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Paramanand Doss Chota Doss and Sons, a Firm of Merchants and ors. Vs. Nannulal Kanji and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1942Mad232; (1941)2MLJ923
AppellantParamanand Doss Chota Doss and Sons, a Firm of Merchants and ors.
RespondentNannulal Kanji and ors.
Cases ReferredIn Kanhayalal v. The National Bank of India
Excerpt:
- - 1,000 and on the 15th april, 1935, a third mortgage in his favour for a like amount. (1) section 69 applies to hindus and there is no indication in the act that the legislature intended to exclude a mortgage created by the managing member of an undivided hindu family, (2) the power to mortgage in itself implies a power in the mortgagor to confer upon the mortgagee a right to sell the mortgaged property without the intervention of the court, and (3) the manager of an undivided hindu family has the power to sell as well as to mortgage......question of law and questions of fact. the question of law is whether a manager of an undivided hindu family in creating for a family purpose a mortgage of immovable property in madras may confer on the mortgagee a power of sale which can be exercised without recourse to the court. the appeals have been heard together and can be dealt with conveniently in one judgment.2. the suit was filed on the original side of this court by respondents 1 to 7, all of whom are minors. the first and second respondents are the sons of the first defendant in the suit. the third respondent is the son of mulji lala, the brother of the first and second defendants. mulji lala died before the institution of the suit. respondents 4 to 7 are the sons of the second defendant. the first and second defendants.....
Judgment:

Alfred Henry Lionel Leach, C.J.

1. These two appeals which arise out of the same judgment raise an important question of law and questions of fact. The question of law is whether a manager of an undivided Hindu family in creating for a family purpose a mortgage of immovable property in Madras may confer on the mortgagee a power of sale which can be exercised without recourse to the Court. The appeals have been heard together and can be dealt with conveniently in one judgment.

2. The suit was filed on the Original Side of this Court by respondents 1 to 7, all of whom are minors. The first and second respondents are the sons of the first defendant in the suit. The third respondent is the son of Mulji Lala, the brother of the first and second defendants. Mulji Lala died before the institution of the suit. Respondents 4 to 7 are the sons of the second defendant. The first and second defendants and Mulji Lala constituted an undivided Hindu family and the family remained joint after Mulji Lala's death, which occurred in 1928. The first defendant has, at all times material to the issues, been the manager of the family. The family is a business family and during the period with which this suit is concerned its activities were confined to building contracts entered into with Railways. The family owned immovable properties in Madras, in the Native State of Sachin and in the District of Surat. The Madras properties consisted of land and premises known as Nos. 34 and 35, Gollavar Agraharam, Tondiarpet, and land and premises known as Nos. 9 and 1.0, Hunters Road, Vepery. For the sake of convenience I shall refer to the former property as 'the Tondiarpet property' and the latter as 'the Vepery property.'

3. On the 23rd October, 1931, the first defendant, as manager of the family, mortgaged the Tondiarpet property with the firm of Paramanand Doss Chota Doss and Sons, the third defendant, to secure a loan of Rs. 15,000. The mortgage deed contained a power of sale. On the 27th March, 1935, the first and second defendants created a second mortgage on the Tondiarpet* property in favour of the seventh defendant for a sum of Rs. 1,000 and on the 15th April, 1935, a third mortgage in his favour for a like amount. On the 16th November, 1935, the third defendant exercised the power of sale under the mortgage and the property was purchased by the eighth defendant for the sum of Rs. 16,300. On the 13th October, 1932, the first and second defendants deposited with the fifth defendant by way of equitable mortgage to secure a loan of Rs. 20,000, the title deeds of the Vepery property. The deposit was evidenced by a memorandum executed on the same day. On the 12th May, 1933, the first defendant created a second mortgage in favour of the fourth defendant to secure a loan of Rs. 5,000. This deed also contained a power of sale, which was exercised on the 9th April, 1935, when the property was purchased by the sixth defendant for Rs. 28,500. The plaintiffs allege that all these mortgages are invalid so far as their respective interests in the properties are concerned. It is denied that the monies were required for the business of the family or for any family purpose. They allege that the first and second defendants are addicted to drink, profligacy and gambling and that the moneys raised on the mortgages were spent on vice. They aver that the manager of an undivided Hindu family cannot, even when mortgaging family property for a family necessity, confer upon the mortgagee a power of sale.

4. The suit was tried by Somayya, J., who held that Section 69 of the Transfer of Property Act does not extend to the .manager of a Hindu family when mortgaging family property. On the evidence he found that the mortgage of the Tondiarpet property to the third defendant was binding on the family to the extent of Rs. 6,000, that of the Rs. 15,000 advanced by the third defendant Rs. 10,000 had been repaid, that the first mortgage to the fifth defendant of the Vepery property was valid so far as the family was concerned to the extent of Rs. 10,000 (half the amount of the loan) and that the second mortgage of the Vepery property in favour of the fourth defendant was not binding on the family at all. The seventh defendant in whose favour the second and third mortgages of the Tondiarpet property had been created led no evidence in support of his mortgages and in these circumstances the learned Judge held that they were not binding on the plaintiffs. In the end the learned Judge declared that the plaintiffs were entitled to their shares in the Tondiarpet and Vepery properties, and, as I read his judgment, free from all liability. Appeal No. 18 of 1940 has been filed by the third and eighth defendants and Appeal No. 31 of 1940 has been filed by the fourth defendant. The fifth and the sixth defendants have filed memoranda of cross-objections in Appeal No. 31 of 1940.

5. It is manifest that the persons who are responsible for this suit are the first and second defendants. The first defendant has gone so far as to give evidence in support of his sons' allegation against him of immorality and he allowed his motor car driver to be called to give the names of women with whom it is said he had had immoral relations. It is a regrettable fact that the Courts of this Province are not infrequently called upon to decide cases in which Hindu fathers have set their sons up to plead parental immorality in order to defeat alienees of family properties, but until this case came into Court I had never met with a case where a father had gone to the length of supporting by his own evidence a plea of immorality made against him by his son. When the Vepery property was sold on the 9th April, 1935, the first and second defendants wrote to the purchaser offering to buy back the property from him for Rs. 500 more than he had agreed to pay for it. There was no suggestion in the letter that the power of sale had been unlawfully exercised. The notice which preceded the exercise of the power of sale was dated the 30th November, 1934, and no reply was sent. On the 2nd August, 1935, the sixth defendant, the purchaser of the Vepery property, filed a suit against the first and second defendants to recover possession of it, and on the 30th November, 1935, he obtained a decree. On the 17th February, 1936, the present suit was filed and there can be no doubt that its immediate object was to defeat the sixth defendant. The fact that the institution of the present suit had been instigated by the two fathers does not, of course, prevent the plaintiffs from being granted the reliefs to which they are entitled in law, but it is important to bear in mind that the fathers are behind this suit when it comes to consider the evidence relating to the issues of fact.

6. It will be convenient now to decide the question whether the manager of a Hindu family may lawfully create a mortgage which confers upon the mortgagee a power of sale when the money is required for a family necessity. Somayya, J., is emphatic in his opinion that the manager of a Hindu family is outside the scope of Section 69 of the Transfer of Property Act. Obviously the learned Judge was greatly impressed by the fact that a power of sale embodied in a mortgage created by the manager of a Hindu family might mean, that the other members of the family would not have recourse to the property should the mortgage prove to be invalid and they would have to be content with a money decree, which might not be enforceable. The learned Judge's reasons for holding that the manager of a Hindu family is outside the scope of Section 69 are that the section was passed in the interests of the commercial community, that it does not profess to affect or modify the rules of Hindu law and that there is no authority in the manager of the family to delegate his powers. Accepting all this to be true, it does not follow that the manager of a Hindu family cannot avail himself of Section 69 when he has occasion to mortgage family property for a family necessity.

7. The section applies to Hindus and the manager of an undivided Hindu family is himself always a Hindu. The wording of the section is free from ambiguity. It says that notwithstanding anything contained in the Trustees' and Mortgagees Powers Act, a mortgagee or any . other person acting on his behalf, shall subject to the provisions of the section have power to sell or concur in selling the mortgaged property or any part of it, in default of payment of the mortgage money, without the intervention of the Court in certain specified cases. One of the cases specified is where a power of sale without the intervention of Court is expressly conferred on the mortgagee by the mortgage deed and the mortgaged property or any part of it was on the date of the execution of the mortgage deed situate within certain towns, of which Madras is one of those named. The section goes on to provide that the power shall not be exercised until (a) notice in writing requiring payment of the principal money has been served on the mortgagor or on one of several mortgagors and default has been made in payment of the principal money or part of it for three months after the service of the notice or (b) some inte-rest under the mortgage amounting at least to Rs. 500 is in arrear and unpaid for three months after becoming due. In passing it may be mentioned that it is not suggested that the notices which were served by the third and fourth defendants were in any way defective. There is nothing in the section it-self or in any part of the Act which indicates that it does not apply to a mortgage created by a managing member of a Hindu family and this being the case the Court is bound to give effect to it, even if there is a manifest hardship in its application. I do not suggest that the section works any hardship in this case, but supposing that it did the Court could not take the hardship into consideration. The case must be decided on what the section says. Of course there must be a power to mortgage. Unless money is required for the purposes of the family the manager has no power to mortgage, and if a mortgage is itself invalid the deed cannot confer a power to sell, This has been freely conceded by the appellants.

8. But the matter can be carried further. A power to mortgage in itself implies a power to give the mortgagee a right of sale, if the conditions in the mortgage with regard to repayment are not fulfilled. The power can undoubtedly be taken away by statute, but in the case of a mortgage of property by deed in one of the specified towns the right to give such a power has in fact been recognised by the inclusion of Section 69 in the Transfer of Property Act. In Russell v. Plaice (18S4) 52 E.R. 9 Romiliy, M.R., said:

The power of sale given to a mortgagee must, I think, be considered, not as the delegation of a power entrusted to the executor, which is a power to sell for the benefit of his cestui que trust, but as the creation of a new power to sell, not for the benefit of the persons interested in the testator's estate, but for the benefit of the person interested in the mortgage; that is, a power to render the mortgage effectual; and I think that the right to create this power is incidental to the authority of the executor to mortgage.

In that case the question was whether an executor could give a power of sale when mortgaging property of the estate. It was contended that he could not, but this contention was emphatically overruled and the opinion expressed by Romilly, M.R., has been accepted as a correct statement of the law. In Bridges v. Longman (1857) 53 E.R. 267 Romiliy, M.R., had occasion to refer again to this question. In that case he observed:

I think that no objection can be taken before me that the power of mortgaging was executed by means of a mortgage, which contained a power of sale, because I think that such a power is incident to the power to mortgage unless expressly excluded.

In Niamat Rai v. Din Dayal (1927) 52 M.L.J. 729 : L.R. 54 IndAp 211 : I.L.R. 8 Lah. 597 the Privy Council held that it was for the manager to decide whether he should mortgage or sell. In delivering the judgment of the Board, Sir John Wallis said:

The learned Judges of the High Court were of opinion that as in this case the business had recently resulted in loss, the managing member was not justified in putting more money into it, and that in any case he should have raised money by mortgage instead of by sale. As regards the latter question, it is not clear that borrowing, probably at a high rate of interest, would have been more beneficial than sale. In any case, this was a question for the manager to decide.

As the manager of an undivided Hindu family may sell or mortgage as he deems fit for the purpose of raising money for a family necessity it follows that, apart from any statutory provision to the contrary, he has the right to confer upon a mortgagee a power of sale. Of course where the Transfer of Property Act is in force the mortgage must be one of those specified in Section 69. In Kanhayalal v. The National Bank of India, Ltd. the Privy Council held that a power of sale embodied in a mortgage of property situate in a part of India where the Transfer of Property Act did not apply was a lawful provision.

9. Therefore, we have these factors in favour of the contention of the appellants: (1) Section 69 applies to Hindus and there is no indication in the Act that the Legislature intended to exclude a mortgage created by the managing member of an undivided Hindu family, (2) the power to mortgage in itself implies a power in the mortgagor to confer upon the mortgagee a right to sell the mortgaged property without the intervention of the Court, and (3) the manager of an undivided Hindu family has the power to sell as well as to mortgage. This being the position it seems to me that the considerations which weighed with Somayya, J., must be ignored. It follows that I consider that the learned Judge misread Section 69. Should it be found that the section results in hardship to members of joint Hindu families, the remedy lies with the Legislature but it must be remembered that the section does not apply to moffussil mortgages, and comparatively speaking there is little scope for the misuse of it.

10. The plaintiffs contend that even if the mortgagee of the Vepery property was entitled to exercise the power of sale mentioned in the deed there could in law be no sale of the mortgaged property without the intervention of the Court. This contention is based on the fact that the power of sale was only conferred on the second mortgagee. The first mortgagee admittedly concurred in the exercise of the power by the second mortgagee, of course, on the understanding that he was paid first. The plaintiffs say that the first mortgagee had no right to concur in the sale by the second mortgagee, but here again the provisions of Section 69 of the Transfer of Property Act are overlooked. There is nothing in the section to prevent a mortgagor giving to a second mortgagee, if he likes to do so, a power of sale, even when he has not given one to the first mortgagee. Sub-section (1) of the section says that a mortgagee or a person acting on his behalf shall, subject to the provisions of the section have power to sell or concur in selling the mortgaged property. There can be nothing plainer than this and the first mortgagee in this case did in fact concur. Therefore if the second mortgage was lawfully created the sale of the Vepery property to the sixth defendant cannot be disturbed.

11. I now come to the findings of fact and I will commence with the findings of the learned Judge with regard to the mortgage of the Tondiarpet property. As already mentioned, the appellants here are the third and the eighth defendants. Mr. V. V. Srinivasa Aiyangar on their behalf has given no reason for challenging the finding of the learned Judge that only Rs. 6,000 out of the Rs. 15,000 advanced by the third defendant on this mortgage can be regarded as binding on the family. In fact he has made no attempt whatever to dispute the correctness of the learned Judge's conclusion. Therefore the finding must be accepted. It is equally clear that the learn-ed Judge was right in holding that there remains only Rs. 5,000 of the principal sum advanced on this mortgage. On the 2nd November, 1938, Rs. 10,000 of the Rs. 15,000 was repaid. It is not disputed that the Rs. 10,000 came out of moneys belonging to the family and this being the case the family liability of Rs. 6,000 was discharged. But as the property has been lawfully sold the plaintiffs have lost their interests in it. Their rights are now restricted to the proceeds of the sale. Sub-section (4) of Section 69 says that the money which is received by the mortgagee arising from the sale, after discharge of prior incumbrances, if any, to which the sale is not made subject, or after payment into Court under Section 57 of a sum to meet a prior incumbrance, shall, in the absence of a contract to the contrary be held by him in trust to be applied, first in payment of all costs, charges and expenses incurred in connection with the sale; and secondly, in discharge of the mortgage money and costs and any other money due under the mortgage; and the residue shall be paid to the person entitled to the mortgage property. Consequently the plaintiffs are merely entitled to payment of their shares in the balance of the Rs. 16,300 which was realised by the sale of the property, after the expenses of the sale have been met and the mortgagee has received all which be is entitled to in law as against the plaintiffs.

(His Lordship then dealt with the findings and concluded.)

* * * *

12. The result is that the decree passed by the learned Judge will be set aside and the suit remanded to the Original Side for the taking of an account of what the plaintiffs are entitled to receive out of the proceeds of the sales of the properties. During the arguments the Court indicated that this course might be adopted should it consider that the learned Judge had misread Section 69 of the Transfer of Property Act and find that the mortgages are binding, either in whole or in part, on the family. No objection was raised to this course being adopted and the parties accepted the position that if the plaintiffs have lost all interest in the properties themselves they are entitled to have recourse to the sale proceeds in this suit. The account will be taken in the light of this judgment and regard will be had to considerations arising out of the personal law of the minors, such as their liability under the pious obligation rule. When the account has been taken the trial Court will pass a fresh decree.

13. The appellants in each appeal are entitled to their costs against respondents 1 to 9 and I consider that the fifth defendant should have his cost on Rs. 4,556-11-11 in respect of his cross-objections but that no costs should be awarded on the memorandum of objections filed by the sixth defendant. The plaintiffs have sued in forma pauperis. The question of the court-fee will be decided by the learned Judge when he is giving directions for the drawing up of the new decree. He will also decide the question of the costs to be awarded in the trial Court.

Chandrasekhara Ayyar, J.

14. I agree and have nothing to add.


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