R.A.NO.9/2004 ON THE FILE OF THE FAST TRACK COURT-II, BAGALKOT ALLOWING THE APPEAL AND SETTING ASIDE THE JUDGMENT AND DECREE DATED 09.03.2004 PASSED IN O.S.NO.79/1994 ON THE FILE OF PRINCIPAL CIVIL JUDGE (SR.DN.), BAGALKOT. THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 29/6/2017 AND COMING ON FOR PRONOUNCEMENT THIS DAY, THIS COURT DELIVERED THE FOLLOWING : - JUDGMENT The defendant No.2 in O.S.No.79/1994, on the file of the Prl. Senior Civil Judge, Bagalkot, has preferred this second appeal assailing the judgment dated 26/3/2005 passed by the Fast Track Court No.II, Bagalkot, in R.A.No.9/2004. The trial Court dismissed the suit initiated by the plaintiff for recovery of Rs.55,616.21/- with interest and the First Appellate Court reversed this judgment by holding that the plaintiff was entitled to recover the said : 3 : amount with interest at the rate of 6% p.a. from defendant Nos.2 to 5.
2. In a nutshell, if pleadings are stated, the plaintiffs case is that defendant No.1 was a partnership firm of which defendant Nos.2 to 5 were the partners. The said firm was dissolved on 5/12/1990. It was being managed by the second defendants husband Papayya Goudar. When the firm was dissolved, defendant No.2 and her husband promised the plaintiff firm that any payment made by the plaintiff for discharging the debts of first defendants firm would be repaid to it by them and they would settle the accounts also. They failed to make payments to the plaintiff as promised by them and they also did not account for the recovery of money that they made from the customers of defendant No.1. The plaintiff discharged several liabilities of the first defendant firm owing to pressure by the first defendant creditors and the tax authorities. The plaintiff maintained accounts in relation to the liability cleared by it on behalf of defendant No.1. The second defendant and her husband in fact agreed to settle the matter through the panchas and had submitted an agreement to the panchas on : 4 : 12/1/1993 in this regard and since the defendants did not repay the money, the plaintiff brought a suit for recovery of the said money with interest at the rate of 18% p.a.
3. Defendant No.2 in his written statement refuted all the plaint averments and denied that the plaintiff firm had been authorized by her and her husband to clear the dues of defendant No.1. They also denied that they agreed to settle the matter through panchas and that they submitted an agreement to them on 12/10/1993. Their specific contention is that after dissolution of the firm on 5/12/1990, all the partners agreed for carrying on the business in the name of the dissolved firm, but some of the partners joined the plaintiffs firm as partners. Only defendant No.2 and her husband continued the business with their own investment. They never authorized the plaintiff to clear the dues of first defendants firm. The plaintiff created false documents in collusion with some of its partners who were earlier partners of the first defendants firm. They also contended that the suit is time barred.
4. After appreciating the evidence, the trial Court found that according to the plaintiff there was an agreement : 5 : between the plaintiff and the defendants on 12/1/1993 for discharge of the dues of defendant No.1 by the plaintiff, but that agreement was not produced. Even the document produced before the Court did not disclose that the plaintiff made payments of the dues of the first defendants firm. Though in the documents as per Exs.P10, 11, 13 and 15, there are some entries regarding some payments, none of them discloses that the partners of defendant No.1 or the husband of defendant No.2 authorized the plaintiff to make payments on behalf of defendant No.1. Therefore, those documents could not be relied upon. The learned trial Judge has further observed that when defendant No.1 firm was dissolved on 5/12/1990, no written authority was given to the plaintiff to clear the arrears of the dissolved first defendant firm and that he also admitted that the plaintiff firm and the first defendant firm were two different entities. In the absence of any authority by first defendant firm or its partners, any payment made by the plaintiff cannot be believed to be payment for and on behalf of first defendant firm. The witnesses PWs.2 and 3 were also unable to say under what authority the plaintiff discharged the dues of the first defendant firm. In fact PW-3 has stated in his : 6 : examination chief that he does not know who had cleared the entire loan and interest of the first defendant firm to Veeresh Finance Corporation and further that he did not know who used to pay the income tax and the sales tax of the said firm. The trial Judge also further referred to one answer given by PW-2 in his cross examination that defendant No.3 had raised loan on behalf of defendant No.1, but the other partners had not authorized him to raise that loan and further that there was no authorization to the plaintiff by defendant No.1 for making payment of the debts of the first defendant firm.
5. The learned trial Judge also noticed the fact that defendant No.3 who adduced evidence as DW-1 is not only one of the partners of the plaintiff firm, but also brother of PW-1. Defendant Nos.4 and 5 are the wife and mother of PW-1 respectively, and for this reason, their admission cannot be relied on to hold that the plaintiff had cleared the loan of defendant No.1. Giving these reasons, the learned trial Judge came to the conclusion that the plaintiff had utterly failed to prove that it cleared the liabilities of the first defendant firm on a promise made by defendant No.2 and : 7 : her husband. Consequently, the suit came to be dismissed by the trial Court.
6. Aggrieved by the judgment of the trial Court, the plaintiff preferred an appeal to the District Court, Bagalkot. The learned Judge, before whom the appeal was argued, accepted the arguments of the plaintiffs counsel that the entire case of the plaintiff could be brought within the scope of the Sections 69 and 70 of the Indian Contract Act, although the plaintiff had not founded his case on the premise of the principles enunciated in these two sections. It was a pure question of law that could be raised at any time, was of the opinion expressed by the First Appellate Court. The learned Judge has opined that after assessing the entire oral and documentary evidence, the payment made by the plaintiff to clear the dues of the first defendant firm could be believed. Such a payment made by the plaintiff would fall within the scope of Sections 69 and 70 of the Indian Contract Act. First defendant cannot claim unjust enrichment. The plaintiff was a person interested in the payment of money which the defendant was bound to pay, and therefore, the payment thus made by the plaintiff should : 8 : be reimbursed by defendant No.1. He referred to judgment of this Court in the case A.Ayodhyaram Vs. N.T.P. Muttuswami Mudaliyar {1967 (2) Mysore Law Journal 499}. Opining that the preponderance of probability lay in the case of the plaintiff, the First Appellate Court allowed the appeal and decreed the suit by reversing the judgment of the trial Court.
7. In the light of the findings given by the trial Court and the First Appellate Court, the actual substantial question of law that arises in this second appeal is whether the First Appellate Court, in the facts and circumstances of the case, is legally justified in invoking Sections 69 and 70 of the Indian Contract Act?
8. The counsel for the appellant-defendant argued that there was no agreement that the debts of the first defendant should be paid by the plaintiff and that first defendant should reimburse the payments made by the defendant No.1. In the absence of contract, the plaintiff cannot claim reimbursement by defendant No.1. The plaintiff has stated that the plaintiff and the defendant No.1 submitted an agreement to the panchas on 12/1/1993 and : 9 : that agreement was not produced before the Court. He argued further that the evidence of PW-2 discloses that defendant No.3, the brother of the partner of the plaintiffs firm had raised a loan in his individual capacity and that loan might have been repaid by the plaintiff. Such a repayment cannot be said to be the liability of defendant No.1 and that the trial Court has rightly observed this point. Referring to Sections 69 and 70 of the Indian Contract Act, the learned counsel argued that these two Sections do not find application to the facts and circumstances of the present case. The plaintiff has not made out a case that he had an interest for repaying the outstanding dues of defendant No.1 firm, and therefore, Section 69 of the Indian Contract Act does not get attracted. The scope of Section 70 of the Indian Contract Act is something different and it is not applicable to this case. Therefore, he argued that the judgment of the trial Court has to be restored by allowing the appeal.
9. The learned counsel for the respondent-plaintiff argued that DW-2 clearly admitted in the cross examination that defendant No.3 had authority to raise loan on behalf of : 10 : defendant No.1 firm, and therefore, the loan that he raised was undertaken to be paid by the plaintiff. The First Appellate Court has rightly come to conclusion that Sections
69 and 70 of the Indian Contract Act are applicable, and therefore, the First Appellate Court is justified in reversing the judgment of the trial Court. He referred to the judgment of this Court in the case of A.Ayodhyaram Vs. N.T.P. Muttuswami Mudaliyar stated supra.
10. In view of the above argument, firstly the scope of Sections 69 and 70 of Indian Contract Act, is to be examined. Section 69 reads as below; 69.Reimbursement of person paying money due by another, in payment of which he is interested.- A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other. This section contemplates existence of an interest in the person making the payment of another who is bound by law to pay. The payment is made for protecting the interest of another and not that the payment itself creates an interest. If payment is made voluntarily by one person without having any kind of interest in making payment, he cannot claim benefit of this section. The Privy Council, in the : 11 : case of Ram Tuhul Singh Vs. Biseswar Lall Sahoo [(1875)
2 IA 131. Commentary on Indian Contract Act, and Specific Relief Act by Pollock and Mulla (14th Edition), Volume-II at Page No.1055] has observed as below; It is not in every case in which a man has benefited by the money of another that an obligation to repay that money arises. The question is not to be concluded by nice consideration of what may be fair and proper according to the highest morality. To support such a suit there must be an obligation express or implied to repay. It is well-settled that there is no such obligation in the case of voluntary payment by A of Bs debt.
11. Section 70 of the Indian Contract Act, reads as below; 70.Obligation of person enjoying benefit of non- gratuitous act.- where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. This section makes it very clear that one person should do something for another person or should deliver something to him and he should have done without : 12 : intending it to be done gratuitously. When another person takes benefit of something done by the former, the latter is bound to compensate the former. This section is based on the doctrine of restitution which prevents unjust enrichment who has taken the benefit.
12. In the light of the scope of the two sections, the present case has to be examined. The plaintiff says that it made the payment of the dues of the 1st defendant-Firm. What was the interest that the plaintiff had for clearing the dues of the 1st defendant has not been proved by the plaintiff. There is no evidence in this regard. In the plaint, it is clearly stated that after dissolution of the 1st defendant- firm on 05.12.1990, the defendant No.2 and her husband made a promise to the plaintiff that any dues paid by the plaintiff would be paid by them and that they agreed to settle the matter through panchas by submitting an agreement to them on 12.01.1993. So, these averments found in the plaint clearly indicate the existence of a contract between the plaintiff and defendant Nos.1 and 2. The trial court has clearly given a finding that the agreement dated 12.01.1993 was not produced. The trial court has also taken note of one : 13 : answer given by PW.1 that there was no written authority to the plaintiff firm to pay the dues of the dissolved defendant- firm. PW.3 has also stated in the cross-examination that there was no document authorizing the plaintiff-firm to pay the debts of the 1st defendant-firm. The First Appellate Court has come to contrary conclusion that the evidence placed by the plaintiff before the court would prove that the plaintiff had been authorized to clear the dues of the 1st defendant- firm. On going through the entire evidence, I am of the opinion that the First Appellate Court has not at all discussed the evidence properly by applying its mind independently. The First Appellate court should have noticed that the entire claim of the plaintiff is founded on a contract which is not proved. The existence of interest in plaintiff to make the payment on behalf of the 1st defendant independent of the contract has not been proved. Therefore, Section 69 of the Indian Contract Act, has been wrongly invoked by the First Appellate Court. In the case of A.Ayodyaram (supra) the facts were that, the plaintiff was the sole agent of M/s Margarine and Refined Oils Company. He got supplied to the defendant 32 tins of vanaspati and 25 tins of refined oil from the said company. The defendant did : 14 : not make payment of Rs.1,662.12 to the company and for this reason the company sent a notice to the plaintiff that if he did not make payment of the amount due by the defendant, the said amount would be adjusted from his security deposit and other commission amounts. In these circumstances, the plaintiff made payment and claimed an amount of Rs.1,662.12 from the defendant. Thus, the facts disclose as to how the plaintiffs interest was created when he made payment of the amount to the company of which he was the agent. But in the present case, there is nothing on record to show that the plaintiff had such a kind of interest as it can claim reimbursement from the 1st defendant for the payment said to have been made by it to the defendants creditors. Therefore, the First Appellate Court has wrongly applied Section 69 of the Indian Contract Act, to the facts and circumstances, of this case.
13. Secondly, with regard to application under Section 70 of the Indian Contract Act, it has to be stated that there is no evidence to the effect that the 1st defendant-firm has benefited by the payment made by the plaintiff. If section
70 has to be applied, the plaintiff should have proved that, : 15 : the 1st defendant owed certain sums of money to its creditors. Of-course, PW.2 and PW.3 have been examined to prove that the plaintiff has cleared the dues of 1st defendant to a Private finance-firm called Veeresh Finance Corporation. The clear finding of the trial court is that, the evidence of these two witnesses is not useful as they do not know who cleared the entire dues of the 1st defendant-firm. On the other hand PW.2 has stated that, defendant No.3 had borrowed money on behalf of defendant No.1 without authority from the other partners of 1st defendant-firm. It is an admitted fact that the defendant No.3 is a brother of Ashok Sangappa Yadagi, who has filed the suit representing the plaintiff-firm. If defendant No.3 had no authorization to borrow money on behalf of 1st defendant, any payment made by the plaintiff cannot be said to be payment made on behalf of the 1st defendant to claim reimbursement under Section
70 of the Indian Contract Act. The First Appellate Court has thus come to wrong conclusion that Section 70 of the Indian Contract Act could also be applied for decreeing the suit.
14. So from the above discussion, I come to conclusion that, the judgment of the First Appellate Court is : 16 : not sustainable. Appeal deserves to be allowed. Hence, the following order :- ORDER
1. RSA No.1355/2005 is allowed with costs.
2. The judgment of the First Appellate Court in R.A.No.9/2004 is set aside.
3. The judgment of the trial court in O.S.No.79/1994 is restored. Sd/- JUDGE
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