Skip to content


Purasawalkam Hindu Janopakara Saswatha Nidhi, Ltd. Vs. Kuddus Sahib and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1926Mad841; 94Ind.Cas.860
AppellantPurasawalkam Hindu Janopakara Saswatha Nidhi, Ltd.
RespondentKuddus Sahib and ors.
Cases ReferredMadras Deposit and Benefit Society v. Passanha
Excerpt:
- kumaraswami sastri, j.1. this is an appeal from the decision of justice courts-trotter dismissing the plaintiff's suit ; the plaintiff, which is a fund, sued to recover rs. 6,032-9-6 with costs and further interest. plaintiff's case is that the 1st defendant applied for a loan to the fund of rs. 10,000 on the mortgage of two of his properties; 17, thacker street, vepery; and 17, perambore barracks street. on his application the usual form and papers were filed with the 2nd defendant who is the appraiser and the 3rd defendant who is the surveyor of the fund in the usual course of business to value and appraise the properties; that they wrongfully valued the properties at about rs. 12,000 and odd while the real value of the proper-ties was much lower ; that on the strength of their.....
Judgment:

Kumaraswami Sastri, J.

1. This is an appeal from the decision of Justice Courts-Trotter dismissing the plaintiff's suit ; the plaintiff, which is a fund, sued to recover Rs. 6,032-9-6 with costs and further interest. Plaintiff's case is that the 1st defendant applied for a loan to the fund of Rs. 10,000 on the mortgage of two of his properties; 17, Thacker Street, Vepery; and 17, Perambore Barracks Street. On his application the usual form and papers were filed with the 2nd defendant who is the appraiser and the 3rd defendant who is the surveyor of the fund in the usual course of business to value and appraise the properties; that they wrongfully valued the properties at about Rs. 12,000 and odd while the real value of the proper-ties was much lower ; that on the strength of their valuation the fund advanced Rs. 9,475 to the 1st defendant and got the mortgage deed Ex. C, executed on the 8th February 1921 ; that as the defendant did not pay the money due on the mortgage the mortgaged property was sold under power of sale reserved to the plaintiffs under the deed of mortgage on the 13th and 21st October 1922 when the properties realized only Rs. 2,150 and Rs. 2,600 respectively as against the sum of Rs. 10,782-9-6 due on the mortgage at the date of the sale ; that the 1st defendant has to pay Rs. 6,032-9-6, the difference between the amount due on the date of the sale and the amounts realized by private sale ; that the 2nd and 3rd defendants, by their wrongfully appraising the property at an amount far in excess of the actual value, acted in conspiracy with the 1st defendant to defraud the fund and acted also with gross negligence in the valuation, and that they are, therefore, liable to pay the difference between the actual value of the property and the amount due on the mortgage. The 1st defendant denied the claim of the fund. He pleaded that the properties mortgaged were worth about Rs. 20,000, one property being worth Rs. 8,000 and the other Rs. 12,000. He sets up an agreement whereby the fund itself promised to lend the money in order to enable him to redeem a prior mortgage. He states that the power of sale was wrongfully exercised and the sale is not binding on him. He also pleads that the property was under-sold collusively by the fund.

2. The Defendants No's. 2 and 3 denied that they over-valued the properties. They denied that there was any fraud or collusion between them and the 1st defendant. They stated that the property was correctly valued and that they are not liable for the deficiency if any. They also pleaded that the sale was not properly conducted.

3. Justice Courts Trotter dismissed the plaintiff's suit against Defendants Nos. 2 and 3. He held that there was no conspiracy or negligence ; and as regards the 1st defendant he held that the power of sale was improperly exercised, that notice was not properly given and that consequently the plaintiffs have no right to claim any deficiency. So far as the 2nd and 3rd defendants are concerned the learned Advocate-General who appeared for the fund conceded that no case of conspiracy was proved ; but he supported the appeal on the ground that the defendants grossly over-valued the property. Reliance was mainly sought to be placed on the evidence of Mr. Aiyaswami Mudaliar who was called by the plaintiffs to prove the value. I am not satisfied on the evidence that the Defendants Nos. 2 and 3 negligently overvalued the properties or that there was any conspiracy between the parties.

4. The 2nd and 3rd defendants have given evidence as to what they did so far as the valuation of the properties was concerned. There are some facts which to my mind make it rather clear that there could not have been over-valuation which is now sought to be suggested. I find on the evidence of the 1st defendant that there were previous mortgages on this property in favour of the Madras City Co-operative Bank at a time when there was only one item of property in existence and the other was only a vacant site. We find that at that time a sum of Rs. 5,000 was lent and under the rules of the Bank only 2/3rds can be lent, so that about a year before the suit mortgage the properties were valued by that Bank at Rs. 7,500. I also find that a sowcar lent Rs. 3,000 on one item of property. The evidence is that after the mortgage to the Bank, the 1st defendant built on the vacant site at a cost of about Rs. 5,000, so that at the time of the mortgage to the fund it is difficult for me to believe that the property was worth only about Rs. 4,000, as Mr. Aiyaswami Mudaliar would have us believe. Under these circumstances I think that there has been no case made out against the 2nd and 3rd defendants either on the ground of conspiracy or on the ground of negligence. As pointed out by the learned Judge the 2nd and 3rd defendants were employed by the fund with knowledge of their qualifications and so far as they are concerned they did what they thought to be the best. There can be no question of negligence unless they have done anything which any reasonable man with their qualifications would have omitted to do. The fund which employed them was aware of their qualifications.

5. I may say in this connexion that I disagree with the learned Judge in the view he takes that there has been anything in the conduct of Mr. Sivagnana Mudaliar which is unprofessional. He got permission from the High Court to act as legal adviser and director of this fund. So far as the business of the fund is concerned, it appears that the fund consists of persons who take shares and borrow moneys and what the shareholders get is about 9 per cent. compound interest and it is only the balance that is divided. It is divided in such a way as to give a remuneration to the legal adviser, the director, the appraiser and others. In this case it cannot be said that the percentage allowed to Mr. Sivagnana Mudaliar is anything which can be said to be high or unreasonable. On the contrary it works out at a very low figure, about Rs. 200 a year.

6. As regards the directors I do not think they can be blamed for employing the 2nd and 3rd defendants because in their case also the qualifications will depend on the remuneration and they could not have gone and employed experts or men with high qualifications having regard to the very small remuneration paid to both of them. They had to fix the remuneration according to the funds in their hands. I do not think it can be said that in employing the 2nd and 3rd defendants the directors were guilty of negligence or were answerable for employing persons who ought not to have been employed, more especially as we find in this case that during all these years there have been no complaints made by the share-holders or anybody of any misconduct or any loss that arose to the fund by their employment.

7. So far as I have dealt with the case of the 2nd and 3rd defendants which seems to us to be fairly clear. The case of the 1st defendant is a little more complicated. So far as the sale is concerned the evidence of the Secretary is that this sale was conducted in pursuance of a notice, Ex. D, which was given on the 26th July 1921. The sale took place on the 13th and 21st October 1922 about 15 months after the date of the notice. It also appears that after the notice was given, the fund received payments of Rs. 300, while the amount due at the date of the notice was about Rs. 442. No payments were made subsequently. So far as the notice is concerned I have little doubt that the receipt of Rs. 300 after the notice and the staying of the sale as threatened was clearly an abandonment of any rights which the fund wanted to enforce by reason of the notice. They received the money and kept quiet 15 months after. I do not think that the fund could act on that notice at the expiration of such a long time. Fresh notice ought to have been given if they wanted to sell.

8. Then the question is whether the fund is entitled to sell without giving any notice. On this part of the case we have to see the Articles of Association and the mortgage-deed. The Articles of Association define the rights between the share-holders and the fund. This is clear from Section 21 of the Indian Companies Act. In this case the loan was to a share-holder. Article 72 runs as follows:

If any person who has received loans on mortgage of moveable or immovable properties fails to pay the monthly interest regularly and allows such interest at any time to accumulate to what shall be due for three months, the Secretary shall call upon him by notice in writing to pay the principal and intereet due and in default of such payment the property shall be liable to be sold by public auction; provided always that the Secretary may at any time before the commencement of the sale, at his discretion withdraw from sale any property moveable or immveable the arrears of, interest on which shall be less than what shall he due as interest for three months.

9. It is argued by K. Narasimha Iyer that this is merely a direction to the Secretary and it confers no rights on the share-holder or the mortgagor. I do not think that this contention can be upheld. It is clearly a provision put in in the interests of both the fund and the mortgagor, the fund being entitled to sell if three months' interest) is in arrears, the mortgagor being entitled to due notice to enable him to pay up. The deed of mortgage, Ex. C. provides for a power of sale. The clause runs as follows:

If with regard to the interest payable every month accordingly, three months' interest falls in arrears at any time, or if the Nidhi being in need of the principal and interest gives intimation by means of notice to pay off the same and I or my heirs fail to pay the principal and interest, the Nidhi itself shall sell the aforesaid houses and grounds by public auction or private sale under Section 69 of the Transfer of Property Act and credit the expenses in connexion with the said sale and whole of the amount due by me to the Nidhi ; and if there is excess it should be paid to me. If there is shortage I shall myself be responsible and pay the amount falling short together with interest as mentioned above.

10. It ends as follows:

Further, until this mortgage debt is discharged I shall be bound by the rules now in force in the Nidhi and the rules which may be framed from time to time.

11. This mortgage, therefore, incorporates the provisions of the Transfer of Property Act and of the Articles of Association. The amount due for principal is not repayable at. any particular date. Nor is anything stated as to when it is to be repaid. Under these circumstances it seems to me to be clear that until there is a demand made for the money, there can be no default in payment of the principal sum due No doubt the fund could have sued the next day for the money or the mortgagor might have offered to redeem the next day ; but that would not make non-payment a default within Section 69 of the Transfer of Property Act. I may refer in this connexion to the case in Ramadh Bibi Ammal v. Kandasami Pillai [1919] 9 L.W. 479, where Justices Spencer and Krishnan have discussed the question of what is the meaning of default and they incline to the view that before there can be said to be default where no time is fixed there ought to be a demand. Section 69 of the Transfer of Property Act begins by stating that the power of sale in the mortgage-deed conferred on the mortgagee or any person in his behalf to sell or concur in selling, in default of payment of the mortgage-money, the mortgaged property or any part thereof without the intervention of the Court is valid in certain specified cases. Then it says in what cases such power of sale will be valid. There is to be a default in the payment of the mortgage-money. Now, in this case, reading Section 69 with the Articles of Association and the mortgage deed, I am clearly of opinion that before the sale is held for the purpose of recovering principal and interest due on the mortgage notice has to be given and the learned Judge was right in coming to the conclusion that the want of notice was an irregularity because the fund did not act in a manner that would entitle them to have sold the property rightly. There was no notice given before the sale. It is suggested that there was a notice of the date of the sale sent to the 1st defendant to his address but that was returned as he was not in Madras, and it cannot be said that that notice was not a notice required by the Transfer of Property Act or Article 72.

12. It is unnecessary in this case to decide the wider question raised whether in case of interest alone being due notice is necessary ; because I think that if Article 72 is also to be considered notice is necessary whether the sale is for the amount due for principal or interest. There having been, therefore, no proper notice under Art, 72, as regards sale of this property, the question is whether the plaintiffs can sue to recover the balance which is claimed under the sale. (His Lordship then discussed the evidence about the sales and came to the conclusion that they were not properly held.)

13. The next question is as to whether the plaintiffs are entitled to sue for the 'balance which they claim even though the power of sale was improperly exercised and even though there were irregularities in the sale, and low prices realized leaving the 1st defendant to file a counter-claim or a separate suit for damages, or whether the suit itself cannot be maintained. Before dealing with the question it must be remembered that the suit is not against the purchaser of the property as he is not a party to the suit, and it is not by the defendant to redeem or get damages for wrongful sale, but it is a suit by the plaintiff against the defendant to recover the balance of mortgage-money. The case does not fall within Section 69 of the Transfer of Property Act and has to be decided on considerations as to the general law regulating the rights of mortgagor and mortgagee. It is clear that when a mortgagee demands payment of the mortgage-money, he should be in a position to give back the mortgaged property and allow the mortgagor to redeem. This is the effect of Order 34, Rules 5, 6 and 8 of the Civil P.C. and mortgage-decrees are always drawn in the form that on payment of the money the mortgagee should return the title-deeds and, if, in possession, give possession to the mortgagor. Where he wrongfully disables himself from doing so the law in England seems to be that he cannot after a wrongful sale sue for the balance of the mortgage-money. The authorities on the subject are referred to in Ellis & Co.'s Trustee v. Dixon Johnson [1924] 2 Ch. 451. Lord Justice Warrington refers to the rule of equity at page 470 (1924) 2 Ch Ed as follows:

A mortgagee who cannot or will not return the mortgaged property, on payment is not entitled to sue for the debt.

14. He goes on to observe:

There can, I think, be no question that such was and is the rule in equity. In Palmer v. Hendrie [1859] 27 Beav. 349 the rah was there stated by Romilly, M. R : 'These then are the relative duties and reciprocal obligations between mortgagor and mortgagee. The mortgagee has a right to make use of all his remedies against the mortgagor for obtaining payment of his money ; but as soon as the mortgage-money has been fully paid, he is bound to deliver over the mortgaged estate to the mortgagor. The question is whether, when the mortgagee has made it impossible to restore the property mortgaged, he can proceed against a mortgagor to recover the amount of the mortgage-money. He can, undoubtedly, at law, sue upon the covenant, and consequently, the executors of Hendrie are, at law, entitled to recover from the plaintiff the unpaid mortgage-money ; but the mortgagees must perform their reciprocal obligations ; they are bound, on payment, to restore the property to the mortgagor, and-this is a most important part-' if it appears, from the state of the transaction, that, by the act of the mortgagee, unauthorised by the mortgagor, it has become impossible to restore the estate on payment of all that is due, I am of opinion that this Court will interfere and prevent the mortgagee suing the mortgagor at law.

15. The learned Judge also says that this statement of the law was cited and adopted by Stirling, J., in Kinnaird v. Trollope [1888] 39 Ch. D. 636 and refers to the rule being based on the very nature of a mortgage security and the reciprocal obligations of mortgagor and mortgagee and considers it as being in accordance with justice and common sense. Sargant, J., observes:

The cases of Walker v. Jones [1865] 35 L.J.P.C. 30, Palmer v. Hendrie [1859] 27 Beav. 349 and Kinnaird v. Trollope [1888] 39 Ch. D. 636 have definitely recognized that, in general a mortgagee or his assignee cannot recover his debt from the mortgagor except upon performing his reciprocal obligation of reconveying the mortgaged property to the mortgagor and, accordingly, where the security for the debt was a specific estate, and through the unauthorized acts of the mortgagee it had become impossible to restore the estate at law, the mortgagee lost the right to sue for the mortgage-debt.

16. All the learned Judges of the Court of appeal are clear that a mortgages who wrongfully disposes of property so as to prevent redemption could not sue for the mortgage-debt. In the case of moveables they thought that if he could purchase exactly similar stock and deliver he might do so. But in the case of immovable property it is clear that the principle could not apply as both under the Specific Belief Act and otherwise, it is presumed that the breach of contract to deliver immovable property cannot be compensated for by damages. This decision was affirmed by the House of Lords as appears from the note in the Weekly Notes of the 28th February 1925, page 61 Ellis & Co.'s Trustee v. Dixon Johnson [1925] A. C. 489 where the Lord Chancellor is reported to have held that a creditor holding securities which he has wrongfully disposed of could not have judgment for his debt. Reference was made to Madras Deposit & Benifit Society v. Passanha [1888] 11 Mad. 201 and it is argued that a suit would lie to 'recover the balance. It was a reference from the Small Cause Court and all that the Judge held was that the provision giving 15 days' notice in the mortgage-deed was invalid, but it did not prevent a suit for the recovery of the debt. It also appeared there that more than three months' notice was, as a matter of fact, alleged to have been given. It does not appear that there was no default in the payment of the mortgage-money and the report is so meagre that it is difficult to hold that a person who sells mortgaged property wrongfully can turn round and demand the balance of the money leaving the mortgagor to a separate suit for damages. As pointed out in Ellis & Co.'s Trustee v. Dixon Johnson [1924] 2 Ch. 451; above referred to, it is not a question of set-off or counterclaim ; it is a question of defence to the action itself on the ground that it is not maintainable. The latest decision of the House of Lords and the Court of appeal are clear so far as the law goes. The sections of the Conveyancing Act as to power of sale do not differ in any material part from Section 69 of the Transfer of Property Act, the sections of the Conveyancing Act being almost identical with the sections of the Transfer of Property Act. I think there is clear authority for holding that where there has been a wrongful sale it is not open to the mortgages who has put it out of his power to allow the defendant to redeem to sue the mortgagor for recovering the balance of the mortgage money. We think that the judgment of Justice Coutts-Trotter is correct and that the suit against the Defendant No. 1 also fails. In the result the appeal fails and is dismissed with costs three sets.

Krishnan, J.

17. (His Lordship stated the facts as given in the judgment of Kumaraswamy Sastri, J., and proceeded.) It is convenient to consider the case of these defendants separately as the plea of conspiracy has entirely failed which was the only common ground between all the defendants. The fund have not adduced any evidence of this conspiracy and no attempt has been made to controvert the finding of the learned trial Judge that the conspiracy is not proved. I will take the case of the surveyor first because that seems to be the easiest of the three. The learned Judge has found that the surveyor is not chargeable with any negligence at all and I think the learned Judge is right in the view. The surveyor is, as the learned Judge points out, an ex-schoolmaster, who does not seem to be properly qualified to do the work of surveying which he has been appointed to do. The directors knew the qualifications of the surveyor when they appointed him. They must be taken to have accepted the best he could do in the discharge of his duty as a satisfactory discharge of his functions. What he usually did was, as I have said already, to go and value the property by looking at it generally and by finding out from the neighbourhood the rental value of the property. In this case the rental value which he found on inquiry justified him in coming to the conclusion that the estimate of the appraiser was correct. After all it must be understood that this appraising and checking are not expected to be very accurate, but only to give a rough idea of what the property is worth so that the fund may not lose money. As the surveyor did what he usually did in such matters, and as the directors must be taken to have known his practice and they never objected before, he cannot be charged with negligence at all. Therefore the case against him for negligence fails.

18. Next, as regards the appraiser, the Defendant No. 2: the learned Judge has come to the conclusion that he was negligent for he says:

He saw thousands of cubic feet of bricks which were not there ; he imagined the existence of concrete foundations which in fact did not exist; he measured joists and beams not with a tape but with an eye which made him find more than he saw.

19. I do not think that that is altogether a fair way of putting the case so far as he is concerned. He went there and took his measurements as usual. He was apparently never in the habit of measuring very exactly the walls and the joists and so on ;. but he was taking rough measurements of things and up to date no complaint had been raised against him, for doing his work in that manner, When the Engineer Aiyaswami Mudaliar went there he apparently found that those measurements were not accurate. He took very strict measurements evidently, but it seems to me that the differences between the measurements of Aiyaswami Mudaliar and of the Defendant No. 2 do not show such a disparity as to attribute negligence to the latter. If the appraiser had not gone to the place where those houses were, and merely made a fanciful estimate, one can say he was negligent; but when he did the very things he was expected to do and which the directors knew he was doing, and arrived at results which were perhaps not quite so accurate as one would have liked, I do not think it is correct to attribute negligence to him. I am inclined to think that the finding that he was grossly negligent is not correct. The learned Judge dismissed the case against him in spite of his finding that he was negligent on the ground that the failure to realise enough money to cover the mortgage by the sale of these two properties was not due to any act of the appraiser. He was of opinion that the properties were under-sold in the auction that took place because at that time there was a slump in the value of property in the neighbourhood on account of certain disturbances in the Buckingham and Carnatic Mills. The evidence in the case shows that the properties must have been under-sold : for, as my learned brother has pointed out, they were worth at least Rs. 8,000 or Rs. 9,000. The two properties without the new house constructed on the second of them were accepted as sufficient security for a loan of Rs. 5,000 by a very careful money-lending body called the Madras City Cooperative Bank. That implies that they estimated the value at Rs. 7,500 before the new house was built as they advanced only 2/3rds of the value and the new house was built at an expenditure of about Rs. 5,000 by the 1st defendant. Making all deductions, I think one may very well value the properties at Rs. 9,000. I do not think, therefore, that there was very much loss caused by the report of the appraiser. However that may be, I prefer to put my judgment on the ground that he has not been proved to have been guilty of negligence and therefore, he is not1 liable:

Now, as regards the 1st defendant, as remarked by my learned colleague, his case is a little more difficult and raises some interesting questions of law. The learned trial Judge has dismissed the suit against him on the ground that the sale was carried through in defiance of the provisions of the Transfer of Property Act. He observes.

As the 1st defendant has not secured the right; given to him by the Transfer of Property Act, I think the suit against him must also fail.

20. He has not discussed the case of the 1st defendant, at any length and, therefore, it is difficult to be sure how the learned Judge dealt with it. It is argued before us by the 1st respondent that the properties were really worth about Rs. 20,000 or at any rate more than enough to cover the mortgage debt and that the sale of these properties without notice to him and in a manner which led to considerable loss because the sale was not conducted with that amount of publication and care as one would expect the mortgages to take in selling the mortgaged property, was an improper sale and therefore, he was not bound to make good the balance of the mortgage debt. The first question that arises on the defence is whether it was necessary to have given him notice before the sale. If notice was necessary, I am in agreement with my learned brother in thinking that no proper notice was given.

21. The notice relied on by the Secretary to the fund sent 15 months before the date of the sale for the payment of a sum of interest then due but mostly repaid subsequently is not sufficient, in my opinion, to justify the sale 15 months after. It is stated-and I take it that it is correct-that at the time of the sale about Rs. 1,300 was due for interest alone and it is argued that under Section 69 of the Transfer of Property Act when interest on the mortgage amounted to at least Rs. 500 and remained unpaid for three months after becoming due, the power of sale can be exercised by the mortgages without any notice whatsoever given. It seems to me that it is not necessary to definitely pronounce upon this argument but I am inclined to think that the argument is correct that in cases falling under Section 69, if interest amounting to at least Rs. 500 is in arrears and unpaid for three months the mortgages, if he has got the power of sale under the mortgage, can exercise the power without notice to the mortgagor but that is not the point here. The point here is that under the Articles of Association it is expressly provided under Article 72 that

the Secretary shall call upon him (the debtor) by notice in writing to pay the principal and interest due and in default of such payment the property shall be liable to be sold by public auction.

22. This article is certainly a binding provision between the mortgagor in this case who is a share-holder of the fund and the fund itself. The Secretary was bound under that article to call upon the defendant by notice in writing to pay up the principal and interest due and it was only in default of his complying with that demand that the properties could have been sold.

23. It was suggested that this article was only a sort of direction by the fund to its own Secretary as to how he was to act and that the mortgagor, the 1st defendant could not take advantage of the provision. I do not think that this suggestion is at all correct for it is one of the Articles of Association ; a rule in an Articles of Association can very well be relied upon by a person dealing with the fund knowing that the fund could not act without the provision of the article being complied with and here there is the further reason that the 1st defendant was himself a shareholder. Under these circumstances, it is perfectly clear that the Article 72 should have been complied with by the Secretary. Now let us see what the result of his non-compliance is. Section 69 says that the power conferred by the mortgage-deed on the mortgages to sell or concur in selling in default of payment of the mortgage-money is valid in the following cases and in no others. To start with, therefore, it must be established that the power of sale under the mortgage-deed has come into play, in other words that the mortgage-money has become payable, as Chief Justice Macleod has held in Jerup Teja & Co. v. Peerbhoy Adamji : AIR1921Bom421 . There it was a case where a time was fixed for the mortgage-money to be repaid and as the sale was attempted within that time, the learned Chief Justice held that the money did not become payable and, therefore, the power exercised under Section 69 was improperly exercised. I am of opinion, that as notice should have been given before the power of sale could have been exercised by the fund, the absence of that notice makes it an improper sale.

24. Our attention was drawn to what is called a notice said to have been sent just before the sale to the address of the 1st defendant through post, but that notice came back undelivered to the fund and the fund knew perfectly well that the notice had not been served. If it did not come back, the fund might have been justified in presuming that it was delivered ; but it was returned. Furthermore the notice itself was not a proper notice calling upon the debtor to pay the principal and interest due as required under Article 72, it was a printed copy of the notification to the public of the sale that was going to take place of the properties and nothing more. For both these reasons that notice was inadequate to serve the purpose of compliance with Article 72 of the Articles of Association. It follows, therefore, that according to my view the mortgage-money had not become payable under the mortgage-deed with the result that, though the plaintiffs need not have served any notice for making Sub-clasue (e) of Clause (2) of Section 69 applicable, they were not in a position to exercise the power of sale because of the initial difficulty of making out that there was a default in payment of the mortgage-money.

25. The question then argued was what effect should be given to this failure to give the necessary notice On the one hand it was suggested that we should take no notice of it in this case, but that the 1st defendant should be referred to a new suit for damages if he had suffered any damage by the sale having been held in an improper manner without notice to him. On the other hand it was argued for the 1st respondent that, this being a suit for the balance of the mortgage-debt by the setting-off the sale-proceeds of a sale which was illegally held, the mortgages suit should be dismissed into to because it was urged that a mortgages who is not in a position to deliver over the mortgaged property because he has parted with it in a wrongful manner cannot sue the mortgagor for payment of the mortgage-debt.

26. So far as the English Law is concerned it is pretty clear from the authorities cited, and which have been referred to by my learned brother, that the law is that the mortgages who wrongfully disposes of the property, and who is, therefore, unable to restore the mortgaged property when the mortgage-money is paid to him, cannot maintain a suit for the mortgage-debt at all and necessarily, therefore, for any balance of the mortgage-debt. For this the latest authority is the case in Ellis & Co.'s Trustee v. Dixon Johnson [1924] 2 Ch. 451. The learned Judges have stated there the law on the point although in the particular case they stretched a point in favour of the mortgagee and made him liable only for damages as the case was one of wrongful sale of shares which could easily be purchased and replaced. In such a ease they held that the strict rule applicable to immovable property need not be applied and that the trial Judge was right in estimating the amount of damages arising from the action of the mortgagee and allowing that amount. Here this being a case of immovable property the rule would apply in all its strictness if it were in England. The question then is whether this rule should be applied in this country or not. There is nothing, so far as I can see, in Section 69 of the Transfer of Property Act or any other section of that Act which militates against the application of this rule. Sections 20 and 21 of the English Conveyancing Act of 1861 are very nearly in the same words as Section 69 of our Transfer of Property Act; and certainly the last clause of Section 69 is exactly in the same words. Nevertheless the learned Judges in England have applied that rule as between mortgagor and mortgagee when the latter lost the mortgaged property by some wrongful act of his.

27. The Lord Chancellor in his judgment affirming the decision in Ellis & Co.'s Trustee v. Dixon Johnson [1924] 2 Ch. 451, above cited, lays down the rule in very broad terms as appears from Ellis & Co.'s Trustee v. Dixon Johnson [1925] A. C. 489. I must confess that I felt some hesitation in applying this rule here when we have no Indian authority on the point brought to our notice. However that may be, the rule seems to be based upon equity and good conscience and I think we must adopt it here as well. The case cited in the Madras Deposit and Benefit Society v. Passanha [1888] 11 Mad. 201 has really no bearing on the present point. That is the only case under Section 69 which has been brought to our notice. There, certain property had been sold under the power granted under the mortgage deed. It appears from the statement made by the learned Judge of the Small Cause Court making the reference that in that case the sale had taken place as a matter of fact after proper notice to the mortgagor. But it was apparently argued in that case that because in the mortgage deed there was a covenant that the property might be sold after 15 days' notice, which was against the provisions of Section 69 of the Transfer of Property Act, the sale should be treated as invalid and the claim for the balance of the mortgage debt should be held to be barred. The learned Judges rightly held, if I may say so with respect, that the provision in the mortgage-deed did not constitute a bar at all. But they certainly did not consider the question as to what was to happen if the sale was an improper sale and if the mortgaged property had been parted with by the mortgagee by a wrongful act of his. That question was not before them at all. I am, therefore, of opinion that the learned Judge's decision that the plaintiff's claim against the 1st defendant also fails is correct in this case.

28. Before closing I should like to add that the strictures passed by the learned Judge against a well-known member of the Bar, Mr. Sivagnana Mudaliar, are, in my opinion, not justified. The vakil, it is now stated, had obtained the leave of the Civil Justice to become a director of the fund ; and the fact that he became legal adviser to the fund does not, in my opinion, amount to anything unprofessional in his conduct. The fee he was getting was a very small one. I must, therefore, agree with my learned brother in holding that the learned trial Judge was not right in passing the strictures he passed on the vakil.

29. The directors of the fund also have a grievance because it is suggested by the learned Judge that the share-holders may make a claim against them. That is a matter with which we are not concerned at all. So far as I can see the directors have done nothing to justify a claim by the share-holders, but I do not wish to say anything more about it.

30. I agree that this appeal fails and must be dismissed with costs, three sets.


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