1. This is a plaintiffs' appeal arising out of a suit for sale on foot o simple mortgage bond dated 13-4-1931 executed by Sawant Singh and others in favour of Babu Ram and Nannumal, plaintiffs, for a sum of Rs. 26,000/- repayable with interest by means of instalments within twenty years. The bond provided that in case of default in payment of any three instalments, the mortgages shall have the right to realise the entire amount of principal and interest in a lump sum. The property that was mortgaged was zamindari property. The plaintiffs alleged that a sum of Rs. 1250/- alone was repaid and the balance of Rs. 30,000/- was due and legally recoverable, interest having been worked out at 4 1/2 per cent per annum on the unpaid balance.
2. The suit was resisted on a variety of grounds; and all the pleas except, which were raised by the defendants were decided by the court below against them. The court below left Issue No. 9 undetermined, holding that that issue, which relates to the question as to whether the hypothecated property can be put to auction sale or not, may be determined in the Execution department. The court below decided Issue No. 12 alone against the plaintiff's and upon that decision dismissed the suit with costs.
3. The sole question which has been argued before us is that the decision of the lower court on Issue No. 12 is incorrect, and it has been urged that the suit ought to have been decreed.
4. The bond which is the basis of the suit was executed in lieu of two earlier mortgage bonds of 27-8-1914. When those earlier bonds were executed, the loans under them were advanced for the satisfaction of a decree No. 256 of 1911 of the court of the Subordinate Judge of Shahjahanpur held by Manohar Singh against Bhagwan Singh, which was under execution and in which this very property was under attachment and sale before theCollector the property having been ancestral property of the executants. Admittedly the written permission of the Collector had not been taken when the earlier bonds were executed. Admittedly also the Collector's regime had ended after the decree aforesaid had been satisfied, and, at any rate when the mortgage bond in suit was executed.
The plea that was advanced by the defendants and which formed the subject matter of Issue No. 12, and which ultimately found favour with the court below, was that the earlier mortgage bonds were hit by the provisions of para 11 of Schedule III C. P. C. and, therefore, void and that the bond in suit which was executed in lieu of those bonds was also void and the remedy which was open to the plaintiffs under Section 65 of the Contract Act had become time barred. In our opinion the view of the court below on Issue No. 12 was erroneous, and the suit ought to have been decreed.
5. Paragraph 11 of Schedule III C. P. C. imposes restrictions as to alienation by a judgment-debtor or his representative. It says that so long as the Collector can exercise or perform in respect of the judgment-debtor's immovable property, or any part thereof, any of the powers or duties conferred or imposed on him by paragraphs 1 to 10, the judgment-debtor or his representative in interest shall be incompetent to mortgage, charge, lease or alienate such property or part, except with the written permission of the Collector, nor shall any civil court issue any process against such property or part in execution of a decree for payment of money.
When the earlier mortgages of 27-8-1914, were made, the decree No. 256 of 1911 of the court of the Subordinate Judge of Shahjahanpur against the same judgment-debtor was in execution as against the same property before the Collector as the property was ancestral. The mortgages were made in order to discharge that decretal debt and they had the sanction of the District Judge as the interests of certain minors in that property had been involved; the sanction having been given by the District Judge to the certificated guardian of the minors.
The written permission of the Collector was not, however, taken to effectuate the transfers in terms of Paragraph 11 of Schedule III of the Code. As has been held by the Privy Council in Gauri Shankar Balmukund v. Chinnumiya, ILR 46 Cal 183: (AIR 1918 PC 168), the incompetency imposed on a judgment-debtor by Section 325A, C. P. C. (Act XIV of 1882) (equivalent to Para. 11 of Schedule III of the present C. P. C. is absolute, and no implied limitation can be reed into it, and accordingly if the judgment-debtor executed a mortgage in such property during the period of the Collector's management, the mortgage is void.
Applying that principle to the two earlier mortgages of 27-8-1914, which were made during the Collector's regime and without the written permission of the Collector, it must be held that they were void because of the incompetency imposed on the judgment-debtor by Para 11 of Schedule III of the Code. The present suit was not, however, on the basis of these two mortgage deeds of 27-8-1914. It was on the basis of the mortgage deed of 13-4-1931 which was executed in lieu of the two earlier mortgages aforesaid. This renewed deed of 13-4-1931 was admittedly made after the Collector's regime had ended and there was on that date no incompetency in the executant of the deed such as is envisaged by Para 11 of Schedule III of the Code.
In the case of Raja Mohan Manucha v. Manzoor Ahmad Khan, , their Lordships of the Privy Council observed that the incapacity imposed on a judgment-debtor by Para 11 of the Third Schedule is an incapacity to affect his property and not a general incapacity to contract, and it follows that the covenant to repay is not made void by the mere operation of the paragraph. The lender who has agreed to make a loan upon security and has paid the money, is not obliged to continue the loan as an unsecured advance. The bottom qua the earlier mortgages, had fallen out of the contract, and he could avoid it.
If he did so, and if he were to bring himself within the terms of Section 65 of the Contract Act and had sued for restitution, the borrower was bound to restore the advantage received by him and to make compensation for it to the lender from whom he received it. If the covenant to repay under the earlier mortgage deeds was not made void by the mere operation of Para 11 of the Schedule III C. P. C., it could form valid consideration under the renewed bond even if the debt had be-come time barred; and the agreement under the fresh bond would not be deemed as made without consideration and therefore void because of the provisions of Section 25 of the Indian Contract Act.
That section, inter alia provides that an agreement made without consideration is void unless a is a promise, made in writing and signed by the person to be charged therewith, or by such agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In such a case such an agreement is a contract.
6. The Privy Council decision in cited above was quoted with approval by their Lordships of the Supreme Court in Firm Sriniwas Ram Kumar v. Mahabir Prasad, : 2SCR277 .
7. Having regard to what we have said above we are of opinion, that the two earlier mort-gages of 27-8-1914, although made fully for consideration, were void as mortgage deeds because of the incapacity imposed on the executants by para. 11 of Schedule III C. P. C.; that there was no general incapacity in the executants to contract and the covenant to repay was not made void by the operation of para 11; that in view of, and with in the terms of Section 65 of the Contract Act the borrower was bound to restore to the lender the advantage received by him; that no invalidity attached to the renewed mortgage deed of 13-4-1931 and it was fully for consideration and was valid as a contract by virtue of Section 25 of the Indian Contract Act and that the suit ought to have been decreed.
8. The question of limitation does not present any difficulty whatsoever. The cause of action for the suit arose on 30-6-1933, the day when the default in payment of the 3rd, 4th and 5th instalments was made. The suit was filed on 4-7-1915 on which date the Civil Courts reopened after the vacations. The suit was therefore within time.
9. We have already said that the property covered under the mortgage deed in suit is zamindari property. By the coming into effect of the Zamindari Abolition and Land Reforms Act the Zemindari rights do not now exist. But the plaintiffs shall be entitled under the decree to be passed in the suit to proceed against such rights or privileges created formed or retained in respect of that property under the Zamindari Abolition and Land Reforms Act.
10. For reasons stated above we allow the appeal, set aside the decision of the court belowand decree the plaintiff's suit with pendente liteand future interest at 3. p.c. per annum and withcosts throughout. The usual decree under Order 34,Section 4, C. P. C. with six months time of grace shallbe prepared.