In R. S. Thakur v. H. G. E.

Corporation, AIR 1971 Bom 97 it was observed that:

"9. ... Exception 1 applies where the buyer requires the goods for a particular purpose, where
the buyer expressly or implication makes known to the seller that particular purpose, where it
is shown that the buyer relies on the seller's skill or judgment and where the seller's usual
course of business is to sell such goods, whether he is the actual producer or not. Where all
these essential facts exist, there is an implied condition that the goods shall be reasonably fit
for such purpose. The buyer in our case did rely on the skill or judgment of the seller. This is
not a case where he had inspected the goods and bought them on his own judgment. In this
case, the buyer purchased the radio set with some specified purpose. It could easily be said
that the vendor sold this radioset for that specified purpose. It has, therefore, to be of a certain
quality. If it is not of that quality and if it is not fit for such purpose, then the law implies a
promise from the vendor that he will supply to the purchaser an article of that quality and
reasonably fit for the purpose for which it is required. The seller's liability in such cases to
supply goods that are reasonably fit is an absolute one.
10. It is not necessary that the buyer should expressly or by implication make known to the
seller a particular purpose.
The words "by implication" in Section 16(1) clearly indicate that the communication of the
purpose to the seller need not be expressed in words. It may be inferred from the description
of the goods given by the buyer to the seller or from the circumstances of the case. The buyer
however must rely on the seller's skill or judgment. In this particular case, it does appear that
the plaintiff naturally had relied on the radioset which he had purchased from the defendants.
In the instant case defendant No. 2 was a firm which was supplying radios in the ordinary
course of their business. In fact they were supplying the goods manufactured by defendant
No. 1. Therefore the buyer naturally should expect goods which were fit enough for the
purpose for which he was buying. We have seen that the radioset started giving the plaintiff
trouble almost about two months after he purchased it. In this view of the matter, therefore, it
appears to me that the case of the plaintiff could even come within the purview of subsection
(1) of S.
16."
. The Bombay High Court also relied upon another decision and observed that:

"13. In Raghava Menon v. Kuttappan Nair, AIR 1962 Ker 318, the Kerala High Court was
dealing with the purchase of a wrist watch. The plaintiff there had purchased a wrist watch
from the defendantcompany along with a guarantee certificate and within about three weeks
the plaintiff found that the watch was not working properly. Therefore, he handed over the
watch to the defendantcompany. It was kept there for a few days and was returned to the
plaintiff but the plaintiff was not satisfied and therefore he handed over back the watch at the
Headoffice of the defendant company. It was again returned back to the plaintiff with the
assurance that the defects were set right. But within a week the trouble again reappeared. The
plaintiff therefore had to hand over the watch again to the defendantcompany and in the
background of these circumstances he had to file a suit against the defendantcompany. That
High Court observed that where a layman purchases a watch of a particular make from a
reputed firm which exclusively deals in such watches, the sale is governed by exception (1) to
Section 16 of the Sale of Goods Act because in such a case the purpose is only the common
purpose and not any special purpose, the seller knows it and the purchaser being only a
layman, he relies on the seller's skill or judgment. According to that High Court such
transaction being a sale by description from a dealer who deals in goods of that description
can also fall under exception (2) to Section 16."

30. In my view, the order placed by the defendant in the present case is also capable of falling
under both sub sections of Section 16 inasmuch as the order was placed describing the
specifications of the computer including the software components and therefore, a sale by
description and secondly, the laptop was purchased for the MD of an educational institute
who cannot be called a technician, the sale is for common purpose for which the laptop must
be fit i.e. for use as a computer. Computer hardware cannot be put to any use by a common
man unless the requisite operating system and softwares, required for interacting with the
machine are installed in the system. In the present case it has been proved that the operating
system could not be used because of want of activation key. The only remedy would be to
seek re installation of operating system and all the softwares from some other vendor or the
service centre of the manufacturer in these circumstances. The sale/invoices do not segregate
the software and hardware component and therefore the price of the hardware/software
cannot be segregated from the total cost. The breach in my view was breach of guarantee and
the defendant was within its right to reject the goods on breach of guarantee. The emails
exchanged between the parties exhibited as Ex.PW1/D2 (colly) and admitted to be correct by
PW1 in his cross examination reveal that the laptop was in fact rejected after numerous
attempts to fix the same failed. The plaintiff has failed to prove that the laptop was repaired
and the defendant continued to use it thereafter. In fact the plaintiff had denied any
communication with regard to defect in the laptop and had taken a stand in the plaint that the
defendant herein was not even responding to its request for payment whereas the truth is that
there was correspondence exchanged between the parties regarding the defective laptop and
which correspondence was placed on record by the plaintiff itself after filing of replication. In
my view such litigants in any event, do not deserve any indulgence of the court and having
concealed material facts they try and mislead the court. The plaintiff ought to have collected
the laptop from the defendant but it allowed the laptop to remain in the office of the
defendant and is now trying to potray that the defendant continued to use the same. Once the
defendant had indicated that he did not want to use the said laptop any more because of the
defects i.e. want of activation key for operating system windows. Although, the defendant
herein was a supplier and not the manufacturer, it is equally settled that the seller of goods is
also liable besides the manufacturer and can be sued for recovery of price paid. Reliance is
placed on Ashoke Khan v. Abdul Karim, AIR 2005 All 396 wherein it was observed that:

"The aforesaid subsequent judgment rendered in Philip Mampillil v. Premier Automobiles

Ltd. (supra) makes the position clear that dealer/agent and manufacturer would be jointly and
severally liable. Further, considering the provisions of Section 226 of the Contract Act, it
cannot be said that agent or dealer is not jointly and severally liable for the defects in the
'power tiller', as the contract is through the dealer. Therefore, privity of contract is with him.
It is true that normally such liability with regard to the manufacturing defects is to be borne
by the manufacturer. But, that would not mean that the dealer is absolved from joint and
several liability".

31. Accordingly, a suit of the plaintiff is partly decreed for a sum of Rs.54,600/ alongwith pre
litigation interest @ 12% per annum w.e.f. August, 2012 i.e. the date of invoice as well as
pendelite and future interest @ 9% per annum.

Mr. Ashok Kumar Sharma vs 2 Sh. Inderjeet Singh (Manager) on 21 December, 2010

The Plaintiff is thus entitled to refund of the entire sale price of the cell phone. Reference
may be made to the decision in Nepal Mr. Ashok Kr. Sharma Vs. 10 of 11 Star Mobile Ltd
etc suit no. 750/2010 Food Corporation Vs. UPT Import and Export Ltd.(PART) & Anr.

AIR 1988 Cal. 283.

In view of thereof, the suit of plaintiff is decreed for the amount of price paid by the plaintiff
towards the purchase of the hand set along with interest at the rate of 14% per annum from
the date of legal notice up till the filing of the suit as well as pendente lite and future interest
till the date of realization of the amount. The costs of the suit are also awarded in favour of
the plaintiff.

Decree sheet be prepared. File be consigned to record room.

Eastern Mining Contractors ... vs The Premier Automobiles Limited on 11 August, 1962
Equivalent citations: (1963) 65 BOMLR 183
Author: Patel
Bench: Patel, Wagle

JUDGMENT Patel, J.

1. His Lordship after stating the facts of the case and matter not relevant to the report,
proceeded. The next question is of liability. The respective liabilities of the dealer and the
manufacturer are two entirely different matters and have to be dealt with, separately ; of the
dealer it is under the Sale of Goods Act, and of the manufacturer, if at all, in tort. It is first
necessary to take up the question of the dealer's liability.

2. The appellant relies upon Section 16(1) and (2) and respondent No. 2 relies upon the
proviso to Sub-section (1) for excluding his liability. The section is:

Subject to the provisions of this Act and of any other law for the time being in force, there is
no implied warranty or condition as to the quality or fitness for any particular purpose of
goods supplied under a contract of sale, except as follows:

(1)Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are required, so as to show that the buyer relies on the seller's
skill or judgment, and the goods are of a description which it is in the course of the seller's
business to supply (whether he is the manufacturer or producer or not), there is an implied
condition that the goods shall be reasonably fit for such purposes:

Provided that, in the case of a contract for the sale of a specified article under its patent or
other trade name, there is no implied condition as to its fitness for any particular purpose.

(2)Where the goods are brought by description from a seller who deals in goods of that
description (whether he is the manufacturer or producer or not), there is an implied condition
that the goods shall be of merchantable quality:

Provided that, if the buyer has examined the goods, there shall be no implied condition as
regards defects which such examination ought to have revealed.

3. This section corresponds to Section 14 of the English. Sale of Goods Act, 1893. It
enunciates the well-known rule of caveat emptor and formulates exceptions necessitated by
the requirements of the times.

4. For a case to fall within Sub-Section (7) it is clear that the purchaser must make known to
the seller the particular purpose for which he buys the goods and must rely on the judgment
and skill of the seller for the selection of the article. That the section can apply even to
specific goods sold at the counter provided that the purchaser relies upon the skill and
judgment of the seller is illustrated by Wallis v. Russell [1902] 2 I.R. 585 where fresh crabs
were sold and by Preist v. Last [1903] 2 K.B. 148 where hot-water bottle was sold. in this
case Collins M.R. said (p. 153):

in a case where the discussion begins with the fact that the description of the goods, by which
they were sold, points to one particular purpose only, it seems to me that the first requirement
of the sub-section is satisfied, namely, that the particular purpose for which the goods are
required should be made known to the seller. The sale is of goods which, by the very
description under which they are sold, appear to be sold for a particular purpose.

See also Grant v. Australian Knitting Mills Ld [1936] A.C. 85. The section, therefore, would
apply to the sale of specific things at the counter. It is also not necessary that the purpose for
which, an article is purchased must be expressly communicated to the seller. Sub-section (1)
of Section 16 clearly includes the purpose being made known by implication. Moreover, the
reliance by the purchaser on the skill and judgment of the seller may even be inferred from
the communications by the purchaser of the particular purpose for which the goods were
purchased and need not be supported by positive evidence: see Manchester Liners Ld. v. Rea
Ld [1922] 2 A.C. 74.

5. In the present case, the evidence shows that it was known that the car was required for use
in the Nagpur district where summer temperature was high. The conversation as deposed to
by Thakar shows that Modi said that the car had fine performance and it seems to us that in
substantial measure the plaintiff has relied upon this statement of Modi. Even if we must
accept that to some extent the plaintiff also relied on Eduljee, even so, Section 16 will apply,
for, it is not, necessary that he must exclusively rely on the skill and judgment of the
defendant': see Lord Sumner in Medway Oil and Storage Co. v. Silica Gel Corporation
(1928) 33 Com. Cas. 195. The case would, therefore, fall within Sub-section (1).

6. It is, however, argued that the defendant's liability is excepted under the proviso since the
sale was of the specified article under its patent or trade name. The evidence shows that the
ear was not ready for delivery when the contract was made. It was clearly bought by
description. In this connection, it is necessary to refer to Baldry v. Marshall [1925] 1 K.B.
266 270 in which case the plaintiff ordered a car telling the defendants that he wanted a
comfortable ear suitable for touring purposes. The defendants recommended a "Bugatti Car",
saying that it would meet the requirements and showed the plaintiff a specimen. The plaintiff
then placed an order. It was held by the Court that the requirement that the ear should be
comfortable and suitable for touring purposes was a condition and not a warranty and. that on
the principle of Wallis Son & Wells v. Pratt Haynes 1911 A.C. 394 the implication of that
condition was not excluded by the terms of the contract. Construing Section 14(7) of the
English Sale of Goods Act, 1893, corresponding to Section 16(7) of the Indian Sale of Goods
Act, it was said:

The mere fact that an article is sold under its trade name, in the sense that the trade name
forms part of the description of the thing sold, does not necessarily bring the case within the
proviso to Section 14, Sub-section (2), so as to exclude the implication of the condition of
fitness. If the buyer, while asking to be supplied with an article of a named make, indicates to
the seller that he relies on his skill and judgment for its being fit for a particular named
purpose, he does not buy it 'under its trade name' within the meaning of the proviso;...

7. Cases whore the proviso may apply are illustrated as where a man, goes to a medicine shop
and buys a particular medicine known, by a trade name. In conversation he might tell the
chemist the purpose for which the medicine is purchased ; but that does not mean that he
asked him whether the medicine was suitable and the chemist replied that it was so. But the
present case is different. The order was placed for a Dodge car on an assurance that its
performance was tine coming from a dealer in Nagpur. In the very purchase there is a
condition that it is what it purports to be and the proviso cannot apply, for, it cannot be
inferred that the purchaser relied upon his own judgment and not that of the seller. The
proviso, in our view cannot apply in cases where there is express representation as in the
present case, for it deals with cases 'of express or implied information of the purpose for
which the article is to be used, showing reliance upon the skill and judgment of the dealer.

8. Apart from this, Sub-section(2) of Section 16 in any case is applicable. Defendant No. 2
deals in cat's and particularly cars etc. manufactured by defendant No. 1 company. The car in.
question has been bought by description though it has got a trade name since what was
purchased was a car of the quality generally implied, in the trade name attached to it and the
knowledge that it was to be used in Nagpur. As there is no proviso similar to that in Sub-
section (7) in this sub-section, there is an implied warranty that the article is merchantable
unless the buyer has examined the goods and even then only if the defect were discoverable.
The words of the proviso show that defects in manufacture may make the article non-
merchantable; merchantable does not mean saleable. In Grant v. Australian Knitting Mills
Ltd [1936] A.C. 85. the Judicial, Committee said (pp. 99-100):

whatever else merchantable may mean, it does mean that the article sold, if only meant for
one particular use in ordinary course, is fit for that use; merchantable does not mean that the
thing is saleable in the market simply because it looks all right; it is not merchantable in that
event if it has defects unfitting it for its only proper use but not apparent on ordinary
examination: that is clear from the proviso, which shows that the implied condition only
applies to defects not reasonably discoverable to the buyer on such examination as he made
or could makea thing is sold by description, though it is specific, so long as it is sold not
merely as the specific thing but as a thing corresponding to a description, e.g., woollen under-
garments, a hot-water bottle, a secondhand reaping machine, to select a few obvious
illustrations.

What the plaintiff bought was a "car" and it contract at least be capable of use as any other
car in the district. There being a latent defect which could not have been discovered by
examination, it could be rejected.

9. As to the liability of defendant No. 1, it, is clear from the evidence and from the contract
that there was no privity of contract between the plaintiff and defendant No. 1. It was sought
to be suggested on behalf of the plaintiff that defendant No. 2 was the agent, of defendant No.
1. It is clear, however, from the terms of dealing between defendant No. 1 and defendant No.
2 defining dealer's rights that defendant No. 2 cannot lie regarded as an agent of defendant
No. 1. The liability of defendant No, 1, therefore, cannot be in contract; its liability can only
be in tort. The liability can only be on the ground of negligence since if want of good faith in
defendant No. 1 is established, it may amount to fraud or cheating. To succeed on this
ground, the defendant must owe a duty to the plaintiff, a breach of it and consequental
damage, for merely on the ground of negligence it would not be liable unless there be duty of
care owed to the plaintiff.

10. So far as this branch of the law is concerned, it consists mostly of decided cases. The
limits within which reliefs may be granted are not defined since the law "has grown up
behind a screen of. legal procedure." Until recently it was doubtful if a manufacturer could be
held liable, for injury caused to a consumer if the defective articles were sold through
retailers. The principles of the liabilities of the manufacturer have been emphatically stated in
the majority decision in Donoghue v. Stevenson [1932] A.C. 562. It also reveals the sharp
cleavage in judicial opinions as illustrated by the views expressed by Lord Buck-master and
by Lord Atkin. The appellant in that case drank a bottle of ginger beer given to her by a
friend. The beer was contained in a sealed opaque bottle and was manufactured by the
respondent. It contained the decomposed remains of a snail in it. As a consequence of the
consumption of the beer, she suffered from shock and gastro-enteritis. She commenced
proceedings against the manufacturers. She was appellant before the House. Lord
Buckmaster, after stating the general principle in the words of Lord Simmer in the case of
Blacker v. Lake and Elliot Limited (1912) 106 L.T. 533 at P. 536 that the breach of the
defendant's contract with A. to use care and skill in and about the manufacture or repair of an
article does not of itself give any cause of action to B. when he is injured by reason of the
article proving to be defective says that (p. 569) From this general rule there are two well
known exceptions: (1) In the case of an article dangerous in itself; and (2) where the article
not in itself dangerous is in fact dangerous, by reason of some defect or for any other reason,
and this, known to the manufacturer.
As to George v. Skivington (1869) L.R. 5 EX. 1 and Heaven v. Pender (1883) 11 Q.B.D. 503
at P. 509, on which the appellant relied, he said it is, in my opinion, better that they should be
buried so securely that their perturbed spirits shall no longer vex the law.

and expressed the opinion that the appellant had no case. On the other hand, Lord Atkins says
(pp. 582-3):

There will no doubt arise cases where it will be difficult to determine whether the
contemplated relationship is so close that the duty arises.

But in the class of case now before the Court I cannot conceive any difficulty to arise, A
manufacturer puts up an article of food in a container which he knows will be opened, by the
actual consumer. There can be no inspection by any purchaser and no reasonable preliminary
inspection by the consumer. Negligently, in the course of preparation, he allows the contents
to be mixed up with poison. It is said that the law of England and Scotland is that the
poisoned consumer has no remedy against the negligent manufacturer. If this were the result
of the authorities, I should consider the result a grave defect in the law, and so contrary to
principle that I should hesitate long before following any decision to that effect which had not
the authority of this House I do not think so ill of our jurisprudence as to suppose that its
principles are so remote from the ordinary needs of civilized society and the ordinary claims
it makes upon its members as to deny a legal remedy where there is so obviously a social
wrong.

The learned Lord then, analysed the position in English law and came to the conclusion that
(p. 599):

a manufacturer of products, which he sells in such a form as to show that he intends them to
reach the ultimate consumer in the form in which they left him with no reasonable possibility
of intermediate examination, and with the knowledge that the absence of reasonable care in
the preparation or putting up of the products will result in an injury to the consumer's life or
property, owes a duty to the consumer to take that reasonable care.

This case clearly defined the duty which a manufacturer owes to the consumer provided that
the article reached the consumer in the same state in which it was manufactured.

11. Negligence is a question of fact which must he proved by the plaintiff as any other fact.
But in some cases the defect itself may furnish the proof. In Grant v. Australian Knitting
Mills Ld [1936] A.C. 85, the appellant before the Privy Council purchased a woollen garment
from the retailers. There was presence of excess sulphites in the garment which, it was found,
had been negligently left in it in the process of manufacture. As a result of this, the appellant
contracted dermatitis. The manufacturers were held liable. Evidence was led to show that the
method of manufacture was correct and the danger of excess chemical being left was guarded
against and it was intended to be fool-proof. The Privy Council said (p. 101):

The appellant is not required to lay his finger on the exact person in all the chain who was
responsible, or to specify what he did wrong. Negligence is found as a matter of inference
from the existence of the defect taken in connection with all the known circumstances:

If it was shown that all cars of this company and|or cars of other companies-suffered from the
defect complained of, possibly negligence could have been disproved. Even in respect of the
cars manufactured by this company only a few suffered from this defect. It must, therefore,
appear that someone at some stage left something undone or did it improperly and was,
therefore, negligent.

12. Mr. Phadke contended in the first instance that if the case is now to be argued on the basis
of tort, there must be sufficient allegations in the plaint of the existence of a duty on the part
of defendant No. 1 as manufacturers to the plaintiff and its breach. According to the learned
counsel, such an allegation is materially absent. We do not think that the facts alleged do not
make out a case of negligence. Negligence is an inference to be drawn from facts and they are
sufficiently alleged in the plaint. As to the duty of the manufacturer, no doubt there is no
specific allegation as such but that also is implied from the facts stated. We do not think that
on this ground the contention of the appellant can be thrown out.

13. It is, however, strenuously argued by Mr. Phadke that the cases in Donoghue v. Stevenson
and Grant v. Australian Knitting Mills, Ld. qualify the liability of the manufacturer on the
ground of negligence. It is contended that negligence must cause injury either to the person of
the user or his property and not merely monetary loss, relying on the observations in the last
but one paragraph of Lord Atkin's judgment where he says (p. 599):

with the knowledge that the absence of reasonable care in the preparation or putting up the
products will result in an injury to the consumer's life or property.

He refers us to Winfield on Tort, 6th ed., page 665, where it is said:

The principle is limited to physical damage to the person or property of the consumer or user,
and does not extend to pecuniary loss suffered by relying on negligent misrepresentation.

He also refers us to Clerk & Lindsell on Torts, 12th ed., at page 697 where it is said:

It would be true to say that there is a wide recognition of physical injury to person and
property, but that the law is very hesitant about recognising pecuniary loss.

The authorities cited by the learned authors do support the proposition made by the authors.
But Wilkinson v. Coverdale (1793) 1 Esp. 74 S.C. 53 R.R. 256 and Morrison Steamship Co.
Ld. v. Greystoke Castle Cargo Owners [1947] A.C. 265 show that monetary loss caused by
negligence of a person may be recovered by a, third party. We may in this connection refer to
the dissenting judgment of Denning, L.J., in Candler v. Crane, Christmas and Co [1951] 2
K.B. 164. where the learned Judge very emphatically expressed his opinion holding the
defendant liable. Mr. Phadke made the same argument as was made in that case that so far
there is no authority to support the liability of his client. The learned Judge says (p. 178):

If you read the great cases of Ashby v. White (1703) 2 Ld. Raym. 938, Pasley v. Freeman
(1789) 3 Term. Rep. 51, and Donoghue v. Stevenson you will find that in each of them the
judges were divided in opinion. On the one side there were the timorous souls who were
fearful of allowing a new cause of action. On the other side there were the bold spirits who
were ready to allow it if justice so required. It was fortunate for the common law that the
progressive view prevailed. Whenever this argument of novelty is put forward I call to mind
the emphatic answer given by Pratt, C.J., nearly two hundred years ago in Chapman v.
Pickersgill (1762) 2 Wilson 145 at P. 146 when he said: I wish never to hear this objection
again. This action is for a tort: torts are infinitely various; not limited or confined, for there is
nothing in nature but may be an instrument of mischief. The same answer was given by Lord
Macmillan in Donoghue v. Stevenson, when he said: (p. 619): The criterion of judgment must
adjust and adopt itself to the changing circumstances of life. The categories of negligence are
never closed.

14. The law of tort itself is of slow growth according to the changing needs of the society. No
general principle of liability in tort is discoverable. The Judges have from time to time
contented themselves by saying whether liability existed in a particular case. It would seem
that the general principle, as stated by Lord Atkins in Donoghue v. Stevenson, is (p. 580):

The liability for negligence, whether you style it such or treat it as in other systems as a
species of 'culpa', is no doubt based upon a general public sentiment of moral wrongdoing for
which the offender must pay.

So far as we in this country are concerned, in the absence of statutory or customary law
applicable in a case we must be guided by the principles of justice, equity and good
conscience. One very often turns to the principles of English Common law though it cannot
be said that we are tied to them. If a particular principle does not depend upon any
technicality of English law and is applicable to conditions here then it is usual to apply the
principle. However, as pointed out by the Judicial Committee in Rajah Kishendatt Bam v.
Rajah Mumtaz Ali Khan (1879) L.R. 6 I.A. 145 (p. 159):

It is only applicable because it is agreeable to general equity and good conscience. And,
again, if it possesses that character, the limits of its applicability are not to he taken as rigidly
defined by the course of English decisions, although those decisions are undoubtedly
valuable, in so far as they recognise the general equity of the principle, and show how it has
been applied by the Courts of this country.

In the absence of any binding authority to the contrary we would prefer to adopt the view
expressed, by Denning L.J. in Candler v. Crane Christmas and Co. In the case of
manufactured commodities most often under monopolies if the law were limited as contended
for by Mr. Phadke, there will be no remedy to the buyer who must and does rely on the skill,
reasonable care and honest of the manufacturer. Obviously the manufacturer in many eases
may not only be negligent but worse. The consumer in such a case must buy an article
irrespective of its usefulness as there is no competitor in the market. It cannot be gainsaid that
it is wrong to supply sub-standard goods and there should be no reason why the remedy
should not extend to a negligent manufacturer causing monetary loss by the supply of a sub-
standard article. We would apply to such cases the words of Knight Bruce L.J. in Slim v.
Cruncher (1860) 1 De G.F. & J. 518 (p. 527):

A country whose administration of justice did not afford redress in a case of the present
description would not be in a state of civilization.

and hold, that defendant No. 1 is liable.

15. It is argued that such a view of the law will hamper trade. Everyone would want trade to
prosper but certainly not at the cost of the consumer. It would not he unreasonable to expect
the consumer to rely on the honesty and care or the part of the manufacturer and get his
money's worth. As the rule has obvious limitations as pointed out by Lord Wright in Grant v.
Australian Knitting Mills at p. 107, we think that the fear is groundless.
16. We also do not think that the warranty and the expiry of the period makes any difference,
since the defect could not possibly have been discovered before the period expired. In our
view, the terms of the warranty do not help the defendants.

17. The rest of the judgment is not material to this report.

The fiduciary relationship is relationship subsisting between two persons reposing trust and
confidence in the other. A fiduciary relationship encompasses the idea of faith and confidence and is
generally established only when the confidence given by one person is actually accepted by the
other person. Mere respect for another individual's judgment or general trust in his or her character
is ordinarily insufficient for the creation of a fiduciary relationship. Their duties of a fiduciary include
loyalty and reasonable care of the assets within custody. All of the fiduciary's actions are performed
for the advantage of the beneficiary. The examples of fiduciary relations are those existing between
attorney and client, guardian and ward, principal and agent, executor and heir, trustee and cestui
que trust, landlord and tenant etc

The term `fiduciary' and `fiduciary relationship' refer to different capacities and
relationship, involving a common duty or obligation. 20.1) Black's Law Dictionary (7th
Edition, Page 640) defines `fiduciary relationship' thus:

"A relationship in which one person is under a duty to act for the benefit of the other on
matters within the scope of the relationship. Fiduciary relationships - such as trustee-
beneficiary, guardian-ward, agent-principal, and attorney-client - require the highest duty of
care. Fiduciary relationships usually arise in one of four situations : (1) when one person
places trust in the faithful integrity of another, who as a result gains superiority or influence
over the first, (2) when one person assumes control and responsibility over another, (3) when
one person has a duty to act for or give advice to another on matters falling within the scope
of the relationship, or (4) when there is a specific relationship that has traditionally been
recognized as involving fiduciary duties, as with a lawyer and a client or a stockbroker and a
customer."

. Black's Law Dictionary, Seventh Edition (1999), edited by Mr. Bryan A. Garner gives the
following meaning for the term:

"fiduciary relationship. A relationship under which one person is under a duty to act for the
benefit of the other on matters within the scope of the relationship. Fiduciary relationships -
such as trustee- beneficiary, guardian-ward, agent-principal and attorney-client -
require the highest duty of care. Fiduciary relationship usually arise in one of four situations:
(1) when one person places trust in the faithful integrity of another, who as a result gains
superiority or influence over the first, (2) when one person assumes control and responsibility
over another, (3) when one person has a duty to act for or give advice on matters falling
within the scope of the relationship, or (4) when there is a relationship that has traditionally
been recognised as involving fiduciary duties, as with a lawyer and a client or a stockbroker
and a customer.

12. The Corpus Juris Secundum gives the following meaning for the expression, which is
stated to be based on various decisions on the subject:

" The term "fiduciary relation" has reference to any relationship of blood, business,
friendship, or association in which the parties repose special trust and confidence in each
other and are in a position to have and exercise, influence over each other, and implies a
condition of superiority of one of the parties over the other; but in relation with undue
influence, it does not necessarily imply acts which the law deems fraudulent.
...............................................................................................................
...............................................................................................................
When it exists. What constitutes a fiduciary relationship is often a subject of controversy. The
relationship may exist under a great variety of circumstances; it exists in all cases where there
has been a special confidence reposed in one who in equity and good conscience is bound to
act in good faith and with due regard to the interests of the one reposing the confidence, in
cases when confidence is reposed on one side and there is resulting superiority and influence
on the other, in all cases in which influence has been acquired and abused, in which
confidence has been reposed and betrayed."

13. The Dictionary of Law by L.B. Curzon (fourth edition) gives the following meaning for
the word `fiduciary':

"fiduciary. Involving trust or confidence. e.g., as describing the relationship between a trustee
and beneficiary. In general, where a fiduciary relationship between parties to a transaction
exists, undue influence leading to some agreements, such as contract may be presumed."

The Dictionary of Law by L.B. Curzon (fourth edition) gives the following meaning for the
word `fiduciary':

"fiduciary. Involving trust or confidence. e.g., as describing the relationship between a trustee
and beneficiary. In general, where a fiduciary relationship between parties to a transaction
exists, undue influence leading to some agreements, such as contract may be presumed."20.
In Stroud's Judicial Dictionary, the expression "fiduciary capacity" is described as follows-.
FIDUCIARY CAPACITY. An administrator who has received money under letters of
administration and who is ordered to pay it over in a suit for the recall of the grant, holds it
"in a fiduciary capacity" within Debtor's Act, 1869 .............; so, of the debt due from an
executor who is indebted to his testators estate which he is able to pay but will not............;
so...of moneys in the hands of a of a receiver..........., or agent.......,or manager........, or
moneys due on an account from the London agent of a country solicitor........, or proceeds of
sale in the hands of an auctioneer........., or moneys in the compromise of an action have been
ordered to be held on certain trusts ................. of partnership moneys received by a partner
............[Note. The period to be looked to is that of the act done.......] Wharton's Law Lexicon
refers to the expression "fiduciary"
and explains the same in the following words:
"One who holds anything in trust. See Trust"
In Bouvier's Law Dictionary, "fiduciary relationship" is defined in the following words:
"What constitutes fiduciary relation is often a subject of controversy. It has been held to
apply to all persons who occupy a position of peculiar confidence towards others, such as a
trustee, executor or administrator, director of a corporation or society..... Medical or religious
adviser,...... husband and wife ......... an agent who appropriates money put into his hands for
a specific purpose, of investment, collector of city taxes who retains money officially
collected,...... one who receives a note or security for collection.......In the following cases
debt has been held not a fiduciary one; a factor who retains money of his principal ...... an
agent under an agreement to account and pay over monthly;.........one with whom general
deposit of money is made."
(emphasis supplied)
21. We thus find that to understand the expression fiduciary capacity, we have to look at the
nature of the relationship in the instant facts. At least in Bouvier's Law Dictionary, the
husband and wife relationship is specifically referred to as a fiduciary relationship. All
relationships which are built on mutual trust, dependence and confidence of a special variety
can certainly be described to be fiduciary relationship for the purpose of S.51(c), according to
us. Following the dictionaries, trustee, executor, administrator, director of a Corporation or
society, Medical or Religious Adviser, husband and wife, ward and guardian, agent and
principal etc. can safely be held to be fiduciary relationship for the purpose of S.51(c) C.P.C.
We asked for precedents specifically on the point as to husband and wife relationship can be
described to be a fiduciary relationship. Specific precedents on the point are not brought to
our notice."

15. A Full Bench of the High Court of Delhi, in the decision of Secretary General Supreme
Court of India V Subhash Chandra Agarwal, L.P.A. No. 501/2009, while dealing with the
question as to whether the Chief Justice of India holds information regarding the assets of
judges of the Supreme Court in a fiduciary capacity, held thus:

"POINT 2: WHETHER THE CJI HELD THE "INFORMATION" IN HIS "FIDUCIARY

CAPACITY"
95. The submission of the learned Attorney General is that the declarations are made to the
CJI in his fiduciary capacity as pater familias of the judiciary. Therefore, assuming that the
declarations, in terms of the 1997 resolution constitute "information" under the Act, yet they
cannot be disclosed - or even particulars about whether, and who made such declaration,
cannot be disclosed - as it would entail breach of a fiduciary duty by the CJI. He relies on
Section 8(1)(e) to submit that a public authority is under no obligation to furnish "information
available to a person in his fiduciary relationship". He argues that the voluntary information
given by the judges is not information in the public domain. He emphasises that the
resolution crucially states:
"The declaration made by the judges or the Chief Justice, as the case may be, shall be
confidential".
96. On the other hand, Mr. Prashant Bhushan argues that a fiduciary relationship is one that is
based on trust and good faith, rather than on any legal obligation. The purpose for disclosing
a statement of assets to the CJI is to foster transparency within the judiciary and is essential
for an independent, strong and respected judiciary, indispensable in the impartial
administration of justice. Where the judges of the Supreme Court act in their official capacity
in compliance with a formal Resolution, it cannot be said that the CJI acts as a fiduciary of
the judges and that he must, therefore, act in the interests of the judges and not make such
information public. According to him, unless the information sought can be excluded on the
basis of one of the exemptions under Section 8 of the Act, the same cannot be denied merely
on the classification of a document or on a plea of confidentiality, if the document is
otherwise covered by the Act.
FIDUCIARY RELATIONSHIP
97. As Waker defines it: "A `fiduciary' is a person in a position of trust, or occupying a
position of power and confidence with respect to another such that he is obliged by various
rules of law to act solely in the interest of the other, whose rights he has to protect. He may
not make any profit or advantage from the relationship without full disclosure. The category
includes trustees, company promoters and directors, guardians, solicitors and clients and
others similarly placed." [Oxford Companion to Law, 1980 p.469]
98. A "fiduciary relationship", as observed by Anantnarayanan, J., "may arise in the context
of a jural relationship. Where confidence is reposed by one in another and that leads to a
transaction in which there is a conflict of interest and duty in the person in whom such
confidence is reposed, fiduciary relationship immediately springs into existence." [See Mrs.
Nellie Wapshare v. Pierce Lasha & Co. Ltd. (AIR 1960 Mad 410)]
99. In Lyell v. Kennedy, (1989) 14 AC 437, the Court explained that whenever two persons
stand in such a situation that confidence is necessarily reposed by one in the other, there
arises a presumption as to fiduciary relationship whcxih grows naturally out of that
confidence. Such a confidential situation may arise from a contract or a gratituous
undertaking, or it may upon previous request or undertaken without any authority.
100. In Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan, (2005) 1 SCC 212 and Needle
Industries (India) Ltd. V. Needle Industries Newey (India) Holding Ltd. (1981) 3 SCC 333,
the Court held that the directors of the company owe fiduciary duty to its shareholders. In
P.V. Sankara Kurup v. Leelavathy Nambier, (1994) 6 SCC 68, the court held that an agent
and power of attorney can be said to owe a fiduciary relationship to the principal.
101. Section 88 of the Indian Trusts Act requires a fiduciary not to gain an advantage of his
position. Section 88 applies to a trustee, executor, partner, agent, director of a company, legal
advisor or other persons bound in fiduciary capacity. Kinds of persons bound by fiduciary
character are enumerated in Mr. M. Gandhi's book on "Equity, Trusts and Specific Relief"
(2nd ed., Eastern Book Company) "(1) Trustee, (2) Director of a company, (3) Partner, (4)
Agent, (5) Executor, (6) Legal Adviser, (7) Manager of a joint family, (8) Parent and child,
(9) Religious, medical and other advisers, (10) Guardian and ward, (11) Licensees appointed
on remuneration to purchase stocks on behalf of government, (12) Confidential transactions
wherein confidence is reposed, and which are indicated by (a) Undue influence (b) control
over property, (c) Cases of unjust enrichment, (d) Confidential information,
(e) Commitment of job, (13) Tenant for life, (14) Co-owner, (15) Mortgagee, (16) Other
qualified owners of property, (17) De facto guardian, (18) Receiver, (19) Insurance
Company, (20) Trustee de son tort, (21) Co-heir, (22) Benamidar."
102. The CJI cannot be a fiduciary vis-a-vis judges of the Supreme Court. The judges of the
Supreme Court hold independent office. And there is no hierarchy, in their judicial functions,
which places them at a different plane than the CJI. The declarations are not furnished to the
CJI in a private relationship or as a trust but in discharge of the constitutional obligation to
maintain higher standards and probity of judicial life and are in the larger public interest. In
these circumstances, it cannot be held that the asset information shared with the CJI, by
judges of the Supreme Court, are held by him in a capacity of fiduciary, which if directed to
be revealed, would result in such breach of duty."

16. From the meanings as ascertained above, it is clear that `fiduciary relationship', although
arises out of a transaction involving trust between two parties, it requires something more
than mere trust to make the relationship fiduciary. It also cannot be equated with mere
privacy or confidentiality. At the heart of fiduciary relationship lie reliance, de facto control
and dominance. A fiduciary relationship exists when confidence is reposed on one side and
there is resulting superiority and influence on the other. The Canadian Courts have developed
the following tests for determining whether fiduciary relationship has been established, viz.

a) The fiduciary has the scope for the exercise of some discretion or power;

b) The fiduciary can unilaterally exercise that power or discretion so as to affect the
beneficiary's legal or practical interests; and

c) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the
discretion or power.

Based on the legal principles arising from the above discussion, I am inclined to add one
more to the same viz.

d) The fiduciary is obliged to protect the interests of the other party.

From the material available on the subject, I am satisfied that those tests can be applied for
deciding the question as to whether there is fiduciary relationship between two parties.