1. The facts out of which this appeal arises may first be stated. The 1st plaintiff herein (who will also be referred to as M.L.M.) obtained a decree in O.S. No. 9 of 1912 for a sum of Rs. 60,800 and odd against four sets of defendants 1. Four brothers of the A.R.P. family, 2. N. Muthiah, 3. A. Srinivasaand 4. S.R.M. Ramaswami Chetti (who will hereafter be referred as5 S.R.M.). Srinivasa was M.L.M.'s maternal uncle and father-in-law. In O.S. No. 64 of 1912 the A.R.P. family consisting of four brothers who were plaintiffs 1, 5, 6 and 7 in that suit and the sons of one of them obtained a decree for about Rs. 1,75,000 against S.R.M. and two others. In execution of the decree in O.S. No. 9 the decree-holder M.L.M. attached the decree in O.S. No. 64 and as attaching decree-holder proceeded to execute the latter decree. The execution petition dated 17th December, 1919 with the orders thereon is Ex. J. He applied to arrest S.R.M. Notice and arrest warrant were issued. S.R.M. was arrested and brought before the Court in the custody of the arresting officer. One V.S. Subramanian Chettiar, father of the defendant in the present suit (who will be referred to as S.V.S.) executed a security bond Ex. K-1 and S.R.M. was released on the 19th of January, 1920. The matter was adjourned to 31st January, 1920. On the 24th of January some of the parties concerned, namely, M.L.M., three out of the A.R.P. brothers (the 4th brother Narayana Chetti being not willing to join), S.R.M. and three other persons, namely, S.V.S., one Elayaperumal Chetti and the 2nd plaintiff in this suit met for the purpose of amicably settling the matter and getting S.R.M. discharged. S.V.S. was S.R.M.'s nephew and was therefore interested in getting him released. Elayaperumal had dealings with S.R.M. and was also similarly interested. The 2nd plaintiff was a friend of the 1st plaintiff and also acted as mediator between all the parties. It was agreed that in full discharge of the 3|4 share of the A.R.P. brothers (that took part in O.S. No. 64 of 1912) a sum of Rs. 47,000 was to be paid by or for Section R.M. and the A.R. Ps. in their turn should pay a certain amount to M.L.M. towards the decree in O.S. No. 9. The exact terms of the settlement with M.L.M. are the subject of the dispute and the parties differ in their versions about it. According to M.L.M. a sum of Rs. 41,000 was agreed to be paid to him; of this Rs. 24,000 was to be in full discharge of the liability of three of the A.R.P. brothers and of N. Muthiah. The balance of Rs. 17,000 was to be paid in discharge of the liability of the 4th brother Narayana Chetti but M.L.M. was to execute the decree against Narayana Chetti, collect as much amount from him as he could up to Rs. 17,000 and pay it over to the three brothers who undertook to pay the amount of Rs. 17,000 as M.L.M. would not consent otherwise to the settlement. M.L.M.was to reserve his right of proceeding against A. Srinivasa and S.R.M. was to be discharged. The version of the defendant in the suit agrees with that of the plaintiff so far as Rs. 24,000 is concerned, that is, that it should be in full discharge of the liability of the three A.R.P. brothers and N. Muthiah, but differs in asserting that the Rs. 17,000 were to be paid to M.L.M. as the consideration for an assignment by M.L.M. of the decree in O.S. No. 9 to S.V.S. Anyhow, both parties are agreed that Rs. 41,000 was to be paid to M.L.M. Accordingly two hundis were drawn up on that date. The first hundi is Ex. 1 for Rs. 24,000. drawn by Elayaperumal Chetti in favour of M.L.M. on S.R.M.M.C.T. Venkatachala Chetty of Rangoon. Though the hundi was drawn on Rangoon it is agreed by the parties that the intention was to pay it here. The second hundi (Ex. B ) was for 'Rs. 17,000 drawn by S.V.S. in favour of the 2nd plaintiff on another firm in Rangoon but it is agreed by the parties that the intention was to pay the amount here. Both these hundis were dated 24th January. Two receipts were executed on the same day, namely, Exs. 2 and 2-A.Ex.2 is a receipt by M.L.M. for Rs. 24,000 in favour of the three A.R.P. brothers. Ex. 2-A is in one sense a duplicate of Ex.2 but in another sense a counterpart. In the heading it purports to be a receipt by M.L.M. in favour of the three A.R.P. brothers but it was signed by the A.R.P. brothers and was intended to be handed over to M.L.M. Both these receipts were not immediately handed over to the persons for whom they were intended but were entrusted to the 2nd plaintiff pending payment of the hundis. On the 26th of January, that is two days later, a receipt was executed by one of the three A.R.P. brothers and the sons of another in favour of S.R.M. for Rs. 47,000(Ex.H ). It is there mentioned that Rs. 24,000 was paid by S.R.M. to the A.R.P.'s in the shape of the hundi (Ex. 1) executed by Elayaperumal Chetti in favour of M.L.M. Thus the payment of Rs. 24,000 operates as a partial discharge of the decree in O.S. No. 64 and of the decree in O.S. No. 9. S.R.M. was then brought up before the Court on the 31st of January, and the matter was adjourned to 1st March, fresh security being given for 30 days, apparently to await payment of the hundis. On the 2nd of February, a registered Letter was written by S.V.S. (Ex. C) in favour of the 2nd plaintiff stating the terms of the settlement. On the 24th of February S.R.M. writes a letter to M.L.M. (Ex.G)in which he suggests that the drawee of Ex. I may be sent for and that he will come with the other Rs. 17,000 after the Rs. 24,000 had been paid. The next day S.R.M. writes Ex. E to the 2nd plaintiff containing the same statement as in Ex. G. On the 1st March the Subordinate Judge again took up the matter and adjourned it to 24th. On the 24th he adjourned it to the 27th. Meanwhile on the 13th of March Rs. 24,000 were paid to M.L.M. on the 1st hundi. On the 27th of March the vakil for M.L.M. said that he did not want to send S.R.M. to jail and would not pay batta, but the vakil for Narayana Chetty, who is one of the decree-holders in O.S. No. 64, offered to pay batta for sending S.R.M. to jail. The Subordinate Judge refused to give this permission holding that Narayana cannot continue M.L.M.'s petition and released the judgment-debtor. It also appears from a later order of the Subordinate Judge, dated 19th October, 1921 (Ex.L) that M.L.M.'s vakil stated that he might be given permission for withholding reasons for non-payment of jail batta as a disclosure of the same might prejudice the interests of his client and he also represented that he was not bound to give his reasons. On the 28th of March the parties seem to have fallen out and misunderstandings arose as to the exact terms of the settlement. On the 29th of March S.V.S. sent a registered letter Ex.C-2 to 2nd plaintiff in which he states his version of the settlement of 24th January, that M.L.M. refused on the 28th to assign the decree in O.S. No. 9 for Rs. 17,000 and demanding a return of the second hundi for Rs. 17,000. This was replied to by Ex. D on 12th April by the 2nd plaintiff in which the plaintiffs state their version as already given by me. On the 20th of April S.V.S. sends a further registered letter Ex. C-1 to the second plaintiff protesting against operating on the hundi Ex. B, but the hundi was endorsed by the 2nd plaintiff in favour to the 1st plaintiff on the 22nd of April and the present suit was filed by the two plaintiffs who are the drawee and the endorsee of Ex. B to recover Rs. 17,000 from the defendant who is the son of S.V.S. who dies in the interval. The plaint is dated 5th July, 1920.
2. The first issue in the suit is, whether the hundi is supported by consideration. Before this suit came on for trial in December, 1923 the A.R.P. brothers applied to the Sub-ordinate Judge to record full satisfaction of O.S. No. 9 of 1912 so far as they were concerned. The matter was enquired into by the Subordinate Judge and the order passed thereon is Ex. L. He held in favour of M.L.M.'s version. He found there was no agreement to assign the decree in O.S. N0.9 to S.V.S. He found that M.L.M.'s receipt (now Ex. 2 and then Ex. A) was to operate only after Rs. 17,000 was paid and until then the transaction could not be regarded as completed. In the result he recorded satisfaction to the extent of Rs. 24,000 only in O.S. No. 9 of 1912. Narayana. Chetti wanted to record full satisfaction even as regards him self but that was of course refused as he never paid any amount and he filed an appeal which is the connected C.M.A. posted with this appeal.
3. The suit was tried in 1923 by a Subordinate Judge different from the one who dealt with the execution proceedings of 1920 and 1921. (See Exs. J and L. ) He agreed with the former Subordinate Judge in accepting the plaintiff's version and rejecting the story of the defendants to the extent that there was no undertaking by M.L.M. to transfer the decree in O.S. No. 9 even as against Srinivasa. And even as against Narayana either there was to be an assignment of the decree or M.L.M. was to collect from Narayana and pay it over to the three A.R.P. brothers. (So far as he found in favour of the plaintiffs. ) But the hundi, Ex. B, was not to be cashed until the assignment or payment was made and as the plaintiffs refused to assign the decree in O.S. No. 9 and have not yet collected Rs. 17,000 from Narayana and paid it to the A.R.P. brothers the hundi is not supported by consideration. He also thought that such consideration as there is for the hundi Ex. B is in violation of the provision enacted in Order 21, Rule 16 and was unlawful and therefore dismissed the suit with costs. The plaintiffs appeal.
4. The points before us are whether Ex. B was supported by consideration and whether such consideration was not unlawful. The oral evidence in the case consists of the evidence of the 2nd plaintiff as P.W.I, of an agent of S.R.M., one Ulagappa who was mentioned in Exs. G and E and also the depositions of a vakil (Ex. F), of one of the A.R.P. brothers (Ex.3) and of Elayaperumal Chetty (EX.3-A) in the enquiry in execution proceedings on which the order in Ex. 1 was based. Now Ex. F shows that the deponent was s High Court vakil of 17 years' standing. He says that the parties went to him on the 24th for consulting him. He says that the arrangement was that M.L.M. was to retain his right against Srinivasa. This shows that the defendant's version that the whole decree even including Srinivasa's liability was to be transferred is not true. He also says that Rs. 41,000 were to be paid to M.L.M. and that M.L.M. agreed to release S.R.M. and also collect Rs. 17,000 from Narayana and hand over to the A.R.P. brothers provided the whole of the sum of Rs. 41,000 was paid to him at once. This shows that the whole transaction regarding the payment of Rs. 41,000 was one and cannot be split up into two parts as the defendants would have it, one part Rs. 24,000 for discharging the liability of the three A.R.P. brothers, and(2)a distinct transaction by which for a consideration of Rs. 17,000 the whole of the remaining decree was to be assigned to S.V.S. According to defendant the two transactions were entirely separate and were even settled at different times, the fist part in the morning and the second part in the evening. (See, the evidence of D.W. 1). But the vakil's evidence shows it cannot be so split up into two parts. It is unlikely that M.L.M. would transfer to strangers a decree against his own maternal uncle and father-in-law Srinivasa. It is true that M.L.M. undertook to collect Rs. 17,000 from Narayana Chetti and pay it over to A.R.P. brothers but that was so because he was getting a ready payment of full Rs. 41,000. The vakil further says that as he was dictating the draft it was objected that the arrangement as to Rs. 17,000 should not be mentioned in the receipt. And then the parties left. He also adds that he thought they had arranged among themselves. The mere fact that the draft was not completed does not show necessarily that there was any change in the terms. On the other hand Ex. C which is written on the 2nd of February confirms my view of what took place on the 24th. It says:
As soon as information is received of the cashing of the hundi for Rs. 24,000 we shall bring the balance of Rs. 17,000 also.
5. Then it refers to the release of S.R.M. The words 'free from the trouble of' Narayana Chetty' show that Narayana Chetty was attempting to arrest S.R.M. on his own initiative (he seems to have filed two petitions even before the 31st of January. See Ex. J). But it was hoped that his obstruction would be warded off and then Exs. 2 and 2-A were to be handed over to the respective persons intended. If the parties did not succeed in getting S.R.M. released on account of the obstruction of Narayana Chetty the whole of the Rs. 41,000 was to be returned by M.L.M. This is how I understand the sentence 'If you fail to do so you should pay the money to us'. The respondent's vakil contends that the 2nd plaintiff never replied to Ex. C. There was nothing to reply to. As they understood it, it states the terms correctly. The words 'you should obtain an assignment or receipt from M.L.M.' refer to either an assignment of the decree so far as Narayana Chetty is concerned or a receipt stating that Rs. 17,000 would be collected from him and paid over if an assignment of the decree (as to some judgment-debtor only) was not feasible according to law. If the decree against Narayana Chetty had been transferred to the other three A.R.P. brothers it could not be executed against him. See Order 21, Rule 16, Civil Procedure Code. But in consideration of the receipt of Rs. 17,000 from them M.L.M. himself could execute the decree against Narayana Chetty and hand over the amount. Therefore it was intended that a receipt stating his willingness to execute should be executed as an alternative to the assignment. This the plaintiffs were always willing to do as Ex. D shows. Ex. C also shows that Rs. 17,000 must be first paid and it is only after such payment that S.R.M. should be released and the plaintiffs should then begin their execution against Narayana Chetty for Rs. 17,000 and hand the collections over to the A.R.P. brothers. If so, it is argued for respondents that, on the 27th March, there was no ground to release S.R.M. as the sum of Rs. 17,000 was not actually paid. But it must be remembered that M.L.M. not only was paid Rs. 24,000 but got a hundi for the Rs. 17,000 also which, after the release of S.R.M. would cease to be an escrow, for the consideration intended by it, namely, the release of S.R.M., would have been executed and there would be no further reason to suspend it from operation. The evidence of the other witnesses is all interested and cannot help us very much against that of the vakil who is disinterested. But apart from the oral evidence, the probabilities and the construction of Ex. C and the events that happened support, in my opinion, the' view I have taken of the transaction.
6. The only other point that remains for consideration is, whether this arrangement was legal. I have already anticipated this to some extent. Order 21, Rule 16 prohibits the execution of a decree by one judgment-debtor against another. But the arrangement contemplated by the parties here was that M.L.M. who was the original decree-holder should execute the decree against Narayana Chetty. Only he was to pay the amount to the three brothers in consideration of the fact that they have paid the amount in advance to him. It has been held in Palanityappa Chettiar v. Chockalingam Chettiar (1930) 39 M L J 692 that Order 21, Rule 16 does not make the transfer itself illegal nor the adjustment of equities between the judgment debtors in other proceedings than the execution of the decree itself. The transaction cannot therefore be held to be illegal. The result is we must hold that the hundi Ex. B is supported by consideration, reverse the judgment of the Subordinate Judge and allow the appeal by giving a decree to the 1st plaintiff with interest at 9 per cent from the date of the hundi and 6 per cent on the aggregate amount up to date of payment with costs throughout. But we add a declaration chat the 1st plaintiff is bound to execute the decree in O.S. No. 9 against Narayana Chetty and pay over such amount as he may recover up to Rs. 17,000 to A.R.P. brothers.
I have come to the same conclusion that this appeal should be allowed and a decree passed in 1st plaintiff's favour, as stated in my learned brother's judgment. The facts of the case are rather complicated but have been succinctly set out in his judgment. The suit being upon a hundi, which is a negotiable instrument, there can be no doubt that if the 1st plaintiff were a holder in due course the defendant would have had no answer to the claim. But when the endorsee happens to be one of the parties to the transaction in the course of which the hundi comes into existence, the defendant can put forward any defence, legal or equitable, that would have been open to him upon a suit to enforce the terms of the contract out of which the hundi originated. One of those defences which was put forward in defendant's written statement was that it was agreed that the 1st plaintiff should either assign his right to execute his decree against Narayana Chetti (a non-co-operating A.R.P. brother) or should enter into an undertaking to execute it himself for the benefit of the defendant's father or in default to return the hundi executed in favour of the stake-holder, 2nd plaintiff, and that the 1st plaintiff having failed to perform his part of the contract, the promise to pay in Ex. B, though apparently unconditional, became a promise for which the consideration had failed. At the trial in the Lower Court another defence was successfully urged, which was that part of the consideration was for the doing of a thing forbidden by law, viz., transfer of a decree for the payment of money to one of several judgment-debtors in order that he might execute it against the others. I find from Ex. C, which admittedly embodies the terms of the agreement between the parties, that the defendant's father undertook to bring actual cash of Rs. 17,000 for which he had executed the hundi as soon as news was received of the cashing of the hundi for Rs. 24,000, and that one of the principal considerations for the agreement was that S.R.M. should be released from custody.
7. Now it is proved that Rs. 24,000 was paid on March 13th and S.R.M. was released on March 27, 1920, so that in these respects it cannot be said that there was any failure of consideration.
8. There was nothing unlawful in the agreement that the 1st plaintiff should execute his own decree against Narayana Chetty and, in return for the Rs. 17,000 which he was to receive immediately in cash, should make over a similar amount to the other three A.R.P. brothers.
9. From Ex. C it appears that the payment of the amount of the hundi was second in order of the promises to be performed and that the assignment or receipt to be given by M.L.M. was the last but one in order. There is no mention in this document of any condition that the hundi should not be sued upon until the other terms of the agreement had been performed. It is therefore no defence at law to assert that the plaintiffs have not performed their part of the contract. Where the two versions, as to what occurred during the negotiations between the various decree-holders, judgment-debtors, and sureties, conflict, I agree with my learned brother in preferring the plaintiff's version, which was clearly stated in Ex. D on 12th April, 1920. In paragraphs 17 and 18 of his judgment the learned Subordinate Judge has come to the conclusion that it was agreed that Rs. 41,000 should be paid to M.L.M. in respect of his decree in O.S. No. 9 of 1912. The circumstance that both the hundis were handed over to the 2nd plaintiff negatives the Sub-Judge's theory that the parties did not come to a definite settlement and that the negotiations finally fell through. Decree for the 1st plaintiff with costs in both Courts against the assets of Subramaniam Chetty in defendant's possession and add declaration.