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The Secretary of State for India in Council Vs. Pandit Radhika Prasad Bapuli - Court Judgment

LegalCrystal Citation
Decided On
Reported in(1923)ILR46Bom259
AppellantThe Secretary of State for India in Council
RespondentPandit Radhika Prasad Bapuli
government bonds - promissory-note--on demand--demand by creditor at debtor's treasury--demand, whether necessary for liability to arise--suit on bond, as a simple contract debt--limitation--limitation act (ix of l908), section 10 and article 120--agreement of 1824 between the east india company and creditors of deposed raja of tanjore as to payment of debts--bonds executed in 1845 on behalf of east india company to creditors of deposed raja of tanjore--sinking fund created and maintained out of tanjore revenues for discharge of interest and principal--subsequent issue of bonds--effect of--east india company and its successor (government of india), whether trustees to creditors--suit against secretary of state, whether against trustee and so barred by limitation--specific trust. - - 1......schwabe, c.j.1. the history of this matter is so clearly stated in the judgment of coutts trotter, j., that it is unnecessary for me to repeat it and i have nothing to add to his statement of the facts except as to the plaintiff's title and i will deal with that first.2. the plaintiff is the assignee of one mukund lal who is the direct lineal descendant of madhu sahai who, in the year 1845, had issued to him a document called a promissory-note of the tanjore debt no. 307. the plaintiff has also obtained from the district court of benares a succession certificate under the succession certificate act of 1889 in the matter of the estate of madhu sahai declaring him entitled to collect the money and the interest due on the said promissory-note (exhibit m). the effect of that certificate is.....

Schwabe, C.J.

1. The history of this matter is so clearly stated in the judgment of Coutts Trotter, J., that it is unnecessary for me to repeat it and I have nothing to add to his statement of the facts except as to the plaintiff's title and I will deal with that first.

2. The plaintiff is the assignee of one Mukund Lal who is the direct lineal descendant of Madhu Sahai who, in the year 1845, had issued to him a document called a promissory-note of the Tanjore debt No. 307. The plaintiff has also obtained from the District Court of Benares a succession certificate under the Succession Certificate Act of 1889 in the matter of the estate of Madhu Sahai declaring him entitled to collect the money and the interest due on the said promissory-note (Exhibit M). The effect of that certificate is that the n plaintiff is declared to have whatever rights Madhu Sahai would have had in that promissory-note if he had been alive, and payment to him will be a good discharge to the Government. The assignment to the plaintiff (Exhibit J) was made in 1909 and in my judgment it assigns all the rights that the assignor had as representing Madhu Sahai. It is true that it recites that the assignor, is entitled to the promissory-note and to a specified amount of interest Rs. 2,833-15-0 1/2. That is the amount of interest accrued due from the date of the last payment referred to hereafter, up to the time when by Exhibit F published in the Fort 8t. George Gazette, it was announced that, as Madhu Sahai had declared that he had not received the promissory-note No. 307, it would be paid on 30th September 1854, and that the notice would be held equivalent to a tender of payment on that date, from which date all interest on the said note would cease. It has not been contended before us that that notice had any effect on the rights of Madhu Sahai, but apparently the parties to the assignment thought that it had the effect of stopping the interest as from that date, and that is apparently the meaning of this recital. However, the operative part of the document assigns all the interest in the promissory-note which the assignor had. In the translation before us the words are 'right and authority.' But we have had before us the Court interpreters of Hindi and Gruzarati and they agree that the words mean literally 'the rights and powers' and convey what we understand by such words as 'all the right, title and interest' and include particularly all powers of recovering by action or otherwise the amount due on the promissory-note. This, in my judgment, is wide enough to cover both principal and all interest due and to become due. It follows that the plaintiff had both, by the assignment and by virtue of the succession certificate all the rights of the estate of Madhu Sahai.

3. I propose now to consider the rights of the plaintiff apart from the Limitation Act, and then whether that Act applies. The history of the matter as far as we can ascertain it, is that in 1847 one Hur Kissen Doss received through his agent one Pattam Narayanaswami Chehti, the arrears of interest up to 30th October 1846 from the date of the agreement of 1824 referred to hereafter, i.e., Rs. 8,411-5-1 (Exhibit 1-A). The promissory-note itself has a column on the back for acknowledgment of the receipt of interest. That column contains what purports to be an order by Madhu Sahai to pay to Hur Kissen Doss and it also contains what purports to be a further order signed by Madhu Sahai to pay to one Shri Grirdharji Maharaj. This is the best that can be made out of the endorsement on the original somewhat dilapidated promissory-note, and of a copy of this endorsement made by the plaintiff when it first came into his possession some 13 years ago. It is suggested that these endorsements are forgeries, and there is some support for that theory in that in 1853 Madhu Sahai's statement that he had never received the promissory-note is officially accepted as is shown by Exhibit E. But the United East India Company paid this interest to Hur Kissen Doss in 1844 on what purports to be the direction of Madhu Sahai and, in the absence of evidence that it was not done by his direction, in my judgment the plaintiff has failed to establish that this amount of interest was not properly paid; and therefore in my judgment his claim to that amount fails.

4. At later dates other persons made claims under the promissory-note, but they were all rejected, one by the High Court made by V. Muniswami Chetti, as appears T from Exhibit G at some date before 1864. In 1892 t one Shri Jivan Lalji put in a claim which was rejected (boo Exhibit H). It would appear that Shri Jivan Lalji was the grandson of Shri Girdharji Maharaj, who in Exhibit E is stated to hare died in 1842, and Jivan Lalji left surviving him, a widow and two sons, one also called Girdharji Maharaj (see Exhibit K). If Exhibit E, which does not seem to have been proved by any one, is accurate, that Girdharji whose name appears endorsed on the promissory-note was dead before the promissory-note was issued in 1845 and it is not surprising that doubts were thrown in Exhibit H on the honesty of any claim made through him. At any rate, no payment was made of principal or interest to Girdharji Maharaj or any one claiming under him, and the plaintiff has by Exhibit K taken the precaution of obtaining a release deed from the present representatives of Girdharji Maharaj, and in my judgment the supposed endorsement to him can be disregarded. It is not relied upon by the Secretary of State. Where the promissory-note was until between 1901 and 1906, when it is stated that it came into the hands of the heirs of Madhu Sahai, we do not know. But it was originally issued to Madhu Sahai and was throughout his and his legal representatives' property, and I find no assignment of his rights thereunder, except to the interest dealt with above, until the assignment to the plaintiff. I therefore hold that the plaintiff has the full rights that Madhu Sahai would have had if he were alive now.

5. Those rights, apart from limitation, are to be paid the principal, the requisite notice having been given in 1853 and apparently again in 1858 (see Exhibit G) and interest at 4 per cent from October 1846 until the decree herein.

6. It is contended that all rights to the principal and consequently also to the interest are barred. It is argued that under Article 120 of the schedule to the Limitation Act of 1908, if under no other article, the right to recover is barred six years after the principal debt became payable, i.e., from the date of expiry of the 15 months' notice given in 1853 or 1858. There are two answers made to this: first, that time can only begin to run from the date of demand for payment made at Madras which was not until October 1916; and secondly, that the Government, who it is admitted have succeeded to the rights and liabilities of the United East India Company were and are in the position of trustees and that, under Section 10 of the Limitation Act, no period of limitation can apply. The learned Judge has found the first point against the plaintiff and the second in his favour. In my judgment the plaintiff is right on both points.

7. The first point turns on the terms of the promissory-note itself. By it the Company agrees to pay to Madhu Sahai, on the expiration of 15 months' notice of payment, on demand at the general treasury at Fort St. George the principal sum and to pay interest half-yearly as long as the Company was in possession of the revenue of Tanjore. The interest was to be paid at the Treasury in cash to proprietors if resident in India and in cash or by bills at 12 months at the option of the proprietors, if resident in Europe.

8. According to the law of England when money is payable on demand and nothing further is said, it is payable at once and without demand and time under the Statute of Limitations begins to run at once. The most common instances of the application of that principle are of money lent repayable on demand or at request, and promissory-notes payable on demand. Norton v. Ellam (1837) 2 M. & W. 461. It is -worth, noticing that this principle of the English common law has been held not ' to apply to cases in the mufassal. Tarinee Pershad Ghose v. Pran Kishen Banerjee (1870) 14 W.R. 224. However the principle is in terms applied by Articles 59 and 73 of the . Limitation Act to cases of money lent and bills of exchange and promissory-notes payable on demand. But it is not extended to any other case. Article 73 does not apply to this case as the so-called promissory-note is not a promissory-note within the definition of the Limitation Act. Further, in England the question in such cases is stated clearly by Sorutton, L.J., in Bradford Old Bank v. Sutclife [1918] 2 K.B. 833 and by Bankes and. Atkin, L. JJ., in Joachimson v. Swiss Bank Corporation [1921] 3 K.B. 110 where it was established that the principle did not apply to cases between customers and bankers. The question to be considered is whether the words 'on demand' are mere words, or whether, looking at the whole document, it is really intended that the demand should be made before the liability to pay arises. Now in this connexion, I attach very great importance to the fact that the payment is to be made at a named place by the person liable, which place is the address of the debtor and not of the creditor. In the case Rowe v. Young (1820) 2 Bligh., 391 it was held that the presentment for payment of a bill of exchange payable at, a named place was a condition precedent to the right to sue on the bill. It is true as pointed out by Coutts Trotter, J., that that particular rule has since been altered by Statute, but the principle of the decision is, in my judgment, in no way thereby affected and I consider it directly in point. Further, it is worth observing that there has been no similar statutory alteration of the law in India. Looking at the whole documents in my judgment, it was the intention of the Company to insist on a demand at the place named; for I cannot think that it was intended that the Company should be under a duty to seek out the creditors and pay them, especially as the payment under the promissory-note was to be to the payees or their order and the Company would not know who they would be at the expiration of 15 months' notice to be given at some future date. Further, as to the interest the Company would require to know if the proprietor for the time being was in India, in which case it was to be paid in cash at the general treasury, or in Europe, in which case he had an option, the exercise of which he would have to communicate. In my judgment, the Company came under no liability to pay either the principal or interest until the demand was made for payment at a particular place and in some cases in a particular manner; and if the Company had been sued without a demand, it would, in my judgment, have been a good defence to the action that no demand had been made. It follows, in my judgment, that the rights under the promissory-note looked upon as a simple contract debt are not barred.

9. Secondly, are the Government trustees within the meaning of Section 10? Following the words of that section, is the Government a person in whom property has been vested in trust for any specific purpose and is the action for the purpose of following the trust property? A specific purpose is a purpose that is either actually and specifically defined in the terms in which the trust is created, or a purpose which from the specified terms can be certainly affirmed. Khaw Sim Tek v. Chuah Hooi Gnoh Neoh (1922) 49 I.A. 37. In this case the terms are to be found in the articles of agreement of 1824 (Exhibit C) a of which, I think, if this case goes further, Articles 15 and 16 should be printed. It was an agreement between the Company and amongst others, Madhu Sahai's predecessor-in-title. In my judgment, by that agreement the United Company undertook to set aside a sufficient part of the Tanjore revenue to be received by it, to provide for the payment to the creditors of Amar Singh, who had signed the agreement, of their debts. Those creditors were to receive transferable bonds or certificates, and sufficient revenue was to be set aside and applied to paying the interest on those bonds, and also to creating and accumulating a sinking fund for the redemption in due course of the principal. In pursuance of this agreement a transferable bond, called a promissory-note, was issued as the note states conformity with and in pursuance of the articles of agreement of 1824, and is now held, by the plaintiff it is true that by the terms of the document the Company agrees to pay in the events that have happened, the interest and principal due on the bond to Madhu Sahai or his order. He or his assignees could have sued on the promissory-note itself; and the Company undertook the liability to pay interest so long as they received the Tanjore revenue, and principal after 15 months' notice given by them, and it would have been no defence that the Company had not, received sufficient revenue or that, after giving the notice had not got sufficient sinking fund in its hands; but, this does not in my judgment prevent the Company from being trustees of the fund that it did get into its hands, that is, of that part of the revenue required for the purpose of meeting the principal and interest of these bonds. I agree with the judgment of Coutts Trotter, J., that a trust was created by the articles of agreement and in my judgment, the Company and the Government and its successors are trustees of the funds in their hands for the purpose specifically defined in the articles of agreement, namely, the payment of interest and of principal of the transferable bonds to be issued under that agreement of which the bond in suit is one. I therefore hold that Section 10 of the Indian Limitation Act applies.

10. The judgment must be reduced by Rs. 8,411-5-1 referred to above. That is however a minor part of the case, but the appellant's case partially succeeded and I think that the justice of the case will be met by awarding to the plaintiff three-fourths of the taxed cast,1! of this appeal.

11. Time for payment three months from to-day.

Wallach, J.

12. The plaintiff is suing to recover money due on a bond Exhibit A, dated the 28th July 1845, under which the Governor in Council promised on behalf of the East India Company to pay certain principal and interest to one Madhu Sahai and his successors-in-title. The said Madhu Bahai represented a creditor of the deposed Raja of Tanjore Amar Singh, whose debts so far as they had been proved to the satisfaction of the Company under a Commission appointed for the purpose, the Company took over, and for the due payment of which they made themselves responsible. The manner in which this was done is set out in Exhibit C, dated the 11th February 1824, articles of agreement between the Company and those claiming to be the creditors of Amar Singh.

13. A great deal of discussion has centred round this document. On the best consideration that I can give it the important provisions in it appear to me to mean this:---the creditors who put their hands to it agreed to abide by the decision of the Commission appointed to determine the extent of their debts. The Company who were then in possession of the revenues of Tanjore, formerly in the possession of Amar Singh, on their part agreed to take over these debts so determined with simple interest on the balance found due at 4 per cent from the date of the debt to the 30th April 1823, to consolidate that sum as the principal of bonds to be issued by them to the creditors in full satisfaction of such debts due by Amar Singh, the bonds to carry simple interest at 4 per cent per annum to be paid half-yearly from the 30th April 1823; such interest was payable only so long as the Company retained the Tanjore revenues, while the payment of principal was not so conditioned such payment to be made only after 15 months' notice by the Company. In order to provide means for the redemption of these bonds, the total principal of which amounted, we are told, to nearly nine lakhs of rupees, a reserve fund sufficient to pay the interest was to be set apart by the Company out of the Tanjore revenues plus a sum equal to 5 per cent of the principal annually out of the same revenues as a sinking fund, to meet the principal; and on this sinking fund the Company would pay 4 per cent per annum to be paid from general revenues. This latter stipulation, is important as showing that the Company regarded the sinking fund as a separate fund with them belonging to and for the benefit of others. The sinking fund was to remain in existence and be a charge on the Tanjore revenues until all the bonds were discharged. Article 15 of the deed further stipulates that the deed shall not operate to make the Company's property apart from the Tanjore revenues, liable for these debts or any other debts owing to these creditors of Amar Singh, or to make even the Tanjore revenues liable unless these are received by the Company at Madras. The effect of this agreement clearly is, I think, that the Company, who had come into possession of the Tanjore revenues and recognized the justness of the claims of Amar Singh's creditors on these revenues, took on themselves the obligation to pay these debts and constituted themselves trustees, so far as they were and remained in possession of the Tanjore revenues, for the payment of these bonds so issued, and undertook to set apart a sufficient portion of these revenues as a trust fund to be used for the payment of interest on, and the ultimate redemption of, these bonds until all of them were discharged.

14. In pursuance of this agreement, bonds, as contemplated were issued, and Exhibit A, the bond under which the plaintiff sues, is one of them. It is not denied that it is undischarged as regards the principal and most of the interest.

15. The plaintiff's contention is twofold: firstly, he sues on Exhibit A on the ground that he is entitled to be paid on it from the trust fund maintained ad hoc by the Government and therefore his claim cannot be barred since the Government cannot plead limitation against a trust obligation, and secondly, that apart from any question of trust, and even if there is no trust fund, the payment is not, barred by limitation. The Government claims that the trust, if created (and its creation is not strenuously disputed) came to an end when Exhibit A was issued, and that Exhibit A is only an ordinary contractual bond between debtor and creditor, whereon payment is barred by limitation. Exhibit A itself states that it was issued in pursuance of the agreement (Exhibit C) detailed above and the whole tenor of it shows that this was so. The Advocate-General's chief contention is that, in Exhibit C, it was laid down that the amount of principal and interest found by the Commission to be due to any particular creditor of Amar Singh was to be satisfied by the bond to be issued and that, implied that, on the issue of the bond, the trust ultimately ceased. That view I cannot accept. The debt of Amar Singh was indeed to be satisfied once and for all by the bond, but the agreement went on to make distinct provision for the ultimate satisfaction of the bond itself, by announcing a promise of a sinking fund to be maintained until the bonds were fully discharged. It is not denied that the sinking fund was maintained, and the Government notifications of the 24th June 1853 (Exhibit E), and 18th December 1858 (filed in this Court) indicate that it was so being maintained, and of course Government was bound under Exhibit C so to maintain it until all the bonds were discharged. Government has been, since the date of Exhibit C, in possession of the Tanjore revenues and I must presume that it has carried out the promise contained in that document.

16. So then we have the position that pari passu with the issue of and running of the bonds, the sinking fund to pay them off was being accumulated, until, by 1858, all except four bonds, of which Exhibit A was one, had been paid off, and that in 1858, Government had sufficient sinking fund to clear these also. It is plain then that Government had been all along holding in trust for the bond-holders the amount necessary to pay off each bond. The trust had in fact not ceased by the issue of the bonds, but continued and was to continue according to the agreement so long as any obligation to pay remained on any bond, and the trust fund could be dissolved only when every bond was discharged. Exhibit A has not been discharged. The trustee must therefore meet it from the trust fund so far as that fund is sufficient to meet it, and he cannot be heard to plead that he is not bound to do so or that the payment is barred by time, and thus in effect appropriate to himself the trust fund. To this part of the case no defence can be put forward against payment other than one of two pleas: (1) that such a loss in the Tanjore revenues has taken place that the trust fund was exhausted so that the bonds cannot be redeemed from it; or (2) that all the bonds have been discharged. Neither plea has been here advanced.

17. Another argument to show that the trust came to an end with the issue of the bonds is based on the wording of Exhibit A itself. Exhibit A no doubt does not mention any sinking fund or reproduce Article 15 of Exhibit C, which, makes only the Tanjore revenues liable for the debt. So far as its wording goes, the Governor in Council is prepared to meet the obligation to pay the principal and interest from general revenues. Interest, no doubt, would not be payable if the company had wholly lost the Tanjore revenues, but apparently the obligation to pay from general revenues would continue even if the Tanjore revenues, while not wholly lost, nevertheless proved insufficient to meet the bond. Incidentally, this shows that Exhibit A was something more than a mere warrant or declaration of intention to carry out Exhibit C, or a mere label to indicate to the holder of Exhibit A what his share in the trust fund was.

18. But apart from that, the present question is, was the original trust obligation charged on Tanjore revenues then converted, when Exhibit A was issued, into an ordinary contractual obligation to pay from general revenues so that the trust obligation had come to an end? I can find no ground for such a conclusion. The wording of Exhibit A so tar from indicating any innovation from the agreement (Exhibit C), directly purports to be in pursuance of Exhibit C. The probable explanation of the use of language in Exhibit A loose enough to make the Company's general revenues liable for the bond, is that the risk of the Company losing the Tanjore revenues, which was a real risk in 1824, had by 1845 become negligible, and it became a matter of indifference to the Company whether the bond was redeemed from the trust fund fed by the Tanjore revenues, or from general revenues; while beyond that Government always had the safe guard that interest was not payable, if the Tanjore' revenues were lost, while principal was not payable until Government chose to give notice. Had there been any real risk at the time of the issue of the bond in 1845, it is obvious that the full terms of the agreement in Exhibit C, would have been strictly set out in Exhibit A, and that a bond professedly issued in pursuance of that agreement would have, if it had been at all necessary, limited the liability of the Company to a charge on the Tanjore revenues as set out in Exhibit C. There is nothing in the wording of Exhibit A, then, to indicate that Exhibit C, was not being carried out, that the trust fund was not in being, or that there was any fresh agreement at the time of Exhibit A which put an end to the trust. In fact its wording implies that the trust set out in Exhibit C, had been accepted and was being carried out thereby.

19. My conclusion on this part of the case then is this: there is and ought to be a trust fund in existence for the payment, of the amount due under this bond. Government cannot be heard to say, nor is it in fact pleaded, that they have broken that trust or have not maintained the fund. The plaintiff, assuming that he is the real beneficiary under the bond, is entitled to enforce his claim under Exhibit A, as if he were, as he is, one of the beneficiaries under this trust, and if there is sufficient money in the fund to discharge what is due on this bond, the money due under it must be paid, and payment of it cannot be barred by limitation, since a trustee cannot be allowed to vouch, a statute of limitation, against a breach of trust; and the present suit is clearly one for the purpose of following, i.e., for recovering for the cestui que trust, in the hands of Government, trust property vested in it for a purpose specific and specified in this case by the author of the trust. So far then as the trust fund will discharge Exhibit A, it must do so, but if, and in so far as, the trust fund is insufficient to discharge Exhibit. A and therefore the obligation to discharge it falls on the ordinary revenues, Exhibit A, is enforceable against these general revenues only as an ordinary contract between a debtor and a creditor. It might in certain circumstances therefore have been necessary to inquire how far the trust fund will suffice to meet Exhibit A, but, fortunately, in. the present case it is not necessary for two reasons. First, Government has not pleaded that the trust fund is insufficient to meet Exhibit A; and secondly, I hold, in agreement with the learned Chief Justice that even as an ordinary contract, Exhibit A. is enforceable in plaintiff's favour.

20. Turning to this second part of the case, viz., whether, apart from any trust, payment under the bond is barred by limitation, I agree with, and have very little to add to what the learned Chief Justice has said. As to the question of the meaning of the phrase 'on demand' at a particular place I would note the significance of the general notification of 1858 filed in this Court, which, after giving the necessary 15 months' notice announced that, 'on presentation of the notes to the Accountant-General at Fort St. George 'a certificate for payment both of principal and interest would be issued, It, is clear then that before Government became liable to pay on the notes, whether principal or interest, that is, 'before any of the debt became due, there was to be a specific demand accompanied by presentation of the note at the Accountant-General's office at Fort St. George.

21. I have nothing to add to what the learned Chief ,Justice has said regarding what plaintiff has acquired under the assignment deed, Exhibit J, except that I do not think it necessary to consider the scope of Exhibit M, or to decide whether it is co-extensive with Exhibit J or not. Personally I think it is limited to the sums named in it, but it is not a point of importance at present.

22. As to the disallowance of Rs. 8,411-5-1 the plaintiff clearly has no right to that sum. The assignor believing, no doubt, that under the notification of 1853 Exhibit F, interest ceased from 30th September 1854, calculated the interest due to him up to that date from 30th October 1846, the date up to which, according to the endorsement on the note Exhibit A, interest had been paid by Government to Hari Kishen Doss, described in Exhibit A as the general attorney of Madhu Sahai, the original holder, and Rs. 2,833 -15-0| represents that sum. The plaintiff has shown no reason for us to suppose that the sum of Rs. 8,411-5-1 was not paid to the holder's attorney, and the Government books, Exhibit I (a), show that it was so paid, The plaintiff's assignor claiming from Madhu Sahai and therefore the plaintiff himself could have no right to have this sum paid over again, and the plaintiff's assignor evidently was quite aware of this, and therefore refrained from assigning that sum over to the plaintiff.

23. I therefore agree in the order proposed by the learned Chief Justice.

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