HINDUSTAN MERCANTILE BANK LIMITED Vs. OFFICIAL RECEIVER DELHI

JUDGEMENT

(1.) This is a petition for revision under Section 75 of the Provincial Insolvency Act. The facts briefly are that Messrs Kishan Chand Megh Raj were adjudged insolvents. The petitioner Bank prewired a claim before the Official Reciver in the sum of Rs. 720.00 The goods, which had been pledged with it, v. ere stated to be of the value of Rs 22,000.00 . They were sold for Rs. 21.000.00 but the Official Receiver allowed a sum of Rs. 15, 345. 48 only. He directed that the Bank should refund the balance amount of Rs. 5.654.52 with interest at 31/2 percent per annum from the date of the sale of the goods. The petitioner Bank, however, claimed that a large amount was still due from "the insolvents. The question, that has now urisen, and on which the Controversy centres, relatts to a degree obtained by the petitioner Bank from the Bombay High Court. A cheque fild been drawn by Messrs Lakhmi Chand Lal Chand in favour of the insolvents in the sum of Rs. 40,000.00 . The insolvents made it over to the petilioner Bank for collection and drew against it a sum of Rs. 40,000.00 from their cash and eredit account with the Bank. The payment of the cheque was stopped by Messrs Lakhmi Chand Lal Chand. The petitier Bank instituted a suit in the Bombay High Court to recover Rs. 40,000.00 with interest from Messrs Lakhmi Chand Lal Chand and Messrs Kishan Chand Megh Raj. This suit was filed under the provisions of Order XXXVII of the Code of Civil Procedure. Messrs Kishan Chand Megh Raj did not apply for leave to defend and on 24th April 1959 a decree for a sum of Rs. 40,000.00 together with costs and interest was passed against them in favour of the petitioner Bank. Messrs Lakhmi Chand Lal Chand sought leave and on obtaining the same contested the suit but a decree was passed against them on 23rd July, 1959 in the sum of Rs. 40,000.00 together with costs and interest. The following portion of the decree dated 24th April, 1959 deserves to be reproduced-

(2.) Mr. D. K. Kapur, who appears for the petitioner Bank says that ' the decision of the Courts below is not in accordance with law and that not only there has been misconstruction of the decree but also there has been mis-reading of the evidence and wrong application of the well-established principles of law. My attention has been invited to both the decrees, the relevant part of which has been set out before. According to Mr. Kapur, the legal effect of both the decrees was that a sum of Rs. 40,000.00 together with interest and costs stood decreed against Messrs Lakhmi Chand Lal Chand and Messrs Kishan Chand Megh Raj jointly and severally. In other words, their liabilities under the two decrees was joint and several and that is why it was stated in both that any amount that may be realised from one defendant or 'the other be entered in the decree. The Bank's Manager, S. Kartar Singh, appeared as a witness and in his statement before the Official Receiver dated 2nd January, 1963 said that the Bank had realised Rs. 7,500.00 from Messrs Lakhmi Chand Lal Chand in satisfaction of the decree passed against the insolvents and the other party. He was asked whether there was any settlement between the Bank and Messrs Lakhmi Chand Lal Chand regarding the decretal amount. He replied that he had received a letter from the Bombay Office that Rs. 7.500.00 were accepted from Messrs Lakhmi Chand Lal Chand in full and final settlement. This letter had been received on 14th Feburary, 1961. This letter was .however, not traced apparently because it could not be found on the file. He produced a letter dated 27th July, 1962 in which it was stated that Rs. 7,5001.00 had been accounted for as having been realised from Messrs Lakhmi Chand Lal Chand. Mr. Kapur has pointed to another letter which is at page 119 of the record dated 16th February 196 and which is addressed by the Bombay office of the Bank to its Delhi office in which it is stated as follows :-

(3.) Section 44 of the Contract Act provides that where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors; neither does it free the joint promisors so released from responsibility to the other joint promisor or joint promisors. In Mool Chand v. P. Alwar Chetty' it was held that a release by a decree-holder of some of the joint judgment-debtors from liability under the decree did not operate as a release of the other judgment- debtors from their liability. This was because of the rule embodied in section 44 of the Contract Act which is different from the rule of English Law which is not applicable to this country. In Chand Mall Babu v. Ban Behari Bose Mookerjee and Rankin JJ. held that joint liability implied joint and several liability and a creditor was entitled to a decree for the entire amount against anyone of the debtors and that the release of one of the several joint judgment-debtors did not affect the right of the decree holder to proceed against the other judgment-debtors. To the same effect is the law laid down in Daulat Ram v. Punjab National Bank Ltd That being the rule Mr Kapur says it was for the Official decerver to establish in the present case that by accepting a sum of Rs. 7,500.00 from Messrs Lakhmi Chand Lal Chand and releasing them from liability, the liability of the insolvents under the decree was also wiped out. It is pointed out that the learned Additional Distirict Judge drew an adverse inference against the petitioner Bank lor not producing copies of the proceedings before the Court where the settlement was arrived at between the Bank and Messrs Lakhmi Chand Lai Chand and raised presumption against it. Secondly, the learned Judge ignored the provisions of section 44 of the Contract Act and by a curious process of reasoning which is given in the last but one paragraph of the judgment, came to the conclusion that because the Bank accepted Rs. 7,500.00 from Messrs Lakhmi Chand Lai Chand in full satisfaction of the decretal claim the said payment should be taken as the payment of the full amount due under the decree against both Messrs Lakhmi Chand Lal Chand and the insolvents.