# J.yqti Bhushan Gupl4 v. Tiu Banartu Bonk Ltd - **Citation:** [1962] Supp. 1 S.C.R. 81 - **Court:** Supreme Court of India - **Decided:** 1962 - **Bench:** B. P. Sinha, P. B. Gajj\]Ndragadkar, RAGHUJIAR DAYAt - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-yqti-bhushan-gupl4-v-tiu-banartu-bonk-ltd-2572 - **Pages:** 24 ## Headnote Bread/, of coritract-Buit for damages-Broker•' bought and sold notea, if and when constitute terms of the comract-Commercial U8(l{le-Conlract on behalf af discloBPJl partner-Maintainability of •uit-lndian Contract Act, 1872 (9 of 1872), s. 230. · The appellant sued the respondent for damages for breach of contract. The respondent pleaded .that the app• ellant had contra~ted as agent for its disclosed principal and had no right to sue. The bought and sold notes issued by the brokers 1howed that the appellant had entered into ihe contract on account of the disclosed principal; but in the confirmation slips and subsequent letters exchanged between the parties no reference was made to the principal nor did the appcllan!J describe themselves as acting or signing on his behalf. H eU, that it is well established in commercial usage 1h~t the bought and sold notes issued by the brows, where 1961 J.yqti Bhushan Gupl4 v. Tiu Banartu Bonk Ltd. Shah J. 1901 0&10/ur 13. 1961 lfa1Mt1Ul&na Siwz.d11Jt~ Rai •• Td7tballi D11U'OlH/bluii 82 SUPREME COURT REPORTS [1962] SUPP· 1 there is no \'ariation or disparity between them, constitute th~ contract that 1nust bind the parti~5. But where the bought and sold notes show material variations, neither of them nor both of thrm taken together can be relied upon for proving the terms of the contract. Since there was 110 di!parity in the instant ca!C bct\vccn ,. the two note< which specifically mentioned the appellants as acting on account of the disclosed partner, it mu't be l:cld that the appellants had entered into the contract on behalf of the disclosed partner and as such \\'as not entitled to sue. Coirie v. Rarnfr!f, (1846) 3 Moo. I. A. 448, Siweinrighl v. Archibald, I 1851) 117 E.R. 122 I, Ah Shain Shoke v. MoolJ.ia Chetly (1899) L. R. 27 I. A. 30 and Gadd v. l/oughton '.1871i) I Ex. D. 357, referred to. Held, further, that in deciding whether or not the a~ent had entered into the contract on behalf of the principal, the way he signed the document must be considered in the light of the recitals in the r~Jcvant document. In the instant rase, the letters and the confirmation slips must be read in the light of the bought and sold notes and presumed to be consistent with th~m and it would, therefore, be unreasonable to attach undue importance to the signature or how the parties described themselves. CrvH, APPELT.AT!~ JvRISllICTION: Civil Appeal No. 212 of 1959. Appll<'\I from the judgment and d<'cr1>e datecl March 1, 1957, of the Calcutta High Court in Appeal from Original Decree No. 71 of 1954. G. S. Patluik and ;Vaunit Lal, for the appellants. A. I'. Visuunatha Sa•tri, S. N. Andley, Ram.eshwai- Nath and l'. L. Vohra; for the respondent. 1961. October 13. The Judgment of the Court was delivered by Ge datecl March 1, 1957, of the Calcutta High Court in Appeal from Original Decree No. 71 of 1954. G. S. Patluik and ;Vaunit Lal, for the appellants. A. I'. Visuunatha Sa•tri, S. N. Andley, Ram.eshwai- Nath and l'. L. Vohra; for the respondent. 1961. October 13. The Judgment of the Court was delivered by Grnerl in the pres11nt appeal. Mr. Justice Bose who trice! the suit framed twe I vo i88ues. On the principal point in controversy between the parties the learned judge found that the appellant had entered into the contract with the respondent on its own account and not on account of the disclosed principal as allogcd by the respondent. According to the learned judge the reference to Messrs. Khaitan and Sons Ltd., made in the bought and sold notes on which the respondent's plea was based bad been inserted by the brokers "by mistake or due to some misconception." The learned judge also found that the rcHpondent had commited a breach of the contra.ct as allegerl by the a. ppellant. Tbe appelhtnt's case with regard to the excess payment of Rs. 3,840 made by L. N. Poddar & Co. was, however, held not to have been proved. In the result a decree was passed in favour of the appellant for Rs. 79,800 a.long with interest as stipulated in the decree. Against this decree the respondent preferred an appeal; and the main point which was urged on its behalf was directed against the finding of the trial judge that the contract had been entered into by the appellant for itself and not on account of the disclosed principal. This contention ,wa.s based in the Court of Ap]>"al, as in the trial court, on the bought and sold notes; and it was urged that • ' .. .. .. (1) S.C.R. SUPREME OOURT REPORTS 85 the bought and sold notes clearly showed that the appellant had entered into the· contract on account of the disclosed principal Messrs. Kh~itan and Sons Ltd. Before the Appellate Court the respondent's ease was that the said bought and sold notes cs do not tally the sold not'l alone cannot constitute the terms of the contract. In dealing with this question, however, their Lordships referred to the mercantile custom in regard to the bought and sold notl'B and observed that "the established usage of dealing in the mercantile world should be held in high · respect; the very existence of such usage shows that in pradice it has been found useful and b(lueficial; the presumption is in its favour, and no departure from it is to be inferred from doubtful circumstances". That is why the Privy Council reached the conclusion that "this must be considered as a transaction in the contemplation of the parties by bought and sold notes, and that the contract is contained in both of tho notes, and not in one;" inevitably there being a material variaticon between the two notes "the consequen'!C follows, from all legal principles, that no binding contract has been effected". This decision shows that the roPrcantile usage of entering into contracts evidenced by the bought and sold notes issuetl by the brokera was treated by the Privy Council as well recognised. The next decision to whioh roferonco may be usefully made is the case of Sievewright v. Archibald( 1 ). In that ease again there was a variation in the bought and sold notes and the variation was material, and so it was held that there was no (I) (1851) 117 E.R. 1221, 1228, 1219. 1 ' ; .. ..... (I) S.C.R. SUPREME OOURT REPORTS 95 sufficient memorandum of a contract to satisfy the Statute of Frauds. In dealing with the question raised for the decision of the Court Lord Campbell, C. J., has made certain genera.I observations which throw considerable light on the genesis of tb.e bought 1md sold notes and the effect which is usually attributed to the said notes by commercial usage. "If the bought note cai,i. be considered a memorandum of the parol agreement", observed Lord Campbell, C. J., "so may the sold note; and which of them is to prevail.? It seems to me, therefore, that we get back to the same point at which we-were when the variance was first objected, and the de<'laration was amended. I by no means say that where there are bought and sold notes they must necessarily be the only evidence of the contract; circumstances may be imagined in which they might be used as a memorandum of a paroJ agreement. Where there has been an entry of the contract by the broker in his book signed by him, I should hold without hesitation, notwithstanding some dicta, and a supposed ruling of Lord Tenterden in Thornton v. Meux (M. & M. '8), to the contrary, that this entry is the binding contract between the parties and that a mistake made by him, when sending them a copy of it in the ,shape of a bought or sold note, would not affect its validity. Being authorised by the one to sell, and the other to buy, in the terms of the contract, when he has reduced it into writing and signed it as their common agent, it binds them, both, according to the Statute of Frauds, as if both had signed it with their own hands; the duty of the broker requires him to do so; and till recent times, this duty was scrupulously performed by every broker. What are called the bought and sold notes were sent by him to his principals by way cif information that he had acted upon their instructions, but not as the actual contract which was to be binding upon them. This; clearly appears from the practice still followed of sending the bought note to the buyer, and the sold 1161 Radhakrislm• Siuadutta Rai v. Ta;•ehalli Dawoodbhai Gajendratmlkar J. JMI &'°1okri»I.,, Sioatlulta Rai ... T.,.bo/li Da1-f611ai 96 SUPREME OOURT REPORTS [1962) SUPP. note to the seller; wh'lreas, if these notes had been meant to constitute the contract, the bought note would be put into the hands of the seller, and the sold note into the hands of the buyer, th:;t eaoh might have the engagement of the other party and not his own. But the broker, to save himself trouble, now omits to enter and sign any contract in his book, and still sends the bought and· sold notes as before. If these agree, they are held to oonstitute a binding contract; if there be any material variance between them, they are both nullities, and there is no binding contract. Thie la~t proposition, though combated by the plaintiff's counsel, has been laid down And acted upon in such a long series of oases that I could not venture to contravene it, if I did not al!l!ent to it; but, where there is no evidence of the contract unless by the bought and sold notes sent by the broker to the parties, I do not see how there can be a binding contract unless they su bstanti~lly agree; for contracting parties must consent to the same terms; and where the terms in the two notes differ there can be no reason why faith should be given to the one more than the other". These observations seem to establish two propositions, first that if the bought and sold notes show a material variation neither of them nor both of thf'm taken together can be relied upon for the purpose of proving the terms of the c.ontraot, and second if the bought and sold notes agree they are held to constitute a binding contract. To the same effect is tbe observation made by the Privy Council in Ah Skain Shoke v. Moothia Chetty,(1 ) when Sir Richard Couch observed that .. Moothia Chetty, one of the respondents, said in hie evidence he did not consider the contract 118 concluded until bought and sold notes were signed. He was right in this. They were the only evidence of the cont.ract." It is in the light of this legal position that we mllllt consider the effect of the bought and sold (I) (IS99) L. R. 271.A. SO. • .. ... (I) S.C.R. SUPREME COURT REPORTS 97 notes in the present case. The notes referred to the appellant and added "A/C Khaitan & Sons Ltd." There is no disparity in the notes at all; and so the two notes can be safely taken to evid· ence the terms of the contract. When along with the name of the appellant the notes specifically refer to "Khaitan & Sons Ltd." with the preceding words "A/c'', there can be no doubt that the appellant is shown by the notes to be acting on account of the disclosed principal. The appellant realised that the effect of the reference to Khaitan & Sons in the notes would inevitably be to support the plea of the respondent that it was not entitled to bring the present action and so it pleaded that the said reference was the result of a mistake. Therefore, there can be no doubt that if the material question had to be considered in the light of the bought and sold notes alone the appellant was acting on behalf of the disclosed principal and, on the contract thus entered into, it had no right to sue and can claim no cause of action in its favour. In Gadd v. Houghton ('), James, L. J. observed "when a man says that he is making a contract 'on account of' some one else, it seems to me that he uses the -yery strongest terms the English language affords ·to show that he is not binding himself, but is binding his principal". In that case fruit brokers in Liverpool gave a fruit merchant a sold note which read thus: "We have this day sold to you on account of James Morand & Co., Valentia, 20JO cases Valentia, oranges, of the bran-! James Morand & Co., at 12s. 9d. per case free on board", and the brokers signed the note without any addition. The purchaser brought an action against the broker for non·deliver1 of the oranges. It was held that the words "on account of James Morand & Co." showed the intention to make the foreign principals and n,ot the brokers liable and that the brokers were not liable upon the contract. It would be noticed that (1 11816) I E" D. 357, IIMI lladhalaitlWz SivaduttG Rai v. Tayeballi Dawoodbhai Gajtndragadk1r 1. • 1961 11a4M1ai1/ ... Sioodutta Rai .. Tl!1'6.Jli Da,,_fih«i C-,jrnJ'"tHlcar ]. 98 SUPREME OOURT REPORTS [1962) ~UPP. in dealing with the question about the brokers liability two points foll to be considered. The first point in support of fixing the liability with tho brokers was that the brokers had signed this note without describing themselves as acting for the disclosed principals; and the argument was that "when a man signs a oontract in his name he is prima Jacie a contracting party and liable and there must be something v.~ry strong on the {ace of the instrument to show that the liability does not attach to him". This principle was accepted by the learned judge who decided the C88e; but it was pointed out that there was another fact which had an overriding effect and that was th~t the note showed that the brokers were acting for the dis. closed principal, and that fact clearly repelled the brokers' liability in regard to the contrac,-t. In deal· ing with the argument about the effect of the signature Mellish, L. J. observed "when the sig· nature comes at the end you apply it to everything which occurs throughout the contract. If all that appears is that the agent has been making .a oontraot on behalf of some other person, it seems to me to follow of necessity that that other prrson is the person liable. This is one of the simplest possible cases. How can the words 'on account of Morand & Co.' be inserted merely as a description ? The words mean that Morand & Co. are the people who have sold. It follows that the persons who have signed are merely the brokers and are not liable". We have referred to these observations made by Mellish, L. J., because as we will presently point out they would be of material assistanoe in deciding the point which Mr. Pathak has raised on the strength of the two subsequent letters. Thus, the bought and sold notes in this case unambiguously indicate that tho appellant was acting for a disclosed principal and the contracting party was the disclosed principal and no other. It is, however, urged by Mr. Pathak that before determining the term& of the contract and the ' •• ' .,. < (1) S.C.R. SUPREME COURT REPORTS 99 parties to it we must read the notes in question along with the two letters. We have already seen the sequence of the documents. First, the note1 were delivered by the brokers to the appellant and the respondent. Then the respective parties filed confirmation slips and then followed the two letters exchanged between them. Mr. Pathak contends that in its letter addressed to the respondent the appellant has definitely stated that 'they' had bought from the respondent 1000 bales in question. Mr. Pathak pfoces considerable empha.sis on the use of the .word "we" without reference to the principal; and he also relies on the fact that the letter is signed by the appellant without describing itself as acting on behalf of the principal already disclosed. Similarly he relies on the statement of the respondent's letter to the appellant that the respondent had sold to the appellant "to you" the bales in question. According to Mr. Pathak the significgnce of these letters should not be underestimated in determining the parties to the contra.ct. There is no doubt, and indeed it is a matter of common-ground before us, that the letters do not constitute all the terms of the contract, and all that is urged by Mr. Pathak is that they should be considered along with the notes. The notes refer to the fact that if any dispute arises in the deal it is subject to the arbitration by the Bengal Chamber of Commerce. They also refer to the S!llea tax number which is to be furnished by the buyers, otherwise they would be charged. These terms undoubtedly constitute terms of the contra.ct; but the argument is that in the correspondence which took place between the parties there is no reference to the principal and indeed the correspondence proceeds on the basis that the appellant act.a for itself and not for a disclosed principal, and' that should be borne in mind in de_ciding whether the appellant wa.s acting for the disclosed principa:l or not. 1961 Radhakrishnt. Sivadutta Rai v. Tayeballi Dawoodbhrri Gaj1ntlragadkllr J, 1'61 R adhakrislrna Sitiaiutta Ilai •• Tay