The main legal point established in the judgment is the distinction between works contract and contract of agency, the application of privity of contract, and the absence of exceptional circumstances enabling an agent to call upon the principal to render accounts.

Headnote:
Agency - Interpretation of Ext. B2 agreement - Indian Contract Act, S.191, S.194 - Ext. B2 is a works contract, not a contract of agency - Privity of contract - Suit for accounts by independent contractor not maintainable - No exceptional circumstances enabling the agent to call upon the principal to render accounts - Recovery of amounts due under promissory note - Decrees for accounting set aside - Decree in favor of first defendant in OS. 42 of 1973 confirmed
Fact of the Case:

The case involved suits filed by sub-agents or substituted agents against the principal for accounts and recovery of amounts due under a contract. The main issue was the interpretation of the contract Ext. B2 between the appellant company and the second defendant, and whether it constituted a contract of agency.
Finding of the Court:

The court found that Ext. B2 was a works contract, not a contract of agency, and the plaintiffs had no privity of contract with the first defendant. It held that suits for accounts by independent contractors were not maintainable, and there were no exceptional circumstances enabling the agent to call upon the principal to render accounts. The court also confirmed the decree in favor of the first defendant in OS. 42 of 1973 and dismissed other appeals.
Issues: Interpretation of Ext. B2 agreement, privity of contract, maintainability of suits for accounts by independent contractors, exceptional circumstances for rendering accounts, recovery of amounts due under promissory note
Ratio Decidendi: The court interpreted Ext. B2 as a works contract, not a contract of agency, and applied the principle of privity of contract to dismiss suits by independent contractors for accounts. It also emphasized the absence of exceptional circumstances enabling the agent to call upon the principal to render accounts.
Final Decision: Decrees for accounting against the first defendant were set aside, and the decree in favor of the first defendant in OS. 42 of 1973 was confirmed. Other appeals were dismissed, and parties were directed to bear their respective costs.

Judgment :-

1. Second Appeals 153 of 1981 and 168 of 1981 arise out of two suits OS 12 of 1973 and OS 30 of 1975 on the file of the Subordinate Judge's Court Kottarakara filed by the respective plaintiffs as sub-agents or substituted agents for accounts against the principal. Second Appeal No. 189 of 1981 arises out of OS 42 of 1973 on the file of the same court by the plaintiff claiming to be the agent of the defendant for accounts of dealings between them. The first defendant is the appellant in S.A. Nos. 168 and 153 of 1981 and the only defendant is the appellant in S.A. No. 189 of 1981. The appellant in these appeals is a company by name Dalmia Cement (Bharat) Ltd. The company bad filed OS No. 42 of 1973 for recovery of amounts due under a promissory note Ext. B-9 executed by the plaintiff in OS 12 of 1973. SA No. 166 of 1981 is by the company against the dismissal of the suit OS No. 42 of 1973 by the Courts below.

2. The principal question for consideration in S. A. Nos. 153, 168 and 189 of 1981 is relating to the interpretation of Ext. B2 agreement between the appellant company and one B. P. Jacob who is the second defendant in OS Nos. 12 of 1973 and 30 of 1975 and the plaintiff in OS No. 48 of 1973. All the cases were jointly tried and evidence was recorded in OS No. 12 of 1973. The parties in these second appeals are

referred to as arrayed in OS No. 12 of 1973.

3. The facts of the case are not in dispute. The appellant company purchased raw cashew nuts locally for the purpose of export of processed kernels. The company entered into Ext. B2 contract with the second defendant for processing the raw cashew nuts. Ext. B2 is dated 15-12-1969. As per the terms of the contract the second defendant is to be paid processing charges at the rate of Rs. 23/- per bag containing 168 pounds of raw cashew nuts. Clause.1 of Ext. B2 permits the second defendant to get the processing done by sub contractors. Clause.1 of Ext. B2 is extracted below:

"The Second party hereby undertake to process either himself or through his agencies who shall be got approved by the first party, the raw cashew nuts supplied by the first party with due diligence and caution exercising proper care and attention for the safety of the goods and quality of the kernels."

The plaintiffs in OS. Nos. 12/73 and 30 of 1975 are persons engaged by the second defendant for processing raw cashew nuts supplied by the first defendant company in pursuance to the contract Ext. B2. Ext. Al is the agreement between the 2nd defendant and the plaintiff in OS. 12 of 1973 and Ext. B11 is a similar agreement between the second defendant and the plaintiff in OS. 30 of 1975. According to the plaintiffs in those suits, the agreement Ext. B2 is a contract of agency and the 2nd defendant it the agent of the first defendant for processing raw cashew nuts. Exts. A1 and B11 agreements between the 2nd defendant and the respective plaintiffs are also contracts of agency and they are either sub agents within the meaning of S.191 or substituted agents within the meaning of S.194 of the Indian Contract Act. The plaintiffs bad processed raw cashew nuts supplied by the first defendant company in pursuance to Ext. B2 agreement between defendants 1 and 2 and the two suits OS. Nos. 13/1973 and 30/1975 are by the respective plaintiffs for settlement of accounts and for recovery of the amounts found due thereon from defendants 1 and 2. OS. No. 48 of 1973 is by the second defendant against the first defendant company for settlement of accounts relating to the raw cashew nuts processed in pursuance to the contract Ext. B2, and for recovery of the amounts found due from the first defendant to him. The plaintiffs in these three suits proceed on the basis that Ext. B2 is a contract of agency with authority delegated to the agent to get the work executed through sub agents appointed by him with the approval of the first defendant company. The first defendant company contested these suits and raised the contentio

Click Here to Read the rest of this document