MADRAS CONSOLIDATED SUGAR AND SPIRIT FACTORIES, LIMITED Vs. WILLIAM SISSMORE SHAW

JUDGEMENT

(1.) This is an appeal by the defendant, a company incorporated under the Indian Companies Act against the judgment of Boddam, J., decreeing a sum of Rs. 89,421-0-5 (with interest) in favour of the plaintiffs carrying on business at Madras under the name and style of Parry & Co. The said amount represents the value of a certain quantity of char, bones, &c., which along with other property movable and immovable, was agreed to be sold by the plaintiffs to the defendant Company, under an agreement (Exhibit D) dated the 1 December 1897. The learned Judge has decreed the plaintiff's claim on the ground that the plaintiffs discharged the defendant Company from its liability to them(sic) n respect of the sum of Rs. 7,97,460-11-0-- in-cluding the above item of Rs. 89,421-0-5--by reason of a mistake, common to both the plaintiffs and the defendant. The mistake was in believing that the East India Distilleries Company (incorporated under the English Companies Acts 1862 to 1893) which under an agreement (Exhibit F), dated the 14 December 1897, purchased from the defendant Company all the property which the latter had acquired from the plaintiffs, was under a liability to the defendant company in the sum of Rs. 7,97,460-11-0 including the value of char, &c., (besides the price fixed in Exhibit F in respect of some immovable properties, &c.), whereas, in truth and fact, according to the proper construction of Exhibit F, the value of the char, &c., was included in the fixed price above referred to and the English Company was liable to pay only Rs. 7,97460-11-0 less the value of the char, viz, Rs. 89,421-0-5. The English Company repudiated its liability to pay for the char, &c., separately; the matter was formally referred on behalf of the two companies to the arbitration of Mr. Davey in England and an award was made by him on the 4 October 1898 in which he held that the English Company's claim was right and that the value of the char was included in the fixed price and should be deducted from the sum of Rs. 7,97,460 as. 11-0 claimed by the defendant company. The learned Judge being of opinion that the plaintiffs could not have known of their mistake until the award was given, held that the suit was not barred under article 96 of the second schedule to the Limitation Act" the suit having been instituted on the 2 October, 1901; and he awarded the amount decreed as " compensation" under Section 65 of the Indian Contract Act, for the loss sustained by the plaintiffs by reason of the release or discharge--which, on the 4 October 1898, they discovered to be void.

(2.) Both before the learned Judge who tried the case and before us in appeal, there was a great deal of discussion as to the pleadings in the cause and as to whether the plaint disclosed any cause of action and if so what and as to whether the written statement did not admit the release pleaded by the plaintiffs. Paragraphs 4 & 5 of the plaint are not as clear as one might wish, especially in the light thrown upon it by the evidence of Mr. Yorke, one of the plaintiffs, who are themselves tha managing agents of the defendant company the company being represented in this suit by Mr. Dick, its attorney, who is also Secretary to the Commercial Bank at Madras, which with the plaintiffs practically constitute the defendant company both having an equal interest therein. I am satisfied, especially after our attention was drawn to the evidence of Mr. Yorke that the word " arranged" in paragraph 4 and the word " arrangement" in paragraph 5 of the plaint were advisedly used, as in reality there was no agreement in any legal sense of that term between the various parties therein referred to, viz., the Bast India Distilleries Company, the defendant company, the plaintiffs and the Commercial Bank; the arrangement itself when reported to the English Company for its confirmation, having been disapproved of and repudiated by it (as stated in paragraph 6 of the plaint) so far at any rate as its liability to pay for the char, &c. was concerned. I take it--and I believe that was the view taken by Boddam, J.--that the cause of action on which the suit is really based is that averred in paragraph 7 of the plaint, viz., that the plaintiffs released the defendant company from its indebtedness in respect of char, &c., under a mistake, shared in by the defendant company, as to the liability of the English Company to pay for the value of char, &c, taken over from the defendant company under agreement F and in the mistaken belief that the English Company were prepared to take over the indebtedness of the defendant company to the plaintiffs in respect of the char, &c. and that they are entitled to be relieved from the consequences of such mistaken belief. The contention that the release as pleaded in paragraph 7 of the plaint is, in fact, admitted in the written statement is quite untenable. A reference to paragraphs 4, 5 and 6 of the written statement clearly shows that the admission therein made by the defendant company is not of the release as set forth in paragraph 7 of the plaint, but of a novation by which the English Company, in consideration of the defendant company releasing in from liability to pay the defendant the sum of Rs. 7,97,460-11-0 including the value of char, &c, agreed to pay the same amount to the plaintiffs and the plaintiffs, in consideration of the defendant company having procured the English Company to undertake to pay the amount to the plaintiffs, released the defendant company from its liability to them in the same amount. Leaving out the Commercial Bank--in regard to which there was a similar arrange ment from consideration, the defendant understands the arrangement referred to in paragraph 4 and the whole of paragraph 5 of the plaint, as an agreement between the three parties and refers to it as such in both paragraphs 4 and 6 of the written statement. If the defendant company is to be held bound by the admission in the statement, the admission certainly must be taken as a whole and not merely in so far as it relates to the release of the defend-ant company by the plaintiffs. The question is not whether the defendant company rightly construed the plaint, but what the so-called admission made by it in the written statement is. The defendant admits the arrangement referred to in paragraph 4 of the plaint, referring to the same as an agreement and adds in paragraph 6 of the statement, that that agreement was acted upon and carried out, as alleged in paragraph 5 of the plaint, in which paragraph it is clearly stated that Rs. 7,97,460-11-0 was entered as the loan due by the East India Distilleries Company to the plaintiffs, the same being the amount due by the defendant com-pany to the plaintiffs. If, as stated by the defendant, the entries and the transfers of the sums, referred to in paragraph 5 of the plaint were in accordance with an agreement to which the English Company was a party, the result of course would be that the suit could not lie, inasmuch as the defendant company, by reason of its release by the plaintiffs, has released the English Company from its liability to it in respect of the same amount; and admit-tedly the English Company was labouring under no mistake as to its liability under Exhibit F. It is in this view that the defend- ant pleaded that the suit was bad for nonjoinder of the English Company which was a party to the agreement. The so-called admission of the defendant therefore is really no admission, when taken as a whole, in favour of the plaintiffs, but realty a defence in bar of the suit based apparently on a pardonable misconception of the plaint and an ignorance of the fact that there was really no such agreement as the defendant company understood the plain-tiffs to aver in paragraphs 4 and 5 of the plaint. Indeed the learned Counsel for the defendant offered and applied for leave before the learned Judge to amend the written statement.

(3.) Proceeding now to the consideration of the merits of the case and of the cause of action as set forth in paragraph 7 of the plaint,