Indermal vs Ramprasad and another

K. L. Pandey, J.

This appeal by the defendant 1 is directed against a money-decree for RS. 30,000 together with interest and costs grounded upon a promissory-note dated 10 September 1962, which he had executed for that sum in favour of the defendant 2, who subsequently endorsed it in favour of the plaintiff.

The material facte which are not in controversy may be shortly stated. At Ujjain, the defendant 1, Indermal, had executed in favour of the defendant 2, Mohammad Hussain, the promissory-note Ex P. 1 dated 10 September 1962 for an apparent consideration of Rs. 30,000 repayable on demand and carry, ing interest at 6% per annum. On the back of that document, there is an endorsement in favour of the plaintiff, Ramprasad, which purports to have been made at Mhow in Indore Civil District within the jurisdiction of the lower Court. Upon demand having been made by the plaintiff for the amount due on the promissory-note, the defendant 1 did not make any payment.

Ramprasad (plaintiff) averred that the promissory-note was executed for a cash consideration of Rs. 30,000, that it was endorsed in his favour at Mhow for consideration and that, being thus the holder in due course, he is entitled to recover the amount due thereon. While the promisee Mohammad Hussain (defendant 2) accepted these averments, the promisor Indermal (defendant 1) resisted the claim on several grounds,

4 The defendant 1 denied that he received any consideration for the promissory-note and pleaded that he executed that document in order to persuade the defendant 2 to sign the sale deed of Nazar Ali Mills, Ujjain, so that the sale proceeds thereof might be made available for satisfy-ing the numerous creditors of those Mills. According to the defendant I, the consideration for execution of the promissory-note was thus against public policy and unlawful. Further, the amount due under the promissory-note was, by agreement arrived at between the parties, adjusted towards the amount due to the defendant 1 under a decree passed against several persona including the defendant 2, who did not then return the promissory-note on the pretext that it was lost. The defendant 1 further denied that the plaintiff was the holder of the promissory-note in due course and contested his claim that it was duly negotiated or endorsed in his favour either at Mhow or for consideration.

Upon a consideration of the evidence led by the parties, the lower Court held inter alia that the promissory-note was negotiated and endorsed at Mhow for a consideration of Rs. 20,000 and, therefore, the Court at Indore had jurisdiction to try the suit but the plaintiff, being admittedly aware that the amount had already become due and had not been paid in spite of demand, was not a holder in due course. The promissory-note itself was, however, found to have been executed by the defendant 1 for Ra. 30,000 received by him in cash and it was further held that, even the consideration for that document, as pleaded by him in his defence, was valid and good in law.

In the memorandum of appeal, the defendant I raised ground No, 20 to challenge the lower Court''s conclusion, that it had jurisdiction to try the suit. His counsel, however, readily conceded before us that he was unable to show that any prejudice was caused by reason of the fact that the suit was tried at a wrong place, Indore, instead of Ujjain. That being so, the conclusion is, having regard to the provisions of section 21 of the Code of Civil Procedure, not assailable. The further finding that the plaintiff was not a holder in due course was, in view of the evidence on record and the circumstances of the case, not challenged before us. The learned counsel for the defendant 1, however, vigorously attacked the following conclusions:

(i) That the promissory-note was executed for a cash consideration of his. 30,000.

(ii) That even otherwise, it was, in the circumstances pleaded by the defendant 1 himself supported by good and valid consideration.

(iii) That there was no adjustment or appropriation of the amount due on the promissory-note towards payment of a debt owing by the defendant 2 and other persons.

(iv) That endorsement was made for consideration of Rs. 20,000.

The question whether the promissory note in this case was executed for a cash consideration of Rs. 30,000 was debated at the Bar at some length. In considering this controversy, we must bear in mind the statutory presumption arising u/s 118 of the Negotiable Instruments Act, 1881, and the legal position that presumption may be rebutted by direct or circumstantial evidence or even presumption of law or fact. So, in Kundan Lal v. Custodian Evacuee Property AIR 1961 S C 1316, Subba Rao J., who spoke for the Court, observed:

To illustrate how this doctrine works in practice, we may take a suit on a promissory note. u/s 101 of the evidence Act, "whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove those facts exist". Therefore, the burden initially rests on the plaintiff who has to prove that the promissory note was executed by the defendant. As soon as the execution of the promissory-note is proved, the rule of presumption laid down in section 118 of the Negotiable Instruments Act helps him to shift the burden to the other side. The burden of proof as a question of law rests, therefore on the plaintiff, but as soon as the execution is proved, section 118 of the Negotiable Instruments Act imposes a duty on the Court to raise a presumption in his favour that the said instrument was made for consideration. This presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case shifts to the defendant. The defendant may adduce direct evidence to prove that the promissory-note was not supported by consideration, that, if he adduced, acceptable evidence, the burden again shifts to the plaintiff and so on. The defendant may also rely upon circumstantial evidence and, if the circumstances so relied upon are compelling, the burden may likewise shift again to the plaintiff. He may also rely upon presumptions of fact for instance those mentioned in section 114 and other sections of the evidence Act. u/s 114 of the Evidence Act, ''''The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular ease". Illustration (g) to that section shows that the Court may presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. A plaintiff who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the defendant certainly cannot be expected to produce his documents. In these circumstances, if such a relevant evidence is withheld by the plaintiff, section 114 enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a Court, can under certain circumstances rebut the presumption of law raised u/s 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or facts, and presumptions of law or presumption of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact.

In the course of arguments, we were also reminded that this is a Court of appeal and that we should be slow to interfere with the lower Court''s finding of fact. In this connection, the counsel referred to us the oft-cited cases, namely, Netherlands-che v. Chettiar A I R 1929 P. C. 202. Virappa v. Periakaruppan A I R 1945 P. C. 25 . AIR 1949 32 (Privy Council) . Sarju Pershad Vs. Raja Jwaleshwari Pratap Narain Singh and Others, . and Radha Prasad Singh v. Gajadhar Singh 1960 M P L J 1 (S C). The way in which the conclusions reached by the first Court on questions of fact should be approached and regarded is well settled and it is not necessary for us to dilate upon considerations which should be borne in mind in any examination of such conclusions in appeal. We consider it sufficient to say that, in this case, the proved circumstances not only shift the onus of proof in regard to payment of Rs. 30,000 in cash as consideration for the promissory-note, but they also contra-indicate and render improbable the conclusion reached on the point by the lower Court.

In proof of the circumstances in which Mohammad Hussain came in possession of Rs. 32,000, he produced the undated Ikrarnama Ex. 2D-1. He admitted that it was executed on the same date (the date of the promissory-note) by Fazl Hussain, Allahbux, Asgarbhai, Saifuddin and Ismail.

[After considering the recitals of an undated Ikrarnama and the oral evidence about cash consideration, the judgment proceeds,-]

It may be, as observed by the lower Court, that Manaklal 1 D.W. 2, Shrawanlal 1 D. W. 3, Udharam 1 D. W. 4 and Hakimuddin 1 D. W. 7 are not disinterested and their evidence is not dependable otherwise also, but we do not propose to take a different view about their credibility. We consider this question in the light of inherent probabilities and the weight of evidence. In paragraph 15 of the judgment of the lower Court, it has referred to the subsequent conduct of in dermal lest we think that that conduct is not inconsistent with the promissory-note being without any cash consideration. In our opinion, the fact that Mohammad Hussain did not receive any part of the consideration of the sale of the Nazar Ali Mills as sought to be shown by Ex. 2D-1 dated 10 September 1962 and the presumption arising from the fact that he did not examine the person who, he claimed, gave him Rs. 32,000 to enable him to advance a loan of Rs. 30,000 to Indermal rebutted the presumption u/s 118 of the Negotiable Instruments Act, 1881, and shifted the onus of proof. Further, having regard to the considerations set out in the foregoing paragraph, we are also of opinion that this shifted onus of proving, as alleged, that the consideration for the promissory-note was a cash advance of Rs. 30,000 was not discharged by the prevaricating, suppressive and unsupported evidence of Mohammad Hussain 2 D. W. 2. In short, we conclude, differing from the lower Court, that the consideration for the promissory-note was not a cash advance of Rs. 30,000. We may, however, add that this conclusion does not affect the claim grounded on the promissory-note because, as we would show in the sequel, it was otherwise supported by good and valid consideration.

In paragraph 13 (5) of his written statement, Indermal (defendant 1) pleaded that there was no consideration for the promissory-note or that such consideration, even if regarded as existing technically, was illegal and opposed to public policy on the following averments. The Nazar Ali Mills, which was owned by Mohammad Hussain and 31 others of one Bohra family, was largely indebted. For recovery of a small sum due to Government, the Mills had been sold by public auction for Rs. 7,00,000 only. Some disinterested persons intervened and got the sale set aside. Then the owners of the Mills decided to sell it and satisfy the claims of all its creditors. Mohammad Hussain too agreed to that course. Since there were numerous owners, they appointed six among themselves, including Mohammad Hussain, as agents for the purpose. There was a contract with two persons, Gendalal and Parasmal, for sale of the Mills for Its. 12,50,000 and a separate contract for sale of another property for Rs. 75,000. Since the Mills were subject to charge for payment of several debts, the creditors too were called. Indermal, who too was a creditor, extended his full co-operation to facilitate the sale. There were two such meetings but, at the time of execution of the sale deed, Mohammad Hussain did not sign it on some pretext or another and thus the contract fell through. However, Mohammad Hussain subsequently agreed to extend full co-operation and also gave an assurance that he would sign the sale deed. Thereafter a new contract was made with Baohharaj Factories (Private) Limited to sell the Mills for Rs. 12,75,000. All agreed to it, but, at the time of execution of the sale deed, Mohammad Hussain said that, before signing it, he would, like other executants, take Rs. 60,000 as commission over and above the agreed price. Then, at the instance of others, Indermal intervened and, by executing the promissory-note dated 10 September 1962 for Rs. 30 000 in lieu of the commission demanded by Mohammad Hussain, induced him to execute the sale deed.

The lower Court framed issues 3 (a) and (b) to cover the plea of want of good and valid consideration for the promissory note. In support of this plea, Indermal stated in the witness-box inter alia that the sale of the Mills to Baohharaj Factories (Private) Limited was arranged through him, that, at the time of execution of the sale deed, Mohammad Hussain declined to eign it saying that he would do so only if Rs. 60,000 be paid to him and that, in the end, it was settled between him (Indermal) and Mohammad Hussain that the former would pay Rs. 30,000 to the latter who would then sign the sale deed. Continuing, Indermal stated that it was in pursuance of this agreement that he (Indermal) executed the promissory-note without receiving any cash consideration and added that, before the contract for sale was made with Bachhraj Factories (Private) Limited, Mohammad Hussain had promised not to ask for more money but, at the time of execution of the sale deed, he became obdurate and insisted on getting more money.

The learned counsel for Indermal attacked the conclusion of the lower Court that the passing of valid consideration could be spelled out of the plea contained in paragraph 13 (3) of his written statement mainly on the ground that it was not permissible to direct a pleading and to found a conclusion, as was done by the lower Court, only that part of it which was favourable to Mohammad Hussain. The principle no doubt is that admission in a written statement may be taken as a whole or not at all. There is, however, some misconception about the mode in which it should be used in order to operate against the defendant. It, is, therefore, necessary to refer to two leading cases bearing on the point. Long ago, Sir Barnes Peacock laid down in Sooltan Ali v. Chand Bibee 9 Suth. W R 130 that a written statement was not a pleading in confession and avoidance whereby a defendant was bound by the confession and compelled to prove the avoidance and that, if used against the defendant, the whole statement must be taken together Giving an instance of application of the principle, Sir Barnes Peacock devised a hypothetical illustration:

Suppose a man should be sued for goods sold and delivered and should state and awear to the statement that the goods were brought and delivered to him in a shop by a person whom be did not know and that be paid for them at the time.

If that statement were true, he could not honestly state that be had never bought the goods, and if the statement that he had bought them, was to be taken against him without also taking his statement that be paid for them at the time, the greater injustice might be done, for he would be unable to compel the attendance of the man who sold the goods, in us much as he was unknown to him, but if the plaintiff being unable to read one part of the statement as evidence against the defendant without reading in his favour what he said as to payment, the plaintiff would have to cite the man who sold the goods for the purpose of proving his case, and then if the witness should speak the truth, the statement would make out his defence by eliciting from the witness on cross-examination the fact that the defendant had paid for the goods at the time.

This view was repeated by Sir Barnes Peacock in a subsequent Full Bench case in Poolin Beharee v. R. Walton and Co. 9 Suth. W R 190. The same principle was laid down by the Judioial Committee in Motabhoy Mulla Essabhoy v. Mulji Haridas A I R 1915 P C 2. In that case, Lord Dunedin observed:

It is permissible for a tribunal to accept part and reject the rest of any witness''s testimony. But an admission in pleading cannot be so dissected, and if it is made subject to a condition, it must either be accepted subject to the condition or not accepted at all. Therefore the admission that the promissory-note was to be held as satisfied on 30th January by a new debt on the part of Hyderally, provided that security was found for the whole debt by that date cannot be treated as an admission that in any case the promissory-note was to be held as satisfied by 30th January.

It is plain that the principle illustrated above is that, if a written statement incorporates an admission of some facts favourable to the plaintiff and a denial of certain other facts favourable to him or an assertion of still other facts which are unfavourable to him, he (plaintiff) must, if he wants to take advantage of the admission, take not only the first set of facts as truly stated but also the second get of facts as so stated. But the principle is limited in application to facts and does not embrace within its ambit any plea of law raised by the defendant on the cumulative effect of the two sets of facts. We would show in the following paragraphs that the conclusion reached by the lower Court can be supported on this basis.

14 It is now well established that where an alternative case, which the plaintiff could have made, but did not make in the plaint, is admitted by the defendant in his written statement, it is permissible to grant to the plaintiff relief on that basis. So, in Srinivas Ram Kumar Vs. Mahabir Prasad and Others, . Mukherjee J. (as he then was) held:

The rule undoubtedly is that the Court cannot grant relief to the plaintiff on a ease for which there was no foundation in the pleadings and which the other side was not called upon or bad an opportunity to meet. But when the alternative case, which the plaintiff could have made, was not only admitted by the defendant in his written statement but was expressly put forward as an answer to the claim which the plaintiff made in the suit, there would be nothing improper in giving the plaintiff a decree upon the case which the defendant himself makes. A demand of the plaintiff based on the defendant''s own plea cannot possibly be regarded with surprise by the latter and no question of adducing evidence on these facts would arise when they were expressly admitted by the defendant in his pleadings.

In this case, the matter does not rest there. As we indicated earlier, the facts alleged by Indermal in paragraph 13 (5) of his written statement as constituting want of consideration and the consideration being unlawful or opposed to public policy were put in issue and the burden of proving those fact3 was rightly placed on Indermal. Examining him self in support of those issues, he disclosed in his evidence that, before the contract was made, Mohammad Hussain had promised not to ask for more money but after the bargain was made through him (Indermal), Mohammad Hussain did so. There is a variation between this evidence and the pleading to the effect that all (presumably including Mohammad Hussain) had agreed to the contract and then Mohammad Hussain turned back and asked for more money. The rule no doubt is that no amount of evidence can be looked into upon a plea that was never made AIR 1930 57 (Privy Council) . But that rule is based mainly on the principle that no party should be prejudiced by the change in the case introduced by this method. In Eshanchunder Singh v. Shamachun Bhutto 11 M I A 7, Lord Westbury, in delivering the judgment of the Board, observed:

It will introduce the greatest amount of uncertainty into judicial proceedings if the final determination of cause is to be founded upon inferences at variance with the case that the plaintiff has pleaded, and, by joining issue in the cause, has undertaken to prove .........They desire to have the rule observed, that the state of facts, and the equities and ground of relief originally alleged and plaeded by the plaintiff, shall not be departed from..

These observations were, however, explained by the Board in Haji Umar v. Gustandji A I R 1915 P C 89. Viscount Haldane, who delivered the judgment of the Judicial Committee, observed that the principle was not to be applied in an abstract way and added:

In applying such a principle the whole of the circumstances must be taken into account and carefully scrutinised. The question is in ultimate analysis one of circumstances and not of law.

We have already noticed in the case of Srinivas Ram Kumar Vs. Mahabir Prasad and Others, . an example of departure from the rule which was permitted because, in the facts of that case, the question of surprise could not possibly arise and no injustice could possibly result to the defendant. Similar considerations persuade us to take the view that Indermal could not be prejudiced by his own evidence given on the issues he had undertaken to prove, though that evidence is in one respect at variance within his pleading on the point. If, as disclosed by the evidence, Mohammad Hussain had promised, before the contract was made, that he would not ask for more money, that assurance could not prevent him from exercising his freedom of contract by not accepting the terms of the bargain subsequently settled through Indermal and demanding a larger price for the shares represented by him in the transaction. But we do not propose to rest our decision on this narrow ground. We would show hereafter that the ultimate result is not different even if we consider cumulatively all the facts pleaded in paragraph 13 (5) of Indermal''s written statement.

Shri Sanghi, learned counsel for Indermal, suggested that the contract for sale of Nazar Ali Mills was really a tripartite contract to which the creditors, including Indermal, were parties. We do not find anything in paragraph 13 (5) or elsewhere in his written statement to show that the creditors too were parties to the contract which was made with Bachharaj Factories (Private) Limited. The facts as pleaded in paragraph 13 (5) taken together do, however, show that all the owners of the Nazir Ali Mills, including Mohammad Hussain, had agreed to the contract for sale of the Mills with that Company but, at the time of execution of the sale deed, Mohammad Hussain insisted on taking a sum of money as commission over and above the agreed price and, in lieu of the commission thus demanded, Indermal agreed to pay Rs. 30,000 for which he executed the promissory-note. In short, therefore, Indermal, a third party, who was looking forward to recovering from the sale price a large sum of money upon completion of the sale, executed the promissory-note and thereby induced Mohammad Hussain to perform his part of the executory contract for sale, which he was already bound to perform under the contract with Bachharaj Factories (Private) Limited. The question is whether the promise to perform an existing contract with a third party can be a good and valid consideration for another contract.

The definition of consideration in section 2(d) of the Indian Contract Act comprehensively provides that when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or promises to do or abstains from doing something, such act or abstinence or promise is called the consideration for the promise. It will be readily Been that, according to this definition, the fresh promise, which Mohammad Hussain gave to Indermal, for fulfilling his part of the executory contract for Bale is the consideration for the promissory.note. Sir Frederick Pollock and Sir D. F. Mulla in their commentary on the Indian Contract and Specific Relief Acts (Eighth Edition, pages 209-10) observe:

If A is already bound to do a certain thing, not by the general law, but under a contract with Z, it seems plain that neither the performance of it nor a fresh promise thereof without any addition or variation will support a promise by Z, who is already entitled to claim performance. For Z in none the better thereby in point of law, nor A any worse. But if M, a third person not at present entitled to claim anything, offers a promise to A, in consideration of (a) A''B performance or his obligation to Z, or (b) A''s pro-mine to M to perform that obligation? These questions have given rise to great difference of learned opinion in England and America. They do not seem to have been considered by Indian Courts. Such English authority as there is favours the opinion that the performance is a good consideration; but the reasons given are not very clear, and seem to assume that both performance and promise must be good consideration in such a case, or neither. It is submitted, however, that on principle this assumption is not tenable. The test in whether there in any legal detriment to A, the supposed promises Now A''s performance of what be already owes to Z is no detriment to him, as has been pointed out; and indeed the resulting discharge of his ability seems rather to be an advantage; and therefore it is no consideration for a new promise by any one. But A''s promise to M to do something though be may have already promised Z to do that something, is the undertaking of a new obligation to a new party. There is no reason why it should not be made binding by M''s counter-promise, as in any other case of a contract by reciprocal promises, unless the law forbids the same performance to operate in discharge of two distinct contracts. There in no positive authority for any such rule of law, and when we bear in mind that in a contract by reciprocal promises, the promises are the consideration for each other, and not the performance, no such rule appears to be demanded or warranted by principle.

In Firm Gopal Company Ltd. and Another Vs. Firm Hazarilal Company, ., a Division Bench of this Court had to consider whether the promise to do a thing which the promises was already bound to do under a contract with a third party could be good consideration to support a contract. The facts of that case were these. The plaintiff had entered into a contract with a textile mill for purchase of some bales of cloth. The defendant, which was the sole selling agent of the mill, signed the contract, as guarantee broker. After taking part delivery of the first consignment, the plaintiff refused to take further delivery of the goods mainly because it would be put to loss owing to fall in the market price. The defendant, which was the guarantee broker as already indicated, induced the plaintiff to take delivery of the remaining Part of the first lot by offering to purchase some bales from the plaintiff at the contract price or to pay to him at his option a sum of Rs. 25,000. The plaintiff accepted the offer, took delivery of the goods and subsequently brought a suit to recover from the defendant Rs. 25,000 with interest and, in the alternative, claimed the loss which it had suffered on the bales agreed to be purchased by the defendant. The claim was resisted inter alia, on the ground that the agreement to pay Rs. 25,000 was without consideration and unenforceable because it was nothing more than a gratuitous offer for something which the plaintiff was already bound to do under the contract with the textile mill. The Division Bench rejected that contention and held that there was good consideration to support the contract relating to payment of Rs. 25,000. In doing so, the Division Bench referred inter alia to the English law and particularly to the two leading cases on the point.

In Halsbury''s Laws of England, Simonds Edition, Volume 8, page 117, the law is thus stated:

The fact, moreover, that the promises is already under a legal liability to some third person to perform the act does not prevent his promise to perform it at the request of the promises from constituting a valid consideration.

One of the leading cases mentioned at the foot-note is Shadwell v. Shadwell 142 E R 62. In that case, an uncle wrote to his nephew, who was already engaged to be married, as follows:

I am glad to hear of your intended marriage with Ellen Micholl; and, as I promised to assist yon at starting, I am happy to tell you that I will pay to you 1501 yearly during my life and until your annual income derived from your profession of a Chancery Barrister shall amount to 600 guineas.

The plaintiff married Miss N. He never earned as much as six hundred guineas. The annuity fell into arrears; the uncle died and the plaintiff sued his executors. In regard to the question whether there was consideration for the promise to pay the annuity, the majority of the Judges answered in the affirmative. They observed that there was benefit to the promises because the marriage was an "object of interest with a near relative" and a detriment to the promises because he "may have made the most material changes in his position and have incurred pecuniary liabilities resulting in embarrassment, which would be in every sense a loss if the income which has been promised should be withheld". The other leading case mentioned at the foot-note is Scotson v. Pegg l58 ER 121,. There Scotson promised to deliver to X, or to his order a cargo of coal then on board a ship. X made an order in favour of Pegg. Subsequently, Pegg made an agreement with Scotson that if the latter delivered the coal to him, he would in return unload and discharge the coal at a fixed rate each day from the date when the ship was ready for discharge. This he failed to do, and when sued by Scotson, pleaded that there was no consideration for the promise because Scot-son was already liable to deliver the coal under the contract with X and had, therefore, promised no more than what he was found to perform in any case. The Court held that there was consideration and Pegg was liable. Wilde B observed:

If a person chooses to promise to pay a sum of money in order to induce another to perform that which he has already contracted with a third person to do, I confess I cannot see why such a promise should not he binding.

Pollock has considered the question whether the promise in such a case is valid consideration in his treatise on Principles of Contract, Tenth Edition, at pages 183 to 187 and concluded:

What is here mentioned is that a promise made for valuable consideration, and otherwise good as between the parties, is not the less valid because the performance will operate in discharge of an independent liability of the promises to a third person under an independent contract already existing. This was the opinion of W. M, Leake, a most accurate lawyer, and of Prof. Langdell of Harvard

Referring to the two cases, Shadwell v. Shadwell 142 E R 69. and Scotson v. Pegg l58 E R121, Anson observes:

But it seems reasonable to hold that they establish that the performance of an existing duty to a third party is a good consideration. Indeed, this is the interpretation which has generally been adopted.

There is, in fact, very little reason why either the promise or the performance of an existing contractual duty to a third party should not be a good consideration. The promisor gets a benefit for which he bargains, something to which he was not previously entitled and which he would not otherwise have received. Although consideration is sometimes thought of only in the sense of a detriment to the promises, this overlooks the fact that it may also consist of a benefit conferred on the promisor as the result of a bargain made between them. Further, there are no sound reasons of public policy, as there might be, Bay, in the case of the performance of an existing duty to the public in general, which would serve to justify such an exception to the rule regarding sufficiency of consideration. The conclusion is, then, that either the performance, or the promise of performance, of an act which is already obligatory towards a third party constitutes a good consideration.

[ Principles of the English Law of Contract, 1967 Edition, page 100]

Cheshire and Fifoot discuss the same question in their treatise on the Law of Contract (1964 Edition) at pages 88 to 92. Referring to the two leading cases, they observe:

If this interpretation be correct, English Judicial authority, as far as it goes, is un. animous in holding that the performance of an outstanding contractual obligation is sufiicient consideration for a promise from a new party, while there is no decided case, at least since the dark years of the early seventeenth century, upon the validity of a pro-mite of such performance.

How far is this distinction between executory and executed consideration to be regarded as relevant? Sir Frederick Pollock thought that, in principle at least, it should be decisive. In his opinion the promise might be good consideration, for it involved the promissor in two possible actions for breach of contract instead of one, and thus was a detriment within the meaning of the law.

Concluding the authors observe:

It would seem, therefore, reasonable to accept the three cases in the nineteenth century as deciding, as a matter of concrete law, that the performance of an outstanding contractual obligation is sufficient consideration for a promise by a new party, and to assume, as does the great bulk of juristic opinion, that the promise of performance is equally valid.

In our opinion, it is thus clear, both on principle and authority, that the promise of Mohammad Hussain to perform his part of the executory contract for sale of the Mills which he had already contracted with a third party so to do, constituted good consideration for the promissory-note executed by Indermal who, upon subsequent performance of the promise, admittedly recovered out of the price realised by the sale of the Mills a sum of Rs. 3,25,000.

The further submission that the consideration of the promissory-note is illegal or opposed to public policy may be shortly disposed of. It was argued that Mohammad Hussain demanded Rs. 30,000 to exercise his intiuenee over the co-sharers, whom he represented in the transaction, in favour of the proposed sale and thus secured the promissory-note. In this connection, the learned counsel invited our attention to illustration (j) u/s 23 of the Contract Act. Hero there is no evidence at all to show that the money was demanded for such a purpose. What is more, the specific plea contained in paragraph 13 (5) of the written statement of Indermal is that he wanted the money for himself [Swayam Ke Liya). Further, there is neither any plea nor any evidence to support the argument that the promissory-note was secured by practising on the co-sharers, whom Mohammad Hussain represented, any fraud by concealment. In this situation, the lower Court rightly rejected this contention,

The claim that there was any adjustment of the amount due on the promissory-note is, we think, not substantiated by evidence. Indermal pleaded in paragraph 13 (6) of the written statement that when he refused to pay the amount demanded by Mohammad Hussain on the strength of the promissory-note, the latter agreed to the amount being appropriated towards a decree obtained against him and other persons and expressed his inability to return the promissory-note saying that it was lost. In this vague pleading, Indermal appears to have artfully abstained from stating where and when the agreement was made. His case seems to be that, sometime before Diwali of the year 1964, Mohammad Hussain went to Khachrod and then to Nagda where the settlement was made. Mohammad Hussain 2 D. W. 2 denied that he went to those places or there was any such settlement. Jayantilal 1 D. W. 3 stated that he gave to Indermal the notice Ex. ID-6 at the instance of a person who claimed to be Mohammad Hussain but whom he could not say he would be able to identify. The witness added that that person subsequently approached him and took away all the papers relating to the notice. It is not difficult to see that this evidence has 1 been brought into existence to support the defence on the point. Indermai 1 D. W. 1 stated that, some 15 days after Diwali of the year 1964, Mohommad Hussain approached him at Nagda and made a demand for the amount due on the promissory-note. The witness added that he refused to pay but Mohommad Hussain insisted on payment and, therefore, he (witness) said that he would adjust it towards the decree for Rs. 75,000 obtained against Mohommad Hussain and others. Although the witness did not state in his esamination-in-chief that Mohommad Hussain had agreed to that course (paragraph 2), he said so in cross-examination (paragraph 6). Of the two witnesses Mauaklal P. W. 2 and Shrawanlal P. W. 3, who were admittedly present on the occasion, the latter did not say that Mohammad Hussain had then agreed to that course. It is siguiricant that none of these witnesses, including Indermal I P. W. 1, said that Mohammad Hussain represented at that time that the promissory-note was lost. Indermal i D.W. 1 admitted that he did not ask for that promissory-note at Nagda or at all. This is not all. In reply Ex. P 6 dated 6 June 1965 to the notice of demand made by the plaintiff, Indermal did not state that the amount was so adjusted in pursuance of an agreement made with Mohammad Hussain. On the other hand, he referred to such adjustment on the faith and assurance of other co-owners of Nazar Ali Mills and added that it had already been made several months ago. But it was not disclosed either in that notice or in the written statement that the amount was adjusted towards a decree for Rs. 75,000 obtained against Mohammad Hussain and others. Finally, Indermal did not produce his account books to show such adjustment and admitted in the witness-box that it was made only after the suit, out of which this appeal arises, was tiled. We are unable to accept this discrepant, inconsistent and self-serving evidence as establishing that Mohammad Hussain had agreed to any such adjustment. We may also add that, in the circumstances of the case, Indermal was disentitled to appropriate, on his own, the amount due on the promissory-note towards a decree passed against several persons, including Mohammad Hussain.

Under section 118 of the Negotiable Instruments Act, there is a presumption that a negotiable instrument has been endorsed for consideration. Further, Ramprasad P. W. 1 stated that he paid Rs. 20,000 as consideration for the endorsement to Mohammad Hussain 2 D. W. 2, who supported that fact. Both Ramprasad and Mohummad Hussain denied that there was any arrangement between them and Fazal Hussain 2 D W. 1 to the effect that, of the amount recovered by filing a suit on the foot of the promissory-note, one-fourth would be given to Fazal Hussain and the remainder would be shared equally by Ramprasad and Mohammad Hussain. Fazal Hussain 2 D. W. 1 too repudiated that suggestion. Even apart from the consideration that this was not the precise plea in paragraph 13 (8) of Indermal''s written statement, the fishing cross-examination of Ramprasad P. W. 1 and Mohammad Hussain 2 D. W. 2 tends to indicate that an endeavour was being made to show somehow or the other that the endorsement was without consideration. If, as disclosed by Indermai 1 D. W. 1 that he had received definite information about this arrangement from Inayat Hussain in the presence of his son Naaar Ali 1 D. W. 6, he would not have failed to incorporate it in his written statement. Then he declined to examine Inayat Hussain [Indermai 1 D. W. 1, paragraph 3]. Finally, Nazir Ali P. W. 6 stated that he, and not Inayat Hussain, gave information about the arrangement and that, at that time, Inayat Hussain wan not present (paragraph 8), It would, however, appear from the evidence of Iidermal 1 D.W. 1 (paragraph 2) that Inayat Hussain made a disclosure about certain admissions made to him by Mohammad Hussain (defendant 2). But Inayat Hussain was not examined and there is no other witness who said that Mohammad Hussain made those admissions to him or in his presence. Nazir Ali P. W. 6 merely testified to certain statements which he attributed to Fazai Hussain 2 D. W. 1 who however repudiated them. Those so-called admissions of Fazal Hussain are not relevant, Fazal Hussain, to whom the making of the alleged arrangement was attributed, could have given direct evidence about it but, far from doing so, he repudiated it. In our opinion, all this evidence led to rebut the presumption of consideration for the endorsement in favour of the plaintiff does not bear scrutiny. In conclusion, we hold, relying upon the evidence of Ramprasad P. W. 1 and Mohammad Hussain 2 D. W. 2 that the endorsement was made for a consider-ation of Rs. 20,000. We may add that a bare finding that the endorsement was for consideration is enough to sustain the claim decreed by the lower Court.

In view of the discussions in the foregoing paragraphs and the reasons therein given, this appeal fails and is dismissed. Costs throughout shall follow that event. Hearing fee in this Court according to schedule.