Supreme Court: In an appeal transferred under Article 374(4) of Constitution, against the decree of the Appellate Bench of the High Court (‘the High Court’) dismissing the appellant’s suit, the four Judges Bench of M.C. Mahajan, CJ* and N.H. Bhagwati, B. Jagannadhadas and T.L. Venkatarama Ayyar, JJ., stated that the death of Sharfuddin Khan, who was the original debtor, could not make the agreement inoperative and unenforceable on any principle of law or equity. The Supreme Court stated that it was not able to agree that the agreement was without consideration. The forbearance by the appellants in not enforcing the legal remedies open to them, would itself be sufficient to support the agreement on the ground of consideration. However, apart from that circumstance, it was clear that as there was consideration against the original debtor, wherein the respondents had agreed to repay the decreed debts of Sharfuddin Khan, was good consideration to support the agreement.
Thus, the Supreme Court set aside the judgment of the High Court and restored the decree in appellant’s favour, subject to the modification that the legal representatives of Respondent 1 would only be liable to the extent of the estate of Respondent 1 that might have come into their hands.
Background
The appeal arose out of a suit for recovery of a sum of Rs 1,67,488, with costs and interest up to the date of realisation. The appellants claimed a decree against the respondents personally, as well as against the estate of the late Nawab Sharfuddin Khan. The first respondent in the suit was Mohamed Ekramuddin Khan and Respondents 2 to 12 were impleaded as representing the estate of Sharfuddin Khan.
The suit was based on an agreement dated 2-10-1923 (‘1923 agreement’), executed by Nawab Ekramuddin Khan, and Nawab Sharfuddin Khan (deceased) (‘two executants’), in the appellant’s favour, wherein the deceased had promised to pay the appellant’s debts out of the income from his jagir. As, Sharfuddin Khan died during the pendency of the enquiry, the accumulated jagir money of his share was directed to be paid to his heirs and for future, Ekramuddin Khan was constituted manager to realise the jagir money and pay to the heirs of Sharfuddin Khan, his share of jagir money.
It was alleged that the appellants were entitled to recover the amount from them as per 1923 agreement and that although Respondents 2 to 12 were the legal representatives of Nawab Sharfuddin Khan, they were liable to pay to the appellants, the amount due personally because they had obtained the property of the deceased Sharfuddin Khan and had enjoyed the usufruct thereof. It was also alleged that Respondent 1 was personally liable as he had executed the document.
The Trial Court decreed the appellants’ suit with costs against the person and property of Respondent 1 to the extent of Rs 59,563 and against the rest of the respondents to the extent of the “Matruka” of late Nawab Sharfuddin Khan in their possession. The Trial Court held that the agreement in suit was executed for consideration and that the condition on which liability had been undertaken by the two executants had been fulfilled.
Subsequently, two appeals were filed before the Appellate Bench of the High Court, one on behalf of the respondents and the other on behalf of the appellants. The Appellate Bench of the High Court dismissed the appellants’ appeal and allowed the respondents’ appeal with costs. The High Court was of the view that the agreement on which the suit was based was without consideration, and that as Nawab Sharfuddin Khan died before the jagir was sanctioned in his name, the promise made by him became impossible of performance.
In the present appeal, it was contended that the agreement in the suit was clearly for consideration, as the debts the liability to pay which was undertaken by the two executants were certainly outstanding against Nawab Etazad Jung. That being so, it was unnecessary to prove that the executants themselves personally received under that agreement any consideration. It was further contended that, the agreement did not become impossible of performance by death of Nawab Sharfuddin Khan.
Analysis, Law, and Decision
The Supreme Court noted that as per the 1923 agreement, Nawab Ekramuddin Khan and Nawab Sharfuddin Khan undertook to pay Rs 59,563 to the appellants out of the income of the jagir, if the jagir was confirmed in their names. If they failed to pay as promised, the appellants would have the power to recover the amount from them, according to law. The jagir was confirmed in the names of both the executants. Thus, the condition contained in the agreement was fulfilled.
The Supreme Court stated that the only effect of the death of Nawab Sharfuddin was that in his own right, he only became entitled to the amount of the income of the jagir that had accumulated during his lifetime. The Government paid this amount to Respondent 1 with a direction to pay it over to his heirs. The amount which thus came to his heirs by way of inheritance was clearly liable for the debt due from him under the agreement, and unless the legal representatives were able to account for that amount, they would certainly be liable personally to that extent to satisfy the claim of the appellant under the said agreement.
However, the Supreme Court stated that the income received by his heirs that accrued due after his death could not be described as part of his estate and his Matruka; as it was well settled that there was no succession in the legal sense to the Atiyat property. The Supreme Court stated that what took place on the death of the last owner of the jagir was a regrant and that being so, whatever becomes due and was received by the heirs after the death of the former grantee was received by them.
The Supreme Court stated that the death of Sharfuddin Khan could not make the agreement inoperative and unenforceable on any principle of law or equity. The order making the regrant operated retrospectively from the date of death of the previous holder of the jagir and the effect of the order was that at the moment of Etazad Jung’s death. Nawab Sharfuddin who was alive, became entitled to the jagir and its income and it was this accumulated amount that after his death was paid to the heirs and is thus a part of his estate. He had promised to pay the debt of the appellants out of this income and in this situation those who got the accumulated income were liable to pay the debt due on the agreement out of that amount unless they account for it otherwise.
Regarding Respondent 1, the Supreme Court stated that the agreement was clearly enforceable against him. The Supreme Court was not able to agree that the agreement was without consideration. The agreement recited the consideration for which it was executed and the debts mentioned in the agreement were outstanding against the estate of Etazad Jung. There was nothing wrong in law in Ekramuddin and Sharfuddin agreeing to discharge his liabilities. A decree had also been obtained against the late Nawab by the appellants, and they could have easily executed that decree against the estate of the late Nawab on any assets of his that might have come into the hands of the two executants before 1923.
The Supreme Court stated that it was clear that the appellants, who were the creditors were quite vigilant and had these two persons did not execute the agreement, the creditors would have sued them as legal representatives of the late Nawab and obtained a decree against his estate. The forbearance by the appellants in not enforcing the legal remedies open to them would itself be sufficient to support the agreement on the ground of consideration. However, apart from that circumstance, it was clear that as there was consideration against the original debtor, that consideration was good consideration to support the agreement. The agreement thus, was clearly for consideration and was enforceable.
The Supreme Court stated that Respondent 1 died during pendency of the appeal. That could not affect the decree passed against them personally. However, the Supreme Court clarified that his legal representatives would only be liable to the extent of his estate in their hands, and they had no objection to a decree being passed against his estate.
Thus, the Supreme Court set aside the judgment of the High Court and restored the decree in appellant’s favour, subject to the modification that the legal representatives of Respondent 1 would only be liable to the extent of the estate of Respondent 1 that might have come into their hands. The jagir income accruing due after the death of Respondent 1 would be treated as the property of the legal representatives themselves.
[Sadasukh Jankidas Sahu (Firm) v. Nawab Akram Jung, (1954) 2 SCC 847, decided on 06-12-1954]
*Judgment authored by: Chief Justice M.C. Mahajan
Advocates who appeared in this case :
For the Appellant: S. Aravamuda Aiyangar and K.S. Krishnaswami Iyengar, Senior Advocates (K.R. Krishnaswamy, Advocate, with them)
For the Respondent: Sardar Bahadur, Advocate
**Note: Consideration
Section 2(d) of Contract Act, 1872 (‘the Act’) defines the term consideration. As per the provision, when at the desire of the promisor, the promisee or any other person:
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has done or abstained from doing, or
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does or abstains from doing, or
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promises to do or abstain from doing something,
such act or abstinence or promise is called consideration for the promise. Generally, the rule is that a contract without consideration is void. However, Section 25 of the Act, is an exception, which states that an agreement made in writing, which is out of love and affection between two parties and registered as per the provisions of law, does not need any consideration.
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