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Kerala High Court · body

1990 DIGILAW 104 (KER)

Xavier v. Kasi

1990-02-27

SHAMSUDDIN

body1990
Judgment :- Plaintiff is the appellant. The appeal is directed against the judgment and decree in O.S. No. 137 of 1981 on the file of the Sub Court, Thodupuzha. The suit was for recovery of Rs. 13,770/- by sale of plaint schedule property on the strength of hypothecation bond. 2. 1st defendant borrowed Rs. 1,000/- from plaintiff on 7-6-1968 agreeing to pay interest at the rate of 12% per annum and to repay the amount after one year and he executed a hypothecation bond mortgaging the plaint schedule property as security for this amount, as evidenced by Ext.A1. The 2nd defendant is the wife of 1st defendant. Plaintiff filed O.S. No. 433 of 1978 in the Sub Court, Kottayam for recovery of the amount on the strength of the hypothecation bond. It was transferred to Sub Court, Thodupuzha and renumbered as A.S.No. 96 of 1978. Plaintiff filed an interim application for attachment of plaint schedule property. Thereupon, 2nd defendant who is the wife of 1st defendant filed a claim petition contending that the plaint schedule property belonged to her and that the 1st defendant had no right in the property. It was only then the plaintiff came to know that 1st defendant had no right in the plaint schedule property and that he practiced fraud on the plaintiff. This in brief is the plaintiff's case as disclosed by the plaint. 3. In the written statement filed by the 1st defendant, he contended that the suit was barred by limitation and that the liability was discharged by payments on different occasions. It was also his case that no fraud was committed by him. The 2nd defendant also in her written statement, contended that the suit was barred by limitation and that the plaintiff had no cause of action against her. 4. The lower court found that the suit was barred by limitation. It, however, held that the suit was not barred under Order IX Rule 9 of the Code of Civil Procedure. In view of its finding that the suit was barred by limitation, the lower court dismissed the suit. 5. In this appeal, learned counsel for appellant challenged the findings of the court below. It, however, held that the suit was not barred under Order IX Rule 9 of the Code of Civil Procedure. In view of its finding that the suit was barred by limitation, the lower court dismissed the suit. 5. In this appeal, learned counsel for appellant challenged the findings of the court below. The court below proceeded on the basis that the suit was on a hypothecation bond on a period of 12 years from 7-6-1969, the date on which the amount had to be repaid under the agreement, would be available to the plaintiff for filing the suit, but the suit was filed beyond that period. The lower court repelled the contention of the plaintiff that the written statement filed by the 1st defendant in O.S.No. 96 of 1978 would operate as acknowledgement and in support of its findings, relied on a passage at page 651 of the Limitation Act by Chitaley (5th edition) to the effect that the acknowledgement of a payment in the written statement filed in the suit cannot be called in aid for pleading extended period of limitation. The passage quoted by the learned Sub Judge applies only to written statement filed in that particular suit itself and not in a former suit. This position has been laid down in several rulings. In Narayani Amma Karthayani Amma v. Padmanabha Filial Aiyappan Pillai (AIR 1957 TC 246), the Travancore Cochin High Court held that the reference in the settlement officer's order to the prior karnavan's statement embodied in the same record can be taken as sufficient proof of the fact that the said statement was actually made by him and that statement would constitute a valid acknowledgement of liability saving the suit from bar of limitation. The same view was expressed by the Bombay High Court in Dunichand Bishendas v. Comptoir National D'Escompte D'Paris (AIR 1930 Born. 187), where it was held that the statement made in the written statement amounted to an acknowledgement of liability under S.19 of the Limitation Act. The Allahabad High Court in Raghubar Dayal v. banwarilal (AIR 1933 All. 352) also expressed the view that the plaintiff could very well rely on the written statement in a previous suit as an acknowledgement. The question has been rut beyond doubt by the Supreme Court in Basant Singh v. Janaki Singh and others (AIR 1967 SC 341). The Allahabad High Court in Raghubar Dayal v. banwarilal (AIR 1933 All. 352) also expressed the view that the plaintiff could very well rely on the written statement in a previous suit as an acknowledgement. The question has been rut beyond doubt by the Supreme Court in Basant Singh v. Janaki Singh and others (AIR 1967 SC 341). The court said: "The High Court also observed that an admission in a pleading can be used only for the purpose of the suit in which the pleading was filed. The observations of Beaumont, CJ. In Ramabai Shriniwasv. Bombay Government, AIR 1941 Born. 144 lend some countenance to this view. But these observations were commented upon and explained by the Bombay High Court in D.S. Mohite v. S.I. Mohite, AIR 1960 Born. 153. An admission by a party in a plaint signed and verified by him in a prior suit is an admission with in the meaning of S.17 of the Indian Evidence Act, 1872, and may be proved against him in other litigations. The High Court also relied on the English law of evidence. In Phipson on Evidence 10th Edn. 741, the English law is thus summarized: "Pleadings, although admissible in other actions, to show the institution of the suit and the nature of the case put forward, are regarded merely as the suggestion of counsel, and are not receivable against a party as admissions, unless sworn, signed, or otherwise adopted by the party himself." Thus even under the English law, a statement in a pleading sworn, signed or otherwise adopted by a party is admissible against him in other actions. In Marianski v. Cairns, (1852) 1 Macq. 212, the House of Lords decided that an admission in a pleading signed by a party was evidence against him in another suit not only with regard to a different subject matter but also against a different opponent. Moreover, we are not concerned with the technicalities of the English law. S.17 of the Indian Evidence Act, 1872 makes no distinction between an admission made by a party in a pleading and other admissions. Under the Indian law, an admission made by a party in a plaint signed and verified by him may be used as evidence against him in other suits. S.17 of the Indian Evidence Act, 1872 makes no distinction between an admission made by a party in a pleading and other admissions. Under the Indian law, an admission made by a party in a plaint signed and verified by him may be used as evidence against him in other suits. In other suits, this admission cannot be regarded as conclusive, and it is open to the party to show that it is not true". Therefore, learned Sub Judge was not right in holding that the acknowledgement in the written statement in an earlier suit cannot operate as an acknowledgement within the meaning of S.18 of the Limitation Act. 6. Learned counsel for the respondents, however, contended that period of 12 years is not available for the plaintiff in the case on hand. He argued that the properties did not belong to the 1st defendant, that therefore mortgage created by 1st defendant was void and that the plaintiff would not be entitled to a period of 12 years on the basis that it is a mortgage transaction. Learned counsel is well founded in this contention. Learned counsel further submitted that the plaintiff was entitled to recover the amount only on the basis of S.65 of the Indian Contract Act. Section 65 of the Contract Act reads as follows: - "When an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it." Learned counsel for the respondents argued that in such cases, Article 24 of the Limitation Act would apply and the period of limitation would start from the date on which the money was received. He heavily relied on the following observations of a Division Bench of the Allahabad High Court in Sana Ullah v. Jai Narain Singh and another (AIR 1942 All. 409): - "It is an established principle of law that no person can plead ignorance of a statute. The parties must therefore be deemed to have had information of the provisions of the statute in the year 1926 and consequently it must be assumed that they knew that the agreement was void when they entered into it. 409): - "It is an established principle of law that no person can plead ignorance of a statute. The parties must therefore be deemed to have had information of the provisions of the statute in the year 1926 and consequently it must be assumed that they knew that the agreement was void when they entered into it. The result is that the cause of action arose at the time when the parties entered into the agreement. There are only two elements, which are necessary in order to enable a person to make a claim under the provisions of S.65 of the Contract Act, namely (1) that the agreement has been discovered to be void, and (2) that the other party has received some advantage under the agreement or contract. The advantage alleged in this case is that the defendants or their predecessors-in-interest obtained a sum of Rs. 99.15.0 from the plaintiff. That sum was paid at the time when the alleged deed of mortgage was executed. Consequently, the fact that the agreement was void and the fact that the defendants had received an advantage under the agreement were both in existence in the year 1926, i.e. 15 years before the suit was instituted. Learned counsel for the plaintiff has urged that he could not claim the money so long as he was in possession of the property. It may be that he did not feel inclined to claim the money. so long as he was in possession but the fact that he was in possession of the property would not have prevented him from instituting a suit to recover the advantage received by the other party provided it was an advantage. It may be that the Court, if such a suit was filed, might have put the plaintiff upon terms and refused to give him a decree until he had returned the property or it might have held that the advantage was not so great as that alleged by the plaintiff, but the fact remains that the cause of action of the plaintiff arose when the void agreement was entered into and when the money was paid to the defendants or their predecessors-in-interest. No cause of action as against the defendants arose at the time when the plaintiff was ejected by the proprietor of the land". The above decision is not applicable to the facts of this case. No cause of action as against the defendants arose at the time when the plaintiff was ejected by the proprietor of the land". The above decision is not applicable to the facts of this case. The decision is rested on the dictum that nobody could plead ignorance of statute. An agreement executed in violation of a state cannot be equated with an agreement entered as a result of misrepresentation as to the ownership of the property, which is a mistake of fact. Learned counsel also relied on the following passage in the Commentaries in Law of Limitation and Prescription by U.N. Mitra, 9th edition at page 936: "In regard to money paid under a valid agreement, the person who paid it can recover back the money under S.65, Contract Act on discovering that the agreement is void. Such cases would be treated as cases of money received by the defendant for the use of the plaintiff within the meaning of this Article under which time will commence to run from the date of the receipt of the money by the defendant. In the absence of special circumstances, the time at which the agreement is discovered to be void is the date of the agreement. Where, due to special circumstances, the discovery of the agreement being void, is subsequent to the agreement, the cause of action for recovery of the money will accrue under S.65 after the agreement and the payment of money there under and this Article would not apply". 7. On the other hand, learned counsel for the appellant contended that it is not Article 24 that would apply in a case, where the void nature of transaction is discovered subsequent to the agreement, but Article 113 of the Schedule to the Limitation Act. He argued that in such cases, the limitation would run only on the discovery of the fact that the contract or agreement was void. In support of this contention, learned counsel relied on the following observations of a Full Bench of the Hyderabad High court in Budhulal v. Deccan Banking Company Ltd. (AIR 1955 Hyd. 69): - "In our opinion, the view of the learned authors is neither supported by any the subsequent Privy Council decisions nor is it consistent with the natural meaning to be given to the < provisions of S. 65. 69): - "In our opinion, the view of the learned authors is neither supported by any the subsequent Privy Council decisions nor is it consistent with the natural meaning to be given to the < provisions of S. 65. The section by using the words "when an agreement is discovered to be void' means nothing more nor less than: when the plaintiff comes to know or finds out that the agreement is void. Theword'discovery'would imply the pre-existence of something which is subsequently found out and it may be observed that S.66, Hyderabad Contract Act makes the knowledge of the agreement being void as one of the pre-requisites for restitution and is used in the sense of an agreement being discovered to be void. If knowledge is an essential requisite even an agreement ab into void can be discovered to be void subsequently. There may be cases where parties enter into an agreement honestly thinking that it is a perfectly legal agreement and where one of them sues the other or wants the other to act on it, it is then that he may discover it to be void. There is nothing specific in S.65, Indian Contract Act or its corresponding section of the Hyderabad Contract Act to make it inapplicable to such cases". The Privy Council had occasion to consider a similar question in a suit on mortgage, in Babu Raja Mohan Manucha and others v. Babu Manzoor Ahmad Khan and others (AIR 1943 P.C. 29). The Privy Council said: - "Their Lordships have already expressed in this judgment their view that the transaction in question in the present case was an open and honest transaction and think that its invalidity was at the time obscured by the difficulty in applying Para 11 of S.3 correctly to the particular facts of the execution proceedings and to the terms of the orders as recorded. For ten years, payments of interest were made and received there under. In these circumstances they are of opinion that in the special circumstances of the case the security of 12th August 1919 was not discovered to be void until after the present suit was in situated on 7th August 1934. On this view no question of limitation can arise under S.65 since the circumstances giving rise to their right to rescind did not come to the plaintiffs' knowledge until after action brought". On this view no question of limitation can arise under S.65 since the circumstances giving rise to their right to rescind did not come to the plaintiffs' knowledge until after action brought". The Madras High Court also considered a similar situation, as in this case, in Nagheetha Maracair v. Govindaswami Naidu and others (1977(1) MLJ. 411). The property belonged to the wife and the husband had no authority to borrow on security, but the husband mortgaged the wife's property as power of attorney holder and received money. In that context, the court had to consider the applicability of S.65 of the Contract Act. The Court said: - "Even if the suit is treated as a money suit based on S.65 and 235 of the Contract Act, it is in time. When an agreement is discovered to be void, or when A contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it in view of S.65 of the Contract Act. In this case, the amount advanced under the mortgage deed Exf. Al has admittedly been received by the 1st defendant and has been found to be utilized for his own purposes. Now that Ext.A1 is found to be void in fiat the first defendant had no authority to execute the same on behalf of Kathija Bi the money received under the document toy the first defendant has to be restored. S.235 will also stand attracted in this case. That S.235 provides that where a person untruly representing himself to be the authorized agent of another and thereby induces a third person to deal with him as such agent, he is liable to make good the representation to the other in respect of any loss or damage which he has incurred by so dealing, xxxxxxxxxxxxxxx Since the mortgage Ext.A1 executed by the first defendant as power of attorney agent of his wife has become void for want of authority to transfer title it should betaken that there is a breach of contract to mortgage. Such a breach became* known to the plaintiff only when Ext. Al is found to have been executed by the first defendant without due authority. Though the limitation will normally begin from the date of breach on the facts of the cases. Such a breach became* known to the plaintiff only when Ext. Al is found to have been executed by the first defendant without due authority. Though the limitation will normally begin from the date of breach on the facts of the cases. 17 of the Limitation Act will come into play. According to that section, where in the case of any suit a period of limitation is prescribed by the Act, a suit based oil fraud of the defendant, or the knowledge of the right or title on which a suit is founded is concealed by the fraud of the defendant the period of limitation shall not begin to run until the plaintiff has discovered the fraud. Therefore, the limitation to enforce the liability of the first defendant under S.65 and 235 of the Contract Act will commence from the date of discovery of the fraud or misrepresentation". 8. The evidence in the case would show that the plaintiff discovered the void nature of contract only when the 2nd defendant challenged the authority of the 1st defendant to mortgage the property contending that the property mortgaged belonged to her in an earlier suit filed by the plaintiff. It is evidently on the representation of the 1st defendant that the property belonged to him that the plaintiff advanced the money and got a hypothecation deed executed by the 1st defendant. Plaintiff came to the actual Position only when the 2nd defendant filed LA. No. 109 of 1978 in O.S. No. 96 of 1978 on 13-5-1978. The present suit was filed on 17-12-1981, which is well within a period of 3 years from that date. 9. Learned counsel for the respondents, however, vehemently contended that the suit framed on the basis of hypothecation deed executed by the 1st defendant is not maintainable. It was also pointed out that he has sought the relief of recovery of the amount by way of sale of the plaint schedule property in respect of which the hypothecation deed was executed. It is not on the basis that the mortgage became void since the 1st defendant had no title to the mortgage property, that the suit was filed. 10. It is not on the basis that the mortgage became void since the 1st defendant had no title to the mortgage property, that the suit was filed. 10. No doubt, in Para 6 of the plaint, plaintiff averred that he filed O.S. No. 96 of 1978 before the Sub Court, Thodupuzha and during the trial, he came to know that the 1st defendant had committed a fraud on him and created a mortgage in respect of the property in which he had no right. He also explained that it was from the objection filed by the 2nd defendant in the application for attachment of the property filed in the above suit that fraud was realized. OX course, the averments contained in Para 6 would give an impression that the present suit is for the recovery of the amount he paid on the basis that he discovered that the 1st defendant had no right to the plaint schedule property. However, the suit as framed is based on the mortgage deed and relief for recovery of the amount by sale of the plaint schedule property is also claimed. Such a position is inconsistent with the plea on the basis of S.65. 11. When this aspect was pointed out, learned counsel for the appellant prayed that in the interest of justice, the plaintiff may be permitted to amend the plaint by incorporating necessary averments so as to bring the claim within the ambit of S.65 of the Contract Act. In the peculiar circumstances of this case, I am of the view that the plaintiff should be allowed such an opportunity to amend the plaint in the interest of justice. Counsel for the appellant prays for a month's time from the date of appearance of the parties in the lower court to amend the plaint deleting the 2nd defendant's name from the party array and omitting the relief of enforcement of the charge under the agreement and incorporating necessary averments to bring the case within the ambit of S.65 of the Contract Act. In the circumstances, I set aside the judgment and decree of the lower court and remand the matter for fresh disposal, after giving an opportunity to the plaintiff to amend the plaint as aforesaid. The defendants will be entitled to file additional written statements after the amendment was made. The parties will be at liberty' to adduce fresh evidence. In the circumstances, I set aside the judgment and decree of the lower court and remand the matter for fresh disposal, after giving an opportunity to the plaintiff to amend the plaint as aforesaid. The defendants will be entitled to file additional written statements after the amendment was made. The parties will be at liberty' to adduce fresh evidence. The appellant will be entitled to refund of the court fee paid on the memorandum of appeal. The parties will appear before the lower court on 28-5-1990. The records will be sent back to the lower court forthwith. Since the matter is old, the lower court will dispose of the matter as expeditiously as possible. The appeal is allowed as above and the matter is remanded. There will be no order as to costs. Issue photocopy of this judgment to parties on usual terms.