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Judgment
Alfred Henry Lionel Leach, C.J.—The appellant firm and the firm of M.A.P. Mohammad Hussain Ravuthar and Sons (now represented by
the Official Assignee, the third respondent) were defendants in a suit instituted on the Original Side of this Court by the first and the second
respondent firms. The first respondents are a firm of European merchants carrying on business in Madras. The second respondents are their
guarantee brokers"" which means that for consideration they guarantee to the first respondents the fulfilment of the obligations of those contracting
with them. The appellants are manufacturers of brass and copper-articles and carry on their business at Pettai, Tinnevelly. The firm of M.A.P.
Mohammad Hussain Ravuthar and Sons (for the sake of convenience I will hereafter refer to this firm as ""the M.A.P. firm"") were merchants and
commission agents carrying on business at Pettai, Madras and Bombay with their head office at Pettai. The suit was filed to recover a sum of Rs.
16,940-11-10 in respect of contracts entered into by the M.A.P. firm with the first respondents for the purchase of brass sheets. Of this sum Rs.
1,008-10-5 represented a claim for damages for breach of a contract dated the 22nd January, 1930, the balance representing the price of goods
sold and delivered under earlier contracts. The figures are not in dispute and the liability of the M.A.P. firm is admitted, but as they were insolvents
and a decree against them alone would be infructuous it was sought to make the appellants also liable. The plaintiff-respondents alleged that the
appellants through their principal partner one Mohammad Shamsudin Ravuthar had guaranteed the liabilities of the M.A.P. firm. This was their
main contention in the Court below, but they advanced other-pleas which may be summarised as follows: - (1) The business of the M.A.P. firm
was really the business of the appellants. (2) If the business of the M.A.P. firm did not belong to the appellants absolutely, the members of the
appellant firm must be regarded as partners in the M.A.P. firm. (3) In any event, the M.A.P. firm acted as the agents of the appellants for the
purposes of the contracts with the first respondents.
The case was tried by Wadsworth, J., who held that the alleged guarantee had not been proved, but granted a decree against the appellants on
the ground that they were principals and that the M.A.P. firm were merely their agents. Although he did not say so the learned Judge seems to
have treated the appellants as undisclosed principals. The appellants deny that the M.A.P. firm were their agents. They say that the M.A.P. firm
dealt with the first respondents as principals and that they had nothing to do with the contracts. The plaintiff-respondents contend that the learned
Judge erred in holding that the guarantee had not been proved. They maintain that the appellants and the M.A.P. firm are really one and the same
firm, but, if not, the appellants are liable as the contracts were entered into by the M.A.P. firm as the agents of the appellants. The plea of
partnership has been abandoned in this Court, but the appeal throws open all questions, except that of partnership.
The appellant firm consists of three brothers, Mohammad Shanisudin Ravuthar, Mohammad Ghanni and Peer Mohideen. The M.A.P. firm was
founded many years ago by one M.A.P. Mohammad Hussain Ravuthar, the brother-in-law of the partners in the appellant firm. When the M.A.P.
firm was started the appellant firm had not been constituted. Mohammad Hussain Ravuthar had with him as his partners his two sons. Mohammad
Yusuf Ravuthar and Mohammad Abu Bakar Ravuthar. The business was that of general merchants and commission agents. Mohammad Hussain
Ravuthar died on the 1st December, 1927, when his sons were aged 32 and 28 years respectively. After the father''s death the sons carried on the
business. The M.A.P. firm supplied goods to the appellants as principals and also as commission agents. It is the appellants'' case that in so far as
brass and copper sheets were concerned the M.A.P. firm were the actual sellers, unless such goods were obtained from Bombay in which case
they were supplied on a commission basis. It is clear that from 1925 onwards the M.A.P. firm had not sufficient capital to finance their contracts
with the appellants. The result was that the appellants had to make advances to the M.A.P. firm. At the end of the financial year in 1926 the books
of the M.A.P. firm showed that the appellants were creditors for the sum of Rs. 16,338-13-4. At the end of 1927 the M.A.P. firm owed the
appellants Rs. 10,433-4-7; at the end of 1928, Rs. 27,432, and at the end of 1929 Rs. 21,235-6-9 The partners of the M.A.P. firm were
adjudicated insolvents on the 24th April, 1930, and at that time they were indebted to the appellants in the sum of Rs. 15,421-10-3 in respect of
advances made. The appellants have in fact proved in the insolvency as creditors for this sum.
It is admitted that according to the books of the respective firms the M.A.P. firm bought as principals brass and copper sheets and sold a large
proportion of their purchases to the appellants. The learned Advocate-General has prepared a statement from the Exhibits showing the total
purchases by the M.A.P. firm of brass sheets from 1926 to 1929 and the brass sheets they sold to the appellants. In 1926 the M.A.P. firm bought
820 bundles of which they sold 638 bundles to the appellants. In 1927 they bought 935 bundles and sold to the appellants 618 bundles. In 1928
the total purchases were 975 bundles of which the appellants took 625 bundles. In 1929 the M.A.P. firm bought.934 bundles and sold to the
appellants 821 bundles. In most cases the M.A.P. firm sold to the appellants at a profit, but in some cases they sold at a loss. The two firms kept
separate books of account and at the end of each financial year they prepared their own profit and loss, statements. There is no evidence, that the
appellants ever shared in the profits of the M.A.P. firm or contributed to its losses, or that the M.A.P. firm had any share in the business of the
appellants. So far as the books are concerned the two businesses were entirely independent. At the end of each financial year the appellants and
the M.A.P. firm exchanged statements showing the amounts due by one firm to the other in respect of the transactions during the year and in every
case interest was charged on outstanding sums. Before the suit was filed it was never contended that the appellants had any interest in the business
of the M.A.P. firm or that, they were in any way liable in respect of the contracts in suit.
With this statement of the facts 1 will turn to the question whether the appellants through their senior partner Shamsuddin guaranteed the
liabilities of the M.A.P. firm. The evidence in support of this contention is that of Motilal, a partner in the second respondent firm and of J. K.
Waterfield, an assistant in the first respondent firm who was examined on commission. Motilal states that in the month of December, 1927, that is
shortly after the death of Mohammad Hussain Ravnther, he met Shamsuddin in the office of the first respondent firm and that Shamsuddin then
gave the alleged guarantee. I should mention that the first respondents did business with the M.A.P. firm in 1925 and 1926, but the business was
discontinued in 1926, because the M.A.P. firm failed to fulfil their obligations. According to Motilal an agent of the M.A.P. firm was present at his
interview with Shamsuddin, but he could not give the name of the agent. He admits that Shamsuddin only spoke Tamil and he only Hindustani. He
says that the agent interpreted in Hindustani, but he is silent on the question whether the agent understood Tamil. Motilal says that he asked
Shamsuddin to give the guarantee in writing, but he refused to do so. Mr. Waterfield admittedly never saw Shamsuddin. His recollection was that
the second respondents told his firm that they could do business with the M.A.P. firm on a credit basis because some one had offered to guarantee
the M.A.P. firm. So far as Mr. Waterfield was concerned, the question was really one for the second respondents as the guarantee brokers, the
first respondents merely looked to their guarantee brokers to safeguard their business with the M.A.P. firm. Shamsudin denies that he ever had an
interview with Motilal, but we are not prepared to accept this denial. Something must have happened to induce the second respondents to
guarantee the performance by the M.A.P. firm of their obligations to the first respondents. We consider that Motilal and Shamsudin had a
conversation and as the result of that conversation business was resumed between the M.A.P. firm and the first respondents, but it does not follow
that a guarantee was in fact given. The plaintiff-respondents maintain that the appellants were really the proprietors of the M.A.P. firm. If this were
in fact the case it is difficult to see why Shamsudin would refuse to give a written guarantee. Shamsudin''s firm were financing the M.A.P. firm and
we have no doubt that Motilal knew this. It is part of the business of a guarantee broker to find out the positions of these dealing with the
principals. We consider that it is very likely that Shamsudin told Motilal that the first respondents might safely do business with the M.A.P. firm as
he was helping them with finance and taking goods from them, but this would fall far short of a guarantee. In face of the admitted refusal of
Shamsudin to give a guarantee in writing and the fact that it has not been proved that that the interpreter was in a position to make Shamsudin and
Motilal fully understand each other, we are constrained to hold that the alleged guarantee has not been proved. It follows that we concur in the
finding of the learned trial Judge on this issue.
With regard to the question whether the appellants and the M.A.P. firm are really one organisation I have already mentioned that the books
themselves, point altogether the other way and the admitted facts support the books. The plaintiff-respondents here have relied on correspondence
which shows that the appellants were financing the M.A.P. firm for the purposes of their contracts and that the M.A.P. firm were writing informing
the appellants of market rates and asking whether they should do business at those rates. The plaintiff-respondents, however refused to go to the
length of saying that the two firms were in reality one and the same firm before the death of Mohammad Hussain Ravuthar. The contention is that
the business of the M.A.P. firm must be regarded as belonging to the appellants from the death of Muhammad Hussain Ravuthar because of the
financial aid rendered. Yet it is quite clear that before his death the appellants were financing the M.A.P. firm just in the same way. The appellants
had to acquire brass and copper sheets for the purpose of their business, and there is nothing extraordinary in the fact that they got their
requirements through; the firm carried on by their nephews and that they rendered them financial assistance when required. Nor is there anything
suspicious in the fact that the M.A.P. firm were in the habit of sending market quotations to the appellants. The M.A.P. firm carried on business as
commission agents as well as that of sellers. If they dealt as principals their invoiced price left a margin of profits for themselves in most cases, but
sometimes they had to sell even at a loss. When buying for the appellant firm as agents they always charged commission. To ask the Court to hold
that the appellants and the M.A.P. firm formed the same organisation merely because the appellants lent financial assistance to the M.A.P. firm in
asking far too much, and on the evidence we must hold that the appellant firm and the M.A.P. firm were separate entities.
The question which remains to be considered is whether the M.A.P. firm acted in the transactions in suit as agents for undisclosed principals, but
before alluding to the facts it is necessary to deal with a legal argument advanced by the learned Advocate-General on behalf of the appellants. He
says that it is not open to the plaintiff-respondents to contend that the appellants were principals because the second respondents had already
proved in insolvency against the M.A.P. firm. He says that the doctrine of election here comes in and the proof in insolvency amounts to obtaining
a judgment against agents which precludes a suit being subsequently maintained against their principals. In this connection he has cited Morel
Brothers & Co., Ltd. v. Earl of Westmorland (1904) A.C. 11 Moore v. Flanagan and Wife (1920) 1 K.B. 919 and Firm of R.M.K.R.M v. Firm
of M.R.M.V.L. (1926) A.C. 761 In the case in Morel Brothers & Co., Ltd. v. Earl of Westmorland (1904) A.C. 11 the House of Lords held that
a judgment signed against one defendant was conclusive evidence of an election not to proceed against the other, and following this decision the
Court of Appeal in Moore v. Flanagan and Wife (1920) 1 K.B. 919 held that the plaintiff having signed judgment against the agent could not
afterwards recover judgment against the principal in respect of the same debt. The case of Firm of R.M.K.R.M. v. Firm of M.R.M.V.L. (1926)
A.C. 761 was decided by the Privy Council on an appeal from a judgment of the Supreme Court of the Straits Settlements. A judgment had been
obtained against the agent of a local money-lending firm, but in a subsequent suit it was sought to make the firm liable. The Judicial Committee,
however, held that the second suit did not lie. These decisions expound the law of England and of the Straits Settlements, but it does not
necessarily follow that the law in British India is the same. We are here governed by the provisions of the Indian Contract Act, and Section 233 of
that enactment states that in cases where the agent is personally liable, a person dealing with him may hold either him or his principal, or both of
them liable. An illustration is given to the section and it is in these words:
A enters into contract with B to sell him 100 bales of cotton, and afterwards discovers that B was acting as agent for C. A may sue either B or C,
or both, for the price of the cotton.
Therefore, there is in India a statutory provision allowing a plaintiff to sue both the principal and the agent in a case where the agent is personally
liable. In Pootheri Illath Kuttikrishnan Nair, Proprietor, Malabar Tile Works Vs. Kallil Appa Nair and Another, , Coutts-Trotter, C.J., expressed
the opinion that the section could only be construed as meaning that the plaintiff might sue both the principal and the agent in the alternative, but he
could not get judgment against both of them jointly for the amount sued for. I find myself unable to accept the construction. There is no ambiguity in
the language used in the section and I am unable to see anything unreasonable in the rule which it embodies. What would be the position if a suit is
brought against the principal after judgment had been obtained against the agent in an earlier suit is another matter but we are not called upon to
consider that question here. Even if proof in insolvency amounted to a judgment for the purposes of the doctrine of election - I express no opinion
on the point - it appears that the action which the second respondent took in the Insolvency Court was entirely without prejudice to the rights of
the parties in this suit. For these reasons we reject the argument of the learned Advocate-General that it is not open to the plaintiff-respondents to
advance in this suit the plea that the appellants were principals.
The learned Advocate-General is, however, on much firmer ground when he says that the evidence does not warrant the conclusion that the
M.A.P. firm were agents of the appellants. As I have already pointed out the M.A.P. firm dealt with the first respondents as principals and they
sold to the appellants as principals. The books and the course of dealing are entirely inconsistent with the suggestion that the M.A.P. firm were
acting as agents of the appellants. But there is also a letter which shows that the two firms were distinct. On the 29th May, 1928, the Madras
Agents of the M.A.P. firm when writing to the appellants at Pettai in respect of a shipment of brass sheets enclosed the bills of lading and asked
that as soon as they were received by the appellants they should take ""the signature of the principal and do the needful"". The principal was the
M.A.P. firm in Pettai.
The learned trial Judge observed that if the M.A.P. firm were merely selling to the appellants it is inconceivable that the appellants would have
been a large creditor of the M.A.P. firm. Considering that the partners in the appellant firm were the uncles of the partners in the M.A.P. firm there
is nothing extraordinary in this financial aid. Moreover the appellants were requiring brass sheets for their own business and if they wanted to
secure their requirements from the M.A.P. firm, which was only natural considering the relationship, they had to finance the transactions. They had
to finance transactions at a time when the two firms were deemed by the appellant-respondents to be distinct. The learned trial Judge considered
that the action of the M.A.P. firm in quoting market prices to the appellants firm, not their own selling prices, and asking for instructions regarding
the placing of orders was evidence that they were acting as agents. We do not view the position in this light as I have already indicated. There was
undoubtedly a close connection between the two firms, but there is no evidence which in our opinion justifies the conclusion that the M.A.P. firm
acted in these transactions as agents for the appellants. In fact we regard the evidence as pointing directly the other way.
For these reasons we allow the appeal and the suit will be dismissed with costs both in this Court and in the Court below against the plaintiff-
respondents.