Vidya Prakash Puri vs Roshan Lal Malhotra and Others

Capoor, J.—This Letters Patent appeal is directed against the judgment dated the 5th October, 1962, of a learned Single Judge of this Court whereby he allowed an appeal at the instance of certain of the creditors, Shrimati Kartar Devi and others (respondents 2 to 8) against the judgment of Tribunal under the Displaced Persons (Debts Adjustment) Act, 1951, (Act No. 70 of 1951), hereinafter to be referred to as the Act. These creditors, that is, respondents. Nos. 2 to 8-, have also filed a Letters Patent Appeal No. 6-D of 1963 against the same judgment claiming certain further reliefs against the debtors. Both these appeals will be disposed of in the course of the following judgment.

It is necessary for the proper understanding of the dispute between the parties to state the facts in some detail. There used to be published at Lahore, prior to the partition of the country, a film, magazine in Urdu, that is, Chitra Weekly. The two partners in that concern were Vidya Parkash Pun and Din Dayal Bhatia, and one of the terms of the partnership deed was that the death of either of the two partners would not automatically result into dissolution of partnership but that heirs of the deceased partner would continue to be treated as partners. Din Dayal Bhatia died at Lahore on the 16th April, 1946. leaving behind his widow Shrimati Kartar Devi (respondent No. 2) and six minor children (respondents No. 3 to 8). On the 10th May, 1946, a fresh partnership deed was drawn up between the petitioner on one side and the respondents on the other. Kartar Devi was not happy with the terms of the partnership and on the 28th January, 1947, it was decided to dissolve the partnership. In this connection, a deed (Exhibit P. 6) was executed which describes itself as a deed of reference to arbitration. Raj Lal and Kala Ram were appointed as the arbitrates to carry out the agreement between the parties, which briefly was to the effect that the business and good will of the partnership was to be auctioned and Vidya Prakash Puri on one side and Shrimati Kartar Devi on the other were to give bids. The party, who gave the highest bid was entitled to get the business along with its good will on payment of hall of the amount bid by him to the other party. On the very next day, that is, 29th January, 1947. the auction was held but before the bids were made, parties vide Exhibit P. 2 entered into an agreement that the highest bidder at whose bid the bargain was struck would pay twenty-five per cent of the half of the bid to the other party on the spot, the balance to be paid within two months, that is, ending on the 29th March, 1947. If the payment was not so made, the next highest bid would stand; the party who made the next highest bid would pay the full amount of his bid to the other party on the 30th March, 1947 and the amount already received by him would be forfeited to him. The bid was on the basis of the audited accounts as on the 31st December, 1946. The bidding then started and the final bid was that of Vidya Prakash Puri at Rs. 2,00,000/- The bid immediately preceding was that of Kartar Devi at Rs. 1,00,000/-. Exhibit P. 4 shows that the bid of Rs. 2,00,000/ by Vidya Prakash Puri was accepted by Kartar Devi, and the former gave a cheque for Rs. 25,000/- favouring Shrimati Kartar Devi and the balance was to be paid as above. The parties as well as both the arbitrators have signed Exhibit P. 4.

There is no dispute with regard to the sum of Rs. 25,000/- which had been duly received by Shrimati Kartar Devi and had been retained by her on behalf of respondents 2 to 8. On the 27th March. 1947, Vidya Parkash Puri made an application (Exhibit R.I) u/s 14 of the Indian Arbitration Act praying that the arbitrators be called upon to file their award. He also on the 29th March, 1947, made a deposit in the Court of Rs. 73,936/15/- and a telegram (Exhibit P. 8) was despatched by him to Shrimati Kartar Devi informing her that the above application had been made and the amount specified above deposited in Court. On the 26th June, 1947, Vidya Parkash Puri gave an application (Exhibit R. 2) in the Court of Dawan Chaman Lal Puri, Subordinate Judge, Lahore, where the arbitration matter was pending, alleging that the award had not so far been made by the arbitrators, one or whom, that is, Kala Ram, had refused act and the period prescribed for making the award had expired; submitted that in these circumstances he did not wish to proceed with the application u/s 14 of the Indian Arbitration Act and that he withdrew the same. The Subordinate Judge, who had issued notice on the application u/s 14 to the respondents, dismissed that application in view of the contention advanced by Vidyat Parkash Puri''s counsel that his client was withdrawing the application unconditionally. He also ordered on the same date, that is, 26th June, 1957, that any amount deposited by the applicant in the case may be withdrawn by him (Exhibit R. 3). In consequence of this order the entire sum deposited by Vidya Parkash Puri was withdrawn by him. It was after this and on the 7th July, 1947, that the arbitrators put in their award in the Court.

Then came the partition of the country and migration of the parties to the case from Lahore to Delhi. Shrimati Kartar Devi on the 31st March, 1948, instituted a suit against Vidya Parkash Puri claiming the return of Rs. 73;936/15/- which according to her was her money and withdrawn illegally by him from the Court. In the alternative she prayed for dissolution of the partnership and rendition of accounts. While this suit was pending Vidya Parkash Puri instituted his application u/s 5 of the Act, which has given rise to these two appeals.

In this application he maintained that he was a displaced person from the territories now in West Punjab. A reference was made, to, the partnership pertaining to the Chitra Weekly and it was said that on account of the award of the arbitrators, respondents Nos. 2 to 8 were liable to pay to the petitioner a sum of Rs. 95,000/-, which they had not paid, but have instead lodged a suit claiming Rs. 73,189/- against the petitioner, which was totally false and unfounded. He also pointed out that he had filed a separate claim u/s 10 of the Act against respondents- Nos. 2 to 8 for the recovery of Rs. 95,000/-. In the schedule showing particulars of the debts said to be owing by the petitioner he also included certain debts due to other creditors, that is, Rbshan Lal Malhotra, Dewan Rajinder Kumar Chopra, Raghunandan Lal Marwaha, Manohar Lal Kochar and Ram Lal Dhamija. The respondents, who really opposed the petition, were respondents No. 2 to 8 and the learned Subordinate Judge constituting the Tribunal framed the following issues:

(1) Does any debt exist in favour of respondents 2 to 8 ? If so, to what amount ?

(2) Is this application not maintainable ?

(3) Whether any other debt is due from the petitioner ?

(4) What is the paying capacity of the applicant ?

(5) Relief.

The Tribunal held that no debt existed in favour of respondents 2 to 8 and that the application wa9 maintainable. On issue No. 3, it held that debts amounting to Rs. 12,000/- and Rs. 17,000/- were due from the petitioner to Roshan Lal Malhotra (respondent No. 1) and Manohar Lal Kochar (respondent No. 2) On issue No. 4, he held that the petitioner was not in a position to pay his debts in lumpsum and so under the provisions of the Act, the debts had to be scaled down and paid out of the compensation due to him. In the result, a decree for Rs. 12,000/- and Rs. 17,000/- was granted in favour of respondents Nos. 1 and 2 respectively, which were to be recoverable out of the amounts of the claim verified in favour of the applicant as scaled down u/s 32(6) of the Act.

It may be mentioned that Vidya Parkash Puri''s application u/s 10 of the Act was dismissed and no appeal was taken against that order.

In the appeal by Shrimati Kartar Devi and her children, that, is, respondents Nos. 2 to 8, the learned Single judge reversed the findings of the Tribunal on all the material issues. He held that actually no debts were owing by Puri to Roshan Lal Malhotra and Manohar Lal Kochar. He further held that the sum of Rs. 773,98 which is a mistake for the sum of Rs. 73,936/15/ was due from Vidya Parkash Puri to Shrimati Kartar Devi and her children and was a debt falling within the ambit of the Act. He was further of the view that the debtor''s paying capacity was more than the debt found due from him. Lastly, it was held that the debtor had wilfully and fraudulently within the meanings of subsection (2) of section 12 of the Act omitted to include his assets including good-will of the Chitra Weekly in the schedule to his application, and was not qualified for as much facility for payment of his debt under the provisions of the Act as would have been obtainable to him if he had come with clean hands. In the result, setting aside the order of the Tribunal, he granted to Shrimati Kartar Devi and others a decree for Rs. 73,189/- with costs against Vidya Parkash Puri. Keeping in view the provisions of section 33 of the Act, he directed that this decretal amount be paid in half yearly instalments of Rs. 5,000/- each.

In the appeal by Vidya Parkash Puri the submission is that the order by the learned Single Judge be set aside and the order by the Tribuual restored. In the appeal on behalf of Shrimati Kartar Devi and others, the prayer is that Vidya Parkash Puri may be ordered to pay the full decrial amount at once or in the alternative a default clause may be incorporated in the judgment and decree to the effect that if any installment is not paid by him in time, the balance decrial amount would become immediately payable by him to the appellants and further that interest at the rate of 6 per cent, per annum may also be allowed till the amount be paid.

The crucial question in this case is whether the amount claimed by Shrimati Kartar Devi and others, appellants in Letters Patent Appeal No. 6-D of 1963, is a debt wixhin the meaning of Clause (6) of section 2 of the Act. Mr. N.C. Chatterji, on behalf of the appellant debtor, has maintained that it does not fall within this definition. The definition, so far as relevant, is as follows :

''debt'' means any pecuniary liability, whether payable presently or in future, or under a decree or order of a civil or revenue court or otherwise, or whether ascertained or to be ascertained, which-

(a) In the case of a displaced person who has left or been displaced from his place of residence in any area now forming part of West Pakistan, was incurred before he came to reside in any area now forming part of India;

It is, maintained by Mr. Chatterji that actually under the terms of the agreement of reference to arbitration (Exhibit P. 6), Vidya Parkash Puri had not incurred any liability to make any payment to the other side, and it was entirely a matter of his choice whether he exercised his option under the agreement. Even after he had paid the sum of Rs. 25,000/-, he could choose not to pay the balance of half of his bid of Rs. 2,00,000/- and the only penalty inclined by him would be forfeiture of sum of Rs. 25,000/-. The deposit made by him in Court was a conditional tender of the balance and this for two reasons-

(1) It was not the entire amount of Rs. 75,000/-. and

(2) It was made with reference to his application (Exhibit R.I.)

under section 14 of the Indian Arbitration Act, and the amount deposited would be payable to the other side only if award was duly filed by the arbitrators and resulted in a decree. Until that event occurred, the money deposited remained his and could not, in any sense, be termed as the money of Kartar Devi and her children.

To support his argument, Mr. Chatterji cited certain authorities for the proposition that a tender to be effective must be, as required by section 38 of the Contract Act, unconditional and of the full amount due. A tender clogged with the term that the money was to be taken as a settlement is not good. Narain Das v. Abinash Chandar and another AIR 1922. P.C. 347, Hira Lat and others v. Khizar Hayat Khan AIR 1936 Lah. 198 at p. 175 and Bank of Mysore v. B.D. Naidu AIR 1954 Mys 168.

The learned Single Judge to whom similar arguments were addressed was of the view that it has not been proved that deposit in Court was made subject to any condition. The discrepancy between the balance due and the amount deposited was explained on the ground that the amounts received by Kartar Devi and others subsequent to the 31st December, 1946, were adjusted. The learned Single Judge was influenced by the consideration that the default would have meant to Vidya Parkash Puri a loss of Rs. 25,000/-, which had been paid after the termination of the auction. In his view, the payment was made u/s 31 of the Punjab Relief of Indebtedness Act, 1934 (Act No. 7 of 1934) as applied to the Delhi State. This section is as follows :

(1) any person who owes money may at any time deposit in court a sum of money in full or part payment to his creditor,

(2) The court on receipt of such deposit shall give notice thereof to the creditor and shall, on his application, pay the sum to him.

(3) From the date of such deposit interest shall cease to run on the sum so deposited

In view of sub-sections (2) and (3) of this section, the Court continues to hold the money for and on behalf of the creditor. The subsequent withdrawal of the money by Vidya Parkash Puri under the orders of the Court was considered wrongful and as such it was held that he was liable to repay the amount to Shrimati Kartar Devi and others.

While it is correct that if Vidya Parkash Puri did not pay the balance of Rs. 75,000/- by the 29th March, 1947, he stood to lose the sum of Rs. 25,000/- paid by him to Shrimati Kartar Devi on the 29th January, 1947, but from this inference cannot necessarily be drawn that she would be able to withdraw the amount even before the arbitrators filed their award and the Court made its decree in pursuance of the award. It is to be remembered that respondents 3 to 8 were still minors and it would be only natural that vidya Parkash Puri should safeguard himself against any objections which may be lodged on their behalf prior to the award being made the rule of the Court. The deposit cannot be divorced from the application made by him u/s 14 of the Indian Arbitration Act. Mr. R.L. Tandon, on behalf of respondents 2 to 8, maintained that actually there was no necessity for the filing of the award as there was really no arbitration agreement in the prompter sense of the word and the two gentlemen referred to as arbitrators, that is, Raj Lal and Kala Ram, were merely to be the witnesses of the bids. In this connection, he relied on Mst. Akbari Begdm v. Rahmat Husain and others AIR 1333 All. 861 and Vadilal Chatrabhuj Gandhi Vs. Thakorelal Chimanlal Munshaw and Others, . In the former case it was held that where parties agree to abide by the statement of a third person or a referee, the referee merely makes a statement according to his knowledge or belief. The agreement is in substance not a reference to arbitration because the referee is not authorized to make inquiries and take evidence, and then announce his decision on the basis of such evidence. In the second case, the nature of the agreement between the parties was that they intended the person appointed to act as a value and not as an arbitrator and that the decision was to be made by him in his absolute discretion. The facts of the instant case are, however, different. The proposed arbitrators were not merely to be witnesses of the bids but to make over the business and good will in accordance with the eventualities of the bidding as well as subsequent events. They formally entered on the reference vide Exhibit P. 1 on the 29th January, 1947, and in the proceedings u/s 14, Kartar Devi''s counsel did not make any objection that there was really no arbitration agreement. The arbitrators formally filed the award on the 7th July, 1947. In the circumstances, it must be held that the deposit was made with reference to and for the purpose of the proceedings u/s 14 of the Indian Arbitration Act, and we are unable to accept the view that it was made u/s 31 of the Punjab Relief of Indebtedness Act, 1934. There was no reference to this Act in any of the proceedings in the Court at Lahore. Mr. Chatterji drew our attention to the rules made by the Punjab Government in the Home Department u/s 32 of the Punjab Relief of Indebtedness Act, 1934, as published by notification No. 2461-J 36-16790 in the Punjab Gazette dated the 22nd May, 1945, These rules were applied to all deposits to be made u/s 31 of this Act. Under rule 3, sums less than one thousand rupees may be deposited in any stipendiary civil court having jurisdiction within the district in which the debtor resides, but under rule 4 sums of one thousand rupees or over shall be deposited only in the Court of the Senior Subordinate Judge of the district in which the debtor resides. It does not appear from the record that the Court in which the deposit was made was the Court of the senior Subordinate Judge at Lahore. This is another argument in support of the view that the deposit was made in the suit itself and not u/s 31 of the Punjab Relief of Indebtedness Act. It is significant that no notice of the deposit was given by the Court though if the deposit had been under this provision such notice was necessary under subsection (2) of section 31. Moreover, Kartar Devi took no steps to get the payment of the deposit from the Court, which also implies that it was understood that it would be paid out by the Court only in the event of the arbitration award being filed, followed by its being made the rule of the Court.

Thus, the deposit cannot be treated as payment having been made to Kartar Devi etc. and on this point we must with respect differ from the view of the learned Single Judge. Even if it be held that the deposit amounted to payment having been made to Kartar Devi etc. The learned counsel for the contesting respondents is faced with another difficulty because on that view there would be no longer any pecuniary liability subsisting between the appellant and the contesting respondents. Mr. R.L. Tandon, however, sought to place the matter in another aspect and contended that the contesting respondents were deprived of this money by the wrongful act of the appellant in withdrawing the deposit and as such the moment he did so, he was under a liability to repay the amount to Kartar Devi etc. and that liability was a pecuniary liability which came within the definition of "debt" in the Act. The learned Single Judge has held and with good reason that the appellant Vidya Parkash Puri had made false representation in the application (copy Exhibit R. 2) made by him to the Court at Lahore on the 26th June, 1947, and that his real motive was to put the large sum deposited by him back into his pocket due to the impending partition of the country. Even so, the question arises whether in these circumstances the withdrawal of the money would raise any pecuniary liability to repay it to Kartar Devi etc. A Full Bench of this Court in Ram Lal Jain v. Central Bank of India Ltd. Bombay AIR 1961 Pni. 340, considered the connotation of the term "debt" in clause (6) of section 2 of the Act and at page 344, the following passage occurred :

the definition of ''debt'' as given in the Act contemplates that the primary right was to receive money or money''s worth whether presently or in future and the corresponding liability incurred was similarly a pecuniary one, that is, to pay money or money''s worth. If the agreement was to pay money or money''s worth or if the defendant became liable to pay the price of goods purchased by him or received by him under a mistake giving rise to what is known as a quasi contract, there was at the inception of the transaction a liability, to pay money or money''s worth, that is, a pecuniary liability, which gave a primary right to the other party to receive money or money''s worth. Undoubtedly in other cases of breach of contract, the aggrieved party, if he seeks recourse to the Courts, has a right to be compensated by way of damages for the breach, but that is a sanctioning right, and the same applies mutatis mutandis in action seeking damages for tortuous acts.

As according to the finding by the learned Single Judge, the withdrawal of the money from the Court by the appellant was a tortuous act, it would follow that the proper remedy for Kartar Devi etc. was to bring an action seeking damages and no pecuniary liability arose, which would be considered as a "debt" within the meaning of the definition. The learned counsel for the contesting respondents invoked in this connection section 72 of the Indian Contract Act, 1872, which is as follows :

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it." and it was maintained that the withdrawal of the money by Vidya Parkash Puri gave rise to a quasi contract to make restitution and as such a pecuniary liability arose. We are not, however, satisfied that recourse can be had to section 72 of the Indian Contract Act in the circumstances of this case. It was the Court which ordered on the 26th June, 1947, that any amount deposited by the applicant in the case may be withdrawn by him. This was in consequence of the original application u/s 14 of the Indian Arbitration Act having been dismissed as withdrawn by that Court. The mistake, if any, was therefore, of the Court at Lahore but no steps were taken by Kartar Devi etc. to move the Court to order restitution and it is impossible to speculate as to what the Court would have done on such an application.

In the circumstances, it has to be concluded that there was no debt owing by Vidya Parkash Puri to the contesting respondents within the meaning of the term as defined in clause (6) 01: section 2 of the Act. On this view it is unnecessary to decide any of the other questions which were canvassed before the learned Single Judge and I would, therefore, set aside the order under appeal and allow Letters Patent Appeal No. 76 D of 1962. The other appeal, that is. Letters Patent Appeal No. 6-D of 1963, ipso facto fails and is dismissed. In the circumstances, I would leave the parties to bear their own costs throughout.

Dulat, J.

I agree.