NATH SAH Vs. LALA DURGA SAH

JUDGEMENT

(1.) This is a defendant's appeal arising out of a suit on a promissory note, dated 22 June, 1929 for Rs. 900 which contained no mention of any liability to pay interest. The plaintiff alleged in the plaint that the promissory note had been executed in respect of Mine old debt and after borrowing money in cash. In his defence the defendant pleaded that he had received only Rupees 200 out of the amount of the promissory note and did not get the balance. He also denied his liability to pay interest, which the plaintiff had alleged had been agreed upon orally to be at 1 per cent per mensem. The plaintiff replied that although only Rs. 200 had been paid in cash, the balance of Rs. 700 consisted of a sum of Rs. 500 due on a previous promissory note of 15 April 1926 and Rs. 200 interest due thereon at 1 per cent per mensem as well as Rs. 20 on a parole debt. The Court of first instance decreed the claim for Rs. 900 together with past and future interest at six per cent per annum. The defendant appealed, but the plaintiff submitted to the decree. On appeal the decree of the first Court has been affirmed.

(2.) The first point urged in appeal is that the consideration of Rs. 700 alleged by the plaintiff was non-existent inasmuch as the debt had become time-barred. A time-barred debt cannot be recovered, and an oral promise to pay a time-barred debt is not a good consideration under Section 25, Indian Contract Act. But if the promise to pay a time-barred debt either wholly or in part is made in writing and signed by the person to be charged therewith, then the consideration is not void under Sub-section (3) of that section. In the present case the defendant in writing signed by him agreed to pay Rs. 900 which apparently included the time-barred debt as well, but there was no specific reference to this earlier debt. There is some authority for the view that it is not necessary for the purposes of Section 25, Sub- section (3), specifically to refer to the previous time-barred debt, so long as it can be ascertained that there is a promise in writing to pay such debt. Gnaaptty Moodelly V/s. Maniswami Moodelly (1910) 33 Mad 159. On the other hand, there are some observations in Appa Roy V/s. Suyaprakasa (1900) 23 Mad 94, which support the contrary argument, though the latter case can be distinguished on facts. It seems to us that where there is nothing but a mere promise to pay a time-barred debt, then unless that promise is in writing and signed by the person to be charged therewith, it would not form a good consideration. But where there is not merely a promise to pay a time barred debt, but there is a novation of contract under which fresh consideration passes from the promisee and there is on the part of promisor the receipt of such consideration as well as a promise to pay time- barred debt, the two taken together would amount to a valid agreement, although the previous debt had been barred by time.

(3.) This would be particularly so where it was clear that the creditor would not have advanced further consideration, unless a promise to pay the time-barred debt had also been made. The case of Bindeshri Prasad V/s. Sarju Singh 1923 21 ALJ 446 has some bearing on this point. In that case the defendant's father, while a ward of the Court of Wards, had executed a promissory note in favour of the plaintiff for a certain sum, and after release of the estate and the death of the defendant's father, he executed a fresh bond in favour of the plaintiff for an additional consideration and also promising to pay his deceased father's debt. It was held that the contract was not unlawful and was enforceable. In that case the bond was executed before the coming into force of the Usurious Loans Act of 1916. The Court held that Section 25 was not applicable to such a case. It is difficult to hold that a fresh contract of this kind is in any way illegal, void or ineffective. The mere inadequacy of the consideration cannot be enquired into by the Court. Nor can it be said that any part of the consideration was merely absent within the meaning of Section 44, Negotiable Instruments Act or that part of the consideration had subsequently failed. We therefore hold that the Courts below have rightly held that the amount due on the previous promissory note could have been legally included in the consideration for the second contract. The same argument would have applied to the promise to pay interest at the contractual rate of 1 per cent per mensem on the previous debt, which also would then have been a part of the consideration for the second contract.