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1940 (9) TMI 29 - HC - Indian Laws

Issues Involved:
1. Maintainability of the suit due to the relationship of partnership.
2. Agreement not to bring a suit under Order 21, Rule 63, Civil Procedure Code.
3. Allegation of the hypothecation deed being an arrangement to delay and defeat creditors under Section 53, Transfer of Property Act.
4. Validity of the hypothecation deed and the plaintiff's rights under it.

Detailed Analysis:

1. Maintainability of the Suit Due to the Relationship of Partnership:
The first issue addressed was whether the suit was maintainable due to the alleged partnership between the plaintiff and defendant 1. The appellants argued that the suit was not maintainable because of the partnership and an agreement in the claim case where the plaintiff agreed not to bring a suit under Order 21, Rule 63, Civil Procedure Code.

The court held that the contention could not be supported for multiple reasons. Firstly, the hypothecation bond dated 12th February 1935 clearly recited that the partnership was not acted upon. Secondly, the provisions of the so-called partnership deed did not disclose a partnership relationship as defined under Section 4 and Section 6 of the Partnership Act. The court emphasized that the plaintiff was to be paid interest at 12% per annum, which did not depend on the profits, thus negating a partnership relationship. The court also referenced the decision in Bhugwandas v. Rivvet-Carnac, which stated that a court cannot order partnership moneys to be paid to one partner without taking accounts of the partnership. The court concluded that the relationship of partners did not exist between the parties.

2. Agreement Not to Bring a Suit Under Order 21, Rule 63, Civil Procedure Code:
The second issue was whether the plaintiff's agreement not to bring a suit under Order 21, Rule 63, Civil Procedure Code, was valid. The appellants claimed that the plaintiff agreed not to file a suit in exchange for withdrawing the hatchitha and avoiding a criminal prosecution.

The court found that there was no enforceable agreement in writing by the plaintiff not to bring a suit. The court noted that the plaintiff was entitled to withdraw the hatchitha without the defendants' consent. The court also held that any agreement made was likely in consideration of the defendants not pursuing a criminal prosecution, which would be illegal under Section 23 of the Contract Act. The court referenced the case of Jones v. Merionethshire Permanent Benefit Building Society and Kamini Kumar v. Birendra Nath, which established that agreements made to avoid criminal prosecution are unlawful.

3. Allegation of the Hypothecation Deed Being an Arrangement to Delay and Defeat Creditors Under Section 53, Transfer of Property Act:
The third issue was whether the hypothecation deed was an arrangement to delay and defeat creditors under Section 53, Transfer of Property Act. The appellants argued that the deed was intended to defraud the creditors of defendant 1.

The court dismissed this argument, stating that the sums advanced by the plaintiff to defendant 1 were genuine. The court referenced the decision in Musahar Sahu v. Hakim Lal, which held that a transfer that prefers one creditor to another is not an instrument that defeats or delays creditors. The court concluded that defendant 1 was merely preferring the plaintiff, which he was entitled to do.

4. Validity of the Hypothecation Deed and the Plaintiff's Rights Under It:
The final issue was the validity of the hypothecation deed and the plaintiff's rights under it. The appellants contended that the deed of hypothecation did not give any rights to the plaintiff and that no notice was served on the Railway Company, thus negating any priority for the plaintiff.

The court held that the hypothecation deed operated as a deed of assignment under Section 130, Transfer of Property Act. The court referenced the decision in Mulraj Khatau v. Vishwanath Prabhuram Vaidya, which established that assignments by way of security are valid under Section 130. The court concluded that the plaintiff had valid rights under the hypothecation deed, and the attachment by the defendant-appellants had no effect.

Conclusion:
The court upheld the decision of the lower court, dismissing the appeal with costs. The court found that the suit was maintainable, the agreement not to bring a suit was invalid, the hypothecation deed was not an arrangement to delay and defeat creditors, and the plaintiff had valid rights under the hypothecation deed.

 

 

 

 

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