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Jnan Chandra Mukherjee Vs. Manoranjan Mitra and ors. - Court Judgment

LegalCrystal Citation
SubjectContract;Limitation
CourtKolkata
Decided On
Reported inAIR1942Cal251
AppellantJnan Chandra Mukherjee
RespondentManoranjan Mitra and ors.
Cases ReferredBrojendra Kishore v. Hindusthan Co
Excerpt:
- .....a party to the contract, parker acted as a trustee for him in respect of the promise and through parker, gregory could enforce the promise against williams. it must be noticed that parker himself figured as a plaintiff in the suit along with gregory. it is true, as has been pointed out by dr. roy, that the case in gregory v. williams (1818) 36 e.r. 224, has been treated in many subsequent decisions as laying down that it was williams, the assignee of the property, who was really a trustee for gregory. it may be that an entrustment of property to williams could reasonably be inferred from the circumstances of the case, but the actual decision in the case, as we have pointed out above, was something different. in dwarka nath v. priya nath ('18) 5 a.i.r. 1918 cal. 941, where the case in.....
Judgment:

1. This appeal is on behalf of the plaintiff and it arises out of a suit commenced by him to recover a sum of Rs. 5000 alleged to be due as principal and interest on two hundis executed by the defendants in his favour. The material facts are not in controversy and may be shortly stated as follows: Defendants 1 and 2, who are two brothers took a loan of Rs. 2500 only from the plaintiff and executed two hundis in respect of the same-one on 12th August 1924, and the other on 14th August, following. Defendants 3 and 4 also signed both the hundis as co-debtors along with defendants 1 and 2 though, it is said, that they were only sureties for the latter. On 8th August 1927, a sum of Rs. 5 was paid towards interest due on the hundis. This amount was paid by all the four defendants and the endorsements were signed by them all. There were two other subsequent payments of interest one of Rs. 10 and the other of Rs. 5 on 20th April 1930 and 18th April 1933, respectively, but on both these occasions the payments were made by defendants 1 to 3 only and not by defendant 4. On 20th June 1932, defendants 1 and 2 executed a kobala in respect of certain properties in favour of defendant 4 who was an officer as well as a relation of theirs and as consideration for the same defendant 4 undertook to pay the debts due to the plaintiff as well as to another creditor named Prokash Chandra Nag Choudhury whose names were specifically mentioned in the schedule to the conveyance. It was recited in the document that defendant 4 had stood surety in respect of both these loans and he had given hopes to defendants 1 and 2 that he would be able to induce the creditors to abandon their claim for interest and give full acquaintance to the debtors on receipt of the principal sums only. The value of the properties was stated in the kobala to be Rs. 3000 and that was exactly the principal amount advanced by these creditors. As no money was paid by any of the defendants, the plaintiff instituted the present suit on 19th June 1935 and the claim was laid at Rs. 5000 which was the principal and interest due on the two hundis. As against defendant 4, the claim was based not only on the hundis but on his express undertaking to pay the dues of the plaintiff as contained in the conveyance mentioned aforesaid.

2. The first three defendants did not contest the suit and it was contested by defendant 4 alone. Defendant 4 denied any personal liability on the hundis and contended inter alia that the suit against him was barred by limitation. It was further alleged that no liability could be imposed on him on the basis of the kobala that was executed by defendants 1 and 2 in his favour. The Subordinate Judge who tried the suit passed a decree against the first three defendants and dismissed the suit against defendant 4. It was held by the Subordinate Judge that the suit was barred by limitation as against defendant 4 who did not join in the last two payments of interest, and as the plaintiff was not a party to the contract contained in the kobala executed by defendants 1 and 2 in favour of defendant 4, he could not enforce it against the latter. This view was affirmed in appeal by the Additional District Judge of Dacca. It is against this decision that the plaintiff has come up on appeal to this Court. Dr. Roy who appears for the appellant has taken two points in support of the appeal. He has con-tended, in the first place, that as under the terms of the kobala executed by defendants 1 and 2 in favour of defendant 4 the latter was made a trustee for payment of the debt due to the plaintiff, it was competent to the latter to sue defendant 4 for enforcement of that obligation even though he was not a party to the document which created it. The second point taken is that the Courts below erred in law in holding that the plaintiff's suit was barred by limitation as against defendant 4.

3. So far as the first point is concerned, the law seems to be fairly well settled. A stranger to a contract which reserves a benefit for him cannot sue upon it either in English or in Indian law even though in India the consideration need not move from the promisee. There are two well-recognised exceptions to this doctrine. The first is where a contract between two parties is so framed as to make one of them a trustee for a third; in such cases the latter may sue to enforce the trust in his favour and no objection can be taken to his being a stranger to the contract. The other exception covers those cases where the promisor, between whom and the stranger no privity exists, creates privity by his conduct and by acknowledgment or otherwise constitutes himself an agent of the third party. There are numerous authorities, both English and Indian, which have laid down these propositions of law and reference may be made, among others, to the decisions in In re Empress Engineering Co. (1881) 16 Ch. D. 125, Lloyds v. Harper (1881) 16 Ch. D. 2902, Gandi v. Gandi (1885) 30 Ch. D. 57, Dunlop Pneutnatic Tyre Co. v. Selfridge (1915) 1915 A.C. 847, Jiban v. Nirupama ('26) 13 A.I.R. 1926 Cal. 1009, Krishna Lal Sadhu v. Pramila Bala Dasi 0065/1928 : AIR1928Cal518 , Adhar Chandra v. Dalgobinda : AIR1936Cal663 , District Board Malda v. Chandraketu : AIR1937Cal625 , and Ramaswami v. Krishna and Sons : AIR1935Mad904 . There are a number of eases in India where under marriage settlements or in connexion with family arrangements or otherwise a charge is created on specific immovable property for the benefit of a third person or provisions are made for the maintenance or marriage expenses of female members. In such cases the beneficiaries, though not parties to the contract, are entitled to sue : vide Khwaja Muhammad Khan v. Husaini Begum ('10) 32 All. 410, Suppu Ammal v. Subramaniam ('10) 33 Mad. 238. Sundara Raja v. Lakshmiammal ('14) 1 A.I.R. 1914 Mad. 95, A Full Bench of the Madras High Court, vide Subbu Chetti v. Arunachalam ('30) 17 A.I.R. 1930 Mad. 382, has placed these cases under different categories and treated them as additional exceptions under the Indian law to the general doctrine. In our opinion, they do really come under the first exception and the third parties are allowed to sue entirely on the footing that the instruments created a trust in their favour. This would be clear from the latest pronouncement of the Judicial Committee which is to be found in Uma Nath v. Jang Bahadur .

4. These general propositions of law cannot be disputed and in fact have not been disputed by Dr. Roy who appears in support of the appeal. The sole point for our consideration, therefore, is as to whether having regard to the nature of the agreement contained in the kobala (Ex. 5) and the surrounding, circumstances of this ease, a trust was in fact created in favour of the present plaintiff. Dr. Roy contends that a trust is created in the present case, firstly, because defendant 4 took the property burdened with certain obligation and, secondly, because he got a transfer of the property on the express undertaking that he would pay the debts due to certain specified creditors whose names appeared in the schedule to the instrument and who thereby became express beneficiaries under the same. Before considering this point, it would be proper to set out the material portions of this document itself. The conveyance starts by saying that the vendors had borrowed money from two persons whose names appear in the schedule and they had not been able to pay off the same. They had been unable to sell their properties also owing to economic depression obtaining in the country. In these circumstances, they approached the purchaser who was their relation and well-wisher and the latter gave them an assurance that he would go to the creditors personally and satisfy the debts with the principal amounts only. 'Considering that we would not be able to secure more advantage,' so the document proceeds, 'in respect of the liquidation of our debts in any other way, we, having settled in accordance with our wishes to give you in kobala properties, - the present market value of which is Rs. 3000, which is the amount of debts specified in schedule Ka,-and you having agreed to release us from the liability of the debts due to the creditors described in schedule Ka and having agreed to take the properties in kobala in consideration thereof, we are, for, that consideration, selling the properties described in schedule Kha....' The rest of the document is not material except the last paragraph which runs as follows:

You will release us from our debts by liquidating the dues of those creditors in any way you can. If you do not liquidate these debts and they sue us in Court you will be liable for it.

5. Taking the document as it stands, the first branch of Dr. Roy's contention seems to be manifestly untenable. It cannot be said that the property itself was transferred to defendant 4 charged with the payment of debt due to the plaintiff. It was a case of a sale out and out and the vendee took the property without any limitation whatsoever though the consideration for the transfer was the promise made by him to pay the debts due to the creditors. The decision of the Privy Council in Uma Nath v. Jang Bahadur upon which Dr. Roy relies has no application to the facts of the present case. We now come to the other branch of Dr. Roy's contention as to whether defendant 4 could be said to have constituted himself a trustee in respect of the property sold or the consideration money payable for it, for the benefit of the plaintiff and the other creditor. It is conceded by Dr. Roy that if A promises B to pay a debt due by B to C, that by itself would not make A a trustee and C a beneficiary in respect of the amount due to the latter. He says, however, that there is something more in this case. Here is a transfer of property in favour of the promisor who has declared himself liable in a particular way with regard to the property or its consideration money for the benefit of certain named persons. Nothing more, says Dr. Roy, is necessary to constitute a trust and in support of his, contention he has relied strongly upon the cases in Gregory v. Williams (1818) 36 E.R. 224 and Dwarka Nath v. Priya Nath ('18) 5 A.I.R. 1918 Cal. 941, As the case in Gregory v. Williams (1818) 36 E.R. 224, is regarded as a leading decision on the subject, and has been referred to in numerous subsequent cases both in England and in India, it is necessary to examine that decision carefully with a view to ascertain what exactly it laid down. The facts of that case were as follows : The defendant Williams was the landlord of Parker, one of the plaintiffs, and not only there were arrears of rent due by Parker to Williams in respect of two farms for which the latter had the right to distrain but Parker was indebted to the defendant to the extent of 539 odd for moneys advanced. On Parker's representing to Williams that he was indebted to Gregory to the amount of about 900 for which he was in fear of arrest and was about to leave the kingdom, Williams undertook that if Parker would give up to him the farms and execute an assignment of his properties, he would pay Gregory's debts in the first instance out of the sale proceeds and after paying off the debts due to himself refund the surplus, if any, to Parker. On the basis of this understanding Parker executed a bill of sale to Williams of his properties. It appears that the sale proceeds of the properties came up to 1195 and was not even sufficient to satisfy the debts due to Williams by Parker. On a bill filed by Gregory and Parker against Williams, the agreement was enforced against Williams to the extent of 900, the alleged amount of Gregory's debt, though the actual debt was in excess of that. A question was raised as to whether Gregory could enforce the agreement to which he was not a party. Sir William Grant, M. R. in his judgment dealt with the point in the following manner:

Now, it may be of doubt whether they could have recovered at all upon this agreement; for the agreement is not made directly to Gregory, it is made to Parker only and the consideration is furnished by Parker, for, it is Parker alone that does the acts which constitute the consideration for the agreement. Gregory himself furnishes no part of the consideration and he is no party to the contract. Parker acts as his trustee and Gregory may derive an equitable right through the medium of Parker's agreement.

5. So, what was decided by Sir William Grant was not that Williams was a trustee of the property for Gregory but that Parker being a trustee for Gregory in respect of the promise made to him by Williams, Gregory could sue Williams through Parker on the ground that the promise was made to the latter as his trustee. Whether Williams was a trustee for Gregory has nowhere been adverted to or discussed in the body of the judgment and the whole decision seems to have proceeded on the footing that Williams was liable on his contract to pay 900 to Gregory, and though Gregory was not actually a party to the contract, Parker acted as a trustee for him in respect of the promise and through Parker, Gregory could enforce the promise against Williams. It must be noticed that Parker himself figured as a plaintiff in the suit along with Gregory. It is true, as has been pointed out by Dr. Roy, that the case in Gregory v. Williams (1818) 36 E.R. 224, has been treated in many subsequent decisions as laying down that it was Williams, the assignee of the property, who was really a trustee for Gregory. It may be that an entrustment of property to Williams could reasonably be inferred from the circumstances of the case, but the actual decision in the case, as we have pointed out above, was something different. In Dwarka Nath v. Priya Nath ('18) 5 A.I.R. 1918 Cal. 941, where the case in Gregory v Williams (1817) 3 Mer. 582, was considered, Sir George Jessel made the following observations:

There may be an agreement like that in Gregory v Williams (1817) 3 Mer. 582, where the agreement was to pay out of property and one of the parties to the agreement may constitute himself a trustee for the benefit of the third party. So, again it is quite possible that one of the parties to the agreement may be the nominee or the trustee of the third person.

7. It is the second of the above propositions that was in our opinion the express basis of the decision in Gregory v. Williams (1817) 3 Mer. 582, though the first might have been implied in it. It is curious to notice that James L.J. who was also a party to the decision in In re Empress Engineering Co. (1881) 16 Ch. D. 125, relied on Gregory v. Williams (1817) 3 Mer. 582, as a definite authority for the second proposition, in Gandi v. Gandi (1885) 30 Ch. D. 57, which is reported in the very same volume. Here, there was no entrustment of property and Lloyds, the promisee was suing on behalf of an outsider. Referring to this point James L.J. made the following observations in his judgment:

I am of opinion that Fry J. was well-warranted in the conclusion at which he arrived that the engagement was made with the committee as trustees for and on behalf of the persons beneficially interested. That brings the case within the authorities of which there are more than one, namely, Gregory v. Williams (1817) 3 Mer. 582, before Sir William Grant, Lamb v. Vice (1840) 6 M. & W. 467, and many other cases which proceed on the principle that if A is trustee for B, A can sue on behalf of B.

8. The very same principle was invoked in Les Affreteurs Reunis. v. Leopold Walford (1919) 1919 A.C. 801, where the charterer sued the shipowner for the amount of broker's commission and the claim was allowed against the shipowner on the ground that the charterer was the nominee or trustee for the broker. If this principle were to be invoked in the present case, then defendants 1 and 2, the promisees, ought to be regarded as trustees for the plaintiff and the plaintiff should have sued through them for enforcement of the contract against defendant 4. This is not however the plaintiff's case and Dr. Roy makes it clear in his argument that he is not relying on this principle in support of his client's case. He relies entirely on the first proposition enunciated by Sir George Jessel in In re Empress Engineering Co. (1881) 16 Ch. D. 125, which was accepted by this Court in Dwarka Nath v. Priya Nath ('18) 5 A.I.R. 1918 Cal. 941, and his contention is that defendant 4 in the circumstances of this case constituted himself a trustee for the benefit of his client.

9. We do not think that in the present case there was any entrustment of the property to defendant 4. In Gregory v. Williams (1817) 3 Mer. 582, Williams took assignment of the property from Parker for the express purpose of disposing it of and applying the sale proceeds towards the payment of 900 due to Gregory in the first place and to the satisfaction of his own dues after that. The residue, if any, he undertook to refund to Parker. There was an agreement in fact to pay out of a certain property, but this element is entirely lacking in the present case. Defendant 4 was under no obligation to use the property or its sale proceeds in any particular way; he was to take it as a purchaser in absolute right and the promise that was made was entirely a personal covenant which had nothing to do with the property itself. Dr. Roy appreciated this difficulty and that is why he said that defendant 4 might be regarded as a trustee in respect of the consideration money and in support of his contention he laid great stress upon the decision of this Court in Dwarka Nath v. Priya Nath ('18) 5 A.I.R. 1918 Cal. 941, This contention cannot also in our opinion succeed. In Dwarka Nath v. Priya Nath ('18) 5 A.I.R. 1918 Cal. 941, the first two defendants who were indebted to the plaintiff for a certain sum of money transferred the property to defendant 3 and on the very day that the conveyance was executed the purchaser executed an agreement in favour of his vendors expressly undertaking to pay to the plaintiff his dues out of the consideration money retained in his hand. We might say that in these circumstances a definite sum of money was allocated and held by defendant 3 for the benefit of the plaintiff and in a sense the money was earmarked for that purpose. But nothing like that happens in the present case. The property was not sold for a fixed consideration and the vendee did not retain out of it a certain sum of money which he undertook to pay to the creditors. The consideration for the transfer was that the purchaser would satisfy the two creditors of the vendors, and release the latter from their liability in respect of the two debts. The amount which the vendee was to pay to the creditors would depend upon the arrangement which he might be able to make with them. He took the chance of his being able to induce the creditors to give up their claim for interest either in whole or in part. But it is perfectly clear that it was for the benefit of the vendors themselves and not for the benefit of the creditors that this bargain was made. If the transferee has not made good his promise, it is open to defendants 1 and 2 under the terms of the kobala to sue defendant 4 for the recovery of the sum that has been decreed to the plaintiff against them. We cannot hold, however, that defendant 4 was in any way a trustee for the plaintiff in respect of the money due to him. The first contention of Dr. Roy, therefore, must fail.

10. The other point raised by Dr. Roy relates to the question of limitation. As has been said already, the only payment which was made by defendant 4 towards the interest due on the hundis was on 8th August 1927, and the suit is admittedly filed more than three years after that date. The question is whether the payment by the other debtors could save limitation against defendant 4. Dr. Roy argues that defendant 4 being only a surety for the debtor, a payment by the principal defendants would keep alive the debt against the surety under Section 20, Limitation Act, and in support of his contention he has relied upon a decision of Lort Williams J. in Ranjit Kumar Roy v. Kaviraj Kishori Mohan Gupta : AIR1940Cal401 . There is some difference of judicial opinion on this point as to whether a payment made by a principal debtor would save limitation against the surety and conversely whether a payment by the surety will keep alive the debt against the principal debtor. The view that was accepted by Sir Lawrence Jenkins in Gopal Daji Sathe v. Gopal ('04)28 Bom. 248, and by this Court in Brojendra Kishore v. Hindusthan Co-operative Insurance Society ('18) 5 A.I.R. 1918 Cal. 707, is that the liabilities of the debtor and the surety are distinct though they arise out of the same transaction and consequently the payment of interest by the principal debtor cannot extend the period of limitation against the surety. The other view which is indicated by Lort Williams J. in the case noted above is that there is really one debt owing to the debtor and the surety and, therefore, a payment by one of them would save limitation against the other. This view assumes that though the debt is common, there are really two distinct contracts, one with the debtor and the other with the surety ; for, if the surety be taken to be a joint contractor with the principal debtor, a payment by one will not save limitation against the other under Section 21, Limitation Act. In the case before us, the hundis make it perfectly clear that defendant 4 was a joint contractor with the other defendants, and there was no separate contract with him and the case of the plaintiff proceeded throughout on that footing. In the trial Court limitation was sought to be saved against defendant 4 by attempting to prove that the other defendants were authorised by him to make the payment and the question was not at all raised before the lower appellate Court. In our opinion, therefore, so far as the present case is concerned, defendant 4 must be deemed to be a co contractor with defendants 1 and 2 and the payment by the latter would not entitle the plaintiff to get an extension of time as against defendant 4. The result, therefore, is that the appeal is dismissed with costs. The cross-objection is not pressed and is dismissed without any order as to costs. No order is necessary on the application and the affidavit.


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