Venkata Ramaiya, J.
1. Respondent sued the appellant which is the Bank of Mysore, Ltd., for return of the Shares left as security for a loan, alleging that the Bank unreasonably failed to accept the tender of monies due and caused loss to the respondent estimated at Rs. 11,000/- and this sum together with dividends payable with respect to the shares are more than sufficient to wipe off the debt. The tender and discharge of the debt were both denied by the Bank and a lien on the shares was claimed for payment of the loan referred to in the plaint as well as another for recovery of which a decree has been obtained in the Court of the Sub Judge. The question as to what was the amount due to the Bank was raised in Issue No. 4, that of tender in Issue No. 1 and of damages in Issue No. 3. Without recording any evidence the learned District Judge dismissed the suit holding that it was not maintainable. The dismissal was set aside by this Court and the ease remanded for disposal after taking evidence and allowing amendment of the plaint.
Subsequently, an account of monies due to the Bank and of damages due to plaintiff was asked for and an additional issue about the Bank's right. to retain the shares till payment of the amount, due under the decree of the Sub Court was framed. Besides the correspondence and extracts of accounts relating to the transactions exhibited in the case, the only persons examined in the case are plaintiff and the Superintendent of the Loan section of the defendant Bank. The lower Court has on a consideration of these decreed the suit as prayed for awarding Rs. 11,000/- as damages. On behalf of the Bank it is contended that the decision is not warranted either by the facts of the case or the law applicable to it. Learned Counsel for the respondent did not rely on the cases referred to in the judgment for supporting it as some of these were found to be either misquoted or misapplied.
2. The plaintiff's right to the shares cannot be disputed as these stand in his name and the plaintiff cannot question the Bank's claim to retain the shares till the amount due in respect of what is called the share loan account is discharged as the shares were given as security for the loan. The case of the plaintiff is not that as a matter of fact the amount was paid by him but only that he offered to pay it, that the Bank unreasonably refused the offer and that, owing to this refusal to receive the amount and release the shares, the plaintiff could not have the benefit of realising about Rs. 11,000/- by disposing of the shares when the value of these had appreciated. According to the Bank there was no acceptable offer and plaintiff has suffered no loss by retention of the shares.
The crux or the case is the factum and legality of tender. Except for a mere reference in the plaint which is controverted, there is no proof of tender of any amount in the year 1S41. The allegation concerning this in the letter Exhibit A is so vague and dubious that no weight can be attached to it. Apart from this it is the cheque dated 29-5-1943 for a sum of rupees twenty thousand drawn by the plaintiff in favour of defendant which is alleged to constitute an effective tender. The cheque was not sent to the Manager of the Bank but given to Sri Wajid who was then a Director of the Bank. Mr. Wajid is not examined in this case and the cheque is not encashed. The cheque directs payment in 'full and final settlement of all accounts' of the plaintiff. In his evidence the plaintiff states
'I had known from the defendant that Rs. 21,500/- was due by me on all accounts and if Rs. 20,000/- had been accepted it was in full Settlement and the defendant is to give up Rs. 1500/-'.
It is admitted that besides the debt contracted by the plaintiff for the purchase of shares, he owed monies in the overdraft account, that in the suit for recovery of the latter, the settlement of both debts by means of the cheque was set up by plaintiff but negatived and there was a decree without relying on the settlement. Absolutely no evidence is adduced in this case to prove that the Bank agreed to forego any part of the amount due from plaintiff. It therefore follows that the amount for which the cheque was issued is less than what was payable to the Bank as admitted by the plaintiff himself for complete discharge of his liabilities. The cheque was stated to be in full discharge of all liabilities find there was no letter qualifying it or intimation for its being appropriated otherwise. Nor did plaintiff make any effort directly with the Manager to reach an understanding or renew the offer to pay on modified terms. In these circumstances the question is whether the Bank can be subjected to liability for not returning the shares.
3. It is argued on behalf of the plaintiff that since the amount of the cheque was at any rate more than what was due for satisfaction of the share loan, the Bank should have appropriated what was necessary for the same out of the realisation under the cheque and credited the rest towards the other account. In the absence of any instruction from plaintiff in this behalf, the Bank could hardly have adopted this course unless the law required it. Even if this was possible or necessary, the plaintiff, it is alleged is not entitled to insist on delivery of the shares by virtue of Article 19 of the Articles of Association. The Article is pointedly set out in a letter to the plaintiff wherein a lien is claimed on the shares for the amount due not merely on the share loan account but also on the overdraft account.
An attempt was made on plaintiff's behalf to show that the contract between the parties must, be construed as having limited the lien only to the share loan. Even so, the contention for the Bank is that the lien is two-fold -- one under the general law of contract as in section 171 capable of being varied by agreement, another under the Companies Act binding on plaintiff as a shareholder which cannot be avoided. The Bank's contention has, I think, to be upheld though it is enough for the purpose of the decision in this case that the cheque in any event cannot be regarded as a valid tender and the right of the Bank to proceed against the shares for recovery of the debt in respect of the overdraft account is secured by the attachment of the shares in execution of the decree.
A tender to be effective must be, as required by Section 38, Contract Act, unconditional and of the full amount due. Prima facie both these are lacking in the cheque. The amount is admittedly short of what was payable for a complete discharge and yet it is intended to operate as extinction of liability. In -- 'Bowen v. Owen', (1847) 11 QB 130 (A), Lord Denman C.J. Observed
'All persons who make a tender in form do so for the purpose of extinguishing a debt. If, in tendering for that purpose, they merely propose that the creditor should take the sum offered and leave it open to him to persist in his claim for more such a tender is free from objection: but if a party says 'I will not pay this money unless you give a receipt for it as the whole amount due' that is no legal tender'.
Baron Vaughan put it tersely thus in -- 'Mitchell v. King', (1833) 172 ER 1223 (B):
'A tender clogged with the terms that the money is to be taken as a settlement is not good'.
Learned counsel of plaintiff has not pointed put any provision or principle of law which authorises the acceptance by the creditor of a cheque for a sum smaller than what is due without prejudice to his rights, when the cheque describes the payment to be in full discharge of the liability. There is also no authority for the proposition that when the cheque is meant to discharge two debts as a whole without specifying the portion of the amount to be applied to either debt the creditor has an option or obligation to receive the amount and distribute it between the debts in a manner which the debtor considers to be helpful to him. A view definitely against it has been expressed in --'Hardingham v. Alien', (1848) 136 ER 1091 (C) with the head note
'A demands from B 11. 7s. for several matters including 10s. for a particular service performed by A. B tenders 19s. 6d. This will not support a plea of tender of 10s. on account of such, service.'
4. Cottman J. observed:
'With regard to the tender no doubt it the 19s. 6d. tendered was sufficient to cover the plaintiff's entire demand it would be a good tender as to the 10sh.; but if it was insufficient to cover the entire demand then inasmuch as it was not specifically applied to any portion of it, it does not sustain the replication'.
Assuming that a choice of adjustment was open to the Bank, there is apparently no reason why the settlement of the share loan amount had to be preferred to the discharge of the decree debt. On the contrary, consistent with the contention about the lien being confined to the share loan account, the Bank would have better reason in the absence of definite instructions to appropriate the amount towards the debt which was unsecured rather than the one which was secured.
It may be mentioned that plaintiff attempted settlement only after the Bank sued him for recovery of the money due on the overdraft account and in the course of the suit drew the cheque for Rs. 20,000/- for discharge of that debt as well as the one now in dispute. The question of settlement was raised in issue and the learned Sub-Judge Mr. U.D. Narayanamurthy after recording evidence came to the conclusion against plaintiff. The effect of this is that it was not in mind of plaintiff when he gave the cheque, it was given in discharge of one of the debts as is now argued.
The result is that the cheque cannot be held to be a valid tender of the amount due by the plaintiff either for both the debts or any of those. The claim for damages does not arise as the foundation for it of a valid tender is lacking. It is therefore unnecessary to discuss whether the plaintiff can be said to be damnified at all and if so to what extent. The plaintiff has been benefited in a way by the shares not being disposed of as on the strength of being a holder of these he has acquired an equal number at the reallotment, on terms manifestly favourable to him. This is not taken into account but arbitrarily the value of the shares prevalent in 1944, the year following that of the cheque and preceding that of tile suit, is taken as basis for awarding the damages as it happened to be higher comparatively. The award of damages being thus untenable and the amount allowed being unreasonable must be set aside.
Though this is the essential part of the plaintiff's case, there arc other reliefs for which the suit was unnecessary and about which there is no controversy. Those are returning the shares to the plaintiff on payment of the amount due. Relying on the Bank's accounts Exhibit XVIII the lower Court has held that the amount due on 31-3-1950 by the plaintiff is Rs. 10,843-13-0. The correctness of this is not questioned by the plaintiff.
5. The learned Judge of the lower Court was of the view that the tender was sufficient and that the Bank has no lien for the overdraft account, and that a sum of Rs. 11,000/- was due to plaintiff towards damages by the Bank on account of the failure of defendant Bank to return the shares to plaintiff. The sum of Rs. 10,843-13-0 due by plaintiff was adjusted to the amount of Rs. 11,000/- due by defendant as damages. He directed the return of the shares unconditionally. As has been stated already he should have held that there was no proper tender and that the Bank had a lien over the shares in respect of the overdraft account. In this view his decree for returning the shares should have been conditional on the plaintiff paying not only Rs. 10,843/- but also money due on the overdraft account. The finding that plaintiff is entitled to damages on the ground of there being a proper tender and on the ground that the Bank had no lien for the overdraft account is therefore set aside.
6. There will be a decree that in case the plaintiff pays Rs. 10,843-13-0 with interest at 4 per cent, from 31-3-50 and discharges the decree debt due on the overdraft account within three months from this date the Bank will return the shares with dividends thereon from the above date and in case he fails to do so the Bank is at liberty to realise the debts due to them on the security of the shares. The appeal is allowed and the claim for damages is dismissed. The plaintiff will pay the costs of defendant in both Courts as he has not been able to establish his claim to the unconditional delivery of the shares.
7. Appeal allowed.