PALANIAPPA CHETTY v. SAMINATHAN CHETTY et al

042-NLR-NLR-V-15-PALANIAPPA-CHETTY-v.-SAMINATHAN-CHETTY-et-al.pdf


( 1«1 )Present : Laseelles C. J. and Wood Benton J.
1M8.
PALANIAPPA CHETTY v- SAMINATHAN' CHETTY et al
3S—D. G. Colombo, 30,719.
Payment of debt by a promissory note—Conditional payment—Aotion onnotes dismissed for material alteration—Subsequentaction for- the
recovery of the originalconsideration—Besjudicata—Civil
Procedure Code, $s. 34,207.
Thedefendants gavetheplaintifftwopromissory notes aBa
conditional discharge of their indebtedness. The plaintiff suedthe defendants on the notes, but the action was dismissed on thegroundthat'the noteswere materially alteredby theinsertion of
a rateofinterest.The plaintiff thereuponbroughtthe present
actionfor the recovery ofpart oftheoriginal considerationin
respect of which the notes were granted.
Held,that plaintiff'saction was not barredby thedismissal of
the previous action upon the notes.
Wood AlstonJ.—" Section34 of the CivilProcedure Code
does not require a plaintiff to exhaust in one suit all the causes ofaction that he may have at the date of the suit in respect of- thep 'operty or the relief claimed by him, and of which he was then
Lascelles C.J.—“ The crucial question in a case like this is notwhether the subject-matter of the * present action, that is to say,the moneys sought to be recovered, is the same as part of thesubject-matter inthe former action.Thequestion is whether the
' cause of action,' that is, the question of right involved in the twoactions, is identical.They appear to me to be essentially different.
In the one caseitis the failure of thedefendantsto meet their
notes; in the other it is their failure to pay a balance claimed by theplaintiff on certain complicated loan transactions."
Where a bill or note is given by way payment there is a strongpresumption that the payment is conditional, so that the originaldebt revives if the note or bill is not realized.
HE facts are set out as follows by .Wood Benton J.: —
The plaintiff-appellant sues the defendants-respondents for therecovery (1) of Bs- 11,526*23, with interest thereon at 9 per cent*from August 30, 1909, till payment in full; (2) of a sum of Bs. 771,being the balance of principal and interest thereon at date of suit,together with further interest on the principal sum at 9 per cent,from August 30, 1909, till payment in full. The appellant, who is amoney lender and trader carrying gh business under the vilasam ofS. S. P., alleged that the respondents were partners, and that thefirst defendant-respondent was also, between December 14, 1905,
J. N. A 99413 (8/50)
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1918. and June 15, 1909, his agent and the manager of his business inrrrfnninjjrn Ceylon during bis . absence in India. During that period the secondOhttiyv. defendant-respondent was a member of the firm of M. S. P. TheSamimuhati appeuantj on his return from India in 1909, examined the accountsof the first defendant-respondent, and found, as he alleged in hisplaint, in the first place, that the first defendant-respondent haddiscounted a large number of promissory notes at the banks for thefirms of M. S. P. and S. S. P., which had not been entered in his books,and the profits of which had not been credited to him; and in thenext place, that the first defendant-respondent had had transactionswith the firms of M. S. P., S. S. P., and M. K. P. R., with whom theappellant had forbidden him to have any business dealings as hisagent. The appellant threatened to prosecute the respondentscriminally. The respondents thereupon approached two leadingmembers of the Chetty community, Ramanathan Chetty and MuttuRamen Chetty, and induced them to arbitrate, and if possible tosettle the disputes, between the parties. The appellant' consentedto their doing so. The arbitrators examined the parties and theiraccounts, and on August 30, 1909, a settlement was drawn upand signed by both respondents, whose signatures were attestedby those of the arbitrators. The arbitrators found that the totalamount of the indebtedness of the respondents to the appellantwas Rs- 28,224.15f. This sum was made up of the followingamounts
It is necessary to quote the exact language of the paragraphs inthe settlement following this enumeration of the various heads ofthe respondents’ indebtedness.
“ This total amount we have this day settled with you in thefollowing manner; —
“ Rs. 224.15| in cash is paid to you by us this day.
“ On demand promissory note given you by us, on whichRs. 14,000 is payable by us with interest on September 15 proximo.
“ On demand promissory note given to you by us on this day, onwhich Rs. 14,000 is payable by us with interest on November 30proximo.
‘‘As the said. Rs. 28,224.15f has been settled in the manneraforesaid, this receipt shall be witness to the fact that there shall beno further claim whatever against us by you or anything due by usto you.”
The promissory notes made by the respondents in favour of theappellant were payable on demand. But according to the settle-ment they were not payable till September 15 and November 30respectively. The respondents failed to pay the note falling due onSeptember 15, and the appellant then sued them on both notes in caseNo. 29,886, D. C. Colombo. The respondents met the appellant’sclaim on the notes in that action by a plea that there had been a
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material alteration of' the notes without their consent. This altera* 1912.tion consisted in the insertion in the notes of the rate of interest- It pcj^miappmwas effected by the arbitrators themselves. But the District Judge, Ohetty n.in case No. 29886, D. C. Colombo, upheld the respondents’ plea, and Sa*oh^andismissed the appellant’s action with costs- In the present actionthe appellant sues, not on the notes themselves, but for the recoveryof part of the original consideration in respect of which they weregranted. His claim has been met by two pleas: first, that in thesettlement of August 80, 1909, he accepted the notes as a dischargeof any claim that he might have had for the original debt; and in thenext place, that even if he accepted the notes merely as conditionalpayment, sections 34 and 207 of the Civil Procedure Code renderedhis claim for the original debt not maintainable, Bince he could have,and ought to have, included it in his plaint in. case No- 29,886, D. C.
Colombo. The learned District Judge has upheld both pleas, andthe appellant’s action has again been dismissed with costs.
The plaintiff appealed.
De Sampayo, K.C., for appellant.
Walter Pereira, K.C. (with him B. L. Pereira), for the respondents.
Cur. adv. vidt.
April 4, 1912. Lascelles C.J.—
His Lordship stated the facts, and continued:—
To this claim the defendants in effect plead (1) that the notes weregiven to the plaintiff in full payment and satisfaction of the defend-ants’ liabilities, and (2) that the present action is barred by sections34 and 207 of the Civil Procedure Code- The District Judge hasconsidered that he was obliged to uphold the defendants’ contentionon both grounds, and from his decision the present appeal is nowbrought.
With regard to the first point, there is no question as to the generalprinciple that, where a bill or note is given by way of payment, as isadmittedly the case here, there is a strong presumption that thepayment is conditional, so that the original debt revives if . the noteor bill is not realized. But the respondents claim that they haverebutted this presumption, and proved that the notes were givenand taken in complete satisfaction and discharge of the debt.' Thequestion is thus one of the intention of the parties.
Neither of the defendants went into the witness box, but therespondents rely principally on the evidence of one of the arbitrators,the terms of the document P 1, and the conduct of the parties.
A good deal of caution is necessary, in* my opinion, in consideringthe effect of oral evidence on a point like that now in question,especially when the questions are addressed to a native witnessthrough the medium of an interpreter. The question whether a
16-
( )1812. note is given as absolute or conditional payment is one of someT-Aflng-TjjwQ nicety. It cannot be disposed of by the respondents’ counsel
J. eliciting an affirmative answer to a skilfully framed question. ItPalaniappa mus<i be shown that the witness appreciated the distinction betweenOhtttyv. conditional and absolute payment, and that he gave his answer inone direction or the other with full knowledge of the distinction.
The respondents rely strongly on certain passages in the cross-examination of the arbitrator, Muttu Ramen Che tty. At page 82of the record he said, “ the plaintiff accepted the two promissory notesin satisfaction of the old account," and when asked whether a certainpassage in the memorandum P 1 meant that the plaintiff ordefendants should have no claim against each other except on thepromissory notes, he replied: ‘ ‘ That is how it is written here—theplaintiff took the two promissory notes on that footing." Butreading his evidence as a whole,'I do not think that it goes far tosupport the respondents’ contention, for in re-examination the samewitness stated: ‘ ‘ The promissory notes were given as a security forthe debt, and not in lieu of the debt ’’—a statement which is whollyinconsistent with his former answer., and suggests that the distinctionbetween conditional and absolute payment was not present in thewitness’s mind. I can find nothing in the evidence of RamanathaoChettv, the other arbitrator, which supports the contention that theplaintiff received the two promissory notes in absolute payment ofthe debt, nor is there anything in the plaintiff's evidence which lendscountenance to this view of the transaction. The notes, he says,were given to him, not on his own suggestion, but on that of thearbitrators’. In the oral evidence I can find no clear indication thatthe notes were given and taken in satisfaction and discharge of thedebt, the creditor accepting the risk of the notes proving worthless-The truth, perhaps, is that the defendants were induced to givepromissory notes, because it was considered they were slipperypeople, and that it was necessary to bind them to their bargain inthis way.
Then, reliance has been placed on the passage in P 1, which istranslated as follows: " As the said Rs. 28,224.15£ has been settledin the manner aforesaid, this receipt shall be witness to the fact thatthere shall be no further claim whatever against us by you oranything due by us to you." This passage is no doubt consistentwith the view that the notes Were given in absolute payment; but,on the other hand, it is equally consistent with the view that allthat the parties intended was that the award, as regards the amountsmutually payable by the parties, was accepted as final and conclusive.Then, it is said, that the conduct of the plaintiff in suing on thenotes after the defendants had failed to meet them proves that heregarded the notes as absolute payment of the debt.
But the circumstances that he put the notes in suit is surely notinconsistent with the view that the notes were accepted only as.
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conditional payment. In several English cases, where the negotiable *****instrument was held to be merely conditional payment, a similar Lascbimscourse was taken. Thus, in Wegg Prosser v. Evans,1 one of two jointguarantors gave his cheque for the amount; the plaintiff recovered palaniappajudgment on the cheque, but the judgment was not satisfied. Theplaintiff then sued the other guarantor on his guarantee. In that Chettycase it was held that the judgment was no defence to the claim on theguarantee, and it appeai'3 from the judgment of Lord Esher that theresult would have been the same if the plaintiff, in the second action,had sued both guarantors. In Drake v- Mitchell2 an unsatisfiedjudgment recovered against one ol .three covenantors was held to beno bar to an action against all three. The fact that a part of theconsideration was paid in cash does not amount to much, as it isapparent that the object of the payment was to enable the notes to begiven in round sums of Rs. 14,000.
For the above reasons, I would hold that the defendants havefailed to rebut the strong presumption of law that the notes weregiven merely as conditional payment.
It has been strongly insisted that the present action is barred bysection 34 of the Civil Procedure Code. The question whethersection 34 has this effect depends upon whether the ‘' cause of action *fis the same in both actions. The leading Indian decisions on themeaning of the terms “ cause of action ” in the corresponding Indianrule are clearly summarized in Woodroffe and Amir Ali’s work onCivil Procedure. On these authorities, and on the authority of thedecision of the Privy Council in Pittapur Raja v. Suriya Ran 2 it isclear that the crucial question in a case like this is not whether thesubject-matter of the present action, that is to sav, the moneyssought to be recovered, is the same as part of the subject-matterin the former action. The question is whether the “ cause of.action/’ that is, the question of right involved in the two actions,is identical. They appear to me to be essentially different. In theone case it is the failure of the defendants to meet their notes; in theother it is their failure to pay a balance claimed by the plaintiff oncertain complicated loan transactions. The period of prescriptionin an action on the notes would, under section 7 of Ordinance No. 22 of1871, be six years; whilst in the present action it would, under section8, be three years. In the former case the rights and liabilities of thepartieswould, under section 2 of Ordinance No. 5 of 1852, be regulatedby the law of England; in the present action it is possible that therelations of the parties may be in some respects governed by the.Roman-Dutch law. Further, if we apply the test laid down inBrunsden v. Humphreys * the difference between the two causes ofaction is clear, for the evidence required to support the former claimwould be different from that on which the present claim depends.
i (1895) 1 Q. B. 108.* (1885) f. L. R. 8 Mad. 520.
* (1803) 3 East 253.« (1884) 14 Q. B. D, 141.
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1912.
Iasoelles
G.J.
Palamiappa
Ohettyv.
Saminalhan
Ohetiy
With regard to section 207 of the Civil Procedure Code, it is clear that
the section is applicable only if the causes of action are the same inthe two actions. If, as I hold, the causes of action are not identical,it is clear that no question of res judicata can arise. In my opinionthe result of the evidence is that the two promissory notes wereaccepted by the plaintiff as merely conditional payment, so that it'is open to him, now that he has failed to realize the notes, to enforcethe original cause of action, and I do not think that he is precludedby sections 34 or 207 from taking this course. The result is thatthe appeal succeeds, and judgment must be entered for the plaintiffin accordance with his plaint, with costs here and in the Court below.I should have much regretted the result if we had been obliged onmerely technical grounds to come to a different conclusion in a casewhere every consideration of justice and honesty is on the side of theplaintiff.
Wood Benton J.—
His Lordship stated the facts, and continued: —
It is obvious that if this decision is correct on the law, it entailsgreat hardship on the appellant. The respondents’ liability to himhas been ascertained by arbitrators selected by themselves, and theyhave no defence to the appellant’s action on the merits.
There is no difficulty as to the law applicable to the question raisedby the first of the two pleas just referred to. A cheque or promissorynote given and received in respect of a debt may be so given andreceived either as conditional or as an absolute satisfaction of thedebt. In the former case, when the cheque or note is actually-orpractically dishonoured, and satisfaction of the claim on the writteninstrument cannot be obtained, the original claim on the debt revives,and may be enforced- In the latter the original claim on the debtis extinguished by the giving or the acceptance of the cheque or noteas an absolute payment of the debt. The law presumes conditionalpayment- But this presumption may be rebutted by evidence thatabsolute payment was intended by the parties. On the evidence inthe present case the learned District Judge has held that in thesettlement of August 30, 1909, the respondents’ promissory noteswere accepted by the appellant as an absolute discharge of any claimbased on the original indebtedness. There are undoubtedly cir-cumstances – that tell in favour of that interpretation of the facts.The document in question speaks of itself as a “ settlement ”, andexpressly provides that there should be no further claim whateveragainst the respondents by the appellant or anything due by themto him. Moreover, a portion of the whole amount of the debt asfound by the arbitrators was paid, to the appellant in cash. Inaddition to that, there is the viva voce evidence of Muttu Bamen
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Chetty, one of the two arbitrators, that* the appellant accepted thetwo promissory notes in satisfaction of the old account, and that themeaning of the agreement was that the parties should have no claimagainst each other except on the notes. Lastly, there is the factspoken to by the other arbitrator, Bamanathan Chetty, that on theexecution of the agreement of August 30 four promissory notes, the*value of which the respondents had agreed to pay, were handed byhim to the second defendant-respondent. There are, however,circumstances that have to be taken account of on the other side.Where the language of an agreement of the character of that ofAugust 30, 1909, is not unambiguous, it is reasonable, I think, toask ourselves who were the parties to the transaction, and with whatintention would they enter into an agreement of this kind. Theparties to the transaction were Chetties—a class of business menwho are not in the habit of relaxing their legal claims on the one side,or of expecting that such claims should be relaxed on the qther. Ifind it difficult to suppose that the appellant had any other object,in accepting the promissory notes, than to get the amount of therespondents’ indebtedness ascertained by a written document signedby, and binding upon, them both. The language of the settlementitself is not inconsistent with this view of its meaning. The clauseabove quoted, which provides that as the debt has been settled k< in
the manner aforesaidthere shall be no further claim whatever
against us by you or anything due by us to you/’ does not determinethe question whether the promissory notes were to be an absolute ormerely a conditional discharge of the debt, and means only, I think,that' there should, be no claim outside the amounts dealt with inthe settlement. The sum paid to the appellant in cash—namely,Rs* 224.153—is an amount the deduction of which would enable theremainder of the indebtedness to be dealt with by the two promissorynotes in round figures. The appellant, who gave evidence, was notcross-examined on this point. Neither of the respondents venturedinto the witness box. The burden of displacing the presumption ofconditional payment was on the respondents. In the state of theevidence which I have just described, it may fairly be said that theycannot rely on the cash payment as a very strong circumstance intheir favour. It is true that Muttu Bamen Chetty said in one partof his evidence that the promissory notes had been accepted insatisfaction of the old account, but a little later on he stated thatthey were given as a security for the debt, and not in lieu of the debt.The learned counsel for the respondents relied strongly on the factsthat the appellant in his own evidence had not disputed the earlierstatement made by Muttu Bamen Chetty as to .the intention withwhich the notes were given and accepted; and further, that when thefirst of the two notes was not paid, he had immediately brought hisaction on the notes themselves, showing thereby that it was on themand not on the old account that he relied. The arbitrators* evidence,
19121
WoodRenton J.
PalaniappaChatty v.SaminathanChetty
( 168 )
1912.
WoodRbnton J.
PalaniappaCketty v.SaminathanChelty
as 1 have shown, was inconsistent with itself. There was no cross*examination of the appellant on the point, although it touched anissue, the burden of proving which was on the respondents. More*dver, the tenor of the appellant’s evidence seems to me to show thathe did regard the notes as conditional payment only. In additionto the circumstances just mentioned, there is the fact that the noteson their execution were retained by the arbitrators, and were notreceived back by the appellant till a few days before the institutionof the action No. 29,886, D. C. Colombo. The fact that the appellanthaving the notes in his possession sued upon them in the firstinstance, and not upon the original debt, can scarcely be held tojustify the conclusion that he regarded himself as having a remedyon the notes alone.
On the whole, I am of opinion that the learned District Judge waswrong in holding that the appellant accepted the notes as an absolutedischarge of his original claim against the respondents. It was heldby the Court of King’s Bench in Drake v. Mitchell1 as far back as 1803that where one of three joint covenantors gives a bill of exchangefor part of a debt secured by the covenant, a judgment recovered onthe bill is no bar to an action of covenant against the three covenan-tors; such bill of exchange, though stated to have been given for thepayment and satisfaction of the debt, not being averred to have beenaccepted as satisfaction, nor to have produced it in fact. In thatcase the bill was regarded as being a collateral security only. Butin the later case of Tarleton v- Allhusen,2 it was held that “ judgmentwithout satisfaction is no payment,” and in Wegg Prosser v- Evans,3an unsatisfied judgment against one contractor on a cheque given byfiim alone for the joint debt was held not to be a bar to an actionagainst the other joint contractor on the original contract. Theprinciple of these decisions seems to me to be applicable here. Theappellant’s claim on the. promissory notes was not satisfied by theaction on those notes. He did not even obtain judgment on thenotes in that action. His 'right to sue on the Original obligations,therefore, remains unaffected.
Certified copies of the proceedings in D. C. Colombo, No. 29,886,have been put in evidence. It' appears to me that the cause ofaction on which the appellant sued was the breach by the respondentsof the undertaking contained in their promissory notes. That wasthe wrong in respect of which he sought redress. The respondentsin their answer alleged that he had agreed to accept interest on thenotes at the rate current among Chetties in doing business with eachother, and that, in breach of that agreement, he had materiallyaltered the notes by inserting in them a stipulation for the paymentof 9 per cent, per annum. The cause set up in the present case isdifferent, viz., failure to pay sums due as the result of mutual
1 (1803) 3 East 251.2 (1834) 12 Ad. it E. 32.
(1895) 1 Q. B. 108.
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dealings, and on an account stated, between the parties. Bothcauses oi action no doubt spring to some extent from the samecircumstances* But they are not the same* The evidence requiredin the two cases would be different {Brumden v. Humphrey;1 Serraov. Noel 2). As has already been shown, some of the heads of claim inthe present suit affect one respondent only. The claim for Bs. 800,for instance, is a matter that concerns the first defendant-respondentalone. Moreover, as the notes were accepted as conditional pay-ment, and not as a collateral security (in which case the explanationto section 34 might have applied), the appellant’s remedy on theoriginal obligations was suspended till it had been made apparentthat he could not get satisfaction by action upon the notes. Underthese circumstances, there is, in my opinion, nothing in section 34or section 207 of the Civil Procedure Code to compel the appellantto include a claim on the original obligations in his action on thepromissory notes, on pain of having his remedy on the originalobligations barred if he failed to do so.
Section 34 does not require a plaintiff to exhaust in one suit all thecauses of action that he may have at the date of the 3uit in respectof the property or the relief claimed by him, and of which he wasthen aware.
Referring to the corresponding provisions in the Indian Code ofCivil Procedure [section 7 of Act VIII. of 1859; and c/. section 43 ofAct XIV. of 1882, and Act V. of 1908, 1st Sched. 0. 11 r. 2 (1)], inthe case of Pittapur Raja v* Suriya Ban 3 the Privy Council observedas follows: —
” That section does not say that every suit shall include everycause of action, or every claim which a party has, but that everysuit shall include the whole of the claim arising out of the cause ofaction, meaning the cause of action for which the suit is brought*”(And c/* Amanat Bibi Imdad Husain;4 Mahomed Reasat Ali v.Hasin Banu;5 Ramaswami Ayyar v. Vithinatha Ayyah.6)
I would hold that the promissory notes sued on were accepted bythe appellant only as a conditional discharge of the respondents'original indebtedness., and that his remedy on the original debt is notbarred by the dismissal of his previous action upon the notes. Thedecree of the District Court should be set aside, and judgmententered for the appellant as prayed for in the plaint, with the costsof the action and of the appeal. The learned District Judge hasdecided all the material issues, except those as to the meaning of thesettlement of August 30, 1909, and res judicata, in the appellant’sfavour, and there is therefore no need for any further inquiry inregard to them.
Set aside.
1 c1884) 14 Q. B. D. 141.* (1888)L. R. 15 Ind. App. Ill,112.
(1885) 15 Q. 8. D. 549.* (1893)L. R. 20 Ind. App. 155.
(1885) /. L. B. 8 Mad. 620.* (1903)I. L. R. 28 Mad. 760.
1912.
WoodBenton J.
PalaniappaChetty v.SaminathanChetty