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Bhimji Mauji Vs. Dhirajlal Panjiban Thakar and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtOrissa High Court
Decided On
Case NumberSecond Appeal No. 111 of 1956
Judge
Reported inAIR1959Ori204
ActsNegotiable Instruments Act, 1881 - Sections 80
AppellantBhimji Mauji
RespondentDhirajlal Panjiban Thakar and anr.
Appellant AdvocateH. Mohapatra and ;R.N. Misra, Advs.
Respondent AdvocateP.V.B. Rao, Adv.
DispositionAppeal partly allowed
Cases ReferredManik Ratan v. Prakash Chandra
Excerpt:
.....the courts below with which i should interfere at this stage. 3. this leads me to the consideration of an interesting point of law raised by mr. the earliest indian case on the point was a decision of the madras high court in best v. this view is in consonance with the english law as well. the bombay high court had also in view the well settled law in england that a promissory note payable on demand becomes payable at once. as clearly explained by the learned judge in calcutta case the word 'same' can only relate to 'interest' and not to the words 'amount thereon'.indeed, it would be doing violence to the section itself if the word 'same' was to refer to the words 'amount due thereon'.further, this view is also supported by a further consideration that after the word 'same',again the..........act. the bombay high court had also in view the well settled law in england that a promissory note payable on demand becomes payable at once. the bombay high court's whole perspective in the case was with reference to the question of limitation. the case of norton v. ellam, (1837) 2 m and w 461 on which the bombay high court relied was also decided in this context that where money is lent simply, limitation began to run from the time of lending; cause of action arose immediately. up to this point there is no difficulty.but as interest is a collateral sum, the position is otherwise because it is a promise to pay a collateral sura on request, for then the request ought to be made before action can be brought. in all the cases referred to in the bombay decision the question was as to.....
Judgment:

S. Barman, J.

1. The defendant No. 2 is the sole appellant from the judgment of the Additional District Judge, Puri confirming the decision of the learned Subordinate Judge, Puri, who passed a decree in favour of the plaintiff in a suit filed by him against the defendants for recovery of certain amount advanced to the defendants on a hand-note purported to have been executed by the appellant-defendant No. 2 for the purpose of completing construction of portions of a Cinema House called Mohan Talkies at Jatni.

2. The plaintiff's case is, as appears from records,, that he lent to the defendant No. 2 a sum of Rs. 3,259/- in cash on June 15, 1947 and that the defendant No. 2 had executed a hand-note promising to repay the loan on demand with interest at 12 per cent. per annum. The hand-note (Ext. 1) is, however silent about interest : -- far less that the interest was payable at the rate of 12 per cent. per annum as alleged in paragraph 2 of the plaint. The defendants not having paid the amount the plaintiff filed a suit in June 1950. In the plaint, the plaintiff claimed interest for three years at the rate of 12 per cent. per annum amounting to Rs. 1,173/4/-, the total amount claimed in the suit being Rs. 4,432/4/-.

The defence taken in the suit was that no amount was received by either of the defendants as alleged. As regards the genesis of the promissory note (Ext. 1) the defendant's case was that the plaintiff produced before the defendant No. 2 a Wank paper intended to be used as a deed of partnership, at Khurda Railway Station when the said defendant was on his way home (Desh). The defendant No. 2's case was that in good faith he put his signature on the blank paper while he was in a hurry as the train was about to start. It appears that the text of the hand-note had been written by the plaintiff. There were two attesting witnesses to the document.

As regards the alleged cash considerations for the hand-note, the Books of Account of the plaintiff's business (Ext. 2 series) show that there was no cash balance in the hands of the plaintiff. Evidence was, however, adduced that this money was taken from his wife and necessary adjustment was made in the Books of Account. In short, the defendant No. 2 sought to establish that the document (Ext. 1) was not a genuine document and no consideration passed from the plaintiff to the defendant No. 2, Both the trial courts and the lowerappellate Court were not satisfied as to the defence on merits.

The learned Subordinate Judge (trial court) for the reasons fully stated in his judgment held that the defendant No. 1 could not be made liable for the loan and it was defendant No. 2, the executant of the hand-note, who was to be liable for the alleged loan. This finding of the learned trial Judge was not interfered with and, in fact, was confirmed, in appeal. I am not satisfied that there is any such finding by the Courts below with which I should interfere at this stage.

3. This leads me to the consideration of an interesting point of law raised by Mr. Harihar Mo-hapatra (with him Mr. R. N. Misraj, the learned counsel appearing for the appellant, on the question from what date the interest would be payable to the plaintiff. The hand-note in question reads as follows:

'Rs. 3259/-

On demand we proprietors and managers of Mohan Talkies of Khurda Road, P. O. Jatni, promise to pay jointly and severally Mr. D. P. Thak-ker of Jatni or order the sum of Rupees three thousand two hundred fifty nine only for the value received in cash as taken loan for the cinema purpose.

Sd. Bhimji Chauhan

For Mohan Talkies

15-6-47

Witness:

Sd. Madhab Satpathi.

Sd. Karson Madhabji.

16-6-47.

Please pay to bearer.

Sd. D. P. Thakker.

15-10-49.'

The document shows that there is no mention of any interest being payable on the loan. The trial Court has allowed interest at the rate of 6 per cent. per annum and future interest at 6 per cent. per annum. The learned counsel for the appellant contended that no interest is payable on the loan as the document on the strength of which the suit is filed is silent about interest. Mr. P. V. B. Rao, learned counsel appearing for the respondents, however, relied on Section 80 of the Negotiable Instruments Act in support of his contention that even if no interest is specified in the instrument, interest on the amount due shall, in any event, be calculated at the rate of 6 per cent. per annum from the date of the execution of the document, namely, June 15, 1947.

4. The question for consideration on this point is from what date the interest should be paid, whether or not it is from the date oh which the money ought to have been paid which is generally the date of maturity of the instrument. There are conflicting decisions on this point. There is a difference of opinion as to the date from which interest is to be calculated in the case of instruments payable on demand. The earliest Indian Case on the point was a decision of the Madras High Court in Best v. Haji Muhammad Sait, ILR 23 Mad 18, where it was held that the notes being payable on demand, it is not the date of the making but the date of demand, that must be taken as the point from which to calculate interest.

This view is in consonance with the English Law as well. The English decisions however are not quite applicable in determining this point under the Indian Law, as it exists, in view of the fact that in English Law, there is a clear provision that presentment is necessary for an instrument payable on demand. There is, however, no such corresponding section in the Indian Act and Section 80 of theNegotiable Instruments Act awards interest from the time when the dues ought to have been paid. A decision of the Full Bench of the Bombay High Court throws some light on this point.

In the Full Bench decision of the Bombay High Court in Ganpat Tukaram v Sopana Tukaram, AIR 1928 Bom 35 : ILR 52 Bom 88, their Lordships, after consideration of the Indian decisions-, then available, as also the English decisions on the subject, came to the conclusion that where a promissory note is payable on demand but not at a specified place and is silent as to interest, interest can be awarded under Section 80 at 6 per cent. per annum from the date of the promissory note. We are not directly coacerned with the other aspects of the judgment.

On careful scrutiny of the Bombay decision, it seems to me that the direct context in which the Bombay High Court decided the case was the maturity of the suit promissory note for determining the question of limitation, and while so deciding they referred to Sections 32, 22 and 19 of the Negotiable Instruments Act. The Bombay High Court had also in view the well settled law in England that a promissory note payable on demand becomes payable at once. The Bombay High Court's whole perspective in the case was with reference to the question of limitation. The case of Norton v. Ellam, (1837) 2 M and W 461 on which the Bombay High Court relied was also decided in this context that where money is lent simply, limitation began to run from the time of lending; cause of action arose immediately. Up to this point there is no difficulty.

But as interest is a collateral sum, the position is otherwise because it is a promise to pay a collateral sura on request, for then the request ought to be made before action can be brought. In all the cases referred to in the Bombay decision the question was as to the due date of payment of the principal sum (amount due) but in the present case before me the question is when interest became due. Interest is in the nature of damages. There must be demand; and damages accrue after refusal on demand. Until demand, there is no breach of contract to entitle the creditor to damages.

The Bombay High Court decided on the facts of the case, within the scope and in the light of Sections 22, 32 and 64 of the Negotiable Instruments Act; but the real scope of Section 80 which allowed interest by way of damages appears to have been lost sight of in coming to the ultimate conclusion. The particular aspect of the case does not appear to have been considered in the Bombay case. Section 80 read with Clause 2 of Section 32 throws light on the correct position. Clause 2 of Section 32 refers to payment of compensation for any loss or damage to the creditor caused by default in payment at maturity according to apparent tenor.

Here the promissory note only matures on demand according to apparent tenor. So until demand, it does not mature and so no question of loss or damage. Damages presupposes breach of contract. There is no breach of contract until refusal on demand. So until demand, there is no occasion for breach of contract or consequential damages in the shape of interest as in the present case. The angle or view point from which the Bombay High Court decided the case is that the liability on a promissory note payable on demand arises from the date of the note from which the time of limitation begins to run and not from the date on which a demand is made for payment. This staggering aspect in the Bombay case was subsequently clarified in a later decision of the Calcutta High Court.

The Bombay decision came to be discussed in a subsequent decision of the Calcutta High Court by Mr. Justice Lort-Williams in Prem Lall Sein v. Radha Bullav Kankra, AIR 1931 Cal 140. This case is a direct authority on the point with which we are concerned. The ratio decidendi of the Calcutta view was that interest under Section 80, must be in the nature of damages. Relying on certain English decisions referred to in the judgment, Lort-Williams J. made it clear that interest is only payable as damages, that is, in case of default and it follows that where there is no specific agreement to pay interest, it cannot be claimed until after demand. The Bombay decision was fully discussed in the judgment. Lort-Williams J. followed the reasoning of the Bombay High Court up to a certain point. The crux of the question depended upon the meaning to be given to the words:

'interest shall be calculated........from thedate at which the same ought to have been paid by the party charged.'

The Calcutta decision adopted the Bombay view that these words referred to the date when the amount secured by the note ought to have been paid but with regard to the conclusion, which the Bombay Full Bench arrived at, there was some underlying misconception. Such misconception was due to the disregard of the salutary rules for the construction of statutes. The misconception in the Bombay view as the learned Judge in Calcutta case pointed out, was due to the fact that their Lordships of the Bombay High Court overlooked the distinction in law, so far as regards the question of the necessity for demand, between a claim for the amount due on a note payable on demand and claim for interest thereon.

Proceeding further Lort-Williams J. then discussed the natural meaning of Section 80. The view that Lort-Williams J. held was that the phrase 'date at which the same ought to have been paid' has no reference to the 'amount due' on the note as has been assumed by the Bombay Full Bench but relates to the 'interest' due thereon. As clearly explained by the learned Judge in Calcutta case the word 'same' can only relate to 'interest' and not to the words 'amount thereon'. Indeed, it would be doing violence to the section itself if the word 'same' was to refer to the words 'amount due thereon'. Further, this view is also supported by a further consideration that after the word 'same', again the words 'amount due thereon' occur in the section. If, in fact, the word 'same' was intended to refer to the words 'amount due thereon', then this would result in apparent tautology which surely could not have been the intention of the Legislature. On a construction of Section 80 it was held that the phrase 'date at which the same ought to have been paid' has no reference to the words 'amount due' on the note but relates to the 'interest' thereon.

5. The other High Courts, however, appear to have taken a different view. Several decisions were 'placed before me purporting to cite a view contrary to the view taken by Lort-Williams J. in Calcutta case cited above. In Bishum Chand v. Audh Behari Lal, 2 Pat LJ 451: (AIR 1917 Pat 533) a hand-note payable on demand but which did not provide for the payment of interest, was held to carry interest at the rate of 6 per cent. per annum from the date of execution of the hand-note until the realisation of the debt. The question, fromwhich date the interest became payable, appears to have been discussed in the judgment. It appears to me that the Patna High Court did not consider in the said judgment from the point of view with which we are directly concerned here.

There, their Lordships proceeded to consider on a construction of Section 80 whether interest was payable on the note in suit. This being a decision in 1917--long before the Bombay and Calcutta decisions--the Patna High Court had not the benefit of these subsequent decisions. The Patna High Court also missed the real point that interest under Section 80 must be in the nature of damages. Then in a decision of the Allahabad High Court in Williams v. Kallu Mal Magan Lal, AIR 1935 All 451 the Calcutta and Bombay decisions were discussed in the context of a promissory note where no interest was mentioned and it was held that interest should run from the date of execution of the instrument.

Mr. Justice Allsop delivering the judgment differed from the Calcutta view in its construction of Section 80 with particular reference to the words 'same' and the 'amount due'. The view that his Lordship took in the Allahabad case was that the word 'same' could not refer to 'interest' but to 'amount due' and while commenting on the Calcutta view it was observed that if the Calcutta view was accepted then the wording of the section would be meaningless because interest could not be calculated until it became due and interest could not become due so that it ought to have been paid before the date from which it could be calculated.

In the Allahabad case, in the instrument which was in dispute, there was no reference to any payment of interest. The document was in these terms:

'Due to Kallu Bania for stones purchased the sum of Rs. 649/14/6..... .only.'

In the judgment itself the Allahabad High Court expressed that it was doubtful whether this could be called a promissory note. With great respect, the reasoning of the Allahabad judgment that interest should run from the date of execution, is not quite clear to me. This decision also appears to have missed the ratio decidendi of the Calcutta decision that under Section 80, interest must be in the nature of damages, that is in case of default and it follows that where there is no specific agreement to pay interest as in the present case, it cannot be claimed until after demand. The Allahabad decision overlooked this particular aspect of the Calcutta decision.

It also overlooked that Section 80 of the Negotiable Instruments Act related to interest when no rate was specified and not to the amount due to the creditor. The dominant subject-matter of Section 80 is 'interest' and not the 'amount due'. Mr. P. V. B. Rao, the learned counsel appearing for the respondents, also cited before me decision of the Lahore High Court in Khurshid Haq v. Ramditta Mall, AIR 1928 Lah 665 in support of the contrary view. This case appears to have been decided on the same basis as the Allahabad case and the comments which I have made with regard to the Allahabad case equally apply to the Lahore decision cited above. Besides, the Lahore decision was in 1928, that is to say, long prior to the Calcutta decision which was in 1931 and the Lahore High Court had not had the benefit of the subsequent decisions which followed.

In a later decision of the Allahabad High Court in Nath Sah v. Lala Dursa Sah, AIR 1936 All 160 although the same conclusion was reached as in the earlier decision, one striking feature was thatin this case the Allahabad Bench appears to have broached the subject from a something different angle. Sulaiman C. J. in his judgment conceded that there are difficulties in either view. His Lordship in the judgment discussed the consequences of both views on the construction of Section 80. Presumably attention of the Allahabad High Court, Division Beach was not drawn to the deciding aspect that under Section 80, interest must be in the nature of damages.

The Allahabad High Court would possibly have to come to a different conclusion, if this aspect was pointed out to them. In the ultimate analysis, on a fair construction of Section 80 it appears to me that the Calcutta view,--as expressed by Lort-Williams J. which was followed in a recent decision of the same High Court in Manik Ratan v. Prakash Chandra, (S) AIR 1955 Cal 338: 58 Cal WN 545 (Das Gupta and Mookherji JJ.)--is the reasonable view; and their Lordships reiterated the correctness of the decision of Lort-Williams J. and held that when the amount itself is payable on demand there can be no question of interest becoming payable before that date. Where, however, the amount is payable under the instrument on the expiry of a certain period of time, the amount becomes payable at once so that where the amount is not being paid, it was proper to allow interest by way of damages.

6. Relying on the authorities cited above, I accept the contention of Mr. Harihar Mohapatra, learned counsel for the appellant, that Lort-Williams J. took the reasonable view and it should be followed. In the present case, the facts were that no interest was mentioned in the hand-note, nor was there any demand made prior to the institution of the suit. The suit was filed on June 19, 1950. It appears from records that the summons was served on the defendant-appellant in July 1950. Therefore, interest at 6 per cent. per annum shall be calculated from the date of the service of the summons. The trial court, however did not allow interest pendente lite. Therefore, all that the plaintiff is entitled to as interest is post-decree interest at 6 per cent. per annum.

7. The result, therefore, is that subject to the modifications as to interest as hereinbefore stated, the judgment and decree are upheld and the appeal is partly allowed as aforesaid.

8. There will be no order as to costs of this appeal.


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