KAPUR CHAND GODHA versus MIR NAWAB HIMAYATALIKHAN AZAMJAH

S. K. DAB, J .-Thia is an appeal on a certificate granted by the High Court of Bombay under e. I 10 of the Code of Civil Procedure, and arises out of a suit which the 11.ppellants had brought for recovery of Ra. !l,! 9,940/- with interest and coat from Mir Nawab Himayatalikhan Azamjah, who was then known as the Prince of Berar, being the eldest. son of the Nizam of Hyderabad. The circumstanooa in which the appeal has arisen are these.

p. 170

On or about January 31, 1937 Baboo Mull and Co. sold and delivered to the Prince of Berar in Bombay various articleR of jewellery the aggregate value of which was Ra. 13,~0,750/-. Lala Kapurchand Goclha, who was the first plaintiff in the action and Lala Heeralal Godha, the original second plaintiff, carried on busineaa in jewellery in partnel""hip with their father and one Lala Baboo ~foll (sinec deceased) in the name and style of Ba.boo lliull and Co. It is not disputed that the appellants now before us own the entire interest in the Subject matter of the suit and instead of using the name of Ba.boo Mu II and Co. we shall name the appellants a.a the persona who sold the jewellery to the" Prince of Berar on January 31, 1937. A writing dated January 31, 1937 w&e executed by the Prince of Berar, respondent before us, by which he declared and acknowledged having purchased the jewellery specified in a schedule from the appellants at the aggregate price of Rs. 13,20,750/-. In that writing {Ex. A) the respondent stated:

p. 170

"I promise on behalf of myself and my heirR, executor~. administrators and successors to pay to you or to your order at my '' ptiou and le<surn at your abovementioued address the said sum of rupees thirteen lacs twenty thousand seven hundred and fifty only together with simple interest thereon @

pp. 170–171

10% ten per cent. per annum." - It is not disputed that the jewellery was iu fact delivered by the appellants to the respondent, and after January 31, 1937 the respondent passed various acknowledgements in respect.of the debt due'. at the time of the passing of the respective acknowledgments. These documents consisted of an acknowledgement of liability and a promise to pay on behalf of the respondent and the la.lit of such acknowledgments was passed on February 15/16,.1948. By that time the debt of Rs.13,20, 750/-with ten per cent. interest thereon bad increased to about Rs.27,79,000/-. By that last document the respondent admitted bis liability for the amount of Rs .. 27, 79,078-2-0 and promised to pay the amount, again at his option and leisure. On April 30, 1948, the appellants presented their bill a.nd some time in January, 1949, one of the appellants bad an interview with the respondent and was told that the Nizam had passed the bill. · In 1949 when Hyderabad was under military occupation after the Police Action, a Comll!ittee . was set up on February 8, 1949, by the Military Governor known as the Princes Debts Settlement Committee. The report of this Committee shows that it was set up in accordance with a resolution made by the Military Governor in order to scrutinise all debts of the Prince of Berar and his younger brother. On Ft>bruary 19, 1949, .the appellants presented a petition tq the Military Governor with regard to their claim and asked for p~ yment of the amount due to them or in the al ternative for the return of the.jewellery. The claim of the appellants was considered by the Committee in para. l l of their report. The Committee recommended that the appellants should be paid a sum of Re. 20 lacs in full satisfaction of their claim. The Committee further stated that they did not recommend the return of the jewellery. It may be here stated that the Committee consisted of two persons, namely, Zaheruddin Ahmed, who was the Controller of Accounts to the Nizam and A. N. Shah, a member of the. Indian Civil Service. It may also be stated that the report of the Com· ruittee shows that it made a reduction of about ten per cent. In the case of all suppliers of goods to the two Princes because the Committee thought that in most of the cases the eupplie.rs inflated the price for the ~upply of goods to the two Princes. The Committee also thought that the reasonable rate of interest would be six per cent. in the case of creditors who had to wait for a number of years for payment of their dues. On September 27,1949, a sum of Rs.11,25,000/-was paid to the appellants. At that time there wr.s a dispute going on as tQ "1'1-hether the appellants were entitled to the entire amount of Rs.20 lacs or to only 9/ 16th share there· of. That dispute having been finallysettled in favour of the appellant·, the appellants received a second payment of Re.8,75,000/- on February 14, 1950. This amount along with the earlier amount paid to the appellants came to the total of Re.20 lacs. which the Committee bad recommended should be paid to the appellants in full satisf~ction of their claim. On February 14, 1950, a receipt was passed by the appellants for the sum of Re.8,75,000/- (Ex. C) and this receipt ran in the following terms:

pp. 171–172

"Received from the Controller General of Ac:counts and Audit, Hyderabad Government the sum of Rs.8,76,000/- (Rupees eight lacs ~nd seventy-five thousand) only in full and final payment of the balance of rupees twenty lacs allowed by the Government in respect of my claim under the pronote dated 15 February 1948 passed by the Prince of Berar in my fovour, reserving however my right to recover the balance amount due to me under tbe said pronote from the Prince

pp. 172–173

of Berar." · The relevant authorities refused, however, to make payment on the receipt Ex. C in which the appellan'ts reserved their right to recover the balance amount due from the Prince of Berar. Thereupon, the appellants discharged all the previous pronotes and on each one of them recorded a satisfaction of full payment. We may refer to the last of them, namely, the one dated February 15/16, 1948. This was for a sum of Rs.27, 79,078·2-0 and on this docu· ment Kapurchand Godha, one of the appellants recorded "received payment in full".

p. 173

Then, on Au!!ust 14, 1950, the appellants served through their Rolicitors a notice on the respondent asking him to make payment'of the balance of Rs.9,99,940/- with interest at ten per cent. The respondent not having paid the amount a suit was instituted on February 5, 1951, in the High Court of Bombay for recovery of the amount.

p. 173

The suit was tried ·by Coyajee, J. The principal issue for trial was issue No. 6, namely, whether the appellants had accepted payment of Rs. 20 lacs in full satisfaction of their claim against · the respondent . and surrendered all tbe writings duly dischaTged and there was ab~olute release of the debt as stated in paras. 7, 8 and 11 of the written-statement. On a consideration of the oral and documentary evidence given. in the case and relying particularly on Ex. C, Coyajee, J, came to the conclusion that the appellants did not take the sum of Rs. 20 lacs in full satisfaction of their claim, The learned Judge said:

p. 173

"Ordinarily, a plaintiff wou,ld. have been in a most difficult and unenviable position to enforce this claim after having endorsed those rlocuments namely 'Ex. No. 1 as payment in full satisfaction. But evidently "payment in fu II Aatiafaction" there mE>ant full satisfaction as regards the liability of tbe Hyderabad State and that would naturally be the meaning if taken in conjunction with Ex. C where he reserved liberty to proceed personally against the Prince of Berar. I have therefore come to the conclusion on the main iasue in the suit namely, that there was no accord and satisfaction when the plaintiff' received the second cheque from the Accountant-General of Hyderabad St ate."

pp. 173–174

Then there was an appeal by the respondent which was heard by the appellate court (Chagla, C. J. and Mody, J.) By its judgment datt.d April 15, 1958, the appellate court came to a contrary conclusion and held that on the evidence, oral and documentary, given in the case it was clearly established that the appellants accepted the sum of Re. 20 lacs in full Ratisfaction of their claim and duly discharged tho promissory notes by endorsing fu II satisfaction thereon; therefore, s. 63 of the Indian Contract Act, 1872, applied and the suit of the appellants was lia.ble to be dismissed. It accordingly allowed the appeal and dismissed the suit with costs.

p. 174

In the appeal before us Mr. B. R. L. Iyengar appearing on behalf of the appellants has very strongly contended tha.t the view of Coyajee, J. is the correct view on the evidence given in the case. He has emphasised two points in connection therewith: (I) the crucial question is-what does the evidence show as to the intention of the creditor in accepting Rs. 20 lacs? and (2) what is the effect of Ex. C, a receipt executed contemporaneously with the payment of the second instalment of Rs. 8, 75,000 T Mr. Iyengar has argued that the appellate court did not attach sufficient importance to these two points and the conclusion which it reached is vitiated for that reason. As the judgment of th11 appellate court is a judgment in reversal and the question raised are essentially questions of fact on which there are conflicting findings, we allowed counsel for the parties to place before us the relevant evidence along with the pleadings of the parties. Two ''Of the witnesses whose evidence appears to be decisive of the questions raised were Putt& Madhava Rao who was examined on behalf of the appellants and Kapurchand Godha, one of the appellants. Putta Madhava Rao was at the relevant time, Assistant Accountant-General, Hyderabad and he was present before the Committee on more than one occasion when the claim of the appellants was considered. Before Coyajee, J. a questson was raised whether the statements of this witness as to what transpired before the Committee were admissible in evidence, when none of the two members of the Committee was called for examination. Madhava Rao was undoubtedly competent to prove what he himself heard or saw if such hearing or seeing was a fact in issue, and we consider it unnecessary to determine the further question as to whether be was competent to prove the statements alleged to have been made by one or other of the two members of the Committee. Therefore, we confine. ourselves. to the · statements of Madhava Rao as to what happened before him. Madhava Rao said that before the Committee the appellants insiste~ on payment of their full claim, but the Committee decided that the appellants must take Rs. 20 lacs in full satisfaction of thQir claim; on this Kapurchand Godha protested and sai<l that he would have to reserve· his right for the balance. The Committee thereupon ma<le it clear that they could not recomwe.ud payment of anything more, because a specific amount for distribution had been allotted to them. The reference to "& specific amount" was to a sum of rupees two orores earmarked for the liquidation of the debts of the two Princes out of a. fund known as Sa.rf-e· Kha.n_ Wha.t happened after tho Committee had mw:le its recommendation is very important. The first instalment of Rs. 11,25,000/-was paid on September 27, 1949. At that time a dispute was going on a.bout the share of the appellants to the money. The receipt which wa.s pa.BBed for the payment of Rs. 11,25,000/· is nia.rked Ex. B. That receipt does • not show whether the appellants had a.greed to accept Ra. 20 la.cs in full satisfaction of thc>ir ola.im. As to the second instalment of Ra. 8,75,000/- which was pa.id on February 14, 1950, Ma.dha.va. Ra.o give the following evidence. He said that when Ex. C was brought to him by Ka.purcha.nd Godha., the witness told the 'latter tha.t he could not make payment against that receipt as the receipt recited, reservation of the right of the appellants for the balance. The witneBB took the document, Ex. C, to Za.heruddin Ahmed who the Accountant. Genera.I then. Za.heruddin Ahmed suggested that the ola.ima.nt should endorse full satisfaction and payment of all the promissory notes a.nd then only the payment would be ma.de. The witness then said:

pp. 174–176

"Thereupon I obtained these endorsements (on the promissory notes) from Ka.puroha.nd. Ka.pur(,ha.nd whilst endorsing these documents protested tha.t he had been forced to endorse these and he wa.s not a.t a.II sa.ti.stied. This happened on the 14th of

p. 176

February, 1950." We may here state tha.t no plea wa.s raised by the a.ppella.nts to the effect tha.t tho endorsements on the promissory notes had been obtained by coercion, and no issue waa struck between the parties to the endorsements on the . promissory • notes having been obtained by ooeroioi:. That being the position, what is the effect of Madhava Rao ~s evidence ? The clear effect is that the authorities who were paying the money in disoha.rge of the debt of the respondent made it clear that they would pay the money only if a full satisfaction of the claim was given by the appellants. The appellants after some initial protests a!!l"eed e.nd duly discharged all the promissory notes by endorsing thereon full payment and satisfaction. The question of coercion was introduced as and by way of after-thought. Two facts seem to be clearly established by the evidence ofMadhava Rao. One is that the authorities r13fused to pay the second instalment unless full satisfaction of the claim was endorsed in accordance with the recommendation of the Committee; the second is that the appellants did record full payment in satisfaction of the promissory notes before they received· the money. In our opinion, these two facts clearly establi~hed the case of the respondent that the appellants had given a full discharge when they received the second instalment. Indeed, the evidence of Madhava Rao is supported by the evidence of Kapurchand Godha. Kapurchand Godha said that when he presented the receipt, Ex. C, to Madhava Rao the latter said that he would not accept the receipt in that form .. Madhava Rao then took Kapurchand to the Accountant-General. Kapurchand was asked to product> the promissory notes and was told that unless the promissory notes were endorsed with full satisfaction, no payment would be made. Kapurcband then said :

pp. 176–177

"I was told that unless I signed the receipt for full payment, no cheque would be issued to me. Thereupon I endorsed the receipt for full payment. By that I mean I was asked to endorse full payment on the vouchers and I did so. I protested and said that. as I was asked to endorse full payment, I was doing so despite the fact that I was not reoeiving full payment. Thereafter I signed the receipt as the vouchers and handed over the

pp. 177–178

documents to the Accountant-General." This evidence is in accord with the evidence of Madhava Rao and :\gain establishes that appellants when they received the second and the last instalment of Hs. 8,75,000/-gave a full discharge of their claim and the plea of coercion was later introduoed as and by way of an after-thought.

p. 178

There was some difference of evidence as to whether Ex. C bore the signature of Kapurchand when it was first presented to Madhava Rao or whether the signature wes later put on it. With that difference we are not now coni'erned. Nor are · we concerned with certain minor discrepancies between the evidence of the two witneSBes refeued to above. The substantial result of the evidence of the two witnesses to whom we have referred is that whatever reluctance Kapurohand might have had in accepting· Rs. 20 lacs in full satification of the claim of the appellants, he ultimately agreed to do so. Not only did be agree, but be actually endorsed full satisfaction and payment on all the promiBBory notes and thereafter he receive payment of the second instalment of ·Ra. 8,75,000/wbich along with the first instalment of Rs. 11.25,000/-marle up the sum of Rs. 20 laca. On these facts which are established by tho evidence given on behalf of the appellants themeelvee, the only conclusion is that there was full satisfaction of the claim of the appellants.

p. 178

The legal position is clear enough. Section 63 of the Indian Contract Act reads :

p. 178

"Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for euch performance, or may· accept instead of it any sa.tisfaotion which he thinks

pp. 178–179

fit." Illustration (c) to the section ea.ye :

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"A owes B 5000 rupees. C pays t.o B 1000 rupees, and B accepts them in satiefao. tion of his claim on A. 'l'his payment is a

p. 179

discharge of the whole claim." It seems to us that this case is completely covered by 63 and illustration ( c) thereof. The appellants having accepted payment in full eatisfactJon of their claim, are not now Antitled to sue the respondent for the balance. A reference may also be made in tbiq conn'-'ction to s. 41 of the Contract Act under which when a promisee accepts performanGe of the promise from a third person. he cannot afterwards enforce it against the promisor. There is some English authority 'to the t>ft'eot that discharge of a contract by a third person is effectual only if authorised or ratified by the debtor. In India, however, the words of s. 41 of the Contract Act leave no room for doubt. and when the appellants have accepted performance of th'3 promise from a third .person, they cannot afterwards enforce it against the promiser, namely, the respondent.

p. 179

'When a statute clearly covers a case, it is hardl,v necessary to refer to decisions. In deference however, to the arguments advanced on behalf of the appellants, we refer to tbe two decisions on which learned counsel for the appellant has relied. One is the decision in Day v. Mc Lea (1), In that case the plaintiffs made a claim against the defendants for a sum of money as damages for breach of contract ; tbe defendants sent a cheque for a less amount stating that it was in full payment of all' demands. he plaintiffs kept the cheque stating they did so on account and brought an action for the ha.la.nee of their claim. It wa.9 held that keep· ing the cheque wa.s not a.s a. matter of h.w conclusive that there was a.n a.ocord a.nd satisfaction of the cla.im ; but tha.t it was a. question of fa.ct on wha.t terms the cheque wa.e kept. We do not think that that decision is of any help to the appellant. As Lord Justice Bowen said in Day v. Mc Lea(') :

pp. 179–180

"If a person sends a sum of money on the terms that it is to be taken, if at all. in ea.tis· faction of a. larger claim ; and if the money is kept, i~ is a question of fact as to the terms upon which it is so kept. Accord and satisfaction imply an argeement to take the money in satisfaction of the claim in respect of which it is sent. If accord is a question of agreement there must be either two minds agreeing or one of the two persons acting in such a. wa.y a.s to induce tho other to think tha.t the money is ta.ken in satisfaction of the claim, a.nd to ca.use him to act upon that view.

p. 180

In either case it is a. question of fact." We ha.ve already Mferred to the facts which a.re clt>arly established by the evidence in this case. Those facts clearly established that the appellants took the second instalment in full sa.tisf11ction of their claim. The second decision relied on on behalf of the appellants Ne:uchat,el Aspkalt,e Co. Ltd. v. Barnett (') also proceded on a similar ground. In that case ibe claim of the plaintiff company amounted to £259, but the defendant raised some minor question which might reduce it by £14 or £15. The defendant then sent a cheque for £125 and stated in covering letter that this sum was "on account" pending the receipt of the pla.intifrs reply to outstancling queries in connection with the work done. Some time later the defendant enclosed a further cheque for £75 and on the back of the cheque was endorsed "in full and final settlement of the account". 'lhe l·heque was accepted by the plaintiff company, which later sued for the balanoe of the amount of the claim. It was held that having regard to the correspondence and the surrounding circumstances, there was no intention on the part of the plaintiff company to accept the cheque for £75 in full satisfaction of the plaintiff's claim, because the words "in full and final settlement of the account" typed on the back of the cheque were inconsistent with the main object and intention of the transaction, pa.rticular ly since (a) the covering letter sent by tbs defendants plainly imported that the cheque was sent only on account and not in full and final settlement, and (b) it could not reasonably be supposed that, in the circumstances,. the plaintiff company had agreed to a reduction of the amount claimed. The facts of the case before us are entirl'lly different. The appellants were clearly and unambiguously told that unless they gave a full satisfaction of their claim, they would not be paid the amount. The appellants were left in no doubt as to the condition on which payment would be ma.de to them. The appellants clearly accepted the con· dition and recorded· full .satisfaction on all the promissory notes. It is now impossible to accept the position that the appellants reserved their right to · sue the respondent for the balance of the amount. In Hirachand Punamchand v. Temp'le (1) the father of a debtor wrote to the creditor offerfog an amount less than that of the debt in full settlement of the debt and enclosing a draft for that amount. _ Tha creditor cashed and retained the proceeds of the draft and afterwards brought an action against the debtor for the balance of the debt. It was held that the creditor must be takan to have accepted the amount received by him on the terms upon which it was offered and therefore he could not maintain the action. The was considered ond"'r the English law and it was observed that assuming that there was no aooord and satisfaction in the strict sense of the law in England, it could still be held that the creditor had ceased really to be holder of the negotiable instrument on which he sued. With the nicetirs of English law in the matter of accord and satisfaction we are not concerned. The position in the present case is the.t the appellants ' must have known that they could receive the second instalment and retain the first instalment by accep· ting the condition which the sum or Rs. 20 lacs was offered to them, namely that they must record a full satisfaction or their claim. They accepted the money on the condition which it was offered and it is not now open to them to say, either in fact or in law, that they accepted the money but not the condition.

pp. 180–182

For these reasons we are satisfied that the appellato court was right in the view which it took. Therefore, the appeal raile and is dismiased with ~- ..

p. 182