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Case Number

Civil Revision No. 186 of 1945, from an order of Anand Behari Lal, Judge, Small Cause Court, Cawnpore, dated the 18th of November, 1944.

Attorney(S)

Mr. Ambiha Prasad, for the applicant.
Messrs Girdhari Lal Aganuala and Kartar Narain Aganuala, for the opposite parties.

Judges

Wali-ullah, J.

Acts

1, Article 75, of the Limitation Act and Article 75
provisions of column 3 of Article 75
section 25, Small Cause Courts Act,
Article 75 of the Limitation Act
Article 80 of the Limitation Act

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Smart Summary

Structured Summary of the Opinion (Wali-ullah, J.)

Factual and Procedural Background

This is an application in revision under section 25, Small Cause Courts Act by the plaintiff (the son of Radhe Shiam) against a decree of the Small Cause Court dismissing his suit as barred by limitation.

Relevant facts as stated in the opinion:

On 25 December 1930 Durga Ahir executed a promissory note for Rs. 200 in favour of Radhe Shiam, with interest at two rupees per cent per mensem (as described in the record).
On 24 September 1933 Durga executed a simple money bond for Rs. 200 in favour of Radhe Shiam. The bond recited that the earlier promissory note and interest amounted to a larger sum but, because of the executant's poverty, Radhe Shiam had agreed to accept the bond for Rs. 200 only in lieu of the earlier note.
The bond provided for payment by instalments of Rs. 20 each every year in the month of Jaith, and contained a provision that on default in any instalment the creditor could either sue for the entire amount (with interest at one rupee per cent per mensem) or sue only for the amount of the instalment in respect of which default occurred. It was also stipulated that the creditor had the right to sue for the total amount after the time for all instalments had expired (i.e., when the last instalment fell due).
No instalment was ever paid; the first default occurred in June 1934. The suit was instituted on 22 July 1944.
The suit below was contested on grounds including denial of execution, absence of consideration and that it was barred by limitation. The learned Judge below found the bond was duly executed and for consideration, held Article 75 of the Limitation Act applied, and dismissed the suit as time-barred (no order as to costs). The plaintiff then filed this revision application.

Legal Issues Presented

Whether the suit is governed by Article 75 of the Limitation Act (instalment bond where default makes whole amount due) or by Article 80 (or alternatively Article 74), i.e., which article of the Limitation Act governs the claim arising under the bond in suit.
Whether the specific stipulations in the bond — notably the clause allowing the creditor to sue for the entire amount either upon first default or alternatively at the time when the last instalment falls due — create a distinct "third option" that prevents time from running from the date of the first default and instead causes limitation to begin from the date fixed for payment of the last instalment.
Whether a contractual provision in the bond allowing the creditor to wait until the last instalment before suing may validly alter the statutory period or the statutory starting point of limitation, or whether such a covenant is void under section 23 of the Contract Act insofar as it purports to alter the statutory limitation regime.

Arguments of the Parties

Plaintiff-Applicant's Arguments

Contended that the court below erred in applying Article 75 of the Limitation Act; the correct provision to apply was Article 80, which would make the suit within time.
Argued that the bond itself conferred a "third option" on the creditor — namely, a right to sue for the whole amount only at the time fixed for the final instalment — and that under that special stipulation time should run from the date fixed for payment of the last instalment rather than from the date of first default.
Relied on the two-Judge Bench decision in Lalta Prasad v. Gajadhar Shukul to support the proposition that the creditor could waive the early right and wait for the full period before suing.

Defendant-Opposite Parties' Arguments

Relied on the Full Bench decision in Jawahar Lal v. Mathura Prasad and Munshi Lal v. Sagar Mal (which is based on the Full Bench ruling) to argue that Article 75 applies to an instalment bond which provides that default makes the whole due.
Also relied on the decision in Sukh Lal v. Bhoora in the course of arguments (the opinion indicates this case was considered by the court).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Jawahar Lal v. Mathura Prasad (Full Bench)	In an instalment bond which provides that on default the whole shall become due, Article 75 applies; time runs from the date of the first default (subject to waiver giving rise to a fresh default). If directly covered by Article 75, there is no escape from Article 75.	The court adopted and summarized the Full Bench principles as controlling. It held that these principles mean that where the bond makes the whole due on first default, Article 75 governs and limitation begins to run from that default.
Munshi Lal v. Sagar Mal	Applied the Full Bench ruling in Jawahar Lal v. Mathura Prasad to hold that Article 75 governs instalment bonds with a default clause making the whole due.	The learned Judge below relied on this case; the revising court accepted its relevance and treated it as consistent with the Full Bench rule applied to the facts.
Lalta Prasad v. Gajadhar Shukul (two-Judge Bench)	Observed that a covenant entitling the creditor to sue before expiry of the stipulated period was for the creditor's benefit and that the creditor could waive that option and wait for the full period (the decision concerned a different factual matrix — not a bond payable by instalments).	The court considered this authority but distinguished it: since that case did not involve a bond payable by instalments (it involved interest payable on specific dates with the principal payable after a fixed date), Article 75 did not apply there and the principle could not be applied to the present instalment-bond situation.
Sukh Lal v. Bhoora	The opinion does not state a specific rule from this case; it was cited in argument and considered by the court alongside other authorities.	The court noted the citation and that it had been considered, but the opinion does not record a specific doctrinal point from this case applied to the facts.

Court's Reasoning and Analysis

The court's analysis proceeds from a textual interpretation of the bond and application of controlling precedent:

Examination of Bond Terms: The court set out the material terms of the bond — instalments of Rs. 20 yearly, a provision permitting the creditor on default to realise either the entire amount (with specified interest) or only the instalment in default, and an additional stipulation that the creditor had the right to sue for the total amount after expiry of time for all instalments (i.e., when the last instalment fell due).
Crucial Legal Question: The court framed the crucial question as whether the bond, on proper interpretation, fell within the four corners of Article 75 — i.e., whether the stipulation that default makes the whole amount due brings the obligation within Article 75.
Application of Precedent: Relying on the Full Bench in Jawahar Lal v. Mathura Prasad (and Munshi Lal v. Sagar Mal which follows it), the court concluded that where an instalment bond provides that on default the creditor can sue for the entire amount, the whole amount becomes due for the purposes of Article 75. The Full Bench principle was summarized: such bonds are governed by Article 75; Articles 74 and 80 do not apply; and time begins to run from the date of the first default (unless waiver is proved, in which case time begins from the date of fresh default).
Interpretation of the "Third Option" Argument: The plaintiff's contention that the bond created a distinct third option (to sue only when the last instalment fell due, thereby delaying the running of limitation) was considered and rejected. The court reasoned that the clause permitting the creditor to sue at the time of the last instalment does not arrest the running of time where Article 75 otherwise applies; such a contractual stipulation attempting to alter the statutory period or the statutory starting point of limitation would be void under section 23 of the Contract Act.
Distinguishing Lalta Prasad: The court acknowledged observations in Lalta Prasad in favour of the plaintiff-applicant (that the creditor could waive an early right and wait), but distinguished that case because it did not involve a bond payable by instalments — instead it involved interest payable on particular dates and the principal payable after a fixed date — so Article 75 was inapplicable there.
Conclusion from Analysis: Given the express default clause in the bond making the whole amount due on first default, Article 75 governs and time began to run from the date of the first default (June 1934). Because the suit was filed on 22 July 1944, it was clearly barred by limitation under Article 75 (three years, or six years if registered, as summarized by the court), and the learned Judge below was correct to dismiss the suit as time-barred.

Holding and Implications

Holding:

The revision application is dismissed.

Implications and consequences as stated in the opinion:

The court affirmed that the suit based on the instalment bond is governed by Article 75 of the Limitation Act because the bond provided that on default the whole amount became due; therefore time began to run from the date of the first default (June 1934).
As a result, the suit instituted on 22 July 1944 was held to be barred by limitation and the dismissal by the court below was upheld.
The court rejected the plaintiff's contention that a contractual option to sue only at the time of the last instalment could validly postpone the statutory commencement or period of limitation, observing that parties cannot by contract alter the statutory period or the statutory starting point of limitation (such a covenant would be void under section 23 of the Contract Act).
The court made no order as to costs of the revision application, observing that the plaintiff-applicant “may have been misled by the language in which the bond was couched.”
No new legal precedent was announced; the court applied and followed existing Full Bench and other decisions in reaching its conclusion.

This summary is strictly confined to the matters and language set out in the provided opinion and does not add facts or inferences beyond the opinion's text.

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Bhagwati Prasad v. Chatrapal

Wali-ullah, J.:— This is an application in revision by the plaintiff under section 25, Small Cause Courts Act, against the decree passed by the learned Judge of the Small Cause Court dismissing his suit as barred by limitation.

It appears that one Durga Ahir executed a promissory note on the 25th of December, 1930, for Rs. 200 in favour of Radhe Shiam. It was stipulated that interest would be paid on the amount borrowed at the rate of two rupees per cent, per mensem. Subsequently on the 24th of September, 1933, Durga Shiv executed a simple money bond for Rs. 200 in favour of Radhe Shiam. It was recited in the bond that the amount due under the earlier promissor) note dated the 25th of December, 1930, together with interest came to a large amount but owing to the poverty of the executant of the bond (Durga Ahir) Radhe Shiam the creditor, had given up his claims to interest and had agreed to accept the bond for Rs. 200 only in lieu of the earlier promissory note. It was stipulated in the bond that the sum of Rs. 200 would be paid by instalments of Rs. 20 each every year in the month of Jaith. It was further provided in the bond that in case of default in the payment of any instalment the lender aforesaid shall have the right to realise, by filing a suit either the entire amount of the instalments in respect of which default be committed and those in respect of which there be no default till then with interest at one rupee per cent, per mensem or only the amount in respect of the instalment in payment of which default be committed. Further it was stipulated that the said Lala Saheb (the lender) will also have the right to realise by filing a suit in court the total amount due from the executant on account of principal and interest after the expiry of time for all the instalments, that is at the time when the last instalment fell due. The plaintiff is the son of Radhe Shiam who is dead. The defendants are the sons of Durga who is also dead. The suit was instituted on the 22nd of July, 1944.

It is common ground that no instalment was ever paid at any time by the executant; so the first default in payment occurred in June, 1934. The suit was contested substantially on the grounds that Durga had not executed the bond in suit; that it was not for consideration and that in any event the suit was barred by limitation. On a consideration of the evidence on the record the learned Judge of the court below found that the bond in suit was duly executed by Durga deceased and was for consideration. He also recorded a finding that the suit was governed by Article 75 of the Limitation Act and was consequently barred by time. The suit was accordingly dismissed but there was no order for costs.

Learned counsel for the plaintiff-applicant has strongly contended that the court below took an erroneous view of the law in applying Article 75 of the Limitation Act to the facts of the present case. His contention is that the proper article to apply was Article 80 of the Limitation Act and the suit was consequently within time. It is, however, obvious that Article 80 would have no application if the suit falls within the purview of Article 75 of the Act. The crucial question, therefore, is whether on a proper interpretation of the bond in suit the case comes within the four corners of Article 75. The material portions of the bond in suit have been set out above. It was provided in the bond that payments were to be made by instalments. It was further provided that if default was committed in the payment of any one instalment the creditor could realise the entire amount due under the bond with interest at one per cent, per mensem. In view of these stipulations in the bond it must be held that according to the provisions of the bond the whole amount became due at the time when the first default was committed. Learned counsel for the applicant, however, contends that it is clear from the provisions of the bond itself that a third option was given to the creditor, namely a right to sue for the entire amount due under the bond together with interest, at the time fixed for the payment of the last instalment. His contention is that owing to what he characterises as the third option given to the creditor time did not begin to run against the plaintiff-applicant from the date of the first default. He argues that according to the special stipulation—the so called third option—in the bond the plaintiff could institute the suit within three years of the time fixed for payment of the last instalment. If this contention is correct Article 75 has no application and the case would be governed by Article 80. This contention was raised on behalf of the plaintiff-applicant in the court below as well but it was repelled by the learned Judge. The learned Judge of the court below has relied upon the case of Munshi Lal v. Sagar Mal(1) which in its turn is based on a Full Bench ruling of this Court in Jawahar Lal v. Mathura Prasad(2). The learned Judge of the court below has found as a fact that there was no allegation or evidence to show that the creditor ever waived the benefit of the default clause in the bond. In regard to the stipulations contained in the bond the learned Judge was of opinion that on a proper interpretation of the document as a whole there was no third and distinct option given to the creditor as contended for by the plaintiff. Learned counsel for the plaintiff-applicant has also contended that the principle laid down by a Bench of two learned Judges of this Court in Lalta Prasad v. Gajadhar Shukul really governs the present case.

Learned counsel for the defendant-opposite parties has strongly relied on the Full Bench decision in Jawahar Lal v. Mathura Prasad (ubi supra) and the case of Munshi Lal v. Sagar Mal referred to above. During the course of arguments reference has also been made to the case of Sukh Lal v. Bhoora. I have considered these rulings with care and I have also carefully perused the stipulations contained in the bond in suit. It seems to me that the principles laid down by the Full Bench in the case of Jawahar Lal v. Mathura Prasad may be summed up as under:

In the case of an instalment bond, if it is provided that in the event of a default in payment of one instalment the creditor can bring his suit for realising the entire amount of the bond, the whole amount must be considered to become due within the meaning of column 1, Article 75, of the Limitation Act and Article 75 would be applicable to a suit based on such a bond. As Article 75 would cover such a case neither Article 74 nor Article 80 can have any application. By virtue of the provisions of column 3 of Article 75 time will begin to run from the date of the first default which makes the whole money due and if waiver is proved the date of a fresh default.

In delivering the judgment of the Full Bench in the case mentioned above at page 1043 Sir Shah Sulaiman, Chief Justice, is reported to have observed:— “If a case is directly covered by the language of column I of Article 75, namely, it is a case of a suit brought on a bond payable by instalments which bond provides that if default be made the whole shall be due and the suit is brought after the whole has become due, then in my opinion, there is no escape from Article 75.”

It follows, therefore, that time will begin to run from the date of default, no matter whether the creditor has been given the option of suing only for the instalment in respect of which a default has been committed. The essential thing, to my mind, therefore, is to find, on a proper interpretation of the language of the bond, whether the entire amount of the bond becomes due on the occurrence of the default in question. If it be found that the entire amount becomes due the claim for the recovery of the amount would become barred by time after three years or six years if the deed be a registered one. It may be that it is barred by time even before the date for payment of the last instalment arrives. The stipulation in the bond in suit in the present case to the effect that Lala Saheb will also have the right to realise by filing a suit in court the total amount due from the executant on account of principal and interest after the expiry of time for all the instalments, that is, at the time when the last instalment falls due, cannot arrest the running of time when once it has begun to run on account of the fact that Article 75 governs the case. Such a stipulation is nothing short of a contract or agreement between the parties for altering the statutory period of limitation, namely three years, as prescribed by Article 75. It is, however, quite clear that parties cannot by contract alter the statutory period of, limitation; nor can they alter the statutory ‘starting point’ of limitation. Such a covenant must be deemed to be void under section 23 of the Contract Act.

Learned counsel for the plaintiff-applicant has relied upon the observations of the learned Judges in the case of Latta Prasad v. Gajtidhar Shukul (ubi supra) at page 560 where it is observed that the covenant in the bond entitling the creditor to sue before the expiry of the stipulated period … was for the benefit of the creditor, and it was open to him to waive that option and to wait for the full period of four years before putting the bond into suit. These observations no doubt are in favour of the applicant but this case is clearly distinguishable. It was not a case of a bond payable by instalments inasmuch as a bond is payable by instalments only when the principal amount thereof is payable by instalments and not where the interest is payable on particular dates but the whole of the principal is payable after a fixed date. Article 75, therefore, could not have applied in that case. In view of what has gone before, it seems to me that the suit was clearly barred by time and the court below has taken a correct view of the law.

In my opinion, therefore, there is no force in this application and it is accordingly dismissed. As observed by the learned Judge of the court below the plaintiff applicant may have been misled by the language in which the bond was couched. I, therefore, make no orders as to costs of this application.

Bhagwati Prasad v. Chatrapal

Structured Summary of the Opinion (Wali-ullah, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Plaintiff-Applicant's Arguments

Defendant-Opposite Parties' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Bhagwati Prasad v. Chatrapal

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