Kanaiyalal vs Bhanwarlal

P.R. Sharma, J.—This is a Defendants second appeal arising out of a suit for recovery of money on the basis of a ''hundi''.

The Defendant-Appellants had a cash credit account with; the Plaintiffs firm since Samvat year 1997. On shraven-sudi 3 Samvat 2004 two hundis one for Rs, 4000/- and another for Rs. 1400/- were endorsed by the Defendants firm in favour of the Plaintiffs in respect of their dues up-to-date. The present suit, which was filed on 18-7-1949, was for recovery of the amount of the hundi for Rs. 4000/- plus Rs. 660/- by way of interest thereon at the rate of 1% per mensem.

The Defendants pleaded that the two hundis were given as collateral securities for the balance due in the cash credit account and were not enforceable except to the extent of the amount actually due on the said account. It was also pleaded that the Defendants had paid Rs. 1000/- in cash and a sum of Rs. 3230/- had been paid by adjustment of a debt to the Defendants from one Pannalal Bherulal, who had sold a truck to the Plaintiffs. It was alleged by the Defendants that the Plaintiffs had deducted the sum of Rs. 3230/- from the price of the truck payable to Pannalal Bherulal whereas the Defendants bad given a discharge to Pannalal Bherulal in respect of the debt which the latter o(sic)ved to them. These two payments were, it was alleged, made in discharge of both hundis and nothing, therefore, remained due to the Plaintiffs in respect thereof. Lastly it was alleged that the amount sued for included compound interest, which could not be allowed under the provisions of the Madhya Bharat Interest Act, 1953. The other pleas raised by the Defendants in their written-statement are no longer material and need not, therefore, be detailed here.

The trial Court decreed the Plaintiffs'' suit for Rs. 4000/- together with interest at the rate of 9% per annum. On appeal the rate of interest was reduced to 6% per annum and the amount of interest was reduced to Rs. 165 only. The remaining part of the decree passed by the Court of first instance was, however, affirmed by the lower appellate Court. The Defendants have now come up in second appeal

It was firstly contended by the learned Counsel for the Appellants that the lower. Courts had erred in holding that the payment of Rs. 1000/- to the Plaintiffs was not proved. In the first place Jainarayan admitted in his statement dated 10-2-1955 that the payment of Rs. 1000/- was made towards the hundi for Rs. 1400/-. In para 2 of the written-statement it was vaguely pleaded by the Defendants that the sums of Rs. 1000/- and Rs. 3230/-were received by the Plaintiffs in full satisfaction of both hundis. Since the hundi for Rs. 1400/- formed the subject-matter of a separate suit and Jainarayan admitted in his statement that the payment of Rs. 1000/- was made in part payment of the amount due on the hundi for Rs. 1400/-, the Courts, below rightly held that the Defendants could not be permitted to plead the same payment in the present suit also. The contention of the learned Counsel for the Appellant with regard to this payment cannot, therefore, be accepted.

With regard to the alleged payment of Rs. 3230/- no details were given in written-statement. Hiralal deposed that Nandlal bad purchased a truck belonging to Bherulal for a sum of Rs. 6500/- and that the deal was settled by Nandlal with one Bansi. The case for the Defendants is that Bherulal owed a debt to them, from which they gave him discharge in consideration for the sum of Rs. 3230/- being credited by the Plaintiffs towards the amount due on the hundi for Rs. 4000/- executed by them in favour of the Plaintiffs. Bherulal having died could not be examined as a witness and Bansi, though alive(sic) was not produced by the Defendants in support of their version. Nandlal denied the facts of this recovery. It is not easy to believe that the Defendants would have allowed the two hundis to remain uncancelled with the Plaintiffs even after they had made the two payments of Rs. 1000/- and Rs. 3230/- in satisfaction of almost the entire amount due under the two hundis. The omission on their part to do so becomes still more significant in view of the Defendants'' plea that these two payments were made in full discharge of the amount due from them under both the hundis. I am therefore, of the opinion, that the Courts below acted rightly in holding payment of the sum of Rs. 3230/- as not proved to have been made by the Defendants in the manner suggested in the evidence adduced on their behalf.

The last question to be determined is whether the Defendants are entitled to re-open the entire accounts prior to the execution of the two hundis in question. The learned Counsel for the Appellants argued that his case would be covered by the provisions of S. 44 the Negotiable Instruments Act, in as much as there has been a partial absence or failure of money consideration. I am afraid this contentions altogether untenable. In Ajodhya Prasad Singh Vs. Ramgulam Sahu and Others, , a hand-note reserving simple interest was renewed after adding compound interest. A renewal for a second time also was for a sum inclusive of compound interest. It was held that there was no failure of consideration to the extent of difference between simple interest and compound interest and that Section 44 could have no application to such a case, the consideration for each renewal being forbearance to sue, though not specifically expressed.

In the present case a large amount was outstanding against the Defendants in the account which was started in Samvat year 1977. The hundis were executed on shravan sudi 3 Samvat 2004. In the circumstances of this case it must be held that the Plaintiffs would have sued the Defendants for recovery of the amount due on the cash credit account if it had not been for the execution of the two hundis in their favour by the Defendants. I am, therefore, of the opinion that Section 44 of the Negotiable Instruments Act would have no application to the present case.

The next question to be considered is whether the Defendants are entitled to the benefit of Section 3 of the Madhya Bharat Interest Act (hereinafter referred to as the Act). Reliance was placed in this connection by the counsel for the Appellants on the decision of a Division Bench of this Court in Bhanwarlal v. Navalkishore 1957 JLJ 954, in which it was held that the provisions of section, 3 of the M. B. Interest Act were retrospective in character and could apply even to transactions which had been effected prior to the year 1956. The real question to be determined, however, is as to the interpretation to be placed on the words "the rate of interest adjudged on a principal sum or ordered in a decree by any Court" used in Section 3 of the Act. The principal sum has been denned in Section 2(4) of the said Act as ''the sum adjudged as such by a Court''. It was held by Dixit J. (at the then was) in Mushat Cloth Stores Vs. Shivratan 1958 JLJ (sic) 462 ; that the principal sum as defined in S. 2 (4) of the Act means the sum which is adjudged by the Court as principal in accordance with an agreement between the Parties or in accordance with the provisions of any law. The Words ''notwithstanding anything to the Contrary contained in any law or in any agreement between the parties" used in Section 3 of the act have reference only to an agreement between the parties or the law relating to interest and not the principal sum. I am in respectful agreement with the observations made by Dixit J. in Mushat Cloth Stores'' case (supra) to the effect that Section 3 does not give to the Court any power to adjudge the principal amount.

The view taken in Mushat Cloth Stores case (supra) was approved of by a Division Bench of this Court in Mohanlal v. Kallu 1960 JLJ 442, wherein it was held that a settled account or an acknowledged principal sum could not be re-opened except on tire ground of fraud or mistake. Krishnan J. in Badrilal v. Badrilal (1961 JLJ 748) held that if at any particular point in a succession of transactions, the parties created a fresh cause of action, either by an acknowledgment noted in the books, or by a fresh pro-note, then that is the starting point of the liability for the purpose of the suit, though behind it there might have been other transactions. The accounts in such a case can be worked out backwards up to that point but not any further behind.

The learned Counsel for the Appellants has, however, referred to me the decision of a single Judge of this Court reported in Kishan v. Mangva 1961 JLJ 251. In the first place it is not clear from the abbreviated report of the decision whether the learned Judge thought that the case before him was one of partial absence or failure of consideration to which the provisions of S. 44 of the Negotiable Instruments Act could apply. A(sic) any rate there is nothing in the report to show that the provisions of S. 44 of the Negotiable (sic)truments Act were held by the learned Judge to be applicable to the facts of that case. It does not further appear from the report of the case that the attention of the learned Judge was invited to the decision of a Division Bench of this Court in Mohanlal''s case (supra) and of Krishnan J. in Badrilal''s case (supra).

As I have already stated above, I am of the opinion thst S. 44 of the Negotiable Instruments Act cannot apply to the facts of the .present case. I am further in respectful agreement with the view taken by the Division Bench of this Court in Mohanlal''s case (supra) and by Krishnan J. in Badrilal''s case (supra).

I would, therefore, hold that the amounts prior to the execution of the hundi in the instant case cannot be reopened by virtue of anything contained in the provisions at S. 3 of the Madhya Bharat Interest Act. Tie fact that the amount in the case of each hundi was, inclusive of interest being admitted in this case, it can be taken into account white-awarding interest after the date of the institution of the suit. I shall, in view of this fact, modify the decree passed by the lower appellate Court to the extent that the Defendant shall be liable to pay interest only at the rate of 3% per annum from the date of the suit, till realisation.

Subject to the aforesaid modification, the decree passed by the lower appelate Court is hereby affirmed.

The result is that this appeal is partly allowed to the extent noted above. The Appellants shall pay the Respondent'' costs; since they, have failed in respect of a major part of their claim in appeal.