Loonkaran Sethiya Vs. State Bank of
Jaipur & Ors [1968] INSC 124 (25 April 1968)
25/04/1968 HEGDE, K.S.
HEGDE, K.S.
SHELAT, J.M.
GROVER, A.N.
CITATION: 1969 AIR 73 1969 SCR (1) 122
ACT:
Indian Contract Act 9 of 1872, s. 202-Debtor
giving power of attorney to creditor bank to execute a decree in his favourIt
is power coupled with interest and irrevocable-Bank an equitable assignee--Can
execute decree under Code of Civil Procedure, s. 146.
HEADNOTE:
The appellant was indebted to the respondent
Bank. He executed a power of attorney in favour of the bank giving it authority
to execute a decree which he had obtained in his favour. The bank filed an
application for the execution of the decree in the appellant's name, the
application being signed by the manager of the Bank as holding power of
attorney. The appellant object to the execution.His objections were over-ruled
by the, executing court as well as the High Court In appeal to his court.
HELD:(i) The power given by the appellant in
favour of the Bank was a power coupled with interest and in view of s. 202 of
the Indian Contract Act it was irrevocable. [126 D] (ii) The interest of the
appellant under the decree could not be said to have been transferred to the
Bank either in writing or by operation of law. But the power of attorney was an
engagement to pay out of the particular fund the debt due to the Bank and hence
the same constituted an equitable assignment of the amount due under the decree
or so much of that amount as was necessary for discharging the debts due to it.
[127 A C] Watson v. The Duke of Wellington, [1830] 39 E.R. 231 and Burn N.
Carvalho, [1839] 41 E.R. 265, applied.
Jagabhai Lallubhai v. Rustamji Nasarwanji,
[1885] I.L.R. IX Bom. 311 and Prahlad Pd. Modi v. Tikaitni Faldani Kumari, A.I.R.
[1956] Patna 233, approved.
(iii) An equitable assignee of a decree who
cannot have the benefit of O. XXI, r. 16 of the Code of Civil Procedure can
still execute the decree under s. 146 of the Code. [128 F] Jugulkishore Saraf
v. Raw Cotton Co. Ltd. [1955] 1 S.C.R. 1369, affirmed.
(iv) Although the application had been made
by the bank as the appellant's agent, the bank was also entitled to file it and
carry it on in its own right. It would serve no useful purpose to direct the
present application to be closed merely because it was made in the name of the
appellant.
[129 A-B]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 644 of 1965.
Appeal by special leave from the judgment and
order dated July 10, 1963 of the Allahabad High Court in Execution First Appeal
No. 26 of 1961.
123 M. C. Chagla, B. Dutta, and O. C. Mathur,
for the appellant.
C. B. Agarwala and V. D. Mahajan, for
respondent No. 8--the State Bank of Jaipur & Ors.
The Judgment of the Court was delivered by
Hegde, J.-This appeal by special leave arises from the decision of the
Allahabad High Court in execution first appeal No. 26. of 1961 on its file. The
appellant is the decree holder. The contesting respondent is the State Bank of
Jaipur-to be hereinafter referred. to as the Bank-; other respondents are not
interested in the decision in this appeal.
The material facts of the case are few. The
appellant was.
indebted to the Bank. On March 27, 1959, he
executed a power of attorney in favour of the Bank. That power of attorney
interalia recited:"AND WHEREAS I am very heavily indebted to the Bank of
Jaipur Limited, Agra branch and my liability is partly secured by the pledge of
my goods and partly by the equitable mortgage of me and my mother's immovable
properties with the said Bank;
AND WHEREAS a major part of my said liability
is unsecured;
AND WHEREAS I have agreed to. appoint the
Bank of Jaipur Ltd. ,to be my true and lawful attorney to execute the said
decree in suit Nos. 76 of 1949 (with which we are concerned in this appeal) which
may ultimately be passed in my said appeal and to do the following acts, deeds,
matters and things for me, on my behalf and in my name and to credit to my
account the sum or sums which may be realised in execution of or under the said
decrees;
NOW KNOW YE ALL men and these presents
witness that I do hereby irrevocably constitute, nominate and appoint the said
Bank of Jaipur Limited, and/or any principal officers and/or any other person
or per-sons that may be appointed by the said Bank of, Jaipur Ltd. or its
assigns from time to time in this behalf to, be my true and lawful attorney for
me and, on my behalf and in my name to represent me therein and do all acts,
deeds, matters and things in connection with the execution of the said decree
in, the Agra suit No.. 76 of 1949 and the decree that may be passed in the,
said appeal, that is to say
1. To proceed in execution of the said decree
passed' in the said Agra suit No. 76 of 1949 and to proceed in 124 execution of
the decree which may be passed in the said, appeal and to realise and recover
the decretal amounts.
8. To withdraw any amount that may be
deposited in the courts at Agra and/or Allahabad or any court of justice in the
said decree and/or in the decree in the said appeal and/or other proceedings in
connection with the execution of the said decrees or any other order passed or
made therein and/or in any Insolvency Court or from the Official Receiver
concerning Insolvency of any of the defendants.
It may be noted that on the day the power of
attorney was executed the decree passed in favour of the appellant in suit No.
76 of 1949 was under appeal. Subsequently. in appeal the same was affirmed.
Thereafter the bank levied execution of the ,decree in question on May 8, 1959.
The execution application was filed in the name of the appellant but it was
signed by the manager of the Bank as his power of attorney holder. The
appellant objected to the execution.
He contended that the power in question had
been obtained "by false representation and assurance held out to the
deponent (appellant) that they (the -Bank) would advance large sum of money
including for the purpose of John's Mill and improvement of the same, and for
'conducting of the appeals and other business." He further averred in his
counter statement "that no sum whatsoever at any time was advanced by the
Bank against the security of the aforesaid decree and no sum whatsoever is
payable to the Bank against the same. There is no lien of the Bank of any
nature whatsoever in the aforesaid decree." The objection of the appellant
was over-ruled by the executing court and the execution was directed to
proceed.
Against -that order the appellant
unsuccessfully went up in appeal to the High Court. The only question
considered by the High Court was whether the power executed in favour of the
bank was a power coupled with interest and hence the same could not be revoked
in view of s. 202 of the Indian Contract Act, 1872 (9 of 1872). The High Court
answered that question in favour of ,the Bank. It held that it was a power
coupled with interest and therefore the same could not be revoked by the
appellant. In The last paragraph of the High Court judgment it is observed
"Mr.Kirti then tried to argue that the entire execution proceedings are
ultra vires but we cannot allow him to argue an entirely new point. Sethiya's
application was founded on specific grounds which have been 125 rejected by the
court below and he cannot be permitted to travel outside them in this
appeal." We are unable to spell out the meaning of these observations. It
is seen from the grounds of appeal filed before the High Court that the
appellant had contended that "because there being no transfer or
assignment of the decree in its (Bank's) favour, the Bank of Jaipur Limited,
had no legal right or locus standi to execute the decree and the executing
court had no jurisdiction to entertain the execution application and to
continue the execution proceedings." He had also contended that the
execution court cannot go behind the decree, and the execution case must
proceed according to the provisions in the Code of Civil Procedure. Obviously
the contention of the appellant was that 'as the decree stood in his name, his
agent cannot proceed with its execution as he desired to take into his own hands
the execution proceedings. The above contentions of the appellant were purely
legal contentions; if they are valid, they go to the root of the matter and
therefore the High Court was not right in brushing aside those contentions on
the ground that those contentions -had not been taken in the pleadings or urged
before the executing court.
In this appeal we had the benefit of hearing
the elaborate arguments of Shri M. C. Chagla for the appellant and of Shri C.
B. Agarwala for the respondent. From the arguments advanced the following
questions arise for consideration :
(1) Whether the power of attorney in question
is a power coupled with interest; if it is so, whether the same is revocable
(2) Whether in view of the said power the Bank can be held to be an assignee of
the interest in the decree; if so, whether that assignment is a legal
assignment or an equitable assignment ? (3) Whether the dispute between the
appellant and the Bank could have been enquired under s. 47 of the Code of
Civil Procedure ? (4) If it is held that the Bank is an assignee of the amount
due under the decree or any portion thereof, can it because of that interest
execute the decree, despite the objection of the appellant, either under O. XXI
r. 16 or under s. 146 of the, Code of Civil Procedure ? and (5) The execution
application having been filed in the, name of the appellant, can the Bank now
be permitted to continue the execution in its own, right ? 126 Some of the
questions presented for decision are not free from difficulty. But it is not
necessary for us to pronounce on those questions as we are of the opinion that
the power of attorney in question is a power coupled with interest, and hence
the same is not revocable. Further, the transaction entered into under that
document amounts to an equitable assignment of the decree in favour of the Bank
to the extent necessary to discharge appellant's debts to the Bank and on the
basis of the rule laid down by this Court in Jugulkishore Saraf v. Raw Cotton
Co. Limited,(1) it is open to the Bank to execute the decree in its own right.
Lastly, we attach no importance to the form of the execution, which form was
necessitated because of the terms of the power of attorney; looking to the
substance of the matter and not being unduly weighed down by the form, we are
of opinion that the Bank has been executing the decree in its own right. We
shall -elaborate our reasons in support of these conclusions presently. In view
of our above conclusion we have not thought it necessary to go into the other questions
of law raised at the hearing.
There is hardly any doubt that the power
given by the appellant in favour of the Bank is a power coupled with interest.
That is clear both from the tenor of the
document as well as from its terms. Section 202 of the Contract Act provides
that where the agent has himself an interest in the property which forms the
subject-matter of the agency, the agency cannot, in the absence ,of an express
contract, be terminated to the prejudice of such interest. It is settled law that
where the agency is created for -valuable consideration and authority is given
to effectuate a security -or to secure interest of the agent, the authority
cannot be revoked. The document itself says that the power given to the Bank is
irrevocable. It must be said in fairness to Shri Chagla -that he did not
contest the finding of the High Court that the -power in question, was
irrevocable.
The next question for decision is whether
from the terms of the power of attorney we can conclude that the appellant had
transferred or assigned his rights in the decree or any portion thereof in
favour of the Bank. From those terms it is not possible to come to the
conclusion that there was any transfer of the interest of the appellant in the
decree to the Bank. In that document there are no words of transfer.
The document specifically says that the Bank
should execute the decree on behalf of the appellant. As per the terms of the
document the appellant continues to be the owner of the amount due under the
decree; the Bank was merely authorised to act as his agent;and therefore it is
not possible to hold that in law the Bank was an assignee of the,decree. The
interest of the appellant under the decree (1) [1955] 1 S.C.R. 1369.
127 cannot be said to have, been transferred
to the Bank either in writing or by operation of law.
This takes us to the question whether the
power given to the Bank amounts in equity to an assignment of the decree or any
portion thereof, to the Bank. From the power of attorney it is clear that the
amount under the decree was specifically ear-marked for discharge of the debts
due to the Bank. It was constituted as a special fund for the said purpose. The
power to realise that fund was made over to the Bank with the further authority
to set off the amount realised towards the debts due to it. In other words, the
power of attorney is an engagement to pay out of the particular fund the debt
due to the Bank and hence the same constitutes an equitable assignment of the
amount due, under the decree or so much of that amount as is necessary for
discharging the debts due to it. That rule is recognised in Watson v. The Duke
of Wellington(1). Therein the plaintiffs, executors of Mr.
Sims, had advanced a large sum of money to
Marquis of Hastings ,on the joint bond of the Marquis and a surety.
The sum due on the bond exceeded pound 9000.
Towards the end of 1825, the Marquis having returned from India to England, the
plaintiffs made repeated applications to him for payment of the debt. The
Marquis represented that he was about to receive a large share of the Deccan
prizemoney; promised that their demand should be paid out of that fund; and
begged that, in the meantime, no proceedings might be taken against him or the
assets of his surety. On February 6, 1826, Mr. Allen, the solicitor of the
plaintiffs. again waited on the Marquis, who then stated that he had directed
Col. Francis Doyle, whom he had empowered to receive his share of the
prize-money, to pay the debt and costs due to the executors of Mr. Sims; and at
the same time the Marquis wrote and delivered to Mr.Allen a letter addressed to
Col. Doyle directing him that the executors of Mr. Sims were claimants on that
/fund for a bond debt with interest. From these facts the Court of Chancery
came to the conclusion that there was an equitable assignment in favour of the
executors of Mr. Sims of a portion of the prize-money sufficient to meet the
debts due to the estate of Mr. Sims by the Duke of Wellington. To the same
effect is the decision in Burn v. Carvalho (2). Therein the Court of Chancery
held that in equity, an order given by a debtor to his creditor upon a third
person, having the assets of the debtor to pay the creditor out of such fund is
a binding equitable assignment of so much of the fund.
The courts in India, which administer both
law as well as equity, have followed the rule laid down in the above decisions.
In this connection reference may be made to the decision of the (1) [1830] 39
E.R.231.
(2) [1839] 41 E.R. 265.
128 Bombay High Court in Jagabhai Lallubhai
v. Rustamji Nasarwanji(1) and of the Patna High Court in Prahlad Pd. Modi v.
Tikaitni Faldani Kunari (2). In the latter case, the Patna High Court held that
a transaction similar to the one we are concerned in this case, in substance
amounted to allocation of fund to be appropriated towards the debt and
therefore it is ail equitable assignment. No decision taking a contrary view
has been brought to our notice. We think that the rule laid down in the above
decisions is a sound rule as it advances the interest of justice. We
accordingly adopt that rule.
There was great deal of controversy as to
whether on the strength of the equitable assignment in its favour, the Bank
could execute the decree, even when the decree-holder (appellant) does not want
that it should be executed. Shri Chagla argued that an executing court cannot
go behind the decree; it has to execute the decree as it stands; so far as that
court is concerned, the only person who can execute the decree is he whose name
is shown in the decree as the judgment-creditor; unless the decree has been
transferred, and the transfer in question recognised under O.XXI, r. 16 of the
Code of Civil Procedure, the court has no power to execute the decree when the
judgment creditor does not want it to be executed. He urged that as the decree
was not transferred to the Bank either in writing or by operation of law, nor
was there any recognition by court of such a transfer, the Bank was incompetent
to execute the decree in its own right. He was emphatic that the only method by
which an assignee of a decree can execute the decrees is by having recourse to
O.XXI, r. 16. As the Bank cannot avail of that provision the execution cannot
be proceeded with.
In support of those contentions Shri Chagla
invited our attention to various decisions. It is not necessary for us to go
into those controversies in view of the decision of this Court in Jugulkishore
Saraf (3). Therein this Court held that an equitable assignee of a decree who
cannot have the benefit of O.XXI, r. 16 can still execute the decree under s.
146 of the Code of Civil Procedure. Shri Chagla contested the correctness of
that decision and desired that the question of law should be reconsidered by a
larger Bench. We are bound by that decision and no compelling circumstances
were made out for its reconsideration.
It is true that the -execution application
shows that the applicant is the appellant and the Bank is merely acting as his
agent. In other words, the Bank did not purport to execute the decree in its
own name or in exercise of its own right. When the execution application was
filed, there was no dispute between the appellant and the Bank. Hence the Bank
levied execution of the decree in (1) (1885) I.L.R.IX Bom.311. (2) A.I.R. 1956 Patna 233.
(3) [1955] 1 S.C.R. 1369.
129 the name of the appellant as provided in
the power of attorney. The controversy between the parties arose during the
pendency ,of the execution. It is only thereafter that it became necessary for
the Bank to assert its own right.
It serves no useful purpose to direct the
present application to be closed merely because it, was made in the name of the
appellant. In view of our earlier conclusions it will be still open to the Bank
to levy fresh execution of the decree. It will be in the interest of the
appellant as well as the Bank to allow the present application to go on.
For the reasons mentioned above, this appeal
is dismissed with costs.
G.C. Appeal dismissed.
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