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PETITIONER:

TROJAN & CO. LTD.

Vs.

RESPONDENT:

RM. N. N. NAGAPPA CHETTIAR.

DATE OF JUDGMENT:

20/03/1953

BENCH:

MAHAJAN, MEHR CHAND

BENCH:

MAHAJAN, MEHR CHAND

DAS, SUDHI RANJAN

CITATION:

1953 AIR 235 1953 SCR 780

CITATOR INFO :

R 1964 SC 136 (11)

R 1966 SC 735 (8)

R 1977 SC 890 (8)

D 1980 SC 727 (11)

ACT:

Contract-Damages-Sale of shares-Sale induced by fraud-

Measure of damages-Difference between price paid and market

price on date of sale-Fluctuations of market and sudden

closure of Stock Exchange, effect of--Interest on damages-

Practice-Conflict between pleadings and proof-Decree on

alternative claim not set up in plaint-Legality.

HEADNOTE:

Where a person is induced to purchase shares at a certain

price by fraud the measure of damages which he is entitled

to recover 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 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

790

panic in consequence of the very fact that was fraudulently

concealed, then the real value of the shares has to be

determined on a Consideration of a variety of circumstances,

disclosed by the violence 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 April, 1937,

at Rs. 77 and Rs. 77-4as, per share 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. 428as. The High Court awarded the difference

between the price paid by the plaintiff and the prices

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fetched on resale as damages. On appeal,

Held, that the prices received at the resale on the 20th

and 22nd April could 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

know 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.C. 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 defendants had sold certain shares belonging

to him without his instructions, but he was not able to

prove that the sale was not authorised by him: Held,

reversing the decision of the High Court, that the plaintiff

could not be given a decree for the sum 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.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No..139 of 1962.

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 O.S.A. No. 34 of 1947, arising out

of

791

the Judgment and Decree dated the 18th April, 1947, of the

said High Court (Clark J.) in the exercise of the 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. Parasuram, with him) for the

respondent.

1953. March 20. The 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 his brothers. In the hope of

getting rich by obtaining quick dividends by speculating on

the stock-exchange be, through the 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, vie.,

Indian Iron & Steel Co. Ltd., and the Bengal Iron & Steel

Co. Ltd., merged into one concern and a new issue of shares

was made. The 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. The 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 in the

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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

792

for a while. On the same evening plaintiff's stockbroker

Annamalai Chettiar, who was carrying on business in firm

name Trojan & Co., had telephonic conversation with one

Ramdev Chokani, a member of the Calcutta Stock Exchange, on

this subject and from this conversation he gathered that a

sharp fall in the prices of Indian Irons was likely. At

that time Annamalai Chettiar had on his bands 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 got 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.

On the 6th April the Committee of the Calcutta Stock

Exchange Association passed a resolution closing the Stock

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, run.

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, 1937, he

made payments to defendants of various amounts totalling Rs.

60,000. A lot of 700 shares was sold by the plaintiff to

Pilani & Co. and on 19th April, 1937, he instructed the

defendants.for sale of the remaining 3,000 shares at the

best price obtainable. The defendants sold 2,000 shares on

20th April, 1937, for prices ranging between Rs. 47-4-0 to

793

Rs.44-12-0 per share. The remaining 1,000 shares were sold

by him through Messrs. Ramlal & Co. at Rs. 42-8-0 per share

on 22nd April, 1937. The result of it was that on 22nd May,

1937, when the accounts between the plaintiff and the

defendants were settled it was found that plaintiff was

heavily indebted to them in the sum of Rs. 51,712-7-0 and

the credit balance of Rs. 64,000 that he had with the

defendants at the end of March, 1937, 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 Ramnad 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 Ramlal & Co.

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In the course of the insolvency proceedings defendants

tendered proof of their claim on the promissory note,

Exhibit P-33. The Official Assignee having acquired

knowledge about the telephonic conversation that had passed

between Annamalai Chettiar and Ramdev 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 be-

longed to one of its partners, Annamalai Chettiar, and also

on account of the failure on its part to disclose its

knowledge of the likelihood of a slump in the market because

of the notice given by its members to close the Stock

Exchange.

794

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 29th

September, 1938, filed an application in the High Court, No.

313 of 1938. The 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 wag refused. Defendants then

applied to the Privy Council for special leave and that

application was also dismissed some time in October, 1943..

On the 28th September, 1940, when the appeal 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 and 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. The second referred to a transaction of Associated

Cements. On 22nd March,1937, the plaintiff had sold through

the defendants 5O shares in Associated Cements at Rs.180-8-0

per share. On 30th March, 1937, he had similarly sold a

further 200 shares in Associated Cements 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 at

795

Rs. 151 a share. 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

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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 26th

August, 1944. Meantime, that is to say, on 21st February,

1944, the adjudication of the plaintiff was annulled and on

his application 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 favour of

103

796

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

appeal 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 Tatas 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 discussed in that court were in respect of the trans-

action 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 night

of the 6th 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.

The 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 ques-

tion canvassed at this trial was whether the plaintiff

797

had suffered any damage as a consequence of this fraud and

if so, how were the damages to be measured. In the plaint

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plaintiff claimed that he was entitled to be recompensed for

all loss and damage which he had suffered. A sum of Rs.

45,042-9-0 was credited 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 Rs. 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

plaintiff, 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 6th

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 in error in his assessment of the

real value of these shares on 5th April, 1937, 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 circum-

stances of this case it could not be said that the plaintiff

acted unreasonably in holding on to the shares for the time

that be 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 contentious raised by him in the High

798

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 transaction, 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, he 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 plaintiff 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 affected by the very fact

concealed from the plaintiff, its effect disappeared by the

10th April, when the fact became fully known and damage

should have been assessed on the difference 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 contract 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 circum-

stance. 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.

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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 purchase

provided of course that there was a fair market then. The

question to be decided in such a case is what could the

plaintiff have obtained if he had resold forthwith that

which he bad been induced to purchase by the fraud

799

of the defendants. In other words, the mode of dealing with

damages in such a case is to see what it would have cost him

to get out of the situation, i.e., how much worse off was

his estate owing to the bargain in which he entered into.

The law on this subject has been very appositely stated in

McConnel v. Wright(1) by Lord Collins in these terms:-

"As to the principle upon which damages are assessed in

this case, there is no doubt about it now. It has been laid

down by several judges, and particularly by Cotton L. J. in

Peek v. Derry(2), 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 his loss, and that loss is measured by the money which

was in his 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 he has got an equivalent for that money,

that loss is diminished; and I think, in assessing the

damages, prima facie 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 wag

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,

(1) [1903] 1 Ch. 546. (2) 37 Ch. D. 541.

800

then the real value of the shares has to be determined on a

consideration of a variety of circumstances disclosed by the

evidence led by the 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, never-

theless, if there is no market or there is 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 resale 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 referred to above, be

taken as the real or fair value of the thing and the

representee 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,

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provided such subsequent events are not attributable to

extraneous circumstances which supervened on account of the

retaining of the thing. These, 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 fact and

the concurrent findings of the courts below on such points

except in very exceptional circumstances are not 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.

801

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. Without 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 own 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 buyers and sellers had information that the

market was to be closed on 8th and 9th April to enable

settlement of outstanding transactions to be effected, and

had appreciated the effect of that decision. In the words

of Buckley J. in Broome v. Speak(1), it is indeed a

difficult question to answer beat 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 facie 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

(1) [1931] I. Ch. 586.

802

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 Satur day 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 6th April the price

was Rs. 77. On Tuesday the 6th, the day when the decision

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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 Wednesday 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, 1937, amply

bears out this fact. In this report it was stated as

follows :-

" The outstanding feature of the Indian markets during the

week under review was the sudden landslide in Indian Iron

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 Rs. 80.

At this dizzy height, the markets lost their equilibrium and

frenzied selling resulted in a sensational decline of about

25 points. The heavy liquidation was due to a predominance

of weak holders-that had come into the market at a late

stage. Further, selling was accentuated 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. Heavy 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

heavy liquidation."

803

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 16th 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. 74 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 Trojan & 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

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and closed at Rs. 47. The 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

104

804

Madras between the 8th and 17th which was a Saturday, and on

the 17th the prices seemed to be settling down at Rs. 46.

On the 19th the plainti gave to the, defendants an 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 the 20th at prices

varying between Rs. 44-12-0 to Rs. 47-4-0. The remaining

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 that 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 evidence 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 godown. He said that he was told by the

defendants to sell the shares but no purchasers were

available and in spite of his keenness to liquidate them he

was not able to do so before the 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 this material, we are

satisfied that the market rate prevailing on the 5th, 6th

and 7th had been affected by reason of the decision of the

Calcutta Stock Exchange to keep the market closed on the 8th

and 9th and the market did not settle 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. The difference between these

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 on account of the 3,000

shares at the rate of Rs. 31 per share.

The 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 and which credit disappeared by

reason of the failure of the suit on the promissory note.

At the hearing of the case before Bell J. the contention

that the purchase was unauthorized was abandoned by counsel

and the same position was adopted before Clark J. During

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cross-examination 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 the 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 he 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 plaintiff the

money actually due in respect of that particular

transaction. It also held

806

that the plaintiff's claim in respect of this item of

Rs.6,762-8-O was with in 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 grounds 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 asked for and no prayer was ever made to amend the

plaint so as to incorporate in it an alternative case. The

allegations on which the plaintiff claimed relief in respect

of these shares are clear and emphatic. There was no

suggestion made in the plaint or even when its amendment was

sought at one stage that the plaintiff 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. Accounts 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

amount found due to the plaintiff from 5th April, 1937, to

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

and 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 his 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 that interest is allowed by a court of eqity in

the case of money obtained or retained by fraud. As

807

stated in article 423 of Volume 1 of Halsbury, the agent

must also pay interest in all cases of fraud and on all

bribes and secret profits received by him during his agency.

Their Lordships of the Privy Council in johnson v. Rex(1)

observed as follows: --

"In order to guard against any possible misapprehension

of their Lordships' views they desire to say that 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

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jurisdiction both equitable and legal."

The 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 paid to

the defendants a sum of Rs. 60,000 in cash which he would

not have parted with otherwise and he also lost the money

which stood at his credit with the defendants. 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 in 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 one year and six months during

which the decree stood satisfied. The facts are that on 9th

March, 1943, a decree for Rs. 51,805-1-0 carrying interest

at six per cent. was

(1) [1904] A.C. 817.

808

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. This amount was

returned by the Official 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 on 16th March, 1944. It

was contended that during the period when the money remained

with the Official Assignee who was the plaintiff no future

interest was payable as the decree stood satisfied during

that period. The 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 paid the money to the

decree-holder 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 September, 1944.

The appeal is therefore allowed to the extent indicated

above. The decree of the High Court will be

809

modified and plaintiff will be entitled to damages in the

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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 the plaintiff will not be allowed interest

from 9th March, 1943, to 12th September, 1944. In the

result the decree given to the plaintiff in the sum of Rs.

61,787 is reduced to Rs. 42,175. He will get interest at

six per cent. per annum from 5th April, 1937, until payment

or realization except for a period of one year and six

months. Plaintiff will get proportionate costs throughout.

Appeal allowed in part.

Agent for the appellant: Ganpat Rai.

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