1. This letters patent appeal is directed against the order dated 11th August, 1967, passed by Shri Justice H. R. Krishnan in Miscellaneous Appeal No. 12 of 1965, partly allowing the appeal filed by the appellant against the order dated 24th December. 1964. passed by the third Additional District Judge, Indore, in Execution Case No. 16 of 1958.
2. The judgment-debtors, who are respondents in this appeal, are a joint Hindu family firm. During the depression in the thirties they fell on bad times and had to take financial assistance from the Bank of Indore Limited (The State Bank of Indore. Limited, as it is now styled), the appellant in this case. There were diverse dealings between the parties but there are two transactions only which are material for the purpose of this appeal. By one transaction the respondents mortgaged their property situated at Indore, with the appellant, to secure repayment of a loan advanced to them by the appellant. This transaction is hereinafter referred to as the 'Indore transaction'. The respondents also executed a mortgage of their property in a village -- Bhikangaon to secure repayment of another loan advanced to them by the appellant. This transaction will hereinafter be referred to as the 'Bhikangaon transaction'. On failure of the respondents to repay the loan in respect of Indore transaction, the appellant filed Civil Original Suit No. 2 of 1945 to enforce the mortgage. In this suit a consent decree was passed on 12-11-45. This decree was put to execution by the appellant in Execution Case No. 52 of 1949 but eventually parties entered into a compromise on 17-11-51, and. on a petition filed in the Court on 19-11-51, the adjustment so arrived at between the parties was recorded. By this compromise the appellant gave up its claim for Rupees 17,000/- and interest, and the respondents agreed to pay a sum of Rs. 21,000/- to the appellant within four years from the date of the compromise. The appellant was also authorised to appropriate the income of the mortgaged property in its possession towards the liquidation of its claim. In the event of failure of the respondents4 to pay the sum of Rs. 21,000/- within a period of four years, the appellant was entitled to sell off the property either through Court or privately as provided in the compromise. If the proceeds of sale were found insufficient to satisfy the claim of the appellant, the appellant was entitled to recover it from other property owned and possessed by the respondents. The compromise so recorded was registered on 14-3-1952 by the Sub-Registrar, City Indore.
3. After this compromise dated 17-11-1951 was entered into by the parties in respect of the execution case arising out of Indore transaction, the appellant also acceded to the request of the respondents to extend the period of repayment of the loan advanced to them in connection with the Bhikangaon 'transaction. The respondents, therefore, by a letter dated 19-11-1951, requested the appellant to credit the rental income of the Indore property in possession of the appellant, towards the Bhikangaon loan account. This letter Ex. p. 1 is suite material and reads as follows:--
The Bank of Indore Ltd..
We thank you very much for your kind letter No. 11380 of the 17th instant regarding Bhikangaon Loan account for which my Firm is much obliged to the Bank for its kind consideration and sympathetic feeling.
Now looking to our past relations and assistance rendered by the Bank, we have to request YOU to continue Bhikangaon Loan account as it is and interest may be charged on it at the agreed rate till pay-merit in full.
We have further to request you to kindly liquidate this loan account by depositing the monthly rental income of our Indore Property and we shall be contributing Rs. 5,000/- a year to reduce if. at an early date. Thereafter you may credit the rental income of Indore Property to main Loan account.
for Jasrup Baijnath Bahety.'
It is pertinent to note that the respondents were anxious to clear off their liabilities in respect of the Bhikangaon transaction, earlier than those arising out of the Indore transaction, because while they were liable to pay interest on the amount due in respect of Bhikangaon transaction, there was no such liability to pay interest on the amount due from them in respect of the Indore Transaction in view of the terms of the compromise dated 17-11-1951 entered into by the parties during the executing proceedings.The request of the respondents as contained in their Letter Ex. P-1 was acted upon and the appellant credited the rental income of the Indore property towards the satisfaction of the Bhikangaon transaction. The respondents did not raise any objection to this appropriation. On the contrary they accepted the benefit thus accruing to them and kept quiet as they were naturally interested in discharging their liabilities under the Bhikangaon transaction.
4. Now, according to the terms of the consent decree as adjusted between the parties, the respondents were to repay the entire amount of Rs. 21,000/-within a period of four years from 19-11-1951. But as they failed to make the full payment till 1958, the appellant filed the present execution application, being Execution Case No. 16 of 1958, for enforcing the compromise certified by the Executing Court on 19-11-1951. This application was resisted by the respondents who objected to the appropriation of the rental income of the Indore property towards the satisfaction of their liabilities under the Bhikangaon transaction. Other objections relating to the amount of expense-alleged to have been incurred by the appellant in connection with the maintenance of Indore property were also raised but are not now material because the appellant is not challenging before us the findings of the learned Single Judge disallowing some of its claim in this behalf. The respondents, without prejudice to their objections, deposited a sum of Rupees 3,588.43 in the Court under protest in full satisfaction of the appellant's claim outstanding according to the appellant in terms of the compromise Ex. P-1 and obtained delivery of possession of the mortgaged property from the appellant.
Thereafter, by an order dated 26-12-1964, the objection of the respondents to the appropriation of rental income of Indore property towards satisfaction of Bhikangaon account was upheld by the Executing Court. The Court held that the letter Ex, P-1 was issued by the respondents prior to the compromise recorded by the Executing Court on 19-11-51 and the terms of that letter not, having been incorporated in the compromise, no effect could be given to those terms. The Court also held that the letter being unregistered was not admissible and could not vary the terms of the registered compromise. In an appeal against this order, i.e.. Misc. Appeal No. 12 of 1965, preferred by the appellant, the learned Single Judge reversed the findings of the Executing Court regarding the sequence of events and held that the letter Ex. P-1 was written subsequent to 'the compromise dated 17-11-51 entered into by the parties. The learned Single Judge, however, held that as that letter introduced a definite variation inthe terms of the compromise, it was not admissible in view of the provisions of proviso (4) to Section 92 of the Indian Evidence Act. The learned Judge also overruled the contention of the appellant that the respondents were estopped from challenging the appropriation by the appellant at the request of the respondents. Aggrieved by this order, the appellant has filed this letters patent appeal.
5. Now, the finding of the learned Single Judge that, the letter dated 19-11-1951 (Ex. P-1) in pursuance of which appropriation of rental income of Indore property was made towards satisfaction of Bhikangaon transaction, by the appellant was subsequent to the compromise dated 17-114951 entered into by the parties, cannot be and has not been challenged before us. Learned Counsel for the respondents, however, contended that Kalyandas, who purported to sign that letter for and on behalf of the joint Hindu family firm Jasroop Baijnath had no authority to act on behalf of the firm. But the capacity of Kalyandas to sign for and on behalf of the joint Hindu family firm was never disputed before the Executing Court and hence it was not put in issue. The objection to the authority of Kalyandas to act as 'karta' of the joint Hindu family was never raised by the respondents before the Executing Court in their objections dated 24-2-1959 and 20-2-1961. This objection does not also appear to have been raised before the learned Single Judge. The respondents, therefore, cannot now be permitted to question the authority of Kalyandas to sign the letter Ex. P-1 on behalf of the joint Hindu family firm at this stage.
6. Shri Chitale, learned Counsel for the appellant, assailed the finding of the learned Single Judge that the terms of the letter Ex. P-1 cannot take effect withtout registration as the letter varied the terms of a registered compromise. He contended that the bar under proviso 4 to Section 92 of the Indian Evidence Act, was not attracted where a document affected the terms of a decree. He also urged that the respondents were estopped from challenging the appropriation made by the appellant pursuant to their letter Ex. P-1. Shri Saxena, learned Counsel for the respondents, fully supported the finding of the learned Single Judge in this behalf and further contended that the letter Ex. P-1, apart from the provisions of proviso 4 to S. 92 of the Evidence Act, could not be acted upon in view of the provisions of Sections 49 and 50 of the Registration Act. Now, it is necessary to bear in mind that the present proceedings do not arise out of a claim made by the appellant to enforce the terms of the letter. Ex. P-1. The learned Single Judge has assumed that the letter Ex. P-1 constituted an agreement between the parties --and as it varied terms of a registered compromise, the appellant cannot be permitted to base its claim on an unregistered agreement. Now this approach, if we may say so with respect, is entirely erroneous.
In the first place, the letter Ex. P-1 is merely a direction to the creditor by the judgment-debtors, who were anxious to clear off their liabilities under the Bhikangaon transaction, to first appropriate the rental income of the Indore property towards satisfaction of the amount due in respect of Bhikangaon transaction. It will not be, therefore, correct to designate letter Ex. P-1 as an agreement between the parties. Secondly, the appellant is not seeking to enforce, in these proceedings, any claim on the basis of the terms of Ex. P-1. Acting on a specific request and direction by the respondent the appellant has appropriated the amount of rental income of Indore properly towards clearing liabilities of the respondents under another transaction. The respondents have definitely been benefited by this appropriation and the appellant has acted to its own prejudice inasmuch as by such appropriation it has postponed the payment of the amount due under the Indore transaction which was not carrying any interest under the terms of the compromise. The respondents by their Letter Ex. P-1 had impliedly assured the appellant that the mode of payment contemplated by the compromise dated 17-11-51 would be kept in abeyance. The respondents have thus induced the appellant to act in a particular way and have derived benefit firm that course. It is against this background that we have to examine whether the appellant can be directed in the present proceedings to refund that amount which was credited by it to the Bhikangaon loan account, in pursuance of the direction of the respondents contained in the letter Ex. P-1, from out of the rental income received by it from the property of the respondents in its possession.
7. Now, in equity, where two parties stand together in a contractual or other similar legal relationship, and one of them makes to the other a promise to waive, suspend, or vary his strict legal rights, the promisor may be estopped from acting inconsistently with the promise which he has made. In Hughes v. Metropolitan Railway Co., (1877) 2 App Cas 439), Lord Cairns described the principle as follows:--
'It is the first, principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results--certain penalties or legal forfeiture--afterwards by their own act or with their consent enter upon a course of negotiations which has the effect of leadingone of the parties to suppose that the Strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced these rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.'
Based on this principle, the doctrine now appears to be well settled that where one 'party has by his words or conduct, made to the other, a promise or assurance which was intended to affect the legal relation between then and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the party who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relationship as 'if no such promise or assurance had been 'made by him. He must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration, but only by his word.
This principle, enunciated in Central London Property Trust Ltd. v. High Trees House Ltd.. (1947) 1 KB 130 has been recognised by the Supreme Court in Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd.. AIR 1972 SC 1311. In that case the Supreme Court has observed that the rule laid down in those decisions advanced the cause of justice. We, have therefore, no hesitation in applying that rule in the circumstances of this case. We have already stated that the appellant, acting on the specific request of the respondents, refrained from enforcing its rights under the Bhikangaon transaction and also placed itself in a disadvantageous position by postponing the payment of the amount due under the Indore transaction, which did not carry interest under the terms of the compromise. In these circumstances, therefore we hold that the claim made by the respondents for refund of the amount, which was credited by the appellant towards the Bhikangaon loan account at the specific request of the respondents from out of the rental income received by the appellant from the property of the respondent in its possession is clearly untenable. The learned Single Judge held that, had the appellant, having applied some of the income from the Indore property towards the Bhikangaon mortgage, still filed a suit on the basis of the letter, its claim would have been barred by the rule of estoppel. The learned Single Judge has, however, held that that rule could not be made applicable to the claim for refund made by the respondents in the execution proceedings. With respect, we are unable to appreciate this distinction. The finding by the learned Single Judge in this be-half cannot be sustained. We accordingly hold that the claim by the respondents for the amount credited by the appellant towards the Bhikangaon loan account is barred by the rule of estoppel.
8. On behalf of the respondents, it was contended that it was not open to the executing court to act on the terms of the letter Ex. P-1 in view of the bar imposed by proviso 4 to Section 92 of the Evidence Act, and Sections 49 and 50 of the Registration Act. Now, so far as the contention of the respondents based on applicability of proviso 4 to Section 92 of the Evidence Act, is concerned, it cannot be sustained in view of the fact that the rule of estoppel must prevail against a pure rule of procedure contained in Section 92 of the Evidence Act. This is not a case where the appellant is seeking to enforce its rights flowing from an unregistered document varying the terms of a registered document. All that the appellant seeks to do is to contend that the respondents are estopped from claiming a refund in the execution proceedings on the ground that there has been an excess payment received by the appellant under the terms of the compromise dated 17-11-1951. As the respondents, by their own conduct and assurance contained in the letter Ex. P-1, have led that appellant to act in the way it has done, the respondents cannot now be permitted to fall back upon Section 92 of the Evidence Act, and thereby escape the consequences of their own action.
9. The learned Single Judge has refused to act on the letter Ex. P-1 on the ground that as it varied the terms of the compromise dated 17-11-1951 which was registered, its registration was compulsory and in the absence of registration it could not be looked into. The learned Single Judge has held that that letter had a two-fold effect: firstly, of diverting the income from the Indore property in a manner not envisaged in the compromise agreement, and secondly, the date on which the judgment-debtors were to get back Indore property was postponed by a period equal to that income during which would suffice to pay off the Bhikangaon debt. We do not agree. The compromise dated 17-11-1951 stipulated that the principal amount would be repaid within four years. The property referred to in that compromise did not come into the possession of the appellant as a result of the compromise. The compromise recited that the property was already in possession of the appellant. This is also evident from the following statement of Kalyandas before the executing Court:--
'Property was in possession of the Bank even before 19-11-1951.'
Now, the compromise did not provide that the only mode of payment of principalamount was by appropriation of income 4 from Indore property. The judgment-debtors had undertaken to pay off the principal amount within a period of four years. But they had a right to get back Indore property as soon as the principal amount was repaid. This right is not in any way affected by the letter Ex. P-1 as it did not in any way prevent the respondents from paying the amount due under the compromise and from claiming back the possession of the property. It cannot be, therefore, held that by that letter the date of getting back Indore property was postponed. Jt will also not be correct to hold that that letter varied the terms of the compromise. The letter merely requested the appellant to first apply the income from Indore property to Bhikangaon transaction before applying it towards the satisfaction of the Indore transaction. The appellant was not bound to follow the instructions contained in the letter Ex. P-1. The appellant had never agreed to the course suggested. There was, therefore, no agreement in that sense of the term. The instructions were unilateral and could be withdrawn at any time by the respondents. The directions contained in the letter Ex. P-1 could not have been legally enforced. It is, therefore, difficult to appreciate the finding that it had the effect of diverting the income from Indore property or that it, in any manner, affected the right of the respondents to get back Indore property.
10. Moreover, the entire approach of the learned Single Judge to the controversy was as if the executing Court was being called upon to enforce the rights, if any, flowing from the letter Ex. P-1. Had it been so, the questions as to whether the letter Ex. P-1 constitutes an agreement and whether its registration was compulsory, would have been material. The decision of the Privy Council in Saiyid Abdullah Khan v. Saiyid Sasharat Husain, (1913) 40 Ind App 31 (PC) relied upon by the learned Single Judge is distinguishable. The question for consideration in that case was as to the terms on which the decree for redemption could be made. The mortgagor contended that the right of the parties should be governed not merely by the mortgage deed which was duly executed and duly registered but by a letter as well, neither registered nor witnessed, purporting to be signed by the mortgagee who died ten years before institution of the suit for redemption. This contention was repelled by the Privy Council on 'the ground that the document being unregistered, was inadmissible in evidence. The facts of the present case are, however, entirely different. Here, in an application for execution by the decree-holder, the contention of the judgment-debtors is that the appellant has misappropriated the income received fromthe Indore Property and hence It has resulted in an excess payment to the decree-holder under the consent decree as compromised. This contention cannot be upheld in view of the fact that the amount alleged to have been misappropriated by the appellant, is in fact appropriated in compliance with the direction of the respondents contained in the letter Ex. P-1.
11. For all these reasons, this appeal is partly allowed. The orders of the executing Court and that of the learned Single Judge, in so far as they require the appellant to refund the sum of Rupees 17,276.37 (Rupees Seventeen thousand two hundred seventy-six and thirty-seven paise) which sum is agreed to by counsel for the parties as the amount, appropriated towards the discharge of Bhikangaon mortgage account, are set aside. The respondents shall pay the costs of this appeal to the appellant. Counsel's fee Rupees 200/-, if certified.