Durga Singh and Others vs Kesho Lal and Another

Fazl Ali, J.—This is an appeal from a decision of Rowland J. in a suit brought by the respondents to recover a certain sum of money from the appellants. The suit was decreed by the trial Court, but was dismissed on appeal by the lower Appellate Court. Rowland J. has in second appeal set aside the judgment of the lower Appellate Court and restored the judgment of the trial Court. The defendants first party who contested the suit have accordingly preferred this appeal under the Letters Patent.

The circumstances which gave rise to this litigation may be briefly stated as follows: On 6th November 1923, defendant 11 executed a zarpeshgi lease in respect of a seven pies share in Mauza Bahpuri Majurahi in favour of the appellants (defendants first party). On 10th November 1928, he mortgaged the same property to defendant 12 for a sum of Rs. 1000 and on 13th October 1932, he borrowed a sum of Rs. 330 from the latter by executing a hand-note in his favour. On 23rd June 1933, he sold to the appellants the property already mortgaged to them and defendant 12 for a sum of Rs. 5000.

It was recited in the sale-deed that out of the total sum of Rs. 5000, Rs. 2125 had been set off against the mortgage debt due to the vendees on the basis of the mortgage dated 6th November 1923, and a sum of Rs. 2227 had been left in deposit with them for the purpose of paying off the mortgage dues of defendant 12. The balance of the consideration money, namely Rs. 648, was paid in cash. As the debt due to defendant 12 from defendant 11 on the hand-note was not paid by the appellants, defendant 11 had to borrow a sum of Rs. 450 from the plaintiff for the purpose of paying it off and on 28th January 1935, in consideration of the advance made by the plaintiff to him he executed a registered deed (Ex. l) by which he assigned to him (the plaintiff) his right to realize a sum of Rs. 500 from the appellants.

It was recited in the deed of assignment that the sum of Rs. 2227 which had been left with the vendee represented the total sum due on the date of the sale to defendant 12 from defendant 11, both on the mortgage bond dated 10th November 1928 and the hand-note dated 13th October 1932. It was also stated that by mistake the dues under the hand-note had not been mentioned in the sale-deed though the understanding between the parties was that this debt should also be paid off out of the money left with the appellants.

After the assignment the plaintiff brought the present suit to recover the sum of Rs. 500 with interest up to the date of the suit calculated at the rate mentioned in the hand-note dated 13th October 1932, and prayed that the money claimed should be charged on the property which had been sold by defendant 11 to the defendants first party. The suit was decreed by the Munsif but his decision was reversed by the Subordinate Judge on the ground that in law a part of a debt could not be assigned and therefore the plaintiff had no right of suit.

This view was not accepted in second appeal by Rowland J. who accordingly set aside the judgment of the Subordinate Judge and restored the decree of the Munsif. The principal point therefore which arises in this appeal is whether the assignment of a part of a debt is valid in India. The point is a somewhat difficult one and it does not appear to have been fully discussed in any of the Indian authorities cited at the Bar. In Sabjan Sahib v. Abdul Azzeez Sahib AIR (1918) Mad 1337 Seshagiri Ayyar J. sitting singly made an observation to the effect that the omission of the word "absolute" from Section 130, T.P. Act, which deals with the assignment of actionable claim,

was a deliberate departure from the rule of English law and indicated that an assignment of part of a chose in action can be given effect to under the Transfer of Property Act.

In 4 Doraiswami Mudaliar v. Doraiswami Aiyangar AIR (1925) Mad 75 Ramesam J. (also sitting singly) dissented from the observation of Seshagiri Ayyar J. and after referring to certain English cases expressed the view that the assignment of part of a debt is not valid. In Raja of Ramnad v. Subramanian Chettiar AIR (1928) Mad 1201 a Bench of two Judges of the Madras High Court followed an earlier case of 1919 in preference to the decision of Ramesam J. in Doraiswami Mudaliar v. Doraiswami Aiyangar AIR (1925) Mad 75, but all that they said on the point is to be found in the following passage:

The transfer of a part of a debt was not recognized in English Common Law, but the assignment of a part of a debt was always held to be good in equity and was deemed to pass the property in that portion of the debt. In enforcing such claim, it would be necessary to implead the owner of the other portion of the debt, but apart from that there is no objection in equity to enforcing a claim for part payment of a debt: vide In re: Steel Wing Co. (1921) 1 Ch 349. It has also been held that the partial transfer of a debt is valid in Appeal No. 63 of 1919 in this Court, and this objection must therefore be disallowed although there is a remark in Doraiswami Mudaliar v. Doraiswami Aiyangar AIR (1925) Mad 75 which throws some doubt upon this conclusion.

In 62 Cal 5105 a Division Bench of the Calcutta High Court consisting of Lort-Williams and Jack JJ. expressed a contrary view but they did not discuss the point and based their decision wholly on Doraiswami Mudaliar v. Doraiswami Aiyangar AIR (1925) Mad 75 decided by Ramesam J. It will not be out of place here to refer to certain cases decided in England after the passing of the Judicature Act of 1873. It is well-known that according to the Common Law of England chooses in action could not, as a rule, be assigned but in equity such assignments were allowed to be made from a very early date and even at Common law an assignee was generally allowed to sue in the name of the assignor and in some cases under a power of attorney obtained from him. After the passing of the Judicature Act 1873, however, Section 25(6) of that Act enabled the legal right in debt or other thing in action to be transferred to the assignee together with all remedies including the right to sue in his name. Section 25 of the Judicature Act has now been superseded by Section 136 of the Law of Property (15 Geo. V, Ch. 20) which runs as follows:

Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor....is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice (a) the legal right to such debt or thing in action; (b) all legal and other remedies for the same, and (c) the power to give a good discharge for the same without the concurrence of the assignor, etc. etc.

Now, the question as to whether a part of a debt was assignable u/s 25 of the Judicature Act appears to have been raised in many cases, but it has not yet been authoritatively answered. In Brice v. Bannister (1878) 3 QB 569 Lord Coleridge expressed the view that such an assignment fell within the Act, but on appeal Cotton L.J. treated the particular assignment as a case of equitable assignment. In Durham Bros. v. Robertson (1898) 1 QB 765 Chitty L.J. questioned the correctness of the view expressed by Lord Coleridge in Brice v. Bannister (1878) 3 QB 569 and observed:

The decision of Lord Coleridge C.J. in Brice v. Bannister (1878) 3 QB 569 that the case fell within Section 25 appears to me to be open to question....The Section speaks of an absolute assignment of any debt or other chose in action. It does not say "or any part of a debt or chose in action." It appears to me as at present advised to be questionable whether an assignment of part of an entire debt is within the enactment. If it be, it would seem to leave it in the power of the original creditor to split up the single legal cause of action for the debt into as many separate legal causes of action as he might think fit. However it is not necessary to decide the point in the present case, and I leave it open for future consideration.

In the same case Collins L.J. while agreeing with Chitty L.J. refrained from pronouncing any opinion on the question whether an assignment of a part of a debt was within Section 25, Sub-section (6), Judicature Act of 1873. In Jones v. Humphreys (1902) 1 KB 10 an assignment of

so much and such part of my income, salary and! other emoluments from H as shall be necessary to pay a definite sum and any further sums in which I may hereafter become indebted to you was held by Darling J. to be not such an assignment as was contemplated by Section 25 Sub-section (6), Judicature Act. The learned Judge observed that

having regard to the expression of opinion by Chitty L.J. in Durham Bros. v. Robertson (1898) 1 QB 765 it is extremely doubtful whether the assignment being of part of a debt only would come within the Act.

Lord Alberston C.J. and Channel J. however refrained from expressing any opinion in that case as to whether an assignment of a part of a debt fell within the Section. In Forster v. Baker (1910) 2 KB 636 a judgment-creditor having assigned a part of the judgment-debt for valuable consideration, the assignee applied for leave to issue execution. It was held by Bray J. that there could not be an absolute assignment within Section 25(6), Judicature Act, of a definite part of an existing debt or other legal chose in action. The Court of Appeal however without expressing an opinion on the point held that as the original judgment-creditor could only issue a single execution upon his judgment and, could not split up the judgment-debt and issue separate executions upon the different parts, he could not give to an assignee of a part of the judgment-debt a right which he himself did not possess.

In Hughes v. Pump House Hotel Co. Ltd. (1902) 2 KB 190 Mathew L.J. did not express any definite opinion on the question, but observed:

In the course of the argument the question was raised whether an assignment of part of a debt. comes within Section 25, Judicature Act, 1873. We are not called upon to decide that question in this case, and I will express no opinion upon it further than to say that, as at present advised, I think, when that question arises for decision, much'' may be said in favour of the view that an assignment of part of a debt could not be an absolute assignment within the Section.

In Skipper & Tucker v. Holloway & Howard (1910) 2 KB 630 Darling J. (notwithstanding the fact that he had expressed a contrary view in Jones v. Humphreys (1902) 1 KB 10) held that an assignment of part of a debt came within Section 25, Judicature Act, but in Forster v. Baker (1910) 2 KB 636, Bray J. refused to follow the decision and observed as follows:

But if an absolute assignment, of part of a debt is valid u/s 25, Sub-section (6), the consequence is that the assignee is able to sue the debtor without joining the assignor or the assignee of the other part of the debt, if there have been two assignments; and it may happen that if the debt had been split up into two, three or four parts, there might be two, three or four actions with different results. All sorts of difficulties would arise, and a great burden, an unnecessarily great burden, would be placed upon the debtor. In the case of a judgment debtor that consideration applies with even greater force because the remedy on a judgment-debt is execution, and the result would be that if a judgment-debt was divided into, say, three or four parts, each of which was assigned to a different person, there might be three or four executions, and three or four petitions in bankruptcy, and the debtor might be considerably and unnecessarily harassed. These considerations, in my opinion, point to the fact that I ought not, unless compelled by the language of the Section, to construe the words "legal debt or chose in action" as including part of a legal debt or part of a chose in action.

In In Re: Steel Wing Co. (1921) 1 Ch 349 P.C. Lawrence J. agreed with the opinion of Bray J. as expressed in Forster v. Baker (1910) 2 KB 636 and held that the assignment of part of a debt does not operate to pass the legal right to that portion of the debt as it is not an assignment within Section 25, Sub-section (6), Judicature Act. He however held at the same time that such an assignment does operate in equity to transfer the part assigned and it constitutes the assignee a creditor for the original debtor. It may be stated here that this view was perfectly in consonance with the opinion expressed in a long line of Cases and even in Durham Bros. v. Robertson (1898) 1 QB 765 Chitty L.J., though he questioned the correctness of Lord Coleridge''s dictum in Brice v. Bannister (1878) 3 QB 569, conceded that the assignment in question before him was valid as an equitable assignment.

In Bank of Liverpool and Martins, Ltd. v. Holland (1927) 43 TLR 29 which was decided in 1926, it was held firstly, that an assignment of a debt which limited the amount to a certain sum was good on the ground that it was an assignment of the whole debt with a proviso that any excess of certain sum must be held by the assignee as trustee for the assignor and secondly, that even if it was an assignment of part only of the debt, it would still be a good equitable assignment and the plaintiffs were entitled to recover. It will thus appear that though the point cannot be taken to have been finally settled in England, the weight of authority in that country seems to he in favour of the view that the assignment of a part of a debt does not operate to pass the legal right to that portion of the debt u/s 25, Sub-section (6), Judicature Act, but such an assignment would operate in equity to transfer, the part assigned and constitute the assignee a creditor for the original debtor.

In India however the position is somewhat different, because if it is found that a part of a debt cannot be assigned under the Transfer of Property Act, it will be difficult to hold that such an assignment can still be valid in equity. The first question to be answered therefore is whether a part of a debt can be validly assigned under the Transfer of Property Act. The answer to this question depends on whether a part of a debt is "property," because Section 6 of the Act clearly provides that

property of any kind may be transferred except as otherwise provided by this Act or by any other law for the time being in force.

Now, at the first sight it would seem that if the whole debt is property, as it undoubtedly is, a part of the debt must be so. The matter is however not so simple as it seems. Under the Transfer of Property Act "debt" belongs to a particular species of property namely actionable claims. An actionable claim has been defined as "a claim to a debt the...which the Civil Courts recognize as affording grounds of relief." It follows that a claim to a debt which cannot be enforced by action, as for example, when the debt is barred by limitation, is not property. The same limitation must, in my opinion, apply to a part of a debt; and in order to determine whether or not it is property, we must find out whether an action can be sustained to recover it. At this point it seems necessary to refer to Order 2, Rule 2, which runs as follows:

(1) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court.

(2) Where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim, he shall not afterwards sue in respect of the portion so omitted or relinquished.

This rule in my opinion meets the point so emphatically raised in the judgments of Chitty L.J., in Durham Bros. v. Robertson (1898) 1 QB 765 and of Bray J., in Forster v. Baker (1910) 2 KB 636. Both the learned Judges have pointed out that if a part of a debt can be legally transferred, it would seem to leave it in the power of the original creditor to harass his debtor by splitting up the single cause of action of his debt into as many legal causes of action as he might think fit. This rule will, in my opinion, prevent him from doing so. It appears to me to be elementary that a creditor cannot confer upon his assignee a higher right than what he himself possesses. Thus, if he himself could not sue the debtor twice with regard to parts of the same debt under Order 2, Rule 2,''he cannot be allowed to defeat that provision by assigning one part of a debt to one person and another part to another. There is however nothing to prevent him from relinquishing one part of the debt and transferring another part, as such an assignment will be tantamount to an assignment of the whole debt which remains unpaid after a part of the debt has been relinquished.

He may also transfer one part of the debt to one person and another part to another person and the two assignees may possibly jointly sue the debtor in a common action and ask for a joint decree in respect of the whole debt. But once a suit has been brought on a part of the debt, then no suit can be brought subsequently for the remaining part either by the creditor or by any person to whom he assigns the remainder. It appears to me that the assignment of the remainder in such a case must be ineffectual because, as the creditor himself cannot sue upon it, it ceases to be his property and he cannot by transferring it to another person confer upon him a higher right than what he himself possessed.

Reference may also be made in this connexion to Section 130, T.P. Act, which provides the mode of transferring an actionable claim. The language of this Section bears some resemblance to the language of Section 25(6), Judicature Act, 1873, and Section 136, Law of Property Act, 1925, but it is not precisely the same. One of the points of difference which alone need be pointed out here is that while the two English Acts speak of the assignment of "any debt or other legal chose in action," Section 130, T.P. Act, purports to deal with the "transfer of an actionable claim" only. The difference may at first sight appear to be one without distinction as the definition of "actionable claim" includes a claim to a debt, but that definition also provides that it must be such a claim ''as the Civil Courts recognize as affording grounds of relief." Thus, if claim to a part of a debt cannot be enforced under Order 2, Rule 2, it is not an actionable claim and Section 130 can have no application to it.

Thus, the conclusion which I have arrived at may be summed up in a few words. The Transfer of Property Act does not recognize any distinction between whole debt and part of a debt. Both may be transferred under that Act, if they come under the category of "actionable claims" as an actionable claim is "property." The transferee of a part of a debt may, however, find that what is transferred to him is not an actionable claim as under Order 2, Rule 2, a single cause of action cannot be allowed to be split up into several causes of action. Order 2, Rule 2, being a rule of procedure, does not affect the right of transfer, that is to say, it cannot make what is transferable non-transferable. It does, how-ever, bar the right of suit in certain cases and it may prevent the transferee of a part of a debt from enforcing his claim and thereby make the transfer nugatory.

I have dealt with the question as to whether or not a part of a debt can be transferred at some length in view of the general importance as well as because we have been pressed to do so by the learned Counsel for the appellant. In my opinion, however, the present case can be decided on a short and simple ground apart from this question. As I have already said, it was recited in the appellants'' own sale deed that a sum of Rs. 2227 had been left in deposit with them for the purpose of paying off the mortgage dues of defendant 12. On calculation it appears that the mortgage dues of defendant 12 amounted only to Rs. 1,855 odd on the date of the sale deed and the dues on the hand-note amounted to Rs. 371 odd on that date and to Rs. 501 on 28th January 1935, when Ex. 1 was executed by defendant 11 in favour of the plaintiff. Thus, defendant 11 had left with the appellants a surplus sum of money over and above the amount which was payable to defendant 12 on the basis of his mortgage.

This sum clearly represented a single and whole debt and not part of a debt and there can be no doubt that it could be validly assigned by defendant 11 to the plaintiff. The appellant''s counsel has pointed out that in the deed which was executed by defendant 11 in favour of the plaintiff it has been expressly stated that what had been transferred to the plaintiff was a part of Rs. 2227. That is undoubtedly so, but the deed must be read as a whole, and when read as a whole, it clearly shows that according to the statement made by defendant 11 in that deed, he left with him two distinct sums, one payable to defendant 12 on the basis of a mortgage deed and another on the basis of a hand-note. These two items being quite separate, there was nothing to prevent defendant 11 from recovering them by two separate suits brought on two different occasions especially when in the deed executed by defendant 11 in favour of the appellants no time was fixed for the payment of the two debts due to defendant 12. Thus, the debt of Rs. 500 which was assigned by defendant 11 to the plaintiff was a distinct and separate debt and not merely part of a debt.

In my opinion therefore even if we were inclined to hold that a part of a debt cannot be assigned under the Transfer of Property Act, the assignment in favour of the plaintiff could not be held to be invalid. Another point which was raised on behalf of the appellants was that the amount decreed by the trial Court cannot be charged on the property sold to them. It is unnecessary to decide this point as the respondent does not press for a charge. I would therefore direct that instead of a decree for charge, a money decree only be passed in this case, and subject to this modification, I would dismiss the appeal with costs.

Harries, C.J.

I agree that this appeal should be dismissed. Upon the facts of the case, I agree that two sums were left in deposit with the purchaser, one sum to pay off what was due on the mortgage and one sum to pay off what was due on the hand-note. What the assignor assigned was the sum left with the purchaser to pay off the hand-note dues together with interest thereon. The assignment was not an assignment of part of a debt but was in substance and in fact an assignment of a distinct and separate debt. It was accordingly a valid assignment which gave the assignee a right to sue. This is sufficient to dispose of the appeal, and the point whether part of a debt is assignable does not strictly arise. In these circumstances, I prefer to express no opinion in this judgment upon the very difficult point as to whether a part of a debt is assignable.