SURAJ PRASAD OJA Vs. RAM LAL SINGH

JUDGEMENT

(1.) THIS appeal is by the plaintiff and arises out of a suit for recovery of money due on two handnotes. One of these notes was executed by defendant 3 in favour of defendant 4 for Rs. 150. The other was executed by defendant 3 in favour of defendant 5 for Rs. 400. The defendants 4 and 5 assigned the notes to the plaintiff. Thereafter, defendant 3, the executant of the notes, sold all his properties to defendants 1 and 2. The sale deed contained a recital that defendants 1 and 2 undertook to pay the amount due on the handnotes. The present suit was instituted to recover Rs. 721 which was the amount due at the time of the institution of this suit. The only question is whether the plaintiff is entitled to recover this amount from defendants 1 and 2, he not being a party to the contract between them and defendant 3 by which they undertook to discharge the debt. For the plaintiff reliance is placed on the decision in Debnarayan Dutt V/s. Chunilal Ghose A.I.R. 1914 Cal. 129 In that case the transferee of a debtor's property had acknowledged his obligation to the creditor for the debt to be paid by him, under the provisions of a registered instrument conveying to him all the movable and immovable properties of the original debtor, and the acknowledgment was communicated to the creditor and accepted by him. It was held that the arrangement between the creditor and the transferee did not amount to a novation within the meaning of Section 62, Contract Act, that the obligation undertaken by the transferee was for, and intended to be for, the benefit of the creditor, and that the creditor was entitled to sue the transferee on the registered instrument. THIS view of the right of a stranger to sue on a contract to which he is not a party was extended in Khirodbihari Dutt V/s. Mangobinda in which it was held that, there is nothing in the Contract Act which prevents the recognition of a right in a third party to enforce a contract made by others which contains a provision for his benefit. In two other cases, in the Calcutta High Court, however, that view has not been accepted. See Jiban Krishna V/s. Nirupama Gupta A.I.R. 1926 Cal. 1009 and Krishna Lal V/s. Promila Bala . In Dwarka Nath V/s. Priyanath A.I.R. 1918 Cal. 941 it was held that a stranger to the contract was entitled to sue on it even though he had not agreed to accept the liability being transferred from the original debtor to the transferee of the debtor's property. THIS view was not accepted by a Full Bench of the Madras High Court in Subbu Chetti V/s. Arunachalam Chettiar A.I.R. 1930 Mad. 382. It was there held that where, on a contract between A and B, the latter agreed to pay a sum of money to C, who was a stranger to the contract, C was not entitled to sue B for the money, even in a suit to which A and C were parties. THIS was stated to be the general rule; but four exceptions to this rule were enunciated, namely, (a) where B afterwards agrees with C to pay him direct or becomes estopped from denying his liability to pay him personally; (b) where the contract between A and B creates a trust in favour of C; (c) where the contract charges the money to be paid out of some immovable property or (d) where it is due to C under a marriage settlement, partition or, other family arrangement. In this Court no case has arisen where a stranger has sought to recover on a contract to which he was not a party on an undertaking by a party to pay him direct, but it has been held in this Court in Achuta Ram V/s. Jainandan Tewary A.I.R. 1926 Pat. 474, in a case where there was no undertaking given to a plaintiff to pay him direct, that he was not entitled to recover on a contract to which he was not a party. In the present case, the plaintiff alleged that the undertaking given by defendants 1 and 2 to defendant 3 to discharge the latter's liability under the handnotes had been communicated to him and that he had accepted it. The Court below has found that this was not so. In my opinion, we are bound by the decision of this Court so far as this question is concerned. The present case would have been maintainable by the plaintiff had he been able to show that a trust was created in his favour. The facts of the case, however, do not disclose that there was such a trust. The appeal, therefore, fails and must be dismissed with costs. Shearer, J.

(2.) I agree, but wish to say that, in my opinion, this is not strictly speaking, a case in which two persons have entered into a contract for the benefit of a third person and that person has instituted a suit to enforce the contract. The recital in the sale-deed amounts, I think, to no more than a direction by defendant 3 to defendants 1 and 2 to pay certain sums of money to defendants 4 and 5 instead of to himself. A direction of that kind could at any time have been revoked, and defendants 1 and 2 were in the position of mandatories and not of contractors or even trustees. When one person conveys property on trust to another person so that the latter may sell the property and use the proceeds to pay off his creditors, the trust is one which can be revoked at any time before it is communicated to the creditors; see Section 78(c), Trusts Act and Acton V/s. Woodgate (1833) 2 M. & K. 492. I am inclined to think that the decision in A.I.R. 1914 Cal. 129 can be supported on the ground that there was a trust, and the trust not merely having been communicated to the creditor but the creditor having relinquished a document which he believed to be security for his debt, the trust was not a voluntary one and could be enforced at his instance.