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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.