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Second Civil Appeal No. 146 of 11966, decided on 23rd December 1972.

Ss. 230 & 235 read with Evidence Act (I of 1872), S. 115 ‑ Agent, responsibility of ‑Estoppel‑Agents pleading to be agents of foreign principals for limited purpose of receiving freight‑Agents in reply to requests for payment of bills not disclaiming their liability‑Agents' letters, on other hard, holding out agents as fully competent and authorised to make payment‑No suggestion from agents during whole course of dealings that responsibility vested with principals ‑ Agents conduct, in effect, held, amounted to representation that they were either principals and entered into contract themselves, or were agents with full authority to make payments on principal's behalf‑Rule contained in S. 235 fully applied to case and agents liable to pay bills.

In their letters, the appellants (agents) did not disclaim their liability to make payment of the balance of the bills, which they had received for payment from the masters of the ships. In fact, these letters would tend to show that the appellants held themselves out as fully competent and authorised to make pay ment of the bills. The respondents were not referred by the appellants to address themselves to their foreign principals for payment of their dues. Thus, the appellants' conduct, in effect, amounts to representation that they were either principals and entered into contracts themselves, or were agents of foreign principals with full authority and competence to make payments on behalf of their principals. In the whole dealings between the parties, there is no suggestion from the appellants that the primary liability for payment of the respondents' bills is that of their principals. The appellants' case was that they were agents of their foreign principals for a limited purpose, that is, to receive freight. But the letters would show that they, in fact, represent ed themselves to have authority and competence to make payment of the bills in dispute. At no time did they make it clear to the respondents that they should have recourse to their foreign principals to receive payment of their bills, or the balance thereof. Throughout, they appear to have given the impression that the respondents bills shall be paid by the appellants themselves. Thus, the rule contained in section 235 of the Contract Act and elucidated in the Allahabad decision. Ganpat Prasad and another v. Sarju (1912) 13 I C 94 has full application to the present case.

Dawsons Bank Ltd. v. Nippon Menkwa Kabushihi Kaish A I R 1935 P C 79; Kali Dayal v. Umesh Prasad and others A I R 1922 Pat. 63; Allahbux Pindok and others v. Nusserwanji & Co. and others A I R 1936 Sind 99; West Punjab Government v. (Mian) Akbar Hussain P L D 1952 Lah. 430; Collen v. Wright (1857) 7 E & B 301; Starkey v. Bank of England 1903 A C 114 and Ganpat Prasad and another v. Sarju (1912) 13 I C 94 ref.

S. 235 and Evidence Act (I of 1872), S. 115 ‑ Estoppel ‑ Section 235 wider in scope than S. 115‑Rule of estoppel applies when person acting on represen tation alters his position‑Such condition not necessarily applicable to cases covered by S 235‑Person representing himself to be agent of another and inducing such person to deal with him as such agent Section 235, held, fully applicable to case.

Section 235 of the Contract Act is wider in its scope than section 115 of the Evidence Act. Under this latter provision of law, the view has generally been taken that tae rule of estoppel would apply when a person, acting on the representation made to him, alters his position. This condition would appear not to be necessarily applicable to cases covered by section 235 of the Contract Act, under which it would be enough if a person represents himself to be an agent of another and induces a third person to deal with him as such agent.

S. 115‑Estoppel‑Representee made to incur expenditure in bringing suit‑Such incurring of expenditure, held, amounted to alteration in position of representee.

Expenditure of money in litigation has been held as altera tion in the position of a person to whom certain representations have been held out. In Monir's Commentary on the Law of Evidence, on page 342 referring to Bigelow, 6th Edn., p. 696, it has been stated that alteration in the position of the representee may assume an infinite variety of forms, including expenditure of money in litigation..

Monir's Commentary on the Law of Evidence, p. 342 rel.

S. 115‑Estoppel‑Need not be specifically pleaded‑Record bearing out whole evidence‑Open to Court to consider whether party can be allowed to take stand contrary to its earlier position or representations made to other party.

The whole evidence being on record, it is open to the Court to consider whether a party to the proceedings can be allowed to take a stand contrary to its earlier position, or representations made to the other party.

Monir's Commentary on Evidence (1969 Edn.) not fol.

A. K. Lakhani for Appellant.

Asif Zahidi for Respondent.

Dates of hearings 17th September 1971 ; 20th, 21st and 23rd December 1972.

‑This second appeal turns on a legal ques tion, that is, whether an agent of a foreign principal is liable for a claim against his principal in cases where the agent represents that he has certain authority from his principal, when, in fact, he has authority of another description. To appreciate this question, the brief facts of the case may be narrated hereunder. The appellants were, at material times, agents of an Indian Ship ping Line, namely, Ashok Lines. Two ships of Ashok Lines, s.s. Nilgiri and s.s. Sea Fox visited the Karachi port, and the respondents, on the orders of the masters, supplied various goods to these ships. The masters signed these bills and forwarded the same to the appellants to make payments thereof to the respon dents, the appellants being local agents of Ashok Lines. The appellants made part payments of these bills, but failed to pay the balance, for which a suit was brought by the respondents which was decreed by a Civil Judge at Karachi for Rs. 10,243.19. The appeal against the judgment of the Civil Judge was dismissed day a learned Additional District Judge of Karachi on 19‑1‑1966. This second appeal questions the judgments of the trial Court as well as the first appellate Court.

2. The appellants' case, as made out in the written state ment, was that they were agents of Ashok Lines for a limited pur pose, that is, to receive freight charges only, and that they had no thing to do with the orders placed for the goods supplied by the respondents by the masters of the two ships mentioned above. To this, the respondents' reply is that by their conduct the appel lants held out themselves firstly as principals, and alternatively, as agents fully competent to make payment of the goods ordered by the ships of Ashok Lines, and therefore they are estopped from disputing their liability to make payment of the balance as agents of foreign principals under section 230 of the Contract Act.

3. Before discussing the legal question as to whether the appellants are estopped from disputing their liability to make payments of the balance of the bills, it would be convenient to take notice of some evidence which bas come on the record. T would first refer to the deposition of the plaintiffs' witness, Nusserwanji (Exh. 5), who stated that all the transactions for which his Company submitted the bills to the masters of the ships were entered into fn his presence, and that it is the practice of his Company to submit the bills for goods supplied to ships to the local agents of the ship. According to this witness, the appellants are the local agents at Karachi of Ashok Lines. The appellants' director, Abdul Rasool examined himself as Exh. 39. He denied that his Company entered into any contract with the respondents for supply of provisions to the Ashok Lines' ships, which visited Karachi. He further stated that the appellants are not the agents of Ashok Lines for this purpose. He, however, admitted that the appellants did make part payments of the hills submitted by the respondents, but they did so, according to this witness, at the instance of Ashok Lines, who had placed the necessary funds at the appellants' disposal. In cross‑examination this witness admitted that he did not clearly intimate to the res pondents that his Company was not liable to pay the balance of the bills. The next relevant piece of evidence are two letters written by the appellants to the respondents. The first letter is Exh. 36 and is dated 14th October 1960 and reads as follows :

"Messrs Pestanjee Bhicajee, Stevedores & Dubashes, Karachi

Dear Sirs,

Re : Your outstandings against s. s. Nilgiri.

As per arrangements approved by you for payment of your bills, we are sending herewith our cheque No. 423103 dated 14‑10‑1960 for Rs. 2,873‑9-6 (Rupees two thousand seventy -three annas nine and pies six only) in full and final payment of your bill No. 16. The remaining bill No. 14 will be paid in another fortnight's time so that your entire dues will have been cleared up.

We are very much grieved for not having paid your bills promptly on presentation as was our practice before s.s.Nilgiri. The bills remained outstanding on account of unavoidable circumstances which we have already personally explained to you. We hope you will condone the: delay and continue your good relations with us. We on our part give you solemn assurance that in future all your bills will be paid promptly.

Thanking you,

Yours faithfully,

for National Carriers Limited,

(Sd.) A. M. Lakho, Director."

The second letter, Exh. 38, dated 26th March 1961, which was addressed to the Official Assignee as Receiver of the respondents' firm, which was under dissolution, is to the following effect :

"To the Official Assignee of Karachi, High Court of West g. Pakistan, Karachi Bench, Karachi.

Re : Dr. Punshotan Dubash v. Ferozshah and another‑Suit No. 110 of 1957.

Sub : Oustanding bills for the year 1959‑60 and 1960‑61 against National Carriers.

Ref : Your letter No. OR/266 of 1961 dated 28‑2‑1961.

Dear Sir,

These bills are under scrutiny with regard to rates etc. As soon as this is over, we shall communicate with you in the matter.

Thanking you,

Yours faithfully,

for National Carriers Limited.

(Sd.) Director."

4. In bout these letters, the appellants did not disclaim their liability to make payment of the balance of the bills, which they had received for payment from the masters of the two afore mentioned ships. In fact, these letters would tend to show that the appellants held themselves out as fully competent and authorised to make payment of the bills. The respondents were not referred by the appellants to address themselves to Ashok Lines in India for payment of their dues. Thus, the appellants' conduct, in effect, amounts to representation that they were either principals and entered into contracts themselves, or were agents of Ashok Lines at Karachi with full authority and compe tence to make payments on behalf of their principals. It is in the context of the evidence led by parties that the learned Advocates addressed their legal arguments to us, which, in effect, remained confined to the applicability of the rule contained in section 115 of the Evidence Act. Mr. Asif Zahidi placed reliance on Dawson& Bank Ltd. v. Nippon Menkwa Kabushihi Kaish (AIR 1935 P C 79) to support his contention that the appellants held themselves out as agents of Ashok Lines with full competence and authority to make payments of the respondents' bills, and that, therefore, they are prevented from making an assertion to the contrary. Mr. Arif Zahidi referred to three further decisions. One decision is of the Patna High Court. Kali Dayal v. Umesh Prasad and others (A I R 1922 Pat. 63), in which it has been held that estoppel is a rule of evidence precluding a person from denying the truth of that thing which he has induced another person to believe to be true. The next cases are, Allahbux Pindok and others v. Nusserwanji & Co. and others (A I R 1936 Sind 99) and West Punjab Government v. (Mian) Akbar Hussain (P L D 1952 Lah. 430) which are to the same effect as the Patna decision with regard to the scope of estoppel. On the other hand, Mr. A. K. Lakhani, the learned Advo cate for the appellants, urged that the rule of estoppel should not be applied to this case, as estoppel was not pleaded n the suit by the respondents. He referred to Monir's Commentary on Evidence (1969 Edn.), in which it is stated that, since the application of the rule of estoppel depends on certain questions of fact, it should be specifically pleaded either in the plaint, or by way of objection. We are unable to accept Mr. A. K. Lakhani's contention. In our view, the whole evidence being on record, it is open to the Court to consider whether a party to the proceedings can be allowed to take a stand contrary to its earlier position, or representations made to the other party.

5. In our view, this case has to be considered with reference to the provisions of section 115 of the Evidence Act, and sec tions 230 and 235 of the Contract Act. The evidence shows that, at no time up to the suit was filed, did the appellants qualify their liability with regard to the payment of the bills of the res pondents. Their acceptance of the bills, and payments of some of these bills, would create an impression that it is the appellants themselves who contracted, through their agents the masters of the vessels, to purchase the goods from the respondents. In the whole dealings between the parties, there is no suggestion from the appellants that the primary liability for payment of the respondents' bills is that of their principals in India. In essence, there fore, the appellants can be said to have represented themselves as principals to the respondents. Even if it were not so then the appellants would be liable for the respondents' bills either under section 230, or under section 235 of the Contract Act. Under section 230, an agent is personally liable under a contract made by him for sale or purchase of goods for a merchant resident abroad, or where the agent does not disclose the name of his principal, or where the principal, though disclosed, cannot be sued. The rule contained in section 230 would apply to the present case. Mr. A. K. Lakhani, however, contended that no contract was entered into between the appellants and the respondents for supply of goods to the vessels mentioned above, and that these goods were supplied by the respondents on the orders placed with them by the masters of the vessels. But the conduct of the appellants was such that they should be deemed to have impliedly contracted with the respondents for supply of the goods in the vessels in question. The appellants would also be liable under section 235 of the Contract Act, which reads as under :

"235. A person untruly representing himself to be the authorised agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing."

This section itself is based on the English decision in Collen v. Weight ((1857) 7 E & B 301), and the rule laid down therein has been rearmed in several English decisions, the leading case being Starkey v. Bank of England ((1903) A C 114). Under section 235 of the Contract Act, the rule is that a person is liable if he induces a third person to deal with him as authorised agent of another. This rule would cover even the case of a person who represents that he hag certain authority from another, though his actual authority is of another descrip tion. In this connection, reference may be made to an Allahabad decision, Ganpat Prasad and another v. Sarju ((1912) 13 I C 94). It is interesting to note that section 235 of the Contract Act is wider in its scope than section 115 of the Evidence Act. Under this latter provision of law, the view has generally been taken that the rule of estoppel would apply when a person, acting on the representation made to him, alters his position. This condition would appear not to be necessarily applicable to cases covered by section 235 of the Con tract Act. under which it would be enough if a person represents himself to be an agent of another and induces a third person to deal with him as such agent.

6. Now, the appellants' case is that they were agents of Ashok Lines in Karachi for a limited purpose, that is, to receive freight. But the two letters (Exh. 36 and Exh. 38) reproduced ab3ve would show that they, in fact, represented themselves to have authority and competence to make payment of the bills in dispute. At no time did they mike it clear to the respondents that they should have recourse to Ashok Lines in India to receive payment of their bills, or the balance thereof. Throughout, they appear to have given the impression that tire respondents' bills shall be paid at Karachi by the appellants themselves. Thus, the rule contained in section 235 of the Contract Act and eluci dated in the Allababad decision, Ganpat Prasad and another v. Sarju has full application to the present case. With regard to the applicability of section 235 of the Contract Act also, Mr. A. K. Lakhani contended that no contract was entered into between the appellants and the respondents. Again, we would say that the conduct of the appellants in their dealings with the respondents was such that they should be deemed to have im pliedly contracted with the respondents for supply of goods to the two vessels mentioned above.

7. Mr. A. K. Lakhani contended again, with reference to section 115 of the Evidence Act that rule of estoppel would apply only if the respondents have been led by the appellants' conduct to alter their position. But, in our view, even under section 115 of the Evidence Act, the appellants are liable to make payment of the disputed bills, as, by their conduct, they have, in fact, in duced the respondents to alter their position, in that the respon dents were made to Incur expenditure on the suit from which the present appeal arises. Expenditure of money in litigation has been held as alteration in the position of a person to whom cer tain representations have been held out. If authority is needed for this rule, then we would refer to Monir's Commentary on the Law of Evidence, on page 342 whereof, referring to Bigelow, 6th Edn., page 696, it has been stated that alteration in the position of the representee may assume an infinite variety of forms, including expenditure of money in litigation.

8. Our view is that sections 230 and 235 of the Contract Act are applicable to the present case and even under section 115 of the Evidence Act, the appellants are liable to make payment of the balance of the respondents' bills. This appeal, therefore, fails and is dismissed with costs.

S. A. H.

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