Ajudhia Pershad and Another vs Sidh Gopal and others

Richard Couch, J. 1. The Appellants in this appeal, who are the Plaintiffs in the suit, are bankers at Cawnpore. The Respondents are a joint Hindu family consisting of four brothers, the sons of Divarka Das, and carried on business at Cawnpore, Calcutta, and Luchnow, the business at the different places being managed by some members of the family. It was a family business, apparently founded by Dwarka Das, the father; and the evidence was that the joint expenses of the family were paid out of the profits of the business. Indeed, on the argument of the appeal it was not disputed by the counsel for the Respondents that the members of the family would be bound by the deed upon which the suit was brought if it were valid and binding in other respects. In June, 1875, the Calcutta firm of the Respondents stopped payment, and that brought the firm at Cawnpore into financial difficulties. Huudis had become due, and other hundis, for which the Cawnpore firm was liable, were becoming due. It appeared to be the object of the creditors of the Cawnpore firm to prevent a stoppage of payment, and, by giving time to that firm, to tide them over the difficulties in which they were placed. For that purpose it seems to have been arranged by some of the creditors that a meeting should take place to see what could be done. 2. The evidence with regard to this is as follows: - The first witness to which it is necessary to refer is Kakai Mal, who was one of the creditors. He said: - "Five or six days before the execution of the mortgage deed I had a conversation with Ajudhia Pershad" - that is the Appellant and Plaintiff in the suit - "at his house, to the effect that if all the creditors were willing a deed may be obtained from Kanha Mal" - the Defendant, who appeared to have the management of the business at Gawnpore "regarding the property. Kanha Mal was then sent for. He said that though the hundis had not fallen due, yet he would pay half of the amount of the hundi which would fall due, and give a hundi for the other half. I and Ajudhia Pershad asked Kanha Mal to give a mortgage of his property for three months, and that we would settle with the creditors. I had made mention of my Rs. 8000. It was agreed at the time that all the money due to me would be entered. When I came from Luchnow I then learnt that only Rs. 300 of the amount due were entered. I got very much displeased with Kanha Mal for Rs. 300 only being entered as due to me. Kanha Mal had asked me to obtain the consent of all the creditors, and that then he would execute a deed. He had told this to me and Ajudhia Pershad. Both of us had agreed to this, that we would obtain the consent of all the creditors." The next witness is. Madho Ram, who was also a creditor. He said: - "The amount due to me was Rs. 1500. I said that I was not agreeable" - that is with reference to their asking him to join in giving time. - "Ajudhia Pershad, Puran Chand, and others, said that I should get my money included in the bond which was to be executed in favour of all persons. Afterwards I said that I was agreeable to what all proposed. Afterwards Kanha Mal was asked to execute the deed. He said that as some were agreeable and some not, let the dates of the bills of exchange expire, and he would pay the money as each date expired. Ajudhia Pershad told him to execute the deed, and that he would obtain the consent of all." 3. Another witness was Lahnan, who was the gomashta of Kanha Mal. He said: - "Five, six, or four days before execution of the deed, there was some conversation between Ajudhia Pershad and Kanha Mal at ten or eleven o''clock at the new house. The former told the latter to write an agreement to all his creditors that they would be paid in proportion to each one''s share from the income of the Benares and Luchnow firms. Kanha Mal then replied that the amounts of expired dates would be paid first, and those of unexpired dates would be paid from time to time as their dates of payment expired. Ajudhia Pershad then said: - ''This arrangement mighi lead some one to institute a suit whereby you will be put to a loss. I will make them understand that I will pay them proportionately when the money is received.'' Kanha Mal answered that those who had amounts of expired dates still outstanding would hardly agree to this; whereupon Ajudhia Pershad said that he would make settlement with them all. Kanha Mal then said: - ''If you take the responsibility upon yourself I will execute the agreement.'' Kanha Mal then executed the agreement, and pledged his property therein." 4. Kanha Mal was also called as a witness, and after speaking as to the firms at Cawnpore and Calcutta, he said: - "Five or six days prior to the execution of the document the creditors began to make their demands. Radhe Pershad, Puran Chand, and Parmeshri Das made demands in respect of kutcha and pucca hundis. No other creditors made demands. The request made was to have the property made over to them, lest we should hereafter deny, as others had done, and that a suit should be brought, and a proportionate division of any moneys be paid. Ajudhia Pershad and others said that all would be settled up, and I asked how those were to be settled whose dates for payment had fallen due. The first day the conversation was held with me alone, and the next day Behari Das was also with me. Ajudhia Pershad said that he had prevailed on all to take a proportionate share." Further on he made a statement to which the Subordinate Judge who tried the suit seems to have attached some importance. He said: - "There was no stipulation as to what would be the result if any creditor complained after the document had been written." 5. There was some evidence given on the part of the Plaintiff which was not altogether in agreement with that which has been read, but the Subordinate Judge took no notice of that evidence, and the High Court appears not to have thought it to be trustworthy. It is to be observed that the principal part of Ajudhia Pershad''s debt was upon hundis which had not become due. He had, therefore, a strong interest in promoting an arrangement which would place him in the same position as the creditors whose hundis were due. 6. It is true that Kanha Mal made the statement that there was no stipulation, but the whole of the evidence shews that the parties from the first appeared to have contemplated that all the creditors would join; and it would not be necessary that there should be an express stipulation if, from the nature of the transaction, and their conduct, it is apparent that this was the understanding of the parties, and that they all acted upon the faith that all the creditors would join in the arrangement. 7. Upon that the deed which is the subject of the suit was executed. It is dated the 22nd of June, 1875, and is in these terms: "Hypothecation deed, dated 22nd June, 1875, executed by Kanha Mal and others. We, Kanha Mal, Benarsi Das, Badhe Lai, and Sidh Gopal, the sons of Bwarlca Das, and proprietors of the firm known as that of ''Dwarka Das, Kanha Mal, in Old Generalganj, City Cawnpore, by caste Khattri, and residents of Cawnpore, do hereby declare that being sound in both body and mind we agree that a balance of Rs. 30,700 is due by us on account book accounts and hundis to the following creditors." Here follow the names of all the creditors, with the sums due to them, as in a list given in by Kanha Mal, the whole amounting to Rs. 30,700. Then it says: "And at the present time we cannot arrange to meet these liabilities. Therefore in lieu of the Rs. 30,700 due to the aforesaid mahajans we mortgage to them collectively three pucca masonry houses, together with the shop in which the business of Kanha Mal, Dwarka Das, is carried on in Old Generalganj, together with all its rights and appurtenances." Then follow some conditions and particulars which need not be read, one being a provision that Ajudhia Pershad''s firm should collect the debts due to the firm and divide the money amongst the creditors. 8. Shortly after the mortgage was executed two of the creditors named in it, namely, Sadhari Lal and Debi Cham, brought suits against the Eespondent''s firm, and obtained decrees. It does not appear that from the time of the execution until the suit of the Appellants was brought anything was done under the deed, that any of the debts due to the firm were collected by Ajudhia Pershad''s firm, and apparently the deed was not acted upon in any way. 9. The present suit was not brought until November, 1880. It was brought to enforce the claim of the Appellants under the mortgage. In their plaint they treated the deed as a mortgage to them for Rs. 6600, the amount of their debt, and they prayed: - "A judgment to recover the Rs. 6600, principal and interest, with costs of suit, by enforcement of the mortgage lien against, and auction sale of the mortgage property entered in the mortgage deed to the extent of the Plaintiff s right, and also by holding liable the persons of the Defendants, and the other property owned and held by them." 10. The Subordinate Judge made a decree in their favour to the effect of what was prayed for in the plaint. 11. Some questions have been raised upon the form of this decree, and the form of the suit being not upon the whole mortgage, and for the benefit of all the mortgagees and creditors, but for the benefit of the Appellants alone. It is not necessary for their Lordships to say anything upon those questions. 12. The main ground of defence in the case is that in consequence of the two creditors who brought their suits and obtained decrees not assenting to the deed, it cannot be enforced; that the intention and agreement were that the deed should not take effect unless all the creditors came in and were bound by it. Now it appears to their Lordships, upon the evidence in the case, that this was the intention of the parties, and that, although there was no express stipulation to that effect, it is obvious from all that took place that this is what they meant, and is the agreement which was come to between them. The deed would not have been executed unless there had been that agreement. If the object of the arrangement is looked at, it would appear that this must have been their understanding. What all the parties desired was, that time should be given by the creditors to the Cawnpore firm in order that they might not be obliged to stop payment. If any creditor was at liberty to disregard the deed, and to bring a suit and obtain a decree, and get execution of it, he would be able to gain a preference over the other creditors, and in effect to oblige the Cawnpore firm to stop payment. It would be proper and right for them, if one creditor was endeavouring to obtain a preference over the others, to stop payment and to see that their property was equally divided amongst their creditors. In fact they did stop payment upon the suit being brought by the two dissentient creditors and the decrees obtained, and the effect was that the mortgage was not acted upon. Nobody appears to have sought to enforce it until this suit was brought; and the conclusion which their Lordships draw from the evidence is much strengthened by the conduct of the parties. The High Court, upon an appeal from the decision of the Subordinate Judge, were of the opinion here expressed, and accordingly they reversed his decree, and dismissed the suit. Their Lordships think that was the proper conclusion from the evidence which was given in the case, and that under the circumstances the mortgage did not take effect. They will therefore humbly advise Her Majesty to dismiss the appeal, and affirm the decree of the High Court, and the Appellant will pay the costs.