T. Ramaprasada Rao, J.
1. The learned Subordinate Judge of Nilgiris atOotacamund combined the two original suits, O.S. Nos. 222 of 1966 and 152 of 1968, and rendered a common judgment. It is not seriously disputed that though not expressly but by implication at least the two suits are connected. The parties agreed that the evidence recorded in O.S. No. 222 of 1966 may be taken as evidence in the other suit as well and reference to the parties in this judgment will, therefore, be with reference to O.S. No. 222 of 1966. A.S. No. 295 of 1970 is directed against the judgment and decree of the lower Court in O.S. No. 222 of 1966 and A.S,. No. 294 of 1970 is directed against the judgment and decree in O.S. No. 152 of 1968. The defendant in O.S. No. 222 of 1966 and the plaintiff in O.S. No. 152 of 1968 (one H. M. Kari Gowder) is the appellant in both the appeals.
2. We shall now trace the relevant facts independently in each of the suits and whenever necessary the collective facts in both the suits. The 1st plaintiff in O.S. No. 222 of 1966 is a partnership firm and is represented by its managing partner Section A.K. Chinnathambi Chettiar who is also the second plaintiff therein The defendant is a potato grower and businessman. The plaintiffs are dealers in Burmah Shell products besides being money-lenders. The course of dealings between the parties may be briefly stated thus. The defendant was a grower of potatoes and was dealing in them. He used, to transport them to various places outside Nilgiris and he used to despatch such goods either by rail and present the railway receipt to the 2nd plaintiff and receive the value of potatoes by what is known ins mercantile practice as discounting of bills and thereafter the railway receipt would I5e sent to its destination through a recognised bank. If the consignee fails to take the receipt by paying the value, necessary entries will be made in the accounts of the plaintiffs and the defendant would be debited with the said amount. But, if the consignee honours the railway receipt and pays for it then the credit entry in favour of the plaintiffs at the time of discount would automatically be wiped out by a debit entry as against it after the consignee honours the same. This course of conduct is reflected in the account books. The parties had such dealings ever since 1959 and in or about December, 1960 a 'sum of Rs. 50,026.03 became due and payable by the defendant to one or the other of the plaintiffs. An arrangement was thought of whereby the defendant was to secure the repayment of the aforesaid amount and, the parties contemplated to secure from the defendant a regular mortgage deed over his immoveable properties for which purpose the necessary non-judicial stamp to the value of Rs. 1,000 was purchased on 26th December, I960. It is claimed that on 29th December, 1960 a memorandum of deposit of title deeds wasdrawn up under Exhibit A-26 in which the upper limit of Rs. 50,000 which was fixed as the limit of borrowing of the defendant was made out. But, soon thereafter, after the year 1960, the plaintiffs' case is that they advanced on three occasions under Exhibits A-11, A-12 and A-13 three sums of Rs. 5,500, Rs. 20,000 and Rs. 25,000 respectively and that in evidence of lending such cash necessary entries have been made in the books kept by the plaintiffs in the regular course of business and the relevant entries evidencing such payment of cash is claimed to be Exhibits A-15, A-16 and A-17. We have already seen that there were regular business transactions between the plaintiffs and the defendant in connection with the potato trade of the defendant. But the plaintiffs' case is that under Exhibits A-1 l, A-42 and A 13, they advanced cash to the defendant on the respective dates and these cash transactions were independent of the business dealings. In connection with the cash dealings, the plaintiffs' case is that the defendant deposited the title deeds in relation to his immoveable properties, at Sukkirivarapet in Coimbatore on the 11th January, 1961 and after the execution of the promissory note, Exhibit A 13, and in order to make the security more clear and perfect a memorandum evidencing such deposit was taken under Exhibit A-14 dated 15th January, 1961. In this memorandum also, the upper limit up to which the defendant could borrow is fixed at Rs. 60,000. The plaintiffs would say that as the memorandum was a favour of the 2nd plaintiff by name, he became a mortgagee of such properties within the meaning of Section 58(g) of the Transfer of Property Act as by then the deposit of title deeds with intent to create an equitable mortgage thereon was effected and that Exhibit A-14 was only a memorandum recording a past transaction. The plaintiff claims that in the list of documents certain share certificates also were included, but he fairly concedes that he is not claiming any relief on them as no equitable mortgage as such could be created on such shares. Based on Exhibit A-14 which according to the plaintiff evidence an equitable mortgage, the suit has been brought after issuing a suit notice Exhibit A-8. We may at once state that the defendant replied under Exhibit A-9 denying liability are claiming that he had only one set of transaction viz., the usual, normal business transaction and he never borrowed cash from the plaintiff and that the suit promissory notes were only intended to act as security, not as evidence of an independent borrowing as claimed by the plaintiff.
3. In the written statement filed, the defendant repeated what he averred in the reply notice, but set out more details as to under what head he was liable to the plaintiff and what was the amount that was payable by him at or about the time when the suit was brought. As plaintiff based his claim on Exhibit A-14 which according to him created an equitable mortgage, he filed the action in 1966 though the promissory notes are admittedly of the year 1961. The first and foremost defence taken up by the defendant was that no cash consideration was paid under the promissory notes and that he never handed over any title deeds at Coimbatore to the 2nd plaintiff with intent to create an equitable mortgage thereon and as there was no subsisting mortgage on which the plaintiff could sue upon, the suit based on the promissory notes, even if the consideration was true, is barred by limitation. Expatiating his case that there was only one set of dealing as between him and the plaintiff, the defence case is that a sum of Rs. 50,026-03 was due at the end of the year and more particularly on 31st December, 1963 and on 25th October, 1961 he paid a. sum of Rs. 25,000 (which receipt is not in dispute) and that subsequent thereto, he had several normal business transactions with him and by about 1st December, 1961, the amount payable by him to the plaintiffs was about Rs. 24,981-92 and even according to the books of account kept by the plaintiffs the amount that could be claimed by either the 1st plaintiff or the 2nd plaintiff towards general dealings had between them was only Rs. 25,486-30 and in respect of this amount which fell due by the beginning of December, 1961 the defendant agreed to execute two usufructuary mortgages over his properties and pursuant to the understanding between himself and the plaintiff he did execute such usufructuary mortgages under Exhibits B-17 and B-18, but in favour of the nominees of the plaintiffs, for a sum of Rs. 40,000 and that this sum of Rs. 40,000 represents the principal amount of about Rs. 25,000 which was by then due by him as also the interest payable by him to the plaintiffs as per the arrangement and understanding between themselves. In any event, it is claimed that there were no independent cash transactions and particularly, under Exhibits A-11, A-12 and A-13, and if at all the defendant was due and owing any amount, it was under the general transactions and it was computed at the end of 1961 at Rs. 40,000 and for which purpose the two usufructuary mortgage deeds, Exhibits B-17 and B-18, were executed.
4. The defence case is that as there were multiplicity of dealings between himself and the plaintiffs in connection with his normal business, the cleric of the plaintiffs, examined as P.W. 2 in the case, used to obtain from him various documents holding out rosy promises that further and big advances would be obtained from the plaintiffs and it was in that fashion that the documents produced by the plaintiffs in O.S. No. 222 of 1966 came to be in their custody and that at no time the documents were ever handed over to the 2nd plaintiff at Coimbatore with intention of creating an equitable mortgage thereon.
5. We may in passing refer to the plaint in the suit in O.S. No. 222 of 1966. Whilst the plaintiffs are emphatic in the major part of the plaint that they are treating Exhibit A- 14 as evidence of the creation of an equitable mortgage over the properties by deposit of title deeds, it is rather queer that they did not set it out as such in paragraph 11 of the plaint which is ordinarily considered to be an important paragraph under the caption 'cause of action'. The plaintiffs would say that the cause of action for the suit arose on 10th January, 1961,11th January, 1961, 12th January, 1961 and 15th January, 1961 at Kotagiri and several places at Nilgiris where the properties are situated within the jurisdiction of the Court. It is singular that the main foundation of the action, which is the alleged deposit of title deeds at Coimbatore by the defendant which practically metamor phasised the action on the promissory notes to that of a cause of action, the alleged mortgage has not been adverted to specifically or even referred to by necessary implication. The defendant also claimed that he was an agriculturist and raised other defences which in our view need not be set out in extenso.
6. Whilst this suit was pending, the defendant instituted O.S. No. 152 of 1968. While repeating the nature of dealings had between him and the 1st plaintiff as a partnership firm in which the 2nd plaintiff is a partner and after admitting that he owed a sum of Rs. 50,026-03 at the end of I960 towards which he paid a sum of Rs. 25,000 in the beginning of 1961, the defence case is that in respect of such an outstanding two usufructuary mortgage deeds under Exhibit B-17 and B-18 were taken in favour of the nominees of the plaintiffs. Contemporaneous with the execution of the usufructuary mortgage, two leases deeds were obtained as possession was not given by the defendant to the plaintiffs which entitled the defendant to continue in possession of the hypotheca but under which he was obliged to pay rent to the plaintiffs. In the suit for redemption (O.S. No. 152 of 1968) the defendant as plaintiff says that he is entitled to redeem the mortgages without any payment for the reason that no further amounts, other than the amounts found to be due under the general dealings were advanced by the plaintiffs under the various mortgages and that they were taken in the names of their nephews and admittedly it is a benami transaction and the transaction could only have an impact on the generality of the dealings which the defendant as a potato dealer had with the plaintiffs and that he did not borrow any amount much less a sum of Rs. 20,000 under each of the usufructuary mortgages referred to above The substance of the plea in this suit also is that the defendant admits liability to pay the sums due under the general dealings which according to him was worked out to be Rs. 25,486-38 as per the account books of the plaintiffs themselves at the end of 1961 and that no more amounts were due by him by way of principal to the plaintiffs. In this context, the defendant filed this suit for redemption saying that he is entitled to redeem the mortgages without payment. To this, the plaintiffs who claimed that the mortgagees under Exhibits B-17 and B-18 are benamidars have filed a written statement. They would say that the mortgages are supported by consideration and they are valid and subsisting. They base their answer on an admission made by the plaintiffs in the written statement in O.S. Nos 222 of 1966 and would say that the plaintiffs are not entitled to redeem without paying the entirety of the sum of Rs. 40,000.
7. The following issues were framed in O.S. No. 222 of 1966:
1. Whether the deposit of title deeds was made at Coimbatore on the 11th of January, 1961?
2. Whether the deeds were deposited with intent to create a mortgage, if so over what loans?
3. Whether the plaintiff is entitled to a mortgage decree and if so over what properties and on what amounts?
4. Whether the plaint promissory notes are not supported by cash consideration?
5. Whether the promissory notes were executed for balances on accounts between the plaintiff and the defendant and if so what is the correct amount due on the same?
6. Whether the payment of Rs. 25,000 by sale of the defendant's Mettupalayam house is true?
7. Whether all the accounts between the plaintiff and the defendant were not looked into and if the plaintiff did not take two usufructuary mortgages for Rs. 20,000 each in the name of his benamidars C.S. Natarajan and Sadasiva Mudaliar?
8. If so, whether the plaintiff is competent to maintain this suit and without offering to get his benamidars to surrender the usufructuary mortgages duly cancelled and surrendered?
9. Whether the alleged letter of 15th January, 1961 is admissible without being registered and whether it can operate to create a mortgage?
10. Whether the suit on the promissory notes are in time?
11. Whether the defendant is an agriculturist entitled to the benefits of the Madras Agriculturists Relief Act?
12. Whether the dealings of the 2nd plaintiff were on behalf of any joint family of which he was a manager?
13. Whether the 1st plaintiff is entitled to sue without an assignment in his favour in writing and registered?
14. Whether the suit is bad for misjoinder of the 1st plaintiff?
15. Whether the suit is bad for non-joinder of the other members of the joint family of the 2nd plaintiff?
16. Whether the suit is bad for nonjoinder of the lessees of some of the plaint properties?
17. Whether the plaint items of properties are not correctly described?
18. To what relief, if any, is the plaintiff entitled?
8. The following issues were framed in O.S. No. 152 of 1968:
1. Whether the suit, as framed, is not maintainable?
2. Whether proper Court-fee is paid?
3. Whether the usufructuary mortgages dated 1st December, 1961 stand redeemed without any payment?
4. To what relief?
As we said, the learned Judge tried the suits together and rendered a common judgment. In the suit based or the promissory notes coupled with a memorandum which created, what according to the plaintiff an equitable mortgage, the learned Judge was satisfied that the promissory notes were supported by consideration and that the passing of consideration is evidenced by the account books kept by the plaintiffs in their regular course of business. He believed the evidence of P.W. 1 (2nd plaintiff) and that of P. W. 2 (their clerk). He would also place reliance upon the testimony of the accounts-clerk (P.W. 3) and found that Exhibits A-15, A-16 and A-17 are reliable entries in the account-books of the plaintiffs on which a decree could be passed. He would also refer to the sc-called admission made by the plaintiffs and would hold that the promissory notes are supported by consideration. He would understand the defendant's case one way viz., that it could be the subject-matter of an independent account suit which he could file as against the plaintiffs. In, the suit in O.S. No. 152 of 1968, he totally relied upon the recitals in the usufructuary mortgage deeds and believed the evidence of P.W. 1 and held that cash was paid under the aforesaid two mortgages as recited therein and that the mortgage deeds are, therefore, supported by consideiatian. In the result, therefore, he passed a preliminary decree in O.S. No. 222 of 1966 and, passed a decree for redemption, of the mortgage deeds provided the plaintiff paid the full mortgage amounts and on payment of the deficit Court-fee before the notified date. It is as against this common judgment that the present appeal has been preferred in both the suits by the defeadant.
9. Before we go into the real issues which arise for consideration in this case, it is necessary to make general observations on the accounts kept by the plaintiffs. No doubt, on a prima facie examination of the account-books of the plaintiffs, it would be difficult to eschew them as those rot kept in the regular course of business. But, it is not incredible as experience shows that even regularly kept account-books are sometimes used as a media for exposing false cases. I he Courts, therefore, have to be particularly careful in examining such account-books with apparent mercantile cleanliness but which is attacked on the ground that they are unclean because of certain interpolations made therein and where the proof of such interpolations are very clear and positive even on a prima jade examination of the relative attacked entrirs. In the instant case, there could not have been cash dealings as claimed by the plaintiffs as between themselves and the defendant. Nevertheless, the plaintiff is emphatic that the suit promissory notes, Exhibits A-11, A-12 and A-13 are supported by cash consideration and that the passing of such consideration is proved in the recitals in entries Exhibits 'A-15, A-16 and A-17. We shall presently consider in detail the nature of such entries Exhibits A-15, A-16 and A-17. We are only referring to this at this juncture while dealing with the account-books of the plaintiffs only for the purpose of showing that in the instant case there was a specific attack on such recitals and the accent of the defendant was always on the fact that there was no general cash dealings between the plaintiffs and himself and at all material times he was dealing with the plaintiffs only in connection with his potato business and it is only in connection therewith he discounted the bills and obtained cash. The emphatic stand take a by the defendant is that at no time he borrowed cash from the plaintiffs for or in connection with us potato business. Therefore, it is for consideration whether the suit laid primarily on the promissory notes, but aid by Exhibit A-14, has to be accepted by raising the usual presumption under Section 118 of the Negotiable Instruments Act. No doubt, special Rule is of evidence are provided for under the self-contained enactment viz., the Negotiable Instruments Act. Section 118 says that until the contrary is proved inter alia the following prosurtption that every negotiable instrument was made or drawn for consideration shall be drawn. But, by now, it is well established that such a presumption is sometimes displaced by certain acceptable materials placed by the maker of the note which under such circumstances shifts the burden of proof from the maker to the payee. The presumption that could be raised under this Section is only a prima fade presumption. If the maker of the note satisfies the conscience of the Court that at no time consideration passed under the negotable Instrument and that he executed it under certain circumstances which are not far from truth, then the ordinary presumption that consideration is presumed will not arise. As a matter of fact, Courts have laid down that the maker of the note or the defendant in an action on the promissory note may also rely upon circumstantial evidence and if those circumstances are compelling, the burden would likewise shift again to the payee or the plaintiff to establish the existence of consideration or at least its probability. In the instant case, not only in the reply notice, Exhibit A-9, but also in the written statement the defendant's specific stand was that no consideration passed under the promissory notes. In this situation, therefore, it is not unreasonable to expect that the circumstances are compelling in this case and the surrounding circumstances are thus far clear for the shifting of the burden of proof from the shoulders of the defendant - appellant to that of the plaintiff - payee.
10. With this background, we shall now examine the account-books of the plaintiffs to see whether on the 10th, 12th and 15th of January, 1961 the plaintiffs could have paid a sum of Rs. 5,500, Rs. 20,000 and Rs. 25,000 respectively. Exhibit A-15 is the entry in the day-book which according to the plaintiffs shows such payment of Rs. 5,500 on 10th January, 1961 which forms the consideration for the promissory note, Exhibit A-11. We have examined this entry. We find that even to the naked eye there is an interpolation in the regularly kept account. The entry is written with a different pen and with a differnt ink and it cannot be stated to be an entry which was made in the regular course. Even so Exhibit A-16. This is the last entry in that page written again by a different pen with a different hand with different ink and it stands solitarily alone to expose the plaintiffs' interpolation in a regularly kept account. Exhibit A-17 is said to be the entry in relation to the payment of-Rs. 25,000 which according to the plaintiffs is the consideration for the promissory note, Exhibit A-13. Here again, the same pen and the same hand which caused the interpolations in Exhibits A-15 and A-16 have chosen to write up the entry as if Rs. 25,000 was paid to Kari Gowder, the defendant. Obviously, a show of genuineness is also attempted in this page. But we are of the view that the entry of Rs. 25,000 revealing a cash payment on that date of such an amount to the defendant is obviously brought into account in order to support the plaintiffs' case. An examination of the ledger which singularly brings these three disputed items of cash said to have been paid by the plaintiffs to the defendant again makes a revealing situation. We examined the index of the lodger. Upto page 79 there appears to be no misgiving about the entries in the ledger, but thereafter as to why the writer of the account went back to pages 34 and 42 is not clear. Obviously the plaintiff did not have the requisite cash in or about 10th January, 1961. Therefore, he invented the position that he borrowed the amount from one Pushirarr Vishindas of Madras. He has not been examined. The mode in which the amount was borrowed has not been adverted to or proved. In order to provide themselves with cash, the plaintiffs, therefore, had to inhrfent such a borrowing on their part from Pushirara VfeWndas. This invented borrowing is also exposed in the day-book as the entry relating to it appear seven tour naked eye to be an after-written affair. After having invented such a borrowing the writer of the ledger who wont up to page 79 came back to 34 and entered this borrowing from Pushiram Vishind as at that page. It is not as if more pages are not available in the account-book. As a matter of fact, after page 81, several hundreds of pages are available for being written up, but the writer takes a step backward and uses pages 3 and 42 in order to sustain the cash lending of about Rs. 5.0,500 to the defendant. There is no explaration at all as to why this fact of going backward in the ledger was adopted by the plaintiffs who are rot only money lenders, but experienced commercial businessmen. At page 42 of the ledger is an entry, Exhibit A-20, which is no doubt a consolidated entry, showing the alleged payments of Rs. 5,500, Rs. 20,000 and Rs. 25,000, making a sum of Rs. 50,500. But, as we said, this ledger entry is obviously in consonence with the entries which prima facie cannot be relied upon and these entries (Exhibits A-15, A-16 and A-17) in our view are interpolated in the daybook. If, therefore, Exhibits A-15, A-16 and A-1 7 are interpolations, it follows that Exhibit A-20, which is a follow-up of such entries, obviously cannot be credited and relied upon. Mr. T. R. Srinivasan appearaing for the respondents in this appeal, is unable to place any contrary material before us to accept the plaintiffs' version, that cash passed under these promissory notes and that the entries, Exhibits A-15, A-16 and A-17 are real and true. He also examined the account-books along with us in Court and was unable to efface the reasonable impression which follows from an examination of such entries that they are interpolations and interlineations in a regularly kept account for the purpose of creating the story that the plaintiffs paid cash consideration under Exhibits A-11, A-12 and A-13. We are unable, therefore, to accept the theory of the plaintiffs that the promissory notes, Exhibits A-11, A-12, and A-13, are supported by consideration. But what is. pressed into service is that when the defendant was called upon to produce his accounts for which a notice to produce 5 was also given the defendant did not produce such accounts and, therefore, the usual adverse inference should be drawn against the defendant. No doubt, such is one of the norms which Courts have fixed to themselves while appreciating the conduct of the litigant. But such an inference cannot be mechanically or automatically drawn in every case on the only basis that a litigant did not produce the account after he was called upon to produce the same. Each case has to be decided on its own merits. As we said, the airbulatory proof of a negotiable instrument, the proof of passing of consideration under a negotiable instrument is now shifted to the shoulders of the plaintiffs and as we are unable to exercise the discretion and raise the usual presumption under Section 118 of the Negotiable Instruments Act, it is for the plaintiffs to establish that they paid cash under the three promissory notes. For this purpose, they wanted to rely on their accounts. We have examined the account-books and have made the observations found above which compel us to hold that the entries in the account-books in so far as this case is concerned appear to be entries which were brought in with a motive and they are not entries which could be said to have been made in the regular course of accounts-keeping. We, therefore, reject the theory that the promissory notes are supported by consideration.
11. One other aspect which we would like to state at this juncture is that the sum total of the alleged consideration which passed under the promissory notes almost represents the amount by then due by the defendant under the general dealings they had with the plaintiffs. This probablises the defence version that he gave several blank signed sheets to P.W. 2 on various occasions in the hope of getting finances and advances from the plaintiffs in the general business and that such documents handed over to P.W. 2, who is an employee of the plaintiffs, have been misused. One other (thing which strikes us is that the theory of the defendant that even if the promissory notes were signed by him, as claimed by the plaintiffs they were understood only as security documents for the amount due by him under the general dealings and not because any Cash, consideration was paid under them.
12. Even assuming that the presumption under Section 118of the Negotiable Instruments Act arises in this case and that cash consideratior should be deemed to have passed under Exhibits A-11, A-12 and A-13, the plaintiffs have not come to Court on the basis of such a negotiable instrument, but on the basis that there has been a deposit of title deeds at Coimbatore by the defendant with intent to create an equitable mortgage over the properties listed out by the defendant under Exhibit A-14. It is on the strength of such an equitable mortgage said to have been created in their favour by such deposit that the plaintiffs have filed this suit long after the lapse of three years from the respective dates of the promissory notes in question.
13. The immediate point, therefore, for consideration is whether there could have been a deposit of title deeds by the defendant in favour of the plaintiffs at Coimbatore. In paragraph 4 of the plaint, the plaintiffs allege that or the 11th January, 1961 the defendant deposited his title deeds with the 2nd plaintiff at Coimbatore with intent to creat a security over the properties detailed in the schedule to the plaint. He would also add that the defendant also left a letter in plaintiffs' office at Mettupalayam on 15th January, 1961 mentioning the list of documents aheady deposited at Coimbatore. The said letter, according to the plaintiffs, was produced along with the plaint to prove the admission of the defendant that the deposit was made at Coimbatore. We have already noticed that even though the plaintiffs allege that there was such a deposit of title deeds with the intention of creating an equitable mortgage thereon, in the cause of action paragraph in the plaint there is no specific reference to it. Mr. T.R. Srinivasan, says that inartistic pleading can never be a ground for refusal of relief. We agree. But whether it is inartistic pleading or deliberate avoidance of a positive fact on which the case rests is a matter which has to be decided upon on the evidence and facts of the case.
14. We shall first consider whether the oral evidence let in this case regarding deposit of title deeds at Coimbatore is sufficient and clinching. Under Section 58(g) of the Transfer of Property Act in certain metropolitan cities like Calcutta. Madras and Bombay and in any other town the State Government concerned may by notification in the Official Gazette specify a mortgage by deposit of title deeds known as equitable mortgage can be created. That could be created by the debtor delivering to the creditor or his agent the documents of title to immoveable property with intent to create security thereon. Firstly, the two limbs of the Section which have to be necessarily complied with are delivery of title deeds relating to immoveable property in one of the specified towns and secondly such delivery or deposit was with intent to create a security thereon. These two factors act conjunctively and they cannot be dissociated under any circumstances whatsoever. As pointed out by our High Court in The Chief Controlling Revenue Authority, Madras v. Messrs. Pioneer Spinners Private Limited : AIR1968Mad223 the existence of the intention may be established by written documents alone or coupled with oral evidence, or oral evidence only, P.W. 1 in chief examination claims that he knows] the defendant forl5years and after stating that the promissory notes, Exhibits A-11, A-12 and A-13 were for cash consideration, said that the defendant delivered the documents of title to him at Sukravarappet in Coimbatore. He admits that no documents were given when he lent a sum of Rs. 5,500. When he gave a sum of Rs. 25,000 at Mettupalayam and obtained Exhibit A-13, he asked the defendant to give a list of documents and that the defendant gave such a list of documents at Mettupalayam. He denies that he received the documents at Kottagiri. He has not even whispered in the box that the said documents were handed river to him with intent to create a security thereon. What he says is that he asked the defendant to give a list of documents and such a list was given to him at Mettupalayam. The only document on which the plaintiffs rely upon is Exhibit A-14,the purport of which we shall presently consider; P.W. 1 admits that excepting Exhibit A-14 there is no other document to show that the title deeds were deposited at Coimbatore. P.W. 2 who is an employee of the 2nd plaintiff, corroborates P.W. 1 and would say that the title deeds and other documents were given to the plaintiffs at Coimbatore. He adds that at that time a document was proposed to be executed. P.W. 2's evidence is as follows:
He gave the title deeds and other documents to the plaintiff at Coimbatore. Then a document was proposed to be executed. The plaintiff paid money for purchasing stamp papers. The defendant represented that if the document was registered, his reputation would suffer and he offered to execute an equitable mortgage. He received back some of the documents. The defendant again wanted money from the plaintiff in. January, 1961. P.W. 1 advanced him loans. P.W. 1 wanted security; The defendant deposited title deeds. The defendant was paid Rs. 5,500 on 10th January, 1961 at Mettupalayam. Exhibit A-1l is the promissory note executed by the defendant. Two days later, the defendant was paid Rs. 20,000. Exhibit A-12 is the promissory note executed by him. Two days later he was paid another Rs. 25,000. Exhibit A-13 is the promissory note executed by him. He delivered the title deeds to P.W. 1 at Coimbatore on the next day after he was paid Rs. 5,500. A list of memorandum was taken from him on 15th January, 1961 when Rs. 25,000 was paid to him.
P.W. 2 therefore, admits that though under the contemplated arrangements between the parties the stamps were purchased for executing a regular mortgage and though at that time certain documents were with P.W. 2, some of them were returned back. But what documents were taken back is not clear. He would mechanically add that he delivered the title deeds to P.W. 1 at Coimbatore on the next day after he was paid Rs. 5,500. He does not even say that such redeposit was made with the intention to create a security on those properties. The lower Court relied upon the judgment of the Delhi High Court in Parkask Dev v. New Bank of India : AIR1968Delhi244 , which says that physical delivery of documents by the debtor to the creditor is not the only mode of deposit. There may be a constructive deposit. A Court will have to ascertain in each case whether in substance there is a delivery of title deeds by the debtor to the creditor. If the creditor was already in possession of the title-deeds, it would be hypertechnical to insist upon the formality of the creditor delivering the title deeds to the debtor and the debtor redelivering them to the creditor. We are unable to hold this view in its entirety. Section 58(g) contemplates delivery of documents which means actual delivery and not constructive delivery or constructive deposit. No doubt, in a case where the creditor is in possession of the title deeds of the debtor it may not be strictly necessary for him to redeliver the same to the creditor vender certain circumstances if there is continuity in the transactions or if the parties intended that the original delivery is sufficient to constitute security for the later dealing. It all depends upon the facts of the case. But, in the instant case, what happened was that the title deed s were taken in order that a regular mortgage may be written up in connection with the general borrowing of the defendant. But what happened according to the plaintiffs is that apart from the debits under the general business account he advanced cash urder three promissory notes which were undoubtedly different transactions and which have no link or connection with the general business. Therefore, independent delivery of the documents with intent to create an equitable mortgage is a necessary sine qua non before an encumbrance becomes attached to immovable property. If this according to us is the position, P.W. 2 has not even referred to the fact that the delivery of title deeds said to have been made at Coimbatore the next day after the execution of Exhibit A-11 was with the intention of creating a security thereon.
15. This is the nature of the oral evidence let in by the plaintiffs regarding the alleged deposit of title deeds. As we said, there is nothing clear and clinching in the testimony of either P.W. 1 or P.W. 2 to compel us to hold that such delivery of documents at Coimbatore at or about the time when the promissory notes were executed by the defendant after receipt of cash consideration was with the intention of creating a mortgage over the immoveable properties covered by such documents within the meaning of Section 58(g) of the Transfer of Property Act.
16. But P.W. 1 would say that excepting Exhibit A-14 there is no other document to show that the title deeds were deposited at Coimbatore. This would mean that Exhibit A-14 is the sole evidence which according to the plaintiffs would be sufficient to create an equitable mortgage over their properties by reason of the alleged deposit of title deeds at Coimbatore.
17. It, therefore, becomes necessary for us to examine Exhibit A-14 as the memorandum evidencing the deposit of title deeds and consider whether Exhibit A-14 by itself is sufficient in law to vest in the plaintiffs a right to enforce an equitable mortgage known to law. We have already referred to the two limbs of Section 58(f) of the Transfer of Property Act. An equitable mortgage or mortgage by deposit of title deeds consists of a transaction and a bargain. If both the transaction and the bargain are telescoped one with the other and they appear to be so integrated, then oral evidence is admissible to prove both. The transaction reveals the borrowing1 and the bargain depicts that there was a deposit of title deeds within the jurisdiction of a prescribed town with intent to create security. If, however, the bargain is reduced to writing, then the question often arises whether such writing is the sole repository of the evidence of the bargain or is it merely a memorandum or record of the past or earlier transaction which brings out the intention of the torrower to create an equitable mortgage over immoveatle properties in connection with which alone the title deeds have been delivered or deposited. As no oral proof of writing is possible and indeed eschewed by the provisions of the Evidence Act, it becomes necessary to understand the true legal effect of the writing in case parties choose to reduce the bargaii or their contract to writing. If at the time of borrowing, the title deeds are deposited or indeed handed over with no more incidents attached to it, but with intent to create a mortgage there or, then the presumption arises that the parties intended so and a mortgage has been created in accordance with Section 58(g). But, if as in the instant case as claimed by the plaintiffs if the transaction is followed up either contemporaneously or at any time later by a written bargain then the legal implications as to the above presumption is excluded. In United Bank of India v. Lekhram S. and Co. : AIR1965SC1591 the Supreme Court quoted with approval the words of Lord Gairins in the leading case of Shaw v. Foster (1872) 5 H.L. 321, 341 , thus:
Although it is a well established Rule of equity that a deposit of a document of title without more, without writing or without word of mouth, will create in equity a charge upon the property referred to, I apprehend that that general Rule will not apply when you have a deposit accompanied by an actual written charge. In that case you must refer to the terms of the written document, and any implication that might be raised, supposing there was no document, is put out of the case and reduced to silence by the documents by which alone you must be governed.
There is, however, an exception to the above Rule ; If the writing or memorandum is a record of the past transaction and no more, and if we analyse the facts and circumstances of the case which obviously differ from one to the other, the writing is not so express as to make the writing as the sole and only bargain, then the implication in law that even at the time when the transaction was entered into accompanied by the deposit, the parties intended to create a mortgage may arise. As stated by the Supreme Court in V.G. Rao v. Andhra Bank : AIR1971SC1613 , when parties creating security by deposit of title deeds intend to reduce their bargain regarding that deposit to the form of document, such document must be registered. But if on a proper construction and from the surrounding circumstances it is found that the parties did not intend to do so, then there being no express bargain the contract to create mortgage by deposit of title deeds arises by implication of law from the deposit itself and the document being merely evidential does not require registration. Bar of Sections 91 and 92 of the Evidence Act docs rot apply to such document and correctness of recitals therein can be looked into. In Rachpal Mahraj v. Bhagulandas Daruka : 1SCR548 , Justice Patanjali Sastri, as he then was, summarises the law thus:
A mortgage by deposit of title deeds is a form of mortgage recognised by Section 58(g) of the Transfer of Property Act which provides that it may be effected in certain towns (including Calcutta; by a person 'delivering to his creditor or his agent documents of title to immoveable property with intent to create a secuiity thereon.
That is to say, when the debtor deposits with the creditor the title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage, and no registered instrument is required under Section 59 as is. other forms of mortgage. But if the parties choose to reduce the contract to writing, the implication is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredierts in the creation of the mortgage. As the deposit alone is not intended to create the charge and the documents which constitutes the bariyai regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under Section 17 of the Indian Registration Act, 190?, as non-testamentary instrument creating an interest in immoveable property, where the value of such property, is one hundred rupees and upwards. The time factor is not decisive. The document may be handed over to the creditor along with the title deeds and yet may not be registrable, as in Obla Suttdardckariar v. Marayarta Ayydr , or it may be delivered at a later date and nevertheless be registrable, as in Ran Sankar Paul v. Kedar Naih Saha . The crucial question is Did the parties intend to reduce their bargain regarding the deposit of title deeds to the form of a document? If so, the document requires registration. If, on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document, being merely evidential does not require registration.
18. Thus it is seen that if the letter o writing between the borrower and the lender on its true understanding and in the light of the surrounding circumstances is evidence of a past transaction, then that instrument or letter or writing does not create a mortgage by itself. What is needed is that the writing on the face of it and on a rational and normal interpretation of it should give that it was under that letter, writing or instrument that the mortgage was created. In other words, the writing should have an operational effect, but should not be puiely evidential in scope. In the light of this position of law as above by judicial precedents, we shall now take up Exhibit A-14 which is said to be the only document to show that the title deeds were deposited at Coimbatore and see whether this story of the plaintiffs is acceptatle and what is its legal effect. Exhibit A-14 is a document written by an expert. The writer was a retired Sub-Registrar who is obviously convergent with the intricacies attached to such writings. Though it is captionedas as list or memorandum executed by the defendant in favour of the plaintiffs, it is in effect a deed of equitable mortgage executed as between Ghinnathambi Ghettiar on the one hand and Kari Gowder on the other The words deployed to name this instrument is by no stretch of imagination it can be said that after the parties executed solemnly a writing like Exhibit A-14 it is not the sole repository of the bargain between the parties, but it is a record of a past transaction. We cannot lightly ignore the description given by the parties to this instrument as a deed of equitable mortgage executed as between one and the other. After mentioning the outer limit up to which Kari Gowder could borrow, the parties say that as security for such lending assured by Ghinnathambi Chettiar and as secuiity thereof, the documents relating to the properties described in Exhibit A-14 were deposited by Kari Gowder at Coimbatore. At this juncture, it is for us to consider whether the intent to create a security on the property resulting in a mortgage by deposit of title deeds was ever thought of at all even assuming' that the title deeds were delivered at Coimbatore; Once they have unequivocally reduced the bargain into writing and expressed that one is creating an equitable mortgage in favour of the other under it, and in that context referred to the deposit of certain title deeds at Coimbatore, it would not mean that the deposit made at Coimbatore was not with intent to create security, but it is only under Exhibit A-14 that such an intention was made clear.
19. If Exhibit A-14, therefore, is the bargain between the parties or the sole evidence by which the borrower intended to offer his properties as security, then undoubtedly Exhibit A-14 requires registration under Section 14 of the Indian Registration Act as a non-testamentary instrument creating an interest in immoveable property. If Exhibit A-14 is understood in that line, then it is inadmissible in evidence and cannot fix any right much less a right as a mortgagee to enforce the security in a manner known to law.
20. Not only on the ground, that the promissory notes are not supported by consideration but also on the ground that there is no clinching evidence that the title deeds were deposited at Coimbatore and also for the reason that Exhibit A-14 which according to us is the sole repository of the bargain between the parties is a compulsorily registrable instrument and that not having been registered the suit laid by the plaintiffs on the foot that Exhibit A-14 created such a mortgage in their favour is not maintainable and has, therefore, to be dismissed. On the first ground that the promissory notes were not supported by consideration the suit also fails. The lower Court was, therefore, wrong in having decreed the suit.
21. The appeal, A.S. No. 295 of 1970 is, therefore, allowed with costs.
22. The other question for consideration is whether the decree of the lower Court in O.S. No. 152 of 1968 would stand as it is. The lower Court no doubt came to the correct conclusion that the plaintiff could only redeem the property by paying the sum of Rs. 40,000 which is the amount mentioned in the two usufructuary mortgage deeds, Exhibits B-17 and B-18. But the question is whether the plaintiff, in the sense the defendants in O.S. No. 152 of 1968, should succeed on the ground that the usufructuary mortgage deeds are supported by consideration or on the material which has been referred to by us and also the lower Court and which facts are not in dispute before us. In so far as the usufructuaiy mortgage deeds. Exhibits B-17 and B-18 are concerned, admittedly they are taken one in the name of the nephew and another in the name of the friend. They have been impleaded as defendants 2 and 3 in the present action. The ist defendant concedes in this suit that they were only name-lenders and that he lent the money from the saving from agricultural Income. But the ist defendant is a businessman who is regularly keeping accounts in respect of his business. Being a businessman, he ought to have kept accounts in respect of his private income elsewhere. No such accourt has been produced. Excepting for the bare ipse dixit of the ist defendant in this suit, there is no evidence before us to show that Exhibits B-17 and B-18 are supported by consideration. We asked Mr. T.R. Srinivasan to substantiate from any exhibited document or from acceptable oral testimony to prove that Rs. 20,000 passed under each of these documents. He was unable to place before us any such material. It is in these circumstances we should consider the version of the plaintiff in the suit. The plaintiff's case is that under the general dealings which he admittedly had with the 1st defendant, a sum of Rs. 50,926.03 became due by the beginning of 1961 and that he paid a sum of Rs. 25,000 towards these dues and by the end of 1961, it was agreed that towards the discharge of this debt, the plaintiff should execute two usufructuary mortgage deeds over his properties. The version of the plaintiff in this suit is that it was agreed that the figure of Rs. 40,000 was arrived at taking into consideration the interest payable on the earlier dues of the plaintiff to the 1st defendant and it was in that context that the figure of Rs. 40,000 was arrived at and later the usufructuary mortgages under Exhibits B-17 and B-18 were entered into. This version of the plaintiff is probable and is also substantiated by the defendant's own account books. The ledger of the 1st defendant in connection with the general business has been produced. That shows a debit entry on the 1st of January, 1961 and Rs. 50,026.03. This is at page 399 of the ledger which has not been independently marked but which we are marking as Exhibit C-1. At page 408 of Exhibit C-1 this account is carried forward and is closed at the end of December of the year 1961. This takes into consideration the sum of Rs. 25,000 paid by the plaintiff. But there appears a debit to the value of' Rs. 442.27 in this account. That is why we see at page 408 of Exhibit C-1 that the amount of Rs. 24,981.92 which ought to be the only debit as against the plaintiff in respect of the general dealings, is increased to Rs. 25,486.38 instead of remaining at Rs. 24,981.92. It is m full settlement of this general account which resulted in the debit of Rs. 25,486.38 the plaintiff claims that the two usufructuary mortgage deeds were entered into by adding on the interest which the plaintiff agreed to pay to the 1st defendant in respect of prior dealings. It is also seen that at page 99 in Exhibit C-1 the 1st defendant omitted to add on the sum of Rs. 50,026.03. As to why he did to is not clear. But in the same Exhibit C-1 at page 408, he once again brings this debit of Rs. 50,206-03 at the end of the year and adds or Rs. 442.27 to it and makes up a debit of Rs, 25,486-38. This obviously appears to be the only amount due by the plain tiff to the defendants in the course of the general dealings between him and the 1st defendant. It is in respect of this that these usufructuary mortgages have been executed though for an agreed larger amount, but on an understanding of the account, as disclosed by the 1st defendant himself. It is seen that no further amount is due by the plaintiff under the general dealings and that all such debits have become merged in the consideration recited though not paid under Exhibit B-17 and B-18. As justice should be done and also seem to be done, we are not inclined to allow the suit for redemption without payment. But as Mr. V.K. Thiruven katachari for the appellant himself fairly concedes that his client owes the suit sum of Rs. 25,486.38 being the debit as against him in the general account at the end of 1961 and which was raised to the figure of Rs. 40,000 by consent, we accept the probable version of the plaintiff and decree the suit for redemption on the plaintiff depositing the full mortgage amount within three months from this dpto and also on payment of the required deficit Court-fee, if not already paid. The appellant in A.S. No. 294 of 1970 shall pay the counsel's fee in this appeal. Any amounts paid by the appellant in these proceedings during the pendency of this appeal shall also be taken into consideration at the time of final ascertainment of the amount payable by the plaintiff to redeem the mortgage.