1. One Riaz-ud-din on January 30th, 1920, executed a usufructuary mortgage-deed of his house in favour of Bishambhar Nath and on the same day Bishambhar Nath executed a lease of the houses in favour of Riaz-ud-din. A rate of interest was specified in the mortgage-deed and a sum exactly equivalent to this interest Was named as the rent provided for by the lease. The periods of the mortgage and the lease were identical and mutual references were made in the deed and in the lease inter se to each other.
2. On August 9th, 1922, Raiz-ud-din executed a usufructuary mortgage in favour of R. G. Bansal & Co., for Rs. 12,000 by the terms of which Rs. 11,000 were to be paid to Bishambhar Nath in discharge of his mortgage. This condition was, however, never carried out.
3. On November 29th 1922, Riaz-ud-din executed a third usufructuary mortgage in favour of Bishambhar Nath for Rs. 12,000. This mortgage also, like the first was accompanied on the same day by a lease from Bishambhar Nath to Riaz-ud-din.
4. On January 2nd, 1923, Riaz-ud-din petitioned to be declared insolvent and in the insolvency proceedings Bishambhar Nath claimed to be ranked as a secured creditor. To this R. G. Bansal & Co., the present opposite party, took objection by an application under Section 54 of the Provincial Insolvency Act by which they successfully claimed to have Bishambhar Nath's second mortgage of November 29, 1922 declared to be invalid as giving a fraudulent preference to Bishambhar Nath.
5. The consideration for the mortgage of November 29th 1922 is set out in the order of the learned Subordinate Judge dated the 11th April 1924 and is as follows:
Rs. a. p.
(a) Set off against a prior mort-
gage-debt, date 1920 ... 10,000 0 0
(b) Set off against rent for 13
months ... 975 0 0
(c) Set off on account of a Small
Cause Court decree ... 363 3 0
(d) Set off against two pro-note
debts ... 104 0 0
(e) Took cash for purchase of
stamped paper. ... 137 8 0
(f) Set off against rent for one
month in advance. ... 97 8 0
(g) Left for payment to the present
applicant on account of a mortgage
-bond dated 9th August 1922 ... 1,000 0 0
(h) Took Rs. 50 in cash. ... 50 0 0
(i)Cash before the Sub-Registrar ... 272 13 0
Total ... 13,000 0 0
6. Both Courts held that the mortgage-deed did give a fraudulent preference to Bishambhar Nath and, therefore, disallowed all the items except (a) and (g).
7. The fifth ground in the memorandum of appeal challenges the finding that the document generally was by way of fraudulent preference. It is unnecessary to deal with this contention in detail. It is really only necessary to state the facts and dates that I have already set out and to note the items (d), (e), (f), (h), and (i) to appreciate the correctness of the finding of the lower Courts in regard to the general nature of this transaction in relation to Section 54 of the Provincial Insolvency Act. I see no reason to differ from the lower Courts on this point.
8. Serious contention has, however, been raised before us as to whether the items (b) and (c) ought not to have been allowed as being secured debts.
9. Item (b) set off against rent for 13 months. It is contended that the mortgage-deed and the lease of January 30th, 1920, must be regarded as one transaction and, that so regarded, it follows that the rent stated by the lease is only the usufruct under the mortgage-deed stated in another form. I think that there is force in this contention. The case is really governed by Altaf Ali Khan v. Lalta Prasad 19 A. 496 : A.W.N. (1887) 128 : 9 Ind. Deo. (n. s.) 320. decision of Banerji and Aikman, JJ. It was there held, and this is a view that so far as I am aware has never been departed from and frequently affirmed and the real question is what was the intention; of the parties. In other cases differing on, their facts a different result has been arrived at. But no case has been drawn to our, attention in which any Judge has expressed the view that the decision in Altaf Ali Khan, v. Lalta Prasad 19 A. 496 : A.W.N. (1887) 128 : 9 Ind. Deo. (n. s.) 320. should have been otherwise than it was. Apart altogether from the fact that there has been no such expression, of opinion, I am of opinion, that that case was rightly decided.
10. In connection with this point I have considered the following cases:---23 A 341 (footnote) [S. A. No. 1112 of 1894, decided on the 8th April 1897, no name is given in the report]; Altaf Ali Khan v. Lalta Prasad 19 A. 496 : A.W.N. (1887) 128 : 9 Ind. Deo. (n. s.) 320.; Imdad Hasan Khan v. Badri Prasad 20 A. 401 : A.W.N. (1898) 90 : 9 Ind. Deo. (n. s.) 617.; Chimman Lal v. Bahadur Singh 23 A. 338 : A.W.N. (1901) 95.; Partab Bahadur Singh v. Gajadhar Bakhsh Singh 24 A. 521 : 29 I.A. 148 : 7 C.W.N. 97 : 4 Bom L.R. 845 : 8 Sar, P.C.J. 310 (P. C.); Madhwa Sidhanta Onahini v. Venkataramanujulu Naidu 26 M. 662; Khuda Bakhsh v. Alim-un-nissa 27 A. 313 : A.W.N. (1904) 273 : 1 A.L.J. 715.; Abdullah Khan v. Basharat Hussain 17 Ind. Cas. 737 : 35 A. 48 : 17 C.W.N. 233 : 13 M.L.T. 182 : (1913) M.W.N. 131 : 17 C.L.J. 312 : 15 Bom. L.R. 432 : 25 M.L.J. 91 : 40 I.A. 31 (P. C.).; Ramakrishna Kukhilaya v. Nekkar Kuppanna 43 Ind. Cas. 286 : 33 M.L.J. 581 : 6 L.W. 621 : 22 M.L.T. 422 : (1918) M.W.N. 75.; Kadma Pasin Muhammad Ali 50 Ind. Cas. 134 : 41 A. 339 : 17 A.L.J. 481. and Panaganti Ramara-yanimgar v. Maharajah of Venkatagiri 61 Ind. Cas. 612 : 44 M. 301 : 12 L.W. 685 : 28 M.L.T. 234 : 40 M.L.J. 236,
11. Matters, to which weight has often been given in determining whether the transactions were one or separate, are :---Whether the documents were executed on the same day or the second very shortly after the first; whether they were registered on the same day ; whether they refer inter se to each other and, if so, in what terms ; whether there is interest named in the mortgage of an amount equivalent to the rent named in the lease; whether the periods of the two deeds are identical. Examined in the light of such facts I think that there can be no doubt whatever that the two deeds in the present case constituted 'one transaction'.
12. In 23 A, 341 (footnote), effect was given to the consideration that the lease in many of this type of cases could equally have been given to a third party as a reason for divorcing the two deeds and treating them, as evidencing two wholly separate transactions. But it has not to be considered in such cases what may be the effect of two documents one between A and B and the other between A and C with no interest, or intention common between all three but of two documents between A and B and, as it appears to me the fact that a lease between A and C would, in such circumstances of absence of interest and intention common to A, B and C, be a transaction separate from a mortgage between A and. B is wholly irrelevant to the consideration of two documents both between A and B.
13. To divorce wholly the two deeds in this case would involve holding that the mortgagee intended and the mortgagor believed him to intend to give up all security for the interest on the money he was lending. Such a view is surely untenable.
14. I desire to make it clear that in arriving at my conclusion in this case, I have not been influenced by, and would deprecate any subtle weighing of isolated facts in any particular Case. A certain percentage of weight cannot be allowed to the presence or absence of each particular fact so as to make a mathematical sum of the decision to be arrived at.
15. It may well be that in cases where dates, periods, interest and rent are not identical, the two deeds may yet be regarded as really one agreement evidenced by the first deed with certain extra conditions having effect only for a limited period or in regard to a limited portion of the usufruct, etc.
16. For instance, it may be quite possible under given circumstances to i properly regard the two deeds as one transaction notwithstanding the fact that considerable interval elapsed between the execution of the two deeds [compare Imdad Hasan Khan v. Badri Prasad 20 A. 401 : A.W.N. (1898) 90 : 9 Ind. Deo. (n. s.) 617., where the interval was three weeks, and Kadma Pasin v. Muhammad Ali 50 Ind. Cas. 134 : 41 A. 339 : 17 A.L.J. 481. where the interval was seven weeks]
17. Again it may be that the periods covered by the mortgage-deed and the lease are not identical. In such a case pursuing the principle above suggested, the mortgage-deed would be regarded as the principal agreement the terms of which, would be applicable in their entirety to those parts of the period of the mort-gage not covered by the lease and the terms would be varied only in regard to the period covered by the lease. Prima facie, it would seem that it the parties can by a duly registered document vary the terms of the mortgage in relation to the usufruct for the whole term of the mortgage there is no logical and valid reason why they should not vary the terms for a part of the term covered by the mortgage.
18. Similarly if they can by a duly registered document vary the manner in which the mortgagee is to receive the whole of his usufruct, there is prima facie no logical and valid reason why the manner of receipt of the usufruct should not be varied to the extent corresponding to the amount of the rent named in the lease. If this be so, the fact that there is no interest named in the mortgage-deed or that the amount named is not exactly equivalent to the rent named, would be no bar to the applicability to such a case also of the view that I take of this case, namely, that it is merely a case of the principal terms being 'settled by the mortgage deed with certain variation as to the manner of receipt of a part of the usufruct super-imposed by a duly registered lease.
19. If the view that is here suggested be generally applicable to ail such cases in their numerous varieties it may be all to the good, for it is clearly to the interest of the public and of legal practitioners that a general principle should be applicable to such cases and that the decision in any particular case should not depend on the uncertain particular weight which may be attached by a particular Judge to a particular element among the varied circumstances of each case. A broad view of the facts in every case should be taken [compare the remarks of Piggot and Walsh JJ., in Kadma Pasin v. Muhammad Ali 50 Ind. Cas. 134 : 41 A. 339 : 17 A.L.J. 481.]
20. The Courts are concerned to get at the real intention of the parties, a proposition which has been constantly affirmed, and such intention cannot be discovered and given effect to by holding them bound by some wholly uncontem plated effect of and the acceptance of subtle argument on the use of particular phraseology. That may be inevitable in some cases, but if it is possible to found decisions on the basis of a broad principle, it is desirable to do so in the interest of ail concerned.
21. I have for purposes of convenience employed above the words used in many cases, 'one transaction'. The phrase 'one transaction', however, suggests to my mind too strongly the idea or the two documents being of even or nearly even date, a condition which, as i have already stated, I do not hold to be essential. I think that in a case like the present the mortgage-deed constituted the principal document which governs the rights of the parties and under it the profits or interest would be secured to the mortgagee by his possession and right to collect. When the lease came into effect, on the same day, as it happens, in this case, the rights remained the same only with this variation effected by a properly registered document, that the lease indicated the mode in which during the continuance of the lease, the mortgagee was to collect his profits or interest but there was no alteration in the liability of the property as security for the profits or interest represented and measured by the rent.
22. The broad principle stated above I have outlined only to illustrate my meaning where I have said that in arriving at my finding I am not unduly influenced by any consideration and that I do not consider the existence or non-existence of any particular element vital to an interpretation of the documents in one way or in another.
23. Whether the broad principle suggested be applicable or not to all cases, I have no doubt that the case before us should be regarded as merely the case of a usufructuary mortgage-deed varied as to the manner of the receipt of the usufruct by a duly registered lease. I hold, therefore, that in regard to the item (b), that is, the amount of the outstanding arrears of rent for which no decree had been obtained i. e., Rs. 975, Bishambhar Nath was entitled to rank as a secured creditor.
24. The other item in regard to which there has been contention is the item (c) set off on account of a Small Cause Court decree. This decree was obtained in a suit upon the lease for certain arrears and is to that extent distinguishable from she item (b) for outstanding arrears which I have just considered, Bishambhar Nath's claim in respect of this decree is governed by the decision of Knox and Banerji, JJ., in Imdad Hasan Khan v. Badri Prasad 20 A. 401 : A.W.N. (1898) 90 : 9 Ind. Deo. (n. s.) 617., in that case the mortgagee had obtained a decree in respect of revenue paid by him. There was a covenant in the lease that the lessee would pay the revenue and he had defaulted in so paying. The mortgagee-lessor had to pay. He sued and got a decree. Subsequently in answer to a suit for redemption the mortgagee claimed that he should be allowed the amount of his decree for the revenue which he had to pay. Knox and Banerji, JJ., held that as the mortgagee-lessor had chosen to sue on his covenant, the debt merged in the decree and he could not enforce concurrent remedies as there might be injury to the mortgagor whereas in that case the decree had been assigned. That view is clearly correct and the claim of Bishambhar Nath in respect of item (c) was properly disallowed.
25. The result is that I would allow this application to this extent that in addition to the items (a) and (g) already allowed, the item (b) for Rs. 975 be further allowed as a secured debt. For the rest the application is dismissed with costs in proportion to success and failure.
Kanhaiya Lal, J.
26. The question for consideration in this case in whether certain items of prior debts credited, in a mortgage deed executed by Riaz-ud-din in favour of Bishambhar Nath on the 29th November 1892, are secured debts entitled to protection as against the other creditors of the mortgagor if the mortgage is set aside owing to the adjudication of the mortgagor as an insolvent within three months of the mortgage under Section 54 of the Provincial Insolvency Act of 1920.
27. On the 30th January 1920 Riaz-ud-din executed a usufructuary mortgage in favour of Bishambhar Nath for Rs. 10,000 re-payable with interest at 10 annas per cent, per mensem and in lieu of giving actual possession over the mortgaged property executed a lease in favour of the mortgagee, agreeing to pay him an annual rent which corresponded with the amount of interest due on the mortgage-money for each year. The lease did not create any charge over the mortgaged property.
28. On the 9th August 1922 he executed another usufructuary mortgage in favour of Messrs. Bansal & Co., for Rs. 12,000 re-payable with interest at Re. 1 per cent. per mensem and left Rs. 11,000 with them to pay the prior mortgage-money due to Bishambhar Nath Messrs, Bansal & Co., did not pay the money due to Bishambhar Nath.
29. On the 29th November 1922 Riaz-ud-din executed a fresh usufructuary mortgage in favour of Bishambhar Nath for Rs. 13,000 re-payable with interest at 12 annas per cent. pen mensem, out of which Rs. 10,000 were credited towards the satisfaction of the prior mortgage of the 30th January 1920. Rupees 1,000 were left for payment to Messrs. Bensal & Co., in satisfaction of their mortgage of the 9th August 1922, and with the exception of Rs. 460-5 said to have been taken in cash, the rest was credited towards some prior debts alleged to have been due by the mortgagor.
30. On the 2nd January 1923 Riaz-ud-din applied to be adjudicated an insolvent and he was so adjudicated on the 31st August 1923. As the petition for insolvency was made within three months of the mortgage of the 29th November 1922 that mortgage has been annulled and out of the prior debts credited towards the mortgage-money by the mortgagor, Rs. 10,000 payable to Bishambhar Nath on account of the mortgage of the 30th January 1920 and Rs. 1,000 payable to Messrs. Bansal & Co., on account of the mortgage of the 9th November 1922, have been allowed to be proved as secured debts. The other items credited in the mortgage-deed have been left to be proved by Bishambhar Nath as unsecured debts. Except an item of Rs. 975 which can be regarded either as rent secured by the lease of the 30th January 1920 or as interest due on the mortgage money, the rest are clearly unsecured debts due on a decree for money, promissory notes and the like and the Courts below have rightly refused to treat them as secured debts.
31. No property is hypothecated to secure the payment of the rent and the rent due cannot, therefore, be regarded as a secured debt but the mortgage deed provides for the payment of interest on the mortgage-money at a fixed rate, and as such interest it can be treated as a secured debt irrespective of the lease.
32. It is not possible to lay down any general rule applicable to all cases where a lease is obtained by a mortgagor from the mortgagee in lieu of giving actual possession over the mortgaged property, Each case has to be decided on its own facts. The legal incidents attaching to the levy of interest, as such or to the rent secured by a lease are not the same, for as pointed out in Chimman Lal v. Bahadur Singh 23 A. 338 : A.W.N. (1901) 95. no interest may be recoverable in the case of a usufructuary mortgage from the person or other property of the mortgagor, but the rent secured by the lease may be so recoverable and its non payment may entitle the lessor to seek the ejectment of the lessee. If dispossessed from the mortgaged property, the lessee may not be entitled to claim a charge for rent unless the lease purports to create such a charge. The interest payable on a mortgage has moreover to be set-off against the profits of the mortgaged property or the rent paid or payable by the mortgagor under the lease and it can be taken into account at the time of redemption or in a suit for sale. But in the absence of a contract to the contrary, it cannot be separately recovered. The rent due can, however, be recovered as it falls due by a suit in the proper Court independently of the money due on the mortgage. The mortgage and the lease are in a sense parts of the same transaction, but the rights secured by each are separate and distinct and as pointed out in Imdad Hasan Khan v. Badri Prasad 20 A. 401 : A.W.N. (1898) 90 : 9 Ind. Deo. (n. s.) 617. rent or, lease money qua lease money, is not a charge on the mortgaged, property but qua interest it is a charge on the property and the mortgagee is entitled to hold the property as secured not only for his principal mortgage-money but also for the interest if it remains unpaid. The payment of rent is only a mode of paying the interest due on the mortgage and regarded as interest secured by the mortgage, the item of Rs. 975 aforesaid can be treated as a secured debt due on the mortgage and charged on the mortgaged property.
33. I agree, therefore, in the order proposed.
By the Court
34. The order of the Court is that this application be allowed to this extent that in addition to the items (a) and (g) already allowed, the item (b) for Rs. 975 be further allowed as a secured debt. For the rest the application be dismissed with costs in proportion to success and failure.