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Ramnath Gouri Sankar Daway Vs. Chandulal B. Modi - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1938Cal649
AppellantRamnath Gouri Sankar Daway
RespondentChandulal B. Modi
- .....the defendant to purchase on his account out of the money that was lying with the -defendant two government promissory notes of the face value of rs. 2000 each. the notes were purchased through a broker of the name of ganny and paid for by the defendant. government promissory notes bearing interest at 3i per cent. were at that time at a considerable discount, and the broker's receipt shows that the cost of the two notes after making the necessary adjustments for interest and income-tax amounted to rs. 2669-10-1. the interest had not been drawn by the sellers of the note when they were purchased by the defendant on the plaintiff's account. on one of the notes interest was due as from january 1929 and as to the other interest was due from may 1929. the particular note with which this.....

Panckridge, J.

1. The amount claimed in this suit is comparatively small, but the matter for decision, which is purely a question of fact, is by no means simple. This is largely due to the lack of trustworthiness which, in my opinion, characterizes both plaintiff and defendant. The impression which they made on me is that they are neither of them persons on whose statement reliance can be placed in the absence of corroboration in the shape of documentary evidence or inherent probability. The plaintiff and defendant have been acquainted for many years, and they are both engaged in trade. The defendant's financial position appears on the whole more substantial than that of the plaintiff, but they are both persons who have resources and should not be open to financial temptation. The story begins as long ago as the month of April 1930. At that period the defendant held on deposit on the plaintiff's account certain cash certificates and fixed deposit receipts, and a considerable sum in cash. The plaintiff at that period was contemplating a visit to Kathiawar where his home is, and during the last week of April he requested the defendant to purchase on his account out of the money that was lying with the -defendant two Government promissory notes of the face value of Rs. 2000 each. The notes were purchased through a broker of the name of Ganny and paid for by the defendant. Government promissory notes bearing interest at 3i per cent. were at that time at a considerable discount, and the broker's receipt shows that the cost of the two notes after making the necessary adjustments for interest and income-tax amounted to Rs. 2669-10-1. The interest had not been drawn by the sellers of the note when they were purchased by the defendant on the plaintiff's account. On one of the notes interest was due as from January 1929 and as to the other interest was due from May 1929. The particular note with which this suit is concerned is No. 375163 of 1865. On that a sum was due on the date of sale by way of interest amounting to Rs. 35-3-1, and further interest was to accrue in June following the month of sale.

2. On 3rd May 1930, when the plaintiff was about to leave for Kathiawar he obtained from the defendant all the postal securities and fixed deposit receipts held by the defendant and also the other Government promissory note which had been purchased two days previously. Note No. 375163 however remained with the defendant, and the issue which I have to decide is whether it remained with him, as the plaintiff states, only for the purpose of the collection of interest, or whether, as the defendant states, it was held by him as security for a sum of about Rs. 1100, which is said to have been owing by the plaintiff to the defendant. The plaintiff returned from Kathiawar about the beginning of August. Meanwhile the defendant had hypothecated the Government promissory note along with certain securities, which were his own property, to the Eastern Bank, which was the Bank employed on financing the import side of his business. This incident is not of much importance, because the defendant's account with the - Bank was subsequently cleared and the Government promissory note was released by the Bank. In September 1931 the defendant instructed the Eastern Bank to sell the Government promissory note which the Bank accordingly did and credited Rs. 1125, being the sum realized by the sale, to the defendant. According to the defendant the sale was effected with the express consent of the plaintiff, who was at the time, indebted to the defendant for a sum in excess of the price realized. The plaintiff on the contrary states that nothing was due from him to the defendant, and that the sale was without his authority and consent and amounted to a wrongful conversion on the defendant's part. The plaintiff states that he first became aware of the sale by the defendant in April 1933, whereupon, after some correspondence between the attorneys of the parties, the plaintiff made a complaint to the Chief Presidency Magistrate on 24th April 1933, charging the defendant with criminal breach of trust. On 11th May 1934, the defendant was convicted of an offence punishable under Section 406,I.P.C., and sentenced to pay a fine of Rs. 500, or to undergo rigorous imprisonment for six months in default of payment. The Court also directed that Rs. 400 out of the Rs. 500, if the fine were realized, should be paid to the plaintiff as compensation.

3. The defendant appealed against his conviction and sentence, but his appeal was dismissed on 22nd January 1935, and I understand that the fine was thereafter paid, and that the plaintiff received Rs. 400 as compensation in terms of the Magistrate's order. This suit was filed on 23rd July 1935, and the relief asked for is the return of the Government promissory note or its value at the date of the institution of the suit. There is also a claim for the costs incurred by the plaintiff in the criminal proceedings less the sum of Rs. 400 realized under the Court's order. The latter claim however has been abandoned, and the suit is now one for damages for conversion. The history of the case, which I have to set out, sufficiently indicates the issues that arise, and they are whether the terms on which the defendant retained the Government promissory note were that the defendant should keep it for safe custody and collection of interest, or whether that he should hold it as security for the dues of the plaintiff. In coming to a conclusion on this point, it is necessary to decide what the position was as between the plaintiff and the defendant on 3rd May 1930. The defendant admits that he, but for a certain transaction with which I will deal shortly, held cash on the plaintiff's account to an extent quite sufficient for the purchase of the two Government promissory notes, but he says that this situation which subsisted up to 30th April 1930, was altered to the detriment of the plain-tiff by the dishonour of certain cheque for Rs. 1000.

4. The documents which relate to this transaction are two cheques, namely the dishonoured cheque for Rs. 1000 which is drawn by a man named E. H. Solanki, in favour of the plaintiff and is dated 30th April 1930. This cheque is endorsed in blank by the plaintiff and an endorsement by the defendant proves that it was presented through his Bank, the Netherlands Trading Society, to the National Bank of India Ltd. on which it had been drawn, and was dishonoured. The other cheque is dated 25th April 1930 and is for Rs. 850. It is drawn by the defendant in the plaintiff's favour. It is endorsed in blank by the plaintiff and, so far as I can see, it was presented over the counter on the same day to the Netherlands Trading Society on which it was drawn, and was paid to the person presenting it. The defendant's story is that on 25th April 1930, he at the plaintiff's request, drew the cheque for Rs. 850, and in return for it, the plaintiff handed him the post-dated cheque for Rs. 1000, plaintiff representing that he required the Rs. 850 to lend to Solanki, the drawer of the cheque for Rs. 1000. The plaintiff's story is that the transaction really represents an advance of Rs. 850 made by the defendant to Solanki. He says that both Solanki and he came to the defendant's place of business and the defendant expressed his willingness to advance the sum of Rs. 850 to Solanki if Solanki would repay a previous loan of Rs. 150. This previous loan represents the difference between the cheque drawn by the defendant and that drawn by Solanki. The reason assigned for the interposition of the plaintiff is, as I understand it, that a certain gentleman who had previously obliged Solanki, would be offended if he found that Solanki was getting accommodation elsewhere, and therefore the advance was ostensibly made to the plaintiff who was in a sense Solanki's benamidar in the transaction.

5. On this part of the case I have come to the conclusion that the defendant's evidence does not justify me in holding that the cheque for Rs. 850 represents a transaction different from that which appears on the face of it, namely a payment by the defendant to the plaintiff. I find the explanation which the plaintiff gives of the use of his name to cover a loan made to Solanki most unconvincing, but there are other circumstances which have considerably more weight with me than the inadequacy of the explanation offered. As soon as the cheque for Rs. 1000 was dishonoured, criminal proceedings were initiated against Solanki. These began with a complaint settled by a legal practitioner and dated 5th May 1930. The complaint is headed '0. B. Modi' (that is, the plaintiff) 'on behalf of E. G. Dawey' (that is, the defendant) 'against E. H. Solanki'. The story as set out in the complaint is that the dishonoured cheque was given by Solanki to the plaintiff and that the plaintiff borrowed money from the defendant to advance to Solanki. The petition ends:

The complainant has been authorized by Dawey who has gone to his native place to attend a sradh ceremony, to lodge this complaint before your honour, and the said Dawey will appear and give evidence when the case is ripe for hearing.

6. At that time there was no disagreement between the plaintiff and the defendant, and no adequate reason has been suggested why the defendant should file the complaint on the plaintiff's behalf and not on his own behalf if he were the person who had advanced the money to Solanki on his fraudulent representation. There is certain admitted correspondence which I think is significant. In a letter written by the plaintiff to the defendant on 16th May 1930 in answer to a letter from the defendant which is missing, the plaintiff states:

I am glad to learn that you have been able to take criminal steps against Solanki. I hope you will be able also to recover the amount. What about his shop? Is it still closed?

7. In my view those sentences indicate more than a merely friendly interest in the proceedings against Solanki, and they show that the plaintiff was hoping that, in addition to the criminal case, effective civil proceedings might be taken to recover the amount lent, but which Solanki had claimed upon his false representation with regard to the cheque for Rs. 1000. There is another letter dated 27th July 1930. In that the plaintiff writes:

What progress has been made in the matter of Solanki? Let it be. It does not matter since I am now coming there.

8. In my opinion, the only meaning that can be assigned to these expressions is that as the plaintiff contemplated coming to Calcutta within a very few days, the defendant need no longer attend to the criminal proceedings because the plaintiff would shortly be in a position to conduct his litigation personally. I cannot accept the suggestion that has been made that 'it does not matter' refers to the collection of interest mentioned in a preceding paragraph. I accordingly come to the conclusion that the Rs. 850 was rightly debited to the plaintiff by the defendant in the matter of the dishonoured cheque, and I am also prepared to accept the position that on the basis that the cheque for Rs. 1000 was worthless, the account was against the plaintiff as far as cash was concerned.

9. The plaintiff's story is that in contemplation of this situation, the defendant agreed that one of the promissory notes should be held by the defendant as security against the debit. I have considered the evidence and the defendant's explanation appears to me to be the only reasonable one to account for the fact that when on 3rd May the plaintiff withdrew all the securities of which the defendant had custody, the promissory note with which we are concerned was left with the defendant. The only suggestion which the plaintiff makes is that the purpose for which the note was retained was the collection of interest. That explanation seems to me unsatisfactory because it is possible to collect the interest due on such notes at other places as well as in Calcutta, and also because the other Government promissory note on which interest was due was taken away by the plaintiff along with his other documents. There is no other suggestion to explain why the note in suit was retained by the defendant and that being so, the circumstances indicate that the defendant's suggestion is the true one. The suggestion is supported by a certain passage in the plaintiff's letter of 16th May 1930. He writes:

Re: Government security. II the paper is received from the Allahabad Bank, I would rather request you to please send the same to my address along with the amount of interest realized to enable mother to ascertain the right situation. I will in return send another paper which will fall due on 30th June 1930.

10. If the plaintiff's story is true, the defendant was entitled to call for the Government promissory note as a matter of right and without assigning any reason. The promise to send another paper in return is one which I can only interpret as an admission that the defendant was entitled to the protection afforded by the hypothecation and possession of a Government promissory note of a similar issue and denomination as the one which the plaintiff was asking for on which the interest duel on 30th June would be realizable. I do not attach so much importance to the words 'in return', as to the fact that the letter indicates that the plaintiff fully understood that it was out of the question to ask for the promissory note to be sent to him unless he was prepared to place the defendant in the same position in which he stood before he parted with it.

11. According to the defendant's story the defendant on 24th May 1930 wrote to the plaintiff by registered post enclosing a statement of account showing that the defendant was in debit to the extent of Rs. 1188.2-0, and asking for a remittance. A copy of the statement of account, which is said to have been enclosed in the letter, gives the details of the various transactions, and debits the defendant with the Rs. 850 corresponding to the cheque of 25th April, and also with Rs. 500 which the plaintiff, according to the defendant, borrowed from him on 3rd May, just before his departure . for Kathiawar. The letter is only of importance because if it was actually received, and if the account was not challenged, in the circumstances the plaintiff must be taken to have accepted it. The story of the letter can be criticized from a good many points of view, but it is an admitted fact that the plaintiff did receive a registered cover from the defendant corresponding to a postal receipt of 24th May 1930. The plaintiff says that the registered cover contained a cheque for Rs. 41 which was a gift to the plaintiff's family on the occasion of a wedding, and also a statement of the details of the purchase of the promissory notes. That statement is not produced nor is the registered cover still in existence. The defendant says that he sent the cheque by ordinary post, and with it he enclosed a carbon copy of the original letter sent under registered cover. The copy produced, he says, is a typed copy which he prepared from the carbon copy before he despatched it together with the cheque.

12. It is pointed out that the disputed letter refers to an undated letter of the plaintiff and also to a letter of the defendant dated 13th May 1930. The original undated letter is not produced nor is there a copy produced of the letter of 13th May 1930 from the defendant to the plaintiff. I do not quite appreciate why the defendant, if he> was concocting a spurious copy, should go out of his way to create for himself difficulties of this sort, but the defendant's counsel has been forced to admit that there are circumstances of suspicion attached to the document which his client produces. He rightly points out however that if the plaintiff's story is true, and he had received a different account from the account which is said to have been enclosed in the letter, the defendant was taking a great risk of having that account refuted by the production of the account actually sent.

13. The conclusion I have arrived at is that, I should not be justified in coming to an affirmative conclusion that any letter corresponding to the document produced was sent on 24th May, but as I do not base my decision upon the defendant's oral testimony my suspicions with regard to this letter are of less importance than they would be, if the document formed an essential link in the train of transactions. With regard to the sale of the security in September 1931, the plaintiff's story now is that he was unaware of this fact until correspondence began in April 1933 as a prelude to the institution of the criminal proceedings. He admitted however in his cross-examination in the Police Court that he did make enquiries from time to time, and he suggested that he was put off with a promise that the plaintiff would return it in a few days when he had recovered it from the Allahabad Bank where it had been lodged for the collection of interest. It must be remembered that it is not suggested that the plaintiff received any payment on account of interest on this note from the date of its purchase onwards. If, as he says it had been left for the express purpose of facilitating the collection of interest, I think it certain that having regard to the length of time between the plaintiff's return from Kathiawar and April 1933 he would have pressed his enquiries to a conclusion and would not have consented to being put off with a promise.

14. I am conscious that there are some aspects of the matter which have not been disclosed in the evidence, and I think that something must have happened in the early part of 1933 which was the motive causing the plaintiff to make his present claim. There is another circumstance that weighs. with me, and that is that the defendant is a man of substance, and it has not been shown that when the promissory note was sold he was in need of money in the sense that he was in such difficulties that he would be willing to take considerable risk for the sake of a sum of Rs. 1100. I have already found that the plaintiff was indebted to the defendant, and that this promissory note was held as security. That being so, I think that the defendant would probably have notified the plaintiff of his intention to realize the security, and I am therefore willing to accept his statement that he did so, and that the plaintiff raised no objection to the step which the defendant was proposing to take. The plaintiff's books have been put in, both the cash books which were kept under his supervision in Calcutta and the ledgers and balance-sheets which a professional accountant compiled at a subsequent date on the basis of the cash book. I think that the credit of the books has been in no way destroyed in cross-examination as regards the state of accounts between the plaintiff and the defendant.

15. The only point of importance from the plaintiff's point of view to which my attention has been drawn is the fact that when the promissory note was sold there is no credit entry as against the plaintiff's account. On the contrary, there is an admitted entry of 9th April 1933, which it was conceded was prompted by the plaintiff's demand for the return of the note. This entry is a direction by the defendant to his accountant to make a credit entry in the plaintiff's ledger account of the amount realized by the sale of the note. I am willing to accept the explanation that the entry was not made at the date of the sale by an oversight due to the fact that the other securities belonging to the defendant in his own right were sold together with the note.

16. I reiterate, my decision is not founded on the fact that I found the oral evidence of the defendant particularly convincing or because I consider he is a person deserving of much credit, but it appears to me the circumstances of the case and the documents together with the probabilities generally all point to the fact that there was an agreement whereby the promissory note in suit was pledged with the defendant as security for the defendant's indebtedness, and that the note was eventually sold by the defendant after notifying the plaintiff and without objection on his part. In these circumstances the suit is dismissed with costs.

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