1. In this case the following facts are undisputed. The plaintiff held two policies upon the life of Dwarkadas Dharamsey, one in the London and Lancashire Assurance Company and the other in the New York Assurance Company, which had been deposited with him by Dwarkadas as security for pecuniary liabilities incurred by the plaintiff from time to time on behalf of Dwarkadas.
2. On the the 23rd of April 1909, the plaintiff was responsible upon promissory notes and bills of Dwarkadas to the extent of Rs. 75,000 and in July those obligations were renewed. Of those a sum of Rs. 50,000 was payable by the 1st of September and Rs. 25,000 by the 20th of September 1909 to the Indian Specie Bank. On the 20th of August 1909, the plaintiff received notice from the Bank to discharge the obligations upon their due dates and was informed that the advances would not be renewed. On the 28th of August Dwarkadas committed suicide, and in the month of September the plaintiff had to deposit security with the Specie Bank against his obligations.
3. On the 4th of September the plaintiff's attorneys gave notice to the agents of the London and Lancashire Assurance Company that the plaintiff held policy No. 59656 on the life of Dwarkadas as security for the advances made to the latter. The plaintiff was then informed by the agents that on the day before the death of Dwarkadas, they had received for registration a deed of assignment of that policy in favour of the defendant Mulraj Khatau. This deed of assignment was dated the 13th August 1909, and under it the defendant claims payment of the policy moneys in preference to the plaintiff.
4. The suit was filed by the plaintiff against the defendant and the Insurance Company to establish his claim to the policy money. The Insurance Company were discharged from the suit on payment into Court of the moneys secured by the policy.
5. The defendant claims to be the legal transferee of the policy and the moneys secured thereby on the ground that at the date of the transfer they were an 'actionable claim ' withinthe meaning of Section 3 of the Transfer of Property Act, and he contends that the plaintiff can claim no interest in or charge upon the policy moneys by mere deposit of the policies. The' defendant's position is challenged by the plaintiff on this ground, amongst others, that the policy did not constitute an 'actionable claim' within the meaning of the statute. It was contended on his behalf, first, that there was no debt, and, secondly, that if there was a debt, it was secured by hypothecation of moveable property.
6. In order to determine these questions, it is necessary to refer to the terms of this policy. The policy provides that in consideration of the payment of the annual premium thereby reserved so long as the assured should be living up to a specified date then on the death of the assured and upon such proof of death as the directors might reasonably require and proof of age, and of title to this policy, the capital funds and property of the Company should be liable to the payment to the executors, administrators or assigns of the assured of the sum of Rs. 30,000 : provided that the liability under the policy should take effect and be satisfied exclusively out of the capital funds and property of the Company, and that neither the Company nor the directors nor the shareholders of the Company should be under any further or other liability in respect of any claim or demand under the policy than to pay and contribute to the capital of the Company the amount for the time being unpaid on the shares in such capital.
7. Policies of assurance in similar form have on several occasions been the subject of judicial decision. It has been held by Sir George Jessel in Matthew v. Northern Assurance Company (1878) 9 Ch. D. 80. that an Insurance Company is a debtor in respect of policy moneys secured by a policy in this form. We, therefore, hold that the claim to the policy moneys is a debt within the meaning of Section 3 of the Transfer of Property Act. Is it then a debt secured by hypothecation of moveable property? That point has also been decided in England. In In re State Fire Insurance Company (1863) 1 De G.J. & S. 634 and In re Sovereign Life Assurance Company  3 Ch. 279 it has been held that provisions such as those above set out do not constitute a charge upon the property of the Company.
8. We, therefore, hold that the policy moneys are a debt not secured by hypothecation of property. They do not constitute a debt payable in present before the death of the assured put a conditional and contingent debt within the meaning of the statute the contingency being the death of the assured and the condition, the proof of death and of title to the policy.
9. It was next contended on behalf of the plaintiff that the defendant by his assignment of the 13th August was not an assignee for valuable consideration and as a volunteer was in no better position as against the plaintiff than his assignor. It is, however, undisputed that the defendant was, at the beginning of June, a creditor of Dwarkadas to the extent of nearly a lac of rupees, and on the 8th of June had paid to him a further sum of Rs. 50,000 on short loan for two days. The money was not re-paid and the defendant in consequence put pressure upon Dwarkadas through his solicitor as a result of which Dwarkadas saw the defendant on the 20th of June and promised to give him life policies to the extent of a lac and ten thousand rupees as security and said that he would hand over the policies to the defendant's solicitors at once. He did in fact hand over four policies of the value of Rs. 60,000 but failed to hand over the policy in question in this suit and one of the New York Life Assurance Company. The assignment of the 13th of August was effected in consequence of his undertaking to hand over policies as security for the existing debts.
10. Under these circumstances we feel no doubt that the assignment was not voluntary but for consideration. If authority is needed we may refer to Leask v. Scott (1877) 2 Q. B. D. 376.
11. The defendant is, therefore, by his assignment the transferee for consideration of an actionable claim against the Insurance Company, subject, however, to the conditions imposed by the terms of the policy upon his transferer, and as provided by Section 132 to all other liabilities and equities to which his transferer was subject in respect thereof at the date of the transfer. We will now consider the position of the plaintiff which is attacked by the defendant, on the ground that because Section 130 provides that the transfer of an actionable claim shall be effected only by the execution of an instrument in writing signed by the transferer or his agent, the plaintiff acquires no claim to the policy moneys by virtue of the deposit. The words of Section 130 which are relied upon, are similar to the words in Section 54 and Section 59 which provide that the transfers by way of sale or mortgage can be effected only by registered instrument in the case of transactions exceeding Rs. 100 in value. The existence of these provisions, however, does not interfere with the creation of charges upon immoveable property as is clear from the terms of Section 100. There is, therefore, no reason to suppose that the words relied upon in Section 130 were intended to prohibit the creation of charges upon securities for money, or other documents of title not covered by Section 137. To use the words of Lord Macnaghten in the Bank of New South Wales v. O'Connor (1889) 14 A C 273, 'it is a well-established rule of equity that a deposit of a document of title without either writing or a word of mouth will create in equity a charge upon the property to which the document relates to the extent of the interest of the person who takes the deposit. In the absence of consent that charge can only be displaced by actual payment of the amount secured.'
12. The cases of Crossley v. City of Glasgow Life Assurance Company (1876) 4 Ch. D. 421 and Spencer v. Clarke (1878) 9 Ch. D. 137 illustrate the application of this rule to policies of life assurance.
13. We, therefore, hold that the plaintiff did by the deposit of the policy and the obligation incurred by him on the security thereof acquire a charge upon the policy and the money secured by it.
14. It does not appear to have been disputed in the Court below that he occupied this position. His claim was, however, rejected on the ground that the defendant by virtue of his assignment in writing executed by Dwarkadas acquired a legal estate in the policy moneys which must prevail over the equitable interest of the plaintiff, unless it could be shown that the defendant had taken his assignment with notice of the plaintiff's charge.
15. It is also contended that the defendant by giving notice to the Company of his assignment on the 27th of August 1909 acquired priority over the plaintiff's charge.
16. The use of the expression 'legal estate' in connection with the transfer executed in favour of the defendant loses sight of the fact that in this case we are concerned with the law regarding the transfer of actionable claims, or what in England is called the assignment of choses in action, and not with the English law regarding legal and equitable estates in land. It is one of the conditions of a transfer of an actionable claim that the transferee takes subject to the equities to which the tranferer was subject in respect thereof at the date of the transfer. It is the same in England in the assignment of choses in action-subject to the acquisition of priority by notice which we will shortly consider. The result is that (subject to the question of notice) equitable rights cannot be overridden and transferees stand in the same position inter se as possessors of equitable rights upon property of the nature of real estate. The closeness of this parallel is illustrated by the case of In re Morgan, Pillgrem v. Pillgrem (1881) 18 Ch. D.93 where Sir George Jessel said of the depositee of a trust lease with whom it had been deposited for his own purposes by a trustee who had renewed it in his own name: 'He was, therefore, a purchaser without notice, who did not get the legal title, therefore he must take the lease subject to prior equities, that is, to the trust on which it was held.' Chapter VIII of the Transfer of Property Act does not exactly reproduce the English Law.
17. In England ' where several successive assignments are made of the same debt or fund, the assignees presumptively take in order of date because each assignment is presumed to operate only upon the beneficial interest left in the assignor after the prior assignments; but an assignee who takes without notice of any prior assignment may secure his own assignment by giving notice to the debtor, and thereby obtain priority over the prior assignee who has neglected to give notice.' (Leake on Contracts, 4th Edition, p. 832). Chapter VIII of the Transfer of Property Act, as amended by Act II of 1900, contains no provision allowing a transferee giving notice to obtain priority over a previous transferee who has failed to give notice.
18. Under the Act, prior to the amendment, Section 131 provided that no transfer of any debt should have any operation against the debtor unless express notice of the transfer was given to him, unless he was otherwise aware of such transfer; and on receiving such notice the debtor was bound by Section 133 to give effect to the transfer. The validity of a transfer thus depended entirely upon the giving of notice. Therefore, the person who gave no notice acquired no interest in the debt. These provisions went much further than the English law by which an assignment is good as between assignor and assignee although notice may not have been given to the debtor. As the law stands under the amended Indian Act the validity of the transfer in no way depends upon the giving of notice to the debtor although notice is necessary to prevent the debtor from dealing with the debt to the prejudice of the assignee. The English rule which permits an assignee to obtain priority over earlier assignees by giving notice no longer finds any counterpart in the Act. It is suggested in a well-known commentary (a) that the reason of the omission is that since the transfer is complete and effectual on the execution of the instrument the assignor has nothing left to assign and the possibility of a second assignment to another assignee is thus excluded. This view, however, dues not seem consistent with Section 134 which contemplates transfers of debts by way of mortgage and the application of the moneys when recovered first in payment of the amount secured by the transfer, and then of the residue to the transferer or other person entitled to receive the same.
19. In our opinion transferees under the Act take in order of date and acquire no priority by giving notice. The defendant, therefore, can take no, advantage by his notice of the 27th of August 1909.
20. The case may be decided upon a consideration of the question, which party fulfills the condition of the policy by proving title thereto. That condition, we think, must be taken literally as referring to the document known as the policy and not merely to the debt thereby created. An Insurance Company which has issued a policy containing such a condition. is, we think, entitled to decline to pay the policy moneys if the policy is not produced, except upon a complete indemnity. This would seem to be so on principle and to follow from the decision of the Vice Chancellor in Bushnan v. Morgan (1833) 5 Sim. 635., where it was held that an Insurance Company was not bound to pay interest upon the policy moneys claimed under a lost policy between the date at which it would have been payable under the policy and the date of an indemnity given by the claimant.
21. This conclusion is not, we think, affected by the decision in the case of England v. Lord Tredegar (1866) 35 L.J. Ch. 386, relied upon by the respondent's counsel, as that decision assumed that an Insurance Company is a trustee entitled to pay money into Court under the Trustees Relief Act, a view which was dissented from by Sir George Jessel in the case of Matthew v. Northern Insurance Company, above referred to.
22. The liability of an Insurance Company to pay to an encumbrance by deposit of the policy is shown by Crossley v. City of Glasgow Life Assurance Company (1).
23. Having regard to the importance of the existence of the policy itself in all transactions in which use is sought to be made of the interest of the assured as a security for the money, the condition of the policy is perfectly reasonable and should be given effect to.
24. The London and Lancashire Company have from the time of the earliest communication which took place between them and the defendant Mulraj, and prior to the date of his assignment, shown the importance they attach to the possession of the policy. It is in evidence that Messrs. Madhavji and Kamdar, acting nominally on behalf of Dwarkadas, though really on behalf of the defendant, informed the agents of the Company on the 23rd of July 1909 that the original of the policy No. 59656 was either displaced or. lost and that Dwarkadas requested them to issue a duplicate of the same. The agents replied that they would be glad to issue a certified copy of the policy on receipt of the enclosed form of indemnity duly completed by Dwarkadas. The indemnity proposed was in the following form :-
I hereby declare that I have lost my life Policy with the London and Lancashire Life Assurance Company No. for the sure of Rs. that I have endeavored to recover it but without success, and that I have not parted with it by way of sale or deposit but that it has been lost whilst in my own possession, and I therefore ask the said Company to grant me a certified copy thereof I undertaking to deliver up the certified copy to the said Company in the event, of the original Policy being found or coining to my hands. And I hereby agree to indemnify and hold the said Company harmless against all damages, losses and expenses which they may incur by reason or in consequence of the loss or non-production of the original Policy and the issue of the certified copy in lieu thereof and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of an Act made and passed in the year 1873 intituled 'The Indian Oaths Act.
Declared and subscribed before me on day of 1908.
Justice of the Peace.
25. No further communication took place between the defendant and the Company's agents until the 27th of August when Messrs. Madhavji and Kamdar forwarded the assignment now in question for registration. Upon this the agents wrote asking if the policy had been found. To this a reply was received that the original of the policy was not found so the deceased had assigned the same by executing a separate transfer form in the defendant's favour.
26. Assuming that the plaintiff could acquire a charge by virtue of the deposit of the policy, we think that the defendant is only able to prove title to the policy subject to that charge. He is in effect in no better position than his assignor Dwarkadas. His position is not analogous to that of a purchaser or mortgagee of real property who has acquired the legal estate in the subject of his transfer so as to override the rights of existing equitable encumbrances.
27. This conclusion is supported by the case of West of England Bank v. Batchelor (1882) 51 L.J. Ch. The plaintiffs claimed not under an equitable assignment but as assignees under an assignment which fell both within the provisions of the Policies of Assurance Act 1867 (30 & 31 Vic. c. 144) and of the Judicature Act, Section 25, Sub.-section 6, and they sued for a declaration that their mortgage was a first charge on the policy, the subject of the assignment. The policy was in the hands of the assignor's solicitors who claimed a lien on it for unpaid costs. That lien was treated as an equity subject to which the plaintiffs took their assignment but it was argued for the plaintiffs that the equity constituted by the lien was repelled by negligence in not giving notice of it to the Insurance Company. The Court, however, held that no duty lay on the holder of the policy to give notice because the fact of his holding the policy was notice to all the world that it was held by some one not present. The rule in Dearie v. Hall (1823) 3 Russ. 1 did not, therefore, apply and the holder's equity was not lost. This decision is directly in the plaintiff's favour whether we are right in holding that the rule in Dearie v. Hall finds no place in Chapter VIII of the Transfer of Property Act or not.
28. In this view of the case, it is not strictly necessary that we should come to a decision upon the question, which was much discussed before us and in the original Court, as to whether or not the defendant took his assignment with notice that the policy was pledged to secure a debt, but as we have come to a conclusion differing from the learned Judge on the sixth issue we think it desirable to give our reasons.
29. It is conceded on the defendant's behalf that if he took with notice of a valid charge upon the policy, his title would not prevail over that of the plaintiff. The circumstances under which it is contended that he had notice are as follows :-
On the 8th of June 1909, the defendant, being already a creditor of Dwarkadas for about Rs. 90,000, paid him as a loan for two days Rs. 50,000. Dwarkadas did not repay him, the defendant pressed him for all the money due to him.
30. Dwarkadas promised to pay a large sum on account but failed to do so. The defendant then put pressure on him through his solicitor Mr. Madhavji. Then Dwarkadas came and promised the defendant 011 the 20th June to hand over to Madhavji life policies for Rs. 1,10,000 as security saying that all premia had been paid up to date. On the 24th June the defendant came to know that only four policies for Rs. 60,000 had been handed over and asked why the other policies for Rs. 50,000 had not been handed over. Dwarkadas said he had lost or misplaced them.
31. The defendant says he first realised Dwarkadas was in monetary difficulties about the middle of June: he heard he was giving securities to other creditors and so thought he too would ask for security.
32. The four policies for Rs. 60,000 were handed over to the defendant's solicitor on the 22nd of June, and a formal assignment of the same was executed on the 23rd June. They included a policy No. 58,649 for Rs. 20,000 of the London and Lancashire Company of an earlier date than the policy in question in this suit which bore an endorsement showing it had already been the subject of assignment by, and reassignment to, Dwarkadas.
33. In June no assignment of the missing policies was taken. On the 22nd of July Dwarkadas gave to the defendant's solicitors particulars of the missing policies saying he had lost them and the solicitors should get duplicates from the Companies. The Companies were then written to and the London and Lancashire, as already stated, agreed to give a certified copy on receipt of a specified form of indemnity duly completed by Dwarkadas.
34. The form of indemnity brings out prominently the determination of the Company not to be satisfied by statements that the policy was lost unless they were not only indemnified against loss in consequence both of the non-production of the original and of the issue of a certified copy but received a solemn declaration that the policy had not been parted with by way of sale or deposit. It is not surprising, therefore, that when the defendant soon afterwards gave instructions for the preparation of assignments of the policies he also gave instructions for the preparation of the indemnity bonds. All the documents were prepared and taken to Dwarkadas for execution on the 13th August. He executed the assignments but excused himself from executing the indemnity bonds, as they required to be executed before a Justice of the Peace and he said he would get it done. It is admitted, however, that there were Justices of the Peace actually in the same office as Dwarkadas. Dwarkadas never executed nor affirmed the statements contained in the indemnity bonds and committed suicide on the 28th of August.
35. The defendant says he thought he was secure as soon as he got the assignments on the 13th without getting duplicate policies and that it would have taken a long time to get the duplicates from the Head Offices. This excuse is not consistent with the knowledge of his solicitors that the London and Lancashire Company's agents would only issue a certified copy but would do that upon receipt of the form of indemnity duly completed by Dwarkadas. It is difficult to understand why if the defendant thought the assignments were sufficient he did not take them on the 23rd of June with the assignments of the other policies. He says that Dwarkadas had told him he had not charged the policies. It is evident, however, that the defendant attached importance to the possession of the policies, or failing that, to the possession of certified copies.
36. The letter of the agents of the London and Lancashire Company cannot have lessened in his eyes or those of his solicitors the importance of the possession of the policies but rather indicated the danger which that Company's experience showed to exist of a secret deposit of the policy as security for money. To this must be added the desperate position of Dwarkadas which was known to the defendant and the fact that his large insurances must have been taken out in order to furnish him with securities upon which to raise loans. It was hardly credible that Dwarkadas did not know what had become of two policies for large amounts on which he said all premia had been paid. Applying the remarks of Fry J. in West of England Bank v. Batchelor, the fact that Dwarkadas did not hold the policies was notice that they were somewhere else and that there was a risk of some one having a lien upon them. If the defendant had determined to learn the truth he could have insisted on Dwarkadas affirming the declaration in the indemnity bond or on his advertising for the missing policies. A definite refusal on the part of Dwarkadas would have shown the defendant clearly enough that Dwarkadas had pledged the policies.
37. We cannot doubt that in the circumstances of the case the defendant would not have advanced any money to Dwarkadas on the assignment of the policy because of the strong suspicions aroused from the first which the subsequent conduct of Dwarkadas tended to accentuate. The defendant preferred, instead of making further enquiries or pressing for execution of the bond and declaration, to make his position if possible better by giving notice of the assignment to the Company. The giving of the notice when Dwarkadas' affairs had reached the lowest point and without any further communication from the Company's agents when taken with Dwarkadas' unwillingness to execute the bond and declaration appear to us to indicate a consciousness that the policy had been pledged. The defendant did not know that it was held by the plaintiff but we think he can have had no reasonable doubt that it was held as security by some one to whom Dwarkadas was indebted.