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Bombay High Court
Jamnadas Adukia vs Chetandas Daga on 14 March, 1928
Equivalent citations: (1928) 30 BOMLR 1317
Author: K Amberson Marten
Bench: A Marten, Kt., Blackwell


Amberson Marten, Kt., C.J.

1. This is an appeal from the judgment of Mr. Justice Taraporewala dismissing the plaintiffs’ suit for Rs. 15,810 and interest in respect of certain outstanding forward transactions in wheat and linseed, and allowing the counter-claim of defendants Nos. 2 and 3 for Rs. 1883 and interest. These outstanding transactions consisted of 1150 tons of wheat and 175 tons of linseed for September 1924 delivery, and 50 tons of linseed for May 1925 delivery. All these transaction were closed by the plaintiffs on July 30, 1924, and tiny justify the closing before the due date on the ground that the defendants had failed to comply with an alleged custom by which the plaintiffs were entitled to Call for a “shroff’s kabala,” and in default to close the transactions at the then market rate. It is common ground that the case solely depends on the existence of this alleged custom. Chetandas The market was in favour of the plaintiffs on July 30, 1924, but against them at the due dates. Hence the difference between the claim and the counter-claim. The learned Judge after a lengthy trial found that the alleged custom was not proved, The plaintiffs appeal. [After dealing with a technical point the judgment proceeded:]

4. As regards the alleged custom, it is important to observe that it does noc extend to all shroffs and all kabalas. “Shroff” is a generic term for an Indian banker or financier, and is not confined to any particular community. So, too, “kabala” merely means a contract, But the alleged custom is confined to particular contracts of a particular class of shroffs, viz.v Marwari shroffs. And although the precise nature of those contracts and of that class of shroffs is in dispute, we are mainly concerned here with the business usages of the Marwari grain bazaar or market in Bombay. In the present case both the plaintiffs and defendants were members of the Grain and Seed Brokers Association and also of the Marwari Chamber of Commerce, which are mainly Marwari institutions.

5. It is also important to note that although the plaintiffs and defendants are said to have entered into the suit transactions as brokers, yet in fact neither of them was acting for any principal. Consequently inter se they were liable as principal and principal, and more resembled jobbers than brokers. Further, we have not got to determine a case between broker and shroff or between broker and merchant. It is conceded that the practice in the latter two cases may be different from that as between broker and broker, whether acting as jobbers or as agents.

6. The onus is on the plaintiff to establish this custom, and they set out in para 5 of the plaint what they claim to be the conditions of the custom. Before us counsel for the appellants has formulated the custom thus, viz. :

(1). In respect of transactions entered into in the manner stated in para. 5 of the plaint by and between the brokers who are members of the Association either party can call upon the other partyif a seller, to produce a shroff’s kabala,if a buyer, to procure a shroff purchaser for any part of the outstanding transactions between them; and on the refusal of the other party to comply with the demand, the party making the demand has a right to close all outstanding transactions at the market rate of the day.

(2). The kabalas are to be produced at the approximate average rate of the outstanding transaction between the parties.

(3). The shroffs’ kabalas are contracts on official contract form of the Marwari Chamber of Commerce executed by shroffs recognised by the Marwari Panchayet.

7. These allegations may be supplemented by the following explanation of the alleged course of business. It is clear that transactions between brokers of this Association are not usually embodied in formal contracts, but are merely rajooed (confirmed) in each other’s books. Beyond these rajoos, there is no formal contract between the plaintiffs and defendants in the present case. The plaintiffs allege that any time after this rajoos up to the last day of the vaida either party has a right to call on the other to furnish a shroff’s kabala. For instance, supposing A is the selling broker and B the purchasing broker, A can call on B to furnish a shroff’s kabala, Then the result will be this: A will have to enter into a new contract with his shroff, and B will have to enter into a new contract with his shroff D, and there will be a third new contract between the selling shroff C and the purchasing shroff D. Thereupon the original transaction between A and B will be treated in their respective books as having been squared by a cross-transaction, subject to certain minor adjustments. On the other hand, the rate put in the kabala whether the kabala is given in respect of all outstanding transactions or only for a portion of them is not the market rate of the day, but the average rate of all the then outstanding transactions as between A and B, It is further alleged that if B declines to give this kabala, then A may close forthwith all outstanding transactions between A and B and the rate will be the then market rate of the day.

8. I may here state that no instance has been brought to our notice of any formal contract between broker and broker, apart from the rajoos I have referred to. And indeed it is not contended that it is the practice to execute formal contracts between brokers apart at any rate from any formal contract which may be requisite at the vaida on completion under the Marwari Chamber Rules. It is also clear that the alleged right of calling for a shroff’s kabala is only exercised in a small minority of cases, Thus, although there was a substantial number of transactions between the plaintiffs and the defendants, it was admitted at the trial that from 1920 up to date, there was only one instance in which a kabala was exchanged between the plaintiffs and defendants, viz., on November 21, 1920; and it is shown that that kabala was returned on December 10, 1920, and that no fresh kabala was given. On the other hand, it would appear that shroffs, as opposed to brokers, usually call on the other side to furnish a shroff’s kabala, although according to the evidence of Dhanalal, the assistant Munim of Sarupchand Hukumchand, one of the largest shroffs, his masters had never closed a transaction before due date under the alleged custom. The plaintiffs, however, say that though a shroff’s kabala is only called for exceptionally as between brokers, yet it can be demanded as of right. The defendants, on the other hand, say that the instances given are not properly proved and that in any event they do not establish the alleged right and can be explained on the ground of the kabalas having been given voluntarily for business convenience or credit. This is an important point of controversy in the case, for undoubtedly kabalas of Marwari shroffs have in certain cases passed between various parties. Another very important point is whether what is proved is sufficiently certain to establish a custom, particularly as regards the alleged right to close the contract in default of a shroff’s kabala.

9. I think I have now outlined the case sufficiently to show that the alleged custom is of a very important and yet complicated character. Its importance lies in the right it gives to close before the due date, Its complications mainly arise from the precise steps that may have to be taken before this right of closing actually arises. And there are many permutations and combinations to consider, e. g. (a) whether the broker is acting for a principal or on his own account, and if the former whether the principal is a shroff or a merchant; (b) whether two shroffs are introduced into the transaction by the respective parties, or on the other hand one broker pays margin to avoid giving a kabala; and (c) whether the shroff gives the kabala on adat (commission) terms or otherwise. Much of this business may seem arrange to those accustomed to London ways, but whatever their deficiencies as witnesses may be, the financial or trading ability of Marwaris is widely recognised. As then the market or bazaar which we have to deal with in the present case mainly consists of Marwaris, the proper course is to put oneself into the position of a Marwari trading in this bazaar, and then to endeavour to understand the reasons for or against any alleged business practice. Doing that, one can readily comprehend the reasons for the custom alleged in the present case, for the shroff’s kabala is in 1928 the nature of a security for the fulfilment of the contract between the brokers, On the other hand, I would hold on the evidence before us that at best it is of recent origin. Apart from Chetandas one instance in 1905 which I would reject for reasons sub-sequently apppearing, the instances only begin in 1918, whereas the suit was brought in 1924. I do not mean that a business custom as opposed to say a land or family custom cannot be established within a period of six years. Their Lordships of the Privy Council pointed out long ago in Juggmohan Ghose v. Manickchand that a business custom may be valid in law although it does not possess antiquity. But in a case like the present, I think that a recent origin imposes practical difficulties of proof, as I am unable to accept the opinion evidence put forward as to the existence of the alleged custom prior to 1918.

10. In this connection it is important to observe that in April 1922 the Brokers Association was unable to agree on framing a rule with reference to shroff’s kabalas?. The plaintiffs contend that this disagreement was limited to the time within which kabalas must be executed by both brokers, and not to the main custom itself. This contention is not borne out by the minute book of the Association, and I do not accept it. The minute, Exhibit 6, as to the meeting of April 2, 1922, of the Managing Committee runs :

The matter of the taking and giving of kabala was taken up : much discussion ensued but decision was not arrived at on any (point) what so over. So the same (matter) was postponed for next Sunday.

No rule, however, was ever framed. Consequently it is now left to the Court to say what the custom, if any, is in the absence of any definite rule of the Association; for even if the above meeting was confined to a question of fixing definite times, yet that is too important a point to be left in vagueness if a valid legal custom is to be established.

In Juggomohun Ghose v. Manichand, their Lordships of the Privy Council say (p. 282):

It remains now to consider the other ground on which the Plaintiff relied : the evidence of mercantile usage. To support such a ground, there needs not either the antiquity, the uniformity, or the notoriety of custom, which in respect of all these becomes a local law. The usage may be still in course of growth; it may require evidence for its support in each case; but in the result it is enough if it appear to be so well known and acquiesced in, that id may be reasonably presumed to have been an ingredient tacitly imported by the parties into their contract. We have examined the (evidence before us by the light of this principle : id is certainly not conclusive; it is open to criticism it may require and admit of explanation: but, such as it is, we think it required an answer

12. That ease came from Calcutta and the question was whether there was a usage to pay interest on certain wagering Jamnadas contracts as to the price of opium, Further, in a previous and chetandas similar case from Bombay, Doolubdass Pettamberdass v. Ram-loll Thackoorseydass (1850) 5 M.I.A. 109 their Lordships at p. 136 had already held that the Bombay Court was warranted in giving interest it appeared that “interest was accustomed to be paid on such pecuniary transactions.” Accordingly this was an additional reason why the defendant in the Calcutta case should have answered the plaintiffs’ evidence, as is pointed out in Juggomohun Ghose v. Manickchand (p. 282).

13. So, too, in Plaice v. Allcook (1866) 4 F & F. 1074 Mr. Justice Willes, in charging the jury as to an alleged custom in the Nottingham bleaching trade as to the right of the bleachers to a Hen on goods sent to them, said (p. 1075):

In order to make out a usage of the kind contended for, it must be shown as a matter of law, first, that it wag a certain usage; and, secondly, that it was a reasonable usage, not inconsistent with law, and as a matter of evidence, that it was so universally acquiesced in that everybody in the trade knew it, or could have ascertained it if he had taken the paise to inquire.” And there are many other authorities to show that one of the essentials of a valid trade custom is certainty in its main characteristics.

14. What, then, is the general nature of the Marwari grain bazaar we have to deal with here? Its history on the evidence before us appears to be briefly as follows. This bazaar is said to have been started about 1870 and to have been controlled by the Marwari Panehayet of shroffs down to 1915-16. There was also an informal meeting place (patya) for the brokers operating in that bazaar. In 1915-16 the Marwari Chamber of Commerce was formed by the shroffs. Under the rules (Exh. 12) brokers and others were allowed to become members. Thereafter the Panchayat was confined to social matters; but the Patya continued. In 1920 the brokers started the Grain and Seed Brokers Association. Its rules were framed partly in 1920 and partly in 1921 and will be found in Exh. N.

[His Lordship after examining the pertinent rules of the Marwari Chamber and the Brokers’ Association proceeded:]

25. The net result is then that the custom we have to deal with is not provided for expressly in the Marwari Chamber Rules, nor I think in the rules of the Brokers Association. The attempt in 1922 to formulate a rule broke down. And no new rule in this respect has since been framed, despite the fact that the plaint in this suit was filed as long ago as October 1924. It is comparatively easy to frame rules like No. 12 of the Brokers Association or No. 14 of the Marwari Chamber to meet in effect the contingency of an act of bankruptcy. But it would, I think, be more difficult task to frame accurate rules to meet the custom now alleged as regards a shroff’a kabala. The plaintiffs’ witnesses at any rate had a very uncomfortable time in endeavouring to answer the searching questions of cross-examining counsel, and the answers they gave showed that they were at variance on essential points. 1 will accordingly next deal with the oral and documentary evidence given at the trial

26. Now at the outset certain questions may be formulated for testing this custom, and the evidence given in support of it, viz. (a) What is meant by a shroffs kabala? (b) Up to what time may it be demanded, and within what time must the demand be complied with? (c) Has either party a right to reject the shroff tendered, and if so within what time? (d) Within what time must a kabala called for be executed by both shroffs? (e) If one party demands a kabala, is either party entitled to close if the other party fails to furnish an executed kabala, and if so within what time? [His Lordship then dealt with the evidence on these points and proceeded :]

50. I have had the advantage of reading the judgment of my brother Blackwell on these and other difficulties as regards test (a) in para. 26 above, and on the whole I am not satisfied that the plaintiffs have established their case before us, viz., that shroff’s kabalas are contracts on official contract form of the Marwari Chamber of Commerce executed by shroffs recognised by the Marwari Punchayet (See para. 6 above). It may be that in many cases there would be no doubt in the market as to whether a particular person was a recognised shroff, or whether a particular document was a kabala, But the present evidence leaves too many loopholes to enable me to determine the meaning of these expressions for the purposes of the alleged custom with reasonable certainty.

51. As regards tests (6) (e) and (d), I think the plaintiffs have failed in the important element as to the time by which these various matters must he carried out. The plaintiffs’ witnesses say there is a right to reject the tendered name of any particular shroff. Assuming for the sake of argument that this rejection can only be on reasonable grounds, the evidence is, I think unsatisfactory as to the time within which the rejection must be notified. So, too, as regards another important point as to the time by which a kabala which has been called for must be executed by both shroffs, the evidence shows much uncertainty. Disputes arose in the market because of delay in this respect, and the formal meeting of the Association in April 1922 was unable to settle the matter. I need not respect what I have already said in this respect in para. 10. I may, however, quote what Jamnadas, the plaintiffs’ partner, says at p. 94 :

There was no custom prescribing or fixing the time within which the Kabula was to be given or the other half was to be gob signed. This question was discussed as the meeting and no decision was arrived at. Prior to this meeting there was no custom fixing the time within which the kabala was to be given or the other half signed.

52. But when one considers the vital importance of time in a speculative market like this, even a delay of three or four days may involve large losses to the one party and large profits to the other. I think, therefore, that these matters cannot be left to be determined in each case by what is a reasonable time. If a general meeting of the Association itself cannot agree or decide the point, the Court can hardly be expected to tell them what they ought to agree on, or decide, particularly as the witnesses before the Court are far from definite or unanimous in their opinions. And on another point I may here note that although the witnesses agree that a kabala may be asked for up to the last date of the vaida, this cannot be taken literally and must be modified, for otherwise it might enable one party to get out of his contract by waiting until the last day of the vaida, and then making a demand for a kabala which could not in that short space of time be complied with, particularly having regard to the Chamber rules re completion.

53. In my opinion then the plaintiffs’ evidence has failed to satisfy tests (a) to (d). And as regards test (e) I have already held that the instances put forward in group (f) do not establish the alleged right of closure.

54. Various other points were dealt with in the course of the case, such as (i) the Judge’s adverse comments on certain witnesses for the plaintiffs, and (ii) certain correspondence with the Association, and (iii) the events of 1924 leading up to the present suit including the meetings of the Association in July 1924. But I do not think it necessary to deal with them. Nor need I, for instance, consider the alternative contention of the defendants that even if the necessary facts were proved, the alleged custom was unreasonable and therefore bad in law. I may, however, say that business men are usually the best judges of whether an – established usage in their trade is reasonable.

55. In the result then I would hold that the learned Judge was right in finding that the alleged custom was not proved. I would accordingly dismiss the appeal with costs. I should like to state that our task has been much simplified by the lucidity and complete grasp of the facts which Mr. Munshi for the appellants and Mr. Kania for the respondents have shown in laying before us this complicated and heavy appeal over a hearing which has occupied some eleven days. And as regards the decision we have in the result arrived at, it is satisfactory to feel that although in our judgment no legal custom has been held to be proved, yet if the market as a whole desires to establish an usage of that character, it can be done by framing appropriate rules to that effect. And should that object he desired by the general body of members, then the present litigation may at any rate have resulted in this advantage, viz., that the conflicting arguments presented in the present case have been as it were a searchlight thrown on to the vital points for which the draftsman of such new rules should provide. But I do not envy his task.

Blackwell, J.

The relevant facts and documents relating to this appeal have been set out in such detail in the judgment of the learned Chief Justice, which I have had the advantage of reading, that I need not repeat them, I will content myself with expressing my opinion upon such of the points arising as seem to me to be necessary for the determination of the question whether the plaintiffs have succeeded in establishing the custom which they have sought to prove.

The proof required for the establishment of a usage of trade was stated by Willes J. in Plaice v. Allcock (1866) 4 F& F. 1074 as follows (p. 1075):

In order to make out a usage of the kind contended for, it must be shown as a matter of law, first, that it was a certain usage; and, secondly, that it was a reasonable usage, not inconsistent with law, and as a matter of evidence, that it was so universally acquiesced in that everybody in the trade knew it, or could have ascertained it if he had taken the pains to inquire.

Applying the law as laid down in that case, the first question which arises on this appeal is whether the custom of trade alleged is certain.

In paragraph 5 of the plaint, the custom was originally pleaded in very wide terms. This paragraph was amended during the hearing of the appeal. The substance of the custom relied upon as the result of the amendment is as follows:

1. In respect of the transactions entered into in the manner stated in paragraph 5 of the plaint by and between the brokers, who are members of the Association, either party can call upon the other party,if a seller, to produce a shroff’s kabala,if a buyer, to procure a shroff’s purchaser for any part of the out-standing transactions between them; and on the refusal of the other party to comply with the demand, the party making the demand has a right to close all outstanding transactions at the market rate of the day.

2. The kabalas are to be produced at the approximate average rate of the outstanding transactions between the parties.

3. The shroff’s kabalaa are contracts on official contract form of the Marwari Chamber of Commerce executed by shroffs recognised by the Marwari Punchayet.

This being the usage or custom relied upon a number of considerations arise upon the question whether the alleged custom is certain or uncertain, reasonable or unreasonable, which I will proceed shortly to refer to. [His Lordship after dealing with the evidence as to the custom proceeded :]

Summing the matter up, upon the evidence adduced in the case I am of opinion that the alleged custom is uncertain as to (1) who is a shroff (2) what is the form of the kabala required to be tendered (3) whose kabala would be accepted, if tendered (4) when a kabala if called for must be given (5) when the counterpart of the kabala must be returned, and (6) when there is a right to close the transaction. I am also of opinion that the alleged custom is unreasonable upon two grounds (a) that a broker called upon to tender a kabala would not know whose kabala, if tendered, would be accepted, and (6) that a broker who bad not returned a counterpart duly signed would not know when his transactions were liable to be closed by reason of his omission to return the counterpart.

It follow from the opinion already expressed by me that in my judgment the plaintiffs’ case fails, and I might content myself with leaving it there. As, however, a large number of points have been raised and discussed in the course of the arguments, and evidence has been given of instances which are alleged to prove the existence of the custom relied upon, I will briefly refer to them.

[His Lordship after dealing with those points and discussing the Rules of the Marwari Chamber and the Brokers Association concluded:]

In my opinion, therefore, the contention of the plaintiffs that 1928 the rules of the Association imply the existence of the alleged custom is unsound and cannot be sustained.

Referring next very briefly to the instances of closing relied upon by the plaintiffs pursuant to the alleged right, it is significant that only seven instances were given in all. Two of these in-stances relate to contracts between shroff and broker, and afford no assistance in regard to a custom alleged to exist as between broker and broker. Moreover, in all these instances, except one, the broker had either failed or disappeared. Further, the evidence of closing pursuant to the alleged right was sought to be proved in each of these instances by one party to the transaction only, and in all these instances except one (a case in which the broker had disappeared), the broker had either consented to or acquiesced in the closing. On the evidence adduced in support of these instances, I do not think that it is proved that the closing was pursuant to the alleged right at all, On the contrary, I think that the closing is explained by the fact that the broker whose transactions were closed had got into financial difficulties, and was himself willing that his outstanding transactions should be closed.

The plaintiffs having In my view failed to prove a single instance of closing as of right under the alleged custom, I do not propose myself to examine the other instances, which they have adduced in support of the alleged custom. They have been examined in detail by the learned Chief Justice in his judgment, and I desire to express my entire concurrence in his conclusions in regard to them.

In my opinion the learned trial Judge rightly held that the plaintiffs had failed to establish the custom which they sought to prove, and this appeal should be dismissed with costs.

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