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Kabul Chand Vs. Badri Das - Court Judgment

LegalCrystal Citation
Subject Civil
CourtAllahabad
Decided On
Reported inAIR1938All22; 173Ind.Cas.130
AppellantKabul Chand
RespondentBadri Das
Excerpt:
- - we think that a case like this can be easily decided on that footing. and if they had done so, they could not have failed to discover that the mortgagors bad, by a deed dated 19th april 1923, created a charge as regards the share which came into their possession by pre-emption on 30th april 1920, a fact which it is not disputed, was known to them. they failed to redeem the mortgage of 1915, with the result that part of the property was sold for satisfaction of the prior mortgage. the result of our findings is that these appeals fail and are dismissed with costs......of their family, and that there was no legal necessity for the loan evidenced by the mortgage deed in suit. defendants 4 and 8, the appellants in this court, contested it on the ground that a portion of the mortgaged property did not belong to the mortgagors on the date of the mortgage and that qua such portion the mortgage deed was invalid. subsequently it became common ground that the property hypothecated under the deed in suit included a portion of a mahal in the village comprising the share of the mortgagors and that of another cosharer, who had executed a sale deed in favour of a stranger, giving rise to a right of preemption exercisable by the mortgagors. it was also common ground that the mortgagors were contemplating a suit for preemption in respect of the share transferred.....
Judgment:

Niamatullah, J.

1. These two appeals arise out of a suit for sale on foot of a mortgage deed, dated 2nd July 1919, executed by Raja Ram, who is now represented by his sons, and by Lajja Ram who is defendant 3. The sum secured by the deed was Rs. 200 carrying interest at the rate of Re. 1-8-0 per cent, per mensem, compoundable every year. The plaintiff, in whose favour the deed was executed, brought the ?suit, which has given rise to these appeals against the sons of one of the mortgagors and the other mortgagor (defendant 3), impleading also, among others, defendants 4 and 8, the appellants in the two appeals before us, who were described as subsequent mortgagees. The suit was contested by some of the defendants on the ground that the property mortgaged by Raja Ram and Lajja Ram belonged to a joint Hindu family consisting of the executants and other members of their family, and that there was no legal necessity for the loan evidenced by the mortgage deed in suit. Defendants 4 and 8, the appellants in this Court, contested it on the ground that a portion of the mortgaged property did not belong to the mortgagors on the date of the mortgage and that qua such portion the mortgage deed was invalid. Subsequently it became common ground that the property hypothecated under the deed in suit included a portion of a mahal in the village comprising the share of the mortgagors and that of another cosharer, who had executed a sale deed in favour of a stranger, giving rise to a right of preemption exercisable by the mortgagors. It was also common ground that the mortgagors were contemplating a suit for preemption in respect of the share transferred to the stranger when they executed the mortgage deed in question. Their right to pre-empt was so clear that they had no doubt that they would acquire the property sold to the stranger, and in anticipation of the exercise of their pre-emptive right they included, as part of the mortgaged property, the share which had been sold to the stranger and which they intended to acquire by exercising their right of pre-emption. It is conceded that this share was subsequently acquired by the mortgagors by preemption. To the defence put forward by defendants 4 and 8, the plaintiff replied that though part of the mortgaged property did not belong to the mortgagors on the date of the suit, yet as it was subsequently acquired by them, the mortgage, as regards such share became effective when the mortgagors acquired it. The plaintiff relied on Section 43, T.P. Act.

2. Both the lower Courts held that the entire consideration of Rs. 200, advanced by the plaintiff, was warranted by legal necessity, the same having been borrowed by the mortgagors for payment of Government revenue and for the purchase of bullocks. Both the lower Courts likewise found that the mortgage deed enured for the benefit of the plaintiff in respect of the share which did not belong to the mortgagors on the date of the mortgage, but was subsequently acquired under a decree for pre-emption. On these findings the plaintiff's suit for recovery of principal and interest due under the mortgage deed in suit by sale of the mortgaged property was decreed. Defendants 4 and 8 filed separate appeals in the lower Appellate Court. They have done the same in this Court. S.A. No. 1505 of 1933 is that of defendant 4. S.A. No. 513 of 1935 is that of defendant Section As identical questions have been raised and argued in these appeals, we propose to dispose of both of them by this judgment.

3. It was argued by learned Counsel for the appellants that in the absence of a finding by the Courts below, it should be held that no legal necessity for contracting a loan at a high rate of interest has been made out. It is contended that the validity of the mortgage having been challenged, the plaintiff ought to have established not only that there was legal necessity for the loan itself, but also for raising it at the high rate of Re. 1-8-0% per mensem compoundable every year. No specific plea in reference to the rate of interest was raised in the written statement filed by any of the defendants. The judgments of the lower Courts do not indicate that the questions which are argued in second appeal were mooted in those Courts. The question of legal necessity was raised by members of the family of the mortgagors. Strictly speaking, it is not open to defendant 4 and 8, the appellants in this Court, who are subsequent transferees, to raise any question of this kind. In any case, we think that they are not entitled to raise it in second appeal. If the plea had been taken at the proper time, the plaintiff might have established that the mortgagors, whose need of money was urgent, could not obtain a loan at a more favourable rate of interest. Accordingly we overrule the appellant's contention on this part of the case.

4. The most important question argued in the case is whether the mortgage deed in suit can be considered to have validly conveyed to the plaintiff an interest in the property which did not belong to the mortgagors when they executed the deed in suit and which they subsequently acquired in a pre-emption suit. We do not consider it necessary to enter upon a detailed examination of the arguments for and against the view that Section 43 is applicable to the circumstances of this case. This Court has held in several cases that, if the transferee was aware of all the circumstances and the state of the transferor's title, so that it could not be said that the mortgagor fraudulently or erroneously represented to the transferee that the property transferred by the deed belonged to him and that he was authorized to transfer it, Section 43 does not apply : see for instance Mulraj v. Indar Singh : AIR1926All102 . If the question was res integra, we would have considered it for ourselves, as in our opinion much can be said on either side. The lower Appellate Court held, relying on the rulings of this Court, that Section 43 does not help the plaintiff, but it went on to hold, on the authority in Ram Lal v. Shiama Lal : AIR1931All275 that on equitable grounds, the plaintiff is entitled to treat the property subsequently acquired as security for the money advanced by him. The case undoubtedly supports the view taken by the lower Appellate Court. We are however unable to find any statutory law on which the view can be based. The learned Judges applied the-doctrine of grant feeding the estoppel. How far that doctrine is applicable, apart from Section 43, T.P. Act, is a question not free from difficulty. The learned Judges apparently think that Section 43 is not exhaustive on the subject and that it is open to the Courts in this country to draw on the English law to decide cases on equitable-considerations, even though Section 43 does not cover the case.

5. Learned Counsel for the respondents hast referred us to another case of this Court, Gaya Din v. Kashi Gir (1907) 29 All. 163 which is very similar to the case before us. In that case, the plaintiff in a pre-emption suit, in order to procure funds for the prosecution of his suit, executed a mortgage comprising certain property of which he was the owner and also the property which was the subject matter of the suit for pre-emption. The suit for pre-emption was successful. It was held that the mortgage took effect as regards the property of the subject of the preemption suit from the time when the plaintiff mortgagor obtained possession by virtue of his decree in the suit. The learned Judges based their view on certain English cases. They quoted from Collyer v. Isaacs (1882) 19 Ch. D. 342 the following passage:

A man cannot in equity, any more than at law,, assign what has no existence. A man can contract to assign property which is to come into existence in the future, and when it has come into-existence, equity treating as done that which ought to be done, fastens upon that property, and the contract to assign thus becomes a complete assignment.

6. It is possible that the learned Judges thought that the rule accepted by them is to be applied in this country, being covered by Section 43, T.P. Act. That section is-not however in terms referred to by the learned Judges. At another place in their judgment they observe:

It appears to us that when the mortgagor acquired by preemption and got possession of the pre-empted property, equity treating that as done which ought to be done gave the mortgagee a charge by way of mortgage upon the pre-empted-shares.

7. This dearly indicates that the learned Judges gave effect to the transaction as-creating a charge. We think that a case like this can be easily decided on that footing. Section 100, T.P. Act, provides:

Where immovable property of one person is, by act of party or by operation of law, made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property and all the provisions hereinbefore contained which apply to a single mortgage shall, so far as may be, apply to such charge.

8. If Section 43 is not applicable, the deed in suit did not create a mortgage as regards the property which the mortgagors did not own but subsequently acquired under the pre-emption decree. We have referred to the terms of the deed and find that in clear terms it makes the property which was subsequently acquired by the mortgagors, though the deed treats it as then belonging to the mortgagors, as security for the money advanced there under. The lower Court has found that the mortgagee was aware of the fact that the share did not belong to the mortgagor at the time when the mortgage deed was executed. It has also found that both the mortgagors and the mortgagee had every reason to expect that not long afterwards that part of the mortgaged property would also belong to the mortgagors. Taking this fact with the contents of the mortgage deed, it is clear to us that, in substance, the parties had agreed that the money, then advanced, would be charged on the property then belonging to the mortgagors and that another share mentioned in the deed, for which a suit for pre-emption was in contemplation, would also be a security for payment of the money when it was acquired. The transaction qua this property did not amount to a mortgage but created a charge on the share to be subsequently acquired by the party to whom the debt was advanced. A floating charge on the assets of a company for the time being is a familiar instance of a charge being created on property not in existence at the time when the loan is advanced but which is acquired subsequently. We think that the share which the mortgagors subsequently pre-empted became a security for the money borrowed by them previously under the deed of 19th April 1923. Accordingly we hold that the decree of the lower Court in this respect can be supported on the ground mentioned above, if the charge is otherwise valid.

9. Learned Counsel for the appellants contended that unless the plaintiff proves that defendants 4 and 8 had notice of the charge, he cannot succeed in enforcing it against them. The reply to this contention, given by the lower Court, is that the mortgage deed in suit was registered and defendants 4 and 8 should have searched the registration office to find out if any encumbrances had been created before they advanced the money under their own deeds. Defendant 4 entered the witness box and stated that he inspected the registers for four years, i.e. for a period after 30th April 1920, when the decree for preemption was passed in favour of the mortgagors. Defendant 8 did not give his own evidence. A person is said to have notice of a fact when he either actually knows it or but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it. We think that in all the circumstances of the ease, defendants 4 and 8 ought to have searched the registers for at least 12 years; and if they had done so, they could not have failed to discover that the mortgagors bad, by a deed dated 19th April 1923, created a charge as regards the share which came into their possession by pre-emption on 30th April 1920, a fact which it is not disputed, was known to them. Accordingly we hold that the appellants are not protected by para. 2 of Section 100, T.P. Act.

10. A subsidiary question has been argued on behalf of the appellants to the effect that they are entitled to redeem the mortgaged property piece-meal. It is said that part of the mortgaged property had been hypothecated by the mortgagors to the plaintiff under a deed executed in 1915. In enforcement of that mortgage that part of the property was sold and purchased by some members of the plaintiff's family. It is contended that, in these circumstances, the integrity of the mortgage now in suit has been broken and that it is open to the defendants to redeem only part of the mortgaged property. The lower Appellate Court has repelled this contention and we think rightly. To the suit; brought for the enforcement of the mortgage of 1915, all those who are parties to this case were also parties. They failed to redeem the mortgage of 1915, with the result that part of the property was sold for satisfaction of the prior mortgage. The property which is left for the satisfaction of the mortgage in suit is the only property on which it can operate. The integrity of the mortgage in question in the present ease has, in no sense, been broken. The result of our findings is that these appeals fail and are dismissed with costs.


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