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Ratan Lal and anr. Vs. Commercial and Industrial Bank Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtAndhra Pradesh High Court
Decided On
Case NumberC.C.C.A. No. 4 of 1959 with cross Objections and 11 of 1959 and C.M.P. Nos. 610/62, 9148/63, 9716/63
Judge
Reported inAIR1965AP349
ActsLimitation Act, 1908 - Sections 19, 20 and 21(2); Partnership Act, 1932 - Sections 19
AppellantRatan Lal and anr.
RespondentCommercial and Industrial Bank Ltd. and ors.
Appellant AdvocateN. Narasimha Ayyangar and ;S.M.A. Abidi, Advs.
Respondent AdvocateY. Siva Rama Sastry, ;Bishambar Dayal and ;Syed Mohd. Hasan Abidi, Advs.
Excerpt:
.....1st defendant, who endorsed it in favour of the 1st defendant, who endorsed it in favour of the plaintiff bank. in giving better particulars at the request of the 1st defendant had made payments on various dates in his personal capacity and as the agent of the other defendants. ' from this, it is clear that one of several joint contractors, like the 1st defendant in the present case cannot keep the debt alive and subsisting against the other joint debtors by reason only of a written acknowledgment signed or a payment made by himself. the question that arose for decision was whether a payment made and endorsed by defendants 1 and 2 would save the suit from the bar of limitation as against the 3rd defendant, who was the third mortgagor. subramaniam chettiar, air 1957 mad 8 where in it..........defendants are partners of the said firm. the plaintiff bank advanced loan to the partners and the suit promissory note was executed on behalf of the firm. it was also decided that every partner would repay to the extent of his respective share amount to the plaintiff-bank. therefore, the 3rd defendant paid the whole amount of his share to the plaintiff-bank. hence the suit is liable to be dismissed against him.(5) the 4th defendant died shortly after the filing of the written statement and before the suit was taken up for trial and his legal representatives are brought on record. he pleaded that sri viswanath rao is not entitled to sue on behalf of the plaintiff-bank, who assured him that he will not be made liable. he himself did not pay any amount towards the suit promissory note. so,.....
Judgment:

Chandrasekhara Sastry, J.

(1) These two appeals are against the decree in O. S. No. 173 of 1958 on the file of the City Civil Court, Hyderabad . The Commercial and Industrial Bank Ltd ., is the plaintiff. There are seven defendants in the suit. The suit is filed to recover a sum of H. S. Rs. 22,0606-8-0, which is equivalent to I. G. Rs. 18,908-14-6 from the defendants. The plaintiff's case is that on 29-7-46, the defendants borrowed. I. G. Rs. 25,000/- from the plaintiff bank promising to pay the same with interest at 1% per month and executed a promissory note and a receipt making themselves jointly and severally liable for the amount. In a paragraph 5 of the plaint. it is alleged that the defendants paid certain on several times, the last payment being made on 18-1-51, and the balance due as per the extract of the loan account filed with the plaint being Rs. 18,908-14-6. In paragraph 7 of the plaint it is stated that, as the last payment was made on 18-151 and some letters have been sent to the bank accepting the balance and promising to pay the amount due the suit is within time and that the said letters would be filed afterwards, if necessary.

(2) The 1st defendant admitted the execution of the promissory note, but disputed the correctness of the amount on the ground that all the payments made by the other defendants are not shown in it. he also pleaded that the rate of interest charged is in contravention of the provisions of the Hyderabad Money lenders Act, 1349 fasli. It is also pleaded the promissory note is not duly stamped and is, therefore, inadmissible in evidence and that the suit cannot be maintained on the basis of it. it was further pleaded that the 1st defendant did not make any payments personally, but simply passed on the money paid by some of the other defendants. Therefore, the said payments do not save limitation as against him. it appears that, at the request of the 1st defendant, better particulars were furnished by the plaintiff on 14-4-54. In that statement of the better particulars the plaintiff stated that the 1st defendant had made payments on various dates in his personal capacity and as the agent of the other defendants. it was also stated therein that the 1st defendant sent two letters to the plaintiff dated 27th may and June 1953 in which he accepted the balance and promised to pay the amount due and that, in view of these payments and letters, the suit is in time against defendant No. 1 The dates of the payments also were given in the statement of better particulars. The written statement of the 1st defendant was subsequently filed on 22-4-54 in which it is also asserted that the two letters dated 27th May and June 1953, which the plaintiff calls acknowledgments, are not acknowledgments, they do not save limitation. Some other pleas were also taken; but it is not unnecessary to refer to them.

(3) The 2nd defendant admitted the execution of the promissory note, but denied that the she narrowed Rs. 25,000/- she denied that she made any payments as alleged in the plaint. In any view she submitted that the suit amount is mostly made up of compound interest calculated at a usurious and unconscionable rate. she executed the promissory note only as a surety for the 1st defendant and the plaintiff agreed to recover the full amount only from the 1st defendant. The claim is barred by limitation.

(4) The 3rd defendant pleaded that Viswanath Rao, who signed the plaint a s Manager of the Plaintiff bank, was not competent to sign it and was not competent to file the suit. The execution of the promissory note was admitted. The entire amount was paid to the 1st defendant with the knowledge that he was the managing partner of the firm. In paragraph 4 of his written statement , he pleaded that he joined in the execution of the promissory note on the insistence of the bank under a special settlement between the parties that each of the defendants would individually pay to the plaintiff-bank his respective share amount of Rs. 4,600/- and accordingly the 3rd defendant paid his share amount of I. G. Rs. 4,600/- to the plaintiff bank through a crossed cheque drawn on the Hyderabad state Bank, Hyderabad, Hyderabad on 18-1-51 and that, therefore, no further amount is due from him. The accounts submitted by the plaintiff are incorrect and compound interest was illegally charged. It is also pointed out that, in the plaint, it is not stated which of the defendants made payments. The suit is barred by limitation. In paragraph 10, under the heading 'Additional Pleas' the 3rd defendant stated that a partnership firm by the defendants are partners of the said firm. The plaintiff bank advanced loan to the partners and the suit promissory note was executed on behalf of the firm. It was also decided that every partner would repay to the extent of his respective share amount to the plaintiff-bank. Therefore, the 3rd defendant paid the whole amount of his share to the plaintiff-bank. hence the suit is liable to be dismissed against him.

(5) The 4th defendant died shortly after the filing of the written statement and before the suit was taken up for trial and his legal representatives are brought on record. he pleaded that Sri Viswanath Rao is not entitled to sue on behalf of the plaintiff-bank, who assured him that he will not be made liable. he himself did not pay any amount towards the suit promissory note. So, the suit is barred by limitations. the claim of compound interest is not tenable. The account is not correct. The other defendants are ex parte.

(6) For the purpose of deciding these appeals, it is necessary to refer to the following issues only framed by the lower Court :

'(1) Whether the plaint is signed and duly presented by the authorised person?

(2) Is the plaintiff's claim barred by limitation?'

The lower Court held these two issues in plaintiff's favour as well as the other issues framed by it and decreed the suit with costs against all the defendants . The City Civil Court Appeal No. 4/59 is filed by the legal representatives of the deceased 4th defendant. C. C. C. appeal No. 11 of 1959 is filed by defendants 2, 3, 5, 6, and 7.

(7) The following points, which were argued in these appeals arise for determination :

(1) Whether the plaintiff's suit is in time or whether it is barred by limitation ?

(2) Whether the plaintiff is entitled to the amount as claimed which includes compound interest ?

(3) Whether the Hyderabad Money lenders Act applies to the suit claim and

(4) Whether the plaint was properly instituted by Sri Viswanath Rao Billorgikar on behalf of the plaintiff-bank?

(8) The lower Court has pointed out that the original power of Attorney in favour of Viswanath Rao was produced and that is evident from the said power of Attorney that he could sign the plaint and present it to the lower court . Viswanath Rao himself gave evidence to the effect that he is the Manager of the Plaintiff bank and that he is authorised to file the suit on its behalf and that he also holds the general power of attorney from the bank. The lower Court is right in holding that the plaint was properly signed and duly presented by Viswanath Rao Billorgikar. Who was the Manager of the Bank.

(9) Under the Hyderabad Money Lenders Act, 1349 fasli

'Loan means a loan secured or un-secured advanced on interest in cash or in kind and shall include every transaction which is in substance a loan but shall include a loan advanced by a bank, a company, a co-operative society or by a corporation created by any law for the time being in force.' (Vide Sec 2, Clause of the Act).

Therefore the provisions of the Hyderabad Money lenders Act do not apply to the suit loan.

(10) The main question argued in these appeals is the question of limitations. The suit promissory note is dated 29-7-1946. It was executed by the seven defendants. The suit was filed on 18-1-54 Under Article 57 of the First Schedule to the Indian Limitation Act, 1908, the period prescribed for filing a suit for money lent is there years from the date when the loan was made. Therefore, the present suit would be barred by limitation having been filed more than three years form 29-7-46 when the loan was made unless the plaintiff proves that acknowledgments of their liability under the suit promissory note were made by the executants of the promissory note with in the meaning of S. 19 of the Indian Limitation Act or that payments on account of the debt were made by them under section 20 of the same Act so as to save the suit claim from the bar of limitation In paragraph of the plaint it is merely stated that the defendant paid certain amount on several times and that the last payment was made on 18-1-51 and some letters have been sent to the bank accepting the balance and promissing to pay the loan, the suit is within the time. Under Order 7, Rule 6 C. P.. C. where the suit is instituted after the expiration of the period prescribed by the law of limitation, the plaint shall show the ground upon which exemption from such law is claimed. In the present case, no doubt, an extract from the loan account is filed along with the plaint. But it merely shows the debits and the creditors and the balances from the time to time. It appears that eight payments were made from time to time amounting to Rs. 22-594-3-4 towards the suit debt either by cheque or by cash, the last payments being an amount of Rs. 4,600/- by cheque on 18-1-51. This payment was specifically referred to in the plaint as the last payment. The cheque was one drawn by the 3rd defendant in favour of the 1st defendant. The latter endorsed it is plaintiff's favour. It is admitted by the 3rd defendant in his share of the liability under the suit promissory note. Thus it is admitted by him that (it) drawn by him initially in favour of the 1st defendant, who endorsed it in favour of the 1st defendant, who endorsed it in favour of the plaintiff bank. It is admitted that all the other payments were made by the 1st defendant alone. In giving better particulars at the request of the 1st defendant had made payments on various dates in his personal capacity and as the agent of the other defendants. Reference is also made to two letters dated 27th May and June 1953 sent by the 1st defendant in which he accepted the balance and promised to pay the amount. These letters are not specifically referred to in the plaint itself, the vague allegation there in being that some letters have been sent to the bank accepting the balance and promising to pay the loan due and that they will be filed after ward if necessary. These two letters were written by the 1st defendant alone wherein he stated :

''We are trying to liquidate your debts as soon as we can.'

These letters are remarked as Exs. P. 4 and P. 5 in the case. On behalf of the plaintiff, reliance is also placed on what are called the pay slips signed by the 1st defendant when the payments were made to the bank, These would, no doubt, be the acknowledgments within the meaning of s. 19 or payments made by the 1st defendant within the meaning of Section 20 of the Indian Limitation Act. It is argued by Mr. Sivarama Sastry, the learned counsel for the plaintiff-respondent that the payments made by the 1st defendant would save limitation under section 20 of the Indian Limitation Act even as against the other defendants as the 1st defendant, who made these payments, was a person liable to pay the debt with in the meaning of S. 20 of the Indian Limitation Act and that these payments are acknowledged in writing signed by the 1st defendant as required by the provision to the said section. But this argument cannot be accepted in view of sub-section (2) of Section 21 of the Indian limitation Act which is as follows :

'Nothing in the said sections (sections 19 and 20) renders one of several joint contractors, partners, executors or mortgagees chargeable by reason only of a written acknowledgment signed or of a payment made by or by the agent of, any other or others of them.'

from this, it is clear that one of several joint contractors, like the 1st defendant in the present case cannot keep the debt alive and subsisting against the other joint debtors by reason only of a written acknowledgment signed or a payment made by himself. what is further necessary for the plaintiff to prove is that the 1st defendant was the agent of the other defendants duly authorised by them to acknowledge he liability or to make the payment on account of the debt and acknowledge the payment in writing signed by him. This is also the view taken by the Madras high court in Muthu Chettiar v. Muhammad Hussain, 55 Ind Cas 763 : AIR 1920 mad 418. That was a case of joint mortgagors. Certain payments were made by one of the joint mortgagors and were acknowledged in writing by him. The question arose whether these payments were sufficient under Section 20 of the Indian Limitation Act to keep the debt alive against the other joint mortgagors. The learned judges held that these payments did not save limitation against the other joint mortgagors. The learned Judge observed as follows :

'As was pointed out by Mr. Krishnaswamy Iyer for the respondents s. 21 is really an explanation to sections 19 and 20 . The object of the explanation is to provide that one only of the contracting parties shall not ordinarily impose a liability on the other by anything done by him. The general principle being that a suit should be dismissed if barred by limitation, any act which avoids this result must be charged against the party responsible for it and not against the other in whose favour the law has created a right to plead limitation. Limitation, whether treated as a right or disability, is prima facie personal and unless the legislature so provided, a co-operative right or liability should not be imposed. We are, therefore, of opinion that the District Judge was right in restricting the liability to the share of Naina Mohammed Rowther alone in the property.'

Similar is the view taken by another Bench of the Madras High Court in Thayammal v. Muthu Kumaraswami, AIR 1929 Mad 881. In that case also, the suit was filed to enforce a mortgage executed by the three defendants. The question that arose for decision was whether a payment made and endorsed by defendants 1 and 2 would save the suit from the bar of limitation as against the 3rd defendant, who was the third mortgagor. It was held that it does not. it was pointed out that, in the case of several joint contractors, partners, executors or mortgagees, the operation of S. 20 seems to be cut down or limited by S. 21(2) of the Act.

(11) Reference was made by the learned counsel for the plaintiff respondent to the decision of the full bench in Veeranna v. Veerabhadraswami, ILR 41 Mad 427 : AIR 1919 Mad 1140 and it is argue that the payments made by the 1st defendant would save the suit from the bar of limitation even as against the other defendants what all was decided by the full bench was that :

'Direct evidence that one of several partners or co-contractors had authority to acknowledge liability or make payments so as to save limitation as against his parties or co-contracts is not necessary, but such authority can be inferred from surroundings circumstances such as the position of other contractors or partners.'

It was pointed out :

'It is important to notice the exact wording of section 21(2) of the Limitation Act. The section does not say that a person shall not be liable on an acknowledgment signed by the partner by reason only of his being a partner but by reason only of a written acknowledgment signed by his partner, and it amounts to saying that if you have no more than a written acknowledgment signed by one defendant the fact that the other defendant is his partner cannot effect the latter's liability. You could obviously have a case where one partner signed an acknowledgment would be sufficient debt of his own; but for the sub-section, proof of the acknowledgment would be sufficient to fix the other partner with liability, a conclusion manifestly repugnant both to sense and justice. We see nothing in the sub-section to make it necessary to suppose that it is intended to apply to transactions conducted in the ordinary course of partnership business. We need only refer to the general principle of law embodied in S. 251 of the contract Act that partners are the agents of one another and that their acts done in the ordinary course of the partnership business bind the partnership.'

It is to be noted that this full Bench also expressed the view that, in the case of partners, s. 21(2) is not intended to apply to transactions conducted by them in the ordinary course of partnership business because of the general principle of law that partners are the agents of one another and that their acts done in the ordinary course of the partnership business bind the partnership. The case Madava Pillai v. Subramaniya, AIR 1944 Mad 152 is not one under S. 21(2) of the Indian limitation Act. The question that arose for decision in that case was one under Sections 20(1) and 21(1) of the Indian Limitation Act. The case in Velayudam Pillai v. Vaithia Lingam Pillai, 24 Mad LJ 66 is also not one of joint contractors at all and has, therefore, no app to the present case. The question that arose for decision in that case was whether a payment made acknowledged by the debtor would save limitation as against a universal donee from him. Section 21(2) has no application to such a case and the learned Judges held that the payment by the debtor would have limitation as against the universal donee.

(12) Mr. Sivarama Sastry relied also upon the decision in Meenakshi Achi v. P. S. M. Subramaniam Chettiar, AIR 1957 Mad 8 where in it was broadly stated that :

'The acknowledgment by one partner is good as against the other partners and saves limitations against all.'

The decisions of the full bench in ILR 41 427 : AIR 19191 Mad 1140) and other cases were referred to ;

(13) In the present case, there is no allegation in the plaint that the defendants were partners and were carrying on business in partnership. There is also no allegation that the suit debt was incurred for the business of the partnership or that the 1st defendant, as partner, was authorised to borrow for the business of any such partnership or to acknowledgment and keep alive the liabilities of the partnership. Viswanatha Rao Billorgikar, the manager of the plaintiff bank did not depose that the defendants were carrying on business in partnership and that the suit was incurred for the business of any such partnership or that the 1st defendant was the authorised agent of the other defendants, or that he made the payments in question in the ordinary course of business of the partnership, In cross examination no doubt he stated that the heard about a concern known as 'Deccan film Exchange' But he admitted that he does not know the shares-holders of the partnership firm. he only knew that defendants 1 and 3 were interested in it. No doubt, to a question put in the cross examination he stated that the fourth defendant used to be presents on the occasion of every payment made towards the loan. This part of his statement cannot be accepted as true. Mr. Sivarama Sastry relied upon a statement in the written statement of the 3rd defendant that he had a partnership firm known as 'Deccan Film Factory', that the defendants were the partners of the aforesaid firm, that the plaintiff had advanced the loan to the aforesaid partners and that on behalf of the aforesaid partners of the firm the suit promissory note was executed and the further statement in the written statement that each partner would pay the amount of his share to the plaintiff bank. But the 3rd defendant himself has not given evidence . In fact, none of the defendants gave evidence . It has to be noted that the 4th defendant died before the suit came for trial. The statement made by the 3rd defendant in his statement cannot be evidence against the other defendants.

(14) Reference is made to Ex. P. 3, the receipt for Rs. 25,000/- executed by all the seven defendant wherein it is recited that the draft for Rs. 25,000/- was drawn in favour of the 1st defendant. From this fact and from the fact that the 1st defendant alone we are asked to draw the inference that the 1st defendant for making the payments. We are unable to accept this argument in view of the fact that the plaintiff was not context to get the promissory note executed by the 1st defendant alone as the agent of the other defendants also, but on the other hand, got the promissory note executed by all the defendants.

(15) The plaintiff has not adduced evidence to prove that defendants 2 and 4 to 7 were the partners of a firm along with the 1st defendant when they borrowed the suit amount or that the payments were made by the 1st defendants in the ordinary course of the partnership business so as to bind them. The suit is therefore, barred by limitation against defendants 2 and 4 to 7 and has to be dismissed as against them.

(16) The claim against the 3rd defendants has to be considered separately. he admitted in his written statement that there was a partnership consisting of himself and the other defendants including the 1st defendants and also further that the last payment of Rs. 4,600/- was his money which he paid to the plaintiff-bank though, no doubt, by the 1st V. On the averments in the written statement of the 3rd defendants, there can be no doubt that the last payment of Rs. 4,600/- was made by the 1st defendants and acknowledged by him as the duly-authorised agent of the 3rd defendant within the meaning of s. 20 of the Indian Limitation Act. But it is contended by his learned counsel, Abidi that the said payment dated 18-1-51 was itself made after the expiry of three years from 29-7-46 the date of which the suit promissory note was executed and not before the expiration of the prescribed period. Therefore, it is argued that the said payment could not save limitation even as against the 3rd defendant. Since the payment of Rs. 4,600/- was made by the 1st defendants after the expiration of the period prescribed for the suit. fresh period of limitation cannot be computed from that the date and hence the suit is bared by limitation against the 3rd defendant also and has to be dismissed against him also.

(17) The last point urged by the learned counsel for the appellants is that the plaintiff had no right to claim compound interest. it is clear that the suit promissory note, Ex, P, 2 provided only for the payment of simple interest at 1% per month. it is stated before us that compound that interest with quarterly rests is claimed in the plaint as appears from the extract of the loan account filed with the plaint. The plaintiff is clearly not entitled to the compound interest at all. The plaintiff can get a decree only for the principal amount of Rs. 25,000/- with interest at 1% per month simple. While ascertaining the amount due the payments made towards the suit loan as evidenced by the extract of the loan account filed with the plaint have to be given credit to, as on the dates on which the amounts were paid, the balance alone of the principal amount carried interest after the date of each payment and not the interest outstanding on those dates. But this direction is unnecessary with respect to the appellants as the suit is dismissed against them as being barred by limitation.

(18) The appeals are allowed and the suit is dismissed with costs against defendants 2, 3, 4, and 7 and the legal representatives of the 4th defendant. In the appeals, the parties shall bear their own costs.

(19) The plaintiff filed a memorandum of cross objections claiming interest on the suit claim at the contract rate or at any other rate from the dare of the plaint till realisation. There is no reason at all why the plaintiff shall not get interest at a reasonable rate on the principal amount due as on the date of the plaint from that date till realisation. But it is urged by the learned counsel appearing before us for the 1st defendant that the decree against the 1st defendant has to be modified by disallowing compound interest, though there is no appeal by the 1st defendant. since it is quite clear that the promissory note does not provide for the payment of compound interest at all, we direct, in the exercise of our power under O. 41, R. 33 C. P. C. that the decree against the 1st defendants be modified by calculating the amount at the rate of 1 % per month simple interest as indicated in this judgment till the date of the suit. While passing the decree against the 1st defendant as modified in the manner indicated above by calculating simple interest only at 1 % per month, the decree also shall direct that the plaintiff is entitled to recover from the 1st defendants simple interest at 6% per annum from the date of the plaint till realisation. the memorandum of cross-objections is allowed to this extent. The parties will bear their own costs in the memorandum of cross objections.

(20) C. M. P. Nos. 9716 and 9717 of 1963 : These are petitions praying to permit the plaintiff to amend the plaint by adding paragraph 7(a) alleging that :

'The defendant No. 1 had made the various payment on various dates as disclosed in the extract of account in his personal capacity and as the duly authorised agent of the other defendants.'

These petitions are opposed by the respondents We do not see sufficient grounds for allowing the amendment at this stage. the petitions are dismissed.

(21) C. M. P. No. 610/62 : The petition is filed by defendants 2, 3 and 5 to 7, who are the appellants in C. C. C. A. No. 11/59 praying to pass order that the suit debt is extinguished as against the appellants under S. 22 of the Jagirdar Debt Settlement Act or in the alternative to transfer the appeal to the Jagirdar Debt Settlement Board under S. 25 of the said Act. In view of the fact that we have allowed their appeal and dismissed the suit against these petitioners as being barred by limitation, on orders are necessary in this petition . The petition is dismissed.

(22) C. M. P. No. 9148 of 1963 : This petition is allowed.

(23) Order accordingly.


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