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In Re: Industrial Bank of Western India, Ld.; in Re: Manchand Walchand and Company - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case Number O.C.J. Appeal No. 12 of 1930
Judge
Reported in(1930)32BOMLR1656; 129Ind.Cas.890
AppellantIn Re: Industrial Bank of Western India, Ld.; in Re: Manchand Walchand and Company
DispositionAppeal dismissed
Excerpt:
.....of the insolvent firm and certain other persons who were alleged to be members, it operated as an absolute release in favour of the whole firm.;section 63 of the indian contract act, 1872, is intended not only to enable a promisee to release a debt at the instance of a third party, but also to enable the promisor, whose debt has been released at the instance of a third party, to take advantage of that release. - .....insolvent firm of maoshand walchand & co. it is quite clear that the first member of the family firm of haribhai devkaran, namely, hirachand ramchand, was a partner in the firm of manchand walchaud & co., but it is alleged that the family firm was not a partner. the family firm was also alleged to be liable on the hundies, and in 1924 the appellant bank filed a suit no. 2253 of 1924 against seven defendants, who were the members of this joint family firm of haribhai devkaran. the plaint shows that the claim was made against the seven defendants either as members of the firm of haribhai devkaran and on the footing that that firm was a partner in the firm of manchand walchand & co., or, alternatively, on the hundies which had been accepted by haribhai devkaran. that suit in due course.....
Judgment:

J.W.F. Beaumont, C.J.

1. This is an appeal from an order of Mr. Justice Rangneker confirming a decision of the Official Assignee which rejected a proof of claim of the Industrial Bank of Western India Ltd., in the insolvency of the firm of Manchand Walchand & Co. The appellant bank put in a claim in the insolvency for a sum of Rs. 2,47,656-1-11. The insolvency commenced in 1922. The debt due from the insolvents was in part secured, by certain hundies which had been drawn by the insolvent firm in favour of the appellant bank and had been accepted by Haribhai Devkaran & Co. Haribhai Devkaran were a joint Hindu firm, and it had been alleged at one time, but it has not been proved, that that firm was a partner in the insolvent firm of Maoshand Walchand & Co. It is quite clear that the first member of the family firm of Haribhai Devkaran, namely, Hirachand Ramchand, was a partner in the firm of Manchand Walchaud & Co., but it is alleged that the family firm was not a partner. The family firm was also alleged to be liable on the hundies, and in 1924 the appellant bank filed a suit No. 2253 of 1924 against seven defendants, who were the members of this joint family firm of Haribhai Devkaran. The plaint shows that the claim was made against the seven defendants either as members of the firm of Haribhai Devkaran and on the footing that that firm was a partner in the firm of Manchand Walchand & Co., or, alternatively, on the hundies which had been accepted by Haribhai Devkaran. That suit in due course came on for trial, and a consent decree was made, and the question with which we have to deal really turns on the construction of that decree. By the decree, which was approved by the Court on behalf of the minor defendants, it was ordered that defendants Nos. 1, 2, 4 and 7 personally and defendants Nos. 3 and 6 to the extent of their interest in the properties belonging to the family of Haribhai Devkaran do pay to the plaintiffs the sum of Rs. 1,05,000; and then it was provided as follows:-

This Court by and with such consent doth declare that as between the parties to the suit and save as aforesaid the plaintiffs have no longer any claim against Manchand Walchand and Company or its assets or against the members or assets of the family of Haribhai Devharan or against any partner or alleged partner in the firm of Manehaud Wulchand and Company or of Haii-bhai Devkaran. And this Court by and with such consent doth further declare that as between the parties to the suit, the second, third, fourth, fifth, sixth and the seventh defendants' (their names being given) 'will be entitled to participate in the distribution of the assets of Manchand Walchand and Company by the Official Assignee of Bombay in the Insolvency proceedings No. 81 of If)a2 on the footing of their being creditors of Manchaud Walchand and Company for Rs, one lac and five thousand.

2. The contention of the Advocate General on behalf of the Official Assignee is that that decree amounts to an assignment of part of the appellant bank's debt amounting to Rs. 1,05,000, and a release of the rest of the debt. It is not really necessary to decide in this ease whether the decree amounts to an assignment of a part of the debt. That is a matter which can be dealt with in the insolvency of Manchand Walchand & Co. I may observe in passing that if the Advocate General's contention is correct, it looks rather as if the effect of the decree was to benefit the outside creditors, inasmuch as it would substitute a debt of Es. 1,05,000 for a much larger debt of the bank, and consequently a smaller dividend would be payable than otherwise would have been the case in respect of the bank's debt. But we have to deal with the question as to whether the decree does amount to a release of the appellant bank's debt.

3. Mr. Thakor says in the first place that the Official Assignee, who was not a party to the action, cannot take ad vantage of the release even if the order amounts to a release, I think that if we were dealing with the case under English law, that would be so, because it is quite clear that in English law a contract between A and B for the benefit of C, cannot be enforced by 0, it is res inter alias acta. But we are not dealing with the matter under English law but under Indian law, and it seems to me that the effect of Section 63 of the Indian Contract Act, which provides that

Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit,

is not only to enable a promisee to release a debt at the instance of a third party, but also to enable the promisor-whose debt had been released at the instance of a third party-to take advantage of that release. That that was the intention of the Act seems to be shown by the third illustration which says,

A owes B 5000 rupees. C pays to B 1000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.

4. That seems to recognise the intention of the framers of the Act that the release need not necessarily be made in favour of the person liable. Section 41 of the Act carries out the same idea, because it provides that

When a promisee accepts performance of the promise from a third parson, he cannot afterwards enforce it against the promisor,

So that, it is, I think, clear that the Indian Contract Act materially alters the provisions of English law as to accord and satisfaction and as to the right of a third party to take advantage of a release made for his benefit. I think, therefore, that in the case of this order, if the debt is released, it is open to the Official Assignee to take advantage of the release, although he was not a party to the action.

5. Then Mr. Thakor says that the words of the decree do not amount to an absolute release because of the words, ' as between the paities to the suit'. The declaration is that as between the parties to the suit, the plaintiffs have no logner any claim against Manchand Walchand & Company or its assets. I think myself that the words ' as between the parties to the suit ' do not really carry the matter further. The parties to the suit included one who was himself a member of the insolvent firm, and, although he was not sued in that capacity, undoubtedly a release in his favour must operate in his favour in every capacity. So that there is a release against one of the partners and the whole of the assets, and the release is expressed to be for the benefit of that partner and certain other persons. In these circumstances, I do not see how you can have any debt left. I rather doubt if you can ever have a debt alive for the benefit of some persons, but dead as to others; but however that may be, having regard to the fact that the release in this case is in favour of one of the members of the insolvent firm, and certain other persons who are alleged to be members, I think that it operates as an absolute release in favour of the whole firm, and I therefore think that this appeal should be dismissed with costs.

Blackwell, J.

6. I agree and have nothing to add.


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