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Raghavendrarao Vakil and Co., Bijapur Vs. B.R. Elavia - Court Judgment

LegalCrystal Citation
SubjectContract;Commercial
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 1272 of 1969
Judge
Reported inAIR1973Kant203; AIR1973Mys203; (1973)1MysLJ59
ActsIndian Contract Act, 1872 - Sections 25(3); Code of Civil Procedure (CPC) , 1908 - Sections 100 and 101
AppellantRaghavendrarao Vakil and Co., Bijapur
RespondentB.R. Elavia
Appellant AdvocateS.K. Kulkarni, Adv.
Respondent AdvocateV.S. Kulkarni, Adv.
DispositionAppeal dismissed
Excerpt:
.....suit referred thereto refer to proceedings other than under sub-clause (b) which also include a suit. any suit referred to a suit other than the suit instituted under the act to enforce the statutory remedies provided under the act. it is a suit to enforce the common law remedies. therefore, the words in any suit or any other proceeding for relief under sub-section (2) has to be read disjunctively and not conjunctively, otherwise it leads to absurdity. when the legislature has consciously used the aforesaid two different phrases , they cannot be read to mean one and the same. each phrase has to be given its due weight and meaning. between the two phrases, all the remedies to which a registered proprietor would be entitled to is covered. in includes both the statutory remedies ..........it is also the plaintiff's case that the defendant has paid some amounts towards the sold debt. the suit was filed on 10-11-1965. for a sum of rs. 1,800/- towards principal as well as for interest, in all for a sum of rs. 2,233-35. the last entry in the plaintiff's account books is dated 19-9-1954, which shows that a sum of rs. 2,117-14-3 as being due from the defendant's father to the plaintiff-firm.3. the lower appellate court has relied on the decision in 30 bom lr 1407 = (air 1928 bom 539). (pestonji manekji modv v. bai meherbai). in that decision, it has been held that under section 25(3) of the indian contract act, 1872 the person making the promise is the person against whom the liability might have been enforced and that a promise made by a person who is under no.....
Judgment:

M. Sadananda Swamy, J.

1. The Appellant is the plaintiff, the respondent is the defendant. The suit was filed for recovery of Rs. 2,233-35 on a promissory note dated 10-12-1962 executed by the defendant in favour of the plaintiff. The defendant admitted the execution of the promissory note but pleaded that there was no consideration for it. He also pleaded that It was obtained by misrepresentation and fraud. Both the lower Courts have dismissed the suit Both the lower Courts have held that the suit promissory note is not supported by consideration and that it is unenforceable. It is the correctness of this finding that is in question in this appeal.

2. The plaintiff is a Banking firm. Defendant's father used to borrow monies from the plaintiff-firm. He died. According to the case of the plaintiff, thereafter the defendant verified the accounts of his father and was satisfied that a sum of Rs. 3,900/- was due from the defendant's father to the plaintiff-firm. that a remission of Rs. 1,400/- was made and that the defendant agreed to pav Rs. 2,500/- and executed the suit promissory note on 10-12-1962. It is also the plaintiff's case that the defendant has paid some amounts towards the sold debt. The suit was filed on 10-11-1965. for a sum of Rs. 1,800/- towards principal as well as for interest, in all for a sum of Rs. 2,233-35. The last entry in the plaintiff's account books is dated 19-9-1954, which shows that a sum of Rs. 2,117-14-3 as being due from the defendant's father to the plaintiff-firm.

3. The lower appellate Court has relied on the decision in 30 Bom LR 1407 = (AIR 1928 Bom 539). (Pestonji Manekji Modv v. Bai Meherbai). In that decision, it has been held that under Section 25(3) of the Indian Contract Act, 1872 the person making the promise is the person against whom the liability might have been enforced and that a promise made by a person who is under no obligation to pay the debts of another, even though they are time-barred, is clearly not within the exception to the general rule that an agreement made without consideration is void. Mr. S. K. Kulkarni. appearing on behalf of the appellant, relied on a number _ of decisions in support of his contention that another view is possible and that the person undertaking the liability contemplated under Section 25(3) of the Contract Act need not be a person who would be liable to pav the debt if the same is not time barred.

4. He has been fair enough to point out that a Division Bench in : AIR1934Mad549 , (Valliappa v. Maruda Pandian) has held that where the debt is not binding on the defendant and consequently not enforceable against him, there is no question of applicability of Section 25(3) of the Contract Act. because, the barred debt is not one which would be enforceable against the defendant but for the law of limitation. He relied on the decision in AIR 1940 Mad 678. (Govinda Nair v. Achutan Nair). The learned single Judge has held in that case that the words 'by the person to be charged' are wide enough to cover the case of a person who agrees to become liable for the (payment of debt due by another and need not be limited to the person who was indebted from the beginning. In that case, the suit was instituted for the recovery of the price of paddy alleged to have been due by the defendant's brother and verbally agreed to be paid by the defendant. The lower Court found the agreement to be true, but refused to give effect to it as it was held to be without consideration. The plaintiff came up in revision. It was observed as follows :

'It may not be quite correct to say that the agreement between the parties to the suit was without any consideration. The agreement by the plaintiff to release the defendant's brother from liability -- if it was legally enforceable at the time when the agreement was said to have been reached was quite a good consideration for the new agreement between the parties to the suit'.

Thus, it is seen that the finding was that there was consideration fof the undertaking given bv the defendant in that case. He next relied on the decision in : AIR1957Mad14 , Adiraia v. K. Beeranna Rai. In that case, the sons of the original mortgagor executed a fresh mortgage. On a suit based on the second mortgage, the defence taken was want of consideration for a fresh mortgage. It was held that on the date of the second mortgage, the original mortgage debt had not become time barred. But it was held that assuming that the claim was time barred on the date of the fresh mortgage it could be supported under Section 25(3). Contract Act, and that the words 'the person charged therewith' in Section 25(3) need not refer only to a person who was initially or originally liable but may refer also to third parties who have undertaken the liability though not personally, but by reason of their owning the properties. In that case, the original mortgagor had made a testamentary disposition of his properties including the mortgaged properties giving the suit properties to his three sons, the defendants, a life estate in the properties. The sons were therefore the successors-in-interest of the original mortgagor and they took the properties subject to the encumbrance. They were therefore persons who were under an obligation to discharge the mortgage debt. That was therefore not a case where the persons who undertook the liability under Section 25(3) of the Contract Act. could be said to be persons who were not liable for the original debt

5. Mr. V. S. Kulkarni. appearing on behalf of the respondent, has relied on the decision in AIR 1937 Oudh 300, (Md. Yunus Khan v. Raja Ram Shukul). In that case a bond was executed by the promisor in favour of the plaintiff's minor son who was under the guardianship of the plaintiff's father and subsequently, the pronote was executed in lieu of the bond at the time when the suit bond was barred. It was held by a Division Bench that the pronote was without consideration as the plaintiff could not have enforced payment on the bond and that the debt contemplated under Section 25(3) of the Contract Act must be one which the plaintiff might have enforced, but for the law of limitation.

6. Section 25 of the Contract Act, provides that an agreement made without consideration is void. Three exceptions are provided to that general rule. The first is. when the agreement is in writing and registered and is made on account of natural love and affection between the parties standing in near relation to each other. The second exception is when the promise is made to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do. The third exception is when the promise is made in writing and signed bv the person to be charged therewith, or bv his duly authorised agent, to pav wholly or in part a debt of which the creditor might have enforced payment but for the law of limitation to file suits. Under Section 25(3) therefore, the original debt must be one the payment of which the creditor could enforce but has been disabled on account of the law of limitation.

7. In the present case, the promissory note has been executed by the son after the death of his father. It has to be noticed that the defendant is not a Hindu and no question of pious obligation arises. It is relevant to note that under_ Section 127 of the Contract Act, anything done or any promise made for the benefit of the principal debtor, mav be sufficient consideration to the surety for giving the guarantee. But if there is no consideration, the surety mav avoid liability on the ground that the agreement is void. The illustration (c) to that Section makes it clear that if a person without consideration agrees to ipay the debt of another, such an agreement is void. In the present case, no consideration has been shown to have passed for the undertaking given by the defendant to discharge the debts of his deceased father. Hence, even if the debt had not become time barred, the plaintiff could not have enforced payment from the defendant. Therefore. Section 25(3) of the Contract Act will not make the debt enforceable must because it has become time barred. The decisions relied on by the appellant are therefore of no help to him.

8. The appellant next contended that even if no decree could be passed against the defendant in respect of personal liability, the plaintiff is entitled to a decree against the defendant in respect of the assets of the deceased father in the hands of the defendant. His contention is that such a relief was given in the decision in 30 Bom LR 1407 = (AIR 1928 Bom 539) referred to above.

In that case, a promissory note had been executed by the widow in respect of the debt of her deceased husband. After the death of her husband, the defendant took letters of Administration to the estate of her deceased husband on March 6, 1925. The suit pronote was executed by her on March 6, 1926. a year later. It was held that the defendant was not personally liable under the promissory note since there was no consideration and Section 25(3) of the Contract Act did not help the plaintiff. Then the Court considered the case of the plaintiff as to the liability of the defendant for what she had done in her capacity as an Administrator of her deceased husband's estate. The plaintiff in his reply affidavit in reply to the summons for leave to the defendant, had stated categorically that the defendant was liable to pay the amount of her deceased husband's debt, as Administrator of her husband's estate. Since the point was considered to have been raised in the pleadings and all the evidence necessary to determine the point had been given on either side the Court considered it desirable to determine that question. But in the present case, there is no plea taken by the plaintiff that the plaintiff is entitled to a decree against the defendant in respect of the assets in the hands of his deceased father in the hands of the defendant. This point was not taken in anv of the lower Courts either but has been raised for the first time here. The defendant had no opportunity to meet such a contention urged on behalf of the appellant. Hence, he cannot be allowed to urge this point for the first time in this Court.

9. The appeal is therefore dismissed. But in the circumstances of the case, the parties will bear their own costs.


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