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TMI Blog1940 (9) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ad interim attachment was obtained on 14th September 1933; but on 6th November 1933, in the presence of defendant 1, these bills were released from attachment, although the attachment of other immovable properties was confirmed. The suit was eventually decreed on 3rd April 1935, and it was upon that date (the actual date is not before me) that this attachment, upon which the defendants-appellants rely, was made. On 12th July 1935, the present plaintiff put in a claim case under Order 21, Rule 58, Civil P.C. It was the case of the plaintiff that he had advanced sums of money to defendant 1 to finance his contracting business which he was carrying on for the Bengal Nagpur Railway. 3. The claim case which the plaintiff started was supported by hatchitha representing the sums of money alleged to be advanced by the plaintiff to defendant 1. The case came on for hearing in January 1936, and after evidence had been adduced, the plaintiff (claimant) asked for leave to withdraw his claim and the Court granted the leave asked for on 11th January 1936. Two days later the claimant (plaintiff) withdrew from the Court the hatchitha which as I have stated he adduced in evidence to support his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thirty-four but it was never carried into effect nor was it acted upon by the mortgagee except for the purposes of advancing money in order to enable the mortgagor to carry on the business and the said partnership has since dissolved, etc. etc. It was upon this deed of hypothecation that this suit was brought. 6. A number of points were argued in the Court below and they are argued in this appeal. The learned Judge in the Court below overruled the contentions of the defendant-appellants and has given a decree to the plaintiff. Hence this appeal. The first point argued was that the suit was not maintainable by reason of the relationship of partners which existed between the plaintiff and defendant 1 and by reason of the agreement arrived at in the claim case between the plaintiff and defendants 2 and 3 (appellants). The agreement in the claim case was, as I have said, that the plaintiff undertook not to bring a suit under Order 21, Rule 63, Civil P.C. Secondly it is contended that this deed of hypothecation is nothing more than an arrangement to delay and defeat creditors within the meaning of Section 53, T.P. Act. 7. The last question, apart from the question of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted unless of course there are any inherent improbabilities.] 10. If we were to come to a conclusion that the argument presented to us by the appellants in this matter should be accepted, it would be impossible to support such a judgment by any juristic reasons. In my judgment, so far as the appellants' case depends upon any question of fact, it must be decided in the same sense as the learned Judge in the Court below has decided it, and I must come to the conclusion that these sums of money were in fact advanced by the plaintiff to defendant 1. Now I come to the question of partner, ship. The appellants rely upon the decision in Bhugwandas v. Rivvet-Carnac (1899) 23 Bom 544. The substance of that decision is that a Court cannot order partnership moneys recovered from the debtors of the firm to be paid over by the receiver to one partner to the exclusion of the others without taking accounts of the partnership. 11. There can be no dispute in my judgment in regard to that proposition. But the contention that this action cannot be maintained by reason of the existence of the relationship of partnership between the plaintiff and defendant 1 cannot be supported for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the business of the defendant first party. 14. Then Clause (v) of the partnership deed says: That the said Sailaja Kanta Mitra of the second part will keep proper accounts of all moneys advanced by him and the payments received by him on account of the bills, and Clause (vi) provides: That the said Sailaja Kanta Mitra of the second part will deduct the amounts advanced by him with interest at rupees twelve per cent, per annum from the amounts that will be collected by him and the amount of interest received will be his share of the profits in the said contract business. We are not concerned with the other provisions. Looking at this document in the light of the provisions of Section 4 and Section 6, Partnership Act, it is first to be observed that there is no share in the profits as such. The plaintiff was to be paid interest on his advances at 12 per cent, per annum. 15. It was certainly described as his share of the profits. But whatever name the parties gave to it, it could not possibly be said that this was a share of the profits. The defendant might have been insolvent, he might have been carrying on the business at a loss, even so the plainti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of partner, ship, and the fact that it was necessary to include a provision of this kind rather indicates that the persons were not partners, or, at any rate, whatever they may have called themselves they understood that that relationship did not exist between them. The authority to which I have referred is no authority for the case argued; and the passage in the judgment on which reliance is placed by the appellants does not support the contention put forward, as that passage is prefaced by the following observation of Sir Montague Smith who delivered the judgment of their Lordships of the Privy Council: It was strongly insisted for the appellants that if 'a true partnership' had not been created under the agreement, the Watsons were constituted by it the agents of the Raja to carry on ,the business, and that the debt of the plaintiffs was contracted within the scope of their agency. 18. It is in relation to that matter that the last two paragraphs of the judgment which are relied upon by the appellants were uttered. In my judgment there was no relationship of partners between these parties by reason of this deed; and, secondly, even if the partnership existed, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efendant, made this statement: I met Haridas Babu, son of Lalit Babu, and requested him to insert such undertaking in order to avoid criminal prosecution of his brother and unpleasantness of this kind. But Haridas Babu did not agree to pay Rs. 10 as fee paid by Karnidan to his pleader Amar Babu. At my request Amar Babu returned his fee which I made over to Karnidan and thus the matter was brought to a close. The petition for a contemplated criminal action was withheld accordingly. The other petition containing such undertaking was filed in. Court. 20. The witness in cross-examination said: I did not read the petition for contemplated prosecution but I was told by somebody about it. Witness 3 for the defendant, Amrendra Nath Mukharji, states: I remember that in January 1936, when I was in Subdivisional Magistrate's Court, defendant 2 gave me a petition and vakalatnama to be moved before this Court with a view to have some hatchitha or chithas filed by Sailaja Mitter to be kept in Court's custody for Court's enquiry because it was a suspicious piece of document. I must say that I find it difficult to ascertain from that evidence, which I read in detail purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The consideration or object of the agreement is lawful, unless it is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. 23. The appellants in this connexion rely upon a decision of this Court in AIR 1917 Pat 454 Bukhdeo Das v. Mangal Chand. There the decision was that when an agreement was come to on a mere threat to prosecute or on an apprehension that prosecution would take place, such threat or apprehension would not be sufficient to vitiate the agreement. The learned Judges there (Chapman and Jwala Prasad JJ.) quite clearly laid down that: Where the consideration for an agreement is a .promise not to prosecute for an offence which is not compoundable, the agreement is not enforcible by law, but this limitation of freedom of contract should only be enforced where it is quite clear that the consideration for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the reference or ekrarnama as the case may be was unlawful. 26. And then they proceeded to rely upon the Case in (1892) 1 Ch 173 Jones v. Merionethshire Permanent Benefit Building Society. I should have said that in this connexion reference was also made to Golap Jan v. Bholanath (1911) 38 Cal 880. Later they proceeded to say, though not in express terms, that in consideration of the executants admitting the share of the plain, tiffs they would not proceed with the charges laid against the accused. If any authority is needed, this in my judgment is the clearest possible authority on the point contended for by Sir Manmatha Nath Mukherji that (evan if we are to hold contrary to his contention on that point, as regards the necessity of starting a prosecution) it was not an illegal consideration. In my judgment this agreement, if made by the plaintiff, was an agreement for consideration which was illegal and therefore not binding upon him. 27. The other contention of the respondents in the circumstances it is unnecessary to determine. That was whether Section 28, Con-tract Act, was a bar to the enforcement of the agreement. Section 28 provides: Every agreement, by which any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this rule it was long since determined that, if a person after mature deliberation enters into an agreement for the purpose of compromising a claim bona fide made to which he believes himself to be liable....the compromise of such a claim is a sufficient consideration for the agreement, and the agreement is valid. The next decision relied upon is in AIR1925All503 Gajendra Singh v. Durga Kumari where the learned Judges came to the conclusion that the agreement arrived at was substantially a case of Order 23, Rule 3. The case was complicated by the other point, namely the criminal prosecution, but the learned Judges came clearly to the decision that the agreement was not invalidated by Section 23 or Section 28, Contract Act. It seems to me however that this matter is concluded, so far as this Court is concerned, by the decision of Fazl Ali and James JJ., in AIR 1934 Pat 644 Bhirgunath Prasad v. Mt. Annapurna Dai where similar agreement set out in the judgment of my learned brother Fazl Ali was held not to come within the mischief of Section 28, Contract Act. 31. I have referred to these cases somewhat briefly because I have already come to the conclusion that the agreement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers of moveable property. But as an analogy the learned Judges referred I might add to the statute of 13 Elizabeth, c. 5 and to Section 53, T.P. Act, and made this observation: We are equally satisfied that no money was due to Chidambaram. We think that there can be no doubt that the arrangement effected by the assignment, though partly entered into for the purpose of discharging debts really due by Sami Aiyar, was also clearly intended to secure a sum of over Rs. 7000 to the assignor himself or to persons in whom he was interested, but who were not his creditors....The assignment therefore operated to screen some 60 per cent, of his assets from being taken by his other creditors. The learned Judges also made this statement: As observed by the Judicial Committee of the Privy Council in Corlett v. Radclifle (1860) 14 MPC 121 ) each case must depend upon its own circumstances, and in all the question is one of fact, whether the transaction was bona fide or was a contrivance to defraud creditors. As I have already said they applied by analogy the provisions of the English statute of 13th Elizabeth c. 5 and Section 53, T.P. Act. But the statute of 13th Elizabeth does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recognized; the Court of Chancery did recognize them. The Chancery Court would enforce such rights as between the parties. Then came the Judicature Act which made certain provisions entirely different from the provisions of Section 130. The only resemblance is that they both relate to transfers of actionable claims. Section25 of the Judicature Act expressly excludes transfers by way of security; Section 130, T.P. Act, expressly recognize them. Under Section 25, Judicature Act, notice is necessary, while under Section 130, T.P. Act, no notice is necessary. 38. That there is a hypothecation of these actionable claims there is no doubt. But the question which arises is, what has the plaintiff got by that hypothecation? Their Lordships of the Privy Council in Mulraj Khatau v. Vishwanath Prabhuram Vaidya (1918) 37 Bom 198 decided that Section 130, T.P. Act, which provided that the transfer of an actionable claim shall be effected only by an instrument in writing, applied not only to absolute assignments but also to assignments by way of charge, and the deposit without writing of a document of title to such a claim does not create any equitable charge. The action there was brought b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely transferred to the transferee under Section 130, T.P. Act. The learned Judges observed: That the transfer of the debt by way of security as in this Case is good under the Transfer of Property Act, has not been seriously questioned at the bar as it could hardly be in the face of Section 134. Even in the sense of the English law, the assignment under Exs. A and E would be an absolute assignment. 42. In the decision in Mutbukrishna Aiyar v. Veeraraghava, Iyer AIR (1915) Mad 1031 the learned Judges followed the decision in 40 IA 2416 to which I have referred. The Chief Justice made this observation: Under Ex. A the defendants mortgaged to the plaintiffs a house and a promissory note which had been executed to the defendants, by a third party as security for money owing by the defendants to the plaintiffs. The promissory note was not endorsed to the plaintiffs.... and then observed later: The mortgage thereof was in my opinion, a transfer of an actionable claim within the meaning of Section 130, T.P. Act, which vested in the transferee the rights and remedies of the transferor, subject to the equities which remained in the transferor by reason of the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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