K.S. Menon, J.
1. This is an appeal against the judgment of Butler, J., dismissing the suit brought by the appellant on the basis of a hypothecation bond executed to him by one Chellam Aiyar in respect of the subscriptions paid by the latter towards a chit fund.
2. Chellam Aiyar had taken a ticket in a chit fund, which was being managed by a firm known as S.K.S.N., of which the first defendant, the father of the defendants 2 and 3 and the grand-father of the fourth defendant were partners. As Chellam Aiyar was indebted to the plaintiff, he executed the hypothecation bond, Ex. B, in favour of the plaintiff on 15th August, 1919 in respect of the subscriptions he had paid for five instalments in the chit fund. On 5th October, 1921, Chellam Aiyar and his brother, Krishna Aiyar, executed another hypothecation bond Ex. II, in favour of the fifth defendant in respect of the amounts paid by them for six instalments in the chit fund, (including the amount paid for five instalments for which Ex. B, had already been executed). The fifth defendant gave notice, Ex. IV, to the first defendant on 6th October, 1921. The plaintiff also sent notices to the first and third defendants on 26th October, 1921 (vide Exs. E-2 and E). The amount of the subscriptions was, however, not payable by the stake holders, according to the terms of the chit fund, till 14th July, 1926. Plaintiff, therefore, sent notices again to the first defendant, demanding payment of money in July, 1926 (Ex. H). The fifth defendant also made a demand at about the same time (Ex. V). Ignoring the claims of the plaintiff, defendants 1 and 8 paid the amount to the fifth defendant and obtained the receipt Ex. VII. In the suit by the plaintiff for recovery of the amount from defendants 1 to 3 (the fourth defendant having been exonerated), the fifth defendant contended that the plaintiff was guilty of gross negligence inasmuch as he did not secure the chit fund receipt book and did not give notice to defendants 1 to 4, and that he (the fifth defendant) was entitled to priority over the plaintiff.
3. The trial Court accepted the contentions of the fifth defendant and dismissed the suit. The lower appellate Court found against the fifth defendant and decreed the suit. Butler, J., accepted the finding of the lower appellate Court that the plaintiff was not guilty of gross negligence, but held that as the plaintiff did not give notice of the transfer in his favour to defendants 1 to 3, he was not entitled to priority over the fifth defendant, applying the principle laid down in the case of Dearie v. Hall (1823) 3 Russ. 1 : 38 E.R. 475 and dismissed the suit. It will, therefore, be seen that the lower appellate Court and Butler, J., held, and we think, for very good reasons - that there was no negligence on the part of the plaintiff. We did not, therefore, allow the fifth defendant to argue it over again.
4. The only question for decision, therefore, is which of the hppothecations - the plaintiff's or the fifth defendant's--is entitled to priority. Chellam Aiyar's right to receive the amounts subscribed by him for the chit fund is certainly an actionable claim. That claim (in respect of the five instalments paid by him) must be deemed to have been effectively transferred by him to the plaintiff when he executed the hypothecation bond Ex. B. No other act on the part of Chellam Aiyar or the plaintiff was necessary to complete the title of the plaintiff to recover that amount, for Section 130, Transfer of Property Act lays down:
The transfer of an actionable claim...shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent and shall be complete and effectual upon the execution of such instrument, and thereupon all the rights of the transferor, whether byway of damages or otherwise, shall vest in the transferee whether such notice of the transfer, as is hereinafter provided, be given or not.
5. There is nothing in this section to warrant the view that the title of the transferee is not complete until a notice is issued to the debtors. The proviso to that section is only for the benefit of the debtor in case he pays the amount to the transferor before he receives a notice of the transfer from the transferee. That proviso has nothing to 3o with the title of the transferee or with priority of claims. It must, therefore, be held that the plaintiff perfected his title to recover the debt in question on 15th August, 1919, the date of execution of Ex. B. For the same reason the title, if any, of the fifth defendant to recover the same debt must be deemed to have been perfected on 5th October, 1921, the date of execution of Ex. II.
6. The question then is whether, though the 5th defendant obtained title to recover the debt only two years after the title vested in the plaintiff, he is entitled to priority over the plaintiff, simply because he happened to give notice of his claim to the debtors, defendants 1 to 3, before the plaintiff did so. Under the English Law he would certainly be entitled to such priority, and the reason for it is clear. According to the Bankruptcy Law which was in force at the time the case of Dearie v. Hall (1823) 3 Russ. 1 : 38 E.R. 475 was decided, in cases of assignments of choses in action, notice was necessary in order to take the property out of the order and disposition of the bankrupt. The doctrine was extended to other cases also and it came to be held that the title of an assignee of a chose in action was not complete until he gave a notice of the assignment to the debtor. This was subsequently recognised in the Supreme Court of Judicature Act, 1873 (vide Section 25(b)). If, therefore, a notice is essential to perfect the title of an assignee, that assignee who gives notice earlier, perfects his title earlier than the one who gives one subsequently, and naturally gets priority over the latter. This makes it clear why, under the English Law, priority in the case of successive assignments of choses in action, each one without notice of the earlier one, is determined by the date of the notice to the debtor. But in India no such notice to the debtor is now necessary to perfect the assignee's title. As already observed Section 130 of the Transfer of Property Act lays down that the title vests in the assignee on the execution of the transfer deed, and no further action on his part, such as sending a notice to the debtor, is necessary to complete his title. In such cases, priority has ordinarily to be determined with reference to the date on which the title vested in the transferee. In cases where the earlier transferee is guilty of gross negligence, or is estopped, and the subsequent transferee takes the assignment without notice of the earlier one, different considerations may arise. But ordinarily, the date of execution of the deed of transfer should determine priority. We are therefore, of the opinion that the application of the rule laid down in the case of Dearle v. Hall (1823) 3 Russ. 1 : 38 E.R. 475 to cases coming within Section 130 of the Transfer of Property Act is not at all warranted. We, therefore, hold, differing from Butler, J., that the plaintiff is entitled to priority over the fifth defendant.
7. Mr. Sitarama Rao then raised another question, namely that as the transfer in favour of the plaintiff, was only in respect of part of the debt due to Chellam Aiyar, it was invalid, and that the transfer did not come within Section 130 of the Transfer of Property Act. But, as this objection was not taken either in the lower Courts or before Butler, J., and as the plaintiff had no opportunity to meet it with necessary evidence, we did not allow it to be argued.
8. We therefore allow the appeal, set aside the judgment of Butler, J., and restore that of the lower appellate Court. The respondents must pay the the costs of the appellant in this Court and in the Second Appeal.