MUDDALA VENKATAREDDI NAIDU Vs. DHARWADA VENKATA VARAHA NARASIMHARAO

JUDGEMENT

(1.) Second defendant is the appellant in this case. He is the purchaser of property that was mortgaged to the plaintiff from the mortgagor, and it was arranged at the time of the purchase that part of the purchase price, viz., Rs. 2,900 should be retained in the hands of the second defendant to pay to the mortgagee to discharge the mortgage amount then owing by the mortgagor to the mortgagee. In pursuance of that arrangement, the second defendant, having this money which was due to the vendor in his hands, wrote on the 10 of July, 1923, to the mortgagee saying that the property had been sold to him and a portion of the sale amount paid to the vendor, and as for the balance "it is arranged as between us (i.e., the vendor and vendee) that I should pay you the same towards your mortgage-debt, and obtain the return of the mortgage bond with payment endorsement noted thereon. Accordingly, I should have already brought your money, but delay occurred on account of some transactions and urgent business here. So, I shall, within the end of this month, bring to Rajahmundry the amount of principal and interest due under the said bond, pay you the money, and obtain back the said mortgage bond from you. I have therefore informed you of the fact. In the meanwhile you need not ask (the mortgagor) Veerabadhrasawmi Garu for repayment". Following upon that there are a number of letters wherein the second defendant seeks to excuse his failure to carry out that promise and bring the money and pay to the mortgagee. On those facts the learned District Judge has come to the conclusion that the second defendant has rendered himself personally liable to pay to the mortgagee that sum of money, viz: Rs. 2,900. In our opinion the learned Judge is right in so doing. Mr. Bowstead in his work on Agency, 8th Edition, p. 457, says: Where an agent is authorised to pay money on behalf of his principal to a third person, the authority becomes irrevocable as soon as the agent enters into a contract, or otherwise becomes bound, to pay or hold such money to or to the use of such third person.

(2.) It is true that the Privy Council in Jamna Das V/s. Pandit Ram Autar Pande (1911) L.R. 39 I.A. 7 : I.L.R. 34 All. 63 : 21 M.L.J. 1158 (P.C.), regarded it as clear that where the action is brought by a mortgagee to enforce against a purchaser of the mortgaged property an undertaking that he entered into with his vendor, the mortgagee has no right to avail himself of that undertaking because he was no party to it. The purchaser in that case entered into no contract with him and the purchaser is not personally bound to pay the mortgage-debt. But here the facts are different from the facts in that case because here it is not merely a question of the mortgagee seeking to make the purchaser liable under the contract between him and the mortgagor but it is a case where the mortgagee has been communicated with or has been told by the purchaser that he holds certain moneys for the mortgagee and has been asked not to press the mortgagor for payment of that amount. On these facts the purchaser occupies a different position to what he would have occupied had he not communicated the undertaking to the mortgagee. This is much nearer the case in Siva Subramania Mudaliar v. Gnanasammanda Pandara Sannadhi , where according to the head-note it was held that a person who directs another to pay money to a third person is entitled to countermand that order before that person has entered into direct relations with the third person and agreed to pay it to him; but where the agent is directed or authorised by his principal to pay to a third person money existing or accruing in his hands to the use of the principal, and he expressly or impliedly contracts with such third person to pay to him, or to receive or hold the money on his behalf or for his use, he is personally liable to pay such third person, or to receive or hold the money on his behalf. In these circumstances we think therefore that on this part of the case the appeal fails and should be dismissed with costs.

(3.) There remains the question of compound interest. The learned Judge has allowed interest at 12 per cent, compound interest. That is in accordance with the terms of the contract, and although it may be that the interest could be regarded as penal, still some interest must be given and the quantum of that interest is a matter within the discretion of the court; the Court in its discretion has considered that the contract rate is a proper rate of interest in this case. We see no reason to interfere with that discretion.