SRI VUPPALAPATY VENKATAPPALA NARASIMHARAJU GARU Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) This appeal arises out of a suit instituted by the Official Receiver, East Godavari, as receiver of the estate of defendant 2, for the recovery of money due from defendant 1 to defendant 2 under a promissory note Ex. A, dated 20 February 1931. This note was executed in settlement of prior accounts between the parties and was for a sum of Rs. 4338- 12-6 and it provided for payment of compound interest at 12 annas per cent, per month with annual rests. Defendant 1 admitted execution of the note but pleaded that he was not liable for interest; he also relied upon a letter, Ex. I dated 2 March, 1931, said to have been given to him by defendant 2, as amounting to a remission or discharge of the suit debt to the extent of Rs. 3500. Issues (ii) and (iii) related to the truth of the letter, Ex. 1 and its effect as against the Official Receiver. The learned Subordinate Judge allowed defendant 1's objection as to interest to some extent. On issues (ii) and (iii) he found against defendant 1, holding that Ex. I was not executed on the date that it bears but must have been got up later, i.e., after defendant 2 had been adjudicated insolvent. He was also of the opinion that even if Ex. I was true and binding it could not bind the Official Receiver. He accordingly passed a decree substantially in the plaintiff's favour; and against that decree defendant 1 has appealed.

(2.) The sequence of dates and events is no doubt calculated to raise considerable suspicion against Ex. I. The accounts were settled and the suit promissory note was executed only on 20 February 1931. On 5 March, defendant 2 was obliged to execute a trust deed in favour of his creditors. On 9 March, the Imperial Bank from which he had borrowed compelled him to execute a mortgage deed for a sum of Rs. 60,000 to secure repayment of his dues. On 17th March, a petition was filed by some of defendant 2's creditors to get him adjudicated insolvent and he was so adjudicated in November 1931. If, in these circumstances, defendant 2 who, in February is said to have gone out of his way to insist upon defendant 1 making himself liable for payment of interest even though there was no such understanding before, is, within ten days after the date of Ex. A, found to give up the greater portion of the claim under that document, it was nothing strange that the learned Subordinate Judge felt inclined to think that Ex. I might, in all probability, have come into existence after defendant 2's creditors took steps to get him adjudicated insolvent. We, however, feel that beyond mere suspicion, there is not enough material to justify a positive conclusion to that effect. Such evidence as there is on the record is to the effect that Ex. I was executed on the date that it bears. The Official Receiver has not thought fit even to examine the insolvent to allow the Court an opportunity of knowing what his version might be. We prefer to leave this matter there, because we have come to the conclusion that even on the assumption that Ex. I was executed on the date that it bears, it does not, in the circumstances, furnish a valid defence to the claim on the suit note.

(3.) It is true that under Section 63, Contract Act, lit is open to a promise to remit his claim in whole or in part even without consideration. But when a person, who is on the verge of insolvency, purports to make a (remission like that under Ex. I, the validity of that transaction as against the Official Receiver cannot be determined merely with reference to Section 63, Contract Act. If the remission was one without consideration, it will obviously be inoperative as against the Official Receiver according to the principle of Section 53, Provincial Insolvency Act. It has however been contended before us that Ex. I is supported by consideration and that there is nothing on the record to show it was the result of any fraud or collusion to which defendant 1 was a party. The only proof of consideration is what is contained in Ex. I itself. It appears that for some years prior to the suit transaction, defendant 1 has been occasionally standing as surety for defendant 2 in connexion with the loans taken from the Imperial Bank at Coeonada. The record does not clearly establish whether the amounts thus borrowed were wholly taken by defendant 2 alone or defendant 1 had any benefit out of these loans. Here again, we have to observe that defendant 1 has sworn that he was only a surety and there is no evidence to the contrary. We are surprised to note that even the books of the insolvent have not been produced in the case. Dealing with the case on the footing that defendant 1 was only a surety, we are, nevertheless, not satisfied that the remission could be said to have been supported by consideration.