which firm Jagan Nath is a partner at Rs. 18/14/9 per maund. Jagan Nath, on the other hand, he stated that the eight teeps of cotton were purchased by him at various rates ranging from Rs. 18/14/9 to Rs. 19/-. The conflict in the statements of Rama Rakha and Jagan Nath, is so prominent that it is rot possible to accept the entries in the books of account of the defendants with regard to the November cotton transactions to be correct. No authority from the Plaintiffs to sell this cotton has been produced nor was any invoice regarding the transactions sent to the Plaintiffs. Before settling the transactions on Assauj Shudi 11, 2000 no notice of the contemplated settlement was given to the Plaintiffs and their concurrence obtained. It may also be mentioned here that the entries in the Plaintiffs'' books with regard to other transactions that they had with the defendants completely agree with those present in the defendant''s account books. The defendants do not accuse the Plaintiffs of having behaved dishonestly on any other occasion or with regard, to any other transaction. It is difficult to think, therefore, that the Plaintiffs had not entered the November cotton transactions in their books to evade liability for the alleged loss.

Shri Dalip Chand contended that the books of account of the defendants have been regularly kept in the ordinary course of business and, therefore, all entries in them should be considered to be relevant and to have been proved. The proposition propounded by him is not acceptable as all that Section 34, Evidence Act says is that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire. This rule is however subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were made in accordance with facts. The statement of Ram Rakha Defendant shows that the November cotton contracts alleged to have been entered into on behalf of the Plaintiffs were with different persons. There is not a word in his evidence to show that the defendants paid any amount to any person on behalf of the Plaintiffs with regard to these transactions. Even Jagan Nath D.W. has not stated that he was paid anything by the defendants on behalf of the Plaintiffs. A commission agent would doubtlessly be entitled to be reimbursed by his principal for the loss sustained by him on his behalf to the extent that he is able to establish the payment made by him for such principal to other persons; but in the present case evidence is entirely lacking that the defendants paid anything to any person in respect of the losses suffered on account of the November transactions entered into by them for the Plaintiffs. Even after the transactions had been settled pursuant to the Government Notification mentioned above, the Plaintiffs were never informed of the settlement or of the amount by which they had sustained the loss. It must, therefore be held that the defendants have failed to prove that the sum of Rs. 1136/4/- was due to them from the Plaintiffs, and in the light of this conclusion it must further be held that on the date the 110 bales of cotton in dispute were sold, the defendants'' books of account showed that a sum of Rs, 917-9-6 was due to the Plaintiffs.

It is not denied that the Plaintiffs had not consented to the sale of the 110 bales of cotton. The defendants as commission agents could not put those bales to sale when the price of the cotton even at the rate of Rs. 8/8/- per maund was more than what was due to them. According to Ram Rakha Defendant himself commission agents do not generally demand money from their constituents till the margin of deposits on transactions in their hands is exhausted. In the present case as mentioned above there was still a sum of Rs. 917-9-6 due to the Plaintiffs on 25-11-1944 even if the value of the cotton in the possession of the defendants on -behalf of the Plaintiffs were to be calculated at the rate of Rs. 8/8/-.

The question of margin money in the hands of the defendants on 25-11-1944 has to be decided from another angle as well. Even if the amount of Rs. 1136/4/- were actually due to the defendants, which as held by me above was not due, the defendants could not take that amount into consideration while determining the amount of the requisite margin in respect of the transactions relating to the 110 bales in question. A commission agent may have a lien on his principal''s goods with regard to which the particular transaction was made & against which the commission agent has spent money, on his principal''s behalf, but that lien cannot extend to other goods of the principal that may be in his possession on account of other transactions. There was no contract and none is even alleged between the Plaintiffs and the defendants whereby the former had agreed to the creation of the defendant''s lien on all goods belonging to them and in the possession of the defendants at any time on their behalf, and in the absence of such a contract the defendants would not have a lien on goods, papers and other property of their principal unconnected with the specific transactions of November, 1943 due to them. The right of the agent''s lieu on the principal''s property is restricted to the goods in respect of which the commission was earned, disbursements made or services rendered. The scope of the agent''s lien is not vast enough to include his right to retain even those goods, papers and other property of the principal which were the subject of different and separate transactions. In this view of the law, also the defendants had no right to include the item of Rs. 1,136/4/- in calculating the margin between the amount due to them and what the price of the cotton was likely to fetch. There was thus no cause or justification for selling the Plaintiffs'' 110 bales of cotton.

Shri Atma Ram has taken us through the evidence produced by the defendants to prove the sale of these bales and has vehemently contended that the alleged sale was a bogus transaction. It is alleged by the defendants that the said bales were sold to one Inder Sain of Mansa. The daughter of Mehar Chand Defendant is married to this Inder Sain. Prior to the sale in question Inder Sain. had no dealings whatsoever with the defendants and was not in account with them. Although the cotton according to the defendants had been sold on 24-11-1944, no entry in respect of the transactions was made in their books by the defendants till four or five days later. The cotton was not weighed when it was sold nor when it was alleged to have been removed by the purchaser. The bales continued to lie with the defendants and were with them even on 19-6-2002 when Ram Rakha Defendant appeared as a witness in his own suit for the recovery of Rs. 348/14/- from the Plaintiffs. No advance or earnest money was paid in respect of the transaction at all. It was not till Chet Badi 8, 2001 that Inder Sain is stated to have sent Rs. 5000/- to the defendants. No entry regarding this remittance was made by Inder Sain in his books of account for about a month. It is difficult to believe that if in fact the amount of Rs. 5,000/- had been remitted to the defendants on the date mentioned in the statement of Inder Sain, he would have failed to make an entry at once. Inder Sain has stated that the defendants had sent him an invoice for Rs. 5,445/13/- and that he had sent Rs. 5000/- to them on Chet Badi 8, 2001. Regarding the payment of the balance, viz. Rs. 445/13/- there is no evidence at all. The transaction was not entered into through any broker. Although he has stated that he received a Bichak from the defendants five or six days after the transaction yet no Bichak was produced by him. Feeling that it would be impossible to prove that the bales were transported to Mansa by a goods train, he stated that he had brought carts and porters from Mansa for taking the bales to Mansa. It is curious that he should have felt the necessity of bringing porters even from Mansa when there is no dearth of them in Barnala Mandi itself. Again he paid no octroi duty on the bales taken by him and he has tried to offer an unsatisfactory explanation by saying that he had sold the goods outside the Mandi. The defendants did not make any entry regarding the sale to Inder Sain in their Naqal Sahi and that is the book in which a transaction is recorded on the day it is entered into. The absence of this particular transaction from the Naqal Sahi makes the sale extremely doubtful. We, therefore, agree with the learned Counsel of the Appellants that the 110 bales of cotton were not sold and the defendants'' allegation in that behalf is not correct.

Shri Dalip Chand in order to make out a case of justifiability for the sale, on 25-11-1944 made a half hearted attempt to argue that the defendants had an unpaid seller''s lien on the cotton and since a fairly large amount was due to them from the Plaintiffs they were within their right to dispose of the cotton and satisfy their claim. In their own suit the defendants did not base their claim on that ground, and in the suit against them no such plea was taken. The evidence examined by them also shows that the defendants opposed the Plaintiffs'' suit on the ground of want of margin money left with them. They never asked the Plaintiffs to pay up the amount that had remained due to them after crediting the amount of Rs. 6,285/- that had been received from the Plaintiffs. The telegram despatched by them on 20-11-1944 was as follows "Cotton old 8/10 send money otherwise selling" and the telegram that was sent on 25-11-1944 after the sale of the cotton stated "No margin sold 110 bales old cotton 8/8". These messages should leave no doubt that the defendants never intended to exercise the right of an unpaid seller u/s 47, Sale of Goods Act but that they found it necessary to sell the cotton because of the downward tendency of the rates and the insufficiency of the margin money in their hands. The argument of Shri Dalip Chand has no force.

Shri Atma Ram has next urged that the rates of cotton on 20-11-1944 have not been proved. No evidence has been led by the defendants on whom the onus lay to prove that on 20-11-1944 the market rate of cotton was Rs. 8/10/- per maund or that it came down to Rs. 8/8- on 25-11-1944. Some witnesses have'' no doubt been examined by them, but they have only been able to state that the price of the old cotton between 20-11-44 and 25-11-44 exclusive of pressing charges ranged in the neighbourhood of Rs. 10/-. This is not precise evidence as to the rates of cotton on the two dates in, dispute. From what has been stated and discussed above, the conclusion is irresistible that the defendants have not succeeded in proving that the 110 bales of cotton were in fact sold by them. They have also failed to prove the rates of cotton on 20-11-1944 and 25-11-1944 and the cause, justification or authority for the sale. The evidence produced by the defendants does not establish satisfactorily that the amount of Rs. 1,134/4/- was actually due to them by the Plaintiffs.

With the above conclusions, the only question that remains to be decided is as to what relief are the Plaintiffs entitled. They have calculated the amount of damages according to the rate of cotton on the date of the suit. This they are obviously not entitled to as the breach of contract had happened on 25-11-44 when the cotton was alleged to have been sold and intimation of the sale sent to them, Even if they, could ignore the sale, the Plaintiffs had demanded delivery of 110 bales and the defendants had definitely refused to make over the said bales to them on 26-10-2001. They cannot select the rates prevailing on any date before the suit for assessing damages after the breach of the contract had occurred or after the delivery of the goods has been refused to them. The measure of damages in such cases is the amount indicated by the difference in the rate at which the goods were purchased and the rate at which they could be sold when the Plaintiffs demanded their delivery and the defendants failed to comply. Unfortunately the Plaintiffs have not led any evidence to prove the rates of cotton on 26-10-2001 when they asked the defendants to make over the cotton to them. The damages cannot consequently be assessed and no decree for damages can be granted to them. They are, however, in view of our finding that they were wrongly debited with Rs. 1,136/4/- entitled to recover from the defendants the amount that has been over charged by the defendants & this amount according to the counsel of the parties comes to Rs. 1,042/5/6 to which interest at the contractual rate of Rs. -/9/- per cent. per mensem must be added. The interest from the date of which the amount became due to the date of the institution of the suit, comes to Rs. 149/- The appeal is accordingly accepted and a decree for Rs. 1,171/5/6 is passed in favour of the Plaintiffs with proportionate costs through out. They will also be entitled to recover interest on Rs. 1,042/5/6 at the rate of 6 per cent. per annum from the date of the institution of the suit till realisation. In the cross revision petition the facts and the points of law are the same and as the appeal of the Plaintiffs has partially succeeded, that revision petition must fail and is dismissed with costs.

Teja Singh, C.J.

I agree.