Citation Codes

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Case Number

A.S Nos. 650 of 1122 and 57 of 1123

Attorney(S)

For the Appellant: V. I. Joseph, Advocate.
For the Respondent: R2, C. I. Parameswaran Pillai G. Rama Iyer, Advocates.

Judges

Koshi
Gangadhara Menon, JJ.

Acts

Section 114(g) of the Evidence Act
Debt Relief Act.

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Smart Summary

Judgment Summary — Delivered by Koshi, J.

Factual and Procedural Background

These appeals arise from the third preliminary decree passed in an administration suit (O.S No. 18 of 1112) on the file of the Parur District Court. The present decree was passed on 27-9-1946; two earlier preliminary decrees were passed on 13-1-1941 and 10-1-1945. Issue No. 7, framed for trial and central to the appeals, asked:

“Whether any amounts are payable by defendants 1, 2 and 7 to the estate of the deceased as damages or as amounts collected by them during the period of their management”

The lower Court found no proof on the plaintiffs' side to establish liability of the defendants except for an amount of Rs. 2,800 for which defendant 7 alone was held liable. The plaintiffs appealed by filing A.S. No. 650, claiming that defendants 1, 2 and 7 should be held liable (jointly and severally) for outstanding debts of the deceased Chidambarom Pillai, profits of the business conducted after his death, rents and profits of immovable property until the Court-appointed administrator assumed charge, and the value of movables including stock-in-trade. Chidambarom Pillai died on 31-30-1107 and an administrator took charge on 1-3-1112. The plaintiffs valued their appeal at Rs. 22,400. Defendant 7 separately preferred A.S. 57 against the decree making him liable for Rs. 2,800.

Legal Issues Presented

Whether defendants 1, 2 and 7 are liable to the estate for amounts collected, outstanding debts, profits of the business carried on after the deceased's death, rents and profits of immovable properties, and value of movables (as framed in Issue No. 7).
Whether the lower Court was correct in requiring plaintiffs to establish the quantum of liability notwithstanding the defendants' failure to produce account books kept in their custody.
In A.S. 57: Whether the legacy paid to defendant 5 (the deceased's daughter) should be recalled from defendant 5 (and, if necessary, made good by defendant 7 and/or defendant 2) and under what conditions such recall should be directed.

Arguments of the Parties

Plaintiffs' Arguments

The plaintiffs contended that, in addition to the Rs. 2,800 for which defendant 7 was held liable, defendants 1, 2 and 7 should be made liable for all outstanding debts due to Chidambarom Pillai at his death, profits of the business after death, rents and profits of immovable properties until the administrator assumed charge, and the value of movables including stock-in-trade.
They argued that, because the defendants who managed the estate failed to render accounts or produce account books, adverse presumptions should be drawn against them and at least the amounts admitted by defendant 1 in his statement should be accepted.
Plaintiffs pointed to statements and figures (including a statement by their Advocate) indicating substantial realisations and profits—figures which, if accepted, would more than satisfy the amount claimed in appeal.

Defendants' Position (as reflected in the record)

The lower Court's approach was to require proof from the plaintiffs of realisation by the defendants and treated the matter as if it was the plaintiffs' duty to establish the exact extent of the executors' liability.
The defendants did not produce account books or satisfactory explanations for their non-production. Defendant 2 and defendants 1 & 7 disputed whether account books were handed over between them; defendant 1 filed a statement admitting certain amounts and figures relating to outstandings and income.
Defendant 7 was made liable for Rs. 2,800 by the lower Court; defendant 7 appealed against that specific liability by A.S. 57.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Debendra Narayan v. Narendra Narayan, 54 I.C. 636 (A.I.R. 1920 Cal. 428)	Non-production of account books by the party in custody justifies presumption under Section 114(g) of the Evidence Act that the books are withheld because they would be unfavourable; courts may make reasonable presumptions against the party withholding accounts and, where necessary, enforce production by disciplinary measures.	The Court relied on the principle to justify drawing adverse inferences against defendants who failed to produce accounts and to proceed on the plaintiffs' evidence and reasonable presumptions to determine liability.
Upendra Kishore v. Ram Tara	Cited as authority for dismissal of suit where plaintiff withholds papers in a suit for accounts.	Used within the exposition of law showing that withholding documentation justifies adverse consequences; supported the Court's view that withholding accounts permits presumption against the withholding party.
Chand Ram v. Broja Gobind Doss	Cited alongside other authorities on consequences of withholding account books.	Reinforced the principle that non-production permits adverse inference; cited in the doctrinal exposition relied on by the Court.
Syud Shah Alaiahmad v. Bibee Musibun	Observation that where defendant is liable to render accounts, court may make reasonable presumptions against him.	Supported the Court's authority to act on plaintiffs' evidence and draw presumptions against the defendants in custody of accounts.
Annoda Persad v. Dwarakanath (and Degamber v. Kallynath)	Illustrations that courts may, where necessary, punish non-production (imprisonment/attachment) or raise presumptions against the party who refuses to produce accounts.	Provided precedential support for adverse consequences (including charging with interest and presumption of amounts) where accounts are withheld.
Rampershad v. Sheochurn	Example of charging defendant with principal sum plus interest where defendant refused to render accounts and spoliation of banking books proved.	Pointed to equity-consistent remedies of charging defendants when accounts/spoliation established; used to justify remedial approach in present case.
Walmsley v. Walmsley; Gray v. Haig; Armory v. Delamirie; Wardour v. Berisford; Rowley v. Adams	Equity principles: where accounting party withholds or destroys accounts, the court may presume everything most unfavourable to that party consistent with other facts.	These cases were cited to justify presuming, against defendants, facts unfavourable to them because of non-production/destruction of accounts.
Sankunni Menon v. Komu Menon; Antony v. Kunhuvaried (Cochin decisions)	Applied similar approach of making adverse inferences where accounts in possession were not produced.	Referred as local decisions consistent with the general principle and as supporting authority for drawing adverse inferences.
Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi, 40 Mad. 402 (A.I.R. 1919 P.C. 6); Guruswami Nadar v. Gopalswami, 42 Mad. 629 (A.I.R. 1919 Mad. 444); Jag Prasad Rai v. Mt. Singari (A.I.R. 1925 P.C. 93); Viadyanatha Iyer v. Haji Abdulla Haji Abdu Sathar; Purushottom Gala Sait v. Haji Essa Hajee Moosa; Varkey Mathew v. Kunhabdulla Hajee	Instances where courts drew adverse inferences and decided in favour of plaintiffs for non-production of accounts by parties in custody.	Grouped by the Court as authorities that justify accepting plaintiffs' figures or drawing adverse inferences to determine liability when defendants failed to produce accounts.

Court's Reasoning and Analysis

The Court began by identifying a misdirection in the approach of the lower Court. The lower Court had placed the burden on plaintiffs to prove by definite evidence the quantum of liability of executors and managers. The appellate Court emphasized that this was incorrect because the primary duty rests on an accounting party — whether agent, trustee, receiver, or executor — to be ready with and to produce accounts.

The facts before the Court established that the defendants who took charge of the deceased's assets managed the estate for over four years and failed to produce any books of account or to offer a satisfactory explanation for their non-production. The release deed (Exhibit B), under which defendant 2 renounced management and executorship to defendants 1 and 7, showed no transfer of account books. The explanation that the plaintiff had destroyed or sold the accounts was not accepted by the lower Court and the appellate Court also found it unsatisfactory.

The Court noted evidence in the record indicating that Chidambarom Pillai ran a flourishing trade and maintained regular accounts while alive; the trade continued for at least a year or two after his death, and therefore accounts ought to have existed for the period in question. Defendant 1's statement admitted substantial sums due to the deceased and estimated profits from properties and trade; plaintiffs' advocate had also filed a statement quantifying larger realisations and profits. Despite this, no account books were produced.

Relying primarily on the legal principle set out in Debendra Narayan v. Narendra Narayan and Section 114(g) of the Evidence Act, and supported by a number of other precedents, the Court held that non-production of accounts by the party in custody justifies drawing presumption that the documents are withheld because they would be unfavourable. In such situations the Court may proceed on the evidence placed by the plaintiffs and make reasonable presumptions against the defendants; disciplinary remedies or presumptive relief are available.

Applying these principles to the facts, the Court concluded that the lower Court erred in exonerating defendants 1, 2 and 7. The appellate Court was entitled to adopt presumptions adverse to the defendants and to accept sufficient figures (or at least adopt a conservative approach) to hold the defendants liable to the extent of the plaintiffs' claimed amount in A.S. No. 650 (Rs. 22,400), without having to accept every contested figure in full.

With respect to A.S. 57 (the challenge to defendant 7's liability for repayment of a legacy paid to defendant 5), the Court analyzed that a legacy should not have been paid before debts were discharged. The lower Court was not wrong in directing recall of the amount paid, but the appellate Court modified the order: recall was to be required only if necessary to discharge estate debts. The Court further set out the procedure to be followed: the Court will first call on defendant 5 to refund the amount; only if she fails to do so within a time fixed will defendants 2 and 7 become jointly and severally liable; defendant 2's share in the estate is to be available as a charge if recall becomes necessary.

The Court also directed the District Judge to expedite completion of the administration of the estate, noting the significant delays in closure since the deceased's death in 1107 and the institution of proceedings in 1110 with an administrator appointed in 1112.

Holding and Implications

Core Ruling: The appellate Court set aside the lower Court's decision that had exonerated defendants 1, 2 and 7 from liability and held that, in the circumstances of non-production of accounts and the admissions and figures on record, the plaintiffs are entitled to the amount claimed in A.S. No. 650 (Rs. 22,400) for which court-fee has been paid. The Court directed that:

The shares of defendants 1 and 2 in the deceased's estate shall stand charged for the amount awarded to the plaintiffs; defendant 7's liability in respect of that amount shall be postponed and limited to the extent the shares of defendants 1 and 2 prove insufficient.
The plaintiffs shall recover their costs of the appeal and such costs shall also form a charge on the shares of defendants 1 and 2.
With respect to A.S. 57 concerning the legacy paid to defendant 5, the Court modified the lower Court's direction: the amount need be recalled only if necessary to discharge the estate's debts. The Court will first call upon defendant 5 to refund; if she fails within time fixed, defendants 2 and 7 will become jointly and severally liable, and defendant 2's share in the estate shall be a charge under the Court's direction.

Implications: The direct effect is to reverse the lower Court's exoneration of defendants 1, 2 and 7 and to impose a monetary charge on the estate shares of defendants 1 and 2 up to the awarded amount, with defendant 7's liability contingent and subsidiary. The Court did not purport to lay down a new general precedent beyond applying established principles: it applied existing authority that permits adverse presumptions and relief where accounting parties fail to produce accounts. The Court further ordered expedition in finalizing administration of the estate. The opinion does not claim to set a novel rule of law; it applies and follows established precedents on adverse inference for non-production of accounts.

Disposition: The Court disposed of A.S. No. 650 in favour of the plaintiffs as described above; A.S. 57 was modified to the limited recall regime set out. The Court ordered no costs in the latter appeal. The opinion concludes with the administrative direction to close the estate proceedings as soon as practicable.

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Chidambaram Pillai Sivarama Pillai And Another v. Chidambaram Pillai Aundy Pillai And Others Responlents.

The Judgment of the Court was delivered by

Koshi, J.:— These appeals arise from the third preliminary decree passed in an administration suit (O.S No. 18 of 1112) on the file of the Parur District Court. The present decree was passed on 27-9-1946, the two earlier preliminary decrees having been passed respectively on 13-1-1941 and 10-1-1945. Issue No. 7 raised for trial is the issue now dealt with. It reads:

“Whether any amounts are payable by defendants 1, 2 and 7 to the estate of the deceased as damages or as amounts collected by them during the period of their management”

2. The Court found that there was no proof on the Bide of the plaintiffs to establish the liability of these defendants except for an amount of Rs. 2800 for which defendant 7 alone has been made liable. The plaintiffs have preferred A.S No. 650 against this decision and claim that in addition to the amount of Rs. 2800 for which defendant 7 has been made liable, defendants 1, 2 and 7 ought to have been made liable for all outstandings due to Chidambarom Pillai when he died, for the profits of the business conducted after his death, for the rents and profits of his immovable properties till the date, the administrator appointed by the Court to manage the estate assumed charge and for the value of the movables Chidambarom Pillai died possessed of including the stock-in-trade. Chidambarom Pillai died on 31-30-1107 and the administrator took charge on 1-3-1112. The plaintiff's appeal is valued at Rs. 22400 and the claim is that the three named defendants should be jointly and severally made liable to the plaintiffs at least to that extent. Defendant 7 has preferred A.S 57 against the decree making him liable in the amount of Rs. 2800.

3. The Court had in its previous decisions found that as executors and managers appointed under Chidambarom Pillai's last will and Testament these defendants (1, 2 and 7) were liable to account for all the heads of claims mentioned above. The Court's present task was only to assess the quantum of their liability, if any. We feel constrained to observe that the Court has thoroughly misdirected itself in discharing that task. The Court wrongly thought that it was for the plaintiffs to establish by definite evidence the extent of the liability of the executors and clean forgot that it was the first duty of an accounting party, whether an agent a trustee, a receiver, or an executor to be constantly ready with his accounts. The lamentable fact about the whole case is the defendants who took, charge of assets of the deceased when he died and who were admittedly managing his estate for over four years have not cared to produce any books of account to show that the out-standings were, how the business was run, or what the rents and profits of the properties were or how they were dealt with during all these years. Exhibit B. the release deed, under which defendant 2 renounced his management and executorship and entrusted those functions to defendants 1 and 7 shows that no account books were handed over to them at that time. Defendants 1 and 7 acted improperly in taking over management without making defendant 2 render a proper account. The explanation offered for non-production of the accounts that plaintiff 1 himself had destroyed or sold them away for paper value hardly commends itself to us as true. The lower Court has itself not accepted the explanation. Admittedly Chidambarom Pillai was running a flourishing trade and he was maintaining regular accounts. That trade was continued for at least a year or two after his death. Necessarily those who were running the trade after Chidambarom Pillai's death must also have been maintaining; accounts. A statement which defendant 1 filed during the course of the proceedings show that Chidambarom Pillai had to realise very nearly Rs. 20,000 from various individuals and institutions. That statement also shows that the profits of the properties came to not less than Rs. 1800 and 453 para 3 of paddy a year. Of the outstandings due one item in respect of which an amount of Rs. 2450 or thereabout was due was the subject of a proceeding under the Debt Relief Act. By the time the administrator came on the scene the outstandings due to the trade must have become barred unless they were only collected. There is no evidence what has become, of them or how the trade goods were disposed of. Even on the modest estimate regarding outstandings and annual income given by defendant 1 the plaintiffs' 1/5 share in them would, exceed the amount they have claimed in the present appeal. If the figures mentioned in the statement the plaintiffs gave, are accepted they would become entitled to more than twice the amount claimed. As pointed out by the lower Court the plaintiffs' figures in the plaint regarding these matters were not disputed in the salt. As per a statement their Advocate filed in Court on 7-11-1120 the profits of the trade and outstandings collected amounted to not less than Rs. 29,000 and 4800 paras of paddy. Their claim in the appeal amounts to a little over Rs. 3000 whereas if we accept their figures they would become entitled to very nearly Rs. 6000 and 1000 paras of paddy. In the Court below it was cotended on their behalf that as the defendants had failed to render any account with respect to the period they were in management they must at least be made liable for the amounts admitted by defendant I in his statement. But the argument was however summarily turned down by the Court who stated

“that there is no proof of realisation of any amount by defendants 1, 2 and 7 except what is admitted by defendant 5 in Ex. 14 disposition.”

4. This we are afraid betrays ignorance of the law to be applied in circumstances similar to the present. That the account books of Chidambarom Pillai's trade went in the hands of defendant 2 admits of no doubt. Defandant 1 and defendant 7 on the one hand and defendant 2 on the other are not agreed whether the latter handed them over to the former. The fact however remains that no account books whether existing when Chidambaram Pillai was alive or those maintained after his death are produced in the case nor is any satisfactory explanation for their non-production forthcoming.

5. The law to be applied in situations like this, is, if we may say so with respect, clearly and succinctly stated by Sir Asutosh Mookerjee, J., and Panton, J. in the case reported in Debendra Narayan v. Narendra Narayan, 54 I.C 636 : (A.I.R (7) 1920 Cal. 428). The relevant portion of the judgment can usefully be reproduced here

“In a suit for accounts, the non-production of account books by the party who has custody of them justifies the presumption under Section 114(g) of the Evidence Act that they have been withheld, because, if produced, they would have been unfavourable to his case. If he is the plaintiff and is claiming accounts though withholding papers, his suit is liable to be dismissed. Upendra Kishore v. Ram Tara, 4 Ind. Cas. 542 : (13 C.W.N 696); Chand Ram v. Broja Gobind Doss, 19 W.R 14. If he is the defendant who is liable to render accounts, the Court will proceed on the footing of evidence furnished by the plaintiff, and, in doing so, may make all reasonable presumptions against him; see the observations of Pheer, J. in Syud Shah Alaiahmad v. Bibee Musibun, 24 W.R 70 quoted with approval by Field, J., in Annoda Persad v. Dwarakanath, 6 Cal. 754 : (8 C.L.R 821), Again, as was pointed out by Field, J., in Degamber v. Kallynath, 7 Cal. 654 : (9 C.L.R 265), if satisfied that the defendant has contumaciously refused or omitted to comply with the order for production of the papers, the Court may enforce obedience by imprisonment or by attachment of property or by both. But, even if the Court does not consider it necessary to exercise its disciplinary powers, it may, by raising a presumption against the defendant, afford relief to the plaintiff. An instance of this nature will be found in the case of Rampershad v. Sheochurn, 10 M.I.A 490 at p. 507 : (2 Sar 177 P.C). There the defendant refused to render accounts; on evidence adduced to prove spoliation of the banking books the Court charged him with the principal sum for which he was accountable with interest at 12 per cent in lieu of the profits he had failed to account for. The Judicial Committee affirmed the decree of the Agra gadder Court and held that the Court had properly visited the failure of the defendant to produce the accounts required by charging him with interest on the principal sum for which he was accountable. This is in conformity with principles firmly established in equity jurisprudence. Thus, in Walmsley v. Walmsley, (1846) 3 J & L 556 : 72 R.R 129, where an accounting party withheld the partnership books and documents and thereby endeavoured to baffle the justice of the Court, Sir Edward Sugden, L.C, held that the Master had rightly raised a presumption against him both as regards the amount of the capital and stock-in-trade and of the annual gains from the business. Again, in Gray v. Haig, (1855) 20 Beav. 219 : (109 R.R 396), where an accounting party had destroyed the accounts before the matters had been finally adjusted, Sir John Romiliy, M.R, stated that he would act on the principle laid down in the well known case for Armory v. Delamirie, (1722) 1 Sm. L.C 356 : (93 E.R 664) and presume, as against the person who destroyed the evidence, everything most unfavourable to him, which is consistent with the rest of the facts either admitted or proved. This accords with the view adopted by Lord Nottingham, L.C in Wardour v. Berisford, (1687) 1 Vern. 452 : 23 E.R 579. See also Rowley v. Adams, (1849) 2 H.L.C 725 : (9 E.R 1267), affirming Rowley v. Adams, (1844) 7 Beav. 395 : (49 E.R 1118)…”

6. In the light of the law expounded in the above extract and other cases to be referred to presently we have no hesitation to hold that the learned Judge in the Court below has taken a very wrong view of the whole matter and that it has really led to failure of justice. In the circumstances of the case, we are in law entitled to adopt every presumption to the disadvantage of the defendants. Sea Armory v. Delamirie, 1 Sm. L.C 356. The extract from the decision in 54 I.C 635 quoted above Bhowa that the principle of that decision has been applied to suits of the present nature. The Cochin decisions reported in Sankunm Menon v. Komu Menon 1, Select Decision 1 and Antony v. Kunhuvaried, 40 CLR 173 adopted a similar course. The cases in Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi, 40 Mad. 402 : (A.I.R (4) 1919 P.C 6); Guruswami Nadar v. Gopalswami, 42 Mad. 629 : (A.I.R (6) 1919 Mad. 444); Jag Prasad Rai v. Mt. Singari, A.I.R (12) 1925 P.C 93 : (86 I.C 122); Viadyanatha Iyer v. Haji Abdulla Haji Abdu Sathar, 4 CLR 386; Purushottom Gala Sait v. Haji Essa Hajee Moosa, 14 CLR 899 and Varkey Mathew v. Kunhabdulla Hajee, 2 CLR 143, are among other cases where for non-production of accounts by parties in whose possession or custody they were the Courts drew adverse inferences against them and gave decisions accordingly. The cases referred to would even justify our holding in this case that the plaintiffs' figures as to the trade debts, profits of the business and rents and profits of the properties etc., should be accepted to determine the liability of defendant 1, 2 and 7. However as by accepting the figures given by defendant 1 in his statement we would easily give a decision in favour of the plaintiff's to the extent of the amounts claimed by them in appeal, we do not think it necessary to go to that extreme length. In fact here it is not even necessary to give full effect to the admissions made by defendant 1. We would accordingly set aside the lower Court's decision exonerating defendants 1, 2 and 7 from any liability under the various heads of claims put forward by the plaintiffs for the amount of Rs. 22400 claimed in A.S No. 650 and on which court-fee has been paid. Defendant 1 is now no more and his legal heirs are defendants 8 to 11. The share of defendants 1 and 2 in the deceased Chidambarom Pillai's estate will stand charged for the amount we have awarded to the plaintiffs in this appeal and defendants 7's liability in respect thereof will stand postponed until these two shares are found insufficient for the purpose. Defendant 7's liability will also be limited to the extent, if any, the shares of defendants 1 and 2 are found short to meet the plaintiffs' claim. The plaintiff will get their costs of the appeal and the same will also form a charge on the share of defendants 1 and 2. This disposes of A.S No. 650.

7. The position that arises in A.S 57 is really this. Chidambarom Pillai's will provided for a legacy in favour of his daughter, defendant 5. Defendant 2 collected a debt due to the estate and paid off the legacy due to defendant 5. Defendant 7 is the husband of defendant 5, and a joint receipt was passed by them (defendants 5 and 7) to defendant 2. It is this amount which defendant 7 is now asked to make good to the estate. Really no legacy could be paid before the debts are discharged and the lower Court cannot be said to be wrong in asking the amount paid to be recalled. However if the estate is solvent to discharge all debts there will be no necessity at all to recall the amount paid to defendant 5. The impression that we have formed about the financial position of the estate is that there would be assets sufficient to discharge not only the debts and legacies but that something would also be left behind to be distributed among the heirs. We would in these circumstances modify the lower Court's decision and direct that the legacy paid need be called back only in case that course is found to be necessary to discharge the debt due by the estate.

8. Further, the amount was paid to defendant 5 and the liability of defendant 2 or defendant 7 in respect thereof could arise only if defendant 5 does not refund the amount when called upon to do so. In case occasion arises for the amount to be recalled, the Court shall first ask defendant 5 to refund the amount and if she does not comply with it within a time limited by the Court the legal consequence that would arise therefrom is that both defendants 2 and 7 would jointly and severally become liable for the same. Defendant 2 is, no doubt, not a party in A.S No. 57, but defendant 13 who is respondent 3 in that appeal now represents the interests of defendants 2 to 4 and 8 to 11, and in the exercise of the jurisdiction vested in us under O. 40. R. 32 of the CPC we direct defendant 2's share in the estate shall also be a charge for this amount in case it has to be recalled. This appeal civil stand disposed of as above. We make no order for costs in it.

9. Before parting with these appeals we would like to point out to the learned District Judge that we expect him to close the administration of this estate as expeditiously as possible. Chidambaram Pillai died in 1107. The matter came to Court in 1110 and an administrator was appointed early in 1112. A large share of the debts still remains to be discharged and a proper step to find the wherewithal to pay off these debts has not yet been taken. The learned Judge will therefore soon try to dispose of the remaining issues that await disposal and finally close the administration of Chidambaram Pillai's estate without losing any further time.

10. Appeal dismissed.

Chidambaram Pillai S... v. Chidambaram Pillai A...