MANU/SC/0021/1972

Equivalent Citation : AIR 1973 SC 381

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 909 of 1967

Decided On: 06.10.1972

Appellants:Hari Chand Madan Gopal and Ors.

Vs.
Respondent:State of Punjab

Hon'ble Judges/Coram:
D.G. Palekar, J.M. Shelat, K.K. Mathew, S.N. Dwivedi and Y.V. Chandrachud, JJ.

Counsels: 
For Appellant/Petitioner/Plaintiff: D. V. Patal, P.C. Bhartari, J. B. Dadahchanji, O. C.
Mathur and Ravinder Narain, Advs.

For Respondents/Defendant: V.M. Tarkunde, Harbans Singh and R.N. Sachthey, Advs.

Subject: Commercial

Catch Words

Mentioned IN

Acts/Rules/Orders: 
Indian Independence Act, 1947 - Section 9(2)

Cases Referred: 
The State of Tripura vs. The Province of East Bengal MANU/SC/0027/1950 ; The State of
West Bengal vs. Shaikh Serajuddin Batley MANU/SC/0078/1953 ;Union of India (UOI)
vs. Chaman Lal Loona MANU/SC/0021/1957 ; State of West Bengal vs. Brindaban
Chandra Pramanik and Anr. MANU/WB/0014/1957 ;Scindia Steam Navigation Co. Ltd.
vs. Union of India (UOI) MANU/SC/0394/1961 ; Union of India (UOI) and Ors. vs. Indo-
Afghan Agencies Ltd.MANU/SC/0021/1967 ; Century Spinning and Manufacturing
Company Ltd. and Anr. vs. The Ulhasnagar Municipal Council and
Anr. MANU/SC/0397/1970
Prior History: 
Appeal by certificate from the Judgment and decree dated April 1, 1966 of the Panjab
High Court at Chandigarh Regular first Appeal No. 216 of 1960

Disposition: 
Appeal Dismissed

Citing Reference: 

Discussed
 
 5

Mentioned
 
 2

Case Note:

Commercial - remission - Section 63 of Indian Contract Act, Punjab Partition

(Contracts) Order, 1947 and Section 9 (2) of Indian Independence Act, 1947 -
appellants owed money to Government being clearing agent of former -
Government's claim of recovery of money resisted on ground of arbitral award -
money originally owed to undivided Punjab - on independence arbitrator
appointed to decide liabilities of East and West Punjab on partition - Government
of West Punjab entitled for 40% of claims of undivided Punjab as per arbitral
award - Government cannot claim more than 40% on ground that they paid to
sellers of agricultural produces to appellants as such payment was without
consent of appellant.

JUDGMENT
S.N. Dwivedi, J.

1. The factual framework of this appeal is set spastically in the undivided geography of
India during the British period and temporarily during 1944 to June 1947. There are three
appellants:

(1) Messrs Hari Chand Madan Gopal and Co., (2) Hari Chand and (3) Sri
Ram. The first appellant is a partnership firm, of which the other two
appellants are partners. Some time in 1944 there was concluded an
agreement between the first appellant and the Government of the Province
of Punjab (hereinafter called the Undivided Punjab). By that agreement,
the first appellant agreed to act as a Clearing Agent (Foodgrains) for the
sale and purchase of foodgrains on behalf of the Undivided Punjab on
payment of a commission. The first appellant obtained stock of rice from
the Rationing Controllers of the districts which were after the Partition of
India in August 1947 included in the State of East Punjab and are now
included in the State of Punjab. According to the State of Punjab (the
plaintiff-respondent) the price of the stock supplied by the said Rationing
Controllers was Rs. 12,15,178/4/11. The stock was supplied in May and
June, 1947. The first appellant sold the said stock to persons in Delhi and
the United Provinces (now called Uttar Pradesh). The plaint admits the
receipt of three amounts : (1) a sum of Rs. 2,91.817/13/11/2 , (2) a sum
of Rs. 2,67,963/10/1, collected from various purchasers in Delhi and Uttar
Pradesh to whom the first appellant had sold the stock, and (3) a sum of
Rs. 20,000/-paid by the first appellant. The aggregate of receipts thus
comes to Rs. 5,79,84l/8/1/2. Deducting the aggregate amount from the
total sum due, there still remains an outstanding of Rs. 6,03,897/-/9. It is
alleged in paragraph 9 of the plaint that on July 29, 1953. the appellants
admitted their liability to pay the said amount.

2. The third appellant did not enter appearance. The case proceeded ex-parte against him
in the trial court.

3. The appellants Nos. 1 and 2 filed their first joint written statement on June 15, 1957.
They pleaded that all rights and liabilities under the agreement of 1944 have accrued in
favour of the Government of West Punjab which forms part of Pakistan and the
respondent has no right to sue. They also pleaded that in the meeting held on July 28 and
29, 1953 between the representatives of the respondent and the first appellant, it was
admitted on be-half of the respondent that the first appellant, was liable to pay only 40%
of the total amount. It is alleged that according to the respondent the 40% of the total
liability was Rs. 5,00,085/12 but according to the first appellant it was only Rs.
47,327/6/9. As the plaintiff has admitted in the plaint to have received Rs. 5,79,841/8/
1/2 from and on behalf of them, there was in credit in favour of the first appellant a sum
of Rs. 59,695/12/1/2. The written statement adds that according to the first appellant the
credit amount would be Rs. 86,510/1/3. It is asserted in the written statement that
nothing was due by the appellants. The written statement denies that the appellants Nos.
1 and 2 admitted their liability to pay any amount in the meeting held on July 29, 1953.

4. The appellants Nos. 1 and 2 filed another written statement on June 2, 1959. In this
written statement they reiterated their pleas in the first written statement. They also
added that the Award of the Chairman of the Arbitration Tribunal, dated March 17, 1944
determined the ratio of financial adjustment between East Punjab and West Punjab in
respect of assets and liabilities of the Undivided Punjab as 40 : 60 and that accordingly
the respondent was entitled only to 40% of the amount due by the appellants.

5. The trial court decreed the suit of the respondent for a sum of Rs. 5,53,897/-/9. On
appeal the High Court of Punjab reduced the decretal amount to Rs. 3,23,897/-/9. Not
feeling satisfied with the judgment and decree of the High Court the appellants Nos. 1 and
2 have preferred this appeal.

6. It is now necessary to set out the legal background against which two of the appellants'
arguments need to be examined. On July 18, 1947, the British Parliament enacted the
Indian Independence Act, 1947. Section 1(2) defines the expression "appointed day" as
the 15th of August, 1947. On the said date there were born two independent Dominions,
the Dominion of India and the Dominion of Pakistan. The Undivided India was partitioned
between the two Dominions. Consequently, the Undivided Punjab was split up into two
Provinces, one called the Province of West Punjab and the other the Province of East
Punjab. Section9(1) (b) enabled the Governor-General to make Orders for dividing
between the new Dominions, and between the new Provinces rights and liabilities of the
Governor-General in Council and the relevant Provinces which were to cease to exist."
Sub-section (2) of Section 9 provided that the power conferred on the Governor-General
by Section 9(1)(b) could, in relation to their respective provinces, be exercised also by
the Governors of the provinces which would cease to exist on the appointed date.

7. On August 14, 1947, the Governor-General issued, in exercise of his power Under
Section 9(1)(b), an Order called the Indian Independence (Rights, Property and
Liabilities) Order, 1947 (hereinafter called the Governor-General's Order). It came into
force at once. Clause 3(1) of the Order provided that the provisions of the Order related
to the initial distribution of rights, property and liabilities consequential on the setting up
of the Dominions of India and Pakistan. The Order would have effect subject to any award
that might be made by the Arbitration Tribunal. Clauses 8(3) is important for our
purposes and is reproduced in extenso :

8(3) Any contract made on behalf of the Province of the Punjab before the
appointed day shall, as from that day-

(a) if the contract is for purposes which as from that day are
exclusively purposes of the Province of East Punjab, be deemed to
have been made on behalf of that Province instead of the Province
of the Punjab, and

(b) in any other case be deemed to have been made on behalf of

the Province of West Punjab instead of the Province of the Punjab;
and all rights and liabilities which have accrued or may accrue under
any such contract shall, to the extent to which they would have
been rights or liabilities of the Province of East Punjab or the
Province of West Punjab, as the case may be.

8. On the same day, the Governor of the Undivided Punjab issued an Order Under
Section 9(2). The Order is called the Punjab Partition (Contracts) Order, 1947 (hereinafter
called the Governor's Order). The second paragraph in the preamble to the Order recited
that "whereas it was necessary to make provision for division between the two new
Provinces of the rights and obligations of the Governor of the Punjab in respect of
contract, deeds, covenants and all other matters hereinafter referred to", accordingly the
Governor was making the Order. The material part of Clause 2(d) of the Order, which is
important for this case is set out here :

2. With effect from the appointed day every contract made, deed executed
or covenant entered into, by or on behalf of the Governor of the Punjab in
accordance with Section 175 of the Government of India Act, 1935, shall,
for all purposes, in so far as it relates to :

(d) services to be rendered, in or for the benefit of areas situated, within both the
new Provinces, be deemed to have been made, executed or entered into with the
West Punjab Province and the East Punjab Province, as two separate contracts,
deeds or covenants having effect respectively only in relation to such services as
are to be rendered in, or for the benefit, of the West Punjab Province or the East
Punjab Province; and...
9. The Governor of the Undivided Punjab issued another Order called the Punjab Partition
(Apportionment of Assets and liabilities) Order, 1947. Clause 6 of the Order provided that
there would be a general financial settlement between the two new Provinces, West
Punjab and East Punjab in regard to all assets and liabilities of the Undivided Punjab as
they stood immediately before the appointed day. It further provided that any award of
the Arbitrator given under Clause 3 or Clause 4 of the Order would be taken into account
in making general financial settlement. The two new Provinces did not arrive at any
agreement regarding financial settlement. So the Chief Justice of the Federal Court was
appointed the Arbitrator. He gave his Award on March 17, 1948. According to the Award,
60% of the total assets were to go to the Province of West Punjab and 40% thereof to the
Province of East Punjab.

10. The first argument of counsel for the appellants is developed in this way : Clause 2(d)
of the Governor's Order deals with a contract with a continuing obligation and not with a
completed contract. The contract of agency between the appellants and the Undivided
Punjab was a completed contract. Accordingly it was not governed by the Governor's
Order. It was governed by Clause 8(3) of the Governor-General's Order. Clause 2(d) of
the Governor's Order dealt with any contract made for "services to be rendered".
Obviously Clause 2(d) dealt with contracts with continuing obligations. The written
contract in the present case is not on record, but it is admitted that the contract was
subsisting during May and June, 1947 when the appellants took stock of rice from the
Rationing Controllers of the districts which fell into the new Province of East Punjab and
are now comprised in the Province of Punjab. In the period when the contract of agency
was subsisting it created the relationship of principal and agent between the contracting
parties. That relationship imposed mutual obligations on them. The appellants were bound
to render the service of acting as a clearing agent and of purchasing and selling
foodgrains for the Undivided Punjab. The services were to be performed as long as the
contract remained in force. It cannot accordingly be said that the contract between the
appellants and the Undivided Punjab was a completed contract. On the other hand, it was
a contract which imposed a continuing obligation of rendering the services of an agent on
the appellants. In the result, Clause 2(d) of the Governor's Order would apply to the
contract.

11. The next argument is that Governor-General's Order and the Governor's Order
occupied the same field. On the analogy of Section 107 of the Government of India Act,
1935, the former Order would prevail over the latter Order. Counsel has cited a number
of cases in support of this argument. But it is not necessary to refer to them as we are of
opinion that the two Orders did not over-lap. They operated in different fields. Clauses
8(2), (3) and (4) of the Governor-General's Order dealt with any contract made "on
behalf of the Province of West Bengal", "the Province of Punjab" and the "Province of
Assam" before the appointed day. Clauses 2, 3, 4 and 7 of the Governor's order dealt with
various contracts "made by or on behalf of the Governor of Punjab in accordance with
Section 175 of the Government of India Act, 1935", or rights and obligations of the
Governor arising under those contracts. The aforesaid difference in the phraseology of the
two Orders is purposive. The phrase "on behalf of the Province of Punjab" in Clause 8(3)
of the Governor-General's Order shows that the contracts dealt with in that clause were
the contracts which formed the subject-matter of Section 177(1) of the Government of
India Act, 1935. Section 177(1) provided that any contract made before the
commencement of Part III of the said Act by or on behalf of the Secretary of State in
Council, would from that date, if made for purposes which would after the
commencement of Part III of the Act be purposes of the Government of a Province have
effect as if it had been made "on behalf of that Province" and reference in any such
contract to the Secretary of State in Council would be construed accordingly. According to
Section 179(1) of that Act, such a contract could be enforced in a suit against the
province concerned. So Clause 8(3) of the Governor-General's Order dealt with contracts
made by or on behalf of the Secretary of State in Council for purposes of the Punjab
Province before March 1937 when Part III of the Government of India Act, 1935 was
brought into force. Clause 8(3) has nothing to do with the contracts made by or on behalf
of the Governor of Punjab Under Section 175(3) of the Government of India Act, 1935,
after March 1937. Clause 2(d) of the Governor's Order dealt with the contracts made by
or on behalf of the Governor Under Section 175(3). It would thus appear that the fields of
operation of Clause 8(3) of the Governor-General's Order and Clause 2(d) of the
Governor's Order were distinct and discrete. They did not overlap and there was no
conflict between them.

12. In the State of Tripura v. The Province of East Bengali ., this Court construed the
phrase "any liability in MANU/SC/0027/1950  : [1951]19ITR132(SC) respect of any
actionable wrong other than breach of contract" in Clause (1) of the Governor-General's
Order as including a liability to be restrained by injunction from completing what was a
wrongful or unauthorised act already commenced. The question that we are called upon
to decide in this case was not considered in that case. Counsel laid stress on the Court's
remark that "a wide and liberal construction, as far as the language used would admit,
should be placed upon the terms of the order so as to leave no gap or lacuna in relation
to the matters sought to be provided for." It is difficult to understand how this remark
helps the appellants on account of the construction that we are putting on the language of
Clause 8(3) of the Governor-General's Order. In the State of West Bengal v. Shaikh
Serajuddin Batley MANU/SC/0078/1953  : [1954]1SCR378 the Province of Bengal took
certain premises on lease on February 6, 1947. It agreed to pay a monthly rent of Rs.
1800/-. The purposes for which the lease was entered into were exclusively the purposes
of West Bengal after August 15, 1947. It was held that the liability to pay the amount was
not a "financial obligation" contemplated by Clause 9 of the Governor-General's Order and
the Government of West Bengal was liable under Clause 8(2) (a) of the said Order to pay
the rent which had accrued upto August 15, 1947. It does not appear that the Governor
of the Province of Bengal had made an order of the nature of the Governor's Order in the
present case. At any rate, the Court was not referred to any such order. On the contrary,
at page 382 of the Report it is said that the Advocate-General of West Bengal fairly and
frankly conceded that in the absence of anything else that case would be wholly covered
by Article 8(2) (a), but contended that by virtue of Article 8(6) that article was to have
effect subject to the provisions of Article 9. It is thus clear that the case was decided on
the concession made by the Advocate-General and the question that has arisen before us
did not arise there. In Union of India v. Chaman Lal Loona MANU/SC/0021/1957  :
[1957]1SCR1039 the contract was made on behalf of the Governor-General in Council
and the question arising before us could not arise there. In State of West Bengal v.
Brindaban Chandra Pramanik MANU/WB/0014/1957  : AIR1957Cal44 certain paddy was
requisitioned under the Defence of India Rules during the Second World War by the
Province of West Bengal. The amount of compensation was assessed Under Rule 75-A of
the Defence of India Rules. That amount was not paid by the Province of Bengal. After
partition a suit was instituted against the Province of West Bengal. The High Court of
Calcutta held that by virtue of Clause 10(2) of the Governor-General's Order, the Province
of West Bengal was liable to pay the amount to the plaintiff whose paddy had been
requisitioned. In that case also the High Court was not called upon to decide the question
that arises before us. In the judgment there is no reference to any Order made by the
Governor of the Province of Bengal. In Scindia Steam Navigation Co. Ltd. v. Union of
India MANU/SC/0394/1961  : [1962]3SCR412 the contract was made by the Governor-
General in Council. There the question that faces us could not arise. None of the aforesaid
decisions assist the appellants in this case.

13. It is then submitted that the contract of agency between the appellants and the
respondent was a single and indivisible contract and could not be split up at the will of the
Government for the purpose of instituting a suit against the appellants. This argument is
completely negatived by Clause 2(d) of the Governor's Order. Clause 2(d) provided that
any contract made by the Governor of Punjab in accordance with Section 175 of the
Government of India Act, 1935, in so far as it related, inter alia, to services to be
rendered "in or for the benefit of areas situated within both the new Provinces, would be
deemed to have been made, executed or entered into with the West Punjab Province and
the East Punjab Province, as two separate contracts". Each such separate contract would
have effect only in relation to "such services as are to be rendered in or for the benefit of
the West Punjab or East Punjab Province". Obviously Clauses 2(d) itself provided for the
bifurcation of a single and indivisible contract into two separate contracts.

14. Lastly, it is submitted that the Government could recover only 40% of the total
liability from the appellants. This argument had been put in several ways. Firstly, it is
pointed out that the arbitration award of the Chief Justice of India, dated March 7, 1948
had distributed the total assets of the Undivided Punjab between the West Punjab and
East Punjab in the ratio of 60 : 40. Consequently the Government can recover from the
appellants only 40% of the total dues found due by them. As admittedly the Government
has recovered more than 40%, nothing remains due by the appellants. The trial court and
the High Court did not accept this argument. We are also unable to accept it. The
arbitration award brought about a financial adjustment between the West Punjab and East
Punjab. It did not deal with the liabilities of third parties like the appellants to one or the
other Province. It did not direct that an amount due by a third party could be recovered
only to the extent of 40% of his total liability. According to the award, if more than 40%
is recovered from the appellants, the excess over 40% would become payable by the
Government to the West Punjab. Secondly, it is said that by virtue of a settlement
between the Government and the appellants, the former can recover only 40% of the
amount found due by the latter. The trial court and the High Court have found that there
was no settlement between the parties, and we agree with them. The so-called
settlement, is spelt out by the appellants from two letters, dated January 17, 1951. One
of the letters was written by the Director of Food. Civil Supplies, Punjab to the first
appellant and the other was a reply to it by the second appellant on behalf of the first
appellant. The subject-matter of the Director's letter is "settlement of accounts". The
letter opens with the statement that "the question of settlement of claims of Government
and all sellers against your agency has been discussed at length", in the presence of
certain Government representatives and Hari Chand, the second appellant. The second
paragraph of the letter pertinently states : "It appears that a settlement of these claims
will be possible in the following manner :

(a) This Government should realise only 40% of the amount debited to the Joint
Punjab account prior to March 1948 and the sellers on whose behalf the amounts
have been realised by Government should be paid by the Clearing Agents through
the Controller of Food Accounts and the balance amount adjudged by the
Committee against the Clearing Agents may be paid by the Clearing Agents direct.

Paragraph 3 requests : "kindly confirm if you are agreeable to this method of settlement".
It is stated that the actual details of the amounts due to the Government and to the
sellers would be supplied to the appellants later "on receiving your acceptance as above".
The second appellant in his reply letter said : "We hereby confirm the arrangements
embodied in your letter...... subject to the following amendments .............. (1) you shall
be entitled to a realisation on the basis of 40% out of the amount realised by us on
account of rice supplied by Rationing Controllers; (2) after disbursing the balance to
sellers for whose supplies the amounts have been realised by you in our account, the
balance shall be utilised for the settlement of the claims of other sellers against our
agency."

15. It may be noted that in paragraph 3 of the written statement the appellants had
taken the plea that the settlement of January 17, 1951 was "without prejudice". The
phrase "without prejudice" suggests that they had accepted the settlement without
prejudice to their rights. It is not a pleading that there was a firm settlement between the
parties. It is evident from the Director's letter that he had only made a proposal to the
appellants for the settlement of the claims of the Government and sellers. The proposal
contained two essential and inseverable terms. The inference that the letter made a
proposal to the appellant is supported by such phrases in the letter as "kindly confirm if
you are agreeable to this method of settlement", and "on receiving your acceptance as
above". The inseverable character of the two terms follows from such expressions as "the
question of settlement of claims of Government and of sellers against your agency has
been discussed, "and" a settlement of these claims will be possible in the following
manner". Hari Chand's reply letter did not unconditionally accept the Director's proposal.
Instead, he made an alternative proposal. According to the Director's letter, the
Government could recover 40% of the amount debited to the Joint Punjab account prior
to March 1948 : according to Hari Chand's reply the Government could recover 40% of
the amounts realised by the appellants on account of rice supplied by the Rationing
Controllers. According to the Director's proposal, the appellants should pay the sellers on
whose behalf certain amounts had been realised from purchasers by the Government.
They should also pay the sellers to whom payments were to be made according to the
decision of the Delhi Committee. Hari Chand, on the other hand, suggested that excess
over 40% recovered by the Government should be paid to the sellers for whom the
Government has recovered the amounts and that the balance, if any, should be utilised in
paying the remaining sellers. There is plainly substantial difference between the terms
proposed by the Director and the alternative term proposed by Hari Chand. It has not
been argued that the Government accepted the alternative proposal of Hari Chand. In the
result, we are of opinion, that there was no settlement between the parties. The things
did not move beyond the stage of proposal and counter-proposal. This inference is
supported by three letters sent to the appellants by the Director, Food and Civil Supplies,
the Controller of Food Accounts and the Director General, Food and Civil Supplies, dated
September 22, 1951 November 22, 1951 and September 18, 1952 respectively in all
these letters it is insisted upon that the appellants should settle the claims of the sellers.
The appellants can derive no advantage from the word "settlement" in those letters. We
are satisfied that the said word has been loosely used therein.

16. Thirdly, it is said that as the Government had represented to the appellants that it
would recover only 40% of the amount debited to the Joint Punjab account, it is now
estopped from claiming any higher amount. This argument cannot be raised at this stage.
The plea of estoppel was not taken by the appellants in their two written statements filed
on January 15, 1957 and June 2, 1959. No issue was framed on estoppel. No argument
founded on estoppel was advanced by the appellants in the trial court and the High Court.
The argument is not raised even in the statement of case filed by the appellants in this
Court. As we are not allowing the appellants to raise the plea of estoppel at the stage of
hearing, it is not necessary to deal with Union of India and Ors. v. Indo-Afghan Agencies
Ltd.MANU/SC/0021/1967  : [1968]2SCR366 and Century Spinning & Manufacturing Co.
Ltd. and Anr. v. The Ulhasnagar Municipal Council and Anr.MANU/SC/0397/1970  :
[1970]3SCR854 .

17. Fourthly, it is said that as the Government had decided to claim only 40% of the
amount debited to the Joint Punjab account before March 1948, the Government cannot
now recover more than that amount. While dealing with this argument, the trial court said
: "These letters and other letters on the file which have been referred to by the learned
Counsel for the defendants do show that the Government had taken such a decision".
However, the trial court did not accept the argument that the Government could not claim
more than 40%. It does not appear from the judgment of the High Court that this
argument was reconvicted before it, for the judgment of the High Court does not
expressly deal with it. The argument is founded on the proceedings of the meeting held
on July 28 and 29, 1953 in the office of the Controller, Food Accounts, at Simla. In the
meeting the second appellant and the other partner Sri Ram were present on behalf of
the first appellant. The other three persons who attended the meeting were the
Government representatives. One of them was the Deputy Controller, Food Accounts. The
Deputy Controller, Food Accounts, explained the history of the controversy to the
meeting. He said that the Government had been claiming 40% of the amount actually
debited to the Joint Punjab account before March, 1948 and payment by the appellants of
the claims of sellers for whom the Government had recovered certain amounts from the
consignees. Thereafter he stated the case, of the appellants which was set forth in their
reply letter of January 17, 1951. Then he stated that 40% of the amount actually debited
to the Joint Punjab account came to Rs. 5,85,000/12/-according to the Government and
Rs. 4,73,271/6/9 according to the appellants. He admitted that the Government has
recovered two sums of Rs. 2,92,102/11/9 and Rs. 2,67,963/10/1 from and on behalf of
the appellants. Thus the total recovery was admitted to be Rs. 5,59,781/8/4. Then he
said that the net credit in favour of the Clearing Agents came to Rs. 59,695/12/1 1/2
according to the Government and according to the Clearing Agents it was Rs. 86,510/1/3
1/2. Thereafter he added that they have "to settle all the accounts of all the sellers on
whose behalf the Punjab Government has recovered the money from the consignees and
the amounts found due to different sellers as per Delhi Committee proceedings by making
cash payment to Government of the amount found short". He ended by saying that the
appellants stated that they had settled the amounts of certain sellers and that they
promised to settle the accounts of more sellers by the third week of August, 1953. They
were asked by him to bring the payees' receipts with them in support of payments made
to sellers.

18. While examining the implications of the aforesaid minutes of the meeting, it is
necessary to bear in mind three things One, it is clear from the letter of the Director
General, Food and Civil Supplies, to the Secretary, Government of West Punjab dated
March 31, 1948 that the Government of East Punjab had great sympathy for the pitiable
plight of the appellants. The letter say that the Clearing Agents were unable to pay the
amounts debited to the Joint account of the Punjab Government before March, 1948,
because they had been uprooted from West Punjab where they had huge property worth
27 lakhs in the shape of mills, agricultural lands and other movable and immovable
properties, because large amounts were due to them from West Punjab Government on
account of the supply of foodgrains by them, because there were also other dues payable
to them on account of securities and shares in wholesale Pacca Ahrties Association and
Syndicate in West Punjab and because the commission due to them to the tune of Rs. 7
lakhs by Undivided Punjab was not being paid to them. It is said that on account of their
financial difficulties the Government bad decided that Rs. 12,55,214/6/3 payable by them
should be debited to the Joint Account of the Undivided Punjab and that all recoveries in
respect of those dues relating to the pre-partition period and payable at Lahore should be
credited to the Joint Account. Second, the Government was not legally liable to pay the
sellers from whom the appellants had purchased rice. Shri H. S. Achreja, Secretary to the
Governor, has deposed that there was "no legal liability of the Government to pay sellers,
whose goods were supplied to the consignees through the sellers at Shahdara. The
Syndicate had filed a suit against the Government. That suit was dismissed." Third, the
Government was likely to get mere 40% of the recovery from the appellants. Any
recovery in excess of it was likely to benefit West Punjab. So the Government could afford
to take a magnanimous decision without the likelihood of any loss to itself that only 40%
of the amount debited to the Joint Punjab Account before March 1948, should be
recovered from the appellants.
19. According to counsel for the respondent, the minutes of the meeting would show that
the decision to recover only 40% of the aforesaid amount was subject to the condition
that the appellants should pay the sellers for whom the Government has already
recovered certain amounts from the consignees. We are diffident to draw that inference
from the minutes of the meeting held on July 28 and 29, 1953. It is important to notice
the difference in the language of the Director's letter dated January 17, 1951 and the
minutes of the aforesaid meeting. The language of the former clearly evinces that
payment to the sellers by the appellants was an essential term of the proposed
settlement. The language of the minutes of the meeting does not show that payment to
the sellers was a condition precedent to the limitation of recovery to 40%. The minutes of
the meeting can be split up in two parts : (1) limiting the appellants' liability to 40%, and
(2) payment of the amounts due to sellers by the appellants. The first part is not
dependent on the performance of the second part as in the Director's letter of January 17,
1951.

20. This inference is supported by the subsequent conduct of the Government Officers.
After January 17, 1951, the Government had sent letters to the appellants indicating that
payment to sellers was an essential term of the proposed settlement of January 17, 1951.
A similar letter was never sent to the appellant after July 28-29, 1953. On the other hand,
letters of the Director, Food and Civil Supplies, dated April 21, 1954 and May 11, 1954
show that the Government was paying the sellers from the amount with it to the credit of
the appellants and asking them to give their consent to such payment. The Director, Food
and Civil Supplies, sent five letters to the appellants on April 21, 1954. They are exhibits
D-6 to D-11. In each of them he has stated that if no reply were received within a
fortnight, it would be presumed that the appellants had agreed to the payment being
made to the sellers mentioned in the letters. The appellants replied to those five letters
on May 3, 1954. They said that unless a detailed account of their post-partition dealings
was made available to them, it would not be possible to reply to the Director's letters. The
Director was requested to send a complete copy of the accounts. In his reply letter of May
11, 1954, the Director said that the appellants had already been given details of the
accounts in the meeting of July 28 and 29, 1953. He concluded by saying that if no reply
was received by him up to May 20, 1954, it would be presumed that they had no
objection to the payment being made to the sellers and that "this office would proceed to
make payment to the parties concerned." These letters indicate that in spite of the
absence of consent by the appellants, the Government was paying sellers from the
amount with it to the credit of the appellants. These letters show that instead of insisting
upon payment to the sellers by the appellants, the Government was accepting and acting
according to the appellants' proposal of January 17, 1951 that the sellers should be paid
by the Government from the money with it to the credit of the appellants.
21. In view of the foregoing discussion, we are of the view, that the Government had
decided to recover only 40% and no more. The Government's decision would amount to
remitting a part of the debt due by the appellants. Under Section 63 of the Contract Act. a
promise can remit a promise in part. It is not necessary under the Contract Act that such
remission should be supported by consideration. If the decision of the Government
amounts to remitting a part of the debt, as we think, then the Government cannot seek to
recover more than 40%. Admittedly more than 40% of the total liability has already been
paid to the Government. Therefore nothing remains due by the appellants.

22. Accordingly we allow the appeal and dismiss the suit of the Government. In the
peculiar circumstances of this case, the appellants shall get no costs throughout.

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