1. This is an appeal from a decision of Davar, J., which raises a short point of law. The material facts are that a man named Ganeshlal Munda owed a sum of Rs. 27,500 to Messrs Gill & Co., who held as security for the debt 212 bales of cotton belonging to Munda. The appellant, who is the defendant in the suit, was also entitled to a debt due from Munda, and there was another firm, in which the appellant was interested, which was also owed money by Munda.
2. In those circumstances an arrangement was made in July 1925, the effect of which was that the appellant took over the liability of Munda to pay Gill & Co.'s debt and also the liability for the debt to the other firm in which the appellant was interested though nothing, I think, turns on that debt; and Gill & Co., agreed that they would hold the 212 bales to the account of the appellant, instead of to the account of Munda. The transaction, the nature of which is not in dispute, is proved by a clerk of Gill & Co., who produced Gill & Co.'s books. Ex. 7, which is a letter written by Gill & Co., to the appellants, explains exactly what had happened. In that letter Gill & Co., say:
212 bales of Ganeshlal Munda are credited to your account as per his and your instructions and Rs. 27,500 have been debited to your account and credited to the account of Ganeshlal Munda.
3. The transaction is shown more in detail in Gill & Co.'s books. That letter was written on 23rd July 1925, and on the next day Munda wrote to the appellant a letter' (Ex. 9) stating that Rs. 41,000 odd, made up of Rs. 27,500 due to Gill & Co., Rs. 10,500 due to the other firm I have mentioned, and the amount due to the appellant 'are to be paid to you,' that is, the appellant. Then the letter proceeds:
As against the said amount our bales 212 which are lying with Gill & Co., are got transferred to your name. When these 212 bales are sold do you please credit the amount of sale proceeds towards this amount.
4. So that the effect of that was that the appellant became entitled to the 212 bales, which were deposited with Gill & Co., as security for the total debt of Rs. 47,000 odd, and the appellant took over Munda's debt to Gill & Co. On 21st August 1925, the plaintiff-respondents, who had a claim against Munda, applied for attachment before judgment in respect of these 212 bales, and in September a summons was taken out by the present appellant to raise the attachment, and as a result of that summons an order was made on 25th September 1925, that the plaintiffs be at liberty to file a suit in respect of the matters in dispute. On 5th November 1925, the plaintiffs filed this suit, and they alleged in the first instance that the transaction between Munda and the appellant was a collusive and fraudulent transaction, and that the appellant was merely the nominee of Munda, and that the bales all the time in substance belonged to Munda. At the trial those charges of fraud and collusion were withdrawn, and an amendment was allowed on certain terms as to costs by which the plaintiffs claimed that the transaction by which the appellant (the defendant in the suit) claimed the 212 bales was void under the Transfer of Property Act, and the question of law which we have to determine is whether that claim is correct or not. The learned Judge held that the transfer of the bales from Munda to the plaintiff was a transfer of an actionable claim which under the Transfer of Property Act must be in writing, and he further held that there was nothing in writing to satisfy the requirements of the statute.
5. Mr. Engineer on behalf of the appellant takes two points. He says, first, that the transaction was not a transfer of an actionable claim, and, secondly, that, if it was a transfer of an actionable claim, then in fact Ex. 9 is a sufficient transfer in writing to satisfy the statute. Before dealing further with his contentions, I should refer to the material words of the Act. Under Section 130, T.P. Act, it is provided that a transfer of an actionable claim shall be in writing signed by the transferor. That is all in the section material for the present purpose. Then Section 3 defines what is an actionable claim. It says an actionable claim means a claim to any debt other than a debt secured by mortgage of immovable property or by hypothecation or pledge of moveable property. Pausing there, this debt was clearly secured by hypothecation or pledge of moveable property, and therefore the debt itself does not fall within the definition of actionable claim. But then the definition goes on to say that actionable claim includes a beneficial interest in property not in the possession either actual or constructive of the claimant which the civil Courts recognize as affording grounds for relief.
6. Now, it is said here on behalf of the plaintiff-respondents that Munda was entitled to a beneficial interest in these bales, and that cannot be questioned; and it is further said that as a result of the transaction of July 1925 that beneficial interest in the bales passed to the appellant. In substance, no doubt, that is so. Before the transaction of July 1925 Munda was entitled to redeem these bales on paying the amount due to Gill & Co., and Munda was entitled to any surplus proceeds of sale which might result if Gill & Co., sold the bales; and after the transaction of July 1925 both of those beneficial interests or claims belonged to the appellants as charges. Therefore say the respondents, the beneficial interests of Munda in the bales, being an actionable claim, are transferable under Section 130 only by a transfer in writing, and there being no such transfer, the bales did not pass to the appellants. Mr. Engineer's answer to that is that if this transaction be properly looked at, the Transfer of Property Act has no application at all; the transaction did not involve a transfer but was an instance of what is known as novation. The ordinary case of novation is where you have a debt due by A to B, and another debt due by C to A, and the three parties meet and agree that, instead of A paying B, and G paying A, C shall pay B. The result of such an arrangement is that you destroy the old debts which A owed to B, and which C owed to A, and you substitute for those debt a new debt by C to B. That is in law something different from a mere transfer of the debt. In so far as the debt in this case is concerned, I feel no doubt that the case was one of novation, the three parties, Gill & Co., Munda, and the appellant, all being parties to the transaction, Mr. Engineer contends that the same principle must apply to the interest in the bales, and that the real transaction amounted to this: that Gill & Co. handed the bales back to Munda in return for payment of Rs. 27,500, that Munda then handed the bales over to the appellant as security for moneys due to the appellant, and that the appellant then handed the bales back again to Gill & Co., who lent to him the same amount as had previously been lent to Munda. The transaction of course was not carried out by actual transfers and payments, but by havala entries in the books. I think on the whole that that argument of Mr. Engineer is sound and that the true view is that the transaction was not a transfer of property, but was a substitution of the appellant for Munda as the debtor to Gill & Co., and as the beneficial owner of the bales charged with the debt.
7. I think authority for that conclusion is to be found in the case, on which Mr. Engineer relies, of Sethna v. Hemingway : AIR1914Bom286 In that case a sum of Rs. 10,500 was deposited in a bank by a person referred to in the head-note as W, and W transferred the receipt for that amount to his nephew H. The receipt was not of course a negotiable instrument, but H took the receipt to the bank with a letter from W, and the bank acted on the receipt and paid the money to H: but the Court expressed the opinion that if the bank had acted on the receipt only by accepting II as the person entitled to the money on deposit, nevertheless that would not have been a transfer of property within Section 130, T.P. Act, but would have been a mere instance of novation.
8. Upon the second point I feel no difficulty at all. The learned Judge held that the document Ex. 9, to which I have referred, and which contains a statement by Munda that 'the bales are lying with Gill & Co., and are got transferred to your name,' did not amount to an instrument in writing within Section 130 because it merely recorded in writing a transaction which had already taken place. That letter is dated 24th July, and the entries in Gill & Co.'s books are dated 23rd July. But, in my opinion, the use of the past tense has no significance. Section 130 provides that a transfer not in writing is in effect a nullity. Therefore if in fact there is, or purports to be, a verbal transfer of an actionable claim made on 23rd July, and then there is an instrument in writing on 24th July which refers to the transfer having been made, it seems to me that the instrument in writing On 24th must be read as being in law the transfer. In point of fact the intended transfer on 23rd July, not being in writing, could only operate as an agreement for transfer and the document on 24th, referring to the transfer as having been made, must, I think, be construed as referring to the intention of transfer having been arrived at. I think it would be much too narrow a construction to put on this document to say that, merely because it is expressed in the past tense, it cannot operate as a present transfer within Section 130, which does not require the transfer to be in any particular form. Even therefore if I had been of opinion that the transaction in question amounted to a transfer of an actionable claim, I should have held that in this case there was a sufficient transfer in writing to satisfy the requirements of Section 130, T.P. Act. That is a conclusion which the learned Judge himself says that he was anxious to arrive at, but did not see his way to do so. I think we ought to arrive at that conclusion and the appeal must therefore, be allowed with costs. Appeal allowed with costs. Cross-objections dismissed with costs. Suit dismissed with costs. Appellant entitled to the money in the hands of the two attorneys.
9. I agree that this appeal should be allowed. On 23rd July 1925, the position between the parties seems to have been this: A sum of Rs. 27,500 was due by Munda to Messrs. Gill & Co. As against that amount Messrs. Gill & Co. held 212 bales of cotton belonging to Munda. Under Section 172, Contract Act, the property in those bales was in Munda subject to this: that under the Common law Messrs. Gill & Co., as pledgees of the goods and being in possession of them had a right to sell them and appropriate the sale proceeds towards the amount they had advanced to Munda. Under those circumstances it is clear that although the legal ownership in the goods was still in Munda, in reality he had only a beneficial interest to the extent of any surplus there might be after these goods were sold and the sale proceeds were first applied towards the claim of Messrs. Gill & Co. against Munda. At this time Munda was also a debtor of the appellant in certain sums of money and a tripartite agreement seems to have been arrived at by which the liability of Munda to Messrs. Gill & Co., was extinguished. So was also the security given by Munda to Messrs. Gill & Co. In place of that liability and the security going with it a new contract seems to have been arrived at, by which the appellant became liable to Messrs. Gill & Co. in the sum of Rs. 27,500 and Messrs. Gill & Co. Continued to be in possession of the 212 bales, but not as pledgees from Munda, but as pledgees from the appellant. The result of the tripartite agreement between the parties amounted, in my opinion, to a novation and not to an assignment of the beneficial interest which Munda originally had in these 212 bales. The entries in the books of Messrs. Gill & Co. which were exhibited in the case as well as the letter Ex. 7 written by Messrs. Gill & Co. to the appellant make it quite clear that as from 23rd July 1925 the appellant was to be regarded as the debtor of Messrs. Gill & Co., and the security was to be held by Messrs. Gill & Go. as from the appellant. The appellant, in my opinion, is entitled to succeed on the first point which has been raised on his behalf by Mr. Engineer.
10. With regard to the second point, viz., the construction which is to be put upon Ex. 9 it is clear that although the letter Ex. 9 from Munda to the appellant speaks of the transfer as having been already effected and seems at first sight merely to record what had already taken place, the document must be taken as. a whole and in view of the fact that the original is in the vernacular regard must also be had to the mode of thought among the people of this country. It is clear that the intention of the document is intended to transfer to the appellant any beneficial interest that may have remained in Munda in respect of these goods. In my opinion Ex. 9 Would in any event satisfy the requirements of Section 130, T.P. Act, if this transaction is to be regarded as an assignment of an actionable claim.