Case Analysis: Narandas Morardas Gajiwala v. Spam Papammal, AIR 1967 SC 333

Case Number

Appeal (Civil) 177 of 1964

Equivalent Citations

1967 AIR 333 1966 SCR 38

Bench

RAMASWAMI, V.

SUBBARAO, K.

Date of Judgment

25/03/1966

Relevant Act/ Section

Principal and Agent-Whether Agent can sue Principal for rendition of accounts.

Indian Evidence Act, 1872, s. 92 , Proviso 3

Facts of the Case:

Narandas Morardas Gaziwala and Ors., a partnership firm based in Surat that dealt in lace and silver thread, had dealings with another firm, Krishna and Company, who worked as their agents for selling their goods on a commission basis throughout the three districts of Madras. Murugesa Chettiar, one of Krishna & Co.’s partners, dissolved all of the firm’s assets and obligations. Krishna & Co. became indebted in 1951 as a result of their dealings. On April 1, 1951, Murugesa Chettiar (hereafter referred to as the plaintiff) executed a promissory note in favor of Narandas Morardas Gaziwala for Rs. 7,500/-, the amount determined by Krishna & Co. to be due and payable. The plaintiff filed a claim in Kancheepuram’s District Munsif’s Court, requesting a rendition of accounts dating back to April 1, 1951, through the date of the suit, in order to determine the amount owed to him. In response, the Surat firm filed a claim against the plaintiff in the court of Subordinate Judge, Chingleput, trying to recover the sum owed under the promissory note. By agreement of the parties, both actions were tried concurrently.

Issues:

(1) Is the plaintiff, as the agent, authorized to sue the defendant-Surat firm for accounts?

(2) Is the plaintiff allowed to put up a parole agreement to establish the condition prior to the promissory note’s enforceability?

Held:

Subordinate Judge- It decided that the Surat firm was obligated to account for its sales in those territories and issued a decree for the amount covered by the promissory note, but instructed that the decretal amount be adjusted out of any commission due and payable on account taking.

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

SUPREME COURT-

The Indian Contract Act makes no provision for an agent to sue the principal for the account’s rendition. The act is not exhaustive, and the agent’s authority to sue the principal for accounting is an equitable right that arises in unusual circumstances, rather than a statutory right. Such unusual circumstances may develop when the principal owns all of the accounts and the agent lacks the necessary accounts to determine his claim for commission against his principal. The agent’s right may also arise in extraordinary circumstances, such as when his remuneration is contingent on the size of deals that he is unaware of, or when he cannot know the extent of the sum owed to him unless his principal’s books are examined.
The Supreme Court agreed with the HC that the transactions for which the plaintiff is entitled to the commission are unique in that they are only known to the principal. As a result, the Supreme Court decided that the plaintiff has the right to sue the Surat firm for accounts because of the unique conditions of this case (remuneration was based on the number of transactions).
The court also decided to uphold the HC’s judgment that the Surat firm had made direct sales to customers in violation of the plaintiff’s single agency contract.
On the issue of the parole agreement, the SC dismissed the Surat Firm’s argument and confirmed the HC’s judgment that there was a collateral oral agreement that the promissory note obligation would not be enforced for 5 years and until the amount was due after the commission agency’s accounting period. The Supreme Court held that the agreement was a condition prior to the promissory note’s enforceability and that the plaintiff could use the 3rd proviso to s. 92 of the Proof Act to adduce evidence of oral agreement.

This is a case analysis is written by Sanjana Suman, student of Amity Law School, Amity University Jharkhand Ranchi.

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