TMI Blog1953 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... s which a person held in the Indian Iron Co. Ltd. on 22nd April, 1937, one fully paid up share would be given to him at a price of ₹ 25. The market price at the time this scheme was announced was about ₹ 55 per share. A wave of speculation followed this announcement and there was a boom in the market. Prices of Indian Iron shares were going up to unreal heights. To stabilize the situation thus created by heavy speculation, three members of the Committee of the Calcutta Stock Exchange presented a petition to the Committee on 5th April, 1937, to close the Calcutta Stock Exchange for a while. On the same evening plaintiff's stockbroker Annamalai Chettiar, who was carrying on business in firm name Trojan Co., had telephonic conversation with one Ramdev Chokani, a member of the Calcutta Stock Exchange, on this subject and from this conversation he gathered that a sharp fall in the prices of Indian Irons was likely. At that time Annamalai Chettiar had on his bands some 5,000 of these shares. Shortly after this conversation and after business hours the same night, between the hours of 7-30 and 8-30, Annamalai Chettiar rang up the plaintiff and suggested to him that it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for adjudication of the plaintiff as an insolvent. On 22nd September, 1937, Trojan Co. also filed a petition for the same relief. An order adjudicating the plaintiff an insolvent was made by the High Court on 5th October, 1937, on the petition of Ramlal Co. In the course of the insolvency proceedings defendants tendered proof of their claim on the promissory note, Exhibit P-33. The Official Assignee having acquired knowledge about the telephonic conversation that had passed between Annamalai Chettiar and Ramdev Chokani on the evening of the 5th April, 1937, came to the conclusion that the insolvent had been a victim of a fraud perpetrated by the defendants and dismissed their claim. Defendants-firm was guilty of fraud both in respect of the failure to disclose the fact that the Indian Iron shares or most of them be- longed to one of its partners, Annamalai Chettiar, and also on account of the failure on its part to disclose its knowledge of the likelihood of a slump in the market because of the notice given by its members to close the Stock Exchange. On an application made to the High Court against the order of the Official Assignee it was set aside by Mockett J. and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the plaintiff as it had been made after the commencement of the insolvency. No claim was made in the alternative that if this contention failed, the plaintiff was entitled to recover the amount credited towards the promissory note on the ground of failure of consideration. The third transaction related to 300 shares in Tatas, and the fourth one was in respect of shares in Ayer Mani Rubber Co. The last claim was abandoned at the trial and the claim on the third transaction was decreed in favour of the plaintiff and the correctness of the order of the trial judge was not canvassed in the appeal before the High Court. The amount decreed as regards these 300 shares was in the sum of ₹ 1,050. The defendants denied liability for the entire claim and pleaded that they were not guilty of any fraud and that in any case the plaintiff was not entitled to claim any damage, as he could have easily sold away all his shares soon after his purchase without incurring any loss, and that he retained them in order to make profit. The suit was first heard by Bell J. who decreed the claim of the plaintiff on 9th March, 1943. The defendants appealed. The appellate court set aside the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues- tion canvassed at this trial was whether the plaintiff had suffered any damage as a consequence of this fraud and if so, how were the damages to be measured. In the plaint plaintiff claimed that he was entitled to be recompensed for all loss and damage which he had suffered. A sum of ₹ 45,042-9-0 was credited in his account in respect of the sale of 3,000 shares made on 20th and 22nd April, 1937. He claimed the whole of this amount as damages on this count; in other words, according to the plaintiff, the damage suffered by him was to be measured according to the difference between the purchase price of the shares and the price for which they were ultimately sold. The shares were bought on 5th April at ₹ 77 and ₹ 77-4-0 and sold at prices ranging between ₹ 42-8-0 and ₹ 47-4-0 on the 20th and 22nd April, 1937. This method of measuring damages was successfully challenged by the defendants before the trial judge. Clark J., in spite of holding that the measure of damages in a case like this could not be as suggested by the plaintiff, estimated the damage suffered by him at the difference between the rate at which the plaintiff purchased the shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A general principle cannot be laid down for measuring it, and every case must to some extent depend upon its own circum- stance. It is, however, clear that in the absence of ,any special circumstances the measure of damages cannot be the amount of the loss ultimately sustained by the representee. It can only be the difference between the price which he paid and the price which he would have received if he had resold them in the market forthwith after the purchase provided of course that there was a fair market then. The question to be decided in such a case is what could the plaintiff have obtained if he had resold forthwith that which he bad been induced to purchase by the fraud of the defendants. In other words, the mode of dealing with damages in such a case is to see what it would have cost him to get out of the situation, i.e., how much worse off was his estate owing to the bargain in which he entered into. The law on this subject has been very appositely stated in McConnel v. Wright([1903] 1 Ch. 546. (2) 37 Ch. D. 541.) by Lord Collins in these terms:- As to the principle upon which damages are assessed in this case, there is no doubt about it now. It has been laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no market at all or if the market rate cannot, for reasons referred to above, be taken as the real or fair value of the thing and the representee has not sold the things, then in ascertaining the real or fair value of the thing on the date when deceit was practised subsequent events may be taken into account, provided such subsequent events are not attributable to extraneous circumstances which supervened on account of the retaining of the thing. These, we apprehend, are the well settled rules for ascertaining the loss and damage suffered by a party, in such circumstances. If damages had been measured on the rules above stated by the courts below, this court would have then respected the concurrent finding on this point as the question of assessment of damages primarily is a question of fact and the concurrent findings of the courts below on such points except in very exceptional circumstances are not reviewed by this court. We however find that in spite of the circumstance that the courts below correctly enunciated the rule of measuring damages in such cases, they estimated them on the difference between the cost price and the price realized at the sale on the 20th and 22nd a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55. By Satur day the 3rd April after the announcement of the terms of the merger by reason of the keen speculation the shares were being dealt at around ₹ 73. On Monday the 6th April the price was ₹ 77. On Tuesday the 6th, the day when the decision was taken to close the market for two days, these shares touched ₹ 79 but by the close of business fell back to ₹ 72 a sudden drop of ₹ 7. On Wednesday the 7th April in the Calcutta market they closed at ₹ 58, a drop of ₹ 14 in a day. These sudden rises and falls in the market during the course of these two days are sufficient indication of the fact that the drop was due to the decision of the Stock Exchange to close the Exchange for two days. There is no evidence that any other factor was then disturbing the market rate of these shares. The share market report of the defendants themselves issued on 10th April, 1937, amply bears out this fact. In this report it was stated as follows :- The outstanding feature of the Indian markets during the week under review was the sudden landslide in Indian Iron and Steel shares, which proved infectious to the other sections of the market. The week opene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 1937. It states as follows :- In the first place, Indian Irons are very cheap around ₹ 46. The company is doing extremely well and the stage is set for a steady rise to ₹ 70............... Indian Iron and Steels fluctuated between ₹ 55 to ₹ 60 and closed at ₹ 47. The recent hectic speculation has brought its own nemesis. This report proves that there was really no market as it appears from the evidence on the record in Madras between the 8th and 17th which was a Saturday, and on the 17th the prices seemed to be settling down at ₹ 46. On the 19th the plainti gave to the, defendants an order to sell his 3,000 shares and it was said Please retain this order till-executed . The defendants were only able to dispose of 2,000 of these shares on the 20th at prices varying between ₹ 44-12-0 to ₹ 47-4-0. The remaining 1,000 shares the plaintiff was able to sell through Ramlal and Co. at ₹ 42-8-0 on 22nd April, 1937. It is quite possible and probable that had the plaintiff placed an order before the 19th, say on the 16th or 17th, with the defendants or with Ramlal Co., he might have been able to sell these 1,000 shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son of the failure of the suit on the promissory note. At the hearing of the case before Bell J. the contention that the purchase was unauthorized was abandoned by counsel and the same position was adopted before Clark J. During cross-examination of the plaintiff it was elicited that he either instructed the defendants to purchase the shares or at any rate ratified the purchase which the defendants had made on his behalf. It was argued before the appellate Bench of the High Court that having pleaded one thing and having led evidence in support of that thing but later on having been forced to admit in the witness box that the true state of things was different the plaintiff had disentitled himself to relief as regards these shares and he could not be granted the relief that he had not asked for. The High Court negatived this contention on the ground that though a claim for damages in respect of a particular transaction may fail, that circumstance was no bar to the making of a direction that the defendants should pay the plaintiff the money actually due in respect of that particular transaction. It also held that the plaintiff's claim in respect of this item of ₹ 6,762-8-O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their opinion there can be no doubt whatever' that money obtained by fraud and retained by fraud can be recovered with interest, whether the proceedings be taken in a court of equity, or a court of law, or in a court, which has jurisdiction both equitable and legal. The appeal court affirmed the view of Clark J. on this point. The learned counsel for the appellant contended that the decisions relied upon concerned cases where the agent had retained some money of his principal in his hands but that in the present case the claim was merely for damages. This contention is fallacious. By reason of the transaction brought about by fraudulent concealment plaintiff paid to the defendants a sum of ₹ 60,000 in cash which he would not have parted with otherwise and he also lost the money which stood at his credit with the defendants. It is thus clear that the agents had a large sum of the plaintiff with them which they would not have acquired but by reason of the fraud that they practised on him. In this view of the case we see no force in the contention of the learned counsel and we repel it. The only other point that was argued before us was in respect of future interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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