Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on : July 09, 2012
Judgment Pronounced on: July 13, 2012
+ RFA(OS) 27/2010
DABUR INDIA LTD. & ANR. ..... Appellants
Represented by: Mr.Sudhir K.Makkar, Advocate
versus
HANSA VISION LTD. & ANR. ..... Respondents
Represented by:Mr.N.B.N.Swamy, Advocate and
Mr.I.C.Kumar, Advocate for R-1.
None for respondent No.2.
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE MANMOHAN SINGH
PRADEEP NANDRAJOG, J.
1. Respondent No.1 Hansa Vision Ltd. filed a suit
seeking decree in sum of ` 43,85,605/-. It pleaded being
engaged in the business of marketing T.V. serials and
advertising on television. It pleaded that Dabur India Ltd.,
defendant No.1, had appointed Adbur Pvt. Ltd., defendant
No.2, as its agent to advertise its products and in turn Adbur
Pvt. Ltd. had appointed M/s A.V. Communications, defendant
No.3, as the sub-agent, which defendant, in said capacity i.e.
of a sub-agent, approached M/s Hansa Vision Ltd. to advertise
products of the first defendant during telecast of various
programmes by various television networks and for which
defendant No.3 issued release orders on April 06, 1995 and
April 26, 1995 as also a release order dated nil, pursuant
whereto, Hansa Vision obtained slots in various programmes
RFA(OS) No.27/2010 Page 1 of 14
aired by various T.V. networks in which advertisements of
defendant No.1 were aired and for which it was pleaded that
as per the agreement a sum of `47,13,897/- became payable
to it. Alleging that defendants acknowledged liability to pay
`23,39,177/- but defendant Nos. 1 and 2 thereafter informed
having paid `32,34,250/- to defendant No.3, and washed off
their hands; alleging further that `23,39,177/- was admittedly
payable as of July 23, 1999 and claiming pre-suit interest @
18% per annum, suit was filed praying for a decree in sum of
`43,85,650/-.
2. In the written statement jointly filed by Dabur India
Ltd. and Adbur Pvt. Ltd., it was pleaded that the plaintiff
executed the works as per a contract with defendant No.3 with
respect to the publicity/advertising job assigned by defendant
No.2 to defendant No.3 on principal to principal basis; and that
the relationship between the plaintiff and defendant No.3 was
also of principal to principal. It was denied that defendant
No.3 acted as the sub-agent of defendant No.1. As regards
defendant No.2, requiring defendant No.3 to execute the
publicity work on behalf of defendant No.1, it was pleaded that
the said pertained to an internal working between defendant
No.1 and defendant No.2 and had no concern with the claim of
the plaintiff. It pleaded having paid full money to defendant
No.3.
3. In a nutshell, the pleading was that for advertising
the products of defendant No.1, defendant No.2 had entered
into a principal to principal contract with defendant No.3 and
defendant No.3 had likewise entered into a principal to
principal contract with the plaintiff. As per defendants No.1
and 2, they had made the entire payment to defendant No.3
RFA(OS) No.27/2010 Page 2 of 14
and it was for the plaintiff to realize the money, if any unpaid,
from defendant No.3.
4. Defendant No.3 remained ex-parte.
5. On the pleadings of the parties, the following issues
were settled as per order dated January 27, 2004:-
“ 1. Whether the suit is within time? OPP
2. Whether the plaint has been signed, verified and
filed by a duly authorized person? OPP
3. Whether the written statement filed on behalf of
defendants No.1 and 2 has been signed, verified and
filed by a duly authorized person? OPD
4. Whether the defendants No.1 and 2 have no
privity of contract with the plaintiff as averred in the
written statement? OPD
5. Whether there is no cause of action against the
defendant Nos. 1 and 2? OPD
6. Whether the plaintiff is entitled to recover the
suit amount from defendants No. 1 and 2 on the
grounds mentioned in the plaint? OPP
7. Whether the plaintiff is entitled to interest as
prayed? If so, on what amount and for which
period? OPP
8. Relief.”
6. The plaintiff examined Subhash Gulati, its Senior
Finance Manager and R.Jaganathan its Senior Accounts Officer
as PW-1 and PW-2 respectively and apart from reiterating the
case pleaded in the plaint the two proved the bills Ex.PW-2/1
to Ex.PW-2/23 raised by the plaintiff on defendant No.3 on
various dates between April 20, 1995 and October 31, 1995 as
also the telecast certificates Ex.PW-2/24 to Ex.PW-2/37
evidencing advertisements pertaining to defendant No.1 being
RFA(OS) No.27/2010 Page 3 of 14
telecast. They also proved the authority in favour of Subhash
Gulati to institute the suit. The witnesses deposed that
plaintiff acted pursuant to release orders issued by defendant
No.3 as also the certificates Ex.PW-1/7 to Ex.PW-1/34 being
certificates of telecasts.
7. Defendants No.1 and 2 examined A.K.Sharma and
M.L.Wadhwa as the two defence witnesses who deposed in
sync with the defence taken.
8. Deciding issue No.1 and issue No.2 in favour of the
plaintiff and issue No.3 in favour of defendants No.1 and 2,
which issues were in the nature of technical objections and in
respect whereof no arguments were advanced before us in
appeal, and thus we eschew reference to the first three issues
and proceed directly to the main issue between the parties i.e.
Issue No.4, 5 and 6.
9. From the pleadings of the parties it is apparent that
the core issue was : Whether defendant No.3 acted as a sub
agent, under power being given by defendant No.2; and
whether defendant No.2 was the agent of defendant No.1. For
if, the defence taken by defendants No.1 and 2 that their
transaction with defendant No.3 was on principal-to-principal
basis and in turn defendant No.3 acted on principal-to-principal
basis with the plaintiff, the suit could have been decreed only
against defendant No.3 upon proof that the plaintiff did not
receive the full money from defendant No.3.
10. The findings returned by the learned Single Judge
on issue No.4 need to be extracted by us verbatim. They read
as under:-
“32. Defense of defendants No.1 and 2 reiterated
on oath is that there was no privity of contract of
RFA(OS) No.27/2010 Page 4 of 14
the answering defendants with the plaintiff. At
best, if the plaintiff has any claim, it is against
defendant No.3. Defendant No.1 i.e. M/s Dabur
(India) Limited had entrusted the second defendant
i.e. M/s Adbur Private Limited with the job of
carrying advertisement of its company products
over Doordarshan National Network and other T.V.
Channels. This was an internal arrangement
between defendants No.1 and 2 and had no
concern whatsoever with the plaintiff. The
answering defendants No.1 and 2 did not have any
contract or transaction with the plaintiff.
Defendant no.2 had thereafter on a principal to
principal relation with the third defendant namely
M/s A.V. Communications entrusted him the job of
telecasting advertisements which was to be done
on various T.V. Channels in the television network.
Defendants No.1 and 2 had never appointed
defendant No.3 as their agent or sub-agent.
Relations of defendants no.2 and 3 was of principal
to principal and not of an agency. The contract
evidenced by the release orders ex.P-1/3 to Ex.P-
1/6 was a transaction between the plaintiff and
defendant No.3.
33. Ex.P-1/3 to Ex.P-1/6 are the release orders
which have been issued by defendant No.3 to the
plaintiff. They are dated 6.4.1995, dated nil, dated
26.4.1995 and dated nil. These documents
evidence that defendant No.3 had pursuant to
discussions with the plaintiff regarding co-
sponsorship over the various T.V. channels
mentioned therein had confirmed the booking with
the plaintiff on behalf of their client M/s Dabur
(India) Limited for advertisements to be effected
by the plaintiff at the rates mentioned therein. The
duration of the advertisements, the channel on
which they were to be aired and details of the
products were contained therein. Price of the
confirmed booking was also mentioned. Ex.P-1/3
to Ex.P-1/6 were admittedly on exchange of
communication between defendant No.3 and the
plaintiff; name of defendant No.1 found mention
as the product which was to be beamed on the TV
channels by the plaintiff were of defendant No.1
RFA(OS) No.27/2010 Page 5 of 14
company. There was no mention of defendant
No.2.
34. Ex.P-1/3 to Ex.P-1/6 are admittedly the only
written communications exchanged between the
plaintiff and defendant No.3 on the basis of which
the plaintiff is now endeavoring to fasten liability
on all the defendants i.e. defendants No.1 to 3 co-
jointly.
35. Onus to discharge this issue is on the
defendants. Question first to be answered is
whether defendant No.1 and defendant No.2 had a
principal-agent relation; further if defendant No.3
was a sub-agent of defendant No.2.
36. Defendant No.2 is the advertising agency of
defendant No.1. This position stands admitted by
both the defendants. DW-1 in his cross-
examination has admitted that business of
defendant No.2 is the handling of the
advertisement campaign of defendant No.1 as also
of other companies; advertisement bill is raised by
a third party on defendant No.2; essential
documents would be the bills of the said party i.e.
the release orders as also the telecast certificates.
Rates would be negotiated between defendants
No.2 and 3; defendant No.3 would raise a bill
directly on defendant No.2. The Media Manager of
defendant No.2 would prepare two sets of bills; one
to be forwarded to defendant No.1 and the second
to its accounts branch for payment to defendant
No.3. Defendant No.2 would then pay the bill.
37. Defendant No.2 in his cross-examination has
reiterated the stand of DW-1. It has been admitted
that the advertisement order placed on behalf of
defendant No.1 with defendant No.2 was by the
marketing department of defendant No.1. Plaintiff
was never notified by defendants No.1 and 2 that
bonus spots in the southern area being free spots
would not be entitled for payment of
advertisements. Defendants No.1 and 2 did not
have any dealings with the plaintiff.
RFA(OS) No.27/2010 Page 6 of 14
38. In Lakshminarayan Ram Gopal and Son, Ltd,
vs. Government of Hyderabad, through the
Commissioner, Excess Profits Tax AIR 1954 SC 364
while expounding the relations vis a vis a master-
servant and principal-agent, it was held that the
principal has a right to direct what work the agent
has to do, but a master has a further right to direct
as to how the work is to be done; the agent is
bound to exercise his authority in accordance with
all lawful instructions which may be given to him
from time to time by his principal.
39. DW-2 was admittedly the inhouse advertising
agency of defendant No.1 which had entrusted this
job of its advertisements to defendant No.2. Both
are located at the same address. Defendant No.2
could release payment to a third party only after
one copy of the bill was sent by it to defendant
No.1 and the second copy was to be retained by its
account branch. Further the marketing division of
defendant No.1 had placed the order of the
advertisement on defendant No.2 which was doing
no other work except being an accredited
advertising agency. Their relationship as principal-
agent stands established. Defendant No.2 is liable
for the acts of its principal i.e. of defendant No.1.
40. The relations of defendants No.2 and 3
however do not establish a sub-agent relationship.
Defendant No.2 being an advertising agency was
placing orders of advertisement on defendant
No.3. Defendant No.3 is a proprietorship firm; it
was receiving orders for advertising from various
persons. This position is not in dispute. Defendant
No.3 was not doing the job of defendant No.2
alone. Rates were negotiated between defendant
No.2 and defendant No.3 independent of any
interference by defendant No.1; defendant No.3
would raise the bill directly on defendant No.2 and
was getting its payment from defendant No.2
directly and independently of defendant No.1.
Dealings between defendant No.2 and defendant
No.3 were essentially on a principal to principal
basis.
RFA(OS) No.27/2010 Page 7 of 14
41. The submission of the counsel for the plaintiff
that in para 8 of the written statement the
defendants have admitted that defendant No.2 and
defendant No.3 were sub-agent of one another is
not borne out from the record; the written
statement as also the averments on oath of both
the witnesses of the defendants i.e. DW-1 and DW-
2 is that defendant No.3 had an independent
relation with defendant No.2. PW-2 in his cross-
examination has also admitted that his averment
in his affidavit that defendant No.3 was a sub-
agent of defendant No.2 is based on the
documents which are the release orders only.
42. Evidence has failed to establish that
defendant No.3 was an agent of defendant No.2. It
was however been established that defendant No.2
was an inhouse advertising agency of defendant
No.1.
43. Defendant No.3 had approached the plaintiff
to advertise certain products which included the
products of defendant No.1. This contract is
evidenced by the release orders Ex.P-1/3 to Ex.P-
1/6. Defendant No.3 in his independent capacity
entered into this contract with the plaintiff.
Defendant No.1 has been referred to as „client‟ in
these release orders; there is no mention of
defendant No.2; PW-1 in his cross-examination has
admitted that he had not raised any bill upon
defendants No.1 and 2; no release order was
issued by defendants No.1 and 2 to the plaintiff.
PW-2 has also admitted that he had not dealt with
defendant No.1 or defendant No.2 at any point of
time; defendants No.1 and 2 had never entrusted
any work to the plaintiff. This evidence on record
has established that there was no privity of
contract between the plaintiff and defendants No.1
and 2.
44. Issue No.4 is answered in favour of defendants
and against the plaintiff.”
11. The learned Single Judge has, with reference to
Ex.PW-1/3 to Ex.PW-1/6 rightly returned a verdict that
RFA(OS) No.27/2010 Page 8 of 14
defendant No.3 was not acting as a sub-agent under the
authority of defendant No.2. The learned Single Judge has
rightly returned a verdict that evidence establishes that
defendant No.3 had approached the plaintiff to advertise
certain products which included the products of defendant
No.1 as per release orders Ex.PW-1/3 to Ex.PW-1/6. The
finding returned by the learned Single Judge in para 43 of the
decisions is that defendant No.3 in its independent capacity
entered into the contract with the plaintiff. We may highlight
that the learned Single Judge has correctly noted that in the
release orders, defendant No.3 referred to defendant No.1 as
its client. The learned Single Judge has concluded, and rightly,
that there was no privity of contract between the plaintiff and
defendants No.1 and 2. The learned Single Judge has correctly
opined in paragraph 40 that dealings between defendant No.2
and defendant No.3 were on principal to principal basis.
12. But, with respect to issue No.5 and 6 i.e. whether
the plaintiff had a cause of action against defendants No.1 and
2 and if yes, what sum has to be paid by them to the plaintiff,
the learned Single Judge has proceeded to hold that since the
benefit of the works performed by the plaintiff i.e. in managing
goods of defendant No.1 to be advertised has been accepted
by defendant No.1, it must pay on account of Section 70 of the
Indian Contract Act 1872.
13. The learned Single Judge has extensively relied
upon the law laid down in the decisions reported as:-
“47. In State of West Bengal v.
M/s.B.K.Mondal and Sons AIR 1962 SC 779
the pre-conditions for the application of the
provisions of the Section 70 of the Contract
Act have been discussed. The first condition
is that a person should lawfully do something
RFA(OS) No.27/2010 Page 9 of 14
for another person or deliver something to
him. The second condition is that in doing
the said thing or delivering the said thing he
must not intend to act gratuitously; and the
third is that the other person for whom
something is done or to whom something is
delivered must enjoy the benefit thereof.
When these conditions are satisfied Section
70 imposes upon the latter person, the
liability to make compensation to the former
in respect of or to restore, the thing so done
or delivered. In the facts of the said case
plaintiff/respondent had constructed a
warehouse; the benefit of which was enjoyed
by the defendant/appellant;
defendant/appellant could have called upon
the plaintiff/respondent to demolish the said
warehouse and take away the materials used
by it in constructing it; but if the
defendant/appellant accepted the said ware
house and used it and enjoyed its benefit
then different considerations come into play
and Section 70 could be invoked.
48. Section 70 which occurs in Chapter V
of the Contract Act deals with certain
relations resembling those created by
contract. In such cases which are filed under
Section 70 a person doing something for
another cannot sue for specific performance
of the contract nor ask for damages for the
breach of the contract for the simple reason
that there is no contract between him and the
other persons for whom he does something
or for whom he delivers something. Section
70 provides if the goods delivered are
accepted or the work done is voluntarily
enjoyed then the liability to pay
compensation for the enjoyment of the said
goods or the acceptance of the said work
arises. Thus, where a claim for compensation
is made by one person against another under
Section 70, it is not on the basis of any
subsisting contract between the parties but it
is on the basis of the fact that something was
RFA(OS) No.27/2010 Page 10 of 14
done by the party for another and the said
work so done has been voluntarily accepted
by the other party.
49. These principles have been reiterated
by the Supreme Court in the subsequent
judgment i.e. New Marine Coal Company Pvt.
Ltd. vs. The Union of India AIR 1964 SC 152.
In this case it had been held that Section 70
of the Contract Act would be applicable even
when a Contract Act had been held void; in
view of the provisions of Section 173(5) of the
Govt. of India Act 1935, the contract had
been declared to be void; since A had
performed his part of the contract and the
Govt. of India had received the benefit of the
performance of the said Act, provisions of
Section 70 of the Contract Act were held
applicable and the Govt. of India was made to
pay compensation for the benefit received by
it.
50. In V.R.Subramanyam v. B. Thayappa &
Ors. AIR 1966 SC 1034, it has been held that
if a party to the contract has rendered service
to the other not intending to do so
gratuitously and the other person has
obtained some other benefit, the former is
entitled to compensation for the value of the
services rendered by him.
51. In Aries Advertising Bureau v.
C.T.Devaraj AIR 1995 SC 2251 this principle
was reiterated. This was the case where the
plaintiff had advertised certain products of
the respondent; Section 70 was held
inapplicable as no benefit has been derived
by the respondent pursuant to the
advertisement made by the appellant.
52. In Food Corporation of India & Ors. v.
Vikas Majdoor Kamdar Sahkari Mandli Limited
(2007) SC 544 it was held that the provisions
of Section 70 of the Contract Act are more
liberal interpretation of the doctrine of
RFA(OS) No.27/2010 Page 11 of 14
quantum merit. This principle has no
application where there is a specific
agreement in operation. This section also
prevents an unjust enrichment; being a
principle of equity.”
14. Section 70 of the Indian Contract Act 1872 reads as
under:-
“Obligation of person enjoying benefit of
non-gratuitous act – Where a person lawfully
does anything for another person, or delivers
anything to him, not intending to do so
gratuitously and such other person enjoys
the benefit thereof, the latter is bound to
make compensation to the former in respect
of, or to restore, the thing so done or
delivered.”
15. As explained by the Supreme Court in R.K.Mondal‟s
case (supra) there are three conditions which attract Section
70 of the Contract Act. Firstly, the person claiming benefit
must do something lawfully for another, secondly while doing
so he should not intend to act gratuitously, and lastly, the
other person enjoys the benefit from or under the act done by
the first person. Explaining the meaning of the word „lawfully‟
which finds a mention in Section 70, the Supreme Court
clarified:-
16. Expanding further, in para 18 of its opinion the
Supreme Court observed:-
“There is no doubt that the thing delivered or
done must not be delivered or done
fraudulently or dishonestly nor must it be
delivered or done gratuitously. Section 70 is
not intended to entertain claims for
compensation made by persons, who
officiously interfered with the affairs of
RFA(OS) No.27/2010 Page 12 of 14
another or who impose on others services not
desired by them.” Emphasis supplied
17. Thus, it is clear that Section 70 of the Indian
Contract Act would have no application where parties have
acted pursuant to a contract for the reason the section is
founded upon the principle of restitution and prevention of
unjust enrichment i.e. equity recognized by Common Law in
the words of Lord Wright in the decision reported as 1943 AC
32 Fibrosa v. Fairbairn: „It is clear that any civilized system of
law is bound to provide remedies for cases of what has been
called unjust enrichment or unjust benefit, that is, to prevent a
man from retaining the money of, or some benefit derived
from, any other which it is against its conscience that it should
keep.‟
18. Though the terms of Section 70 of the Indian
Contract Act 1872 are unquestionably wide, but have to be
applied with discretion to do substantial justice in cases where
it is difficult to impute to the persons concerned relations
created by contract. In other words, if parties are bound by a
contract, it is the contract alone which governs their respective
obligations and as observed by the Supreme Court in the
decision reported as AIR 1968 SC 1218 Mulamchand v. State of
Madhya Pradesh, Section 70, rested on principle of restitution
and prevention of undue enrichment, can never be applied if
there is a contract between the parties.
19. Evidence establishes that defendant No.2 paid full
amount to defendant No.3 for getting executed the job
assigned to air the advertisements of defendant No.1 and that
defendant No.3 did not pay the money due and payable to the
RFA(OS) No.27/2010 Page 13 of 14
plaintiff. Liability could thus be fastened only on defendant
No.3.
20. The impugned judgment runs in the teeth of the
afore-noted settled principles of law, and thus the finding
returned by the learned Single Judge with respect to issues
No.5 and 6 is reversed and keeping in view the logical
inference which flows from the determination of issue No.4 by
the learned Single Judge, which finding has been affirmed by
us, the appeal is allowed. Impugned judgment and decree
dated January 15, 2010 is set aside and suit filed by
respondent No.1 against the appellants is dismissed with costs
all throughout.
21. We find that pursuant to an interim order dated
May 05, 2010 the appellants deposited ` 23,39,177/- in this
Court which amount was released in favour of respondent No.1
upon said respondent furnishing a bank guarantee for said
sum in favour of the Registrar General of this Court. We
accordingly direct the learned Registrar to invoke the bank
guarantee and pay over ` 23,39,177/- by drawing a cheque in
the name of appellant No.1 and needless to state if said
appellant has a claim with respect to interest on said amount it
would be entitled to seek restitution by initiating appropriate
proceedings.
(PRADEEP NANDRAJOG)
JUDGE
(MANMOHAN SINGH)
JUDGE
JULY 13, 2012
KA / DK
RFA(OS) No.27/2010 Page 14 of 14
% Judgment Reserved on : July 09, 2012
Judgment Pronounced on: July 13, 2012
+ RFA(OS) 27/2010
DABUR INDIA LTD. & ANR. ..... Appellants
Represented by: Mr.Sudhir K.Makkar, Advocate
versus
HANSA VISION LTD. & ANR. ..... Respondents
Represented by:Mr.N.B.N.Swamy, Advocate and
Mr.I.C.Kumar, Advocate for R-1.
None for respondent No.2.
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE MANMOHAN SINGH
PRADEEP NANDRAJOG, J.
1. Respondent No.1 Hansa Vision Ltd. filed a suit
seeking decree in sum of ` 43,85,605/-. It pleaded being
engaged in the business of marketing T.V. serials and
advertising on television. It pleaded that Dabur India Ltd.,
defendant No.1, had appointed Adbur Pvt. Ltd., defendant
No.2, as its agent to advertise its products and in turn Adbur
Pvt. Ltd. had appointed M/s A.V. Communications, defendant
No.3, as the sub-agent, which defendant, in said capacity i.e.
of a sub-agent, approached M/s Hansa Vision Ltd. to advertise
products of the first defendant during telecast of various
programmes by various television networks and for which
defendant No.3 issued release orders on April 06, 1995 and
April 26, 1995 as also a release order dated nil, pursuant
whereto, Hansa Vision obtained slots in various programmes
RFA(OS) No.27/2010 Page 1 of 14
aired by various T.V. networks in which advertisements of
defendant No.1 were aired and for which it was pleaded that
as per the agreement a sum of `47,13,897/- became payable
to it. Alleging that defendants acknowledged liability to pay
`23,39,177/- but defendant Nos. 1 and 2 thereafter informed
having paid `32,34,250/- to defendant No.3, and washed off
their hands; alleging further that `23,39,177/- was admittedly
payable as of July 23, 1999 and claiming pre-suit interest @
18% per annum, suit was filed praying for a decree in sum of
`43,85,650/-.
2. In the written statement jointly filed by Dabur India
Ltd. and Adbur Pvt. Ltd., it was pleaded that the plaintiff
executed the works as per a contract with defendant No.3 with
respect to the publicity/advertising job assigned by defendant
No.2 to defendant No.3 on principal to principal basis; and that
the relationship between the plaintiff and defendant No.3 was
also of principal to principal. It was denied that defendant
No.3 acted as the sub-agent of defendant No.1. As regards
defendant No.2, requiring defendant No.3 to execute the
publicity work on behalf of defendant No.1, it was pleaded that
the said pertained to an internal working between defendant
No.1 and defendant No.2 and had no concern with the claim of
the plaintiff. It pleaded having paid full money to defendant
No.3.
3. In a nutshell, the pleading was that for advertising
the products of defendant No.1, defendant No.2 had entered
into a principal to principal contract with defendant No.3 and
defendant No.3 had likewise entered into a principal to
principal contract with the plaintiff. As per defendants No.1
and 2, they had made the entire payment to defendant No.3
RFA(OS) No.27/2010 Page 2 of 14
and it was for the plaintiff to realize the money, if any unpaid,
from defendant No.3.
4. Defendant No.3 remained ex-parte.
5. On the pleadings of the parties, the following issues
were settled as per order dated January 27, 2004:-
“ 1. Whether the suit is within time? OPP
2. Whether the plaint has been signed, verified and
filed by a duly authorized person? OPP
3. Whether the written statement filed on behalf of
defendants No.1 and 2 has been signed, verified and
filed by a duly authorized person? OPD
4. Whether the defendants No.1 and 2 have no
privity of contract with the plaintiff as averred in the
written statement? OPD
5. Whether there is no cause of action against the
defendant Nos. 1 and 2? OPD
6. Whether the plaintiff is entitled to recover the
suit amount from defendants No. 1 and 2 on the
grounds mentioned in the plaint? OPP
7. Whether the plaintiff is entitled to interest as
prayed? If so, on what amount and for which
period? OPP
8. Relief.”
6. The plaintiff examined Subhash Gulati, its Senior
Finance Manager and R.Jaganathan its Senior Accounts Officer
as PW-1 and PW-2 respectively and apart from reiterating the
case pleaded in the plaint the two proved the bills Ex.PW-2/1
to Ex.PW-2/23 raised by the plaintiff on defendant No.3 on
various dates between April 20, 1995 and October 31, 1995 as
also the telecast certificates Ex.PW-2/24 to Ex.PW-2/37
evidencing advertisements pertaining to defendant No.1 being
RFA(OS) No.27/2010 Page 3 of 14
telecast. They also proved the authority in favour of Subhash
Gulati to institute the suit. The witnesses deposed that
plaintiff acted pursuant to release orders issued by defendant
No.3 as also the certificates Ex.PW-1/7 to Ex.PW-1/34 being
certificates of telecasts.
7. Defendants No.1 and 2 examined A.K.Sharma and
M.L.Wadhwa as the two defence witnesses who deposed in
sync with the defence taken.
8. Deciding issue No.1 and issue No.2 in favour of the
plaintiff and issue No.3 in favour of defendants No.1 and 2,
which issues were in the nature of technical objections and in
respect whereof no arguments were advanced before us in
appeal, and thus we eschew reference to the first three issues
and proceed directly to the main issue between the parties i.e.
Issue No.4, 5 and 6.
9. From the pleadings of the parties it is apparent that
the core issue was : Whether defendant No.3 acted as a sub
agent, under power being given by defendant No.2; and
whether defendant No.2 was the agent of defendant No.1. For
if, the defence taken by defendants No.1 and 2 that their
transaction with defendant No.3 was on principal-to-principal
basis and in turn defendant No.3 acted on principal-to-principal
basis with the plaintiff, the suit could have been decreed only
against defendant No.3 upon proof that the plaintiff did not
receive the full money from defendant No.3.
10. The findings returned by the learned Single Judge
on issue No.4 need to be extracted by us verbatim. They read
as under:-
“32. Defense of defendants No.1 and 2 reiterated
on oath is that there was no privity of contract of
RFA(OS) No.27/2010 Page 4 of 14
the answering defendants with the plaintiff. At
best, if the plaintiff has any claim, it is against
defendant No.3. Defendant No.1 i.e. M/s Dabur
(India) Limited had entrusted the second defendant
i.e. M/s Adbur Private Limited with the job of
carrying advertisement of its company products
over Doordarshan National Network and other T.V.
Channels. This was an internal arrangement
between defendants No.1 and 2 and had no
concern whatsoever with the plaintiff. The
answering defendants No.1 and 2 did not have any
contract or transaction with the plaintiff.
Defendant no.2 had thereafter on a principal to
principal relation with the third defendant namely
M/s A.V. Communications entrusted him the job of
telecasting advertisements which was to be done
on various T.V. Channels in the television network.
Defendants No.1 and 2 had never appointed
defendant No.3 as their agent or sub-agent.
Relations of defendants no.2 and 3 was of principal
to principal and not of an agency. The contract
evidenced by the release orders ex.P-1/3 to Ex.P-
1/6 was a transaction between the plaintiff and
defendant No.3.
33. Ex.P-1/3 to Ex.P-1/6 are the release orders
which have been issued by defendant No.3 to the
plaintiff. They are dated 6.4.1995, dated nil, dated
26.4.1995 and dated nil. These documents
evidence that defendant No.3 had pursuant to
discussions with the plaintiff regarding co-
sponsorship over the various T.V. channels
mentioned therein had confirmed the booking with
the plaintiff on behalf of their client M/s Dabur
(India) Limited for advertisements to be effected
by the plaintiff at the rates mentioned therein. The
duration of the advertisements, the channel on
which they were to be aired and details of the
products were contained therein. Price of the
confirmed booking was also mentioned. Ex.P-1/3
to Ex.P-1/6 were admittedly on exchange of
communication between defendant No.3 and the
plaintiff; name of defendant No.1 found mention
as the product which was to be beamed on the TV
channels by the plaintiff were of defendant No.1
RFA(OS) No.27/2010 Page 5 of 14
company. There was no mention of defendant
No.2.
34. Ex.P-1/3 to Ex.P-1/6 are admittedly the only
written communications exchanged between the
plaintiff and defendant No.3 on the basis of which
the plaintiff is now endeavoring to fasten liability
on all the defendants i.e. defendants No.1 to 3 co-
jointly.
35. Onus to discharge this issue is on the
defendants. Question first to be answered is
whether defendant No.1 and defendant No.2 had a
principal-agent relation; further if defendant No.3
was a sub-agent of defendant No.2.
36. Defendant No.2 is the advertising agency of
defendant No.1. This position stands admitted by
both the defendants. DW-1 in his cross-
examination has admitted that business of
defendant No.2 is the handling of the
advertisement campaign of defendant No.1 as also
of other companies; advertisement bill is raised by
a third party on defendant No.2; essential
documents would be the bills of the said party i.e.
the release orders as also the telecast certificates.
Rates would be negotiated between defendants
No.2 and 3; defendant No.3 would raise a bill
directly on defendant No.2. The Media Manager of
defendant No.2 would prepare two sets of bills; one
to be forwarded to defendant No.1 and the second
to its accounts branch for payment to defendant
No.3. Defendant No.2 would then pay the bill.
37. Defendant No.2 in his cross-examination has
reiterated the stand of DW-1. It has been admitted
that the advertisement order placed on behalf of
defendant No.1 with defendant No.2 was by the
marketing department of defendant No.1. Plaintiff
was never notified by defendants No.1 and 2 that
bonus spots in the southern area being free spots
would not be entitled for payment of
advertisements. Defendants No.1 and 2 did not
have any dealings with the plaintiff.
RFA(OS) No.27/2010 Page 6 of 14
38. In Lakshminarayan Ram Gopal and Son, Ltd,
vs. Government of Hyderabad, through the
Commissioner, Excess Profits Tax AIR 1954 SC 364
while expounding the relations vis a vis a master-
servant and principal-agent, it was held that the
principal has a right to direct what work the agent
has to do, but a master has a further right to direct
as to how the work is to be done; the agent is
bound to exercise his authority in accordance with
all lawful instructions which may be given to him
from time to time by his principal.
39. DW-2 was admittedly the inhouse advertising
agency of defendant No.1 which had entrusted this
job of its advertisements to defendant No.2. Both
are located at the same address. Defendant No.2
could release payment to a third party only after
one copy of the bill was sent by it to defendant
No.1 and the second copy was to be retained by its
account branch. Further the marketing division of
defendant No.1 had placed the order of the
advertisement on defendant No.2 which was doing
no other work except being an accredited
advertising agency. Their relationship as principal-
agent stands established. Defendant No.2 is liable
for the acts of its principal i.e. of defendant No.1.
40. The relations of defendants No.2 and 3
however do not establish a sub-agent relationship.
Defendant No.2 being an advertising agency was
placing orders of advertisement on defendant
No.3. Defendant No.3 is a proprietorship firm; it
was receiving orders for advertising from various
persons. This position is not in dispute. Defendant
No.3 was not doing the job of defendant No.2
alone. Rates were negotiated between defendant
No.2 and defendant No.3 independent of any
interference by defendant No.1; defendant No.3
would raise the bill directly on defendant No.2 and
was getting its payment from defendant No.2
directly and independently of defendant No.1.
Dealings between defendant No.2 and defendant
No.3 were essentially on a principal to principal
basis.
RFA(OS) No.27/2010 Page 7 of 14
41. The submission of the counsel for the plaintiff
that in para 8 of the written statement the
defendants have admitted that defendant No.2 and
defendant No.3 were sub-agent of one another is
not borne out from the record; the written
statement as also the averments on oath of both
the witnesses of the defendants i.e. DW-1 and DW-
2 is that defendant No.3 had an independent
relation with defendant No.2. PW-2 in his cross-
examination has also admitted that his averment
in his affidavit that defendant No.3 was a sub-
agent of defendant No.2 is based on the
documents which are the release orders only.
42. Evidence has failed to establish that
defendant No.3 was an agent of defendant No.2. It
was however been established that defendant No.2
was an inhouse advertising agency of defendant
No.1.
43. Defendant No.3 had approached the plaintiff
to advertise certain products which included the
products of defendant No.1. This contract is
evidenced by the release orders Ex.P-1/3 to Ex.P-
1/6. Defendant No.3 in his independent capacity
entered into this contract with the plaintiff.
Defendant No.1 has been referred to as „client‟ in
these release orders; there is no mention of
defendant No.2; PW-1 in his cross-examination has
admitted that he had not raised any bill upon
defendants No.1 and 2; no release order was
issued by defendants No.1 and 2 to the plaintiff.
PW-2 has also admitted that he had not dealt with
defendant No.1 or defendant No.2 at any point of
time; defendants No.1 and 2 had never entrusted
any work to the plaintiff. This evidence on record
has established that there was no privity of
contract between the plaintiff and defendants No.1
and 2.
44. Issue No.4 is answered in favour of defendants
and against the plaintiff.”
11. The learned Single Judge has, with reference to
Ex.PW-1/3 to Ex.PW-1/6 rightly returned a verdict that
RFA(OS) No.27/2010 Page 8 of 14
defendant No.3 was not acting as a sub-agent under the
authority of defendant No.2. The learned Single Judge has
rightly returned a verdict that evidence establishes that
defendant No.3 had approached the plaintiff to advertise
certain products which included the products of defendant
No.1 as per release orders Ex.PW-1/3 to Ex.PW-1/6. The
finding returned by the learned Single Judge in para 43 of the
decisions is that defendant No.3 in its independent capacity
entered into the contract with the plaintiff. We may highlight
that the learned Single Judge has correctly noted that in the
release orders, defendant No.3 referred to defendant No.1 as
its client. The learned Single Judge has concluded, and rightly,
that there was no privity of contract between the plaintiff and
defendants No.1 and 2. The learned Single Judge has correctly
opined in paragraph 40 that dealings between defendant No.2
and defendant No.3 were on principal to principal basis.
12. But, with respect to issue No.5 and 6 i.e. whether
the plaintiff had a cause of action against defendants No.1 and
2 and if yes, what sum has to be paid by them to the plaintiff,
the learned Single Judge has proceeded to hold that since the
benefit of the works performed by the plaintiff i.e. in managing
goods of defendant No.1 to be advertised has been accepted
by defendant No.1, it must pay on account of Section 70 of the
Indian Contract Act 1872.
13. The learned Single Judge has extensively relied
upon the law laid down in the decisions reported as:-
“47. In State of West Bengal v.
M/s.B.K.Mondal and Sons AIR 1962 SC 779
the pre-conditions for the application of the
provisions of the Section 70 of the Contract
Act have been discussed. The first condition
is that a person should lawfully do something
RFA(OS) No.27/2010 Page 9 of 14
for another person or deliver something to
him. The second condition is that in doing
the said thing or delivering the said thing he
must not intend to act gratuitously; and the
third is that the other person for whom
something is done or to whom something is
delivered must enjoy the benefit thereof.
When these conditions are satisfied Section
70 imposes upon the latter person, the
liability to make compensation to the former
in respect of or to restore, the thing so done
or delivered. In the facts of the said case
plaintiff/respondent had constructed a
warehouse; the benefit of which was enjoyed
by the defendant/appellant;
defendant/appellant could have called upon
the plaintiff/respondent to demolish the said
warehouse and take away the materials used
by it in constructing it; but if the
defendant/appellant accepted the said ware
house and used it and enjoyed its benefit
then different considerations come into play
and Section 70 could be invoked.
48. Section 70 which occurs in Chapter V
of the Contract Act deals with certain
relations resembling those created by
contract. In such cases which are filed under
Section 70 a person doing something for
another cannot sue for specific performance
of the contract nor ask for damages for the
breach of the contract for the simple reason
that there is no contract between him and the
other persons for whom he does something
or for whom he delivers something. Section
70 provides if the goods delivered are
accepted or the work done is voluntarily
enjoyed then the liability to pay
compensation for the enjoyment of the said
goods or the acceptance of the said work
arises. Thus, where a claim for compensation
is made by one person against another under
Section 70, it is not on the basis of any
subsisting contract between the parties but it
is on the basis of the fact that something was
RFA(OS) No.27/2010 Page 10 of 14
done by the party for another and the said
work so done has been voluntarily accepted
by the other party.
49. These principles have been reiterated
by the Supreme Court in the subsequent
judgment i.e. New Marine Coal Company Pvt.
Ltd. vs. The Union of India AIR 1964 SC 152.
In this case it had been held that Section 70
of the Contract Act would be applicable even
when a Contract Act had been held void; in
view of the provisions of Section 173(5) of the
Govt. of India Act 1935, the contract had
been declared to be void; since A had
performed his part of the contract and the
Govt. of India had received the benefit of the
performance of the said Act, provisions of
Section 70 of the Contract Act were held
applicable and the Govt. of India was made to
pay compensation for the benefit received by
it.
50. In V.R.Subramanyam v. B. Thayappa &
Ors. AIR 1966 SC 1034, it has been held that
if a party to the contract has rendered service
to the other not intending to do so
gratuitously and the other person has
obtained some other benefit, the former is
entitled to compensation for the value of the
services rendered by him.
51. In Aries Advertising Bureau v.
C.T.Devaraj AIR 1995 SC 2251 this principle
was reiterated. This was the case where the
plaintiff had advertised certain products of
the respondent; Section 70 was held
inapplicable as no benefit has been derived
by the respondent pursuant to the
advertisement made by the appellant.
52. In Food Corporation of India & Ors. v.
Vikas Majdoor Kamdar Sahkari Mandli Limited
(2007) SC 544 it was held that the provisions
of Section 70 of the Contract Act are more
liberal interpretation of the doctrine of
RFA(OS) No.27/2010 Page 11 of 14
quantum merit. This principle has no
application where there is a specific
agreement in operation. This section also
prevents an unjust enrichment; being a
principle of equity.”
14. Section 70 of the Indian Contract Act 1872 reads as
under:-
“Obligation of person enjoying benefit of
non-gratuitous act – Where a person lawfully
does anything for another person, or delivers
anything to him, not intending to do so
gratuitously and such other person enjoys
the benefit thereof, the latter is bound to
make compensation to the former in respect
of, or to restore, the thing so done or
delivered.”
15. As explained by the Supreme Court in R.K.Mondal‟s
case (supra) there are three conditions which attract Section
70 of the Contract Act. Firstly, the person claiming benefit
must do something lawfully for another, secondly while doing
so he should not intend to act gratuitously, and lastly, the
other person enjoys the benefit from or under the act done by
the first person. Explaining the meaning of the word „lawfully‟
which finds a mention in Section 70, the Supreme Court
clarified:-
16. Expanding further, in para 18 of its opinion the
Supreme Court observed:-
“There is no doubt that the thing delivered or
done must not be delivered or done
fraudulently or dishonestly nor must it be
delivered or done gratuitously. Section 70 is
not intended to entertain claims for
compensation made by persons, who
officiously interfered with the affairs of
RFA(OS) No.27/2010 Page 12 of 14
another or who impose on others services not
desired by them.” Emphasis supplied
17. Thus, it is clear that Section 70 of the Indian
Contract Act would have no application where parties have
acted pursuant to a contract for the reason the section is
founded upon the principle of restitution and prevention of
unjust enrichment i.e. equity recognized by Common Law in
the words of Lord Wright in the decision reported as 1943 AC
32 Fibrosa v. Fairbairn: „It is clear that any civilized system of
law is bound to provide remedies for cases of what has been
called unjust enrichment or unjust benefit, that is, to prevent a
man from retaining the money of, or some benefit derived
from, any other which it is against its conscience that it should
keep.‟
18. Though the terms of Section 70 of the Indian
Contract Act 1872 are unquestionably wide, but have to be
applied with discretion to do substantial justice in cases where
it is difficult to impute to the persons concerned relations
created by contract. In other words, if parties are bound by a
contract, it is the contract alone which governs their respective
obligations and as observed by the Supreme Court in the
decision reported as AIR 1968 SC 1218 Mulamchand v. State of
Madhya Pradesh, Section 70, rested on principle of restitution
and prevention of undue enrichment, can never be applied if
there is a contract between the parties.
19. Evidence establishes that defendant No.2 paid full
amount to defendant No.3 for getting executed the job
assigned to air the advertisements of defendant No.1 and that
defendant No.3 did not pay the money due and payable to the
RFA(OS) No.27/2010 Page 13 of 14
plaintiff. Liability could thus be fastened only on defendant
No.3.
20. The impugned judgment runs in the teeth of the
afore-noted settled principles of law, and thus the finding
returned by the learned Single Judge with respect to issues
No.5 and 6 is reversed and keeping in view the logical
inference which flows from the determination of issue No.4 by
the learned Single Judge, which finding has been affirmed by
us, the appeal is allowed. Impugned judgment and decree
dated January 15, 2010 is set aside and suit filed by
respondent No.1 against the appellants is dismissed with costs
all throughout.
21. We find that pursuant to an interim order dated
May 05, 2010 the appellants deposited ` 23,39,177/- in this
Court which amount was released in favour of respondent No.1
upon said respondent furnishing a bank guarantee for said
sum in favour of the Registrar General of this Court. We
accordingly direct the learned Registrar to invoke the bank
guarantee and pay over ` 23,39,177/- by drawing a cheque in
the name of appellant No.1 and needless to state if said
appellant has a claim with respect to interest on said amount it
would be entitled to seek restitution by initiating appropriate
proceedings.
(PRADEEP NANDRAJOG)
JUDGE
(MANMOHAN SINGH)
JUDGE
JULY 13, 2012
KA / DK
RFA(OS) No.27/2010 Page 14 of 14