J.H Pattinson v. Srimati Bindhya Debi

Wort, J.:— These appeals arise out of two actions brought by the plaintiff claiming royalty, cess and damages. Incidentally there was also a claim for interest prior to the institution of the suit as well as afterwards. These claims were based on a mining lease, dated the 17th March, 1915. The defendants are the appellants. The first defendant is one, J.H Pattinson, the second defendant is the New Sinidh Coal Company, Limited, and the third defendant is H.V Low and Company, Limited.

In the action out of which Appeal no. 88 of 1929 arises there was a claim for royalty, cess, damages and interest. In the action out of which Appeal no. 77 of 1930 arises, there was involved the question of royalty and interest only but before this court no question arises as regards royalty. The matters which come before us are questions of cess, damages and interest.

I propose, in the first place, to deal with the position of the defendants in the action. Under a patta, dated 1908, the plaintiff had got a prospecting lease with regard to certain mining lands. In March of 1915 by reason of an option which had been granted by a sub-lease of 1914, Pattinson, the first defendant, took a mining lease for the unexpired term created by the patta of 1908 in favour of the plaintiff, and it is under that lease of 1915 that this claim is brought. It is not necessary to state any other fact at the moment in dealing with the position of the three defendants in the action. It is clear that on the merits of the questions themselves, that is to say, the question of cess, interest and damages, considerations which apply to one apply to the others: but Mr. P.R Das in appearing for all the defendants contends that there are certain other questions which are applicable to defendants 2 and 3 only and on the submissions which he makes it is, contended that they must be dismissed from the action. The New Sinidh Coal Company, that is, the second defendant, appears to have been a company which was promoted by Messrs Pattinson and Low, who were the lessees under the lease of 1915. There is no clear evidence regarding them but it, is suggested in the plaint that Pattinson. Low and the New Sinidh Coal Company are one and the same person. That statement may be true in the sense that there are no share-holders in those two companies other than Pattinson and Low but of that we have no evidence. But it cannot be said that the New Sinidh Coal Company, Limited, and Low and Company, Limited, are the same person or persons as Pattinson and Low in the eyes of the law. There is no dispute that they, defendants 2 and 3, are companies which had been incorporated under the Indian Companies Act and the position, therefore, in law is that they are separate legal entities. Of that there can be no doubt—Solomon v. Solomon and Company. There is a recent Full Bench decision of this court which bears on the point.

Now we have no evidence in the case as to whether the New Sinidh Coal Company had taken an assignment or sub-lease from Pattinson and Low. It is clear, however, that the New Sinidh Coal Company, Limited, in spite of what the learned Judge in his judgment has said, was not a party to the lease of 1915; but that does not conclude the matter. I have already referred to the suggestion made in the plaint as regards the personality of these three defendants, but in the written statement defendants 2 and 3 made this averment, having denied their liability to pay cess,

“that these defendants are bound and governed by the terms of the Indenture, dated the 17th March, 1915 and nothing is payable by these defendants except what is mentioned in the said Indenture.”

Mr. P.R Das would have us ignore the admission on the ground that, if we accept that as an admission that the defendants are liable, we shall be splitting up the contentions in the written statement and disregarding therefore their denial of their liability as regards cess. But their denial as regards liability to cess is a denial that in point of law, on the construction of the deed by which they say they are bound, they are liable; but the paragraph which I have just read can be construed only on the assumption that they are admitting that some transaction had taken place which binds them to the terms of the lease because, as I have said, it is clear that they were not parties to the lease; they could be bound only by the terms of the lease if there had been a sub-lease, incorporating the terms of the head lease or an assignment, and, in my judgment, by pleading as they did in paragraph 5 of the written statement, they have made it unnecessary for the plaintiff to prove that there was some transaction such as the assignment or sub-lease which imposed the obligation of the lease of 1915 or the patta of 1908 upon the defendants. In my judgment, therefore, so far as the New Siaidh Coal Company is concerned, any liability which Pattinson is found to have incurred in this action must also be the liability of the New Sinidh Coal Company. The same argument which was advanced by the plaintiff with regard to the New Sinidh Coal Company was advanced as regards H.V Low and Company, Limited. That question is somewhat more difficult. We still have paragraph 5 of the written statement which admits liability on the part of Low and Company, Limited, as well as the New Sinidh Coal Company, Limited. But the defendants, third party, have contended in paragraph 2 of the written statement that they were merely managing agents of the defendants. Had the matter rested there, it seems to me that no other conclusion could have been reached than that at which I have arrived in the case of the New Sinidh Coal Company, Limited. But the judgments of both the cases the learned Judge has stated that the defendants H.V Low and Company, Limited, were the managing agents. It is true, as Sir Sultan Ahmad has pointed out, there was no evidence of that; but, in my judgment, it is impossible to say that there was not some material upon which the learned Judge could have arrived at that decision. The mere statement in the written statement itself, of course, is insufficient; it was necessary for the defendants to prove it. But they have been excused from proving it by an admission on the part of their advocates, and there is nothing in the case to show that what, the learned Judge has stated was incorrect. It seems, therefore, that one has to read paragraph 2 with paragraph 5 of the written statement, and even taking paragraph 5 of the written statement by itself, although both parties may have been bound by the lease of 1915, when once it is shown, as the Judge states here, that one of them was the managing agent of the other, in law both cannot be held liable. Had Low and Company, Limited, stood alone as agents for an undisclosed principal, undoubtedly under the Contract Act they would have been liable; but having joined both principal and agent, in law only one can be held liable. As I have come to the conclusion that the New Sinidh Coal Company is liable, in my judgment, for the considerations which I have stated, it necessarily follows that Low and Company, Limited, must be dismissed from the action.

Now to come to the question of cess, damages and interest. In the lease of 1915 there is a clause which reads:

“The lessees also duly observing all the covenants and conditions in the said instrument of lease or pattah of the seventh day of May One thousand nine hundred and eight contained on the part of the lessees thereunder to be observed and performed.”

Then comes the ordinary covenant for quiet enjoyment or the mines and premises on the part of the lessors.

Mr. P.R Das' argument, in the first instance, was that covenant was merely the conveyancer's method of imposing liability on Pattinson for such covenants in the head lease as he would otherwise be liable for in law. But it is well established in the law that a covenant such as I have read out incorporates covenants of the head lease. One of the covenants in the head lease was that

“if Government levies any tax or road cess on me in regard to these leasehold mines or coal business he shall pay it”.

In my judgment, therefore, that covenant being incorporated in the lease of 1915 the lessee becomes liable. The point, although made by Mr. Das, was not seriously pressed. In my judgment, therefore, Pattinson and the New Sinidh Coal Company are liable as the learned Subordinate Judge has held them to be liable for cess.

Before I come to the question which involved the chief argument in the case, namely, the question of interest, I propose to deal with the question of damages.

Damages, which were claimed by the plaintiff, were the costs which the plaintiff had to pay as defendant in the suit by her lessor, and in order to recover them she sought to prove an agreement by which Pattinson had undertaken to paythe liabilities direct to the head landlord. The learned Judge had said that there was some evidence of this but has come to the conclusion that there was no contract binding between the parties. There were letters which were produced which show some such arrangement for a period prior to the period for which the royalty and cess in these actions were claimed, but they are far from showing that during the period in dispute there was such an agreement, and without such an agreement it is impossible for the plaintiff to say that it was reasonable for her to defend the action in the suit of the lessor: in other words, her liability was one under the head lease. The liability of Pattinson was a separate liability under his lease, and by declining to pay, the plaintiff could not pass on the liability to pay costs to the defendant Pattinson, which resulted from her defending the action. In my judgment the learned Subordinate Judge was right on this point. That disposes of all the questions other than the question of interest.

Interest in this case was claimed and was allowed by the Subordinate Judge on the amounts claimed at the rate of 12 per cent per annum. An elaborate argument, as I have already stated, was addressed to the court on that question. The argument, if I may say so, was out of all proportion to the sum involved, but the point was urged and it is necessary, therefore, to deal with it. At first it was sought to show that the plaintiff was liable for interest by reason of the provisions in the head lease or patta of 1908; but in clause 14 of the lease of 1915 it is clear that the covenants relating to royalty and interest to which I have referred are expressly excluded. Interest therefore could only be claimed by law, that is to say, by law other than by contract. The substance of the argument on behalf of the defendants was this. No interest can be claimed other than under the Interest Act of 1839. Sir-Sultan Ahmad, on the other hand, contended that interest was recoverable other than under the Interest Act of 1839. Mr. P.R Das modified his argument to some extent during the course of the case by admitting that there were certain cases in which interest could be claimed under the proviso to the Interest Act of 1839. Act XXXII of 1839 is as follows:—

“It is, therefore, hereby enacted that upon all debts or sums certain payable at a certain time or otherwise, the Court before which such debts or sums may be recovered, may, if it shall think fit, allow interest to the creditor at a rate not exceeding the current rate of interest from the time when such debts or sums certain were payable, if such debts or sums be payable by virtue of some written statement at a certain time, or if payable otherwise, then from the time when demand of payment shall have been made in writing, so as such demand shall give notice to the debtor that interest will be claimed from the date of such demand, until the term of payment: Provided that interest shall be payable in all cases in which it is now payable by law.”

Mr. Das' modification of his argument was to this effect, that there are certain cases in India, as in England, in which interest was already payable by law at the time of the passing of the Interest Act. Those cases include cases, in which interest is allowed on equitable principles. Now the Act, as I have said, was passed in 1839 some five or six years before there had been passed in England what is now known as Lord Tenterdan's Act III and IV, Wm, IV, Chapter 42, the relevant section being section 28. I mention the English Act because, as Lord Tomlin said in the case to which I shall presently refer, the two Acts being indistinguishable, cases under the English law are relevant for the guidance and the consideration of the question which arises. There is no doubt what the law was in England at the time of the passing of Lord Tenterden's Act. The case of Page v. Newman had been decided by Lord Tenterden and other Judges in 1829. That laid down in substance that except by contract or under some commercial usage a party could not claim interest. That the law has remained the same in England since that date, apart of course from Lord Tenterden's Act, is shown by the case of London Chatham and Dover Railway Company v. The South Eastern Railway Company. Lord Herschell in that case said, after discussing the various English authorities, that the matter was governed by the decision in Page v. Newman. I apprehend that the law at the time as since was the same in India as it is in England. It must be obvious that were it not so at the time of the passing of the Interest Act there would have been no reason for passing that Act. But there may be this difference. In both the English Act and in the Indian Act there is a proviso that

“interest shall be payable in all cases in which it is now payable by law”

The cases in which it is payable by law in India may be different from cases in which it is payable by the law in England. But one matter is perfectly clear that for the mere detention of money, however wrongful, interest could not be claimed as damages.

Now I propose to come to those cases in India from which it might be supposed that the law was otherwise. In the case of Lala Chhajmal Das v. Brijbhukan Lal Lord Morris, in dealing with the case of a bond, where interest was payable after two years and in which there was no reservation of interest after that period, agreed with the High Court in its construction of the bond and expressed the view that it could hardly be the intention of the parties that no interest was payable after the two years. He added even on that construction, that is, the construction with which he had agreed and which had been placed upon the bond by the High Court, that interest could technically be recovered by way of damages. If we are to take that statement by Lord Morris in the case in which incidentally there was no discussion of the authorities at its face value, it is difficult to reconcile it with the decision of the Privy Council in the case of Lala Kalyan Das v. Sheikh Maqbul Ahmad in which Lord Sumner said that interest depends on contract express or implied. In one sense of the word, perhaps, and technically if I may say so with respect to Lord Morris, his statement that damages could be recovered by way of interest was correct. That leads me to a consideration of section 73 of the Contract Act upon which the statement that damages by way of interest may be recovered is usually founded. Lord Wrenbury in the case of Jamal v. Moolla Dawood Sons and Company said that section 73 of the Contract Act was merely declaratory of the right to damages for breach of contract. If I may say so, that is obvious on the plain reading of the section itself. There is nothing in the section which could even suggest that interest, could be claimed merely for withholding money that was due. Illustration (n), which is referred to, is no warranty for such a proposition. It reads—

“A contracts to pay a sum of money to B on a day specified. A does not pay the money on that day; B, in consequence of not receiving the money on that day, is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to the day of payment.”

There is nothing to show from this Illustration that the rule of Indian law which was the same as English law, as I have already stated, has been superseded. As Mr. Mullah says in his book on the Contract Act, the Illustration does not say that the defendant is necessarily liable to pay interest but assumes that he may be so under the Act that is, the Interest Act or otherwise and says that he is not in any event liable for more. I would add that the Illustration is declaratory of the principle that the defendant is not liable to pay damages in those circumstances. A case which is also often referred to in this connection is the case of Surja Narain Mukhopadhya v. Pratap Narain Mukhopadhya. It is not necessary to state the facts of that case excepting to say that it was a claim by one brother against another for a sum of money which one brother, the plaintiff, had expended in briefing Counsel in litigation in which both brothers were engaged on the same side. Maclean, C.J, as did Banerjee, J., held that the claim for interest that was made in the action came under the Interest Act of 1839. Not content with that decision, Banerjee, J., proceeded to say that the plaintiff might have recovered interest under section 73 as loss or damage caused by breach of contract; but he goes on to explain that such a claim cannot be made unless the creditor can show that actual loss or damage has accrued by reason of the defendant's breach. Cumming and Mukerji, JJ., in the case of Ramnath Karmakar v. Hiralal Shaha, dissenting from the proposition that in the absence of a stipulation interest could not be recoverable, awarded interest, relying on the judgment of Banerjee, J. But that case is no authority and could not be, having regard to the decision upon which the learned Judges relied, for the proposition that interest could be recoverable for mere detention of money. It is clear, therefore, what the law in India is, unless the matter can be brought within the Interest Act or within the proviso, there is no warranty under section 73 of the Contract Act for awarding interest for the mere detention of money after the date has arrived upon which it should have been paid. If it were otherwise it would involve in its turn the proposition that a breach of contract to pay money was an exception to the rule and that in claiming damages for breach of contract, damages had to be proved. In the case of Mohamaya Prosad Singh v. Ram Khelawan Singh Thakur Mukerjee, J., relying on the statement of Lord Morris in the case to which I have just referred, without examining in detail the facts of the case and without referring to the case of Surja Narain Mukhopadhya v. Pratap Narain Mukhopadhya, allowed interest, relying on the broad proposition that damages may be awarded for wrongful detention of money, but upon what principle is not disclosed. As far as I can see, in no case, in which the principles have been examined in detail, has it been said that damages by way of interest can be had merely on the allegation that money has been detained. In this connection, in my judgment, it is impossible to state the case more succinctly than was stated by Coutts Trotter, C.J, in the case of Kandappa Mudaliar v. S.R Muthuswami Ayyar. That was a case in which the plaintiff had advanced to the defendant money in consideration of the defendant supplying certain goods to him, the plaintiff. There was a breach of contract and the plaintiff sought to recover the sums of money which he had advanced together with interest. The decision in the case is correctly summed up in the headnote to that case:— “That in the absence of any demand or of any stipulation as to interest, a person who has advanced money to another for supply of goods at a certain time is entitled on default to recover only the advance and damages, viz. the difference in price between the contract rate and the market rate, and not also interest on the advance by way of damages for the period between the date of breach and the date of suit”. In the course of his judgment the Chief Justice says this:—“I desire to point out that if the plaintiff is entitled to interest, I do not see over what period it is to be calculated. He was clearly entitled to none up to the date of breach, because up to that time it was in the contemplation of both parties that the money should remain in the hands of the seller”: in other words, the parties had to abide by the contract. “For any period after that and before the plaintiff launched his suit it appears to me that he has himself to blame if such a period existed. By deferring the filing of his plaint he cannot cast an additional burden on the defendant. As for the period between the filing of his plaint and the determination of the suit, he is entitled to interest in the ordinary way and he will get it The Chief Justice was obviously referring to the fact that so soon as the plaintiff filed his suit he would be entitled to interest; prior to that date he could not recover it except under contract: in other words, the date from which he could recover interest was entirely a matter for himself. Cases similar to the one I have quoted are, for instance, the case of Jwala Prasad v. Hoti Lal and the case of Kirpal Singh v. Jiwan Mal where the proposition which I have already stated and repeated more than once was laid down, that is to say, the Allahabad High Court and the Lahore High Court had come to the conclusion that interest merely for the detention of a sum of money was not recoverable.

I then come to the question of the proviso, that is, the proviso to the Interest Act which says:

“Provided that interest shall be payable in all cases in which it is now payable by law.”

The authority which is often relied upon as giving the courts a right to award interest for the detention of money on equitable principles is the case of Hurropersaud Roy v. Shamapersaud Roy. This case was one of the authorities upon which Sir Sultan Ahmad relied for the proposition that interest is recoverable although that case was not covered by the Interest Act. In my judgment an examination of this authority will clearly show that this is one of those cases which is covered by the proviso. In that case there was a claim to mesne profits. Their Lordships of the Judicial Committee having examined the Interest Act of 1839 said this: “And that refers their Lordships to the state of the law and the practice in India independently of the Statute. They have taken some pains to ascertain what the law and practice has been, and have been referred to a number of cases upon the subject. It may be enough now to quote a case (Rungmala Chowdharain) which is to be found reported in Carren's Reports of Summary Cases in the Presidency Sudder Court, of the date of October 1st, 1850, where certain resolutions were come to at a sitting of all the Judges of the Court, and among those resolutions was this—‘Interest on mesne profits may be awarded as of course from date of suit in a decree; when, however, interest is awarded from an earlier, or from a later date than of suit, special reasons should be assigned in the decree’”. Their Lordships of the Privy Council then go on to say—“Their Lordships find that this resolution has been, to a great degree, acted upon in subsequent cases; indeed there have been subsequent cases in which interest has been given at a date prior to the institution of a suit, and their Lordships are far from saying that such cases have been wrongly decided”. In the particular case before us interest, was not allowed. That authority, in my judgment, is clearly an authority for the proposition that interest may be recovered on mesne profits. The principle and practice which had developed at the time of the resolution of the Judges referred to the case of a rule of law and, therefore, a case which comes quite clearly within the proviso to the Interest Act, a principle now recognised by the Civil Procedure Code.

I come now to the only authority which has been quoted from this court, the case of Inglis v. Sarju Prasad. Dawson Miller, C.J contented himself with agreeing with the judgment of Mullick, J., who, in dealing with the case in which a co-owner had appropriated the profits of joint property, said—“The question, however, is whether interest is allowable here for the period anterior to the suit”. And then said, quoting the Interest Act and referring to the case of Hurropersaud Roy v. Shamapersaud Roy, the case in which their Lordships of the Privy Council have referred to the resolution of the Judges—“It was clear that in their Lordships' opinion interest could be granted on equitable grounds though in the circumstances of the case before them they gave interest only from the date of the institution of the suit”. The judgment of Mullick, J. then proceeds on the basis of an analysis of the case as to whether it came within the proviso. This much must be said with respect to the learned Judge that their Lordships in the case of Hurropersaud Roy v. Shamapersaud Roy did not say that interest was payable or recoverable on equitable grounds. They held, as I have already pointed out, that interest was recoverable by reason of the resolution of the Judges that the rule of practice had developed into a rule of law. In addition to this it is to be noticed that the case which Mullick, J., was dealing with was a case of mesne profits. This brings me to the consideration of what are equitable principles for this purpose. There is no doubt that the expression ‘equity’ has been often used in a loose sense in Indian cases as has been the expression ‘equity, justice and good conscience’. Courts in this country are enjoined to apply the rule of equity, justice and good conscience where there is no rule of, law applicable to the facts but that is far from saying or meaning that each Judge may decide a case as he thinks fit and bound by no rules, but they must be rules and the decision of the case cannot depend upon caprice. Often the rule of equity, justice and good conscience means the rule of the Common Law of England or rules of equity, not as binding upon Indian Courts, but as a guidance in determining the matters which come before them in which there is no rule of Indian law. In this connection I propose to refer to the case of Maine and New Brunswick Electrical Power Company, Limited v. Hart. Lord Tomlin, who delivered the opinion of their Lordships of the Judicial Committee of the Privy Council, compared there Lord Tenter den's Interest Act of 1839 and the Interest at or the equivalent statutory provisions of New Brunswick (the Interest Act of India is in the same terms as I have pointed out) and stated that the language of the section which he had to construe was indistinguishable from that of section 28 of III and IV Wm. IV, Chapter 42: There, in a, case not dissimilar to the one which is before us, the plaintiff under certain covenants sought to recover what may be described as royalties against the defendants (who were assignees of certain conveyances) for horse power developed in an electrical station under the covenant exceeding 2,000. A claim was made for a substantial sum amounting to about 28,000 dollars together with interest. The trial court had rejected the claim for interest but the Appellate Court had allowed it, it appears on equitable principles. Lord Tomlin in dealing with this last point makes these observations:—“It remains to consider whether any rule of equity entitles the plaintiff to interest. In order to invoke a rule of equity it is necessary in the first instance to establish the existence of the state of circumstances which attracts the equitable jurisdiction, as, for example, the non-performance of a contract of which equity can give specific performance”. He then points out that this case did not attract the equitable principles or the equitable jurisdiction of the court; and then came to the conclusion that neither in law nor in equity was the plaintiff entitled to interest.

The case of Hamira Bibi v. Zubaida Bibi is an authority which has been relied upon for the proposition that interest is recoverable on equitable grounds. That was a case in which a Muhammadan widow had been allowed to take possession of her husband's estate in order to satisfy her dower debt with the income of it. There was no agreement express or implied that she should be entitled to claim anything other than the actual amount of dower. The claim for her dower included the claim for interest. There was a discussion at the Bar as to whether interest could be recovered by a Muhammadan under the Muhammadan law, the contention being that the Muhammadan law was against it. In deciding the question of interest Lord Parker makes this statement:—“Their Lordships think that she is so entitled, and obviously compensation for forbearance to enforce a money, payment is best calculated on the basis of an equitable rate of interest. This appears to be consistent with the chapter on ‘The Duties (Adab) of the Kazi’ in the principal works on Musulman law, which clearly shows that the rules of equity and equitable considerations commonly recognised in the Courts of Chancery in England are not foreign to the Musulman system, but are in fact often referred to and invoked in the adjudication of cases”. This, as I have said, has been sometimes relied upon by courts in India for the proposition that interest is recoverable under equitable principles. Lord Parker, who was one of the most eminent equity Judges in England in this century, no doubt uses the expression ‘equity’ in its true significance; but it is to be noted, that what the Judicial Committee awarded to the plaintiff in that case was compensation for forbearance to enforce a money payment for her management of the estate. There is nothing in the law to prevent compensation taking the form of interest, and, in my judgment, this case cannot be said to be an authority in law for the proposition that damages by way of interest are recoverable.

Having regard to these authorities, it remains in this case now to determine whether this is one of those cases, in which on equitable grounds interest may be recoverable. To sum up I would hold that, apart from one item, to which I shall presently refer, interest is not recoverable under the Interest Act. In my judgment it is not shown, apart from the item of which I have spoken, that it is one of those cases in which interest is now payable by law within the meaning of the proviso to the Interest Act; and clearly this being an action of law in which the equitable jurisdiction of the court is not attracted, it is not a case in which interest is recoverable on equitable principles. The claim made in the plaint was based on the lease of 1915 and it was for two sums of Rs. 2,000 for each half year and then an additional sum for excess royalty: Royalty due on the 30th September, 1926, was Rs. 2,000, on 31st March, 1927, Rs. 2,000, and then the excess commission for 1926 due on the 1st January, 1927, Rs. 749. From the lease itself it is shown that the Rs. 4,000 per annum is described as rent and is recoverable in any event and it appears is recoverable as a separate item. It is only when the quantity is exceeded that the excess commission becomes payable. In some leases of this description when once the minimum quantity has been exceeded then royalty is payable from, the first ton to the last and it becomes in that sense a matter of calculation and, therefore, uncertain. But the amount to be calculated in this case is only that sum in excess of the minimum quantity. The amount that, therefore, remains uncertain is the excess only. The rent or minimum quantity, therefore, clearly comes within the Interest Act. As this is a sum which is reserved by the lease, the plaintiff, in my judgment, is entitled to interest on it. For the reasons which I have already elaborately stated, she is not entitled to interest on the Rs. 749 in Appeal no. 88 of 1929 as not coming within the provisions of the law. The interest or refit recoverable on the minimum quantity of royalty will be at the rate of 12 per cent. per annum.

With this modification the appeals are dismissed. As the defendants have failed in substance, I think they should not get their costs. Costs should be awarded to the respondent.

Fazl Ali, J.:— I agree.

Decree modified.