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TMI Blog1919 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... which were by arrangement sold by the then Liquidator of the plaintiffs in the same year. Counsel for the appellants stated that apart from the sums in dispute, the realised Indian assets of the plaintiff's are insufficient to meet their Indian liabilities, but there is no evidence before us to that effect. 2. It is common ground that both the cotton blankets and the cotton bales were, prior to the war, the property of the plaintiffs, Wolf Sons, a German firm with its head office in Germany and a branch office at Bombay, which was managed by a German named P. Zoller, who was interned on the 5th September 1914. Para 2 of the plaint describes the plaintiff-firm as being incorporated ; but there is no evidence of this, and they have been treated in these proceedings as an ordinary partnership firm. From the report in Wolf Sons v, Carr, Parker Co. (1915) W.N. 195, this appears to be their correct status. The plaintiff firm now sues by Mr. P. S. Mellor, the present Controller of Hostile Trading Concerns, Bombay, who was appointed Liquidator of this hostile firm by the Bombay Government Order of the 20th September 1916, Exh A to the plaint. The defendants Dadiba Khimji C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the 5th June 1915, the Liquidator says : I have the honour to inform you that there are now the following stocks left with me which I would propose selling by auction in small lots...799 balea of cotton blankets in the godown of Dadiba Khimji Co. The blankets are in possession of Dadiba Khimji Co. as security against differences due to them on cotton, but I trust there would be no objection on their part to have these goods sold. Their claims have been duly taken note of....As for the blankets it is imperative they should be sold now. To this proposal for sale, the Controller agreed in a letter of the 11th June 1915. 6. Then the Liquidator after taking the advice of his solicitors wrote to the Controller on the 1st July as follows :- Re: 797 bales of cotton blankets. I have the honour to acknowledge receipt of your letter of 11th instant referring among other lots to the 797 bales mentioned above. These bales were given in charge of Dadiba Khimji Co,, Muccadums of this firm under an agreement dated 5th August 1914, and with the view of obtaining possession of the same I consulted Messrs. Payne Co. for opinion, and received their reply as per their lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auction and as this is prejudicial both to W. Wolf Sons' interest and to ours, we would propose to allot the balance of about 500 bales to us against our outstanding claim with W. Wolf Sons, and we are prepared to pay ₹ 10 per bale more than the average price obtained in the three auction sales... The assuring is of course not possible for you to do because you have to sell quickly and close the liquidation. Please remember that the running expenses per month are about ₹ 750; we have to pay ₹ 450 in shape of godown rent and there is insurance and shop rent and wages etc. which expenses will be saved to you, besides the auctioneers' commission at 2 1/2 per cent, if the goods are sold by auction. 10. The Liquidator consulted the Controller on this proposal and wrote to him on the 22nd October 1915 as follows: With reference to the interview I had with you this afternoon in connection with the sale of blankets of this firm mortgaged to Dadiba Khimji Co.. I have the honor to inform you that I have duly intimated to them that their offer is accepted at the prices realised in the auction sale held on the 18th instant. There are some bales absolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Tombroff acted here with the approval of the Controller, as he ' undoubtedly did as regards the blankets. 14. The precise date of this agreement about the sale of the cotton bales does not appear, but I think it clear that the sales took place somewhere in 1915. The reason no doubt why the evidence is rather meagre is that at the trial there was really no dispute as to the facts. The only witness called by the plaintiffs was Zoller, and he could not depose to the arrangement with the Liquidator, for he was interned at the time, and it does not appear that he was consulted in any way. Counsel tells us too that he could not be questioned much, owing to his strange manner in the witness box, and that he committed suicide the same evening. 15. It is common ground however that the arrangement in question was carried out so far as the defendants were concerned. They gave delivery to Tombroff's purchasers and allowed him to get possession of the sale proceeds. The plaintiffs however now repudiate the condition on which these bales were given up by the defendants, and the sale proceeds obtained by Tombroff, and claim that they are under no obligation to pay what was agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them was the solicitors' letter of the 12th April 1916. The appellants rely on this letter of the 13th November 1915 as establishing the date when they first discovered the pre-war contracts to be illegal and void. 18. The arguments presented to us on this appeal were centred round two main points, viz., (1) the effect of the war on the transactions in question and on the legal position of the Bombay branch of the enemy firm, and (2) the provisions of the Indian Contract Act with reference to the recovery of money. 19. On the first branch of the case, it was urged by the appellants that the pre-war contracts of 16th to 23rd July 1914 and the pre-war pledge (if any) of 4th August 1914 became ipso facto void on the outbreak of war: that the further pledges given on the 5th August and on the 26th or 27th August were similarly void: and that the cross contracts of the 3rd of September were so tainted with the illegality of the pre-war contracts as to be themselves void, or alternatively only amounted to the settlement of a nullity. It was further urged by the appellants that Zoller's agency terminated ipso facto on the outbreak of war, and that therefore he had no power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the plaintiffs' head office in Germany, but perhaps not Zoller himself, as ho was neither resident nor carrying on business in Germany . Para G dealt with branches as follows: Provided always that where an enemy has a branch locally situated in British, allied, or neutral territory, not being neutral territory in Europe, transactions by or with such branch shall not be treated as transactions by or with an enemy. Then in para 7 : Nothing in this Proclamation shall be deemed to prohibit payments by or on account of enemies to persons resident carrying on business or being in Our Dominions, if such payments arise out of transactions entered into before the outbreak of war or otherwise permitted. 23. In addition to these Proclamations, there was in India on the 8th August 1914 a Notification (see Indian Manual, p. 184) putting in force the Foreigners Act III of 1864. By virtue of Section 9 of that Act no foreigner was to travel in or pass through any part of British India without a license. This was followed on the 20th of August by a Foreigners Ordinance No. III of 1914 (see Indian Manual, p. 47) giving powers to the Governor-General in Council by order to restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d payment within para 7 as being a payment to a British subject arising out of a transaction entered into before the outbreak of war. (See same case p. 232 and Halsey v. Lowenfeld (1916) 2 K.B. 707, 712, 717). And that if such a payment was authorised, it was also legitimate to do something short of payment, viz., to give security to a British subject for such payment. 26. Or, again, if one looked at Hall's International Law, 6th Edn., p. 388, which was cited with approval by Mr. Justice Sargant in Princess Thurn and Taxis v. Moffitt (1915) 1 Ch. 58, 61, it might be said that at any rate until his internment Zoller was not disabled by the war from entering into the transactions in question. The' passage I refer to is as follows: When persons are allowed to remain, either for a, specified time after the commencement of war, or during good behaviour, they are exonerated from the disabilities of enemies for such time an they in fact stay, and they are placed in the same position as other foreigners, except that they cannot carry on a direct trade in their own or other enemy vessels with the enemy country. Now, here, Zoller was prohibited by the Notification of the 8th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to rank as unsecured creditors. 30. I think, I have now stated enough to show, that in 1914-15, the true legal position was open to doubt, at any rate in some particulars. As 1 have already said, I need not and I do not decide what that position was. I merely assume for the purposes of this case that the appellants are correct on this first branch of the case. 31. I come accordingly to the second branch which appears to me to be the crux of the case, viz., on what legal grounds can the plaintiffs claim to recover the sale proceeds of the blankets. One may clear the ground by saying that their claim is based solely on Section 72, or alternatively, on Section 65, of the Indian Contract Act. They admitted that no claim based on the English law apart from that Act could succeed. The relief given in Gulabchand v. Fulbai (1909) I.L.R. 33 Bom. 411; 11 Bom. L.R. 649 (where the illegal purpose had not been carried out) was therefore inapplicable. In view of such cases as Kearley v. Thomson (1890) 24 Q.B.D. 742 this admission was, I think, properly made, having regard to the appellants' contentions that all the transactions were illegal Nor need I consider whether if this Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not voidable because it was caused by a mistake as to any law in force in British India . Consequently, if Section 72 applies to mistakes of law, a man might recover payments under Section 72, although he could not avoid the contract under Section 21. I am thinking of course of a case where the same mistake is made at the inception of the contract as on the payment thereunder. Counsel for the appellants admitted that in such a case Section 72 would not apply. The payment in such a case he said would be made under the contract (which ex hypothesi could not be rescinded under Section 21), and consequently the payment would not be by mistake. 35. The appellants contended however that Section 21 did not apply here because there was no contract as defined by Section 2 (h), viz., ''an agreement enforceable by law. There was at most an agreement not enforceable by law' and therefore void under Section 2 (g). This contention is, I think, erroneous on the facts. In my judgment the Liquidator entered into binding agreements with the defendants for the sale of the blankets and bales and for the application of the proceeds in discharge of the defendants' debt. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uit, particularly when they were told by their legal advisers that the defendants were right. 39. It is not suggested that the wide powers given by Section 6 of the Enemy Trading Act, 1916, to the Governor-General in Council of cancelling contracts injurious to the public interest or revesting property transferred under them have ever been or could be exercised in the present case. 40. I am, therefore, of opinion that the agreements entered into by the Liquidator with the defendants were contracts within the meaning of the Indian Contract Act and could not be avoided under Section 21 as being made under any mistake of law That being so, I am further of opinion that the payments made to the defendants were payments under this binding contract, and could not be recovered under Section 72. 41. In this view of the case, I need not decide whether Section 72 can ever apply to a mistake of law, but as at present advised, the passage referred to by the learned trial Judge in Pollock and Mulla (3rd Edn.) at p. 308 seems to me good sense : and good sense is generally good law. The passage in question runs ; The man who has chosen to judge his own cause upon all the facts, and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65 does not apply to the payments in question as they were made to the defendants under valid agreements and not under void ones. 44. But supposing for the sake of argument that the payments were made under the contracts and pledges ending 3rd September 1914, and that the Liquidator's agreements were mere machinery for carrying out these contracts and pledges, the appellants have still other difficulties to contend with The first arises from the words agreement discovered to be void. I agree with the learned trial Judge that the word agreement as used in that section does not apply to the pre-war contracts, for they were contracts within the meaning of the Indian Contract Act and not agreements . As regards the subsequent agreements, the parties knew all the material facts and I doubt whether the words discovered to be void are really applicable to those agreements (see Gulabchand v. Fulbai (1909) I.L.R. 33 Bom. 411, 417; 11 Bom. I.R. 649), The decision in Jijibhai v. Nagji (1909) 11 Bom. L.R. 693, 698 can be supported as being based on the validity of a collateral agreement for a refund, quite apart from Section 65 (see p, 698). 45. Next, if the other branch o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and details such as godown rent challenged; but no repudiation of the mortgage itself was intended by the parties. That as the correspondence shows was regarded as valid at any rate with respect to the blankets. Nor in the view 1 take is this a case where the assistance of equity is asked towards carrying out an illegal agreement as in Mohori Bibee v. Dhurmodas Ghose (1903) L.R. 30 I.A. 114, 126: 5 Bom. L.R. 421. In substance, therefore, it seems to me, that the defendants' case on the cotton bales stands or falls with their case on the cotton blankets. They have succeeded on the claim. I think they also succeed on the counter-claim. 50. The appeal, therefore, of the plaintiffs should in my judgment be dismissed with costs. It will not however be necessary to proceed with the account directed by the decree, as the parties have since agreed on the figures. But this need not, I think, be mentioned in the order we make. Heaton, J. 51. I agree that the Liquidator entered into valid agreements with the defendants regarding the sale of the blankets and of the cotton bales and for the disposal of the proceeds. And I think so for the reasons stated by my learned brother. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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