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Nagappa Pandyappa Kadar v. Badridas Shrikishan
Concise Analytical Summary of the Opinion — Marten, C.J.
Factual and Procedural Background
This appeal raised two principal points: (1) whether judgment had been rightly entered for plaintiff 2 as well as for plaintiff 1; and (2) whether interest prior to the suit had been rightly awarded.
The underlying transactions involved three cross-contracts (vayadas) between plaintiff 1 and the defendants for August, September and October 1920, in respect of 175, 75 and 25 bales respectively. Each sale exactly counterbalanced a purchase so that, on the parties' case, no actual delivery of bales was required and only net differences in money were payable for each vayada — approximately Rs. 2,091; Rs. 2,615; and Rs. 660 respectively.
Plaintiff 2 claimed to be the assignee of plaintiff 1 in respect of those sums. The defendants contended that the assigned subject-matter was not a "debt" or an "actionable claim" within the meaning of Section 3 of the Transfer of Property Act but instead was a mere right to sue (allegedly within Section 6(e)), and therefore not transferable. The defendants were also concerned that a judgment in favour of plaintiff 2 might affect a cross-decree or cross-claim they alleged against plaintiff 1.
The trial judge entered judgment for both plaintiffs. The decree referred to at the end of the trial judge's judgment (suit No. 1791 of 1923) was said to be under appeal to this Court (Appeal No. 311 of 1925). The present appeal challenges the trial judge's findings on transferability and on interest.
Legal Issues Presented
- Whether the sums claimed and assigned by plaintiff 1 to plaintiff 2 constituted a "debt" or an "actionable claim" (assignable under Section 3 and Section 130 of the Transfer of Property Act), or whether they were a mere right to sue for unliquidated damages (non-assignable under Section 6(e)).
- Whether interest prior to suit should have been awarded (and, if so, at what rate), given the characterisation of the sums as a debt or as damages.
Arguments of the Parties
Appellants' (Defendants') Arguments
- The defendants/appellants argued that the subject of the assignment was not a "debt" or an "actionable claim" within Section 3 of the Transfer of Property Act but rather a mere right to sue for damages falling under Section 6(e) and hence not transferable.
- They contended that the sums represented damages for breach of contract (unliquidated) and therefore, on the authority of prior decisions, the plaintiff only had a right to sue — such rights being non-assignable.
- The defendants also had a practical interest in the assignment issue because they alleged a cross-decree/cross-claim against plaintiff 1 which, they asserted, might be affected if judgment were entered in favour of plaintiff 2 as well.
- It was further contended that the assignment document(s) might be defective in form (an objection later addressed in the judgment).
Plaintiffs' Contentions (as reflected in the evidence and findings)
- Plaintiff 2 claimed to be the assignee of plaintiff 1 by deed (Ex. 33) and a subsequent document (Ex. 59) which, on plaintiffs' case, effect and confirm the assignment of the three balances owing in respect of the vayadas.
- Plaintiff 1's witness (a partner) gave uncontradicted evidence that no bales remained to be delivered, that only profits for rates were to be paid, and that specific sums were due for each vayada; he also stated that interest at six per cent was to be paid according to the custom of the bazar.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Uderam v. Shivbhajan (case before Crump, J.) | Cross-contracts between the same parties for identical quantities and dates remain independent; the payment of differences may be the practical result but does not extinguish the original contracts or effect a novation (Section 62 Contract Act distinction). | The court relied on the reasoning to support that where contracts exactly counterbalance each other the only practical result is payment of differences, and that this circumstance does not convert the situation into one of mere unliquidated damages. The opinion used this to support treating the sums as ascertainable debts. |
| Hirachand v. Nemchand | Held that a right to sue for damages consequent upon breach of contract (unliquidated damages) cannot be transferred; the loss there was an unliquidated amount arising from auction resale. | The court distinguished Hirachand as involving unliquidated damages ascertainable only by litigation; in the present case the court found the sums were already ascertained and thus not within Hirachand's rule. |
| Abu Mahomed v. S.C. Chunder | Held that damages for failure to deliver a future instalment (difference between contract and market price) were unliquidated and not assignable. | The court treated Abu Mahomed as analogous to Hirachand on the point of unliquidated damages, but distinguished the present case on the ground that the sums here were already ascertained between the parties and supported by uncontradicted evidence. |
| Venkalaswami v. Ramachandra Raju | Held that a claim for damages for failing to collect certain rents was not assignable whether founded in tort or contract. | The court noted this case was "totally different" and used it as part of the body of authority on non-assignability of certain unliquidated claims but distinguished it from the present case on factual grounds (ascertained sums). |
Court's Reasoning and Analysis
The court proceeded by first examining the factual matrix and the evidence placed before the trial judge. The transactions consisted of matched sales and purchases for identical quantities and vayada dates so that, by arithmetic and the parties' own accounts, no deliveries were required and only monetary differences were to be paid for each vayada.
The court placed particular weight on the uncontradicted evidence of plaintiff 1's partner (Ex. 29), who stated that no bales remained to be delivered, set out the sums alleged to be due for each vayada, and stated that interest at six per cent was to be paid "according to the custom of this bazar." The witness was not cross-examined on these points: although he had been tendered for cross-examination later, the cross-examination was declined and both parties called no further evidence. The judge therefore accepted the factual statements as uncontradicted.
On the legal characterisation of the sums, the court considered authorities where courts had held that unliquidated damages for breach of contract are non-assignable. The court analysed those cases (Hirachand, Abu Mahomed, Venkalaswami) and emphasised that in those authorities the damages were unascertained and required further proof (market rates, multiple witnesses, etc.) to be fixed.
By contrast, invoking the reasoning in Uderam v. Shivbhajan (Crump, J.), the court observed that cross-contracts which counterbalance each other do not result in novation and that the payment of differences is the necessary and ascertainable consequence of insisting on performance of both contracts. Given the factual finding (on uncontroverted evidence) that the parties had agreed there should be no delivery and that specific sums had been ascertained between them, the court concluded that those sums amounted to a definite debt owing from the defendants to plaintiff 1.
Having so characterised the sums as an ascertained debt (an "actionable claim" under Section 3 of the Transfer of Property Act), the court further held that the assignment effected by Ex. 33 (and confirmed by Ex. 59) operated to transfer that debt to plaintiff 2 and was therefore valid and assignable under the provisions of the Transfer of Property Act (S. 130 referred to in the opinion).
On the form of the documents, the court noted an initial inaccuracy in an unofficial translation but, after obtaining an official translation of the material portion, found Ex. 33 to be an agreement by plaintiff 1 to sell the three debts in satisfaction of a lesser sum due to plaintiff 2. The subsequent document Ex. 59 (dated later) was treated as a confirmation of Ex. 33; the court did not regard the later date of Ex. 59 as affecting the substance of the assignment.
On interest, the court reasoned that once the claim was held to be an ascertained debt, the argument that the sums represented only damages (and hence that interest should not be awarded) largely fell away. The uncontradicted evidence that interest at six per cent was payable according to the market custom was accepted by the trial judge and was affirmed by this Court. The court observed that it is common on original suits to award interest where evidence shows the market custom to charge interest on such balances.
Holding and Implications
APPEAL DISMISSED.
Implications and direct consequences:
- The trial judge's judgment in favour of both plaintiff 1 and plaintiff 2 is affirmed; the assignment of the ascertained sums from plaintiff 1 to plaintiff 2 was valid and effective.
- The sums were characterised as an ascertained debt (an "actionable claim" under Section 3 of the Transfer of Property Act) and therefore assignable (the court referenced S. 130 of that Act in confirming assignability).
- Interest prior to suit at the rate of six per cent (as stated to be the bazaar custom) was properly awarded and affirmed by this Court.
- The appeal was dismissed with costs (one set of costs awarded to the plaintiffs as stated in the opinion).
The opinion expressly distinguishes the present facts from prior authorities where claims were unliquidated and not assignable; the court found no new principle of law was required beyond applying those authorities to the facts and distinguishing them where appropriate.
Marten, C.J:— There are two points argued before us in this appeal, namely, first, whether judgment was rightly entered for plaintiff 2 as well as for plaintiff 1, and, secondly, whether interest prior to the suit was rightly awarded. With regard to the first point plaintiff 2 claims to be the assignee of plaintiff 1, and it is argued that the subject of the assignment was not a “debt” and therefore an “actionable claim” within the meaning of Section 3 of the Transfer of Property Act, but was a mere right to sue within the meaning of S. 6(e), and so could not be transferred. The defendants' interest in getting the judgment limited to plaintiff 1 is that they allege that they have a cross-decree and so we understand a cross-claim against plaintiff 1 which possibly they would be unable to enforce if the judgment were in favour of plaintiff 2 as well. As regards the decree, that, we under-stand, is the decree in suit No. 1791 of 1923 referred to at the end of the learned Judge's judgment. We are informed that the decree is now under appeal to this Court in Appeal No. 311 of 1925.
2. The subject-matter of the assignment arose out of three cross-transact ions between plaintiff 1 and the defendants for the August, September and October vayadas of 1920, namely for 175 bales, 75 bales, and 25 bales, respectively. It is important to observe that as regards each vayada the sales exactly counterbalanced the purchases, and consequently on balance there were no bales to be delivered or taken. Similarly, under those circumstances the exact rate of the vayada is immaterial because the same rate had to be applied on both sides of the account with regard to each of the said contracts making up the aggregate number of bales for the particular vayada. The effect, therefore, as a matter of arithmetic, was that there were to be mere payments of differences as regards each vayada and they amounted approximately to Rs. 2,091, Rupees 2,615, and Rs. 660, for the three vayadas in question. The appellants argue that although this was the net financial result, yet the sums were really damages for breach of contract and accordingly on authority the plaintiff had merely a right to sue for recovering the amount, and accordingly the transfer was invalid under S. 6(e).
3. The transactions are set out in plaintiff 1's patta patti books for the three separate vayadas as Exs. 35, 31 and 22, respectively, and on turning to the evidence of plaintiff 1's partner, Ex. 29, he, after referring to these exhibits, says:
“No bales remained to be delivered and taken. Profits for rates ouly are to be paid. Rs. 9,671-14-0 are due to August 1920 vayada. Rs. 1,025 are paid. Rs. 1,646-14-0 remain due. Interest at six per cent is to be paid up to payment.
According to the custom of this bazar, we have demanded it …. Rs. 2,07-4-3-6 remained due to us from defendants for September vayada and Ss. 527-5-6 remained due for October 1920 vayada. Rujuwat took place between us parties.”
4. Now, there is no cross-examination of this witness. He gave this evidence on 3rd November 1924, and the rojnama shows that on 27th January 1925, he was tendered for cross-examination, but it was declined, and both parties stated that they wished to call no more evidence. The learned Judge says that the parties were agreed as to the bales, rates and vayada of all the contracts in dispute, and he finds that it is not a mere right to sue that is transferred, but that a definite sum is due to plaintiff 1 and it is assigned. Speaking of cross contracts, a case came before Crump, J., in Uderam v. Shivbhajan (1). That was a case where there was a contract between A and B and the defendant as surety guaranteed the performance of the contract. But on the plaintiff hearing rumours of the financial weakness of B, he entered into a cross-contract with B for the same number of bales and for the same vayada date. The surety then contended that this in effect rescinded the first contract and consequently he was discharged from all liability. Crump, J. negatived the surety's contention and held that on the face of them the two contracts remained wholly independent and that each continued in full force and effect until it was discharged. He pointed out that each party had a right to demand delivery from the other, but as the quantities were equal the practical result must have been that there would be no delivery. This was a necessary consequence of the two contracts and was their combined effect. But there was no novation in the sense in which the term is used in Section 62 of the Contract Act. Then he says (p. 716):
“The payment of differences is no more than the necessary result of any attempt to insist on the performances of both contracts. If the procedure of tendering the price against the goods and the goods against the price were solemnly enacted the result dearly would be that the advantage of the one party over the other would be measured precisely by the difference between the contract rates. It is therefore in my opinion unsound to argue that because the parties had in mind the payment of differences only, the two contracts were extinguished.”
5. He accordingly held Shat the surety was not discharged. I am almost sure that in a subsequent case this appellate Court had occasion to consider the observations of Crump, J., in the case cited, but I have not got the reference. It is, however, clear that in a case like the present the bales on the one side balance the bales on the other and the vayada rate must be the same as regards both contracts. So the only difference can be in the aggregate sums of the two contracts, and this can be ascertained and paid as soon as the vayada has passed. That indeed is what the witness says: “No bales remained to be delivered and taken. Profits for rates only are to be paid.”
6. But it may be said that nevertheless the true view is that the amount in question represented damages for breach of contract. For the sake of argument let that be so. But if the parties had thought that their case must rest on that view, then one party or the other ought to have taken delivery or demanded delivery, but in fact they did not do so. In a case like this no delivery would be desired because the bales after delivery by A to B would only have to be returned by B to A. Consequently, I can understand what the witness says: “Rujuwat took place between us parties.”
7. It is contended on behalf of the appellants that this amount was put in the plaintiff's books though there was no actual trade settlement of the accounts between the parties. To my mind, if they wished to raise any point of that sort, they should have cross-examined the witness in the Court below as to what according to the defendants took place. I think it clear that in fact only differences were to be paid, and consequently the parties were agreed that there should be no delivery. So on the uncontradicted evidence before the Judge, I think, he was entitled to find that in fact the amounts were ascertained and a sum was arrived at between the parties. That being so, that to my mind would mean, apart from any authority, that there was here an ascertained sum due from the defendants to the plaintiff, in other words, a debt.
8. Accordingly, the present case to my mind is clearly distinguishable from the decision of Sir Norman Macleod and Crump, J. in Hirachand v. Nemchand (2), where it was held that a right to sue for damages consequent upon an alleged breach of contract cannot be transferred. There what had taken place was this: One Jivraj had purchased goods from a mill and had sold the goods to the defendant. The defendant broke his contract. Then Jivraj sold the goods by auction on the defendant's account and the difference between the contract price and the auction price resulted in a logs of Rs. 13,784 to Jivraj. Jivraj assigned that loss to the plaintiff, and it was held that he was not entitled to recover it as it was not a debt. That was a clear case of unliquidated damages for breach of contract. The defendants there argued that the auction rate was not a proper amount and clearly the auction rate did not represent a fair market rate as on the date of breach. Consequently, it was a clear case to my mind where the, damages were unascertained and could not be ascertained until you obtained a decision of the Court. The same observations apply to the decision in the case of Abu Mahomed v. S.C Chunder (3). That was a case of a purchase of gunny bags to be delivered in equal portions during the months of January to May 1905, each amounting to a separate contract. There delivery was duly given of the January and February portions but there was a failure to give delivery of the March instalment and thereby the purchaser sustained damages to the extent of Rs. 1,112-8-0, being the difference between the contract price of the goods and the market price prevailing on 31st March 1905. This was held to be merely a claim for unliquidated damages for breach of contract, and therefore not assignable. There to prove the claim, the market price at the date of breach would have to be ascertained and this might involve calling several witnesses. The other case cited, Venkalaswami v. Ramachandra Raju (4), was a totally different case, namely, for damages for failing to collect certain rents. That claim was held not to be assignable whether it was founded on tort or contract. The conclusion, therefore, which I have arrived at is that on the date of the assignment in the present case, namely 29th August 1923, there was and had been for a long time past a debt owing by the defendants to plaintiff 1, and it was accordingly an “actionable claim” within the meaning of Section 3 of the Transfer of Property Act, and was assignable under S. 130 of that Act.
9. A question has been raised as to the form of this document. The first portion of the unofficial translation was inaccurate but having obtained an official translation of the material portion we find that by the deed, namely, Ex. 33, plaintiff I agreed to sell the three debts in question of the three vayadas in satisfaction of a somewhat lesser sum due by plaintiff 1 to plaintiff 2. Then this is followed by a subsequent document, Ex. 59, dated 31st January 1925. Speaking for myself I do not see the necessity for it. But even as to that document some question is raised as to its precise form. To my mind however it is clear that it is at any rate a confirmation of the previous document, Ex. 33 as being the final assignment of those particular debts. I of course appreciate that while the first document, Rs. 33, was executed a few days before the suit, the second document, Ex. 59, was executed a long time afterwards. But I do not see that makes any substantial difference in the case we have before us. In my opinion the learned Judge arrived at the right conclusion on this part of the case, and, accordingly, judgment was rightly entered for both plaintiff 1 and plaintiff 2.
10. As regards the question of interest it was argued that it was interest on damages, but on my above finding that there was an ascertained debt that argument to a large degree disappears. Here again the plaintiff's uncontradicted statement in evidence that interest at six per cent was to be paid according to the custom of the bazar, to my mind, puts an end to that question. It often happens on the original side that we give interest where the evidence shows that this is in accordance with the custom of the market in any particular transaction. In the written statement in the present case it was rather the rate of interest that was demurred to than that no interest at all was payable. And the learned Judge accepted that view when he stated that the usual interest charged for such balances in the bazar is six per cent. In my opinion he was right in this part of the case also. Accordingly, I would dismiss this appeal with costs. One set of costs.
Patkar, J.:— I agree and I have nothing to add.
S.N/R.K
11. Appeal dismissed.
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