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1972 SCC OnLine Cal 81 : AIR 1973 Cal 401

Calcutta High Court

(BEFORE RAMENDRA MOHAN DATTA, J.)

Smt. Narayani Devi … Plaintiff;

Versus
Tagore Commercial Corporation Ltd. and another … Defendants.
Liquidated Claim Suit No. 1002 of 1966
Decided on June 27, 1972
ORDER
1. This is a suit for the recovery of a sum of Rs. 14,000/- due on account of
principal and Rs. 3915/- as damages in respect of interest due and for further
damages. The defendant No. 1 Tagore Commercial Corporation Ltd. has virtually closed
down its business and accordingly, the plaintiff seeks to claim relief mainly against the
defendant No. 2, the guarantor who is Maharaja Prabinrendra Mohan Tagore Bahadur.
2. A formal agreement, between the plaintiff's husband one Nagendra Lal Saha,
since deceased, and the defendant company as the principal debtor and the said
Maharaja Prabirendra Mohan Tagore Bahadur as the guarantor, was entered into on or
about October 5, 1951. The plaintiff's husband, the said Nagendra Lal Saha, held
several shares of the face value of Rs. 40,500/- in Messrs. L.C. Saha Limited. By the
said contract it was agreed, inter alia, that the plaintiff's husband will sell off his said
shares in favour of the defendant No. 1 in consideration of the defendant No. 1
agreeing to pay him i.e., to Nagendra Lal Saha during his lifetime the sum of Rs. 500/-
per month and after his death to pay to the plaintiff the sum of Rs. 250/- per month,
month by month and every month during her natural life if she would survive her
husband. By that agreement if the defendant company would fail to make the said
payment then the guarantor defendant No. 2 agreed to make due payments of the
said sums as aforesaid. By the said agreement Nagendra Lal Saha also agreed to
surrender, relinquish, and release all his right, title and interest, claim and demand
whatsoever to receive the royalty @ 150/- per month from the said Messrs. L.C. Saha
Limited and agreed to sign, execute and register the formal deed surrendering,
relinquishing and releasing his said right, title and interest, claim and demand
whatsoever and agreed to cause all necessary parties to join in the said deed when
called upon by the purchaser company to do so at its costs.
3. In terms of the said agreement since 1951 the defendant company and/or
Maharaja Prabinrendra Mohan Tagore, the guarantor, paid the said sums to the said
Nagendra Lal Saha during his lifetime and after his death from time to time to his
wife, the plaintiff herein. Nagendra Lal Saha died on July 8, 1957.
4. The plaintiff's case is that the defendant No. 2 from time to time paid several
sums in part payment of the sums due under the said contract, firstly, to the plaintiff's
husband and after his death to the plaintiff

Page: 402

directly but since September 1, 1961 till Apri 30, 1966 he failed and neglected to pay
the said sum of Rs. 250/- per month which was payable to the plaintiff.
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5. The defendant No. 1 has not entered appearance nor has filed any writter
statement herein. The defendant No. 2 has filed a written statement and has denied
his liability in respect of the plaintiff's claim. He has challenged the agreement as void
as in valid for want of consideration as a document which is not binding upon the
defendants. It is also pleaded therein that the said agreement was not enforceable in
law inasmuch as the same was not a concluded contract at all because the plaintiff
failed and neglected to execute the formal deed of transfer and/or release and/or
surrender and/or relinquishment in respect of the said shares and for the royalty
thereof. Those averments have been made in paragraph 2 of the said written
statement in which allegation was made against the plaintiff having failed and
neglected to execute and register the proper deed of transfer and/or release and/or
surrender and/or relinquishment in respect of the said shares and in respect of the
claim for the royalty as mentioned therein in terms of the said purported agreement.
As already stated, the defendant No. 1 has not entered appearance herein. It is
difficult to follow why the plaintiff should fail and neglect to execute and register the
proper deed of transfer and why the plaintiff should be called upon by the defendant
No. 1 to do so as pleaded in the said paragraph specially when payments were being
made to the plaintiff's husband when he was alive and thereafter to the plaintiff for
sometime under the said agreement. A further point has been taken in the said
written statement to the effect that the plaintiff's claim, if any, is barred by the law of
limitation.
6. An important point has also been urged by and on behalf of the defendant No. 2
to the effect that since the plaintiff was not a party to the said agreement which was
entered into by her husband and the defendants herein, she was not legally entitled to
any benefit under the same and she had not acquired any right to sue the defendants
under the said agreement. Accordingly, the suit is wholly misconceived.
7. The following issues were settled at the trial:
1. Did the defendant No. 1 fail or neglect to pay the monthly sums in terms of the
agreement dated October 5, 1951 as alleged in paragraph 3 of the plaint?
2. Is the plaintiff not entitled to any benefits under the said agreement dated
October 5, 1951 as alleged in paragraph 4 of the written statement?
3. Has the defendant No. 2 any obligation or liability to make any payment to the
plaintiff under the said agreement?
4. Is the plaintiff's claim or any part thereof barred by limitation?
5. Does the plaint discloses any cause of action?
6. To what relief, if any, is the plaintiff entitled?
Issues Nos. 1 and 3:
8. I shall first take up issues Nos. 1 and 3 which can be dealt with together. On
behalf of the plaintiff reliance has been placed on the correspondence which would
suggest that such monthly sums were payable to the plaintiff by the said guarantor.
In the letter dated June 25, 1960 (Exhibit ‘C’) there is a clear admission by the
defendant No. 2 to the effect that he would make the payment of half the amount of
the arrear on June 22, 1960. He regretted that he was unable to arrange for the
money for payment. By the said letter he also requested them not to file any suit for
another 15 days within which time he promised to pay the arrear dues. The said letter
referred to two other letters dated June 3, 1960 and June 20, 1960 which formed part
of Exhibit ‘A’. The letter dated June 3, 1960 was written by Messrs. Nahar & Datta,
attorney for the plaintiff to the defendant No. 1 whereby the agreement was set out
and on the basis of the agreement claims were made for arrears of monthly sums
payable thereunder to the extent of a sum of Rs. 6900/- due upto May, 1960. The
letter dated June 20, 1960 was a reminder to their letter dated June 3, 1960
addressed to the defendant No. 1 and the same recorded that on June 15, 1960 the
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Chairman of the defendant No. 1 being the said Maharaja Bahadur P.M. Tagore assured
that he would be in a position to say when he would settle the claim. By the said letter
payment was again demanded and upon default in making the payment, the said
solicitors threatened to take action by filing a suit.
9. On behalf of the defendant No. 2 it is argued that the plaintiff has failed to prove
her case and has failed to discharge the onus in respect of those two issues. The above
correspondences would show that the plaintiff was entitled to the payment of some
amount which was admitted to be due as appeared from the evidence on record, and
from the probabilities or legal inferences derived from the admitted facts on record the
court is in a position to come to the finding that the obligations under the said
contract were duly performed by the said Nagendra Lal Saha. It is contended on behalf
of the defendant No. 2 that even though an issue has been raised, the plaintiff has not
made any effort to satisfy the Court that the shares were transferred or that formal
deeds as mentioned in the said agreement were executed by the said Nagendra Lal
Saha. It is argued that there might be evidence showing liability for payment but the
same cannot amount to a legal liability to pay unless it is proved that the shares were

Page: 403

transferred and the deeds were executed in favour of the defendant No. 1 as per terms
of the said agreement. The only evidence that has been led is in question No. 17 which
was put to Jogindra Lal Saha and which reads as follows:—

“Q. 17. With regard to the agreement between your brother and the defendants,
would you tell my lord if you have any personal knowledge as to what happened to
the shares which were being held by your brother Nagendra? All these transactions
had been completed. Nagendra Saha transferred all shares to Maharaja Prabirendra
Mohan Tagore on the basis of the agreement that has been executed by Maharaj
Bahadur.”
10. On the basis of the aforesaid evidence adduced on behalf of the plaintiff it was
contended by Mr. Bankim Dutt that there was positive evidence to the effect that the
formalities prescribed under the said agreement had been completed and the same
were so done on the basis of the said agreement. It is true that Jogindra Lal Saha in
his evidence has stated that the shares were transferred to the Maharaja but by that
he must have meant the company of which the Maharaja was, at all material time, the
Chairman and/or the Managing Director.
11. The correspondence tendered herein would also support the plaintiff's case that
the Maharaja was accepting the letters addressed to the defendant No. 1 and had been
giving replies in respect thereto to the plaintiff or her solicitors. By the letter dated
June 25, 1960 (Ext. ‘C’) the Maharaja has acknowledged receipt of all such letters
even addressed to the defendant No. 1 and on the basis of such letters has
acknowledged full liability to the plaintiff to make full payment under the said
agreement dated October 5, 1951. The oral evidence adduced herein and the
documentary evidence in support thereof leave no doubt in my mind that the Maharaja
was acting not only on his own behalf as the guarantor but also on behalf of the
principal debtor being the defendant No. 1 herein on the basis of the said agreement.
In fact and in effect he adopted the agreement as Chairman of the defendant No. 1
and as the guarantor under the said agreement and in both the said capacities he
intended to make it an effective and valid agreement so as to bind him in both the
capacities to the plaintiff. Neither the defendant No. 1 nor the defendant No. 2
adduced any evidence contrary to what has been adduced on behalf of the plaintiff. I
have come to the finding that the company had all throughout been represented by
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the defendant No. 2.

12. On the question as to whether the defendant No. 1 failed to pay the monthly
sums to the plaintiff or not so as to make the guarantor liable, the plaintiff's letter
dated June 3, 1960 would reveal that a sum of Rs. 850/- was paid from time to time
in instalments by the defendant No. 1 through its Chairman the said Maharaja P.M.
Tagore. After giving the company credit for the said sum a demand was made for the
balance sum from the company in respect of the monthly payments payable under the
said agreement. The receipt of the letter was acknowledged by the Maharaja's letter
dated June 25, 1960 (Ext. ‘C’) and such liability had been admitted. In my opinion, it
was the defendant No. 1 who could come and say that no such sums were paid by the
company but the defendant No. 1, as stated above, neither filed any written statement
nor gave evidence to the contrary. In so far as the defendant No. 2 is concerned he
has also chosen not to adduce any evidence on his behalf. Under those circumstances,
my finding is that in spite of demands the defendant No. 1 failed and neglected to pay
the balance sums due and owing from the defendant No. 1 to the plaintiff and,
accordingly, the defendant No. 2 as the guarantor became liable to pay such amounts
to the plaintiff. To my mind, there is enough evidence to the effect that the liability on
the part of the guarantor duly arose upon the failure on the part of the company to pay
the arrear dues to the plaintiff. I am also satisfied that all formalities in respect of the
transfer of the shares were observed on behalf of the plaintiff long time back and
during the lifetime of Nagendra who also received the monthly sums under the said
agreement. On the evidence on record and in the absence of any evidence to the
contrary on behalf of the defendants, this Court is entitled to draw the legal inference
from the admitted or proved facts that unless such formalities had been observed the
defendant company would not have made any payment to Nagendra at any point of
time or to the plaintiff, since Nagendra's death.
13. In paragraph 6 of the written statement the defendant No. 2 has alleged that
Nagendra committed breaches in performing his part of the said agreement dated 5-
10-1951, and the issue was sought to be raised by Mr. Banerjee on those pleadings
but the same was not allowed to be raised in the manner it was suggested because it
was understood that under these two issues Nos. 1 and 3 the said allegations could be
considered. In my opinion, since payments have all along been made under the said
agreement, the onus was on the defendant to show that such formalities were not
observed and in the absence of any such evidence the plaintiff is not called upon to
lead further evidence besides what have been adduced to show that such transfers
were actually effected by Nagendra. The evidence on record proves that such shares
were handed over to the Maharaja for effecting the transfer and that would go to show
that the plaintiff's predecessor performed his part of the obligation under the said
agreement.

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14. Mr. C. Banerjee has argued that the plaintiff has failed to prove that there was
any consideration for the said guarantee. I am satisfied from the prima facie evidence
adduced before me that there was such consideration and in the absence of any
positive evidence either oral or documentary adduced on the part of the defendants
that there was no such guarantee, this Court will be justified in relying on the said
prima facie evidence. The fact remains that the Maharaja was the Chairman of the
defendant No. 1 and as such Chairman also he was interested to purchase the said
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shares from Nagendra and as a share-holder and the Chairman of the Board of
Directors of the said company he was to derive benefit out of the said transaction. In
any event, the correspondence will show that the Maharaja had been acting as a
guarantor all throughout and he had acknowledged his liability to the plaintiff as such
guarantor and on that basis he had been making payments. Under such circumstances
it is now idle on the part of the defendant No. 2 to raise that point and that again,
without calling any evidence to show to the contrary. In fact no such dispute was ever
raised before.
15. Mr. Banerjee has argued that the payments made by the Maharaja, ipso facto,
did not attach any liability to him. He had no legal liability to pay. Such payments had
been made not under the agreement but on the basis of the promise to pay without
any consideration. According to him such payments might at best be evidence of his
promise to pay but the legal liability could not arise by reason of such payment and it
could not be contended that such payments were made in furtherance of any
agreement or guarantee. On the basis thereof, it was argued, that Exhibit ‘C’ could not
help the plaintiff to establish any legal liability. In my opinion, if the Maharaja had
come to the witness box to explain under what circumstances he had made the
payments and if he could give any valid explanation as to why he made the said
admission by Exhibit ‘C’ or if that admission could be explained by him by oral
evidence then only the above argument put forward by Mr. Banerjee could have some
relevance but in the absence of any evidence to that effect, in my opinion, the said
Exhibit ‘C’ has to be read in accordance with its apparent tenor which clearly shows
acknowledgment of liability on the part of the Maharaja as such guarantor to make the
payments to the plaintiff under the said agreement.
16. I accordingly answer the said issues as follows:—
Issue No. 1: The answer is in the affirmative.
Issue No. 3: Is also answered in the affirmative.
17. Issue No. 4: In the case of Sant Lal Mahton v. Kamala Prasad, 1951 SCC 1008 :
1952 SCR 116 at p. 123 : (AIR 1951 SC 477) the Supreme Court observed:
“If the plaintiff's right of action is apparently barred under the statute of
limitation, Order 7, Rule 6 of the CPC makes it his duty to state specifically in the
plaint the grounds of exemption allowed by the Limitation Act upon which he relies
to exclude its operation.”
18. There is no such averment in the plaint. There is a vague pleading relating to
acknowledgment by the letter dated June 25, 1960. Accordingly the claim is clearly
barred by limitation for the period starting from September 1, 1961, till May 23, 1963
but in view of the fact that the monthly payments constitute a continuing cause of
action in respect of the payment for each month, such claim, if otherwise
maintainable, cannot be barred by limitation for the period of 3 years immediately
preceding the date of the filing of the suit. The suit having been filed on May 24, 1966
the period commencing from May 24, 1963 is within the period of limitation. I answer
the issue accordingly.
19. Issue No. 5 has not been pressed and is accordingly decided against the
defendant No. 2.
20. The only issue that remains to be considered is issue No. 2. In paragraph 4 of
the written statement it is pleaded that inasmuch as the plaintiff is not a party to the
said agreement dated October 5, 1951, she is not entitled to any benefit under the
said purported agreement and accordingly, her suit was wholly misconceived. This
raises an important question of law.
21. In paragraph 4 of the written statement it is pleaded as follows:—
“This defendant further states that, in any event, inasmuch as the plaintiff was
not a party to the said agreement dated October 5, 1951 and the said purported
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agreement was not made by and between the plaintiff and the defendant, she was
and is not entitled to any benefit under the said purported agreement and this suit
instituted by her to enforce her alleged right under the said purported agreement is
therefore, wholly misconceived and is liable to be dismissed.”
22. It is argued that the plaintiff cannot sue the defendants under the agreement in
which she was not a party. The contract was entered into by and between the said
Nagendra Lal Saha, the husband of the plaintiff and the two defendants herein. Under
the said contract after the death of the said Nagendra Lal Saha a sum of Rs. 250/- per
month would be payable by the defendant No. 1 and on its failure, by the defendant
No. 2, to the plaintiff so long she would be alive. The question before me is, can the
benefit that was conferred on the plaintiff by the parties to the said agreement be
enforced by the said beneficiary at law? In other words, is the agreement herein, of
such a

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nature which would create any such obligation so as to entitle the plaintiff to any
equitable relief? Does it create an obligation in the nature of or amounting to a trust?

23. A series of judgments of the Courts in England as also of India have been cited
from the bar. It appears that the law is that even though under the Indian Contract
Act the definition of consideration is wider than in the English Law, yet the common
Law principle is generally applicable in India, with the effect, that only a party to the
contract is entitled to enforce the same. It is to be noted that in some exceptional
cases, such as Nawab Khwaja Muhammad Khan v. Nawab Husaini Begum, (1910) 37
Ind App 152 (PC), Deb Narayan Dutt v. Ram Sadhan Mandal, ILR 41 Cal 137 : (AIR
1914 Cal 129) and several others the above common law principles have not been
applied. In one of such exceptional cases the Courts found that an obligation in equity
amounting to a trust arising out of such contract did exist and as such the beneficiary
had the right to sue.
24. The plaintiff has pleaded that there is an obligation in the nature of trust arising
out of the said contract entered into by and between her husband and the defendants.
In paragraph 3 (a) of the plaint the plaintiff has pleaded that the defendants were and
are estopped from disputing their liability to the plaintiff under the said agreement
because the defendants treated the plaintiff as a party to the said agreement and after
the death of the said Nagendra Lal Saha, paid various sums to the plaintiff in terms of
the said agreement. The plaintiff has also pleaded by way of amendment that by the
letter dated June 25, 1960 written by the defendant No. 2 to the plaintiff's solicitors
the said defendant admitted and accepted liability to the plaintiff in terms of the said
agreement and requested the plaintiff to grant him time to make the payment and not
to sue for the money. The plaintiff has suffered prejudice by acceding to his said
request. On the basis of the aforesaid pleading it is contended that the defendants are
estopped from disputing their liability to the plaintiff.
25. Moreover, paragraph 2 of the written statement of the Maharaja contains a very
vital admission to the effect that under the said agreement the plaintiff was called
upon by the defendant No. 1 and in spite thereto the plaintiff failed and neglected to
execute and register proper deed of transfer and/or release and/or surrender and/or
relinquishment in respect of the shares and the claim for royalty. This is clear
admission that according to the defendant No. 2 the defendant No. 1 called upon the
plaintiff to perform her obligation under the said agreement. In other words, the
defendants by their conduct treated the plaintiff as a party to the said agreement.
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26. It has been argued on behalf of the defendant No. 2 that this is a mistake and
in the place of the plaintiff the name of her husband was intended to be pleaded. If
that was so, the same could be corrected by applying for an amendment to that effect
or, at least, the defendant No. 2 could have come to the witness box and could have
led evidence to that effect. None of the steps were taken and the admission uptill now
has been allowed to stand.
27. In my opinion, even if it is held, that there was no privity between the plaintiff
and these two defendants, when the said contract was entered into, yet in the facts
and circumstances of this case, it must be held that the two defendants have created
such privity with the plaintiff by their conduct and by acknowledgment and by
admission, as stated above and they have constituted themselves the agent of the
plaintiff. Such admission will also be found in Exhibit ‘C’ and such conduct will be
found from the evidence both oral and documentary. This is a case which comes
directly within the exceptions to the general doctrine that the stranger to the
agreement cannot sue to enforce his right because of want of privity between the
promisor and the stranger (Vide: observation of the Division Bench of this Court in
Jnan Chandra Mukherjee v. Monoranjan Mitra, AIR 1942 Cal 251 at p. 252).
28. The next question to be considered is whether from the language of the
agreement itself it can be held that a trust was created in favour of Narayani Debi.
29. It is provided in clause 8 of the said agreement that the said shares remained
charged for the payment of the monthly sums provided therein both to the husband
and after his lifetime to the wife. That is one of the terms of the said agreement. Then
again, the character of the money is nothing but the sale proceeds of the said shares.
Nagendra intended and the parties bargained thereby that instead of the sale proceeds
being paid immediately the same was to be payable in monthly instalments and was
so calculated that the same would cover the limetime of Narayani and on that basis
provision was made by Nagendra in such a way that every month she would get out of
the sale proceeds a sum of Rs. 250/- to maintain herself and for that purpose
Nagendra entrusted the entire sum to the company and to the Maharaja for his own
benefit during his own lifetime and thereafter for the benefit of his wife during her
lifetime. It was Nagendra's money and the two defendants were entrusted with that
sum for the sole purposes of disbursements in the manner as provided in the said
agreement.
30. By taking into account the position of the parties including Nagendra, vis-a-vis
the defendants, the nature of the money that was entrusted with the defendants by
Nagendra under the said agreement, and the nature of the provisions made in the said

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agreement, I have no doubt in my mind that an equity was created in favour of the
plaintiff to entitle her to sue for the said sum. An obligation in the nature of a trust can
certainly be inferred from all these surrounding circumstances and in the very special
facts and circumstances of this case.

31. The point which is before me for determination is, in my opinion, also covered
by the English decision in Page v. Cox, reported in (1852) 10 Hare 163 : 68 ER 882.
There the testator and his wife's sister's husband entered into partnership articles with
a proviso that if the testator should die in course of the partnership, the testator's
widow should be entitled to the interest to be left by the testator. Sometime prior to
entering into the said partnership the testator who was a tradesman, by his will,
bequeathed the interest to his wife's sister whose husband and the testator entered
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into the said partnership. Turner V.C. held that the effect of the agreement between
the said two partners was to create an obligation in equity upon the surviving partners
and in that respect it did not differ from a trust. In other words, the said partnership
articles created a trust in favour of the widow of the testator. Such a trust was founded
on contract and as such was capable of being enforced.
32. It it to be noted that the said agreement could be enforced by the plaintiff's
husband during his lifetime because he was a party to the same. The question is
whether after his lifetime the wife being the plaintiff herein could enforce the same
against the defendants. As observed by the Bench decision of this Court in District
Board, Malda v. Rai Bahadur Chandra Ketu Narayan Singh, AIR 1937 Cal 625 at p.
630: “The question whether in a particular case there is an obligation in the nature of
a trust in favour of a third party arising out of a contract will depend on the facts of
the case.”
33. In the facts and circumstances of this case both the defendant No. 1 and the
guarantor bound themselves to pay to the plaintiff by accepting the position that she
was entitled to the benefit under the said agreement. By the terms of the said
agreement an equity was created in her favour and such equity entitled her to enforce
her claim. The obligation that was created in equity, in the facts of this case, did not
differ from a trust. In fact, it was in the nature of a trust in favour of the plaintiff.
34. The sale of the shares was completed by the said agreement. Only the
payments were entrusted to the defendants to be made to Nagendra and after his
lifetime to his wife, that indeed, was an obligation in the nature of a trust.
35. In those respects, as discussed above, this case must be regarded as an
exception to the general rule as laid down in Twddle v. Atkinson, (1861) 1 B & S 393 :
121 ER 762. I, accordingly, answer issue No. 2 as follows:—
36. The plaintiff has a right to sue the defendants under the said agreement. The
plaintiff is entitled to the benefits under the said agreement dated October 5, 1951
and the allegations in paragraph 4 of the written statement do not show the correct
legal position.
37. This disposes of all the issues except issue No. 6 under which I shall now pass a
decree to which the plaintiff is entitled to in this suit both against the defendant 1 and
also against the defendant No. 2 as follows:
38. The plaintiff would be entitled to a decree for Rs. 9,000/- in respect of the
arrear payments due for the period from May 24, 1963 to May 24, 1966 being the date
of the institution of the suit. The plaintiff would also be entitled to interest on the said
sum which is assessed at a sum of Rs. 800/- upto the date of the suit and thereafter
interim interest on the sum of Rupees 9000/- at the rate of 6% per annum from the
date of the suit till the decree herein and thereafter interest on decree at the rate of
6% per annum. The plaintiff will be entitled to the cost of the suit and certified for two
counsel as against the defendant No. 2.
39. Suit decreed.
———
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