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TMI Blog1952 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... instalments. The first instalment was to fall due on 23rd June 1937 and the last was payable on 23rd December 1942. It was further provided that in default of payment of any two instalments the whole amount would become payable with interest allowed by law. The Hindustani expression used in the compromise was rather clumsy. It was: "Kul mutalba ekmusht mae sud qanooni lagaya jawe." As it stands the expression is meaningless, but there can be no doubt that parties meant what we have stated above. No instalment was paid. An application for the preparation of a final decree was made on 26th July 1943. The decree-holder claimed that he was entitled to get a final decree prepared in respect of all the twelve instalments. 3. Now, if regard be had to the default in payment of the first two instalments then the cause of action accrued on 23-12-1937, and an application for preparation of the final decree should have been made by the latest on 23-12-1940. But if regard be had to the last of the defaults or to the individual instalments alone, then it was clear that the last five instalments, namely, those that fell due on 23-12-1940, 23-6-1941, 23-12-1942, 23-6-1942, and 23-12-194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ault is made, unless where the payee or obligee waives the benefit of the provision, and then when fresh default is made in respect of which there is no such waiver. Article 80: Suit on bill of exchange, promissory note or rond not herein expressly provided for. (3 years) When the bill, note or bond be-domes payable Article 120: Suit for which no period of limitation is provided elsewhere in this schedule. (6 years) When the right to sue accrues. Article 132: To enforce payment of money eharges upon immovable property. (12 years) When the money sued for becomes due. Article 181: Applications for which no period of limitation is provided elsewhere in this Schedule or by S. 48, Civil P. G., 1908. (3 years) When the right to apply accrues. Article 182: For the execution of a decree or order of any Civil Court not provided for by Art. 183 or by S. 48, Civil P.O., 1908. (Three years;or where) (a certified copy of ) (the decree or order ) (has been registered ) (six years. ) (Where the application is to enforce any payment which the decree or order directs to be made at a certain date (such date). 8. In Juneswar Das v. Mahabeer Singh 1 Cal. 163 a case falling under A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t date yet in their Lordships' view he was not bound to do so and if he elected not to do so, his cause of action nevertheless arose when the payment was not made on the date fixed in the bond. In other words, the second cause of action was to be taken into account when the default clause was for the benefit of the mortgagee. 9. In Gaya Din v. Jhumman Lal 37 ALL. 400 a Full Bench of this Court had to consider a case falling under Article 132. There was a mortgage bond in which the mortgage money was payable after a certain period. There was a default clause to the following effect : "If we fail to pay the interest aforesaid in any month, on the principal by the end of the stipulated period, as specified above, or no payment is made in a year, the mortgagee shall, under all these circumstances, be at liberty to realise the entire amount with the interest aforesaid in a lump sum, through Court, by means of a suit, from the mortgaged and other moveable and Immovable property and the persons of us the executants." It was held by Richards C.J. and Tudball J. that within the meaning of the article the money became due as soon as it could be legally demanded, that is, up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Board observed as follows : "Applying certain previous decisions of that Court, and in particular a Full Bench decision in Gaya Din v. Jhumman Lal 37 All. 400 the High Court held that under a clause in the above form a single default on part of the mortgagors, without any act of election, cancellation or other form of response or acceptance on the part of the mortgagees, and even, it would appear, against their desire operates, eo instanti, to make the money secured by the mortgage "become due," so that all right of action in respect of the security is finally barred twelve years later, that is in the present case, on 21-2-1906. All this the High Court held, notwithstanding that the mortgage is for a term certain, a "provision which may be as much for the benefit of the mortgagees as the mortgagors, and notwithstanding that the proviso is exclusively for the benefit of the mortgagees. The decision also apparently proceeds upon the view that the words of the English Limitation Act and the English decisions thereon apply without question to the words of Article 132 of Schedule to the Indian Act--a conclusion which, as it seems to their Lordships, may invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Bench which referred five questions for decision by a Full Bench. 17. In the Full Bench, Boys J. held that the instalments as individual instalments could be recovered under Article 182, Clause (7) within three years of their falling due and that the whole amount then remaining due could be recovered within three years of the last of two consecutive defaults under Article 181. Sulaiman A. C. J. after pointing out that in that case the default clause did not provide that in case of default the decree-holder shall have power or option to recover the amount, but provided that the amount shall be paid by the defendants to the plaintiffs, held that this difference in language was not material. In his Lordship's opinion Article 181 was applicable to the relief claimed under the default clause and relying upon the Privy Council case just cited, Maung Sin v. M Tok LR 54 Ind. App. 272 concurred with Boys J. in holding that: If the application for execution is one for the remaining unpaid balance of the decretal amount under the default clause, it is not governed by Article 182, at all but by Article 181, and limitation will run from the date of the last of any two successive defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, have power to realise the entire mortgage money and the remaining interest and compound interest due to him in a lump sum through Court by sale of the mortgaged property. There was default in payment of interest, but the mortgagee did not avail himself of the option given to him. He sued upon the mortgage after 12 years from the date of such default but within twelve years from the date of the expiry of the stipulated period of six years. Sir George Lowndes delivering the judgment of the Board observed as follows: "There can be no doubt, as pointed out by Lord Blaneshburgh, a proviso of this nature is inserted in a mortgage deed "exclusively (or the benefit of the mortgagees", and that it purports to give them an option either to enforce their security at once, or if the security is ample, to stand by their investment for the full term of the mortgage. If on the default of the mortgagor, in other words, by the breach of his contract the mortgage money becomes immediately 'due' it is clear that the intention of the parties is defeated and that what was agreed to by them as an option in the mortgagees is, in effect, converted into an option in the mortgag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. It will be observed that the reasoning upon which the decision was based was that where a default clause is inserted in a bond "exclusively for the benefit of the mortgagee" and gives him an option to either enforce the security at once, or, if the security is ample, to stand by his investment for the Full term of the mortgage, the mortgagee is not bound to sue at once upon the happenning of the default, but may wait and sue when the time fixed for the payment expires. It is true that while distinguishing the case of Beeves v. Butcher 1891 2 QB 509 (supra), their Lordships have observed that: "If in the Indian cases the question were did the mortgagee's cause of action arise? i.e., when did he first become entitled to sue for the relief claimed by his suit --their Lordships think that there might be much to be said in support of the Allahabad decisions." he words "there might be much to be said in support of the Allahabad decisions" are significant. Where two views are possible and much can be said on both sides, the mere fact that much can be said in favour of one view does not mean that that view is necessarily correct. Having regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase laid "stress upon the point that the provision enabling the mortgagees to sue before the expiry of the stipulated period is inserted exclusively for the benefit of the mortgagees' giving them an option either to enforce their security at once, or, to stand by their investment for the full term. I take this to mean that the mortgagee has an option of treating the money as having 'become due' by demanding or suing for it, and it does not become due unless he exercises his option, even though the mortgagor may already have a right to redeem in accordance with the terms of the mortgage contract. If we hold that time begins to run for a suit to enforce the mortgage from the date of the first default that gives an optional cause of action, then it could not be said that the provision is inserted exclusively for the mortgagee's benefit. He would have to sue within twelve years from the date of the first default although he might prefer to stand by his investment for the full term and then sue within twelve years from the expiry of that term. He might indeed be compelled to sue before the expiry of the full term, if the term were 13 years or more. In my view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench case, to our minds, equally apply to the present case. 26. In Ram Prasad Bam v. Jadunandan Upadhia 1934 ALJ 772 however, there was a compromise decree fixing payments of certain instalments on specified dates. It provided further that: "In the case of default in the payment of two successive instalments, the decree-holder would be entitled to realise the entire balance of his decretal amount, irrespective of the fact whether or not instalments have fallen due, by execution of the decree." An application for execution was made more than three years after the first default in the payment of two successive instalments. Sulaiman C. J. and Mukerji, J. held that the decree-holder's right to receive the instalments as and when they fell due was not barred but that his right to enforce the payment of all the instalments that might remain unpaid, in the event of two successive instalments remaining unpaid was time barred. The application was made more than three years after the right to apply first accrued on the default of first two instalments. This ruling was given in spite of the Full Bench decision in Joti Prasad v. Sri Chand 51 ALL. 237. Their Lordships felt not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly once on the occurrence of the first default. 30. This leads us to a consideration of the last case in this series. 31. In Mt. Bhagwati v. Sant Lal a Bench of this Court consisting of Verma and Pathak JJ. had a case very much similar to the present case. In that case the preliminary decree for sale provided that the decretal amount would be paid in instalments and in case of non-payment of any three instalments the entire amount would be payable in a lump sum. It was held that the expression "When the right to apply accrues" in Article 181 meant "when the right to apply first accrued". Their Lordships relied upon the sentence in Lasa Din's case so often quoted by us already. Their Lordships held that the Privy Council case in Maung Sin v. Ma Tok LR 54 Ind. App. 272 was different. They distinguished the case in Sam Dutta v. Mahpal Singh AIR 1938 Oudh 112 on the ground that in that case the preliminary decree conferred an option on the decree- holder to obtain a final decree on default of any one instalment when the entire amount unpaid became payable, and observed that if there was anything in the judgment of the Chief Court which may be said to be in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Whether the answers to the above two questions would be affected if the default clause instead of being worded as "the decree-holder shall have a right to apply," or "the decree-holder shall have the option to apply", is worded as "the entire decretal amount shall become payable," or "the entire decretal amount shall become due", or, "the judgment-debtor shall pay the entire decretal amount", even though in all these cases the default clause be intended for the benefit of the decree-holder? We, therefore, order that the case may be laid before the Hon'ble the Acting Chief Justice for the constitution of a Full Bench for a decision of the above questions. Opinion of the Full Bench Chandra Bhan Agarwal, J. 33. The following questions have been referred to us for decision by a Bench of the Court: [After stating the questions referred his Lordship continued]. 34. The appellant judgment-debtors brought a suit for accounts under Section 33, U. P. Agriculturists' Belief Act. On 6-10-1936, a decree-was passed in favour of the creditor-respondent. The amount found due was made payable in 12 sis-monthly instalments. It was pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and it is not necessary to repeat what has been stated therein. 37. The Article of the Indian Limitation Act applicable to an application for the preparation of a final decree is 181. The period of limitation for the application is three years and it begins to run from the time "when the right to apply accrues." The right to apply may occur only once or may occur more than once. It will all depend upon the cause of action. It is an error to suppose that in all cases the right to apply can accrue only once. No doubt, for one particular cause of action the right to apply can accrue only once. But where there are different causes of action, or where after the accrual of one cause of action, another cause of action arises by reason of a change in the circumstances the right to apply can be said to arise upon the accrual of each of the causes of action. For example, in respect of a preliminary decree payable by instalments when there is no defaults clause, as many applications for the preparation of a final decree can be made as there are instalments to be recovered. It cannot be that in such a case there should be only one final decree, for if an application for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the decree-holder is bound to apply for the recovery of the whole amount due under the condition on the very first default or he can waive the default and apply on the basis of a subsequent default. To my mind, the decree-holder can waive the first or subsequent default and apply for the preparation of a final decree on the basis of the default not waived. Of course, in such a case he cannot claim to recover instalments already barred by time. To hold that he is bound be apply on the very first default is to hold that he has no option which would be to deny the very hypothesis upon which the question is posed. It is said that the right to apply must mean the first right to apply, and that, therefore, even though there is an option in the decree-holder to enforce the default clause or not to enforce it, still he must apply upon the very first default. I cannot accept this argument. It seems to me that if the decree-holder has a right to waive or condone the default he can avail of the second default and then apply, because his right to apply upon each subsequent default when the previous defaults have been waived is based upon a different cause of action. The first cause of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first become entitled to sue for the relief claimed by his suit--their Lordships think that there might be much to be said in support of the Allahabad decision" should not be taken to mean that their Lordships finally decided that the mortgagee's cause of action arose on the first default even though the mortgagee had a right to waive or condone the first default. To my mind the decision of the Privy Council in Maung Sin v. Ma Tok is decisive upon the question under consideration. In that case there was a decree against the husband in favour of the wife directing the husband to pay ₹ 2,000 annually to the wife and to remain in possession of the disputed property. It further provided that in case of default of payment, the wife would be entitled to take possession of the property. There was default on several occasions. More than three years after the first default, the decree-holder applied on the basis of a fresh default for recovery of the amount then due and also for the recovery of possession over the disputed property. It was held, that the decree-holder was entitled not only to the instalments claimed but also to the delivery of possession of the disputed pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that the Legislature treats this clause also as giving an option to the creditor which he can waive, vide the third column of the Article. 44. In Shib Dutt v. Kalka Prasad 2 ALL. 443 and in Dulsook Rattanch Ind v. Chugon Narrun 2 Bom. 356 the Courts held that a provision similar to the provision in the present case implied that the instalment arrangement ceased to exist. With respect, I am unable to agree with this construction of the default clause. There was no express statement that the instalment arrangement shall cease and there was nothing to show that the default clause was not for the benefit of the creditor but was equally intended for the benefit of the debtor. 45. In my opinion the case of Mt. Bhagwati v. Santlal was not correctly decided. In that case a Bench of this Court construed the default clause which was in very much similar terms to the default clause in the present case as if it extinguished the instalment arrangement and left no option to the decree-holder. This was contrary to the Full Bench decision in Joti Prasad's case 51 ALL. 237. Further when the learned Judges observed that "when the right to apply accrues" under Article 181 mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich case limitation would not run from the default which was condoned or waived but from the default which the decree-holder treated as a default under the decree. 47. After making these observations the learned judges pointed out that in the case before them no question of waiver or condonation arose as the decree-holder treated the first default made by non-payment of two instalments as a default under the decree and it was on the basis of that default that he filed his darkhast of 1936 claiming the whole amount due under the decree. It is, therefore, clear that the learned Judge held that if the decree-holder "waived or condoned the default" or, in other words, exercised his option not to enforce the default clause on the first default, limitation would not begin to run against him. This is precisely what I have stated above. The learned judges, however, seem to have been of the opinion that there must be an agreement of both parties in order that waiver or condonation may take effect. Say they : "Where the parties agree not to treat failure on the due date as a default then in the eye of law there is no default at all and limitation does not begin to run and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner alone. If a debtor pleads that he is released from the performance of a contract because the creditor has waived his rights under the contract, he has to show that the waiver of the right to have the contract performed or a release from the obligation of the performance of a contract was such as would be binding upon the creditor, e.g. either by reason of estoppel or by reason of a fresh agreement (which must be under the Indian Law for consideration and which may be under the English Law for consideration or under seal) vide Halsbury's Laws of England, Vol. VII, p. 250. This principle is not applicable to the exercise of an option by a creditor. No fresh agreement or estoppel is required for the effectiveness of the exercise by a creditor of the option to waive or condone a default. The distinction between the two classes of cases should always be borne in mind when dealing with a question of waiver. 51. Proof of waiver or condonation of a default will depend upon the circumstances of each case. Where a creditor asserts that he has waived or condoned previous defaults and applies to enforce the default clause upon the happening of a subsequent default, he is entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an instalment decree with a default clause the question for consideration is whether on a true interpretation of the decree after a default is made the only cause of action surviving to the decree-holder is the cause of action based on the default clause or the causes of action for payment of instalments on the dates fixed survive even though default may have been made and the whole amount may have become recoverable. If the decree ceases to be an instalment decree on default and the only relief avail, able to the decree-holder is the relief for realisation of the whole amount, the application must be made within three years of the date on which the default was made giving rise to a right to recover the whole amount. If, however, the default clause gives the decree-holder a mere right or an option, there appears to be no reason why he should not avail himself of the option and choose his remedy. In my opinion, the question must depend upon the interpretation of the decree itself. 56. would probably clarify matters if I were to give a few illustrations. If an instalment decree provided in clear terms that on default of two instalments being made the decree shall cease to be an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of a particular cause of action arises, it is the first date of the arising of the cause of action that is material for an application under Article 181. Subsequent breaches in payment of instalments cannot be relied upon to give each time a fresh right to rely on the default clause and to claim the whole decretal amount. 60. A case may arise, however, in which defaults have been made in payment of instalments giving rise to a right in the decree-holder to claim the whole amount, but before the decree-holder could bring such a claim the judgment-debtor had paid up the instalments with reference to which he had defaulted and the decree-holder had waived the default with the result that he had no longer the right to rely on the default clause, thereafter if on a later date fresh defaults are made, would the decree-holder have the right to rely on the fresh defaults and bring a suit for realisation of the whole amount then due? As at present advised I consider that the decree-holder having waived the default the cause of action on the earlier defaults had ceased to exist and the decree-holder can rely on the subsequent defaults, claim that there was a fresh cause of action a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essive instalment as it falls due, provided the decree is not so worded that the only right left to the decree-holder after the first default is to realise the whole decretal amount. 2. The answer to the second question is the same, that is, the right to apply for a final decree in respect of the instalments not barred by limitation as individual instalments would remain intact in spite of the omission to take advantage of the default clause provided the default clause is not so worded that the decree-holder has a right to rely on that alone and the decree after the default ceases to be an instalment decree. 3. It is immaterial that the default clause is worded as "the decree-holder shall have a right to apply", or as "the decree-holder shall have the option to apply", or as "the entire decretal amount shall become payable", or as "the entire decretal amount shall become due", or as "the judgment-debtor shall pay the entire decretal amount", as in all such cases the default clause is to be interpreted liberally and for the benefit of the decree-holder and the rights of the decree-holder mentioned by us in our answers to question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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