The defendants appealed.
The Official Assignee representing the estate of the plaintiff denied its liability on the promissory numbere on the ground of fraud.
The decision of the Calcutta Stock Exchange was published in the Hindu of Madras on the evening of the 7th.
208 of 1940.
There was a transaction on the 9th at Rs.
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 numberice given by its members to close the Stock Exchange.
The companypany is doing extremely well and the stage is set for a steady rise to Rs.
70 Indian Iron and Steels fluctuated between Rs.
The suit embraced in particular claims in respect of four transactions.
For the reasons given above we modify the order passed by Clark J., and by the appellate Bench of the High Court to the extent indicated above and we estimate the plaintiffs damage at Rs.
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.
On an application made to the High Court against the order of the Official Assignee it was set aside by Mockett J. and he directed that the claim of the defendants be disposed of on a companyrt motion, the claim being heard as if it were a suit.
It states as follows In the first place, Indian Irons are very cheap around Rs.
The result of it was that on 22nd May, 1937, when the accounts between the plaintiff and the defendants were settled it was found that plaintiff was heavily indebted to them in the sum of Rs.
At this dizzy height, the markets lost their equilibrium and frenzied selling resulted in a sensational decline of about 25 points.
183 per share.
It became necessary for him therefore to companyer the sales.
The Judgment of the Court was delivered by MAHAJAN J. The dispute in this appeal is between a companystituent and a firm of stock brokers.
From the statement of account, Exhibit P 41, filed by Trojan Co. on 7th, about half a dozen transactions in these shares took place through them.
79 but by the close of business fell back to Rs.
1,050 and the companyrectness of this order was number canvassed in the appeal before the High Court.
42 8 0 and Rs.
The defendants applied for leave to appeal to His Majesty in Council but leave wag refused.
Appeal from the Judgment and Decree dated the 17th March, 1950, of the High Court of Judicature at Madras Horwill and Balakrishna Ayyar JJ.
He held the defendants firm guilty of fraud in both respects.
The Official Assignee having acquired knowledge about the telephonic companyversation that had passed between Annamalai Chettiar and Ramdev Chokani on the evening of the 5th April, 1937, came to the companyclusion that the insolvent had been a victim of a fraud perpetrated by the defendants and dismissed their claim.
As above stated, the claim in respect of Ayer Mani Rubber shares was abandoned at the trial and the claim on the third transaction relating to 300 shares in Tatas was decreed for the sum of Rs.
The two claims discussed in that companyrt were in respect of the trans action of 5,000 Indian Iron shares and in respect of the transaction made in Associated Cements.
Against this decree the defendants preferred an appeal.
Defendants then applied to the Privy Council for special leave and that application was also dismissed some time in October, 1943 On the 28th September, 1940, when the appeal from the decision of Somayya J. was still pending, the Official Assignee as representing the estate of the plaintiff filed the suit out of which this appeal arises against Trojan Co. for an account of the transactions between himself as principal and the defendants as agents and claiming damages for loss sustained by him and for various other reliefs.
The Calcutta market on the 7th dropped from 72 to 58 as already stated.
The appellate Bench modified the decree of Clark J., and reduced the amount of the decree by a sum of Rs.
72 a sudden drop of Rs.
On the 6th April the Committee of the Calcutta Stock Exchange Association passed a resolution closing the Stock Exchange on the 8th and 9th April.
No transaction after the 10th made by this companypany has been exhibited on the record.
From the 6th April onwards the market sagged and the prices came down, at first gradually and then literally at a, run.
The main ques tion canvassed at this trial was whether the plaintiff had suffered any damage as a companysequence of this fraud and if so, how were the damages to be measured.
After giving credit for payments received on the promissory numbere the defendants filed a suit against him O.S. 150 of 1937 on the Original Side of the Madras High Court and obtained an ex parte interim order for attachment before judgment and attached plaintiffs movable and immovable properties at Madras, and also at Kottaiyur in Ramnad district.
The defendants made demands on the plaintiff for the price of those shares.
51,712 7 0 and the credit balance of Rs.
The remaining 1,000 shares were sold by him through Messrs. Ramlal Co. at Rs.
The youthful plaintiff in his anxiety to got rich quickly accepted the suggestion and purchased these shares, some at Rs.
On 21st July, 1937, defendants purchased on plaintiffs account 100 shares at Rs.
The difference between the prices at which these shares had been sold and bought amounted to Rs.
55 to Rs.
Prices of Indian Iron shares were going up to unreal heights.
There were two or three transactions on the 10th also near about this rate.
The result of it was that the plaintiff had to sell at a very heavy loss.
The defendants were only able to dispose of 2,000 of these shares on the 20th at prices varying between Rs.
61,787 9 0 with interest at the companyrt rate of six per cent.
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.
1,050.
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 companyrse of the insolvency proceedings defendants tendered proof of their claim on the promissory numbere, Exhibit P 33.
A sum of Rs.
A lot of 700 shares was sold by the plaintiff to Pilani Co. and on 19th April, 1937, he instructed the defendants.for sale of the remaining 3,000 shares at the best price obtainable.
77 and Rs.
The defendants denied liability for the entire claim and pleaded that they were number guilty of any fraud and that in any case the plaintiff was number entitled to claim any damage, as he companyld 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.
44 12 0 and Rs.
42 8 0 per share on 22nd April, 1937.
Meantime, that is to say, on 21st February, 1944, the adjudication of the plaintiff was annulled and on his application he was brought on the record in the place of the Official Assignee and he companytinued the suit.
The defendants sold 2,000 shares on 20th April, 1937, for prices ranging between Rs.
Another firm of brokers, Ramlal Co., had also in their hands another 4,000 of these shares.
A wave of speculation followed this announcement and there was a boom in the market.
On 15th March, 1940, Somayya J. dismissed the claim of the defendants.
60 and closed at Rs.
On 30th March, 1937, he had similarly sold a further 200 shares in Associated Cements at Rs.
On Tuesday the 6th, the day when the decision was taken to close the market for two days, these shares touched Rs.
On the 20th Trojan and Co. sold 2,000 of the plaintiffs shares at rates varying between Rs.
The suit was first heard by Bell J. who decreed the claim of the plaintiff on 9th March, 1943.
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.
Shortly after this companyversation 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 would be a good thing for him to buy these shares.
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 Rs.
6,762 8 0 and for this amount the defendants gave the plaintiff credit by adjusting it towards the promissory numbere account.
In respect of this transaction the case of the Official Assignee was that the purchase which had been made by the defendants was number only unauthorized, but companytrary to instructions and was number valid and binding on the plaintiff as it had been made after the companymencement of the insolvency.
He claimed the whole of this amount as damages on this companynt 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 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 companyrectness of the order of the trial judge was number canvassed in the appeal before the High Court.
There is numberevidence that any other factor was then disturbing the market rate of these shares.
On 22nd March,1937, the plaintiff had sold through the defendants 5O shares in Associated Cements at Rs.180 8 0 per share.
161 12 0 per share.
77 4 0.
The finding of Somayya J., that the 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 belonged to one of its partners, Annamalai Chettiar, and also on account of its failure to disclose its knowledge of the probable slump in the market by reason of the numberice given by three members of the Stock Exchange to temporarily close it, was number companytested before Clark J., and it was companyceded that that finding had become final.
The amount decreed as regards these 300 shares was in the sum of Rs.
55 per share.
CIVIL APPELLATE JURISDICTION Civil Appeal No139 of 1962.
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.
44 12 0 to Rs.
Between 5th April and 20th April, 1937, he made payments to defendants of various amounts totalling Rs.
The heavy liquidation was due to a predominance of weak holders that had companye into the market at a late stage.
93,000 on account of the 3,000 shares at the rate of Rs.
The second referred to a transaction of Associated Cements.
In the plaint plaintiff claimed that he was entitled to be recompensed for all loss and damage which he had suffered.
This method of measuring damages was successfully challenged by the defendants before the trial judge.
47 4 0 to Rs.44 12 0 per share.
On 22nd September, 1937, Trojan Co. also filed a petition for the same relief.
The plaintiff did number have on hand even a single share in Associated Cements.
57 to Rs 66.
The dispute before us so far as the Indian Iron shares are companycerned has narrowed down to the question of quantum of damages in respect of 3,000 out of the 5,000 shares that were transferred by the defendants to the plaintiff on the night of the 6th April, 1937, 1,300 out of these shares having been sold at companyt price by the plaintiff the day after the purchase, and 700 having been sold to Pilani Co., and regarding which the plaintiffs claim was rejected in the High Court and plaintiff preferred numberfurther appeal.
They too found in the plaintiff a ready buyer.
The week opened with a cheerful bullish sentiment and Indian Iron and Steels touched Rs.
47 4 0 on the 20th and 22nd April, 1937.
On 1st September, 1937, they purchased a further 150 shares at Rs.
The appellate companyrt set aside the decision of Bell J. and remanded the suit for fresh disposal on 26th August, 1944.
Exhibit P 23 is another weekly share market report of Trojan Co. issued on 17th April, 1937.
On Wednesday the 7th April in the Calcutta market they closed at Rs.
per annum from 1st September, 1937, until payment or realization with companyts.
77 4 0 and sold at prices ranging between Rs.
Clark J. who tried the suit after remand gave a decree in favour of the plaintiff for the sum of Rs.
The market price at the time this scheme was announced was about Rs.
Leave to appeal to this companyrt against the decree was granted and the appeal is number before us under the certificate so granted.
From this there was an appeal which was dismissed on 12th August, 1942.
For the amount found due he passed a promissory numbere in favour of defendants, Exhibit P 33.
Each party was made to pay proportionate companyts throughout.
Owing to the attachment proceedings the firm of Ramlal Co. filed a petition for adjudication of the plaintiff as an insolvent.
The shares were bought on 5th April at Rs.
The share market report of the defendants themselves issued on 10th April, 1937, amply bears out this fact.
The market reports for the week ending March 19, show that the Indian Irons were standing at or around Rs.
9,100.
60,000.
Indian Iron Steel Co. Ltd., and the Bengal Iron Steel Co. Ltd., merged into one companycern and a new issue of shares was made.
They also companytacted him on the phone after Annamalai had done so, and sold him 4,000 shares that they held.
34 of 1947, arising out of the Judgment and Decree dated the 18th April, 1947, of the said High Court Clark J. in the exercise of the Ordinary Original Civil Jurisdiction of the High Court in C. S. No.
In the hope of getting rich by obtaining quick dividends by speculating on the stock exchange be, through the defendant firm and certain other stockholders, entered into a series of speculative transactions and it seems he did number fare badly in the beginning.
The scheme was that for every five shares 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 Rs.
Some time before April, 1936, the plaintiff, then a young man, came into possession of property worth about 2 lakhs of rupees on a partition between him and his brothers.
The first related to the 5,000 Indian Iron shares.
Rangachari K. Mangachary, with him for the appellant.
At that time Annamalai Chettiar had on his bands some 5,000 of these shares.
On the same evening plaintiffs stockbroker Annamalai Chettiar, who was carrying on business in firm name Trojan Co., had telephonic companyversation with one Ramdev Chokani, a member of the Calcutta Stock Exchange, on this subject and from this companyversation he gathered that a sharp fall in the prices of Indian Irons was likely.
in O.S.A. No.
64,000 that he had with the defendants at the end of March, 1937, had been wiped off.
Out of the lot which the plaintiff purchased from the defendants he sold 1,300 shares to Ramanathan Chetti at companyt price.
151 a share.
In pursuance of this direction Trojan and Co. on 29th September, 1938, filed an application in the High Court, No.
On Monday the 6th April the price was Rs.
313 of 1938.
March 20.
Krishnaswami Iyengar K. Parasuram, with him for the respondent.
77 and others at Rs.
