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V. Ramasami Ayyangar And Another v. S.M.A.M Ar. Arunachalam Chettiar And Others
Structured Summary of the Opinion
Factual and Procedural Background
Four appeals arose out of separate suits filed in the Court of the Subordinate Judge of Devakottai; they raised the same questions and were heard together and decided by that Court in one judgment. The present summary deals first with Appeal No. 67 of 1939 (derived from Original Suit No. 193 of 1936, instituted on 2 December 1936), since its conclusions governed the decrees in the other three appeals.
The suit in O.S. No. 193 of 1936 was originally instituted by Arunachalam Chettiar to recover Rs. 46,538-6-9, alleged to be due in respect of a sum deposited on 8 July 1930 with the Chettiar firm of N. M. S. Rm. carrying on business at Laithieu (Laithieu) in French Cochin-China. Arunachalam died before the hearing; his executors were substituted as plaintiffs and, later, the receivers of his estate were also made plaintiffs and carried on the litigation.
The firm N. M. S. Rm had been formed at Pallathur by the first, second, third and fourth defendants and one Alagappa Chettiar (who died in 1931) for the purpose of carrying on business at Laithieu. The deposit was renewed on 19 March 1934 for a period of ninety days and became payable on 17 June 1934.
To carry on business in French Cochin-China the firm required registration; for this purpose the third defendant was declared to be the proprietor. On 12 March 1936 the third defendant was adjudicated a bankrupt in Saigon. In written statements: the first and second defendants denied being partners and averred the third defendant was sole proprietor; the third defendant admitted the deposit but pleaded the adjudication in bar. The fourth defendant did not appear and the case proceeded ex parte against him. The claim against the legal representatives of Alagappa was abandoned at the trial court.
On 24 August 1938 the first defendant filed an additional written statement alleging that he had paid $1,10,525 to the Official Assignee of Saigon—said to represent the firm's total liabilities under French law, calculated in dollars—and that the sum admittedly included what was due in respect of the deposit with interest calculated up to the date of the third defendant's adjudication. The Official Assignee had applied for the adjudication of the first and fourth defendants; that application was dismissed but, on appeal, the Court of Appeal at Saigon (judgment delivered 31 December 1937) held the first and fourth defendants were jointly and severally liable "for the debts left by Raman Chettiar as managing partner", while also holding there was no ground for the adjudication of the first and fourth defendants nor of the firm. As a result, the first defendant was called upon by the Official Assignee to pay the $1,10,525 and did so; he contended that this payment discharged him from all liability in respect of the deposit.
The Subordinate Judge made findings including (i) that the Laithieu business was carried on in partnership by the first, second, third and fourth defendants and Alagappa until Alagappa's death; (ii) that the business continued thereafter, though the Judge left undecided whether the second defendant was a continuing partner; (iii) that the firm's liability for the deposit had been discharged by the payment made by the first defendant to the Official Assignee at Saigon; and (iv) that the adjudication of the third defendant operated as a bar to suit against him.
Legal Issues Presented
- Whether the payment by the first defendant of $1,10,525 to the Official Assignee of Saigon operated as a discharge of the firm's liability in respect of the deposit.
- Whether the adjudication (bankruptcy) of the third defendant in Saigon barred the suit against him.
- Whether the plaintiffs (appellants) could maintain a suit against the other partners (or alleged partners) for the full amount when payment had been made to the Official Assignee in Saigon.
- Whether the appellants were entitled to interest on the principal sum from the date of the adjudication of the third defendant up to the date of the decree, even if the payment made to the Official Assignee covered the deposit up to the date of adjudication.
Arguments of the Parties
Appellants' Arguments
- Conceded that the contract for the deposit is governed by French law and that the adjudication of the third defendant in Saigon takes away the right to sue him personally.
- Contended they are nevertheless entitled to maintain the suit against the other partners because the first defendant did not pay the $1,10,525 to a person who, under Indian law, could be regarded as the authorised agent of the depositor; therefore, in law, there had been no repayment of the deposit.
- Sought a decree against the solvent partners for the full amount with interest to the date of suit, calculated in rupees at the rate of exchange ruling on the date the deposit fell due.
- Further contended that even if the payment by the first defendant to the Official Assignee covered deposit and interest up to the date of adjudication, they were nevertheless entitled to interest on the principal from the date of adjudication up to decree.
Respondents' / First Defendant's Position
- The first defendant pleaded that he had paid $1,10,525 to the Official Assignee of Saigon, representing total liabilities of the firm under French law, and that this payment included what was due in respect of the deposit (with interest calculated up to the date of the third defendant's adjudication).
- Relied on the Saigon Court of Appeal judgment (31 December 1937) which held the first and fourth defendants jointly and severally liable for debts left by the managing partner but did not hold there was ground for their adjudication; as a result the Official Assignee could enforce payment, which compelled the first defendant to pay.
- On this basis the first defendant asserted that the payment operated to discharge him from liability for the deposit and related interest beyond the adjudication date.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Murugesa Chetti v. Annamalai Chetti (1900) 10 M.L.J. 39 : I.L.R. 23 Mad. 458 | Authority bearing directly on the effect of foreign adjudication / bankruptcy on suits in this Court (as cited). | The opinion notes this Court has decisions directly bearing on the question that the adjudication in Saigon affects the right to sue the bankrupt (used as supporting precedent for treating the adjudication as a bar to suit). |
| Narayanan Chettiar v. Veerappa Chettiar (1916) 31 M.L.J. 386 : I.L.R. 40 Mad. 581 | Authority bearing directly on the effect of foreign adjudication / bankruptcy on suits in this Court (as cited). | Referred to as a direct decision of this Court relevant to the adjudication issue and relied upon in the reasoning that adjudication in Saigon removed right to sue the bankrupt. |
| Swiss Bank Corporation v. Boehmische Industrial Bank (1923) 1 K.B. 673 | Principle that whether a foreign payment discharges a debt depends on where the debt is "situate" or recoverable; payment under a foreign order may discharge liability if debt is recoverable in that foreign jurisdiction, but payment in one jurisdiction does not necessarily discharge a debt recoverable in another. | The Court relied on the passage (Bankes, L.J., and Atkin, L.J.) to support the proposition that the debt being recoverable in Laithieu and payment having been compelled by a French court meant the appellants could not require further payment here; the foreign payment was treated as a discharge. |
| Mount Albert Borough Council v. Australasian Temperance and General Mutual Life Assurance Society Ltd. (1928) A.C. 224 | Statement by Lord Wright on the "proper law of the contract" and the approach to choice of law: Court determines the law governing obligations by reference to parties' intention, terms, situation and surrounding facts. | The Court applied this principle in concluding that it was admitted (and reasonable on the facts) that French law governed the contract between the depositor's representatives and the firm; thus French law principles and the Saigon decisions control the rights and liabilities. |
| Decision of the Court of Appeal at Saigon (Judgment delivered 31 December 1937) | Determination under French law concerning liability of first and fourth defendants and extent of liabilities (including interest liability up to the date of adjudication). | Used as the controlling statement of French law: the Saigon Court of Appeal held the first and fourth defendants jointly and severally liable "for the debts left by Raman Chettiar as managing partner" but that there was no ground for their adjudication; it also held the first defendant liable for interest only up to the date of adjudication. The present Court accepted that decision as correctly stating French law until (and unless) it is reversed. |
Court's Reasoning and Analysis
The Court proceeded on the admitted premise that the contract for the deposit is governed by French law because the deposit was made in Saigon in dollars and was repayable there in dollars. On that basis the Court applied the principles of private international law and the effect of foreign adjudications and payments.
The Court reasoned as follows:
- Choice of law: It is admitted (and the Court considered it reasonable) that French law governs the contractual relations between the depositor's representatives and the N. M. S. Rm firm. Lord Wright's statement (Mount Albert) on determining the proper law was cited to support applying French law to contractual obligations.
- Effect of foreign payment: Quoting Swiss Bank Corporation, the Court emphasised the territorial character of a debt: if the debt is properly recoverable in the foreign jurisdiction (Laithieu/Saigon), payment there under a foreign order discharges the debt so that the debtor should not be compelled to pay again in another forum. The proposition from Atkin, L.J., about execution and discharge was used to show that payment made where the debt is situate can operate as discharge.
- Application to the facts: Here the debt was recoverable in Laithieu, and a French Court of competent jurisdiction (the Saigon proceedings) had compelled the first defendant to make payment to the Official Assignee. Given these facts and that the rights are governed by French law, the appellants could not ask the Indian Court to make the first defendant pay the same debt twice over.
- Agent question avoided: The Court stated that it was not necessary to decide whether the Official Assignee could be regarded as the authorised agent of the depositor for the receipt of payment under Indian law—the question did not arise once the payment had been made under the French proceedings and the debt was governed and recoverable under French law.
- Interest claim: The appellants' claim for interest from the date of adjudication was addressed by reference to the Saigon Court of Appeal, which had held the first defendant liable for interest only up to the date of adjudication. Because French law governs and the Saigon Court of Appeal is the competent French appellate court, its decision on the scope of liability for interest must be accepted unless reversed; no sufficient material was presented to show that the Saigon decision was erroneous.
- Conclusion on discharge and interest: The Court concurred with the Subordinate Judge that the payment made by the first defendant to the Official Assignee at Saigon operated as a payment in full discharge (including with respect to interest beyond the adjudication date, consistent with Saigon appellate determination).
The Court therefore found no basis to allow the appellants' claims against the solvent partners for the full amount or for interest after the adjudication date.
Holding and Implications
Holding: The primary appeal (Appeal No. 67 of 1939) failed and was dismissed with costs in favour of the contesting respondents. The Court held that the payment of $1,10,525 by the first defendant to the Official Assignee at Saigon operated as a payment in discharge of the firm's liability in respect of the deposit and that the adjudication of the third defendant barred suit against him. The Court also accepted the Saigon Court of Appeal's limitation of interest liability to the date of the adjudication.
Consequences / Implications:
- Direct effect on the parties: The appellants cannot recover the deposit or interest beyond the adjudication date from the first defendant or the other defendants on the basis asserted; the payment in Saigon is treated as a discharge under the governing French law and applicable private international law principles.
- Other appeals: The three companion appeals raising the same questions were also dismissed with costs; memoranda of cross-objections as to costs filed by the first and second respondents were dismissed with costs (one set), and similar disposals were made in the other appeals.
- Specific directions in Appeal No. 106 of 1939: The sons of Alagappa Chetti had been wrongly impleaded (the claim against their father had been given up in the lower Court) and were awarded separate costs fixed at Rs. 100.
- No new precedent beyond application of cited authorities: The Court accepted existing authorities and the Saigon appellate decision as stating the relevant French law; the opinion does not purport to lay down a new general rule beyond applying those decisions to the facts. (The opinion states the Saigon Court of Appeal's decision must be accepted until reversed and that no attempt was made to show it was erroneous.)
Disposition summary: The appeals were dismissed with costs; memoranda of cross‑objections dismissed with costs; other procedural cost directions as indicated above were made.
1. These four appeals arise out of separate suits filed in the Court of the Subordinate Judge of Devakottai. They all raise the same questions; they were heard together and were decided by the Subordinate Judge in one judgment. It will be convenient to adopt the same course here; but we propose to deal with Appeal No. 67 of 1939, in the first instance as our conclusions in that case will govern the decrees to be passed in the other three appeals.
2. Appeal No. 67 of 1939, arises out of O.S. No. 193 of 1936, which was instituted on the 2nd December, 1936. The suit was brought by one Arunachalam Chettiar, who died before the hearing. In consequence the executors of his will were substituted as the plaintiffs, but at a later stage the present appellants, the receivers of Arunachalam's estate, were also made plaintiffs, since when they have carried on the litigation. The 'suit was filed to recover Rs. 46,538-6-9, alleged to be due in respect of a sum deposited on the 8th July, 1930, with the Chettiar firm of N. M. S. Rm. carrying on business at Laijhieu in French Cochin-China. This firm had been formed at Pallathur in this Presidency by the first, second, third and fourth defendants (first, second, third and fourth respondents), and one Alagappa Chettiar, who died in 1931. It was formed for the purpose of carrying on business at Laithieu. On the 19th March, 1934, the deposit was renewed. The period was one of ninety days and the money became payable to the depositor on the 17th June, 1934.
3. In order to carry on business in French Cochin-China, registration of the firm was necessary, and for this purpose the third defendant was declared to be the proprietor. On the 12th March, 1936, the third defendant was adjudicated a bankrupt in Saigon. In their written statement the first and second defendants denied that they were partners in the firm and averred that the third defendant was the sole proprietor of the business. The third defendant admitted that the, deposit had been made, but pleaded his adjudication in bar. The fourth defendant did not appear and the case proceeded against him ex parte. The case against the legal representatives of Alagappa was abandoned in the trial Court.
4. On the 24th August, 1938, the first defendant filed an additional written statement pleading that he had paid $1,10,525 to * the Official Assignee of Saigon. This sum represented the total liabilities of the firm under French law, calculated in dollars. Admittedly the amount included what was due in respect of the deposit in suit, with interest calculated up to the date of the adjudication of the third defendant. The Official Assignee of Saigon had moved the Court for the adjudication of the first and fourth defendants. This application was filed after the adjudication of the third defendant. The Bankruptcy Court dismissed the application, but on appeal, the Court of Appeal at Saigon held that the first and fourth defendants were jointly and severally liable "for the debts left by Raman Chettiar as managing partner". At the same time the Court of Appeal was of the opinion that there was no ground for the adjudication of the first and fourth defendants, nor of the firm. As a result" of this judgment, which was delivered on the 31st December, 1937, the first defendant was called upon by the Official Assignee of Saigon to pay the $ 1,10,525 and he took out process to enforce the demand. Consequently the first defendant was compelled to make the payment. It is his case that the payment operated to discharge him from all liability in respect of the deposit.
5. The Subordinate Judge considered (i) that the business carried on at Laithieu in the firm name of N. M. S. Rm. did not belong to the third defendant alone, but was carried on by the first, second, third and fourth defendants and Alagappa in partnership until Alagappa's death; (if) that after Alagappa's death, the business was certainly continued, but he left undecided the question whether the second defendant could be regarded as one of the continuing partners; (in) that the firm's liability in respect of the deposit had been discharged by the payment by the first defendant of the $1,10,525 to the Official Assignee at Saigon; and (iv) that the adjudication of the third defendant in itself operated as a bar to the suit against him.
6. It is conceded on behalf of the appellants that the contract in respect of the deposit is governed by French law, the deposit having been made in Saigon in dollars and the money being repayable there in dollars. It is also a common ground that the adjudication of the third defendant in Saigon took away the right of the depositor's representatives to institute a,suit against him. There are, in fact, decisions of this Court directly bearing on the question Murugesa Chetti v. Annamalai Chetti (1900) 10 M.L.J. 39 : I.L.R 23 Mad. 458 and Narayanan Chettiar v. Veerappa Chettiar (1916) 31 M.L.J. 386 : I.L.R. 40 Mad. 581. The appellants say, however, that they are entitled to maintain the suit against the other partners of the firm as the first defendant did not pay, the $1,10,525 to a person who under Indian law could be regarded as the authorised agent of the depositor and therefore there had in law been no repayment of the deposit. In these circumstances they contend that they are entitled to a decree against the solvent partners for the full amount with interest to date of suit, calculated in rupees at the rate of exchange ruling on the date when the deposit fell due. They advance the further contention that even if the money paid by the first defendant to the Official Assignee of Saigon can be regarded as covering the deposit and interest thereon up to the date of the adjudication of the third defendant, they are entitled to a decree for interest on the principal sum from the date of the adjudication up to the date of the decree for which they pray.
7. The rights and liabilities of the parties must in all respects be decided according to French law and if the payment made by the first defendant to the Official Assignee of Saigon operates as a discharge of the liability in respect of the deposit, the suit must fail. In Swiss Bank Corporation v. Boehmische Industrial Bank (1923) 1 K.B. 673, Bankes, L.J., said:
If the debt is situate,' or in other words if it is properly recoverable, in this country, then it would be discharged by payment under an order of our Courts and the garnishee need have no fear of being required to pay it a second time; but if the debt is situate, that is properly recoverable, in a foreign country, then it is not discharged by payment in this country under an order of the Courts of this country, and the debtor may be called upon to pay It over again in the foreign country.
In the same case, Atkin, L.J., said:
The plaintiffs having got judgment by an order of the Court now seek to get execution by attaching a debt which to my mind clearly 'arises' and "is situate", within the territorial limits of the jurisdiction of the English Courts, if there is any difference between the two expressions. Those Courts have statutory power to order execution to issue against such property, and by our law, and by the principles of private international law, such process when executed has the effect of discharging the person who owes the debt thus attached from further liability to pay it.
In delivering the judgment of the Privy Council in Mount Albert Borough Council v. Australasian Temperance and General Mutual Life Assurance Society Limited (1928) A.C. 224, Lord Wright observed:
The proper law of the contract means that law which the English or other Court is to apply in determining the obligations under the contract. English law in deciding these matters has refused to treat as conclusive, rigid or arbitrary, criteria such as lex loci contract us or lex lorn solutionis, and has treated the matter as depending on the intention of the parties to be ascertained in each case on a consideration of the terms of the contract, the situation of the parties, and generally on all the surrounding facts. It may be that the parties have in terms in their agreement expressed what law they intend to govern, and in that case prima facie their intention will be effectuated by the Court. But in most cases they do not do so. The parties may not have thought of the matter at all. Then the Court has to impute an intention, or to determine for the parties what is the proper law which, as just and reasonable persons they ought or would have intended if they had thought about the question when they made the contract.
In the present case it is admitted that the contract between the depositor's representatives and the N. M. S. Em. firm is governed by French law. On the facts, any other conclusion would not be reasonable. The debt being recoverable in Laithieu and a French Court of competent jurisdiction having compelled the first defendant to make payment, the appellants cannot ask this Court to make him pay twice over. It is not a question whether the Official Assignee can be regarded as the authorised agent of the depositor to receive payment. This question does not arise. We concur in the finding of the Subordinate Judge that the payment must be regarded as a payment in discharge.
8. The plea that the first defendant is liable for interest on the principal sum from the date of the adjudication of the third defendant is on no firmer basis. The Court of Appeal in Saigon held that the first defendant is only liable for interest up to that date, and the rights and liabilities of the parties being governed by French law, this decision must be accepted. It has been stated at the Bar that an appeal was filed from the decision of the Court of Appeal in Saigon to the cour de cassation in Paris, but it is not known whether steps are being taken to prosecute it. In any event until it has been reversed, the decision of the Court of Appeal in Saigon must be accepted as stating the French law correctly. It may be mentioned that no attempt has been made to show that the decision of that Court is in any way erroneous. It follows that we concur also in the decision of the Subordinate Judge that the payment made by the first defendant to the Official Assignee at Saigon must be deemed to operate as a payment in full discharge. The appeal fails and is dismissed with costs in favour of the contesting respondents.
9. Memoranda of cross-objections regarding the order for costs passed by the Subordinate Judge have been filed by the first and second respondents. The Subordinate Judge ordered the first and fourth defendants to pay the plaintiffs the court-fee on the plaint and half the pleader's fee and also directed the defendants to bear their own costs. It is admitted that if the deposit had not been repaid, a suit for its recovery would lie in the Subordinate Court, although the decision would be governed by French law. When the suit was instituted, the first defendant had not paid the $1,10,525 to the" Official Assignee of Saigon and therefore there was reason for the institution of the suit. In these circumstances we consider that the order with regard to costs passed by the Subordinate Judge was a proper one. The memoranda of cross-objections will be dismissed with costs, one set.
10. As no different considerations arise in the other three appeals, they must also be dismissed with costs and the memoranda of cross-objections which have been filed there will likewise be dismissed with costs (one set in each appeal).
11. In Appeal No. 106 of 1939, the sons of Alagappa Chetti have been wrongly impleaded as parties because the claim against their father was given up in the lower Court. They will be given separate costs which we fix at Us. 100.
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