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Khimji Bhimsi Vs. Chunilal Ambaidas - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberSecond Appeal Nos. 1033 of 1915 and 323 of 1916
Judge
Reported inAIR1919Bom131; (1919)21BOMLR419
AppellantKhimji Bhimsi;chunilal Ambaidas
RespondentChunilal Ambaidas;govindji Khimji
Excerpt:
.....in the course of one transaction shall not exceed the principal. but it does not prevent an agreement between the debtor and the creditor to capitalize interest at a stage when the interest does not exceed the principal. all the smriti writers and the commentators are agreed that there must be an agreement between the debtor and the creditor to capitalize interest in order to justify the calculation of interest in future on the sum made up of the principal and the interest thus agreed to be capitalized. the question whether that agreement should he in writing or not is one upon which the smriti writers are not unanimous.' - - that there is nothing in the texts which would prevent an agreement amounting to a new transaction between the parties, the debtor and the creditor, for..........agreed to capitalize interest at the intervals at which he passed those acknowledgments. in this respect the present case is really different from the case of shankar v. mukta i.l.r. (1896) 22 bom. 513. the transaction here is one between two merchants; and there is no reason to suppose that, when the debtor acknowledged the particular amount to be due on calculating the interest not only on the original principal, but on the principal plus the interest which was acknowledged on a previous occasion, he meant anything but an agreement on his part to treat the sum thus agreed to be due as principal for the calculation of interest in future. whether such an acknowledgment can form the basis of an action or not is not the question in the present suit, and it may be that in the case of.....
Judgment:

Basil Scott, C.J.

1. In appeal No. 1033 of 1915 it is agreed between the parties that there is a mistake in the figure mentioned in the District Judge's judgment, and that '983', should read '938' and it may be taken that the judgment is inaccurate in that respect. Whether the judgment should stand in its amended form is a question which has to be decided in the other appeal No. 323 of 1916. Chunilal brings this suit against Nathu Shivji. Ambaidas, the father of Chunilal, and Nathu Shivji were partners in equal shares in a cotton business. The partnership was dissolved on the 3rd of November 1839, the business having resulted in a loss. On the 24th September 1900, Nathu Shivji admitted by an acknowledgment in the accounts that he was indebted to Ambaidas in the sum of RS. 1,022-12-0. The acknowledgment runs as follows:--'Cotton was pressed into bales in partnership between you and me. Therein a loss was sustained. As to the amount of loss falling to my share an account in respect thereof was made and Rs. 1,022-12-0 were found due as up to this day.' On the 22nd September 1903, just before the expiry of three years from the date of the last acknowledgment in account, a fresh acknowledgment was signed by Nathu Shivji stating that an account in respect of the previous Khata was made and a balance of Rs. 1,033-10-0 was found due. Before the expiry of three years from that date another acknowledgment was signed by Nathu Shivji stating that an account in respect of previous Khata was made and Rs. 1.694 were found due, and a little less than three years later a further acknowledgment was signed by Nathu Shivji stating that an account in respect of the previous Khata was made and Rs. 2,071 were found due. Rs. 2,071 together with interest from the date of the acknowledgment, namely, 19th of September 1909, until the date of suit amount to Rs. 2,000. For that sum the plaintiff has instituted this suit.

2. The learned trial Judge passed a decree for the amount claimed with coats and interest on Rs. 2,600 at 6 per cent, from the date of suit to payment.

3. On appeal to the District Judge the decree was modified by the reduction of the decretal sum from Rs. 2,600 to Rs. 1,877-10-0, the reason being that the learned Judge was of opinion that the rule of damdupai applied and prevented the recovery of any more than the last mentioned sum, thereby differing from the conclusion arrived at by the learned trial Judge. The decision appears to have been based upon the penultimate paragraph in the case of Shankar v. Mukta (1896) I.L.R. 22 Bom. 513, 520, in which it was said that 'how much of this due for principal and how much for interest is a matter of calculation, but the interest recoverable by suit is limited by the amount of principal originally advanced.' There was in that case no discussion of the texts in Hindu law bearing upon the rule of damdupat, and the decision is expressed to be based upon an unreported case of Motilal v. Shivram S.A. No.43 of 1894 (unreported). In a later case in this Court, Sakalal v. Bapu I.L.R.(1899) 24 Bom. 305; 2 Bom. L.R. 18, the texts relating to damdupat in the matter of loans were fully considered in the judgment of Sir Lawrence Jenkins, and the Court was of opinion that in the case of a bond where there was an express agreement for payment of interest, which involved in effect an agreement for payment of interest on capitalized interest exceeding the original principal, that there was nothing to prevent a decree for a larger sum than the principal originally advanced.

4. In the present case we are dealing with mercantile accounts which are ordinarily made up from year to year with yearly rests for interest calculated at the time of Diwali. But owing to the business having ceased to be a going concern, presumably the practice of yearly rests was not followed from the date of first adjustment referred to but costs were taken at intervals of three years at the times when acknowledgments were required to prevent the operation of the law of limitation.

5. In the present case we have had the advantage of an argument on behalf of the respondent from Dewan Bahadur Rao in which he attempted to meet the case made upon the Hindu law texts relied upon by the learned trial Judge, and adverted to in the judgment of the Court in Sukalal v. Bapu I.L.R.(1899) 24 Bom. 305; 2 Bom. L.R. 18. His argument resolves itself into this: that there is nothing in the texts which would prevent an agreement amounting to a new transaction between the parties, the debtor and the creditor, for payment of a larger sum than double the amount of principal, provided the agreement was clearly proved ; that by reason of certain expressions in texts of Brihaspati and Manu that proof could only be by a document in writing, and that the acknowledgments signed in the books in the present case could not be held to be writings satisfying the necessities of the rule, because in Shankar v. Mukta I.L.R.(1896) 22 Bom. 518 it has been held that a signed Ruzukhata cannot in the Bombay Courts be taken as anything more than an acknowledgment of liability for the purpose of saving limitation, and does not give rise in itself to afresh cause of action, and therefore that the Ruzukhatas cannot be taken to amount to a fresh agreement such as was contemplated by the Hindu Smriti writers. It appears to me, however, that the decision in Shankar v. Mukta must be taken subject to a recognized mercantile usage, that interest can be capitalized between Hindus at the end of each year, and a fortiori no objection can be taken to the capitalization at the end of every three years in relation to mercantile accounts, where the yearly settlement of accounts has ceased owing to the ceasing of the business.

6. As regards the requirements of proof under the Hindu law, if that can be considered as part of the substantive Hindu law, and not now rendered obsolete by the rules of procedure in Anglo-Indian Courts, it is to be observed that the translators of the text of Manu relied upon by Dewan Bahadur Rao are by no means unanimous in agreeing that Mauu thought a writing to be necessary, and that out or several Hindu law texts which have been referred to, Brihaspati is apparently the only one in which the necessity for a writing is clearly mentioned. We have in each of the Ruzukhatas a written document in which there is the clearest implication that the party liable agrees to pay interest upon interest, because the sum mentioned in each of the three last Ruzukhatas is only arrived at by calculating interest upon interest, and that is the sum which is acknowledged to be due. It, therefore, appears to me that both as a matter of natural inference from the documents and us a matter of Hindu law there is nothing to prevent the Court from awarding the full sum claimed, and that therefore the judgment of the District Judge should be set aside and that of the trial Judge restored in its entirety with costs throughout upon the respondent.

Shah, J.

7. I agree. I desire to add with reference to the rule of damdupat, that it requires that the interest in the course of one transaction shall not exceed the principal. But it does not prevent an agreement between the debtor and the creditor to capitalize interest at a stage when the interest does not exceed the principal. All the Smriti writers and the commentators are agreed that there must be an agreement between the debtor and the creditor to capitalize interest in order to justify the calculation of interest in future on the sum made up of the principal and the interest thus agreed to be capitalized. The question whether that agreement should be in writing or not is one upon which the Smriti writers are not unanimous. But in my opinion in the present case whatever agreement there is between the parties is in writing, and therefore, the difference on that point between the Smriti writers is not a matter of any practical importance in the present case. The question really is whether the acknowledgments passed by the debtor from time to time afford a fair basis for the inference that the debtor agreed to capitalize the interest. On that point having regard to the four acknowledgments passed by the debtor, it is clear that he agreed to capitalize interest at the intervals at which he passed those acknowledgments. In this respect the present case is really different from the case of Shankar v. Mukta I.L.R. (1896) 22 Bom. 513. The transaction here is one between two merchants; and there is no reason to suppose that, when the debtor acknowledged the particular amount to be due on calculating the interest not only on the original principal, but on the principal plus the interest which was acknowledged on a previous occasion, he meant anything but an agreement on his part to treat the sum thus agreed to be due as principal for the calculation of interest in future. Whether such an acknowledgment can form the basis of an action or not is not the question in the present suit, and it may be that in the case of Shankar v. Mukta I.L.R. (1896) 22 Bom. 513, there was not sufficient basis for an inference as to the agreement between the debtor and the creditor for the capitalization of interest. But in the present case it seems to me that the trial Court was right in inferring such an agreement, and the passing of the acknowledgments by the debtor seems to me to be consistent only with that inference.


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