P L D 1961 Supreme Court 321 (PLP)

CORNELIUS C. J.‑This appeal by special leave involves the interpretation of an agreement executed between the appellant Shewram Das Agarwala, who was the owner of certain machinery collectively described as "cinema talkie machines", of the one part, and Arobinda Podder, described in the agreement as the "hire‑purchaser", of the second part. The agreement, executed on the 14th March 1939, was expressed to be an "agreement of hire‑purchase". The principal question for decision in the case is whether this agreement, in the eye of law, was not an agreement for the sale of the apparatus in question, supported by conditions as to the rights of the two parties in relation thereto. The apparatus was installed in his cinema hall by Arobinda Podder and has been in use for the projection of films ever since, so far as we could ascertain in the course of the argument. The agreement provided in detail for monthly payments to commence in June 1939 and to continue until November 1942, the sums payable each month being specified, and the total provided for being Rs. 7,137/14. The last payment was made by Arobinda Podder in June 1941, but the plaintiff did not commence his action out of which the present appeal arises until the 23rd July 1954, the reason given being that "in view of his own friendship with the defendant" he had for so long refrained from exercising his rights. The plaint recounted the details of the transaction as well as of the payments, stating specifically that instalments from June 1941 to November 1942 were in arrears. It went on to declare that "under the temps of the said agreement, owing to defendant's default in payment of more than three instalments", the plaintiff had become entitled to the return of the apparatus. He had however demanded the return of the apparatus for the first time by a registered notice on the 18th December 1953, which notice was superseded for technical reasons by another notice of the 18th January 1954, and finally by a pleader's notice issued on the 1st April 1954, which had been followed by verbal demands. Arobinda Podder had however failed to return the apparatus, and since that time had been wrongfully detaining it, nor had he allowed the plaintiff' access to the cinema hall foe the purpose of seizing the apparatus in exercise of his rights under the agree ment. At this point, the contents of the agreement may be briefly recounted. It provided that when the full amount of Rs. 7,137/14 had been paid by instalments as specified, Arobinda Podder would become absolute owner of the apparatus and Shewram Dal, Agarwala would thereafter have no further right, title or interest therein, and, if requested, would execute a formal transfer deed. All this was set out in the first article, which, however, also clearly specified that "till the payment of the full value of the price settled and mentioned below the hire‑purchaser will have the right to keep and use the said machines at his Chayabani Theatre Hall, Chandpur", subject to the conditions of the contract. The second article provided that if there should be default in payment of three consecutive instalments, the "owner" would have the right to remove the apparatus from the custody of the "hire‑purchaser" into his own custody to use as he pleased, and he would also have "every right to sell . . . . without objection . . . . . what‑ soever from the hire‑purchaser, and the hire‑purchaser will not be entitled to set up any claim whatsoever to the said machines and will allow free access to the owner and every facility to him to take away the said machines into the custody of the owner"., By article (3), the "hire‑purchaser" was required to insure the apparatus in the name and for the interest of the "owner", himself paying the premiums regularly. Article (4) imposed .a duty on the "hire‑purchaser" to maintain the apparatus in good order and safeguard it from loss from any cause, and article (5) required him to allow the owner or his agents free access to his cinema hall for the inspection of the apparatus. Article (6) obliged the "hire‑purchaser" to keep the apparatus in his own custody and to refrain from selling or pawning or otherwise disposing of it, and fur ther that without the consent of the "owner" he would not remove the apparatus from his cinema hall. Article (7) provided for the contingency under which the "owner" having retaken posses sion of the apparatus, should sell it. In such a case, if there was any excess in price fetched over the balance remaining due to the "owner" such excess would appertain to the `hire‑purchaser", but if any money was left due to the "owner", he would have the right to recover it by selling the "present properties both movable and immovable belonging to the hire‑purchaser". By way of precaution against the possibility that the sale might be so contrived as to leave a balance due to the "owner", this article expressly provided that the sale should be held openly and that the hire‑purchaser should the informed about it. Under article (8) power was given to the "owner" to enter the "hire purchaser's" premises for the purpose of. retaking possession of the apparatus under the terms' of the agreement. Article (9) provided that for the fulfilment of the conditions of agreement all the furniture in the Chayabani Theatre Hall, should remain hypothecated. Articles (10) and (11) relate to matters of no concern in this case, but article (12) expressly provides, repeating in relation to different contingencies the terms of article (7) viz. that should the apparatus be destroyed by fire, and when the claim should be met by the Insurance Company, to money would be first applied in satisfaction of unpaid instalments due to the owner, but "if any excess remains thereafter then the hire‑pur chaser shall get that excess amount to which the owner shall not be entitled". The reliefs claimed in the suit were as follows :‑ (a) a decree for return of the apparatus within a time to be fixed by the Court ; (b) in case the articles should not be returned, then a decree awarding compensation to the extent of Rs. 4,000 on the basis of a certain calculation ; (c) in case the defendant should return the apparatus, then a decree enabling the plaintiff to sell it in order to recover the amount of his compensation, viz., Rs. 4,000; and (d) if the sale proceeds be found insufficient, then the decree should declare a charge for the balance upon the properties of the Chayabani Theatre Hall, and order that they should be sold and plaintiff's dues recovered there from. Costs were also claimed. The defendant denied that the apparatus belonged to the plaintiff, declaring that he had himself purchased the apparatus, but being short of funds, had borrowed money with which to pay the price from the plaintiff. He admitted having executed the agreement of the 14th March 1939, but said that this was done under pressure from the plaintiff for payment of his debts. In paragraph 4 of the written statement however an equivocal statement was made as regards the ownership of the apparatus in the following terms, viz:‑ "

the defendant states that the plaintiff was never the owner of the Cinema Talkie machines

In fiany event the defendant has become the owner of the said machines." The words "has become" were repeated in paragraph 5 of the written statement, reliance being placed upon the "true terms, scope and effect" of the instrument of the 14th March 1939. It appears to negative the allegation that the defendant had himself bought the apparatus and paid for it with borrowed money. Similarly, the denial of default in payment of the instalments contained in paragraphs 6 and 8 is not free from equivocation. The plaintiff's allegation that instalments from June 1941 to November 1942 were in arrears was traversed in paragraph 6, but in paragraph 8, specific mention was made that "the defendant made default in payment of the November 1942 instalment .........and in December 1942 the plaintiff for the first time verbally, asked the defendant to return the said cinema talkie machines". In paragraph 7, a contention in law was raised, namely, that on proper construction, the instrument of the 14th March 1939 would be found to be not a hire‑purchase agreement, but an agreement for sale, for which reason the plaintiff was not entitled to return of the apparatus. In paragraph 8 to which reference has been made already, besides declaring that the first occasion when return of the apparatus was demanded was in December 1942, the defendant also expressly denied receipt of the plaintiff's registered notice of the 18th January 1954. In paragraph 9, after denying that the cause of action arose from the date of that notice or that the defen dant's possession of the apparatus became unlawful from that date, it was expressly averred that the cause of action, if any, arose between July 1941 and December 1942, and the effect was stated in paragraph 11 to be that the suit was barred by the law of limita tion. In the course of the trial, it was established that the apparatus had in fact been ordered from a Company in Calcutta by the defendant, who was unable to produce the necessary money upon arrival of the goods, and accordingly full payment was made to the Calcutta Company by the plaintiff, after which the defendant by a written kabala transferred ownership of the apparatus to the plaintiff. This was done three days before the execution of the memorandum of agreement upon which the suit is based. The case was contested mainly upon the issue whether this agreement was an agreement of hire‑purchase or had the effect of creating by itself, a transfer of ownership. The trial Court found that payments had been made only to the extent admitted by the plaintiff, and with respect to the agreement concluded that the defendant had not yet become owner of the apparatus since he had failed to pay the price in full. The amount of the unpaid instalments was calculated by the trial Court to be Rs. 2,917/10. The plaintiff' had claimed compensation for delay in payment to the extent of Rs. 1,082/6 making a total of Rs 4,000, which the trial Court thought to be excessive, and accordingly had reduced the total amount claimable by the plaintiff to the round figure of Rs. 3,

500. On the point of limitation, the trial Court held that this fell to be determined under Article 49 of Schedule 1 of the Limitation Act which provides in relation to suits for specific movable property a period of three years limitation which commences from the date "when the property is wrongfully taken or injured or when the detainer's possession becomes unlawful". The trial Court held that as the suit had been brought within three years from the 18th January 1954, from which date the defendant's possession became unlawful, it was not barred by time. A decree was made in the following terms, viz:‑ "The plaintiff is entitled to recover a sum of Rs. 3,500 with costs from. the defendant. The defendant is however given two months' time to pay up the decretal dues failing which the plaintiff will be at liberty to sell the machines described in the Schedule I of the plaint and if the price fetched be less than the decretal amount the plaintiff will have right to recover the balance that would remain after deducting the sale price there from by selling the personal properties of the defendant. If on the other hand the sale price of the machines exceeds decretal amount then the defendant will be entitled to such excess " An appeal from this decision was taken before the sub ordinate Judge of Comilla who modified it to the extent of reducing the amount found due to the plaintiff from Rs. 3,500 to Rs. 2,917/0/0, on the ground that the‑agreement did not provide for any interest. A second appeal was then preferred by the defendant in the High Court, and was heard by a Division Bench. In tile judgment of the High Court the only point considered was whether the agreement was a hire‑purchase agree ment. The learned Judges after consideration of relevant decisions came to the conclusion that in the present case, the "main distinguishing feature of a hire‑purchase agreement", namely, that the hirer has a right to terminate the contract for hire at his pleasure and is not bound to pay the value of the goods, was absent, and therefore the agreement was an agreement for sale. On this point " it should be mentioned that the finding of the first appellate Court was by no means clear, as appears from the following passage:‑ , "So, I find and hold that the plaintiff is the onwer of the movable properties mentioned in schedule of the plaint. Though the present contract between the parties is not a true hire‑purchase as an essential feature of contract for hire purchase, namely, the option given to the prospective purchaser to terminate the contract is wanting, I think it just like an agreement on hire‑purchase system as the plaintiff as owner of the goods has given possession of the same in favour of the defendant, and the agreement entered into by the parties is that the owner could terminate the hiring and retake posses sion in default of payment at any moment after default is made." But having held that the agreement was one far sale, the High Court proceeded to say that for this reason, Article 49 of the Limitation Act would not govern the case, which would instead fall under Article 116, providing for suits for compensation for the breach of a contract‑ in writing, registered, to which a six‑year period of limitation was attached, to commence on the same date as for a suit on a similar contract not registered. Leave was granted to Shewram Das Agarwala to appeal against this decision, as‑ it raised a question of general and substantial importance regarding the appropriate Article in the Limitation Act applicable to a case like the present. Mr. Mesbahuddin for the appellant took us through the provisions of the agreement in an attempt to support the conclu sions reached by the Courts below the High Court. In our opinion, the conclusion that the agreement was not to be construed as a hire purchase agreement can be supported on other grounds besides that mentioned by the learned Judges of the High Court, viz., that it contains no provision enabling the "hire‑purchaser" to return the apparatus. Firstly, as has been pointed out‑ above, there is a specific provision in the first paragraph of the agreement that the "hire‑purchaser" would have "the right to keep and use" the apparatus "till the payment of the full value of the price settled" subject only to the other terms and conditions, of which the relevant condition is that contained in article (2) relating to the right of distraint to be vested in the owner upon default of payment of three consecutive instalments. The conferment of a "right" in these terms is highly unusual. Its duration was to be determined by the performance of an obligation by the "hire purchaser" himself. Moreover, upon fulfilment of this obligation, the right was not to 'terminate, but was to continue. The purpose behind the use of these words is thus not wholly clear, but it is certainly opposed to any suggestion that the "hire‑purchaser" was entitled to return the property, in the manner of a true hire‑purchaser at law. Further indications to the contrary are found in the two provisions regarding the right of the "hire purchaser" to receive any balance over the amount due to the owner which might be left upon a forced sale by the owner under the terms of the agreement. If property in the goods continued to vest in the owner, there could be no question of the "hire‑purchaser" having a right to any part of the sale proceeds. Moreover, the apparatus in question being movable property, the ordinary presumption would be that property in the apparatus passed to the alleged "hire‑purchaser" when the contract was made, it being immaterial whether the time of payment of the price was postponed. beyond the date of the contract. Reference in this connection may be made to section 20 of the Sale of Goods Act, 1930, which is relatable to `an unconditional contract for the sale of specific goods" but embodies a principle which in our opinion may be extended to cover a case where there are terms in the contract which purport to retain ownership in the vendor until the fulfilment of a certain condition relating to the price, alongside with other conditions from which an equally clear conclusion may be drawn that ownership in the goods became vested in the vendee upon the making of the contact. We consider that when the agreement of the 14th March 1939 is read as a whole, it can be understood only as an agreement by which the apparatus was sold to Arobinda Podder, subject to certain conditions regarding the payment of the price, which t conditions themselves are supported by further conditions relating to custody of the apparatus itself at the instance of the unpaid 'vendor. In this view, we are unable to support the conclusion of the High Court that the case fell, in point of limitation, under Article

116. The contract undoubtedly gave a right to the vendor to seize the property and bring it to sale upon default in payment of three consecutive instalments, but this should be read subject to the condition in article (1) that until the fell price was paid, the other party would be entitled to retain possession of the apparatus sold, in other words that by mere default in payment of the instalments, the possession of Arobinda Podder did not become unlawful. That possession only developed in 7954 when a notice of demand was sent and was not complied with. The learned Judges in the High Court appear to have been of the view that breach of the contract took place in June 1941 when the default in payment of instalments took place. In fact the default in terms of article (2) of the agreement did not become, valid until there was a default of three consecutive instalments, but that did not, as we have seen, immediately entitle the vendor to treat the possession of Arobinda Podder as if it were unlawful Arobinda Podder was expressly empowered to keep possession of the apparatus Until the full price had been paid by himself, subject to the right of the vendor to retake possession and sell the apparatus to recover his dues. It was only when the vendor purported to exercise that right, and Arobinda Podder resisted that exercise; that there was a breach of the contract on the part of the latter, and from that, date, his possession would be deemed to be unlawful. It is clear that the suit was brought within the time limited by Article 49 viz., three years commencing from that date. For these reasons, we allow this appeal, and setting aside the decree of the High Court, we restore the decree of the first appellate Court, which we consider was the proper decree to make in the circumstances of the case, ire view of the fact that the memorandum of agreement made no provision for interest on unpaid instalments. We allow the appellant his costs throughout in proportion to the amount of the decree of the first appellate Court. A. H. Appeal allowed.