Author Profile

Legal India News Admin

Posted On by &filed under Format of Legal Documents Drafting.


Hazari Lal vs Hari Ram on 16 February, 1959
Equivalent citations: AIR 1959 Raj 153 a
Author: K Sharma
Bench: K Sharma

JUDGMENT K.K. Sharma, J.

1. This is an appeal by the plaintiff against the appellate judgment and decree of the learned Senior Civil Judge, Baran, dated 18-5-1953.

2. The plaintiff-appellant filed the suit in the court of the Munsif, Baran out of which this appeal has arisen against the defendant-respondent for the recovery of Rs. 1,596-6-6 on 11-2-1952. According to the plaint, the defendant-respondent appointed the plaintiff-appellant his aratia and purchased 200 tins of ghee, weighing 95 Mds-39 Srs.-7 Chhs., through the plaintiff’s arat, on Kartik Sudi 5, Sambat 2005, corresponding to 6-11-1948, for which the plaintiff had to spend Rs. 13,529-7-0 on behalf of the defendant. This ghee was despatched to Deogarh Madaria in November 1948, through Tulsi Ram, the agent of the defendant.

Again, according to the instructions of” the said Tulsi Ram, 200 tins more of ghee were purchased for the defendant by the plaintiff on Magsar Badi 10, Sambat 2005, corresponding to the 26-11-1948, which weighed 89 Mds. 10 Srs. 1 Chhatak and for which the plaintiff had to pay a sum of Rs. 14,313-6-0 on behalf of the defendant. These 200 tins of ghee were taken by the said Tulsi Ram by truck to Kota and were deposited with Gaindi Lal Suraj Mal of Kota. The plaintiff also spent a sum of Rs. 115-4-6 as miscellaneous charges on account of the above ghee. The plaintiff drew up a Hundi for the sum of Rs. 3,000/-/- on the defendant towards the payment of the amounts spent by the plaintiff, but the defendant did not honour that Hundi and the plaintiff had therefore to pay an additional sum of Rs. 9/-/- to the Bank for Hundi expenses.

The plaintiff thus spent a sum of Rs. 30,967-5-0 on account of the defendant. A sum of Rs. 3,000/-/-on account of the Hundi and another sum of Rs. 10,599/-/- on account of the price of the ghee sold at Deogarh Madaria and yet another sum of Rs. 13,197-13-0 on account of the price of the ghee sold through Cendi Lal Suraj Mal of Kota, viz., a total sum of Rs. 29,796-18-0 was credited in the account of the defendant. Thus, a sum of Rs. 1,170-8-6 remained due to the plaintiff on account of principal. It had been stipulated that interest would be paid at the rate of 9 per cent. per annum and so the interest due to the plaintiff, came to Rs. 425-14-0. Thus, a total sum of Rs. 1596-6-6 was due to the plaintiff. The plaintiff claimed a decree for the above amount.

3. The defendant filed his written statement pleading inter alia that the suit was barred by limitation. Learned Munsiff, found that the plaintiff was entitled only to a sum of Rs. 820-4-0 from the defendant. He held that the suit was within time as in his view it was governed by Article 85 of the Limitation Act. He consequently gave a decree to the plaintiff for the recovery of Rs. 820-4-0 by his judgment dated 24-1-1953.

4. Against the above judgment and decree of the learned Munsiff, both the parties went in appeal to the court of the Senior Civil Judge, Baran. The appeal filed by the plaintiff was dismissed, but the appeal filed by the defendant was allowed by the judgment dated 18-5-1953. Learned Senior Civil Judge held that Article 85 did not apply to the facts of the case and that it was Article 83which applied. As more than three years had elapsed since the payment made by the plaintiff on account of the defendant before the suit was brought, learned Senior Civil Judge dismissed the plaintiff’s suit in toto. Against this judgment and decree of the learned Senior Civil Judge, the plaintiff has come in appeal.

5. I have heard Shri P. C. Bhandari on behalf of the plaintiff-appellant and Shri D. P. Gupta on behalf of the defendant-respondent.

6. The only point canvassed before me is that of limitation. It has been argued by Shri P. C, Bhandari that Article 83 of the Limitation Act did not apply to the facts of the present case. It was argued that Article 83 applied only when there is an express contract to indemnify between the parties, but in the present case, there was no express contract to indemnify. It was argued that by virtue of Section 222 of the Contract Act, the principal is no doubt liable to indemnify his agent against consequences of lawful acts. But this liability arises by virtue of law and not by any contract. Article 83, therefore, did not apply.

It was argued that the only other Article is 61 of the Limitation Act, but that does not apply to the case of an agent and principal. There is, therefore, no specific Article of Limitation Act applying to the facts of the present case and therefore Article 120 of the Limitation Act, which applies when no period of limitation is provided elsewhere in the First Schedule of the Limitation Act should be applied to the facts of the present case.

7. On behalf of the respondent, it was argued by Shri D. P. Gupta that Article 83 does not say that it is applicable only to the case of an express contract to indemnify. The word used is ‘contract,’ which may be an implied as well as an express contract. Section 222 of the Contract Act gives a right to the agent to be indemnified against consequences of lawful acts. In a contract of agency, therefore, there is an implied contract that the agent would be indemnified against consequences of lawful acts by the principal, and, therefore, Article 83 is fully applicable to the case of an agent, who is damnified in doing lawful acts for the principal. Learned counsel relied upon the following rulings in support of his contention –

(i) Mangi Ram v. Firm of Ram Saran Das Maman Chand, 26 Ind Cas 415: (AIR 1914 Lah 407) (ii)Upendra Nath v. Kumar Bimalendu AIR 1944 Cal 302 (1) (iii) Firm Kadari Pershad Chhedi Lal v. Har Bhagwan and Tirath Ram AIR 1921 Lah. 167; (iv) Firm Devi Sahai-Ramji Das v. Thirath Ram AIR 1923 Lah 473; (v) Firm Kirpa Ham Lachhman Dass v. Firm Sawan Mal Gopi Chand AIR 1927 Lah 826; (vi) Bhagwan Das-Giani Ram v. Mustsaddi Lal, AIR 1931 Lah 392; (vii) Harakchand Tarachand v. Sumatilal Chunilal, AIR 1932 Bom 25.

8. On behalf of the plaintiff-appellant, Shri P. C. Bhandari relied upon a ruling of Madras High Court in Kandaswamy Pillai v. Avayambal, ILR 34 Mad 167 in order to show that Article 83 lid not apply to a case like the present. In the said Madras case, Article 61 was made applicable, but Shri Bhandari argued that so far as that decision holds that Article 61 is applicable, he did not rely upon it, because to his mind, only the residuary Article 120 applied.

9. I have considered the arguments of both the learned counsel.

10. I may say at once that I do not agree with Shri Bhandari that Article 120 of the Limitation Actapplies to the present case. That Article is a residuary Article and applies only when there is no other Article of Schedule I of the Limitation Act which can be made applicable. To my mind, the competition in the present case, can be only between Article 61 and Article 83 of the Limitation Act Article 61 is general and can be applied in a case, where the plaintiff sues for money paid for the defendant. In the present case, the price of the ghee was no doubt paid by the plaintiff for the defendant and therefore if Article 83 or for the matter of that any other specific Article of the Limitation Act did not apply to the facts of the present case. Article 61 would apply.

11. Having considered the rulings cited on behalf of both the parties, I am more inclined to the view that Article 83 applies to the facts of the present case, and not Article 61. Article 83 is a special Article which applies to the case of a suit upon any contract to indemnify, other than a contract covered by Article 81, or Article 82 which apply respectively to a suit by a surety against a principal-debtor and by a surety against a co-surety. The present is not a suit by a surety against the principal-debtor, nor is it a suit by a surety against a cosurety. If, therefore, there is a contract to indemnify in the present case, it is a contract other than a contract envisaged by Article 81 orArticle 82. The question to be seen is whether there is a contract to indemnify in the present case.

12. There can be no doubt that there is no express contract to indemnify, but the words used inArticle 83 are not ‘express contract’, but ‘contract’ only. The contract may, therefore, well be an implied contract. Now by virtue of Section 222 of the Contract Act, the employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him. The contract of agency, therefore, implies a contract by the principal to indemnify the agent against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him. In the present case, the authority to purchase ghee was conferred on the plaintiff. In paying for the price of that ghee on behalf of his principal, the plaintiff did a lawful act.

In consequence of that act, the plaintiff was damnified inasmuch as he was out of pocket for a certain amount to meet the liability of his principal. The suit is for the balance of the amount that remained due to the plaintiff out of the amount paid by him on account of the defendant. Article 83, therefore, clearly applies to the facts of the present case. I have in my support the ruling of the Calcutta High Court in the case of AIR 1944 Cal 302 (1), relied upon by the learned counsel for the respondent. In that case, the plaintiff was the defendant’s agent for looking after the criminal litigation started against his principal. The plaintiff spent a certain amount out of his own pocket in exercise of the authority conferred upon him by the defendant. The plaintiff filed a suit for the recovery of the said amount. It was observed:

“Once the relationship of principal and agent is established, Section 222, Contract Act, comes into operation. The obligation of the principal to indemnify the agent, therefore, flows from the nexus of the principal and agent. It is a part of the contract of agency, although it is an obligation imposed by statute. We are, therefore, of opinion that the liability under Section 222, Contract Act, to indemnify the agent is a liability under a contract within the meaning of Article 83,Limitation Act.”

As to the starting point of limitation, it was held that-

“An agent is damnified when he makes the payment on behalf of the principal; in other words, when the expenses incurred by him are recoverable.”

As the amount in that suit was spent by the plaintiff more than three years before the institution of the suit, the suit was held to be time barred. Besides the above ruling, there is a string of rulings of Lahore High Court in which it has been held that Article 83 of the Contract Act applies to the case of an aratia suing for the money spent on behalf of his principal. The earliest ruling is that of Punjab Chief Court, which was the predecessor of Lahore High Court. In that case (26 Ind Cas 415 : AIR 1914 Lah 407), it was held that :

“The right of an agent to be recouped by his principal in respect of losses sustained by the agent in his agency is a direct consequence of the agency contract, and a suit to enforce the right is governed by Article 83 of the Limitation Act.”

It was observed that-

“…….Section 222 of the Contract Act purports to be and is an integral part of the law of contract and it merely affirms and expressly lays down one of the principles of the law of contract. In effect it says that, unless there be some agreement to the contrary, the establishment of the relation of principal and agent shall inevitably bring in its train the liability of the principal to indemnify the agent. The right, instead of being merely implied in accordance with general principles, is expressed clearly by the Statute.”

The suit having been brought more than three years after the plaintiffs were damnified was held barred by time. The same view was taken in the cases of AIR 1921 Lah 167; AIR 1923 Lah 473; AIR 1927 Lah 826; AIR 1931 Lah 392 by Lahore High Court. A Division Bench of Bombay High Court has taken the same view in the case of AIR 1932 Rom 25. In that case, a difference of opinion arose between Fawcett and Mirza JJ. That case was the case of a commission agent (aratia), paying losses of his principal on forward contract. Fawcett J. held that Article 83 applied on forward contract, whereas Mirza J., held that it did not. The case was referred to a third Judge Patkar J.. who agreed with Fawcett J. and held that Article 83 applied. It was observed by Patkar J. that-

“In Kandaswamy’s case, ILR 34 Mad 167 the Madras High Court appears to have held that the agent’s right to indemnification arises from the statute law, i.e., Section 222, Contract Act, and is not a part of the agency contract. We think that the right to indemnification though recognized by statute is the necessary consequence of the agency contract. The contract to indemnify underArticle 83 Lim. Act, need not be by express stipulation, and may be either imposed by statute or implied or inferred in virtue of the jural relations of the parties:

“We think that a suit by a commission agent to recover loss on the transactions entered into on behalf of his constituents is governed by Article 83 Lim. Act.”

Fawcett J., after referring to Kandaswamy Pillai’s case and the cases of Lahore and other High Courts observed, as follows:-

”I agree with the view taken in these latter cases (the cases of Lahore and Calcutta High Courts) because there is nothing in the article itself which, in my opinion, justifies the distinction made by the Madras High Court”. (‘The words within the brackets are mine).

13. Thus, there is a preponderance of authority in favour of the view that a case like the present is governed by Article 83 of the Limitation Act. The Madras High Court in the case of Kaiidaswamy Pillai, ILR 34 Mad 167, thought that Article 83 can be made applicable only to a case where there is an express contract of indemnity and because the duty of principal under Section 222 of the Contract Act, to indemnify the agent is an obligation imposed by law and is attached to the relation of principal and agent constituted by act of parties, Article 83 does not apply.

For the reasons given by me above and those in the rulings of the majority judgment of Bombay High Court and Lahore and Calcutta High Courts referred to above, I respectfully differ from the view taken by the Madras High Court in Kandaswamy Pillai’s caso ILR 34 Mad 167 and hold that the present suit is barred by Article 83 of the Limitation Act, as it was brought more than three years after the payment was made on account of the principal by the plaintiff. I may observe here that even if Article 61 were to apply, the suit would be barred as it was brought more than three years after the payments wore made and even if the view of the Madras High Court were to be preferred the present suit will, all the same be time barred and that is why Shri Bhundari did not rely upon the ruling of the Madras High Court so far as it says that Article 61 applies. Tie relied upon that ruling only so far as it says that Article 83 does not apply.

14. I see no reason to interfere with the judgment and decree of the lower appellate court.

15. The appeal is dismissed. The defendant-respondent shall get his costs from the plaintiff-appellant.

 


Leave a Reply

Be the First to Comment!

Notify of
avatar
wpDiscuz