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PETITIONER:

M/S. VIJAY TRADERS

Vs.

RESPONDENT:

M/S. BAJAJ AUTO LTD.

DATE OF JUDGMENT01/11/1995

BENCH:

FAIZAN UDDIN (J)

BENCH:

FAIZAN UDDIN (J)

SEN, S.C. (J)

CITATION:

1995 SCC (6) 566 JT 1995 (7) 608

1995 SCALE (6)150

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

Faizan Uddin, J.

1. This appeal at the instance of the plaintiff has been

directed against the judgment and decree dated 27,1,1992

passed by the High Court of Bombay in First Appeal No.

490/1974 affirming the judgment and decree dated 21,1,1974,

passed by the Civil judge, Senior Division, Ahmednagar

dismissing the suit of the plaintiff-appellant except for an

amount of Rs. 4419.81 which was admitted.

2. The appellants hereinafter shall be referred as

plaintiffs and the respondents as defendants.

3. The facts in brief leading to this appeal are that the

plaintiffs are a trading firm registered under the Indian

Partnership Act, having its Office at Station Road,

Ahmednagar. The defendants are a Company registered under

the Indian Companies Act as a Public Limited Company having

its Registered Office at Pune, The defendants are the

manufacturers of Scooters called Vespa Scooters and Vespa

Auto-rickshaws, hereinafter referred to as Vespa

commercials. Due to the shortage of automobiles at the

relevant time the Central Government in exercise of its

powers conferred by Section 18(G) of the Industries

(Development & Regulation) Act, 1091 had promulgated an

Order called the Scooter (Distribution & Sale) Control

Order, 1000" and later on similar order was promulgated in

respect of Vespa Commercials, The plaintiffs alleged that

the defendants wanted to secure proper distribution and sale

of their products mentioned above and, therefore, wanted to

appoint Agents at different places including Ahmednagar.

Further case of the plaintiffs was that the defendants by

their latter/order dated 9/12-10-1964, appointed the

plaintiffs as their permanent sole selling agent for Vespa

Scooters and December 12, 1966 for the Vespa Commercials in

the district of Ahmednagar and thus they were the sole

distributors of the said vehicles and the appointment was

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irrevocable. The plaintiffs took the plea that the

appointment constituted an agency coupled with interest and

the relationship between the parties was that of principal

and agent. The plaintiffs alleged that they secured 2700

orders for Vespa Scooters and 501 orders for Vespa

Commercials. But the defendants wrongfully terminated the

distributorship with effect from 1.7.1968 for Vespa Scooters

by their letter dated 4/7.8.1968 and by a subsequent letter

dated 28.8.1968 the defendants terminated the

distributorship for Vespa commercial also with effect form

1.10.1968 and directed the plaintiffs to transfer the orders

booked by them together with the registers and postal

deposit books to their Branch at Wakdevadi, Pune. The

plaintiffs alleged that this termination was wrongful,

illegal and without proper notice, causing loss to the

plaintiffs and, therefore, filed the suit for damages for

wrongful termination and rendition of accounts.

4. The defendants contested the suit by denying the

allegation that they and appointed the plaintiffs as their

agent. The defendants denied the relationship of agent and

principal as alleged by the plaintiffs. The defendants

pleaded that they had never appointed the plaintiffs as

their sole, permanent and irrevocable agents but their

relationship was that of principal to principal. The

plaintiffs used to pay for the said automobiles and sell

them independently. The defendants asserted that it was not

a fact that plaintiffs were appointed distributors. The

demand for supply was greater than the capacity of the

defendants to manufacture the vehicles and therefore, there

was no question of the defendant's desiring to have a better

distributing agency. The defendant's took the plea that the

plaintiffs were appointed as ordinary distributors which

could be terminated at any time. But the plaintiffs were

never required to procure any orders from the customers on

behalf of the defendants and that the defendants had a right

to terminate the contract with a particular dealer at their

sole discretion and their decision to that effect was final.

The defendants, in their pleadings refuted the claim of the

plaintiffs firm.

5. The learned Trial Judge held that the plaintiffs had

failed to establish that there was any relationship of agent

and principal between the parties and the termination of

distributorship was lawful and, therefore, dismissed the

suit of the plaintiffs except for an amount of Rs. 4419.81

which was admitted by the defendants, The High Court

reappreciated the evidence on record and recorded the

finding that there was no material to establish relationship

of principal and agent between the parties and that the

documents and the evidence on record indicated that the

plaintiffs purchased from the respondents the vehicles

allotted to them at the net dealer's price, and retained the

defference as their profit and that being so the

relationship between the plaintiffs and defendants in

respect of sale by the plaintiffs' was not the relationship

of agent and principal. With these findings the High Court

affirmed the judgment and decree of the Trial Court and

dismissed the plaintiffs appeal against which this appeal

under Article 136 (1) of the Constitution of India has been

preferred.

6. Learned counsel for the plaintiffs-appellants contended

that the distribution and sale of the Vespa Scooters and

Vespa Commercials were regulated and controlled by Scooter

(Distribution & Sale) Control Order, 1960 and after the

plaintiffs were appointed as sale distributors by the

defendants the defendants were under an obligation to sell

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the products to the customers whose orders were booked by

the plaintiffs for which the defendants gave their own

guarantee/warranty for the vehicles manufactured by them and

the defendants also gave guarantee cards duly endorsed by

them at the time of delivering the vehicles. He also

submitted that the intending purchasers of the vehicles were

required to apply in the prescribed form with a prescribed

guarantee from the post Office payable to the dealer at the

time when vehicles would be ready for delivery and the

plaintiffs in the capacity of a dealer of the respondents

entered the names of such purchasers in the register in

accordance with the date of receipt of applications and the

vehicles were delivered to the intending purchasers

according to the serial order in the said register and that

these facts coupled with latter dated 8,10,1984 with regard

to the appointment of plaintiffs-appellants as distributor,

clearly established that the relationship between the

parties was that of an agent and principal, Learned counsel

for the plaintiffs-appellants therefore, vehemently urged

that the view taken by the learned Trial Judge as well as by

the High Court is erroneous and deserve to be set aside.

7. In view of the afore-mentioned facts and circumstances

the short question that arises for consideration is whether

there existed a relationship of agent and principal between

the parties or there was only relationship of buyer and

seller between them.

8. Here a reference may be made to Section 182 of the

Contract Act which defines an agent thus :

"An `agent' is a person employed to do

any act for another of to represent

another in dealings with third persons.

The person for whom such act is done or

who is so represented, is called the

"principal".

It has, therefore, to be seen whether in the present case

the plaintiffs were employed by the defendants to sell their

products i.e. Vespa Scooters and Vespa Commercials to the

customers on their behalf or while so dealing they

represented the defendants in the transaction with third

parties i.e. the ultimate purchasers of the vehicles so as

to bring the defendants in the category of the principal and

the plaintiffs as their agent.

9. In order to determine the relationship between the

parties it would be appropriate to look to the contents of

letter dated 9.10.1964 by which the plaintiffs were

appointed as dealers/distributors by the defendants of their

products and the evidence on record as there is no written

contract precisely setting out the nature of contract

between the parties. The letter dated 9.10.1964 on which the

plaintiffs-appellants have placed reliance to spell out the

relationship of agent and principal between the parties

reads as under :

"We have pleasure in appointing you

distributor for Vespa Scooters at Ahmed

nagar. Your territory will be city of

Ahmednagar.

We have already explained to you the

procedure regarding announcement in the

paper, registration of orders etc., you

should accordingly arrange for the

necessary advertisements in the papers

and start the registration of orders

seven days after necessary announcement

appears in the paper.

10. From a bare perusal of the contents of the letter

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reproduced above it is difficult to accept that it envisages

any relationship between the parties as that of agent and

principal but it relates to the appointment of the

plaintiffs as distributors and not as an agent to sell the

products of the defendants to purchasers, The question

whether the plaintiffs took the delivery of the vehicles

manufactured by the defendants in the capacity of an agent

for sale on their behalf or whether the plaintiffs

themselves purchased the vehicles out-right, would largely

depend upon the terms of the contract.

11. The terms of the contract are not clearly spelt out

from the letter reproduced above appointing the plaintiffs

as distributors and, therefore, the evidence produced by the

parties on record has to be looked into, One Hastimal

Chandmal Muner, a partner of the plaintiffs firm was

examined as a witness who deposed that the talks took place

in his presence in respect of the dealership with one

Firodia who represented the respondents and thereafter the

letter dated 9.10.1964 was received by the plaintiffs.

According to the terms of the dealership the dealer was to

get the difference between the retail and wholesale price.

He stated that when the scooter was sold to the customer,

the customer was entitled to three free servicings thereof

by the plaintiffs for which the plaintiffs were paid Rs.

21/- by the respondents. He admitted that the company used

to despatch the letters to the plaintiffs mentioning the

allotment sanctioned in a particular month and the

plaintiffs were communicated wholesale price of the scooters

allotted in that particular month and the plaintiffs used to

send the amount on receipt of such allotment letter. H also

stated the sometimes the delivery was made even before the

payment of the amount on account of the confidence that the

defendant-company had in the plaintiffs firm. He admitted

that as per rules the plaintiffs should send the amount

first and it was thereafter that the delivery was to be

made. He also admitted that the transport charges were paid

by the plaintiffs firm and that if the scooter was damaged

during transit it had to be suffered by the plaintiff-firm.

Almost similar was the statement of Sharaschandra Kamlakant

Paranjape examined on behalf of the defendants. He

categorically stated that normally deliveries of the

vehicles were made to the distributors on receipt of the

price and if the amount was not sent the defendants did not

despatch the scooters.

12. From the evidence discussed above it is abundantly

clear that the plaintiffs were buying the vehicles from the

defendants for resale and the assertion of the plaintiffs

about agency is quite inconsistent with the notice of

transaction between the parties, The evidence discussed

above clearly goes to show that the contract was one of sale

and if in fact the plaintiffs were intended to be

constituted as agents for sale of the vehicles on behalf of

the respondents the terms of the contract would have been

entirely different. It cannot be disputed that even an agent

can become a purchaser when the agent makes payment of the

price to the principal on his own responsibility. In such a

circumstance the agreement would be one between vendor and

purchaser and not one of principal and agent.

13. Here a reference may be made to a decision of this

Court in the case of State of Mysore Vs. Mysore Spinning and

Manufacturing Company Limited [AIR 1958 SC 1002] in which

the manufacturer sold the goods to the licensed export

dealers who exported the goods to the foreign buyers were

agents of the manufacturer or the export dealers themselves

were the principals and not the agent of the manufacturers.

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This Court took the view that such a transaction would not

make the exporters as agents of the manufacturers because of

the very act of purchase, the exporters became the

principals buying as such, Similar was the view expressed by

this Court in Gordon Woodroffe & Co. Vs. S.K. M.A. Majid &

Co. [AIR 1981 SC 967].

14. Learned counsel for the appellants also submitted that

though the appointment of the appellant-firm as an agent was

irrevocable yet the respondent-company terminated the same

without reasonable notice as required by Section 206 of the

Contract Act. From the discussion afore-mentioned it is

clear that no relationship of agent and principal is

established between the plaintiffs and defendants and,

therefore, in this case, the question of application of

Section 206 did not arise. In any case it may be noted that

the respondent-company had given a notice terminating the

distributorship after about 15 days from the date of receipt

of said notice, The said period of 15 days cannot be said to

be unreasonable for termination of distributorship.

15. In the present case also as noticed above, it is clear

from the evidence that the contract provided that the

distributor will pay the price of the vehicles ordered and

delivery was to be given to the plaintiffs an payment of the

price, The defendant-company took no risk with regard to the

damage caused to the vehicles during transit and the same

had to be suffered by the plaintiffs-firm. Thus the contract

between the plaintiffs and the defendants would be one of

purchase and sale and not of any agency. In these facts and

circumstances the view taken by the two courts below cannot

be said to be erroneous so as to call for any interference.

16. In the result the appeal fails and is dismissed but

without any order as to costs.