1. The plaintiffs in this case are the executors of Mr. Henry Vales Low who died in the year 1926 and Mr. John Herbert Pattinson, described as residing at Srinagar in the State of Kashmir. Low and Pattinson carried on business for many years as H, V. Low and Co. and in the course of their business they became the lessees under a mining lease dated 28th November 1918 of a tract of coal land in the District of Birbhum. The lessor was one Mr. John Arthur Millar and the term of the lease was 999 years. The consideration for the lease was a salami of Rs. 25,000 and a covenant by the lessees to pay a minimum rent or royalty of Rs. 3000 a year payable quarterly. On 4th April 1919 Low and Pattinson agreed in writing to grant a sub-lease of the coal land to a company called the Aurrang Coal Co. Ltd. The term of the sublease was the unexpired residue of the term of the lease of 28th November 1918. The salami agreed upon was a sum of Rs. 2,50,000 of which Rs. 50,000 were payable in cash and Rs. 1,50,000 in shares in the sub-lessee company. The company also agreed to pay minimum royalty at the rate of Rs. 5000 per annum.
2. About the same time, Low and Pattinson agreed to transfer their business, or at any rate the greater part of it, to the defendant company. This agreement is contained in a document dated 16th April 1919. There is a recital that 'the firm', i.e. Low and Pattinson, had for some time past been carrying on in Calcutta, Rangoon and elsewhere the business of Managing Agents, Agents and Managers of public and private limited companies and of privately owned business concerns and the business of dealers in and shippers of coal and coke and general merchants and commission agents and that in connexion with such business they held the managing agencies or other similar offices of the companies and concerns specified in Schedule 1. The managing agencies in the schedule include that of the Aurrang Coal Co. Ltd. Among the assets agreed to be transferred are certain leaseholds specified in Schedule 2, which do not include the leasehold interest created by the lease of 28th November 1918 and also 'all the other property to which the firm is entitled in connexion with the said businesses save only as hereinafter expressly excepted.' With regard to consideration, the agreement provides that the defendant company shall allot 14,765 of its fully paid-up shares of the denomination of Rs. 100 to Low and 11,485 of such shares to Pattinson. Clause 3 provides that as the residue of the said consideration the company shall pay, satisfy, discharge and fulfil all the debts and liabilities of the firm in connexion with the said businesses, subject to certain exceptions which are not material for this case.
3. The final document to be considered is one dated 5th March 1923. The parties to it are Low and Pattinson (called the vendors), the Aurrang Coal Company Ltd., (called the Company) and the defendant company in this suit (called the lessors). The document recites the lease granted by Millar and the agreement of 4th April 1919, and that the company has been granted possession by the vendors. The recitals proceeded:
And whereas the said coal mines and premises comprised in the said lease (i.e. Millar's lease) were held by the vendors in connexion with their said firm and whereas the company has now called upon the vendors for a formal demise of the said coal mines and premises and whereas at the request of the vendors the lessors have agreed to join in these premises in manner hereinafter appearing.
4. Then comes the operative part, by which the vendors by the direction of the lessors demise and transfer and the lessors demise and confirm unto the company the mining lands. There is an agreement for royalty and also a number of covenants by the company expressed to be in favour of the lessors. These follow covenants on the part of the lessors with the company. The third of such covenants is as follows:
That the lessors will duly pay the royalty and minimum royalty reserved by the said indenture of lease dated 28th November 1918, as and when the same shall fall due and will indemnify the company from and against all suits, actions, proceedings, claims, demands, costs, loss, and expenses, for or in respect of the maintenance of such royalty or minimum royalty.
5. The defendant company has not paid Millar's executors the minimum royalty in terms of the covenant since the second quarter of 1928, and on 1st June 1934 the executors obtained a decree in this Court against the plaintiffs for Rs. 17,250 being the amount of royalty in arrears up to November 1933. The plaintiffs now claim this sum as due under the covenants entered into by the defendant company, or alternatively as damages. The written statement admits para. 6 of the plaint, wherein it is alleged that the interests of Low and Pattinson in the land covered by Millar's lease were included in what was agreed to be transferred by the instrument of 16th April 1919. The defendant company however contend that the debts and liabilities which it promised to discharge as part of consideration under that instrument did not include the liability to pay the minimum rent or royalty under Millar's lease. With regard to the covenant contained in the document of 5th March 1923, the defendant company takes the point that the lessor's covenant to pay the royalty was made with the Aurrang Coal Co. Ltd. and was for the sole benefit of the latter.
6. Counsel for the defendant company has argued that since its admission as to the correctness of para. 6 of the plaint is one as to the proper construction of a document, he is not bound by it, and he has sought to argue that debts and liabilities under Millar's lease cannot be said to be debts and liabilities of the firm 'in connexion with the said businesses.' I find this quite unconvincing. The lease is a mining lease and the residue of it had been transferred to the Aurrang Coal Co. Ltd. under a mining sub-lease, that company being one of those whose managing agency was held by Low and Pattinson, and the company's business is one of the businesses specified in Schedule 1. I think also the fact that the document of 16th April 1919 is recited in the document of 5th March 1923 shows that the parties had intended that all the interests of Low and Pattinson connected with the Aurrang Coal Company and its working should be covered by the former agreement. There is perhaps more in the point taken that the words 'debts and liabilities' mean only such debts and liabilities as were in existence on 16th April 1919. Counsel for the plaintiffs has drawn my attention to Section 62 (2), Presidency Towns Insolvency Act 1909, and has submitted, in my opinion rightly, that had Low and Pattinson been adjudicated insolvent, the Official Assignee could have disclaimed Millar's lease, in which the liability to pay royalty in future would have been a liability determined under the provisions of the sub-section.
7. This is not a particularly satisfying method of argument, but nonetheless I think that on the plain language of the document and upon its most reasonable construction, the defendant company promised and covenanted to pay, satisfy, discharge and fulfil all obligations which Low and Pattinson could be called upon to fulfil in connexion with the businesses agreed to be transferred. To limit 'liabilities' to those obligations which had given rise to a cause of action at the date of the document is in my opinion to construe the document too narrowly. I hold there was a promise made by the defendant company to Low and Pattinson to pay the minimum royalty due under Millar's lease, and that the plaintiffs are entitled to the decree they ask for as compensation for the defendant company's failure to perform the promise. My decision as to the effect of the earlier document renders it unnecessary for me to consider whether any right of action arises by reason of the covenant by the defendant company, contained in the document of 5th March 1923, to pay the royalty and minimum royalty reserved under the lease of 28th November 1918. The difficulty in the plaintiff's way is that the covenant is not with Low and Pattinson but with the Aurrang Coal Co. Ltd. I think the description of the document given by counsel for the defendant company is substantially correct; he says that it is a hybrid document, containing a conveyance and a contract, and that Low and Pattinson were parties to the conveyance only.
8. Mr. S. M. Bose on the other side submits that as the covenant is for the benefit of Low and Pattinson, the plaintiffs can enforce it or alternatively sue for damages for its breach. He relies on Kshirode Bihari Dutt v. Mangobinda Panda : AIR1934Cal682 , a decision of Lort-Williams and M. C. Ghose JJ., who held that a zamindar can sue on a contract made between his mokarraridar and darmokarraridar, whereby the latter undertakes to pay the mokarraridar's rent direct to the zamindar, and can obtain a decree for rent against the darmokarraridar. He has also drawn my attention to West Yorkshire Darracq Agency Ltd. v. Coleridge (1911) 2 KB 326, where a company in liquidation was permitted to take advantage of an agreement with it whereby a director agreed to forgo his director's fees, although no consideration moved from the company. That case does not in my opinion apply because the plaintiffs' obstacle here is not so much absence of consideration as the fact that they are not parties to the covenant.
9. As Lort-Williams J. recognizes in his judgment, there are several reported decisions in which the contrary view has been taken : see Jiban Krishna Mullick v. Nirupama Gupta (1926) 13 AIR Cal 1009, Jagadamba Debi v. Bibhuti Bhusan Sarkar : AIR1933Cal407 , Krishna Lal v. Promilabala Dasi 0065/1928 : AIR1928Cal518 and also the Full Bench decision of the Madras High Court in Subbu Chetti v. Arunachalam Chettiar (1930) 17 AIR Mad 382. Moreover, Lort-Williams J.'s view has sub-sequently been expressly dissented from : see National Petrolium Co. Ltd. v. Popatlal Mulji (1936) 23 AIR Bom 344, Adhar Chandra v. Dol Gobinda Das : AIR1936Cal663 and Malda District Board v. Chandra Ketu Narayan Singh : AIR1937Cal625 . I am however relieved from the necessity of considering this conflict of authority, because the facts with which I have to deal are clearly not covered by Kshirode Bihari Dutt v. Mangobinda Panda : AIR1934Cal682 . Even if a covenant made between A and B, whereby B promises to pay C, can be enforced in a suit brought by C against B, it certainly does not follow that B's failure to pay C will give a right of action to D should D suffer damage on account thereoof. If Millar's executors were attempting to enforce the covenant the (authorities to which I have referred would be apposite, but none of them can assist a (stranger, to sue on a covenant, in the performance of which he has only an indirect interest. There will be a decree for the amount claimed with interest on judgment at six per cent. and costs.