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Doraiswami Mudaliar and anr. Vs. M. Doraiswami Iyengar and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in87Ind.Cas.382
AppellantDoraiswami Mudaliar and anr.
RespondentM. Doraiswami Iyengar and ors.
Cases ReferredIn Sabjan Sahib v. Abdul Azeez Sahib
Excerpt:
transfer of property act (iv of 1882), section 130 - assignment of debt, what constitutes--words of transfer, absence of---assignment of part of debt, validity of--notice to debtor, whether assignment--evidence act (i of 1872), section 91--stamp act (ii of 1899), section 35--unstamped transfer deed--secondary evidence, admissibility of. - .....1914.-------------------------------------------------------------------------2nd defendant to assignee letter not exhibit c.exhibited, 2nd defendant to the exe-cutive engineer ... i ' e.assignee to executiveengineer ... iii ' d.reply by executive engineer to assignee ... ii endorsement on d.-------------------------------------------------------------------------2. from the above table, it is seen that, on each occasion, the scheme was the same, consisting of (1) a letter from assignor to assignee as an instrument of transfer, (2) a letter from assignor to executive engineer being the notice intended by section 130 of the transfer of property act. the letter of transfer to the 3rd defendant though referred to in ex. iii is not forthcoming. it is admitted to be unstamped (d. w. no......
Judgment:

Ramesam, J.

1. This facts of this second appeal may be briefly stated. The 2nd defendant is a contractor who entered into a building contract in respect of the Vellore Municipal Hospital Works with the P. W. Department. By September 1914, a sum of Rs. 2,156-8-1 was due to him. At that time he owed Rs. 1,600 to the 3rd defendant. When the 3rd defendant demanded the payment of his debts, he executed certain letters intending (I assume this in favour of 3rd defendant) to transfer Rs. 1,600 out of the amount due to him from the P. W. D. In December 1914, he owed Rs. 6,750 to the plaintiffs and intending to transfer the whole of the said amount, he executed similar letters. The documents that came into existence in September and December respectively may be shown in a tabular form as follows:

-------------------------------------------------------------------------3rd Plaintiffs, Defendant dated 10thdated 22nd December1914. 1914.-------------------------------------------------------------------------2nd defendant to assignee Letter not Exhibit C.exhibited, 2nd defendant to the Exe-cutive Engineer ... I ' E.Assignee to ExecutiveEngineer ... III ' D.Reply by Executive Engineer to Assignee ... II Endorsement on D.-------------------------------------------------------------------------

2. From the above table, it is seen that, on each occasion, the scheme was the same, consisting of (1) a letter from assignor to assignee as an instrument of transfer, (2) a letter from assignor to Executive Engineer being the notice intended by Section 130 of the Transfer of Property Act. The letter of transfer to the 3rd defendant though referred to in Ex. III is not forthcoming. It is admitted to be unstamped (D. W. No. 1) and no secondary evidence can be given of its contents [Raja of Bobbili v. Inuganti China Sitaramasami Garu 23 M. 49 : 4 C.W.N. 117 : 26 I.A. 262 : 7 Sar.P.C.J. 597 : 8 Ind. Dec.428.]. In the written statement of 3rd defendant, it was alleged (paras. 3 and 5), 'When the 2nd defendant was demanded payment, he gave this defendant a letter of authority asking him to draw Rs. 1,600 from the amount due to him for the Pentland Hospital Works and also he sent a letter to the Executive Engineer, North Arcot, asking him to pay the said amount to this defendant. This was on or about the 22nd September 19l4. The alleged assignment referred to in para. 4 (plaint) is a fraud and not sustainable in law when the 2nd defendant had already given a letter of assignment to this defendant to draw the amount, referred to in para. 3 of this statement,' It is, therefore, clear, that the only assignment to the 3rd defendant pleaded by him is the letter addressed to him, of which no secondary evidence can be given. As the assignment to 3rd defendant cannot be proved, it follows that there is no assignment in his favour and the appeal must fail on this ground. Mr. Anantakrishna Iyer contends that, apart from the assignment intended by the missing letter, Ex. 1 only is enough to prove an assignment. In the first place, this is opposed to the pleadings in which the letter of 22nd September 1914 other than Ex. I was described as the letter of assignment and the plea cannot be allowed to be raised. In the second place, to allow the plea to be raised is an evasion of Section 91 of the Evidence Act and of the Stamp Law and the principle of the ruling in Raja of Bobbili v. Inuganti China Sitaramasami Garu 23 M. 49 : 4 C.W.N. 117 : 26 I.A. 262 : 7 Sar.P.C.J. 597 : 8 Ind. Dec. 428. A perusal of Exs. I and III only or of even I alone leaves in one's mind the impression that something like a transfer was intended. It is so easy to infer the transfer but to allow such an inference to be made and to give effect to it is to allow secondary evidence of the letter of assignment to be given.

3. For the sake of argument, I will leave these two considerations aside and consider the question whether Ex. I by itself amounts to an assignment. In my opinion, if the matter is dealt with, apart from the English decisions to be considered lower down, it does not. There must be words of transfer in the instrument. A notice to the debtor not containing words of transfer nor referring to a transfer is not an instrument of transfer. Otherwise every order of payment is a transfer. Every cheque or bill of exchange is a transfer. In the first place one would expect that an instrument of transfer should, in general be an instrument executed in favour of the assignee. I say 'in general,' for there is the well recognized exception of a transfer effected by an endorsement on the bond or other paper evidencing the debt sought to be transferred. The case in Rama Iyen v. Venkatachellam Pattar 30 M. 75 : 1 M.L.T. 329 : 16 M.L.J. 554 is an example. So also is the decision in Tmrding v. Harding (1886) 17 Q.B.D. 442 : 55 L.J.Q.B. 462 : 34 W.R. 775. In civilised communities, such an endorsement ordering the debtor to pay, has been always considered as a transfer--an idea borrowed from the law and practice of Negotiable Instruments--and the intention is given effect to by recognizing the endorsement as a transfer. But, apart from such cases, I would expect an instrument of transfer to be addressed to the assignee. The settlement of accounts containing the entry in Seetharama Ayyar v. Narayanaswami Pillai 17 Ind. Cas. 749 was between the assignor and assignee and must be regarded as addressed to the assignee. But assuming that the instrument may be addressed to the debtor, there must be words operating as a transfer.

4. In England, the matter has been complicated by the history of the law relating to the assignment of choses-in-action. At common law, except in the case of an annuity, a chose-in-action cannot be assigned at all. The inconvenience of the rule was avoided by permitting the assignee to sue in the name of the assignor [see reference in foot-note (n) to Section 780 of Halsbury's Laws of England, Vol. IV. ] The case where the debtor consents and a novatio is effected is really not an assignment. But Courts of Equity recognized equitable assignments from the earliest times--Ryall v. Rowles (1750) 1 Wh. & T.L.C. 96 : 1 Ves. Sen. 318 : 27 E.R. l074. The assignment may be verbal (Halsbury's Laws of England, Vol. IV, a. 796). An agreement to assign is enough see Tudsbery on Equitable Assignments, pages 54 and 53 and Ryall v. Rowles (1750) 1 Wh. & T.L.C. 96 : 1 Ves. Sen. 318 : 27 E.R. l074. | An agreement may be made out from a course of dealing between the parties. (Halsbury's Laws of England, Vol. IV, Section 79(5). An order to pay will be enough provided the intention is clear. Brandt Sons & Co. v. Dunlop Robber Co. (1905) A.C. 454 : 74 L.J.K.B. 898 : 93 L.T. 495 : 21 T.L.R. 710 : 11 Comp. Cas. 1. Then came the Judicature Act, Section 25 (6). The Act created no new rights but enabled the assignee to sue in his own name. It has not made assignable contracts which were not assignable in equity before. Nor does it impair the efficacy of equitable assignments which would previously have been valid. (Halsbury's Laws of England, Vol. IV, Section 783). Mr. Anantakrishna Iyer also contended that no particular form of assignment under the Statute is re-quired, and relied on Halsbury's Laws of England, Vol. IV, Section 788, where it is said: 'A. direction or order by the creditor to pay the amount is sufficient' and reference is given to Harding v. Harding (1886) 17 Q.B.D. 442 : 55 L.J.Q.B. 462 : 34 W.R. 775 and Brice v. Bannister (1878) 3 Q.B.D. 569 : 47 L.J.Q.B. 722 : 38 L.T. 739 : 26 W.R. 670. In the former(not a case' of debt) the assignor George Harding writes the instruction to pay at the foot of the account furnished by the trustees. The case is similar to Rama Iyen v. Venkatachellam Pattar 30 M. 75 : 1 M.L.T. 329 : 16 M.L.J. 554, Wills, J., recognizes that, 'before the Judicature Act, it would have been impossible to give a legal title to Laura Harding, so as to enable her to sue in her own name in respect of this right of action; she could have maintained a suit in equity, but the legal title could not have been completed in her. Now it can be done.' He then points out that the trustees assented to the assignment. 'It seems to me that that fact carries us a step further, and imports into the case another doctrine of equity.' Lord Alverston, C.J., in Brandt, Sons & Co. v. Dunlop Rubber Co. (1901) 1 K.B. 387 : 73 L.J.K.B. 247 : 52 W.R. 501 : 90 L.T. 106 : 20 T.L.R. 195 : 9 Comp. Cas. 149 thinks this is the real ground of the decision--a remark not affected by the reversal of the decision by the House of Lords in Brandt Sons & Co. v. Dunlop Rubber Co. (1905) A.C. 454 : 74 L.J.K.B. 898 : 93 L.T. 495 : 21 T.L.R. 710 : 11 ComP. Cas. 1 as I shall show lower down. In Brice v. Bannister (1878) 3 Q.B.D. 569 : 47 L.J.Q.B. 722 : 38 L.T. 739 : 26 W.R. 670, the only point argued and decided was that there can be a good equitable assignment of a future debt. It is true that Lord Coleridge, C.J., regarded it as a good assignment under the Statute, but on appeal, this position was attacked and the Counsel for the respondent supported the judgment on the ground that there was a good assignment in equity. Cotton, L. J., opens his judgment by' saying that there was a 'good equitable assignment.' Brett, L. J., who dissented discusses the case only on that footing. None of the Lords Justices refers to the Statute. This has been pointed out by Chitty, L. J., in Durham Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q.B. 484 : 48 L.T. 438: 'It is necessary to refer to Brice v. Bannister (1878) 3 Q.B.D. 569 : 47 L.J.Q.B. 722 : 38 L.T. 739 : 26 W.R. 670...Lord Coleridge, C.J. held that the assignment was within the 25th section. The Court of Appeal decided the, case quite apart from the Act. Cotton) L. J., expressly decided the case on the ground of equitable assignment....Bramwell, L.J. reluctantly assented to this view. Brett, L. J., dissented, but on general principles. So soon as it was ascertained that there was a good equitable assignment, with power to give a discharge, it became, unnecessary to consider whether it fell within the Act or not.'' In Brandt Sons & Co. v. Dunlop Rubber Co (1905) A.C. 454 : 74 L.J.K.B. 898 : 93 L.T. 495 : 21 T.L.R. 710 : 11 Com. Cas. 1, Lord Macnaghten says (page 161 Page of (1905) A.C.-- [Ed.]) 'With the utmost deference to the Court of Appeal, I have great difficulty in following to their reasoning. The plaintiffs' case was put in two ways. It was presented as a case within Sub-section (6) of Section 25 of the Judicature Act. it was also presented as a simple case of. equitable assignment perfected by notice. Unfortunately the stress of the argument was laid on the Judicature Act. The Court of Appeal devoted almost the whole of their attention to it. The substantial question--the only question worth considering--was all but ignored. It was treated as subordinate to the question on the Statute and bound up with it. The Lord Chief Justice, with whom the other members of the Court agree says: 'I come to the conclusion that this document,--does not fulfil that which is necessary in order to entitle the plaintiff to sue,...on the ground that it is not an absolute assignment or an assignment at all within that section.' Why that which would have been a good equitable assignment before the Statute should now be invalid and inoperative because it fails to come up to the requirements of the Statute. I confess I do not understand. The Statute does not forbid or destroy equitable assignments, or impair their efficacy in the slightest degree. When the rules of Equity and the rules of the Common Law conflict, the rules of Equity are to prevail. Before the Statute, there was a conflict as regards assignment of debts and other choses-in-action. At law it was considered necessary that the debtor should enter into some engagement with the assignee. That was never the rule in Equity. In certain cases, the Judicature Act places the assignee in a better position than he was before. Whether the present case falls within the favoured class may be doubted. But, says the Lord Chief Justice 'the document does not, on the face of it, purport to be an assignment nor use the language of an assignment.' 'An equitable assignment does not always take that form. It may the 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.' After the references I have made to Cotton and Brett, L. JJ., in Brict v. Bannister (1878) 3 Q.B.D. 569 : 47 L.J.Q.B. 722 : 38 L.T. 739 : 26 W.R. 670, to Chitty, L.J., in Durham Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q.B. 484 : 48 L.T. 438 and to Lord Macnaghten in Brandt Sons & Co. v. Dunlop Rubber Co. (1905) A.C. 454 : 74 L.J.K.B. 898 : 93 L.T. 495 : 21 T.L.R. 710 : 11 Com. Cas. 1, I confess I do not understand the sentence in Section 788 of Halsbury's Laws of England, Vol. IV. It seems to me conclusive from the manner in which Lord Macnaghten deals with Lord Alverston, C.J.'s judgment, that an assignment to be under the Statute must either ''purport to be an assignment or use the language of an assignment.'

5. Now the Privy Council in Mulraj Khatau v. Vishwanath Prabhuram Vaidya 17 Ind. Cas. 627 : 37 B. 198 : (1912) M.W.N. 1247 : 12 M.L.T. 652 : 11 A.L.J. 7 : 1912 24 M.L.J. 60 : 17 C.W.N. 209 : 15 Bom. L.R. 9 : 17 CRI.L.J. 162 : 40 I.A. 24 say:' 'The error arose from the learned Judges not having appreciated that the positive language of the section precluded the application in India of the principles of English Law on which they based their decision.'

6. Mr. Anantakrishna Iyer referred me to Nandubai v. Gan 27 B. 150 : 4 Bom.L.R. 951. There, Chandavarkar, J., relies on a sentence from Leake on Contracts, 3rd Edition, page 1005. The passage also occurs in the 8th Edition at page 881 and runs thus: 'But an order for payment out of a debt accruing due under a contract, as for goods sold, or for work and labour, or the like, is an assignment of a debt which must be stamped as a transfer of property.' Buck v. Robson (1878) 3 Q.B.D. 686 : 48 L.J.Q.B. 250 : 39 L.T. 325 : 26 W.R. 804 is cited as an authority. On an examination of the case, I find that the letter is not an order of payment but contains express words of assignment! It runs: 'I hereby assign to Messrs. R. & Son. etc.' It was held that the letter was not an order for payment of money. The point discussed was that the letter related to a 'debt that may accrue due in future. The Court, following Brice v. Bannister (1878) 3 Q.B.D. 569 : 47 L.J.Q.B. 722 : 38 L.T. 739 : 26 W.R. 670 and differing from Ex parte Shellard, In Re: Adams and Kirby (1874) 17 Eq. 109 : 43 L.J. Bk. 3 : 39 L.T. 691 : 22 W.R 152, Bacon, V.C, held that it was assignment and it was admitted to evidence on payment of penalty. I do not think that the case supports the statement in Leake or the decision in Nandubai v. Gan 27 B. 150 : 4 Bom.L.R. 951.

7. I may point out that there are other difficulties in the way of holding Ex. I to be an assignment. For the letter Ex. I to operate as an equitable assignment, the fund out of which the payment was to be made should be specified and if no fund is specified, the order does not operate as an equitable assignment [Halsbury's Laws of England, Vol. IV, Section 801, page 378] citing Percival v. Dunn (1885) 29 Ch. D. 128 : 54 L.J. Ch. 570 : 52 L.T. 320,] where the order was handed to the third party as is the case before me [Ryall v. Rowles (1750) 1 Wh. & T.L.C. 96 : 1 Ves. Sen. 318 : 27 E.R. l074] citing Rodick v. Gandell (1852) 1 De.G. M. & G. 703 : 19 L.J.Ch. 113 : 13 Jur. 1087 : 42 E.R. 749 : 12 Beav. 325 : 91 E.R. 282.] But a more formidable difficulty is that the assignment of a debt must be of the whole debt. It is true that the word 'absolute' in the English Statute does not occur in the Transfer of Property Act. But the effect of the word 'absolute' is that it should not be by way of charge [Durham Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q.B. 484 : 48 L.T. 438] and the omission of the word permits an assignment of the debt by way of security [Mulraj Khatau v. Vishwanath Prabhuram Vaidya 17 Ind. Cas. 627 : 37 B. 198 : (1912) M.W.N. 1247 : 12 M.L.T. 652 : 11 A.L.J. 7 : 1912 24 M.L.J. 60 : 17 C.W.N. 209 : 1912 15 Bom. L.R. 9 : 17 Cri.L.J. 162 : 40 I.A. 24 (P.C.) see also Vencatachellam Iyer v. Subramanya Iyer 11 Ind. Cas. 144 : 11 M.L.T. 245 : (1912) M.W.N. 461.] But the distinction between absolute transfers and transfers by way of. security has nothing to do with the question whether the assignment should be of the whole or may be of a part. In my opinion the assignment of the debt must be of the whole and cannot be of part. The observations of Chitty, L. J. in Durhan Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q.B. 484 : 48 L.T. 438* are pertinent. 'It does not say 'or any part of a debt or chose-in-action.' it appears to me as at present advised to be questionable whether an assignment of part of an entire debt is within the enactment. If it be, it would seem to leave it in the power of the original creditor to split up the single legal cause of action for the debt into as many separate legal 'causes of action as he might think fit.' The right of assignment is not a Common Law right and is the creation of the Act and I do not think the Act ought to be construed so as to cause such obvious inconvenience to the debtor. Darling, J., expresses a similar doubt in Jones v. Humphreys (1902) 1 K.B. 10 : 85 L.T. 488 : 18 T.L.R. 54 : 71 L.J.K.B. 23 : 50 W.R. 191. Lord Alverston, C.J., uses words to the same effect in Brandt Sons & Co. v. Dunlop Rubber Co. (1901) 1 K.B. 387 : 73 L.J.K.B. 247 : 52 W.R. 501 : 90 L.T. 106 : 20 T.L.R. 195 : 9 Comp. Cas. 149 and the reversal by the House of Lords in Brandt Sons & Co. v. Dunlop Robber Co. (1905) A.C. 454 : 74 L.J.K.B. 898 : 93 L.T. 495 : 21 T.L.R. 710 : 11 Comp. Cas. 1 does, not affect this portion 'of the Lord Chief Justice's judgment; The different opinion of Darling, J., in Jones v. Humphreys (1902) 1 K.B. 10 : 85 L.T. 488 : 18 T.L.R. 54 : 71 L.J.K.B. 23 : 50 W.R. 191 does not,, convince me, the decision being reversed by the Court of Appeal (on another point), as the reasons given do not meet the difficulties pointed out by Chitty, L. J., in Durham Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q.B. 484 : 48 L.T. 438. He deduces his conclusion from the fact that a future debt may be assigned. In Sabjan Sahib v. Abdul Azeez Sahib 42 Ind. Cas. 684, Seshagiri Iyer, J., makes an observation that the omission of the word 'absolute' was perhaps intended to settle the conflict; in the English decisions. I have already pointed out that the word 'absolute' is used in contrast to by way of security' and has nothing' to do with the point now raised. An assignment may be of the whole debt by way of security though when the security is worked out, a part only may suffice. There may be a series of assignments each of the whole debt by way of security. The assignees will then be in the position of a number of mortgagees. I am, therefore, of opinion for all these reasons, that Ex. I is not an assignment or a valid assignment.

8. The appeal fails and is dismissed with costs of respondents Nos. 1 to 4 (plaintiffs).


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