The main legal point established in the judgment is that recognition of funds and the validity of claims to retain settlement amounts are crucial in determining the rights of parties involved.

JUDGMENT

Panckridge, J. - This is a suit transferred from the Small Cause Court, on the application of the defendants, under the provisions of Section 39, Presidency Small Cause Courts Act, 1882. The circumstances which have occasioned the suit are as follows: On 9th January 1923, one John Marchmont Gregory obtained a decree for Rs. 16,307 with interest and coats against three persons, of whom one was the plaintiff, and another a gentleman named Lala Raghumal. As security for his claim in that suit, Gregory held the title-deeds of a property, belonging to Lala Raghumal, known as 132, Harrison Road, Calcutta. After the decree, Gregory gave a warrant of attorney to the defendants, authorising them to act as his attorneys in the execution proceedings. On 14th May 1924, Lala Raghumal filed a suit, namely Suit No. 1302 of 1924, to set aside the decree obtained by Gregory and to obtain the return of the title deeds.

2. In June 1924 the defendants filed a warrant of attorney on behalf of Gregory. Writing to the plaintiff on 29th August 1928, the defendants state that they entered appearance in the suit on the plaintiff's instructions and on the plaintiff's undertaking to pay the costs. In subsequent correspondence, the plaintiff states that he does not agree with the defendants' version of the circumstances in which they entered appearance on Gregory's behalf. On 6th February 1925 the parties to Suit No 1302 arrived at a compromise, and, in a letter of that date, Gregory informed the defendants of its terms. The letter is as follows:

6th February 1925.

Messrs. Morgan and Co.,

Solicitors, Calcutta.

Dear Sirs,

Suit No. 1302 of 1925 O O.C. Jn, Calcutta H. C. Lala Raghumal Khandelwall

v.

Myself and Ray Bahadur Damodar Das

A. settlement has been made between me and Lala Raghumal in this case on the following terms:

Lala Raghumal will pay my costs and any amount still due on account of interest and obtain a discharge from Ray Bahadur Damodar Das on my behalf in Suit No. 8629 of 1921: Myself v. Lala Raghumal and another.

On Ray Bahadur Damodar Das certifying the payment of costs to me, etc., by Lala Raghumal, as mentioned above, on my behalf, the title-deeds of 132, Harrison Road, which I have sent to you, will be made over to Lala Raghumal, who will withdraw this case, each party bearing his own costs.

Ray Bahadur Damodar Das will pay you the costs incurred by you on my account in this case, and I request you to give effect to this settlement.

Yours faithfully,

(Sd.) John M. Gregory.

3. On 18th February 1925 Gregory was adjudicated an insolvent. When he was subsequently asked by the Official Assignee as to the settlement, Gregory stated that he had no interest whatever in either of the suits between himself and Raghumal, and that they had been settled long ago and certainly prior to his insolvency. At the end of March 1925 the position with regard to the decree obtained by Gregory in January 1923 was as follows: the balance of the taxed costs payable by the defendants in that suit had been deposited in Court, and there was still due a sum of Rupees 1,741 in respect of interest payable on the decretal amount. On 31st August 1928 a settlement was arrived at between the defendants and Messrs Khaitan and Co., who were acting for the legal re-presentatives of Lala Raghumal, who (had died in the meantime. Under the settlement the defendants received a sum of Rs. 1,300 in full satisfaction of Gregory's claim for costs and otherwise under the decree of 1923, and made over the title deeds of No. 132, Harrison Road, free from any claim by way of lien. It was also agreed that the suit filed by Lala Raghumal in 1924 should be struck off, each party bearing his own costs. It is not clear what instructions, if any, the defendants had when they agreed to settle the outstanding claims under Gregory's decree on the terms I have stated. It is however admitted that the settlement was made without reference to the present plaintiff.

4. This suit was instituted in the Small Ca