MANU/UP/0149/1980

Equivalent Citation: AIR1980All15

IN THE HIGH COURT OF ALLAHABAD

First Appeal No. 552 of 1956
Decided On: 02.07.1979
Appellants: Raghunath Prasad
Vs.
Respondent: Firm Seva Ram Tikam Das
Hon'ble Judges/Coram:
Hirdey Nath Kapoor and N.N. Mittal, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: J. Swarup and B. Dayal, Advs.
For Respondents/Defendant: G.D. Srivastava, Adv.
Subject: Contract
Acts/Rules/Orders:
Contract Act, 1872 - Section 192, Contract Act, 1872 - Section 226
Cases Referred:
Sobhagmal Gianmal v. Mukundchand Balia, AIR 1926 P.C. 119;Sheo Narain v. Bhallar, MANU/UP/0132/1950
Citing Reference:

Discussed
2
Disposition:
Appeal Dismissed

JUDGMENT
Seth, J.
1. This First Appeal by plaintiff. Seth Raghunath Prasad is directed
against the decree of the Civil Judge, Agra (who was also
exercising powers of Judge, Small Cause Court. Agra) dated 2-61956, dismissing his suit.

2. There is also before us a cross-objection by the defendant who

claims that the trial court, while dismissing the suit, erred in
refusing to award costs in its favour.
3. Plaintiff, Sri Raghunath Prasad, filed civil suit No. 6 of 1946 in
the court of Civil Judge, Agra praying that the defendant Firm

Sewa Ram Tikam Das, be ordered to render true and correct

account of all the transactions entered into through its
Commission. Agency from Katik Badi 15 Sambat 2001
corresponding to 16th October, 1944 to Bhando Badi 15 Sambat
2002 corresponding to 6th September, 1945, and claimed a decree
for such amount as may be found due to him from the defendant
with pendente lite and future interest. He estimated the value of his
claim at Rs. 2,31,000/-.
4. Briefly stated the allegations on which the plaintiff brought the
suit were, that the defendant Firm did Commission Agency
business of Bullion at Bombay. A few days before Diwali, Sambat
2001, Seth Ram Chand of defendant's firm came to Agra and
discussed the matter with the plaintiff. It was decided that the
plaintiff would do business in the Commission Agency of the
defendant on following terms and conditions :-1. That the defendant would render the account of all sales,
purchases and other transactions to the plaintiff at Agra.
2. That the defendant would be responsible to the plaintiff for the
solvency of the persons with whom he will do the transactions on
behalf of the plaintiff and for realisation of the amount found due
from such persons.
3. That the defendant would act according to the instructions of the
plaintiff.
4. That the defendant would charge annas 2 per Rs. 100/- on the
transactions as his commission, but on the plaintiff's objection it
was suggested by the defendant that if the volume of business of
the plaintiff was larger the defendant would charge less
commission. Thereafter the plaintiff did considerable amount of
business through the defendant Seth Ram Chand of the defendant
firm revisited, Agra in May, 1945 and the question of commission
was again discussed with him. The parties agreed that the
defendant would be charging commission at the rate of 1 anna per
tola of Gold and 2 annas per 100 tola of Silver in respect of the
transaction entered into through the defendant. However, in order
to avoid a demand being made by other clients of the defendant for
reduction of commission, it was agreed that the defendant would
show in the Bijak, the higher rate of commission, namely, 2 annas
per Rs. 100/-, and would pay the difference in commission later on
a separate bijak by showing this difference in commission as part
of plaintiff's profit. The lesser rate of commission was agreed upon
between the parties in respect of their dealings relating to Waida
No. 24 of Silver and Waida No. 31 of Gold and the transactions
entered into thereafter. After the aforesaid agreement, the plaintiff
continued to do business in the commission agency of the
defendant and a large number of transactions in Gold and Silver
were done from Diwali Sam-bat 2001 to August, 1945.
Subsequently, there was a difference between the parties in respect
of a particular transaction viz. that entered into by the defendant on
19-8-1945, which the plaintiff claimed was not authorised, and the
dealings between them came to an end. According to him at that
time a sum of Rs. 3,84,569.62 was due on account of the
transactions, mentioned by him in Schedule 'A' to the plaint and he
asked the defendant to render true and correct account of all those
transactions as also other transactions from Diwali Sambat 2001.
However, the defendant, did not admit correctness of the claim
made by the plaintiff and remitted a sum of Rs. 2,59,876-62 to
him, which according to it was the amount due to the plaintiff. The
plaintiff cashed the cheque sent by the defendant towards part
satisfaction of the claim made by him and alleged that
approximately a sum of Rs. 2,31,000/- more was due to him. As
the defendant did not render the accounts, the plaintiff had no other

option but to file the suit which has given rise to the present
appeal.
5. The defendant contested the suit and alleged that it never had
any dealing with plaintiff Raghunath Prasad. According to it, to
begin with the defendant received a letter from Lala Amar Nath,
brother of the plaintiff on 18-10-1944, saying that Lala Amar Nath
had been trading under two different names i.e. Makhan Lal
Radhey Lal and Makhan Lal Narain Dass and that he wanted all
his transactions to be carried on under the aforementioned two
names. Subsequently, Lala Amar Nath instructed the defendant to
put down another set of transaction in the name of Ram Narain
Agarwal. As the defendant did not have any transaction with Seth
Raghunath Prasad, he was not liable to render any account to him
and that the suit for accounting filed by him was not maintainable.
Firm Sewa Ram Tikam Dass was a joint Hindu family firm of
which Tikam Dass Sewa Ram was the 'Karta', and that the said
firm had been wrongly. impleaded through Seth Ram Chand son of
Tikam Dass Sewa Ram. The defendant, further pleaded that the
transactions between Lala Amar Nath, carrying on business in the
assumed name of Makhan Lal Radhey Lal, was settled at Bombay
and that the accounts as between the parties were also to be settled
at Bombay. It, therefore, claimed that the Agra Court had no
jurisdiction to try the suit. The defendant denied that it had at any
stage agreed to, as claimed by the plaintiff, reduce the commission
chargeable by it, and asserted that the transaction entered into by it
on 19-3-1945 was fully authorised. On correct accounting a sum of
Rs. 2,59,876-6-6 only was due from it to Makhan Lal Radhey Lal
which it remitted by means of cheque in full and final settlement of
its liability. Now as the said cheque has been cashed, it is not open
to any one to claim any account from the defendant.
6. On the pleadings of the parties, the trial court framed a number
of issues, some of which including the issue with regard to the
jurisdiction of Agra Court to try the suit, were not pressed by the
concerned parties. After going through the evidence produced in
this case, the trial Court held, that the transactions in question had
been entered into between Lala Amar Nath acting on his own
behalf and not on behalf of the plaintiff, and the defendant acting
as kuccha arhtia on terms and conditions mentioned in the plaint,
and that there was no subsequent agreement between the parties for
reduction of the commission payable to the defendant. After taking
into consideration the correspondence between the parties, the trial
court came to the conclusion that no further amount was due from
the defendant. In the result, it dismissed the suit, but in the
circumstances of the case it declined to make any order with regard
to costs.
7. At the hearing of this first appeal, learned counsel for the
respondent requested us to, before touching any other controversy
raised by the parties, deal with following two questions:-1. Whether there was any privity of contract between the plaintiff
and the defendants entitling him to claim accounts in respect of
transactions which had been entered into in the name of Makhan
Lal Radhey Lal and,
2. Whether after the plaintiff Lala Amar Nath had cashed the
cheque sent to him in full and final settlement of his claim, he can
still maintain a suit for accounts.
As according to him if the answer to either of the two questions
mentioned above goes in defendant's favour, it will not at all be
necessary to go into any other question involved in the appeal,
Learned counsel for the appellant did not object to this and
addressed us on the aforementioned two questions.

8. However, as after hearing counsel for both the parties we have

come to the conclusion that answer to the first of the two questions
mentioned above goes in favour of the defendant, the appeal filed
by Sri Raghunath Prasad would fail, it is not necessary for us to go
into any other question involved in the appeal.
9. It is not disputed that the plaintiff is seeking accounting in
respect of the business transacted with the defendant, in the name
of Makhan Lal Radhey Lal. At the time when the said business was
transacted the business in the name of Makhan Lal Radhey Lal was
being carried oh by Lala Amar Nath and that it was not a
partnership business. The terms on which the business of Makhan
Lal Radhey Lal was carried on in the commission agency of the
defendant were settled with Lala Amar Nath, and that it was he
who had carried on the correspondence with the defendant in
relation to the said business. Whereas the case of the plaintiff is
that this proprietary business which was being run in the name of
Makhan Lal Radhey Lal was being run by Amar Nath on plaintiff's
behalf, the case of the defendant is that it had entered into
transactions with Amar Nath on the understanding that the business
carried on by him in the name of Makhan Lal Radhey Lal, was
Amar Nath's proprietary business and that the plaintiff had nothing
to do with it.
10. In case, the case set up by the defendant is accepted it would be
obvious that there would, in relation to relief claimed in the suit,
not be any privity of contract between the plaintiff and the
defendant, and the plaintiff's claim for accounting is liable to be
rejected on this very ground. However, we will proceed to examine
the question with regard to the right of the plaintiff to claim
accounts from the defendant on the assumption that Lala Amar
Nath had been running the business, Makhan Lal Radhey Lal for
and on behalf of the plaintiff.
11. According to Sri Jagdish Swarup, learned counsel for the
appellant, while Lala Amar Nath carried on the business run in the
name of Makhan Lal Radhey Lal, he did so as the agent (as defined
in Section 182 of the Contract Act) of the plaintiff. Section 226 of
the Contract Act lays down that contracts entered into through an
agent, and obligations arising from the acts done by an agent, may
be enforced in the same manner and will have the same legal
consequences, as if the contracts had been entered into and the acts
done by the principal in person. It, therefore, follows that the
agreement which had been entered into between Amar Nath and
the defendant was an agreement which had been' entered into
between the plaintiff and the defendant. Accordingly by a legal
fiction there came into existence a privity of contract between the
plaintiff and the defendant, and the plaintiff is fully competent to
claim accounts from the defendant.
12. Sri Swami Dayal, learned counsel for the defendant, on the
other hand, urged that even if it be accepted that the position of
Amar Nath was that of an agent of the plaintiff, it is obvious that
the plaintiff had authorised Amar Nath to carry on the business in
any manner that he liked including that by employing any other
person for doing the act which he had been authorised to do in
connection with the carrying of that business. Sri Amar Nath
appointed the defendant as an agent on payment of commission,
and the position of the defendant, therefore, was that of a subagent.

The agent is responsible to the principal for the acts of the subagent.
The sub-agent is responsible for his acts to the agent, but not to the
principal, except in case of fraud or willful wrong."
Accordingly even if, it might be possible for the third parties, with
whom the defendant had entered into the transactions, to file a suit
against the plaintiff, the plaintiff cannot seek any relief against the
defendant who is answerable to Lala Amar Nath alone.
14. A perusal of Sections 192 and 226 of the Contract Act shows
that whereas Section 192 defines the rights and obligations as
between the principal, agent, sub-agent and the third parties in
respect of a transaction entered into through a sub-agent, Section
226 deals with the case where a transaction is entered into between
two principals through an agent but without the intervention of a
sub-agent.
15. According to Sri Jagdish Swarup, the defendant was puccka
arhtia, and as such the dealings between it and the plaintiffs were
as between two principals through the agency of Amar Nath. The
instant case therefore, was covered by Section 226 of the Contract
Act and the plaintiff could sue and claim accounting from the
defendant.
16. Contention of Sri Swami Dayal, teamed counsel for the
defendant, on the other hand, is that the defendant had entered into
the transactions in question, as a cutcha arhtia appointed by Amar
Nath. His position was that of a sub-agent and the case was
squarely covered by Section 192 of the Contract Act where-under
the defendant has not at all been made responsible for his acts, to
the plaintiff.
17. Crucial question therefore, that arises for consideration is
whether in this case the defendant entered into the transactions
with Lala Amar Nath as a puccka arhtia or in his capacity of a
cutcha arhtia. The incidence of a cutcha arhtia vis-a-vis an upcountry constituent has been described by their Lordships of Privy
Council in the case of Sobhagmal Gianmal v. Mukundchand Balia
AIR 1926 P C 119 thus :-"There is no dispute that as regards cutcha arhtia transaction the
course of business and the relative positions of the parties are as
follows: when a cutcha arhtia enters into transactions under
instructions from and on behalf of his up-country constituent with
a third party in Bombay he makes a privity of contract between the
third party and the constituent, so that each becomes liable to the
other; but also he renders himself responsible on the contract to the
third party. He does not ordinarily communicate the name of his
constituent to the third party, but he informs the constituent of the
name of the third party. The position, therefore, as between himself
and the third party, is that he is agent for an unnamed principal
with personal liability on himself. His remuneration consists solely
of commission, and he is in no way interested in the profits or
losses made by his constituent on the contract's entered into by him
on his constituent's behalf."

13. Section 192 of the Contract Act runs thus:--

The difference between a cutcha arhtia and puccka arhtia was very
clearly brought out by Agarwala, J. in the case of Sheo Narain v.
Bhallar, MANU/UP/0132/1950 : AIR1950All352 thus:--

"Where a sub-agent is properly appointed the principal is, so far as

regards third persons, represented by the sub-agent, and is bound
by and responsible for his acts, as if he were an agent originally
appointed by the principal.

"The basic distinction between a kutcha and a puccka arhtia is that

a kutcha arhtia acts as an agent on behalf of his constituent and
never acts as a principal to him. The person with whom he enters,

into a transaction on behalf of his constituent is either brought into

contact with the constituent or at least the constituent is informed
of the fact that the transaction has been entered into on his behalf
with such and such other person. Although the kutcha arhtia may
not communicate the name of his constituent to the third party, he
informs the constituent of the name of the third party, In the case of
a puccka arhtia, the agent makes himself liable upon the contract
not only to the third party, but also to his constituent and he does
not inform his constituent as to the person with whom he has
entered into a contract on his behalf."
18. It will thus, be seen, that the question whether the defendant
was, in regard to the transaction entered into at the instance of Lala
Amar Nath acting as puccka arhtia or as a cutcha arhtia, depends
on the nature and terms of the contract entered into between it and
Lala Amar Nath and in absence of any evidence with regard to
such nature and terms of contract it will depend upon the custom of
the trade as prevailing in the market. It is significant to note that in
this case while the plaintiff came to court with the case that the
defendant had been appointed as a commission agent, he did not
plead that the defendant was a puccka arhtia. There is absolutely
no evidence whatsoever on the record to show that there was some
custom or usage of the trade according to which such dealings as
between the constituent and the commission agent were to be
treated as dealings between two principals.
19. According to plaintiff's own case, as set up in the plaint, the
defendants had been appointed as a commission agent on
following terms:-A. That the defendant was to render the account of all sales and
purchases and other transactions to its constituent at Agra and
would pay whatever dues may be found to the constituent at Agra.
B. That the defendant was responsible to its constituent for
solvency of the person with whom it will do the transactions on
behalf of the constituent and for realisation of amounts due from
such persons.
C. That the defendant would act according to the instructions of its
constituent and,
D. That the defendant gave out that he would charge 2 annas per
Rs. 100/-on the above transactions as his commission, but on
constituent's objection it was suggested by the defendant what if
the volume of business of the constituent was large, the defendant
would charge less commission.
In case the real intention of the parties was that the defendant was
to deal either with Lala Amar Nath or with the plaintiff as
principal, there was no point in the agreement providing that the
defendant would render the accounts of sales and purchase which
were to be entered through its commission agency. The provision
in the agreement that the defendant was to be responsible to its
constituent for the solvency of the persons with whom it was to do
the transactions on constituent's behalf also indicates that the
defendant was not dealing with its constituents as principal. The
provision| that the defendant was to enter into transactions on
behalf of its constituents, clearly indicates that the relationship
between the two was to be that of principal and agent and not that
of principal and principal. In case the defendant was to act as
puccka arhtia i.e. as principal to principal, there was no point in the
agreement providing that the defendant was to act in accordance
with the instructions of the plaintiff. Last covenant in the
agreement indicates that in respect of the transactions entered into
by the defendants the defendant has to be concerned only with its

commission and that it had nothing to do with the profits and loss
accruing as a result of those transactions. The terms and conditions
on which the defendant had been appointed as a commission agent
as disclosed in the plaint, clearly indicate that the position of the
defendant could not be that of a puccka arhtia. In our opinion the
terms and conditions enumerated in the plaint are indicative of the
fact that the defendant was to act as a kutcha arhtia and not as a
puccka arhtia.
20. Sri Jagdish Swarup, learned counsel for the appellant, relying
upon certain observations made by the Privy Council in the case of
Sobhagmal Gianmal v. Mukundchand Balia (supra) urged that if
the defendant had been acting as a cutcha arhtia he would have
disclosed the names of the persons with whom he had entered into
the transactions on behalf of the plaintiff to the plaintiff. He invited
our attention to certain bijaks and contended that the name of the
person with whom those transactions had been entered into had not
been disclosed therein, and as such the defendant cannot be
considered to be a cutcha arhtia. The Privy Council in the case of
Sobhagmal Gianmal v. Mukundchand Balia (supra) while, taking
notice of the fact that in Bombay a cutcha arhtia does not
ordinarily communicate the names of his constituent to the third
party but it observed that he informs the constituent about the
name of the third party with whom he enters into such transaction.
The question whether in the instant case, the defendant had been
informing Lala Amar Nath about the names of the third parties
with whom he had been transacting, is essentially a question of fact
which had to be pleaded and proved by the plaintiff. The plaint
neither contains an averment that the defendant was a puccka
arhtia nor does it contain any allegation indicating that in its
dealing with third parties the defendant was not informing their
names either to the plaintiff or to Amar Nath.
Sri Jagdish Swarup, invited our attention to certain bijaks sent by
the defendant which do not disclose the names of the third parties
and urged that this shows that the defendants were not expected to
disclose the names of such third parties to the plaintiff and that it
could not be considered to be of a cutcha arhtia. There are a
number of documents on the record, namely, Ext. 108 dated 31-101944, Ext. 111 dated 26-6-1945. Ext. 112 dated 3-7-1945, Ext. 478
dated 20-7-1945, Ext. 103 dated 17-8-1945, which shows that the
defendant had been mentioning the names of the parties with
which it had been dealing on its constituent's behalf. If the
defendant had been acting as a puccka arhtia, there was no point in
its indicating the names of the third parties to its constituent. In
view of the terms and conditions on which the defendant had been
employed as a commission agent, as disclosed in the plaint, as also
the fact that the defendant had been indicating the names of the
third parties with which it had entered into the transactions on
behalf of its constituent, its position vis-a-vis Amar Nath could not
be anything else but that of a cutcha arhtia. Consequently, if Lala
Amar Nath had employed the services of the defendant as a cutcha
arhtia for carrying on the business on behalf of the plaintiff, the
position of the defendant was that of a sub-agent and the case
would be covered by Section 192 and not Section 226 of the
Contract Act. As a sub-agent, the defendant is not answerable to
the plaintiff.
21. Accordingly, in any view of the matter, the plaintiff is not
entitled to seek any relief from the defendant.
22. In this view of the matter, it is not necessary for us to express
any opinion either on the 2nd question on which learned counsel
for the parties made their submissions before me or on any other
controversy that had been raised in the suit.

23. Before parting with the case, we may, observe that Sri Swami
Dayal did not advance any arguments in support of the crossobjection filed by him.
24. In the result, both the appeal and the cross-objection fail and
are dismissed with costs.

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