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Judgment
Jackson, J.—Suit to recover Rs. 35,776-4-9 on the plea that the mortgages on the properties cited in Schedule A of the plaint executed by
defendants 1 and 2 in favour of defendants 5 to 7, as well as the attachment by 8th defendant and Court purchases by defendants 9 and 10 are
subject to the first charge created in favour of plaintiff by the family partition deed of 9th January, 1920, Ex. O.
This family derives from one Basivireddi who died in 1915. He was a rich man and his son-in-law Venkayya, the father of the plaintiff left
considerable sums in his hands, which he acknowledged by a pro-note. After his death the Estate was in the hands of a receiver who renewed the
note. This is the basis of the plaintiff''s claim and the reality of the debt is now disputed. Issue No. 1 as to its validity was found in the affirmative by
the lower Court and that finding stands.
The question for our determination is, whether this debt was secured in 1920 when the members of Basivireddi''s family, who were involved in a
partition suit, came to a compromise which was embodied in a decree. (See order at foot of compromise Ex. O, p. 194.) The actual decree is not
exhibited but is admitted.
In the compromise certain properties were given to certain branches to which also were allotted certain debts as set forth in paragraph 13 of the
document and then it was provided
that until the debts mentioned above arc fully discharged the properties allotted to the shares of the respective persons shall be liable in the first
instance.
We prefer to read this as the similar deeds in the Madras Law Journal cases T.A. Sesha Iyer Vs. S.N. Srinivasa Ayyar and Others, and Imbichi
v. Avukoya Haji (1916) 33 M.L.J. 58 were read simply as a contract of indemnity conferring no benefit upon the creditors.
This finding rebuts the plaintiff''s claim, and there is no real necessity for the appellant-defendants to fall back upon their second line of defence
that even supposing a charge had been created in his favour, plaintiff as no party to that contract, cannot make it part of his cause of action.
However since the point has been fully argued we will give our decision.
It is now recognized law that if A contract with B that B shall pay the debt owing by A to C, C cannot sue upon that contract alone unless he
stands in the capacity of cestui que trust. The rule of common law laid down in Tweddk v. Atkinson (1861) 1 B. & S. 393 : 121 E.R. 762 is that
he must have been a party to the agreement and the rule of equity in Gandy v. Gandy (1885) 30 Ch.D. 57 is that he must stand as the beneficiary
of a trust. It was formerly questioned how far that rule applied in India, and the matter came before a Full Bench of this Court in Subbu Chetti v.
Arunachalam Chettiar ILR (1929) 53 M. 270 : 58 M.L.J. 420 where the simple proposition was considered whether, if B promise A that B will
pay the debt of A to C, C can sue B upon that promise.
The opinion of the Full Bench (p. 287) is that
where all that appears is that a person transfers property to another and stipulates for the payment of money to a third person a suit to enforce that
stipulation by the third party will not lie.
Consequently in this Presidency at any rate the law in India and in England is the same. C can only sue as cestui que trust.
A cursory reading of the Madras reports may suggest that another special exception has been approved by this Court, viz., the creation of a
charge on immovable property by the contracting parties A and B.
In Iswaram Pillai v. Sonnivaveru Taragan ILR (1913) 38 M. 753 : 26 M.L.J. 127, A contracted with B that B should pay C and C sued. Two
grounds were taken. That. C was a cestui que trust and that Tweddle v. Atkinson (1861) 1 B. & S. 393 : 121 E.R. 762 did not apply to India as
held in Debnarayan Dutt v. Chunilal Ghosei ILR (1913) 41 C. 137. The discussion on the first ground proceeds to page 757, where it is held that
no trust was created.
On page 762 this result is reached, that unless the contract has been performed so that a trust has already been created, the suit cannot be
maintained.
The head-note runs:
Held, that C who was a stranger to the contract cannot sue B for the payment of his debt without joining A as a pary. Khwaja Muhammad Khan
v. Husaini Begam (1910) L.R. 37 IA. 152 : ILR 32 A. 410 : 20 M.L.J. 614 (P.O.) and Deb Narain Dutt v. Ramsadhan Mondal (1913) 17
C.W.N. 1143 distinguished.
So far this is unexceptionable except that Ramsadhan should be Chunilal Ghose, and as Debnarayan Dutt v. Chunilal Ghose1 was published, a
reference to a private magazine was unnecessary.
But then there is interpolated between these two passages a list of our exceptions as coming per curiam. Inasmuch as the whole judgment is
per curiam this phrase is here otiose.
The second exception (b) is ""the creation of a charge on immovable property by the promisor.
In the whole of this judgment, a charge is only mentioned twice, once, the charge in Debnarayan Dutt v. Chunilal Ghose which A erroneously
thought he had given C when the debt originated and he deposited his patta with C, a matter which has no bearing on the legal question
whatsoever, inasmuch as B is not concerned; and again at the end where (1910) L.R. 37 I.A. 152 (Privy Council) is held to refer to a specific
charge for the benefit of a minor culminating in a trust. This suggestion of the head-note that C can sue B, if B has created a charge, is absolutely
and entirely unwarranted by the judgment. It is a pure interpolation.
In Subhu Chetti v. Aninachalam Chettiar ILR (1929) 53 M. 270 : 58 M.L.J. 420 the case in question was again the simple proposition of B
contracting to pay the debt of A to C. The summary of the case-law on page 278 quotes the head-note to Iswaram Pillai v. Sonnivaveru Taragan
ILR (1913) 38 Mad. 753 : 26 M.L.J. 127 and the final decision on p. 287 is that a person not a party to a contract cannot sue ""unless the case
falls within the exceptions indicated in the case above referred to."" These exceptions were no material part of the question before the Bench, and
the reference to them is merely by the way, in fact one might go far to seek a better illustration of an obiter dictum. yet the head-note details all
these exceptions with no reference at all to Iswaram Pillai v. Sonnivaveru Taragan ILR (1913) 38 Mad. 753 : 26 M.L.J. 127, as though they were
the direct ruling of the Full Bench.
Nothing so crude has ever been ruled by this Court as that C may sue where the contract of A and B charges the money to be paid out of
some immovable property.
If plaintiff is to succeed it would be necessary to find, in the terms of Cunningham v. Foot (1828) 3 A.C. 974 upon the construction of the
written instrument,, that there is land, the trustee of the land, and the cestui que trust for whose benefit in this respect the land is to be held,"" and it
cannot be said here that plaintiff is such cestui que trust under the terms of Ex. O. Therefore, the plaintiff cannot derive any title under that
document so as to make it part of his cause of action.
The appeal must accordingly be allowed with costs throughout to the appellant payable by plaintiff-respondent. The suit is dismissed as against
defendants 5 to 7, 8 and 10 with costs to defendants below.
Pakenham Walsh, J.
I have had the advantage of perusing my learned brother''s judgment and entirely agree with it. At the best, paragraph 13 of the compromise
agreement, Ex. O, is ambiguous and therefore the conduct of the parties to it can be looked at in order to see in what sense they understood its
terms. Their subsequent conduct leaves no room for doubt on the matter as pointed out by my learned brother. It is impossible also to see how the
terms of the compromise were to be worked out if they created a first charge in favour of the creditors. The word ""creditor"" does not appear in the
paragraph at all The obligation to discharge the debts assigned to each member was a continuing one, and it is to be observed that according to the
same paragraph 13
if any one sharer should fail to discharge the debts mentioned above and consequently either obstruction is caused to the properties of the
remaining sharers or the other sharers should be necessitated to discharge such debts, the sharer who has committed default should pay these
amount''s from out of his properties...to the sharers who have discharged such debts.
So that a mere obstruction, say the attachment of a sharer''s land by a creditor, brings the clause into action, and yet we must suppose, if a first
charge was created in favour of the creditor on the lands allotted to the sharer who was to discharge the debt, that the aggrieved co-sharer had
only some sort of second charge which had to be deferred till the creditor worked out his first charge or was otherwise satisfied.
As my learned brother remarks, we have authoritative interpretations of what such clauses in a partition deed mean in T.A. Sesha Iyer Vs.
S.N. Srinivasa Ayyar and Others, and Imbichi v. Avukoya Haji (1916) 33 M.L.J. 58. I have no hesitation in holding that no charge in favour of
creditors was created by Ex. O, and consequently plaintiff''s suit as regards the respondents must fail. As a member of the Full Bench of this Court
in Subbu Chetti v. Arunachalam Chettiar ILR (1929) 53 M. 270 : 58 M.L.J. 420 . I am much obliged to my learned brother for pointing out the
error which has crept into an obiter remark in that decision, on a matter that was not at all directly before us. This was in consequence of an
entirely misleading and incorrect head-note in Iswaram Pillai v. Sonnivaveru Taragan ILR (1913) 38 M. 753 : 26 M.L.J. 127. There was no
discussion whatever before us as to the effect of a mere charge on property as enabling a third person not a party to the contract to sue. As the
misleading obiter dictum has, in one subsequent case at least, before a single Judge, been relied on, apparently with some success (vide S.A. No.
1192 of 1927) I am glad that the error should now have been traced to its source and pointed out.