1962 Supreme(AP) 20

Andhra Pradesh High Court
Judges : VENKATESAM
Gunupati Alluraiah - Appellant
Versus
State OF A.P. represented by the District Collector, Nellore - Respondent
Decided On : 02-02-62

The relationship between the Government and the dealers under the agreements entered into pursuant to the Control Orders may be anomalous bearing the characteristics of several well-known legal relationships, and that the correct determination of the jural relationship depends not upon the nomenclature or words used here and there, but on a consideration of all the terms of the agreement and the substance of the transaction.

Headnote:

ESSENTIAL COMMODITIES ACT - FOOD GRAINS - APPOINTMENT OF WHOLESALERS - RELATIONSHIP BETWEEN GOVERNMENT AND DEALERS - INDEMNITY - JURISDICTION OF CIVIL COURT - SECTION 16 (2) OF THE ACT - INTERPRETATION - SUITS FOR DAMAGES AND COMPENSATION - SECTION 18 OF THE MADRAS GENERAL SALES TAX ACT - INTERPRETATION - RIGHT TO INDEMNITY - DISTINCTION BETWEEN INDEMNITY AND DAMAGES - SECTION 222 OF THE INDIAN CONTRACT ACT - APPLICATION - AGREEMENT BETWEEN GOVERNMENT AND DEALERS - CONSTRUCTION - CLAUSE 8 OF THE AGREEMENT - EFFECT - INTEREST ON THE SUMS DUE - AWARD OF INTEREST - PRINCIPLES.

Fact of the Case:

The appellants were appointed as wholesalers for Kanigiri Taluq under the scheme of State Trading in Food Grains, adopted by the State of Madras in exercise of the powers conferred on it under the Essential Supplies (Temporary Powers) Act (XXIV of 1946), hereinafter called "the Act", in order to make up the shortage of food grains experienced at that time and to ensure proper distribution of the available stocks. In September, 1952, the District Collector, Nellore, allotted to the plaintiffs and some others each 218 bags of Visakhapatnam rice to be delivered at Singarayakonda Railway Station after collection of the price including administrative surcharge and subsidiary surcharge and the Railway freight. The Tahsildar of Kandukur took delivery of the food grains at Singarayakonda Railway Station and handed over the same to the plaintiffs as per their quota. Having discovered that what was delivered by the Tahsildar was boiled rice, for which there was no demand in the locality, the plaintiffs made representation to the Collector, Nellore, who directed the pontiffs to return the stocks remaining with them to the Tehsildar, Kandukur at Singarayakonda Railway Station for export to Madras, which was accordingly done by the plaintiffs. The plaintiffs case is that in receiving the quota of food grains allotted to them and in returning the stocks they acted throughout as agents of the Government, and, on account of the relationship of principal and agent between them, they are entitled to claim the expenses which they incurred in receiving the food grains and if, also returning the same, including reasonable interest on their out-lay in that connection. The plaintiffs have sued for the balance of the sums spent by them with interest and the loss incurred on account of shortage, after deducting the payments made to them by the Government.

Finding of the Court:

The Court held that the relationship between the Government and the dealers was not that of seller and buyer, but of a principal and an agent, and as such, the sums claimed, which are in the nature of indemnity, could be recovered from the Government; That the jurisdiction of the Civil Court is not taken away by the provisions of the Act, and that the suits are maintainable; That the agreements are true, but that Clause 8 in Ex. B-15, which is the same in all other cases, cannot be considered to be an undertaking on the part of the dealer; and oven assuming it to be so, it did not prevent the dealers from claiming the suit amounts by way of indemnity; That the dealers are entitled to interest on the sums found due to them, as the relationship being one of principal and agent, interest could be awarded even according to the decisions cited by the Subordinate Judge; and That the lower appellate Court erred in disposing of the suits on the preliminary issues, which, according to his submission, are erroneous, and that it may be directed to dispose of the appeals on other issues, in particular with regard to the maintainability of the various heads of claims made in each of the suits.

Issues: 1. Whether the relationship between the Government and the dealers is that of seller and buyer, or of a principal and an agent? 2. Whether the jurisdiction of the Civil Court is taken away by the provisions of the Act? 3. Whether the agreements are true and binding on the plaintiffs? 4. Whether the dealers are entitled to interest on the sums found due to them? 5. Whether the lower appellate Court erred in disposing of the suits on the preliminary issues?

Ratio Decidendi: 1. The relationship between the Government and the dealers was not that of seller and buyer, but of a principal and an agent, as evidenced by the terms of the agreements entered into between them. 2. The jurisdiction of the Civil Court is not taken away by the provisions of the Act, as Section 16 (2) of the Act bars only suits for damages caused or likely to be caused by anything done in good faith in pursuance of an order made under Section 3 of the Act, and the claims of the dealers in this case are for indemnity, not damages. 3. The agreements are true and binding on the plaintiffs, but Clause 8 of Ex. B-15, which purports to exempt the Government from liability for any loss arising from the disposal of stocks, cannot be construed as a bar to the dealers' claim for indemnity. 4. The dealers are entitled to interest on the sums found due to them, as the relationship between them and the Government is that of principal and agent, and interest can be awarded in such cases even under the principles laid down in the decisions cited by the Subordinate Judge. 5. The lower appellate Court erred in disposing of the suits on the preliminary issues without considering the other issues, and the case should be remanded for a decision on the remaining issues.

Final Decision: The Court set aside the decrees in all the appeals and remanded them to the Court of the Subordinate Judge, Kavali for disposal on other issues in the light of the above findings and observations. The costs in these second appeals shall abide the result in the lower Appellate Court. The court-fee paid shall be refunded. No leave.