Judgement

MAHAJAN J. The dispute in this appeal is between a constituent and a firm of stock brokers. Some time before April 1936 the plaintiff, then a young man, came into possession of property worth about 2 lakhs of rupees on a partition between him and his brothers. In the hope of getting rich by obtaining quick dividends by speculating on the stock exchange he through the defendant firm and certain other stock-holders entered into a series of speculative transactions and it seems he did not fare badly in the beginning. But subsequent events tell a different tale.

2. In 1937, two iron and steel companies in North India, viz., Indian Iron and Steel Co. Ltd., and the Bengal Iron and Steel co. Ltd., merged into one concern and a new issue of shares was made. The scheme was that for every five shares which a person held in the Indian Iron Co. Ltd. on 22-4-1937 one fully paid-up share would be given to him at a price of Rs. 25. The market price at the time this scheme was announced was about Rs. 55 per share. A wave of speculation followed this announcement and there was a boom in the market. Prices of Indian Iron shares were going up to unreal heights. To stabililize the situation thus created by heavy speculation, three members of the committee of the Calcutta Stock Exchange presented a petition to the committee on 5-4-1937 to close the Calcutta stock exchange for a while. On the same evening plaintiff s stockbroker Annamalai Chettiar who was carrying on business in firm name Trojan and Co., had telephonic conversation with one Ramdev Chokani, a member of the Calcutta Stock Exchange on this subject and from this conversation he gathered that a sharp fall in the prices of Indian Irons was likely.

At that time Annamalai Chettiar had on his hands some 5000 of these shares. Shortly after this conversation and after business hours the same night, between the hours of 7-30 and 8-30 Annamalai Chettiar rang up the plaintiff and suggested to him that it would be a good thing for him to buy these shares. The youthful plaintiff in his anxiety to get rich quickly accept the suggestion and purchased these shares, some at Rs. 17 and others at Rs. 77-4-0, Another firm of brokers, Ramlal and Co., had also in their hands another 4000 of these shares. They too found in the plaintiff a ready buyer. They also contacted him on the phone after Annamalai had done so and sold him 4000 shares that they held. Out of the lot which the plaintiff purchased from the defendants he sold 1800 shares to Ramanathan Chetti at cost price.

3. On the 6th April the Committee of the Calcutta Stock Exchange Association passed a resolution closing the stock exchange on the 8th and 9th April.

4. From the 6th April onwards the market sagged and the prices came down, at first gradually and then literally at a run. The result of it was that the plaintiff had to sell at a very heavy loss.

5. The defendants made demands on the plaintiff for the price of those shares. Between 5th April and 20th April 1937, he made payments to defendants of various amounts totalling Rs. 60,000. A lot of 700 shares was sold by the plaintiff to Pilani and Co, and on 19-4-1937, he instructed the defendants for sale of the remaining 3000 shares at the best price obtainable. The defendants sold 2000 shares on 20-4-1937 for prices ranging between Rs. 47-4-0 to Rs. 44-12-0 per share. The remaining 1000 shares were sold by him through Messrs. Ramlal and Co. at Rs. 42-8-0 per share on 22 4-1937. The result of it was that on 22-5-1937 when the accounts between the plaintiff and the defendants were settled it was found that plaintiff was heavily indebted to them in the sum of Rs. 51,712-7-0 and the credit balance of Rs. 64,000 that he had with the defendants at the end of March 1937 had been wiped off.

For the amount found due he passed a promissory note in favour of defendants, Ex. P-33. After giving credit for payments received on the promissory note the defendants filed a suit against him (O. S. 150 of 1987