Decided on April 17,1953



Govinda Menon, J. - (1.) The appellants before us were the defendants-judgment debtors in O. S. No. 55 of 1931 on the file of the Sub Court of Berhampore. On a number of bills for discount as well as demand promissory notes executed by some of the defendants in favour of others and which were discounted with the Imperial Bank of India, O. S. No. 55 of 1931 was brought for the recovery of a sum of Rs. 11089-12-0 with interest and costs, etc., against sixteen defendants. The monies due to the bank under these bills and promissory notes were secured by means of a mortgage bond dated 9-1-1931 and hence the plaintiff i. e., the Bank, brought the suit for recovery of the amount by sale of the mortgaged property. The preliminary decree dated 24-9-1932 was confirmed by a final decree dated 24-11-1936 and thereafter the decreeholder Bank assigned the decree in favour of the second counter petitioner in the court below whose estate is now being managed by respondents 4 and 5 as receivers appointed by court. I. A. No. 190 of 1945 was filed by the present appellants under Section 19, Madras Agriculturists Relief Act, for scaling down the debt due on the ground that they are agriculturists entitled to relief under the provisions of the Act. It is not disputed that the petitioners appellants are agriculturists entitled to the benefits of the Act but the question that was argued and decided in favour of the contesting respondents by the court below was that since the decreeholder was a scheduled bank as defined by Section 2(e), Reserve Bank of India Act, 1934, and the interest payable in respect of the liability was not more than 9 per cent per annum, the debt in favour of the Bank is exempted and as such the decree could not be scaled down. Therefore the lower court dismissed the application. Hence this appeal.
(2.) Before us the appellant's learned advocate raised three points, each one of which, according to him, if decided in their favour, would be sufficient for the purpose of disposing of the appeal in their favour. It is firstly contended that the negotiable instruments which formed the basis of the claim by the Imperial Bank of India were not executed in favour of the Bank as such but were transactions between the defendants 'inter se' and thereafter endorsed over, or discounted with, the Bank and therefore it cannot be said that the original liability is one in favour of a scheduled Bank as contemplated by Section 10 (2) (iii), Madras Agriculturists Relief Act. Secondly it is contended that the interest payable under the transactions in question would be more than nine per cent per annum with the result that the exemption conferred by Section 10 (2) (iii) is rendered inapplicable. Thirdly it is contended that since the decreeholder Bank has assigned the decree in favour of the second respondent in the court below, who was attempting to execute the decree, and since the assignment in his favour was without recourse whatever, there was no more interest for the Bank in these transactions and hence there was no liability in respect of any sum due to the bank.
(3.) The first argument does not seem to have been put forward or pressed in the court below but despite that fact we allowed the appellants counsel to raise it. There does not seem to be any substance in this argument for if we look at the mortgage deed Ex. P. 1 dated 9-1-1931, on whtch the suit was brought, it is evident that the Bank is the mortgagee and some of the respondents were the mortgagors. Even if the bills of discount and the demand promissory notes were not directly executed in favour of the Bank, still, by the execution of Ex. P. 1, there was a liability created in favour of the Bank under that mortgage which would bring the transaction within the exemption contained in Section 10 (2) (iii), Madras Agriculturists Relief Act. At the time of the execution of Ex. P. 1, the mortgagors were debtors to the Bank in a sum of money for securing which Ex. P. 1 was entered into and that would be sufficient to attract the operation of the subsection. But It is contended that the liability contemplated in the subsection is the initial liability which in the case of the demand promissory notes and the bills of discount was not in favour of the bank at all but 'Inter se' between the defendants and the transactions should be viewed in that light. Though the Bank is only a transferee of the rights under those documents, it cannot be said that there is a liability in favour of the bank. Ex. P. 5, plaint in O. S. No. 55 of 1931, shows that there was no intention when the bills or the promissory notes were executed that anyone else but the Bank was to advance the money. Prom the schedule attached to the plaint it is seen that defendants 6, 8 and 10 executed Bills of discount and demand promissory notes in favour of the first defendant on various dates, which were immediately on the same day cashed, discounted or endorsed over in favour of the bank. Similarly we find defendants 1, 8 and 10 defendants 1, 5 and 8 and defendants 1, 5 and 10 executing bills of discount or demand promissory notes in favour of the fifth defendant in two cases, the tenth defendant in one case and the 8th defendant in one case respectively, who also immediately cashed the documents with the bank. It is nobody's case that any of the defendants in whose favour some of the other defendants have executed the negotiable instruments ever paid any sum of money to the executants at all. If that had been the case, the liability originated in favour of some of the defendants and probably it might be difficult to say that the original liability was in favour of the bank. In the absence of any evidence whatever that for any of the transactions any consideration proceeded from the persons in whose favour they were entered into, we have to hold that the liability arose only when the instruments were negotiated with the bank. It is clear from these documents that what was intended was to borrow monies from the bank but since the bank would not lend monies to a single individual the device was that of creating a principal debtor, and a surety. It was with that object that the negotiable instruments were executed in favour of some of the defendants by the others and were negotiated with the bank. It seems to us therefore that this contention is without force.;

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