Shiam Lal v. Abdul Salam

1. This is an appeal against an order of remand made under the following circumstances:

The respondent, Abdul Salam, executed a mortgage in favour of three persons, Hari Chand and others, and thereby hypothecated a third share in two shops and other properties on foot of a mortgage bond, dated 18th November 1920. He acquired the remaining two-thirds share in the two shops which we have mentioned, and, later, on 26th July 1924, he sold the two shops to the appellant Bhiam Lal, for a sum of Rs. 6,250. Abdul Salam left with the vendee out of the purchase money a sum of Rs. 3,107-2-0 to be paid to Hari Chand and others in, order that the mortgage of 1920 might be cleared off. Owing to certain circumstances, which we need not mention and which will be duly enquired into by the Court of first instance, Shiam Lal made no payment to the mortgagees. The mortgagees brought a suit for sale and' obtained a decree on 3rd January 1929. This mortgage decree was partly based on a compromise. Shiam Lal agreed with the mortgagees that the latter, in consideration of a sum of Rs. 2,300 paid to them, would release from liability the two shops purchased by Shiam Lal. As the result of this compromise and payment, the money due to the mortgagees was reduced in amount and a decree for sale was passed against the remaining properties of Abdul Salam for the realization of a sum of Rs. 2,758-14-0. Thereupon, Abdul Salam brought the suit out of which this appeal has arisen to recover the sum of Rs. 2,758-14-0 with interest from 3rd July 1929 (after the expiry of the six months' time allowed for payment), in all for recovery of Rs. 2,779 from Shiam Lal.

2. The Court of first instance dismissed the suit having held that it was premature. The basis of the judgment was that so far the plaintiff has not paid the mortgagees; nor has his property been sold, and therefore the plaintiff had no cause of action to maintain the suit. The learned Subordinate Judge who hoard the appeal, was of a contrary opinion, and he set aside the decree of the Court of first instance and remanded the suit for trial on the merits.

3. In this Court the learned Counsel for the appellant has argued that the plaintiff has no cause of action, because he suffered so far, no actual damage.

4. If we look to the Contract Act, Section 73, we shall find that the construction which the learned Counsel for the appellant would put on Section 73 is too narrow. The section reads as follows:

When a contract hag been broken, the party who suffers by such breach is entitled to receive * * * * compensation for any loss or damage caused to him there by * * * *.

5. The learned Counsel agrees that by nonpayment of the money due to Hari Chand and others, the mortgagees, his client did commit a breach of the contract, but he says that compensation can be had by Abdul Salam only if he proved any loss or damage. His argument is that a loss or damage can accrue only if the property is sold or the plaintiff has to pay the money to the mortgagees. He went so far as to argue that, if the decree obtained by Hari Chand and others became time barred, the appellant would reap the benefit of the event and the plaintiff cannot recover.

6. We need not consider whether the plaintiff would be entitled or not to recover the money if the decree of Hari Chand and others became time barred, but we are clear that a loss or damage has already accrued to the plaintiff on account of a decree for sale being passed against the plaintiff.

7. If we look to the illustrations attached to Section 73 we shall see that the interpretation put by the learned Counsel for the appellant is too narrow. The first illustration is where A contracts to sell and deliver 50 maunds of saltpetre to B at a certain rate. The promise is broken and it is said that B is entitled to receive from A, by way of compensation, the sum, if any, by which the contract price falls short of the price for which B might have obtained 50 maunds of saltpetre of like quality at the time when the saltpetre ought to have been delivered. There is no condition laid down in the illustration that in order to enable B to. recover compensation, B should have actually purchased saltpetre and should have actually paid a higher price than he had contracted to pay to A. Similar remarks may be made with respect to other illustrations, specially Illus. (f).

8. The learned Counsel for the appellant argued that this view would be in accordance with English law, but it would not be consistent with the Indian law. In India however, we have got some cases including a case decided by our own High Court where the same view has been taken, although Section 73, Contract Act, has not been quoted.

9. In the case of Kumar Nath Bhuttacharjee v. Nobo Kumar [1899] 26 Cal. 241 there was a suit for recovery of damages where damages had actually accrued. In discussing the law at pp. 244 and 245 the learned Judges (including Ameer Ali, J. as he then was) quoted certain cases and remarked as follows:

All these cases point substantially to the conclusion that when a person contracts to indemnify another in respect of any liability which the litter may have undertaken on his behalf such other person may compel the contracting party, before actual damage is done, to place him in a position to meet the liability that may hereafter be cast upon him.

10. The authorities quoted were both English and Indian.

11. In the case of Ramalingathudayar v. Unnamalai Achi [1915] 38 Mad. 791 there was an agreement between two persons, who compromised a case which had been instituted in forma pauperis that if the court-fee was eventually levied by the Government, the plaintiff would pay a sum of Rs. 250 and the balance would be paid by the defendant. The Court subsequently made an order directing the plaintiff to pay the whole court-fee. Thereupon, the plaintiff brought the suit for recovery of the balance after making a deduction of Rs. 250. The question was whether the suit was premature. Their Lordships said:

Assuming in favour of the defendant that his agreement was to pay the balance of the court-fee to the Court and not to the plaintiff, at the date of suit the defendant had committed a breach of his contract and the plaintiff had suffered damage by having her property attached. There was therefore sufficient to give her a cause of action.

12. It will be noted that in this particular case a decree for sale has been passed against the plaintiff, and a decree for sale is certainly much more effective than a mere order of attachment. In the case of Raghubar Rai v. Jaij Rai [1912] 34 All. 429 the view was taken by two learned Judges of this Court that a cause of action arose when a breach took place. The learned Judges went somewhat further and said that there could be only one cause of action viz., the breach and, if a subsequent damage actually occurred, that could give no further cause of action, We need not consider how far we would agree with the second proposition of law, but as regards the first proposition of law, there seems to be no reason to doubt its correctness.

13. The learned Counsel for the appellant quoted before us the case of Sarju Misra v. Ghulam Hussain [1921] 63 I.C. 87 where two learned Judges of this Court distinguished the case in Raghubir Rai v. Jaij Rai [1912] 34 All. 429, but that was a case where an actual loss, in the narrower sense of the word, had occurred.

14. Having regard to the codified law, and having regard to the decided cases, we are of opinion that the plaintiff had a good cause of action and his suit should be tried. The other points that the appellant may have to urge will be heard no doubt by the Court of first instance.

15. We uphold the order of remand and dismiss the appeal with costs, including counsel's fees in this Court on the higher scale.