L. J. Leach and Company Ltd. Vs.
Jardine Skinner and Co  INSC 4 (22 January 1957)
22/01/1957 AIYYAR, T.L. VENKATARAMA AIYYAR,
T.L. VENKATARAMA BHAGWATI, NATWARLAL H.
SINHA, BHUVNESHWAR P.
CITATION: 1957 AIR 357 1957 SCR 438
Amendment of plaint-Addition of alternative
ground for claim --Necessary allegations Present in Plaint-Fresh suit on
amended claim barred by limitation -Whether amendment should be allowed-Action
in trove-when maintainable.
The appellants filed a suit for damages for
conversion against the respondents on the allegations that the respondents were
the agents of the appellants, that theappellants had placed orders for certain
goods with the respondents, and that the respondents had actually imported the
goods but refused to deliver them to the appellants.
The suit was dismissed on the findings that
the parties stood in the relationship of seller and purchaser, and not agent
and principal and that the title in the goods could only pass to the appellants
when the respondents appropriated them to the appellants' contracts. In appeal
before the Supreme Court, the appellants applied for amendment of the plaint by
raising, in the alternative, a claim for damages for breach of contract for non
delivery of the goods. All the allegations necessary for sustaining a claim for
damages for breach of contract were already present in the plaint and the only
allegation lacking was that the appellants were, in the alternative, entitled
to claim damages for breach of contract by the non-delivery of the goods. But a
fresh suit on the amended claim was barred by limitation on the date of the
Held, that this was a fit case in which the
amendment should be allowed. The fact that a fresh suit on the amended claim was
(1) A.I.R.  Raj. 211.
439 barred by limitation is a factor to be
taken into consideration in the exercise of the discretion as to whether the
amendment should be ordered or not, -and does not affect the power of the court
to order it, if that is required in the interests of justice.
Charan Das v. Amir Khan, L.R. 47 I.A. 225 and
Kisan Das v. Rachappa, (1909) I.L.R. 33 Bombay 644, followed.
To maintain an action in trover the
plaintiffs must establish that they had title to the goods in question and that
further they were entitled to possession thereof when they called upon the
defendants to deliver them. If the parties stood in the relation of sellers and
purchasers with reference to the transactions, then the plaintiffs must show
that the property in the goods, which initially was with the defendants had
passed to them in accordance with theprovisions of the Sale of Goods Act. If,
however, the defendants imported the goods as agents of the plaintiffs, then
the title to them would undoubtedly be with the latter, and the only question
then would be whether the former were entitled to retain possession, as they
would be if they had paid the price on behalf of the principals, and had not
been reimbursed that amount.
CIVIL APPELLATE JURISDICTION: Civil Appeal
219 of 1953.
Appeal from the judgment and decree dated
June 26, 1952, of the Bombay High Court in Appeal No. 20 of 1952 arising out of
the judgment and decree dated December 17, 1951, of the -said High Court in its
ordinary Original Civil Jurisdiction in Suit No. 1623 of 1948.
C. K. Daphtary, Solicitor-General of India,
M. N. Gharekhan and M. S. K. Sastri, for the appellants.
H. D. Banaji, D. P. Madon, S. N. Andley,
Rameshwar Nath and J. B. Dadachanji, for the respondents.
1957. January 22. The Judgment of the Court
was delivered by VENKATARAMA AYYAR J.-This appeal arises out of a suit
instituted by the appellants in the High Court of Bombay for damages for
conversion estimated at Rs. 4,71,670-15-0. The suit was decreed by Shah J. sitting
on the Original Side, but his judgment was reversed on appeal. by Chagla C.J.
and Gajendragadkar J. Against this judgment, the plaintiffs have 57 440
preferred the present appeal on a certificate under Art.
133(1)(a) of the Constitution.
Messrs. Maitland Craig Lubricants Ltd. is an
American Company engaged in the manufacture and sale of lubricants.
It carried on business in India with its head
office at Calcutta and a branch office at Bombay. The second plaintiff, H. J.
Leach, was employed during the years 1933 to 1935 in the Bombay branch of the
Subsequent thereto, the Company closed its
Bombay branch, and eventually wound up its Calcutta office as well, and
thereafter its business was taken over firstly by Ewing and Company and then by
the defendants. After he left the service of Maitland Craig Lubricants Ltd.,
Mr. Leach started business as seller of lubricants on his own account and was
importing them through the defendants. On June 6, 1941, they entered into an
agreement, Ex. A, under which Mr. Leach was given an exclusive right to sell
lubricants of the make of Maitland Craig Lubricants Ltd., within the limits of
Bombay Presidency, Central Provinces, Rajputana and such parts of Central India
and Hyderabad as might be determined by the defendants. The agreement was to
continue for a period of five years "unless sooner determined in the
manner hereunder provided. " Clause 14 of the agreement runs as follows:
"Notwithstanding anything hereinbefore
contained this agreement shall be terminable by either of the parties hereto
upon giving to the other three calendar months previous notice in writing
expiring at any time but without prejudice to the rights and liabilities of the
parties respectively which shall have accrued prior to such termination. "
Clause 16 provides that the agreement was personal to the selling agent, and
that he was not to assign or attempt to assign his rights there under without
the consent of the defendants in writing first obtained. It is common ground
that the dealings between the parties continued on the basis of this agreement
during the relevant period.
On March 18, 1944, the first plaintiff, which
is a Joint Stock Company, was incorporated -under the provisions 441 of the
Indian Companies Act, and on March 30, 1944, the second plaintiff assigned his
business to it. On June 13, 1945, the defendants wrote to the second plaintiff
that they were cancelling the agency constituted under the agreement dated June
6, 1941, as he had assigned the same to the first plaintiff without obtaining
their consent in writing as provided therein. Before that date, however, the
defendants had placed orders for import from America of certain goods which the
plaintiffs had required, but these goods were actually received by them after the
cancellation of the contract. The plaintiffs called upon them to deliver those
goods to them, but they refused to do so. Thereupon, the plaintiffs instituted
the present suit for damages for conversion alleging that the goods in question
were due to them under Government quotas comprised in Nos. P.L. 1004 to 1007,
and that the defendants who had ordered them on their behalf had themselves no
title to them. The plaintiffs also averred that in importing those goods the
defendants were acting as their agents. The defendants repudiated this claim.
They contended that far from they being the agents of the plaintiffs, it was
the second plaintiff who was their agent, and that the property in the goods
was with the defendants and that the action for damages for conversion was not
The suit was tried by Shah J. who held that
the plaintiffs were not the agents of the defendants, that the goods in
question had been imported by the latter on behalf of the former, and that in
refusing to deliver the same to them, the defendants were guilty of conversion.
He accordingly passed a decree referring the suit to the Commissioner for
ascertaining the damages. On appeal, Chagla C.J. and Gajendragadkar J. held
that on the terms of the agreement dated June 6, 1941, on which the suit was
based, the title to the goods imported by the defendants vested in them, and
that it would pass to the plaintiffs only when the defendants endorsed the
shipping documents in their favour, and that as that had not been done, the claim
for damages on the basis of conversion was misconceived. They accordingly
allowed the appeal, and dismissed the suit.
442 Now, the contention of the appellants
before us is that on the facts proved, they were entitled to damages on the
basis of conversion.
There is no dispute as to the position in
law. Before the plaintiffs can maintain an action in trover, they must
establish that they had title to the goods in question and that further they
were entitled to possession thereof when they called upon the defendants to
deliver them. If the parties stood in the relation of sellers and purchasers
with reference to the transactions, then the plaintiffs must show that the
property in the goods, which initially was with the defendants, passed to them
in accordance with the provisions of the Sale of Goods Act. If, however, the
defendants imported the goods as agents of the plaintiffs, then the title to
them could undoubtedly be with the latter, and the only question then would be
whether the former were entitled to retain possession, as they would be if they
had paid the price of the goods on behalf of the principal, and had not been
reimbursed that amount. This question, however, would not arise on the facts of
this case, as the defendants denied the title of the plaintiffs to the goods,
and there was no refusal by the latter to pay the price. The main question that
arises for determination, therefore, is as to the relationship in which the
parties stood with reference to the suit transactions.
It is conceded that to start with, it is the
agreement, Ex. A, that governs the rights of the parties. It is therefore
necessary to examine its terms to ascertain the true relationship of the
parties thereunder. It has been already mentioned that under this agreement Mr.
Leach was constituted the selling agent of the defendants in certain areas
specified therein. Under Ex. A, the second plaintiff was not to sell the goods
below a certain price, and they were also to be sold with the mark, Mait land
Craig Lubricants Ltd. The course of business was that the second plaintiff used
to intimate to the defendants his requirements. They would then import those
goods in their own names from America under c.i.f. contracts. After importing
them, they would fix their own price for those goods and 443 endorse the
shipping documents in favour of the second plaintiff, who would be entitled to
clear them at the harbour on payment of 80 per cent. of the price, the balance
of 20 per cent. being payable on the delivery of the goods by him to his
purchasers. The sales to be effected by the second plaintiff within the area to
his own customers were matters which concerned only him and his purchasers. The
defendants had nothing to do with them. Under cl. 6, the second plaintiff had
to "keep the value of his stocks at all times fully insured against fire
risk." Clause 13 is as follows:
" The relationship between parties
hereto shall be that of principal and principal only and the selling agent
shall have no authority whatsoever except such as may be conferred upon him in
writing by the firm to transact any business in the name of the firm or to bind
the firm by any contract, agreement or undertaking with or to any third
party." In contrast with these terms, there is cl. 4, which provides that
the defendants would themselves supply to the Indian Stores Department all
their requirements of lubricants within the territory allotted to the second
plaintiff, who was to act as their agent in clearing the goods and delivering
them to the authorities. And for this, the second plaintiff was to be paid a
It is clear that the agreement read as a
whole is a composite one consisting of two distinct matters. So far as cl. 4 is
concerned, the second plaintiff was merely an agent of the defendants. As regards
the other clauses, the true relationship is, as stated in cl. 13, that the
second plaintiff was purchaser of the goods from the defendants, and the
conditions relating to the minimum price at which they could be sold and the
marking of the goods with the name of Maitland Craig Lubricants Ltd. were only
intended to protect their trade interests but that once the shipping document
were endorsed by the defendants to the second plaintiff, he became the owner of
those goods. The object of the insurance clause was obviously to safeguard the
interests of the defendants with reference to the balance price payable by the
second plaintiff. In this case, we 444 are not concerned with any goods
consigned by the defendants for supply to the Government under cl. 4 but with
goods which were imported by them for meeting the requirements of the
plaintiffs. The relationship of the parties with reference to those goods, if
it is governed by this agreement, is undoubtedly that neither party is agent of
the other, and that the defendants are the sellers and the plaintiffs are the
purchasers. If so, the title to the goods would pass to the plaintiffs only
when the defendants appropriated them to the contract, as for example, by
endorsing the shipping documents, and as that had not been done, the claim for
damages on the ground of conversion would be misconceived.
The learned Solicitor-General who appeared
for the appellants, did not dispute that this was the position under Ex. A. But
he contended that the relationship of seller and purchaser created by the
agreement became modified when the Government introduced the licence system.
That was introduced in August ,September, 1941, while the war was on, with a
view to regulate and control imports. The system adopted was that every importer
was required to give a statement as to they extent of his import business
during the preceding years, and on the basis of that statement, a licence was
given to him to import up to a limit. On September 26, 1941, the second
plaintiff applied to the Controller for a licence to import lubricants stating
that he had been doing that business for seven years and giving particulars as
to the volume of his business. Sometime in November, a licence was granted to
him by the Government.
The defendants also applied for a licence to
import lubricants based on the volume of their business and obtained it. That
licence did not -include the quantity which they sold to the second plaintiff,
and thus the two licences were mutually exclusive. Mr. Leach would have been
himself entitled under the licence to import goods directly from America, but
he chose to import them through the defendants as before, because under the
terms of the agreement, Ex. A, he would have to pay only 80 per cent. of the
price when clearing the goods. There was, 445 however, this change in the
character of the transaction, that whereas before the licence system the
defendants were the purchasers from American Companies under c.i.f. contracts
and they then sold the goods to the second plaintiff on a price fixed by them,
under the licence system the price payable to them was only what they
themselves had to pay to the American sellers with an addition by way of
commission on the transaction.
Now, the argument of the appellants is that
as they were the persons entitled to import the goods under the licence granted
to them, in importing them on their requisition the defendants must be held -to
have acted for them, and that the relationship between them was no longer one
of seller and purchaser under Ex. A but of agent and principal. To this, the
answer of Mr. Banaji, learned counsel for the respondents, was twofold. He
contended firstly that in applying for and obtaining the licence in his own
name, the second plaintiff was merely acting as the agent of the defendants,
and secondly that the present contention was not raised in the plaint and was,
therefore, not open to the appellants. On the first contention he referred us
to the correspondence which passed between the parties at the relevant period.
On September 5, 1941, the defendants wrote to the second plaintiff to send
particulars of certain shipments consigned to him so that they could include
them in their application for licence, and on September 11, 1941, they further
wrote to him that those goods were not to be included in hi,, application for
licence. But the second plaintiff was obviously not agreeable to it, and
actually included those very shipments in his application for licence dated
September 26, 1941. The defendants did not pursue the matter further, and wrote
to the second plaintiff or December 10, 1941, to intimate to them the number
and date of his import licence and continued to import goods for him on the
basis of that licence. Counsel for respondents relied on a letter dated December
11, 1941 in which the defendants advised the second plaintiff to join a group
of oil merchants, which was to be formed at Bombay, but that was obviously by
way of adviced 446 to him as a customer. This evidence is too inconclusive and
too slender to support the contention that the second plaintiff obtained the
licence as the agent of the defendants. On the other hand, if the true position
of the second plaintiff under Ex. A was that he was a. purchaser of goods, then
the sales by him of those goods were as owner and the licence issued to him on
the basis of those sales must have been given to him in his own right and not
as agent of the defendants. This wag the finding of Shah J. and that has not
been reversed on appeal, and we are in agreement with it.
It is next contended that the entire plaint
is framed on the footing that the rights of the parties are governed by Ex. A,
that there is no averment therein that that agreement had been cancelled or
modified, and that a new agreement had been substituted after the licence
system was introduced, that the evidence of Mr. Leach in the box was also that
Ex. A was in force throughout the period, and that therefore it was not open to
the appellants now to contend that the relationship of seller and purchaser
under Ex. A had been altered into one of agent and principal. It is true that
the plaint proceeds on the basis that Ex. A is in force, and there is no
allegation that it had been modified. But Ex. A had not been wholly abandoned.
It was still in force governing the relationship of the parties in respect of
various matters such as delivery of goods on payment of 80 per cent. of the
price. The plaint does refer to the introduction of the licence system, and the
defendants clearly knew as much of the true position thereunder as the
plaintiffs, and there could be no question's surprise.
Under the circumstances, if the rights of the
parties had to be determined on the basis of the licence system, we would have
hesitated to non-suit the appellants merely on the ground that the effect of
that system had not been expressly stated in the plaint.
But then, the licence system itself came to
an end in MarchApril, 1942, and was replaced by what is known as " Lease
and Lend " scheme. It was under this scheme that the goods which form the
subject matter of this litigation were imported, and we have therefore to
examine what the rights of the parties 447 are with reference to the incidents
of that scheme taken along with Ex. A, which is admitted by the appellants to
have been in force. This scheme was introduced by the Government of India as a
war measure to facilitate the import of certain essential goods and to conserve
them for the effective prosecution of the war. Oil and lubricants were among
the goods which were controlled under this scheme. Under it, the Government
prohibited the direct import of oil and lubricants from America through private
agencies, whether individuals, firms or companies and took upon itself to
import the required quantity.
An association of importers and dealers in
Calcutta called the Central Lubricants Advisory Committee (C.L.A.C.) was
formed, and importers were to write to the Committee what quantity they
required to be imported on their behalf. This Committee was a private body, and
served as a liaison between the importers and the Government. A similar
Committee was formed at Bombay called the Bombay Lubricants Advisory Committee
(B.L.A.C.). The procedure adopted in the import of goods was this: the
importers were to state their requirements to the Committee which sent the same
to the Government. Then on intimation given by the Government authorities, the
dealers would have to make deposits on account of the price to be paid for the
goods. The Government had a purchasing agent in America and he would be
required by them to purchase the requisite goods and to arrange to get them transshipped
to the destinations in India mentioned by the several dealers. The shipping
documents would be taken in the name of the Government and on payment of the bills
endorsed over to the importer for clearance at the harbour. The features of the
system to be noticed are that it was the Government who was the importer of the
goods and the dealers became entitled to the goods only on the shipping
documents being endorsed to them by the Government.
Now, so far as the plaintiffs are concerned,
the facts are that they made no deposits with the Government, 58 448 and their
names were not in the list of traders for whom the Government imported the
goods. They had direct dealings only with the defendants and sent their
requirements to them. The defendants would in their application to the
Government include what the plaintiffs required as well as what they themselves
required and make the necessary deposits for all the goods. But all that would
stand only in their name. Though it would be possible to ascertain by reference
to the correspondence between the parties which of the orders placed by the
defendants with the Government related to the requirements of the plaintiffs,
so far as the Government itself was concerned it knew only of the defendants as
importers, and it was in their name that. it would endorse the shipping
documents, and it was only when the defendants in their turn endorsed the same
to them that the plaintiffs would get title to the goods, and the evidence of
Mr. Leach makes it clear that this had not been done, as regards the shipments
with which the suit is concerned. This is what he says in his deposition.
" The goods were shipped all to the
order of the Government of India Separate documents were drawn up in respect of
the consignments which were to be supplied to each of the trader according to
his requirement submitted to Government. The traders who submitted their
requirements cleared the goods by paying the amount of the bills.... The
Government did not make any allocation to me. I depended on the defendants for
obtaining my requirements from the Government. I did not make any cash deposit
as required of the dealer. 1 made no deposit with the Government in respect of
the quantity which I wanted. The entire deposit was made with the Government by
the defendants even in respect of my requirements... The defendants endorsed
over the documents in my favour for goods which were meant for me... Excepting
for the admitted portions the documents for remaining part of PL. 1004 to 1007
were not handed over to me or endorsed in my favour, except to the extent to
which the goods were delivered," 449 The evidence of Sir John Burder for
the defendants was "the shipping documents were received in the name of
the defendants ". It is thus clearly established that with reference to
the goods comprised in P.L. 1004 to 1007, which formed the subject-matter of
the suit, the shipping documents had not been made out in the name of the
plaintiffs, nor had the defendants in whose names they were taken, endorsed the
same to them. That being so, unless the plaintiffs established that the
defendants were importing the goods as their agents, they would not have title
to them, and the claim for damages on the basis of conversion must fail.
We should mention that the appellants relied
on some of the letters written by the defendants as showing that they
recognised the plaintiffs as having the title to the goods.
Thus, on August 12, 1944, the defendants
wrote to the plaintiffs " We confirm that the consignment is for you
", and on March 24, 1945, they wrote, " We enclose herewith a
statement showing quantities and grades that have been ordered by Government on
your account against order P.L. 1006/10" But these statements are quite
consistent with the position of the defendants as sellers who had ordered the
goods on the requisition of the plaintiffs, and do not import that title
thereto had passed to them, which could be only after the goods came into
existence and were appropriated. That did not happen in this case, and the
shipping documents continued in the name of the defendants.
We therefore agree with the learned Judges
that on the pleadings and on the evidence the claim for damages on the footing
of conversion must fail.
That would entail the dismissal of this
appeal, but the plaintiffs have applied to this Court for amendment of the
plaint by raising, in the alternative, a claim for damages for breach of
contract for non delivery of the goods. The respondents resist the application.
They contend that the amendment introduces a new cause of action, that a suit
on that cause of action could now be barred by limitation, that the plaintiffs
had ample opportunity to amend 450 their plaint but that they failed to do so,
and that owing to lapse of time the defendants would be seriously prejudiced if
this new claim were allowed to be raised.
There is considerable force in the
objections. But after giving due weight to them, we are of opinion that this is
a fit case in which the amendment ought to be allowed. The plaintiffs do not
claim any damages for wrongful termination of the agreement, Ex. A, by the
notice dated June 13, 1945.
What they claim is only damages for
non-delivery of goods in respect of orders placed by them and accepted by the
defendants prior to the termination of the agreement by that notice. Clause 14
of the agreement expressly reserves that right to the plaintiffs. The suit
being founded on Ex. A, a claim based on Cl. 14 thereof cannot be said to be
foreign to the scope of the suit. Schedule E to the plaint mentions the several
indents in respect of which the defendants had committed default by refusing to
deliver the goods, and the damages claimed are also stated therein. The
plaintiffs seek by their amendment only to claim damages in respect of those
consignments. The prayer in the plaint is itself general and merely claims
damages. Thus, all the allegations which are necessary for sustaining a claim
for damages for breach of contract are already in the plaint.
What is lacking is only the allegation that
the plaintiffs are, in the alternative, entitled to claim damages for breach of
contract by the defendants in not delivering the goods.
It is no doubt, true that courts would, as a
rule, decline to allow amendments, if a fresh suit on the amended claim would
be barred by limitation on the date of the application. But that is a factor to
be taken into account in exercise of the discretion as to whether amendment should
be ordered, and does not affect the power of the court to order it, if that is
required in the interests of justice.
In Charan Das v. Amir Khan (1) the Privy
" That there was full power to make the
amendment cannot be disputed, and though such a power (1)  47 I.A. 255.
451 should not as a, rule be exercised where
the effect is to take away from a defendants, legal right which has accrued to
him by lapse of time, yet there are cases where such considerations are
out-weighed by the special circumstances of the case.
Vide also Kisan Das v. Rachappa In the
present case, apart from the contents of the plaint already set out, there is
the fact that the defendants cancelled the contract without strictly complying
with the terms of cl. 14. The ground on which they repudiated the contract was
that the second plaintiff had assigned his interests to the first plaintiff ;
but the record shows that subsequent to the assignment the defendants had
business transactions with both the plaintiffs and therefore the ground for
cancellation appears to have been a mere device to deprive the plaintiffs of
the benefits of the orders which they had placed. We are of opinion that the
justice of the case requires that the amendment should be granted.
The plaintiffs will accordingly be allowed to
amend the plaint as follows:
" 12(a) In the alternative and without
prejudice to the claim on the footing of conversion, the plaintiffs say that by
reason of the facts aforesaid, there was a contract between the parties whereby
the defendants undertook to supply and deliver to the plaintiffs (or either of
them) the goods ordered out by Government on-their (the plaintiffs') account
and included in the quotas PL. 1004-PL. 1007. The said goods arrived in Bombay,
but the defendants failed and neglected to deliver the same though demanded,
and in fact repudiated their obligation to deliver. The plaintiffs say that
they were always ready and willing to pay for and take delivery of the same.
The defendants at all material times well
knew that the plaintiffs had purchased the same for resale and for fulfillment
of contracts of sale and supply. The plaintiffs claim damages as per
particulars. " This appeal must accordingly be allowed, the decree under
appeal set aside, and the suit remanded for (1)  I.L.R. 33 Bombay 644.
452 rehearing to the trial court. The
defendants will file their written statement to the amended claim and the suit
will be tried and disposed of in accordance with law.
There remains the question of costs. As the
plaintiffs are getting an indulgence, they must pay the costs of the defendants
both in the suit and in the appeal to the Bombay High Court. So far as costs of
this appeal are concerned, as the defendants persisted in their contention that
the plaintiffs were only acting as their agents, a contention which, if upheld,
would have furnished a conclusive answer to the amended claim as well, we
direct the parties to bear their own costs in this Court.