John Beaumont, Kt., C.J.
1. This is an appeal from a decision of Mr. Justice Kania by which he dismissed the suit on the preliminary point of limitation. He held that the plaintiffs' suit was barred under Section 527 of the City of Bombay Municipal Act, 1888. That section provides that no suit shall be instituted against the corporation in respect of any act done in pursuance or execution or intended execution of that Act or in respect of any alleged neglect or default in the execution of that Act unless it is commenced within six months next after the accrual of the cause of action. Three points, I think, arise for consideration. First of all, what is the plaintiffs' cause of action Secondly, does it fall within the terms of Section 527 And, thirdly, if so, did the cause of action accrue more than six months before the suit was filed ?
2. Upon the first question as to what is the cause of action one has to look at the plaint, and for the purposes of the preliminary point we must assume that the allegations in the plaint are true. Put quite shortly, the plaintiffs' case seems to me to come to this. They say that eight debentures of the Municipal Corporation for the City of Bombay were either issued directly, or endorsed over, to the plaintiffs and one Y. v. Nene, on such terms that any of those three persons could deal with the debentures. Nene died on July 13, 1930, and some time about July, 1930, the debentures, which were then in the hands of one Acharya for collection of interest, were wrongfully dealt with by him. The allegation is that he forged an endorsement of the debentures by Nene in favour of himself or of a nominee for himself, and subsequently endorsed the debentures over to the Bank of India. The Bank of India lodged the debentures with the defendant Corporation, and the defendant Corporation cancelled those debentures, and issued fresh debentures to the Bank of India. The plaintiffs say that as Nene's endorsement was forged, the debentures remain their property, and they ask, first, for a declaration that the endorsement of Nene on the debentures was a forgery, and that the plaintiffs are the owners of the debentures, and then they ask that the defendants may be ordered to transfer and hand over to the plaintiffs the said eight debentures, or alternatively, to pay the plaintiffs the market value thereof, together with accrued interest. In my opinion the cause of action is clearly in tort. The declaration is really ancillary to the other relief asked for, and the other relief is in detinue for the return of the actual debentures, or alternatively in conversion. It was argued for the appellants that the cause of action was in contract, because the Municipality as borrowers would be bound to hand over the debentures to the true owner. No doubt it may have been part of the original contract on the issue of the debentures that the security should be handed over to the lender. But there is not, in my opinion, any contract on the part of the Municipality that directly they get a debenture into their hands they will hand it over to the true owner. They are bound under the general law to hand debentures over to the true owner, but there is not, in my opinion, any contract by them to do so. I think, therefore, that the cause of action is clearly in tort and not in contract.
3. The next question is, does the cause of action fall within the terms of Section 527, that is to say, was the wrongful act complained of done in execution or intended execution of the Act Now the House of Lords in Bradford Corporation v. Myers (1916) 1 A.C. 242 had to consider the true construction of Section 1 of the Public Authorities Protection Act, 1893, which seems to me to be worded in substantially the same language as Section 527 of the Bombay Act, and what the House of Lords decided was that the protection of the statute extended to acts done in direct execution of the powers conferred by the particular Act of the local authority, but that it did not cover acts which were done in pursuance of a contract which the local authority was empowered to enter into, but was not required to enter into, by its Act. I think that that principle applies to the construction of Section 527 of the City of Bombay Municipal Act, and one has to see whether the act complained of was done pursuant to the direct requirements of the Act, or was done under some contract which the Corporation entered into under the powers conferred by the Act but which it was not compelled to enter into.
4. Section 106 of the Act gives to the Corporation power to borrow on the security of debentures, and Section 110 provides that every mortgage authorised to be made under this Chapter shall be by debenture in the form contained in Schedule C, or in such other form as the corporation with the consent of Government shall from time to time determine. Now the debenture in this case, which is exhibit A, provides for payment of the amount due on August 1, 1959, and for payment of interest in the meantime, and then it charges certain taxes as security, and it contains also certain conditions, one of which is that ' this debenture can be renewed at any time at the option of the holder on payment of Rupee one.' It is to be noticed that that condition is not contained in the form given in Schedule C to the Act, although the learned Judge in the Court below seems to have thought that it was. It is therefore to be noticed, in the first place, that the Corporation were not compelled under the Act to borrow, and in the second place that, having decided to borrow, although they were compelled to issue debentures, they were not compelled to issue debentures containing a right of renewal. It is the cancellation of the plaintiffs' debentures and their renewal in favour of the Bank which is the act alleged to have been done in execution or intended execution of the powers of the Act. It seems to me that the case falls exactly within the principle of the decision of the House of Lords, and that the issue of a debenture containing an option of renewal, and the giving effect to that option were not acts done in direct execution of any power contained in the Act, but were acts done under a contract authorised, but not required, by the Act. I am clearly of opinion that the wrongful action charged against the Corporation is not an action which is directly required by the statute, and therefore Section 527 has no application to the case.
5. In case I am wrong on that point, I will consider also the third question, whether, assuming Section 527 to apply, the cause of action accrued more than six months before the commencement of the suit. It is, in my opinion, clearly established on the English authorities that in a case of this sort the plaintiff's cause of action does not arise until a demand is made for the return of the property which is claimed, that is, the debentures, and that demand is refused, seeSpackman v. Foster (1883) 11 Q.B.D. 99 and Miller v. Dell (1891) 1 Q.B. 468. The receipt by the Corporation of the plaintiffs' debentures was not in itself wrongful. They would have been quite entitled to hold those debentures, if asked to do so, for safe custody. Their possession of the debentures only became wrongful when they were asked to return them to the plaintiffs, whom I1 must assume to be the true owners, and refused to do so. Now with regard to that the position is this. On November 30, 1932, the plaintiffs by their solicitors wrote to the defendants setting out fully their case in relation to these debentures, and on March 6, 1933, the solicitors for the Corporation wrote saying, ' You may expect to hear from us shortly in the matter, either admitting or denying our clients' liability.' Subsequently reminders were sent to the solicitors, who wrote on several occasions saying that the matter was complicated, and that they were not at the moment in a position to give a definite reply, and asking the plaintiffs to take no action without first sending to the solicitors intimation. Eventually, on June 23, 1933, the plaintiffs' solicitors wrote to the defendants' solicitors complaining that they were still without a definite answer to their letter, and threatening to commence proceedings forthwith. The solicitors for the Corporation wrote asking for delay, and eventually, on July 27, they wrote saying, ' We regret that it has not been possible to reply definitely to your clients as we hoped to be able to do.' It was argued somewhat faintly by Mr. Coltman on behalf of the Corporation that if a demand and refusal were necessary, there had been no refusal, and the plaintiffs therefore had no cause of action. If that argument were to succeed, it would mean that anybody threatened with a claim in conversion could prevent a suit being brought by the simple expedient of writing and saying, ' I neither admit nor deny your claim.' It seems to me clear that the plaintiffs were entitled, when they got the letter of July 27, 1933, following on the previous correspondence, to treat that letter as a definite denial of their clients' claim. They were, in my opinion, entitled to wait a reasonable time for the answer which the defendants said they were going to give. Until the solicitors of the Corporation definitely refused to say what their position was, the plaintiffs were entitled to delay taking action, as there had been no definite refusal of their claim. But I think on the receipt of the letter of July 27 they were entitled to say, ' We think we have waited long enough, and we must now take your refusal to answer as a definite denial of our claim.' In my judgment, therefore, the cause of action did not arise until July 27, 1933, and the suit was filed on August 11. Mr. Coltman contends that in this country the case is governed by Article 49 of the Indian Limitation Act, as, no doubt, it is. That article provides that in a suit of this nature the time limited is three years from the time when the property is wrongfully taken or injured, or when the detainer's possession becomes unlawful. I think that only states the rule established in the English cases, and that the detention by the defendants only became unlawful when they refused to accede to the demand of the plaintiffs for the return of their debentures.
6. In my opinion, both on the ground that Section 527 does not apply to this case, and on the alternative ground that if it does, the suit is brought within the period of six months after the cause of action accrued, the appeal must be allowed with costs, and the suit sent down to the lower Court to be dealt with on the merits. Costs in the lower Court will be in the discretion of the Judge.
B.J. Wadia, J.
7. I agree, in my opinion the provisions of Section 527 of the City of Bombay Municipal Act, 1888, were not intended to extend to all suits against persons whom it was meant to protect. I do not think that the cause of action as disclosed in the plaint in this suit is covered by the section, nor are the defendants within its protection in reference to the act complained of. In renewing the debentures the defendants were not performing an act in pursuance, or execution, or intended execution, of the Municipal Act. It was not, according to the distinction pointed out by Lord Haldane in Bradford Corporation v. Myers (1916) 1 A.C. 242 an act done in pursuance of any direction contained in the statute. It was an act which was incidental to the exercise of powers arising out of the power, though not the obligation, to borrow moneys, which was not in reality provided for by the statute. Section 110 lays down that every mortgage authorised to be made shall be by debenture in the form contained in Schedule C to the Act, or in such other form as the Corporation, with the consent of Government, shall from time to time determine. The particular debentures with which we are concerned contained a further provision, namely, that the debenture could be renewed at any time at the option of the holder on payment of Re. 1. There is no evidence that the consent of Government was obtained to the insertion of this stipulation, but I think we can presume that it must have been. Even if it was, I do not agree with the learned Judge that this stipulation should be read as if it was incorporated in and expressly provided by the Act. In my opinion therefore the section does not afford a good defence to the defendants. The claim is not in respect of any alleged default on the defendants' part in the exercise of a public duty enjoined upon them by the statute.
8. Assuming that the section affords a protection to the defendants, there is the further question, namely, whether the suit was filed within six months after the accrual of the cause of action in terms of Section 527. That period cannot, in my opinion, be computed from the date of the first notice sent by the plaintiffs, namely, November, 1932, in view of the correspondence that passed between the parties. Whether the claim is in detinue or in conversion, time would, according to the well-known decisions, begin to run from the date of the refusal to comply with the plaintiffs' demand. It has been held that even mere silence on the part of the defendant on a demand for delivery of moveables does not necessarily constitute a refusal to deliver up. A fortiori the defendants' own suggestion that the plaintiffs should wait to hear whether the defendants would admit or deny their liability, and that in the meantime they should take no action, cannot amount to such refusal. In fact there never was any refusal at all. The plaintiffs were justified in waiting for some time at the request of the defendants, for if they had not, they might have been met with the plea that their title had really never been denied. They were, however, not bound to wait indefinitely after the defendants' attorneys' letter of July 27, 1933. The suit was filed in August, 1933, and is not therefore out of time.
9. On both these grounds I am of opinion that this appeal should be allowed, and the suit remanded for hearing on the other issues.