Sushil Kumar Somani vs Baidyanath Mondal

A.N. Sen, J.—This is a suit for recovery of Rs. 3,80,067 on account of monies lent and advanced.

There are two Plaintiffs in this suit, the first Plaintiff is Sushil Kumar Somani and the second Plaintiff is Ghanaswamdas Maheswari. There are six Defendants, the first five Defendants (hereinafter referred to as the Mondal Defendants) possess a colliery known as Deoli Colliery, situate in Deoli, P.S. Netoria in Burdwan, and the said. Mondal Defendants carry on. business in co-partnership under the name and style of B. N. Mondal & Company which is the Defendant No. 6 herein and of which the said five Mondal Defendants are the partners.

It is the case of the Plaintiffs that the Plaintiff Ghanaswamdas Maheswari in the name of Sushil Kumar Somani had advanced from time to time a sum of Rs. 3,00,000 to the Defendants in their said business of B. N. Mondal & Company for the purpose of business of the said Deoli Colliery on the basis of an agreement in writing and in this suit the Plaintiffs seek to recover the said sum of Rs. 3,00,000 together with interest from the Defendants.

The case of the Plaintiffs as made in the plaint may be set put. In para. 1 of the plaint, the Plaintiffs state that the Defendants Nos. 1 to 5 at all material times carried on business in co-partnership under the name and style of B. N. Mondal & Company at No. 22 Canning Street in the town of Calcutta and the Defendants Nos. 1 to 5 at all material times were and are the owners of a colliery known as Deoli Colliery situate in Deoli in the district of Burdwan. In para. 2 of the plaint, it is stated that by an agreement made on November 23, 1962, between Sushil Kumar Somani, the Plaintiff No. 1, on one hand and the Defendants Nos. 1 to 5 (the Mondal Defendants) carrying on business in the firm name of B. N. Mondal & Company, the Defendant No. 6 herein, on the other hand, it was agreed that the Plaintiff No. 1 Sushil Kumar Somani would lend and advance to the Defendants sums upto the limit of Rs. 3,00,000, as might, in the opinion of the said Plaintiff No. 1, be required from time to time by the Defendants in their said business for meeting expenses in working the said colliery on terms and conditions set out in the said agreement. The material terms and conditions of the said'' agreement as set out in the said para. 2 of the plaint are the following:

(a) That the Plaintiff No. 1 would pay a sum of Rs. 5,000 on the said date or at the time of the signing of the said agreement.

(b) That the Defendants would pay interest on the sum lent and advanced and thereafter to be lent and advanced by the Plaintiff No. 1 and for the time being due and owing to the Plaintiff No. 1 @ 9 % per annum.

(c) That the Defendants Nos. 1 to 5 shall be at liberty to pay the amount that might be advanced by the Plaintiff No. 1 by monthly installments of not less than Rs. 5,000 provided that - simultaneously with the payment of the said instalment or interest that has accrued due on the amount for the time being due and owing to the Plaintiff for advances made shall be paid.

(d) That for securing repayment of the said sum of Rs. 3,00,000 or such sums as may be actually lent and advanced by the Plaintiff No. 1 to the Defendants Nos. 1 to 5 with interest thereon and costs as hereinafter stated, the Defendants Nos. 1 to 5 hypothecated in charge (subject nevertheless to the charge already created by the Defendants Nos. 1 to 5 in favour of (i) the Coal Board and (ii) Sri Gobindadas Bhattar by way of security) plants, tools and appliances, machineries, lifts and other implements and things belonging to the Defendants Nos. 1 to 5 and or the said firm of B. N. Mondal & Company a list whereof is set out in the schedule annexed to the plaint.

(e) That the Defendant shall bear and pay all costs, charges and expenses as between Attorney and client which the Plaintiff No. 1 may be put in or to incur in or about the recovery of the monies secured thereby or otherwise howsoever in connection with the said agreement.

In para. 3, the Plaintiffs state that pursuant to the terms of the said agreement the Plaintiffs had at the time of entering into the said agreement paid a sum of Rs. 5,000 by cheque drawn by the Plaintiff No. 1 in favour of the said firm of B. N. Mondal & Company In para. 4 of the plaint, it is stated that the Plaintiff No. 1 from time to time lent and advanced to the Defendant firm a further sum of Rs. 3,00,000 between November 23, 1962, and January 12, 1963, and particulars of such advances are set out in the said para. 4. It is alleged in para. 5 that the Defendants Nos. 1 to 5 in their said firm of B. N. Mondal & Company repaid a sum of Rs. 5,000 on and about March 27, ] 963, and a sum of Rs. 3,80,067 still remains due and payable by the Defendants and particulars of the said claim are stated in the said para. 5. It is to be noted that in the said paragraph a sum of Rs. 3,00,000 is claimed on account of principal and a sum of Rs. 80,067 is claimed on account of interest. In para. 6 of the plaint, it is alleged that the Defendants have duly admitted the sum of Rs. 3,00,000 on account of principal in the Terms of Settlement filed in Suit No. 74 of 1964 (Pratap Chandra Sukhani v. Baidyanath Mondal and Ors.) on March 4, 1964. It is stated in para. 7 of the plaint that the firm B. N. Mondal & Company through its partner B. N. Mondal, the Defendant No. 1 herein, has also duly acknowledged liability to the Plaintiff No. 1 in respect of the principal and interest due to the Plaintiff by a letter dated June 18, 1965. In para. 8, the Plaintiffs make the case that the properties mentioned in the agreement and particulars whereof are stated in Sch. (A) to the plaint stand charged or payment of the Plaintiffs'' dues. In paras. 9 and 10 it is alleged that the Defendants have failed and neglected to pay any sum in spite of demands and that the Defendants are in embarrassed circumstances and the Defendants are threatening to dispose of the properties charged under the said agreement. In para. 11 of the plaint, the Plaintiffs make the case that the Plaintiff No. 1 Sushil Kumar Somani at all material times was and is merely a benamder or trustee for the Plaintiff Ghanaswamdas Maheswari and the said Plaintiff No. 2 Ghanaswamdas Maheswari was and is beneficiary to the entire amount and to the benefit of the agreement and the security. In para. 12 of the plaint, the Plaintiffs claim that a decree should be passed in favour of the Plaintiff No. 2 or alternatively in favour of the Plaintiff No. 1 for the benefit of the Plaintiff No. 2. On the basis of the aforesaid material averments in the plaint, the Plaintiffs ask for a decree of Rs. 3,80,067 in favour of the Plaintiff No. 2 Ghanaswamdas Maheswari or in favour of the Plaintiff No. 1 Sushil Kumar Somani for the benefit of the Plaintiff No. 2, Ghanaswamdas, Maheswari, further interest, a declaration of charge in respect of the properties mentioned in the agreement and which is also mentioned in the schedule to the plaint, sale of the said charged properties, costs and for other relief�s.

One joint written statement has been filed on behalf of all the Defendants. The. said joint written statement has been signed and verified by one Hemendra Nath Banerjee, said to be a constituted Attorney of the Defendants. In para. 1 of the written statement the Defendants admit the allegation made in para. 1 of the plaint and state the Defendants at all material time have held a mining lease from the Government in respect of the land on which the said Deoli Colliery is situate. In paras. 2 and 3 of the written statement, the Defendants admit the execution of the agreement dated November 23, 1962,'' but the Defendants contend that the said agreement dated November 23, 1962, with Sushil Kumar Somani was entered into without prior permission of the Government and state that the said agreement is unlawful and void and cannot be enforced. In para. 4 of the written statement, the Defendants state that on November 23, 1962, the Defendants entered into another agreement with one Pratap Chandra Sukhani, appointing the said Pratap Chandra Sukhani as superintendent of the said Deoli Colliery with full powers of managing the same and the Plaintiff No. 1 Sushil Kumar Somani is the brother-in-law and benamder or nominee of the said Pratap Chandra Sukhani. The Defendants further state in the said para. 4 that after November 23, 1962, the said colliery was exclusively managed by the said Pratap Chandra Sukhani and the Defendants had nothing to do with the administration or the management of the said colliery and did not receive the monies for running the said colliery or in connection therewith. In paras. 5 and 6 of the written statement the Defendants do not admit that a sum of Rs. 5,000 or any other sum was paid by the Plaintiff Sushil Kumar Somani to the Defendants and the Defendants deny that the Plaintiff Sushil Kumar Somani lent and advanced a sum of. Rs. 3,00,000 or any other sum to the Defendants or any of them and the Defendants deny and dispute the correctness of the particulars of the said sum of Rs. 3,00,000 set out in the plaint. The Defendants make the case that payments, if any, alleged to have been made by the Plaintiff Sushil Kumar Somani were made to the said Pratap Chandra Sukhani and the Defendants have no knowledge of such payments and they do not admit the same and the Defendants state that the said Pratap Chandra Sukhani has not rendered any account to the Defendants in respect of the moneys, if any, which came into his hands while he was running the said colliery. In para. 7 of the written statement the Defendants deny that a sum of Rs. 3,80,067 or any other sum is due and owing to the Plaintiffs from the Defendants or any of them and the Defendants deny that they are liable to pay any sum to the Plaintiff No. 1 Sushil Kumar Somani for principal or for interest as alleged or at all. In the said para. 7 the Defendants make the further case that in any event the Plaintiffs are not entitled to recover the sums alleged to have been advanced to the Defendants pursuant to the illegal agreement dated November 23, 19G2. In para. 8 of the written statement, the Defendants make the further case, without prejudice to any of their earlier contentions, that the agreement dated November 23, 1962, inter alia, provides that --The beneficiary may at any time by giving 14 days notice in writing to the owners, put an end to the agreement and upon such "termination the owner shall pay on demand all sums which remain due and owing by them to the beneficiary with interest as aforesaid and that no such notice has been given by the Plaintiff No. 1 and no proper demand has been made by him from the Defendants of the sums claimed in the suit and the Plaintiff No. 1 Sushil Kumar Somani is not, therefore, entitled to claim the said sum of Rs. 3,80,067 or any other sum from the Defendants; and it is the case of the Defendants that this suit is premature. In para. 9 of the written statement, the Defendants deal with the allegation of the Plaintiff of admission by the Defendants of their liability in the Terms of Settlement filed in suit No. 74 of 1964 and they deny that they have admitted liability to the Plaintiffs for the sum of Rs. 3,80,067 or any other sum as alleged or at all. In para. 10 of the written statement, dealing with the allegation made in para. 7 of the plaint that the Defendants have acknowledged liability to the Plaintiff No. 1 Sushil Kumar Somani through its partner B. N. Mondal, the Defendants deny that the Defendants have acknowledged any liability by the said letter and the Defendants state that the said letter was written at the instance and request of the said Pratap Chandra Sukhani and obtained by him with ulterior motive. In para. 11 of the written statement the Defendants deny that the properties mentioned are charged with payment of any sum to the Plaintiffs and the Defendants state that the machineries are permanently embedded and or attached to earth and situate outside the jurisdiction of this Court. The Defendants further state that the alleged charge is not registered and that no charge exists and that in any event the alleged charge cannot be enforced. In para. 12 of the written statement, the Defendants deny that a sum of Rs. 3,80,067 or any other sum remains due and payable by the Defendants to the Plaintiffs as alleged or at all. In para. 13 of the written statement, the Defendants deny that the Plaintiff No. 1 was or is a benamder or trustee for the Plaintiff No. 2 or that the Plaintiff No. 1 acted as such benamder or trustee in respect of any of the matters as alleged or at all. The Defendants further deny that a sum of Rs. 3,00,000 or any other sum was lent or advanced as alleged or at all. In para. 15 of the written statement, the Defendants deny that this Court has any jurisdiction and in para. 16 the Defendants contend that, the claim of the Plaintiffs is barred by limitation. In para. 17, it is alleged that this suit has been brought by the Plaintiffs in collusion with the said Pratap Chandra Sukhani in order to defraud the Defendants and is mala fide and fictitious. In substance and essence there is a total denial by the Defendants of any loans advanced to them and, although the execution of the agreement dated November 23, 1962, is not disputed, the legality of the said agreement is challenged.

The following issues were raised:

(1) Is Sushil Kumar Somani a benamder for Ghanaswamdas Maheswari as alleged in para. 11 of the plaint ?

(2) Have the Plaintiffs or any of them lent and advanced to the Defendants a sum of Rs. 3,00,000 as alleged in paras. 3 and 4 of the plaint ?

(3) Is the agreement dated November 23, 1962, unlawful and void for reasons stated in para. 3 of the written statement ?

(4) To what relief�s, if any, are the Plaintiffs entitled ?

It is to be noted that apart from the aforesaid issues no other issues were sought to be raised, although various other pleas including the plea of limitation, want of jurisdiction, the suit being premature and invalidity of the charge, had been taken in the written statement.

Evidence, oral and documentary, have been adduced on behalf of the parties. Ghanaswamdas Maheswari, one of the Plaintiffs, has given evidence. Lachminarayan Mundra, cashier and accountant of Jethmal Bhojraj has been called on behalf of the Plaintiffs. Pratap Chandra Sukhani, who at the material time was appointed as the superintendent of the Deoli Colliery of the Defendants and who also held a power of attorney from the Defendants, had been served with subpoena to give evidence by both the parties and he has deposed on behalf of the Plaintiffs. Baidyanath Mondal was the only witness on behalf of the Defendants. The important documentary evidence consists mainly of the agreement dated November 23, 1962, between Sushil Kumar Somani and the Mondal Defendants (Ex. A), the agreement dated November 23, 1962, between the Mondals and Pratap Chandra Sukhani appointing Pratap Chandra Sukhani as the superintendent of the Deoli Colliery (Ex. M), power of attorney by the Mondals in favour of Pratap Chandra Sukhani (Ex. N), receipts granted by Pratap Chandra Sukhani for and on behalf of B. N. Mondal and Company as the constituted attorney (Exs. B, C, D, E and F), entries in the Cash Book of Jethmal Bhojraj (Ex. J. series), entries in the Ledger Book of Jethmal Bhojraj (Ex. I series), letter dated June" 18, 1964, by Baidyanath. Mondal to Sushil Kumar Somani (Ex. G) and Terms of Settlement (Ex. H) filed in suit No. 74 of 1964 instituted by Pratap Chandra Sukhani against the Mondals. Apart from the aforesaid documents, some other documents, important amongst which are the accounts prepared and maintained by Pratap Chandra Sukhani (Ex. 5) have also been exhibited. In the facts of the instant case I propose to discuss the evidence, when I take up the issues for consideration, as, to my mind, a good part of the evidence does not appear to have a material bearing on the principal questions involved in the present case. Before I take up the issues for consideration, it will be convenient to set out certain facts which, to my mind, do not appear to be in any serious dispute between the parties and, in any event, are clearly established by the evidence on record�

(1) At the material time, i.e. in or about November 1962 and prior thereto, the, Mondals were in involved circumstances and were in need of finance for running the business and the Deoli Colliery which belonged to the Mondals and was not working for lack of finance.

(2) On November 23, 1962, the Mondals had by an agreement dated November 23, 1962, with Protap Chandra Sukhani, appointed the said Protap Chandra Sukhani as the superintendent of the Deoli Colliery, on terms and conditions mentioned in the agreement which is Ex. M.

(3) The Mondals on the same date, i.e. November 23, 1962, executed a power of attorney (Ex. M) in favour of Protap Chandra Sukhani with the object of enabling the said Protap Chandra Sukhani to discharge his duties as superintendent properly and efficiently.

(4) On November 23, 1962, an agreement was entered into between the Defendants and Sushil Kumar Somani and under the said agreement Stishil Kumar Somani agreed to lend and advance to the Mondal Defendants in their business of B. N. Mondal & Company sums upto the limit of Rs. 3 lakhs on terms and conditions mentioned in the said agreement. The said agreement on the basis of which the suit has been instituted is Ex. A.

(5) At the time of the execution of the said agreement between the Plaintiff Somani and the Mondals, a cheque for Rs. 5,000 was made over by Somani to Baidyanath Mondal and B. N. Mondal had the said cheque made over to Protap Chandra Sukhani.

(6) Protap Chandra Sukhani had been in charge of the Deoli Colliery and its affairs as the superintendent on the basis of the agreement for the entire period during which the advances were made on the basis of the agreement between the Mondals and the Plaintiff Sushil Kumar Somani.

(7) Disputes and differences had subsequently arisen between the Mondals and Protap Chandra Sukhani and Protap Chandra Sukhani had instituted a suit in this Court in 1964, being suit No. 74 of 1964.

(8) The said suit between Protap Chandra Sukhani and the Mondals was ultimately settled and terms of settlement were filed in the said suit. The terms of settlement which" were ultimately filed have been exhibited in this suit and are marked as Ex. H. Clause (9) of the said terms provides as follows:

The Defendants undertake to Court not to further encumber the said Deoli Colliery or the machinery as per list below thereof or dispose of the same without the approval of the Plaintiff. The Defendants also declare that they have not created any charge hypothecation, mortgage, transfer or encumbrance of the machinery or the moneys mentioned in Clause (7) hereof besides the one in favour of the Coal Board for Rs. 60,000 and the other in favour of Sushil Kumar Somani for Rs. 3 lakhs for the principal amount only.

I shall now take up the issues for consideration and for the sake of convenience I propose to consider issue No. 2 first. The said issue is�"Have the Plaintiffs or any or them lent and advanced to the Defendants a sum of Rs. 3 lakhs as alleged in paragraphs 3 and 4 of the plaint ?"

This issue is essentially and basically one of fact. The evidence on record, in my opinion, clearly establishes this issue. The agreement (Ex. A), the oral evidence of Ghanaswamdas Maheswari, the evidence of Lachminarayan Mundra and the books of account of the firm of Jethmal Bhojraj (Exs. I and J) the testimony of Protap Chandra Sukhani and the receipts granted by him acknowledging payment of the moneys (Exs. B, C, D, E and F) and the accounts submitted by him (Ex. 5), the terms of settlement (Ex. H) filed in Suit No. 74 of 1964 (Protap Chandra Sukhani v. Baidyanath Mondal and Ors.) the letter dated June 18, 1964, of Baidyanath Mondal to Somani (Ex. G) and the evidence of Baidyanath Mondal, to my mind, establish beyond any doubt that the amount in question was advanced to the Defendants. The agreement (Ex. A) itself records payment of, a sum of Rs. 5,000 by cheque. Although the payment of the said sum of Rs. 5,000 was denied by the Defendants in the written statement filed herein, Baidyanath Mondal admitted from the witness-box receipt of the said sum of Rs. 5,000 by cheque (See Baidyanath Mondal Qs. 118-119). It is the positive and categorical evidence of Baidyanath Mondal that a cheque for Rs. 5,000 as mentioned in the agreement was received by him and he caused the said cheque to be made over to Protap Chandra Sukhani as superintendent of Deoli Colliery for the purpose of running the colliery (Sec Mondal Qs. 128 to ]31). The receipt dated November 23, 1962, granted by Sukhani (Ex. B) also establishes the said payment. Ghariaswamdas Maheswari has stated in his evidence that Somani was acting merely as his benamdar and he was really paying all the moneys. It is the evidence of Ghanaswamdas Maheswari that he is employed in the firm of Jethmal Bhojraj of which his father Gangajaldas Maheswari is one of the partners and he used to borrow moneys from the said firm for paying the same to the Defendants in terms of the agreement (Ex. A)... Ghanaswamdas Maheswari has stated in his evidence that after having taken the money on loan from the firm of Jethmal Bhojraj he would go with Somani and would make payment in terms of the said agreement to Protap Chandra Sukhani who was appointed the superintendent of the said Deoli Colliery by the Defendants and who was also given a power of attorney by the said Defendants. It is the. further evidence of Ghanaswamdas Maheswari that against all the payments made necessary receipts would be obtained from Sukhani who would grant such receipts on behalf of the Defendants: Ghanaswamdas Maheswari has proved the receipts granted by Sukhani for the payments made and the said receipts, as already noted, are Exs. B, C, D, E and F. I shall deal with the benami aspect when I consider issue No. 1. It is further to be noted that the evidence of Ghanaswamdas Maheswari that he was taking moneys on loan from the firm of Jethmal Bhojraj is corroborated by the testimony of Lachminarayan Mundra and is borne out by the books of account of the firm of Jethmal Bhojraj. The relevant entries in the books of Jethmal Bhojraj have all been exhibited (Exs. I and J series). The evidence of Maheswari of payment of the amounts is further corroborated by the evidence of Sukhani and the receipts granted by Sukhani for the said sums. The said payments are also established by the accounts which Sukhani maintained and which have been exhibited (Ex. 5).� 12. Mr. N. C. Roychowdhury, the Learned Counsel appearing on behalf of the Defendants, has argued that payments of the aforesaid sums have not been established and the transaction are all fictitious and collusive. He has contended that it is not possible that Ghanaswamdas Maheswari who gets a salary of Rs. 200 from the said firm will borrow such huge sums of money from the firm and will advance the same to the Defendants. Mr. Roychowdhury comments that it is very interesting to note that against such huge advances alleged to have been made by the firm of Jethmal Bhojraj to Ghanaswamdas Maheswari, no security has been taken from Ghanaswamdas Maheswari, and no demands have ever been made upon him by the said firm and no steps have been taken by the said firm for realisation of the said sum from Ghanaswamdas Maheswari, although the said claim is now time-barred. Mr. Roychowdhury has argued that the entries in the books of Jethmal Bhojraj should not be believed and it is his argument that the said entries arc very suspicious, as they happen to be in different ink and arc invariably the last entries in the page. Mr. Roychowdhury has contended that the receipts arc all got up documents and they have been brought into existence in collusion with Mr. Sukhani who is really the man behind the screen and the brain of the whole show. There may be some justification for some of the comments of Mr. Roychowdhury. It may be unusual for the firm of Jethmal Bhojraj to advance such huge sums of money to Ghanaswamdas Maheswari without any proper security, although his father may be a partner of the said firm. It may be still more unusual that the firm chooses not to take any steps against- Ghanaswamdas Maheswari for realisation of the amounts advanced to him and the story of Ghanaswamdas Maheswari that he had borrowed the said huge sum from the firm of Jethmal Bhojraj for the purpose of advancing the same to the Defendants with the object of earning some interest, is difficult to believe. The evidence of Ghanaswamdas Maheswari that he advanced the moneys in the benami name of Sushil Kumar Somani, only because Sushil Kumar Somani had been a good friend of his, seems incredible. Notwithstanding the aforesaid infirmities and weaknesses in the evidence of Ghanaswamdas Maheswari,. I am of the opinion that his evidence that he had taken moneys from the firm of Jethmal Bhojraj and had advanced the same in terms of the agreement, should be accepted, as, apart from the documents to which I have earlier referred, I find that the case of advancing moneys to the Defendants is substantially corroborated by the facts and circumstances of the, case. I am unable to accept the contention of Mr. Roychowdhury that the books of Jethmal Bhojraj should not be believed and the entries therein are Interpolated. It does not appear to me that the entries in the books were written out and could be written out subsequently. It is to be noted that in the book every day the balance is struck and carried forward to the next day and that could never have been possible if the entries were brought into existence Subsequently. I have no hesitation in accepting the evidence of Lachminarayan Mundra and the books of account of the firm of Jethmal Bhojraj which have been exhibited. I am also unable to accept the contention of Mr. Roychowdhury that the receipts were brought into existence at a later stage in collusion with Mr. Sukhani. It is to be noted that it was Mr. Mondal''s evidence before me that when the cheque for Rs. 5,000 was made over to him on the execution of the agreement, he made over the same to Mr. Sukhani as superintendent of Deoli Colliery. Mr. Sukhani naturally granted a receipt for the same, and in the said receipt the payment of the further sum of Rs. 75,000 which was made in cash is also acknowledged (see Ex. B). The evidence of Mr. Sukhani and the accounts which he maintained and which he has exhibited in this proceeding also go to show that all those payments were duly made and were received and were spent for the purpose of the Deoli Colliery- The terms of settlement (Ex. H) filed in suit No. 74 of 1964 clearly indicate that the Defendants knew of the said advances made in the name of Somani, admitted and accepted the same. When disputes and differences arose between Sukhani and the Defendants, Sukhani had filed the said suit against the Defendants being suit No. 74 of 1964. After the institution of the suit Sukhani had made an application for the appointment of a Receiver and at that stage there were negotiations for settlement and terms were arrived at between Baidyanath Mondal and Protap Chandra Sukhani. Terms which were originally arrived at between Baidyanath Mondal and Protap Chandra Sukhani have also been exhibited and are marked as Ex. 8A. The terms contained in Ex. 8A are more or less identical to the terms which were ultimately filed (Ex. H), excepting that in the terms (Ex. 8A) which were originally agreed upon, there was no mention of the amount of Rs. 3 lakhs in Clause (9). It is the evidence of Baidyanath Mondal that although be had agreed to the terms in the said suit, his other brothers who are other Defendants in this suit and also in the other suit were not agreeable. As after the settlement with Baidyanath Mondal, the said terms were not being filed, Sukhani made an application for recording the said terms in his suit. The said application of Mr. Sukhani was settled and the terms of settlement (Ex. H) settling the entire suit were filed. All the Defendants had agreed to the said terms of settlement and the Defendants had appeared to signify their consent and to give the undertaking recorded in Clause (9) of the settlement to which I have already referred. The terms which were ultimately filed and recorded in Court, mention the specified amount of Rs. 3 lakhs in favour of Sushil Kumar'' Somani for the principal amount. A plain reading of the said terms, to my mind, clearly indicates that the Defendants were acknowledging and admitting liability for the said sum of Rs. 3 lakhs for the principal amount in favour of Somani and for a sum of Rs. 60,000 in favour of the Coal Board and were undertaking to Court not to further encumber the said Deoli Colliery or the machinery. The contention of Mr. Roychowdhury that the said Clause (9) only recites previous agreement and docs not contain any admission of liability, to my mind, is not tenable- I see no reason why specific amount should be mentioned in the said terms of settlement unless the Defendants were accepting, acknowledging and admitting liability for the same and were creating the rights in favour of Sukhani subject to the existing rights of the said other creditors for the amounts mentioned. If no moneys were in fact advanced to the Defendants on the basis of the said agreement and if no money would be payable by the Defendants on the basis of the said agreement, I see no reason why the said agreement with Somani and the specific sum for the principal amount should at all be mentioned in the said terms of settlement filed in the suit by Mr. Sukhani. The further contention of Mr. Roychowdhury that whatever amounts were advanced on the basis of the agreement in suit were also taken into consideration at the time of settlement of the suit by Mr. Sukhani, as Sukhani was the real person, is to my mind equally untenable. Apart from the question that no such case was made in the written statement, if indeed, the settlement with Mr. Sukhani had proceeded on the basis that the claim under the agreement with Somani which is the subject-matter of the present suit was also being settled in the said suit, there would have been not only no necessity of making mention of the said claim of Somani in Clause (9) of the terms of settlement, but the said position would, otherwise, have been made abundantly clear. It is to be noted that the terms were filed in the suit and both the parties had the benefit of proper legal assistance. In any event, the evidence of Baidyanath Mondal before me makes it'' quite clear that the Defendants were admitting and accepting liability for the amounts mentioned in Clause (9) of the said terms and were accepting the said claims of the Coal Board for Rs. 60,000 and of Sushil Kumar Somani for Rs. 3 lakhs on account of principal (sec Mondal Qs. 165 to 172). The letter of Baidyanath Mondal dated June 18,1964, to Sushil Kumar Somani also unequivocally admits and acknowledges liability for the loan. Mr. Roychowdhury has sought to contend that this letter is not a genuine letter arid a fabricated one. He does not dispute that the letter bears the signature of Baidyanath Mondal, but he contends that the letter has been fabricated on a signed blank letter-head of the Defendant firm. I have no hesitation in rejecting this case sought to be made by Mr. Roychowdhury in course of the trial. It is to be noted that not only no such case was made in the written statement but in the written statement the Defendants have categorically stated in para. 10�

The said letter was written at the instance and request of the said Protap Chandra Sukhani and obtained by him with ulterior motive as it now appears.

Taking advantage of a typographical error with regard to the date of the letter mentioned in para. 7 of the plaint wherein the letter has been described to be a letter of June 18, 1965, instead of June 18, 1964, the said case was sought to be made, notwithstanding the fact that in the written statement a different case accepting the position of writing such a letter has been made- The evidence of Mr. Baidyanath Mondal on this question is very unconvincing and I am unable to place any reliance on his testimony. I have further to note that in earlier interlocutory proceedings, the Plaintiffs, had referred to the letter and in the said interlocutory proceedings the Defendants have always made the same case which they have made in the written statement and which they sought to change at the trial. I only wish to add that the manner in which the letter has been typed and signed goes to'' indicate that the same is not a fabricated document. I hold that the said letter is a genuine letter and was in fact addressed by Baidyanath Mondal on behalf of the Defendants to Sushil I Kumar Somani. There is also another significant fact of which I must take notice. The Defendants have chosen not to disclose their books of'' account. The books of account would haw shown whether these moneys were received by the Defendants or not. A faint suggestion was sought to be made that the books of accounts have not been made over to the Defendants and are in possession of Mr. Sukhani. Clause (3) of the terms of settlement (Ex. H) clearly establishes that the said case cannot be true- The accounts (Ex. 5) which Sukhani produced in Court were maintained by Sukhani for his own use and benefit and they are not the books of account of the Defendant firm. I have also to note that Mr. Roychowdhury on behalf of the Defendants called for the said accounts maintained by Sukhani and caused the same to be produced and exhibited. The said accounts (Ex. 5) clearly establish receipt of the money claimed in the suit and there was ho challenge by Mr. Roychowdhury of the said entries in the accounts of Sukhani exhibited in this suit at the instance of the Defendants. I must, therefore, hold, taking all the facts and circumstances into consideration and the materials on record, that the sum of Rs. 3 lakhs was lent and advanced to the Defendants.

I now take up the first issue. The said issue is�"Is Sushil Kumar Somani a benamder for Ghanaswamdas Maheswari as alleged in para. 11 of the plaint ?" While dealing with issue No. 2, I have already indicated that the evidence on record establishes that the firm of Jethmal Bhojraj was advancing moneys to Ghanaswamdas Maheswari and Ghanaswamdas Maheswari was paying the said amounts on the basis of and in terms of-the agreement entered into between Sushil Kumar Somani and the Mondal Defendants on November 23, 1962. As the amounts which were being advanced on the basis of the said agreement were being paid by Ghanaswamdas after Ghanaswamdas Maheswari had obtained the said amounts by way of loan from Jethmal Bhojraj, it is "to. be held that the moneys which were advanced in the name of Somani on the basis of the agreement entered into by and between Somani and the Defendants were not Somani''s money and were the money of Ghanaswamdas Maheswari obtained by him from Jethmal Bhojraj by way of loan. The only explanation offered by Maheswari for entering into the agreement in the name of Somani is that he had entered into the said agreement in the name of Somani as Somani was one of his good friends. The said explanation of Maheswari does not appeal to me and I see no reason why Maheswari should enter into the agreement in the name of Somani, only because Somani happens to be a friend of his. The case of Maheswari that he entered into the said agreement and advanced the said amounts by borrowing the said amounts from the firm of Jethmal Bhojraj appears rather intriguing. In the facts of the instant case, I am unable to accept that Ghanaswamdas Maheswari of his own would enter into the said agreement in the name of Somani and would borrow the said large sums of money from the firm of Jethmal Bhojraj for paying the same to the Defendants only for the purpose of earning a little interest. Any prudent man of business, in my opinion, would not take the risk of borrowing such a huge amount of money for lending the amount borrowed only for the purpose of earning a little interest on the said amount-. The fact that the firm of Jethmal Bhojraj has not demanded payment of the said amount advanced to Ghanaswamdas Maheswari and has not taken any steps for recovery of the said amount from Ghanaswamdas Maheswari suggests, to my mind, that the advances to. Ghanaswamdas Maheswari by the said firm were not in the nature of ordinary loans to an employee of the firm, even though the father of the employee happens to be a partner of the said firm... No firm would in the normal course of business advance such large sums of money to an employee who gets only a salary of Rs. 200 per month without obtaining any kind of security, even though the employee is a son of one of the partners. In any event, no firm would have allowed such huge amount to remain unrealized for such a long time if the amounts had in fact been advanced as loans to its employee in the ordinary course of business. To my mind, it also appears to be incredible that Protap Chandra Sukhani, who also happens to be a partner of the firm of Jethmal Bhojraj, would not have any knowledge of the said advances made by the firm of Jethmal Bhojraj to Ghanaswamdas Maheswari. in the facts of the instant case, the impression'' that I have formed on the materials on record is that the entire arrangement had really been engineered and brought about by Protap Chandra Sukhani. It is to be remembered that Sukhani was placed in charge of Deoli Colliery as its superintendent and a power of attorney had also been executed in favour of Sukhani. Money was necessary for the purpose of running the said colliery which was then at a standstill. The materials on record give the impression that Sukhani for the purpose of getting the necessary finance brought about the arrangement and Sukhani as partner of Jethmal Bhojraj exercised his influence in getting the necessary funds by the method adopted-Although on His materials on record I am inclined to the view that the arrangement and the transaction had been brought about by Sukhani, yet the said position does not and cannot affect the legal nature of the transaction and does not have any material bearing on this issue. The evidence on record establishes, as I have already indicated, that moneys were lent and advanced by the firm of Jethmal Bhojraj to Ghanaswamdas Maheswari, and Ghanaswamdas Maheswari had advanced the said sums so borrowed to the Defendants on the basis of the agreement entered into between Somani and the Defendants. That position remains and is clearly established and the fact that Sukhani might have been responsible for bringing about the situation does not in any way affect the legality and the nature of the transaction. It is to be noted that Somani is also a co-Plaintiff in the suit and the case that Somani is a benamder of Maheswari is jointly made by both the Plaintiffs. Taking into consideration the above fact and the further fact that the moneys which were paid to the Defendants were the moneys which Maheswari had borrowed from, the firm of Jethmal Bhojraj, although Sukhani might have been responsible for bringing about the said arrangement between Maheswari and the firm, I have to hold that Somani was a benamdar for Ghanaswamdas Maheswari. It is also to be noted that all the relevant documents, the agreement (Ex. A), the receipts (Exs. B, C, D, E and F), the letter addressed by Baidyanath Mondal to Somani (Ex. G) have all been produced by Maheswari- I wish only to add that this issue is not of any material consequence as both Somani and Maheswari are the Plaintiffs in this suit and it is nobody''s case that Sukhani or any other person is the real lender. As it is established that the amount had in fact been lent and advanced to the Defendants, it has to be held, in my view, on the materials on record that Maheswari had lent and advanced the money to the Defendants, although the transaction might have been brought about by Sukhani.

I shall now take up the third issue which is�"Is the agreement dated November 23,1962, unlawful and void for reasons stated in para. 3 of the written statement ?"

It is the contention of the Defendants that |the said agreement is illegal and void as the said agreement is in contravention f Rule 37 of the Mineral Concession Rules, I960; the relevant portions of which are in the following terms:

Transfer of lease�

(1) The lessee shall not, without the previous consent in writing of the State Government, which, in the case of a mining lease in respect of any mineral specified in the First Schedule to the Act shall not be given except after previous approval of the Central Government�

(a) assign, sub-let, mortgage or in any other manner transfer the mining lease or any right, title or interest therein, or

(b) enter into or make any arrangement, contract or understanding whereby the lessee will or may be directly or indirectly financed to a substantial extent by, or under which the lessee''s operations or undertakings will or may be substantially controlled by any person or body of persons other than the lessee.

(2) Without prejudice to the provisions of Sub-rule (1), the lessee may, subject to the conditions specified in the proviso to Rule 35, transfer his lease or any right, title or interest therein, to a person holding a certificate of approval, and an income tax '' clearance certificate in Form C from the income tax Officer concerned on payment of a fee of Rs- 100 to the State Government;

Provided that the lessee shall make available to the transferee the original or certified copies of all plans of abandoned workings in the area and in a belt 65 meters wide surrounding it.

(3) The State Government may, by order in writing, determine any lease at any time if the lessee has, in the opinion of the State Government, committed a breach of any of the provisions of Sub-rule (1) or has transferred any lease or any right, title or interest therein otherwise than in accordance with Sub-rule (2);

Provided that no such order shall be made without giving the lessee a reasonable opportunity of stating his case.

Mr. Roychowdhury, Learned Counsel appearing on behalf of the Defendants, has argued that the agreement in question between the parties offends against the provisions contained in Rule 37(1)(b). It is his argument that the agreement in question is one under which the Mondal Defendants who happen to be the lessees have entered into a contract whereby the lessees were to be financed to a substantial extent by the Plaintiff and the said agreement has been entered into without any consent of the State Government as required under'' the said Rule. Mr. Roychowdhury argues that the agreement in question (Ex. A) is clearly a financing agreement under which the lessees arc to be financed to the limit of Rs. 3 lakhs, which, according to Mr. Roychowdhury, is undoubtedly financing the lessees to a substantial extent, and it is the argument of Mr. Roychowdhury that such a contract or arrangement cannot be entered into by the lessee except with the previous consent in writing of. the State Government. Mr. Roychowdhury submits that it is an undisputed fact that consent of the State Government has never been obtained, not to speak of any previous consent of the State Government. Mr. Roychowdhury submits that the said agreement, therefore, is clearly hit by the said provisions contained in Rule 37(1)(b). Mr. Roychowdhury has argued that the said Rule 37 has been enacted in public interest and is mandatory. In support of his contention that the said J. 37 is mandatory, Mr. Roychowdhury has referred to the following decisions: Bishwanath Prasad Vs. National Coal Development Corporation (Private) Ltd., ; Sudhansu Kanta Vs. Manindra Nath, ; In Re: New Standard Coal Co. Pvt. Ltd., ; Biswanath Prasad Vs. Union of India (UOI) and Others, and The Mineral Development Ltd., Calcutta Vs. The Union of India (UOI) and Another, . Mr. Roychowdhury contends that as the agreement in question (Ex. A) is in violation of mandatory statutory provisions, the said agreement is clearly illegal and no claim on the basis of the said illegal contract can be enforced and-entertained. It is the contention of Mr. Roychowdhury that in the instant case the entire cause of action of the Plaintiff is founded on the said contract and the recovery of the money is sought by way of enforcement of the said contract and Mr. Roychowdhury submits that such a cause of action based on an illegal contract cannot be enforced and entertained. In support of his contention that an illegal contract cannot be enforced and a claim on the basis of and in enforcement of an illegal contract cannot be entertained, Mr. Roychowdhury has relied on the following decisions: Cannan and Anr. v. Bryce 106 E.R. 628; Gordon v. Metropolitan Police Chief Commissioner (1910) 2 K.B. 1080; Holman Et Al v. Johnson, alias New land 98 E.R. 1121 and Mahmoud v. Ispahani (1921) Z K.B. 716. Mr. Roychowdhury has also referred to Article 257 in Halsbury''s Laws of England (vol. 8, 3rd ed.; p. 148)- He has also cited the following passage which occurs at pp. 297-98 in Cheshire and Fifoot''s The Law of Contract (7th ed.):

A contract that is expressly or implicitly prohibited by statute is illegal. In this context, ''statute'' includes the orders, rules and regulations that ministers of the Crown and other persons are so frequently authorised by Parliament to issue. But before dealing with the particular case of prohibited contracts, mention should be made of the rules of evidence that govern the proof of illegality, whether the contract is illegal by statute or at common law.

First, where the contract is ex facie illegal, the Court takes judicial notice of the fact and refuses to enforce the contract, even though its illegality has not been pleaded by the Defendant.

Secondly, where the contract is ex facie, lawful, evidence of external circumstances showing that it is in fact illegal will not be admitted unless those circumstances have been pleaded.

Thirdly, when the contract is ex facie lawful, but facts come to light in the course of the trial tending to show that it has an illegal purpose, the Court takes judicial notice of the illegality notwithstanding that these facts have not been pleaded But it must be clear that all the relevant circumstances are before the Court.

A. Prohibition may be Express or Implied The existence of an express prohibition raises no problem; but it may not be easy to decide if a prohibition is implied. This will depend on the construction of the statute under consideration. The question often arises in practice, as where a trader is penalized if he does business without taking out a licence, or where one contracting party is required to deliver to the other a written statement containing certain prescribed particulars and is made liable to a penalty if he fails to do so. In such a case the task of the Court is to determine whether the object of the Legislature is to forbid the contract. In pursuing this enquiry a variety of tests have been applied. For instance, if the sole object of the statute is to increase the revenue in the case of an unlicensed trader or to punish the contracting party who fails to furnish the statutory particulars, the contract that he may have made is not itself prohibited and is in no sense tainted with illegality. On the other hand, if even one of the objects is the protection of the public or the furtherance of some other aspect of public policy, a contract that fails to comply with the statute is implicitly prohibited. But no one test is decisive, for the sole question of construction in every case is whether the -statute is designed to prohibit the contract, and this must always be considered broadly in the light of all the relevant facts and circumstances.

Mr. Roychowdhury has also relied on the following passage, "at p. 303 of the same book, under the heading�

The Consequence Where a Contract is Illegal as Formed:

If the contract as made is expressly or implicitly forbidden by statute it is totally void. No action lies for its enforcement even though it is the Defendant who has broken the law and who pleads his own illegality. Thus an award made by an arbitrator in respect of a prohibited contract will be set aside by the Court. A builder who does work at a cost exceeding the sum authorized by statute cannot recover the excess, and if, having done both authorized and unauthorized work, he received payment under the contract generally, he cannot appropriate the sum to the unlawful work-Again, one party cannot recover what he has given to the other under an illegal contract if in order to substantiate his claim he is driven to disclose the illegality. The maxim in pari delicto potior est condition Defendants applies and the Defendant may keep what he has been given. The Courts have taken this line not for the sake of the Defendant, but because they will not assist cither party to a contract that is statutorily forbidden.

Mr. Roychowdhury also refers to the following passage at pp. 325-326 of the same book under the caption�

The Consequence Where a Contract is Unlawful in its Inception:

(ii) Money paid or property transferred by one party to the other is in general irrecoverable. Property transferred under a contract that is void for mistake is recoverable by the transferor, but not so where the contract is void for illegality. Here the transferee is in a fortunate position, for he can take advantage of the legal maxim ex dolo malo non oritur action- He can successfully plead the turpis causa, and though this ''defence is very dishonest'' and ''seems only worthy of the Pharisee who shook himself free of his natural obligations by saying Corban'', it is allowed for the reasons given by Lord Mansfield in the following passage:

The objection- that the contract is immoral or illegal as between Plaintiff and Defendant sounds at all times very ill in the mouth of the Defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the Defendant has the advantage of, contrary to the real justice, as between him and the Plaintiff, by accident, if I may say so. The principle of public policy is this: ex dolo malo non oritur, actio. No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If from the Plaintiff''s own stating or otherwise, the cause of action appears to arise ex turpi cause, or the transgression of a positive law of this country, then the Court says he has no right to be assisted. It is upon that ground the Court goes, not for the sake of the Defendant, but because they will not lend their aid to such a Plaintiff. So if the Plaintiff and the Defendant were to change sides, and the Defendant was to bring his action against the Plaintiff, the latter would then have the advantage of it, for where both arc equally in fault potior est condition Defendants.

The effect then of the two maxims, ex turpi causa oritur non actio and in pari delicto potior est condition Defendants is that neither can maintain an action against the other if he requires any aid from the illegal transaction to establish his case.

Mr. Roychowdhury contends that in the instant case the contract itself is forbidden by the statute and, as such, is illegal and he submits that the claim made by the Plaintiff on the basis of and in enforcement of the said illegal contract cannot be entertained. Mr. Roychowdhury has further argued that the evidence discloses that the transaction is tainted with illegality as the moneys were all paid to Sukhani on behalf of the Defendants and the appointment of Sukhani as superintendent and his authority to receive, money and to act on behalf of the Defendants is tainted with illegality, because the said agreement with Sukhani (Ex. M) appointing Sukhani. as superintendent is in violation of Rule 37(1)(b). It is his contention that in view of the said illegality being disclosed in course of the trial, the Court should not assist the Plaintiff and should not grant any relief to the Plaintiff. In support of his contention that the Count should take judicial notice of the illegality if disclosed in course of the trial, although such illegality is not pleaded, Mr. Roychowdhury, apart from the authorities already referred to, has also cited the decision in the case of Chettiar v. Chattiar (1962) A.C. 294.

Mr. Bhabhra, Learned Counsel appearing on behalf of the Plaintiff, has submitted that the agreement in question does not tome within the purview of Rule 37 of the Mineral Concession Rules and it is the submission of Mr. Bhabhra that in any event it has not been established that the said agreement comes within the mischief of the said Rule. Mr. Bhabhra has contended that certain basic conditions have to be satisfied, if the provisions of Rule 37(1)(b) on which the Defendants rely, are to be made applicable to any arrangement, contract or understanding. It is the contention of Mr. Bhabhra that the basic conditions required� to be satisfied are:

(i) The lessee under the State Government must be a party to the agreement.

(ii) The arrangement, contract or understanding which the lessee enters into must be of a kind under which the lessee will or may be directly or indirectly financed to a substantial extent.

(iii) Such arrangement, contract or understanding shall have been entered by the lessee without the previous consent in writing of the State Government.

Mr. Bhabhra has argued that the aforesaid requirements involve essentially questions of fact and it is the argument of Mr. Bhabhra that there is no proper pleading of the relevant facts on the basis of which the Defendants may impeach the legality of the agreement in question. Mr. Bhabhra in this connection has referred to die provisions contained in Rule 2 of Order 8 of the Code of Civil Procedure. Mr. Bhabhra has argued that apart from the question that there is no proper pleading of the relevant facts, there is no evidence to support, the Defendants'' case of illegality; and, according to Mr. Bhabhra, there is really no foundation on the basis of which the Court can come to the conclusion that the agreement in question is in violation of the provisions contained in Rule 37(1)(b). Mr. Bhabhra submits that it may be contended that on a liberal construction of the plaint there is pleading of the fact that the agreement in question has been entered into by the lessee without the previous consent in writing of the State Government and that the agreement in question is an arrangement or a contract under which the lessees are being diligently financed; but it is the submission of Mr. Bhabhra that there is no pleading that the said financial arrangement was to a substantial extent. Mr. Bhabhra contends that necessary and relevant facts should have been stated in the plaint to show that the said agreement was an agreement to finance to a substantial extent and it is the submission of Mr. Bhabhra that in the absence of proper pleadings and of the relevant facts, the Court should not entertain the plea of illegality. Mr. Bhabhra has argued that in any event there is no material before the Court to show that financing the lessee to the limit of Rs. 3 lakhs would be financing to a substantial extent to bring the agreement within the mischief of the said Rule. It is his argument that the sum of Rs. 3 lakhs may be a large amount in many cases and may be an insignificant amount in certain cases. Mr. Bhabhra contends that the Legislature in its wisdom has considered it fit not to mention any particular amount while imposing restriction on the lessee; and it is his contention that whether the financing is to a substantial extent or not, will depend on the facts and circumstances of each particular case. Mr. Bhabhra argues that financing to a substantial extent must be construed with regard to the requirement of the lessee in his undertaking. It is the contention of Mr. Bhabhra that in the instant case, apart from the question of proper pleading, there is no proper evidence or material on the basis of which the Court can come to the conclusion that the agreement was to finance to a substantial '' extent. Mr. Brabhra submits that the Court should normally lean in favour of legality and the onus lies heavily on the Defendants to prove that the agreement in question is illegal. Mr. Bhabhra argues that the Defendants have not chosen to disclose the lease, the books of account relating to the business and have deliberately suppressed all relevant materials which would have gone to show whether financing to a limit of Rs. 3 lakhs could be said to be financing to a substantial extent. Mr. Bhabhra, therefore, submits that the agreement in question cannot be said to come within the provisions of Rule 37(1)(b).

Mr. Bhabhra has next contended that even if the Court comes to the conclusion that the said agreement comes within the purview of the said Rule 37(1)(b), the Plaintiffs will still be entitled to recover the money lent and advanced to the Defendants. Mr. Bhabhra has argued that on a true construction of the said Rule it is quite clear that imposition of the restriction is only on the lessee and there is no prohibition on the financier. Mr. Bhabhra has drawn my attention to the provisions contained in Sub-rule (3) of Rule 37 and has contended that the said Rule empowers the State Government to determine the lease of the lessee, but imposes no penal consequences on the financier. Mr. Bhabhra has also drawn my attention to Rule 52 which reads as follows:

Penalty�(1) If the holder of a prospective licence or a mining lease or his transferee or assignee fails, without sufficient cause, to furnish the document or information, or returns referred to in Rule 46, Rule 47, Rule 48 or Rule 51, or acts in any manner in contravention of Rule 49 or Rule 50, he shall be punishable with imprisonment for a term which may extend to six months or fine which may extend to Rs. 1000 or both.

(2) If any person grants or transfers or obtains a prospective licence or mining lease or any right, title or interest therein, in contravention of any of the provisions of this chapter, he shall be punishable with imprisonment which may extend to six months or with fine which may extend to Rs. 1000 or with both.

Relying on the aforesaid provisions Mr. Bhabhra contends that in case of creating or seeking to create any kind of interest in the lease of the mines or in dealing with the same, by way of assigning, subletting, mortgaging or transferring any right, title or interest in any other manner, penalty has been imposed on both the parties, namely, the lessee and the party with whom the lessee enters into any such transaction ; but in case of any contract under which any financial assistance is rendered, no provision has been made imposing any penalty on the financier at all; and the liability or penalty that has been imposed is only on the lessee. It is the contention of Mr. Bhabhra that the said Rules have been enacted for proper preservation of the lease and the leased property in particular and the entire scheme of arrangement is to see that the lessee does not deal with the lease in any way which may affect the lease and the leased property without obtaining the necessary sanction from the appropriate authority. Mr. Bhabhra contends that the effect of the provisions contained in Rule 37(1)(b) is to impose a statutory term or covenant in the lease, the violation of which might entail forfeiture of the lease and enable the lessor to determine the lease. Mr. Bhabhra lays particular emphasis that even the power to determine the lease on the basis of any violation of Rule 27(1)(b) is not obligatory and the State Government may or may not determine the lease, even if there be any violation by the lessee of the provisions contained in Rule 37(1)(b). Mr. Bhabhra points out that whereas the provisions contained in Rule 37(3) confer a discretionary power on the State Government, the provisions contained in Rule 52 are obligatory. Mr. Bhabhra has argued that Rule 37(1)(b) does not impose any general bar or restriction with regard to entering into financial arrangement and the said Rule imposes no restriction whatsoever on the financier. Mr. Bhabhra contends that as the-said Rule imposes no bar on the financier, the said Rule cannot be construed to debar a financier from recovering the moneys advanced by him. It is Mr. Bhabhra''s contention that the financier cannot be said to be guilty of any violation of the said Rule and is not in pari delicto with the lessee and the financier is, therefore, entitled to recover the moneys lent and advanced by him on any financing agreement even if the lessee be found to have entered into the said agreement in violation of the provisions contained in Rule 37(1)(b). Mr. Bhabhra has referred to the following decisions: Archbolds (Freightage) Ltd. v. S. Spanglett (1961) 1 Q.B. 374; Strongman. (1945) Ltd. v. Sincock (1955) 2 Q B. 525 and Kanuri Sivaramakrishnaiah Vs. Vemuri Venkata Narahari Rao (Died), .

Mr. Bhabhra has submitted that the question of any illegality of the agreement between Sukhani and the Defendants (Ex. M) cannot be canvassed or entertained in this suit. Mr. Bhabhra contends that there is no pleading as to the invalidity of the said agreement and the entire facts with regard to the same are not before the Court. Mr. Bhabhra points out that on the basis of )the said agreement Protap Chandra Sukhani had filed a suit against the Defendants and in the suit a consent decree has already been passed- Mr. Bhabhra contends that on the basis of any incomplete picture and some stray evidence/the Court should never come to any conclusion as to the legality or otherwise of the said agreement in the absence of any pleading or issue. Mr. Bhabhra argues that in any event the said agreement between Mr. Sukhani and the Defendants (Ex. M) is of no real consequence, in view of the power of attorney (Ex. N) granted in favour of Sukhani by the Defendants. Mr. Bhabhra contends that the said power of attorney is an independent document and must be construed and treated as such, whatever may be the object for executing the said power It is the contention of Mr. Bhabhra that the powers conferred on Mr. Sukhani by the said power are several and even if it appears to the Court that some powers may not be lawfully exercised by Sukhani, Sukhani continues to enjoy the other powers conferred on him by the said document and the said document general powers have been given to Mr. Sukhani to do anything and everything on behalf of the Defendants. Mr. Bhabhra points out that, apart from the said document in (the instant case, the evidence of Sukhani and of Baidyanath Mondal both clearly go to show that Sukhani had the authority to receive money on behalf of the Mondals. He points out that Baidyanath Mondal has stated in his evidence that when the cheque for Rs. 5,000 was given to him, he had the said cheque made over to Sukhani. Mr. Bhabhra, therefore, submits that in the. instant case it is therefore clearly established that Sukhani had the authority to receive the money on behalf of the Defendants and to grant receipts in respect thereof and there cannot be any question of any illegality with regard to the same and the said transactions can never be challenged as tainted with any illegality. Mr. Bhabhra has further submitted that, even if it be held that Sukhani did not have any authority, lawful or otherwise, from the Defendants for receiving the said moneys from the Mondals, the moneys paid to Sukhani can still be recovered, as it is clearly established that all the moneys had gone to the use of the Defendants and had been utilized for their benefit and the Defendants had enjoyed the benefit of the said sum. Mr. Bhabhra argues that the evidence on record establishes that the entire amount has been spent for the benefit of the Defendants and for their use. The accounts (Ex. 5) submitted by Mr. Sukhani which were called for by the Defendants and have been tendered by the Defendants themselves clearly establish this fact. In addition to the said documentary evidence, Mr. Bhabhra comments that the facts and circumstances of the case, the other documents exhibited showing various payments made and the oral testimony of Sukhani conclusively establish the said fact. Mr. Bhabhra contends that, as the said amounts advanced had gone to the Defendants and had been utilized for the purpose of the Defendants and as the Defendants had enjoyed the benefits of the said money, the Defendants are legally bound to repay the sum irrespective of the question of any authority of Sukhani through whom the said payments were made. In support of this contention Mr. Bhabhra, has relied on the following decisions: Bannatyne v. D and C Maciver (1906) 1 K.B. 103; Reversion Fund arid Insurance Company Ltd. v. Maison Cosway Limited (1913) 1 K.B. 634 and Reid v. Rigby and Company (1894) 2 Q.B. 40. Mr. Bhabhra, therefore, submits that the suit should succeed in any event. In the facts of the instant case, I am not satisfied that the agreement in question (Ex. A) is hit by the provisions contained in Rule 37 of the Mineral Concession Rules, 1960. Rule 37(1)(b) which contains the provisions relevant for the purpose of the instant case and on which reliance has been placed by the Defendants, docs not impose any total ban on financial arrangements or contracts. The said provisions impose certain conditions upon the lessee only and the provisions of the said Rule become applicable, if the conditions imposed therein are violated- Whether there has been a violation of the conditions laid down in the said Rule to attract (the provisions thereof is essentially a -question of fact and must necessarily depend on the facts and circumstances of each particular case. It is quite clear from the provisions of the said Rule 37(1)(b) that the said - provisions will only apply, if -

(1) Any arrangement or contract or understanding is entered into or made by the lessee under the State Government.

(2) The arrangement or contract or understanding entered into by the lessee is of such a kind under which the lessee will or may be directly or indirectly financed to a substantial extent by any person or body of persons other than the lessee.

(3) Such arrangement or contract or understanding is entered into or made by lessee without the previous consent in writing of the State Government.

Unless'' all the aforesaid requirements are satisfied, no arrangement, contract or understanding entered into by the lessee for obtaining finance, can be said to offend the said Rule and to be hit by the provisions contained therein. The aforesaid basic requirements of the said Rule must be satisfied for applying and attracting the said Rule 37(1)(b). The said basic requirements relate to questions of fact and the relevant facts will, therefore, have to be properly pleaded and proved. I am inclined to agree with the contention of Mr. Bhabhra that, in the instant case, there- is no proper pleading of the necessary facts. Even if on a very liberal construction of the pleading, I pursuance myself to hold that there is necessary pleading, I have no hesitation in coming to the conclusion that the necessary and relevant facts which would justify the Court in coming to the conclusion that the requirements of Rule 37(1)(b) have been complied with, have not been established. One of the fundamental requirements of the said Rule is that the financing, whether directly or indirectly, must be to a substantial extent. Whether there has been financing to a substantial extent or not is essentially a question of fact. Apart from the question whether there is any proper averment of this very material fact, there is no proper evidence before the Court to enable the Court to come to any conclusion that there has been any financing to a substantial extent. The argument of Mr. Roychowdhury that the amount of Rs- 3 lakhs agreed to be financed to the Defendants must be considered to be a substantial amount and the financing, therefore, must be to a substantial extent, is, in my opinion, fallacious. The amount of Rs. 3 lakhs, undoubtedly to many, is a substantial or a large amount, but in certain cases, even the said amount may be quite insignificant. Smallness or largeness of the amount is no criterion and in construing the provisions contained in Rule 37(1)(b), the same is not of any material consequence. The said provisions do not mention any amount, large or small, substantial or insignificant. The said Rule speaks of financing ''to a substantial extent''. In my- opinion, the Legislature in its wisdom has advisedly not mentioned any particular amount and has not chosen to fix any limit. Necessity for entering into any financing agreement, arrangement or understanding will depend necessarily on many factors and considerations. It will depend on the requirement of the undertaking and on the lessee''s resources to meet the same. As financial requirements and necessity of obtaining finance will vary from undertaking to undertaking, no fixed limit has been deliberately and advisedly imposed in the said Rule which only prohibits financing to a substantial extent. Whether (there has been any financing to a substantial extent or not will have to be judged with reference to the financial need or requirement for properly working the mine, the leased property, and not with reference to any particular amount agreed to be borrowed or borrowed in fact. The expression ''to a substantial extent'' will have to be construed, in my opinion, with reference to the over all and total need of money by the lessee in properly working out the lease and managing the undertaking and judged in this context, whether there has been any financing to any substantial extent or not will have to depend on the facts and circumstances of any given case. On a true construction of the said Rule, I am of the opinion that the expression ''to a substantial extent'' cannot be and should not be construed with reference to the amount borrowed or the amount required to be borrowed by any lessee and must be construed and judged in relation to the total financial requirement of the lessee in working properly the. mine concerned and in running his business of working the said mine. An illustration may make the position clear. Suppose, a particular lessee for the purpose of his undertaking requires a Crore of rupees. Suppose, the lessee has at his disposal Rs. 90 lakhs and it is necessary for the lessee to raise finances only to the extent of Rs-10 lakhs and the lessee enters into a financial arrangement or contract with regard to the said sum of Rs. 10 lakhs with a particular party. Can it be said in such a case that the lessee has entered into a financial arrangement or contract whereby the lessee has been financed to a substantial extent ? The answer, in my opinion, will have to be in the negative although the lessee may have received financial assistance from the party for a big amount and for the entire shortfall or requirement for which financial assistance was necessary for the lessee. This question can be looked at from another angle. Suppose, a particular lessee requires a Crore of rupees for the purpose of running his undertaking and the lessee has at his disposal a sum of Rs. 10 lakhs. Suppose, the lessee borrows the remaining Rs 90 lakhs from 90 different individuals, one lakh each from the said 90 individuals. Can it be said that the lessee has entered into or made financial arrangement or contract whereby the lessee has been financed to a substantial extent ? The answer, in my opinion, must be in the affirmative-, although any one of the said 90 arrangements or contracts may not be a contract or arrangement under which the lessee is being financed to a substantial ''extent. The real object of the said Rule 37(1)(b), to by mind, is to impose restrictions on the lessee in the matter of entering into or making any financial arrangement whereby the lessee will or may be directly or indirectly financed to a substantial extent by any person or body of persons other than the lessee, to maintain a kind of check or control over the financial, condition of the lessee and to ensure that the lessee does have his own financial resources to a substantial extent and any lessee who needs to enter into or make any financial arrangement, contract or understanding, whereby the lessee will or may be directly or indirectly financed to a substantial extent, must obtain previous consent in Writing of the State Government: On a true construction of the said Rule 37(1)(b), I am, therefore, of the opinion that whether any financial arrangement or contract or understanding entered into by any lessee is to a substantial extent or not within the meaning of the said Rule, has to be considered and judged in the background of the total financial requirement of the lessee for the purpose of his under taking and of working the leased mines and the largeness or smallness of the amount involved in the financial arrangement is by itself of no consequence. In the instant case, there is no evidence before me as to the over all financial requirement of the lessee in the matter of properly working and running the colliery in relation to which the agreement in question has to be considered. The Defendants have not chosen to disclose, the lease, its books of accounts, any profit or loss accounts or any balance-sheets. The relevant materials which would have been of assistance to Court in determining the question have been withheld. The Defendant Baidyanath Mondal in his oral testimony also does not throw any light on this vital aspect. There is really no material before the Court on the basis of which it can come to the conclusion that the agreement in question is one such under which the lessee has been financed to a substantial extent. The agreement in question (Ex. A) is not, therefore, established to be one of the kind contemplated in Rule 37(1)(b) and I must, therefore, hold that the said agreement (Ex. A) does, not come within the purview of Rule 37(1)(b).

I have to observe that after the hearing of the suit had concluded and I had reserved judgment, Mr. Bhabhra asked for leave to advance further arguments on the question of illegality. Mr. Bhabhra asked for this indulgence when my judgment was more or less ready. With leave of Court, the matter, after some adjournments, was further argued on February 16 and in course of the further argument Mr. Bhabhra submitted that there was no material before the Court on the basis of which it could be contended that the lease in favour of the Defendants was one such as to attract the provisions of Rule 37. It was the submission of Mr. Bhabhra that as there was no material to justify any conclusion that the Defendants were lessees or, in any event, that the lease was one such to which Rule 37 applies, there could be no question of the agreement between the parties or the agreement between the Mondals and Sukhani being illegal. Mr. Roychowdhury on behalf of the Defendants argued that because of the provisions contained in the Estates Acquisition Act, Section 28, the Mondals must be considered to be the lessees under the State Government and, according to Mr. Roychowdhury, the Mondals in fact are lessees under the State Government. Because of the non-disclosure of lease and in view of the recitals contained in the agreement of the Mondals with Somani and Sukhani and in the absence of relevant materials, there appears to be force in the contention of Mr. Bhabhra, but I do not consider if necessary to come to any definite conclusion on this aspect of the matter.

In view of my finding that the agreement in question (Ex. A) does not come within the purview of Rule 37(1)(b) of the Mineral Concession Rules, 1960, and the provisions of the said Rule arc not applicable to the said agreement on the basis of which the present suit has been instituted, it does not become necessary to consider the various authorities which have been cited from the Bar. I, however, wish to add that even if I had come to the conclusion that the agreement in question (Ex. A) did offend the provisions contained in Rule 37(1)(b) of the Mineral Concession Rules, 1960, I would have still held that the financier was not debarred from recovering the amounts lent and advanced- to the Defendants on the basis of the said agreement. As I have already noted, Rule 37(1)(b) does not impose any total prohibition on financial agreements and docs not impose any restrictions on the financier. The restrictions which are imposed arc imposed only on the lessee. The penalty that is imposed is also imposed only on the lessee and the lessee may incur forfeiture of his lease. Rule 37(3) and Rule 52 make the position abundantly clear and the provisions of the said Rules, to my mind, clearly establish that unlike other cases contemplated in Rule 37(1)(a) in respect of which punishment is provided for both the parties, namely, the lessee and the party dealing with the lessee, the financier is not to be punished in any way in any case which may come under Rule 37(1)(b) and the lessee will be the only party to be dealt with in accordance with the provisions contained in Rule 37(3). The said provisions, to my mind, indicate that the Legislature never intended that the financier would riot be entitled to recover the money lent and advanced by him to any lessee on the basis of any financial arrangement or contract which may come within the purview of Rule 37(1)(b). In enacting the said provisions contained in Rule 37(1)(a) and 37(1)(b), the Legislature, in my opinion, intended to impose checks and controls on the lessee in the matter of his dealing with the lease and the leased property with the object of proper preservation of the leased property and also- in the matter of his incurring financial obligation.

Without the previous consent in writing of the State Government, any kind of dealing with the leased property which has been specified in Rule 37(1)(a) is forbidden with penal consequences for both the lessee and the party dealing with the lessee. The Legislature, however, has thought it fit not to prohibit financial arrangement, contract or understanding and has placed certain restrictions on the lessee only in the matter of entering into any such arrangement without imposing any kind of restrictions or penalty on the financier and without prohibiting the transaction itself. In view of the nature of the provisions contained in the said Rule, I am of the opinion that the provisions of the said Rule are not intended to affect the right of the financier to recover any amount % lent and advanced by him and the said provisions in Rule 37(1)(b) arc really in the nature of statutory terms imposed in any lease, the violation of which by the lessee may result in the forfeiture of his lease. On a consideration of the provisions contained in Rule 37 and also in Rule 52, I am of the opinion that on a true construction thereof, any breach by the lessee of the obligations imposed upon him under Rule 37(1)(b) does not affect the rights of the financier and docs not debar the financier from recovering any money lent and advanced by him. In my judgment, it will be grossly unfair and manifestly unjust to allow a lessee who commits a breach of the obligations cast upon him only to reap and retain the benefits of the money by pleading his own breach to the detriment of the financier on whom no obligation or restriction is sought to be imposed. A violation by the lessee only of any restrictions imposed only upon him under Rule 37(1)(b), is not and cannot be intended for his benefits and is not intended to be of such a nature as to prohibit the financier on whom no restriction or penalty is imposed from enforcing his claim. An analysis of the provisions contained in Rules 37 and 52 clearly indicates, to my mind, that the Legislature intended to treat the provisions contained in Rule 37(1)(a) and the provisions contained in Rule 37(1)(b) separately and on different footing and while the Legislature in effect sought to prohibit any of the transactions mentioned in Rule 37(1)(a) without� the prior consent of the said State Government by imposing penalty on both the parties to the transaction, the Legislature in case of any breach or violation by the lessee of the provisions contained in Rule 37(1)(b) has not chosen to inflict any punishment on the financier dealing with the lessee and has only provided for the forfeiture of the lease of the lessee in accordance with the provisions contained in Rule 37(3). The Legislature, to my mind, intended not to treat a financier to be in pari delicto with the lessee in the matter of any breach or violation by the lessee of any provision contained in Rule 37(1)(b). In any event, in the facts of the instant case, I am not satisfied that the financier can be said to be in any way in pari delicto with the Defendants, had the agreement in question been hit by the provisions contained in Rule 37(1)(b) for any breach of the said obligations by the Defendants.

The other contention raised by Mr. Roychowdhury that Sukhani had no valid authority to act on behalf of the Defendants and to, receive any money on behalf of the Defendants as the authority of Mr. Sukhani was tainted with illegality, is, in my opinion, not tenable. The Defendants have chosen to withhold the most material document, namely, the lease in their favour, and in the absence of the said document and all relevant facts and the entire picture being presented with regard to Mr. Sukhani''s appointment as the superintending engineer, it will not be right, in my opinion, to come to any conclusion on certain materials that the superintending agreement (Ex. M) is illegal. It has to be noted that on the basis of the said agreement Sukhani instituted a suit against the Defendants and the Defendants consented to a decree being passed in favour of Sukhani in that suit and a consent decree has already been passed in that suit. Apart from the said agreement (Ex. M), under which Sukhani was appointed as the superintendent, the Defendants executed a power of attorney in favour of Sukhani (Ex. N). The power'' of attorney is a separate and independent document. The fact that the said power of attorney was executed by the Defendants in favour of Sukhani for the purpose of enabling him to discharge his duties as superintendent effectively will not make the said power bad or illegal even if the agreement (Ex. M) appointing Sukhani as the superintendent, could be said to be bad or illegal. The powers conferred on Sukhani by the Defendants under the said power of attorney (Ex. N) are many and several. Even if some of the clauses of the said power of attorney (Ex. N) cannot be made effective and be not valid, the other clauses in the said document will remain unaffected. Under the power of attorney Sukhani was given the general power to do anything and everything on behalf of the Defendants. As I have already noted, the evidence of Baidyanath Mondal itself suggests that Baidyanath Mondal caused the cheque for Rs. 5,000 to, be made over to Sukhani, when the said cheque was made over to Baidyanath Mondal on the execution of the agreement (Ex. A) between the parties. It is important and interesting to note that although in the written statement (para. 6) the Defendants make the case that payments, if any, had been made to Sukhani, yet they do not choose to deny or dispute the authority of Sukhani in the written statement and they make the grievance that Sukhani had not rendered any accounts to them. This grievance does not appear to have any sound basis and, in any event, is not a relevant consideration. It is completely established by the evidence on record that the entire amount advanced to the Defendants and received by Sukhani on their behalf had been utilized for the benefit of the Defendants in their business. The Defendants are, therefore, liable to return the said amount irrespective of the question of any authority of Sukhani. As I have earlier observed, the Defendants have in fact accepted and acknowledged their liability in respect of the claim in the suit.

I, therefore, answer the issues as follows:

(1) Yes.

(2) Yes.

(3) No.

(4) The suit succeeds.

There will be a decree in favour of Ghanaswamdas Maheswari, the Plaintiff No. 2 herein, against the Defendants for Rs. 3,80,067 with interim interest and interest on judgment @ 6 % on the principal amount of Rs. 3 lakhs. There will also be a declaration in terms of prayer (4). The Defendants will pay to the Plaintiff No. 2 Ghanaswamdas Maheswari the costs of the suit. Certified for two counsel.