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Peria Negamam, Sri L... v. Varalakshmi Ammal
Factual and Procedural Background
The plaintiff brought a suit seeking an account from the defendant Bank in respect of 20 Bank shares (value Rs. 500) standing in the name of the plaintiff's husband, A. Gopalakrishna Chettiar, and for a decree for payment of any balance found due to her after crediting dividends and debiting any liabilities of the husband connected with those shares.
The Bank denied the claim and pleaded, inter alia, that the suit was barred by limitation. The suit was decreed in the plaintiff's favour by both lower courts, which held it to be within time. The Bank appealed to the present Court, ultimately relying on Articles 62 and 89 of the Indian Limitation Act in this Court.
Agreed and undisputed factual chronology in the opinion:
- 2 January 1931: The plaintiff's husband applied to the Bank for a loan of Rs. 200; loan was accepted.
- 3 January 1931 (next day): The husband obtained the loan, executed a promissory note for Rs. 200, and lodged 20 Bank shares with the Bank as security (Rs. 25 paid on each share as security).
- 19 August 1931: The husband died.
- 2 June 1933: The Bank sold the shares for Rs. 530 (inclusive of dividend), adjusted the debt due to the Bank, and retained a balance of Rs. 264 in a suspense account for payment to the husband or his heirs. No notice was given to the plaintiff or other claimant before the sale; a notice in the husband's name dated 17 March 1933 was of no use.
- 24 April 1935: The plaintiff served the Bank with a notice asking for particulars of the shares and dividends (no mention of the loan or deposit of shares).
- 30 April 1935: The Bank replied, agreeing to pay on production of a succession certificate and informing the plaintiff that the shares had been sold on 2 June 1933 under Rule 85 of the Bank Rules.
- 1 October 1936: The plaintiff instituted the suit.
Legal Issues Presented
- Whether the plaintiff's suit for an account in respect of the shares is barred by limitation under Article 62 of the Indian Limitation Act (i.e., whether the claim is in the nature of money had and received).
- Alternatively, whether the suit is barred by limitation under Article 89 of the Indian Limitation Act on the basis that the relationship between the Bank and the plaintiff's husband (with reference to the shares) was that of principal and agent, and thus governed by the period applicable to that relationship.
- Whether, if not covered by Arts. 62 or 89, the suit for accounts is governed by Article 120 of the Indian Limitation Act.
Arguments of the Parties
Appellant's (Defendant Bank's) Arguments
- The Bank argued that the suit was barred by limitation and ultimately relied on Articles 62 and 89 of the Limitation Act in this Court.
- Under Article 62: The Bank contended that the present claim should be regarded as analogous to an action for money had and received (English law concept) and thus governed by the three-year period under Art. 62.
- Alternatively, under Article 89: The Bank argued that their relationship with the plaintiff's husband, with respect to the shares in custody, was that of principal and agent; therefore, the limitation period applicable to such fiduciary or agency relationships would apply and, because that relationship terminated on the husband's death, the suit (brought long after three years from termination) would be barred.
- Note: The Bank did not specify the Limitation Act article in its written statement as required by the forms of general defences, and counsel vacillated among articles in earlier courts before finally relying on Arts. 62 and 89 in this Court.
Respondent's (Plaintiff's) Arguments
The opinion does not contain a detailed account of the plaintiff's legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Tarachand v. The Madras and Southern Mahratia Railway Co. Ltd. | Cited in support of treating a claim as falling under Art. 62 (three-year rule for money had and received). | The Court observed that in that case the Railway defended on the basis of Arts. 30/31 but the court there held Arts. 30/31 did not apply and accepted that Art. 62 governed. However, the present Court considered that decision of limited value: it did not discuss whether the defendant's receipt was on its own account or for the plaintiff's use and turned on the Indian Railways Act s.56 directions, so it was not applicable to the present facts. |
| Bank of Bombay v. Fazulbhoy Ebrahim | Discussed with respect to which Article of the Limitation Act (Art. 48 was held applicable; alternatively Art. 62). | The Court noted that in that case the judges held Art. 48 applied, and said that if Art. 48 did not apply the matter might be governed by Art. 62; in any event the suit there was within time. The present Court distinguished that case because the present suit was not for recovery of shares in specie. |
| The Secretary of State v. Guru Proshad Dhur | Cited for the proposition that a suit for residue of sale proceeds under the Revenue Sale Law was governed by Art. 120 rather than Art. 62. | The Court relied on this Full Bench decision to illustrate that suits for sale proceeds or accounts may be governed by Art. 120; it used the reasoning analogously to support that a suit for accounts (when not covered by other Articles) should be governed by Art. 120. |
Court's Reasoning and Analysis
The Court proceeded in a step-by-step legal analysis focusing on the nature of the relationship between the plaintiff's husband and the Bank, and on the legal character of the claim:
- Procedural requirement: The Court emphasised that a defendant should, where possible, specify the article(s) of the Limitation Act relied upon in the written statement. Failure to do so can unfairly prejudice the plaintiff and permit surprise at final arguments; the practice of withholding the specific article is deprecated.
- Characterisation of the claim under Article 62: Art. 62 applies where the defendant has received money which in equity and justice belongs to the plaintiff and where the receipt is regarded in law as a receipt to the plaintiff's use. The Article does not apply where the receipt by the defendant is on his own account and not on behalf of the plaintiff.
- Assessment of the facts: The husband went to the Bank for a loan; the Bank advanced the loan and the husband lodged shares as security (a pledge). On these facts the Court held that the husband's position was that of a pawnor and the Bank's position of a pawnee (creditor with security), not of principal and agent. When the Bank realised the debt by selling the pledged shares, it acted as a creditor entitled to sell the security under the contract, not as an agent selling for the plaintiff's benefit.
- Consequence for Article 62: Because the Bank's receipt (from sale) was of its own account as creditor and not a receipt to the plaintiff's use, Art. 62 did not apply.
- Assessment of Article 89 (principal-agent): The Court rejected the Bank's contention that Art. 89 applied, because the relationship was not principal-agent but pawnor-pawnee; therefore Art. 89 could have no application.
- Notice and contractual duties: The Bank committed a "grave irregularity" by failing to give the owner of the pledged shares a notice of sale as required by Section 176 of the Indian Contract Act. The Court held that this failure could not, by the Bank's own action, shorten or alter the period of limitation or be used to claim that limitation began on the date of sale of which the plaintiff had no knowledge.
- Characterisation as a suit for accounts and Article 120: The Court treated the plaintiff's claim as one for accounts (a suit to obtain an account from the Bank as bailees/pawnees). Where a suit for accounts is maintainable and does not fall under Arts. 62, 89, or 106, it must be governed by Art. 120 of the Limitation Act. The Court concluded that the present suit was governed by Art. 120.
- Conclusion on limitation: Because the suit was for accounts governed by Art. 120, the suit was within time. The Court therefore found no merit in the Bank's limitation defence based on Arts. 62 or 89.
Holding and Implications
Holding:
The appeal is dismissed.
The Court held that the Bank's limitation pleas under Article 62 and Article 89 of the Limitation Act were unsustainable on the facts. The relationship between the husband and the Bank was that of pawnor and pawnee (debtor and creditor with security), not principal and agent. The Bank's sale of the pledged shares without reasonable notice was an irregularity under Section 176 of the Indian Contract Act and did not start the limitation period against the plaintiff. The plaintiff's suit was properly characterised as a suit for accounts and, not being covered by the other specified Articles, was governed by Article 120 of the Limitation Act and therefore within time.
Direct consequences:
- The Bank's appeal fails and is dismissed with costs.
- Leave to appeal was refused (as recorded in the opinion).
- The underlying decree in favour of the plaintiff (as given by the lower courts) stands insofar as limitation is concerned.
Broader implications: The opinion resolves the limitation question on the particular facts (pawnor/pawnee, irregular sale without notice) and applies established Articles of the Limitation Act; the judgment distinguishes prior authorities where appropriate. The opinion does not purport to create a novel legal principle beyond its application to the facts before the Court.
JUDGMENT
This appeal arises out of a suit brought by the plaintiff for taking an account from the defendant Bank in respect of the 20 Bank shares of the value of Rs. 500 which stood in the name of the plaintiff's husband A. Gopalakrishna Chettiar and to pass a decree against the Bank for payment of the balance that may be found due to her after giving her credit for the yearly dividends on those shares on the one side and after debiting her with any liability incurred by her husband touching these shares on the other.
The defendant Bank denied the claim and contended inter alia that the suit was barred by limitation. It is this plea with which I am concerned in the present second appeal. The suit was decreed by both the lower Courts and was held to be within time. The Bank appeals.
Although no article of the Limitation Act was referred to by the defendant Bank in their written statement as required by the forms of general defences given in the Code of Civil Procedure (Sch. I, App. A) and their Counsel in the trial and in the lower appellate Courts have been vacillating in consequence from one to the other, their learned Counsel has finally chosen to depend on Arts. 62 and 89 in this Court and pleads that the suit is barred by either the one or the other.
The provision requiring a party to specify the article or articles of the Limitation Act, under which the suit is according to him barred, is salutary and must be complied with as far as possible. The omission to mention the article may prevent the plaintiff at times from producing such oral or documentary evidence as he might have been capable of doing in answer to the objection raised by the defendant and in so far as the onus of proving limitation is on the plaintiff invariably, it may put him at a disadvantage if some evidence is led on behalf of the defendant after the case on the plaintiff's side is closed, which he would be ordinarily unable to rebut. At all events, this device enables a party to conceal his hand upto the time of final arguments and to spring a surprise on his opponent in a large number of cases. A practice like this cannot but be deprecated and must be discouraged.
In order to appreciate the contentions advanced on behalf of the parties, the facts that have given rise to this litigation may be briefly stated. An application was made by the plaintiff's husband to the Bank on the 2nd January 1931 asking for a loan of Rs. 200 (Ex. VI). This was accepted. The plaintiff's husband got the loan on the next day and executed a promissory note in favour of the Bank for Rs. 200 (Ex. V). On that date, he lodged 20 Bank shares that he had been holding in the defendant Bank and on each of which a sum of Rs. 25 had been paid by him by way of security for the debt advanced to him under the promissory note (Ex. V.). The plaintiff's husband died on the 19th August 1931. The shares were sold by the Bank on the 2nd June 1933 for Rs. 530 inclusive of dividend and the money due to the Bank was adjusted—the balance of Rs. 264 being kept by them in the supense account for payment to the plaintiff's husband or to his heirs. It may be mentioned here that before this sale no notice was given by the Bank to the plaintiff or to any other claimant. A notice appears to have been sent by them in the name of the plaintiff's husband on the 17th March 1933, but that was obviously of no use. The plaintiff served the defendant Bank with a notice on the 24th April 1935 (Ex. B) in which she asked them for particulars of the shares standing in the name of her husband in the Bank and in regard to the dividends that had been due under those shares. There was no reference in this notice to any loan advanced by the defendant Bank to the plaintiff's husband, or even to the deposit of the shares by him with the Bank. To this notice the Bank sent a reply on the 30th April, 1935 (Ex. B-1) in which they agreed that they would pay the amount to her if she produced succession certificate. The information that the Bank shares were sold by the defendant Bank on the 2nd June, 1933 in auction under R. 85 of the Bank Rules was conveyed by this letter. This led the plaintiff to institute the suit on the 1st October, 1936.
I have already referred to the articles of the Indian Limitation Act on which reliance has been placed on behalf of the appellant Bank in this Court. The contention advanced on their behalf is that since the shares deposited by the plaintiff's husband with the Bank were sold by them, the present claim must be regarded to be in the nature of a suit for what will in English Law form the basis for an action for money had and received and ought to be therefore governed by Art. 62. In the alternative, it was urged that the relationship between the Bank and the plaintiff's husband being, with reference to the shares in the custody of the Bank, that of a principal and an agent, the suit would be governed by Art. 89 and in so far as that relationship came to an end on the death of the plaintiff's husband, this suit would be, having been brought long after three years of the termination of that relationship, barred by time.
As to the first contention, Art. 62 is applicable to cases where the defendant has received money which in justice and equity belongs to the plaintiff but in circumstances where the receipt by the defendant would be regarded in law as a receipt to the plaintiff's use. Where the receipt by the defendant is on his own account and is not or cannot be regarded to be on behalf of the plaintiff, this Article would have no application. Reliance was placed in this connection on the decision in Tarachand v. The Madras and Southern Mahratia Railway Co. Ltd.(1). But the defence raised by the Railway in that case was that the suit would be governed by Art. 30 or Art. 31 of the Limitation Act and was barred by time. The plaintiff denied the applicability of those articles and urged that it would be governed by the three years' rule under Art. 62 of the Limitation Act. It would be noticed that the applicability of Art. 62 was not denied although the contention was that Art. 30 or 31 would apply in preference. The learned Judges repelled the defendant's contention and held that the case was not governed by Art. 30 or 31 of the Limitation Act. It is true that they agree with the plaintiff's contention, which was not denied on behalf of the defendant company, that the suit would fall under Art. 62; but in doing so, they did not consider the question whether the Railway Company were selling the goods for their own benefit or for the benefit of the plaintiff consignor or partly for their own benefit and partly for the benefit of the consignor. There is no discussion in that case in regard to the type of cases to which Art. 62 would apply and in the absence of any discussion, the judgment cannot be of any great value. The defendant company were apparently acting as carrying agents on behalf of the plaintiff and since the decision turned on the effect of the direction as to the disposal of the sale proceeds in S. 56 of the Indian Railways Act, that case can have no application to the present one. Learned Counsel for the appellant also relied on Bank of Bombay v. Fazulbhoy Ebrahim(2) but in that case the learned Judges were of opinion that the suit was governed by Art. 48 of the Limitation Act, although they added that if that Article was not held to apply, it might be governed by Art. 62—under either of which the suit was within time. Had the present suit been for the recovery of the Bank shares in specie from the Bank or from the person to whom they had been sold by the Bank, Art. 145 or 48-A would have been applicable—as the plaintiff's husband was undoubtedly, as I would try to show later, a pawnor and the shares were lodged with the Bank as security for the debt. But the suit is not for the recovery of the Bank shares or for compensation for wrongful taking or detaining the same—although the allegations in paragraph 7 of the plaint tend to bring it very much within the ambit of the latter portion of Art. 48. In a suit brought for the residue of the sale proceeds of an estate sold under the provisions of the Revenue Sale Law, Act XI of 1859, against the Secretary of State for India in Council the defence was raised that it was barred under Art. 62 of the Limitation Act; but the objection was overruled by the Full Bench of five learned Judges and the case was held to be governed by Art. 120 of the Act: The Secretary of State v. Guru Proshad Dhur(3). The present suit is, however, for accounts and not for recovery of money merely. If a suit for accounts is maintainable as this has been found to be and does not fall within Art. 62 or 89 or 106 of the Limitation Act, it would have to be governed by Art. 120 of that Act. That it is governed by Art. 64 or 106 has not been contended. The question is whether it is governed by Art. 89 of the Act. Now, in order to ascertain whether this article in the Limitation Act applies, the relationship of the parties to the suit or rather of the plaintiff's husband by whom these shares were given in security and of the Bank must be ascertained. The plaintiff's husband had gone to the Bank to take a loan. The Bank had agreed to advance it. When the loan was advanced, the Bank became a creditor and the plaintiff's husband a debtor. When the shares were being placed with the Bank by way of security, the plaintiff's husband's position could not have been of a principal and the Bank's position that of an agent as urged by learned Counsel for the appellant. The Bank was not being asked to do anything by the plaintiff's husband on his behalf. He was depositing the shares with the Bank by way of security. He was, therefore, a pawnor and the Bank a pawnee. When the Bank sold the shares to realise their debt, they were not acting in the capacity of an agent but in that of a creditor entitled to recover his money by sale of the security under the terms of his contract. That they failed to give any notice to the owner of the shares before the sale does not in any way help them. They committed a grave irregularity in having failed to give a notice as required by S. 176 of the Indian Contract Act and cannot, by their action, abridge the period of limitation or contend that it should be held to have started on the date of the sale of which the plaintiff had no knowledge as is clear from the notices Ex. B and Ex. B-1 that passed between the parties in April 1935. The contract of pledge cannot, in the absence of a reasonable notice, to sell, be held to terminate the pledge or the relationship of pawnor and pawnee with the consequence that the money in the hands of the Bank cannot be held to have been received for the plaintiff's use, at any rate when the sale was not recognised to be valid by the owner of the articles pledged by him. Art. 89 can thus have no application. The defendant Bank may not have been trustees for a specific purpose and S. 10 of the Limitation Act may not apply but in their capacity as bailees they were liable to render account to the plaintiff for the shares delivered to them by her husband. A suit for accounts must, in such circumstances, not being provided for by any other Article, be held to be governed by Art. 120 of the Limitation Act. The suit instituted by the plaintiff must, therefore, be held to be well within time.
For the above reasons, the appeal fails and is dismissed with costs.
Leave refused.
Appeal dismissed.
N.R.R
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