March 16,

780 SUPREME COURT REPOR'fS (1953)

ATHERTON WEST & CO. T, TD.

SUTI MILL MAZDOOR UNION AND OTHERS.

[MEHR CtHND MiUHJAN and BHAGWATI JJ.]

U. P. lndl!strial Disputes Act, 1947, ss. 3, 8-U. P. Government Notification No. 781 (L}!XVIII of March 10, 1948, els. 4, 7, 28-Dismissal of 1.uoikrnen with permission of Regional Gonciliati011 0.(/icer-Jl!risdiction of Board to hear the dispute-TVhether dispute ceases to be an industrial dispnte-Award of Board-Abse10ce of one member dl!ring /waring- Validity of award.,

Under bhe provisions of clauses 4 and 7 (3) of Notification No. 781 (L)/XVIII issued by the United Provinces Government on

farch 10, 1948, the absence of ol)e of the members of the Regional Conciliation Board on the last date of hearing and his nonparticipation iri the making and signing of the award woulcl not render the award void or inoperative.

The dismissal of workmen and their non-employment would not cease to be an industrial dispute merely because the Regional Conciliation Officer had given written permission to the employer to dismiss them under clause 23 of the T:.P. Government Notification of farch 10, 1948. Such permission does not Yalidate the <lismissal but only removes the ban on the right of the employer, bis agent or manager to dismiss the \\'orkmen concerned during the pendency of proceedings relating to an industrial dispute.

CIVIL ArrELLA1'E JURISDICTION: Civil Appeal No. 8 of 1953.

Appeal by special leave from the decision dated 16th August, 1951, of he Labour Appellate 'l'ribunal of India, Calcutta, in Appeal No. 43 of 1951 (Cal.).

0. K. Daphtary, Solicitor-General for India, (Sri Nrirain Andley, with him) for the appellant.

0. P. Vnr1na for the respondent.

1953.

March 16. The Judgment of the Court was delivered by

BHAG\l'A1'I J.-This is an appeal by special leave from a decision of the [Jabour Appellate Tribunal of India, Calcutta, confirming an award made by the Regional Conciliation Board (Textiles & Hosiery), Kanpur, in an industrial dispute between the appellants and the respondents, ·

s.c.R.

SUPREME OOLiRT REPOR'rs 781

The' respondents 2. 3 and 4 were employees of the 1953 appellants, respondent 2 was employed in the - 1 ' l d h' l d 3 d 4 Athsrton West <l) c enca ca re w 1 e respon ents , an were em- 0 Ltd ployed as wrapping boy and piecer respectively and ".. their service conditions were governed by the stand- Si.ti Mill ing orders of the Employers' Association of Northern l1fozdoor Union India, Kanpur, of which association the appellants and Othm. were members.

Bhay11)ati J. There was a theft in the canteen within the mill premises between the night of January 6 and 7, 1950, and some money belonging to the appellants invested iu the canteen account was stolen from the safe.

A report of the theft was made to the police authorities and an investigation was made by the police as well as the appellants in the matter with no result.

The management of the appellants thereafter took action against one J. P. Gurjar, who was in charge of the canteen in connection with the losses of money from the account of the canteen and after the completion of the enquiries terminated his services.

An industrial dispute in respect of the non-employment of the said .J. P. Gurjar arose between the parties which dispute was at the material time taken in appeal before the Industrial Court (Textiles & Hosiery), Kanpur.

During the pendency of those proceedings, some time in August, 1950, the respondent 4 made a confession in regard to the said theft implicating the respondents 2 and 3 also therein.

On the 29th August, 1950, the management of the appellants presented to the respondents 2, 3 and 4 c]large-sheets in respect of the said theft and suspended them on the 30th August, 1950, from their senice. They also made an application on the 2nd September, 1950, to the Additional Regional Conciliation Officer, Kanpur, asking for permission to dismiss the respondents 2, 3 and 4.

'rhe Additional Regional Conciliation Officer, Kanpur, instituted an enquiry, heard the respondents 2, 3 and 4, considered the evidence which was led before him by the appellants as well as the respondents 2, 3 and 4 and made an order on the 12th October, 1950, according to the appellantA permission for the dismisrnl of the

782 SUPREME COURT REPOR'fS [i953J

1953 respondents 2, 3 and 4.

The respondel'lts 2, 3 and 4

Ath t-w t , were accordingly dismissed from _their employ bv the er on es u. • .. co. Ltd. appell:a.nts with effect from the 13th October, 1950.

v. .

An industrial dispute thereupon arose between the 8a"1' vfu, u appellants and respondents 2, 3 and 4 in respect of the Maz oor nion • d d 4 d d a dOth•,.,. non-employmentot respon ents2,3au an respon - n ent l, a registered trade union, of which the respond-

Bhagwoti J. en ts 2, 3 and 4 were . members, ultimately-moved the_ Regional Conciliation Board ('1 1extiles and Hosiery), Kanpur, ou the 1st November, 1950, challenging the propriety and bona fides of the appellants in terminating the services of respondents 2, 3 and 4.

The appellants filed their written statement on the 25th November, 1950, contending inter alia that the dismissal was fully justified, regular and proper, having been made in accordance with the permission accorded by the Additional Regional Conciliation Officer. 'fhe only issue which was canvassed before the Regional Conciliation Board was whether any or all of the three workmen named in the application dated the 1st November, 1950, hits/have been wrongfully dismissed and if so, to what relief is he/they entitled.

The Board consisted of three members, Shri R. P.

Maheshwari, CJiairman, and Shri B. B. Singh and Shri J. K. Bhagat, Members.

Shri J. K. Bhagat was not present on the last date of the hearing and the award was therefore signed on the 20th April, 1951, by Shri R. P. Maheshwari and Shri B. B. Singh.

Under the terms of the award the Board held that the dismissal was wron.ful and that the respondents 2, 3 and 4 were entitled to reinstatement as also to the full wages, including dearness allowance from the date of their suspension to the date they were taken back on duty.

The appellants preferred an appeal to the Labour Appellate 'l'ribunal of India, Calcutta.

The appeal was heard on the 16th August, 1951, and the Labour Appellate Tribunal dismissed the appeal of the appellants. The appellants obtained special leave from this Court and filed the present appeal.

Two conte:etions were urged by Shri C. K. DaphwoB tary who appeared for the appellants before us-(1) - h . h d d d · Athe..ton West .t t at t e a.war was vo1 an moperat1ve as it was Co. Ltd. made by only two members of the Board, the third, v. member, Shri J. K. Bhagat not having been present Snti Mill at the last hearing and not having signed the same Mazdoor Union

and (2) that the Additional Regional Conciliation and Others.

Officer having given the written permission for dis- BhagwatiJ. missal of repondents 2, 3 and 4 no industrial dispute could arise by reason of the non-employment of respondents 2, 3 and 4 and the Regional Conciliation Board had therefore no jurisdiction to entertain the application made before it by respondent 1 on behalf of the respondents 2, 3 and 4 and the award of the Regional Conciliation Board ordering the reinstatement of respondents 2, 3 and 4 was therefore without jurisdiction, void and inoperative and the Labour Appellate Tribunal was in error in confirming the same.

In support of his first contention Shri C. K. Daphtary relied upon clause 4 and clause 7, sub-clause (3) of the G. N. No. 781 (L)/XVIII, dated 10th March, 1948, issued by the United Provinces Government regarding the constitution of Regional Conciliation Boards and Industrial Courts for the settlement of industrial disputes within the State.

Clause 4-" No business may be transacted at any meeting of any Board unless all the three members are present 'I.

Clause 7 (3)-" Where no amicable settlement can be reached on one or more issues the Board, if all the members thereof agree or if they do not so agree, the majority of the members agreeing or if no two members agree, the Chairman alone, shall record an award and the reasons for such award, on the issues on which the parties were unable to reach an amicable settlement."

Shri C. K. Daphtuy therefore urged that Shri J. K. Bhagat not having been present at the last meeting of the Board and not having signed the

19sa award the award could not be lawfully made by the -- Chairman and the other member who were present

Atherto•~est & and who signed the award and the award was therefore 0\. . void and inoperative.

Shri c._ P.

Varma who

suti Mill represented the respondent 1 before us however drew Mazdoo,. Unioii our attention to the Government Order No. 388(11)/ and Others.

XVIII/37 (LL) /50 dated 2nd March, 1051, which amended the abol'e clauses 4 and 7(3).

Bhagwati J. , Clause 4 as amended provides:- " (1) Notice of every meeting of the Board shall be given to the members by the ChairmBn in advance.

(2) If apart from the Chairman either or both the other members fail to attend any meeting of the Board of which notice has been given to them, the Chairman may transact the business of the Board without the presence of the absent member or members; and no such business or proceedings of the Board shall be held invalid merely by reason of the fact that either one or both of the members were not present at the meeting."

Clause 7 (3) as amended provides: - "Where no amicable settlement can be reached on one or more issues, if all the members present agree the Board or if they do not so agree the majority of the members agreeing or if no two rnembero present agree or if only the Chairman is present, he alone, shall record an award and the reasons for such award on the issues on which the parties were unable to reach an amicable settlement." ' 'fhese amendments in the 'clauses 4 and 7 (3) are enough in onr opinion to repel the contention of Shri C. K. Daphtary that the absence of Shri J. K.

Bhagat from the last meeting and also his non-participation in the making and signing of the award rendered the award void and inoperatiYe. 'l'he Board was empowered under the amended clauses 4 and 7(3) to act in the absence of Shri J. R. Bhagat and the award 11s it was made and signed by the two remaining members, viz., Sbri R. P. Maheshwari and Shri B. B. Singh, was lawful and binding on the partie~.

In support of his second contention Shri C. K. 1968 Daphtary relied upon clauses 23 and 24 of the Govern-A'h -m

N 'fi d • eiton '"st <! ment ot1 cat10n ated the 10th March, 1948, above 00• Ltd. referred to. v.

Clause 23 :-" Sa, ve with the written permission of " Sduti Mum th R '

] C ']' 0"" h

A . maz oor nion e eg10na onm iat1on 111cer or t e ss1Stant and Others.

Regional Conciliation Officer concerned irrespective of the fact whether an enquiry is pending before a Bhagwati J.

Regio-nal Conciliation Hoard or the Provincial Conciliation 13oara or an appeal has been filed before the ..

Industrial Court, no employer, his agent or manager, shall discharge or dismiss any workmen during the continuance of an enquiry or appeal and pending the

issue of the orders of the State Government upon the findings of the said Court ......... "

Clause 24 :-"(1) Except as hereinbefore provided every order made or direction issued under the provisions of this Order shall be final and conclusive and shall not be questioned by any party thereto in any proceeding ......... "

Shri C. K. Daphtary contended that the order made by the Additional Regional Conciliation Officer on the 12th October, 1950, giving the appellants permission to dismiss respondents 2, 3 and 4 was final and conclusive in regard to the appellants' right to dismiss them from their employ and their dismissal accordingly by the appellants could not be the foundation of any industrial dispute which could be referred to the Regional Conciliation Board at the instance of respondent 1.

He further contended that if no industrial dispute could thus arise the Regional Conciliation Board had no jurisdiction to entertain the same and the award made by the Board was therefore without jurisdiction, void and inoperative and could not also be con firmed by the Tabour Appellate Tribunal.

We are unable to accept this contention.

The Government Notification dated 10th March, 1948, was issued by the Governor of the United Provinces

in e)l:ercise of the powers conferred by cla, uses (b), (c),

(d) and (g) of section 3 and section 8 of the -w & United Provinces Industrial Disputes Act, 1947. It Athorton est provided for the constitution by the Provincial Co. Ltd. b v.

Government of such num er of Conciliation Boards

suti Mill as might be deemed necessary for the settlement of M•zdoor Union industrial disputes consisting of three members of

.,.a Others. which one was to he the Conciliation Officer for the

B' -t. J area; one was to be representative of the employers ,, agwa • • b h . f k and one was to e t e representative o wor men, the Conciliation Officer for the area being the .Chairman of the Board. '1 1he order provided for the mode in which industrial disputes may be referred to the Board for enquiry and the manner in which the enquiry was to be conduc, ed. It also provided for the constitution by the Provincial Government of such number of Industrial Courts as it might be necessary consisting of a President assisted by such equal number of assessors as the .President might determine representing employers and employees.

Provision was made for appeals to such Industrial Courts from the awards of the Board and also for the hearing of the said appeals.

After making further provision for the procedure to be adopted before the Boards as well a.s the Industrial Courts, the Order by clause 23. above mentioned imposed a ban ou the discli.arge or dismissal of any workman by the employer, his agent or manager during the pe':l.- dency of an enquir1' before the Regional Conciliation Board or the Provincial Conciliation Board or of an . appeal before the Industrial Court except with the written permission of the Regional Conciliation Officer or the Assistant Regional Conciliation Officer concerned and by clause 24 made every order or direction issued under the provisions of the said Government Order final and conclusive except as thereinbefore provided.

It is clear that clause 23 imposed a ban on the discharge or dismissal of any workman pending the enquiry of an industrial dispute before the Board or an appeal before the Industrial Court and the employer, his agent or manager could only discharge or dismiss

S.C.R.

SUPREME COURT REPOR'fS 787

the workman with the written permission of the 1968 Regional Conciliation Officer or the Assistant Regio- 41 1- 11_ ~

1 C 1 .

Offi d E . f h. /<Cr on est na onc1 1at10n cer concerne . ven 1 sue 00• Ltd. written permission was forthcoming the employer, his v. agent or manager might or might not discharge or Suti Mill dismiss the workman and the only effect of such Mazdoor Union written permission would be to remove the ban and Others. against the discharge or dismissal of the workman Bhagwati J. during the pendency of those proceedings.

The Regional Conciliation Officer or the Assistant Hegional Conciliation Officer concerned would institute an enquiry and come to the conclusion whether there was a prima facie case made out for the discharge or dismiss:i.l of the workman and the employer, his agent or manager was not actuated by any improper motives or did not resort to any unfair practice or victimisation in the matter of the proposed discharge or dismiss9'1 of the workman.

But he was not entrusted, as the Board or the Industrial Court would be, with the duty of coming to the conclusion whether the discharge or dismissal of the workman during the pendency of the proceedings was within the rights of the employer, his agent or manager.

The enquiry to be conducted by the Regional Conciliation Offier or the Assistant Regional Conciliation Officer concerned was not an enquiry into an industrial dispute as to the non-employment of the workman who was sought to be discharged or dismissed, which industrial dispute would only arise after an employer, his agent or manager discharged or dismissed the workman in accordance with the written permission obtained from the officer concerned. l'his was the only scope of the enquiry before the Regional Conciliation Officer or the Assistant Regional Conciliation Officer concerned and the effect of the written permission was not to validate the discharge or dismissal but merely to remove the ban on the powers of the employer, his agent or manager to discharge or dismiss the workman during the pendency of the proceedings.

Once such written permission wa, s granted by him, tha, t

10•

1953 order made or direction issued by him w.as to be final - , and conclusive and was not to be questioned by any Atherton West d' 'h l ff f

00. Ltd. party thereto Ill any procee mgs. 1 e on y e ect o v. clause 24(1) was to prevent any party to the pending

Suti Mill proceedings from challenging the written permission Mazdoor Union thus granted by the officer concerned.

Such written and Others. permission could not be made the subject-matter of

Bhaawati J. any appeal at the instance of either party and both the parties would be bound by the order made or direction issued by the officer concerned so far as it gave or refused the permission to the employer, his agent or man11ger in the matter of the proposed discharge or dismissal of the workman.

This was the only scope of the provisions of clauses 23 and 24 (1) above mentioned.

Once the written permission was granted by the officer concerned, the ban against the discharge or dismissal of the workman would be removed and the employer, his agent or manager could in the exercise of his discretion discharge or dismiss the workman but in that event an industrial dispute within the meaning of its definition contained in section 2(k) of the Industrial Disputes Act, 1947, would arise and the workmen who bad btlen discharged or dismissed would be entitled to have that industrial dispute referred to the Region:1l Conciliation Board for enquiry into the same.

That right 9f the workman to raise an industrial dispute could not be taken away in the manner suggested by

Shri C. K. Daphtary by having resort to the provisions of clauses 23 and 24(1) aforesaid. That right \1:as given to the workman by the terms of the Industrial Disputes Act, 1947, and the U.P. Industrial Disputes Act, XXVIII of 1947, and woulii remain unaffected by any of the provisions hereinbefore referred to.

We are therefore of the opinion that this contention of Sbri C. K. Daphtary also fails.

\Ve may before concluding advert to one circumstance and that is that even though the Labour

App111late Tribunal rightly confined its jurisdicti•m to

determining substantial questions of law involved in 1958 the appeal, it nevertheless observed that even on the Atl t-w t , f . ier on es °' :octs the conclus10ns of the Board were perfectly

00. Ltd. justified and there was no substance in the appeal on v. merits as well.

The appellants were not heard at all suti Mill on merits and it was hardly legitimate for the Labour M•zdoor Union Appellate Tribunal sito motu to consider the merits of •nd Others. the appeal and arrive at a finding in regard to the Bhagwati J. same. If at all the Labour Appellate Tribunal had any jurisdiction in regard to the merits it was incum- •. beut upon it to have heard the appellants in regard to the merits before arriving at a conclusion in regard to the same.

The resuH is that this appeal fails and must be dismissed with costs.

Appeal dismissed .

• Agent for the appellant : S. S. Shukla ..

'rROJAN & CO. LTD. v.

RM. N. N. NAGAPPA CHETTIAR. [MEHR CHAND MAHA.TAN and DAS JJ.]

Contract-Damages-Sale of shares-Sale induced by fra11d- Jleas11re of damages-Di(ference between price paid and market price on date of sale-Fluctuations of market and sudden closure of Stock Exchange, effect of-Interest on damaues-Practice-Gonflict between pleadings and proof-Decree on alternative claim not set itp

in plaint-Legality.

Where a person is induced to l)Urchase shares at a certain price by fraud the measure of damages which he is entitled to re cover from the seller is the difference between the price which he paid for the shares and the real price of the shares on the date on which the shares were purchased.

Ordinarily the m"rket rate of the shares on the elate when the fraud was practised would represent their real price in tbe absence of any other circumstance.

If, however, the market was vitiated or was in a state of !lux or

1953)

ATHERTON WEST & CO. T,

SUTI MILL MAZDOOR UNION AND OTHERS

BHAGWATI JJ.

Disputes Act, 1947

ss. 3, 8

clause 23

farch 10, 1948

K. Daphtary

Nrirain Andley

P. Vnr1na

January 6 and 7, 1950

J. P. Gurjar

.J. P. Gurjar

29th August, 1950

30th August, 1950

2nd September, 1950

Kanpur

12th October, 1950

'rhe Additional Regional Conciliation Officer, Kanpur, instituted an enquiry, heard the respondents 2, 3 and 4, considered the evidence which was led before him by the appellants as well as the respondents 2, 3 and 4 and made an order on the 12th October, 1950, according to the appellantA permission for the dismisrnl of the

1953 respondents 2, 3 and 4.

Bhagwoti

25th November, 1950

1st November, 1950

R. P.

Maheshwari

CJiairman

B. B. Singh

J. K. Bhagat

20th April, 1951

R. P. Maheshwari

l'ribunal of India

16th August, 1951

C. K. DaphwoB tary

J. K. Bhagat

C. K. Daphtary

clause 4

clause 7

10th March, 1948

United Provinces Government

Clause 4

Clause 7

C. K. Daphtuy

c._ P.

Varma

Mazdoo

Bhagwati

Clause 4

Clause 7

J. K.

Bhagat

J. R. Bhagat

Clause 23

Clause 24

Tabour Appellate Tribunal

section 3

section 8

clause 23

clause 24

clause 23

clause 24(1)

Bhaawati

section 2(k)

Industrial Disputes Act, 1947

Industrial Disputes Act, 1947

Industrial Disputes Act

S. S. Shukla

MEHR CHAND MAHA.TAN


S.C.R.

SUPREME COURT REPORTS 789

determining substantial questions of law involved in 1958 the appeal, it nevertheless observed that even on the Atl t-w t , f . ier on es °' :octs the conclus10ns of the Board were perfectly

00. Ltd. justified and there was no substance in the appeal on v. merits as well.

The appellants were not heard at all suti Mill on merits and it was hardly legitimate for the Labour M•zdoor Union Appellate Tribunal sito motu to consider the merits of •nd Others. the appeal and arrive at a finding in regard to the Bhagwati J. same. If at all the Labour Appellate Tribunal had any jurisdiction in regard to the merits it was incum- •. beut upon it to have heard the appellants in regard to the merits before arriving at a conclusion in regard to the same.

The resuH is that this appeal fails and must be dismissed with costs.

Appeal dismissed .

• Agent for the appellant : S. S. Shukla ..

'rROJAN & CO. LTD. v.

RM. N. N. NAGAPPA CHETTIAR. [MEHR CHAND MAHA.TAN and DAS JJ.]

Contract-Damages-Sale of shares-Sale induced by fra11d- Jleas11re of damages-Di(ference between price paid and market price on date of sale-Fluctuations of market and sudden closure of Stock Exchange, effect of-Interest on damaues-Practice-Gonflict between pleadings and proof-Decree on alternative claim not set itp

in plaint-Legality.

Where a person is induced to l)Urchase shares at a certain price by fraud the measure of damages which he is entitled to re cover from the seller is the difference between the price which he paid for the shares and the real price of the shares on the date on which the shares were purchased.

Ordinarily the m"rket rate of the shares on the elate when the fraud was practised would represent their real price in tbe absence of any other circumstance.

If, however, the market was vitiated or was in a state of !lux or

Trojan tf; Co.

Ltd.

V, Rm.N.N.

Nagrtppa Chettiar.

790 SUPREME COURT REl'ORTS [1953]

p•nic in consequence of the very fact tha.t wa~ fraudulently concealed, then the real value of the share~ has to be determined on a consideration of a variety of circumstances, disclosed by the evidence led by the parties.

A firm of sharebrokers sold 3,000 shares to the plaintiff who was a constituent of the firm, on the 5th AJ(ril, 1937, at Rs. 77 and Rs. 77-4as. per sb'"e without disclosing to the plaintiff the fact that the shares were owned by one of the partners of the firm and also the fact that they had received telephonic information on that day from a member of the Stock Exchange that there was going to be a sharp decline in the price of the shares. On the 6th April the Stock Exchange Association passed a resolution for closing the Exchange on the 8th and 9th April.

The plaintiff had to sell 2,000 shares through the defendants on the 20th April at Rs. 47 to Rs. 42 per share, and 1,000 shares on the 22nd April at Rs. 42- Sas.

The High Court awarded f.he difference between the price paid by the plaintiff and the prices fetched on resale as damages.

On appeal, Held, that the prices received at the resale on the 20th and 22nd April coul 0d not represent the true value of the shares on the 5th April.

The real question for determination was what the market value would have been on the 5th April of these shares if all the buyers and sellers knew that the Stock Exchange was to be closed on the 8th and 9th April.

Held also that the plaintiff was entitled to get interest on the amount awarded as damages from the 5th April till the date of suit on the principle that where money is obtained or retained by fraud a court of equity will order it to be returned with interest.

Johnson v. Rex {[1904] A.O. 817) referred to.

It is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and that it is the case pleaded that has to be found.

Where the plaintiff based his claim for a certain sum of money on the ground that the defer:dants had sold certain shares belonging to him '>vithout his instructions, but he was not able to prove that the sale was not authorised by him: Held, reversing the deci,, ion of the High Court, that ohe plaintiff could not be given a decree for the SU)Il claimed on the ground of failure of consideration, as he had not set up any such alternative claim in the plaint or even at a later stage when he sought to amend the plaint.

OrvIL APPELLATE JunISDICTION: Orvil Appeal No. 139 of 1952.

Appeal from the Judgment and Decree dated the 17th March, 1950, of the High Court of Judicature at Madras (Horwill and Balakrishna Ayyar JJ.) in 0.8.A. No. 34 of 1947, arising out of

the Judgment' and Decree dated the 18th April, 1'947,

of the said High Court (Clark J.) in the exercise of tbe Ordinary Original Civil Jurisdiction of the High

Court in C. S. No. 208 of 1940.

V. Rangachari (K. Mangachary, with him) for the appellant.

K. Krishnaswami Iyengar (K. Pa:rasuram, with him) for the respondent.

1953.

March 20. l'he Judgment of the Court was delivered. by .

MAHAJAN J.-The dispute in this appeal is between a constituent and a firm of stock-brokers. Some time before April, 1936, the plaintiff, then a young man, came into possession of property worth about 2 lakhs of rupees on a partition between him and bis brothers.

In the hope of getting rich by obtaining quick dividends by speculating on the stock-exchange he, through tbe defendant firm and certain other stockholders, entered into a series .of speculative transactions and it seems he did not fare badly in the beginning. But subsequent events tell a different tale.

In 1937, two iron and steel companies in North India, viz., Indian Iron & Steel Co. Ltd., and the Bengal Iron & Steel Co. Ltd., merged into one concern and a new issue of shares was made. 'rhe scheme was that for every five shares which a person held in the Indian Iron Co. Ltd. on 22nd April, 1937, one fully paid up share would be given to him at a price of Rs. 25. 'rhe market price at the time this scheme was announced was about Rs. 55 per share. A wave of speculation followed this announcement and there was a boom iu the market.

Prices of Indian Iron shares were going up to unreal heights. To stabilize the situation thus created by heavy speculation, three members of the Committee of the Calcutta Stock

Exchange presented a petition to the Committee on 5th April, 1937, to close the Calcutta. Stock Exchange

Trojan & Co.

Ltd. v, R1n. N.N.

Nagap11a Chettiar.

woa for a while.

On the same evening plaintiff's stockbroker Annamalai Chettiar, who was carrying on Trojan rJ; Co. business in firm name •rroJau & Co., had elephonic Ltd. v conversation with one Ramdev Chokani, a member oi Rm. N. N. the Calcutta Stock Exchange, on this subject and from Nagappa this conversation he gathered that a sharp fall in the Ch•ttiar. prices of Indian Irons was likely.

At that time

Mahajan J.

Annamalai Chettiar had on bis hands some 5,000 of these shares. Shortly after this conversation and after business hours the same night, between the hours of 7-30 and 8-30, Annamalai Chettiar rang up the plaintiff and suggested to him that it would be a good thing for him to buy these shares.

The youthful plaintiff in his anxiety to get rich quickly accepted the suggestion and purchased these shares, some at Rs. 77 and others at Rs. 77-4-0.

Another firm of brokers, Ramlal & Co., had also in their hands another 4,000 of these shares. They too found in the plaintiff a ready buyer. They also contacted him on the phone after Annamalai had done so, and sold him 4,000 shares that they held.

Out of the lot which the plaintiff purchased from the defendants he sold 1,300 shares to Ramanathan Chetti at cost price.

Ou the 6th April tbQ Committee of the Calcutta Stock Exchange Association passed a resolution closing the Siock Exchange on the 8th and 9th April.

From the 6th April onwards the market sagged and the prices came down, at first gradually and then literally at a ruu. The result of it was that the plaintiff had to sell at a very heavy loss.

The defendants made demands on the plaintiff for the price of those shares.

Between 5th April and 20th April, 19.37, he made payments to defendants of various amounts totalling Hs. 60,000.

A lot of 700 shares was sold by the plaintiff to Pilani & Co. and on 19th April, 1937, be instructed the deiendants for sale of the remaining 3,000 shares at the best price obtainable. 'fhe defend1wts sold 2,000 shares on 20th April, 1937, for prices ranging between Rs. 47-4-0 to

Rs. 44-12-0 per share.

The remaining 1,000 shares were sold by him through Messrs. Hamlal & Co. at Rs. 42-8-0 per share on 22nd April, 1937. The result of it was that on 22nd May, 1937, when the :i.ccounts between the plaintiff and the defendants were. settled it was found that plaintiff was heavily indebted to them in the sum of Hs. 51,712-7-0 and the credit balance of Hs. 64,000 that he had with the defendants at the end of March, 1907, had been wiped off.

For the amount found due he passed a promissory note in favour of defendants, Exhibit P-33. After giving credit for payments received on the promissory note the defendants filed a suit against him (O.S. 150 of

1937) on the Original Side of the Madras High Court and obtained an ex parte interim order for attachment before judgment and attached plaintiff's movable and immovable properties at Madras, and also at Kottaiyur in Hamnad district.

Owing to the attachment proceedings the firm of Ramlal & Co. filed a petition for adjudication of the plaintiff as an insolvent. On 22nd

September, 1937, Trojan & Co. also filed a petition for the same relief. An order adjudicating the plaintiff an insolvent was made by the High Court on 5th October, 1937, on the petition of Hamlal & Co.

In the course of the insolvency proceedings defendants tendered proof of their claim ou the promissory note, Exhibit P-33.

The Official Assignee having acquired knowledge about the telephonic conversation that had passed between Annamalai Chettiar and

Hamdev Chokani on the evening of the 5th April, 1937, came to the conclusion that the. insolvent had been a victim of a fraud perpetrated by the defendants and dismissed their claim. Defendants-firm was guilty of fraud both in respect of the failure to disclose the fact that the Indian Iron shares or most of them belonged to one of its partners, Annamalai Chettiar, and also on account of the failure ou its part to disclose its knowledge of the likelihood of a slump in the market because of the notice given by its members ~Q close the Stock Exchange.

Trojan & Go. ltd. v.

Rm.N. N.

Nagappa Chettiar.

Mahajan. J.

794 SUPREME OOUR'r REPORTS [19531

Tro}an,, f; Co.

On an application made to the High Court against the order of the Official Assignee it was set aside by Mockett J. and he directed that the claim of the defendants be disposed of on a court motion, the claim being heard as if it were a suit. In pursuance of this direction Trojan and Co. on 2Uth September, 1938, filed an application in the High Court, No. 313 of 1938.

I'he Official Assignee representing the estate of the plaintiff denied its liability on the promissory note on the ground of fraud. On 15th March, 1940, Somayya J. dismissed the claim of the defendants.

He held the defendants-firm guilty of fraud in both respects. From this there was an appeal which was dismissed on 12th August, 1942.

The defendants applied for leave to appeal to His Majesty in Council but leave was refused.

Defendants then applied to the Privy Council for special leave and that application was also dismissed some time in October, 1943.

Ltd. v.

Rm. N. N.

Nagappa Chettiar.

Mahajan J.

On the 28th September, 1940, when the appea.l from the decision of Somayya J. was still pending, the Official Assignee as representing the estate of the plaintiff filed the suit out of which this appeal arises against Trojan & Co. for an account of the transactions between himself as principal a, nd the defendants as agents and claiming damages for loss sustained by him and for various other reliefs.

The suit embraced in particular claims in respect of four transactions. The first related to the 5,000 Indian Iron shares. 'fhe second referred to a trans:;, ction of As.sociated Cements. On 22nd March, 1937, the plaintiff bad sold through the defendants 50 shares in Associated Cements at Hs. 180-8-0 per share. On 30th March, 1937, he h:1d similarly sold a further 200 shares in Associated Cement> at Rs. 183 per share.

The plaintiff did not have on hand even a single share in Associated Cements. It became necessary for him therefore to "cover the sales". On 21st July, 1937, defendants purchased on plaintiff's account 100 shares at Rs. 161-12-0 per share.

On 1st September, 1937, they purchased a further 150 shares a, t

' ' '

Rs. 151 a sha, re.

The difference between the prices at which these shares had been sold and bought amounted to Rs. 6, 762 8-0 and for this amount the defendants gave the plaintiff credit by adjusting it towards the promissory note account. In respect of this transaction the case of the Official Assignee was that the purchase which had been made by the defendants was not only unauthorized, but contrary to instructions and was not valid and binding on' the plaintiff as it had been made after the commencement of the insolvency. No claim was made in the alternative that if this contention failed, the plaintiff was entitled to recover the amount credited towards the promissory note on the ground of failure of consideration. The third transaction related to 300 shares in Tatas, and the fourth one was in respect of shares in Ayer Mani Rubber Co. The last claim was abandoned at the trial and the claim on the third transaction was decreed in favour of the plaintiff and the correctness of the order of the trial judge was not canvassed in the appeal before the High Court. The amount decreed as regards these 300 shares was in the sum of Rs. 1,050.

The defendants denied liability for the entire claim and pleaded that they were not guilty of any fraud and that in any case the plaintiff was not entitled to claim any damage, as he could have easily sold away all his shares soon after his purchase without incurring any loss, and that he retained them in order to make profit.

The suit was first heard by Bell J. who decreed the claim of the plaintiff on 9th March, 1943. The defendants appealed. The appellate court set aside the decision of Bell J. and remanded the suit for fresh disposal on 25th August, 1944. Meantime, that is to say, on 21st February, 1944, the adjudication of the plaintiff was annulled and on his applieation he was brought on the record in the place of the Official

Assignee and he continued the suit. Clark J. who tried the suit after remand gave a decree in f; tvour of

lO~

Trajan .t Co.

Ltd. v.

Rm.N.N.

Nagappa

Ohttiar.

Mahajan J,'

Trojan £t Co.

Ltd. v.

Rm.N.N.

Nagappa Ohettiar.

Mahajan J,

the plaintiff for the sum of Rs. 61,787:9-0 with interest at the court rate of six per cent. per annum from 1st September, 1937, until payment or realization with costs.

Against this decree the defendants preferred an appeal. The appellate Bench modified the decree of Clark J., and reduced the amount of the decree by a sum of Rs. 9,100. 'Each party was made to pay proportionate costs throughout. Leave to app'eal to this court against the decree was granted and the appeal is now before us under the certificate so granted.

As above stated, the claim in respect of Ayer-Mani Rubber shares was abandoned at the trial and the claim on the third transaction relating to 300 shares in 'l'atas was decreed for the sum of Rs. 1,050 and the correctness of this order was not canvassed in the appeal before the High Court. The two claims discnsse\l in that court were in respect of the transaction of 5,000 Indian Iron shares and in respect of the transaction made in Associated Cements.

The dispute before us so far as the Indian Iron shares are concerned has narrowed down to the question of quantum of damages in respect of 3,000 out of the 5,000 shares that were transferred by the defendants to the plaintiff on the nigbt of the 5th April, 1937, 1,300 out of these shares having been sold at cost price by the plaintiff the day after the purchase, and 700 having been sold to Pilani & Co., and regarding which the plaintiff's claim was rejected in the High Court and plaintiff preferred no further appeal.

'fhe finding of Somayya J., that the defendants firm was guilty of fraud both in respect of the failure to disclose the fact that the Indian Iron shares or most of them belonged to one of its partners, Annamalai Chettiar, and also on account of its failure to disclose its knowledge of the probable slump in the market by reason of the notice given by three members of the Stock Exchange to temporarily close it, was not contested before Clark J., and it was conceded that that finding had become final. The main question canvassed at this trial wa, s whether the plaintiff

had suffered. any damage as a consequence of this fraud and if so, how were the damages to be measured.

In the plaint plaintiff claimed that he was entitled to be recompensed for all loss and dama, ge which he had suffered. A sum of Rs. 45,042-9-0 was credi'ted in his account in respect of the sale of 3,000 shares made on 20th and 22nd April, 1937. He claimed the whole of this amount as damages on this count; in other words, according to the plaintiff, the damage suffered by him was to be measured according to the difference between the purchase price of the shares and the price for which they were ultimately sold.

The shares were bought on 5th April at Hs. 77 and Rs. 77-4-0 and sold at prices ranging between Rs. 42-8-0 and Rs. 47-4-0 on the 20th and 22nd April, 1937. This method of measuring damages was successfully challenged by the defendants before the trial judge.

Clark J., in spite of holding that the measure of damages in a case like this could not be as suggested by the plain tiff, estimated the damage suffered by him at the difference between the rate at which the plaintiff purchased the shares and the rate

at which he actually sold them, on the ground that the price at which he sold them was more than the

fair value of these shares realizable on the 5th April, 1937, between bona fide purchasers and sellers having knowledge of the real state of affairs.

Before the appeal Bench of the High Court it was contended that the trial judge was ill errot in bis assessment of the real value of these shares on 5th April, 193 7, and that in any case they could not be valued at four different rates. It was urged that damages had been over-estimated.

This contention was negatived and it was held that in the circumstances of this case it could not be said that the plainbiff acted unreasonably in holding on to the shares for the time that he did and that the defendants had by their own double dealings placed the plaintiff in a difficult position.

The learned counsel for the appellant reiterated before us the contentions raised by him in the High

Trojan Co.

Ltd. v.

Rm. N.N.

N•g•ppa GhettU.r.

M•haj•n J.

l958

Tro;'an i:t Co-.

Ltd. v.

Bm.N.N.

Nogappa Chettiar.

Mahajan J.

Court and urged that the true measure of damages in actions like this is the difference between the price paid and the real value of the shares at the time of the tnnsaction, and that any loss caused to the plaintiff by his retaining the shares after that date could not be decreed. It was strenuously contended that had the plaintiff sold the remaining shares like the 1,300 he sold, be would not have suffered any damage whatsoever, as the market price of these shares on the 6th and 7th was not below the cost price. It was said that the loss that the pla.intiff suffered was merely due to the circumstance that he retained the shares for a fortnight, and was not as a consequence of the fraud.

Lastly, it was contended that even if it could be held that the market on the 6th and 7th was affeuted by the very fact concealed from the plaintiff, its effect disappeared by tbe 10th April, when the fact became fully known and damage should have been assessed on the differenc~ between the market price of these shares which ruled at Rs. 62 per share on 10th April, 1937, and their cost price ..

Now the rule is well settled that damages due either for breach of contr:i.ct or for tort are damages which, so far as money can compensate, will give the injured party reparation for the wrongful act and for all the natural and direct consequences of the wrongful act.

Difficulty however arises in measuring the amount of this money compensation. A general principle cannot be laid down for measuring it, and every case must to some extent depend upon its own circumstance. It is, however, clear that in the absence of any special circumstances the measure of damages cannot be the amount of the loss ultimately sustained by the representee.

It can only be the difference between the price which he paid and the price which he would have received if he had resold them in the market forthwith after the purcb.ase provided of cburse that there was a fair market then. '£he question to be decided in such a. case is what could the plaintiff have obtained if he hi; d resold forohwith that; which he had been induced to purchase by the fraud

. .

of the defend11nts.

In other words, the mode of 1958 dealing with damages in such a case is to see what it Trojan ct Go." would have cost him to get out of the situation, i.e ..

Ltd. how much worse off was his estate owing to the barv. gain in which he entered into.

The law on this sub- Rm. N N. ject has been very appositely stated in McConnel v.

Nagappa Wright(') by Lord Collins in these terms:- Oh.ttiar. "As to the principle upon which damages are Mahajan 1. assessed in this case, there is no doubt about it now.

It bas been laid down by several judges, and particularly by Cotton L.J. in Peek v. Derry('), but the common sense and principle of the thing is this. It is not an action for breach of contract, and, therefore, no damages in respect of prospective gains which the person contracting was entitled by his contract to expect to come in, but it is an action of tort-it is an action for a wrong done whereby the plaintiff was tricked out of certain money in his pocket ; and therefore, prima facie, the highest limit of his damages is the whole extent of bis loss, and that loss is measured by the money which was in bis pocket and is now in the pocket of the company. That is the ultimate, final, highest standard of his loss.

But, in so far as be has got an equivalent for that money, that loss is .diminished; and I think, in assessing the damages, prima f acie the assets as represented are taken to be an equivalent and no more for the money which was paid. So far as the assets are an equivalent, he is not damaged; so far as they fall short of being an equivalent, in that proportion he is damaged."

The sole point for determination therefore in the case is whether the shares handed over to the plaintiff were an equivalent for the money paid or whether they fell short of being the equivalent and if so, to what extent. Ordinarily the market rate of the shares on the date when the fraud was practised would represent their real price in the absence of any other circumstance. If, however, the market was vitiated or was in a state of flux or panic in consequence of the very fact that was fraudulently concealed,

(z) 37 Ch. D. 541 •

then the real value of the shares has to be determined on a consideration of a variety of Trojan & 00• circumstances disclosed by the evidence led by the Ltd.

B1n. N. N.

Nagappa Chettiar.

Mahajan J,

parties.

Thus though ordinarily the market rate on the earliest date when the real facts became known may be taken as the real value of the shares, nevertheless, if there is no market or thereis no satisfactory evidence of a market rate for some time which may safely be taken as the real value, then if the representee sold the shares, although not bound to do so, and if the resale has taken place within a reasonable time and on reasonable terms and has not been unnecessarily delayed, then the price fetched at the re sale may well be taken into consideration in determining retrospectively the true market value of the shares on the crucial date. If there is no market at all or if the market rate cannot, for reasons re £erred to above, be taken as the real or fair value of the thing and the rep resentee has not sold the things, then in ascertaining the real or fair value of the thing on the date when deceit was practised subsequent events may be taken into account, provided such subsequent events a.re not attributable to extraneous circumstances which supervened on account of the retaining of tha thing. '£hese, we apprehend, are the well settled rules for ascertaining the loss and damage suffered by a party in such circumstances.

If damages had been measured on the rules above stated by the courts below, this court would have then respected the concurrent finding on this point as the question of assessment of damages primarily is a question of fa.ct and the concurrent findings of the courts below on such points except in very exceptional circumstances a.re nob reviewed by this court. We however find that in spite of the circumstance that the courts below correctly enunciated the rule of measuring damages in such cases, they estimated them on the difference between the cost price and the price realized at the sale on the 20th and 22nd at four different rates. These four rates could obviously not represent the true value of the shares on the 5th.

Moreover the finding that the true value of these shares was lower than what was actually realized on their resale on the 20th and 22nd is not based on any evidence whatsoever.

Such a finding could only be arrived at on the basis of evidence on the record and by reference to that evidence, and this has not been done.

The High Court did not make an attempt to find out to what extent the value of the shares fell short of being an equivalent for the money taken from the plaintiff. Withollt determining this crucial issue we think it was not right to estimate the damage on the vague finding that the true value of the shares was lower than the value which they fetched at the resale on the 20th and 22nd. In this situation, we have no alternative but to arrive at our owu finding on this question in spite of the concurrent finding and we have to find as to what could be said to have been the true value of these shares on the relevant date.

In other words, the question for our determination is what the market value would have been on 5th April of these shares if all byers and sellers had information that the market was to be closed on 8th and 9th April to enablfl settlement of outsta.nding transactions to be effected, and had appreciated the effect of that decision. In the words of Buckley J. in Broome v. Speak('), it is indeed a difficult question to answer but that difficulty is no ground for refusing to answer it as has been done by the court below.

In order to determine the real price of these 3,000 shares sold to plaintiff by concealment of certain facts, the first question that needs decision is whether the market for these shares, the rate prevailing wherein would prima faoie be a true index of their value, had been affected by the very fact concealed of which the plaintiff complains. In this case from the proved facts it is clear that the market rate of these shares was seriously affected by reason of the impending decision of the Stock Exchange for closing it to stop the wave of speculation that had taken the frenzy of the market by reason of the merger of the two steel

(I) (1903J I Ch. S86.

Trojan. 4 Co.

Ltd. v.

Rm. N.N.

Nagappa Ohettiar.

Mahajan J.

802 SUPREME COUR'l' REPORTS [1953]

Trojan <t Go. companies doing business in northern India. The market reports for the week ending March 19, show that the Indian Irons were standing at or around Rs. 55. By Saturday the 3rd April after the announcement of the terms of the merger by reason of the keen speculation the shares were being dealt at around Rs. 73.

On Monday the 5th April the price was Rs. 77.

On Tuesday the 6th, the day when the decision was taken to close the market for two days, these shares touched Rs: 79 but by the close of business fell back to Rs. 72, a sudden drop of Rs. 7. On vVednesday the 7th April in the Calcutta market they closed at Rs. 58. a drop of Rs. 14 in a day.

These sudden rises and falls in the market during the course of these two days are sufficient indication of the fact that the drop was due to the decision of the Stock Exchange to close the Exchange for two days.

There is no evidence that any other factor was then disturbing the market rate of these shares.

The share market report of the defendants themselves issued on 10th April, 1987, amply bears out this fact.' In this report it was stated as follows:-

Ltd. v.

Rm.N.N.

Nagappa Chettiar.

Mahajan J,

"The outstanding feature of the Indi&n markets during the week under review was the sudden landslide in Indian lron and Steel shares, which proved infectious to the other sections of the market. The week opened with a cheerful bullish sentiment and Indian Iron and Steels touched Hs. 80. At this dizzy height, the markets lost their equilibrium and frenzied selling resulted in a sensational decline of about 25 poi-nts. 1.

The heavy liquidation was due to a predominance of weak holders that bad come into the market at a !ate stage. Further; selling was accent1.ated by the decision of Calcutta Stock Exchange to close the Calcutta market on the 8th and 9th April to enable brokers to make deliveries and'effect settlements for transactions in Indian Iron and Steel shares. Rea vy volume of business has been outstanding between brokers on account of the delay in getting certificates.

Prospect of immediate delivery of share certificates scared off weak holders and prices declined on bea vy liquidation."

It is clear therefore that the decision of the Calcutta Stock Exchange to close the Calcutta market on 8th and 9th affected the market prices considerably.

The Calcutta market on the 7th dropped from 72 to 58 as already stated. The decision of the Calcutta Stock Exchange was published in the Hindu of Madras on the evening of the 7th.

From the statement of account, Exhibit P-41, filed by Trojan & Co. on 7th, about half a dozen transactions in these shares took place through them.

Most of the transactions, it appears, were by small holders of 100 scrips or so, who unloaded their shares between 71 to 60 per share.

On the 8th three transactions took place at Rs. 62.

No transaction took place between 8th and 14th. There were two transactions on the 14th at Rs. 56, and there was a transaction on the 15th at Rs. 57-8-0. On the 20th Trojan and Co. sold 2,000 of the plaintiff's shares at rates varying between Rs. 44-12-0 and Rs. 47-4-0.

According to the statement of account of another broker, Ramlal & Co., there were about 16 transactions in these shares on the 7th. Most of them were sold in lots of 100 or 200 and the sale price of these shares ranged from Rs. 7 4 to 64.

On the 8th there were a few transactions, the rates varying between Rs. 57 to Rs. 66.

There was a transaction on the 9th at Rs. 60. There were two or three transactions on the 10th also near about this rate.

No transaction after the 10th made by this company has been exhibited on the record.

Exhibit P-23 is another weekly share market report of 'l'rojan & Co. issued on 17th April, 1937. It states as follows:-

"In the first place, Indian Irons are very cheap around Rs. 46.

The company is doing extremely well and the stage is set for a steady rise to Rs. 70 ............. ..

Indian Iron and Steels fluctuated between Rs. 55 to Rs. 60 and closed at Rs. 47. 'fhe recent hectic speculation has brought its own nemesis.'.'

This report proves that there was really no market as it appears from the evidence on the record in

Trojan ct Go.

Ltd. v.

Rm. N. N.

Nagappa

Okettiar.

Mahajan I.

19$3

Trojan tf Co.

Ltd,

Rm, N. N.

Nagappa Ohettiar.

Maha}an J.

804 SUPREME COURT .REPOR'l. 18 [1953)

Madras between the 8th and 17th which"was a Saturday, aud on the 17th the prices seemed to be settling down at Rs. 46.

On the 19th the plaintiff gave to the defendants au order to sell his 3,000 shares and it was said "Please retain this order till executed".

The defendants were only able to dispose of 2,000 of these shares on tbe 20th at prices varying between Rs. 44-12-0 to Rs. 47-4-0.

Tbe remaiuiug 1,000 shares the plaintiff was able to sell through Ramlal and Co. at Rs. 42-8-0 on 22nd April, 1937. It is quite possible and probable t.hat had the plaintiff placed an order before the 19th, say on the 16th or 17th, with the defendants or with Ramlal & Co., he might have been able to sell these 1,000 shares also at about the same price as he was able to dispose of his 2,000 shares.

No member of the defendants-firm gave eviden6e in the case.

Plaintiff went into the witness box and stated that had he known what the defendants knew, he would not have purchased the shares.

The information was withheld from him that these shares were likely to go down.

He said that be was told by the defendants to sell the shares but no purchasers were available and in spite of bis keenness to liquidate them he was not able to do so before tha 20th and 22nd, that he approached Trojan & Co., the defendants-firm for selling them but they were not able to sell more than 2,000 shares.

Considering the whole of thiB material, we are satisfied that the market rate prevailing on the 5th, 6th and 7th bad been affected by reason of the decision of the Calcutta Stock Exchange to keep the market closed on tbe 8th and 9th and the market did not set.tie down till about the 17th or 18th and the prices then ruling can in the circumstances of this case be said to be their true market price. In our judgment, Rs. 46 per share was the real price of these shares when they were put in the plaintiff's pocket and he got Rs. 46 for each share in lieu of what he paid for either at Rs. 77 or at Rs. 77-4-0.

He is entitled to commission also which he would have to pay on the sale of these shares. 'rhe difference between these

S.C.R.

SUPREME COtJRT REPORTS 805

two rates is the damage that he has suffered and he is entitled _to it.

For the reasons given above we modify the order passed by Clark J., and by the appellate Bench of the High Court to the extent indicated above and we estimate the plaintiff's damage at; Rs. 93,000 ou account of the 3,000 shares at the rate of Rs. 31 per share. ' 'l'he second question canvassed before the High Court and also before us was in respect of the Associated Cement shares. As above stated, the plaintiff's account was credited in the sum of Rs. 6,762-8-0 on account of the purchase of these shares.

Plaintiff had pleaded that the transaction was not authorised by him and that it had been made in contravention of his instructions.

He had claimed compensation on the ground of breach of instructions; he did not in the alternative claim on the ground of failure of consideration the amount credited by the defendants in the promissory note account a.nd which credit disappeared by reason of the failure of tbe suit on the promissory note. At the hearing of the case before Bell J. the contention that the purchase was unauthorized was abandone, d by counsel and the same position was adopted before Clark J. During crossexamination of the plaintiff it was elicited that he either instructed the defendants to purchase the shares or at any rate ratified the purchase which the defendants had made on his behalf. It was argued before th.e appellate Bench of the High Court that having pleaded one thing and having led evidence in support of that thing but later on having been forced to admit in the witness box that the true state of things was different the plaintiff had disentitled himself to relief as regards these shares and be could not be granted the relief that he had not asked for.

The High Court negatived this contention on the ground that though a claim for damages in respect of a particular transaction may fail, that circumstance was no bar to the making of a direction that the defendants should pay the plain tiff the money actually due in respect of that particular transaction. It also he)d

1~$8

Trojan ct Go~

Ltd. v.

Rm.N.N.

Nagappa Chdttia.1'.

Mahaja,. J.

l943

Trojan &- Oo.

Ltd.

Rm.N.N.

N•gappa Chettiar.

Maka.fa.ii J.

806 8tJPREM:E COURT REPORTS [1953]

that the plaintiff's claim in respect of this item of Rs. 6,762-8-0 was within limitation.

We. are unable to uphold the view taken by the High Court on this point. It is well settled that the decision of a case cannot be based on grouµds outside the pleadings of the parties and it is the case pleaded that has to be found.

Without an amendment of the plaint the court was not entitled to grant the relief not askeCI for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case. The aliegations on which the plaintiff claimed relief in respect of these shares are clear and emphatic. 'rhere was no suggestion made in the plaint or even when its amendment was sought at one stage that the

pla.intiff in the alternative was entitled to this amount on the ground of failure of consideration.

That being so, we see no valid grounds for entertaining the plaintiff's claim as based on failure of consideration on the case pleaded by him. In disagreement with the courts below we hold that the plaintiff was wrongly granted a decree for the sum of Rs. 6,762-8-0 in respect of the Associated Cement shares in this suit.

Ac.counts settled could only be reopened on proper allegations.

The next point canvassed in the courts below was in respect of the claim of the plaintiff regarding interest on the ameunt found due to the plaintiff from 5th April, 1937, fio the date of the suit. It was contended that no interest could be allowed.on damages because to do so would amount to awarding damages on damages which is opposed to precedent a.nd principle.

Clark J., however, awarded interest by placing reliance on certain English decisions which enunciate the rule that an agent who receives or deals with the money of bis principal improperly and in breach of his duty or who refused to pay it over on demand is liable to pay interest from the time when he so receives or deals with the same or from the time of the demand.

We think it is well settled th&t interest is allowed hy a court of equity in the ca.se of money obtained or retained by frioud.

1958 stated in article 423 of Volume I of Halsbury, the a.gent must also pay interest in all cases of fraud and on all bribes and secret profits received by him during his agency. Their Lordshi'ps of the Privy Council

Trojan tt Co.

in Johnson v. Rex(') observed as follows: -

"In order to guard against any possible misappre hension of their Lordships' views they desire to say th.at in their opinion there can be no doubt whatever, that money obtained by fraud and retained by fraud can be recovered with interest, whether the proceedings be taken in a court of equity, or a court of law, or in a court, which has jurisdiction both equitable and legal."

'rhe appeal court affirmed the view of Clark J. on this point.

The learned counsel for the appellant contended that the decisions relied upon concerned cases where the agent had retained some money of his principal in his hands but that in the present case the claim was merely for damages.

This contention is fallacious.

By reason of the transaction brought about by fraudulent concealment plaintiff pa.id to the defendants a sum of Rs. 60,000 in ca.sh which he would not have parted with otherwise and he also lost the money which stood at his credit with the defend- _ ants. It is thus clear that the agents had a large sum of the plaintiff with them which they would not have acquired but by reason of the fraud that they practised on him. In this view of the case we see no force ia the contention of the learned counsel and we repel it.

The only other point that was argued before us was in respect of future interest. It was not denied that plaintiff was entitled to future interest as allowed to him at the rate of 6% on the amount found due. It was however argued that the plaintiff should not have been allowed interest for the period of oue year and six months during which the decrne stood satisfied.

The facts are that on 9th March, 1943, a decree for Rs. 51,805-1-0 carrying interest at six per cent. wa.s

Ltd.

Rm./'V.N.

Nagapp4 Chsttiar.

Mahajan. J.

Trojaa d Oo.

Ltd. v.

Rm.N. N.

Naga1JPtJ Chettia.r. -.

M•h•.i•n J,

passed in favour of the plaintiff. On the 11th May, 1943, an amount of Rs. 71,000 due under this decree was paid by the defendants to the Official Assignee. 'l' his amount was returned by the Officia 1 Assignee to the defendants on 12th September, 1944, after that

decree had been set aside.

Meanwhile the plaintiff's adjudication had been annulled and he had been brought on the record ou 16th March, 1944. It was contended that during the period when the money remained with the Official Assignee who was the pla.intiff no future interest was payable as the decree stood satisfied during that period. 'l'he High Court rejected this contention on the ground that when this money was paid into court, it was coupled with a prayer that it should not be paid out to the creditors of the insolvent's estate pending disposal of the appeal, and therefore as the money was not distributable amongst the insolvent's creditors, interest for this period had been rightly allowed. In our opinion, this view cannot be sustained.

So far as the defendants judgment-debtors are concerned they had done their part and pa.id the money to the decreeholder and had thus satisfied the decree. It was open to the Official Assignee, the decree-holder, not to take the money on the condition on which it was given to him and if he had not taken the money from the defendants he could then justly have claimed future interest on this amount, but having taken the money and kept it, it could not be said that during this period anything was due to the plaintiff from the defendants. The defendants certainly had paid the decretal amount and whether the plaintiff or his predecessor in interest was able to use it or not was a circumstance wholly immaterial in considering whether future interest should or should not be allowed. In our judgment, the plaintiff was not entitled to future interest at the rate allowed for one year and six months period, beginning from 9th March, 1943, and ending with 12th l:!eptember, 1944.

The appeal is therefore allowed to the extent indicated above.

I'he decree of the High Court will be

S.C.R.

SUPREME COUR'r REPOR1'8 809

19~8 modified and plaintiff will be entitled to damages in the sum of Rs. 93,000 on the 3,000 Indian Iron shares.

The decree given to the plaintiff in respect of Rs. 6, 762-8-0 is set aside over and above the decree for Rs. 9,100 in his favour set aside by the High Court.

In the calculation of future interest tbe plaintiff will not be allowed interest from 9th March, 1943, to 12th September, 1944. In the result tbe decree given to the plaintiff in the sum of Rs. 61, 787 is reduced to Rs. 42,17 5.

He will get interest at six per cent. per annum from 5th April, 1937, until pttyment or realization except for a period of one year and six months.

Plaintiff will get proportionate costs throughout.

Trojan ct Co.

Appeal allowed in part.

Agent for the appellant: Ganpat Rai.

Agent for the respondent: M. S. K. Sastri.

MUSH'rAK HUSSEIN

v. 'rHE S'fATE OF BOMBAY. [MEHR CHAND MAHAJAN, VIVIAN BOSE and

JAGANNADHA DAS JJ.]

Criminal trial-Charge to jury-Mis-direction-Powers of appellate Court-Power of appellate Court to go into the whole ease to determine whether there has been failure of justice-Practice- Appellate Court-Summary 1ejection of appeal-D1'ty to state reasons in arguahle cases.

In his charge to the jury the Judge told them that the oase before them was a jig saw puzzle with some missing links and directed them to use their ingenuity to piece them together by finding out the probabilities and seeing whether they could successfully solve the puzzle. Held, this was misdirection in that it invited the jury to exercise its ingenuity by having resort, if necessary, to speculative reasoning.

Where a jury has been mis-directed and bas based its verdict on assumptions and conjectures the Supreme Court may order a retrial or remit the case to the High Court with a direction that it should consider the merits of the case in the light of the decision of the Supreme Court and eay whether there has been a

Ltd. v.

Rm.N. N.

Nagappa Chettiar.

Mahajan J.

l9~3

March BO.

S. S. Shukla

rROJAN & CO. LTD.

RM. N. N. NAGAPPA CHETTIAR

DAS JJ.

Horwill

Balakrishna Ayyar

Clark

V. Rangachari

K. Mangachary

K. Krishnaswami Iyengar

K. Pa:rasuram

MAHAJAN

North India

Indian Iron & Steel Co. Ltd.

Bengal Iron & Steel Co. Ltd.

Indian Iron Co. Ltd.

22nd April, 1937

5th April, 1937

Annamalai Chettiar

Ramdev Chokani

Nagappa

Mahajan

Annamalai Chettiar

Annamalai Chettiar

Ramlal & Co.

Annamalai

Ramanathan Chetti

Calcutta Stock Exchange Association

8th and 9th April

5th April and 20th April, 19.37

Pilani & Co.

19th April, 1937

20th April, 1937

Hamlal & Co.

22nd May, 1937

S. 150

Madras High Court

Kottaiyur

Hamnad district

22nd

September, 1937

Trojan & Co.

Hamdev Chokani

Mockett

High Court, No. 313 of 1938

15th March, 1940

Somayya

12th August, 1942

22nd March, 1937

Associated Cements

30th March, 1937

Associated Cement

21st July, 1937

1st September, 1937

Ayer Mani Rubber Co.

Bell

9th March, 1943

25th August, 1944

21st February, 1944

N.N.

Nagappa

Ohttiar

Nagappa Ohettiar

Ayer-Mani Rubber shares

20th and 22nd April, 1937

5th April, 193

Nogappa Chettiar

10th April, 1937

Collins

Cotton

N. N.

Nagappa Chettiar

20th and 22nd at

20th and 22nd is

20th and 22nd

Buckley

India

companies doing business in northern India.

Calcutta

10th April, 1987

Calcutta Stock Exchange

8th and 9th affected the

20th Trojan and Co.

17th April, 1937

Trojan tf Co.

Ltd,

Rm, N. N.

Nagappa Ohettiar

Maha}an

Ramlal and Co.

16th or 17th,

N.N.

Nagappa Chdttia.1

Mahaja

article 423

Trojaa

12th September, 1944

16th March, 1944

12th l:!eptember, 1944

Ganpat Rai

M. S. K. Sastri

Agent for the respondent: M. S. K. Sastri.

MUSH'rAK HUSSEIN

MUSH'rAK HUSSEIN

v. 'rHE S'fATE OF BOMBAY. [

S'fATE OF BOMBAY

MEHR CHAND MAHAJAN

VIVIAN BOSE

JAGANNADHA DAS

Supreme Court