McDowell and Company Limited vs Ragava Chetty and Others

This is a suit by McDowell and Company, Limited, against Raghava Chetty, the Defendant, lately the Cashier of the Company, and his sons,

who are minors, for the recovery of Rs. 8,558-7-4 being the amount stated to be due under two mortgages executed by Raghava Chetty for

himself and on behalf of his minor sons, on the 4th November 1895 and the 19th October 1899, respectively. Mr. Justice Boddam granted a

decree in favor of the Plaintiff for the amount sued for, against the first Defendant personally; but as against the mortgaged property the learned

Judge allowed the claim only to the extent of Rs. 2,000, on the ground that under the later of the mortgages mentioned above, the Company was,

by the provisions of Section 26 of the Indian Stamp Act II of 1899, precluded from recovering a larger sum.

In this appeal, preferred by the Company, the contesting Respondents are the minor Defendants and three questions were raised in the

argument:

First.-Whether the said mortgage is an instrument falling within the provisions of Section 26 of the Indian Stamp Act.

Secondly.-Whether the mortgage was illegal on the ground that it was executed in consideration of the Company forbearing to prosecute the first

Defendant for embezzlement of funds held by him as their Cashier.

Thirdly.-Whether the sum of Rs. 5,372-1-10, being, the amount of the Plaintiffs'' claim less the sum of Rs. 3,186-5-6 admittedly due under the

mortgage of the 4th November 1895, was a debt not binding on the minor Defendants under the Hindu Law, and, therefore, not chargeable upon

their shares of the mortgaged property.

As to the first question, the instrument of the 19th October 1899 was executed between the members of the firm of McDowell and Company of

the first part, the first Defendant for himself and on behalf of his sons of the second part and Messrs. McDowell and Company Limited of the third

part. Its provisions fall under two heads. Those under the first relate to the transfer to McDowell and Company, Limited, by the firm of Messrs.

McDowell and Company of the mortgage of the 4th November 1895, executed by the first Defendant to one Emil Carl Ruppell, Assistant to the

said firm, and by him formally assigned on the 5th December 1896 to the firm. This part of the instrument was, of course, only the transfer of a

mortgage and as such liable to a fixed stamp duty (see Article 62, Clause (c) of schedule I of the Indian Stamp Act). The provisions of the

instrument, under the other head, relate to the accountability to the Company of the first Defendant in respect of the Company''s funds coming to

his hands as the Company''s cashier, and constitutes a mortgage deed executed as security for the due fulfillment of his duties as cashier, and as

security for the repayment of any sum he may be found liable for as cashier, to an extent not exceeding Rs. 6,000. The stamp duty payable as to

this part was also a fixed duty (Article 57, Clause (b), of schedule I to the Indian Stamp Act). In these circumstances, Section 26 of the Act, which

extends only to cases of instruments liable to ad valorem duty, can have no application to the present case.

No doubt, there is in the instrument a promise on the part of the first Defendant to pay to McDowell and Company, Limited, the amount

payable by him under the mortgage of 1895. This, however, was, obviously no fresh contract, entered into for consideration, but must be

understood to operate only as an admission that what the firm purported to transfer was a subsisting debt due by him. Even, if, in any way, it could

possibly be viewed otherwise, it cannot touch either the right of the Company to recover the amount of the mortgage of 1895, by virtue of the

assignment by the firm to the Company, unaffected as it is by anything contained in the instrument as a contract between the Company and the first

Defendant, or the right to recover from the Defendant what he may be liable for by virtue of the provisions falling under the second head, the said

promise having no reference whatever to the matter dealt with by those provisions.

In other words, as the sustenance of no part of the claim of the Company here involves giving effect to the promise above referred to, the claim

must be held to be unaffected thereby, even if the promise be treated as one requiring the payment of an ad valorem duty as urged on behalf of the

Respondents.

As to the second question, we are clearly of opinion that the contention on behalf of the Respondents, viz., that the mortgage of the 19th

October 1899 is tainted with illegality, has no foundation. No doubt in exhibit II a letter of the 1st September 1899 addressed by the Assistant

Manager of the Company to the first Defendant with reference to the opening of the cash chest when suspicions came to be entertained about his

defalcations, it was stated that the Police would be called in if necessary. But the first Defendant having, as desired in the letter, sent in the key of

the cash chest, it was opened, and the deficit found according to the accounts as they stood unverified was debited to him. There is absolutely no

evidence to show that any intention to prosecute the first Defendant was subsequently entertained, or any steps in the matter taken on behalf of the

Company with or without the knowledge of the first Defendant. It is scarcely necessary to say that the mere fact that on the accounts being gone

into defalcations to a large amount were discovered, and the execution of the instrument in question for the amount due followed some time after,

would in no way warrant the inference that such execution was the result of an arrangement to compound any offence.

Turning to the third and last question, the onus in respect of it is of course upon the contesting Respondents and though they have called no

evidence on the point yet upon the evidence adduced on behalf of the Company itself, the only conclusion that can be arrived at is that every one

of the items making up the total of the claim under consideration relates to company''s moneys taken by the first Defendant and misappropriated

under circumstances which constituted the taking itself a criminal offence. Such being the case, it must be held, following the decisions in Pareman

Dass v. Bhattu Mahton ILR 24 Cal 672 and Mahabir Prasad v. Basdeo Singh ILR 6 All. 234, that the Defendants Nos. 2 to 4 cannot be held

liable in respect of these sums under the Hindu Law rule as to the pious duty of a son to pay his father''s debts. As to the ease of Natasayya v.

Ponnusami ILR 16 Mad. 99 it is clearly distinguishable. There the father of the Defendants entered into a contract with one member of the

Plaintiffs'' family and collected certain moneys due to the family. On the Plaintiff repudiating the contract, he was not paid his share of the

collections by the father of the Defendants. Though, in entering into the contract purporting to bind the Plaintiffs'' family when it could not bind the

family and in collecting the moneys due to it and withholding the Plaintiffs'' share, the father of the Defendants had acted in circumstances which

warranted the learned Judges in characterizing his conduct as dishonest, yet the withholding of the money accounted to nothing more than a breach

of civil duty having no sort of resemblance to the present case. Our conclusion is therefore in no way inconsistent with the actual decision of the

learned Judges in that case, which we think was right, though we do not wish to be understood as expressing entire concurrence with all the

observations made by them with reference to the general question of the sons'' liability under the Hindu Law.

We must therefore modify the decree of the learned Judge and direct that the whole amount decreed against the first Defendant inclusive of

costs throughout, be realizable on his share of the mortgaged property and that the shares of Defendants Nos. 2, 3 and 4 be liable for the sum of

Rs. 3,186-5-6 out of the amount decreed against the first Defendant and interest on such sum of Rs. 3,186-5-6. As regards the costs between the

Plaintiff and Defendants Nos. 2, 3 and 4 the Plaintiff Company must pay its own costs. The amount of the taxed costs of the appeal and the money

advanced by the Plaintiff to Defendants Nos. 2, 3 and 4 for the purposes of the suit in the Court below will be recoverable by the Plaintiff with the

amount charged hereby on the shares of the Defendants Nos. 2, 3 and 4. The time allowed for payment is four months.