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1972 Supreme(Kar) 224

Karnataka High Court
RAGHAVENDRA RAO VAKIL and CO. - Appellant
Versus
B.R.ELAVIA - Respondent
Decided On : 10-03-72
R.S.A. : 1272 of 1969

Advocates:
S.K.KULAKARNI, V.S.KULKARNI

An agreement made without consideration is void under S. 25 of the Contract Act, and S. 25 (3) requires the original debt to be one the payment of which the creditor could enforce but has been disabled on account of the law of limitation.

Headnote:

Consideration - Recovery of Debt - S. 25 (3) of the Indian Contract Act 1872 - S. 127 of the Contract Act

Fact of the Case:

The suit was filed for recovery of a sum of Rs. 2233-35 on a promissory note executed by the defendant in favor of the plaintiff. The defendant admitted the execution of the promissory note but claimed no consideration and alleged misrepresentation and fraud. Both lower courts dismissed the suit, holding it unenforceable due to lack of consideration.

Finding of the Court:

The court found that there was no consideration for the undertaking given by the defendant to discharge the debts of his deceased father, and therefore, S. 25 (3) of the Contract Act would not make the debt enforceable just because it had become time-barred.

Issues: The main issue was whether the suit promissory note was supported by consideration and enforceable under S. 25 (3) of the Contract Act.

Ratio Decidendi: The court relied on S. 25 (3) of the Contract Act, which requires the original debt to be one the payment of which the creditor could enforce but has been disabled on account of the law of limitation. It also considered S. 127 of the Contract Act, which states that without consideration, an agreement to pay the debt of another is void.

Final Decision: The appeal was dismissed, and the parties were ordered to bear their own costs.

( 1 ) THE Appellant is the plaintiff, the respondent is the defendant. The suit was filed for recovery of Rs. 2233-35 on a promissory note dt. 10-12-1962 executed by the defendant in favour of the plaintiff. The defendant admitted the execution of the promissory note but pleaded that there was no consideration for it. He also pleaded that it was obtained by mis-representation and fraud. Both the lower Courts have dismissed the suit. Both the lower Courts have held that the suit promissory note is not supported by consideration and that it is un-enforceable. It is the correctness of this finding that is in question in this appeal.

( 2 ) THE plaintiff is a Banking firm. Defendant's father used to borrow monies from the plaintiff-firm. He died. According to the case of the plaintiff thereafer the defendant verified the accounts of his father and was satisfied that a sum of Rs. 3900 was due from the defendant's father to the plaintiff-firm, that a remission of Rs. 1400 was made and that the defendant agreed to pay Rs. 2500 and executed the suit promissory note on 10-12-1962. It is also the plaintiff's case that the defendant has paid some amounts towards the said debt. The suit was filed on 10-11-65, for a sum of rs. 1800 towards principal as well as for interest, in all for a sum of rs. 2233-35. The last entry in the plaintiff's account books is dt. 19-9-1954, which shows a sum of Rs. 2117-14-3 as being due from the defendant's father to the plaintiff firm.

( 3 ) THE lower appellate Court has re lied on the decision in Pestonji manekji Modi v. Bai Neherabai 30 Bom. L. R. 1407. In that decision, it has been held that under S. 25 (3) of the Indian Contract Act 1872, the person making the promise is the person against whom the liability might have been enforced and that a promise made by a person who is under no obligation to pay the debts of another, even though they are time-barred, is clearly not within the exception to the general rule that an agreement made without consideration is void. Mr. S. K. Kujkarni, appearing on behalf of the appellant, relied on a number of decisions in support of his contention that another view is possible and that the person undertaking the liability contemplated under S. 25 (3) of the Contract Act need not be a person who would be liable to pay the debt if the same is not time barred.

( 4 ) HE has been fair enough to point out that a Division Bench in valliappa v. Mamda Pandean AIR. 1934 Mad. 549. has held that where the debt is not binding on the defendant and consequently not enforceable against him, there is no question of applicability of S. 25 (3) of the Contract Act, because, the barred debt is not one which would be enforceable against the defendant but for the law of limitation. He relied on the decision in govinda Nair v. Achutan Nair AIR. 1940 Mad. 678. The learned single Judge has held in that case that the words by the person to be charged are wide enough to cover the case of a person who agrees to become liable for the payment of debt due by another and need not be limited to the person who was indebted from the beginning. In that case the suit was instituted for the recovery of the price of paddy alleged to have been due by the defen- dent's brother and verbally agreed to be paid by the defendant. The lower court found the agreement to be true, but refused to give effect to it as it was held to be without consideration. The plaintiff came up in revision. It was observed as follows : it may not be quite correct to say that the agreement between the parties to the suit was without any consideration. The agreement by the plaintiff to release the defendant's brother from liabilityif it was legally enforceable at the time when the agreement was said to have been reached was quite a good consideration for the new agreement between the parties to the suit. Thus, it is seen that the finding was that there was consideration for the undertaking given by the defendant in that case. He next relie








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