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Santuram Hari Vs. Trust of India Assurance Co. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 1029 of 1941
Judge
Reported inAIR1945Bom11; (1944)46BOMLR752
AppellantSanturam Hari
RespondentTrust of India Assurance Co.
Excerpt:
.....property act (iv of 1s82), section 130-actionable claim-transfer-suit on actionable claim-whether transferor can maintain such suit-civil procedure code (act v of 1908), order 1, rule 8-power of court la transpose one of defendants as plaintiff.;on the execution of the transfer of an actionable claim (e.g., a life assurance policy) all the rights and remedies of the transferor vest in the transferee ; and the transferee alone is entitled to enforce the remedy. there is no interest left in the transferor which would entitle him to maintain a suit in respect of the actionable debt.;where it appears that the plaintiff has no interest in the cause of action in a suit, it is competent to the court to transpose one of the defendants, who: has such interest, as an additional plaintiff to the..........decided that there was an absolute assignment by the plaintiff, he could no longer maintain the suit.the assignee had to be brought on record as party plaintiff in order that the suit could be effectively maintained. under english law when the assignment is only by way of charge, the assignor is a necessary party to the actioneither as plaintiff or defendant because in the case of an assignment by; way of a charge the remedy for or the legal right to the debt or other chose in action does not vest in the assignee.9. i, therefore, hold that on the execution of the transfer of an actionable claim all the rights and remedies of the transferor vest in the transferee and the transferee alone is entitled to enforce the remedy ; there is no interest left in the transferor which would entitle.....
Judgment:

Chagla, J.

1. On February 4, 1937, the plaintiff applied to the first defendant company for the issue ofan endowment life policy for Rs. 2,000 on the joint lives of himself and his wife. The proposal was accepted, and a policy was issued on April 8, 1937. The plaintiff's wife died on January 14, 1940.

2. On August 15, 1937, the plaintiff assigned the policy to defendant No. 2 who forwarded it to the first defendant company for registration, and the assignment was duly registered by the first defendant company on February 8, 1940. On the face of it this assignment is absolute in form,; but it is clear that it was intended only to be by way of security. On March 14,1941, defendant No. 2 informed the first defendant company that his claim in respect of the policy was restricted to his interest in the policy money as the first mortgagee in respect of the moneys advanced by him on the security of the policy. But, as I shall presently point out, it makes no difference to the position in law whether the assignment by the plaintiff to defendant No. 2 was an absolute assignment or merely an assignment by way of security.

3. The plaintiff has filed the suit for the recovery of Rs. 2,000 due under the policy and has made the assignee as a party defendant to the suit, as he declined to join him in instituting the suit. The first defendant company has taken up the contention that the plaintiff has no subsisting interest under or in the policy and that he is not entitled to file the suit. I have decided to dispose of this contention as a preliminary issue.

4. It is urged by Mr. Tendolkar on behalf of the first defendant company that once the assignment was executed the only person who could sue on the policy was the assignee, and for this purpose he relies on the provisions of Section 130 of the Transfer of Property Act. That section provides that the transfer of an actionable claim shall be complete and effectual upon the execution of the instrument in writing, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee. It is urged that as all the rights and remedies havevested in defendant No. 2 on the execution of the assignment, the plaintiff has R. 95. no interest left in the policy in respect of which he could maintain the suit against the first defendant company.

5. Reliance has been placed on a decision in Muthukrishrder v. Veeraraghava Iyer I.L.R. (1913) Mad. 297. In that case it was held that a mortgage in writing of a promissory note, executed in favour of the mortgagor by a third party for a debt, creates an assignment of the promissory note in favour of the mortgagee even without an endorsement, and as the right of the promisee to sue on the note becomes vested in the mortgagee, the mortgagee alone is entitled to sue on the note, and in taking accounts of the mortgage, the mortgagee is liable to be debited with the) amount of' the note if he without any justification allows the recovery of the debt barred by limitation. At p. 300 of the judgment White C.J. says :

The rights, of the transferor being vested in the transferee, by the express words- of the section, the transferee is the only party entitled to sue, and this being so, he is, I think, accountable to the transferor for having, allowed the remedy to become time-barred.

6. Under the English law there is a distinction between an absolute transferof a chose in action and a transfer by way of a charge. Under our law Section 130 of the Transfer of Property Act makes no such distinction, and the provisions of that section apply as much to a transfer by way1 of a charge as to' a transfer which is absolute (see MulrajKhatau v. Vishwanath Prabhuram Vaidya (1912) L.R. 40 IndAp 24 . Under the English law when there is an absolute transfer the authorities make it clear that only the assignee can sue on the debt or actionable claim transferred. In Read v. Brown3 tha Court considered the effect of Section 25, Sub-section tion (6), of the Judicature Act of 1873, by which an absolute assignment passed and transferred to the assignee the legal right to the debt or chose in action, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor. At p. 132 Lord Esher, Master of the Rolls, says :

The debt is. transferred to the assignee and becomes as though it had been his from the beginning ; it is' no' longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him ; the assignee becomes the assignee! of a legal debt and is not merely an assignee in equity, and the debt being his, hecan sue for it, and sue in his own name.

7. Therefore, under English law, even when there is a transfer by way of a legal mortgage, it is only the mortgagee who is entitledto us. If the assignor wanted to maintain the suit, he had to obtain a re-assignment from the mortgagee.

8. There is an instructive case reported in Hughes v. Pump House Hotel Company, (No. 2) [1902] 2 K.B. 485. In that case the question arose whether the plaintiff had made an absolute assignment or an assignment by way of charge. The trial Court took the view that the plaintiff had made the assignment by way of charge only. That decision was reversed by the Court of Appeal; and that Court held that it was an absolute assignment whereupon the plaintiff applied to substitute in his place the assignee as the plaintiff in the suit. The order was made in chambers substituting the assignee in place of the original plaintiff, the assignor. There was an appeal from the decision of the Master and the Court of Appeal confirmed the decision. This case makes it clear that as soon as it was decided that there was an absolute assignment by the plaintiff, he could no longer maintain the suit.The assignee had to be brought on record as party plaintiff in order that the suit could be effectively maintained. Under English law when the assignment is only by way of charge, the assignor is a necessary party to the actioneither as plaintiff or defendant because in the case of an assignment by; way of a charge the remedy for or the legal right to the debt or other chose in action does not vest in the assignee.

9. I, therefore, hold that on the execution of the transfer of an actionable claim all the rights and remedies of the transferor vest in the transferee and the transferee alone is entitled to enforce the remedy ; there is no interest left in the transferor which would entitle him to maintain a suit in respect of the actionable debt.

10. Mr. G.M. Gupte on behalf of the plaintiff has contended that as both the assignor and the assignee were before the Court, the first defendant company could get a valid discharge and, therefore, it did not matter whether the rights and remedies of the assignor Bad vested in the assignee. But to my mind this is not a question of whether the first defendant company can get a valid discharge or not. It is more a question of the plaintiff having any interest whatever in the actionable claim which would entitle him to maintain the suit. If the plaintiff had an interest jointly with the assignee, it would not have mattered whether the assignee was a party defend,-ant or a party plaintiff; and, as pointed out by their Lordships of the Privy Council in Monghibai v. CooverjiUmersey : (1939)41BOMLR1127 . a decree could have been passed in favour of the' plaintiff and defendant No. 2. But in this case no decree can be passed in favour of the plaintiff because, as I have pointed out, under Section 130 all his rights and remedies have vested in defendant No. 2.

11. Mr. Gupte has further argued that the plaintiff has,an interest in the subject-matter of the claim inasmuch as he is interested in the equity of redemption ; and for that purpose Mr. Gupte has relied on Section 1341 of the Transfer of Property Act. That section deals with the manner in which a debt which is transferred for the purpose of securing an existing or future debt is to be dealt with when received by the transferor or recovered by the transferee. It has to be applied, first, in payment of the costs! of such recovery; secondly, in or towards satisfaction of the amount forthe time being secured by the transfer ; and the residue, if any, is to belong to the transferor. But that section does not permit the transferor to recover the debt; and the very language of the section makes that clear because, whereas in the case of the transferor the section refers to the debt as received by him, in the case of the transferee it refers to the debt as recovered by him, thus assuming that it is only the transferee who can recover the debt and not the transferor.

12. My attention has also been drawn to the hardship that might result if the transferee as in this case might refuse to file a suit to recover the debt. It is pointed out that it may be that the debtor and the transferee may collude and thus defeat the rights of the transferor. But I do not think that under such circumstances the transferor is without a remedy. The transferor can file a suit against the transferee for redemption and can get the debt re-assigned to him in which case he would be entitled to sue his debtor ; or if the security is lost by reason of the transferee not enforcing it, the transferee could be sued for damages by the transferor for his default. I might point out that in the case to which I have already referred, Muthukrishnier v. VeeraraghavaIyer I.L.R. (1913) Mad. 297 the mortgagee was debited with the amount of the promissory note which had been assigned to him because he allowed the debt to become time-barred.

February 14. I delivered my judgment on the two preliminary issues raised in this suit on February 9, 1944. On that day an application was made to me that in view of my decision, defendant No. 2 wanted time to consider whether he should apply to be transposed as an additional plaintiff.

13. The matter has come on for hearing again today February 14, and Mr. S. M. Shah appearing for defendant No. 2 applies that his client should be transposed as an additional plaintiff. Mr. Tendolkar on behalf of the first defendant company opposes the application and relies on a decision of our Court of Appeal reported in Bhmu v.Kashinath I.L.R (1895) 20 Bom. 537. In that case the action was originally instituted by plaintiff No. 1 praying for an account on an allegation that a certain shop at Ratnagiri belonged to him. Subsequently defendant No. 8 consented to be joined as co-plaintiff on condition that any sum which might be awarded by the Court should be paid to him and not to the plaintiff who he alleged had no right to the shop. There was an appeal from the decision of the Subordinate Judge, and the lower Court of Appeal held that plaintiff No. 1 had not shown that he had a right to sue. Our Court of Appeal consisting of Mr. JusticeBayley Acting Chief Justice, and Mr. Justice Parsons held in a judgment delivered by Mr. Justice Parsons (p. 539):

There can, we think, be net doubt that the plaintiff's suit would be good only if at the time he brought it he had some proprietary interest in the shop, the accounts of which he wishes to have taken. If ha had any such interest, then the joinder of Bhiku, first as defendant No. 8 and then as co-plaintiff, would correct the initial non-joinder and make the case complete as to parties. If, however, the plaintiff had no such interest, the joinder of a person who had an interest in the shop could have no effect upon the plaintiff and would confer on him no right of suit.

14. Therefore the view taken by our Court was that where the plaintiff had no right of action, he could not cure that defect by bringing on record as an additional plaintiff a party who was already a party-defendant to the suit. Mr. Tendolkar argues that as I have already held that the plaintiff had no right of action, the plaintiff's suit cannot be cured by making defendant No. 2 an additional plaintiff although he may have the right to maintain the action. This decision of our Court which is as old as the year 1895 seems to be opposed to the current of decisions both in other High Courts here and in England. As will be remembered, in my decision on thepreliminary issues I referred to a case reported in Hughes v. Pump House Hotel Company, (No. 2) (1902) 2 K.B. 485. In that case it was found that the original plaintiff had no interest which would entitle him to maintain the suit; and still the person who could maintain the suit was permitted to be brought on record in substitution of the original plaintiff who was bound to fail in the action. Fortunately my attention has been drawn by Mr. S.M. Shah to a more recent decision of our Court which takes a view contrary to the view expressed in Bhanu v.Kashinath (1895) I.L.R. 20 Bom. 537 and that is the decision reported in Virappa v.Mahadevappa : AIR1934Bom356 . In that case a promissory note passed in favour of the plaintiff's son was allotted to the share of the plaintiff in a partition made by an award on which a decree was pqgsed. The promissory note was not endorsed by the son in favour of the plaintiff. The plaintiff brought a suit to recover the amount due on the note making the son also a defendant. The trial Court decreed the suit holding that though the note was not endorsed in favour of the plaintiff it was transferred to him by operation of law. The Court of Appeal consisting of Mr. Justice Murphy and Mr. Justice Divatia held that there was no assignment of the note by operation of law and, therefore, the plaintiff was not entitled to maintain the suit, and the only person who could maintain the suit on the promissory note was the son who was the holder. But our Court of Appeal also held that the defendant son should have been transposed, to the plaintiff's side under Order I, Rule 10, of the Civil Procedure Code, and a decree should have been passed in his favour. Therefore, I have here a clear decision that although the original plaintiff might not be entitled to maintain the suit, it is competent to the Court exercising its discretion under Order I, Rule 10, of the Civil Procedure Code, to transpose a party defendant to the place of the plaintiff, such a party being entitled to maintain the suit, and pass the decree in favour of the newly-added plaintiff.

15. There are also certain observations of their Lordships of the Privy Council which go to show that the view taken in Bhanu v. Kmhinath is not the correct view, and those views are expressed in a decision to which also I have referred in my judgment on the preliminary issues, and that is the decision reported in Monghibai v.Cooverj : (1939)41BOMLR1127 . It is true that on the facts of that case the original plaintiffs had in interest in the subject-matter of the suit; but at page 1134 their Lordships approved of the decision reported in Hughes v. Pump House Hotel Company (No. 2), and say that the position would have been the same even if a wrong person had originally sued though he had no cause of action. Although these remarks! are obiter, they deserve the respect which all pronouncements of the Judicial Committee must receive atthe hands of Courts in India. It is true that the decision in Bhtmu v. Kashinath has not been specifically referred to in Virappa v. Mahadevappa. But as there are two decisions of the Court of Appeal which are opposed to each other, I prefer to follow the later, and if I may say so, with respect, the better decision in Virappa v. Mahadevappa. I, therefore, hold that there is nothing in law to prevent me from acceding to the application of defendant No. 2 and transposing him as an additional plaintiff in the suit.

16. I might also note a further objection that was raised by Mr. Tendolkar that in this case if defendant No. 2 were to file a suit on the policy his claim would be time-barred. By allowing defendant No. 2 to be transposed as a party plaintiff I am attracting the application of Section 2, Sub-clause (2), of the Indian Limitation Act, and thereby depriving the first defendant company of a valuable right which they have acquired. I agree that in most cases the Court would not exercise its discretion in transposing defendants as party plaintiffs where a valuable right acquired by one of the defendants is likely to be taken away or defeated. But in this particular case, looking to all the circumstances, I do not think that I should permit the claim of the policy-holder to be defeated by the insurance company on a narrow technical ground-Finally, the question is on what terms as to costs I should permit defendant No. 2 to be transposed as a party plaintiff and permit him to make the necessary amendment to the plaint. I think I should be in a much better position to determine the question of costs relating to this amendment after I have heard the suit on its merits. I will, therefore, reserve the question of costs; occasioned by this amendment and relating to this amendment and the costs of today till after the suit has been disposed of on merits.

17. Plaint to be amended at plaintiff's costs in .the course of tomorrow, February 15.


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