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Takhatmal Moth Raj Vs. Bharat Nidhi Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMadhya Pradesh High Court
Decided On
Case NumberFirst Appeal No. 89 of 1959
Judge
Reported inAIR1963MP132; 1963MPLJ98
ActsCode of Civil Procedure (CPC) , 1908 - Sections 60 - Order 21, Rule 63; Transfer of Property Act, 1882 - Sections 130
AppellantTakhatmal Moth Raj
RespondentBharat Nidhi Ltd. and anr.
Appellant AdvocateR.S. Dabir and V.S. Dabir, Advs.
Respondent AdvocateV.S. Pandit, Adv. for Respondent No. 1
DispositionAppeal allowed
Cases ReferredUnion of India v. Bank of East Ltd.
Excerpt:
- - what is essential is that the words used in the instrument of transfer must clearly indicate the intention of the transferor to transfer the claim due to him to the transferee. if the money under the bills had belonged to the bank, then clearly there would have been no question, of its appropriation by the bank towards the repayment of any advances due to the bank from a third person. the subsequent clauses in the power of attorney also clearly show that by that document the bank was constituted only an agent of malhotra for the realisation of all sums of money, debts etc. if the document can be construed as indicating clearly that the owner of the actionable claim has transferred thereby his interest, then no doubt there would be an assignment of the claim......for the execution of the contracts undertaken by him.on i3th july 1946 malhotra executed a power or attorney in favour of the bank authorising it by clause (1) thereof'to present and submit supply bills regarding our contract to the proper officer and/or authority of the government departments concerned; to obtain cheques for sums payable to us under the contracts directly in their own name or in our names in payment of such bills or other amounts and to cash and to receive the amount thereof and appropriate such receipts towards and in repayment of the advances made or to be made hereafter and all other monies due from us to the attorneys in any account whatsoever'. clause (5) of the power of attorney provided that the power would be irrevocable so long as any claim of the bank.....
Judgment:

Dixit, C. J.

1. This is an appeal from a decision of the first Additional District Judge, Jabalpur, declaring that the respondent No. 1, Bharat Nidhi Limited, is the owner of a bill dated 19th July 1948 under which a sum of Rs. 49,633-8-7 was due from the Eastern Command military authorities.

2. The material facts are that in 1946 the respondent No. 2, Malhotra, entered into certain contracts with military authorities and other Government-departments for work or labour. The Bharat Bank Ltd., the predecessor-in-interest of the respondent No. 1, Bharat Nidhi Ltd, agreed to advance moneys from time to time to Malhotra for the execution of the contracts undertaken by him.

On I3th July 1946 Malhotra executed a power or attorney in favour of the Bank authorising it by Clause (1) thereof

'To present and submit supply bills regarding our contract to the proper officer and/or authority of the Government Departments concerned; to obtain cheques for sums payable to us under the contracts directly in their own name or in our names in payment of such bills or other amounts and to cash and to receive the amount thereof and appropriate such receipts towards and in repayment of the advances made or to be made hereafter and all other monies due from us to the attorneys in any account whatsoever'. Clause (5) of the power of attorney provided that the power would be irrevocable so long as any claim of the Bank against the executant Malhotra for any principal amount, interest, costs, charges, etc. remained outstanding and unpaid.

The Bank gave intimation of this power of attorney to the military authorities who, in reply, asked the Bank to send the power of attorney for 'note' and adding that pending receipt of the power the bills submitted by Malhotra would be paid according to the instructions in the bills.

In 1948 the Bank presented to the military authorities the said contractor's bill No. FN/45/2 dated We 19th July 1948 for Rs. 49,633-8-7 for payment. On this bill the respondent-Malhotra made the endorsement 'Please pay to Bharat Bank Ltd., Jubulpore'.

Before the payment of the bill by the military authorities to the Bank, the appellant Takhatmal attached the bill and the money due under it in execution of a decree obtained by him against Malhotra. The Bharat Bank Ltd., preferred an objection to the attachment which was overruled. Thereupon the Bank instituted a suit under Order 21 Rule 63 C. P. C. for a declaration that it was the owner of the Din in question and that the amount due under the bill belonged to it

Malhotra, the respondent No. 2, did not appear and contest the suit. The appellant resisted the suit mainly on toe ground that the bill and the money due under It belonged to Malhotra and the power of attorney executed by him in favour of the Bank did not create any charge or any transfer of the debts due to Malhotra from the military authorities. The learned Additional District Judge rejected this plea of the appellant. He held that the effect of the power of attorney executed by Malhotra and of the endorsement made by him on the bill was that there was an assignment of the bill and of the debt due to Malhotra, in favour of the Bank,

3. The sole question that arises for determination in this appeal is whether the power of attorney executed by Malhotra and the endorsement made by him on the bill referred to above amounted to an assignment of the debt due to Malhotra from the military authorities within the meaning of Section 130 of the Transfer of Property Act.

Under that provision the assignment of a close in action must be made by writing signed by the transferor or his duly authorised agent. Section 130 does not prescribe that the assignment should be in a particular form or that a particular language should be used to effect an assignment. What is essential is that the words used in the instrument of transfer must clearly indicate the intention of the transferor to transfer the claim due to him to the transferee. As was observed by Lord Macnaghten in William Brandt's Sons and Co. v. Dunlop Rubber Co., 1905 AC 454

'An equitable assignment ...... may be addressed to the debtor. It may be couched in the language of command. It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is plain. All that is necessary is that the debtor should be given to understand that the debt has been made over by the creditor to some third person'.

In order, therefore, that an instrument purporting to be an instrument of assignment should operate as such it is necessary that the language must show that the right and title of the transferor to the debt has been transferred to a third party. When there is such a transfer, the assignee becomes entitled as of right to the payment of the debt.

4. The question whether there was an assignment of the bill and of the amount due under it in favour of the Bank depends upon the construction of the power of attorney and of the endorsement on the bill in question. A bare perusal of the power of attorney is sufficient to show that it is in no sense any instrument of assignment. The preamble of the power of attorney only refers to negotiations and the agreement between the Bank and Malhotra about the conditions on which Malhotra was to obtain credit from the Bank, and to the desire of the Bank to become the lawful attorney of Malhotra in all matters relating to the receipt of all payments under the contracts'. The first clause of the power only authorised the Bank to present and submit bills regarding Malhotra's contracts to the competent authorities, to obtain cheques for sums payable to Malhotra under the contracts in the name of the contractor or in the name of the Bank, and then to appropriate the receipts of the bill when received towards the repayment of the advances made by the Bank.

This clause does not contain any words of transfer of the right and title of the executant to any bills and the amounts due thereunder to the Bank. It only gave an authority to the Bank to receive payments from the departments concerned of the amounts due to the contractor after presenting the bills. The expression 'to obtain cheques for sums payable to us under the contracts directly in their own name or in our names' used in Clause (1) is very significant. That expression, when read with the further words occurring in the clause, namely, 'to receive the amount thereof and appropriate such receipts,' lends support to the view that Clause (1) amounted to nothing more than a mere authority to the Bank to cash and realise the amounts of the bills due to Maihotra from the departments concerned. The. expressions referred to abovs show that the Bank was not to collect the money on its own behalf but was to collect it on behalf of the executant of the power of attorney and the moneys due under the bills belonged to the contractor until it was received by the Bank and appropriated by it towards the Bank's advances.

If there had been under Clause (1) an assignment giving to the Bank right and title to the amounts due under the Bills and making the departments concerned liable to the Bank and not to the contractor in respect of those bills, then that clause would not have described the amounts due under the bills as payable to the contractor or permitted the issue of cheques in the name of the contractor or provided for the appropriation of the receipts towards the Bank's advances. If the money under the bills had belonged to the Bank, then clearly there would have been no question, of its appropriation by the Bank towards the repayment of any advances due to the Bank from a third person.

The subsequent clauses in the power of attorney also clearly show that by that document the Bank was constituted only an agent of Malhotra for the realisation of all sums of money, debts etc. due to Malhotra. Clause (2) gave to the Bank authority to compound and settle all accounts relating to the claims of the contractor only with the approval of the contractor. Again, Clause (3) permitted the Bank to conduct and defend proceedings in Court and before Government authorities in consultation with the executant and to take steps in the name of and on behalf of the executant. It is thus plain that the power of attorney only authorised the Bank to receive payments from the departments concerned of the amounts due to the contractor. It neither created a charge nor transferred any debt due to the contractor from any department to the Bank.

5. The endorsement on the bill, namely, 'Please pay to Bharat Bank Ltd., Jabalpur', does not advance the matter any further and does not profess to constitute any assignment either absolutely or by way of a charge 43 contemplated by Section 130 of the Transfer of Property Act. That endorsement is no more than a 'pay order', An order for payment of money is not the same thing as an assignment of a debt. A mere order to pay the amount of a bill to a certain person does not give the payee any interest in the amount and the liability of the debtor to the creditor is not substituted by the liability of the debtor to the payee. Indeed, when a person directs his debtor to pay the debt to another person, there is a necessary presupposition that the debt amount belongs to the person giving the pay order. It follows, therefore, that the endorsement 'Please oay to Bharat Bank Ltd., Jabalpur', does not constitute any assignment of the amount of the bill, which was owed by the military authorities to Malhotra, in favour of the Bank. The endorsement has not that effect, whether read independently or along with the power of attorney.

6. The learned trial Judge has relied on numerous decisions, which are all distinguishable on facts and onthe nature of the documents held to constitute assignments in those cases. The cases analogous to the present one are Bank of the East (1927) Ltd. v. State of Assam, AIR 1958 Assam 22, Gauhati Bank Ltd. v. Rajendra Nath, AIR 1959 Assam 167, Kisen Gopal v. Bavin, AIR 1926 Cal 447, B. N. Ry. Employees' Urban Bank v. Erie Walter Seager, AIR 1942 Pat 307.

In AIR 1958 Assam 22 (supra), a contractor entered into an arrangement with a bank whereby the bank advanced moneys to the contractor on overdrafts against his contract bills on certain government department The contractor gave an irrevocable power of attorney in favour of the bank authorising it to receive payments of the contractor's bills direct from the department and to credit the amount of the bills, when realised, to the account of the contractor. In the preamble of the power of attorney there was a statement that the contractor completely surrendered his right of receiving any payment of dues from the department. The Assam High Court held that the power of attorney only gave an authority to receive payments from the department concerned of the amounts if and when they became due to the contractor, that it did not either create a charge or effect any transfer of a debt due to the contractor from the Government, and that there was no assignment within the meaning of Section 130 of the Transfer of Property Act. Even the words in the power of attorney used by the contractor surrendering all his rights to realise the bills in favour of the bank were not regarded as overriding the other clauses in the document by which the bank was appointed only as an agent of the contractor.

This decision was followed in AIR 1959 Assam 167 (supra) where on similar facts and circumstances it was held that there was no assignment in favour of Gauhati Bank. Ltd. under a power of attorney executed by a Government contractor in favour of the Bank. It is true that in each of these cases the power of attorney provided that the bank should credit the amounts of the bills when realised to the account of the contractor. But that is in no way a feature for distinction between those cases and the present one. In the Assam cases, and so also here, the bank advanced money to the contractor on overdrafts. That being so, when the Bank was given in the Assam cases the power to realise the bills and credit the amounts to the account of the contractor the necessary result was that the amounts of the bills went towards the discharge of the liability of the bank. Here the Bank was given the power to appropriate the amounts of the bills when realised towards the repayment of the. advances made by the Bank. In effect this meant that the Bank should credit the amount of the bills when realised to the account of the contractor.

Learned counsel for the respondent No. 1 placed reliance on Alkash Ali v. Nath Bank Ltd., AIR 1951 Assam 56 to support the contention that the power of attorney executed in favour of the Bank and the endorsement made on the bill constituted an assignment. That case was distinguished in Union of India v. Bank of East Ltd., AIR 1954 Assam 23 and AIR 1958 Assam 22 (supra) on the ground that the words of the document in AIR 1951 Assam 56 (supra) created a hypothecation or a charge as the bills were given for the security of the overdraft account. The Assam case cited by the learned counsel for the respondent No. 1 is, therefore, of no assistance as the decision in such cases turns on the construction of the document. If the document can be construed as indicating clearly that the owner of the actionable claim has transferred thereby his interest, then no doubt there would be an assignment of the claim.

In regard to the question whether an order to pay constitutes an assignment, reference may be made to, AIR 1926 Cal 447. In that case the Eastern Machinery and Engineering Co., Ltd., had to receive a sum of Rs. 1800/-from M/s Kilburn and Co., on account of the sale of a lathe. One Kisen Gopal Bogree claimed to be entitled to receive the sum by virtue of an assignment said to have been made by the Eastern Machinery Company in his favour. The assignment was said to be an endorsement on the back of a bill against M/s Kilburn and Co. It ran thus --

'Messrs. Kilburn and Co., kindly remit to Babu Kissen Gopal Bogree who will collect on our behalf.'

The Calcutta High Court held that this endorsement was nothing more than an order to pay and did not amount to an assignment of the debt which was owed by Kilburn and Co., to the Eastern Machinery Company. In AIR 1942 Pat 307, a letter of authority written by a debtor of a society authorising his employer to deduct from the amount of his salary sums due to the society was held as not constituting an assignment of an equitable charge. It was held to be only a pay order.

7. Having regard to the terms of the power of attorney executed in the present case and the wording of the endorsement on the bill in question, we have no doubt that there was no assignment within the meaning of Section 130, Transfer of Property Act, of the amount of the bill to the Bharat Bank Ltd., and the conclusion of the Additional District Judge that they constituted an effectual assignment was not correct. The amount payable to Malhotra by the military authorities under the bill in question continued to remain the money of the contractor and, therefore, it could be validly attached by the appellant.

8. The result is that this appeal is allowed, thedecision of the learned Additional District Judge of Jaipur is set aside and the suit filed by the Bharat NidhiLimited is dismissed with costs of the appellant throughout.


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