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Hindustan Ideal Insurance Co. Ltd. Represented by S. Rangarajan, Custodian and ors. Vs. Perla Satteyya Chetty Representing Himself and Other Members of His Joint Family as Father Manager - Court Judgment

LegalCrystal Citation
SubjectFamily;Property
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 323 of 1956
Judge
Reported inAIR1961AP183
ActsTransfer of Property Act, 1882 - Sections 59A, 65A, 130 and 132; Hindu Law
AppellantHindustan Ideal Insurance Co. Ltd. Represented by S. Rangarajan, Custodian and ors.
RespondentPerla Satteyya Chetty Representing Himself and Other Members of His Joint Family as Father Manager
Appellant AdvocateA. Kuppuswami and ;T. Ramachandra Rao, Advs.
Respondent AdvocateK. Ramachandra Rao and ;K. Venkateswara Rao, Advs.
DispositionAppeal allowed
Excerpt:
property - right over hypothecated property - sections 59 a, 65 a, 130 and 132 of transfer of property act, 1882 and hindu law - house hypothecated in favour of plaintiff by defendant no. 1 - defendant no. 2 in execution of money decree purchased the hypothecated house - suit for setting aside transaction - provisions to section 59 a and 65 a state that mortgagor was estopped from disputing title to hypothecated property and subsequent purchaser of his rights to property were likewise estopped - held, appellant entitled to recover its money by proceeding against the hypothecated house. - - their lordships there decided only the question of the binding character of the mortgage as such on the footing that moneys bad been borrowed contemporaneously with the mortgage for the purpose of.....narasimham, j. 1. the plaintiff has appealed against the judgment of the court of the subordinate judge, visakhapatnam, in o. s. no. 29 of 1955, by which the mortgage, which the plaintiff was enforcing, was held to be not binding on the minor sons of the mortgagor and consequently restricting the plaintiff-mortgagee's right to proceed against the mortgagor's share in the hypothecated properties. the cross-objections relate to the costs of the 2nd defendant-alienee who contested the suit, the 1st defendant being the mortgagor himself.2. the facts are these -- a simple mortgage. ex. a-1 was executed by perla satteya chetly in favour of the hindustan ideal insurance co., ltd., on 18-2-1950 for rs. 30,000/-. the items hypothecated were a house in visakhapatnam, a house in vizianagram and two.....
Judgment:

Narasimham, J.

1. The plaintiff has appealed against the judgment of the Court of the Subordinate Judge, Visakhapatnam, in O. S. No. 29 of 1955, by which the mortgage, which the plaintiff was enforcing, was held to be not binding on the minor sons of the mortgagor and consequently restricting the plaintiff-mortgagee's right to proceed against the mortgagor's share in the hypothecated properties. The cross-objections relate to the costs of the 2nd defendant-alienee who contested the suit, the 1st defendant being the mortgagor himself.

2. The facts are these -- A simple mortgage. Ex. A-1 was executed by Perla Satteya Chetly in favour of the Hindustan Ideal Insurance Co., Ltd., on 18-2-1950 for Rs. 30,000/-. The items hypothecated were a house in Visakhapatnam, a house in Vizianagram and two policies of life insurance taken by the mortgagor on his own life -- one for Rs. 10,000/- and another for Rs. 20,000. It was stipulated under the mortgage deed that the amount borrowed under the mortgage was payable with interest at 7 p.c. per annum with two months' notice but not earlier than 20-2-1953.

It was further stipulated under the deed that the mortgagor should pay the premiums as and when they fell due. There were other provisions with which We are not immediately concerned beyond noticing that the mortgagor agreed not to alienate the hypothecated properties without the consent of the mortgagee in writing and until the repayment of the mortgage debt. It was expressly recited in the mortgage deed that the amount was borrowed for repayment of the debts incurred by the mortgagor for his business.

Subsequently, without notice to the mortgagee, the mortgagor executed a sale deed (Ex. B-1) for a portion of the house in Visakhapatnam referred to as the 'annexe' in favour of the 2nd defendanton 20-10-1954 for Rs. 12,999/. It was recited in the sale deed that a mortgage in favour of the Hindustan Ideal Insurance Co., Ltd., the plaintiff, was subsisting and that the mortgagor would redeem the mortgage.

3. The 2nd defendant is the widow of oneVenkata Ramamnulu Naidu to whom the murtgagor was indebted on a pronote in a sum of Rs. 10,000/- borrowed thereunder. After the death of the said promisee, his widow filed a suit, obtained a decree in O. S. No. 39 of 1954, Sub-Court, Visakhapatnam and purchased the house in Visakhapatnam in entirety in execution proceedings, E. P. No. 217 of 1954 subject to the mortgage in favour of the Hindustan Ideal Insurance Co., Ltd.

4. The Insurance Company brought the suit on to recover Rs. 34,283-11-8 with further interest and costs. The mortgagor was impleaded as the 1st defendant as representing himseif and his undivided sons as father and manager of the Hindu joint family. The purchaser of the Visakhapatnam house was impleaded as the defendant.

5. The 1st defendant, mortgagor, admitted the execution of the mortgage and the borrowing ot Rs. 30,000/- thereunder and pleaded for a year's time for payment. He admitted the sale deed that he executed in favour of the 2nd defendant and the subsequent execution proceedings instituted by her for realisation of the money-decree in her favour.

6. The 2nd defendant contested the suit advancing two main pleas: firstly, that the hypothecated properties were coparcenary properties of the 1st defendant and his four minor sons and as such the mortgage executed by the 1st defendant was not binding on his minor sons as the mortgage debt was not contracted for any family business or for family necessity or for the discharge of any antecedent debts; secondly, that the plaintiff as mortgagee has to account for the hypothecated insurance policies which had been allowed to lapse. Alternatively she prayed for an equitable relief that item 2 may be proceeded against in the first instance.

7. The Subordinate Judge accepted the plea that the suit mortgage was not binding on the minor sons of the mortgagor and therefore confined the mortgagee's remedy against the mortgagor's share of the hypotheca. The second plea that the mortgagee was accountable for the amounts, of the life insurance policies, was rejected. In the result, the mortgagee was given a limited relief against a part of the hypotheca. In the said circumstances the mortgagee has preferred the appeal.

8. The grounds of impugning the judgment of the Subordinate Judge are two-fold: firstly, that the 2nd defendant, who is the purchaser in execution proceedings subject to the hypotheca is precluded from contending that the mortgage is not binding on the entire hypothecated property. The next contention is that the 1st defendant's family is a trading family, that he is entitled to start a new business and that the debts incurred for the business are binding on the sons. It was further contended that the mortgage debt was contracted fordischarging antecedent debts. We shall now address ourselves to these contentions.

9. The first contention that the 2nd defendant, who purchased the Vizagapatam house subject to the mortgage, cannot be heard to plead against the validity of the mortgage, seems to us substantial. The 2nd defendant had purchased only the equity of redemption at the court sale In execution of the simple money decree that she had obtained against the mortgagor. As such it would not be open tot her as purchaser of the equity of redemption to deny the validity of the mortgage.

10. We may read the express provisions ofthe Transfer of Property Act here. Section 59-A provides thus:

'Unless otherwise expressly provided, reference in this chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively.'

11. Section 65(a) enacts expressly that: 'the mortgagor shall be deemed to contract with the mortgagee that the interest which the mortgagor professes to transfer to the mortgagee subsists, and that the mortgagor has power to transfer the same.'

11a. Reading these provisions together, it emerges that the mortgagor is estopped from disputing the title to the hypothecated property and the subsequent purchasers of his rights to the property are likewise estopped.

12. We may also refer to legat pronouncements to the same effect. In Acchaibar Singh v. Rajmati, AIR 1929 All 483, a Division Bench has held in effect that:

'the estoppel referred to in Section 65(a) operates not only personally against the mortgagor but also against a subsequent transferee of mortgagor.

13. In Karupanan Servai v. Daivasigamania Pillai, : AIR1954Mad650 , a Division Bench of the Madras High Court has expressed with reference to Section 59-A of the Transfer of Property Act that:

'this section which was introduced by the Amending Act of 1929 is only a statutory recognition of what had been already laid down as the law and under this definition, mortgagee for the purpose of redemption would include all persons who derive title from him and it is immaterial' whether that title is derived by sale in invitum or by private treaty Or whether it is by act of parties or by operation of law.'

14. In Sarju Prasad v. Kareemullah, 139 Ind Cas 695 (All), it was expressed that;

'a purchaser of the mortgaged property at a sale in execution of a decree is estopped from denying the validity of the mortgage.'

15. The 1st defendant-mortgagor has not contested the suit himself. He did not raise any contest with reference to the binding nature of the mortgage on his minor sons.

16. In view of the clear provisions of the law and consensus of judicial authority, we are inclined to the view that the 2nd defendant cannot be heard to dispute the binding nature of the mortgage.

17.This ground on which the appellant succeeds is sufficient to dispose of the appeal. However, as the Subordinate Judge had gone into the merits and given his conclusions, we are inclined to examine the correctness of his conclusions, with reference to the contentions raised before us.

18. A few facts spoken to in evidence may be referred to before we address ourselves to the legal questions.

19. The family of the 1st defendant is a trading family belonging to the Vysya community. The adoptive father of the 1st defendant; late Ramamurty Chetty, was having rice mill business. The 1st defendant himself was having two rice mills, though subsequently he was having only one. (Vide the evidence of P. W. 3). While so, the 1st defendant had taken up business in Austin motor cars from 1947 to 1951 Or 1952, incurred losses and gave it up. It is not disputed that previously the family had no motor car business. It is also stated in evidence by P. W. 4 that the 1st defendant had an Over-draft account in the Bank in 1949 for his motor car business on the security of the cars. There is no controversy before us with regard to these facts.

20.On these facts, the learned Subordinate Judge observed that the 1st defendant had embarked on a new business different from the one which his father, late Ramamurthy Chetty had carried on, that the business in motor cars was a risky business and that the debts incurred in carrying on that motor car business for the discharge of which the mortgage was executed would not bind the shares of the minor sons in the joint family property.

21. Sri Kuppuswami, the learned counsel forthe appellant, has addressed elaborate arguments about the powers of a manager of a trading family to start a new business and it he is the father, to bind his sons, with this reasonable restriction that the business shall not be absolutely speculative and risky. The learned counsel has also impugnedthe finding of the Subordinate Judge that the motor car business embarked on by the 1st defendant was undoubtedly a risky business.

22. We shall now proceed to appraise thesecontentions having regard to the undisputed facts before us that the 1st defendant belongs to a trading family and that he started a new business in Austin motor cars and incurred debts and that he executed a mortgage of joint family properties to discharge them.

23. The question at issue is whether the debts incurred for the new business would bind his minor sons. We approach this question having before us the pronouncements of the Judicial Committee in Sanyasi Charan v. Krishnadhan, ILR 49 Cal 560: (AIR 1922 PC 237) and Benaras Bank Ltd. v. Harinarain, ILR 54 All 564 : (AIR 1932 PC 182). In the earlier pronouncement, a minor and his four adult brothers formed a Dayabhaga joint family which was currying on an ancestral business. The adult brothers started and carried On a new buiness. The Privy Council held that the Karta of a joint family cannot impose upon a minor member the risk and liability of a rew business started by himself and the other adult members.

24. In the later pronouncement, the principle of the above decision was extended to a Mitakshara family, and it was further held that the fact that the managing member was the father of the minor coparceners made no difference.

25. Following these decisions of the Judicial Committee, a Full Bench of the High Court of Madras has held in Narayanan v. Varnasi, ILR (1947) Mad 236: (AIR 1947 Mad 76) (FB), that it is not, in the absence of a special custom, within the power of the karnavan or manager of a Nambudri illom to bind the members of the family with liabilities arising out of the running of a 'kuri'.

26. But, it will he presently seen that these pronouncements still left the question open for discussion whether this limitation on the powers of a manager applies to the manager of a trading family or a family whose Kulachara or hereditary avocation is trade. One view seems to have been expressed that there could not be any such limitation with regard to the trading families whose Kulachara is trade. The firm ground on which it is founded is that otherwise there would be an undue curtailment of commercial adventure and enterprise, which is the very life, so to say, of a hereditary trading family.

27. Another ground yet firmer appears to be the recognition of the usages of a trading family as modifying the ordinary rules relating to the joint family so as to empower the managing member to start a new business either in place of the old or in addition to it.

28. We may notice that a Division Bench of the Madras High Court has emphasised this distinction very recently in The Canara Banking Corporation Ltd. v. The South Indian Bank Ltd., 1957-2 Mad LJ 502: (AIR 1958 Mad 132). The learned Chief Justice, who spoke for the Court, observed after making reference to the Benares Bank case, ILR 54 All 504: (AIR 1932 PC 182), and the rule enunciated therein that;

'there is considerable authority in support of the distinction sought to be drawn between the case of an ordinary family and a family whose hereditary avocation is trade.'

29. The Bench referred with approval to the summary of the legal position as expressed by Mayne in para 307, 11th Edn., of Treatise on Hindu Law and Usage: we may usefully extract the said passage referred with approval, which appears to have been adopted in a later pronouncement of that Court in Kumbakonam Bank Ltd. v. Shanmugam Pillai, (1956) 1 Mad LJ 58: (AIR 1956 Mad 306):

'It is however not unreasonable to distinguish between a family whose hereditary avocation or Kulachara is trade Or commerce and a non-trading family. In the latter case, of course, the starting of a new business cannot be within the powers either of a father or other managing member. In the former case, the usage of the family must he held to modify the ordinary rule relating to the joint family so as to empower the managing member to start a new business either in place of the old or in addition to it. Hindu Law does certainly recognise the usages of a trading family. And the distinction in the case of such families betweenan ancestral and a new business appears, so far as the risk and liability are concerned, to be more formal than substantial. An inherited business may involve quite as much risk as a new business and apparently there is no duty on the part of a manager to close down an ancestral business notwithstanding its evident risk. The element of risk, incident in varying degree to all kinds of trade, Or business, is necessarily assumed by trading families.'

30. The legal position adumbrated above resolves itself ultimately to this: that the law recognises a power in the managing member of a trading family to start a new business so as to bind the minor members of the family for the debts incurred in the new business with this reasonable restriction that the business should not be merely speculative Or one attended with unusual risk.

31. We may also refer to an earlier ruling of a Division Bench of the Madras High Court in Venkateswara Rao v. Ammayya, 1939) 1 Mad LJ 493 : (AIR 1939 Mad 561), were Varadachariar, J., (as he then was), held that:

'a debt by a Hindu father in connection with a trade started by himself, when trade was not the normal occupation of the family, cannot be held to be Avyavaharika debt, so as not to bind the sons.'

32. The Division Bench referred to Benares Bank case, ILR 54 All 584: (AIR 1932 PC 182), and distinguished it thus:

'We find nothing in ILR 54 All 564: (AIR 1932 PC 182), that supports this argument. Their Lordships there decided only the question of the binding character of the mortgage as such on the footing that moneys bad been borrowed contemporaneously with the mortgage for the purpose of carrying on a trade started by the father. They declined to deal with the question of the son's liability for the debt under the pious obligation doctrine, on the ground that the question had not been raised in the Courts in India. We have been asked to say that the decision in Achutharamayya v. Ratanji Bhootaji, ILR 49 Mad 211: (AIR 1926 Mad 323), as to 'commercial' debts is opposed to the Hindu Law texts. We are not prepared to accede to this contention. All that could be said against it is based upon an ambiguous test of Gauthama which has been differently read and variously interpreted by different commentators. It is too much at this rime of the day to ask the Court to bold that all debts borrowed for purposes of trade by a Hindu father are Avyavaharika debts.'

33. We may also refer to the pronouncementsof this High Court in A. S. No. 284 of 1956,Chakka Purnachandra Rao v. Kunala MalikharjunaRao, in A. S. No. 415 of 1955 to which one of uswas a party.

34. In the earlier pronouncement, it was held that the ordinary rule in families in which the business is a Kulachara is that unless the new business entered into by the manager is a speculative one, it is binding upon the family.

34a. In the later pronouncement, it was decided that'the question to be determined in each caseshould be whether having regard to the recognised business, profession, means of livelihood or what is called the 'Kulachara' of the family, the particular enterprise or embarking was only within the reasonable limits of the exercise thereof or really having regard to its nature Or extent a new speculative enterprise.'

35. We are inclined to view that there is consistent authority both of this Court and of the Madras High Court for the position that a new business could be started by the manager of a trading family so as to bind the family unless it is highly speculative and risky. Virtually, it resolves itself to a question of fact in each case.

36. The learned counsel for the 2nd defendant has referred to D. A. Kalandar Rowther v. Sivapunyan Chettiar, AIR 1939 Mad 633. In that case, what fell to be decided was whether a debt incurred for purchasing a new rice mill by mortgaging the family property would be binding on the minor son. It was expressed that the question was substantially a question of fact and on the facts of that case, the Division Bench took the view that the debt did not bind the minor sons.

37. Another decision cited is Rattamma v. Narayana Rao, AIR 1947 Mad 252. There again the Division Bench addressed itself to the type of the business embarked upon and held that the debts incurred for the said business did not bind the other members of the joint family.

38. We do not view these decisions as derogating from the consistent trend of rulings we have referred to.

39. Thus, the crucial consideration being the nature of the business carried on by the father (1st defendant), can it be said that his business in Austin Motor cars was speculative and risky which a prudent business man could not embark on? It is a matter of common knowledge that Austin motor cars are a rsputed make of cars which had a ready market in this part of the country and probably elsewhere too. We are of the view that the said business was of an easily marketable commodity of a reputed make in cars. It cannot be said by a process of backward reasoning that as he had been borrowing and incurring debts, the business that he embarked upon was a speculative and risky business that he was heading for losses.

40. For the said reasons, we find ourselves unable to endorse the view of the Subordinate Judge that the business in motor cars was a risky business and should not have been started by the 1st defendant as a joint family manager.

41. We have already expressed ourselves in agreement with the trend of authorities that a manager of a trading family could start a new business so as to bind the minor members of the family on the ground of usage of the family, trans cending the ordinary powers of a manager of a joint family, as the Hindu law does certainly recognise the usage of a trading family.

We are inclined to take the view that the debts incurred by the 1st defendant for the pur pose of carrying on the new business in Austin motor cars would be binding on his minor sons as debts incurred for carrying on a business wellwithin the powers of the father-manager of the joint Hindu family. If the debts were contracted for such a business as the 1st defendant could embark upon and bind the family, the debts incurred in carrying on the business would be normally binding on his minor sons.

42. We shall now examine the binding nature of the mortgage from the stand-point of an alienation made for the discharge of antecedent debts. The power of a father to alienate coparcenary property including his sons' shares for the payment of his own antecedent debts is a recognised feature of the law settled as such, since the pronouncement of the Judicial Committee in Brij Narain v. Mangala Prasad, AIR 1924 PC 50. A full Board of the Judicial Committee had addressed itself to the various aspects of father's alienations and expressed themselves by laying down certain propositions. The propositions laid down may be recalled with advantage.

'(1) The managing member of a joint undivided estate cannot alienate or burden the estate qua manager except for purposes of necessity but

(2) If he is the father and the other members are the sons, he may, by incurring debt, so long as it is not for an immoral purpose, lay the estate open to be taken in execution proceedings upon a decree for payment of that debt.

(3) If he purports to burden the estate by mortgage, then unless that mortgage is to discharge an antecedent debt, it would not bind the estate.

(4) Antecedent debt means antecedent in fact as well as in time, that is to say, that the debt must be truly independent and not part of the transaction impeached.

(5) There is no rule that this result is affected by the question whether the father, who contracted the debt or burdens the estate, is alive or dead.'

43. Eventually, it emerges that in cases governed by the Mitakshara law, a father may sell or mortgage not only his own share but also the shares of his male issue in family property for purposes of satisfying antecedent debts of his own not incurred for any family necessity or benefit provided that they are not immoral or illegal.

44. We may now examine the debts which were discharged by the money borrowed under the mortgage in question.

45. It is seen that the mortgage deed itself recites that an amount of Rs. 30,000/- was borrowed for repayment of the debts incurred by the 1st defendant in connection with his business. The application of this money to the debts incurred prior thereto was proved by evidence. Ordinarily, an alienee is not called upon to see to the application of the proceeds. He has only to put himself on his guard by what is enjoined as a reasonable enquiry. But, this enquiry has relevancy in relation to an alienation for legal necessity as distinct from an alienation for the discharge of antecedent debts. In other words, an enquiry as to the legal necessity for the alienation enjoined on the alienee has no reference to an alienation for the discharge of antecedent debts by the father.

46. In the instant case, the 1st defendant had kept himself out of the way of the mortgagee. So,it would appear that the mortgagee himself had taken the trouble to place before the Court how the money borrowed had been appropriated towards the debts already incurred of the character of antecedent debts.

47-50. (His Lordship considered the evidence and proceeded).

As we have said already, an alienation for legal necessity stands on a footing fundamentally distinct from an alienation by a father for the discharge of antecedent debts. This distinction has been brought out in the propositions adumbrated in AIR 1924 PC 50 referred to supra. It is a distinct power of the father to alienate joint family property including the shares of his sons therein for his antecedent debts, not tainted by illegality or immorality.

The alienation for necessity is a limited power of a manager of the joint family in the exercise whereof a father does not stand in position superior to a managing member of the joint family. Consequently, different considerations arise if an alienation is sought to be supported on the ground of legal necessity. Those considerations cannot be imported in examining an alienation by a father for the discharge of his antecedent debts.

51. We may with advantage cut short further discussion by referring to the statement of the law with reference to decided cases as summarised by Mayne in bis Treatise, 11th Edition. Rules 335 and 336 summarise thus: (omitting the unnecessary portions.)

'335. Where a Hindu son comes into Court to assail a mortgage made by his father.....it restsupon him, if he seeks to escape from having his interest affected by the sale, to establish that the debt which he desires to be exempted from paying was of such a nature that he, as the son of a Hindu, would not be under a pious obligation to discharge.....'

'Rule 336. The burden of proof which is upon the son to establish that the debts in question were incurred by proving a general charge of immorality but there must he proof of direct connection between the debt or the expenditure and the acts of immorality .....' It is unnecessary for the alieneeor the creditors to show that there had been a proper inquiry or that the money had been borrowed for necessity.'

We accept the above as a correct statement of the law.

52. We are, therefore, unable to support the reasoning adopted by the learned Subordinate Judge to discredit the debts in question. The learned Subordinate Judge seems to have expressed certain doubts as to the genuineness of the antecedent debts; but, on scanning the evidence, we find that there is no justification for expression of doubt. Nothing was elicited in the cross-examination of the witnesses, to doubt their credibility.

Nothing was even suggested as a probable reason for discrediting the witnesses. From the record, the evidence appears disinterested and independent. Further, we find no plausible reason for putting up any faked debts and showing their discharge. We are of the view that the mortgage was executed for tbe discharge of antecedent debts of the father, and as such binding on his sons.

52a. The mortgage would be binding also fromanother perspective, viewed from the aspect of the pious obligation of the sons.

53. We may clarify certain fundamental aspects in this context. The powers of a managing member of a joint family to alienate are appraised subjectively, that is to say, subjective considerations arise relative to the restrictions on the exercise of such power as is vested in the manager. The basis of liability for the father's debts on the ground of pious obligation is entirely distinct and different. It is an illustration of a principle which is constantly recurring in Hindu law that legal rights are Liken subject to the discharge of moral obligations.

It has its foundation in the son's moral and religious obligation to rescue the father from the sins arising from the non-payment of his debts. The general rule is that a son is liable to pay the debts of his father except when they are of such a character as to fall within the recognisable category of debts, to wit 'Avyavaharika' debts or debts for 'illegal or immoral purpose.' Vide P. Markandeyulu v. M. Suryanarayana, (1958) 1 Andh WR 313 at p. 314 where this proposition was discussed and enunciated.

54. There is no suggestion in this case that the 1st defendant's debts are Avyavaharika or illegal or immoral, so that, the mortgage debt in question would also bind the sons by reason of their pious obligation.

55. From the aforesaid discussion, it emergesthat the suit mortgage would he binding on the minor sons of the 1st defendant viewed in all possible ways; whether as debts for a business carried on by the father which is binding on the sons, or as an alienation for the discharge of antecedent debt, or as a debt binding on the sons by reason of the pious obligation cast on them by filial relationship.

56. For the said reasons, we set aside the judgment of the learned Subordinate Judge and find differently that the suit mortgage is binding on the sons' shares also, that is to say, that the mortgagee could proceed against all the hypothecated properties for the realisation of his dues.

57. Sri Ramachandra Rao for the 2nd defendant urged a contention that even so, the amount due under the mortgage has to be reduced by the insurance policy amounts as the policies had lapsed. He argues that the mortgagee had committed default in the payment of premium and so, he has to bear the losses.

58. This plea has been refected by the learned Subordinate Judge; and we consider that he was right in so doing. It cannot be said that the mortgagee had committed default by not paying the premium payable under the policies. The mortgage deed (Exhibit A-1) provides expressly for the mortgagor to pay the premiums as and when they fall due. The relevant clause therein be set out in this context.

'That the mortgagor shall pay on the due dates or the grace days allowed under the rules of the, mortgagee company the premiums payable on the Life Insurance policies taken by him in the mortgagee company and pledged and hypothecated to the mortgagee and mentioned in the schedule'.

59. It would appear also that the plaintiff-mortgagee had issued notices calling upon the mortgagor to pay the premiums and keep the policies alive. P. W. 3 produced Ex. A-41 dated 4-8-1953 and A-42 dated 1-8-1953 ns the office copies of the notices issued to the 1st defendant, as regards the insurance policies.

60. The argument propounded before us obviously runs counter to the express stipulations in the mortgage deed. It cannot be said that there was default on the part of the mortgagee so as to make him accountable for the moneys due under the policies.

61. Sri Ramachandra Rao has relied on Muthukrishna Aiyar v. Veeraraghava Aiyar, ILR 38 Mad 297 : (AIR 1915 Mad 1031) (FB) and Mulraj Khatau v. Vishwanath, ILR 37 Bom 198 (PC) in support of his contentions.

62. We find that these decisions render no assistance at all for the contention propounded before us. In the Madras case it was held that

'By virtue of Sections 130 and 134 of the Transfer of Property Act a mortgage in writing of a promissory note executed in favour of the mortgagor by a third party for a debt, created an assignment of the promissory note in favour of the mortgagee even without an endorsement, and as the right of the promisee to sue on the note became vested in the mortgagee, the mortgagee alone is entitled to sue on the note and in taking accounts of the mortgage, the mortgagee is liable to be debited with the amount of the note if he, without any justification allowed the recovery of the debt barred by limitation.'

63. In the Privy Council case, there were rival claimants to the proceeds of a policy of insurance on the file of their debtor. It was decided by the Privy Council that the case was governed by Section 130, Sub-section 1 of the Transfer of Properly Act and the claimant, who had based his claim on the instrument in writing was held entitled to the proceeds.

64. The decisions cited referred to adjudications with reference to Sections 130 and 132 of the Transfer' of Property Act which obviously have no application to the instant case.

65. Section 130 of the Transfer of Property Act deals with transfer of 'actionable claims' and provides expressly that by the execution of an instrument in writing signed by the transferor or his duly authorised agent, 'all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is .....provided be given or not.' Sub-section (2) places the matter beyond doubt.

'The transferee of an actionable claim may, upon the execution of such instrument of transfer as aforesaid, sue or institute proceedings for the same in his own name without obtaining the transferor's consent to such suit or proceedings, and without making him a party thereto.'

66. Section 132 provides:

'The transferee of art actionable claim shall take it subject to all the liabilities and equities to which the transferor was subject in respect thereof at the date of the transfer.''(66a) The hypothecation of life insurance policies with a specific stipulation in the mortgage deed referred to supra cannot obviously attract the provisions of Sections 130 and 132 of the Transfer of Property Act, The decisions cited relate to decisions with reference to those sections and have no application to the facts of the instant case. We are convinced that the analogy docs not apply; and we may also point out that the liability of the mortgagee is expressly excluded by the contract.

67. The argument in the circumstances is utterly devoid of any merit and substance. We cannot possibly give effect to this contention.

68. In the result, the judgment of the Subordinate Judge Visakhapatnam, in O. S. No. 29 of S855, is modified so as to entitle the plaintiff-Company to recover its money by proceeding against the hypothecated properties in entirety. The plaintiff-company, therefore, succeeds and is entitled to its costs, both here and in the court below.

69. It follows that the cross objections filed by the 2nd defendant for costs fail and are dismissed. We propose no order as to costs in the cross-objections as we are allowing costs in the appeal.

70. The appeal is allowed with costs here and in the court below. Time for redemption six months from this date.


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