Skip to content


Sheo Prasad Bansal Vs. Kulsharastra Sabha and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1938All527
AppellantSheo Prasad Bansal
RespondentKulsharastra Sabha and ors.
Excerpt:
- - i have heard learned counsel on both sides and i am clearly of opinion that the view taken by the courts below that the sabha is not bound by the mortgage deed is not correct. on a perusal of the above i am quite satisfied that babu kamta prasad effected to mortgage the boarding house on behalf of the sabha under the authority he claimed to have obtained from itb managing committee. 1). if the corporation had the power to sell, it had the power to delegate its authority to anyone it liked. this being so, it must be held that it has powers, like an ordinary individual, to delegate its power to any of its officials in accordance with its rules......that the sabha, through its secretary, had borrowed a sum of money from him and had executed a mortgage deed on behalf of the sabha. the suit was instituted for enforcing the mortgage deed. the sabha denied the mortgage set up and further pleaded that even if its execution was proved, it did not bind the sabha as the secretary had no power to execute the same on its behalf. the secretary's defence was that the sabha was bound as the loan had been taken under the orders of the sabha and the money borrowed was spent on the property of the sabha, the trial court held that the mortgage was not binding on the sabha. the suit was dismissed as against defendants 1 and 2. the plaintiff appealed. the lower appellate court agreed with the view of the trial court that the mortgage deed was not.....
Judgment:

Rachhpal Singh, J.

1. These are two connected appeals arising out of a mortgage suit and can conveniently be disposed of together. The facts are as follows : There is a society styled Kulsharastra Sabha in the town of Aligarh. One Babu Kamta Prasad, a vakil, was the secretary of this Sabha. The plain, tiff alleged that the Sabha, through its secretary, had borrowed a sum of money from him and had executed a mortgage deed on behalf of the Sabha. The suit was instituted for enforcing the mortgage deed. The Sabha denied the mortgage set up and further pleaded that even if its execution was proved, it did not bind the Sabha as the secretary had no power to execute the same on its behalf. The secretary's defence was that the Sabha was bound as the loan had been taken under the orders of the Sabha and the money borrowed was spent on the property of the Sabha, The trial Court held that the mortgage was not binding on the Sabha. The suit was dismissed as against defendants 1 and 2. The plaintiff appealed. The lower Appellate Court agreed with the view of the trial Court that the mortgage deed was not binding on the Sabha. Two appeals have been preferred. One is by the plaintiff. The other is by Babu Kamta Prasad, defendant 3. The principal question for the determination in the case is whether the mortgage deed in. suit is binding on the defendant Sabha. I have heard learned Counsel on both sides and I am clearly of opinion that the view taken by the Courts below that the Sabha is not bound by the mortgage deed is not correct. It is established that Kamta Prasad executed the mortgage deed in suit. The terms of the mortgage deed are before me. I have no doubt in my mind that Babu Kamta Prasad executed the deed on behalf of the Sabha and I entirely agree with the finding of the lower Appellate Court on this point. The learned Judge says:

On a perusal of the above I am quite satisfied that Babu Kamta Prasad effected to mortgage the Boarding House on behalf of the Sabha under the authority he claimed to have obtained from itB Managing Committee....

2. The learned Judge of the lower Appel. late Court however held that the Sabha had no power under its Rules and Regulations to permit the secretary to create a mortgage. On this point, it appears to me that the view of the learned Judge is quite wrong. The learned Judge admits that the Sabha under the rules are invested with the power to sell or mortgage its property. Ho further finds that the Sabha has the power to delegate its power to the Managing Committee. He however thinks that under the rules the Managing Committee has no power to delegate its authority to the secretary. There is no authority for the view taken by the learned Judge of the lower Appellate Court. If the Sabha has the power to sell the property owned by it, lit has the power to delegate its authority to the Managing Committee. And similarly, the Managing Committee has full power to delegate its power to anyone it likes. Now, we find that in the case before me, the Managing Committee passed a special resolution at a meeting authorizing and empowering the secretary to mortgage the Boarding House as a prior debt due from the Sabha had to be paid. It is not easy to understand why the Managing Committee was not entitled to delegate its power to the secretary. It may be pointed out that the learned Munsif in his judgment says that no resolution was passed by the Managing Committee. But this view is entirely wrong and the trial Court went out of its way to come to this finding. The plaintiff had produced evidence to show that a resolution was passed. But none of the members of the Managing Committee had the courage to come forward and state on oath that this was not true. No evidence was produced on behalf of the defendant Sabha to rebut the evidence of the plaintiff. In these circumstances the view taken by the Munsif was entirely wrong. It must therefore be held that a resolution was passed by the Managing Committee under which the secretary was empowered to create the mortgage in suit.

3. The learned Munsif in his judgment refers to a passage in Bagchi's Law of Corporation in British India (T.L. Lectures) and thinks that it goes against the plaintiff. The passage is to be found at page 120. It runs as follows:

When property is conveyed by a corporation or a charge is created on corporate property, the dispositive acts are to be done in the corporate name. Thus if a mortgage is executed by the corporators in their individual names, although all may join, and although they all may intend to bind the corporation, such a mortgage is not a valid legal incumbrance on the corporate property.

4. It appears to me that there is absolutely nothing in this passage which might hurt the case of the plaintiffs. The cited statement has nothing to do with the case before me. All that the statement means is that a valid mortgage can be created if it is executed in the name of the corporation and that a mortgage by all the corporators in their, own names does not bind the corporation. But, as I have already mentioned, no such question arises in the present case on the pleadings of the parties. A corporation as a general rule and apart from the operation of general or special statutes has the same powers and is subject to the same liabilities as a natural person. Thus as a general rule, though there is no express power to purchase land or to sue or be sued, yet the corporation may so purchase, or sue or be sued as fully as though all these necessary incidents had been expressly granted : Halsbury's Laws of England, Vol. 8, Para. 801 (Edn. 1). If the corporation had the power to sell, it had the power to delegate its authority to anyone it liked. Further it is to be remembered that there is a difference between a statutory corporation and a corporation which is not statutory. The former has such rights and can do such acts only as are authorized directly or indirectly by the statute creating it; the latter, speaking generally, can do every thing that an ordinary individual can do unless restricted directly or indirectly by statute: Halsbury, Vol. 8, Para. 804. Then again it is said that a corporation created by charter has at common law power to deal with its property and to incur liabilities in the same way as an ordinary individual : Halsbury, Vol. 8, Para. 805. In the case before us we have to deal with the case of a corporation which is non-statutory. It will therefore be seen that its powers to deal with its property are the same as of an ordinary individual. The above passages taken from Halsbury's Laws of England are complete answer to the incorrect view taken by the learned Judge of the lower Appellate Court that the deed in suit was not valid because in the rules of the Sabha there is no mention that the Managing Committee is competent to delegate its power to the secretary to mortgage the property of the Sabha. If an individual can delegate his powers to at third person to act on his behalf the same power exists in a non-statutory body. In order to find out as to whether or not the deed in suit is valid one has to see whether the corporation under its constitution has power to create a mortgage. Now, it is clear, as held by the lower Appellate Court, the corporation (the Sabha) has power to make transfer of its property. This being so, it must be held that it has powers, like an ordinary individual, to delegate its power to any of its officials in accordance with its rules. Jones in his book says:

In general, it may be said, that the jus disponendi of a private corporation is at common law unlimited. This right may of course be circumscribed by statute or by the charters under which corporations are organized.... Jones on Mortgages, Vol. 1, Para. 124, Edn. 7.

5. At another place the learned author makes the following observations:

The power to mortgage resides primarily in the body corporate, or, in other words, in the stockholders. They may authorize the execution of the deed by any agent they may by special vote, or general bye-law, constitute for that purpose.... A statute or a bye-law of a corporation, providing that in the management of its affairs the directors shall have all powers which the corporation itself possesses, invests them with powers to borrow money, issue bonds, and convey in mortgage the lands of corporation as security. If the directors have powers to execute a mortgage of corporate property, neither the president nor any other officer can execute a mortgage without a resolution of the Board of directors duly assembled, but such a resolution need not be evidenced by an instrument under seal of the corporation, nor need it be recorded with the deed since it is not a power of attorney : see Jones on Mortgages, Vol. 1, Para. 127.

6. In the case before me the learned Judge of the lower Appellate Court has found that the corporation had full powers to create mortgages under its constitution. He has further found that the authority to do so has been delegated to the Managing Committee. We find that the Managing Committee passed a resolution authorizing the Secretary of the Sabha to create the mortgage in suit. In my opinion, in these circumstances there is not the least doubt that the secretary was acting on behalf of the Sabha in creating the mortgage. The deed is therefore binding on the Sabha. Prom the observations made by the Courts below in their respective judgments it appears that both found that the money taken from the plaintiff had been spent for the benefit of the Sabha. That was a ground in favour of the plaintiff. On this subject Jones in his book says:

But even if the directors exceed their authority in borrowing money for the corporation and executing a mortgage to secure the repayment of it, the corporation cannot, after enjoying the benefit of the loan and acquiescing in the transaction, question their authority : see Jones on Mortgages, Vol. 1, Para. 127.

7. For the reasons given above, I hold that the plaintiff was entitled to a decree for the amount due against defendant 1. The plaintiff is also entitled to a personal decree against Babu Kamta Prasad, defendant 3, as under the terms of the deed in suit he bound himself personally. In his case how. ever the decree should be conditional. If the plaintiff is unable to realize the amount due by the sale of the property mortgaged then he will be entitled to execute his decree against Babu Kamta Prasad. For the reasons given above, the appeals are allowed, the decrees of the Court below are modified and the plaintiff's suit stands decreed in the following terms : The plaintiff's suit for the enforcement of his mortgage is decreed against defendants 1 and 3. Usual mortgage decree will be prepared giving defendants 1 and 3 six months' time within which to pay the amount due and costs in all the Courts. Interest on the loan secured will be calculated at the contract rate till the date fixed for payment and after that date at Rs. 6 per cent, per annum. The decree will make it clear that in the first instance the decree will be executed against defendant 1. In case of nonpayment of the amount due to the plaintiff the mortgaged property will be sold. If there is any balance left then the plaintiff will be entitled to execute his decree to that extent against Babu Kamta Prasad, defendant 3. So far as defendant 2 is concerned the order of the lower Appellate Court remains undisturbed. Babu Kamta Prasad will bear his own costs throughout. Permission to file Letters Patent appeals is granted.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //