JUDGMENT
Page, J.
1. I have taken time to consider this case which is not free from difficulty. In May, 1927, the first defendant purchased from the plaintiffs a quantity of corrugated iron sheets for the sum of Rs. 6,689-11-6. The defendant Neogi forthwith paid Rs. 250 part of the price, and instructed the plaintiffs to forward the goods by rail to Khulna. The goods were duly sent to Khulna in two consignments: on the 1st June, and 8th June, 1927. On the 6th June, the plaintiffs, by letter, gave the following instructions to the defendant Bank in respect of the first consignment:
No. 1883
Calcutta, 6th June, 1927.
To
The Manager,
National Bank of India, Ltd., Calcutta.
Dear Sir,
We beg to request you to be good enough to realize the amount of Rs. 2,675-10-6 from our dealer Mr. G.M. Neogi of Khulna through the Khulna Union Bank, Limited, as advised by him, against Railway Receipt No. 171 of 1st June, 1927, as usual. We are enclosing herewith the above-mentioned Railway Receipt, our bill No. 5341 in duplicate and demand draft as usual requesting your good self to kindly have the amount together with your usual charges realized from the party through the Khulna Union Bank, Ltd., against delivery of the documents (Railway Receipt, etc.) as usual and oblige.
Yours faithfully,
(Sd.) T.C. Chowdhury and Bros.
Enclosure:
Railway Receipt No. 171 of st June, 1927.
Our bill in duplicate. Demand draft.
Accordingly, the Bank sent the documents under a covering letter of even date to the Union Bank of Khulna:
Copy, Registered National Bank of India, Limited, Calcutta, 6th June, 1927.
The Union Bank of Khulna,
Khulna.
Dear Sirs,
We beg to hand you herewith bills as noted below for favour of collection and remittance of proceeds by demand draft on Calcutta.
Yours faithfully,
Sd.
Manager.
Number Drawee. Term. Nature. Amount. Remark. M.B.C.
Rs. a. p.
65-2978 G.M. Neogi D-D Doety. 2,675 10 6
6 11 0
2,682 5 6
Rupees two thousand six hundred and eighty two 5-6.
Please collect all your charges from the drawees,
Note:
D/A. Indicates documents attached to be delivered on acceptance of bill,
D/P. Indicates documents attached to be delivered on payment only.
C. Indicates clean.
National Bank of India Ltd.
Sd.
Calcutta.
And on the 7th June, the Bank replied to the plaintiffs' letter of the 6th June as follows:
National Bank of India Limited.
Calcutta, 7th June, 1927.
Messrs. T.C. Chowdhury Bros.,
Calcutta.
Dear Sirs,
We beg to acknowledge receipt of your letter of 6th instant enclosing the under-noted which we have sent for collection on your account, the proceeds of which will be paid upon receipt of advice of payment only.
Please note that the Bank will not be responsiblefor any loss that may occur by delay in transmission or collection.
Yours faithfully,
Sd,
Manager.
Bill On Amount Remarks.
Rs. a. p.
Khulna 2,675 10 6
Similar letters were sent in respect of the second consignment. On the 20th June, 1927, the plaintiffs wrote to the defendant Bank,
T.C Chowdhury Bros.
“No. 1907
Calcutta, 20th June, 1927.
To
The Manager
National Bank of India Ltd.
Calcutta.
Dear Sir,
With reference to your letter of 7th instant, we beg to request you to kindly advise the Khulna Union Bank Limited, to receive payment of our bill for Rs. 2,675-10-6 from our party Mr. G.M. Neogi within 7 days from the date of receipt of your letter of advice, if the amount is not realized in the meantime, as we are afraid the party may refuse the goods.
Also please do the same treatment regarding our bill No. 5344 for Rs. 3,764.
An early compliance into the matter will oblige.
Yours faithfully,
(Sd.) T.C. Chowdhury and Bros.
2. And the defendant Bank forwarded the instructions therein contained to the Khulna Bank.
3. On the 21st June, the plaintiffs wrote to the defendant Bank:
No. 1913.
T.C. Chowdhury Bros,
Calcutta, 21st June, 1927.
To
The Manager,
National Bank of India, Ltd.
Deer Sir,
In continuation of our letter No. 1907 of 21st instant please instruct the Khulna Union Bank, Limited, by telegram not to clear or take delivary of the goods from the Railway but to retain the Railway Receipt in case it is not paid for by the drawees, pending further instructions from us for its disposal. Please also instruct the Khulna Union Bank, Limited to obtain a definite answer from drawees whether or not they are going to pay the bills.
Yours faithfully,
(Sd.) T.C. Chowdhury and Bros.
And on the 23rd June, the defendant Bank replied:
National Bank of India, Limited.
Calcutta, 23rd June, 1927.
Messrs. T.C. Chowdhury Bros.,
Calcutta.
Dear Sirs,
Re: Yours bills on G.M. Neogi, Khulna, Rs. 2,675-10-6 and 3,764-1.
With reference to your letter No. 1913, dated 21st instant, we wired our Khulna agents in terms of your instructions and have received the following telegram from them:
‘Neogi Calcutta will arrive tomorrow informing intention to-morrow goods stored our godown.’ Please note.
We have debited your account Rs. 1-14-0 for cost of our wire.
Yours faithfully
Sd. Manager.
4. [His Lordship referred to the letters of which one ran as follows: ]
1934.
Dated 27th June, 1927.
To
The Manager,
National Bank of India.
Dear Sir,
Re: Our bills on G.M. Neogi, Khulna, Rs. 2,675-10-6 and Rs: 3,764-1.
With reference to your letter of 23rd instant we beg to request you to kindly furnish us with the following information, also advise the Khulna Bank as under:
We shall be obliged if you kindly give the matter your careful attention as the party is harassing us for nothing by taking time unnecessarily.
Yours faithfully,
(Sd.) T.C. Chowdhury and Bros.
1. Whether Khulna Bank has any authority to have the goods cleared from the Railway Co. and stored in their godown without taking any permission or giving any intimation either to yourself as our banker or to us direct?
2. What is the financial condition of the Khulna Bank at present.
3. Please cable the Khulna Bank again asking about the intention of Mr. Neogi regarding the payment of our above bills.
4. Please write the Khulna Bank strictly to re-book the goods to us in the first week of July if the payment is not made within this half yearly closing.”
No. 1773.
Urgent.
Calcutta, 18th July, 1927,
To
The Manager,
National Bank.
Deer Sir,
Re: M.B.C. 65/2978 and 3042 on G.M. Neogi, Khulna, Rs. 2,675-10 6 and Rs. 3,7614-1.
(1) Please instruct Khulna Union Bank Limited, to remit to you immediately by wire the 25 per cent, margin received by them from the drawees.
2. To give notice to drawers that unless the remaining 75 per cent, is paid by them, together with all charges and interests within 22nd instant the goods will be returned to Calcutta for disposal on their account and risk according to law.
(3) In the event of default by the drawees to comply with this demand, to return the goods to Calcutta forthwith and send the R/R to you with debit note for the charges incurred by them.
(4) To treat this our final instruction, which should not be deviated from by them, otherwise they will be held liable for all losses incurred by us in consequence.
Yours faithfully,
(Sd.) T.C. Chowdhury and Bros.
5. Calcutta, 29th July, 1927.
6. Messrs, T.C. Chowdhury Bros.,
7. Calcutta.
8. M.B.C. No. etc.
Deer Sirs,
9. We have received the following wire from the Khulna Union Bank Limited of Khulna.
Goods delivered our risk against hundis understanding payment be made definitely by 15th August.
10. We have written them pointing out that in delivering the relative goods in this manner they have acted entirely outside their authority as agents for collection and had requested them to remit us forthwith the full amount of the bills.
11. We shall communicate with you in due course.
(Sd.) National Bank.”
The Khulna Bank having pressed the defendant Bank for time, in which to remit the proceeds of the bills the defendant Bank on the 2nd September, asked the plaintiffs for instructions, and received the following reply on 9th September:
No. 1980. Dated 9th September, 1927.
To
The Manager,
National Bank of India, Ltd.
Deer Sir.
Re: M.B.C. 2978, 3042 on G.M. Neogi, Khulna for Rs. 2,675 10-6 and Rs. 3,764-1.
With reference to your letter of 2nd instant, we beg to advise you kindly inform Khulna Bank to pay the amount within 26th instant, i.e., before our closing with the local parties for coming Puja holidays; also please inform if such payment is not made you are advised to take necessary legal action to realise the mount as usual.
Yours faithfully,
(Sd.) T.C. Chowdhury and Bros.
12. No further payments having been made either by Neogi or by the defendant Bank, the plaintiff, on the 27th November, 1927, brought the present suit, claiming against the first defendant the balance of the purchase price with interest thereon at 12 per cent., and against the defendant Bank a like sum as damages, which the plaintiffs (alleged that they) had suffered by reason of the negligence and breach of duty of the defendant Bank “in delivering the said Railway Receipts and or in causing the same to be delivered by their Khulna agents to the defendant Neogi without receiving payment of the full amount of the said drafts”.
13. The defendant Neogi has not appeared and as against him the plaintiffs have proved their claim, and the issue that remains to be determined is whether the defendant Bank is liable for the admitted loss caused to the plaintiffs by the negligence and breach of duty of the Khulna Bank.
14. The issue is one of fact, whether, in connection with the collection of the bills in Khulna, the Khulna Bank was acting as the agent of the plaintiffs or of the defendant Bank. The material sections of the Indian Contract Act (IX of 1872) are Sections 191, 192, 194 and 195 which run as follows:
15. Section 191. A “sub-agent” is a person employed by, and acting under the control of, the original agent in the business of the agency.
16. Section 192. 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.
17. The agent is repponsible to the principal for the acts of the sub-agent.
18. The sub-agent is responsible for his acts to the agent, but not to the principal, except in case of fraud or willful wrong.
19. Section 194. Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.
20. Section 195. In selecting such agent for his principal, an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own case; and if he does this he is not responsible to the principal for the acts or negligence of the agent so selected.
21. Now, it is plain and must be borne in mind that at all material times, until after the goods had been delivered to Neogi, communications with the Khulna Badk were carried on by or through the defendant Bank and further that in the course of such communications, the defendant Bank sometime referred to the Khulna Bank as “our Khulna agents”, and in the letter of 25th August threatened “to place the matter in the hands of our Solicitors.” But undue stress ought not to be laid upon loose or casual words and phrases used in business letters and regard must be had to the substance of the transaction to ascertain whether in fact the Khulna Bank was acting as the sub-agent of the defend-dant Bank in endeavouring to collect the plaintiffs’ bills. Now it cannot be doubted, I think that in so far as the collection was to be carried out at Khulna, the defendant Bank had express authority to appoint the Khulna Bank to act in the transaction as the agents of the plaintiffs. But in my opinion, having regard to the terms of the letters that passed between the plaintiffs and the defendant Bank on the 6th, 7th, 9th and 13th June, the authority thereby conferred upon the defendant Bank to appoint the Khulna Bank the plaintiffs’ agent for collection in Khulna was not within the ambit of Section 194 of the Contract Act. I think that Sections 194 and 195 are to be read together and that the authority to create a third person an agent of the principal referred to in Section 194 connotes that the agent has a discretion “in selecting such agent for his principal.” These sections do not apply to case where the agent has no power of selection and if he undertakes the agency is compelled to appoint a particular nominee of his principal as the agent of the principal for some part of the business of the agency. In my opinion, the effect of the letters in which the terms of the agreement of agency between the plaintiffs and the defendant Bank are set out was that the defendant Bank’ became authorized and undertook to appoint the Khulna Bank and no other person as the agent of the plaintiffs for that part of the business of collection that was to be carried out at Khulna.
22. Now, it is common ground that the defendant Bank did appoint the Khulna Bank to carry out that part of the collection which was to take place at Khulna, but the question to be decided is whether the defendant Bank appointed the Khulna Bank so to act as the sub-agent of the defendant Bank or as the substituted agent of the plaintiffs. The issue depends upon whether the defendant Bank on behalf of the plaintiffs and the Khulna Bank agreed that the Khulna Bank should act at Khulna as the plaintiffs’ agent for the purpose of collecting the bills or in other words whether the defendant Bank created probity of contract between the plaintiffs and the Khulna Bank. In my opinioD, that is the true test to determine whether the person appointed by an agent authorized in that behalf to perform part of the business of the agency is a substituted agent of the principal or the sub-agent of the agent, and the test to be applied is the same whether the case falls within Section 194 or whether, as in the present case, the person so appointed is the nominee of the principal although there is a difference in the obligation undertaken by the agent; for Section 195 applies to a case falling within Section 194, while in cases where the substituted agent is the nominee of the principal the agent is not concerned with the character or efficiency of the person so appointed and his obligation quad the part of the business of the agency entrusted to the substituted agent ceases if and so soon as privity of contract has been created between the substituted agent and the principal. Solly v. Rathbone (1814) 2 M. and Section 298 : 105 E.R. 392, Schmaling v. Thomlinson (1815) 6 Taunt. 147 : 128 E.R. 989 : 1 Marsh, 500, Stephens v. Badeoek (1832) 3 B. and Ad. 354 : 110 15. E. 133 : 1 L.J.K.B. 75 : 37 R.R. 448, Mackersy v. Ram-says (1843) 9 C.I. and F. 818 : S.B.R. 628 : 2 Bell. 30 : 57 R.R. 183, Lockwood v. Abdy (1845) 14 Sim. 437 : 60 E.R. 428 : 9 Jur. 267 : 65 R.R. 621, Robbins v. Fennell (1847) 11 Q.B. 248 : 116 E.R. 468 : 17 L.J.Q.B. 77 : 12 Jur. 157 : 75 R.R. 366, Be Buss he v. Alt (1878) 8 Ch. D. 286 : 47 L.J. Ch. 381 : 38 L.T. 370, New Zealand and Australian Land Company v. Watson (1881) 7 Q.B.D. 374 : 50 L.J.Q.B. 433 : 44 L.T. 675 : 29 W.R. 694, Fine Art Society v. Union Bank of London (1884) 1 T.L.R. 594, Ecossaise Steamship Co. v. Lloyd Low and Co. (1890) 7 T.L.R. 76, Powell and Thomas v. Evan Jones and Co. (1905) 1 K.B. 11 : 21 T.L.K. 55 : 74 L.J.K.B. 115 : 53 W.R. 277 : 92 L.T. 430 : 10 Com. Cas. 36. Story on Agency, 9th Edition, page 255. See also Nensukhdas S.Kivnaraen v. Birdichand Anraj 43 Ind. Cas. 699 : 19 Bom. L.R. 948, for a general discussion of the sections. Now, applying this test to the facts of the present case, I am of opinion that, while the letters and telegrams to the Khulna Bank were sent by the defendant Bank, the mandates therein contained came from the plaintiffs. As I apprehend the facts, in endeavouring to carry out the collection of the bills at Khulna, the Khulna Bank was not acting under the control of the defendant Bank, for, so far as the collection at Khulna was concerned the defendant Bank was acting under the directions of the plaintiffs, who throughout took charge of the transaction. The defendant Bank in my opinion, was merely the conduit pipe through which the plaintiffs communicated their instructions to the Khulna Bank, and, inasmuch as the defendant Bank invariably, I think, forwarded to the Khulna Bank the communications which they received from the plaintiffs, it is clear that the Khulna Bank was fully aware that the instructions which the defendant Bank forwarded to them proceeded from the plaintiffs, and not from the defendant Bank.
23. Take one letter alone by way of illustration that of the 18th July, 1927, from the plaintiffs to the defendant Bank in which the plaintiffs directed’ the defendant Bank to warn the Khulna Bank that it is “to treat this as our final instruction which should not be deviated from by them, otherwise they will be held liable for all losses incurred by us in consequence.” The fact that the Khulna Bank to which that letter was sent by the defendant Bank, received it without challenge or protest is cogent evidence that the Khulna Bank had consented to act as the agent of the plaintiffs quoad the part of the collection that was to be carried out at Khulna. The correspondence speaks for itself and it is necessary for me to discuss the letters in detail. Upon a perusal of the evidence as a whole, the conclusion at which 1 have arrived is that in the collection at Khulna the Khulna Bank was acting as the agent of the plaintiffs, and not as the sub agent of the defendant Bank. The result is that as against the defendant Bank, the suit will be dismissed with costs on scale No 2, but as agajnst the defendant Neogi there will be a decree for the plaintiffs for Rs. 5,157-6 9, interest on judgment at 6 per cent, and costs on scale No. 1.
