The main legal point established in the judgment is that the right to claim possession of goods and the liability for conversion are influenced by the payment of purchase money and the existence of a lien on the goods.

Patanjali Sastri, J.

1. These two connected second appeals arise out of a suit and a cross-suit brought in the District Munsifs Court, Masulipatam. O.S. No. 17 of 1934 was a suit by the appellant for an account of dealings in groundnut with the respondents, a firm of Commission Agents and O.S. No. 81 of 1934 was by the Commission Agents against the appellant for recovery of Rs. 856-7-0 said to be due to them on those dealings. The question for determination in both the suits being the same, they were heard and disposed of together by a common judgment in both the Courts below. Both the suits having been decided against the appellant in the lower appellate Court, he has preferred these appeals. As the first respondent has been the principal contesting party throughout, he is hereinafter referred to as the respondent.

2. The facts of the case may be briefly stated. The appellant who is a groundnut merchant entered into an agreement in October, 1932, with the respondent whereby he was to purchase groundnuts and sell the same as per instructions of the appellant, stocking them in the meanwhile in godowns which he rented for the purpose. The appellant advanced Rs. 1,000 as cover against any possible Joss that might result from the transaction. The respondent was to purchase the groundnuts in the market advancing the purchase money himself or making himself personally responsible for the purchase money to the vendors. When the goods were sold, the respondent was to deduct the purchase money paid by him less the advance received with interest as well as godown rents and commission at the agreed rate and pay the balance of the proceeds, if any, to the appellant. Purchases were made in pursuance of this agreement in November and December, 1932 and the goods were stocked in a godown. On 1st March, 1933, however, owing to financial embarrassment, the respondent pledged these goods as well as other goods with the Andhra Bank, Ltd., at Masulipatam and obtained a loan. This loan was repaid and the pledge redeemed some time in May, 1933. It is in evidence - and it was not disputed - that the market began to decline from January, 1933. The appellant did not send any instructions to the respondent to sell the goods till September, 1933, when the respondent wrote Ex. III to the appellant calling upon him to pay the amounts due to him and take the goods. As there was no reply, he wrote another letter (Ex. III-A) to the same effect on 19th October, 1933. To this letter, the appellant sent a reply (Ex. X) dated 20th October, 1933 in which he stated that on coming to know of the pledge of the goods by the respondent, he had raised objection and that the respondent had then agreed to take the groundnuts himself and settle the account by paying the appellant Rs. 3-2-0 a bag. The appellant thus repudiated the claim made by the respondent in Ex. III and III-A and, in turn, called upon him to pay the amount due to the appellant at Rs. 3-2-0 a bag in accordance with the settlement referred to above. The respondent treated this letter as a breach of the contract by the appellant and sold the goods and after giving credit to the sale proceeds and the original advance received, claimed a sum of Rs. 856-7-0 as due to him in O.S. No. 81 of 1934 while the appellant claimed in his suit O.S. No. 17 of 1934 an account of the dealings on the basis of the agreement which he put forward in his letter (Ex. X). The lower appellate Court found that the agreement put forward by the appellant was not true and, as stated above, rejected his claim and decreed that of the respondent.

3. The appellants learned Counsel did not contest - as indeed he could not in second appeal - the finding of the lower appellate Court that there was no settlement between the parties in March, 1933, as alleged by the appellant. But the learned Counsel argued as a matter of law that the respondents pledge of the goods purchased by him on account of the appellant without the latters authori