MEENAKSHI MILLS LTD Vs. RATILAL TRIBHOVANDAS THAKAR

JUDGEMENT

(1.) THIS is an appeal from a decision of Mr. Justice B.J. Wadia. The plaintiff, who is a broker in Bombay, sued the three defendants for the amount of losses incurred in dealings in cotton on the New York Exchange during the year 1935. He sued defendant No.1 as the principal debtor, defendant No.2 as a surety, and defendant No.3 apparently as having entered into the contract of suretyship on behalf of defendant No.2. Defendant No.2 is a company, which has existed for some time, and defendant No.3 is the sole proprietor of the firm of the managing agents of defendant No.2. Defendant No.1 is a company, which had been formed shortly before the date of the present transactions, and defendant No.3 was one of its directors. In 1935 the plaintiff, who had previously known defendant No.3 and had done business for defendant No.2, was asked to transfer defendant No.2's account to defendant No.1, and that he declined to do. He was distrustful of a new company of which he knew nothing. However, the evidence is that in February, 1935, defendant No.3 came down to Bombay and persuaded the plaintiff to do business for defendant No.1, and it was at that interview that defendant No.3 is said to have given a guarantee on behalf of defendant No.2 of the liabilities incurred by defendant No.1 to the plaintiff. Pursuant to the arrangements then made, the plaintiff, through his ordinary brokers in New York, put through transactions for the purchase of 600 bales of cotton for the October settlement at specified prices. Subsequently the market went down, and as the plaintiff had not sufficient margin, he closed the transactions by instructing his New York brokers to sell 600 bales for October. Evidence as to these transactions was given by the plaintiff. He stated in the witness-box that he had employed Messrs. Harriss & Vose, his usual agents in New York, to carry out these transactions. He produced copies of the telegrams he had sent and the telegrams and letters which he had received in reply, purporting to show that these transactions of purchase and sale had been carried out. The signature on the telegrams is naturally not proved. Harriss & Vose eventually sent a statement of account, which is exhibit A-6. There is a printed signature on it of Harriss & Vose, and it is initialled "Per J.D.F.," the initials being typewritten. That statement was sent on to defendant No.1, who never disputed it. Defendant No.2 must have known about the account, because defendant No.3 is a director of defendant No.1 and also the managing agent of defendant No.2, It is, however, clear that there is no legal evidence of the transactions having taken place on the New York Exchange. The actual contracts entered into on the New York Exchange are not produced, and there is no evidence of the signature of Harriss & Vose. The 2nd defendant company, which is the principal appellant, contends that it was not bound by the evidence adduced by the plaintiff. Defendant No.1 has gone into liquidation and has not challenged the amount claimed by the plaintiff. But defendant No.2, in the first instance, disputes the fact of the guarantee having been given, and, in the second place, contends that if it did guarantee the debt, it is entitled to have the debt strictly proved as against it, and that it is not bound by any admission made by defendant No.1.

(2.) WITH regard to the factum of the guarantee, we have the evidence of the plaintiff and of his clerk that defendant No.3 in February, 1935, did guarantee on behalf of defendant No.2 the liability of defendant No.1 to the plaintiff. There is nothing in writing, and the plaintiff himself, who is a layman, frankly admitted that he did not really know the difference between obtaining a guarantee and a transaction being entered into by an agent. He was very anxious that the transactions, which he was to enter into on behalf of defendant No.1, should be regarded in substance as transactions of defendant No.2, and he did not mind whether that result was brought about by defendant No.2 being regarded as a principal or a guarantor. His evidence as to the terms of the alleged guarantee cannot be regarded as very accurate. But: his clerk Chhaganlal was called, and he is an LL.B., and, therefore, may be taken to know something about general principles of law. He says that he was present at the interview, and that defendant No.3 said that it was the 2nd defendant company's business and the moneys were of the 2nd defendant company, but still if the plaintiff wanted a guarantee, he would stand guarantee on behalf of the 2nd defendant company, and if any moneys remained unpaid, the 2nd defendant company would pay. That is clear evidence of a guarantee having been given. Defendant No.3 did not go into the witness-box and did not, therefore, deny the account of this interview given by the plaintiff and his clerk, and the learned Judge accepted the plaintiff's evidence. No doubt one would have expected a guarantee of this sort to be put into writing, and it is true that no reference was made to the guarantee until the plaintiff's letter of December 12, 1936; but still the learned Judge having accepted the evidence of these two witnesses, relying naturally on the fact that defendant No.3 did not choose to go into the witness-box to deny the account of the interview, there is no reason, in my opinion, why we should differ from the learned Judge on that question. I, therefore, accept the finding that defendant No.2 did guarantee payment of any moneys remaining unpaid by defendant No.1 to the plaintiff.

(3.) I certainly do not desire to challenge the principle there laid down, which was founded on a dictum in Smith v. Blakey (1867) L.R. 2 Q.B. 326. and has been followed in Mayen v. Alston (1893) I.L.R. 16 Mad. 238. and in Barlow v. Chuni Lall Neoghi (1901) I.L.R. 28 Cal. 209. But so far as I know, the principle of those cases has never been extended to the case of forward contracts. In all the cases referred to actual goods had been consigned, and the actual sale of the goods in a foreign country was not disputed, and the Court held that the account sent in by the foreign agent must be treated as prima facie evidence, subject to the right of the client to surcharge and falsify. Mr. Coltman relied on an unreported decision of this Court in Shree Meenakshi Mills, Ltd. v. Maurice Stern (1935) O.C.J. Appeal No.50 of 1934, decided by Beaumont C.J. and Blackwell J., on September 5, 1935, (Unrep.) in which the question which arose was to some extent the same as the question in this case. There were in that case other points which had to be determined, but the question as to the proof of contracts entered into on the Liverpool Market came up for decision, and it appears to have been admitted in that case that the evidence, which was similar to that tendered in this case, was not sufficient. However, these account-sale cases were not cited, and, therefore, I do not regard the decision in Shred Meenakshi Mills, Ltd. v. Maurice Stern as being an authority on the question whether the principle of those cases should be applied to contracts of the character with which we have to deal.