ACHUTHA NAIDU Vs. OAKLEY BOWDEN AND CO

JUDGEMENT

(1.) This is an appeal from the judgment of Mr. Justice Coutts Trotter in which he found that a certain contract for the purchase of tiles could be repudiated by the defendants. The facts appear fully from his judgment and may be stated shortly thus: The plaintiff entered into a contract with the 1 defendants who were themselves agents for the 2nd defendants for the supply over a period of a large number of tiles at a fixed price. Plaintiff in fact was a man of straw and was a mere alias of, or dummy contractor for, Balakrishna Mudaliar, the dubash of the 1 defendants. It was well-known to that dubash and it must be taken to have been within the knowledge of the plaintiff that no such contract would have been entered into by the 1 defendants if they had known the true facts. The 1 defendant has sworn that he would not have made such a contract and the reasons are obvious. It is difficult to imagine anything more undesirable for persons handling the whole output of tiles of a certain manufacture than that their dubash and local agent should have a large running contract for these tiles, the effect of which would make him a competitor with his own principal in the market which it was his duty to exploit for the benefit of his principals and not for the benefit of himself. The act of this dubash and the plaintiff, was On the facts found, in my judgment, a fraudulent conspiracy. On discovery of this fraud the defendants refused to carry out the contract any further, the contract having been partly performed; and an action was brought by the plaintiff for damages for loss he alleges that he suffered by reason of this repudiation. The defence to that action is fraud. Defendants say they were induced by the fraud mentioned above to enter into the contract. Having been induced to enter into the contract by fraud they can, according to law, repudiate the contract on discovering the fraud. The learned Judge has held that that contract was induced by fraud and has given judgment for the defendants on that ground alone, pointing out and giving English authority for the proposition that a fraud as to the identity of the contracting party is as much a fraud as any other fraud; and with that part of his judgment. I entirely agree. And it would be unnecessary to say anything further but for the fact that points were argued under the Indian Contract Act and decided in favour of the plaintiff by the learned judge and that I do not agree with his finding on that part of the case. The point shortly taken is that Section 215 protects this particular fraudulent agent. Section 215 is in the following words: If an agent deals on his own account in the business of the agency without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction if the case shows either that any material fact has been dishonestly concealed from him by the agent or that the dealings of the agent have been disadvantageous to him". It is argued that that section contains the whole law in this country in relation to dealings between agents and their principals and that the law there stated is different to the law of England. I agree that the law as there stated is different to the law of England. By the law of England, if an agent, without disclosing the fact that he is the person dealing, himself deals with his principal, the principal on discovering that fact can have the transaction set aside and it is wholly immaterial whether the transaction is advantageous or disadvantageous to the principal and it is wholly immaterial whether there has been fraud or not. The law on the subject in England is very strict indeed, the view being that the court will not allow a man in a fiduciary capacity to put himself in a position in which his interest might be adverse to the interest of his principal. He may have the best intentions in the world but the law of England requires more, requires that a man in a fiduciary capacity should not be subject even to the temptation of taking advantage of his position. The law here as stated in Section 215, in order to set aside such a transaction, dots require either that the agent should have concealed a material tact dishonestly or that the dealing should have been in fact to the disadvantage of the principal. In my judgment - and here is where I differ from the trial judge - in this case both these conditions were fulfilled. A fact was dishonestly concealed by the agent and that fact was the fact that the plaintif was a mere dummy for the 1 defendant and I am unable to accede to the very able argument of the Advocate General that that is not the sort of dishonesty contemplated by this section. On the contrary, in my judgment those words in Section 215 are put there expressly to keep applicable to the case of principal and agent the general rules as to fraud which appear in Secs.17 and 19 of the Act. Further, in my judgment this action of plaintiff and of the dubash must necessarily have been disadvantageous to the principal. The dubash had many cmties to perform for his principals and to have such a running contract for a peried of time between himself and his principals without their knowing that it was their dubash's contract must inevitably and constantly put the dubash into a position where his duty and his interest must conflict. Further, the mere fact that there was this large quantity of tiles to be given to the dubash under the contract which he was not going to use for building but was going to retail must have an, effect on the market. It may and indeed must be to the disadvantage of his principals who wished to handle that market. It follows that this appeal must be dismissed. We allow two sets of costs.

(2.) I wish to add that I am not satisfied that, even if Section 215 would afford any answer to the dubash if he had brought an action and this plea was put in issue as defence, a similar benefit would accrue to the plaintiff who was not in fact agent for either of the defendants. Wallace, J.

(3.) I agree. I just wish to give shortly in my own words why I do not agree with the interpretation which the learned Advocate-General wishes us to put on Section 215 of the Contract Act. He asks us to say that the "material fact", the dishonest concealment of which by the agent enables the principal to repudiate, is a fact other than the agent's dealing in the business of the agency on his own account. This implies that the agent would be entitled not only to conceal, but also to dishonestly conceal, that fact. I am confident that the section cannot be so interpreted. It no doubt differs from the English law in that under Section 215 mere concealment of the fact that the agent is dealing in the business of the agency on his own account is not in itselt dishonest, and will not of itself enable the principal to repudiate; and that proposition in my opinion is indicated by illustration (a) to the section. But where the concealment has been dishonest am confident that such dishonesty is not rendered lawful by this section, but carries with it the usual effect of dishonesty or fraud upon the contract and renders it voidable. I am clear that the section cannot be used to render lawful actual dishonesty on the part of an agent. Whether in any particular case the concealment of this material fact was dishonest of course has to be decided on the facts of the case itself. So that the sole question in this appeal, I think is whether the concealment by Balakrishna Mudaliar that he and the plaintiff Achutha Naidu were the same person was dishonest. I think that the action of Balakrishna Mudaliar (which has not been defended by the learned Advocate-General before us), as set forth by the learned judge in his judgment and the evidence and the subsequent conduct of Oakley Bowden show that the concealment in this case was dishonest. The agent concealed from his principal the fact that he was dealing himself in the business of the agency in order to obtain for himself a wrongful gain, that is to say, a gain which he knew he would not; have got had he disclosed the fact honestly to his principal. I agree therefore that the appeal should be dismissed with 2 sets of costs.