A.F. Ferguson & Co. And Ors. vs Lalit Mohan Ghosh on 13 August, 1954

Patna High Court
A.F. Ferguson & Co. And Ors. vs Lalit Mohan Ghosh on 13 August, 1954
Author: Choudhary
Bench: Narayan, Choudhary


JUDGMENT

Choudhary, J.

1. This appeal by the defendants is directed against the judgment and decree of the Additional Subordinate Judge of Bhagalpur, whereby the suit of the plaintiff has been decreed.

2. The plaintiff, Mr. Lalit Mohan Ghosh, is an advocate ordinarily practising at Bhagalpur. Defendant No. 2 is Allianz Und Stuttgarter Life Insurance Bank Ltd., a German Firm, having had its branch office in India at Delhi.

On the 17th July, 1930, the plaintiff got his life insured with defendant No. 2 under Policy No. H-2090 for a sum of Rs. 30,000, the annual premium payable being Rs. 2,212/8/- for 21 years or until his death if it occurred before that period.

On the 18th of June, 1935, the plaintiff took a loan of Rs. 3,700/- from defendant No. 2 on the security of his insurance policy and on the 20th of June, 1938, he took another loan of Rs. 2,315 from defendant No. 2 on the same security. On the 26th of June, 1939, he again took a loan of Rs. 519 from defendant No. 2 on the security of his insurance policy.

Till the 31st of August, 1939, the plaintiff paid tall premiums, and the total sum paid by that date comes to Rs. 21,571/14/-.

On the 3rd of September, 1939, war broke out between the British and the Germans, and the case of the plaintiff is that on the declaration of the said war the contract of insurance became frustrated. On the declaration of war, defendant No. 2 being an enemy firm, the Government of India closed its office. The Government of India, however, purporting to act under rule 113A of the Defence of India Rules, issued a notification, exhibit E(I), dated the 14th of December, 1939, authorising Messrs. A.F. Ferguson and Company, Chartered Accountants of Bombay (Defendant No. 1) to carry on the business of this firm subject to the conditions that defendant No. 1
“shall in the management of the said business, be accountable to the Central Government, and be subject to the superintendence, direction and control of the Central Government, and shall not effect any new contracts of life insurance.”

After defendant No. 1 took charge of the firm, there was some correspondence between the plaintiff and defendant No. 1, and the plaintiff paid his premiums from December, 1939, to November, 1940, amounting to Rs. 1,106/4/-.

On the 19th of September, 1943, the plaintiff wrote to defendant No. 1 that due to the declaration of war the contract had become void and he was entitled to get back the amount paid by him after setting off the dues of defendant No. 2 based on the loans taken by the plaintiff, but as defendant No. 1 denied the claim of the plaintiff, he instituted the present suit for, amongst others, the following reliefs:

(1) Accounts from defendant No. 2 on the basis of the plaintiff’s policy with profits or compensation on the premiums paid on it and
of the loans advanced by defendant No. 2 on the said policy;

(2) appointment of a Commissioner to take such accounts from defendant No. 1 and ascertainment of the amount payable by defendant No. 1 to the plaintiff; and

(3) a decree in favour of the plaintiff against the defendants for the sum ascertained by the Commissioner.

2A. The defendants contested the suit mainly on the grounds that (1) the Governor-General in Council not being a party to the suit, it was bad for non-joinder of parties, (2) the suit was bad for want of notice under section 80 of the Code of Civil Procedure, (3) the contract was not frustrated and did not become void and (4) the claim of the plaintiff was barred by waiver and acquiescence.

3. The learned Additional Subordinate Judge held against the defendants on all these points. According to his findings, however, the plaintiff was not entitled to get back the amount which he paid subsequent to the declaration of war. He, therefore, passed a preliminary decree in favour of the plaintiff for accounts being drawn up by appointment of a Commissioner. The plaintiff was not given any interest on the amount paid by him.

Against that decree the defendants filed the present appeal in this Court on the 26th of August, 1947. The plaintiff has also filed a cross-objection on the 12th of March, 1948, for the portion of the claim disallowed by the learned Additional Subordinate Judge.

4. During the pendency of the appeal the Parliament passed the Allianz Und Stuttgarter Life insurance Bank (Transfer) Act, 1950 (Act No. LXII of 1950) (hereinafter to be called the Act), whereby all the assets and liabilities of defendant No. 2 relating to or arising out of the life insurance business of that company carried on immediately before the commencement of the Act by defendant No. 1 under the Defence of India Rules was transferred to and vested in the United India Life Assurance Company, Limited, having its registered office in Madras, subject to the provisions of the Act and to the terms and conditions specified in the First Schedule. Thereafter, the aforesaid United India Life Assurance Company, Limited, was, by an order of this Court, dated the 13th of December, 1951, added as appellant No. 3 in the appeal.

5. Mr. Tarkeshwar Nath on behalf of the appellants has challenged the findings of the court below on all the points referred to above, and has contended that the suit was bad for non-joinder of the Governor-General of India in Council as a party to the suit and for want of notice under Section 80 of the Code of Civil Procedure, that it was barred on account of waiver and acquiescence and that the contract was not frustrated and did not become void due to the declaration of war.

In my opinion, his contention on all these points is barren of substance, and I will deal with them later on.

The most important contention of Mr. Tarkeshwar Nath, apart from the aforesaid points raised by him, is that the effect of the Act of the Parliament is that the contract in question could never be deemed to have been dissolved merely by reason of the declaration of war, and, in my opinion, this is a decisive point in the case. The learned advocate appearing for the plaintiff-respondent has not challenged the validity of the Act or the right of the Parliament to enact it, but his contention is that the Act has no retrospective effect, and, at any rate, it could not affect the pending actions.

In order to decide the question at issue, certain principles relating to the construction of an Act have to be borne in mind.

6. It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. But if the language is plainly retrospective it must be so interpreted. A statute is not to be construed to have a greater retrospective operation than its language renders necessary. Even in construing a section which is to a certain extent retrospective, the maxim ought to be borne in mind as applicable whenever the line is reached at which the words of the section cease to be plain. For it is to be observed that the retrospective effect of a statute may be partial in its operation. In general, when the law is altered during the pendency of an action, the rights of the parties are decided according to the law as it existed when the action was begun, unless the new statute shows a clear intention to vary such rights. If a statute is in its nature a declaratory Act, the argument that it must not be construed so as to take away previous rights is not applicable (Maxwell).

7. In — ‘Banwari Gope v. Emperor’, AIR 1943 Fat 18 (FB) (A), a Full Bench decision of this Court, Fazl Ali J. (as he then was), who delivered the judgment, referring to the discussions made in numerous cases, stated briefly some of the principles which may be taken to have been well settled in those cases, as follows:

“(1) Upon the presumption that the Legislature does not intend to enact what is unjust, every statute which takes away or impairs a vested right acquired under the existing law or creates a new obligation or imposes a new duty or attaches a new disability in respect of transactions or considerations already passed must be presumed to intend not to have retrospective operation;

(2) if there are words in the enactment which either expressly state or necessarily imply that the statute is to be given retrospective operation then the Act should have retrospective operation even though the consequences may appear unjust and hard; and (3) a statute is not to be construed to have a greater retrospective operation than its language renders necessary.”

In — ‘United Provinces v. Mt. Atiqa Begum’, AIR 1941 FC 16 (B), Sulaiman J. referring to the principle to be applied in construing an Act observed as follows:

“Undoubtedly, an Act may in its operation be retrospective, and yet the extent of its retrospective character need not extend so far as to affect pending suits. Courts have undoubtedly leaned very strongly against applying of new Act to a pending action, when the language of the statute does not compel them to do so. It is a well recognized rule that statutes should, as far as possible, be so interpreted as not to affect vested rights adversely, particularly when they are being litigated. When a statute deprives a person of his right to sue or affects the power or jurisdiction of a court in enforcing the law as it stands, its retrospective character must be clearly expressed. Ambiguities in it should not be removed by courts, nor gaps filled up in order to widen its applicability. It is a well established principle that such statutes must be construed strictly and not given a liberal interpretation.”

8. The correctness of the aforesaid principles is not disputed. Regard must, however, be paid to the dominant intention of the Act in question. In fact, we must look at the general scope and purview of the statute, and at the remedy sought to be applied, and consider what was the former state of law and what the legislature contemplated. As observed by Sulaiman J. in the aforesaid Federal Court decision AIR 1941 FC 16 (B), the intention of the legislature has to be gathered from the language actually employed in the Act. We have, therefore, to look to the Act itself.

9. Section 4(2) of the Act states that
“for the removal of doubts it is hereby declared that notwithstanding any decision or rules of law to the contrary, no contract of life insurance as is referred to in Sub-section (1) shall be deemed to have been dissolved merely by reason of the declaration that war had broken out between the Government of the United Kingdom and Germany.”

This sub-section in its very nature seems to be declaratory, and Mr. Tarkeshwar Nath has rightly contended that it should have retrospective effect.

The contention raised on behalf of the respondent is that if the legislature intended to apply this sub-section to pending actions, it would have clearly said so, as generally it does, when any Act is passed to apply to pending actions. Mr. Tarkeshwar Nath on behalf of the appellants has, however, contended that a consideration of the scheme of the Act and the provisions made therein leaves no room for doubt to hold that the legislature clearly intended the Act to apply even to pending actions.

The Preamble of the Act shows that it was enacted only to provide for the transfer of the business of the Allianz Und Stuttgarter Life Insurance Bank, Limited (which has been used in the Act as “transferor company”), to the United India Life Assurance Company, Limited
(which has been used in the Act as “transferee company”), and for matters connected therewith.

Under Section 3 of the Act all the assets and liabilities of the transferor company relating to or arising out of the life insurance business of the transferor company carried immediately before the commencement of the Act by Messrs, A. F. Ferguson & Company, Chartered Accountants of Bombay (defendant No. 1), under the Defence of India Rules stood, by virtue of the Act, transferred to and vested in the transferee company, subject to the provisions of the Act and to the terms and conditions specified in the First Schedule.

Sub-section (1) of Section 4 is very important. It states:

“Every contract of life insurance entered into between the transferor company and the holder of any life policy before the commencement of this Act, shall have effect as from such commencement as if the transferee company had been a party to the contract instead of the transferor company, and for any reference (however worded and whether express or implied) to the transferor company there were substituted as respects anything falling to be done on or after such commencement, a reference to the transferee company, and with such other modifications as may be necessary to transfer rights, liabilities and obligations under the contract so far as unperformed, from the transferor company to the transferee company:

Provided that no provision in any such contract for the payment of any bonus, profit, interest or dividend on any life policy shall have effect against the transferee company except on the basis of an actuarial valuation of the business of the transferor company made after the commencement of this Act and to the extent, if any, that may be recommended by the actuary.”

According to this sub-section, therefore, the contract of life insurance entered into between the transferor company and the insured shall have the effect as if it was entered into between the transferee company and the insured; in other words, the provisions of this sub-section make it clear that the contract into which the insured entered with the transferor company was to be deemed to have been entered into with the transferee company as if the transferor company was to be ignored altogether since after the commencement of the Act.

Reading this sub-section with Sub-section (2) of that section, which has already been quoted, it is clear beyond any controversy that Parliament intended the Act to apply even to pending actions. Under the law as it existed at the time when the war broke out and which, as already stated, I shall discuss later on, the contract became frustrated and the whole object and the scheme of enacting this Act was only to avoid the frustration as if the contract never frustrated. Therefore, on a plain reading of the section and on a consideration of the scheme of the Act, I have no hesitation in holding that the Act purported to apply even to pending actions.

10. The learned Counsel appearing for the respondent has argued that Sub-section (2) of Section 4 applies only were the contract of life insurance had to be dissolved merely by reason of the declaration that war had broken out between the Government of the United Kingdom and Germany. According to him, it does not apply where the contract stood dissolved not merely by reason of such declaration but also due to a decree passed in the case.

His argument is that in the present case a decree was passed by the learned Additional Subordinate Judge to the effect that the contract had frustrated, and, though that decree is under appeal, it cannot be said that the contract of life insurance had to be dissolved merely by reason of the declaration of war. It has, therefore, been contended by him that the Act has no application to the present case. In my opinion, there is no substance in this contention. The use of the words “notwithstanding any decision or rule of law to the contrary” in the Act makes it clear that the legislature intended the Act to apply even where there has already been a decision to the contrary. These words, in my opinion, make it perfectly clear that the contract of life insurance has to be taken as not having been dissolved even in cases where decrees to the contrary have been passed and such decrees have become final. There seems, therefore, to be no justification for the contention that the Act should not apply to pending actions. Again, the use of the words “shall be deemed” also indicates the retrospective character of the Act, the legislature having made no distinction between a contract of insurance which has not been the subject-matter of litigation and a contract of insurance which is the subject-matter of litigation in any pending action. If the legislature intend-ed that the Act should not apply to pending actions, we would have found that distinction being made in it.

The view that I have taken of the Act gains support from some of the decided cases. By Section 10 of the Bihar Tenancy (Amendment) Act, 1934. Section 26 (N) was inserted into the Bengal Tenancy Act of 1885 which runs as follows:

“Every person claiming an interest as landlord in any holding or portion thereof shall be deemed to have given his consent to every transfer of such holding or portion by sale, exchange, gift or will made before the first day of January, 1923, and, in the case of the transfer of a portion of a holding, to have accepted the distribution of the rent of the holding as stated in the instrument of transfer, or if there is no such instrument, as settled between the transferor and the transferee.”

In — ‘K.C. Mukherjee v. Mt. Ramratan Kuer’, AIR 1930 PC 49 (C) the Privy Council held, from the use of the words “shall be deemed” that the section applied to pending actions.

Their Lordships observed as follows:

“Section 26(N) is not a provision to the effect that no action shall lie in certain circumstances, nor has it any reference directly to litigation. Its provision is that every person
claiming as interest as a landlord shall be deemed to have given his consent to every transfer made before January 1, 1923. This is retrospective: the question is not whether general language shall be taken only in a prospective sense. The object of this section can only be to quiet titles which are more than ten years old, and to ensure that if during this ten years the transferee has not been ejected he shall have the right to remain on the land. Within this class the Legislature has not thought fit to discriminate against tenants whose right is under challenge in a suit, a course which it may well have regarded as invidious or unnecessary. As substantive rights of landlords and their accrued causes of action ” were to be abrogated, respect for pending suits over old transfers cannot be assumed.”

Shortly before the decision of the Privy Council in the aforesaid case a Bench decision of this Court in — ‘Shiva Janki v. Kirtanand Singh’, AIR 1936 Pat 173 (D) held the aforesaid section 26(N) not to be applicable to pending actions. But since after the decision of the Privy Council there are various decisions of this Court which following, as this Court was bound to follow, the aforesaid decision, held the section to be retrospective so as to apply even to pending actions.

The learned Counsel for the respondent has contended that now the decision of the Privy Council is no longer binding on us and we should follow the view taken by the earlier Bench decision of this Court. There is, however, a Full Bench decision of this Court in — ‘Sadhu Sharan Singh v. Deonath Saran’, AIR 1943 Pat 206 (PB) (E) where also the point to be decided was whether Section 48A of the Bihar Tenancy Act was retrospective and would apply to pending actions. That section runs as follows:

“Every person who, for a period of twelve years, whether wholly or partly, before or after the commencement of the Bihar Tenancy (Amendment) Act, 1938, has continuously held land as an under-raiyat in any village whether under a lease or otherwise, shall be deemed to have acquired, on the expiration of that period, a right of occupancy in the land he has so held for the said period.”

It was held in that case that by reason of the words “shall be deemed to have acquired, on the expiration of that period, a right of occupancy”, Section 48A, Bihar Tenancy Act, is clearly retrospective and applies to all persons who have held as under-raiyats and who have not been ejected when the section came into force.

In this connection the observation of Sinha J. (as he then was) to the following effect is very important:

“It will, thus, be clear that there is a large body of judicial opinion in favour of the view that section 48A of the Bihar Tenancy Act is retrospective in its operation in the sense that it will protect an under-raiyat who has not been ejected by a decree which has not become final between the parties. In other words, the section can be applied to cases in which a decree for ejectment has been passed in favour of the landlord, but which was pending in appeal at the date the Act came into force.”

The Full Bench decision of this Court is undoubtedly binding on us. The argument of the learned Counsel for the respondent, therefore, fails.

11. Reliance has been placed on behalf of the respondent on the case of — ‘Sylhet Loan & Banking Co. Ltd. v. Ahmad Majtoba’, AIR, 1946 Cal 337 (F). In that case the point under consideration was whether the amended Section 9 of the Assam Money-lenders Act would apply to pending executions. The amendment was made by the Assam Money-lenders (Amendment) Act 6 (VI) of 1943, and Section 1(2) of that Act enacted that it shall apply to pending suits and appeals. It did not say anything as to whether it would apply to executions, and it was held that the legislature did not intend to make the amending Act applicable to pending execution proceedings.

That case, in my opinion, has no application to the present case. In that case, as already pointed out, provision was made for non-application of the Act to pending suits and appeals and by omission of making provision for its application to pending execution proceedings it was held that it could not apply to execution proceedings.

The decision of the Judicial Committee in AIR 1936 PC 49 (C) was cited before their Lordships and they distinguished that case from the case which was under consideration before their Lordships on the ground that there the language used in Section 26(N), Bihar Tenancy Act, “shall be deemed to have given consent” made that section retrospective and what was laid down was that the Legislature had not made any discrimination against a purchaser who had purchased an occupancy holding before 1st January, 1923, but whose right to remain on the land was under challenge in a suit which was pending when that section, namely, 26 (N), came into operation. Therefore, this case also supports the view that where the Legislature uses the words “shall be deemed to have” it intends to give retrospective character to the Act so as to apply even to pending actions.

12. The learned Counsel for the respondent has also drawn our attention to the case of AIR 1941 PC 16 (B), where the question to be decided was whether the United Provinces Regularization of Remissions Act, 1938, was intra vires the United Provinces Legislature. Section 2 of that Act was in the following terms:

“Notwithstanding anything in the Agra Tenancy Act, 1926, …… where rent has been remitted on account of any fall in the price of agricultural produce which took place before the commencement of this Act, under the order of the Provincial Government or any authority empowered by it in that behalf, such order, whether passed before or after the commencement of this Act, shall not be called in question in any civil or revenue court.”

While the appeal from which the matter was taken to the Federal Court was pending before
the Allahabad High Court, a Division Bench of
that Court held in another case in — ‘Mahomed
Abdul Qaiyum v. Secy. of State’, AIR 1938 All
158 (G) that remissions made in pursuance of
the Government order had no legal effect.

Sulaiman J. while considering that case made
the following observation:

“As already mentioned, the landholders in the present case ignoring the order of remission had claimed the full amount of the arrears of rent from the very beginning. Even in the second appeal before the High Court, they had challenged the order of remissions of rent in grounds Nos. 2, 3 and 6 of their memorandum of appeal, several years before the impugned Act came into force. They had already called the previous order in question, and that plea was already before the High Court for consideration. The Legislature was presumably aware of the previous decision in AIR 1938 All 158 (G) and must also have been aware that numerous other suits for arrears of rent must be pending. And yet no express words were put in the impugned Act to show that it should apply to all actions pending in appeal …..”.

The learned counsel for the respondent has argued relying on the aforesaid observation of Sulaiman J. that in the present case also the plaintiff from the very beginning has asserted that the contract was frustrated and the appellants had taken specific grounds in their memorandum of appeal in this Court that it could not be frustrated. It has been argued that the legislature must have been aware of this fact and if it intended to apply the provisions of the Act (No. LXII of 1950) to actions pending in appeal, it would have expressly said so.

I, however, do not think that this contention has got any merit. There is nothing to show that there was any previous decision of any High Court on the point; there is nothing to show that numerous cases were pending before the Court concerning frustration of contract with defendant No. 2 and it is not possible to presume the legislature to have had knowledge of this litigation. Nothing, in my opinion, can be argued against its applicability to pending actions for want of express provision to that effect.

Apart from this, as already pointed out, the scheme of the Act, the provisions made thereunder and the words used in the sections under consideration give an unambiguous indication that the legislature intended the Act to apply even to pending actions.

13. On a consideration of the principles of construction referred to above and the Act itself, I hold that Sub-section (2) of Section 4 of the Act is retrospective and it applies to actions pending in appeal also. That being the position, the insurance contract of the plaintiff would never be deemed to have been frustrated and will be taken to be existing with this modification that the contract as between him and defendant No. 2 would be deemed to be a contract, from the date of the commencement of the Act as having been entered into between the plaintiff and appellant No. 3. The plaintiff, therefore, is not entitled to get any decree at all. Though the
decision of the learned Additional Subordinate Judge, as I will just now point out, was perfectly correct, according to the law as it stood at that time, it has to be reversed because of the new law which came into force during the pendency of the appeal. The suit of the plaintiff has, therefore, to be dismissed on this very ground and it is not necessary for the decision of this case to deal with the other points raised in the appeal. Since, however, counsel for the parties have argued those points at great length, I would like to give my findings on those points also.

14. The learned Additional Subordinate Judge has found that the contract covered under the policy of insurance taken out by the plaintiff became void and incapable of performance as the result of the outbreak of war between Great Britain and Germany in September, 1939.

Mr. Tarkeshwar Nath for the appellant has challenged this finding, and his contention is that the contract remained only suspended till the period when the Central Government of India took control over the management of the firm, defendant No. 2, after which period the contract of insurance revived and the plaintiff was not entitled to sue for the refund of the premiums paid by him.

In order to appreciate the point, it is necessary to give certain facts and events that have occurred in this case. The premium of the policy of insurance in question, as already stated, amounted to Rs. 2,212/8/- only per annum, and it appears that the agreement between the parties was that this annual premium would be payable quarterly at the rate of Rs. 553/2/- per quarter. The plaintiff himself has mentioned in his letter, Exhibit D-4, addressed to the Superintendent of Insurance, dated the 7th of December, 1939, that the amount of his quarterly premium was Rs. 553/2/-. Prom the record it appears that one of the quarterly kists fell in September and another fell in December of each year.

The plaintiff wrote a letter (Ext. D) to defendant No. 2 on the 15th of September, 1939, in which he has stated that his premium for his policy for September kist (Rs. 553/2/-) has to be paid on or before the 30th of September. In another letter, Exhibit D(3), the plaintiff wrote to defendant No. 1 on the 4th of December, 1939, in which he stated that his December premium was due on the 1st of December, 1939, but there were thirty days grace period and it was to be paid on the 30th of December next. Therefore, the contract between the parties was that the plaintiff was to pay for his insurance policy a quarterly premium of Rs. 553/2/-. Under the terms of the insurance agreement, thirty days’ grace was allowed for the payment of each quarterly premium, and on failure to pay the same within the period of grace the insurance had to lapse unless premiums for at least three full years had been paid, on the payment of which the policy had to be converted into a fully paid-up policy for a correspondingly reduced sum if that sum was not less than Rs. 300.

There is a further stipulation in the contract that an insurance which has lapsed or has been converted into a reduced paid-up policy will be
fully revived without medical examination of the insured, if within six months from the maturity date of the first overdue premium, the overdue premiums are paid together with 1/2 per cent. interest per month, or part thereof, always provided that the insured still be living, and that after the expiry of six months, the policy may be revived on production of evidence of insurability satisfactory to the Company and on payment of the overdue premiums with interest. Therefore, although the contract of insurance was entered into on the 17th of July, 1930, the plaintiff had to perform his own part of the contract by making quarterly payment of Rs. 553/2/- by way of premium till 21 years or till his death if it occurred sooner, and the default in making the payment had its consequence affecting the rights of the parties to the contract.

15. After declaration of war the office of defendant No. 2 had to be closed by Central Government of India. On the 25th of November, 1939, a Government Notification No. 288-OR/39 (Ext. E) from the Defence Co-ordination Department of the Government of India, was issued making certain amendments in the Defence of India Rules by inserting a new Rule 113A in it. This rule runs as follows:

“113A (1) Where it appears to the Central Government that the control of management of any enemy firm has been, or is likely to be, so affected by the state of war as to prejudice the effective continuance of its trade or business, and that it is In the public interest that the “trade or business should continue to be carried on, the Central Government may by order authorise a person to carry on the trade or business in such manner and to such extent as may be prescribed.

(2) While a person authorised under Sub-rule (1) is carrying on the trade or business of any enemy firm,–

(a) such person shall be deemed to be acting as the agent of the firm;

(b) such person shall be entitled to the management of the affairs of the firm to the exclusion of any other person acting or purporting to act on behalf of the firm, and for the purpose of such management shall be entitled to employ such staff or other agency as he thinks fit.

(c) such person shall not, in respect of such matters relating to the said management as may be specified by order of the Central Government, be bound by any obligation or limitation imposed on him as agent of the firm by or under any law, instrument or contract;

(d) such person shall be entitled to retain out of the assets of the firm all costs, charges and expenses of or incidental to, the said management, and such remuneration as may be prescribed; and

(e) the firm shall not have the right to control the carrying on of the trade or business.

(3) No person authorised under Sub-rule (1) to carry on the trade or business of any enemy firm shall be personally liable for acts done
by him in good faith in the course of management of such trade or business.”

At the trial it was contended on behalf of the plaintiff that Rule 113A of the Defence of India Rules is ultra vires the Central Government. This contention was overruled by the Additional Subordinate Judge, and this point has not been taken before us in this Court; rather, the learned counsel for the plaintiff-respondent has clearly stated that he did not challenge the validity of that rule.

On the 11th of December, 1939, another notification was issued by the Defence Co-ordination Department of the Government of India authorising defendant No. 1 to carry on the business of defendant No. 2. This notification runs as follows:

“No. 2S8-Or/39–Whereas it appears to the Central Government that the control and management of the Allianz Und Stuttgarter Life Insurance Bank Ltd. being an enemy firm as defined in rule 103 of the Defence of India Rules, has been so affected by the state of war as to prejudice the effective continuance of its business in British India, and that it is in the public interest that the said business should be carried on:

Now, therefore, in exercise of the powers conferred by Sub-rule (1) of Rule 113A of the Defence of India Rules, the Central Government is pleased to authorise Messrs. A. F. Ferguson and Company, Chartered Accountants of Bombay, to carry on the said business:

Provided that the said Ferguson and Company–

(i) shall, in the management of the said business, be accountable to the Central Government, and be subject to the superintendence, direction and control of the Central Government, and

(ii) shall not effect any new contracts of life insurance.”

On the basis of these notifications it has been argued on behalf of the appellants that the contract of insurance remained only suspended till the period when, under these notifications, defendant No. 1 took charge of the firm, defendant No. 2, and that the contract never became frustrated. There does not seem to be any merit in this contention.

16. Paragraph 2 of Section 56 of the Indian Contract Act provides that a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

It has been argued on behalf of the plaintiff that due to the outbreak of war the performance of the contract by the plaintiff by making payments of the premiums became impossible, and, therefore, the contract became frustrated and void. Section 56 of the Contract Act is perfectly clear on the point, and, if the performance of the contract after the outbreak of war became
impossible or unlawful, the contract of insurance became void.

It is not necessary to take into consideration the principles of English law of frustration for the purpose of deciding this question. A recent decision of the Supreme Court in — ‘Satyabrata Ghose v. Mugneeram Bangur and Co.’, AIR 1954 SC 44 (H), has laid down the law clearly on the point as follows :

“Although various theories have been propounded by the Judges and Jurists in England regarding the juridical basis of the doctrine of frustration, yet the essential idea upon which the doctrine, is based is that of impossibility of performance of the contract; in fact, impossibility and frustration are often used as inter-changeable expressions. The changed circumstances, it is said, make performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility.

* * * * *

the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act.

* * * * *

It must be held also, that, to the extent that the Indian Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law ‘dehors’ these statutory provisions. The decisions of the English Courts possess only a persuasive value and may be helpful in showing how the Courts in England have decided cases under circumstances similar to those which have come before our Courts.

* * * * *

In the large majority of cases, however, the doctrine of frustration is applied not on the ground that the parties themselves agreed to an implied term which operated to release them from the performance of the contract. The relief is given by the Court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement.

* * * * *

When such an event or change of circumstance occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, it is the Court which can pronounce the contract to be frustrated and at an end.”

17. It has now to be seen whether the performance of the contract in question became impossible or unlawful by the event of the outbreak of war. Under Rule 104 of the Defence of India Rules the payment of any sum of money to or for the benefit of an enemy firm was prohibited, and the contravention of the rule provided a punishment of imprisonment for a term which may extend to seven years or with fine or with both. The war broke out on the 3rd September, 1939 and the quarterly payment for the September kist of 1939 after allowing the period of grace had to be paid on or before the 30th of September, 1939. As appears from the correspondence the plaintiff did not pay this premium and was negotiating for a loan from defendant No. 2 for making payment of this premium.

After the 3rd of September, 1939, however, it became impossible for him to make any payment as the payment of any sum of money to defendant No. 2, an enemy firm, had become unlawful and punishable. As held in the Supreme Court case referred to above — ‘AIR 1954 SC 44 (H)’, it and when there is frustration, the dissolution of the contract occurs automatically. It does not depend, as does rescission of a contract, on the ground of repudiation or breach, or on the choice or election of either party. It depends on the effect of what has actuallly happened on the possibility of performing the contract. Therefore, in my opinion, the moment the war broke out, any further performance of the contract became unlawful and the result was that the contract stood dissolved on the very date the declaration of war was made.

18. In — ‘Schering Ltd. v. Stockholms Enskilda Bank Aktiebolag’, 1946 AC 219 (I), Lord Thankerton referred with approval to the following observation of Lord Dunedin in the well-known case of — ‘Ertel Bieber & Co. v. Rio Tinto Co., Ltd.’, 1918 AC 260 (J):

“From these cases I draw the conclusion that upon the ground of public policy the continued existence of contractual relation between subjects and alien enemies or persons voluntarily residing in the enemy country which (1) gives opportunities for the conveyance of information which may hurt the conduct of the war, or (2) may tend to increase the resources of the enemy or cripple the resources of the King’s subjects, is obnoxious and prohibited by our law.”

Lord Thankerton further observed that as regards the contravention of public policy, the Courts had no choice between the abrogation and suspension of the contract, abrogation being the necessary consequence. His Lordship thereafter quoted with approval the observation of Lord Sumner in the aforesaid case of — ‘1918 AC 260 (J)’ as follows:

“My Lords, if upon public grounds on the outbreak of war the law interferes with private executory contracts by dissolving them, how can it be open to a subject for his private advantage to withdraw his contract from the operation of the law and to claim to do what the law rejects, merely to suspend where the law dissolves? The prohibition, which arises at common law on the outbreak of war, has for this purpose the effect of a statute. The choice between suspending and discharging the contract on the outbreak of war was quite deliberately made, and if occasionally the contract is said to be only suspended, or a Court refuses
to dispose of a case on the ground of dissolution alone, this only brings into relief the fact that by an overwhelming preponderance of authority such trading contracts have been held to be dissolved on the outbreak of war. An appearance of authority to the contrary is sometimes found to be in truth a misreading of the language of a decision.”

His Lordship came to the conclusion that the executory contract which is abrogated must either involve intercourse, or its continued existence must be in some other way against public policy as that has been laid down in decided cases.

His Lordship agreed with Sir Arnold McNair’s sugession (Legal Effects of War, 2nd Ed., at p. 93),
“that the distinction between ‘executed’ and ‘executory contracts’ may not be very helpful in this connexion and that it may be found safer to say that…..the effect of the outbreak of war upon contracts legally affected by it is to abrogate or destroy any subsisting right to further performance other than the right to the payment of liquidated sum of money, which will be treated as a debt and will survive the outbreak of war.”

The observation of Willes, J. in — ‘Esposito v. Bowden’, (1858) 27 LJQB 17 (K) is very important in this connection. It is to the following effect:

“It is now fully established, that inasmuch as the presumed object of war is as much to cripple the enemy’s commerce as to capture his property, the declaration of war imports a prohibition of commercial intercourse and correspondence with the inhabitants of the enemy’s country, and that such intercourse except with the licence of the Crown, is illegal ……one of the consequences of war is the absolute interdiction of all commercial intercourse or correspondence between the subjects of the hostile countries, except by the permission of their respective sovereigns……The force of a declaration of war has been held equal to that of an act of parliament prohibiting intercourse with the enemy, except by the Queen’s Licence. As an act of state done by virtue of the prerogative exclusively belonging to the Crown, such a declaration carries with it all the force of law.”

Referring to the question of frustration of a contract the performance of which had to be made after the declaration of war his Lordship observed that
“as to the mode of operation of war upon contracts of affreightment (that was the contract under consideration in that case) made before, but which remain unexecuted at the time it is declared, and of which it makes the further execution unlawful or impossible, the authorities establish that the effect is to dissolve the contract, and to absolve both parties from further performance of it….. If an agreement be made to do an act lawful at the time of such agreement, but afterwards and before the performance of the act, the performance
be rendered unlawful by the government of the country, the agreement is absolutely dissolved. If, therefore, before the commencement of a voyage, war or hostilities should take place between the State to which the ship or cargo belongs, and that to which they are destined, or commerce between them be wholly prohibited, the contract for conveyance is at an end;….. Chancellor Kent, also in his commentaries, Vol. 3, p. 248, after stating that the contract of affreightment may be dissolved without execution, not only by the act of the parties, but also by the act of the law, proceeds to state, that inter alia war, making performance unlawful or impossible, either before or after the commencement, dissolves the contract”.

19. On the authorities referred to above and the provisions of the Defence of India Rules, it is abundantly clear that the further performance of the contract by the plaintiff by making payments of further premiums became unlawful and impossible and it had the effect of absolving both the parties from the performance of the contract. The contract of insurance, therefore, in my opinion, became void after the declaration of war.

20. There are abundant authorities to support the view that I have taken. In — ‘The Textile Manufacturing Co, Ltd. v. Salomon Brothers’, AIR 1916 Bom. 251 (L) the defendants, a German joint-stock company having a branch office in Bombay, entered into, through the manager, a contract in writing with the plaintiffs whereby the defendants agreed to purchase from the plaintiffs the total quantity of waste of the several descriptions specified in the contract produced in the plaintiff’s mills during the year ending the 31st December 1914 at the respective prices specified in the contract, and to take delivery of whatever waste might be ready at least once monthly. The defendants deposited with the plaintiffs 3 1/2 per cent. Government Promissory Notes of the face value of Rs. 2,200 to be retained by the plaintiffs against the fulfilment of the contract.

On the 4th of August, 1914, war was declared between Great Britain and Germany. On the 5th September, the defendants’ manager was interned as an alien enemy, the defendants’ local business ceasing for all practical purposes. The plaintiffs several times demanded of the fullfilment of the contract. The defendants ultimately replied referring to the internment of their manager and claimed that under Section 56(2) of the Indian Contract Act, the defendants were relieved from the performance of their part of the contract. On the 8th February 1915, the defendants obtained a license limited to the winding up and liquidation of their local business under Government supervision. On the 16th February, the plaintiffs informed the defendants that they had sold the waste of which the defendants had been under contract to take delivery at a loss of Rs. 4,270/13/- and after deducting the value of the deposit demanded payment of Rs. 2,074/13/2.

On the 11th March, the plaintiffs filed the suit to recover the sum of Rs. 4,270/13/- from the defendants and for a declaration that the plain-(tiffs were entitled to retain the 3 1/2 per cent. Government Promissory Notes and to set off their value in part satisfaction of the decretal amount. The defendants pleaded illegality of contract on the outbreak of war and impossibility of performance.

It was held in that case that the contract in suit became illegal on the outbreak of war and was dissolved on the 4th August 1914, and that it had become impossible for the defendants to perform their part of the contract, owing to subsequent events arising from a state of war. Macleod J. in the course of his judgment observed that the modern view seems to be that all con-tracts with alien enemies become illegal on the outbreak of war.

21. In — ‘Madhoram Hurdeo Das v. G.C. Sett’, AIR 1918 Cal 830 CM), the defendant-firm agreed on the 2nd of February, 1914, to sell to the plaintiffs 150 tons of basic steel bars under a c.i.f. contract free Hooghly. The shipments were to be made in June, July and October and delivery to be completed within three days from the date of the landing of the goods. It was also agreed between the parties that 45 days’ credit from the date of the delivery of the goods should be allowed to the plaintiffs. In respect of the July shipment, the goods which consisted of partly Belgian and partly German manufacture, were shipped on the 2nd July, 1914, from Antwerp per S. S. Steinturm, a German steamer.

On the 4th August, 1914, war was declared between England and Germany, and on that date the S. S. Steinturm was at sea, She was subsequently captured with her cargo by a British cruiser and taken to Colombo for adjudication. The Prize Court condemned the vessel but released the cargo, which was brought to Calcutta at the expense of Government. The Government, thereupon, notified the vendors that the goods arrived and the latter immediately communicated with the purchasers asking them to take delivery of the goods on payment of certain extra charges to Government. The plaintiffs refused to do so, and the goods were sold by the defendants on purchasers’ account and risk.

A suit was brought for breach of contract and for damages, and it was held that the contract between the plaintiffs and the defendants included the peformance of an act (viz., the procuring of the contract of affreightment under which the goods would be delivered in the Hooghly) which, after the contract was made, became impossible by reason of the outbreak of war, within the meaning of Section 56 of the Indian Contract Act and consequently the contract of the 2nd February, 1914, was void.

It was also held that the procuring of the further execution of the contract of affreightment which was an implied part of the contract of 2nd February, 1914, became unlawful by Tea-son of an event which the defendants could not prevent, viz., the outbreak of war, and conse-

quently the contract of 2nd February, 1914, became void by reason of the provisions of Section 56. Sanderson C. J. relying on the case of — (1858) 27 LJQB 17 (K)’, a reference to which has already been made and will also be made later on, observed as follows:

“But the operation of war on such a contract of affreightment made before, but which remained unexecuted, at the time the war was declared made the further execution so far as the defendants, British subjects, were concerned, unlawful, it being a contract with an alien enemy, and the contract of affreightment thereby become dissolved.”

Mookerjee J. also relying on the same case of — ‘(1858) 27 LJQB 17 (K)’ observed;

“A contract is deemed in its nature incapable of suspension if its proper performance necessitates intercourse with the enemy during the war.”

22. In — “(1858) 27 LJQB 17 (K)’, the question raised was whether a charter-party made before the late Russian War, between an English merchant and a neutral ship-owner, whereby it was agreed that the neutral vessel should proceed to Odessa, a port of Russia, and there load from the frieghter’s factors a complete cargo of wheat, seed or other grain, and proceed therewith to Falmouth, with usual provisions as to laying days and demurrage, was dissolved by the war between England and Russia.

It was held in that case that one of the consequences of war is the absolute interdiction of all commercial intercourse or correspondence between the subjects of the hostile countries, except by the permission of their respective sovereigns, and that, in effect, trading with the inhabitants of an enemy’s country is trading with the enemy. It was further held that the force of a declaration of war has been held equal to that of an act of parliament prohibiting intercourse with the enemy, except by the Queen’s licence.

With respect to the contract in question, it was held that as to the mode of operation of war upon contracts of affreightment made before, but which remain unexecuted at the time it is declared, and of which it makes the further execution unlawful or impossible, the authorities establish that the effect is to dissolve the contract, and to absolve both parties from further performance of it.

If an agreement be made to do an act lawful at the time of such agreement, but afterwards and before the performance of the act, the performance be rendered unlawful by the Government of the country, the agreement is absolutely dissolved. If, therefore, before the commencement of a voyage, war or hostilities should take place between the State to which the ship or cargo belongs, and that to which they are destined, or commerce between them be wholly prohibited, the contract for conveyance is at an end. On these findings the plea of the defendant that the contract came to an end was accepted in that case.

23. Reliance has been placed on behalf of the appellants on the case of — ‘Karl Ettlinger v.

Chagandas & Co.’, AIR 1915 Bom 232 (N); — ‘Andrew Miller & Co., Ltd. v. Taylor & Co., Ltd.’, 1916-1 KB 402 (O) and — ‘1946 AC 219 (I)’. None of these cases, in my opinion, applies to the facts of the present case.

In the first case the plaintiffs, a firm of naturalised Germans, doing business in London, made a contract on the 24th of July, 1914, with the defendant firm through their London agent, Smith, by which the defendants agreed to supply the plaintiff-firm with 1,000 tons freight at 11s. 6d. per ton, the material to be carried being manganese from the Port of Bombay for Antwerp, shipment in September.

On the 4th of August 1914, war broke out between Great Britain and Germany. On the 5th of August, 1914, the Government of India, by a Proclamation duly published in Bombay on the

7th of August, 1914, under the Sea Customs Act prohibited the export from India of ammunition and explosives and all materials used in the manufacture thereof. Manganese not being expressly specified in the aforesaid notification, the Government of India issued, on the 17th of October, 1914, a further notification in supersession of the notification of the 5th of August, by which manganese was amongst other articles specifically prohibited.

Before this notification of the 17th of October, 1914, the defendants relying on the earlier notification of the 5th of August 1914, telegraphed to the plaintiffs that owing to ‘force majeure’ the contract was cancelled. The plaintiffs refused to accept the cancellation and insisted upon the performance of the contract, and on the defendants’ failure to perform the contract the plaintiffs sued the defendants in damages in the sum of £525 or Rs. 7,937. The defendants took the plea inter alia that the export of manganese from India was prohibited by the Government of India notification of the 5th of August 1914, and therefore, the performance of the contract became impossible.

The plea of the defendants was rejected on the ground that having regard to the form of the earlier notification dated the 5th of August, 1914, the plaintiffs were right in contending that the defendants might have performed their part of the contract on the 7th of August, 1914, without contravening any law, or being able to avoid it tinder Section 56 of the Indian Contract Act as having been made unlawful after they had entered upon it inasmuch as the export of manganese was not specifically prohibited by that notification. This case, therefore, has no application to the present case.

In — ‘1916-1 KB 402 (O)’, the plaintiffs agreed in July, 1914, to supply the defendants with confectionery for export. War against Germany was declared on August 4, and by Proclamations of August 5 and 10 the exportation of confectionery was forbidden. . The plaintiffs repudiated the contract and brought an action for the value of goods sold and delivered by them to the defendants. The defendants counter-claimed for breach of contract, and there was a plea to the counterclaim that the contract had been dissolved by the embargo declared by the Proclamations.

On August 20 the prohibition of exportation of confectionery was removed. As it was not a case of trading with the enemy, it was held that the contracts had not been annulled but only suspended and the plaintiffs should have waited a reasonable time before repudiating the contract, and the defendants were entitled to recover on their counter-claim. This case also, therefore, does not apply to the facts of the present case.

In — ‘1946 AC 219 (I)’, the point under consideration was whether a completed contract, payment for which had been postponed for eight years, had become frustrated due to the outbreak of war after the completion of the contract. It was held that accrued rights are not affected though the right of suing in respect thereof is suspended, and that the effect of the outbreak of war upon contracts legally affected by it is to abrogate or destroy any subsisting right to further performance other than the right to the payment of a liquidated sum of money, which will be treated as a debt and will survive the outbreak of war, and the contract was held not to have abrogated by the outbreak of war. That case also, therefore, does not apply to the present case.

24. On consideration of the authorities discussed above, there is no room for doubt that the contract of insurance in question came to an end on the 3rd of September 1939, when the war broke out between Great Britain and Germany and it became void. The contract having become void the question of ratification does not arise, and the argument of the learned counsel for the appellants that on defendant No. 1 being authorised by the Central Government to manage the business of the firm the contract revived, has to be rejected as being without any merit.

25. Another point that was taken on behalf of the appellants was that the Governor-General in Council was a necessary party to the suit, and he not having been made party, it was liable to be dismissed on that very ground. I fail to under-stand how the Governor-General in Council was a necessary party in the suit. No claim has been made against the Governor-General in Council; nor has the Governor-General in Council any interest in the subject-matter of the suit.

Reliance has, however, been placed on behalf of the appellants on the notification, Exhibit E(1), whereby defendant No. 1 was authorised to carry on the business of defendant No. 2 in which it is laid down that defendant No. 1
“shall, in the management of the said business, be accountable to the Central Government, and be subject to the superintendence, direction and control of the Central Government.”

It has, therefore, been argued that the control and supervision of the firm having vested in the Central Government the Governor-General in Council was a necessary party to the suit.

I am afraid this contention cannot be accepted. By reason of the Central Government having the power of control and superintendence in possession, it cannot be said that the Central Government had any interest in the subject-matter of the dispute. This argument, therefore, fails.

It has also been argued that notice under Section 80 of the Code of Civil Procedure was necessary to be given in this case. The Governor-General in Council having been held not to be a necessary party in the suit, notice under Section 80 of the Code of Civil Procedure was not necessary to be served on him.

It has, however, been argued that defendant No. 1 having been authorised to manage the affairs of defendant No. 2 by the Central Government is a public officer within the meaning of Section 2 of the Code of Civil Procedure. I am unable to accept the contention that defendant No. 1 is a public officer.

In the first place, Rule 113A of the Defence of India Rules specifically mentions that the person authorised to carry on the business of an enemy firm shall be deemed to be acting as the agent of the firm. That being so, defendant No. 1 could not get the status of a public officer. In the second place, notice under Section 80 of the Code of Civil Procedure is required to be given to a public officer only if a claim is made in respect of any act purporting to be done by him in his official capacity. In the present case the cause of action for the suit for the refund of money from defendant No. 2 is not in respect of any act purporting to have been done by defendant No. 1. This contention also, therefore, fails.

26. The last contention raised on behalf of the appellants is that the plaintiff’s suit is barred by the principle of waiver and acquiescence.

In order to appreciate this contention certain facts shall have to be given. It appears that, even after the outbreak of war, the plaintiff has treated the contract to be subsisting. By Ex. D, dated the 15th September, 1939, and Exs.

D(1) and D(2) dated the 20th September, 1939, the plaintiff sought to get a loan of Rs. 553/2/-from defendant No. 2 for paying the premium falling due on the 30th of September, 1939, on the security of his insurance policy. Again, by Exs. D(3), dated the 4th of December, 1039, D(4) dated the 7th of December, 1939, and D(5) dated the 8th of December, 1939, the plaintiff sought to get another loan from defendant No. 2 for payment of premium falling due in December, 1939, on the security of the same policy. By Ex. D(10), dated the 21st of March, 1940, the plaintiff writes to defendant No. 2 to grant a fresh loan to the extent of risk premium and to keep the policy in force for one year from the 1st of December, 1939. On the 21st of May, 1940, the plaintiff writes to defendant No. 2 a letter, Ex. D(17), in which he proposes to convert half of his policy to a paid-up one and to continue the other half.

On the 23rd of May, 1940, the plaintiff executes a bond for Rs. 620/-, Ex. B(3), for revival of the policy. On the 31st of May, 1940, the policy is endorsed by reducing the insurance to Rs. 15,0007-to its paid-up value and reducing the premium, vide, Ex. A(1). The plaintiff thereafter makes certain payments on the 1st of July, 1940, the 24th of November, 1942 and 3rd of December, 1942. The rest of the amount not having been paid, the department of the insurance company informs the plaintiff by letter, Ex. D(9), dated the Gth of February, 1943, that the dues had already equalled the surrender value on the 2nd of February, 1943, and the plaintiff was given opportunity to make payment of the dues.

It was then that on the 19th of February, 1943, the plaintiff wrote to defendant No. 2 a letter, Ex. D(30) that due to the outbreak of war the contract had become void and that the plaintiff was entitled to get back his money.

On these facts it has been argued that the plaintiff having accepted the contract as being subsisting even after the outbreak of war was estopped from challenging its validity.

In the first place, there is no estoppel against a statute. The question of waiver and acquiescence does not arise because it appears, apart from any point of law that the plaintiff in writing letters to defendant No. 2 made it perfectly clear that the request that he was making was without any prejudice to the rights of the parties due to outbreak of war, vide, Exs. D(10) and D(17). Even under the notification, Ex. E(1), defendant No. 1 was not authorised to effect any new contract of life insurance, The contract of insurance having become void on the very day when the war was declared, it could not be, as already held, revived or ratified; nor could the plaintiff enter into a
fresh contract with defendant No. 1. That being the position, I fail to understand how the claim of the plaintiff can be held to be barred by waiver and acquiescence.

In this connection reference may be made to — ‘Ram Kumar v. P.C. Roy & Co. (India) Ltd.’, AIR 1952 Cal 335 (P), where it has been held:

“Frustration is a developing concept; like negligence, its categories are never closed but are as wide as the categories of human conduct. Its effect is immediate, automatic; it guillotines a contract and the contract, without the option of either party–accrued rights subsisting–is dissolved. If the parties later purport to act under it they are really making a new contract.”

The argument of the learned counsel on behalf of the appellants is, therefore, rejected.

27. The plaintiff has pressed his cross-objection only on the point of interest. The Court below did not award any interest to the plaintiff. I think the Court below was wrong in doing so. As held in — ‘Satgur Prasad v. Har Narain Das’, AIR 1932 PC 89 (Q), interest should have been allowed at the usual rate upon both sides of the account. But since the suit has to be dismissed on the ground of the application of Act LXII of 1950, the question of interest does not arise.

28. In the result the appeal succeeds and is allowed, and the cross-objection fails and is dismissed. The decree of the Court below is set aside and the suit of the plaintiff is dismissed. In the circumstances of the case, however, parties will bear their own costs throughout.

Narayan J.

29. I agree, but do not express any opinion on the question of interest.

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