Narandas Morardas Gaziwala & Ors vs S. P. Am. Papammal& Anr.

Narandas Morardas Gaziwala & Ors. v. S. P. Am. Papammal & Anr.

1966 SCR 38

(agent’s right to claim for accounts)

FACTS:

Narandas Morardas Gaziwala and Ors. a partnership firm, carrying on business in lace and silver thread at Surat had dealings with another firm, Krishna and Company – who acted as their agents for selling their goods in the three districts in the State of Madras on commission basis. Murugesa Chettiar, one of the partners of Krishna & Co. tool over all the assets and liabilities of the firm on dissolution of the firm. In respect of their dealings Krishna & Co., became indebted in 1951. On April 1, 1951 Murugesa Chettiar (hereinafter referred to as the plaintiff) executed a promissory note in favour of Narandas Morardas Gaziwala for a sum of Rs. 7,500/- the amount ascertained as due and payable by Krishna & Co. The plaintiff instituted a claim in the District Munsif’s Court, Kancheepuram praying for rendition of accounts from April 1, 1951 till the date of the suit in order to ascertain the amount due and payable to him. The Surat firm in return instituted a claim in the court of Subordinate Judge, Chingleput against the plaintiff seeking to recover the amount due under the promissory note. Both the suits were tried together by consent of parties.

ISSUES:

(i)     Whether the plaintiff, being the agent, is entitled to sue the defendant-Surat firm for accounts?

(ii)   Whether the plaintiff is entitled to set up a parole agreement to prove the condition precedent as to the enforceability of the promissory note?

CONTENTIONS:

Plaintiff-

(i)     Surat firm circumvented the terms of the contract of sole agency and privately effected sales through others or direct to customers in those territories.

(ii)   Surat firm as part of this agreement of sole agency agreed to have its indebtedness under the promissory note adjusted towards the commission that may be earned by him.

Surat Firm-

(i)     The plaintiff is precluded from setting up a parole agreement by reason of the provisions of s. 92 of the Evidence Act.[1] The agreement that the promissory note should be discharged by commission payable by the Surat firm was with regard to the mode of discharge of the obligation of promissory note and not a condition precedent to its enforceability.

HELD:

Subordinate Judge- It held that the Surat firm was liable to render an account of their sales in those territories and granted a decree for the amount covered by the promissory note but directed that the decretal amount should be adjusted out of the commission that may be found due and payable on taking of accounts

High Court– The High Court, by its judgment dismissed the appeals of Surat firm.

SUPREME COURT:

1. There is no provision in the Indian Contract Act that an agent can sue the principal for the rendition of the account. The statute is not exhaustive and the right of the agent to sue the principal for accounts is an equitable right arising under special circumstances and is not a statutory right. Such special circumstances may arise where all the accounts are in the possession of the principal and the agent does not possess accounts to enable him to determine his claim for commission against his principal. The right of the agent may also arise in an exceptional case where his remuneration depends on the extent of dealings which are not known to him or where he cannot be aware of the extent of the amount due to him unless the accounts of his principal are gone into.
2. The SC upheld the HC’s stand that the transactions in respect of which the plaintiff is entitled to commission are peculiarly within the knowledge of the principal alone. Therefore the SC held that in the special circumstances (remuneration depended on the volume of transactions) of this case, the plaintiff is entitled to sue the Surat firm for accounts.
3. The court also agreed upheld the HC’s finding that the Surat firm had actually made direct sales to customers in contravention of the contract of sole agency granted to the plaintiff.
4. On the question of parole agreement SC dismissed the Surat Firm’s contention and upheld the HC’s finding that there was a collateral oral agreement that the obligation under the promissory note will not be enforced for 5 years and unless the amount was due after accounting for the period of the commission agency. The SC held that the agreement was not related to the mode of discharge of the obligation under the promissory note but was a condition precedent to the enforceability of the promissory note and it is open to the plaintiff to adduce evidence of oral agreement under the 3rd proviso to s. 92 of the Evidence Act.