Chegamull Suganmull Sowcar v. Govindaswami Chetty

1. Several questions of law have been argued by Mr. Rangaswami Ayyangar, but I do not think that I need on that account reserve judgment. The case now comes up before me after report by the Commissioner, who has been appointed to enquire into certain matters, but, I understand, that for the purpose of this judgment, it is unnecessary either to look into that report or to go through the pleadings. The facts, as stated from the Bar, may be briefly summarized. The plaintiff lent moneys to a firm known as Govindaswami & Co. It originally consisted of two divided brothers, Govindaswami and Chengayya. The former had sons, who do not matter for the present, excepting one of them, Lingayya by name. During the continuance of the firm, Chengayya died in 1916; his widow Chinna, Kannammal took her husband's place in the partnership and the business was continued in the same manner as before. She died on 20th April 1920, having ten days before her death adopted Lingayya as her son. The business of the firm was continued, it having been taken for granted that Lingayya represented Chengayya's estate in the partnership.

2. During the lifetime of Chengayya, the partnership executed two promissory notes in favour of the plaintiff. They were both dated 8th June 1914, the first being for Rs. 5,000 and the second for Rs. 2,500. Title-deeds relating to certain properties belonging to Chengayya were deposited with the plaintiff by way of creating an equitable mortgage. At the same time, the plaintiff took from the firm two memoranda of deposit of title deeds signed by the partners. On 19th December 1920, that is, after the death... of Chinna Kannammal, fresh promissory. notes were taken by the plaintiff for certain amounts. The sums due under the original two notes were included in them and, as a matter of fact, the fresh notes were intended to supersede the orginal two notes of 1914. In 1921, another new promissory note came into existence,...which was intended to serve as a renewal of one of the notes of 1920. The promissory notes of 1920 and 1921 were signed by Govindaswami and Lingayya, the latter representing the estate of Chengayya.

3. The suit was brought on the note of 1920 which was not superseded and on the note of 1921, and the plaintiff claimed that a sum of Rs. 60,000 odd was due to him.

4. After the death of Chengayya's widow his daughters, defendants 4 and 5, filed a suit in this Court, impeaching the adoption of Lingayya. The suit was filed in February 1921, and on 31st August 1922;: a decree was made setting aside this adoption. The result of the decree is to vest the property of Chengayya in his daughters, defendants 4 and 5.

5. The case has been argued before me on the footing that in the circumstances that have happened Chengayya's estate is not liable under the notes of 1920 and 1921. The plaintiff says that he has been driven to fall back upon his original cause of action and seek to enforce his rights under the notes of 1914. The question to be decided is: Is there any impediment in the way of the plaintiff obtaining a decree on 'the original notes?

6. Mr. Rangaswami Aiyangar, for defendants 4 and 5, contends, firstly, that Section 41 Contract Act, applies and that the plain-'tiff cannot recover the amount evidenced by the earlier promissory notes. Section 41 runs thus:

When a promisee accepts the performance of the promise from a third 'person, he cannot afterwards enforce it against the promisor.

7. This contention is obviously untenable. In the first place, Lingayya cannot be regarded as a third person" within the meaning of this section. The plaintiff accepted the. signature of Lingayya, not on the footing that he was a stranger, but that he represented the estate of Chengayya. That was a mutual mistake, which vitiated the transaction and which frustrated the intention of the parties. 'There is another answer to this contention. The section does not say that the original obligation comes to an end, merely because the promisee accepts from a stranger a fresh promise in the place of the old one. Much more than a bare promise is necessary under the section. What it contemplates is actual performance of the original promise. According to the section, performance by a stranger, accepted by the promisee, produces the result of discharging the promisor, although the latter has neither authorized nor ratified the act of the third party. There is not much authority on the point, but the view I have taken receives support from the opinions expressed in the two standard works on the subject (Shepherd and Cunningham's Commentaries and Pollock and Mulla's Contract Act).

8. The law as enacted in Section 41 has been adopted from the Roman law and is a departure from the early English law on the point. In England a payment by a third party without the authority of the debtor was held inoperative to discharge the latter. In Cook v. Lister [1863] 13 C.B.N.S. 543, Willes, J., assailed this doctrine and the Indian rule was presumably based on the view of that learned Judge. Modern English opinion seems, however, to agree with the Indian law as contained in Section 41. (Leake on Contracts, Edn. 7, 685, Hirachand v. Temple [1911] 2 K.B. 330. This is only of historical interest, but my point is that what is required by the section is actual performance and not a substituted promise. Referring to this section their Lordships of the Judicial Committee observe thus' in Harchandi Lal v. Sheoraj A.I.R. 1916 P.C. 68:

It (S. 41) applies only where a contract has been in fact performed by some parson other than the person bound thereby.

9. In the case before me, there has been no payment under the promissory notes of 1920 and 1921, and it cannot therefore be said that the original obligation has become extinguished.

10. It has next been contended for defendants 4 and 5 that there has been a novation under Section 62, Contract Act, and that the promissory notes of 1914 cannot therefore be enforced. The argument is put in this way: By the plaintiff taking fresh notes in 1920 from Govindaswami, the surviving partner, he indicated an intention to waive his rights against the original partners of the firm. The notes of 1914 were executed by both the partners and it is argued that a new contract was substituted in 1920, by which the right against the original contractors was relinquished and the liability of the surviving partner alone accepted in its place. Assuming for a moment that a novation under Section 62 can be made without every party to the original contract being a party to the new contract, I fail to see how it can possibly be suggested that the plaintiff intended to abandon his claim against the estate of Chengayya. Par from doing this, he got Lingayya to join in the execution of the notes of 1920. It is common ground that this man's signature was taken, because it was believed that he was the validly adopted son of Chengayya and represented the latter's estate. The argument based, therefore, on Section 62 must be rejected.

11. The question therefore resolves itself into this: The promissory notes of 1920 having failed to answer their purpose, in so far as the estate of Chengayya is concerned, can the plaintiff not fall back upon his original cause of action? There is nothing in my opinion which prevents the plaintiff from exercising 'his right under the earlier notes. The liability of Chengayya's estate, as I have shown, has not become extinguished. Why then, should the plaintiff be deprived of his right to recover the money due from that estate? This case resembles Harchandi Lal v. Sheoraj A.I.R. 1916 P.C. 68, to which I have already referred, which is a direct authority on the point. As the intention of the parties was entirely frustrated by the fact that the notes of 1920 are held not binding on the heirs of Chengayya it follows that the rights of the plaintiff under the original notes are subsisting. My decision on this point is against the defendants.

12. The next question is: Is the claim on the notes of 1914 barred by limitation? The following dates are material. The promissory notes, as I have said, were executed in 1914. The suit was filed in 1922. The plaintiffs rely upon two endorsements of payment dated 6th June 1917 and 31st March 1920. Chinna Kannammal signed the first endorsement; Govindaswami alone signed the second. Mr. Rangaswami Aiyangar contends generally, that a Hindu widow is not competent to keep the debt of her husband alive. He relies upon Soniram v. Kannaiyalal [1913] 35 All. 237 for this position. Their Lordships held on the facts of that case that a Hindu female's acknowledgment did not keep alive the mortgagor's right to redeem. It is contended that this decision establishes that a Hindu widow can in no circumstances make an acknowledgment so as to attract the provisions of Section 19. It is unnecessary to decide whether this case can be treated as an authority for the proposition so broadly stated. Probably, the case does not go so far and the words at the top of p. 235.

who could be deemed to have admitted for the benefit of mortgagee's estate lend some support to this view. As Mayne points out in his Hindu Law, the propriety of the widow's act must be tested by those principles by which her dealings with her husband's property are ordinarily judged: Mayne, Edn. 9, para 633.

13. It is unnecessary to pursue this point further. Soniram v. Kannaiyalal [1913] 35 All. 237, is a case dealing with acknowledgment under Section 19; the present case deals with payment under. Section 20. Their Lordships construed the words some person through whom he derives title or liability occurring in Section 19 There are no such words in Section 20, and this makes all the difference. I do not therefore regard the Privy Council case as an authority for the proposition that a widow cannot keep a debt of her husband alive by making payments under Section 20. If the widow acts prudently, why should her act not be binding on the reversioner? Is it more advantageous that she should drive the creditor to a suit and waste the estate by incurring costs or allowing her husband's property to be attached and sold?

14. There is yet another argument open to the plaintiff. The learned Judge who heard the case gave a finding, when he passed the preliminary decree, that the partnership business continued by Chinnakannammal after her husband's death was beneficial to the estate and that the reversioners are not entitled to repudiate liability. If the continuing of the business is a proper act, how can one hold that it is improper on her part to make a payment in the ordinary course, which may have the effect of keeping a debt alive? The learned vakil for the defendants tried to prove by oral evidence that it would have been more prudent for the widow to have paid the debt in full than to have made a part payment. This attempt hopelessly failed. Granting that the continuing of the business is a beneficial act I fail to see why it should be held that it is the duty of the widow to diminish her resources by withdrawing moneys from a profitable venture and paying a creditor who is willing to wait. Then remains the question: Does not the endorsement of Govindaswami stand on a footing different from her own endorsement? I think not. These two were partners on the date the second endorsement was made. It has been held that an acknowledgment or a payment by a partner without special authority is binding upon the other partner: P. Veeranna v. Veerabhadraswami [1918] 41 Mad. 427. Under Section 21, a partner ipso facto has no authority to acknowledge or to make a part payment; but if he has general authority to contract; debts or make payments he has implied authority to keep the debt alive and it is unnecessary to make out special authority. This is the effect of the case to which I have referred. I therefore hold that the plaintiff's claim based on the notes of 1914 is not barred by limitation.

15. There remains only one further point. Was a valid equitable mortgage created in favour of the plaintiff? The memoranda to which I have referred contain the following clauses:

With reference to the promissory note * * this day executed * * we hereby deposit with you the title-deeds * * * with intent to create and hereby create an equitable mortgage.

16. These memoranda require registration and are inadmissible in evidence and the transaction is not valid as a mortgage, (see my recent judgments in Ramakrishna Doss v. Kesavulu Chetty A.I.R. 1927 Mad. 1145 and in Alwar Chetty v. Jagannadha Aiyar 54 M.L.J. 109.

17. In the result I pass a decree against defendants 4 and 5 against the assets of Chengayya in their hands, for Rs. 11,682-5-0 with interest thereon at 6 per cent. per annum. So far as defendants 1 and 2 are concerned, the correct-ness of the commissioner's finding is not attacked and I pass a decree against them for Rs. 69,121-5-0 with interest at 6 per cent from this date.

18. There is no other matter, I am told, which I need consider on the commissioner's report. Now I must deal with the costs of the suit. As between the plaintiff and defendants 4 and 5, I make no order as to costs. Though the plaintiff has failed to a large extent, the contest before me mainly has been in regard to the amount for which I have passed a decree. On the whole, I think, the best order is the one I have made. The plaintiff shall get his casts of the suit as well as the reference, from defendants 1 and 2. Mr. Pattabhirama Aiyangar, the guardian of defendants 4 and 5, may pay himself out of the estate in his hands Rs. 1,200 which I fix as his costs of the suit and reference. He may pay Mr. Ramanujachariar, the original guardian ad litem, Rs. 150. This is in addition to Rs. 100 already paid to him. I am asked to fix the costs of the commissioner, Mr. Seshagiri Rao at Rs. 900 and I accordingly do so. A half of this sum shall be paid by the plaintiff and a half by defendants 4 and 5. On the latter's behalf, Mr. Pattabhirama Aiyangar may make the payment from and out of the estate.