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Srinivasa Pillai and ors. Vs. Muthayya Pillai and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported inAIR1956Mad364; (1956)1MLJ319
AppellantSrinivasa Pillai and ors.
RespondentMuthayya Pillai and anr.
Cases ReferredDoe v. Lewis
Excerpt:
- - it is well-established that even an endorsee of a promissory note for collection only can maintain a suit by himself on the promissory note, though he may not be beneficially entitled to the amount due thereunder. there can be no doubt that so far as the creditor is concerned, the requirements of the explanation are satisfied. bashyam that ordinarily we only speak of assignment of rights, it is clear that in law there can be an assignment of liability as well. bashyam that a person acting on behalf of the debtor can only be one like his agent, trustee or benamidar......the addition of the following paragraph:6. (a) the second plaintiff is the original payee of the suit promissory note. in o.s. no. (sic) of 1947 on the file of this court it has been decreed that the second plaintiff should realise the suit amount and get it. the plaintiff and defendants in this suit are parties in the aforesaid o.s. no. 21 of 1947. they are bound by the aforesaid decree. for these reasons a decree has to be passed in favour of the second plaintiff as per the suit.the allegation in paragraph 6 of the plaint that an assignment of the suit promissory note had been obtained by muthayya pillai from lokambal on 25th january, 1942, for proper consideration was not deleted. there was an issue raised in the court below whether the assignment of the promissory note in favour of.....
Judgment:

P.V. Rajamannar, C.J.

1. This appeal arises out of a suit brought in the Court of the Subordinate Judge, Cuddalore, on a promissory note, dated 1st November, 1937, executed by one Venugopala Pillai in favour of Lokambal Ammal, wife of Venkatachalam Pillai, for Rs. 8,253. The amount was payable with interest at 12 annas per cent. per mensem. Venugopal Pillai died on 13th September, 1943. On the 25th January, 1942, Lokambal purported to assign the promissory note in favour of Muthayya Pillai. The suit was brought on 27th October, 1943, by Muthayya Pillai against the widow (1st defendant) and the brothers (defendants 2 and 3) and the sons of his junior paternal uncle (defendants 4 and 5) of Venugopal Pillai. The suit was originally filed by Muthayya Pillai alone as the assignee of the promissory note. He obtained an ex parte decree. Defendants 2 to 5 filed a petition to set aside the ex parte decree. But that petition was dismissed. An appeal was filed to this Court against the order dismissing the petition. The appeal was allowed and the ex parte decree was set aside. Meanwhile disputes arose between Muthayya Pillai and the original payee, Lokambal. Lokambal filed a suit, O.S. No. 21 of 1947, in the Court of the Subordinate Judge of Cuddalore impeaching the assignment in favour of Muthayya Pillai and claiming to be still the beneficiary of the amount of the decree that might be passed in this suit. That suit ended in a compromise which inter alia declared that Lokambal should get the entire amount due under the decree passed in this suit and provided that Lokambal would be impleaded in this suit as the second plaintiff. If necessary, Muthayya was to assign the decree to Lokambal. In pursuance of this decree Lokambal was added as the second plaintiff in the suit by an order dated 13th July, 1950, of the learned Subordinate Judge.

2. Defendants 2 to 5 contested the suit and will be referred to hereafter as the defendants. Though they raised several pleas in defence, it is sufficient to mention only two pleas which were pressed upon us in appeal, namely, (1) that the suit was barred by limitation and (2) that they were entitled to further relief under Madras Act IV of 1938 than what was admitted by the plaintiffs. The learned Subordinate Judge overruled both their pleas and decreed the suit in favour of the second plaintiff and against the property of Venugopal Pillai in the hands of defendants 1 to 5. Defendants 2 to 5 are the appellants before us.

3. R. Viswanathan who appeared for the appellants contended that the suit which was in time when it was instituted by Muthayya Pillai was not maintainable by him, and when Lokambal was added as the second plaintiff in 1950 as the person entitled to the amount due under the promissory note, the suit which must be deemed to have been instituted properly on that date, was barred by time. There is no substance in this contention. Though Lokambal was added as the second plaintiff, the only amendment made in the plaint was the addition of the following paragraph:

6. (a) The second plaintiff is the original payee of the suit promissory note. In O.S. No. (sic) of 1947 on the file of this Court it has been decreed that the second plaintiff should realise the suit amount and get it. The plaintiff and defendants in this suit are parties in the aforesaid O.S. No. 21 of 1947. They are bound by the aforesaid decree. For these reasons a decree has to be passed in favour of the second plaintiff as per the suit.

The allegation in paragraph 6 of the plaint that an assignment of the suit promissory note had been obtained by Muthayya Pillai from Lokambal on 25th January, 1942, for proper consideration was not deleted. There was an issue raised in the Court below whether the assignment of the promissory note in favour of the first plaintiff was true and the learned trial Judge answered this issue in the affirmative. It is well-established that even an endorsee of a promissory note for collection only can maintain a suit by himself on the promissory note, though he may not be beneficially entitled to the amount due thereunder. The effect of the compromise decree in O.S. No. 21 of 1947 would only be to vest the beneficial interest in the amount in Lokambal. It would not render the suit originally filed by Muthayya incompetent. We agree with the learned Subordinate Judge that the suit is not barred by time.

4. To understand the plea of the appellants based on the provisions of the Madras Agriculturists Relief Act, it is necessary to state a few further facts. Even in the plaint it was admitted that the defendants are agriculturists. The suit promissory note purports to be in renewal of a prior promissory note executed by Venugopal Pillai in favour of Venkatachalam Pillai, the deceased husband of Lokambal, on 20th August, 1930, for Rs. 5,720. The amount claimed in the plaint was Rs. 5,720 being the principal amount due under the earlier promissory note, dated 20th August, 1930 and interest thereon from 1st October, 1937, to the date of suit at 6 per cent. per annum, out of which amount a sum of Rs. 100 was deducted as amount paid towards interest on 29th October, 1940. The plea of the defendants was that they were entitled to further relief. Their case was that the promissory note of 20th August, 1930, was itself in renewal of a prior promissory note executed in favour of Venkatachala by one Muthurama Pillai on 27th July, 1926, for Rs. 5,021 which again was in renewal of a still earlier promissory note dated 9th September, 1923, for Rs. 3,988-9-0 executed by Muthurama Pillai to one Sowbagyam Ammal who assigned it to Venkatachalam Pillai in 1926 and that the said promissory note of 1923, was itself in renewal of a promissory note dated 6th November, 1920, executed by Muthurama Pillai to the said Sowbagyam Ammal for Rs. 3,178-3-0. This was again in renewal of a promissory note by the' same Muthurama to Sowbagyam Ammal for Rs. 2,540, dated 19th March, 1916, which was in renewal of a promissory note by the same Muthurama to the same Sowbaghyam Ammal for Rs. 2,000, dated 29th February, 1913. The original advance was thus only Rs. 2,000 and the defendants claimed a scaling down on this basis. Properly scaled down, they stated that the balance due under the suit promissory note would be only Rs. 289-8-0. The learned Counsel for the appellants admitted that this plea would not have been open to them under the provisions of the Madras Agriculturists Relief Act as they originally stood. The material provision was embodied in the Explanation to Section 8 and ran thus:

Where a debt has been renewed or included in a fresh document in favour of the same creditor the principal originally advanced by the creditor together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable by the agriculturist under this section.

By Madras Act XXIII of 1948 the original Explanation was renumbered as Explanation III and the following was substituted in its place:

Explanation III.- Where a debt has been renewed or included in a fresh document executed before or after the commencement of this Act, whether by the same or a different debtor and whether in favour of the same or a different creditor, the principal originally advanced together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable under this section.

Explanation III was further amended by the substitution of the following words for the words 'whether by the same or a different debtor and whether in favour of the same or a different creditor' namely:

Whether by the same debtor or by his heirs, legal representatives or assigns or by any other person acting on his behalf or in his interest and whether in favour of the same creditor or of any other person acting on his behalf or in his interest.

It is common ground that the two Amendment Acts are retrospective in their operation and though the latter Act of 1950 was passed after the suit had been filed, it would have application. Explanation III as it now stands is in the following terms:

Where a debt has been renewed or included in a fresh document executed before or after the commencement of this Act, whether by the same debtor or by his heirs, legal representatives or assigns or by any other person acting on his behalf or in his interest and whether in favour of the same creditor or of any other person acting on his behalf or in his interest, the principal originally advanced together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable under this section.

There can be no doubt that so far as the creditor is concerned, the requirements of the Explanation are satisfied. The original creditor was Sowbagyam Ammal. Venkatachlam Pillai was her assignee and under Section 3 Clause (v) ' Creditor ' includes his heirs, legal representatives and assigns. Lokambal is Venkatachala's heir and Muthayya is Lokambal's assign. So far there is no dispute. The only question is whether Venugopal Pillai can be said to be Muthurama's assign, or a person acting on Muthurama's behalf or in his interest, because obviously Venugopal is not Muthurama's heir or legal representative. Mr. Viswanathan, learned Counsel for the appellants, contended that Venugopal would be Muthurama's assign. Though that was his main contention, he also contended that in any event Venugopal would be a person acting on behalf of Muthurama or in the interest of Muthurama. Mr. Bashyam Ayyangar appearing for the plaintiffs-respondents contended to the contrary.

5. The circumstances under which Venugopal Pillai happened to execute the promissory note, dated 20th August, 1930 can be gathered from the evidence. Muthurama sold some of his properties to one Arunachala under Exhibit A-1. The consideration was a sum of Rs. 6,000 out of which an amount of Rs. 5,495 represented the principal and interest due under the promissory note executed by Muthurama to Venkatachalam Pillai on 26th July, 1926, which was directed to be paid by the purchaser Arunachala to Venkatachalam. Arunachala had married Venugopal Pillai's sister and apparently at the request of Arunachala, Venugopal Pillai undertook the liability to discharge the debt due to Venkatachala and executed the promissory note, dated 20th August, 1930 (Exhibit A-2). This promissory note contains the following recital:

The principal and interest up to date due under the promissory note executed by Muthurama Pillai...in your favour on the 27th July, 1926 is Rs. 5,720. As this sum... has been paid to me in the matter of agreeing to pay you the same, I shall, on demand by the holder pay you or your order the aforesaid amount with interest thereon at Rs. 0-12-0 per cent. per mensem.

Muthurama Pillai as D.W. 1 deposed as follows:

I executed Exhibit B-2 to Venkatachala. One Arunachala owed me money. I asked Venugopala to discharge my note and recoup himself by collecting the money from Arunachala. He agreed and executed Exhibit A-2.... I sold property to Arunachala under a sale deed, copy Exhibit A-1, for Rs. 6,000. This Venugopala 'Pillai attested it. I directed my vendee Arunachala to discharge Exhibit B-2. Arunachala is the son-in-law of defendant 4, cousin brother of Venugopala. Venugopala Pillai undertook to pay the money payable by Arunachala...,

Before dealing with the question whether the execution of the promissory note Exhibit A-2 is a renewal within the meaning of Explanation III to Section 8 as it now stands after the Amending Act of 1950, it is useful to follow the course of legislation and interpretation by Courts of the provisions in the Act relating to renewal. In the Explanation as it originally stood, the material words were 'where a debt has been renewed or included in a fresh document in favour of the same creditor'. In Neelappa v. Solaimuthu : AIR1941Mad58 , Wadsworth and Patanjali Sastri, JJ., held that these words do not cover the case in which a debt due by A is discharged on a debt due by B to the same creditor being substituted for it. The learned Judges followed the view taken by the Court of Appeal in England in Barber v. Mackrell (1892) 68 L.T. R.N.S. 29, namely.

A bill is renewed when another bill is taken in its place, and the parties to the bill and amount being the same, though perhaps in some cases the interest due on the first Bill is added.

Evidently it was not the intention of the Legislature to confine renewal within such strict limits. So we find the Amending Act of 1948 introducing the words 'whether by the same or different debtor' and 'whether in favour of the same or a different creditor.' The Explanation as amended came up for interpretation in two decisions of this Court, namely Thirupatirayalu v. Venkatasubba Rao : (1949)2MLJ768 , and Ramaswdmi Pillai v. Sankara Mudaliar (1950) 1 M.L.J. 224. In the latter case, Subba Rao and Somasundaram, JJ., held that the words 'different creditor' in Explanation III as amended by the Act of 1948, were not comprehensive enough to include even a third person in whose favour a debtor executed a document requesting him to discharge the earlier debt. Presumably in view of the above two decisions the Legislature again amended Explanation III to Section 8 and Explanation IV was added by the Amending Act of 1950. Words of large amplitude were added, namely, 'By the same debtor or by his heirs, legal representatives or assigns or by any other person acting on his behalf or in his interest' and 'whether in favour of the same creditor, or of any other person acting on his behalf or in his interest.' In our opinion the Explanation as it stands emphasises the identity of the debt. So long as the identity can be traced, any change or alteration in the debtor or the creditor would not take the case away from the Explanation. Obviously the Explanation is a very wide departure from the rule enunciated by Lindley, L.J., in Barber v. Mackrell (1892) 68 L.T. R.N.S. 29. According to the Explanation the renewed document may be by a person other than the original debtor and in favour of a person other than the original creditor.

6. Now let us examine the facts of the case before us to see if they would attract the operation of Explanation III. One thing is clear, that the debt for which Exhibit A-2 was executed by Venugopala is the same debt due under Exhibit B-2 which had been executed by Muthurama in favour of the same creditor. Indeed Exhibit A-2 expressly recites, this fact. There can be no question, therefore, of the identity of the debt. The only question is whether Venugopala can be described as the 'assign' of Muthurama or as a person acting on his behalf or in his interest. Mr. R. Viswanatha Ayyar relied on the meaning given by Parke, B., to 'assign' in Doe v. Lewis (1842) 152 E.R. 280 : 9 M.&W.; 663, namely,

The word ' assign ' does not mean 'heir'; it means a person substituted for another by an act of some kind or other...

He also referred us to the following passage in Leake on Contracts, Eighth Edition, at page 921:

The assignment of a debt by novation necessarily imports an assignment of liability, as in the case of a change in a firm of partners.

Mr. Viswanathan contended that there was in effect a novation because Venkatachala was willing to accept Venugopala as the debtor in the place of Muthurama, and therefore it can be said that with his consent, Muthurama assigned his liability under the promissory note Exhibit B-2 to Venugopala, who thus became his assign. Mr. Bashyam Ayyangar contended to the contrary that there could never be an assignment of liability, as the law recognised only an assignment of a right or chose in action. In any event he argued there could be no assignment without a document, because an assignment according to law requires it.

7. Mr. Viswanathan next contended that even if it cannot be held that Venugopala was an assign of Muthurama, he was surely a person acting on behalf of Muthurama and in his interest. The sale deed Exhibit A-1 directed Arunachala to pay the amount due under the promissory note Exhibit B-2 to Venkatachala. This payment can only be on behalf of Muthurama. Instead of Arunachala doing it, Venugopala executed the promissory note Exhibit A-2. That again could only have been on behalf of Muthurama. There was no liability as such of Venugopala to Venkatachala when he executed the promissory note Exhibit. A-2. It was only the liability of Muthurama which he was taking over. Mr. Bashyam very ingeniously argued that if Venugopala executed the promissory note in pursuance of a contract or undertaking, he must be deemed to be acting on his own behalf and in his own interest and not on behalf of Muthurama. Arunachala was bound to discharge the debt due to Venkatachala and if he or his nominee to fulfil this obligation executes a promissory note to Venkatachala, he cannot be said to have acted on behalf of Muthurama. Mr. Bashyam further contended, though we found it rather difficult to follow, that at the time of the coming into existence of the new document, the original debtor must have some interest subsisting in the debt which is renewed. This element, he said, was missing in this case because Arunachala had undertaken to discharge the debt. The flaw in this reasoning is that Arunachala might have undertaken to discharge the debt; but his undertaking by itself would not relieve the debtor Muthurama of his liability to Venkatachala, which certainly continued to subsist in spite of the execution of the sale deed containing an undertaking by Arunachala to discharge it.

8. Having given the matter due consideration we are of the opinion that Venugopala was an assign of Muthurama or was in any event a person acting on his behalf. Though we agree with Mr. Bashyam that ordinarily we only speak of assignment of rights, it is clear that in law there can be an assignment of liability as well. Leake in the chapter on 'Principles of Assignment' says:

An assignment of the rights and liabilities arising out of contracts may occur;-by act or agreement of the parties...' (The italics are ours)

In every case where with the consent of the creditor another debtor is substituted for the original debtor, there is in effect an assignment of liability. The new debtor would be an assign of the original debtor so long of course as the identity of the debt is maintained. We do not agree with Mr. Bashyam that a person acting on behalf of the debtor can only be one like his agent, trustee or benamidar. The expression is wide enough to include a person executing a fresh document in pursuance of an undertaking to do so on behalf of the original debtor. In the present case Venugopala was a person acting on behalf of Muthurama.

9. We must confess that the words 'in his interest' are not easy to construe. It is possible to bring the present case even within those words because it was in Muthurama's interest that Venugopala executed the promissory note Exhibit A-2 as he by executing it absolved Muthurama from his liability under Exhibit B-2. We therefore differ from the learned trial Judge and hold that the defendants are entitled to the benefit of the provisions of Explanation III to Section 8 and the suit debt will have to be scaled down accordingly.

10. The appeal is allowed and the decree of the Court below is set aside and the suit remanded for disposal in accordance with this judgment. As the appellants have substantially succeeded, they will have their costs of the appeal. The Court-fee paid on the memorandum of appeal will be refunded.


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