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Muthukrishnien and ors. Vs. Viraragava Iyer and anr. - Court Judgment

LegalCrystal Citation
Decided On
Reported in16Ind.Cas.601
AppellantMuthukrishnien and ors.
RespondentViraragava Iyer and anr.
Cases ReferredRamasami Pillai v. Muthu Chetti
negotiable instrument or chose in action, hypothecation, of - delivery of possession to hypothecatee--security-- pledge-absence of endorsement-right of hypothecatee to sue-obligation to sue before bar by limitation--low to hypothecator by hypothecatee's failure to sue--laches --liability of hypothecatee in damages--contract act (ix of 1872), section's 139, 141, 151--mere hypothecation of debt, whether amounts to transfer--transfer of perty act (iv of 1882), section 134-stare decisis-application of english law of equity. - sundara aiyer, j.1. a question of law of some importance has been raised for decision in this case. the plaintiffs sued to recover the amount due on a mortgage bond, exhibit a, executed by the 1st defendant to one muthuswamy iyer, the father of the plaintiffs. the bond hypothecated certain immoveable property and certain debts due to the 1st defendant under a promissory-note and two simple mortgage documents. all these three documents were apparently handed over to the plaintiff's father along with exhibit a. the mortgage bonds were returned to the 1st defendant to enable him to realise the monies due under them and pay the same towards the amount due on exhibit a.2. the plaintiffs allege that no payment was really made by the, defendants, and the 1st defendant's plea that he paid rs. 100.....

Sundara Aiyer, J.

1. A question of law of some importance has been raised for decision in this case. The plaintiffs sued to recover the amount due on a mortgage bond, Exhibit A, executed by the 1st defendant to one Muthuswamy Iyer, the father of the plaintiffs. The bond hypothecated certain immoveable property and certain debts due to the 1st defendant under a promissory-note and two simple mortgage documents. All these three documents were apparently handed over to the plaintiff's father along with Exhibit A. The mortgage bonds were returned to the 1st defendant to enable him to realise the monies due under them and pay the same towards the amount due on Exhibit A.

2. The plaintiffs allege that no payment was really made by the, defendants, and the 1st defendant's plea that he paid Rs. 100 has been negatived by the lower Courts. The light to enforce payment of the promissory note, which was executed by a third party in first defendant's favour, became barred by limitation while it was in plaintiff's custody.

3. It was contended that the plaintiff should be debited with the amount due on the note as he was bound to recover it from the maker. This contention has been upheld by both the lower Courts. Plaintiffs appeal and the question for decision is whether the plaintiff was bound to collect the amount due on the promissory-note. Exhibit A, dated 26th October 1902, states: 'As I have received Rs. 600 from you by mortgaging the following, i.e., the house and...and the promissory-note mentioned as '2' in the Schedule...for Rs. 500 executed by my brother Sankara Subbier on the 21st November 1907.... I promise to re-pay the said sum of Rs. 600 with interest thereon at one par cent, per month within a year from the date hereof, failing which I shall re-pay the principal and interest aforesaid with interest thereon at if per cent, per month and add the interest to principal every year and re-pay the same with compound interest at the rate aforesaid, failing which you may proceed against the mortgaged properties, other properties or personally for the collection thereof.'' The promissory-note was not transferred to the plaintiff's father according to the terms of Exhibit A. The note was payable to the 1st defendant or order at sight or on demand.' It was not endorsed over by the payee to Muthuswamy Iyer when Exhibit A was executed or at any time subsequently. The contention of the respondent here, which is the same as in the lower Court, is that the mortgage of a debt, when possession of the bond or other instrument evidencing it is handed over to the mortgagee, amounts in law to an assignment of it, that although the pro-note was not endorsed over to Muthuswamy Iyer, Exhibit A was sufficient to transfer the right to the note as a chose in action to Muthuswamy Iyer ; and that Muthuswamy Iyer was entitled and bound to do everything in his power to realise the amount due on it, failing which he was debitable with the loss caused by his omission to do so. After full consideration, I am unable to uphold these contentions. I am of opinion that Muthuswamy Iyer and the plaintiffs were not entitled to sue the maker of the note for the recovery of the amount due under it and even if they were entitled to do so, they were not bound to do so.

4. If the second point be decided in plaintiff's favour, it would sufficient to dispose of the case. A chose in action or a negotiable instrument may, no doubt, be transferred or assigned to a creditor by way of security' for a debt that is, the ownership of the negotiable instrument or the chose in action may be transferred to the creditor and he may be made liable to account for the proceeds as a trustee. If he recovers the amount due, he would be bound to apply it towards the debt due to himself; and if the amount exceeds his debts, he would be bound to pay the balance to the assignor. This is what I understand by assigning a debt or a negotiable instrument; by way of security.' Bat I am unable to hold that a mere hypothecation or mortgage would vest the ownership in the hypothecatee or mortgagee. None of the cases cited by the respondent, except the one to be noticed hereafter, goes, in my opinion, to support the contrary view or to show that a mere mortgagee of a debt or chose in action would be competent to sue the original debtor of the mortgagor for the recovery of the debt. I shall first deal with the decisions that have been relied on for the respondents.

5. Shyam Kumari v. Rameshwar Singh 32 C.K 27 : 8 C.W.N. 786 : 6 Bom. L.R. 754 : 31 I. was a decision of *the Privy Council. In that case, the mortgagor, at the time of the mortgage in question, executed in favour of the mortgagee another deed spoken of as Bechinama by which he assigned to him a debt due to him from a third person. The question before their Lordships was whether the mortgagee was not bound to use reasonable diligence to recover the assigned debt from the debtor. Their Lordships concurred with the Calcutta High Court in holding that he was bound to do so. The judgment does not touch the question whether when there is no assignment, the mortgagee either could or would be bound to take steps to recover the debt. In lsri Prosad v. Rai Gunga Prosad Singh Bahadur 14 C.W.N. 165 : Ind. Cas. 31 I it was held that the mortgagee in the particular case, who had sued for the mortgage debt after the claim was time-barred and failed to recover anything, was debitable with the amount of the debt. The learned Judges, Stephen and Chatterjee, JJ., held, on the construction of the particular document, that both the mortgagee and the mortgagor were entitled to sue the debtor for the original debt. The mortgagee advanced the money partly to provide for the expenses of such a suit. They observed that the mortgage-deed contained provisions safeguarding the mortgagee's right in case the mortgagor realised the debt. It does not appear from the judgment whether the terms of the mortgage-deed contained a clause assigning the debt to the plaintiffs by way of security, but probably it did for the obligation on the mortgagee's part to get in the debt is rested on a passage cited from Coote's Law of Mortgages where it is pointed out that a mortgagee taking an assignment of a debt by way of mortgage should be specially protected against the obligation which, whether by analogy to a mortgagee in possession, who is bound to account for what he might have received but for his own default, or to a creditor who, by giving time to the principal debtor, discharges the surety, would otherwise attach to him to get in the debt in due course, under penalty of being charged with the loss in case any arise through his default.' It is clear from the citation made that the learned Judges proceeded on the ground that there was an assignment of the debt in the case. They do not say that every mortgage of a debt would amount to an assignment, whether there is a clause purporting to make an assignment or not. They proceeded on the facts found by them in the particular case. Reference is made in the judgment to Muthu Vijia Raghunatha Bamchandra Vacha Mahali Thurai v. Venkatachellam Chetti 20 M.K 35 : 6 M.L.J. 235 in which it was held that a sub mortgagee is entitled to sue the mortgagor of his mortgagor as well as his mortgagor for sale of the mortgaged property. The learned Judges of the Calcutta High Court go on to say that if this is so where a mortgage debt is mortgaged, much more must it be the case where the mortgage is of a simple debt. With all respect to the learned Judges, I am unable to agree with this observation. Muthu Vijia, Raghunatha Bamachandra Vacha Mahali Thurai v. Venkataehellam, Chetti 20 M.K 35 : 6 M.L.J. 235. did not decide that a sub mortgagee could sue to recover the debt due to his mortgagor, but only that the sub-mortgagee could, in suing to recover his own debt, bring to sale the properties mortgaged to his mortgagor instead of merely bringing to sale his mortgagor's interest. His interest in what was mortgaged to his mortgagor was held sufficient to entitle him to sell what was mortgaged to his mortgagor. It would be going a great deal further to hold that the sub-mortgagee could sue on the cause of action open to his mortgagor to recover the debt due to the latter.

6. In English law, the mortgagee is the owner of the property, the mortgagor's right being only an equitable interest.

7. When the mortgagee sub-mortgages, the submortgagee would in turn become the legal owner and would be entitled to foreclose in the same manner as his mortgagor himself could. The decision in favour of the submortgagee's right was based partly on the provisions of the Transfer of Property Act, Section 86. The mortagagor's right of redemption exists not only against his mortgagee but as against the sub-mortgagee. This was relied on as giving a corresponding right to the sub-mortgagee to bring the original mortgagor's right to sale for the enforcement of his sub-mortagagfe, The sub-mortgagee certainly could not sue his mortgagor's mortgagor for the recovery of his debt by the sale of the original mortgagor's rights without making the mortgagee himself a party. The right recognised by the learned Judges must, I think, be rested on the ground that both the mortgagee and the sub-mortgagee having rights in what was mortgaged by the original mortgagor, the sub mortgagee is entitled to recover his own rights by getting the Court to adjudicate upon the respective rights of himself and his mortgagor. In any case, Muthu Vijia Raghunatha Bamchandra Vacha Mahali Thurai v. Venkata-chellam Chetti 20 M.K 35 : 6 M.L.J. 235. does not throw any duty on the sub-mortgagee to sue the original mortgagor for the latter's benefit.

8. Ardesir Bejonii Suiti v. Sped Sirdar Ali Khan 33 B.K 610 : 10 Bom. L.R. 116 4 Ind. Cas. 804. was a case where the debt was assigned to the mortgagee. Chandavarkar, J., expressly bases his judgment on the ground that the transaction amounted to an assignment, although there was difficulty in the construction of the documents. The learned Judge observes: 'The English cases cited before us as making a distinction between a charge and an assignment have no bearing on the question here, which must be decided solely with reference to the intention and conduct of the parties disclosed in the evidence and the provisions of the Transfer of Property Act. The transactions evidenced by Exhibit 14 and Exhibit 14A are substantially transfers of 'an actionable claim' dealt with in Chapter VIII of that Act'. The learned Judge then enunciates a further proposition which, with all respect, appears to me to go too far and is not consistent with the view taken in English law--'Where a creditor purports to create a lien or charge on the debt due to him in favour of another person, the words 'lien' or charge' have no meaning except as giving the latter a right to recover the debt from the debtor. The transaction is in reality one whereby the owner of what in English law is called a chose in action transfers it to another. And that is what the evidence in this case establishes to have been the intention of the parties to Exhibits 14 and 14A.' On the finding of the learned Judge that the parties intended in the particular case to make an assignment, the decision is unimpeachable. But the dictum above cited seems to me to go too far.

9. Another case referred to at the bar is Makund Lall v. Raghoput Doss 2 Agra 83. Dr. Rash Behari Ghose, in his well known treatise on Mortgages, doubts the correctness of this decision. The learned Judges held that although the mortgagee in the case, was by the provisions of the document, authorised and required to sue on the bond mortgaged to him, he was not bound to do so. I share in Dr. Ghose's doubt as to the correctness of that decision. In reality, there was an assignment of the bond to the mortgagee in that case and he was made accountable for the proceeds of it.

10. Durham Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q B. 484 : 78 L.T. 483. was relied on by the learned Vakil for the appellant. That case seems to me to be against the respondent. The question raised there was whether according to the provisions of Section 25, sub-section 6 of the Judicature Act of 1873, a person who has an absolute assignment of a debt, but by way of security and not absolutely, could maintain a suit for the recovery of the debt. The Court below held that he could not. The sub-section of the Judicature Act referred to provides: 'Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action of which express. notice in writing shall have been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been, effectual in law to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor'. In that case, it was held that the assignment was by way of charge only and not absolute. The judgment of Chitty, L.J., explains the circumstances which led to the enactment of the section. He points out that in equity a mere charge would operate as a partial equitable assignment, 'In his suit in equity, the assignee of a debt, even where the assignment was absolute on the face of it, we had to make his assignor, the original creditor, party in order primarily to bind him and prevent his suing at law, and also to allow him to dispute the assignment if he thought fit. This was a fortiori the case where the assignment was by way of security or by way of charge only, because the assignor had a right to redeem. Further, the assignee could not give a valid discharge for the debt to the original debtor unless expressly empowered so to do. The original debtor, whether he admitted the debt or not, was not concerned with the state of the accounts between the assignor and the assignee where the debt was assigned by way of security.'

11. 'Now it was in order to afford some remedy for this stale of the law that Sub-section 6 was passed. It is plain on reading it that it does not apply to every case of equitable assignment of a debt or chose in action'. Two matters,' as is apparent on the face of it, had to be regarded: first, the simplifying the remedy in favour of the assignee; and secondly, the protection of the original debtor. The Lord Justice later on refers to the judgment of Willes, J. in Halliday v. Holgate (1868) L.R. 3 Ex. 299 : 37 L.J. Ex. 174 : 18 L.T. 656 : 17 W.R. 13. where that learned Judge distinguished between lien, pledge and mortgage, and spoke of a mortgage as passing the property out and out. He then says: 'A mortgage is not mentioned in the enactment; but where there is an absolute assignment of the debt, the limiting words as to a charge only are not sufficient to exclude a mortgage.' It seems to me that the learned Lord Justice makes a clear distinction between a case where there is an absolute assignment and one where there is not. In Halliday y. Holgate (1868) L.R. 3 Ex. 299 : 37 L.J. Ex. 174 : 18 L.T. 656 : 17 W.R. 13, already referred to, a pledge is stated by Willes, J., to be intermediate between 'lien' and mortgage.' But he does not say that the pledgee has such a property in the pledge as would entitle him to sue against the original debtor.

12. No English case has been cited at the arguments where it was decided that a person, having a charge ovar a debt without having the debt assigned to him, could sue the original debtor for the recovery of the debt.

13. In Brice v. Bannister (1893) 3 Q.B.D. 569 : 47 L.J.Q.B. 722 : 38 L.T. 739 : 26 W.R. 670 it was, no doubt, held that after notice of assignment of part of a debt is given by the assignee to the original debtor, the latter would not be justified in paying the debt to his creditor and, if he does so, he would be accountable to the assignee for it. Brett, L. J., did not agree and was of opinion that the assignee's right must be confined to cases where a debt had actually accrued due from the original debtor at the time of the assignment. But this case lends no support to the view that a person, who has a mere charge without an assignment, can sue for the debt. If a charge over a debt has been given by the creditor to a third person and notice of it has been given to the original debtor, the latter, no doubt, cannot prejudice the rights of the holder of the charge by paying the debt to his creditor. But that does not show that the charge-holder can himself sue the original debtor for the recovery of the debt due to the creditor.

14. On the other hand, in Ex parte Mure (1788) 2 Cox. 63 : 30 E.R. 30, a clear distinction is drawn by Lord Thurlow, L. C., between a case where only a charge has been created and one where there is an assignment. His Lordship says: 'This being so Woodbridges assign to Turner, by an indenture containing a bare recital of what I have stated and that Woodbridges were indebted to Turner in a considerable sum of money, and in order to make a security for this, what is done? Why an absolute assignment of this bond is made not recoverable in any manner nor any account provided for. I am not now proceeding on an idea that in the actual situation of the thing, an account might not have been demanded; for it might have happened that Turner's debt might have been by other means diminished below the amount of bond; in which case, he must have accounted with Woodbridges, although no provision was made for it. But I mention this only to show that in the idea of parties, they were giving this absolutely to Turner and that the whole would be exhausted in satisfying Turner's demand.' In another passage, he observes: 'In the present case, I think the bond was in the same situation in the hands of Turner as if it had been capable of assignment and had been actually assigned to and vested in him at law; he was in all respects the absolute master of the bond. It has been asked if the bond had been merely lodged in the hands of Turner without an assignment or a power-of-attorney, what would then have been the case? There it would be apparent that something farther remained to be done to give the ownership of the bond: to whom then did it belong in that case to make the first movement? I think then it would belong to the owner of the bond, and the pledgee would not be liable; for there the owner had not completely clothed the pledgee with the authority of acting on the bond, or put the bond out of his own power but kept the property in himself and the power of giving credit or not to the debtor as he pleased.... Where one speaks of a distinction between an equitable and legal interest, it can mean nothing more than that the equitable interest has not the full power and dominion over the subject; for wherever the equitable interest is effectually clothed with the whole power, it must be the same thing as if the legal interest were vested, and consequently the assignee answerable for the discretion he has exercised.' See also Williams v. Price 1 Sim. & St. 81 : 57 E.R. 222 : 24 R.R. 238 : 2 L.J. Ch. 105. In that case, there was an assignment of the bond, and the Vice-Chancellor, Sir-John Leach, abstained from expressing an opinion on the question, whether even in such a case, a creditor would be bound to take steps to realise the debt. But he was held liable in that case because he actually sued out execution and by his wilful default of duty, the debt became irrecoverable. In Jones on ' Pledges and Collateral Securites', page 738, at page 741, it is observed: 'The ground of a creditor's liability for a loss to his debtor, occurring through his creditor's negligenca in enforcing the collateral security, is said to rest in contract between the debtor and the creditor, established by the debtor's assignment of the collateral security which invests the creditor with the ownership of the security for all purposes of dominion over the debt assigned. He alone is empowered to receive the money to be paid upon it and to control it in order to protect his right under the assignment.'

15. Great care has to be exercised in applying in this country the rules laid down in English Law with regard to equitable rights. Dr. Rash Behari Ghose, in his book on Mortgages (See IV Edition, page 107), observes: 'I trust that this cloud in the not very clear sky of English jurisprudence will not darken the law in this country. We have nothing whatever to do either with legal or equitable rights, and the highly ambiguous term 'Special Property', like other unweeded remnants in the English Law, is only calculated to perplex and bewilder the Indian student.'

16. In India, the mortgagee's right is to bring the property mortgaged to him to sale. The Indian Contract Act speaks only of pledge of goods. It may be assumed that incorporeal property, although not goods in the ordinary sense, may be pledged, for it is capable of constructive delivery of possession and that a chose in action, or negotiable instrument, shares in a company and even patent rights may be given in pledge. It is not clear whether in this case the plaintiff could be regarded as a pledgee of the promissory note. He was not authorised by Exhibit A to sell it. The pro-note not having been endorsed to him, he could not sell it effectually as a negotiable, instrument as he could not endorse it over to a purchaser. There is nothing in Exhibit A to show that he was intended to have the power to make a private sale of the note. On the other hand, the stipulation in Exhibit A is that if the debt is not paid within the due date, he is to be entitled to recover the debt by sale of the hypothecated properties through Court.

17. But, assuming that he is a pledgee, no authority has been cited to show that a pledgee for a debt, who has not obtained an assignment of it, can sue to recover the debt.

18. According to American Law, a negotiable instrument requiring endorsement should be endorsed to make a valid pledge. To make the pledge an effectual security, it is necessary that the pledgee should have an effective title. See Jones on Fledges and Collateral Securities, Section 9, page 12; also Section 80, page 79, where the absence of endorsement is stated to show that the property in the negotiable instrument would not effectively pass to the mortgagee.

19. I am prepared to assume that if a negotiable instrument is duly endorsed over to a pledgee, it may be taken to be the intention of the parties that the mortgagee should take steps to realise it. But I do not think that such a duty can lie on him where there has been no endorsement.

20. It was argued that, without an endorsement, a promissory-note could be transferred by a written instrument. But Exhibit A does not amount to a transfer. There is, as I have already stated, no substantial basis for the contention that a mere mortgage of a debt without words of assignment would operate as a transfer of the debt ; appropriate language must be used to make an assignment although it is not necessary that the beneficial interest should be vested wholly in the mortgagee and he may be required to hold the proceeds in trust for the assignor. The intention of the parties in the present case was clearly not to make an assignment. The absence of endorsement on the promissory-note by the 1st defendant is, to my mind, practically conclusive proof of it. There is absolutely no reason to suppose that it was intended to transfer the amount of the promissory-note as a mere chose in action. I am clearly of opinion, therefore, that no duty lay on the plaintiff to realize the amount due on the promissory-note as a mere chose in action. There was nothing to prevent the 1st defendant in whom the ownership vested from instituting a suit himself. Assuming that the plaintiff could have instituted a suit to recover the amount of the debt, I am of opinion that there is nothing to show that it was intended that he should be bound to do so. The case would then be similar to the one in Isri Prosad v. Rai Gunga Prosad Singh Bahadur 14 C.W.N. 165 : 3 Ind. Cas. 311 where both parties were held entitled to sue.

21. For the reasons already stated, I am further of opinion that the plaintiffs were not entitled to sue for the recovery of the debt. Ramasami Pillai v. Muthoo Chetty 34 M.k 53 : 5 Ind. Cas. 834 : 7 M.L.T. 125 : (1910) 4 M.W.N. 281. was strongly relied on to show that a Suit by the plaintiff would have been maintainable. In that case, the original creditor was a party to the suit and did not dispute the plaintiff's right to recover. The actual decision may be supportable on that ground. Miller and Krishnaswami Iyer, JJ., no doubt held that the owner of a charge on a debt could maintain an action to recover it from the debtor. Muthu Vijia Raghunatha Ramchandra Vacha Mahali Thurai v. Venkatachellam Chetti 20 M.k 35 : 6 M.L.J. 235; Isri Prosad v. Rai Gunga Prosad Singh Bahadur 14 C.W.N. 165 : 3 Ind. Cas. 311. and Ardeshir Bejanji Surti v. Syed Sirdar Ali Khan 33 B.K 610 : 10 Bom. L.R. 11 64 Ind. Cas. 804. were cited it support of the judgment. I have already examined these cases and. in my opinion, they do not support the view taken by the learned Judges, although the dictum of Chandavarkar, J. in Ardeshir Bejanji Surti v. Syed Sirdar Ali Khan 33 B.K 610 : 10 Bom. L.R. 11 6 4 Ind. Cas. 804 is expressed too widely.

22. Reference is also made to Durham Brothers v. Robertson (1898) 1 Q.B. 765 : 67 L.J.Q.B. 484 : 78 L.T. 438. But that judgment, in my opinion, does not support the construction put on it. On the other hand, it shows that where there is no assignment but only a charge, the charge-holder could not maintain a suit. Section 131 of the Transfer of Property Act is also referred to but I am unable to see what there is in that section to support the view taken. It appears to me to be a serious thing to hold that every hypothecates of debts is bound to sue all the debtors. It may be that debts of much larger amount than the loan advanced maybe hypothecated as security for it. Are we then to hold that the hypothecates is bound to incur the expenses of realizing every one of these debts that may become payable and to be accountable for them to the hypothecator? That would be to make the hypothecatee a trustee for his debtor. The debtor would then be in a position to hold the mortgagee responsible not only for suing for the recovery of the debts which are about to be barred by limitation, but also for not realizing within reasonable time every one of the hypothecated debts. For it would be open to him to say that if prompt steps had been taken, the debts might have been recovered and that, the delay has made it difficult for him to do so. Such a risk can be thrown on the creditor only where the nature of the transaction is such as to imply a contract that he should realize the debt. I hold, therefore, that the plaintiff was not responsible for the loss incurred by the promissory-note being barred by limitation. The decrees of the lower Courts must, therefore, be modified by awarding to the plantiff a farther sum of Rs. 500, the amount of the promissory-note and the interest due thereon for three years.

23. As my learned brother has come to a different conclusion, the Second Appeal is dismissed with costs under Section 98 of the Civil Procedure Code.

Sadasiva Aiyab, J.

24. The facts are set out in the judgment of my learned brother and I need not repeat them.

25. The questions for decision are (a) whether the pledge by the debtor to the creditor of a promissory note in the debtor's favour as security for the debt constitutes an assignment of the promissory note which entitles the creditor to sue for and realise the amount of the pro-note, (b) whether if it so entitles him, it also casts a legal obligation on him to use due diligence to collect the money from, the party liable on the note, to sue if necessary on the pro-note before it is barred and to. realise the amount on the note, and (c) whether if ~he is guilty of laches in so collecting the money which he could have collected, he is liable to be debited with the loss incurred by his default when accounts are taken between himself and his debtors.

26. I do not think it necessary to consider in detail the English and American cases on the point, whether a pledge or hypothecation of a chose in action or pro note will constitute an assignment of the chose in action or pro-note and will enable the pledgee or hypothecatee to sue for recovery of the money. I think that the principle state decisis should be followed in all doubtful matters and I find that three of the High Courts in India have, in recent cases, adopted the view that the creation of even a charge in the creditor's favour is an assignment of the chose in action. The cases in Isri Prasad v. Rai Gunga Prosad Singh Bahadur 14 C.W.N. 165 : 3 Ind. Cas. 311 ; Ardeshir Bejanji Surti v. Syed Sirdai Ali Khan 33 B.K 610 : 10 Bom. L.R. 11 64 Ind. Cas. 804. and Ramasami Pillai v. Muthu Chetti 34 M.K 53 : 5 Ind. Cas. 834 : 7 M.L.T. 125 : (1910) M.W.N. 4, 281. and the observations in Coote on Mortgages (Vol. I, page 318) seem to me to be clear authorities for the above proposition. The case in Ramasami Pillai v. Muthu Chetti 34 M.K 53 : 5 Ind. Cas. 834 : 7 M.L.T. 125 : (1910) M.W.N. 4; 281. is binding till it is set aside by a Pull Bench. I shall, however, assume for the sake of argument that a mere declaration of the creation of a charge on the chose in action in favour of the creditor does not constitute a complete assignment by the debtor of his rights in the chose in action. But if, besides the declaration of such a charge, the instrument which evidences the chose in action is put in the possession of the creditor, I think, that the reasonable view to be taken of such a transaction is that the debtor intended thereby to divest himself of the power to sue on the instrument to realise the said; chose in action and that he intended to vest; such right in the creditor. An usufructuary mortgagee, though the land is given into his possession as security for his debt and not as full owner and though he himself has an interest in the property, holds also a position analogous to that of a trustee for the mortgagor as far as the proper management of the property, collection of rents and profits, making necessary repairs and preservation of the mortgaged property are concerned. I think that, on principle, the pledgee with possession of the instrument evidencing a chose in action, who has been given the rights of hypothecatee in the chose in action, (even if he is not expressly called a complete assignee), is entitled in his own right and, bound as trustee for his debtor to use due diligence in suing on the instrument and recovering the money due there under. The consideration that the instrument on which the charge is created may be for a larger amount than the amount of the loan for which it is given as security, seems to me to be immaterial, just as it is immaterial in the consideration of usufructuary mortgagee's duties, in respect of the mortgaged property put into his possession, to consider whether the value of the property is not so much greater than the mortgage amount that it would be a grievous hardship on the mortgagee to make him responsible for its due management etc. If the creditor considered that the security he is put into possession of is too valuable or too onerous for him to take due care and custody of, he was at liberty to have declined it.

27. The observations in Jones on Pledges and Collateral Security (page 741) seems to establish that a creditor who holds a collateral security is bound to exercise reasonable diligence in enforcing and realising it and is liable to his debtor for the loss which might have been caused by his (the creditor's) negligence in so enforcing it. This liability is analogous to the duty which the creditor owes to a surety and which is expressly provided for in Sections 139 and 141 of the Contract Act. Section 139 (illustration B) states that the creditor's failure to use due diligence in realising a collateral security will exonerate the surety from liability. Section 141 provides that, if a security is lost by the creditor, the surety is discharged to the extent of the value of the security. A person who gets possession of anything as a pledge is a bailee and under Section 151 of the Contract Act, he is bound to take reasonable care of the pledged property. It is surely not taking such care if the property is made to become valueless.

28. In the result, I think that no interference is called for in second appeal with either the finding of fact by the lower Appellate Court that the plaintiff caused loss to his mortgagor by not diligently suing for the realisation of the collateral security or with the finding that plaintiff is liable to give credit in defendant's favour far the loss so caused. I would, therefore, dismiss the second appeal with costg.

Sundara Aiyar, J.

29. As my learned brother has come to a different conclusion, the second appeal is dismissed with costs under Section 98, Civil Procedure Code.

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