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1962 DIGILAW 227 (KER)

SANKARANARAYANAN v. KRISHNAN

1962-08-08

P.T.RAMAN NAYAR

body1962
Judgment :- 1. The main question for decision in this appeal by a defendant against a decree for money is a question of law. It is whether the case falls within any of the recognised exceptions to the rule that a stranger to a contract cannot sue upon it even if it be clear that it was intented to benefit him. 2. By Ext. BI dated 311949, the defendant and Ms cousin, Raman the sole coparceners of a Hindu joint family governed by Mitakshara Law, entered into a partition of the family property worth over rupees two lakhs. The defendant had, at the time, four sisters, and Raman two, all married, and the plaintiff in the suit is the husband of one of the defendant's sisters, Lakshmikutty by name, who died in January 1953. In their partition the defendant and Raman agreed to pay Rs. 5,000/-to each of their sisters, and the relevant clause in the deed runs as follows: 'We have decided that from the tavazhi (branch) of executant No.1 (No.1 was Raman and he was the only member of his branch) his sisters, Sarada and Yesoda should be paid Rs. 5000/-each, and that from the tavazhi of executant No. 2 (Namely, the defendant who likewise was the only member of his branch) his sisters, Lekshmikutty, Madhavi, Meenakshi and Narayani should be paid Rs. 5,000/-each without the payment being charged on the properties of the respective tavazhis. Accordingly these sums shall be paid either in cash or in the shape of property from the concerned tavazhi within two years from this date without any interest, and receipts obtained. However, each tavazhi will be solely liable for the payments to be made from it and the other tavazhi will in no way be liable". After his wife's death, the plaintiff brought the present suit for the recovery of the sum of Rs. 5000-due to her under Ext. BI, claiming under a will left by her. The defendant pleaded a partial discharge to the extent of Rs. 2000/-, and he also pleaded limitation. He contended that the promises in favour of the sisters were unsupported by consideration and that, in any case, Lekshmikutty, who was not a party to Ext. BI, had no right to sue upon it. He also disputed the plaintiff's claim under Lekshmikutty's will. 2000/-, and he also pleaded limitation. He contended that the promises in favour of the sisters were unsupported by consideration and that, in any case, Lekshmikutty, who was not a party to Ext. BI, had no right to sue upon it. He also disputed the plaintiff's claim under Lekshmikutty's will. The court below upheld the plea of discharge but rejected the remaining pleas, and it decreed the suit for Rs. 3000 -and the interest accrued thereon. As we have seen, the defendant has appealed. The plaintiff has filed no appeal; that the promises in favour of the sisters are supported by consideration though the consideration did not move from them, something which the Indian law does not require, is conceded; that the plaintiff who has obtained a succession certificate can recover money due to Ms deceased wife is no longer questioned; and hence the only questions that remain are the question to which I have already referred, and the question of limitation. 3. However much one might deplore with Denning, L. J. in Drive Yourself Hire Co. Ltd. v. Stratt (1953) 2 All E. R.1475 at page 1482) that the rule deduced from "the unfortunate case" of Tweddle v. Atkinson (121 E. R.762) a case decided in 181, namely, that a stranger to a contract cannot sue upon it, should have been allowed to muddy the clear and settled stream of the English common law, settled for over two hundred years by cases such as Dutton v. Poole, Mariyn v. Hind, Marchington v. Vernon and Carnegie v. Waugh, and with Jenkins C. J. in Debnarayan Dutt v. Chunlal Ghose (ILR. 41 Calcutta 137 with Lord Williams J in Khirod Behari v. Man Gobinda (AIR. 1934 Calcutta 682) and with Viswanatha Sastri J. in Veeramma v. Appayya (AIR. 41 Calcutta 137 with Lord Williams J in Khirod Behari v. Man Gobinda (AIR. 1934 Calcutta 682) and with Viswanatha Sastri J. in Veeramma v. Appayya (AIR. 1957 Andhra Pradesh 955) that free though they were of such impediments in the course of justice as the technicalities of the common law action of assumption and the divorce between law and equity which hampered the courts in England, and released by the definition of 'consideration' in S.2 (d) of the Indian Contract Act from that other rule of English Law (related to both being born of the notion that bargain is the basis of contract but less fundamental than the rule which we are now considering and with which it is sometimes confused) on which Tweddle v. Atkinson avowedly proceeds, that consideration must move from the promisee, the courts in India should have chosen to tap this stream after and not before its defilement, the rule is, I am afraid, too firmly established by the decisions of the several High Courts and of the Judicial Committee to be questioned anywhere in India, It has no doubt been argued that none of these decisions is binding on this court, not even that of the Judicial Committee; but I must decline this invitation to rush in and break untrodden ground although I am free to admit that I am unable to see how exactly the notion that a contract can be enforced by a person who is not a party to the contract is rigidly excluded by the definition of 'promisor' and 'promisee' in S.2 (c) of the Indian Contract Act as Rankin C. J. says in Krishna Lal v. Ml. Pramila (AIR. 1928 Calcutta 518 at page 522), or how as Pollock and Mulla would have it (at page 21 of the eighth edition of their Indian Contract Act), the view that a person not a party to the contract cannot sue on the contract unless the case comes within one of the recognised exceptions is clearly indicated by the provisions of sub-sections (a), (b), (c) and (i) of S.2 of the Act. As Viswanatha Sastri J. confessed in the case just referred to, it is now for the Legislature to mitigate the gross ness of the rule, and all that is left to the courts is the exercise of a beneficent ingenuity for the purpose of bringing a deserving case within one or the other of the recognised exceptions to the rule and thus secure the ends of justice. I must, however, hasten to add that no such exercise is necessary in the instant case, for, on its very 'face, it falls within the well-recognised exception of a family arrangement. 4. As I have already said, the rule has its well recognised exceptions and they have been enumerated in cases like Subba, v. Arunachalam (AIR. 1930 Madras 382-F. B) and Salalkshi Ammal v. Sivarama Pallar (VI Cochin 394). B. K. Mukherjea J. (as he then was) has however pointed out in Jnan, Chandra Mukherjee v. Manoranjan Mitra (AIR. 1942 Calcutta 251 at 252) that there are really only two exceptions and that the other exceptions commonly enumerated are but particular instances of these exceptions. The first exception is where the contract creates a trust in favour of the third party, and the second is where "the promisor, between whom and the stranger no privity exists, creates privity by his conduct and by acknowledgment or otherwise constitutes himself an agent of the third party". With great respect, it seems to me that the second is not really an exception to the rule, for, where privity is created by estoppel or agency or otherwise, the "third party ceases to be a stranger. There is a novation as it were, and it is on the new contract and not on the old that the suit is really brought. 5. The device of a trust seems to have been used by decided cases in two ways: A promises B to pay money to G and the question is whether C can sue A for the money. One way of allowing him to do so is to make out, if possible, that B is a trustee for C of the benefit of the contract of which B is the owner a trust as we know is an obligation annexed to the ownership of property. One way of allowing him to do so is to make out, if possible, that B is a trustee for C of the benefit of the contract of which B is the owner a trust as we know is an obligation annexed to the ownership of property. The other and the readier way, available in cases where a fund or other property in the hands of A is earmarked or charged so that there is some tangible property to which the trust can attach, is to regard A as trustee for C. In the former case, G, the beneficiary, can sue A where his trustee B has failed to sue, making B a party to the action; and, in the latter, he can sue A who is his trustee in enforcement of the trust. In the former case I am not sure that B cannot be regarded as representing C in the transaction being his trustee, much as an agent represents his principal even though the latter be undisclosed, thus making C privy, as it were, to the contract, and it might be that the latter case is the only real exception to the rule. (As Lord Lindley said in Keighley Maxsted & Co. v. Durant (1901) Appeal Cases 240 at page 261) with regard to the rule that an undisclosed principal can sue and be sued on a contract made in the name of some other person, the contract is in truth though not in form that of the undisclosed principal himself, although the modern tendency seems to be to regard this rule as an anomaly or as an exception to the doctrine of privity. Even so it is, strictly speaking, no exception to the rule as it is commonly stated (and as it was stated by Lord Haldane in Dunlop Pneumatic Tyre Company, Limited v. Self ridge and Company, Limited (1915) Appeal Cases 847) which finally established its authority in England), namely, "that only a person who is a party to a contract can sue on it," for, C's suit would not be upon the contract but upon the trust created by the contract. To make the exception a real exception, the rule has to be somewhat differently stated so as to deny the stranger any benefit arising under the contract. To make the exception a real exception, the rule has to be somewhat differently stated so as to deny the stranger any benefit arising under the contract. A comprehensive statement covering also the use of the contract as a shield would be that only a person who is a party to a contract can take a benefit arising from any provision of the contract. This is how the rule was stated by the Judicial Committee in Khwaja Muhammad Khan v. Hisaini Begum (ILR. XXXII Allahabad 410), "First, it is contended, on the authority of Twiddle v. Atkinson that as the plaintiff was no party to the agreement she cannot take advantage of its provisions". And Lord Denning stated it thus in Scruttons v. Midland Silicones (1926) 1 All E. R.1 at page 16), "No one who is not a party to a contract can sue or be sued on it or take advantage of the stipulations or conditions that it contains." 6. The entire matter has been very tersely put by Jessel M. R. in In re Empress Engineering Company (16 Ch. D. 125 at page 129): "There may be an agreement like that in Gregory v. Williams, where the agreement was to pay out of property, and one of the parties to the agreement may constitute himself a trustee of the property for the benefit of the third party. So, again, it is quite possible that one of the parties to the agreement may be the nominee or trustee of the third person ... but then the person makes the contract really as trustee for somebody else, and it is because he contracts in that character that the cestui que trust can take the benefit of the contract." It would thus appear that the exemptions to the rule first crystallised in Tweddle v. Atkinson are apparent rather than real see per Viscont Simonds at page 9 and Lord Reid at page 10 of (1961) 1 All E. R.1 7. Marriage settlements and family arrangements are, at any rate so far as the law in India is concerned, well established exceptions to the rule. Marriage settlements and family arrangements are, at any rate so far as the law in India is concerned, well established exceptions to the rule. They are particular instances of a trust created by contract the parties to the contract are, in these cases anxious to confer some benefit on the third party, and if they make provision for that in their contrast it is because of the confidence they repose in the person appointed to execute the provision. Something in the nature of a trust is thereby created it is useful in this connection to recall Maitland's definition: "Where a person has rights which he is bound to exercise on behalf of another or for the accomplishment of some particular purpose, he is said to have those rights in trust for another or for that purpose, and he is called a trustee" and one or more of the contracting parties is a trustee for the third party beneficiary. In the present case there can be little doubt that the provision made for the sisters in the partition deed Ext. BI is a family arrangement. The third parties for whose benefit the provision is made are persons to whom the contracting parties are bound by ties of natural love and affection, and, although as pointed out by Rankin C. J. in Krishna, Lal v. Mt. Pramila (AIR. 1928 Calcutta 518) the close relationship of the beneficiary cannot by itself spell out a trust, it is certainly a factor to be taken into consideration in deciding whether a trust is created. Both the contracting parties were anxious that, having regard to the status and wealth of the family, in a partition of the family properties, something should be given to the female members of the family who, though on marriage had gone out of the joint family, continued to be members of the family in the natural sense of that word, the sense in which it is used in the expression, family arrangement. Although no charge was created, what both parties intended was that each should, in consideration of the share given to him, give there from that the payment was, in terms, to be made from the tavazhi is not without significance property or cash to the value or Rs. Although no charge was created, what both parties intended was that each should, in consideration of the share given to him, give there from that the payment was, in terms, to be made from the tavazhi is not without significance property or cash to the value or Rs. 5000 to each of his sisters, and I see no difficulty in regarding each sharer as holding this fund or property in trust for his sisters. In other words, the defendant was a trustee for the plaintiffs wife in respect of a sum of Rs. 5000 or its equivalent in property, and the present suit is in enforcement of that trust. Or Raman may be regarded as a trustee for the plaintiff's wife of the benefit of the contract. His failure to enforce the contract enables the plaintiff to :sue, and no objection as to his non joinder can be taken at this stage. 8. It is argued on behalf of the defendant that for a partition like Ext. BI to create a trust, the cestui que trust must be a member of the pint family, that the remust be a pre-existing legal obligation on the family, in his favour, & that there must be a charge created for the enforcement of the benefit given to him. A number of decisions have been cited before me but it is enough to say that none of them gives the least support to any of these propositions. If the cestui que trust is a member of the joint family he would obviously be a party to the partition, and I do not think that a case can arise where a partition deed provides for benefits for a member of the joint family who is not either eo nomine or constructively a party to the deed. A pre-existing legal obligation such as an obligation to maintain, has no doubt been referred to in some cases, but in none of them is this incident depended upon for the purpose of spelling a trust. A pre-existing legal obligation such as an obligation to maintain, has no doubt been referred to in some cases, but in none of them is this incident depended upon for the purpose of spelling a trust. To my mind, a pre-existing legal obligation, unlike a mere moral obligation as in the present case, might be an indication to the contrary, for it might mean that the provision is made by the parties to the contract not out of any desire to benefit the third party, or out of confidence reposed in the party making the promise, but merely for the purpose of apportioning as between themselves the burden of the obligation, although, of course, the apportionment might not bind the third party. A charge no doubt furthers the notion of a trust, for it immediately points to a property to which the obligation is annexed. But none of the decisions states that a charge, by itself, can create a trust or that, in the absence of a charge, there can be no trust. 9. In Uma Nath v. Jang Bahadur (AIR. 1938 Privy Council 245) the contract was between a Hindu father and a son, and the promise made by the son, in consideration of the father relinquishing his properties in favour of the son, was that the son would pay a certain sum of money to an illegitimate son of the father by a Muslim concubine and also put the illegitimate son in possession of a village on his attaining majority. No charge as such was created. The beneficiary could in no sense be regarded as a member of the family, and yet their Lordships found no difficulty in spelling a trust in favour of the illegitimate son and decreeing the suit brought by him for the benefits under the contract. The plaintiff in the present case seems to me in a much stronger position the third parties intended to be benefited were bound by ties of natural love and affection to both the contracting parties and both must have been anxious to make provision for them and I do not think it necessary to refer to any of the other cases cited at the bar except one. That is Dan. Kher v. Sarla Devi (AIR. 1947 Privy Council 8). That is Dan. Kher v. Sarla Devi (AIR. 1947 Privy Council 8). There, there was no doubt a charge on property, but the principle thus stated in paragraph 7 of the judgment is wide enough to cover the present case: "It was further argued that the widow, being a stranger to the contract embodied in the award, cannot sue to enforce it, but it is too late, in their Lordships' opinion, to doubt the rule which has prevailed in India that where a contract is intended to secure a benefit to a third party as a beneficiary under a family arrangement, he may sue in his own right to enforce it." 10. I hold that the present case comes clearly within the exception to the rule that a stranger to a contract cannot claim a benefit arising under it, and that therefore the plaintiff is entitled to sue. 11. The question of limitation need not detain us long. By the terms of Ext. BI, time was given up to 31 1951 for the payment of the money promised to the sisters. The present suit was brought on 23121956, within six years of the money becoming due. The only two articles of the Limitation Act that can possibly apply are Art.116 (Ext. BI being registered), or, in case that article is not applicable, Art.120. Both give six years' time and therefore this suit is in time. 12. In the result I dismiss the appeal with costs. Dismissed.