AIR 1919 PC 20, Is Sub-agent hired by agent working for agent or comes under purview of principal?, Whether the knowledge of agent alone is enough to impute constructive notice on principal?, Indian contract act, 1872 Section 194, Agent should never fraudulently hide or conceal information with malafide or dishonest intention from the principal or the partner, Sub-Agency Liability

1. Texas Co. Ltd
Vs. Bombay Banking Co.
(AIR 1919 PC 20)
 By,
MOHAMMED HAROON RASHEED
 B.A.LL.B (Hons.), [BSW] & [LLM]
Advocate
 Email ID: adv.mdharoon@gmail.com
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2. Facts
 Appellants, a corporation incorporated under laws of
the State of Texas in the USA having control over
extensive field of oil.
 Their head office for India is in Bombay and for
purpose of securing distribution throughout Bengal,
they entered into agreement with one Prabhakar
Vaidya.
 The respondent was agent of Vaidya’s firm.
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3.  Vaidya entered into a series of agreement between himself
and variety of people.
 In addition to Vaidya position as agent for appellant, he was
also member, together with one Kothavle in an V. N. Apte &
co. who were treasure and agent of Respondent’s bank.
 Vaidya overdrawn to extent of 3,00,000 from the respondent
bank.
 Appellant company instituted a suit Claiming repayment of
sum of money on the ground that the money was theirs in
Vaidya’s account, with knowledge of bank.
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4. ISSUE
• Is Sub-agent hired by agent working for
agent or comes under purview of
principal?
• Whether the knowledge of agent alone
is enough to impute constructive notice
on principal?
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5.  To succeed the claim, appellant should prove:
a) Money was theirs.
b) bank know the fact when received it.
 Later the appellants proved that money in the
respondent bank was theirs and not of
Vaidya’s and he was fraudulently hiding the
fact from the bank and claiming the cash as
his own
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6. Laws
 Indian contract act, 1872 section 194.
 Agent should never fraudulently hide or
conceal information with malafide or dishonest
intention from the principal or the partner.
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7. Judgment
 Agreement never said anything about the Sub-agency.
 Vaidya who had complete control over money told everyone
that money was theirs and not the Respondent’s hereby
fraudently hiding the source of the money.
 In this case it was held by Judges that it is entirely
insufficient to impute constructive notice on bank who was
acting as a partner for Vaidya which was only within his
knowledge and was solely due to his own improper conduct.
 Thus, appeal dismissed with the cost.
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