Baboo Lall And Os. vs Joy Lall And Ors. on 18 February, 1897

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Calcutta High Court
Baboo Lall And Os. vs Joy Lall And Ors. on 18 February, 1897
Equivalent citations: (1897) ILR 24 Cal 533
Author: Sale
Bench: Sale


Sale, J.

1. This is a suit by the plaintiffs who carry on business under the name of Sanker Lall Augurwallah to recover Rs. 5,000 [534] with interest alleged to have been advanced as a loan to the defendants in their firm of Asaram Joy Lall. In respect of this loan two hundis were drawn and accepted by the defendant Joy Lall in the name of his firm Asaram Joy Lall and delivered to the plaintiffs; the hundis, the dates of which are, respectively, 6th and 10th November 1896, were payable after 61 days from their respective dates. The defendants’ business was closed on the 17th November and the plaintiffs, alleging that the loans had been obtained by fraudulent misrepresentations, instituted this suit before the due date of the hundis, the plaint being tiled on the 27th November 1896.

2. In the plaint the circumstances are set out under which the advance of the money was made to the defendants; and after stating that in respect of these advances the hundis were drawn and accepted by Joy Lall in favour of the plaintiffs, the plaintiffs in the 5th paragraph allege as follows:

That under the circumstances the plaintiffs charge the defendants with having fraudulently obtained the said sums from the plaintiffs, intending at the time they received the said sums not to repay the same, and the plaintiffs are advised and submit that the said sum so advanced is at once realisable.

3. It cannot, I think, be doubted that if the evidence is sufficient to show that the monies in respect of which the hundis were given were obtained by the defendants on representations made by them which were false in fact, but on the faith of which the plaintiffs were induced to advance the monies, it would follow that the plaintiffs would be entitled to rescind the contracts embodied in the two hundis and to claim immediate repayment of the amount of the advances.

4. The question is whether the evidence is sufficient to establish such a case of fraudulent misrepresentation as would entitle the plaintiffs to rescind the arrangement under which the hundis were executed and to sue to recover the amount of the advances before the due dates of the hundis.

5. It has been said that fraud vitiates all agreements, and I see no reason why the same principle should not be applied to debts evidenced by hundis, promissory notes, or other negotiable instru—[535]ments, if the facts show that the loans were contracted on the faith of fraudulent misrepresentations made by the debtor to a creditor.

6. The evidence of Preolall, who is the managing gomasta of the plaintiff’s in Calcutta, shows this: There had been previous dealings between the plaintiffs’ firm and Asaram Joy Lall in respect of which Preolall came to be acquainted with Joy Lall and Kaliprosad. In November 1896, that is Kartick, Sudi 1953, the defendants’ firm of Asaram Joy Lall were indebted to the plaintiff’s, and being so indebted, Preolall was requested by both Joy Lall and Kaliprosad to make further advances to them in their firm of Asaram Joy Lall. This, according to the evidence of Preolall, he was indisposed to do, and said to them that they were already indebted and had not observed promptitude in repayment of previous loans.

7. The defendants, however, pressed Preolall, and represented to him that the business carried on in Calcutta, as also the business carried on in Agra under the name of Asaram Kaliprosad, were both progressing favourably, and assured him that the money would in due course be faithfully paid. Preolall says that relying on this statement as to the satisfactory state of the defendants’ businesses, he was induced to make the further advances which are the subject—matter of this suit.

8. Comment has been made on the circumstance that the representation, so far as the condition of the defendants’ business was concerned, was not put forward by the witness, Preolall, until his attention was called to it by a question framed specially for that purpose, and of course that is a circumstance which would have to be taken into account, and would, as a matter of fact, have considerable weight if there was any reliable evidence to contradict it. It is necessary to see who it is that has been called to contradict Preolall. The only witness called for this purpose is the defendant Kaliprosad, and what is his evidence? He says in the first case that he never accompanied his father when these loans were obtained; that he had nothing to do with the firm of Asaram Joy Lall, that his father never spoke to him about the business at all, and that he knew nothing of its prospects or condition, and that the only partners in the firm were his father and uncle, Hidaram.

9. [536] Neither Joy Lall nor Hidaram have been called, and they are the only persons, according to Kaliprosad’s account, who could have told us of the financial state of the firm at that time. So far as the issue as to partnership is concerned it was agreed between the parties that the evidence given in the case of Nirbama v. Joy Lall should be taken as evidence in this case, and there is no doubt that the alleged partnership is a relevant fact in this case, because if it is the fact that Kaliprosad was a partner with his’father Joy Lall then it affords strong corroboration of Preolall’s evidence, and Kaliprosad’s evidence, on the other hand, must be false in many respects. I have already come to the conclusion that Kaliprosad and Joy Lall were partner in this firm, and I have no hesitation in accepting the evidence of Preolall, in preference to that of Kaliprosad, and in finding that it is true that the defendant Kaliprosad did as a matter of fact on the occasions of the advances made by Preolall accompany his father, and that he did, as Preolall says, join with his father in representing that the firm of Asaram Joy Lall was in a satisfactory condition. Preolall says that but for those representations he would never have made these advances, and I see no reason to doubt that.

10. The only conclusion I can draw from Joy Lall’s absence from the witness box is that he must have known that at the time he and Kaliprosad made those representations to Preolall their business was in an unsatisfactory condition, and that his object in keeping out of the box was to conceal that fact.

11. If then the defendants did, as I hold they did, obtain these advances on untrue representations knowing them to be untrue, and knowing that without them they could not have got the money, I think the plaintiffs were entitled, on stoppage of the defendants’ business, at once to rescind the contracts evidenced by the hundis and to sue for the amounts advanced to the defendants.

12. In the result there must be a decree against both the defendants for the full amount claimed with costs on scale 2.

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