SUPREME COURT OF INDIA
K. SUBBA RAO AND V. RAMASWAMI, JJ.
Vithal Dass (in both the appeals), Appellant
Versus
Rup Chand and others (in both the appeals), Respondents.
Civil Appeals Nos. 926 and 927 of 1965, dated, 7-4-1966. 189
Advocates appeared
Mr. S. V. Gupte, Solicitor-General of India, (M/s. Rameshwar Nath, S. N. Andley, P. L. Vohra and Mahinder Narain, Advocates of M/s. Rajinder Narain and Co., with him), for Appellant Mr. S. P. Sinha, Senior Advocate, (M/s. Champat Rai, E. C. Agrawala and P. C. Agrawala, Advocates, with him), for Respondents.
It is well settled that interest for the period prior to the date of the institution of the suit if there is an agreement for the payment of interest at fixed rate or if interest is payable by the usage of trade having the force of law, or under the provisions of any substantive law as for instance section 80 of Negotiable Instruments Act or section 23 of the Trusts Act. [Para 4
(2) Interest Act, 1839 - S. 1 - interest under - when may be allowed interest in equity jurisdiction - when may be allowed.
Under the Interest Act, 1839, the Court may allow interest to the plaintiff if the amount claimed is a sum certain which is payable at a certain time by virtue of a written instrument. Where the position is different, interest cannot be allowed under the Interest Act.
It was contended that under the Interest Act interest may be allowed as the Act contains the provision that "interest shall be payable in all cases in which it is now payable by law."
Held: The provision only applies to cases in which the Court of Equity exercises jurisdiction to allow interest. It is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction, as for example, the non-performance of a contract of which equity can give specific performance. AIR 1938 PC 67, AIR 1955 SC 468, AIR 1963 SC 1685 and AIR 1966 SC 275 relied on. [Para 4
(3) Trusts Act, 1882 - Ss. 23, 90 & 95 - co-owner in possession - when becomes a trustee of other owners and is liable to pay interest prior to the suit on profits realised.
(4) Co-owner - in possession of property - when liable to pay interest prior to suit on the profits realised.
A co-owner in possession of all the joint properties does not become a trustee by the mere fact of his collection of the full amount of rent from the tenants. If the co-owner is to be clothed with the status of a trustee it must be shown that he has gained some advantage in derogation of the other co-owners interested in the property and that he gained such an advantage by availing himself of his position as co-owner.
Even where the co-owner is a constructive trustee in view of the provisions of section 90 of the Trusts Act, he is liable to pay interest only if he commits a breach of trust u/s 23 of the Trusts Act. Even in section 23 there is the restriction that a trustee committing a breach of trust is not liable to pay interest except in cases mentioned in that section.
Unreasonable delay in paying the amount due to co-owners does not attract section 23 (b) of the Trusts Act, because that provision contemplates cases where there is an obligation on the part of the trustee to pay the trust money to the beneficiary at fixed intervals or on demand. (1897) 2 Ch. A. 225 and (1900) 1 Ch. 167 relied on. 63 ER 744 and 46 LT 761 distinguished. [Para 6
Judgement
RAMASWAMI, J. : These appeals are brought by certificate on behalf of the defendant from the judgment of the High Court of Madhya Pradesh, Indore Bench, dated November 20, 1962 in First Appeals Nos. 19 and 23 of 1957.
2. The plaintiffs, Rup Chand and Hukam Chand instituted Civil Suit No. 8 of S. 1999 in the Court of District Judge, Ujjain against the defendant Vithal Das and three others, for partition of houses and for rendition of accounts. Two of the defendants, Bheronlal and Indermal died in the course of the suit and the suit was continued against Vithal Das. The plaintiffs alleged that the immovable property constituting Blocks Nos. 206 and 207 in Freeganj, Ujjain was purchased with the capital of the partnership firm in which the plaintiffs and the defendant were, at one time, partners and by two documents, dated July 2, 1937 and July 16, 1937, the properties continued to remain in the ownership of the partnership firm, though the firm had been dissolved in the year 1937. The plaintiffs claimed that the properties were managed by the defendant on behalf of the plaintiffs and the defendant realised rents from the tenants on their behalf and plaintiffs were, therefore, entitled to receive half the amount realised as rent and the defendant was liable to render accounts thereof. The plaintiffs also claimed partition of the joint properties, or in the alternative, the sale of the property by auction and after deducting the cost of auction half of the sale proceeds. The defendant contested the suit on the ground that at the time of the execution of the document, dated July 2, 1937 there were only three blocks in partnership which were at that time open land. The defendant claimed that Block No. 206 and the building constructed thereon was not a partnership property. It was further alleged that the defendant had invested Rs. 10,000 in the three blocks of land which were held in partnership for constructing a building. The trial Court accepted the plaintiffs case and granted a decree for partition of the blocks and for an account of income realised in respect of the property situated on block No. 207. As regards block No. 206 and the property standing thereon the trial Court directed the defendant either to remove the construction or accept his share of money spent by the defendant over it and created a charge over the property in respect of the amount so held payable. Both the parties preferred appeals in the High Court of Madhya Pradesh against the judgment of the trial Court which partially allowed the appeals and remanded the case to the trial Court. The High Court held that the plaintiffs were entitled to claim half share in both the properties built on blocks Nos. 206 and 207 and the defendant was liable to account for the income of the properties on block No. 207 from the date of dissolution, i.e., from July 2, 1937 and of block No. 206 from the year 1939. The High Court also held that the plaintiffs were liable to pay half the costs spent by the defendant in constructing the building on block No. 206. After the order of remand the trial Court appointed a Commissioner for examining the accounts of rent realised by the defendant. After considering the report of the Commissioner, the trial Court determined the total amount of rent of both the blocks Nos. 206 and 207 at Rs. 41,829-3-7 and the half share of the plaintiffs was determined at Rs. 20,914-4-9. The trial Court also awarded interest to the plaintiffs on the half share of the income to the extent of Rs. 6,676-7-3 calculated upto April 11, 1957. The total amount thus due to the plaintiffs was determined at Rupees 27,591-1-0. Out of this amount the trial Court allowed a sum of Rs. 9,755-7-3 on account of the half costs of construction and interest thereon and expenses incurred for house-tax, water-tax, legal expenses and repairs. The net amount thus awarded to the plaintiffs was Rs. 17,670-9-9. As regards the partition of blocks Nos 206 and 207, the trial Cou
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