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Muhammad Khalilur Rahman Khan Vs. Mohammad Muzammilullah Khan - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1933All468
AppellantMuhammad Khalilur Rahman Khan
RespondentMohammad Muzammilullah Khan
Excerpt:
.....alter a perusal of the deed in question, i am clearly of opinion that there is a distinct personal covenant to pay. 6. the next question to be determined is whether the argument that the entire agreement including the personal covenant is void is well founded. i fail to see why the creditor should not be entitled to enforce his remedy under the first part of the agreement when that part is distinct and separate from the (sic) part which is not legal. here, we have a contract contained in the same deed which may clearly be divided into two parts. one part of it is quite good and valid. this ruling is not applicable to the case before us as there the plaintiff's right to recover money was dependent on the failure of the mortgagor to hand over possession of his land which he was..........or if i make excuses in paying the same the creditor aforesaid shall have power to realize his mortgage-money by the enforcement of the hypothecation lien....2. it is common ground between the parties that on the date of the execution of this bond, the property mortgaged was under attachment in execution of a decree against abdul jalil khan and the decree had been sent to the collector for execution. the collector had leased the property to a lessee under rule 7, schedule 3, civil p.c. having regard to the provisions of rule 11, schedule 3, civil p.c., abdul jalil was incompetent to create a mortgage without the permission of the collector in respect of the property which could be dealt with by the collector under that schedule. it is admitted that no such permission had been.....
Judgment:

Rachhpal Singh, J.

1. This is a defendant's appeal arising out of a suit brought by the plaintiff-respondent to recover a sum of Rs. 20,000 which has been decreed by the trial Court. There is no dispute as regards the facts of the case, on 5th December 1922, Muhammad Abdul Jalil Khan, executed a mortgage-deed in favour of the plaintiff in respect of village Pindaul in consideration of a sum of Rs. 20,000. Abdul Jalil Khan is dead and the defendant is his legal representative. The plaintiff admits that Abdul Jalil Khan was incompetent to mortgage the village at the time of the execution of the deed in suit. The plaintiff therefore sued for a simple money decree. On 3rd December 1928 the defendant executed a deed of acknowledgment admitting his liability for the payment of the aforesaid sum. The defendant resisted the claim. He pleaded that the deed set up by the plaintiff was invalid in toto and no simple money decree could be passed in favour of the plaintiff. It was also urged that the suit was not within limitation. Some other pleas were also taken but it is not necessary to refer to them as they were given up. The learned Subordinate Judge decreed the suit holding that the plaintiff was entitled to a money decree that the claim was within limitation. The defendant has come up in appeal to this Court. The plea of limitation was abandoned here and the only question which has been argued on behalf of the appellant is that the plaintiff was not entitled to a money decree on the basis of the deed in suit. The deed on foot of which the plaintiff instituted the suit giving rise to this appeal is printed at pp. 13 and 14 of the paper-book. The material portion of the deed runs as follows:

I therefore covenant that I shall pay on demand the said amount without interest to the said Nawab Saheb and for the satisfaction of the said creditor I pledge and hypothecate the property specified as below....If per chance I fail to pay the amount duo under the bond or if I make excuses in paying the same the creditor aforesaid shall have power to realize his mortgage-money by the enforcement of the hypothecation lien....

2. It is common ground between the parties that on the date of the execution of this bond, the property mortgaged was under attachment in execution of a decree against Abdul Jalil Khan and the decree had been sent to the Collector for execution. The Collector had leased the property to a lessee under Rule 7, Schedule 3, Civil P.C. Having regard to the provisions of Rule 11, Schedule 3, Civil P.C., Abdul Jalil was incompetent to create a mortgage without the permission of the Collector in respect of the property which could be dealt with by the Collector under that schedule. It is admitted that no such permission had been obtained. The plaintiff's case is that in the deed there is a personal covenant to pay, that it is distinct and severable from the void part of the agreement and that therefore he is entitled to a simple money decree in enforcement of the personal covenant. The defendant asserts in the first instance that there is no personal covenant in the deed and in the alternative, it cannot be enforced as the bond as a whole including the personal covenant is void. I find that in Anson's Law of Contract, p. 254, Edn. 5. the rule of law on the point is stated to be as follows:

A contract may consist of several parts; it may be divisible into several promises based on several considerations, and then the illegality of one or more of these considerations will not avoid all the promises if those which were made upon legal considerations are severable from others.

3. In Pigot's case (1614) 11 Coke Rep 270 it was held:

that if some of the covenants of an indenture or of the conditions endorsed upon a bond are against law, and some good and lawful; that in this case the covenants or conditions which are against law are void ab initio and the others stand good.

4. Similarly, Gaskell v. King (1809) 11 East 165 and Shackell v. Rosier (1836) 2 Bing N C 634 are authorities for holding that if a contract contains distinct covenants some of which are legal and others illegal, the Court can enforce the legal ones; but if the covenants are not severable the whole contract is void for illegality; as also if there is one promise made upon several considerations some of which are legal and others illegal. In Pickerring v. Illfracombe Ry. (1868) 3 CP 250, the law on the subject was thus stated:

where you cannot sever the illegal part of a covenant the contract is altogether void, but where you can sever them, whether the illegality be created by Statute or Common law, you may reject the bad part and retain the good.

5. Section 24, Contract Act, enacts a similar rule. It lays down that if any part of a single consideration for one or more objects, or any one or any part of any one of the several considerations for a single object is unlawful, the agreement is void. In Mulla and Pollock's Commentary on the Indian Contract Act it is said that it is well settled that if several distinct promises are made for one and the same lawful consideration, and one or more of them be such as the law will not enforce, that will not of itself prevent the rest from being enforced. The test will be whether a distinct consideration which is wholly lawful can be found for the promise called in question. Pollock and Mulla's Contract Act, Edn. 6, p. 187. Now, the first question which arises from consideration in this case is as to whether or no, there is a personal covenant to pay in the deed set up by the plaintiff. The learned Counsel for the appellant has contended that in the deed there is no such covenant. Alter a perusal of the deed in question, I am clearly of opinion that there is a distinct personal covenant to pay. The executant admits in the deed that a sum of Rs. 20,000 has been advanced to him and he undertakes to repay it on demand. This covenant is quite distinct and separate from the other part of the agreement under which the (sic) gives security for the payment of the amount due from him.

6. The next question to be determined is whether the argument that the entire agreement including the personal covenant is void is well founded. The contention of the defendant is that according to the provisions of Section 23, Contract Act, the entire agreement is void and no part of it can be enforced. According to the defendant, the deed evidences an agreement which is forbidden by law. Now, so far as the mortgage created by the debtor is concerned, there can be no doubt that it was an agreement forbidden by law and therefore it is void. Rule 3, Schedule 3, Civil P.C., made the debtor incompetent to creat a mortgage. But I cannot understand how it can be said that the debtor at the time of the execution of the deed was not competent to take a loan on his personal security. The effect of Rule 11, Schedule 3, Civil P.C., is to restrict the powers of a judgment-debtor to make a mortgage. But he is fully competent to take loans. Now, we find that under the deed in suit, the debtor entered into two agreements. He took a loan and undertook to pay the same on demand. Then, he entered into a second agreement under which he mortgaged his property. He was not competent to create this mortgage. I fail to see why the creditor should not be entitled to enforce his remedy under the first part of the agreement when that part is distinct and separate from the (sic) part which is not legal. In Ram Narayan Singh v. Adhindra Nath AIR 1916 PC 119, their Lordships of the Privy Council made the following observations:

In considering this question it must be borne in mind (i) that a loan prima facie involves such a personal liability; (ii) that such a liability is not displaced by the mere fact that security is given for repayment with interest; (iii) but that the nature and terms of such security may negative any personal liability on the part of the borrower (see p. 400).

7. In the case before us we find that there is an agreement to pay under which the debtor makes himself personally liable. That liability is not displaced because under the second part of the agreement the debtor gives security for repayment of the loan. There is nothing in the deed which would negative the personal responsibility of the borrower. Here, we have a contract contained in the same deed which may clearly be divided into two parts. One part of it is quite good and valid. The other part was beyond the competence of the borrower. There is nothing in the terms of Sections 23 and 24, Contract Act, to prohibit the creditor from enforcing that part of the agreement which the borrower was competent to make. The learned Counsel for the appellant has relied on the following rulings in support of his argument that Section 24, Contract Act, is applicable to the case before us and therefore the whole of the deed including the personal covenant is void. Har Prasad Tiwari v. Sheogobind Tewari AIR 1922 All 134. This was a suit under Section 68, T.P. Act, by a usufructuary mortgagee on an occupancy holding to recover the mortgage money on the basis of a personal covenant to pay. The Court held that the entire contract of mortgage was void under Section 24, Contract Act, and so the personal covenant also fell along with the contract of mortgage. This ruling is not applicable to the case before us as there the plaintiff's right to recover money was dependent on the failure of the mortgagor to hand over possession of his land which he was not competent to mortgage. His right to recover money was not based on independent and separate contract.

8. Kanhai Lal v. Tilak Ram (1912) 16 I.C. 42. That was a case in which a mortgagee of an occupancy holding sued for possession of the mortgaged property and in the alternative for a decree for money. Chamier, J., held that a usufructuary mortgage of an occupancy holding being illegal under Sections 23 and 24, Contract Act, the mortgagee could not even recover the money paid to the mortgagee. In this case also the right of the plaintiff to recover money was dependent on the failure of the mortgagor to perform an unlawful agreement. Daya Ram v. Thakur Lal AIR 1924 All 668 was also a case in which a usufructuary mortgagee of an occupancy holding, after his dispossession sued for the money relying on a personal covenant. The Court held that he could not do so. In this case too, the right to recover money was dependent on the failure of the mortgage to perform an illegal contract. Sital Rai v. Ram Khilawan : AIR1925All543 was also a case in which an occupancy holding along with some fixed rates tenancy had been mortgaged. The mortgagee who was in possession of the occupancy land but had been dispossessed of the fixed rate tenancy sued for possession of the same. The Court held that he could not succeed as it was found impossible to ascertain how much of the entire consideration, was intended to be for the occupancy land and howmuch for the fixed rate tenancy.

9. In Sheo Narain Dube v. Raj Kumar Rai (1929) 116 IC 17, the Court clearly held that if there had been a personal covenant in the first instance, then, the failure of the mortgage would not have led to the failure of the personal covenant. In Dasrath v. Mt. Sandala, A.I.R. 1926 Oudh 270, it was held that where the payment of a sum of money does not constitute an independent transaction of the loan between the parties to a mortgage, but is the essence of consideration for the transaction of the mortgage which is unlawful, the consideration also must be held to be unlawful and therefore not recoverable. But it was also held that Section 24, Contract Act, would not apply where there was an independent contract to pay the money. It will be seen that all these cases related to the mortgages of occupancy holdings except the last Oudh case which related to tenancy holding. The question as regards the applicability of Section 24, Contract Act, to cases in which part of the contract was valid and part invalid came up for consideration in a Full Bench ruling of this Court reported in Dipnarain Singh v. Nageshar Prasad : AIR1930All1 , Sulaiman, C.J., in his judgment drew a clear distinction between cases in which the whole contract was void and those in which a part was void and a part good. He made the following observation in his judgment:

If the effect of enforcing the contract would necessarily be to defeat the provisions of any law the contract would undoubtedly be void, but if it consists of several distinct parts which can be separated, the whole transaction would not be bad unless the provisions of Section 24, Contract Act, are applicable to it....If we take the cases of a contract only partly beyond the competence of the promisor, there is no good ground why the promisee who has paid good consideration should not be allowed to enforce that part of the promise which the promisor was competent to make: (p. 343 of 52 All).

10. Dealing with the question of the mortgagee's right to recover the money in cases of this kind, the learned Chief Justice observed:

It seems to me that if the mortgagee's right to recover money, is under the terms of the document, dependent only on the failure of the mortgagor to hand over possession of his occupancy lands which are non-transferable, the right cannot be enforced because the law cannot recognize that there has been any breach. A man cannot be deemed to have broken a contract which is void in law...If the mortgaged property consists wholly of tenancies which are not transferable in law, the transfer as such is absolutely void and there is no mortgage transaction governed by the Transfer of Property Act. The transaction is merely one of a contract between the parties evidenced by a registered document, which would be governed exclusively by the provisions of the Contract Act and Section 24 of that Act may apply, unless the security offered can be separated from the personal covenant: (p. 52 of 52 All.)

11. In the case before us, the terms of the deed show that there were two separate contracts. In the first part there is an agreement in which the debtor admits that a sum of Rs. 20,000 is due by him and he undertakes to pay the same on demand. The debtor was quite competent to enter into this contract. In the second part, the debtor mortgages certain property by way of security. This part of the agreement was invalid. The two parts can be separated. This being the case, the plaintiff is entitled to maintain the suit on the basis of the personal covenant to pay the first part of the deed. The debtor agreed to pay the money on demand. This part of the agreement was perfectly valid. The right of the plaintiff to recover the amount due was not dependent on the failure of the debtor to perform the contract of mortgage. So Section 24, Contract Act, does not apply. I therefore hold that the suit of the plaintiff was rightly decreed by the Court below. The appeal is therefore dismissed with costs of the respondents.

Niamatallah, J.

12. I agree with the conclusions arrived at by my learned brother and with the reasons on which it proceeds. I would however add a few observations of my own. It seems to me that the analogy drawn from decisions of this Court in cases in which occupancy holdings had been transferred by way of mortgage and claims for recovery of the money advanced were made by the mortgagees under Section 68, T.P. Act, or otherwise is misleading. The ratio decidendi of those cases stands on a totally different footing from that applicable to a case like the one before us. In those cases the mortgagors were under no personal disability in mortgaging their occupancy holdings. There is no law which declares that occupancy tenants are not competent as regards their contractual ability to deal with the occupancy holdings. But the law has declared that the occupancy holdings are not transferable. In other words, though the occupancy tenants are under no personal disability, transfers by them of their occupancy holdings are forbidden by law. Section 23, Contract Act, declares, inter alia, that an agreement of which the consideration or object is forbidden by law is void. The reason why a mortgage by an occupancy tenant of his holding is void ab initio is not that he labours under a personal disability, but because his act is forbidden by law, namely, the Agra Tenancy Act which provides in express terms that:

the interest of an exproprietary tenant, an occupancy tenant or a non-occupancy tenant...is not transferable in execution of a decree of a civil or Revenue Court, or otherwise than by a voluntary transfer between persons in favour of whom as cosharers in the tenancy such right originally arose or who have become by succession cosharers therein.

13. The consideration applicable to a transfer by a judgment-debtor of his immovable property in respect of which the Collector can exercise any of the powers or duties conferred or imposed on him by paras. 1 to 10, Schedule 3, Civil P.C., is different. Para. 11 of the same Schedule declares that the judgment-debtor

shall be incompetent to mortgage, charge, lease or alienate such property or part, except with the written permission of the Collector.

14. It is perfectly clear that para. 11, referred to above, does not forbid, in terms or otherwise, the transfer of the property in respect of which the Collector can exercise or perform any of the powers or duties conferred upon him in the earlier paragraph of Schedule 3. Indeed, such property can be the subject of transfer with the permission of the Collector. All it does is to impose a partial disability on the judgment-debtor in the matter of transfer during the time the Collector can exercise his powers and duties respectively conferred and imposed by paras. 1 to 10, Sch, 3, Civil P.C. Any transfer made by the judgment-debtor in contravention of para. 11 is no transfer in law. It is void, not because the law forbids it, but because the transferor had no power to make it. It is of no higher efficacy than a transfer made by a minor or a person of unsound mind. A Court would regard such transfer as no transfer; as if, it was never made. Where the law has imposed a personal disability of an absolute character, as in the case of a minor or a person of unsound mind, every contract made by him is void. Where the disability is partial, as in the case of a judgment-debtor to whom Schedule 3, Civil P.C., applies, his contractual competency is taken away only so far as the law deprives him of it. It follows that, if a judgment-debtor alienates, without the permissionof the Collector, his immovable property in respect of which the latter can exercise or perform the powers and duties conferred and imposed on him by paras. 1 to 10, Schedule 3, Civil P.C., such transfer will be no transfer in law; but any agreement to pay money recoverable from his person and other property, moveable or immovable, is unaffected by the partial disability imposed by para. 11. Such agreement is enforceable in law and is as valid as any other contract.

15. The argument of the learned Counsel! for the appellant, so far as it is based on the cases referred to by him and fully discussed by my learned brother, proceeds on the assumption that the transfer by a judgment-debtor, who has been declared to be incompetent to make it by para. 11, Schedule 3, Civil P.C., is one forbidden by law. I have given my reasons for not accepting that process of reasoning. Assuming that it is forbidden by law or opposed to public policy, I am in entire agreement with my learned brother in holding that the personal covenant contained in the mortgage-deed is unaffected by Sections 23 and 24, Contract Act. The last paragraph of the former which declares that every agreement of which the subject or consideration is unlawful is void may have, in that view, an application to the agreement creating a charge on such immovable property as is referred to in para. 11, Schedule 3, Civil P.C., but can have no reference to the personal undertaking to pay the money borrowed thereunder, with the result that the agreement creating the mortgage is void, but the undertaking to pay is enforceable. Nor is there anything in Section 24 which can be called in aid by the appellant in support of his contention. That section provides that:

if any part of a single consideration for one or more objects or any one or any part of several considerations for a single object is unlawful, the agreement is void.

16. The consideration proceeding from the respondent, the creditor, was a sum of Rs. 20,000, no part of which can be considered to be unlawful for one or the other reasons mentioned in Section 23. It follows that Section 24 cannot apply. It should be noted that that section does not provide that, if there is a single consideration for two agreements, the object of one of which is unlawful, and such agreement is therefore-void, the other agreement is also void. According to the appellant, where there is one consideration for two agreements, the object of one of which is unlawful the other agreement is also void. As already pointed out, there is nothing in Section 24 which can warrant such a proposition. For the reasons given by my learned brother and emphasised by me above, I agree in dismissing the appeal with costs.


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