The court found that the respondents had acted in good faith and had taken legal advice before filing the complaint, and that the acquittal of the appellant by the trial court and the subsequent appeal were not without reasonable and probable cause.

1. The appellant, Govindji J. Khona, Partner in Messrs. Govindji Jevat and Co., Bombay sued the respondents, the 1st respondent being K. Damodaran, an industrialist at Cannanore and the 2nd respondent. The Cannanore Spinning & Weaving Mills Ltd.,in the Subordinate Judge's Court, Ernakulam for that the 1st respondent acting as the Managing Agent of the 2nd respondent falsely and maliciously and without any reasonable or probable cause prosecuted the appellant and 2 other persons, Sippy and Krishna Chetty, upon a charge of having conspired together and cheated him of large sums of money. The learned Subordinate Judge dismissed with costs the suit which was for recovery of Rs. 1,50,000.

2. The complex facts of which this story is made up are as follows: The appellant is a dealer in cotton, doing business at Bombay. Krishna Chetty and Sippy. describing themselves as commission agents at Coimbatore, offered to sell to the respondents certain varieties of cotton in which the appellant was dealing. On 24th May 1956, Chetty sent the letter, Ext. D-2, to the respondents inviting orders for cotton. Three types of cotton were offered for sale in that letter. One of them was Hubli Jaidar, equal to sample T. 3729. 356 bales of cotton of that variety at Rs. 875 per candy, were stated in the letter to be available for sale. It was added in Ext. D-2, at the foot-note, that Hubli Jaidar was "an attractive quality in comparison to westerners". On 27th May 1956, the respondents sent a telegram to Chetty offering to purchase 356 bales of Hubli Jaidar equal to sample T. 3729. On receipt of it Chetty on 27th May 1956 itself sent the letter, Ext. D-4, to the respondents accepting the offer. He stated in it that he was contacting his principal at Bombay about the sale.

3. On 30th May 1956 Chetty sent the telegram, Ext. D-5, informing the respondents that on contacting his principal at Bombay, it was understood that the price per candy had to be raised from Rs. 875 to Rs. 890. On receipt of it the respondents sent the telegram Ext. D-6, to Chetty accepting the revised price contained in Ext. D-5 regarding sale of 356 bales of Hubli Jaidar. On 30th May 1956 itself, on receipt of Ext. D-6 telegram Sippy wrote the letter, Ext. D-7, to the respondents confirming on behalf of his principal, the appellant, the sale of 356 bales of Jayadhar at Rs. 890 per candy. That letter was sent by Chetty on 31st May 1956 with his forwarding letter, Ext. D-8, to the respondents. It was stated in both Exts. D-7 and D-8 that the usual contract of the sellers would follow.

4. In due course the respondents received through Sippy the triplicate forms, Exts. D-9 to D-ll, of the memorandum of the contract duly signed on 4th June 1956 by the appellant. They had to be signed by the respondents also. Thereafter, one of them was to be retained by the respondents and the remaining two were to be sent to Sippy, one for being retained by him and the other for being sent by him to the appellant. In Exts. D-9 to D-ll the quality of the cotton was described as only'Indian raw cotton' and not 'Hubli Jaidar'. On suspicion being roused that the supply may not be of Hubli Jaidar the respondents inserted the words 'Hubli Jaidar' before the words 'Indian raw cotton' in the description of the cotton covered by the contract and after duly signing Exts. D-10 and D-ll, sent them to Sippy with the covering letter, Ext. D-13, dated 12th June 1956. In Exts. D-9 to D-ll the initial payment to be made was mentioned as 90 per cent. That was also altered by the respondents as 80 per cent before they sent Exts. D-10 and D-ll to Sippy.

5. On receipt of Exts. D-10, D-ll and D-13 Sippy sent the letter Ext. D-14, on 14th June '1956 to the respondents. In it he found fault with the respondents for having made alterations in the contract and said that the contract was for sale by the sample, 3729, and not by description. According to him, his principal at Bombay always entered into transactions for sale