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Royzuddi Sheik Vs. Kali Nath Mookerjee - Court Judgment

LegalCrystal Citation
SubjectTenancy;Property
CourtKolkata
Decided On
Judge
Reported in(1906)ILR33Cal985
AppellantRoyzuddi Sheik
RespondentKali Nath Mookerjee
Cases ReferredBhagwati Prasad v. Radhakihen Seuak Pande
Excerpt:
landlord and tenant - benami transactions--benami lease--authority of benamdar registered tenant to pledge the tenure for arrears of rent--mortgage--form of mortgages--agreement not to alienate--transfer of interest--creation of charge--absence of attestation--charge--transfer of property act (iv of 1882) sections 58, 59, 100--charge for rent--bengal tenancy act (viii of 1885), section 65. - .....of rent due, as also the cesses, damages and interest, and the amount recoverable under the rent decree. by this bond the first defendant not only made himself personally responsible for the payment of the money, but also agreed that in case of default, it would be competent to the plaintiff to institute a suit, to obtain a decree and to recover the dues by attachment and sale of the undertenure. the plaintiff now seeks to enforce the bond and prays for a declaration that the undertenure is liable to be sold for the satisfaction of the charge created by the bond. the court of first instance gave a decree in favour of the plaintiff and declared that the decretal amount was a charge upon the undertenure. upon appeal by the second defendant, the learned subordinate judge has modified.....
Judgment:

Rampini, J.

1. The plaintiff sued on a kistibandi executed by the defendant No. 1, and prayed for a declaration of a lien over certain jote lands referred to in the kistibandi. The bond was executed by the defendant No. 1, but the plaintiff made the defendant No. 2 a party defendant, as ha is the father of the defendant No. 1, and was alleged to be jointly interested in the jote, which stands in the name of defendant No. 1 alone.

2. The defendant No. 2 alone contested the suit.

3. The first Court gave the plaintiff a decree, declaring the amount of the kistibandi to be a charge on the jote lands in question, but exonerated the defendant No. 2 from all personal liability.

4. On appeal the Lower Appellate Court found the kistibandi to be a mortgage, but held that it had not been duly executed as such and therefore was of no avail. He accordingly found the defendant No. 1 liable personally only and dismissed the suit as against the defendant No. 2.

5. On the facts, he found that the defendant No. I was a mere benamdar for his father, the defendant No. 2, in respect of the darganti, which comprises the lands described in the plaint and that 'the plaintiff took the kistibandi with eyes open and with full knowledge of the nature of the interest, which the defendant No. 1 has in the darganti without the knowledge and consent of the defendant No. 2 and that his case of both the defendants agreeing to the kistibandi and to its being executed by the defendant No. 1, as the property stands in his name, is not true.'

6. The plaintiff appeals. On his behalf it is urged (1) that the kistibandi is not a mortgage, but constitutes a charge on the property (2) that as the amount for which the kistibandi was executed, or part of it, was due for rent, the plaintiff had a charge on the property under section G5 of the Tenancy Act, and (3) that a personal decree should have been given against the defendant No. 2, as he had represented the defendant No. 1 to be the owner of the darganti.

7. It appears to me, however, that it is unnecessary to consider whether the kistibandi creates a mortgage or a charge on the lands of the darganti; for on the findings of fact arrived at by the Lower Appellate Court, the question is immaterial. The Subordinate Judge has found that the defendant No. 2 is the real owner of the property. The kistibandi was executed by the defendant No. 1, his benamdar, without the knowledge or consent of the defendant No. 2 and with knowledge on the part of the plaintiff of the nature of the defendant No. l's interest in the darganti, which was nil. Hence, whether the kisitibandi should be regarded as a mortgage or as creating a charge, as it was executed by one, who had no interest in the property, which the bond gave the plaintiff the right to sell, it cannot affect the jote lands in any way, and the plaintiff is entitled only to a personal decree against the defendant No. 1.

8. The appellant's contention that he has a charge on the darganti under Section 65 of the Tenancy Act does not commend itself to me. 'The amount, for -which the kistibandi was executed, was only partly due for rent, but he this as it may, as the plaintiff now sues on the bond, he is not suing for rent, but for money due under a contract, and he can accordingly have no charge on the land under the Tenancy Act.

9. In support of the appellant's third contention the case of Bhaguati Prasad v. Radha Kishen Seuak Pande (1891) I.L.R. 15 All. 304 has been cited. But I am unable to see that the defendant No. 2 has represented the defendant No. 1 as the owner of the darganti in such a way as to render himself liable under the kistilandi. He has allowed the defendant No. I to take the lease of the darganti. The defendant No. 1 is the registered tenant. The plaintiff is entitled to sue him for rent. But where, as found by the Subordinate Judge, the plaintiff was well aware that the defendant No. 2 was the real owner of the darganti, and that the defendant No. 1 was but his benamdar, he was not justified in taking a mortgage or a charge on the darganti, or even a kistibandi from the defendant No. 1, and the defendant No. 2, who is found to have had no knowledge of or part in the transaction, can in no way be held liable under it.

10. I would therefore dismiss this appeal with costs.

Mookerjee, J.

11. On the 17th November 1886, Kali Nath Mukerjee, the second defendant to the present litigation, conveyed to the plaintiff a permanent tenure and on the same date accepted from him an undertenure in the lands conveyed, in the name of his son Kritartha Nath Mukerjee, the first defendant. Default was made in the payment of rent, for the recovery of a portion of which the landlord sued the first defendant and obtained a decree. On the 24th September 1898, the first defendant executed in favour of the plaintiff a bond for Rs. 550 payable in instalments, upon which the present action is founded. The consideration for this bond was the arrears of rent due, as also the cesses, damages and interest, and the amount recoverable under the rent decree. By this bond the first defendant not only made himself personally responsible for the payment of the money, but also agreed that in case of default, it would be competent to the plaintiff to institute a suit, to obtain a decree and to recover the dues by attachment and sale of the undertenure. The plaintiff now seeks to enforce the bond and prays for a declaration that the undertenure is liable to be sold for the satisfaction of the charge created by the bond. The Court of first instance gave a decree in favour of the plaintiff and declared that the decretal amount was a charge upon the undertenure. Upon appeal by the second defendant, the learned Subordinate Judge has modified the decree holding that there is no valid charge upon the property, which can be enforced as against the second defendant. The plaintiff has appealed to this Court and on his behalf, the decision of the Court below has been challenged on four grounds, namely, first, that the bond was not intended to be operative as a mortgage but merely created a charge on the property; secondly, that assuming the bond created a mortgage, it is inoperative as such, because there is only one attesting witness to the instrument, and consequently it operates as a charge;. thirdly, that as the consideration for the bond was in substance arrears of rent, which constituted a first charge upon the undertenure, the bond itself creates a charge upon the property, and. fourthly that, as the first defendant was allowed to represent his father in the matter of the creation of the undertenure, the instalment bond, though executed by the first defendant alone, is binding upon the second defendant as well.

12. In support of the first contention, it was argued by the learned vakil for the appellant that the bond does not create a mortgage, because it does not purport to transfer any interest in immovable property. Reference was made to the case of Khemji Bhagvandas Gujnr v. Rama (1885) I.L.R. 10 Bom. 519 which appears to have been dissented from in Datto Dudheshvar v. Vithu (1895) I.L.R. 20 Bom. 408. On the other hand the learned vakil for the respondent placed reliance upon the case of Nabin Chand Naskar v. Raj Coomar Sarkar (1905) 9 C.W.N. 1001 with a view to show that a bond somewhat similar in terms has been construed by this Court as a mortgage bond. The latter decision however is clearly distinguishable because the bond in that case was expressly described as a mortgage bond. It is not necessary for our present purposes to consider whether the bond in the case of Nabin Chand Naskar v. Raj Coomar Sarkar (1905) 9 C.W.N. 1001, ought not to have been treated as merely creating a charge, as the learned Chief Justice was inclined to hold. Upon the terms of the bond now before us, it must, I think, be held that it did not create a mortgage, but merely effected a charge. There is considerable difficulty, as is well known, in drawing a sharp line of demarcation between a mortgage and a charge; but there is this well marked distinction between the two, that a mortgage does, whereas a charge does not, involve a transfer of an interest in specific immovable property : Narayana Ayyar v. Venkata Ramana Ayynr (1902) I.L.R. 25 Mad. 220, 237 Tancred v. Delagoa Bay and East Africa Railway Company (1889) 23 Q.B.D. 239, 242 following Burlinon v. Hall (1884) 12 Q.B.D. 347, 350, in which. Day J. observed: 'A charge differs altogether from a mortgage: by a charge the title is not transferred, but the person creating the charge merely says that out of a particular fund, he will discharge a particular debt'. Unless therefore we can discover some indication in the instrument before us that not only was the payment of money secured on land, but that some interest in specific immovable property was transferred, the transaction must be taken to amount to a mere charge. It is conceded that there are no express words in the document to indicate such a transfer. On the other hand, the clause, which entitles the creditor to recover his dues by attachment and sale of the property, lends support to the view that a mere charge was intended to be created, inasmuch as an attachment is wholly unnecessary in proceedings for the sale of properties under a mortgage decree. Again the clause, which contains an undertaking by the debtor not to alienate the property, would be intelligible as meant for the necessary protection of the creditor, if a mere charge was intended to be created. Such a covenant on the other hand, would be wholly needless for the protection of a mortgagee, who can follow the mortgaged property in the hands of a transferee from the mortgagor, whereas a charge can be enforced against a transferee only if it is shown that he has taken with notice of the charge. Kishan Lalv. Gangaram (1890) I.L.R. 13 All. 28, 44. Taking therefore the instrument as a whole, I am inclined to regard it as creating a charge in favour of the creditor and not amounting to a mortgage. If however it be treated as a mortgage security, I am unable to hold that it creates a valid charge, because it is inoperative as a mortgage.

13. In support of the second contention the learned vakil for the appellant argued that, where an instrument, which was intended to be a mortgage, is invalid by reason of its not fulfilling the requirements of the law, it should be held as between the parties to it, to operate so as to create a charge under Section 100 of the Transfer of Property Act. This view no doubt receives some support from the observations of the learned Judges of the Madras High Court in Rangasami v. Muttukumarappa (1887) I.L.R. 10 Mad. 509 and Mithiram Bhat v. Somanatha Naickar (1901) I.L.R. 24 Mad. 397. The contrary view however has been uniformly maintained in this Court, Rani Kumari Bibi v. Srinath Roy (1896) 1 C.W.N. 81; Tofaluddi Peada v. Muhar All Shaha (1898) I.L.R. 26 Calc. 78, Girindra Nath Muherjee v. Bejoy Gopal Mukerjee (1898) I.L.R. 26 Calc. 246, and Prannath Sarkar v. Jadu Nath Saha (1905) I.L.R. 32 Calc. 729 and appears to have been adopted by the Bombay High Court; Narayan v. Lakshmandas (1905) 7 Bom. L.R 934. I am not prepared to dissent from this view, which appears to me to be based upon a reasonable construction of the words 'and the transaction does not amount to a mortgage' in Section 100 of the Transfer of Property Act. These words signify that if the relation created by the instrument is not that of mortgagor and mortgagee and immoveable property has been made security for the payment of money, there is a charge on the property; they do not mean that, if the transaction on the face of it purports to be a mortgage, but the instrument is not operative as such by reason of defective execution or non-complianc- with the formalities prescribed by the law, the transaction is converted into a charge. The learned vakil for the appellant invited our attention to the circumstance that under the English law, where an attempt to make a mortgage fails for want of some formality, the transaction may be valid as an equitable charge. No doubt the cases of In re Strand Music Hall Co. (1865) 3 Deg. J.&S.; 147; 35 Beav. 153, Ross v. Army and Navy Hotel Co. (1886) 31 Ch D. 43, In re Queensland Land of Coal Co. (1891) 3 Ch 181, and In re Johnston Foreign Patents Co. (1904) 2 Ch. 234, show that a security, though defective as a legal mortgage, may be enforceable in equity, if it shows an intention to create a charge. This doctrine is founded on the principle that, where there is a valid contract to create a charge, but the acts done in pursuance of the intention are for some reason ineffectual to create it, equity, treating that as done which ought to be done, will enforce the charge, see Malhews v. Goodday (1601) 31 L.J. Ch. 282 and Marshall v. Shrewsbury (1875) L.R. 10 Ch. 250, 254, which are authorities for the proposition that the right of an equitable mortgagee is to have his security perfected by the execution of a legal mortgage and he can combine this remedy with an action for foreclosure. That this is the true foundation of the rule as applied under the English law is manifest from the cases of Ternon v. Poor (1829) 1 Gill & Johnson, 216; 19 Am. Dec. 225; Bank v. Carpenter (1833) 7 Ohio, 21; 28 Am. Dec. 616; Prill v. Macdonald (1823) 1 Mo. 403; 54 Am. Dec. 657; and Vose v. Morton (1819) Cushing 27; 50 Am. Dec. These decisions show that the English rule, namely, that a mortgage, which is defective and is inoperative as such operates as a good equitable lien, has been adopted in some of the American Courts on the ground that, if a transaction resolve itself into a security, whatever may be its form and whatever name the parties may choose to give it, it is in equity a mortgage and effect will be given to the intention of the parties and the lien enforced as an equitable mortgage. Atkinson v. Miller (1890) 34 W.Va. 115 : 11. S.E 1007, Mangarum v. Christie (1896) 37 Fla. 165 : 19 Southern 637, Frank v. Hicks (1891) 4 Wyo. 502 : 35 Pacific. 475 and Sprayue v. Cachroa (1894) 144 N.Y. 104 and Jones on Mortgages, Vol. I, Sections 82, 168, 522. We are, however, not free in the face of the statutory provision contained in Section 100 of the Transfer of Property Act to apply indiscriminately the general equitable principles, upon which these cases are based. It is an established doctrine that equity will not contravene the positive enactments or requirements of law and defeat its policy by supplying, under the guise of amending defective instruments, those deficient elements of form without which the agreement is absolutely void, even as between the parties to it We must further remember that the validity of equitable mortgages is recognized by the Legislature in this country only to a limited extent Konchadi Shan Bhogue v. Shiva Rao (1904) I.L.R. 28. Mad. 54. The appellant is met with the further difficulty that, if he were now to seek specific performance of the agreement to give a mortgage, the plea of limitation would be an effective answer to this suit; this would be an additional reason for not allowing the plaintiff to treat the instrument as creating a valid charge because it turns out to be invalid as a mortgage. See Bibi Jowahir Kumari v. Chatterput Singh (1905) 2 C.L.J. 343 where a similar question was raised and discussed with regard to a lease. It follows consequently that, it there is a subsisting charge on the under-tenure in suit, it is because such a charge was created by the instalment bond, and not because by reason of the invalidity of the mortgage intended to be created thereby the transaction operates as a charge.

14. In support of the third point taken on behalf of the appellant it is argued that, as the consideration for the bond was in reality arrears of rent, which, formed a first charge on the undertenure the bond itself creates a charge on that properly, because it kep-alive in substance the pre-existing rent charge. This contention is obviously fallacious. In the first place as pointed out in the case of Fotick Chunder Bey Sircar v. Foley (1887) I.L.R. 15 Calo. 492 the charge referred to in Section 65 of the Bengal Tenancy Act is not such a charge as that defined by Section 100 of the Transfer of Property Act, and does not require to be enforced in the fame manner; the only consequence, which follows from the provision that rant is a first charge upon an undertenure, is that a sale held in execution of a decree for arrears of rent produces the effects described in Chapter XIV of the Bengal Tenancy Act. In the second place, the present suit is in no sense a suit to enforce the original rent charge. It is in substance, as it is in form, a suit to enforce the rights of the plaintiff under the instalment bond by which, in lieu of the original liability, a new liability was substituted. Besides, if the plaintiff had sued to enforce the rent charge, his claim' would be tarred by limitation and as regards a portion of the claim, which had ripened into a judgment-debt, he would be rest icted to the remedy by execution and could not have recourse to a fresh suit. The third ground taken on behalf of the appellant cannot, therefore, be successfully maintained.

15. The fourth point taken on behalf of the appellant raises the question, whether the charge created by the instalment bond, which was executed by the first defendant alone, is enforceable against the property in the hands of the true owner, the second defendant. It is argued on behalf of the appellant that, as the second defendant accepted the lease of the undertenure in the name of the first defendant, the latter is entitled to represent him for all purposes in connection with the transaction. This contention appears to me to be too broadly expressed. The true test is, whether the first defendant has acted within the scope of his authority. It may be conceded that the landlord was entitled to look to the recorded tenant for the due payment of the rent and if the undertenure fell into arrears, the landlord might sue the first defendant and obtain a decree for rent, which would be operative against the property in the hands of the second defendant. But I am unable to hold, that, if the rent fell into arrears, it was competent to the first defendant to create a charge or mortgage on the property in favour of the landlord. No intelligible principle has been suggested upon which it can be maintained that, if the beneficial owner fails to pay the rent regularly, the nominal owner has implied authority to pledge the propeity in arrears. It cannot be said that the creation of such a charge is necessary for the purposes of the tenancy, or that it is usually done in the course of the management of the tenancy. It may further be added that in the case before us, no question of estoppel arises. The landlord, when he accepted the instalment bond, was aware that he was not dealing with the true owner. It cannot, therefore, be contended that the landlord acted on the belief that the assumed ownership was the real one. There is no foundation for the suggestion that the second defendant stood by and by his conduct induced the plaintiff to alter his position. There are obviously no such equitable considerations here as arose in the case of Bhagwati Prasad v. Radhakihen Seuak Pande (1891) I.L.R. 15 All. 304. The plaintiff accepted the bond from the nominal owner with full knowledge of the true ownership and cannot now be permitted to follow the property in the ha,nds of the second defendant.

16. On these grounds, I agree with my learned brother that the decree made by the Court below must be affirmed and this appeal dismissed with costs.


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