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TMI Blog1992 (12) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... xport of switchgears. The plaintiff was appointed as the sole agent to represent the defendant in the areas covered by the Middle East, Africa and South East Asia. The plaintiff, by reason of its contacts and influence, was able to obtain, for and on behalf of the defendant, a contract from the National Electricity Administration of Baghdad for supply of 11 KV switchgears of the value of about Rs. 15,00,000 (C and F Baghdad). The plaintiff received this order from the National Electricity Administration of Baghdad on August 4, 1969. The plaintiff thereafter in terms of the arrangement with the defendant, communicated, vide its letter dated August 20, 1969, the order of the Iraqi buyers to the defendant who had irrevocably and without any reservation accepted the said order which was in all respects and entirely identical and essentially similar to the terms and conditions of the Iraqi buyer's order. In terms of the said order, the first consignment should have been effected by April, 1970, and the remaining balance consignment should have been completed by September 15, 1970. On November 9, 1969, the plaintiff also received a letter from the tendering authorities by which the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrate its position as export agent of the defendant. According to the plaintiff, the total C and F value of the unexecuted portion of the goods as on April 1, 1972, is Sterling 21375.12 which is equivalent to Rs. 4,00,020.90 and that of the commission which had been increased by 1 per cent. by the letter of the defendant dated February 22,1971, calculated on the f.o.b. value of the unshipped portion of the contract amounted to Rs. 30,403.82. In addition, the plaintiff has claimed, it is also entitled to receive a sum of Rs. 2,915.32 being the commission due by the defendant to the plaintiff on the shipment already made. The plaintiff addressed a legal notice to the defendant dated January 31, 1973, claiming a sum of Rs. 5,00,000 inclusive of the commission due to them by reason of the failure of the defendant to carry out their obligations. By final reply the defendant, through its counsel, refuted the claim of the plaintiff and pleaded that it was unable to keep up to the terms of the delivery schedule by reason of circumstances beyond its control, and pleaded that having paid the penalty under the contract for delay in delivery, there could no further liability on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laintiff is bound to tender account in respect of 2,589 sterling pounds to the defendant." The learned single judge has also held that the defendant is not entitled to call upon the plaintiff to pay any sum as damages. Learned counsel for the appellant has attacked the findings recorded by the learned single judge on the issue whether the provisions of section 294(2A) of the Companies Act would operate as a bar to the maintainability of the suit on the ground, inter alia, that section 294(1) and (2A) of the Companies Act read together ceased the validity of the appointment of a sole selling agent for any area with effect from the date of a general meeting of the company which disapproved the appointment or did not approve the appointment, but operated as no bar to the maintainability of the suit which in common law and the law of contract were/are available to the plaintiff. He has, for the said purpose, drawn our attention to section 294(1) substituted by Act 65 of 1960. Section 294(1), (2) and (2A) read : "294. Appointment of sole selling agents to require approval of company in general meeting. (1) No company shall, after the commencement of the Companies (Amendment) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fulfilment of the condition of approval by the company in the first general meeting held after the date on which the appointment is made, upon which would depend whether the appointment would be valid or cease to be valid. What is noticeable in the instant case is, however, that the defendant has not disputed the de facto transaction of business with the foreign buyers through the plaintiff and conceded that it did give to the plaintiff the contract which contract, according to the plaintiff, was the plaintiff's appointment as the sole agent for export of such orders in the areas covered by the Middle East, Africa and South East Asia. According to the defendant, the company held a general meeting on September 9, 1968 (after the defendant's appointment on September 2, 1967), and the plaintiff's appointment as the sole selling agent was not placed before the said meeting and consequently the plaintiff ceased to be the sole selling agent on and after September 9, 1968 and/or there was no appointment of the plaintiff as the sole selling agent in accordance with the provisions of the Companies Act, 1956, and/or the parties (plaintiff and defendant) were dealing as principal to pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less guilty party may be able to recover money paid, or property transferred, under the contract. This possibility may arise in three situations. First, the contract may be of a kind made illegal by statute in the interests of a particular class of persons of whom the plaintiff is one. Secondly, the plaintiff must have been induced to enter into the contract by fraud or strong pressure. Thirdly, there is some authority for the view that a person who is under a fiduciary duty to the plaintiff will not be allowed to retain property, or to refuse to account for moneys received, on the ground that the property or the moneys have come into his hands as the proceeds of an illegal transaction.' See Anson's Principles of the English Law of Contract, page 346." In the Indian Contract Act, we have in section 64, the consequences of rescission of a voidable contract and in section 65, the obligation of persons who have received advantage under a void agreement or a contract that became void. Section 64 of the Contract Act says that when a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Sivaramakrishnaiah v.Venkata Narahari Rao, AIR 1960 AP 186, in which it is stated (at page 1895) : "In order to invoke section 65 the invalidity of the contract or agreement should be discovered subsequent to the making of it. This cannot be taken advantage of by parties who knew from the beginning the illegality thereof. It only applies to a case where one of the parties enters into an agreement under the belief that it was a legal agreement, i.e., without the knowledge that the agreement is forbidden by law or opposed to public policy and as such illegal. The effect of section 65 is that, in such a situation, it enables a person not in pari delicto to claim restoration since it is not based on an illegal contract but dissociated from it. That is permissible by reason of the section because the action is not founded on dealings which are contaminated by illegality. The party is only seeking to be restored to the status quo ante. Section 65 also does not recognise the distinction between a contract being illegal by reason of its being opposed to public policy or morality or a contract void for other reasons. Even agreements, the performance of which is at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instituted the suit. The principal point for determination in the above case was whether the suit partnership was illegal, in that it contravened the provisions of the Central Excises and Salt Act, 1944, and whether even if the partnership was illegal, the appellant would be entitled to the alternative relief of restitution of the moneys paid to him for the business. The trial court as well as the first appellate court accepted the defence that the contract of partnership which enabled the appellant to join the business without an appropriate licence was prohibited by the statute and, therefore, illegal. They also negatived the appellant's prayer for the alternative relief on the ground that it was a mere equitable claim which, did not deserve to be granted in the light of the circumstances that the appellant was put in charge of the business for some time. The two contentions which were before the court, however, were based on the appellant's claim for accounts in two ways: (1) that the partnership was not illegal, in that one of the parties had a licence and business could be done under it; (2) further as under that rule the parties had 30 days time to intimate the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate amendment of the licence; and he failed to do so. He, therefore, committed a breach of the terms of the agreement which disabled further performance. He will normally be under a duty to restore the benefits received under the contract which had been put an end to." The Full Bench also referred to the judgment of the Privy Council in the case of Muralidhar Chatterjee v. International Film Co. Ltd., AIR 1943 PC 34 to say as follows (at page 243): "In Muralidhar Chatterjee v. International Film Co. Ltd. [1943] 2 MLJ 369; AIR 1943 PC 34, Sir George Rankin in delivering the judgment of the Privy Council analysed the various provisions of the Indian Contract Act and held that money received by a party to a contract in part discharge of the consideration due or to become due, though applied for defraying the expenses of carrying out this part of the contract and spent for that purpose was nevertheless a benefit or advantage had by him, liable to be restored under section 64, on his recission of the contract by reason of breach thereof. It would follow that where an agreement of partnership like the present one has either become impossible of performance by reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court could test the facts and circumstances of the case to find out, whether actually the plaintiff and the defendant were in pari delicto, for if the defendant was to perform a certain act and did not do so, the defendant is the wrong-doer and the plaintiff was wronged by what it did in the sense that the defendant failed to bring on the agenda of the meeting of the company after the agreement was entered into, the question of approval thereof. Dealing with the clause "delays due to causes beyond control (force majeure) will not be liable to penalties, provided, however, that such causes will have been immediately notified by registered letter", exhibit P-2 purchase order and the mention under exhibit P-3 that the same general conditions will equally apply to the pay order and other evidence in this behalf, the learned single judge has stated : "It must be noted that even though details of the circumstances under which the defendants were prevented from fulfilling the contract are not mentioned, yet the defendants have been consistently urging that it was only because of the reasons beyond their control, they are relying on the force majeure clause and that they could not fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendant are in pari delicto for which specific issues are necessary, we propose to remand the case. We do not proceed to examine the evidence on the question whether the defendant can rely on the force majeure clause in the agreement as a complete answer to the suit claim ourselves. We think our recording that the finding in this behalf by the learned single judge in the judgment is without sufficient consideration of the principles of law and the evidence on the subject will be enough for the limited purpose of remand. There are findings recorded in the impugned judgment with respect to certain claims and a certain quantum of damages has also been determined by the learned single judge. The learned single judge, as we have already noticed, has also examined the counter claim of the defendant and found that the claim of accounting is justifiable but not any damages on account of penalty levied for the delayed delivery and collected by the foreign buyers. The case of the parties in this regard, however, will have to be redetermined as damages for the alleged breach of contract and compensation in terms of sections 64 and 65 of the Contract Act create different kinds of obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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