The Indo Union Assurance Co. Limited vs T. Srinivasan

Alfred Henry Lionel Leach, C.J.—The appellant is a limited liability company which was formed to carry on business in life insurance. Its

business was not a prosperous one and at the end of 1943 it was taken over by the Prithvi Insurance Company Limited, since when its business

has been run as a "" closed one "" which means that new policies are not being issued.

On the 4th August 1941, the appellant engaged the respondent to act as its "" Field Superintendent "" for a period of ten years. This merely meant

that he was to canvass for policies on behalf of the appellant with the right to appoint persons to assist him but to be remunerated by him out of his

own pocket. His own remuneration was to be a commission of 75 per cent. on the first year''s premium income and 10 per cent, on premiums paid

by way of renewal. Should the business introduced by him in any one year fall short of Rs. 2,00,000, the rates of commission on Rs. 1,50,000

were to be 70 per cent, and 83/4 per cent, respectively. If the business did not amount to more than Rs. 1,00,000, the rates of commission were

to be 65 per cent. and 71/2 per cent. respectively. In addition to the commission the respondent was to be given a "" consolidated allowance "" of

Rs. 75 per mensem, payable in advance on the first of each month. This allowance was not by way of salary. According to the respondent''s

evidence it was paid to him for expenses incurred for meeting agents, treating them and going about. It was anticipated that his monthly expenses in

this connection would be Rs. 75. The contract further provided that he should be paid on the first of each month Rs. 100 as an advance against the

commission earned by him. The respondent was left to conduct his canvassing as he chose. He admits that in this respect the company had no

control over him.

The respondent appointed several persons as his sub-agents, but they introduced very little new business to the plaintiff. Including the

respondent''s own efforts only seventeen policies were secured, aggregating Rs. 26,000. The respondent was entitled by way of commission to the

sum of Rs. 369-5-0. By the 30th November, 1941 he had drawn Rs. 536-8-0 as commission in advance. The appellant''s general manager was

one K.S. Ramamurthi with whom the respondent was on very friendly terms until the beginning of December, 1941, when they fell out. On the 1st

December, 1941 the general manager sent a statement of account to the respondent showing that he was indebted to the company in the sum of

Rs. 1,217-15-0 after allowing for the commission due to him. In this statement the respondent was debited with advances which the company had

paid to his sub-agents and to one N.S. Mani who had not been engaged by him. The respondent protested, but the general manager maintained

that the advances had been paid with the respondent''s consent. It is said that the respondent never put his foot inside the appellant''s office after

the middle of December, 1941 and that no business was done by him or by his sub-agents beyond the business to which reference has already

been made. It should be mentioned that most of those policies lapsed in 1942.

On the 20th November, 1944 the respondent filed on the Original Side of this Court the suit which has given rise to the appeal. He alleged that

the appellant had broken its contract with him and he claimed the sum of Rs. 10,000 by way of damages. He maintained that he would have

earned this amount if he had been allowed to continue as Field Superintendent for the unexpired portion of the ten years. He alleged that the

general manager had been guilty of sharp practice and that he had done all that was incumbent upon him to do.

The suit was tried by Kunhi Raman, J., who held that the respondent had not substantiated his charge of sharp practice on the part of the

general manager; but he considered that the appellant had broken the contract because it had insisted on the respondent agreeing to a statement of

account in which he had been wrongly debited with advances made by the appellant to his sub-agents. The learned Judge found that the plaintiff

was entitled to a decree for damages in the sum of Rs. 3,000 on the footing that the allowance of Rs. 75 per mensem was in fact salary. He held

the date of breach to be the 1st January, 1942 when the appellant refused to pay him the allowance for that month. The sum of Rs. 3,000

represents Rs. 75 per mensem for forty months by which time the respondent had obtained another appointment. The appeal is from this decision.

The appellant says that the contract was not one of service but of agency and the learned Judge erred in law in treating the allowance of Rs. 75 per

mensem as salary.

We consider that the appeal is well founded. The contract was certainly not one between master and servant but one between principal and

agent, and therefore damages cannot be granted on the basis of the relationship of master and servant. The difference between the relationship of

master and servant and that of principal and agent is stated in Halsbury''s Laws of England Hailsham Edition, Vol. 22, Page 113. to be this:

A principal has the right to direct what work the agent has to do; but a master has the further right to direct how the work is to be done.

As we have indicated, the appellant had no right to direct how the respondent should do his work.

As the Rs. 75 was not salary, but merely an allowance to be paid to the respondent to meet the expenses incurred by him when carrying out his

duties as an agent of the appellant, it is obvious that it cannot be made the basis of assessment of damages for a breach of the contract in suit. We

are not satisfied that the appellant was in breach. The correspondence indicates that the company was willing to continue to employ the

respondent. But assuming that the learned Judge was right in holding the appellant to be in breach, the respondent must show that he has suffered

damage. The learned Judge held that the appellant was under no obligation to accept policies procured by the respondent and therefore future

commission could not be regarded as a basis for assessing damages. If the respondent had been successful in his agency, he would certainly be

entitled to damages in the event of the agency being wrongly terminated, but he was not successful. We have said sufficient to indicate that he did

practically no work, that he introduced very little business to the appellant, that the little business which he did introduce was of a very

unsatisfactory nature and that in respect of this business he has been paid all that is due to him. The respondent has proved no damage and

therefore in any event he is not entitled to a decree.

The appeal is allowed with costs here and below.