Case: Hari Chand Madan Gopal And Others Vs. State Of Punjab

1. The factual framework of this appeal is set spatially in the undivided geography of India during the British period and temporarily during 1944 to June 1947. There are three appellants: (1) Messrs Hari Chand Madan Gopal and Co., (2) Hari Chand and (3) Sri Ram. The first appellant is a partnership firm, of which the other two appellants are partners. Some time in 1944 there was concluded an agreement between the first appellant and the Government of the Province of Punjab (hereinafter called the Undivided Punjab). By that agreement, the first appellant agreed to act as a clearing Agent (Foodgrains) for the sale and purchase of foodgrains on behalf of the Undivided Punjab on payment of a commission. The first appellant obtained stock of rice from the Rationing Controllers of the districts which were after the partition of India in August 1947 included in the State of East Punjab and are now included in the State of Punjab. According to the State of Punjab (the plaintiff-respondent) the price of the stock supplied by the Rationing Controllers was Rupees 12,15,178/4/11. The stock was supplied in May and June, 1947. The first appellant sold the said stock to persons in Delhi and the United Provinces (now called Uttar Pradesh). The plaint admits the receipt of three amounts : (1) a sum of Rupees 2,91,817/13/111/2, (2) a sum of Rupees 2,67,963/10/1, collected from various purchasers in Delhi and Uttar Pradesh to whom the first appellant had sold the stock, and (3) a sum of Rupees 20,000/- paid by the first appellant. The aggregate of receipts thus comes to Rupees 5,79,841/81/2. Deducting the aggregate amount from the total sum due, there still remains an outstanding of Rupees 6,03,897/-/9. It is alleged in paragraph 9 of the plaint that on July 29, 1953, the appellants admitted their liability to pay the said amount2. The third appellant did not enter appearance. The case proceeded ex parte against him in the trial Court3. The appellants Nos. 1 and 2 filed their first joint written statement on June 15, 1957. They pleaded that all rights and liabilities under the agreement of 1944 have accrued in favour of the Government of West Punjab which forms part of Pakistan and the respondent has no right to sue. They also pleaded that in the meeting held on July 28 and 29, 1953 between the representatives of the respondent and the first appellant, it was admitted on behalf of the respondent that the first appellant was liable to pay only 40% of the total amount. It is alleged that according to the respondent the 40% of the total liability was Rs. 5,00,085/12/- but according to the first appellant it was only Rupees 47,327/6/9. As the plaintiff has admitted in the plaint to have received Rupees 5,79,841/8/1/2 from and on behalf of them, there was in credit in favour of the first appellant a sum of Rupees 59,695/12/1/2. The written statement adds that according to the first appellant the credit amount would be Rupees 86,510/1/3. It is asserted in the written statement that nothing was due by the appellants. The written statement denies that the appellants Nos. 1 and 2 admitted their liability to pay any amount in the meeting held on July 29, 1953 between the representatives of the Government and the appellants. The bar of limitation was also pleaded4. The appellants Nos. 1 and 2 filed another written statement on June 2, 1959. In this written statement they reiterated their pleas in the first written statement. They also added that the Award of the Chairman of the Arbitration Tribunal, dated March 17, 1948 determined the ratio of financial adjustment between East Punjab and West Punjab in respect of assets and liabilities of the Undivided Punjab as 40:60 and that accordingly the respondent was entitled only to 40% of the amount due by the appellants5. The trial Court decreed the suit of the respondent for a sum of Rupees 5,53,897/-/9. On appeal the High Court of Punjab reduced the decretal amount to Rupees 3,23,897/-/9. Not feeling satisfied with the judgment and decree of the High Court, the appellants Nos. 1 and 2 have preferred this appeal.

Reasoning:
we are of opinion that the two Orders did not over-lap. They operated in different fields. Clause 8 (2), (3) and (4) of the Governor-Generals Order dealt with any contract made "on behalf of the Province of West Bengal", "the Province of Punjab" and the "Province of Assam" before the appointed day. Clauses 2, 3, 4 and 7 of the Governors Order dealt with various contracts "made by or on behalf of the Governor of Punjab in accordance with Section 175 of the Government of India Act, 1935", or rights and obligations of the Governor arising under those contracts. The aforesaid difference in the phraseology of the two Orders is purposive. The phrase "on behalf of the Province of Punjab" in Clause 8 (3) of the Governor-Generals Order shows that the contracts dealt with in that clause were the contracts which formed the subject-matter of Section 177 (1) of the Government of India Act, 1935. Section 177 (1) provided that any contract made before the commencement of Part III of the said Act by or on behalf of the Secretary of State in Council would from that date, if made for purposes which would after the commencement of Part III of the Act be purposes of the Government of a Province, have effect as if it had been made "on behalf of that Province" and reference in any such contract to the Secretary of State in Council would be construed accordingly. According to Section 179 (1) of that Act, such a contract could be enforced in a suit against the Province concerned. So clause 8 (3) of the Governor-Generals Order dealt with contracts made by or on behalf of the Secretary of State in Council for purposes of the Punjab Province before March 1937 when Part III of the Government of India Act, 1935 was brought into force. Clause 8 (3) has nothing to do with the contracts made by or on behalf of the Governor of Punjab under Section 175 (3) of the Government of India Act, 1935, after March 1937. Clause 2 (d) of the Governors Order dealt with the contracts made by or on behalf of the Governor under Section 175 (3). It would thus appear that the fields of operation of Clause 8 (3) of the Governor-Generals Order and Cl. 2 (d) of the Governors Order were distinct and discrete. They did not overlap and there was no conflict between themThis argument is completely negatived by cl. 2 (d) of the Governors Order. Clause 2 (d) provides that any contract made by the Governor of Punjab in accordance with S. 175 of the Government of India Act, 1935, in so far as it related, inter alia, to services to be rendered "in or for the benefit of areas situated within both the new Provinces, would be deemed to have been made, executed or entered into with the West Punjab Province and the East Punjab Province, as two separate contracts". Each such separate contract would have effect only in relation to "such services as are to be rendered in or for the benefit of the West Bengal or East Punjab Province." Obviously cl. 2 (d) itself provided for the bifurcation of a single and indivisible contract into two separate contractsThe arbitration award brought about a financial adjustment between the West Punjab and the East Punjab. It did not deal with the liabilities of third parties like the appellants to one or the other Province. It did not direct that any amount due by a third party could be recovered only to the extent of 40% of his total liability. According to the award, if more than 40% is recovered from the appellants, the excess over 40% would become payable by the Government to the West Punjab. Secondly, it is said that by virtue of a settlement between the Government and the appellants, the former can recover only 40% of the amount found due by the latter. The trial Court and the High Court have found that there was no settlement between the parties and we agree with them. The so-called settlement is spelt out by the appellants from two letters, dated January 17, 1951. One of the letters was written by the Director of Food, Civil Supplies, Punjab to the first appellant and the other was a reply to it by the second appellant on behalf of the first appellant. The subject-matter of the Directors letter is "settlement of accounts". The letter opens with the statement that "the question of settlement of claims of Government and all sellers against your agency has been discussed at length", in the presence of certain Government representatives and Hari Chand, the second appellantAccording to the Directors proposal, the appellants should pay the sellers, on whose behalf certain amounts had been realised from purchasers by the Government. They should also pay the sellers to whom payments were to be made according to the decision of the Delhi Committee. Hari Chand, on the other hand, suggested that excess over 40% recovered by the Government should be paid to the sellers for whom the Government has recovered the amounts and that the balance, if any, should be utilised in paying the remaining sellers. There is plainly substantial difference between the terms proposed by the Director and the alternative term proposed by Hari Chand. It has not been argued that the Government accepted the alternative proposal of Hari Chand. In the result, we are of opinion, that there was no settlement between the parties. The things did not move beyond the stage of proposal and counter-proposal. This inference is supported by three letters sent to the appellants by the Director, Food and Civil Supplies, the Controller of Food Accounts and the Director General, Food and Civil Supplies, dated September 22, 1951, November 22, 1951 and September 18, 1952 respectively. In all these letters it is insisted upon that the appellants should settle the claims of sellers. The appellants can derive no advantage from the word "settlement" in those letters. We are satisfied that the said word has been loosely used thereinThis argument cannot be raised at this stage. The plea of estoppel was not taken by the appellants in their two written statements filed on January 15, 1957 and June 2, 1959. No issue was framed on estoppel. No argument founded on estoppel was advanced by the appellants in the trial court and the High Court. The argument is not raised even in the statement of case filed by the appellants in this Court. As we are not allowing the appellants to raise the plea of estoppel at the stage of hearing,This inference is supported by the subsequent conduct of the Government Officers. After January 17, 1951, the Government has sent letters to the appellants indicating that payment to sellers was an essential term of the proposed settlement of January 17, 1951. A similar letter was never sent to the appellant after July 28-29, 1953. On the other hand, letters of the Director, Food and Civil Supplies, dated April 21, 1954 and May 11, 1954 show that the Government was paying the sellers from the amount with it to the credit of the appellants and asking them to give their consent to such payment. The Director, Food and Civil Supplies, sent five letters to the appellants on April 21, 1954. They are exhibits D-6 to D-11. In each of them he has stated that if no reply was received within a fortnight, it would be presumed that the appellants had agreed to the payment being made to the sellers mentioned in the letters. The appellants replied to those five letters on May 3, 1954. They said that unless a detailed account of their post-partition dealings was made available to them, it would not be possible to reply to the Directors letters. The Director was requested to send a complete copy of the accounts. In his reply letter of May 11, 1954, the Director said that the appellants had already been given details of the accounts in the meeting of July 28 and 29, 1953. He concluded by saying that if no reply was received by him upto May 20, 1954, it would be presumed that they had no objection to the payment being made to the sellers and that "this office would proceed to make payment to the parties concerned." These letters indicate that in spite of the absence of consent by the appellants, the Government was paying sellers from the amount with it to the credit of the appellants. These letters show that instead of insisting upon payment to the sellers by the appellants, the Government was accepting and acting according to the appellants proposal of January 17, 1951 that the sellers should be paid by the Government from the money with it to the credit of the appellantsview of the foregoing discussion, we are of the view, that the Government had decided to recover only 40% and no more. The Governments decision would amount to remitting a part of the debt due by the appellants. Under S. 63 of the Contract Act, a promisee can remit a promise in part. It is not necessary under the Contract Act that such remission should be supported by consideration. If the decision of the Government amounts to remitting a part of the debt, as we think, then the Government cannot seek to recover more than 40%. Admittedly more than 40% of the total liability has already been paid to the Government. Therefore nothing remains due by the appellants.