1968 SCMR 539 (PLP)

FAZLB-AKBAR, J.-This is a certificated appeal by the plaintiff Messrs Eshaq and Company, from the judgment and decree of a Division Bench of the High Court of West Pakistan whereby their suit for recovery of Rs. 18,975-7-3 which had been decreed by the trial Court, was dismissed by the High Court in appeal. The plaintiff alleged in the plaint that between 12th January and 24th May 1966, they sold and delivered several lots of Mild Steel bars, etc., to the defendants Messrs Dawood Cotton Mills Ltd., under the orders placed by Abu Muhammad, an employee of the Mills in the purchasing department, and that after giving credit for the various amounts paid from time to time a sum of Rs. 18,975-7-3 was found due to them. This suit was, therefore, filed for recovery of the said amount. The defendants in their written statement denied the plaintiffs) claim and stated that the said Abu Muhammad who was a clerk in the purchasing department had no power and authority to place orders for supply of the said goods. The Additional District Judge, Karachi, who tried the suit found "That Abu Muhammad being admittedly a purchasing clerk taking deliveries of goods on behalf of defendants has com mitted these frauds in the course of his employment and within the scope of his authority" and hence relying on section 238 of the Contract Act held that "the defendants would be liable for the deliveries of goods taken by him in their names by means of fraud and misrepresentation. In this view of the matter he gave a decree for the full amount in favour of the plaintiffs with costs and interests on the decretal amount at the rate of 6 per cent. per annum from the date of the decree till realization of the said amount. Against the said decree an appeal was filed by the defendants in the High Court. The learned Judges of the High Court on the evidence, facts and circumstances of the case came to the con clusion that Abu Muhammad had no authority to purchase the goods in question on behalf of the Mills, that there was nothing to show that the defendants held out the said Abu Muhammad as their Agent and/or that they had knowledge of the transactions entered into by him with the plaintiffs. They, therefore, set aside the judgment and decree of the trial Coureand dismissed the suit. It is from this judgment that the plaintiff-company' has come up on appeal before this Court upon a certificate granted by the High Court. Since the High Court has reversed the findings of, the trial Court the learned Counsel appearing in support of this appeal has taken us through the evidence and accounts and has sought to assail the findings of the High Court on facts. He has contended that Abu Muhammad acted as Agent of the Mills in these transactions and as such- the Mills were liable for the amount claimed in the suit. In order to appreciate properly the question whether in these transactions Abu Muhammad acted as Agent of the Mills it is necessary to make a brief statement of facts. From the.accounts filed as Annexure 'A' to the plaint, it appears that between 12th January and May 1966, altogether there were 15 transactions between, the parties. For the first six transactions, i.e., four in January and two in March, the Mills paid for the goods either in cash or by cheques drawn on the Habib Bank Ltd., a sum of Rs. 8,680, leaving a balance of Rs. 1,

634. The Mills subsequently paid another sum of Rs. 2,184 by a cheque drawn on the Habib Bank, Ltd, Since 16-3-56 to 24-5-56, there were 9 transactions and out of Rs. 58,904-3-0 due in respect of those transactions Rs. 39.378-2-9 was paid by 6 cheques drawn by one, Masud Mirza, on Gujrat Co-operative Bank Ltd. The, plaintiffs Stiedfor the balance which was really due in respect of the last 3 transactions, Along with the cheque dated 10-4-56 for Rs. 6,957 drawn by Masud Mirza on Gujrat Co-operative Bank Ltd., the Company received the following letter :- "Dawood Cotton Mills Ltd. 41, Salehmohamed Street, Near Gordhandas Market, Karachi-2. Date 10-4-56 Ref. No. B-Nil. Messrs S. Eshak & Co., Karachi. Dear sirs, Your Bill No. Nil/Dated Nil and Nil/Dt. Nil for Rs. 1,953, 5,004-7-0, 6,957-7-0. With reference to the above, we are enclosing herewith our cheque No. 16345 drawn on Gujrat Co-operative Bank Ltd., for the total sum of Rs. 6,957-7-0 (Rupees six thousand, nine hundred and fifty seven and annas seven only), which please receive and send us your official receipt at your earliest. Thanking you, we are, Yours faithfully, 6,957-7-0 for Dawood Cotton Mills, Ltd.; (Sd.) Illegible. (Sd.) Illegible." Abu Umer, the Manager of the Mills, has denied his alleged signature in the above letter. In the absence of any evidence in rebuttal the Courts below have found that this letter was not written by the Mills. Ishaq Bhai, a Partner of the plaintiff-company, stated in his evidence that on receipt of the letter he had telephoned to Abu Umer but the said fact was denied by Abu Umer. It may also be pointed out that there was no endorse ment or even the stamp of the Mills on any of the cheques drawn by Masud Mirza on Gujrat Co-operative Bank, Ltd, to show that it bad passed through the Milk. On the other hand, one of the cheques shows that Masud Mirza issued the same on behalf of 'Yasmin & Co.'. It was, therefore, duty of the Company to enquire why someone else was paying for the alleged supply of goods to the Mills. Further, Abu Umer, Manager of the Mills, has stated that cheques were issued on behalf of the Mills on their own printed cheques under the signatures of two of their directors. In view of these facts and circumstances, we kagree with the learned Judges of the High Court that the Company acted negligently in accepting these cheques which on the face of it bad no connection with the appellants (Mills)'. Furthermore, both the Courts have found that Abu Muhammad by fraud and misrepresentation obtained goods from the plaintiff-company. Now, the question is "Could the Mills be made liable for the fraudulent acts of Abu Muhammad, their purchasing clerk?" The learned Counsel has relied on the evidence of Ishaq Bhai P. W. to show that Abu Muhammad was authorised by the Manager Abu Umer to purchase goods for the Mills. His evidence is as follows:- "1st transaction was on 12-1-56. When this transaction took place Abu Umer Manager of defendant Co. present in Court and Mr. Abu Muhammad, purchasing clerk of defendants were present. They made payment by cheque. The Manager Introduced the purchasing clerk to us and mentioned that he could get goods on behalf of the defendants." Abu Umer, the Manager, has stated in his evidence that Abu Mahammad had no authority to purchase goods for the Mills and that his duty was merely to take delivery of goods. The Mills' Office is at Karachi. Abu Umer D. W. 1 is In charge of the purchases for the Mills. It is really inconceivable that he would authorise a petty clerk to place orders verbally for goods which may run into thousands. The learned Judges of the High Court have, therefore, rightly refused to place much reliance on the vague statement of Isbaq Bhai (P. W. 1). Besides the above, there is no other evidence to show that Abu Muhammad had authority to make these purchases. On the other hand, the facts and circumstances and specially the mode of payment, clearly indicate that but for their gross negligence the plaintiffs could have easily detected that Abu Muhammad was making these purchases not for the Mills but for some one else. In any event, in the absence of clear evidence a clerk whose duty does not include purchase of goods, cannot be regarded as having authority to do so. This proposition is plainly based on sound and reasonable grounds. It is needless to say that it will place business of any kind in great jeopardy from actions of unscru pulous clerk if goods purchased by him in the name of the Mills he serves, were to become liability of the Mills on that ground alone. In the present case, no written orders from the Mills were placed for the disputed transactions nor any payments were made by them in respect of these transactions. From the facts and circumstances it will also be difficult to say that the Mills held out Abu Muhammad as their Agent for making these purchases. The Mills, therefore, cannot be bound by the acts done by Abu Muhammad which, in fact, he had not been authorised to do and which was also not within the scope of his ostensible authority. For the reasons stated above, we agree with the High Court that the plaintiffs have failed to prove their claim against the defendants. This appeal is accordingly dismissed with costs. Appeal dismissed.