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Allahbad High Court
S.S.DHAVAN,K.B.ASTHANA
Loon Karan Sohan Lal - Appellant
Versus
Firm John and Co. - Respondent
Decided On : 03/12/1965
CONTRACT - SALE OF GOODS - AGENCY - CONVERSION - LIABILITY OF AGENT - APPROPRIATION OF GOODS - DAMAGES - INDEMNITY.
Fact of the Case:
The plaintiff, a registered partnership firm, carried on business in Calcutta and Assam and was appointed yarn procuring agent by the Govt. of Assam in the year 1948. It appears that at that time the manufacture, sale and supply of cotton yarn was controlled by the Government of India in exercise of its powers under the Defence of India Act for which purpose it had issued Cotton Yarn and Cloth Control Order. In exercise of his powers under the said Order the Textile Commissioner at Bombay, at the request of Government of Assam passed an order known as Release Order dated 30-8-1949 directing the John Mill Company Limited. Agra, to sell and deliver 600 bales of yarn of particular variety, being quota for the month of August 1948, to the plaintiff at a price not exceeding the maximum ex-factory price specified by the Textile Commissioner and asking the plaintiff to pay the price within ten days of the release order and to take delivery as early as possible but not later than seven days thereafter. The plaintiff alleged that on the receipt of release order it contacted the John Mills Company of Agra who on 2nd September 1948 telegraphically requested the plaintiff to arrange payment of Rs 3, 84, 750/6/- for delivery of 600 bales of yarn and the plaintiff thereupon remitted telegraphically the said sum to the John Mill Company through the Allahabad Bank Limited. It transpired that there was a shortage of Rs. 9/- in the price and the sales-tax had to be paid which was demanded by the John Mills and which amount the plaintiff further paid. According to the plaintiff a sum of Rs. 12032-11-6 was paid as Sales-tax by it. The plaintiff thus paid Rs. 396783-1-6 on account of the full price of 600 bales of yarn including taxes to the John Mills Company, Agra. By a letter dated 11th September 1948 the plaintiff was informed by the John Mills that they had intimated their financier M/s Sethiya and Company carrying on business in Belanganj, Agra, to arrange despatch of 600 bales, but in spite of various letters and telegrams and repeated requests by the plaintiff the John Mills Agra and its financier delivered only 448 bales and failed to deliver the remaining 152 bales. Thus according to the plaintiff against full price of Rupees 396783/1/6 goods worth Rs 288733/5 only were supplied. The plaintiff having failed to obtain delivery of the remaining 152 bales or the refund of the balance of Rs 108049/12/6 from the John Mills and Company or M/s. Sethiya and Company asked the Government of Assam to compensate the plaintiff as its principal for the loss suffered by it in carrying out the contract of agency. The Government of Assam repudiated its liability and refused the plaintiff's demand.
Finding of the Court:
The plaintiff has not been able to make out any case against Sethiya and Company defendant-respondent No. 2 and the finding of the Court below does not call for any interference. The plaintiff also claims damages from 8th defendant-respondent, the Government of Assam. This claim has been considered and rejected by my learned brother in a separate judgment. I agree with his conclusions.
Issues: None
Ratio Decidendi: 1. The plaintiff failed to establish that Sethiya and Company were liable for conversion of the plaintiff's goods as there was no evidence that specific goods were appropriated to the contract and handed over to Sethiya and Company for delivery to the plaintiffs. 2. Sethiya and Company were not the agents of the John Mills or of the plaintiff and there being no privity of contract between the plaintiff and Sethiya and Company the plaintiffs were not entitled in law to claim any damages or refund of any sum or the delivery of any bales of yarn from Sethiya and Company. 3. The plaintiff did not become the agent of the Assam Government nor is he entitled to any reimbursement from the Assam Government for any loss suffered by him for the non-delivery of 152 bales to him, though I cannot help sympathising with him.
Final Decision: Appeal dismissed.
DHAVAN, J. :- I agree with the conclusions of my learned brother that the plaintiff-appellant has not established any liability on the part of the fifth defendant Sethiya and Co. I would like to add a few reasons of my own by way of supplementing those of my learned brother. Mr. Misra argued the appellant's claim against this defendant in the alternative. First he contended that Sethiya and Co. were liable in damages to the appellant for non-delivery of 152 bales of yarn to the defendant and for the refund of the price. But this liability could only arise under a contract, and the evidence does not disclose any contract between the appellant and Sethiya and Co. The contract of sale was with John and Co., not with Sethiya.
The appellant cannot hold the latter liable unless he can establish privity of contract with that firm. The principle, of law is so simple as to be elementary. If a person makes an agreement of purchase of goods with another paying the price in advance, and the seller directs his agent or stockist or pledgee to deliver the goods to the purchaser from the stock in his possession, and the agent fails or refuses to deliver them, the purchase is against the seller and not against the seller's agent, because the latter is under no obligation or liability to him. In the present case Sethiya and Co. were no party to the agreement of sale of yarn, and under no obligation to the plaintiff to deliver the bales to him. They may or may not be liable for their alleged default to John and Co. under some other agreement, but they are under no liability to the plaintiff.
2. Mr. Misra then argued that Sethiya and Co. were or became, the agents of the plaintiff to receive delivery of the goods on behalf of the plaintiffs and deliver these to him, and as they failed to do so, they are liable in damages for breach of duty as agents. The short answer to this argument is that no agreement of agency between the parties, express or implied, has been established. It was not the plaintiff's case that Sethiya and Co. were his agents and no issue was framed on this point.
3. Mr. Misra then argued that Sethiya and Co. are liable to the plaintiff for wrongful conversion of 152 bales belonging to him. But to establish conversion, the plaintiff had to prove that he was the owner of 152 bales which were misappropriated by this defendant. To establish ownership he had to prove that the property in the goods lying in the custody of Sethiya and Co. had passed to him. The contract was for the sale of 600 bales of yarn - in other words, a contract for unascertained goods. In such a contract, the property in the goods does not pass to the buyer unless and until the goods are ascertained and unconditionally appropriated to the contract and the buyer has notice of this fact. In this case, it is established that Sethiya and Co. were financing John and Co. and were the pledgees of all the yarn manufactured by the latter. They had in their possession more than 152 bales of yarn. In order that property in 152 bales could pass to the plaintiffs. Sethiya and Co. had to set apart 152 bales out of a larger number and appropriate it to the contract. There is no evidence of this appropriation. Learned counsel pointed out that the defendant Sethiya, in his account books, debited John and Co. with the amount of commission on the sale of 600 bales to which he was entitled on every sale made by the Company under the financing agreement. He argued that he could not have charged it without appropriating the goods to the contract because the commission accrued only when the sale was complete. I do not think Sethiya's inclusion of the amount of commission in his account with John and Co. necessarily leads to this inference. He might have charged it on learning of the agreement of sale. John and Co. owed him a large sum of money and he was anxious to get back as much of his dues as he could, and it is not unlikely that he was not particular about the time when
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