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Smt. Narayani Devi Vs. Tagore Commercial Corporation Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberLiquidated Claim Suit No. 1002 of 1966
Judge
Reported inAIR1973Cal401
ActsIndian Contract Act, 1872 - Section 2
AppellantSmt. Narayani Devi
RespondentTagore Commercial Corporation Ltd. and anr.
Appellant AdvocateBankim Dutt, Adv.
Respondent AdvocateC. Banerjee, Adv.
Cases ReferredTwddle v. Atkinson
Excerpt:
- orderramendra mohan datta, j.1. this is a suit for the recovery of a sum of rs. 14,000/- due on account of principal and rs. 3915/- as damages in respect of interest due and for further damages. the defendant no. 1 tagore commercial corporation ltd. has virtually closed down its business and accordingly, the plaintiff seeks to claim relief mainly against the defendant no. 2, the guarantor who is maharaja prabinrendra mohan tagore bahadur.2. a formal agreement, between the plaintiff's husband one nagendra lal saha, since deceased, and the defendant company as the principal debtor and the said maharaja prabirendra mohan tagore bahadur as the guarantor, was entered into on or about october 5, 1951.3. the plaintiff's husband, the said nagendra lal saha, held several shares of the face value.....
Judgment:
ORDER

Ramendra Mohan Datta, J.

1. This is a suit for the recovery of a sum of Rs. 14,000/- due on account of principal and Rs. 3915/- as damages in respect of interest due and for further damages. The defendant No. 1 Tagore Commercial Corporation Ltd. has virtually closed down its business and accordingly, the plaintiff seeks to claim relief mainly against the defendant No. 2, the guarantor who is Maharaja Prabinrendra Mohan Tagore Bahadur.

2. A formal agreement, between the plaintiff's husband one Nagendra Lal Saha, since deceased, and the defendant company as the principal debtor and the said Maharaja Prabirendra Mohan Tagore Bahadur as the guarantor, was entered into on or about October 5, 1951.

3. The plaintiff's husband, the said Nagendra Lal Saha, held several shares of the face value of Rs. 40,500/- in Messrs. L. C. Saha Limited. By the said contract it was agreed, inter alia, that the plaintiff's husband will sell off his said shares in favour of the defendant No. 1 in consideration of the defendant No. 1 agreeing to pay him i.e., to Nagendra Lal Saha during his lifetime the sum of Rs. 500/- per month and after his death to pay to the plaintiff the sum of Rs. 250/- per month, month by month and every month during her natural life if she would survive her husband. By that agreement if the defendant company would fail to make the said payment then the guarantor defendant No. 2 agreed to make due payments of the said sums as aforesaid. By the said agreement Nagendra Lal Saha also agreed to surrender, relinquish, and release all his right, title and interest, claim and demand whatsoever to receive the royalty @ 150/-per month from the said Messrs. L. C. Saha Limited and agreed to sign, execute and register the formal deed surrendering, relinquishing and releasing his said right, title and interest, claim and demand whatsoever and agreed to cause all necessary parties to join in the said deed when called upon by the purchaser company to do so at its costs.

4. In terms of the said agreement since 1951 the defendant company and/or Maharaja Prabinrendra Mohan Tagore, the guarantor, paid the said sums to the said Nagendra Lal Saha during his lifetime and after his death from time to time to his wife, the plaintiff herein. Nagendra Lal Saha died on July 8, 1957.

5. The plaintiff's case is that the defendant No. 2 from time to time paid several sums in part payment of the sums due under the said contract, firstly, to the plaintiff's husband and after his death to the plaintiff directly but since September 1, 1961 till April 30, 1966 he failed and neglected to pay the said sum of Rs. 250/- per month which was payable to the plaintiff.

6. The defendant No. 1 has not entered appearance nor has filed any written statement herein. The defendant No. 2 has filed a written statement and has denied his liability in respect of the plaintiff's claim. He has challenged the agreement as void as invalid for want of consideration as a document which is not binding upon the defendants. It is also pleaded therein that the said agreement was not enforceable in law inasmuch as the same was not a concluded contract at all because the plaintiff failed and neglected to execute the formal deed of transfer and/or release and/or surrender and/or relinquishment in respect of the said shares and for the royalty thereof. Those averments have been made in paragraph 2 of the said written statement in which allegation was made against the plaintiff haying failed and neglected to execute and register the proper deed of transfer and/or release and/or surrender and/or relinquishment in respect of the said shares and in respect of the claim for the royalty as mentioned therein in terms of the said purported agreement. As already stated, the defendant No. 1 has not entered appearance herein. It is difficult to follow why the plaintiff should fail and neglect to execute and register the proper deed of transfer and why the plaintiff should be called upon by the defendant No. 1 to do so as pleaded in the said paragraph specially when payments were being made to the plaintiff's husband when he was alive and thereafter to the plaintiff for sometime under the said agreement. A further point has been taken in the said written statement to the effect that the plaintiff's claim, if any, is barred by the law of limitation.

7. An important point has also been urged by and on behalf of the defendant No. 2 to the effect that since the plaintiff was not a party to the said agreement which was entered into by her husband and the defendants herein, she was not legally entitled to any benefit under the same and she had not acquired any right to sue the defendants under the said agreement. Accordingly, the suit is wholly misconceived.

8. The following issues were settled at the trial:

1. Did the defendant No. 1 fail or neglect to pay the monthly sums in terms of the agreement dated October 5, 1951 as alleged in paragraph 3 of the plaint?

2. Is the plaintiff not entitled to any benefits under the said agreement dated October 5, 1951 as alleged in paragraph 4 of the written statement?

3. Has the defendant No. 2 any obligation or liability to make any payment to the plaintiff under the said agreement?

4. Is the plaintiff's claim or any part thereof barred by limitation?

5. Does the plaint discloses any cause of action?

6. To what relief, if any, is the plaintiff entitled?

Issues Nos. 1 and 3:

9. I shall first take up issues Nos. 1 and 3 which can be dealt with together. On behalf of the plaintiff reliance has been placed on the correspondence which would suggest that such monthly sums were payable to the plaintiff by the said guarantor. In the letter dated June 25, 1960 (Exhibit 'C') there is a clear admission by the defendant No. 2 to the effect that he would make the payment of half the amount of the arrear on June 22, 1960. He regretted that he was unable to arrange for the money for payment. By the said letter he also requested them not to file any suit for another 15 days within which time he promised to pay the arrear dues. The said letter referred to two other letters dated June 3, 1960 and June 20, 1960 which formed part of Exhibit 'A'. The letter dated June 3, 1960 was written by Messrs. Nahar & Datta, attorney for the plaintiff to the defendant No. 1 whereby the agreement was set out and on the basis of the agreement claims were made for arrears of monthly sums payable thereunder to the extent of a sum of Rs. 6900/- due upto May, 1960. The letter dated June 20, 1960 was a reminder to their letter dated June 3, 1960 addressed to the defendant No. I and the same recorded that on June 15, 1960 the Chairman of the defendant No. 1 being the said Maharaja Bahadur P. M. Tagore assured that he would be in a position to say when he would settle the claim. By the said letter payment was again demanded and upon default in making the payment, the said solicitors threatened to take action by filing a suit.

10. On behalf of the defendant No. 2 it is argued that the plaintiff has failed to prove her case and has failed to discharge the onus in respect of those two issues. The above correspondences would show that the plaintiff was entitled to the payment of some amount which was admitted to be due as appeared from the evidence on record, and from the probabilities or legal inferences derived from the admitted facts on record the court is in a position to come to the finding that the obligations under the said contract were duly performed by the said Nagendra Lal Saha. It is contended on behalf of the defendant No. 2 that even though an issue has been raised, the plaintiff has not made any effort to satisfy the Court that the shares were transferred or that formal deeds as mentioned in the said agreement were executed by the said Nagendra Lal Saha. It is argued that there might be evidence showing liability for payment but the same cannot amount to a legal liability to pay unless it is proved that the shares were transferred and the deeds were executed in favour of the defendant No. 1 as per terms of the said agreement. The only evidence that has been led is in question No. 17 which was put to Jogindra Lal Saha and which reads as follows:--

'Q. 17. With regard to the agreement between your brother and the defendants, would you tell my lord if you have any personal knowledge as to what happened to the shares which were being held by your brother Nagendra? AH these transactions had been completed. Nagendra Saha transferred all shares to Maharaja Prabirendra Mohan Tagore on the basis of the agreement that has been executed by Maharaj Bahadur.'

11. On the basis of the aforesaid evidence adduced on behalf of the plaintiff it was contended by Mr. Bankim Dutt that there was positive evidence to the effect that the formalities prescribed under the said agreement had been completed and the same were so done on the basis of the said agreement. It is true that Jogindra Lal Saha in his evidence has stated that the shares were transferred to the Maharaja but by that he - must have meant the company of which the Maharaja was, at all material time, the Chairman and/or the Managing Director.

12. The correspondence tendered herein would also support the plaintiff's case that the Maharaja was accepting the letters addressed to the defendant No. 1 and had been giving replies in respect thereto to the plaintiff or her solicitors. By the letter dated June 25, 1960 (Ext. 'C') the Maharaja has acknowledged receipt of all such letters even addressed to the defendant No. 1 and on the basis of such letters has acknowledged full liability to the plaintiff to make full payment under the said agreement dated October 5, 1951. The oral evidence adduced herein and the documentary evidence in support thereof leave no doubt in my mind that the Maharaja was acting not only on his own behalf as the guarantor but also on behalf of the principal debtor being the defendant No. 1 herein on the basis of the said agreement. In fact and in effect he adopted the agreement as Chairman of the defendant No. 1 and as the guarantor under the said agreement and in both the said capacities he intended to make it an effective and valid agreement so as to bind him in both the capacities to the plaintiff. Neither the defendant No. 1 nor the defendant No. 2 adduced any evidence contrary to what has been adduced on behalf of the plaintiff. I have come to the finding that the company had all throughout been represented by the defendant No. 2.

13. On the question as to whether the defendant No. 1 failed to pay the monthly sums to the plaintiff or not so as to make the guarantor liable, the plaintiff's letter dated June 3, 1960 would reveal that a sum of Rs. 850/- was paid from time to time in instalments by the defendant No. I through its Chairman the said Maharaja P. M. Tagore. After giving the company credit for the said sum a demand was made for the balance sum from the company in respect of the monthly payments payable under the said agreement. The receipt of the letter was acknowledged by the Maharaja's letter dated June 25, 1960 (Ext. 'C') and such liability had been admitted. In my opinion, it was the defendant No. 1 who could come and say that no such sums were paid by the company but the defendant No. 1, as stated above, neither filed any written statement nor gave evidence to the contrary. In so far as the defendant No. 2 is concerned he has also chosen not to adduce any evidence on his behalf. Under those circumstances, my finding is that in spite of demands the defendant No. 1 failed and neglected to pay the balance sums due and owing from the defendant No. 1 to the plaintiff and, accordingly, the defendant No. 2 as the guarantor became liable to pay such amounts to the plaintiff. To my mind, there is enough evidence to the effect that the liability on the part of the guarantor duly arose upon the failure on the part of the company to pay the arrear dues to the plaintiff. I am also satisfied that all formalities in respect of the transfer of the shares were observed on behalf of the plaintiff long time back and during the lifetime of Nagendra who also received the monthly sums under the said agreement. On the evidence on record and in the absence of any evidence to the contrary on behalf of the defendants, this Court is entitled to draw the legal inference from the admitted or proved facts that unless such formalities had been observed the defendant company would not have made any payment to Nagendra at any point of time or to the plaintiff, since Nagendra's death.

14. In paragraph 6 of the written statement the defendant No. 2 has alleged that Nagendra committed breaches in performing his part of the said agreement dated 5-10-1951, and the issue was sought to be raised by Mr. Banerjee on those pleadings but the same was not allowed to be raised in the manner it was suggested because it was understood that under these two issues Nos. 1 and 3 the said allegations could be considered. In my opinion, since payments have all along been made under the said agreement, the onus was on the defendant to show that such formalities were not observed and in the absence of any such evidence the plaintiff is not called upon to lead further evidence besides what have been adduced to show that such transfers were actually effected by Nagendra. The evidence on record proves that such shares were handed over to the Maharaja for effecting the transfer and that would go to show that the plaintiff's predecessor performed his part of the obligation under the said agreement.

15. Mr. C. Banerjee has argued that the plaintiff has failed to prove that there was any consideration for the said guarantee. I am satisfied from the prima facie evidence adduced before me that there was such consideration and in the absence of any positive evidence either oral or documentary adduced on the part of the defendants that there was no such guarantee, this Court will be justified in relying on the said prima facie evidence. The fact remains that the Maharaja was the Chairman of the defendant No. 1 and as such Chairman also he was interested to purchase the said shares from Nagendra and as a share-holder and the Chairman of the Board of Directors of the said company he was to derive benefit out of the said transaction. In any event, the correspondence will show that the Maharaja had been acting as a guarantor all throughout and he had acknowledged his liability to the plaintiff as such guarantor and on that basis he had been making payments. Under such circumstances it is now idle on the part of the defendant No. 2 to raise that point and that again, without calling any evidence to show to the contrary. In fact no such dispute was ever raised before.

16. Mr. Banerjee has argued that the payments made by the Maharaja, ipso facto, did not attach any liability to him. He had no legal liability to pay. Such payments had been made not under the agreement but on the basis of the promise to pay without any consideration. According to him such payments might at best be evidence of his promise to pay but the legal liability could not arise by reason of such payment and it could not be contended that such payments were made in furtherance of any agreement or guarantee. On the basis thereof, it was argued, that Exhibit 'C' could not help the plaintiff to establish any legal liability. In my opinion, if the Maharaja had come to the witness box to explain under what circumstances he had made the payments and if he could give any valid explanation as to why he made the said admission by Exhibit 'C' or if that admission could be explained by him by oral evidence then only the above argument put forward by Mr. Banerjee could have some relevance but in the absence of any evidence to that effect, in my opinion, the said Exhibit 'C' has to be read in accordance with its apparent tenor which clearly shows acknowledgment of liability on the part of the Maharaja as such guarantor to make the payments to the plaintiff under the said agreement.

17. I accordingly answer the said issues as follows:--

Issue No. 1: The answer is in the affirmative.

Issue No. 3: Is also answered in the affirmative.

18. Issue No. 4: In the case of Sant Lal Mahton v. Kamala Prasad, 0043/1951 : [1952]1SCR116 the Supreme Court observed:

'If the plaintiff's right of action is apparently barred under the statute of limitation, Order 7, Rule 6, of the Code of Civil Procedure makes it his duty to state specifically in the plaint the grounds of exemption allowed by the Limitation Act upon which he relies to exclude its operation.'

There is no such averment in the plaint. There is a vague pleading relating to acknowledgment by the letter dated June 25, 1960. Accordingly the claim is clearly barred by limitation for the period starting from Sep-temper 1, 1961, till May 23, 1963 but in view of the fact that the monthly payments constitute a continuing cause of action in respect of the payment for each month, such claim, if otherwise maintainable, cannot be barred by limitation for the period of 3 years immediately preceding the date of the filing of the suit. The suit having been filed on May 24, 1966 the period commencing from May 24, 1963 is within the period of limitation. I answer the issue accordingly.

19. Issue No. 5 has not been pressed and is accordingly decided against the defendant No. 2.

20. The only issue that remains to be considered is issue No. 2. In paragraph 4 of the written statement it is pleaded that inasmuch as the plaintiff is not a party to the said agreement dated October 5, 1951, she is not entitled to any benefit under the said purported agreement and accordingly, her suit was wholly misconceived. This raises an important question of law.

21. In paragraph 4 of the written statement it is pleaded as follows:--

'This defendant further states that, in any event, inasmuch as the plaintiff was not a party to the said agreement dated October 5, 1951 and the said purported agreement was not made by and between the plaintiff and the defendant, she was and is not entitled to any benefit under the said purported agreement and this suit instituted by her to enforce her alleged right under the said purported agreement is therefore, wholly misconceived and is liable to be dismissed.'

22. It is argued that the plaintiff cannot sue the defendants under the agreement in which she was not a party. The contract was entered into by and between the said Nagendra Lal Saha, the husband of the plaintiff and the two defendants herein. Under the said contract after the death of the said Nagendra Lal Saha a sum of Rs. 250/- per month would be payable by the defendant No. 1 and on its failure, by the defendant No. 2, to the plaintiff so long she would be alive. The question before me is, can the benefit that was conferred on the plaintiff by the parties to the said agreement be enforced by the said beneficiary at law? In other words, is the agreement herein, of such a nature which would create any such obligation so as to entitle the plaintiff to any equitable relief? Does it create an obligation in the nature of or amounting to a trust?

23. A series of judgments of the Courts in England as also of India have been cited from the bar. It appears that the law is that even though under the Indian Contract Act the definition of consideration is wider than in the English Law, yet the common Law principle is generally applicable in India, with the effect, that only a party to the contract is entitled to enforce the same. It is to be noted that in some exceptional cases, such as Nawab Khwaja Muhammad Khan v. Nawab Husaini Begum, (1910) 37 Ind App 152 (PC), Deb Narayan Dutt v. Ram Sadhan Mandal, ILR 41 Cal 137 = (AIR 1914 Cal 129) and several others the above common law principles have not been applied. In one of such exceptional cases the Courts found that an obligation in equity amounting to a trust arising out of such contract did exist and as such the beneficiary had the right to sue.

24. The plaintiff has pleaded that there is an obligation in the nature of trust arising out of the said contract entered into by and between her husband and the defendants. In paragraph 3 (a) of the plaint the plaintiff has pleaded that the defendants were and are estopped from disputing their liability to the plaintiff under the said agreement because the defendants treated the plaintiff as a party to the said agreement and after the death of the said Nagendra Lal Saha, paid various sums to the plaintiff in terms of the said agreement. The plaintiff has also pleaded by way of amendment that by the letter dated June 25, 1960 written by the defendant No. 2 to the plaintiff's solicitors the said defendant admitted and accepted liability to the plaintiff in terms of the said agreement and requested the plaintiff to grant him time to make the payment and not to sue for the money. The plaintiff has suffered prejudice by acceding to his said request. On the basis of the aforesaid pleading it is contended that the defendants are estopped from disputing their liability to the plaintiff.

25. Moreover, paragraph 2 of the written statement of the Maharaja contains a very vital admission to the effect that under the said agreement the plaintiff was called upon by the defendant No. I and in spite thereto the plaintiff failed and neglected to execute and register proper deed of transfer and/or release and/or surrender and/or relinquishment in respect of the shares and the claim for royalty. This is clear admission that according to the defendant No. 2 the defendant No. 1 called upon the plaintiff to perform her obligation under the said agreement. In other words, the defendants by their conduct treated the plaintiff as a party to the said agreement.

26. It has been argued on behalf of the defendant No. 2 that this is a mistake and in the place of the plaintiff the name of her husband was intended to be pleaded. If that was so, the same could be corrected by applying for an amendment to that effect or, at least, the defendant No. 2 could have come to the witness box and could have led evidence to that effect. None of the steps were taken and the admission uptill now has been allowed to stand.

27. In my opinion, even if it is held, that there was no privity between the plaintiff and these two defendants, when the said contract was entered into, yet in the facts and circumstances of this case, it must be held that the two defendants have created such privity with the plaintiff by their conduct and by acknowledgment and by admission, as stated above and they have constituted themselves the agent of the plaintiff. Such admission will also be found in Exhibit 'C' and such conduct will be found from the evidence both oral and documentary. This is a case which comes directly within the exceptions to the general doctrine that the stranger to the agreement cannot sue to enforce his right because of want of privity between the promisor and the stranger (Vide: observation of the Division Bench of this Court in Jnan Chandra Mukherjee v. Monoranjan Mitra, AIR 1942 Cal 251 at p. 252).

28. The next question to be considered is whether from the language of the agreement itself it can be held that a trust was created in favour of Narayani Debi.

29. It is provided in Clause 8 of the said agreement that the said shares remained charged for the payment of the monthly sums provided therein both to the husband and after his lifetime to the wife. That is one of the terms of the said agreement. Then again, the character of the money is nothing but the sale proceeds of the said shares. Nagendra intended and the parties bargained thereby that instead of the sale proceeds being paid immediately the same was to be payable in monthly instalments and was so calculated that the same would cover the limetime of Narayani and on that basis provision was made by Nagendra in such a way that every month she would get out of the sale proceeds a sum of Rs. 250/- to maintain herself and for that purpose Nagendra entrusted the entire sum to the company and to the Maharaja for his own benefit during his own lifetime and thereafter for the benefit of his wife during her lifetime. It was Nagendra's money and the two defendants were entrusted with that sum for the sole purposes of disbursements in the manner as provided in the said agreement.

30. By taking into account the position of the parties including Nagendra, vis-a-vis the defendants, the nature of the money that was entrusted with the defendants by Nagendra under the said agreement, and the nature of the provisions made in the said agreement, I have no doubt in my mind that an equity was created in favour of the plaintiff to entitle her to sue for the said sum. An obligation in the nature of a trust can certainly be inferred from all these surrounding circumstances and in the very special facts and circumstances of this case.

31. The point which is before me for determination is, in my opinion, also covered by the English decision in Page v Cox, reported in (1852) 10 Hare 163 = 68 ER 882. There the testator and his wife's sister's husband entered into partnership articles with a proviso that if the testator should die in course of the partnership, the testator's widow should be entitled to the interest to be left by the testator. Sometime prior to entering into the said partnership the testator who was a tradesman, by his will, bequeathed the interest to his wife's sister whose husband and the testator entered into the said partnership. Turner V. C. held that the effect of the agreement between the said two partners was to create an obligation in equity upon the surviving partners and in that respect it did not differ from a trust. In other words, the said partnership articles created a trust in favour of the widow of the testator. Such a trust was founded on contract and as such was capable of being enforced.

32. It it to be noted that the said agreement could be enforced by the plaintiff's husband during his lifetime because he was a party to the same. The question is whether after his lifetime the wife being the plaintiff herein could enforce the same against the defendants. As observed by the Bench decision of this Court in District Board, Malda v. Rai Bahadur Chandra Ketu Narayan Singh, AIR 1937 Cal 625 at p. 630: 'The question whether in a particular case thers is an obligation in the nature of a trust in favour of a third party arising out of a contract will depend on the facts of the case.'

33. In the facts and circumstances of this case both the defendant No. 1 and the guarantor bound themselves to pay to the plaintiff by accepting the position that she was entitled to the benefit under the said agreement. By the terms of the said agreement an equity was created in her favour and such equity entitled her to enforce her claim. The obligation that was created in equity, in the facts of this case, did not differ from a trust. In fact, it was in the nature of a trust in favour of the plaintiff. The sale of the shares was completed by the said agreement. Only the payments were entrusted to the defendants to be made to Nagendra and after his lifetime to his wife, that indeed, was an obligation in the nature of a trust.

34. In those respects, as discussed above, this case must be regarded as an exception to the jeneral rule as laid down in Twddle v. Atkinson, (1861) 1 B & S 393 = 121 ER 762. T, accordingly, aiswer issue No. 2 as follows :--

35. The plaintiff has a right to sue the defendants under the said agreement. The plaintiff is entitled to the benefits under the said agreement dated October 5, 1951 and the allegations in paragraph 4 of the written statement do not show the correct legal position.

36. This disposes of all the issues except issue No. 6 under which I shall now pass a decree to which the plaintiff is entitled to in this suit both against the defendant 1 and also against the defendant No. 2 as follows:

37. The plaintiff would be entitled to a decree for Rs. 9,000/- in respect of the arrear payments due for the period from May 24, 1963 to May 24, 1966 being the date of the institution of the suit. The plaintiff would also be entitled to interest on the said sum which is assessed at a sum of Rs. 800/- upto the date of the suit and thereafter interim interest on the sum of Rupees 9000/- at the rate of 6% per annum from the date of the suit till the decree herein and thereafter interest on decree at the rate of 6% per annum. The plaintiff will be entitled to the cost of the suit and certified for two counsel as against the defendant No. 2.


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