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Kevaldas Kilabhai Vs. Chhotabhai Bhailalbhai Patel and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai High Court
Decided On
Case NumberFirst Appeal No. 587 of 1951
Judge
Reported inAIR1955Bom454; (1955)57BOMLR844; ILR1955Bom962
ActsTransfer of Property Act, 1882 - Sections 58; Evidence Act, 1872 - Sections 114
AppellantKevaldas Kilabhai
RespondentChhotabhai Bhailalbhai Patel and ors.
Appellant AdvocateV.N. Chhatrapati, Adv.
Respondent AdvocateN.R. Oza, ;R.D. Patel and ;A.T. Patel, Advs.
Excerpt:
.....documents of title to immovable property--subsequent memorandum recording completed transaction of equitable mortgage--whether such writing constitutes contract between parties and requires registration.; if a debtor gives his documents of title to immovable property to his creditor, when the debtor has already a debt to pay to the creditor, the fact of delivery of the documents of title to the creditor would raise a presumption of an equitable mortgage by deposit of title deeds. the fact that there was subsequently a memorandum recording the completed transaction of the equitable mortgage does not go to establish that the writing itself constituted the contract between the parties and such writing is not required to be registered.; the requisites of a mortgage by deposit of title-deeds..........1370 of 1947. the plaintiff applied for permission to file a separate suit on the strength of the equitable mortgage under order 2 rule 2, and the permission was granted on 15-5-1947. the plaintiff has, accordingly, filed this suit on 11-7-1949, to enforce the equitable mortgage.3. defendant i filed a written statement, and his principal contention was that no equitable mortgage was made in plaintiff's favour. he contended that documents were not deposited with the plaintiff with the intention of making an equitable mortgage, and his further contention was that the writing, exh. 33, was taken from him as a result of fraud and misrepresentation. lastly, toe contended that the writing exh. 33 was not legal and was inadmissible in evidence. defendants 2 and 3 are subsequent purchasers of.....
Judgment:

1. This appeal arises from a suit to recover Rs. 7,500 at the foot of an equitable mortgage made by defendant 1 in favour of the plaintiff. The circumstances giving rise to the suit cut of which the appeal arises are briefly these.

2. The plaintiff is a firm under the name and style of Kevaldas Kilabhai, Bombay. Chhota-bhai Bhallalbhai. who is defendant 1, owed monies to the plaintiff firm in the sum of Rs. 12,000 and odd, and for the amount, he executed a promissory note in the plaintiff's favour. It seems that the plaintiff firm filed a suit on the Original Side of this Court, and a decree was passed in plaintiff's favour on 2-9-1947. In suit No. 1370 of 1947. The plaintiff applied for permission to file a separate suit on the strength of the equitable mortgage under Order 2 Rule 2, and the permission was granted on 15-5-1947. The plaintiff has, accordingly, filed this suit on 11-7-1949, to enforce the equitable mortgage.

3. Defendant I filed a written statement, and his principal contention was that no equitable mortgage was made in plaintiff's favour. He contended that documents were not deposited with the plaintiff with the intention of making an equitable mortgage, and his further contention was that the writing, exh. 33, was taken from him as a result of fraud and misrepresentation. Lastly, toe contended that the writing exh. 33 was not legal and was Inadmissible in evidence. Defendants 2 and 3 are subsequent purchasers of the suit house. Defendant 2 did not file a written statement But the contentions of defendant 3 were Similar to those of defendant No. 1.

4. On the contentions of the parties, the learned Judge raised several issues and, in the end, he dismissed the plaintiff's suit. The principal ground on which the suit failed was that the writ-ing dated 23-2-1945, was not legal and was not ad-missible tn evidence, because, according to the learned Judge, it did not create an equitable mortgage, as it was not registered. Peeling aggrieved by the decree, the plaintiff has come up in appeal and on the plaintiff's behalf Mr. Chhatrapati has contested the finding of the lower Court on issue No. 4.

5. it is contended by Mr. Chhatrapati that the lower Court was wrong in taking the view that the writing dated 23-2-1945, was not legal and was not admissible in evidence. Now, there is no dispute that defendant 1 owed monies to the plaintiff firm. It is not in dispute that defendant 1 owed in that way to the plaintiff firm a sum of Rs. 12,000 and odd. It is also not in dispute that defendant 1 had executed in favour of the plaintiff firm a promissory note for the said amount. The question which arises for decision is whether the writing, exh. 33, itself created an equitable mortgage and was inadmissible for want of registration. If the writing did not require registration, the plaintiff's claim must succeed. If the writing did require registration, then the plaintiff's claim must fail, and there is no other question argued in this appeal.

6. Now, the expression 'equitable mortgage' is defined in the Transfer of Property Act. Section 58(f) of that Act runs as follows:

'Where a person in any of the following towns, namely, the towns of Calcutta, Madras and Bombay, and in any other town which the Provincial Government concerned may. bv notification in the Official Gazette, specify in this behalf delivers to a creditor or his agent document of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds'.

The requisites of a mortgage by deposit of ttitle-deeds are: (1) a debt, (2) a deposit of title-deeds, and (3) an intention that the deeds shall be security for the debt. Mr. Oza does not disupte that there was a debt which defendant No, 1 owed to the plaintiff. Mr. Oza also does not dispute that a deposit of title deeds was made in this case. The two conditions, therefore, are satisfied in this case But his contention is that, according to the 3rd requirement, there must be an intention that the deeds shall be security for the debt, and in this case that intention is expressed in the writ-tag exh 33. It is. therefore, necessary first to refer to the terms of the writing. The writing, exh. 33 runs as follows:

'Bombay dated 23rd February 1945. Messrs. Kevaldas Killabhal, Dear Sirs,

I beg to record that yesterday the 22nd instant, I deposited the Title Deeds of my house situate at Nadiad in Patl Ratanji, Dumral Bazar, Limbastn Khacli bearing Nadiad Municipal Ward No. l, House No. 72, Tika No. 10 and City Survey No. 51/25 part mentioned in the list below as and by way of Equitable Mortgage for securing the sum of Us. 6000 and interest being part of the amount due under the Promissory Note dated Kartak Sud 1st Section 2000 passed by my firm Messrs. Jasbhai Chhotabhai by their partners, i. e. myself and my partner Jasbhai Vithalbhai for Rs. 1,001 and interest. The said deposit was made in the ' office of Messrs. Choksey and Co. Solicitors, in the presence of Mr. M. B. Choksey, Solicitor. List of Title Deeds.

(1) Mortgage without possession in Gujarat language dated 1st April 1933 passed by Patel Shankarbhai Revandas and Patel Ishwarbhai Re-vandas to Patel Chhotabhai Bhallalbhai.

(2) Sale Deed of Half share of the said house dated 19th October 1938 by Patel Ishwarbhai Revandas to Patel Chhotabhai Bhaiialbhai.

Yours faithfully,

Sd/-

Patel Chhotalal Bhaiialbhai,

(In his own handwriting).

The writing referred to above shows that the title-deeds were deposited with the plaintiff on 32-2-1945 and the writing was executed by defendant 1 on 23-2-1945. The Court below has taken the view that the writing exh. 33 constituted a contract between the parties and the question for decision is whether that view is right.

7. in the plaint, which the plaintiff filed, the date of the equitable mortgage is given as 23-2-1945. Again, in para 2 of the plaint, it is recited :

'Thereof Rs. 6000 and interest has been secured as per the mortgage security relating to the house referred to in para. 1 herein of one said house on date 23-2-1945.'

So far, therefore, as the plaint goes the plaintiff firm says that the date of the equitable mortgage is 23-2-1945. This is a circumstance in favour of the contention of defendant 1, and the Court below has relied upon this circumstance. At the trial, evidence was given on behalf of the plaintiff. It appears that the plaintiff firm consists of three partners, viz. Chimanlal Kevaldas, Bhaiialbhai Kuberdas and Arnbalal Maganlal. It would appear from the notes of evidence in suit No, 1370 of 1947 that Chimanlal KevaJdas was examined on behalf of the plaintiff firm in suit No. 1370 of 1947. This would appear from exh. 37 in this case. In this suit, both Bhaiialbhai and Antbalal have been exam in ed.

The second circumstance on which the lower Court has relied is the evidence of Bhaiialbhai. Bhailalbhai's evidence is that defendant No. 1 has created a mortgage by a writing, the writing being made in Bombay, He stated that defendant 1 came with documents of title when Bhaiialbhai and Ambalal were present. He stated that they (meaning Vithalbhai and defendant 1) had come with documents of title on the same day, and on the same day the writing was made in solicitor's office. In cross-examination he stated, that the documents of title were given to him on the same day and then he went to the solicitor's office. The documents were given to him in his firm and then he went with all the documents to the solicitor's office. Towards' the end of his evidence, he stated as follows:

'The documents were given to us in our firm and with them we went to Solicitor's office. It is false if it is written in the equitable mortgage deed that the title deeds were given on a previous day.'

The learned Judge, therefore, relied upon the evidence of -Bhailalbhai and the recital, in the piaint in order to come to the conclusion that the equitable mortgage was effected on 23-2-1945. But at the trial, another partner, by name Amba-lal, was also examined on behalf of the plaintiff firm, and he said that the documents of title for equitable mortgage were given to him at Bombay on 22-2-1945. His evidence was that the two documents were given to him in the firm's office, where all the terms were settled and then he went to the office of the solicitor Mr. Choosey, and he asked the solicitor, 'Should I take the documents? and the solicitor said that he should take them.

According to Ambalal, the solicitor asked him to see him on the next day for having a document, and the document was then made, and in his presence it was executed by defendant No. 1. In cross-examination he stated that it was not true that, as stated in the plaint, documents were given on 23rd, and that it was not true that Chhotabhai had come to him on 23rd at Bombay, Chhotabhai having come to him on 22nd. The evidence of Ambalal, when analysed, shows that, according to the witness, the documents were deposited with the plaintiff firm on 22-2-1945, While the writing, exh. 33, was executed in the office of the solicitor by. defendant 1 on 23-2-1945.

The Court below has accepted the evidence of Bhallalhhai and has rejected the evidence of Ambalal as being the evidence of a liar. It is also necessary to refer to the evidence of defendant I. Defendant I stated that he gave the documents to Vithalbhai in order that a loan may be raised for him. According to defendant 1, Vithalbhai. gave the documents to. Ambalal Maganlal at Bombay, and Vithalbhai asked defendant 1 to wait for 2 or 4 days, and then defendant No. I went on February 23, 1945, to. the firm of the plaintiffs. He stated that when he and others went to the solicitor's office on 23rd, he gave the documents to the solicitor. The solicitor said that if he gave the documents on 23rd, they would require to be registered, and according to defendant 1, so one date anterior, 1. e., 22nd, was written.

In the course of his cross-examination, defendant 1 stated that Ambalal Maganlal gave him these documents at the solicitor's office and so he stated that Vithalbhai gave these documents to Ambalal. With reference to the writing, exh. 33, he stated, 'I signed exh. 33 after knowing full well the contents of it.' According to defendant No. 1, he does not know English. Now, if defendant No. 1 signed the writing, exh. 33, after knowing full well the contents of the writing, it is hard to believe that he would not protest when he knew that the writing stated that the documents were deposited Yesterday', i.e., on 22-2-1945. But Mr. Oza argues that defendant 1 does not know English, snd so his statement should not be taken at its face value. But I am unable to accept this argument. Even if a person does not know English, it does not mean that he does not understand the contents of a writing, when the contents are explained to him in Gujarati. The writing was executed in the office of the solicitor. He admitted that the solicitor talked with him in Guja-rati, and I find it difficult to accept the contention that, although he signect the writing, exh. 33, he signed it without knowing full well the contents of the writing.

8. The position, on the evidence, therefore, is this. In favour of defendant 1 is the fact that the plaint mentions 23-2-1945, as the date of the equitable mortgage. In favour of defendant 1, is also the evidence of Bhailalbhai who stated that the mortgage was created on 23-2-1945. As against this evidence, is the evidence of Ambalal, and Ambalal's evidence was that the documents of title were given to him at Bombay, first on 23-2-1945, and the writing was executed on 23-2-1945. That the documents were given to Ambalal prior to 23-2-1945, can also be gathered from the evidence of defendant No. 1 himself.

Defendant 1, in his evidence, stated that Vithalbhai gave the documents to Ambalal afe Bombay, and some two or four days after that, he went, on 23-2-1945, to the firm of the plaintiffs. It is clear, therefore, that the documents of title were given to Ambalal, a partner in the plaintlBS' firm, prior to 23-2-1945. This position receives indirect support also from the evidence of Chiman-la'i Kevaldas, who, when cross-examined in suit No. 1370 of 1947, stated that it was true that there was an equitable mortgage on 22-2-1945. This would be seen from exh. 37. In this state of the evidence, I must hold that the documents of title were given to Ambalal, i. e. to the plaintiff firm, prior to 23-2-1945.

It is true that Bhailalbhai, Ambalal and defendant No, 1 met in the office of the solicitor on 23-2-45, When the writing, exh, 33, was executed But on the evidence, it is not possible to hold that the documents of title were, for the first time, deposited in the office of the solicitor on 23-3-1945. This conclusion has an important bearing upon the question of law, which is, whether the writing, exh. 33, required registration.

9. Now, a transaction called an equitable mortgage by deposit of title-deeds may be made orally. In some cases, the documents of title are nrst deposited and an equitable mortgage effected, and, subsequently a memorandum is prepared recording the transaction of the equitable mortgage. In cases in which there is first a deposit of title deeds, followed by a memorandum, the question often arises as to whether the memorandum itself constitutes a contract between the parties, if the memorandum merely records a past transaction of an equitable mortgage, then the writing does not require to be registered. But on the other hand, if the memorandum itself constitutes a contract or a bargain between the parties, then in such a case, the writing would require to be registered, and the question for decision in this appeal is whether the writing, Ex. 33, constitutes a contract between the parties.

10. Now, in this connection one has to bear in mind certain other facts. Prior to 22-3-1945, defendant 1 was a debtor, and the plaintiff flrm. a creditor of defendant 1. On the evidence, I nave already held that the documents of title were deposited with Ambalal prior to 23-2-1945. Now, the documents of title must have been .deposited witb Ambalal for some purpose. The plaintiff firm had a money claim against defendant No. 1, and when documents of title are given to a creditor, it is, I think, reasonable to infer that the intention on the part of the debtor is to create security in respect of the loan. One does not give one's documents of title to another in these circumstances, unless the intention is to create security in respect of the debt.

Mr. Oza argues that the Intention is to be gathered from the writing and from the surrounding circumstances. So far as the writing, exh. 33,goes, it recites that defendant 1 deposited the titledeeds cm 22-2-1945, and this seems to be consistentwith defendant 1's own evidence in this case. This is also consistent with the line of cross-examination adopted by defendant 1 himself while cross-examining ChimanlaL Kevaldas .in &uit; No. 1370of 1947. If, therefore, the documents of title weregiven to Ambalal, a partner in the plaintiff's firm,prior to 23-2-1945, when defendant 1 was a debtorof the plaintiff firm, it IB, I think, not a violentInference to draw that the intention on the partof defendant 1 was to give security in respect ofhis debt. The question of intention is not easy todecide. Intention cannot be proved by positive 'evidence. Intention has to be inferred from the circumstances of the case. But if a debtor gives hisdocuments of title to the creditor, when the debtor had already a debt to pay to the creditor,the fact of delivery of the documents of title tothe creditor would raise the presumption of amortgage. If, therefore, the documents were given toAmbalal on 22-2-1945, when defendant 1 was adebtor of the plaintiff firm, there is no doubtthat the intention was to create security in respectof that debt in relation to the documents of title,and the fact, that there was subsequently a memo-Irandum, such as the writing, exh. 33, in the present case, does not go to establish that the .writ-ing itself constituted a contract between the parties. That is because a transaction was alreadycomplete, and the transaction was not completedby the execution of the writing.

11. The only difficulty which I have felt again and again in the course of the hearing of this appeal is a statement in the plaint and the evidence of Bhailalbhai which says that the equitable mortgage was executed on 23-2-1945. But, in a sense, that is also correct, because the writing, exh. 33, is a Memorandum bearing date 23-2-1945. The writing, exh. 33, is the repository of the transaction already completed, and if the lawyer who drafted the plaint put the elate of the equitable mortgage as 23-2-1945, without reading the contents of the writing, exh. 33, I can only say that he has bungled in the case.

This is a just claim and also a justifiable claim, though put upon an unjustifiable basis, and when all the facts are properly analysed and understood in their proper perspective and in their proper context, I am clear that the title deeds were deposited with the plaintiff's firm represented by Ambalali on 22-2-1945, and that was the transaction of the equitable mortgage, and the writing, dated 23-2-1945, was merely a memorandum recording the completed transaction of 22-2-1945.

Under these circumstances, I do not attach Importance to the recital in the plaint, nor to the evidence of Bhailalbhai. But I prefer to accept the evidence of Ambalal and I accept his evidence for the reason that admittedly, 011 the evidence, these documents of title were given to Ambalal by Vithalbhai, and this is admitted by defendant 1. In my view, therefore, the lower Court was wrong in coming to the conclusion that the writing, exh. 33, constituted a contract between the parties. I hold that prior to 23-2-1945, the documents of title were delivered to Ambalal, and the writing, exh. 33, merely represented the completed transaction between the parties.

12. Mr. Oza for defendant 1 referred to a case reported in -- 'Ebrahlm Hazi v. Ofll. Trustee', : AIR1937Cal741 (A). The writing which the Court was considering in that case is set out at page744, and on a construction of the writing, the Court came to the conclusion that the letter embodied the terms of the loan and that it was contemporaneous with the transaction, being accompanied by the delivery of title deeds and so it required registration. Several cases have been referred to at page 743 of the report, and in substance, the principle which these cases establish, is that if the writing constitutes the contract and embodies the terms of the contract, then the writing would require to be registered. But if the writing is preceded by effecting the transaction of an equitable mortgage, then the writing, would not require to be registered.

In the present case, the writing, exh. 33, shows that the documents of title were deposited on 22-2-1945, and the writing recites that they were deposited for securing the sum of Rs. 60, 000 and interest. It is true that a deposit was made in the office of the solicitor. But that was a second deposit made in the presence of the solicitor. But that does not displace the deposit of title deeds already made with Ambalal. Reading the writing, exh. 33, fairly and in the light of the oral evidence recorded in the case, I am satisfied that the writing, exh. 33, docs not constitute a contract between the parties. It is merely a record of the transaction already completed, and, in my opinimv, therefore, the writing, exh. S3, does not require to be registered. In view of this conclusion, I think, I must differ from the Court below and hold that the writing, exh. 33, does not require registration. If it does not require registration, it is clear that the plaintiff's claim must succeed.

13. in the writing, exh. 33, two documents have been mentioned--a mortgage and a sale-deed The sale-deed is as regards the half share of one of the two mortgagors, and it appears from the record that the other share was purchased by the plaintiff at a court-sale in 1939. This was prior to the date when the equitable mortgage was effected. It is true that the sale certificate was not given by defendant 1 along with the two documents mentioned in the writing, exh. 33. But it has been held in -- 'Surendramohan v. Mahen-dranath', : AIR1932Cal589 (B), that an equitable mortgage, by deposit, may be valid even if only some of the material documents of title to the. property have been deposited. In the present case, defendant l had a completed title to the whole of the property, partly by a private purchase, and partly, by a Court purchase. There is no doubt, therefore, that defendant l intended to give, and gave by way of security, the house described in the writing, exh. 33.

14. The result of the aforesaid discussion is that this appeal must succeed.

15. The appeal will, therefore, be allowed,the decree of the Court below reversed and therewill, accordingly, be a preliminary mortgage decree in favour of the plaintiff in terms of para.98 of the plaint. The plaintiff will be entitled tointerest at 4 per cent, from the date of suit andnot at 6 per cent as claimed by him. The plaintiff wi!l be entitled to recover from the defendantscosts of the suit as well as of the appeal.

16. Appeal allowed.


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