WBJERASG OBIX"A, 2*—Mar*fear v. Sc&eena Vtn&na
Presejil: Weerasooriya, L, and I*. B. de Silva, 1.MARIKAR, Appellant, and SAKERNA XJMHA, Respondent
S.Q. 53—D. C. Kandy, 23701MB
Money Lending Ordinance (Cap. 67)—Section 8 (1) (a)—Re-opening of a money-lendingtransaction—A dmissibility of evidence of a novation—Mortgage bond—Evidenceto contradict terms ae to amount of loan—Admissibility— Evidence Ordinance,s. 92, proviso (1).
Under section 2 (1) (o) of the Money Leading Ordinance, a money-lendingtransaction may be re-opened to ebow that it woe in reality the novation of aprevious debt existing between the lender and a third party and that thetransaction was bar eh and •unconscionable.
Under proviso (1) to section 02 of the Evidence Ordinance, evidence is admis-sible to contradict, on the basis of a mistake of fact, the terms of a mortgagebond in regard to the amount of the loan.
Appeal from a judgment of the District Court, Kandy.
W. Jayeiuardene, Q.C., with 8. Sharvananda and L. C. Seneviratne,for plaintiff-appellant.
Vernon JonJclaas, for defendant-respondent.
Cur. adv. vult.
April 27, 1961. Weebasooriya, J.—
The plaintiff-appellant filed this action against the defendant-respondentfor the recovery of a sum of Rs. 10,300/- being the balance due on amortgage bond hTo. 7136 dated the 10th January, 1955, marked P7.The bond was executed on the basis of a loan of Rs. 6,500/- from theplaintiff to the defendant. Although there was no provision for thepayment of interest, one of the conditions of the bond was that thedefendant should deliver to the plaintiff, during a period commencingon the date of the bond and terminating on the 31st December, 1955, aminimum quantity of 144,000 lb. of green tea leaf payment for whichwas to be made by the plaintiff at the market price prevailing at thetime of delivery less four cents per pound to be kept back by the plaintiffas his “ commission The tea leaf was the produce of an extent ofsome 76 acres of Weralugollehena Estate belonging to the defendant andhypothecated under the bond. On the plaintiff's own valuation theestate was worth about one and a half lakhs of rupees. The full “ commis-sion ” payable to plaintiff came to Rs. 6,760, and the bond secured thepayment of this amount as well as the loan of Rs. 6,500/, or a total ofRs. 12,260/-. Under another condition of the bond the plaintiff was atliberty to deduct from the amount due to the defendant for the tea leafsupplied a sum of Rs. 500 per month in liquidation of the loan.
vy EERAROfVRTYA, J.—Marikar v. Sakeena Umma
According to the plaintiff, 12,000 lbs. of tea leaf were supplied by thedefendant in January, and a like quantity in February, 1955, and notea leaf was supplied thereafter. Out of the amount realised from thequantity of leaf supplied the plaintiff retained a sum of Rs. 960/- as“ commission ” and Rs. 1,000/- in liquidation of the principal; and the_Rs. 10,300/- sued for represented the balance of the sum of Rs. 12,260/-secured by the bond.
That the Rs. 6,500/- referred to in the bond as a loan from the plaintiffto the defendant was not actually lent is common ground. The plaintiff’scase is that this sum was due to him from the defendant’s husband AbdulCader on an earlier transaction between Cader and the plaintiff and tosecure the payment of which the defendant executed the bond. Thedefendant admitted the execution of F7 but her main defence was thatshe accepted the plaintiff’s representation that the Rs. 6,500/- was thebalance due from her husband to the plaintiff on the earlier transaction,that no such amount was in fact due and she was therefore not liable inany sum on the bond, and in terms of the Money Lending Ordinance(Cap. 67) she asked for a re-opening of the transactions which the plaintiffhad with her as well as her husband.
Despite the plaintiff’s unctious assertion at the trial that being a Muslimhe did not charge interest on his loans, the trial Judge rightly held thatthe “ commission ” of Rs. 5,760/- payable by the defendant on bond P7was nothing but camouflaged interest. This return within one year on aloan of Rs. 6,500/- works out at approximately 88 per centum.
Abdul Cader was at one time the owner of the 76 acres of Weralugolle-hena Estate, which he mortgaged with one Muthalib. Muthalib putthe bond in suit in D. C. Kandy Case No. 1166 MB., and obtained decreein a sum of Rs. 46,900. On his death his heirs assigned the decree toone Karupiah. In order to prevent a sale of the mortgaged propertiesat the instance of Karupiah the plaintiff advanced to Abdul CaderRs. 30,000 on a conditional transfer of Weralugollehena Estate andthis sum was paid to Karupiah in satisfaction of the decree. By a separatebond, P6 of the 18th December, 1953, Abdul Cader gave as furthersecurity for the re-payment of the Rs. 30,000 another land said to beworth three or four lakhs of rupees. The bond also provided for AbdulCader, who continued to be in possession of Weralugollehena Estate,supplying a minimum quantity of 144,000 lbs. of green tec leaf per annumon terms which were the same as in P7 ; and for the deduction of a sum ofRs. 500 per mensem in liquidation of the principal sum. On the paymentof this sum and a further sum of Rs. 11,500 within a period of two yearsfrom the date thereof the plaintiff undertook to re-transfer WeralugollehenaEstate to Abdul Cader. During the period 1st February to 31st December,1954, the plaintiff had paid himself a sum of Rs. 5,500 (at the rate ofRs. 500 per mensem) out of the proceeds of sale of the tea leaf suppliedby Abdul Cader, and also taken as “ commission ” Rs. 5,280 (at therate of Rs. 480 per mensem) and a further “ commission ” of Rs. 841/35on 28,045 lbs. of tea leaf at 3 cents per pound. Abdul Cader then soldthe land mortgaged on P6 and paid Rs. 18,000 to the plaintiff. After
WEERASOORIYA, J^-Mankar «. Satmna Umma
giving credit to the defendant in Rs. 5,500 and Be. 3.8,000, the plaintiffclaimed the sum of Rs. 6,500 as the balance due from the loan of its. 30,000.Notwithstanding that the loan remained undischarged, it would appearthat the plaintiff re-transferred WeralugoUehena Estate to Abdul Cedar,who later transferred it to the defendant. The terms on which thisre-transfer came to be made are not in evidence.
The learned trial Judge held that even in the case of the transactionbetween the plaintiff and Abdul Cader, the “ commission ” received bythe plaintiff was in reality interest. He also held that having regard tothe substantial security which the plaintiff had under P6, a reasonablereturn on the Rb. 30,000 was 12 per centum, at which rate (taking intoaccount the reduction of the principal at the rate of Re. 500 per mensem)the amount due as interest to the 31st December, 1954, was Rs. 3,270,and that any “ commission ” recovered in excess of that figure shouldbe set off against the principal sum. On this basis he held that only asum of Rs. 2,688/65 was due from Abdul Cader to the plaintiff at thetime when P7 was executed and that this sum together with interestamounting to Rs. 538 at 12 per centum up to the date of filing of action(or a total of Rs. 3,226/65) represented what was due from the defendantunder P7. Giving credit to the defendant in the sum of Rs. 1,000paid by her in reduction of the loan and the sum of Rs. 960 recoveredfrom her as “ commission ” during January and February 1955, heentered judgment for the plaintiff without costs in a sum of onlyRs. 1,266/65 as principal and interest due on P7 up to the date ofaction. From this judgment the plaintiff has filed the present appeal.
Mr. Jayewardene who appeared for the plaintiff at the hearing of theappeal did not seek to challenge the correctness of the learned trial Judge’sfinding that the “ commission ” provided for in P6 as well as P7 is in factinterest, hut he contended that in this action, which is in regard to atransaction between the plaintiff and the defendant, the latter is notentitled to ask for a re-opening of the earlier transactions between herhusband and the plaintiff. Mr. Jayewardene stressed the wording insection 2 (1) of the Money Lending Ordinance which enables a Court to“ re-open the transaction and take an account between the lender and theperson sued ”, and he submitted that the jurisdiction so conferred doesnot extend to the re-opening of a transaction between the lender andsome other person. I find that I am unable to accept this submission.
Under section 2 (1) a Court may, in any of the circumstances specifiedin paragraphs (a), (6) or (c) therein, re-open the transaction and take anaccount between the lender and the person sued. Paragraph (a) refers,inter alia, to a case where there is evidence which satisfies the Courtthat the transaction embodied in the agreement or security sought to beenforced “ was harsh and unconscionable, or, as between the partiesthereto, substantially unfair These provisions, in my opinion, implythat when such a question arises for consideration evidence may be ledregarding a previous transaction, whether the parties thereto are thesame or not, whioh is relevant to that question.
WEERASOORXYA, J.—Martkar v. Sakeena Ultima
In view of the defence that P7 was executed on the basis of an incorrectrepresentation by the plaintiff that Rs. 6,500 was the balance due fromAbdul Cader on the earlier transaction, it became relevant to ascertainwhether such balance was Rs. 6,500 or a lesser amount. This necessarilyinvolved a scrutiny of the transaction between the plaintiff and AbdulCader. We were referred by Mr. Jonklaas, who appeared for the defen-~dant, to the case of Ramalingam Pillai v. Wimciloratne et al.1 which was anaction on a promissory note said to have been made by the second defendantin favour of the first defendant and endorsed by the latter to the plaintiffwho claimed to be the holder in due course. It was apparent, however,that the transaction evidenced by the note was, in part at any rate, a loanby the plaintiff to the defendants. Prior to the making of the note theplaintiff had various money lending transactions with the second defen-dant’s father, to some of which the first defendant was alsi a party.The second defendant’s father having then fallen seriously ill, the twodefendants approached the plaintiff for a further loan to defray medicalexpenses. The plaintiff refused to give any loan unless they agreed totake over the debt owing to the plaintiff from the second defendant’sfather and which, according to the plaintiff, was Rs. 2,350. A promissorynote for Rs. 3,000 was thereupon made out as for a loan by the firstdefendant to the second defendant, signed by the latter and endorsedby the former, and retained by the plaintiff. The Rs. 3,000 included theRs. 2,350 said to be due from the second defendant’s father to the plain-tiff, a further sum of Rs. 380 lent to the two defendants by the plaintiffand Rs. 270 kept back as interest. At the same time the plaintiffhanded over to the second defendant two notes by the latter’s father forRs. 2,000 and Rs. 300 and a receipt forRs. 50. Dalton, A.C.J. (in ajudgment with which Koch, A.J., agreed) held that all the essentials toeffect a valid novation of the contract were present in that case. Healso held that as the defendants had no knowledge of all the transactionsbetween the plaintiff and the second defendant’s father, and had toaccept plaintiff’s account as correct if they were to obtain the loan theywere seeking, they had made out a case for the re-opening of the transactionbetween them and the plaintiff, and he observed that the legality of theprevious transactions between the plaintiff and the second defendant’s fathermay also have to be considered in that connection.
In the present case the evidence shows that the transaction betweenthe plaintiff and the defendant was intended by all the parties as anovation of the debt—whatever the actual amount of it—then duefrom Abdul Cader to the plaintiff. In considering the defence as tohow the sum of Rs. 6,500 came to be mentioned in P7 as the amountof the loan, it clearly became relevant to look into the earlier transactionbetween the plaintiff and Abdul Cader. I think the evidence relatingto that transaction is admissible under proviso (1) to section 92 of theEvidence Ordinance to contradict the terms of P7 in regard to the amountof the loan (on the basis of a mistake of fact). Such evidence is alsoadmissible under paragraph (a) of section 2 (1) of the Money Lending
1 (1933) 35 N. L. R. 379.
WEBB. ASO OBXYA, J,—Mmikar v. Sa&sena Ummo
Ordinance to prove the harsh and unconscionable nature of the trans-action embodied in 3?7 or that it was substantially unfair as betweenthe parties thereto. There can be no doubt that if the extent of theindebtedness of Abdul Cedar to the plaintiff under the earlier transactionbe regarded as substantially less than Rs. 6,500/-, the transactionembodied in P7, which seeks to make the defendant liable in the greatersum incorrectly represented to her as the actual amount due from AbdulCader, is a harsh and unconscionable one from which she should begiven relief under section 2 (1) of the Money Lending Ordinance.
I am of opinion, therefore, that the learned District Judge was quiteright in admitting evidence relating to the earlier transaction (to whichno objection at all was taken at the trial by plaintiff 's counsel) and inbis findings as to the true nature of the “ commission ” payable there-under and the reasonable rate of interest chargeable. On the basisof these findings there was, as stated earlier, due to the plaintiff a sumof Rs. 33,270 as principal and interest. Deducting from this the sumof Rs. 30,581/35 said to have been recovered by the plaintiff from AbdulCader, the balance Rs. 2,688/65 was held by the Judge to be due fromAbdul Cader to the plaintiff at the time when P7 was executed. It isnot correct, however, to say that the plaintiff had recovered a sum ofRs. 30,581/35 from Abdul Cader. The actual amounts received are asfollows: Rs. 18,000 paid by Abdul Cader in a lump sum, Rs. 5,500deducted by the plaintiff in eleven monthly instalments of Rs. 500,Rs. 5,280 deducted as cc commission ” at the rate of Rs. 4S0 permensem for the eleven months February to December, 1955, and afurther sum of Rs. 841/35 deducted as commission on the sale of28045 lbs. of tea leaf at the rate of -/03 cents per lb., making a total ofRs. 29,621/35. The figures relating to “ commission ” and monthlyinstalments I have taken from the entries in the plaintiff’s pass bookP8 the correctness of which was not in dispute. The last item in theaccount for 1954 in P8 refers to a sum of Rs. 1,821 /35 as ” commissionBut this sum includes the December instalment of Rs. 500 against theloan and Rs. 480 recovered as “ commission ” on the sale of tea leafwhile the balance sum of Rs. 841 /35 is the “ commission ” on the saleof an additional quantity of .28045 lbs. of tea leaf. Deducting from thesum of Rs. 33,270 due to the plaintiff the sum of Rs. 29,621/35, beingthe total of the amounts recovered, Abdul Cader still owed the plaintiffthe sum of Rs. 3.64S/65 at the time when P7 was executed on the 10thJanuary, 1955. This sum must therefore be deemed to represent thedefendant’s initial liability on the bond P7.
The interest at 12 per centum on Rs. 3,648/65 for the period 11thJanuary to the 31st January, 1955, is Bs. 24/32, whereas tbe plaintiffreceived during the same period Rs. 500 in reduction of the principaland Rs. 480 as “ commission ”, or a total of Rs. 9S0. Deductingfrom Rs. 980 tbe sum of Ra. 24/32 as interest, the balance Rs. 955/68should be set off against the principal sum of Rs. 3,648/65 leavingRs. 2,692/97 due as principal on the 1st February, 1955. The interest
Seemon Singho v. Wickremasinghe
on this sum for February is Rs. 26/93, after deduction of which fromthe sum of Rs. 980 received by the plaintiff during that month thereis left Rs. 953/07 to be set off against the principal sum of Rs. 2,692/97.The principal outstanding as on the 1st March, 1955, is, therefore,Rs. 1,739/90. The interest on Rs. 1,739/90 at 12 per centum from 1stMarch, 1955, to the 22nd August, 1956, when action was filed, isRsT~308/53. The total amount due as principal and interest from thedefendant at the date of filing of action, is, therefore, Rs. 1,739/90 plusRs. 308/53, or Rs. 2,048/43.
The decree appealed from will accordingly be varied by substituting-the sum of Rs. 2,048/43 for the sum of Rs. 1,266/65 as the principal and•interest due on bond No. 7136 up to the date of action.
As the plaintiff has succeeded only in part in this appeal I make noorder as regards the costs of appeal.
B. de Silva., J.-—I agree.
Appeal partly allowed.
MARIKAR, Appellant, and SAKEENA UMMA, Respondent