VADILAL SARABHAI Vs. MANEKJI PESTONJI BHARUCHA

JUDGEMENT

(1.) This is an appeal from the decision of Kajiji J. who passed a decree in favour of the plaintiffs against all the three defendants.

(2.) The principal facts are not in. dispute. Plaintiff 1 is a certified broker. Plaintiff 2 is said to be a sub-broker working under him. It is not clear what the term sub- broker implies. There appears to have been some sort of arrangement between plaintiff 1 and plaintiff 2 that plaintiff 2 should induce business on behalf of plaintiff 1 and should obtain remuneration in the shape of a share in the brokerage for such business, but it is not disputed that in this case plaintiff No. 2 conducted the business in his own name. In my opinion the term sub-broker should not be used as it has no legal significance and may only lead to confusion of ideas. The learned Judge says that it is a fact of which even judicial notice can be taken that where a sub-broker issues contracts in his own name and the head broker allows him to do so, the party dealing with the sub-broker always looks to the sub-broker for the performance of the contract. With due respect I cannot agree. The terms head- broker and sub-broker may or may not be a convenient method of expressing the relationship between plaintiff 1 and plaintiff 2, but it is inadvisable to introduce into legal language terms which require explanation when the ordinary terms will suffice. Plaintiff 2 may have been the agent of plaintiff 1 to enter into contract in his behalf, or he may have been an employee of plaintiff 1 so that the law of principal and agent, or master and servant, respectively, would be applicable. As the plaintiff 2 entered into contracts in his own name, it would depend upon evidence whether he was acting on his own behalf or on behalf of an undisclosed principal or on behalf of a principal whose name was given to the other contracting party, and consequently on the facts proved the rights and liabilities of the various parties would have to be decided. I cannot see myself what interest plaintiff 1 had in this suit except to sue on Gora's cheque, unless it can be said that plaintiff 2 was acting as the agent of plaintiff 1. It was plaintiff 2 who contracted in March 1920 to sell 150 shares in Alcock, Ashdown & Co., Ltd., to the first defendant Esmail Gora, a certified broker. Plaintiff 2 was not a certified broker and so we are not concerned with any terms which may be implied in a contract between certified brokers. In all the transactions in suit the parties acted as principals and not on behalf of clients. In pursuance of his contract plaintiff 2 handed over to Gora, on April 14, being payment day, certificates for 129 shares with their respective transfer forms signed in blank by the registered share-holders. The amount to be paid according to the rules, on that day was Rs. 1,54,800, and at about 8 P. M. Gora handed to plaintiff 2 a cheque for that amount drawn in favour of plaintiff 1. The cheque was dishonoured on presentation the next day.

(3.) It will now be necessary to consider what were the dealings of Gora in shares in Alcock Ashdown & Co. for the April settlement. He had been bulling the market, buying largely from defendants 2 and others. Exhibit 5 at page 1, Part III, is his account with defendants 2. Between February 13 a March, 9, he had bought 460 shares, though Manilal said he had bought 463, at prices ranging from Rs. 1305 to 1505 of which thirty-one were sold before April 14. He took delivery on the 14 of 3oH shares, and gave a cheque for Rs. 4,41,600 at Rs. 1200 per share, the rate fixed by the Association on payment day. The final adjustment was to take place on April 17 when a very considerable amount more would have to be paid to defendants 2 on the 368 shares, apart from what was due for differences on the shares of which delivery was not taken and on other accounts. In addition to the 368 shares, Gora had obtained 129 from the plaintiff 2, 56 from one Dave to whom he had given a cheque for Rs 67,200, and 16 from other sources making a total of 569 shares. He delivered 264 to one Nemchand, receiving a cheque from him for Rs. 3,16,800 at Rs. 1200 per share. Out of the 264 shares 25 shares were part of the 129 he had received from plaintiff 2, Gora thus had 305 shares left with him of which 104 had come from plaintiff 2. His position was then desperate. Apart from other liabilities he had issued cheques on the 14 for Rs. 4,41,600, Rs. 1,54,800 and Rs. 67,200 a total of Re. 6,63,600 which he could not hope to meet unless he realised the full value on the 305 shares. His own story is as follows. On April 15, he went with Nemchand's cheque for Rs. 3,16,800 and the 305 shares to the Bank of India. Whilst waiting to receive payment for the cheque he saw Manilal, a partner in defendant 2's firm. He explained his difficulties to Manilal, who said he had a friend who would advance money on the 305 shares at Rs. 1200. Gora gave Manilal the 3,16,800 rupees which he got for the cheque of Nemchand, and the 305 shares, in order that he might arrange the loan. Manilal knew the amounts of the cheques given to plaintiff 2 and Dave which had to be met. Gora met Manilal again in the evening at Manilal's residence when according to him he was asked to sign two documents which he did without reading them. One was a document of pledge, the other a promissory note for Rs. 3,50,000, Exs. M and N. Both were made out in the name of Maganlal C. Ghia whom up to that time Gora had neither Been nor heard of. The pledge document referred to three cheques for Rs. 1,24,800, Rs. 75,200 and Rs. 1,50,000 as having been received by Gora hut as a matter of fact no cheques were given to him. It certainly seems extra-ordinary that Gora should have left without receiving any of the money, of which he was so urgently in need, in exchange for the 365 shares. On the 17 he received a letter dated the 16th, Ex. V, from Mr. Kanuga, a pleader practicing at the Police Courts, purporting to act on behalf of Ghia. It alleged that Gora had already received two cheques from Ghia aggregating Rs. 2,00,000 but as his client had then received information which made him apprehensive that there would be a difficulty in getting the pledged shares transferred to his name, he had told Gora he would not pay the balance of Rs. 1,50,000 until the shares were transferred to his name. Gora was, therefore, to co-operate in getting the shares transferred. On the 19 Messrs. Soonderdas & Co. wrote a reply on behalf of Gora, Ex. 5, stating that the transaction referred to had not been correctly represented and asked for inspection of the writing and the two cheques. On the 16 Gora had written two letters for plaintiff 2 and Dave to deliver to Manilal, asking him to give cheques to plaintiff 2 and Dave for sums of Rs. 1,54,800 and Rs. 67,200 respectively. Exhibit D is the letter in respect of the cheque to be given to plaintiff 2. Manilal admitted he had received these letters asking for cheques : see page 94. Plaintiff 2 and Dave told Gora that Manilal had promised to pay them when the Bazar closed, buteventually when he heard the cheques had not been given he went to the office of defendants 2 where there was a meeting, at which Mr. Devidas, a partner in the firm of Motichand and Devidas, who had acted generally as Gora's solicitors, was present. After a long discussion no arrangement was arrived at. The following is the note in Mr. Devidas's diary: 16 April. Attending with Esmail Gora at the residence of Mr. Mohanlal, having a long interview. Matter could not be amicably settled. Engaged three hours at night.