V.E.A. Annamalai Chettiar And Anr. vs S.V.V.S. Veerappa Chettiar And Ors.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 9 December 1952

Coram: Bhagwati

The case titled V.E.A. Annamalai Chettiar and Anr. versus S.V.V.S. Veerappa Chettiar and Others was decided on 9 December 1952 by the Supreme Court of India, and the judgment was delivered by Justice Bhagwati. This appeal arose from a decree of the High Court of Judicature at Madras that had affirmed a decree of the Subordinate Judge of Devakottai granting the claim of the plaintiffs. Plaintiff 1, who was the son of the sister of the deceased, and plaintiff 2, who was the step-brother of Shanmugham, instituted the suit that now formed the basis of this appeal against the defendants, who were members of the junior branch of a family that from 1888 until 1908 existed as a joint and undivided Hindu family. Ramanatha acted as the karta and managing member of that joint family. The plaintiffs sought the recovery of the defendants’ half-share in monies deposited by Shanmugham’s father on 15-August-1888 with the joint family. The deposited monies comprised the Stridhanam money, the ‘Eadu pon Kalutturu’ money and various jewels belonging to Shanmugham’s mother, and together with interest they totaled Rs 1,310 as of the date of deposit. Veerappa Chettiar, Shanmugham’s father, was related to Ramanatha and the joint family carried on business as Nattukottai Chettiars. The sum of Rs 1,310 was deposited by Veerappa Chettiar in the name of Shanmugham with the joint family, and Ramanatha executed a Kaiyeluthu letter dated 15-August-1888 promising to pay that sum together with interest at a rate of nineteen-thirty-seconds percent per month, calculated with twelve monthly rests. Shanmugham died in 1893 and Veerappa Chettiar died in 1905. As heirs and legal representatives of the deceased Shanmugham, plaintiffs 1 and 2 called upon Annamalai Chettiar, the karta of the senior branch of the joint family, to render an account of the principal amount of the deposit and the interest that had accrued. Annamalai explained that at the time of the partition between the two branches of the joint family the amount had been divided into two equal shares, and he expressed willingness to satisfy only his share, offering to sell his lands in Burma to discharge that liability. Accordingly, on 14-November-1941 he entered into an agreement with the plaintiffs concerning the sum of Rs 17,356-3-9, which was determined to represent the liability of his branch, thereby satisfying the plaintiffs’ demand against him. Thereafter the plaintiffs demanded from the defendants payment of the other half together with interest, and when the defendants failed to satisfy that demand the plaintiffs served a vakil’s notice dated 13-October-1944 formally demanding the amount. The defendants denied any liability, prompting the plaintiffs to file the present suit against them seeking Rs 31,427-1-9, which represented one half of the total sum of Rs 62,854-3-6 shown as due at the foot of the deposit as of 12 November 1944. The defendants denied the claim.

In this case the plaintiffs’ claim was contested by the defendants, who argued that no money had been deposited by Veerappa Chettiar with the joint family as alleged, that the cadjan voucher purporting to evidence the deposit was inadmissible because it lacked the required stamp, and that the plaintiffs’ suit was barred by the law of limitation. The learned trial judge admitted the cadjan voucher as evidence, held the document to be proved, found that the suit was filed within the applicable limitation period, and consequently entered a decree in favour of the plaintiffs. The defendants appealed this decision to the High Court; the High Court dismissed the appeal and confirmed the trial court’s decree. The defendants thereafter filed the present appeal after obtaining the certificate of fitness for appeal required under article 133 of the Constitution. Counsel for the appellants advanced three principal contentions before this Court: first, that there was no proof of any deposit; second, that the cadjan voucher constituted a promissory note and therefore should have been excluded for lack of stamp; and third, that the suit was barred by the limitation law.

The first contention was that the cadjan voucher had not been proved before the trial court and that the witness identified as PW 1, who had testified regarding the handwriting of Ramanatha, was not competent to make such a determination and that his testimony was unreliable. The trial court, however, accepted PW 1’s evidence and additionally relied on the presumption created by section 90 of the Evidence Act, concluding that the cadjan voucher was duly proved and admitting it as exhibit P 8. The High Court agreed with this finding, so that both lower courts had concurred on the genuineness and validity of the document. The defendants further argued that they represented the junior branch of the joint family and were therefore not the representatives of Ramanatha, who had executed the document in favour of Shanmugham. This argument could not succeed because Ramanatha was the karta and managing member of the joint family and possessed the authority to execute a document evidencing a deposit; his act bound all members of the joint family. Neither the senior nor the junior branch could claim exemption from the transaction, and consequently the defendants were liable to Shanmugham and to the plaintiffs for the amount shown at the foot of the deposit together with the other members of the senior branch. This contention of the defendants was therefore deemed unsound.

The second contention asserted that the cadjan voucher was a promissory note. Both the trial court and the High Court rejected this characterization, holding that the voucher was not a promissory note but a receipt that evidenced a deposit. The wording of the voucher read, “Credit to Kandanur Veerappa Chetty, Shanmukham-Debit to VY,” indicating a credit-debit entry rather than a promise to pay, and reinforcing the view that the document functioned as a receipt of deposit rather than as a note of indebtedness.

In the document prepared at the place mentioned above, the parties recorded that the mother’s Stridhanam money, the “Eadu pon Kalutturu” money and various jewels together with interest amounted to one thousand three hundred ten rupees. The document further stipulated that this sum would be paid together with interest calculated at one-half, one-sixteenth and one-thirty-second (nineteen-thirty-second) of one percent per month, with interest to be added once each year. The statement was signed in Tamil by Ramanathan.

Shri R Kesavan Ayyangar argued that the transaction represented a loan rather than a deposit and that the parties stood in a creditor-debtor relationship. He emphasized the clause “we shall pay the said sum” and contended that the document therefore functioned as a promissory note, which under Section 35 of the Stamp Act required a stamp of one anna. Because the document was not stamped accordingly, Ayyangar claimed it should be inadmissible as evidence.

The Court held that determining whether a transaction is a loan or a deposit cannot rely solely on the wording of the document; instead, it must be judged from the parties’ intention and the surrounding circumstances. The defendants’ joint family conducted business as Nattukottai Chettiars, and the money involved consisted of the mother’s Stridhanam, the “Eadu pon Kalutturu” funds and assorted jewels, all totaling the specified amount of one thousand three hundred ten rupees inclusive of interest. This sum was deposited by Veerappa Chettiar—whose sister was married to Ramanatha—on behalf of his minor son Shanmugham, with the joint family that operated the Chettiar business. Under these facts, the Court concluded that the transaction was a deposit, not a loan.

The relationship between the parties, the Court observed, resembled that of a banker and his customer rather than that of a debtor and creditor. The Court referred to the Madras High Court decision in Subbiah Chetty v Visalakshi Achi, AIR 1932 Mad 685, which treated the investment of Stridhanam money in a Nattukottai Chettiar firm as a deposit within the meaning of Article 60 of the Limitation Act. Accordingly, the Court expressed the opinion that the cadjan voucher signed by Ramanatha for Shanmugham functioned as a receipt acknowledging a deposit and did not record a loan agreement.

The Court further explained that the phrase “we shall pay the said sum” did not alter the classification. Even when a deposit is coupled with an agreement that it may be demanded for repayment—whether that agreement is expressed or implied—the existence of such a clause does not transform the deposit into a loan. Consequently, the presence of the words “we shall pay the said sum” could not convert the document into a promissory note.

In this case the Court observed that a document could simultaneously fall within the definition of a promissory note and a deposit under Article 60 of the Limitation Act, and that the proper classification depended on the parties’ intention and the surrounding circumstances. After examining the evidence, the Court held that the lower courts had correctly determined that the cadjan voucher was a receipt evidencing a deposit rather than a promissory note. Consequently, the appellants’ argument that the voucher was a note of promise was found to be without merit. The Court further noted that the voucher had already been admitted into evidence; therefore, under Section 36 of the Stamp Act, the appellants could not now raise any objection that the document had not been properly stamped. The statutory provision barred any fresh objection to the admission of the voucher at this stage, and the Court concluded that the appellants were not entitled to revive that objection before it.

The appellants also contended that the plaintiff’s suit was barred by the law of limitation on two grounds. First, they argued that if the document were a promissory note, the suit should have been instituted within three years of the voucher’s execution, that is, on or before 15 August 1891. The Court rejected this sub-argument because it had already held that the cadjan voucher was a receipt of deposit, not a promissory note, and therefore the three-year limitation for notes did not apply. Second, the appellants claimed that the plaintiffs had made a demand for the deposit more than three years before filing the suit on 13 November 1944. This claim rested on the construction of a receipt dated 14 November 1941 (Exhibit P. 3) and the testimony of the first witness. Exhibit P. 3, prepared by the plaintiffs in favour of Annamalai, recorded that after the plaintiffs pursued the amount owed, both parties agreed that Annamalai’s share would be settled, stating the amount as “Rs. 17,356-3-9.” The witness testified that negotiations lasted about eight to ten days before this settlement was reached. Relying on this, the appellants argued that the demand was made eight to ten days prior to 14 November 1941, which would be more than three years before the suit. However, the Court found that this demand was not made in Annamalai’s capacity as the karta and managing member of the entire joint Hindu family, because the joint family had been severed prior to 1941. Annamalai represented only the senior branch of the family and therefore did not have authority to bind the junior branch. The demand was satisfied by the settlement and no further demand against Annamalai survived. Consequently, the only demand against the defendants representing the junior branch occurred in October 1942, and the plaintiffs’ allegation of a prior demand was denied. In the absence of a proven demand against the junior branch, the limitation period had not yet begun to run against the defendants, and the suit filed against them was deemed timely.

The senior branch of the family was represented by Annamalai, who consented to meet the plaintiffs’ demand by undertaking to pay one half of the joint family’s liability in respect of the deposit. By agreeing to this payment, Annamalai satisfied the demand that the plaintiffs had made upon him, and after the settlement no further demand was directed at Annamalai. Consequently, the plaintiffs’ only remaining demand was the one addressed to the defendants who represented the junior branch of the family. That demand was alleged to have been made in October 1942 and was set out in the plaint filed by the plaintiffs.

The defendants denied the plaintiffs’ allegation that any demand had been made on them for their share of the deposit. In the absence of any proof that the plaintiffs had demanded payment of the junior branch’s moiety, the suit was instituted against the defendants without any prior demand. If the suit was indeed filed without such a demand, the statutory limitation period would not have begun to run against the defendants, and the action would therefore be timely. Both the Trial Court and the High Court made concurrent findings of fact that no demand had been made within the period prescribed by Article 60. Accordingly, the suit could not be said to be barred by the law of limitation. The appellants’ contention on this point consequently fails. As a result, the appeal was dismissed and the appellants were ordered to pay costs.