Murugappa Chetti (Mi... v. Ramanathan Chetti An..., Madras High Court, Judgment, Law, casemine.com

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Case Number

Appeal No. 289 of 1929.

Advocates

Mr. M. S. Venkatarama Iyer for the Appellants.
Messrs. G. Rajagopalan, T. R. Arunachalam and M. Patanjali Sastri for the Respondents.

Judges

Stone
Pakenham Walsh, JJ.

Acts

Art. 59 of the Limitation Act.
Art. 60 of the Limitation Act

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Smart Summary

Factual and Procedural Background

This is a suit by the plaintiff, a Nattukottai Chetty moneylender, against nine defendants on a promissory note. The 1st defendant is the maker of the promissory note; defendants 2, 3 and 4 are his sons; the 5th defendant is his brother; and defendants 6 to 9 are his nephews. The suit arises from a prior business arrangement beginning in 1910 under which the plaintiff paid the 1st defendant Rs. 5,000 on certain terms. Accounts and dealings continued at least until September 1921. A promissory note (the suit note) was executed on 26 August 1924. The plaint was filed on 24 August 1927.

Procedurally, the trial court's framed issues originally did not raise the question of limitation, although the 2nd defendant in paragraph 7 of his written statement pleaded limitation. During judgment the learned Subordinate Judge amended the second and fourth issues (including language introduced relating to limitation), and the appellate court criticized the vital alteration of an issue in the course of judgment as prejudicial. The trial judge otherwise found the facts largely in favour of the plaintiff except as to the limitation matter as newly introduced in judgment. This appeal challenges those aspects and contends with the legal characterization of the underlying transaction (loan vs. deposit) and consequent limitation consequences and the scope of liability of the various family members.

Legal Issues Presented

Whether the transaction between the plaintiff and the 1st defendant was a loan payable on demand (attracting Article 59 of the Limitation Act) or a deposit by a customer with a banker payable on demand (attracting Article 60 of the Limitation Act).
Whether the suit was time-barred in respect of the promissory note given on 26 August 1924, having regard to the relevant limitation period and the character of the original transaction.
Whether, if the pronote was executed by the manager of a joint Hindu family in satisfaction of a non-barred pre-existing debt, the liability extended to the joint family members (in particular defendants 2–4, and defendants 5–9) under the authorities relied upon.
Whether it was proper for the trial judge to amend issues (notably the second and fourth issues) in the course of delivering judgment, thereby introducing the question of limitation that had not been framed earlier.

Arguments of the Parties

Plaintiff's (Appellant's) Position

The underlying transactions from 1910 onward should be characterised as a deposit by the plaintiff with the 1st defendant in the manner of a banker-customer relationship, with the deposit being payable on demand after the fixed period; consequently Article 60, not Article 59, of the Limitation Act applies.
Because Article 60 governs, the promissory note executed on 26 August 1924 was given within the period of limitation; it accordingly discharged a non-barred pre-existing debt and is enforceable.
Where a manager of a joint Hindu family executes such a note in payment of a non-barred debt, the liability attaches to the joint family and its members (so that defendants 2–4 and 5–9 are liable).

Defendants' (Respondents') Position as Presented in the Opinion

The 2nd defendant raised the plea of limitation (paragraph 7 of the written statement), contending that certain defendants (notably defendants 5 and 6–9) can be made liable on the promissory note only if the note was given in respect of a non-barred debt; if the underlying debt was already barred at the date of the note, those defendants are not liable.
It was contended that the transaction was a "loan" payable on demand (falling under Art. 59) rather than a banker-customer deposit (Art. 60), which would render the claim time-barred when the promissory note was given.
As to the sons (defendants 2–4), it was argued they were not liable; the court, however, treated this in the light of authority that fixes liability on them.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Narayanasami Chetty v. Samidas Mudali	Authority fixing liability of sons (and by extension family members) where a manager executes a document binding the joint Hindu family.	The court applied this authority to hold that defendants 2, 3 and 4 (the sons) and, on the facts, defendants 5–9 should be liable where the promissory note was executed by the manager in discharge of a non-barred debt.
Annamalai Chetti v. Annamalai Chetty	Presumption that where there is no evidence as to contractual terms with a Nattukottai Chetty, the Chetty is in the position of a banker and the other party is a customer and the account is on a demand basis.	The court relied on this presumption as a fallback: if Ex. B-19 left the post-term arrangement indefinite, the presumption would support treating the arrangement as a deposit payable on demand.
S.A.S. Chellappa Chetty v. E. Pr. Vr. S. Subramanian Chetty	Bench decision holding that a deposit made for a fixed period and thereafter payable on demand falls within Article 60 of the Limitation Act.	The court followed the Bench decision to conclude that a deposit for a fixed term later payable on demand is governed by Art. 60, and therefore the present transaction falls within Art. 60 rather than Art. 59.
Balakrishnudu v. Narayanaswamy Chetty	Relevant discussion on the history and meaning informing the interpretation of limitation provisions referred to in the Bench decision.	The court referred to Balakrishnudu as background authority invoked in the S.A.S. Chellappa Chetty decision when discussing the history and meaning underlying Art. 60.

Court's Reasoning and Analysis

The court proceeded through a sequence of legal and factual analyses grounded in the documents and the authorities cited:

Characterisation of the underlying transaction was pivotal: if the 1910 transaction was a loan payable on demand, Article 59 would apply (three-year period starting when the loan is made); if it was a banker-customer deposit payable on demand, Article 60 would apply (three-year period starting when the demand is made).
The court examined Ex. B-19 (a communication from the 1st defendant) which recited that Rs. 5,000 had been credited to the plaintiff's account, that Rs. 500 was credited for 12 months' Thavanai at a specified rate of interest, and that the sum of Rs. 5,000 and interest would be paid "to your order in twelve months' Thavanai." On a close construction the court regarded Ex. B-19, in the defendant's favour, as expressing an agreement that the plaintiff was depositing Rs. 5,000 with the 1st defendant as banker for a fixed period of one year, after which the deposit with interest would be payable on demand.
The court recognised an evidentiary gap in account records between 1 October 1911 and 2 April 1920 and observed that the plaintiff might have been prejudiced by the trial judge's late amendment of issues, but proceeded on the basis that the amendment stood for the purposes of the appeal.
The court held that even if Ex. B-19 were construed more loosely—leaving the post-term arrangement entirely indefinite—the presumption established in Annamalai Chetti that a Nattukottai Chetty is to be treated as a banker would operate. Thus, on either construction (specific agreement to repay after the year on demand, or indeterminate post-term arrangements), the agreement would amount to a deposit payable on demand after the fixed period.
The court then relied on the Bench decision in S.A.S. Chellappa Chetty v. E. Pr. Vr. S. Subramanian Chetty, which the court read as directly holding that a deposit for a fixed term that becomes payable on demand thereafter falls within Art. 60. The court expressly stated agreement with the Bench's observations that Art. 60 is not made inapplicable by the fact that the money was deposited for a fixed term and thereafter payable on demand.
Because Art. 60 governs, the relevant limitation period is three years from the date of demand. The court found that no demand had been made earlier than three years from the date of the suit note; therefore, the promissory note executed on 26 August 1924 was within the period of limitation and was executed in payment of a non-barred pre-existing debt.
The court further applied Narayanasami Chetty v. Samidas Mudali to conclude that where a manager of a joint Hindu family executes a promissory note in payment of a non-barred debt, it binds the joint Hindu family and those members whose liability that authority fixes. Accordingly, judgment should be given against the 1st defendant and against defendants 2, 3 and 4 (the sons) under that ruling, and also against defendants 5–9 on the facts as analysed.
The court criticised the trial judge's amendment of issues in the course of judgment—observing that a vital alteration of an issue at that stage may prejudice a party who would have led evidence had the issue been framed earlier—and noted that had the appeal outcome on limitation been adverse to the plaintiff a retrial at least on that issue would have been considered necessary.

Holding and Implications

Holding:

APPEAL ALLOWED.

The court held that the transaction was governed by Article 60 of the Limitation Act (a deposit payable on demand after a fixed term), and therefore the promissory note dated 26 August 1924 was executed within the period of limitation and in payment of a non-barred pre-existing debt. Consequently, the pronote executed by the manager bound the joint Hindu family and the relevant family members, and judgment was to be entered against the 1st defendant and, under the authority relied upon, against defendants 2, 3 and 4 and also against defendants 5 to 9.

Direct consequences and orders:

The appeal succeeds with costs throughout.
Interest awarded at 6% per cent from the date of the suit.
Judgment directed for the plaintiff against the defendants as above.

Implications:

The decision applies established authorities and principles (notably the Bench decision on Art. 60 and the presumption regarding Chetty bankers) to the facts of this case. The opinion does not purport to lay down a new legal principle; it applies existing precedents to resolve whether the Limitation Act's Article 60 or Article 59 governs the transaction and the consequent liability of joint family members.

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Murugappa Chetti (Minor) By Next Friend Valliammai Achi (Deceased) And Another . v. Ramanathan Chetti And Others

This is a claim by the plaintiff, a Nattukottai Chetty moneylender against nine defendants on a promissory note. The 1st defendant is the maker of the promissory note. The 2nd, 3rd and 4th defendants are his sons. The 5th defendant is a brother and the 6th to 9th defendants are 1st defendant's nephews. The issues as originally framed, despite the fact that in paragraph 7 of the written statement of the 2nd defendant the plea of limitation is raised, do not raise the question of limitation at all. The learned Subordinate Judge as regards the second issue and the fourth issue amends them both. The 2nd issue as it stood before his judgment was delivered is as follows:—“Did 2nd defendant and 5th defendant become divided from the other members of defendants' family as alleged by 2nd defendant and defendants 5 to 9?” That is amended by adding “Are defendants 6 to 9 divided from the other defendants?” No question arises on this point before us. The fourth issue stood as follows:—“Did he (i.e, the 1st defendant) borrow the amount for which he executed it for any necessity or benefit of that family or that business? That was amended in the course of the judgment as follows:

“Did he execute the suit promissory note for an amount which he had borrowed for any necessity or benefit of that family or that business. Was the plaintiff's claim to recover it time-barred when he gave or sent to plaintiff the letter of 10th November 1926, and was it not competent to him as manager of the defendants' family to give or send that letter to plaintiff for a barred debt?”

There is nothing to show from the B Diary or the records in this case that that amendment was ever asked for or hinted at in the course of the suit and we think that it is a matter for adverse comment that an issue should be vitally altered in the course of judgment. It is obvious that so to do may entirely alter the complexion of the case and prejudice the side who would presumably lead evidence on the point in issue had he known that the issue was in that form. However, we are proceeding in the course of this appeal on the basis that the amendment is made and it becomes necessary therefore to consider whether on that basis the defence of limitation can be supported. Had we come to a conclusion, on this question of limitation, adverse to the plaintiff we should have considered it necessary to order a retrial, at least of this issue. The learned trial Judge has found all the facts in favour of the plaintiff’ excepting this vital fact of limitation newly introduced, as we have observed, in the course of his judgment and the argument runs as follows: The pronote was executed on the 26th August 1924. The plaint was filed on the 24th August 1927, and of course no question of limitation arises as regards that. But it is said that as regards, at any rate, defendants 6 to 9 and 5 they can be only made liable on this pronote if the pronote which was made by the manager of the joint Hindu family was in consideration of a non-barred debt. Therefore it is said if the debt in respect of which this promissory note was given was, at the date the note was made, a barred debt, then they are not liable. As regards the sons it is also said that they are not liable. But we think that as regards them in any event they are fixed with liability under the authority of Narayanasami Chetty v. Samidas Mudali . So far as the main point is concerned, it arises on the facts of this case as follows: The 1st defendant had with the plaintiff a transaction. If that transaction was one of loan it falls within Art. 59 of the Limitation Act. If on the other hand, the defendant was a banker and the plaintiff had deposited with him money payable on demand then it falls under Art. 60. The words of the two relevant Articles are as follows: Art. 59, “For money lent under an agreement that it shall be payable on demand. Period three years. Date: When the loan is made”. Art. 60, “For money deposited under an agreement that it shall be payable on demand, including money of a customer in the hands of his banker so payable. Period three years. Date: When the demand is made.” Now the parties came to an arrangement in 1910 whereby the plaintiff paid to the defendant Rs. 5000 on certain terms. That course of business continued uninterruptedly until at any rate September 1921. Thereafter there is some evidence that the money was demanded. It was not paid. Then a promissory note was given and that promissory note is now sued on. If the transaction is in its essence a loan by the plaintiff to the defendant payable on demand, then it is said that the claim was barred at the time the note was given. If on the other hand it is a deposit by a customer with a banker payable on demand it was not barred. Which it is depends almost entirely on the true construction of Ex. B-19 which is in the following terms: The 1st defendant is speaking.

“We have credited to your account Rs. 4500 on the 6th, Rs. 500 on the 27th, amounting in all to Rs. 5000. As agreed between us the said amount of Rs. 500, is credited for 12 months' Thavanai, the rate of interest being one anna less the current new Tate. So, the said amount of Rs. 5000 and interest will be paid to your order in twelve months' Thavanai.”

Thereafter numerous accounts were given by the defendant to the plaintiff from which it is apparent that within the year no repayments were made but after the year demands were made and money was paid. So that the original Rs. 5000 by the 1st of October 1911 after taking into account credits in respect of interest had been reduced to Rs. 3576. That sum we find becoming larger, how it is not apparent, because there is a gap in this statement between the 1st October 1911 and 2nd April 1920. This gap, we observe, might well have been closed had the plaintiff been aware that the issues were going to be amended. But we find it increasing to Rs. 3664-5-3 by the 1st September 1921. First of all it should be observed that in accordance with Annamalai Chetti v. Annamalai Chetty , if there is no evidence whatever as to the terms upon which a transaction of this nature is made with a Nattukottai Chetty there is a presumption that the Chetty is in the position of a banker and the person transacting business with him is in the position of a customer and that account is on the demand basis. It is said however that in the circumstances of this case there is no room whatever for a presumption because the presumption can only be raised where there is no evidence as to the terms of the contract between the parties and broadly speaking we agree with that contention though it is subject to an exception which will be mentioned. Here there is evidence as to the terms and Ex.B-19 contains those terms. We think that on the true construction of that document in the most favourable sense to the defendant it has the following meaning: The plaintiff is depositing with the 1st defendant as banker a sum of Rs. 5,000 for a fixed period of one year thereafter that deposit to be repaid to the plaintiff. We are further of the opinion that on the true construction of that document and giving value to the words ‘to your order’ it was thereby agreed that after the year the deposit with interest was payable, on demand. But if we are wrong as to this, then we have a document and a contract which leaves it entirely at large as to what is to happen after the year, and where matters are left entirely at large by the terms of the contract so that the vital term is left completely indefinite, then it does become proper to consider the presumption mentioned in Annamalai Chetti v. Annamalai Chetty and accordingly even on that construction of this document we should arrive at the conclusion that the agreement between the parties was that after the year this deposit was to be payable on demand. That being the position the question arises whether Art. 60 applies only to deposits made by a customer with a banker where the money is payable on demand from the beginning or whether Art. 60 also applies where the money is payable on demand after the termination of a fixed period. The matter is directly covered by the Bench decision of this High Court reported in S.A.S. Chellappa Chetty v. E. Pr. Vr. S. Subramanian Chetty (2) where the then Chief Justice Sir John Wallis at page 223 says as follows:—

“Supposing that the agreement was that the money should be deposited for six thavanais and not repayable until the end of six thavanais and there-after it should remain on deposit payable on demand, I think that that would come within the terms of Art. 60 of the Limitation Act and I need only refer to what I had already said with regard to the history and meaning in Balakrishnudu v. Narayanaswamy Chetty (1).

We observe in passing that in that case Sir John Wallis expressly declined to decide the case in relation to S. 59 or 60. See his remarks at page 179. The other learned Judge that formed the Bench that determined S.A.S. Chellappa Chetty v. E. Pr. Vr. S. Subramanian Chetty (2) was Seshagiri Aiyar J. and at page 224 he observes

“Even supposing that the only possible conclusion upon the evidence is as spoken to by the 2nd defendant himself that there was an agreement that the money should remain with the bank for a year certain (that is, 6 thavanais of two months each) and that it should be drawn out thereafter on demand, I entirely agree with the learned Chief Justice that Art. 60 of the Limitation Act is not made inapplicable by that fact.”

We respectfully agree with those observations and it follows that this is a case that is covered by Art. 60 and not by Art. 59. That being so, and no demand having been made earlier than 3 years from the date of the suit note the suit note was executed at a time within the period of limitation and therefore it was executed in payment of a non-barred pre-existing debt. Being so executed by a manager of a joint Hindu family it was binding on the joint Hindu family and judgment should have been given against not only the 1st defendant and under the ruling Narayanasami Chetty v. Samidas Mudali (3), defendants 2, 3 and 4 but also against defendants 6 to 9 and 5. It is a most unfortunate fact that this simple case within a narrow compass for a sum of money due under a promissory note has taken so long to get decided. The plaint was filed so long ago as 1927 and it has been pending for a trifle over 7 years. The appeal accordingly succeeds with costs throughout. Interest at 6 per sent from the date of suit.

N. R. R.Appeal allowed.

Murugappa Chetti (Mi... v. Ramanathan Chetti An...