1. This case, which involves a sum of three thousand rupees only, has been contested as a test case to determine certain points in the diamond trade in Bombay. Plaintiffs, a firm dealing in diamonds, handed over to defendant No. 1 173 diamonds on or about November 8, 1934, on terms signed by him in the plaintiffs' book. That document runs in the following terms:
Zaveri Amritlal Raichand, Bombay, 8-11-1934.
Written by Shah Fatehchand Lallubhai.
I have this day received from you the goods specified below, for the below-stated purposes and on the below-stated conditions.
1. The goods have been entrusted to me for the sole purpose of being: shown to the intending purchasers.
2. The ownership of the goods is of you alone and I have no right to or interest in them.
3. I have no authority whatever to sell, mortgage the goods or to deal with them otherwise.
4. I am bound to return the goods whenever you make a demand for their return,
5. I am responsible for the return of the goods to you in the same condition in which I have received them. And so long as I do not return them to you, I am liable and responsible for them in all respects.
Particulars of the goods:
Diamond brilliants 173 in number, ratis 14, Rate up to Rs. 225/-
The Signature of Shah Fatehchand Lallubhai in respect of the "jangad" (goods taken on approval) by the hand of Bhagwandas.
Diamond Brilliants 58 in number, carat 5-5, Rate 15-3.
The signature of Shah Fatehchand Lallubhai in respect of the "jangad" (goods taken on approval) by the hand of Bhagwandas.
2. Plaintiffs not having received back the diamonds for some time called upon defendants Nos. 1 and 2 to return the same, but they were put off. Defendants Nos. 1 and 2 are partners and do business as brokers in diamonds. Defendants Nos. 3 and 4 are stated to be brokers in jewellery. The plaint states that on making inquiries the plaintiffs learnt that the defendants had conspired together to deprive them of the diamonds. The plaintiffs thereupon moved the police and the police recovered the diamonds from defendant No. 4's possession. Plaintiffs then filed a complaint for criminal breach of trust and conspiracy. In this suit the plaintiffs claim recovery of the diamonds on the following grounds : (1) That the defendants had entered into a criminal conspiracy to deprive the plaintiffs of the diamonds. (2) That defendants Nos, 1 and 2 had committed criminal breach of trust in respect of the diamonds and defendant No. 4 had obtained possession of the diamonds with notice that an offence had been committed in respect thereof. (3) That the plaintiffs were the owners of the diamonds and as such were entitled to recover the same from the defendant who was in possession of them. Defendants knew that none of them had authority to deal with the diamonds of which plaintiffs were the owners. (4) That the defendants held the diamonds in trust for the plaintiffs and the plaintiffs sought to' follow the same in the hands of defendant No. 4. The prayers are for the return of the diamonds or recovery of their value.
3. Defendants Nos. 1 and 2 admitted in their written statement that they had received the diamonds from the plaintiffs as brokers on the terms mentioned in paragraph 3 of the plaint. According to them they had returned the diamonds to the plaintiffs, who sold the same directly to defendant No. 3. They, therefore, contended that they were not liable to the plaintiffs at all.
4. In his written statement defendant No. 3 alleged that he received those diamonds from defendants Nos. 1 and 2 jangad and in his turn delivered over the same to one Hiralal Jivabhai, in order that Hiralal may sell the same to his customer. In that written statement it was urged that defendant No. 3 having merely passed on the diamonds he was not liable to the plaintiffs.
5. Defendant No. 4 denied the charges of conspiracy made in the plaint and also denied that he had any knowledge of any offence having been committed in respect of the diamonds. Against the plaintiffs' claim to recover the diamonds as the owners thereof, defendant No. 4 stated in paragraph 9 of his written statement that defendants Nos. 1 and 2, who were mercantile agents, were, with the consent of the plaintiffs, in possession of the diamonds and the same were sold by them, when acting in the ordinary course of business, to defendant No, 3 and therefore that sale was valid and binding as if it was expressly authorised by the plaintiffs. Defendant No. 4 contended that he purchased the said diamonds from defendant No. 3 in good faith, and at the time when he purchased them, he had no notice of the fact that defendant No. 1, 2 or 3 had no authority to sell them. He, therefore, contended that the plaintiffs were not entitled to recover anything from him.
6. On these pleadings defendants Nos. 1 and 2 raised five issues. After the case proceeded for a short time those defendants withdrew and the case thereafter proceeded against them ex parte. Defendant No. 3 did not appear at the hearing to defend or support his written statement. On behalf of defendant No. 4 ten issues were raised. At the commencement of the trial Mr. Desai for the plaintiffs intimated that he did not propose to establish any criminal conspiracy or allegations contained in paragraph 5 of the plaint. Issues Nos. 1 and 2 were, therefore, given up and are found against the plaintiffs.
7. Plaintiffs have to prove in the first instance that the 173 diamonds belonged to them. Amritlal, a partner in the plaintiff firm, gave evidence to support that claim. He produced his book in which defendant No. 1 had signed the entry containing the terms on which the diamonds were received by his firm from the plaintiffs. In his oral evidence Amritlal further stated that the diamonds were never sold and the entry in his book remains uncancelled. That supports the plaintiffs' case. He produced his sale book in which there was no entry in respect of the sale of 173 diamonds. In my opinion Amritlal's evidence satisfactorily establishes that the plaintiffs themselves never sold the 173 diamonds to defendants Nos. 1 and 2 or to defendant No. 3. The 173 diamonds produced by defendant No. 4 were identified by Amritlal as his diamonds and he was not cross-examined on that point at all. The result is that the plaintiffs established that the diamonds, which were put in as exhibit F, were plaintiffs' property and had not been sold by them.
8. In my opinion the evidence led on behalf of the plaintiffs does not establish any case of fraud or offence having been committed in respect of obtaining the diamonds from the plaintiffs. In Amritlal's evidence there is nothing to suggest that when defendant No. 1 received the diamonds from the plaintiffs he had any fraudulent or criminal intention. The sixth issue must, therefore, be found against the plaintiffs.
9. Defendant No. 4 denied that when he purchased the diamonds he had any, notice that defendant No. 1, 2 or 3 had no authority to deal with them or that the plaintiffs were the owners thereof. The evidence does not establish that when defendant No. 4 received the diamonds he had notice of want of authority in the defendants or any of them. The evidence does not show that at any stage defendant No. 4 knew that the diamonds had come to defendant No. 3's possession from defendant No. 1. The first part of the fifth issue should therefore be answered in the negative. As regards the second part, defendant No. 3 was called as a witness by the plaintiffs. According to him he handed over the diamonds to Hiralal Jivabhai and at that time had told Hiralal that he had received the diamonds jingad from defendants Nos. 1 and 2 and that they were plaintiffs' property. Defendant No. 3 had not handed over these diamonds to defendant No. 4. Plaintiffs have, therefore, failed to establish that defendant No. 4 was aware that the plaintiffs were the owners of the diamonds when they received the same. The second part of the fifth issue should, therefore, be answered also in the negative.
10. Although defendant No. 4 has raised no issue as regards the plaintiffs' claim to follow trust property in his hands, the evidence does not establish that there was any such trust created or that the plaintiffs were entitled to follow trust property.
11. The main contest between the parties is on the defence formulated in paragraph 9 of defendant No. 4's written statement. That is covered by issues Nos. 7 to 11. The defence is based on Section 27 of the Sale of Goods Act. The first question in that connection is whether there was a sale by defendant No. 3 to defendant No. 4. In his evidence defendant No. 3 denied that he had sold the diamonds to defendant No. 4. That is contradicted by defendant No. 4 in his evidence. In support of his statement defendant No. 4 produced an endorsement made on the back of the counterfoil of his cheque (exhibit No. 4) to the effect that the same was paid in full settlement of the diamond account to defendant No. 3. In the whole counterfoil book produced by defendant No. 4 this is the only counterfoil on which there is an endorsement at all. Moreover the endorsement does not mention 173 diamonds. That is material because it is established by evidence that two lots of nineteen and twenty diamonds of Dalpatram Jashkaran were sold by Dalpatram to defendant No. 3 and the cheque for Rs. 2,715, counterfoil of which is exhibit No. 4, was handed over to Dalpatram, but the cheque was dishonoured. In further support of his case that there was a sale of 173 diamonds to him, defendant No. 4 produced a weighment memo, (exhibit No. 3). That memo, does not contain the name of defendant No. 4 but to the extent that defendant No. 4 produced the same it goes in his favour. The point is not thus free from doubt. If it is necessary to decide, in my opinion, defendant No. 4 has failed to establish that the diamonds were sold to him by defendant No. 3.
12. Even if a different view is taken, the material question is whether such a sale (even if proved) is valid and binding on the plaintiffs and is any answer to the plaintiffs' claim. Section 27 of the Sale of Goods Act deals with the transfer of title. The section incorporates the well-known rule that a person who is not the owner of goods and who does not sell them under the authority or with the consent of the owner cannot give to the buyer a better title than the seller himself has. In the present case there is no evidence to show that defendant No. 3 was the owner of the goods. On the other hand defendant No. 3 denied it, and, as I have pointed out, the evidence clearly establishes that the plaintiffs were the owners of the goods. The evidence also does not establish that defendant No. 3 sold the goods under the authority or with the consent of the plaintiffs. Amritlal of the plaintiff firm emphatically denied that he had authorised anyone to sell the diamonds on his behalf. Defendant No. 3 in his turn denied that he had any communication with the plaintiffs or had any authority to sell the same from the plaintiffs. Therefore, the fourth defendant can only rely on the proviso to that section for his defence. In paragraph 9 of his written statement he has only relied on the proviso and not on the body of the section for his defence. The proviso runs in the following terms:
Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same ; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.
In support of his contention that the sale by defendant No. 3 was binding on the plaintiffs Mr. Amin for defendant No. 4 relied on Durgabai v. Sarasvatibai (1925) 31 Bom. L.R. 414, Oppenheimer v. Attenborough and Son  1 K.B. 221, and Folkes v. King  1 K.B. 282.
13. In my opinion this contention of defendant No. 4 entirely fails. Turning to the words of the proviso it is clear that if defendant No. 3 is considered a mercantile agent, he was not in possession of the goods with the consent of the owners. Plaintiffs who were the owners gave the goods to defendants Nos. 1 and 2 : they had not given the goods to defendant No. 3 and defendant No. 3's possession was therefore not with the consent of the owners. If on a construction of the terms contained in exhibit A defendants Nos, 1 and 2 are held to be mercantile agents within the meaning of the Sale of Goods Act, those defendants were in possession of the goods with the consent of the owners, but they had not sold the goods to defendant No. 4 or to anyone. In that view also the case is not covered by the proviso. Apart therefore from the question of good faith and notice, the words of the proviso do not cover the present case at all. Durgabai v. Sarasvatibai is not a case on this point. That case was decided under Section 178 of the Indian Contract Act the words whereof were different from the words of Section 27 of the Sale of Goods Act. The particular distinction which may be noted is that under Section 178 (as it stood when that decision was given) the word "person" found place in the section in place of "mercantile agent". On going through the judgment again it is clear that the learned Judge held that the person in possession was himself a dealer in diamonds. The decision proceeded on that footing as is clearly stated in the concluding part of that judgment. The learned Judge held that if a dealer was in possession of diamonds, and a purchaser or pledgee for value from him acted bona fide, such purchaser or pledgee had a good title and he could not be ordered to hand over the goods to the owner. Oppenheimer v. Attenborough was a case on the construction of Section 2 of the. Factors Act and dealt with the authority of a mercantile agent, who, having general authority, acted in the ordinary course of business. The decision was that if according to the ordinary course of business there was a general authority, any particular trade-custom could not restrict it. I am not concerned in the present case with an instance where the mercantile agent in the ordinary course of business had general authority to sell diamonds. My attention has been drawn to an unreported decision of the Appeal Court in Emperor v. Hiralal Jivraj (1936) Criminal Appeal No. 413 of 1935 where the term jengad came to be interpreted. I am told that it has considerably disturbed the position of diamond brokers and dealers and has created confusion in the trade. I am, therefore, particularly reluctant to express any opinion on the general relations of a: diamond broker and dealer in respect of the sale of diamonds through a broker, except to the extent it is essential to decide the present case. Plaintiffs handed over their diamonds to defendants Nos. 1 and 2 on terms which are reduced to writing and are found in exhibit A. Having regard to that position, I refrain from stating to what extent, if the facts were applicable, the decision in Oppenheimer v. Attenbarough would affect the diamond trade in Bombay.
14. The decision in Folkes v. King is equally inapplicable because there the owner of a car had delivered it to a mercantile agent for sale. The mercantile agent sold the car to a third party, who in his turn sold it to the defendant. No case of notice of fraud or want of good faith having been established, the Court held that the defendant has acquired a good title under the Factors Act. In the present case if defendants Nos. 1 and 2 had received the diamonds merely as brokers (without any writing as in exhibit A) and had sold them to defendant No. 4 directly or had sold them to defendant No. 3, who in his turn had sold them to defendant No. 4, the applicability of this case may have to be considered.
15. It will be useful to examine first the terms on which defendant No. 1 received the diamonds from the plaintiffs. They are in the form of a letter written by the firm of defendant No. 1 and defendant No. 2 and addressed to the plaintiffs. The opening words clearly set out, in express terms, the purpose and conditions on which the goods were delivered by the plaintiffs to) defendant No. 1. Taking the printed terms together, it is clear that defendants Nos. 1 and 2 admitted that they received the goods only for the purpose of showing them to intending purchasers; that defendant No. l's firm had no authority whatsoever to sell, mortgage or pledge the goods ; that the ownership of the goods remained all along in the plaintiffs and the first and/or second defendants had no right to or interest in them ; and that till the goods were returned in the condition in which they were received or if they were not returned, defendants Nos. 1 and 2 were liable and responsible for the same.
16. It is not disputed that defendants Nos. 1 and 2 are brokers in jewellery and are working as such for many years past. The first question to be considered is whether having regard to these terms they were mercantile agents under the Sale of Goods Act. The effect of these terms on the relation between the parties, and the possession of the goods in the hands of the broker, was considered by Madgavkar J. in an unreported judgment in Kanga Jaghirdar & Co. v. Fatehchand Hirachand (1929) O.C.J. Suit No. 1117 of 1928. At that time the relative section of the Indian Contract Act did not contain the expression "mercantile-agent" but only "person". On a consideration of the terms mentioned above the learned Judge came to the conclusion that the possession obtained under a document worded as aforesaid was not juridical possession within the meaning of Section 178 of the Indian Contract Act. As regards the term jangad used in the document the learned Judge observed as follows : "Assuming that jangad in Gujerati ordinarily means 'approval' there is no reason to assume that the goods entrusted jangad are goods to be sold on approval, rather than goods to be shown for approval." I respectfully agree with that conclusion about the meaning of the conditions found in exhibit A in this case. The relation of a dealer and a broker is that of a principal and agent and not of a seller and a buyer. The extent of the authority of the agent is to be found in the document under which the goods are delivered to him. As between the plaintiffs and defendants Nos. 1 and 2, therefore, it is clear that defendants Nos. 1 and 2 had no authority to sell the goods.
17. The next question to be considered is whether the addition of the word "jangad" in the signature made any difference. It was urged that when there were printed terms and written conditions the written conditions must prevail, and as the word "jangad" was written in manuscript, the effect of the document was that the diamonds were delivered to defendants Nos. 1 and 2 for "sale or return". The authorities clearly show that when in one document there are printed as well as written conditions, the Court's duty, as far as possible, is to reconcile all the terms ; but, when that is not found possible, the written conditions are to be given greater weight than the printed ones. The dictionary meaning of the word "jangad" is "approval". As stated by Madgavkar J. in the passage quoted above, having regard to the printed terms in this case, there appears no reason to assume that the diamonds were entrusted to defendants Nos. 1 and 2 to be sold on approval and not that they were given to them to be shown for approval. In my opinion taking the document as a whole, it is clear that they were given to defendants Nos, 1 and 2 to be shown for approval only. I am unable to accept the contention of defendant No. 4 that the term "jangad" means "sale or return" wherever the same is found. I am also unable to accept his contention that having regard to the term "jangad" used in the signature the printed terms should be given no meaning at all. In my opinion having regard to the terms on which the goods were delivered to defendants Nos. 1 and 2 they are not mercantile agents within the meaning of the Sale of Goods Act having general authority to sell. As I have pointed out, even if they were, the case does not fall under Section 27 of the Sale of Goods Act because they have not sold the goods to defendant No. 4.
18. The terms on which defendant No. 3 received the goods from defendants Nos. 1 and 2 are not clear on the evidence. Defendant No. 3 stated that he had received them on jangad. He did not say whether he had signed any writing like exhibit A or not. He further admitted that he was working as a broker in jewellery at the time. It is, therefore, clear that by the delivery of 173 diamonds to him, even on jangad terms, no property can pass to him under Section 24 of the Sale of Goods Act. On behalf of defendant No. 4 it was urged that in respect of 84 diamonds of the plaintiffs defendants Nos. 1 and 2 had acted as dealers. On the evidence I am unable to accept that contention. For this purpose it is necessary to bear in mind the terms on which the diamonds were originally handed over by the plaintiffs to those parties. According to the evidence of Amritlal, which stands uncontradicted, these diamonds were delivered to those defendants on terms similar to those found in exhibit A. The subsequent dealings with the diamonds and the entry in the plaintiffs' books, as if there was a sale to them, cannot affect the original relations established between the parties by the document, unless there was proof of a new contract. According to Amritlal defendants Nos. 1 and 2 informed him that the diamonds were sold, but as they did not disclose the name of the purchaser, in the plaintiffs' books the goods were debited to them. In answer to some leading questions put in cross-examination Amritlal did state that those diamonds were sold to defendants Nos. 1 and 2, but the remaining evidence quite clearly shows that the goods were not sold to them as merchants but the price was debited to them because they did not disclose the name of the purchaser and they were responsible for the price. I am, therefore, unable to consider that in respect of 84 diamonds defendants Nos. 1 and 2 had acted with the plaintiffs as dealers.
19. Under Section 19(3) of the Sale of Goods Act, passing of property is a question of intention. When the Indian Contract Act governed the sale of goods there were no express words of that kind in the Act. The rule found in Section 24 is to govern when there is no intention to the contrary. In considering the decisions given under the old sections of the Indian Contract Act this distinction has to be carefully remembered.
20. In support of his contention that "jangad" meant 'sale or return' defendant No. 4 relied on an unreported judgment of Beaumont C.J. and N.J. Wadia J. in Emperor v. Hiralal Jivraj (1936) Criminal Appeal No. 413 of 1935. The accused Hiralal Jivraj (whose name was repeatedly mentioned in the evidence in this suit by defendant No. 3) had appealed against his conviction under Section 406 of the Indian Penal Code. After considering that the first charge framed was not sufficiently particular, the judgment proceeded to discuss the charge of criminal misappropriation of eighty-four diamonds given by Purshottam (defendant No. 3 in this case) to the accused. In the opinion of the Appeal Court the learned Chief Presidency Magistrate was in error in convicting the accused. It was stated that the diamonds were given to Purshottam on jangad and became the property of Purshottam, If Purshottam in his turn gave the diamonds to the accused, on jangad terms, they became the property of the accused and he could not be charged with criminal misappropriation of the same The evidence was that Purshottam received the diamonds "jangad" from one Shantilal and delivered them to the accused on jangad. The judgment thereafter runs in the following terms:
That being so, the property would pass to the accused under Section 24 of the Sale of Goods Act either when he signified his approval or acceptance to the seller or did any other act adopting the transaction, and if he did not signify his approval or acceptance to the seller but retained the goods without giving notice of rejection, then, if a time had been fixed for the return of the goods, on the expiration of such time, and, if no time had been fixed, on the expiration of a reasonable time. The learned Government Pleader has argued that the accused was a broker, but there is not a particle of evidence of brokerage. The transaction is stated to be a transaction on jangad. That places the parties in the relationship of seller and buyer, that is, principal and principal. If the person who takes [the property] on jangad, sells the property at a price in excess of that which he has agreed to pay to the seller, he keeps the difference and he does not have to account to the seller as an agent. On the other hand, if the purchaser from him does not pay, he is still liable to pay on his own contract with his seller.
21. This passage from the judgment clearly shows that, on the facts proved, the accused was not a broker and the diamonds were not delivered to him as a broker. Although the judgment does not record that the diamonds were delivered over to the accused as a buyer or had been received by Purshottam as a buyer on jangad from the previous holder or the owner, the relation of buyer and seller between all parties is assumed. The facts in that case also do not show that at the time of receiving the diamonds the parties had signed a document, like exhibit A in the present suit. That judgment therefore does not govern the facts of this case. I think the discussion in that judgment about the applicability of Section 24 of the Sale of Goods Act, when goods are received on jangad terms, requires an explanation. Goods or jewellery may be delivered by the owner to the buyer, with the intention that he may inspect the same and ultimately purchase it. The goods in such cases are stated to be delivered for approval, i.e. "jangad". Section 24 of the Sale of Goods Act covers that situation. On the other hand, the owner of the goods may deliver the same to a mercantile agent, as defined in the Sale of Goods Act. According to that definition of a mercantile agent, in the customary course of business, he has authority to sell the goods. Goods may be handed over to such a mercantile agent also "jangad" meaning to be shown for approval to his customers. Under those circumstances, if the mercantile agent effects a sale, the title of the purchaser is protected under Section 27 of the Sale of Goods Act provided there is no want of good faith. On a comparison of the words of Section 24 and Section 27 of the Sale of Goods Act, it is clear that the mercantile agent who receives goods on jangad acquires no property by reason of Section 24, because he is not a buyer. He has, therefore, no title to pass on the property by reason of Section 24. This is important because if want of good faith is established, the sale can be avoided under Section 27. But if the case was governed by Section 24, no question of want of good faith arises and the property must pass. The third contingency is where the owner delivers goods to an agent (who is not a mercantile agent falling within the definition of that expression as given in the Sale of Goods Act) on terms arranged between the owner and the agent. As one of the terms of delivery the goods may be given jangad, i.e. for approval by a prospective customer or to be shown for approval. To such a case neither Section 24 nor Section 27 of the Sale of Goods Act applies, and the extent of the authority of the agent depends on the terms of his agency, and the provisions governing the relations of principal and agent as found in the Indian Contract Act. It is clear that in that case also no property passes from the owner to the agent under Section 24, nor is a sale by him protected under Section 27. If this authority enables him to sell the goods, the sale is authorised and binding on the owner. If the authority is exceeded, the question will have to be considered in the light of Sections 227 and 228 of the Indian Contract Act. The judgment of the Appeal Court which treats "jangad" as equivalent to sale or return must be read as applicable only when the goods are delivered to a buyer.
22. In addition to the above grounds I have grave doubts about the good faith of defendant No. 4 in the transaction. Defendant No. 4 is an undischarged insolvent and started doing business in Bombay on a small scale in August-September, 1934. The evidence shows that he had no money. His banking account shows that except a sum of about a hundred rupees or so he had no cash to buy diamonds worth any substantial amount at all. According to his own evidence when he purchased these 173 diamonds he had no means to pay, although he hoped to obtain loans from his friends and relatives. He produced no evidence to show that any arrangements were made to procure such loans or that any party had promised to give him any money. On the other hand his conduct in pledging these very diamonds on about November 18/19, 1934, with a Marwari firm and paying over the proceeds to satisfy his debts incurred in cotton speculation, negatives his good faith. He has produced his counterfoil cheque book which is in a very mutilated condition and about eight counterfoils have been found missing between November 14 and November 23, 1934. In the absence of those counterfoils it is difficult to ascertain for what purposes he had attempted to draw the cheques and for what amounts.
23. Defendant No. 4 did not impress me as a truthful witness, and unless his oral testimony was supported by clear documentary evidence, I do not accept his evidence as that of a truthful witness. It appears that about this time defendant No. 3, who was a very petty broker, defendant No. 4, and Hiralal Jivabhai, had dealings in various lots of diamonds and pearls. Barring the 173 diamonds in suit the rest of the jewellery has not been traced. Different merchants who had handed over their jewellery to brokers for sale, and which jewellery ultimately reached Hiralal or defendant No. 4 remained unpaid, because of the dealings of these three parties. Defendant No. 3 came to know defendant No. 4 at the residence of Hiralal. Neither side has called Hiralal as a witness, perhaps realising that his evidence would not be considered reliable. Amritlal gave his evidence in a straightforward and honest manner and I accept his oral evidence as that of a truthful witness. In order to meet the case of defendant No. 4 of a sale of the diamonds by the first and or second defendants to defendant No. 3, the plaintiffs called defendant No. 3 as their witness. As the case proceeded ex parte against defendants Nos. 1, 2 and 3 and contested by defendant No. 4, several statements in the evidence of defendant No. 3 have gone on record which would be hearsay evidence as against the other parties to the conversation. Taking the evidence in that light the case sought to be established by defendant No. 4 has not been established at all, and there is no evidence to prove that there was a sale of the diamonds by the first and/or second defendants to defendant No. 3. Defendant No. 3 was not a satisfactory witness, but I would prefer him to defendant No. 4, particularly on points where the oral evidence of defendant No. 4 was not supported by any document.
24. In addition to the want of means of defendant No. 4 and the manner in which he dealt with the 173 diamonds after he got possession, of the same, his evidence about the making-up of account of sale also shows considerable room for suspicion in this transaction. According to defendant No. 4 when the account of the sale was made up he deducted the full discount of six and a quarter per cent. and received credit for Rs. 25 by way of interest. Defendant No. 4 alleged that as the diamonds; were weighed on November 11, he was liable to pay the price fifteen to twenty days thereafter. He gave a cheque to defendant No. 3 on or about November 11, post-dated November 20. Therefore, at best he made a payment earlier by about five to ten days. Working out the figure of Rs. 25 as interest for that period, it shows that for obtaining a post-dated cheque defendant No. 3 (according to the case of defendant No. 4) gave credit at the rate of about three per cent. per month. It is really a matter of surprise that a dealer in diamonds would give credit for interest at thirty-six per cent. per annum for obtaining payment by a post-dated cheque five to ten days earlier. It is not suggested that this rebate of| Rs. 25 was given otherwise than for interest. If defendant No. 3 was a mercantile agent within the meaning of Section 27 of the Sale of Goods Act, this way of making accounts, in my opinion, indicates that in the matter of this sale he was not acting in the ordinary course of business of a mercantile agent. For these reasons, if necessary, I would hold that defendant No. 4 was not protected under Section 27 of the Sale of Goods Act because there was want of good faith on his part in the transaction.
25. In exhibit A at the time of putting his signature defendant No. 1 had added the word "jangad". It was contended that the word "jangad" meant "sale or return" and under Section 24 of the Sale of Goods Act the diamonds became the property of defendants Nos. 1 and 2. They had, therefore, title to pass on that property to defendant No. 3, by delivery on jangad terms, and defendant No. 3 in his turn could pass it on to defendant No. 4 by sale. When it was pointed out that this case was not pleaded in the written statement, Mr. Amin, for defendant No. 4, at the close of his final address, applied for an amendment of the written statement to raise this contention. In the present suit on the pleadings it is nobody's case that when defendants Nos, 1 and 2 received the diamonds they were the "buyers" of the diamonds. Defendants Nos. 1 and 2 have not alleged that case in their written statement. Nor is that case put forth in the written statement of defendant No. 4. This argument raises a question of fact, as to the position of defendants Nos. 1 and 2 when they received those diamonds. That question of fact not having been pleaded in the written statement, I do not think it is permissible to defendant No. 4 now to amend his written statement and raise that question. If the amendment was allowed, it would involve the re-opening of the bulk of evidence and calling further witnesses.. Mr. Amin's application for amendment is, therefore, rejected.
26. Mr. Amin next urged that defendants Nos. 1 and 2 having received the diamonds on the terms contained in exhibit A (including the word "jangad"), they had authority to hand over the same to defendant No. 3 on jangad. I repeatedly asked Mr. Amin if there was any authority for that proposition, but he failed to point out any. He urged that if defendants Nos. 1 and 2 had authority to sell, the authority to give possession to defendant No. 3 was a smaller authority and was therefore included in the larger one. In my opinion this argument is unsound. Under Section 190 of the Indian Contract Act an agent has no power to delegate his authority to any one except when it is done according to the custom of trade or from the nature of the agency it must be done. Neither of those contingencies are alleged in the pleadings nor suggested in the course of evidence. No issue has been raised on the point. Unless such a right to appoint a sub-agent was established, under Section 193 of the Indian Contract Act this act of the agent is not binding on the principal and he is entitled to repudiate the same. The authority of defendants Nos. 1 and 2 in the present case was defined by the writing which they executed. That writing did not give them any power to sell the goods. There is no authority express or implied in that writing to pass on the goods to a third party, with a power to the third party to deal with the same as if he was the owner. In my opinion if such a privilege was sought to be established, it had to be expressly pleaded and proved by evidence. The power goes to the root of the relations between principal and agent and cannot be lightly inferred because it was urged in the course of argument by counsel. The argument about passing of property to defendant No. 3 and the right of defendant No. 3 to sell is based on Section 24 which is assumed as applicable to an agent who received goods to sell. This is due to ignoring the fundamental distinction between a buyer and a seller and a principal and agent. In my opinion, therefore, the argument that defendants Nos. 1 and 2 had authority to pass on the goods to defendant No. 3 for any purpose is unsound and unwarranted on the evidence.
27. On behalf of defendant No. 4 it was urged that he had paid Rs. 1,324 and Rs. 950 for the price of these diamonds and, therefore, in any event, he should get the same back before the diamonds were delivered over to the plaintiffs. This contention is not pleaded in his written statement. Considerable evidence was led and lengthy cross-examination conducted to establish that defendant No. 4 had paid those two sums towards the price of the 173 diamonds to defendant No. 3. In my opinion the evidence does not justify that conclusion. Defendant No. 4 alleged that in respect of these diamonds at first he gave a cheque for Rs. 2,715 to defendant No. 3. The evidence of Dalpatram Jashkaran shows that this cheque of Rs. 2,715 was handed over to him for the price of two lots of nineteen and twenty diamonds sold by him to defendant No. 3. Me produced his pass-book showing that the cheque was handed over to his bank but was returned dishonoured. Defendant No. 3 in his evidence stated that this cheque for Rs. 2,715 was handed over to Dalpatram against his diamonds. It is not disputed that Dalpatram has not been paid in respect of his two lots of diamonds. Defendant No. 4 admitted that his cheque for Rs. 2,715 was dishonoured and that he had no funds at any time to meet the cheque. His case in the written statement is that after he gave this cheque to defendant No. 3, defendant No. 3 approached him on November 13 and asked for an immediate payment of Rs. 1,324. Defendant No. 4 accordingly gave to the third defendant a cheque dated November 14 for Rs. 1,324. The written statement is completely silent as to what was the agreement made about the balance. In his oral evidence defendant No. 4 alleged that he was to pay the balance afterwards, but as defendant No. 3 absconded from Bombay after a few days it was not paid. This explanation is entirely unsatisfactory because he met defendant No. 3 on November 18/19 and it is not suggested that at that time there was any conversation about it. The pass-book of defendant No. 4 shows that after November 14 he had never any funds to pay this balance. As against this defendant No. 3 denied that the cheque for Rs. 1,324 was received by him for the price of 173 diamonds at all. According to defendant No. 3 he received from Hiralal Jivabhai two cheques for Rs. 1,324 and Rs. 1,700, which was the price of 84 diamonds, and they were the cheques of defendant No. 4. These 84 diamonds originally belonged to the plaintiffs. Plaintiffs produced their cash-book showing that the cheque of Rs. 1,324 was received by them towards the price of their 84 diamonds. When the cheque for Rs. 1,700 was received, Amritlal presented it to the bank; but it was returned dishonoured. He thereupon gave it to defendant No. 1 and ultimately defendant No. 1 paid sixteen hundred and odd rupees in cash, which was the balance of the price payable to the plaintiffs. Defendant No. 3 in his evidence stated that when the cheque of Rs. 1,700 was dishonoured he was informed of it by defendant No. 1 and the cheque was given to him. He conveyed the information to Hiralal and Hiralal paid him Rs. 1,700 in cash, which he passed on to defendant No. 1. It is material to note in this connection that the price of these 84 diamonds as) shown by exhibit No. 2 was about Rs. 3,023. If defendant No. 4 had nothing to do with these 84 diamonds, it is surprising that on the same day he should give two cheques, which exactly make up the price of 84 diamonds, and the said two cheques should be passed on together to the plaintiffs, who were the owners of the diamonds. Defendant No. 4's explanation about the cheque of Rs. 1,700 was that he gave it for the price of certain pearls which he had purchased from defendant No. 3. The pearls belonged to one Ratahchand Bhaidas. According to defendant No. 4 after he gave the cheque of Rs. 1,700 on November 14 (but dated November 20) to defendant No. 3 when he met defendant No. 3 on November 18 or 19, he told him not to present the cheque for some days and paid him Rs. 950 in cash. In spite of this defendant No. 3 presented the cheque and the cheque was dishonoured. After defendant No. 3 absconded, he inquired who was the owner of the pearls, and having ascertained that Ratanchand was the owner, he paid Ratanchand Rs. 1,170 in full settlement of Ratanchand's claim for the pearls. According to the oral evidence of defendant No. 4 he claimed from Ratanchand credit for what he had paid to defendant No. 3 but that was refused. In my opinion this conduct of defendant No. 4 is very surprising if in the regular course of business he had purchased those pearls of Ratanchand and given his cheque for the price. In the first instance he would not have paid defendant No. 3 Rs. 950 without getting back the cheque for Rs. 1,700. Moreover, I do not see any reason why defendant No. 4 should be very anxious to trace the owner of the pearls and offer to pay him the price, if he had in fact given the cheque for Rs. 1,700 for the price of the pearls. Having regard to his means it is also difficult to believe that after paying Rs. 950 to defendant No. 3 towards the price of the pearls, he would pay in addition to Ratanchand Rs. 1,170 without consulting defendant No. 3 at all. These factors taken together, along with the fact that the amount of these two cheques exactly made up the price of 84 diamonds, leads me to believe that defendant No. 4 had given these cheques for the price of 84 diamonds and the cheque for Rs. 1,700 was not given for the price of Ratanchand's pearls.
28. It was urged on behalf of defendant No. 4 that the fact of the cheques being found in possession of the plaintiffs and Dalpatram Jashkaran did not prove that the payments were made in respect of the goods of those merchants. There would be force in that argument if that was the only coincidence. The other factors which I have noticed above and in particular the fact that the exact amount of Rs. 3,023 was the price of 84 diamonds lend support to the evidence of defendant No. 3 that those two cheques were received by him for the price of 84 diamonds. The co-existence of all the factors makes that conclusion highly probable. No witness in his oral evidence had stated in terms that defendant No. 4 had purchased those diamonds. The only witness who could say so is Hiralal, and he has not been called as a witness. The surrounding circumstances, however, are in my opinion sufficiently strong to justify the inference mentioned above. The attitude of defendant No. 4 in connection with the cheque of Rs. 1,700 is also significant. In the written statement he alleged that the cheque was given for the pearls and Rs. 950 were paid also for the pearls. After he filed his written statement he appears to have changed his attitude and in his affidavit dated March 18, 1936, alleged that Rs. 950 should be treated as paid towards the price of 173 diamonds. In fact he went further and on the counterfoil of the cheque which he alleged he had given for the price of the diamonds he endorsed "Cash Rs. 950" as if the same were paid towards the price of the diamonds. This was admittedly done after the suit was filed and savours of manufacturing evidence to urge this claim. The evidence shows that defendant No. 4 had no means to pay for the jewellery purchased by him from time to time, and if he finds it difficult to prove that he had paid those amounts towards the price of 173 diamonds, he has to thank himself for his habit of giving post-dated cheques, for the price, in different sums. Defendant No. 4's written statement does not show what arrangements were made for the payment of the balance and his oral evidence is equally vague on the point. In my opinion defendant No. 4 has failed to establish that he had paid anything towards the 173 diamonds in suit, and his claim to recover the two amounts fails.
29. At this stage Mr. Desai for the plaintiffs states that he does not press for a decree against defendants Nos. 1, 2 and 3. There will, therefore, be a decree for the plaintiffs against defendant No. 4 in terms of prayer (a) of the plaint. In due course the diamonds, exhibit F, would be handed over to the plaintiffs.
30. The allegations of conspiracy were not given up till the suit reached hearing and the plaintiffs led no evidence to establish the charges of fraud or offence, nor of notice to defendant No. 4. Having regard to this, I think defendant No. 4 should pay the plaintiffs the costs of the suit, less Rs. 500.