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SUPREME COURT OF INDIA
BEFORE FAIZAN UDDIN AND S.C. SEN, JJ.
VIJAY TRADERS Versus BAJAJ AUTO LTD.
Civil Appeal No. 4600 of 1984 {From the Judgment and Order dated 27-1-1982 of the Bombay High Court in F.A. No. 590 of 1974},
Decided on 1-11-1995
Advocates appeared:
Krishan Mahajan, P.H. Parekh, Ms Shefali, S. Fazi, Advocates, for the Appellants; V.N. Ganpule, Senior Advocate (Satish K. Agnihotri, Ms Punam Kumari and A.B.L. Saxena, Advocates, with him) for the Respondents.
Indian Partnership Act, 1932 - Industries Act, 1951 - Section 18-G - Constitution of India - Article 136(1) - Contract Act, 1872 - Section 182 - Section 206 - Manufacturers Of Scooters - Parties Agent - Terminated Distributorship - Plaintiffs are a trading firm registered, having its office at Station Road - Defendants are a Company registered as a Public Limited Company having its Registered Office - Defendants are manufacturers of scooters called Vespa Scooters and Vespa Autorickshaws, referred to as Vespa Commercials - Due to shortage of automobiles at relevant time Central Government in exercise of its had promulgated an Order called "Scooter Control Order, 1960" and later on similar order was promulgated in respect of Vespa Commercials - Plaintiffs was that defendants by their letter/order, appointed plaintiffs as their permanent sole selling agent for Vespa Scooters - Plaintiffs took plea that appointment constituted an agency coupled with interest and relationship between parties was that of principal and agent - Plaintiffs alleged that they secured 2700 orders for Vespa Scooters and 501 orders for Vespa Commercials - But defendants wrongfully terminated distributorship - Plaintiffs alleged that this termination was wrongful, illegal and without proper notice, causing loss to plaintiffs and, therefore, filed suit for damages for wrongful termination and rendition of accounts – Held, Appellants also submitted that though appointment of appellant-firm as an agent was irrevocable yet respondent-Company terminated same without reasonable notice - It is clear from evidence that contract provided that distributor will pay price of vehicles ordered and delivery was to be given to plaintiffs on payment of price - Defendant-Company took no risk with regard to damage caused to vehicles during transit and same had to be suffered by plaintiffs firm - Thus contract between plaintiffs and defendants would be one of purchase and sale and not of any agency - In these facts and circumstances view taken by two courts below cannot be said to be erroneous so as to call for any interference – Appeal Dismissed.
Material Fact: The core material fact in this case is whether the relationship between the plaintiffs and defendants was that of an agent and principal or merely a buyer and seller. The plaintiffs allege they were appointed as exclusive, irrevocable agents for distribution, which would establish an agency relationship, while the defendants contend that the relationship was solely that of a buyer and seller, with no agency involved.
Issue Raised: The primary issue is whether a relationship of agency, as defined under the relevant provisions of the Contract Act, existed between the plaintiffs and defendants, or whether the transaction was merely a sale of goods.
Legal Provision: The relevant legal provisions are Sections 182 and 206 of the Contract Act. Section 182 defines an agent as a person employed to do acts for another or to represent another in dealings with third persons, implying that the relationship of agency involves employment and representation. Section 206 pertains to the termination of agency and the requirement of reasonable notice, applicable if an agency relationship is established.
Argument: The plaintiffs argue that their appointment as sole distributors constituted an agency coupled with interest, which should be considered irrevocable, and that the relationship was that of principal and agent. They rely on the appointment letter and the nature of their duties, including securing orders and representing the defendants in dealings, which are characteristic of an agency relationship under Section 182. They further argue that the termination without notice was wrongful, invoking Section 206.
The defendants counter that the transactions were purely of sale, evidenced by the fact that the plaintiffs purchased vehicles at wholesale prices, sold them at retail, and retained the profit—characteristics inconsistent with an agency relationship. They assert that the absence of a clear agency agreement and the nature of the transactions do not support the claim of an agency, and that the relationship was that of buyer and seller, which can be terminated at will.
Judgement: The courts examined the evidence and concluded that the relationship was not of agency but of buyer and seller. The absence of a formal agency agreement, the nature of the transactions, and the evidence of the plaintiffs purchasing and reselling vehicles at profit indicated a sale transaction. The courts held that the appointment was not of an agent but a distributor, and that the termination was lawful and did not require notice under Section 206.
Ratio Decidendi: The courts' ratio was that the material facts and the nature of the transactions did not establish an agency relationship. The evidence showed that the plaintiffs purchased vehicles outright and sold them independently, which is inconsistent with the characteristics of agency as defined by the law. Therefore, the relationship was that of buyer and seller, and the provisions related to agency termination did not apply.
Conclusion: In my opinion, based on the facts and the legal principles, the courts correctly identified the relationship as that of buyer and seller rather than agency. The absence of a formal agency agreement and the transactional evidence support this conclusion. Consequently, the termination was lawful, and the legal provisions concerning agency did not apply. This case underscores the importance of clear contractual terms and the nature of transactions in determining the legal relationship between parties.
JUDGMENT
FAIZAN UDDIN, J.- This appeal at the instance of the plaintiff has been directed against the judgment and decree dated 27-1-1992 passed by the High Court of Bombay in First Appeal No. 490 of 1974 affirming the judgment and decree dated 21-1-1974, passed by the Civil Judge, Senior Division, Ahmednagar dismissing the suit of the plaintiff-appellant except for an amount of Rs 4419.81 which was admitted.
2. The appellants hereinafter shall be referred as plaintiffs and the respondents as defendants.
3. The facts in brief leading to this appeal are that the plaintiffs are a trading firm registered under the Indian Partnership Act, having its office at Station Road, Ahmednagar. The defendants are a Company registered under the Indian Companies Act as a Public Limited Company having its Registered Office at Pune. The defendants are the manufacturers of scooters called Vespa Scooters and Vespa Autorickshaws, hereinafter referred to as Vespa Commercials. Due to the shortage of automobiles at the relevant time the Central Government in exercise of its powers conferred by Section 18-G of the Industries (Development and Regulation) Act, 1951 had promulgated an Order called the "Scooter (Distribution and Sale) Control Order, 1960" and later on similar order was promulgated in respect of Vespa Commercials.
The plaintiffs alleged that the defendants wanted to secure proper distribution and sale of their products mentioned above and, therefore, wanted to appoint agents at different places including Ahmednagar. Further case of the plaintiffs was that the defendants by their letter/order dated 9/12-10-1964, appointed the plaintiffs as their permanent sole selling agent for Vespa Scooters and 12-12-1966 for the Vespa Commercials in the district of Ahmednagar and thus they were the sole distributors of the said vehicles and the appointment was irrevocable. The plaintiffs took the plea that the appointment constituted an agency coupled with interest and the relationship between the parties was that of principal and agent. The plaintiffs alleged that they secured 2700 orders for Vespa Scooters and 501 orders for Vespa Commercials. But the defendants wrongfully terminated the distributorship with effect from 1-7-1968 for Vespa Scooters by their letter dated 4/7-6-1968 and by a subsequent letter dated 28-8-1968 the defendants terminated the distributorship for Vespa Commercials also with effect from 1-10-1968 and directed the plaintiffs to transfer the orders booked by them together with the registers and postal deposit books to their branch at Wakdevadi, Pune. The plaintiffs alleged that this termination was wrongful, illegal and without proper notice, causing loss to the plaintiffs and, therefore, filed the suit for damages for wrongful termination and rendition of accounts.
4. The defendants contested the suit by denying the allegation that they had appointed the plaintiffs as their agent. The defendants denied the relationship of agent and principal as alleged by the plaintiffs. The defendants pleaded that they had never appointed the plaintiffs as their sole, permanent and irrevocable agents but their relationship was that of principal to principal. The plaintiffs used to pay for the said automobiles and sell them independently. The defendants asserted that it was not a fact that plaintiffs were appointed distributors. The demand for supply was greater than the capacity of the defendants to manufacture the vehicles and therefore, there was no question of the defendants desiring to have a better distributing agency. The defendants took the plea that the plaintiffs were appointed as ordinary distributors which could be terminated at any time. But the plaintiffs were never required to procure any orders from the customers on behalf of the defendants and that the defendants had a right to terminate the contract with a particular dealer at their sole discretion and their decision to that effect was final. The defendants, in their pleadings refut
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