judgement:
Appeals Nos. 116 to 125 of 1961.
Appeals by.
special leave from the judgment and decrees dated March 4, 1955, of the former Andhra Pradesh High Court, Guntur, in section T. Appeals Nos.
83,85 88,90,91 and 119 121 of 1954.
M. C. 'Setalvad, Attorney General for India, R. Ganapathy Iyer, V. Sureshan and G. Gopalakrishnan, for the appellants (in C.As.
116 119 of 61) aid the respondents (in C.As.
120 125 of 1961).
282 A.V. Viswanatha Sastri, V. Yedantachari and T.V.R. Tatachari, for respondents 1 to 5 (in C.A. No. 116/61) and respondent No. 1 (in C.As.
Nos. 117 119/61) and the appellants in C.A. Nos.120125/61.
K.Bhimasankaram and P. D. Menon, for respondent No. 2 (in C.A.Nos.
117 119/61).
November 19.
The judgment of the Court was delivered by RAGHUBAR DAYAL, J.
These appeals arise out of the order of the Tribunal appointed under section 8 of the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948 (Madras Act XXVI of 1948), hereinafter called the Act, apportioning the advance compensation given and interim payments made in connection with the vesting of the Venkatagiri Estate in the Government of Madras as a result of a notification issued under sub section
(4) of section 1 of, the Act from the notified date, i.e., September 7, 1949.
The Act received the assent of the Governor General on April 2, 1949 and some of its sections, including sections 4 and 8, mentioned in sub section
(4) of section 1, came into force at once.
The other sections came into force with respect to the Venkatagiri Estate from the notified date.
With effect from the notified date, i.e., September 7, 1949, the entire Venkatagiri Estate stood transferred to the Government and vested in it by reason of section 3(b) of the Act.
283 Section 39 provides for the Director of Settlements to determine the basic annual sum in respect of the estate and also the total compensation payable in respect of the estate, in accordance with the provisions of the Act.
Section 54 A provides that the Government shall estimate roughly the amount of compensation payable in respect of the estate and deposit one half of that amount within six months from the notified date in the office of the Tribunal as advance payment on account of compensation.
(2) of section 50 provides for the deposit of interim payments by the Government during the period between the notified date and the final determination and deposit of the compensation payable in respect of the estate.
In respect of the Venkatagiri Estate, the Government deposited Rs. 12,11,419/ as and by way of advance payment of compensation, after deducting Rs. 7,28,500/ payable to the Government by the Estate for peishkush out of the sum of Rs. 19,39,919 8 0, half of the estimated amount of compensation payable.
The Government also deposited as interim payment Rs. 1,55,194/ for each of the Fasli years 1359 to 1362 F.
It is the distribution of these amounts in deposit as advance payment of compensation and interim payments, which is the subject matter for determination in these appeals.
To understand the various claims for payment out of these deposits, the following genealogical table will be helpful: 284 KUMARA YACHENDUR VARU | | | | Rajagopala Krishna Raja Venkata Krishna Yachendra(Deacsed) Yachendra (Deacsed) | | | | Rajagopala Krishna Raja V. Kumara Krishna Yachendra Yachendra (dead).
(Petitioner in O.P. No. 392 of 1950) | Petitioner | | | | | | | | Raja V. Venkata Raja V. Rama Raja Venkata | Krishna Krishna Rajagopala | Yachendra R.10 Yachendra Krishna Yachendra | O.P.
R.11 O.P. R.12 O.P. | No. 382/50 384/50 | | | | | | vegna Kumara Raja Venkata Rajagopala Krishna Krishna R 3.
R.4 O.P. 256/50 | | | | | Rajagopala Krishna Gopal Krishna Yachendra R 6.
| | | | Son Unnamed R 8.
Son Unnamed R 9. 285 | | Raja Maddukrishna Raja Venugopala Yachendra Krishna Yachendra (Died Issueless) | | | | Raja V. Rajeswara Rao Raja Maheswara Rao (R 14) (R 15) | | Venkata | | Gopala Minor Madanagopal Died Krishna (R 16 O.P. (R 15) No. 385 of 50) 3/50.
| | vaneethu R O.P. 3/50 286 The Venkatagiri Estate is an ancient estate in North Arcot and the necessary history of the estate for the purposes of this case is contained in the document Exhibit A 1 with which we now deal.
Kumara Yachendra Bahadur Varu, who tops the genealogical table noted above and his four sons mentioned therein, are parties to this document.
Kumara Yachendra Bahadur Varu represents also his minor son Venugopala Krishna Yachendra.
The document recites that the estate had been made over in 1878 to Rajagopala Krishna Yachendra, the eldest of the four brothers, by their father Kumara Yachendra Bahadur Varu, the then Rajah, as he wanted to devote himself to offering prayers to God for obtaining salvation.
He was said to be the sole heir to the estate, as Venkatagiri Zamindari was an impartible estate and succession to it was governed by the rule of lineal primogeniture.
In 1889, two of the brothers, Venkata Krishna Yachendra ' and Muddukrishna Yachendra, expressed a desire for the partition of the estate.
The then Rajah, i.e., Rajagopala Krishna Yachendra, the eldest brother, asserted that it was not liable for partition.
The four brothers then consulted their father and he told them : "that the Venkatagiri Zamindari was originally acquired by the valour of our ancestors in warfare, that the Zamindari is ancient, that it is an Impartible Estate which has to pass in the order of primogeniture, that at the time when the Sannad Istimdar Milk was given to the Raja of Venkatagiri who was ruling at the time of the permanent settlement th e Peshkush was settled for this Venkatagiri Samasthanam on the amount which was being paid as tribute and on the entire expenses relating to military assistance that was to be rendered lo the Nawab 's government which was in power previously that for this reason this Venkatagiri Samasthanam is not at all partible that the 287 immovable properties relating thereto and also other immovable properties acquired with the income of the said Samasthanam are not liable for partition that this is his opinion in regard to immovable properties. .
The father suggested partition of certain other property.
The terms of the final settlement between the father and his four sons are then noted.
They may be briefly mentioned.
(1) As the Venkatagiri Estate is an Impartible Estate and it passes to the eldest son by the rule of lineal primogeniture, the said Estate, the immovable properties pertaining to it and other immovable properties acquired with the income derived from the said Estate will be enjoyed by the Rajah, the eldest brother, and after his death his sons and grandsons and so on in succession shall enjoy, always the eldest male being the heir.
(2) If in the line of the said Rajah, his natural sons or adopted so s do not have male issue and that line stops short, then the properties shall be enjoyed by him who is the nearest heir and who is also the eldest to whom the impartible properties of the family pass according to law and custom and the same shall be enjoyed by his successors.
(3) The said Estate, all the properties pertaining to it, the title, power, privileges, all these shall be enjoyed fully and with all powers according to law and custom by the respective individuals who would be ruling at the respective periods subject to the condition of payment of allowances to other members of the family from the income derived from the Estate and from the properties in a manner befitting their respective status.
(4) The allowances were settled as follows Each of the brothers was to get Rs. 1,000/ per mouth 288 for the rest of his life.
After the death of each of these brothers, his male heir would continue to get this allowance of Rs. 1,000/ per month.
This amount of Rs. 1,000/ would be distributable between such male heirs and their male issues, according to Hindu Law.
If the male member died without leaving a natural son or an adopted son, the allowance was to pass the nearest agnates of the same branch according to Hindu Law and in case he left a wife or wives who had to be paid maintenance, their maintenance would be a liability on such agnate.
It was further provided that if any of the three lines of the family ceased for want of male issue, i.e., whether natural or adopted son, then subject to the condition that the wife or wives of the surviving male member of that branch who dies last shall be paid for their life time as maintenance a sum of Rs. 500/ being one half of the entire allowance of Rs. 1000/ that was being paid to the said male member, the allowance which was being paid to that branch would entirely cease.
This document has been acted upon.
In 1904, the Madras Impartible Estates Act, 1904 (Act 11 of 1904) came into force.
The Venkatagiri Estate was included in the Schedule of that Act and had to be deemed to be an impartible estate in view of section 3 of that Act.
Section 9 of that Act mentioned the persons entitled to maintenance out of the impartible estate, where for the purpose of ascertaining the succession to the impartible estate the estate had to be regarded as the property of a joint Hindu family.
In view of section 66 of the Act the Madras Impartible Estates Act of 1904 is deemed to have been repealed in its application to the Venkatagiri Estate with effect from the notified date.
The expression 'impartible estate ' in the Act means an estate governed immediately before the notified date by the Madras Impartible Estates Act, 1904 and therefore applies to this estate.
289 section 41 of the Act provides for the compensation to be deposited in the office of the Tribunal.
Section 42 provides for the; filing of claims to the compensation before the Tribunal by persons claiming any amount by way of a share or by way of maintenance or otherwise and by creditors.
By section 43, the tribunal is to inquire into the validity of the claims and determine the persons who, in its opinion, are entitled to the compensation deposited and the amount to which each of them is entitled.
Section 44 provides that as a preliminary to the final determination, the Tribunal shall apportion the compensation among such persons whose rights or interests in the estates stood transferred to the Government, including persons who are entitled to be maintained from the estate and its Income, as far as possible, in accordance with the value of their respective interests in the estate.
Its sub section
(2) provides how the value of those interests shall be ascertained, and says that in case of an impartible estate referred to in section 45, the ascertainment shall be in accordance with the provisions contained in that section and in such rules, not inconsistent with that section, as may be made by the Government in that behalf.
Section 45 is the main section for our purpose and may be quoted : "45.
(1) In the case of an impartible estate which had to be regarded as the property of a joint Hindu family for the purpose of as certaining the succession thereto immediately before the notified date, the following pro visions shall apply.
(2) The Tribunal shall determine the aggregate compensation payable to all the following persons, considered as a single group : (a) the principal landholder and his legitimate sons, grandsons, and great grandsons in 290 the male.
line living or in the womb on the notified date including sons, grandsons and great grandsons adopted before such date (who are hereinafter called 'sharers ') ; and (b) other persons who, immediately before the notified date,were entitled to maintenance out of the estate and its income either under section 9 or 12 of the Madras Impartible Estates Act, 1904, or under any decree or order of a Court, award, or other instrument in writing or contract or family arrangement, which is binding on the principal landholder (who are hereinafter called 'maintenance holders '): Provided that no such maintenance holder shall be entitled to any portion of the aggregate compensation aforesaid, if before the notified date, his claim for maintenance, or the claim of his branch of the family for maintenance, has been settled or discharged in full.
(3) The Tribunal shall next determine which creditors, if any, are lawfully entitled to have their debts paid from and out of the assests of the impartible estate and the amount of which each of them is so entitled; and only the remainder of the aggregate compensation shall be divisible among the sharers and maintenance holders as hereinafter provided.
(4) The portion of the aggregate com pensation aforesaid payable to the maintenanceholders shall be determined by the Tribunal and notwithstanding any arrangement already made in respect of maintenance whether by a decree or order of a Court, award or other instrument in writing or contract or family arrangement, such portion shall not exceed 291 one fifth of the remainder referred to in sub section (3), except in the case referred to in the second proviso to section 47, sub section (2).
(5) (a) The Tribunal shall, in determining the amount of the compensation payable to the maintenance holders and apportioning the same among them, have regard, as far as possible, to the following considerations, namely: (i) the compensation payable in respect of the estate ; (ii) the number of persons to be maintained out of the estate (iii) the nearness of relationship of the person claiming to be maintained; (iv) the other sources of income of the clai mant; and (v) the circumstances of the family of the claimant.
(b) For the purpose of securing (i) that the amount of compensation payable to the maintenance holders does not exceed the limit specified in sub section (4) and (ii) that the same is apportioned among them on an equitable basis, the Tribunal shall have power, wherever necessary, to re open any arrangement already made in respect of maintenance, whether by a decree or order of a Court, award, or otherinstrument in writing or contract or family arrangement.
(6) The balance of the aggregate compen sation shall be divided among the sharers, as if 292 they owned such balance as a joint Hindu family and a partition thereof had been effected among them on the notified date," Rajah Velugoti Kumara Krishna Yachendra, appellant in Appeal No. 117 of 1961, hereinafter called Krishna Bahadur, filed Original Petition No. 2300 of 1953 before the 'Tribunal.
Three of his sons Ramakrishna Yachendra, Rajagopala Krishna Yachendra and Movva Gopala Krishna Yachendra, appellants in Civil Appeals Nos. 118, 119 and 116 of 1961, respectively, filed separate petitions.
By their applications they raised the contentions that they were entitled to an amount in the compensation as sharers, as the impartible estate lost its character as such from the notified date and that the compensation payable with respect to their estate became partible and that in any case, they were entitled to the amount as creditors.
It was further contended that the provisions of section 45 of the Act were ultra vires the State Legislature and were discriminatory and so void and that the maintenance amount be determined with respect to the amount of compensation and not with respect to the amount of compensation minus the amount of peishkush which was payable by the estate to the Government.
None of these contentions was accepted by the Tribunal or by the Special Tribunal constituted in accordance with section 21 of the Act for bearing appeals against the orders of the Tribunal.
The Tribunal fixed Rs. 75,000/ as the amount payable to Krishna Bahadur 's branch out of the sum of Rs. 12,11,419/ deposited as advance payment of compensation and further fixed the ratio of the value of the interests of Krishna Bahadur and the two brothers of the present Rajah, in the 1/5th of the advance compensation, at 75:75:92.
The amounts 293 deposited as interim Payment were to be distributed in the same, ratio.
The present Rajah, Sarvagna Kumara Krishna, had urged before the 'tribunal that the amount of maintenance to be paid to Krishna Bahadur 's branch should be calculated on a different basis which, in brief, may be said to be that the amount to which he be; held entitled out of the compensation should bear the same proportion to the total compensation as the monthly allowance payable to him under the document Exhibit A 1 bears to the income of the Estate in 1889 when that allowance of Rs. 1,000/per month was fixed.
This contention also did not find favour with the Tribunal or the Special Tribunal on appeal.
The Rajah has therefore filed Civil Appeals Nos.
120 to 123 of 1961.
He has also filed two appeals Nos. 124 and 125 with respect to the interim payments made so Krishna Bahadur 's branch for the Fasli years 1359 and 1360 which were apportioned in accordance with the same principle which the Tribunal had adopted for the distribution of the maintenance allowance out of the advance compensation.
The points urged for the appellants in appeals Nos. 116 to 119 are (1) Venkatagiri Estate was, impartible by custom that impartibility was recognized when disputes arose in 1889, that impartibility continued under the Madras Impartible Estates Act of 1904 but ceased when the Estate vested in the Government on September 7, 1949; (2) In these circumstances, the compensation Will not bear the character of impartibility as the property,, became the property of the joint family, the coparcenary having continued all through 294 (3)Section 45 and other provisions of the Act are ultra vires the State Legislature for want of legislative competence inasmuch as the said Legislature had no power to enact a law disturbing the rights of a joint family and also because the provisions of section 45 are discriminatory and offend article 14 of the Constitution as they provide for the maintenanceholders to get 1/5th out of the compensation while the proprietor and his sons are to get 4/5ths out of it after satisfying the claims of the creditors; (4) The appellants are not maintenanceholders, but creditors; (5) The amount of peishkush payable by the Venkatagiri Estate to the Government was not to be deducted from the compensation when calculating maintenance amount payable to the maintenance.
holders.
Now, the amount of peishkush payable to the Government had to be deducted out of the amount to be deposited under sub section (1) of section 54 A in view of the provisions of its sub section
(2) which provides that from the amount to be deposited under sub section
(1) the Government shall be entitled to deduct one half of all moneys, if any, due to them in respect of peishkush.
Sub section
(4) of section 54 A authorizes the Tribunal, after such enquiry as it thinks fit, to apportion the amount deposited in pursuance of that section, among the persons mentioned in that sub section as far as possible in accordance with the value of their respective interests and further provides that the provisions of sections 42 to 46 (both inclusive), shall apply mutatis mutandis in respect of the amount so deposited.
It is true that the peshkash was a payment which the holder of the Estate had to make to the Government out of the income of the estate and that any arrears of peshkash remain a liability on the 295 estate.
It was in view of this fact that s.55(1) of the Act which takes away the right of any land holder to collect any rent which had accrued to him from any ryot before the notified date and was outstanding on that, date empowers the manager appointed under section 6 to collect such rent and to pay the balance, if any, after making certain deductions specified in the section, including any arrears of peshkash to the landholder.
The real compensation which is to be paid by the Government on the vesting of the estate must be equal to the amount of the value of the estate as such, minus the liabilities of the estate.
What is to be distributed between the various persons entitled to the compensation must be the net amount and not the theoretical compensation for the estate as such.
In this view of the matter too, the share of the maintenance holders will have to be calculated in the amount of compensation deposited, i. e., the amount of compensation minus the permissible deductions including peshkash.
It is therefore clear that the Tribunal could not have ignored the deduction of peshkash from one half of the estimated amount of compensation payable in respect of the estate and had to apportion the amount deposited after taking into consideration such deduction.
The contention for the appellants that the amount to be considered for calculating the share of the maintenance holders should have been taken at Rs. 19,00,000/ odd and not at Rs. 12,00,000/ odd, the actual amount of the deposit, is not sound.
The next question is whether the allowance is a debt owed by the Rajah landholder to his brothers to whom the allowance was to be paid.
It might have been so only if it was postulated that the Rajah had purchased the share of the other members of the family and was paying the sale price in the form of an allowance.
This is, not what the document Exhibit A 1 recites.
There is nothing in it to indicate 296 that the brothers of the Rajah to whom the estate had been made over by their father claimed a share in the estate after they had been told by their father that the estate was impartible.
The sale price is normally fixed while the amount of allowance to be payable is an indefinite quantity depending upon length of time through which each of the brother 's branches continues to have a male member.
The word 'allowance ' appears to have been used either as a dignified expression preferable in form to that of 'maintenance ' or due to the idea that the word ,maintenance ' is to be used appropriately only for the amounts to be paid to female members of the family in certain circumstances.
The allowance referred to in the deed, Exhibit A. 1, as payable to Kishen Chander, father of Krishna Bahadur, is not akin to a debt owed by the Rajah to Kishen Chander.
It is not made payable on account of certain loans taken by the Rajah, but is payable for maintenance, as the estate being impartible the other members of the family had a reasonable claim to maintenance.
The only ground urged in support of the contention that the allowance is not an allowance for maintenance is that the word 'maintenance ' is used in the document A 1 in connection with the amount payable to the widows.
A different terminology in referring to the amounts to be paid to Kishen Chander and his brothers does not change the character of the payment.
The widows were to get a share out of the same allowance when there was no male member in the particular family.
That amount cannot be a debt so long as it was payable to a male member and a maintenance when payable to a female member.
Kishen Chander himself 'referred to this amount as maintenance in earlier proceedings.
We therefore hold that the view expressed by the Courts below with respect to the nature of this allowance is correct.
297 The validity of section 45 of the Act on the ground of the ' competence of the Legislature of the State was not questioned in the High Court.
The contention, however, is that the Act was made by the State Legislature by virtue of Entry 21 in List II of the Seventh Schedule to the Government of India Act, 1935, which reads: "Land, that is to say, rights in or over land, land tenures, including the relation of land lord and tenant, and the; collection of rents transfer, alienation and devolution of agricultural land ; land improvement and agricultural loans ; colonization; Courts of Wards; Encumbered and attached estates ; treasure trove.
" The question of succession to the impartible estate does not come under this Entry and comes under Entry No. 7 of List III of the Seventh Schedule to the Government of India Act which reads : "Wills, intestacy, and succession, save as regards agricultural land.
" The reply for the respondent is that the Act can come within either item No. 9 or item No. 21 or both, of List II ' of the Seventh Schedule to the Government of India Act, 1935.
We are of opinion that the Act does not (teal with the succession to impartible estates.
The Act acquires the impartible estate which vests in the Government on the notified date.
The rights of the and holder in the estate cease on that date.
The Act was enacted by the State Legislature by virtue of item No. 9, List II, Seventh Schedule to the Government of India Act which reads: "Compulsory acquisition of land.
" The Act is not ultra vires the State Legislature Theattack on the validity of section 45 of the Act on 298 the ground of its contravening the provisions of Art 14 of the Constitution is not open to the appellants in view of article 31B which provides inter alia that not of the Acts specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void or ever to have become void on the ,round that the Act takes away or abridges any of the rights conferred by any provisions of Part III.
Article 14 is in that Part of the Constitution.
The Act is mentioned at item No. 10 in the Ninth Schedule.
We therefore hold that the provisions of section 45 of the Act are not void.
The next question for determination is whether the appellants should have got share in the compensation as "sharers ' on account of the partible character of the estate reviving on the notified date as a result of the repeal of the Impartible Estates Act, 1904.
We are concerned in these appeals with the distribution of advance compensation given and interim payments made in accordance with the provisions of the Act.
We have held the relevant provisions to be valid.
Therefore, the appellants can only ask for their share of the compensation in accordance with those provi sions.
We do not consider it necessary to decide the question whether any property ceased to be impartible after the notified date and understand that an appeal in which the question directly arises is pending against a judgment in a civil suit holding that the buildings to which sub section
(4) of section 18 applied were impartible and were owned by the Rajah.
Even if the appellants had any right in the estate, (though we do not so decide), that right ceased on the notified date in view of the provisions of section 3 of the Act and thereafter they are entitled to such rights and privileges only as are recognized or conferred by or under the Act.
Section 3 of the Act provides the consequences of notification of the estate.
The relevant portions of section 3 are : " x x x x 299 (b) .
the entire estate. shall stand transferred to the Government and vest in them. . (c) all rights and interests created in or over the estate before the notified date by the principal or any other land holder, shall as against the Government cease and determine x x x x x (e) the principal or any other landholder and any other person, whose tights stand transferred under clause (b) or cease and determine under clause (c), shall be entitled only to such rights and privileges as are recognized or conferred on him by or under this Act.
, x x x x x (g)any rights and privileges which may have accrued in the estate, to any person before the notified date, against the principal or any other landholder thereof, shall cease and determine, and shall not be enforceable against the Government or such landholder, and every such person shall be entitled only to such rights and privileges as are recognized or conferred on him by or under this Act. ' The estate was impartible up to the moment it vested in the Government on the notified date.
Whatever be the nature of the compensation payable, the distribution of the compensation between the persons who had an interest in the estate would be in accordance with the provisions of sub section
(2) of section 45 which defines "sharers ' to be the principal landholder and his legitimate sons, grandsons and the great grandsons in the main line living, or in the womb on the notified date, including sons, grandsons and great grandsons adopted before such date.
The appellants do not come under any of the persons mentioned in this 300 clause and therefore they cannot get, compensation as "sharers".
The result of our findings is that all the four appeals nos.
116 to 119 of 1961 fail.
The dispute in the remaining six civil appeals relates to the principle on which the amounts of maintenance payable to the persons entitled to it are to be calculated.
The contention is that when the net income of the estate in 1889, was about Rs ' 6,00,000/ a year, the allowance payable to each brother was Rs '.
1,000/ per month and that therefore the value of the interest of each brother in the estate came to about 1/50th of the income.
The amount payable to him now, it is urged should% bear the same proportion to the basic annual sum which is first calculated under the provisions of the Act and later capitalised to obtain the amount of compensation payable for the estate.
The relevant provisions in connection with the apportionment of the maintenance allowance applicable to impartible estates are to be found in section 45 of the Act, Sub section (3) provides for determining the amount to which the creditors of the holder ' of the estate are entitled out of the assets of the estate.
The amount due to them is first to be deducted from the compensation and out of the balance the maintenance holders as a body can have an amount equal to 1/5 th and no more.
If the amount due to them comes to less than 1/5th they will get it as they had been getting in the past.
If the , amount exceeds 1/5th of the aforesaid balance,, the tribunal has the authority, to re open any arrangement previously made in respect of maintenance and re assess the amount to paid to each maintenance holder, keeping in regard the provisions of sub section (5) There is nothing in this sub section which authorises the Tribunal to calculate the incidents of the amount of compensation on the income of the estate at the time it was fixed.
Even in the present case, the amount of 301 maintenance allowance was not.
fixed as a certain proportion of the net income of the estate but was fixed, according to document A 1, after considering several factors affecting the question as is apparent from the following statement in ' the document "The aforesaid mediator considered in full the status of all the claimants.
the status and dignity, of the Estate and all the other matters deserving consideration and settled that the said Rajha.
Rajagopala Krishna Yachendra. . of Venkatagiri should pay the allowances as mentioned below.
" We are therefore of opinion,.
that the Special Tribunal had held rightly that the apportionment of the advance payment of compensation and the interim payment had been made in accordance with the provisions of the Act.
In view of what we have stated above, we dismiss all the appeals with costs, one :hearing fee for Civil Appeals Nos.
116 to 119 and one hearing fee for C I Appeals Nos. 120 to 125.
Appeals dismissed.

summary:
Consequent upon the notification under the Estates Abolition Act, the impartible Estate of Venkatagiri vested in the Government and on claims made under section 41 of the Act, the tribunal determined advance compensation to the various persons interested.
On appeal against the decision of the Tribunal it was contended, that (1) the impartible character of the Estate ceased when the estate vested in the Government; (2) the compensation did not bear the character of impartibility as it became the property of the joint family ; (3) section 45 was a law altering the rights of distribution of property among the members of a joint family and wag beyond the legislative competence of the State Legislature ; (4) the law was discriminatory ; (5) the appellants were not maintenance holders but creditors; (6) the amount of "Paishkush" payable to the Government ought not to have been deducted from the compensation in calculating the amounts payable to the appellants, as the holder of the estate alone was liable to pay it.
Held, that the first question was raised directly in another proceeding and it was not necessary to decide it in these proceedings which were only in respect of advance compensation.
Held, further, that in respect of such compensation the proportion of distribution could only be, in accordance with the provisions of sub section 2 of section 45 of the Act by which alone the appellants were entitled to claim advance compensation.
281 (2)that the legislation was not one in respect of wills, intestacy and succession, under Entry 7, List 3, but under Entry 9 of List 2 of the Seventh Schedule of the Constitution.
(3)that in so far as the legislation came within article 31 (B) of the Constitution it was not open to attack as offending article 14 of the Constitution.
(4)the appellants were maintenance holders howsoever they had been described in the earlier documents and that the earlier documents did not constitute them as creditors of the holders of the estate.
(5)The distributable compensation could only be arrived at afterdeducting the liabilities mentioned in the proviso to section 41 (1) due from the estate to Government from the amount of compensation for the estate and that section 54 (A) (ii) required that half of those liabilities (including Peshkash) due to the Government be deducted from half the amount of compensation which was to be distributed under section 54A (i).
Held, further, that in the other appeal proportion of 1/5th fixed by section 45 had been rightly applied and that the contention that the proportion should have been that which the allowances in the earlier documents bore to the total income in the year 1889, was not tenable.


judgement:
Appeal No. 139 of 1962.
Appeal from the Judgment and Decree dated the 17th March, 1950, of the High Court of Judicature at Madras (Horwill and Balakrishna Ayyar JJ.) in O.S.A. No. 34 of 1947, arising out of 791 the Judgment and Decree dated the 18th April, 1947, of the said High Court (Clark J.) in the exercise of the Ordinary Original Civil Jurisdiction of the High Court in C. section No. 208 of 1940.
V. Rangachari (K. Mangachary, with him) for the appellant.
K. Krishnaswami Iyengar (K. Parasuram, with him) for the respondent.
March 20.
The Judgment of the Court was delivered by MAHAJAN J.
The dispute in this appeal is between a constituent and a firm of stock brokers.
Some time before April, 1936, the plaintiff, then a young man, came into possession of property worth about 2 lakhs of rupees on a partition between him and his brothers.
In the hope of getting rich by obtaining quick dividends by speculating on the stock exchange be, through the defendant firm and certain other stockholders, entered into a series of speculative transactions and it seems he did not fare badly in the beginning.
But subsequent events tell a different tale.
In 1937, two iron and steel companies in North India, vie., Indian Iron & Steel Co. Ltd., and the Bengal Iron & Steel Co. Ltd., merged into one concern and a new issue of shares was made.
The scheme was that for every five shares which a person held in the Indian Iron Co. Ltd. on 22nd April, 1937, one fully paid up share would be given to him at a price of Rs. 25.
The market price at the time this scheme was announced was about Rs. 55 per share.
A wave of speculation followed this announcement and there was a boom in the market.
Prices of Indian Iron shares were going up to unreal heights.
To stabilize the situation thus created by heavy speculation, three members of the Committee of the Calcutta Stock Exchange presented a petition to the Committee on 5th April, 1937, to close the Calcutta Stock Exchange 792 for a while.
On the same evening plaintiff 's stockbroker Annamalai Chettiar, who was carrying on business in firm name Trojan & Co., had telephonic conversation with one Ramdev Chokani, a member of the Calcutta Stock Exchange, on this subject and from this conversation he gathered that a sharp fall in the prices of Indian Irons was likely.
At that time Annamalai Chettiar had on his bands some 5,000 of these shares.
Shortly after this conversation and after business hours the same night, between the hours of 7 30 and 8 30, Annamalai Chettiar rang up the plaintiff and suggested to him that it would be a good thing for him to buy these shares.
The youthful plaintiff in his anxiety to got rich quickly accepted the suggestion and purchased these shares, some at Rs. 77 and others at Rs. 77 4 0.
Another firm of brokers, Ramlal & Co., had also in their hands another 4,000 of these shares.
They too found in the plaintiff a ready buyer.
They also contacted him on the phone after Annamalai had done so, and sold him 4,000 shares that they held.
Out of the lot which the plaintiff purchased from the defendants he sold 1,300 shares to Ramanathan Chetti at cost price.
On the 6th April the Committee of the Calcutta Stock Exchange Association passed a resolution closing the Stock Exchange on the 8th and 9th April.
From the 6th April onwards the market sagged and the prices came down, at first gradually and then literally at a, run.
The result of it was that the plaintiff had to sell at a very heavy loss.
The defendants made demands on the plaintiff for the price of those shares.
Between 5th April and 20th April, 1937, he made payments to defendants of various amounts totalling Rs. 60,000.
A lot of 700 shares was sold by the plaintiff to Pilani & Co. and on 19th April, 1937, he instructed the defendants.for sale of the remaining 3,000 shares at the best price obtainable.
The defendants sold 2,000 shares on 20th April, 1937, for prices ranging between Rs. 47 4 0 to 793 Rs.44 12 0 per share.
The remaining 1,000 shares were sold by him through Messrs. Ramlal & Co. at Rs. 42 8 0 per share on 22nd April, 1937.
The result of it was that on 22nd May, 1937, when the accounts between the plaintiff and the defendants were settled it was found that plaintiff was heavily indebted to them in the sum of Rs. 51,712 7 0 and the credit balance of Rs. 64,000 that he had with the defendants at the end of March, 1937, had been wiped off.
For the amount found due he passed a promissory note in favour of defendants, Exhibit P 33.
After giving credit for payments received on the promissory note the defendants filed a suit against him (O.S. 150 of 1937) on the Original Side of the Madras High Court and obtained an ex parte interim order for attachment before judgment and attached plaintiff 's movable and immovable properties at Madras, and also at Kottaiyur in Ramnad district.
Owing to the attachment proceedings the firm of Ramlal & Co. filed a petition for adjudication of the plaintiff as an insolvent.
On 22nd September, 1937, Trojan & Co. also filed a petition for the same relief.
An order adjudicating the plaintiff an insolvent was made by the High Court on 5th October, 1937, on the petition of Ramlal & Co. In the course of the insolvency proceedings defendants tendered proof of their claim on the promissory note, Exhibit P 33.
The Official Assignee having acquired knowledge about the telephonic conversation that had passed between Annamalai Chettiar and Ramdev Chokani on the evening of the 5th April, 1937, came to the conclusion that the insolvent had been a victim of a fraud perpetrated by the defendants and dismissed their claim.
Defendants firm was guilty of fraud both in respect of the failure to disclose the fact that the Indian Iron shares or most of them be longed to one of its partners, Annamalai Chettiar, and also on account of the failure on its part to disclose its knowledge of the likelihood of a slump in the market because of the notice given by its members to close the Stock Exchange.
794 On an application made to the High Court against the order of the Official Assignee it was set aside by Mockett J. and he directed that the claim of the defendants be disposed of on a court motion, the claim being heard as if it were a suit.
In pursuance of this direction Trojan and Co. on 29th September, 1938, filed an application in the High Court, No. 313 of 1938.
The Official Assignee representing the estate of the plaintiff denied its liability on the promissory note on the ground of fraud.
On 15th March, 1940, Somayya J. dismissed the claim of the defendants.
He held the defendants firm guilty of fraud in both respects.
From this there was an appeal which was dismissed on 12th August, 1942.
The defendants applied for leave to appeal to His Majesty in Council but leave wag refused.
Defendants then applied to the Privy Council for special leave and that application was also dismissed some time in October, 1943.
On the 28th September, 1940, when the appeal from the decision of Somayya J. was still pending, the Official Assignee as representing the estate of the plaintiff filed the suit out of which this appeal arises against Trojan & Co. for an account of the transactions between himself as principal and the defendants as agents and claiming damages for loss sustained by him and for various other reliefs.
The suit embraced in particular claims in respect of four transactions.
The first related to the 5,000 Indian Iron shares.
The second referred to a transaction of Associated Cements.
On 22nd March,1937, the plaintiff had sold through the defendants 5O shares in Associated Cements at Rs.180 8 0 per share.
On 30th March, 1937, he had similarly sold a further 200 shares in Associated Cements at Rs. 183 per share.
The plaintiff did not have on hand even a single share in Associated Cements.
It became necessary for him therefore to "cover the sales".
On 21st July, 1937, defendants purchased on plaintiff 's account 100 shares at Rs. 161 12 0 per share.
On 1st September, 1937, they purchased a further 150 shares at 795 Rs. 151 a share.
The difference between the prices at which these shares had been sold and bought amounted to Rs. 6,762 8 0 and for this amount the defendants gave the plaintiff credit by adjusting it towards the promissory note account.
In respect of this transaction the case of the Official Assignee was that the purchase which had been made by the defendants was not only unauthorized, but contrary to instructions and was not valid and binding on the plaintiff as it had been made after the commencement of the insolvency.
No claim was made in the alternative that if this contention failed, the plaintiff was entitled to recover the amount credited towards the promissory note on the ground of failure of consideration.
The third transaction related to 300 shares in Tatas, and the fourth one was in respect of shares in Ayer Mani Rubber Co. The last claim was abandoned at the trial and the claim on the third transaction was decreed in favour of the plaintiff and the correctness of the order of the trial judge was not canvassed in the appeal before the High Court.
The amount decreed as regards these 300 shares was in the sum of Rs. 1,050.
The defendants denied liability for the entire claim and pleaded that they were not guilty of any fraud and that in any case the plaintiff was not entitled to claim any damage, as he could have easily sold away all his shares soon after his purchase without incurring any loss, and that he retained them in order to make profit.
The suit was first heard by Bell J. who decreed the claim of the plaintiff on 9th March, 1943.
The defendants appealed.
The appellate court set aside the decision of Bell J. and 'remanded the suit for fresh disposal on 26th August, 1944.
Meantime, that is to say, on 21st February, 1944, the adjudication of the plaintiff was annulled and on his application he was brought on the record in the place of the Official Assignee and he continued the suit.
Clark J. who tried the suit after remand gave a decree in favour of 103 796 the plaintiff for the sum of Rs. 61,787 9 0 with interest at the court rate of six per cent.
per annum from 1st September, 1937, until payment or realization with costs.
Against this decree the defendants preferred an appeal.
The appellate Bench modified the decree of Clark J., and reduced the amount of the decree by a sum of Rs. 9,100.
Each party was made to pay proportionate costs throughout.
Leave to appeal to this court against the decree was granted and the appeal is now before us under the certificate so granted.
As above stated, the claim in respect of Ayer Mani Rubber shares was abandoned at the trial and the claim on the third transaction relating to 300 shares in Tatas was decreed for the sum of Rs. 1,050 and the correctness of this order was not canvassed in the appeal before the High Court.
The two claims discussed in that court were in respect of the trans action of 5,000 Indian Iron shares and in respect of the transaction made in Associated Cements.
The dispute before us so far as the Indian Iron shares are concerned has narrowed down to the question of quantum of damages in respect of 3,000 out of the 5,000 shares that were transferred by the defendants to the plaintiff on the night of the 6th April, 1937, 1,300 out of these shares having been sold at cost price by the plaintiff the day after the purchase, and 700 having been sold to Pilani & Co., and regarding which the plaintiff 's claim was rejected in the High Court and plaintiff preferred no further appeal.
The finding of Somayya J., that the defendants firm was guilty of fraud both in respect of the failure to disclose the fact that the Indian Iron shares or most of them belonged to one of its partners, Annamalai Chettiar, and also on account of its failure to disclose its knowledge of the probable slump in the market by reason of the notice given by three members of the Stock Exchange to temporarily close it, was not contested before Clark J., and it was conceded that that finding had become final.
The main ques tion canvassed at this trial was whether the plaintiff 797 had suffered any damage as a consequence of this fraud and if so, how were the damages to be measured.
In the plaint plaintiff claimed that he was entitled to be recompensed for all loss and damage which he had suffered.
A sum of Rs. 45,042 9 0 was credited in his account in respect of the sale of 3,000 shares made on 20th and 22nd April, 1937.
He claimed the whole of this amount as damages on this count; in other words, according to the plaintiff, the damage suffered by him was to be measured according to the difference between the purchase price of the shares and the price for which they were ultimately sold.
The shares were bought on 5th April at Rs. 77 and Rs. 77 4 0 and sold at prices ranging between Rs. 42 8 0 and Rs. 47 4 0 on the 20th and 22nd April, 1937.
This method of measuring damages was successfully challenged by the defendants before the trial judge.
Clark J., in spite of holding that the measure of damages in a case like this could not be as suggested by the plaintiff, estimated the damage suffered by him at the difference between the rate at which the plaintiff purchased the shares and the rate at which he actually sold them, on the ground that the price at which he sold them was more than the fair value of these shares realizable on the 6th April, 1937, between bona fide purchasers and sellers having knowledge of the real state of affairs.
Before the appeal Bench of the High Court it was contended that the trial judge was in error in his assessment of the real value of these shares on 5th April, 1937, and that in any case they could not be valued at four different rates.
It was urged that.
damages had been over estimated.
This contention was negatived and it was held that in the circum stances of this case it could not be said that the plaintiff acted unreasonably in holding on to the shares for the time that be did and that the defendants had by their own double dealings placed the plaintiff in a difficult position.
The learned counsel for the appellant reiterated before us the contentious raised by him in the High 798 Court and urged that the true measure of damages in actions like this is the difference between the price paid and the real value of the shares at the time of the transaction, and that any loss caused to the plaintiff by his retaining the shares after that date could not be decreed.
It was strenuously contended that had the plaintiff sold the remaining shares like the 1,300 he sold, he would not have suffered any damage whatsoever, as the market price of these shares on the 6th and 7th was not below the cost price.
It was said that the loss that the plaintiff suffered was merely due to the circumstance that he retained the shares for a fortnight, and was not as a consequence of the fraud.
Lastly, it was contended that even if it could be held that the market on the 6th and 7th was affected by the very fact concealed from the plaintiff, its effect disappeared by the 10th April, when the fact became fully known and damage should have been assessed on the difference between the market price of these shares which ruled at Rs. 62 per share on 10th April, 1937, and their cost price.
Now the rule is well settled that damages due either for breach of contract or for tort are damages which, so far as money can compensate, will give the injured party reparation for the wrongful act and for all the natural and direct consequences of the wrongful act.
Difficulty however arises in measuring the amount of this money compensation.
A general principle cannot be laid down for measuring it, and every case must to some extent depend upon its own circum stance.
It is, however, clear that in the absence of ,any special circumstances the measure of damages cannot be the amount of the loss ultimately sustained by the representee.
It can only be the difference between the price which he paid and the price which he would have received if he had resold them in the market forthwith after the purchase provided of course that there was a fair market then.
The question to be decided in such a case is what could the plaintiff have obtained if he had resold forthwith that which he bad been induced to purchase by the fraud 799 of the defendants.
In other words, the mode of dealing with damages in such a case is to see what it would have cost him to get out of the situation, i.e., how much worse off was his estate owing to the bargain in which he entered into.
The law on this subject has been very appositely stated in McConnel vs Wright(1) by Lord Collins in these terms: "As to the principle upon which damages are assessed in this case, there is no doubt about it now.
It has been laid down by several judges, and particularly by Cotton L. J. in Peek vs Derry(2), but the common sense and principle of the thing is this.
It is not an action for breach of contract, and, therefore, no damages in respect of prospective gains which the person contracting was entitled by his contract to expect to come in, but it is an action of tort it is an action for a wrong done whereby the plaintiff was tricked out of certain money in his pocket ; and therefore, prima facie the highest limit of his damages is the whole extent of his loss, and that loss is measured by the money which was in his pocket and is now in the pocket of the company.
That is the ultimate, final, highest standard of his loss.
But, in so far as he has got an equivalent for that money, that loss is diminished; and I think, in assessing the damages, prima facie the assets as represented are taken to be an equivalent and no more for the money which was paid.
So far as the assets are an equivalent, he is not damaged; so far as they fall short of being an equivalent, in that proportion he is damaged.
" The sole point for determination therefore in the case is whether the shares handed over to the plaintiff were an equivalent for the money paid or whether they fell short of being the equivalent and if so, to what extent.
Ordinarily the market rate of the shares on the date when the fraud wag practised would represent their real price in the absence of any other circumstance.
If, however, the market was vitiated or was in a state of flux or panic in consequence of the very fact that was fraudulently concealed, (1) (2) 800 then the real value of the shares has to be determined on a consideration of a variety of circumstances disclosed by the evidence led by the parties.
Thus though ordinarily the market rate on the earliest date when the real facts became known may be taken as the real value of the shares, never theless, if there is no market or there is no satisfactory evidence of a market rate for some time which may safely be taken as the real value, then if the representee sold the shares, although not bound to do so, and if the resale has taken place within a reasonable time and on reasonable terms and has not been unnecessarily delayed, then the price fetched at the resale may well be taken into consideration in determining retrospectively the true market value of the shares on the crucial date.
If there is no market at all or if the market rate cannot, for reasons referred to above, be taken as the real or fair value of the thing and the representee has not sold the things, then in ascertaining the real or fair value of the thing on the date when deceit was practised subsequent events may be taken into account, provided such subsequent events are not attributable to extraneous circumstances which supervened on account of the retaining of the thing.
These, we apprehend, are the well settled rules for ascertaining the loss and damage suffered by a party, in such circumstances.
If damages had been measured on the rules above stated by the courts below, this court would have then respected the concurrent finding on this point as the question of assessment of damages primarily is a question of fact and the concurrent findings of the courts below on such points except in very exceptional circumstances are not reviewed by this court.
We however find that in spite of the circumstance that the courts below correctly enunciated the rule of measuring damages in such cases, they estimated them on the difference between the cost price and the price realized at the sale on the 20th and 22nd at four different rates.
These four rates could obviously not represent the true value of the shares on the 5th.
801 Moreover the finding that the true value of these shares was lower than what was actually realized on their resale on the 20th and 22nd is not based on any evidence whatsoever.
Such a finding could only be arrived at on the basis of evidence on the record and by reference to that evidence, and this has not been done.
The High Court did not make an attempt to find out to what extent the value of the 'Shares fell short of being an equivalent for the money taken from the plaintiff.
Without determining this crucial issue we think it was not right to estimate the damage on the vague finding that the true value of the shares was lower than the value which they fetched at the resale on the 20th and 22nd.
In this situation, we have no alternative but to arrive at our own finding on this question in spite of the concurrent finding and we have to find as to what could be said to have been the true value of these shares on the relevant date.
In other words, the question for our determination is what the market value would have been on 5th April of these shares if all buyers and sellers had information that the market was to be closed on 8th and 9th April to enable settlement of outstanding transactions to be effected, and had appreciated the effect of that decision.
In the words of Buckley J. in Broome vs Speak(1), it is indeed a difficult question to answer beat that difficulty is no ground for refusing to answer it as has been done by the court below.
in order to determine the real price of these 3,000 shares sold to plaintiff by concealment of certain facts, the first question that needs decision is whether the market for these shares, the rate prevailing wherein would prima facie be a true index of their value, had been affected by the very fact concealed of which the plaintiff complains.
In this case from the proved facts it is clear that the market rate of these shares was seriously affected by reason of the impending decision of the Stock Exchange for closing it to stop the wave of speculation that had taken the frenzy of the market by reason of the merger of the two steel (1) [1931] I. Ch.
802 companies doing business in northern India.
The market reports for the week ending March 19, show that the Indian Irons were standing at or around Rs. 55.
By Satur day the 3rd April after the announcement of the terms of the merger by reason of the keen speculation the shares were being dealt at around Rs. 73.
On Monday the 6th April the price was Rs. 77.
On Tuesday the 6th, the day when the decision was taken to close the market for two days, these shares touched Rs. 79 but by the close of business fell back to Rs. 72 a sudden drop of Rs. 7.
On Wednesday the 7th April in the Calcutta market they closed at Rs. 58, a drop of Rs. 14 in a day.
These sudden rises and falls in the market during the course of these two days are sufficient indication of the fact that the drop was due to the decision of the Stock Exchange to close the Exchange for two days.
There is no evidence that any other factor was then disturbing the market rate of these shares.
The share market report of the defendants themselves issued on 10th April, 1937, amply bears out this fact.
In this report it was stated as follows : " The outstanding feature of the Indian markets during the week under review was the sudden landslide in Indian Iron and Steel shares, which proved infectious to the other sections of the market.
The week opened with a cheerful bullish sentiment and Indian Iron and Steels touched Rs. 80.
At this dizzy height, the markets lost their equilibrium and frenzied selling resulted in a sensational decline of about 25 points.
The heavy liquidation was due to a predominance of weak holders that had come into the market at a late stage.
Further, selling was accentuated by the decision of Calcutta Stock Exchange to close the Calcutta market on the 8th and 9th April to enable brokers to make deliveries and effect settlements for transactions in Indian Iron and Steel shares.
Heavy volume of business has been outstanding between brokers on account of the delay in getting certificates.
Prospect of immediate delivery of share certificates scared off weak holders and prices declined on heavy liquidation.
" 803 It is clear therefore that the decision of the calcutta Stock Exchange to close the Calcutta market on 8th and 9th affected the market prices considerably.
The Calcutta market on the 7th dropped from 72 to 58 as already stated.
The decision of the Calcutta Stock Exchange was published in the Hindu of Madras on the evening of the 7th.
From the statement of account, Exhibit P 41, filed by Trojan & Co. on 7th, about half a dozen transactions in these shares took place through them.
Most of the transactions, it appears, were by small holders of 100 scrips or so, who unloaded their shares between 71 to 60 per share.
On the 8th three transactions took place at Rs. 62.
No transaction took place between 8th and 14th.
There were two transactions on the 14th at Rs. 56, and there was a transaction on the 16th at Rs. 57 8 0.
On the 20th Trojan and Co. sold 2,000 of the plaintiff 's shares at rates varying between Rs. 44 12 0 and Rs. 47 4 0.
According to the statement of account of another broker, Ramlal & Co., there were about 16 transactions in these shares on the 7th.
Most of them were sold in lots of 100 or 200 and the sale price of these shares ranged from Rs. 74 to 64.
On the 8th there were a few transactions, the rates varying between Rs. 57 to Rs 66.
There was a transaction on the 9th at Rs. 60.
There were two or three transactions on the 10th also near about this rate.
No transaction after the 10th made by this company has been exhibited on the record.
Exhibit P 23 is another weekly share market report of Trojan & Co. issued on 17th April, 1937.
It states as follows : "In the first place, Indian Irons are very cheap around Rs. 46.
The company is doing extremely well and the stage is set for a steady rise to Rs. 70. . .
Indian Iron and Steels fluctuated between Rs. 55 to Rs. 60 and closed at Rs. 47.
The recent hectic speculation has brought its own nemesis.
" This report proves that there was really no market as it appears from the evidence on the record in 104 804 Madras between the 8th and 17th which was a Saturday, and on the 17th the prices seemed to be settling down at Rs. 46.
On the 19th the plainti gave to the, defendants an order to sell his 3,000 shares and it was said "Please retain this order till executed".
The defendants were only able to dispose of 2,000 of these shares on the 20th at prices varying between Rs. 44 12 0 to Rs. 47 4 0.
The remaining 1,000 shares the plaintiff was able to sell through Ramlal and Co. at Rs. 42 8 0 on 22nd April, 1937.
It is quite possible and probable that had the plaintiff placed an order before the 19th, say on the 16th or 17th, with the defendants or with Ramlal & Co., he might have been able to sell these 1,000 shares also at about the same price as he was able to dispose of his 2,000 shares.
No member of the defendants firm gave evidence in the case.
Plaintiff went into the witness box and stated that had he known what the defendants knew, he would not have purchased the shares.
The information was withheld from him that these shares were likely to godown.
He said that he was told by the defendants to sell the shares but no purchasers were available and in spite of his keenness to liquidate them he was not able to do so before the 20th and 22nd, that he approached Trojan & Co., the defendants firm for selling them, but they were not able to sell more than 2,000 shares. ' Considering the whole of this material, we are satisfied that the market rate prevailing on the 5th, 6th and 7th had been affected by reason of the decision of the Calcutta Stock Exchange to keep the market closed on the 8th and 9th and the market did not settle down till about the 17th or 18th and the prices then ruling can in the circumstances of this case be said to be their true market price.
In our judgment, Rs. 46 per share was the real price of these shares when they were put in the plaintiff 's pocket and he got Rs. 46 for each share in lieu of what he paid for either at Rs. 77 or at Rs. 77 4 0.
He is entitled to commission also which he would have to pay on the sale of these shares.
The difference between these 805 two rates is the damage that he has suffered and he is entitled to it.
For the reasons given above we modify the order passed by Clark J., and by the appellate Bench of the High Court to the extent indicated above and we estimate the plaintiff 's damage at Rs. 93,000 on account of the 3,000 shares at the rate of Rs. 31 per share.
The second question canvassed before the High Court and also before us was in respect of the Associated Cement shares.
As above stated, the plaintiff 's account was credited in the sum of Rs. 6,762 8 0 on account of the purchase of these shares.
Plaintiff had pleaded that the transaction was not authorised by him and that it had been made in contravention of his instructions.
He had claimed compensation on the ground of breach of instructions he did not in the alternative claim on the ground of failure of consideration the amount credited by the defendants in the promissory note account and which credit disappeared by reason of the failure of the suit on the promissory note.
At the hearing of the case before Bell J. the contention that the purchase was unauthorized was abandoned by counsel and the same position was adopted before Clark J. During cross examination of the plaintiff it was elicited that he either instructed the defendants to purchase the shares or at any rate ratified the purchase which the defendants had made on his behalf.
It was argued before the appellate Bench of the High Court that having pleaded one thing and having led evidence in support of that thing but later on having been forced to admit in the witness box that the true state of things was different the plaintiff had disentitled himself to relief as regards these shares and he could not be granted the relief that he had not asked for.
The High Court negatived this contention on the ground that though a claim for damages in respect of a particular transaction may fail, that circumstance was no bar to the making of a direction that the defendants should pay the plaintiff the money actually due in respect of that particular transaction.
It also held 806 that the plaintiff 's claim in respect of this item of Rs.6,762 8 O was with in limitation.
We are unable to uphold.
the view taken by the High Court on this point.
It is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and it is the case pleaded that has to be found.
Without an amendment of the plaint the court was not entitled to grant the relief not asked for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case.
The allegations on which the plaintiff claimed relief in respect of these shares are clear and emphatic.
There was no suggestion made in the plaint or even when its amendment was sought at one stage that the plaintiff in the alternative was entitled to this amount on the ground of failure of consideration.
That being so, we see no valid grounds for entertaining the plaintiff 's claim as based on failure of consideration on the case pleaded by him.
In disagreement with the courts below we hold that the plaintiff was wrongly granted a decree for the sum of Rs. 6,762 8 0 in respect of the Associated Cement shares in this suit.
Accounts settled could only be reopened on proper allegations.
The next point canvassed in the courts below was in respect of the claim of the plaintiff regarding interest on the amount found due to the plaintiff from 5th April, 1937, to the date of the suit.
It was contended that no interest could be allowed on damages because to do so would amount to awarding damages on damages which is opposed to precedent and principle.
Clark J., however, awarded interest by placing reliance on certain English decisions which enunciate the rule that an agent who receives or deals with the money of his principal improperly and in breach of his duty or who refused to pay it over on demand is liable to pay interest from the time when he so receives or deals with the same or from the time of the demand.
We think it is well settled that interest is allowed by a court of eqity in the case of money obtained or retained by fraud.
As 807 stated in article 423 of Volume 1 of Halsbury, the agent must also pay interest in all cases of fraud and on all bribes and secret profits received by him during his agency.
Their Lordships of the Privy Council in johnson vs Rex(1) observed as follows: "In order to guard against any possible misapprehension of their Lordships ' views they desire to say that in their opinion there can be no doubt whatever ' that money obtained by fraud and retained by fraud can be recovered with interest, whether the proceedings be taken in a court of equity, or a court of law, or in a court, which has jurisdiction both equitable and legal.
" The appeal court affirmed the view of Clark J. on this point.
The learned counsel for the appellant contended that the decisions relied upon concerned cases where the agent had retained some money of his principal in his hands but that in the present case the claim was merely for damages.
This contention is fallacious.
By reason of the transaction brought about by fraudulent concealment plaintiff paid to the defendants a sum of Rs. 60,000 in cash which he would not have parted with otherwise and he also lost the money which stood at his credit with the defendants.
It is thus clear that the agents had a large sum of the plaintiff with them which they would not have acquired but by reason of the fraud that they practised on him.
In this view of the case we see no force in the contention of the learned counsel and we repel it.
The only other point that was argued before us was in respect of future interest.
It was not denied that plaintiff was entitled to future interest as allowed to him at the rate of 6% on the amount found due.
it was however argued that the plaintiff should not have been allowed interest for the period of one year and six months during which the decree stood satisfied.
The facts are that on 9th March, 1943, a decree for Rs. 51,805 1 0 carrying interest at six per cent.
was (1) 808 passed in favour of the plaintiff.
On the 11th May, 1943, an amount of Rs. 71,000 due under this decree was paid by the defendants to the Official Assignee.
This amount was returned by the Official Assignee to the defendants on 12th September, 1944, after that decree had been set aside.
Meanwhile the plaintiff 's adjudication had been annulled and he had been brought on the record on 16th March, 1944.
It was contended that during the period when the money remained with the Official Assignee who was the plaintiff no future interest was payable as the decree stood satisfied during that period.
The High Court rejected this contention on the ground that when this money was paid into court, it was coupled with a prayer that it should not be paid out to the creditors of the insolvent 's estate pending disposal of the appeal, and therefore as the money was not distributable amongst the insolvent 's creditors, interest for this period had been rightly allowed.
In our opinion, this view cannot be sustained.
So far as the defendants judgment debtors are concerned they had done their part and paid the money to the decree holder and had thus satisfied the decree.
It was open to the Official Assignee, the decree holder, not to take the money on the condition on which it was given to him and if he had not taken the money from the defendants he could then justly have claimed future interest on this amount, but having taken the money and kept it, it could not be said that during this period anything was due to the plaintiff from the defendants.
The defendants certainly had paid the decretal amount and whether the plaintiff or his predecessor in interest was able to use it or not was a circumstance wholly immaterial in considering whether future interest should or should not be allowed.
In our judgment, the plaintiff was not entitled to future interest at the rate allowed for one year and six months period, beginning from 9th March, 1943, and ending with 12th September, 1944.
The appeal is therefore allowed to the extent indicated above.
The decree of the High Court will be 809 modified and plaintiff will be entitled to damages in the sum of Rs. 93,000 on the 3,000 Indian Iron shares.
The decree given to the plaintiff in respect of ' Rs. 6,762 8 0 is set aside over and above the ' decree for Rs. 9,100 in his favour set aside by the High Court.
In the calculation of future interest the plaintiff will not be allowed interest from 9th March, 1943, to 12th September, 1944.
In the result the decree given to the plaintiff in the sum of Rs. 61,787 is reduced to Rs. 42,175.
He will get interest at six per cent.
per annum from 5th April, 1937, until payment or realization except for a period of one year and six months.
Plaintiff will get proportionate costs throughout.
Appeal allowed in part.

dataset_name: IN-Abs

summary:
Where a person is induced to purchase shares at a certain price by fraud the measure of damages which he is entitled to recover from the seller is the difference between the price which he paid for the shares and the real price of the shares on the date on which the shares were purchased.
Ordinarily the market rate of the shares on the date when the fraud was practised would represent their real price in the absence of any other circumstance.
If, however, the market was vitiated or was in a state of flux or 790 panic in consequence of the very fact that was fraudulently concealed, then the real value of the shares has to be determined on a Consideration of a variety of circumstances, disclosed by the violence led by the parties.
A firm of sharebrokers sold 3,000 shares to the plaintiff who was a constituent of the firm, on the 5th April, 1937, at Rs. 77 and Rs. 77 4as, per share without disclosing to the plaintiff the fact that the shares were owned by one of the partners of the firm and also the fact that they had received telephonic information on that day from a member of the Stock Exchange that there was going to be a sharp decline in the price of the shares.
On the 6th April the Stock Exchange Association passed a resolution for closing the Exchange on the 8th and 9th April.
The plaintiff had to sell 2,000 shares through the defendants on the 20th April at Rs. 47 to Rs. 42 per share, and 1,000 shares on the 22nd April at Rs. 428as.
The High Court awarded the difference between the price paid by the plaintiff and the prices fetched on resale as damages.
On appeal, Held, that the prices received at the resale on the 20th and 22nd April could not represent the true value of the shares on the 5th April.
The real question for determination was what the market value would have been on the 5th April of these shares if all the buyers and sellers know that the Stock Exchange was to be closed on the 8th and 9th April.
Held also that the plaintiff was entitled to get interest on the amount awarded as damages from the 5th April till the date of suit on the principle that where money is obtained or retained by fraud a court of equity will order it to be returned with interest.
Johnson vs Rex ([1904] A.C. 817) referred to.
It is well settled that the decision of a case cannot be 'based on grounds outside the pleadings of the parties and that it is the case pleaded that has to be found.
Where the plaintiff based his claim for a certain sum of money on the ground that the defendants had sold certain shares belonging to him without his instructions, but he was not able to prove that the sale was not authorised by him: Held, reversing the decision of the High Court, that the plaintiff could not be given a decree for the sum claimed on the ground of failure of consideration, as he had not set up any such alternative claim in the plaint or even at a later stage when he sought to amend the plaint.