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TMI Blog1942 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... unit does not become a partner but only such of its members as in fact enter into a contractual relation with the stranger. Therefore the only right that the coparceners have against their karta is to call upon him to account with reference to any business that he might do with joint family funds or to have a partition suit filed and to have a receiver appointed in that suit to wind up the business which the karta is doing with the third party. Therefore it is clear that in this case where you find the karta contracting with two companies and is given the right of managing the business of both the companies, the other coparceners have no right to call upon him to associate them in the management of the two companies. If the contention of the plaintiffs was sound that the defendant was appointed managing agent as the karta, then it would follow that all the members of the joint family would have the right to act as the managing agents of the two companies without any reference either to the defendant or to the two companies. That surely is not the position when one looks at the scheme of the four documents I have considered and their true construction and effect. 2. When the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiffs can make a claim as coparceners of a family which was joint prior to 1935. 3. The second contention of the plaintiffs on which the suit is based is the rights that accrued to them under the agreement dated September 18, 1940. Although the validity of this agreement was disputed in the written statement on various grounds, these grounds have not been pressed before me by the Advocate General on behalf of his client. It is conceded by the defendant that the agreement is a valid and binding one. It is further conceded that there was good consideration for the agreement and the defendant committed a breach of it by ousting the plaintiffs from the management of the Lal Mills on November 4, 1941. The agreement is contained in a letter written by the defendant to the plaintiffs, by which the defendant agrees that notwithstanding the provisions of the memorandum of association of Chinubhai Lalbhai and Brothers, Limited, the right conferred upon Sheth Chinubhai Lalbhai by the agency contract between the Lal Mills and Chinubhai Lalbhai and Brothers, Limited, are from this date to be for the benefit of the defendant and the two plaintiffs, and the words Sheth Chinubhai Lalb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the memorandum of association of Chinubhai Lalbhai and Brothers, Limited, and in such other documents as may be necessary in order that the plaintiffs may be invested with the same rights and privileges in the management of the Lalbhai Tricumlal Mills, Limited, under the managing agency agreement as were enjoyed by the defendant himself. It is also clear that the agreement is to transfer the agency jointly to three agents and, therefore, an agency is to be constituted of three persons who are to act jointly in the work of the agency. In view of the writing of September 18, 1940, it is clear that by it the defendant agreed to associate the plaintiffs in the doing of acts which involved personal discretion, personal qualifications and confidence. It would be impossible to carry on the work of the agency unless there was mutual confidence and trust between the agents. Plaintiff No. 1 himself has admitted in his evidence that all important things relating to the management of the mills are attended to personally by the managing agent. Among these important things is purchasing cotton for the mills from time to time. The purchase of cotton both with regard to the time at whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g from the possessions of the see, and the successor to that Bishopric refused to admit the plaintiff's claim of right to perform the various acts which he was entitled to do under the agreement with the defendant's predecessor in office. The plaintiff filed the bill against the defendant for an injunction preventing the defendant from obstructing the plaintiff in the exercise of his rights. In dismissing the bill Sir J.L. Knight-Bruce, V.C., observed (p. 266) : it is obvious that it is of the highest importance to the safety of the temporal interests of the Bishop for the time being, and his ordinary comfort, that the person invested with such powers should be a man not merely respected by him, not merely worthy of trust, but also personally acceptable to him. To force upon him in such characters a person however estimable, however professionally eminent, who is objectionable to him, or in whom he does not happen to confide, would, if legal, be surely hard : and sitting in a Court of Equity, I do not feel any inclination to do it. The defendant in the case before me refuses to work with the plaintiffs, and I am being asked to force the plaintiffs upon the defendant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mutuality, and one of the considerations that weighs with the Court when it is called upon to grant specific relief is whether the defendant in his turn could have specifically enforced the obligations cast upon the plaintiffs by the agreement. It is argued by Mr. Taraporevala that in this case the principle of mutuality would not apply inasmuch as the plaintiffs have carried out all their obligations under the agreement, viz. they have executed a promissory note in favour of the Bank and also given the necessary undertaking to it. But as I have already held in construing the agreement, the plaintiffs are as much under an obligation to act as the managing agents as the defendant himself and the test of mutuality would be this : whether if the plaintiffs declined to act as the managing agents, the defendant could have compelled them to do so. It is conceded by Mr. Taraporevala that such a suit by the defendant for specific enforcement of the plaintiffs' obligations would fail. If so, the agreement certainly lacks mutuality. 7. It is further argued by the Advocate General that when the performance of a contract is dependent upon the volition of a third party, the Court will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the defendant as their managing agents. The company is not before me. I have not heard as to what it has got to say with regard to this appointment. Behind the back of the company I am being asked to appoint new managing agents for it who would manage all its business and carry out the work of a most confidential character. It is not enough for Mr. Taraporevala to say that the plaintiffs who are shareholders and who hold the majority of the shares are in favour of such amendments. The company is a legal entity entirely separate from and independent of the shareholders. I have got to hear not only the shareholders but the company in its corporate capacity. 8. It has been further urged that the writing dated September 18, 1940, constitutes an agreement to transfer a burden under a contract and not a benefit. Mr. Taraporevala concedes that under the ordinary law the burden of a contract cannot be transferred or assigned, but he contends that the ordinary law is amended as far as the managing agency of a company is concerned by Section 87B(c) of the Indian Companies Act which contemplates the transfer of the office of a managing agent. The general law with regard to the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case that instead of specifically enforcing the contract between the parties if necessary some damages might be awarded to the plaintiffs. Sargent J. deals with the argument and says (p. 196) : It is also obvious that merely to award damages for the breach of such an agreement would be a wholly inadequate and illusory remedy. In that case also no damages were as a matter of fact proved. 12. It is further argued by Mr. Taraporevala that inasmuch as there is a part performance of the contract and as damages cannot be awarded for the breach of the agreement, the Court was bound to grant specific performance of the agreement. It is obviously not so because what Section 22, Clause (iii), of the Specific Relief Act, lays down is that in the following case the Court may exercise its discretion to decree specific performance, namely, where the plaintiffs have done substantial acts or suffered losses in consequence of a contract capable of specific performance, Therefore it is only where a contract is otherwise capable of specific performance and the plaintiff; has done substantial acts pursuant to that contract that the Court would exercise its discretion in his favour. If the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns together so that they should be compelled to act as managing agents, thus putting it in their power to make the working of the mills impossible. No Court of Equity would exercise a power which is purely discretionary which would be likely to perpetrate a situation of this character. 15. Mr. Taraporevala has made various submissions all very ingenious and subtle, as one always expects from him, on the construction of the agreement. But I must say that these submissions have been made by him with a cheerful and almost reckless disregard of the pleadings in the case. His first contention is that the agreement constitutes a partnership between the plaintiffs and the defendant and the suit is by two partners who have been excluded from the partnership and for an injunction restraining the other partner from excluding them from the business of the partnership. In the first place, partnership is nowhere pleaded in the plaint, and it would be giving a go by to all the rules of pleading to construe the plaint as a pleading in a partnership action. Further these three persons are not going to work for any benefit or gain. As I have already pointed out, the remuneration for the work of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a change in the constitution of a managing agent's firm, such a change shall not be deemed to operate as a transfer. Therefore, it is clear that but for the proviso even such a change in the managing agency's firm would constitute a transfer. It is only in that specific instance that Sub-clause (c) is not to be given effect to, It would be contrary to all canons of interpretation if I were to give to a proviso to a section a wider effect than the Legislature intended. I, therefore, hold that if the writing of September 18, 1940, effected a transfer, Sub-clause (c) would apply and it would be void. 18. On the question of pleadings Mr. Taraporevala has strenuously argued that all that is necessary for him to set out in his plaint is the writing of September 18, 1940, and it is for the Court to decide what is the result of that agreement and what is the legal relationship established between the plaintiffs and the defendant by that document. Mr. Taraporevala says that it is not necessary for him to allege that the writing constituted a nomination or a partnership or an assignment. If I am satisfied that in fact it does so, it is open to me to come to that conclusion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant constituted plaintiff No. 1 his sub-agent. Mr. Taraporevala argues that plaintiff No. 1 was named by the defendant to act for the principal, namely, the Lal Mills, in the business of the agency and, therefore, he was constituted a substituted agent under Section 194 of the Indian Contract Act and a privity was established between him and the Lal Mills. Mr. Taraporevala further contends that if that is so, the defendant cannot revoke the nomination, and the only person who can do so would be the principal, namely, the Lal Mills. He says that the Indian Contract Act nowhere provides for the right of an agent to revoke the authority of a substituted agent. To my mind the contention of Mr. Taraporevala is clearly erroneous. Section 195 of the Indian Contract Act provides that in selecting a substituted agent under Section 194, 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. It cannot be suggested that as the agent is responsible to the principal for negligence in the selection of a substituted agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. Now the subject-matter of the agency is the management of the Mills, and I cannot understand what pecuniary or beneficial interest the plaintiffs have in the management of the mills. In English law some specific connection must be shown between the authority and the interest, and there must also be an agreement, express or implied, whereby the authority is given to secure some benefit which the donee is to obtain by reason of the authority. As pointed out by Sir Dinshah Mulla although the language of Section 202 is wider, the Legislature did not intend by this section to make any departure from the English law on the subject. In this case, as I have already observed, no benefit was to be obtained by the donee from the managing agency nor do I read anything in the nomination to suggest that the authority was given to the donee as security for some benefit or other. I, therefore, hold that the nomination in favour of plaintiff No. 1 is not an authority coupled with any interest. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the breach. See Mayne on Damages, 10th edn., p. 5; and Chaplin v. Hicks [1911] 2 K.B. 786. The breach of the agreement has resulted in my losing the right of management and the safeguarding of my moneys. 28. There is no question of disharmony. Plaintiff No. 1 worked with the defendant for eight years. There is no valid reason for the deliberate breach on November 2, 1941. The textile trade is going up day by day. I am entitled to substantial damages. 29. M.C. Setalvad. The case of Erie County Natural Gas and Fuel Company v. Carroll [1911] A.C. 105 goes on the measure of damages : there was injury in that case. 30. There must be damage actual or prospective. The Court can award damages, but every breach of contract does not necessarily result in damages, otherwise the words entitled to compensation in Section 19 of the Specific Relief Act are superfluous. Section 19 is in terms on the same lines as Section 73 of the Indian Contract Act. The principle is the same. See Marzetti v. William (1830) 1 B. Ad. 415 Cole v. Christie (1910) 26 T.L.R. 469 and Admiralty Commissioners v. S.S. Susquehanna [1926] A.C. 655. In Chaplin v. Hicks [1911] 2 K.B. 786 the plaintiff had by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een superfluous and should not have found a place in that section at all. The whole question, therefore, is whether in this case on the facts established the plaintiffs are entitled to compensation. Now in deciding whether the plaintiffs are entitled to compensation, the principle that the Court must adopt is the same that underlies Section 73 off the Indian Contract Act. Under that section the Court is empowered to award damages when there is a breach of contract for any loss or damage caused to the party complaining of the breach of contract. Therefore, before a party would be entitled to damages under Section 73 of the Indian Contract Act, he would be bound to prove some loss or damage. Now, you may have cases where it would not be possible for a party to prove actual damages. A party may suffer some injury which may not be assessable in terms of money. In cases like this, Courts both here and in England have laid down that a party who has suffered an injury should not go without any relief merely because that injury is not assessable in terms of money, and under these circumstances the Courts have awarded nominal damages. 33. Mr. Taraporevala has cited several cases and to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have dismissed the suit but ought either itself to have awarded damages or to have ordered an inquiry as to damages. Now, in that case, there can be no doubt that Farran C.J. in delivering his judgment proceeded on the assumption that the plaintiff in being deprived of the services, of the defendant did suffer some injury. What is more the learned Chief Justice actually thought of ordering an inquiry as to what the damages would be; but realizing that such an inquiry would be costly, the suit being of a trumpery character, he awarded ₹ 10 as nominal damages. This decision certainly does not support the contention of Mr. Taraporevala. 35. The other case on which Mr. Taraporevala has relied is Erie County Natural Gas and Fuel Company v. Carroll [1911] A.C. 105 In that case the plaintiff company filed a suit against the defendants for damages because of the plaintiffs not having been permitted to take natural gas for the supply of their works, which they had reserved to themselves in a contract which they had entered into with the defendants for the sale of gas leases and wells belonging to the plaintiffs. The Courts in Ontario awarded heavy damages to the plaintiffs, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (p. 424) : At the same time I cannot forbear to observe that it is a discredit to a person, and therefore injurious in fact, to have a draft refused payment for so small a sum, for it shows that the banker had very little confidence in the customer. It is an act particularly calculated to be injurious to a person in trade. Mr. Justice Taunton in his judgment observed (p. 426); There are many instances where a wrong, by which the right of a party may be injured, is a good cause of action although no actual damage be sustained. Then further on he says (p. 427) : Here, independently of other considerations, the credit of the plaintiff was likely to be injured by the refusal of the defendants to pay the cheque; and as it was the duty of the defendants to pay the cheque when it was presented, and that duty was not performed, I think the plaintiff, who had a right to its being performed, is entitled to recover nominal damages. 37. Then there is a further decision in Chaplin v. Hicks [1911] 2 K.B. 786. In that case the defendant advertised that he would employ actresses from persons for whom the readers of certain newspapers voted and who secured a certain number of vot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endant's act. No attempt has been made in the course of the hearing to prove any damages, and I have as a matter of fact held in my judgment: It is clear from the evidence that no damages have been suffered by the plaintiffs. In view of this state of the record, I must hold that the plaintiffs have not proved any injury or loss or damage suffered by them and that they are not entitled to any damages. Mr. Taraporevala has further contended that in view of the fact that the defendant is going to be in management, the plaintiffs may suffer losses by reason of the defendant's management and that I might take that into consideration and award to the plaintiffs what I have described as prospective damages. But as I have pointed out, the Court only awards prospective damages when the Court may reasonably anticipate that the plaintiffs would suffer damages in future in consequence of the defendant's acts or omissions. I have nothing before me in this case to anticipate reasonably that the defendant in future would so manage the mills that he would cause loss to the plaintiffs. On the contrary, it is in evidence that the defendant is as vitally interested in the good managemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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