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Tirupagari Tayaramma and ors. Vs. Sri Ramanjaneya Merchantile Co., Eluru - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 226 of 1974
Judge
Reported inAIR1977AP205
ActsNegotiable Instruments Act, 1881 - Sections 44 and 45; ;Indian Contract Act, 1872 - Sections 74 and 117; ;Limitation Act, 1963 - Sections 20(2)
AppellantTirupagari Tayaramma and ors.
RespondentSri Ramanjaneya Merchantile Co., Eluru
Appellant AdvocateN.C.V. Ramanujachary and ;A.M. Srinivasa Rangachary, Advs.
Respondent AdvocateY. V. Narayana, Adv.
Excerpt:
.....117 of indian contract act, 1872 and section 20 (2) of limitation act, 1963 - consideration for promissory note need not be monetary as is clear from fact that legislature has provided for non-monetary consideration in section 45 of negotiable instrument act - section 44 of negotiable instrument act is not applicable to facts of case as consideration for promissory note was a set of obligations and did not consist merely of money - section 45 of negotiable instrument act is inapplicable because it is impossible to ascertain without collateral enquiry extent to which consideration for promissory note had failed - mere fact that third defendant was son of defendants 1 and 2 who made endorsement on promissory note does not extend limitation period as against third defendant - section 20..........rs. 2,500/-. the first defendant paid at the agreed rate upto 31st january 1964, on which date the chit was auctioned amongst the subscribers, and the first defendant was the highest bidder for a sum of rs. 1,750/-. out of the balance of rs. 750/- a sum of rs. 125/- was deductible towards the commission of plaintiff, while the remaining rs. 625/- was to be distributed as bonus amongst all the subscribers to the chit. it is common ground that the effect of the first defendant having become the highest bidder at the auction held on 31st january 1964 was that she would get the sum of rs. 1,750/- immediately, and would also get her share of the bonus distributable amongst the subscribers in respect of the said auction as well as in respect each of the auctions that would follow. it is also.....
Judgment:

1. Appellants 1 and 2 are wife and husband respectively and the third appellant is their son. They are original defendants 1, 2 and 3 respectively.

2. The first defendant subscribed to a chit floated by the respondent- plaintiff agreeing to pay the rate of Rs. 3-12 ps . for 800 days commencing form 1st January, 1964 and ending with 11-3-1966. The value of the chit was Rs. 2,500/-. The first defendant paid at the agreed rate upto 31st January 1964, on which date the chit was auctioned amongst the subscribers, and the first defendant was the highest bidder for a sum of Rs. 1,750/-. Out of the balance of Rs. 750/- a sum of Rs. 125/- was deductible towards the commission of plaintiff, while the remaining Rs. 625/- was to be distributed as bonus amongst all the subscribers to the chit. It is common ground that the effect of the first defendant having become the highest bidder at the auction held on 31st January 1964 was that she would get the sum of Rs. 1,750/- immediately, and would also get her share of the bonus distributable amongst the subscribers in respect of the said auction as well as in respect each of the auctions that would follow. It is also common ground that this benefit of immediate receipt of Rs. 1,750/- and the right to receive a share in the bonus distributable on each auction were in lieu of the sum of Rs. 2,500/- being the value of the chit, which would otherwise be payable on 11th March 1966. It is not disputed that the first defendant in fact received the sum of Rs. 1,750/- on 31st January 1964. It is the further common ground that the first defendant continued to be liable to pay at the rate of Rs. 3-12 ps per day till 11-3-1966 as per the original agreement. It appears that on 31st January, 1963 a demand promissory note was signed in favour of the plaintiff, by defendants 1,2 and 3 for the sum of Rs. 2,409/37 ps with interest at 12% p.a. being the aggregate amount, which was still to be payable by the first defendant at the rate of Rs. 3-12 ps per day from the date of the said promissory note till 11-3-1966. That amount was arrived at after deducting from the value of the chit the payment of Rs. 90/- and odd, which the first defendant had admittedly made till then.

3. It is an undisputed position that instead of paying daily at the rate of Rupees 3-12 ps. as per the original agreement, the first defendant made the following payments :

(i) Rs. 1,084-38 ps. being the aggregate amount for the period from 12-2-1964 to 23-3-1965. It may be mentioned that this payment was not endorsed on the promissory note.

(ii) Rs. 5/- was paid on 24-1-1967. This payment was endorsed and signed by all the three defendants on the promissory note.

(iii) Rs. 250/- was paid on 13-9-1968, but that payment was not endorsed on the promissory note, though a receipt for the same was passed by the plaintiff.

(iv) Rs. 5/- was paid on 23-1-1970. The payment of this amount was endorsed on the promissory note and signed only by the defendants 1 and 2 but not by their son the third defendant. The aggregate of these payments comes to Rs. 1,344-38 ps.

4. When the defendants failed to pay the balance of the due from them, the plaintiff filed this suit on 30-3-1971 to recover a sum of Rs. 2,707-88 ps. being the balance due as aforesaid with interest at the rate of 12% p.a.

5. The trial Court decreed the plaintiff's suit for the balance principal amount of Rs. 1,064-99 but awarded interest only at the rate of 5 1/2 p.a. thereon from 25-5-1963 as the defendants being agriculturists' interest had to be scaled down. The plaintiff thereupon filed an appeal before the District Court, and the learned District Judge confirmed the decree passed by the trial Court. The cross-objections filed by the defendants, contending that there was no consideration to the extent of Rs. 750/- were also dismissed by the learned District Judge. It is against that judgment of the learned District Judge that the defendants have filed the present second appeal.

6. The first contention, which was strenuously urged by the learned counsel appearing on behalf of the defendant- appellants before me was that the consideration for the promissory note had failed to the extent of Rs. 750/- which was the difference between the chit amount of Rs. 2,500/- and the sum of Rs. 1,750/- which the defendants have received pursuant to the auction held on 31st of January 1964. As far as that contention is concerned, I am afraid it is misconceived, in so far as the consideration in respect of the promissory note in question was in my opinion, not purely monetary. It is true that under the very definition of 'promissory note' under Section 4 of the Negotiable Instruments Act, it must be in the nature of an unconditional undertaking to pay money only, but there can be no doubt that the consideration for that undertaking need not also be monetary as is clear from the very fact that the Legislature has in the same Act provides for non-monetary consideration in Section 45 thereof. The consideration for the promissory note dated 31-1-1964, executed by the three defendants, in my opinion, was the undertaking of certain rights and obligations by each party in accordance with the terms and conditions of the chit fund. The defendant-appellants undertook the obligation of paying the amount of the said promissory note by daily payment of Rs. 3-12 ps. in accordance with the original agreement with the chit-company. Against that, the obligation of the chit company was to pay from time to time the proper share of the bonus distributable to all the subscribers of the chit on each auction, which would not be ascertainable without a collateral enquiry. That being the nature of the consideration for the said promissory note, neither Section 44, which was relied upon, nor Section 45 of the Negotiable Instruments Act, would be of any avail to the defendants for the purpose of sustaining their plea that consideration to the tune of Rs. 750/- had failed and that the plaintiff cannot therefore get a decree to that extent. That sum of Rs. 750/- was worked out by the defendants, for the purpose of arguments, which I am now considering, as being the difference between the value of the chit, and the bid amount received by them on 31-1-1964 is Rs. 1,750/- but, in my opinion neither of these amounts would come into reckoning for the purpose of ascertaining what is due under the said promissory note. As already stated above in view of the auction held on 31-1-1964, the plaintiff was no longer under the obligation to pay the sum of Rs. 2,500/- the value of the chit, to the defendants on 11-3-1966. The sum of Rs. 1,750/- which the defendants bid at auction and received pursuant thereto also does not come into picture for the purpose of ascertaining the liability under the said promissory note. The simple arithmetical calculation, on the basis of which the defendants have claimed failure of consideration to the extent of Rs. 750/- in respect of the said promissory note is therefore misconceived, as already stated above, and must be rejected.

7. The next contention of the learned advocate for the appellants defendants was that having regard to Section 74 of the Contract Act, the plaintiff can recover on account of the breach of the contract contained in the promissory note only reasonable compensation not exceeding the amount named in the promissory note, but not the actual amount so named. In support of that submission, reliance was sought to be placed on the fact that admittedly the plaintiff has not paid to the defendants at any time, any share in the bonus distributable in respect of the auction held on 31-1-1964, and thereafter, those amounts should be taken into account for the purpose of ascertaining what is the loss which the plaintiff has suffered for which it is entitled to reasonable compensation under Section 74 of the Contract Act. On the other hand, it is contended by the learned advocate for the plaintiff-respondent that it was on account of the failure of the defendants to carry-out their obligation to pay Rs. 3-12 ps. per day as agreed, that the plaintiff had not paid the defendants share in the bonus payable on auction. It is not necessary to go into the question as to whether one or the other of these contentions is correct, for the simple reason that in my opinion Section 74 of the Contract Act has no application at all to the present case. First and foremost, this is not a case in which a sum is named in the promissory note as the amount to be paid in case of breach, nor did the promissory note contain any other stipulation which could be said to be by way of penalty so as to bring it within the terms of Section 74 of the Contract Act. Apart from that, Section 74 of the Contract Act, which is an Act, of general application to all contracts, is not attracted in the case of amounts due on negotiable instruments, which have been dishonoured for the simple reason that the Negotiable Instruments Act itself contains a specific provision in regard to the same in Section 117(a) thereof. The said Section provides that where a promissory note is dishonoured the holder is entitled to the amount due under it. As far as the interest is concerned the matter is regulated by Sub-section 79 and Sub-section 80 of the said Act, which of course would have to be modified in the light to the provisions available to agriculturists. The promissory note dated 31-1-1964, being a demand promissory note, was at maturity forthwith. This is a principle too well-settled to need authority. The said promissory note having been dishonoured by non-payment Section 117(a) of the Negotiable Instruments Act, which is a special Act, is attracted and there is no scope for invoking the general provision in Section 74 of the Contract Act.

8. As far as Sub-section 44 and Sub-section 45 of the Negotiable Instruments Act are concerned, the former Section is not applicable because, as already stated above, the consideration for the promissory note was a set of obligations and did not consist merely of money; and the latter Section would be inapplicable because it is impossible to ascertain without collateral enquiry what, if any, is the extent to which the consideration, for the said promissory note has failed. If the defendants have a right to obtain their share in the distribution of bonus payable on auctions, it is open to them to resort to such other remedies as they may be advised, but any such claim would be no answer to the present suit based on the promissory note. In claiming the amount under the said promissory note, the plaintiff has given credit for all payments made by the defendants subsequent thereto, and there is therefore no reason why the decree passed by both the Courts below should not be confirmed.

9. The only other question is whether the suit as against the third defendant is barred by limitation in view of the fact that the acknowledgment of payment on the promissory note in respect of payment of Rs. 5/- on 23-1-1970 has admittedly been made and signed only by defendants 1 and 2 and not by their son the third defendant. In this connection, it may be pointed out that the earlier payment of Rs. 250/- made on 13-9-1968 has no acknowledgment in respect of the same endorsed on the promissory note, with the result that if the endorsement by the first and second defendant on 23-1-1970 is of no avail against the 3rd defendant, the suit as against the third defendant would be time-barred. Both the Courts below have decreed the suit against the third defendant also. The trial Court had done so on the ground that since all the three defendants belong to the same family and all the three have incurred the debt in question, the acknowledgment made by the first and second defendants on 23-1-1970 must be held to have been made on behalf of the third defendant also. To that the lower appellate Court has added one more reason viz., that the suit debt had been incurred by the first defendant for the benefit of the third defendant also and the acknowledgment in question should therefore be held to be on behalf of the third defendant. In my opinion the mere fact that the third defendant happens to be the son of defendants 1 and 2 who have made the endorsement on 23-1-1970 is of no consequence at all, for after all a son is an individual who has his own rights which cannot be tacked on to those of his parents, as both the lower Courts appear to have done. As far as the other ground given by the lower appellate Court viz., that the debt was incurred inter alia for the benefit of the third defendant is concerned, there is no evidence whatsoever to that effect, and such a finding based on no evidence cannot be sustained even in second appeal.

10. As far as the reasoning given by both the Courts viz. that the debt was incurred by all the three defendants is concerned the answer to it in my opinion is provided by Sub-section (2) of Section 20 of the Lim. Act, 1963 which is in the following terms:

'Sub-section (2) of Section 20 : Nothing in the said Section (18 & 19) renders one of several joint contractors, partners, executors or mortgagees chargeable by reasons only of a written acknowledgment signed by or of a payment made by or by the agent of, any other or others of them.'

11. A plain reading of the said Sub-section leaves no room for doubt that one of several joint contractors as promisors to a promissory note cannot be made liable by reason only of an acknowledgment of payment signed by one of them. The fact that the debt under the promissory note was incurred by all the three defendants as joint promisors, as in the present case, can therefore be of no avail in the face of the express provision contained in the said Sub-section. Reliance was however sought to be placed by the learned advocate for the plaintiff on a decision of a single Judge of Madras High Court in the case of Dev Shanker v. Fernandez, : AIR1964Mad238 , (Paras. 3 and 4). The promissory note in the said case was signed by husband and wife but the acknowledgment of payment which was material, was signed only by the wife. It was held in the said case that it could be inferred that the endorsement was made by her as an agent of her husband and the suit as against him was therefore also not barred by limitation. I do not agree with the view taken by the learned Judges in the said case, in so far as it is in direct conflict with the provisions of Sub-section (2) of Section 20 of the Lim. Act, 1963, which it may be said is identical in terms with Sub-section (2) of Section 21 of the Indian Lim. Act, 1908, to which one does not even find a reference in the Judgment in the said case.

12. The next decision relied upon was that of a single Judge, of this Court in the case of M. A. Qadeer v. Azamatullah Khan, (1974) 1 Andh WR 98, in which an acknowledgment of a part payment by one or several co-heirs was held sufficient to save limitation in regard to all the heirs of a deceased promisor. As the said decision relates to co-heirs, it is easily distinguishable for the simple reason that co-heirs are not amongst the categories of person mentioned in Sub-section (2) of Section 20 of the Lim. Act, 1963, perhaps advisedly, because all the co-heirs really form a unit of inheritance in so far as they represent the estate of one person, vi. the deceased the integrity of whose debt cannot be broken up. It is perhaps for that very reason that the learned single Judge who decided that case has not referred to Sub-section (2) of Section 20 of the Lim. Act, 1963. If I am wrong in the view that the said decision is distinguishable on the ground just stated by me, and the view taken is that co-heirs are within the ambit of Sub-section (2) of Section 20, I would hold that it does not bind me, because it has overlooked the statutory provision in Sub-section (2) of Section 20 of the Lim. Act, 1963. In any view of the matter, the decision of this Court in M. A. Quadeer's case cannot help the plaintiff in the present appeal.

13. In the result, I dismiss the appeal as far as appellants 1 and 2 are concerned, I, however, allow the appeal as far as the third appellant is concerned and set aside the decrees which the lower Courts have passed against him. In the circumstances of the case I make no order in regard to costs. Leave under clause. 15, is granted both to the appellants as well as to the respondents.

14. Appeal dismissed.


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