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Jadu Nath Vs. Jagat Prasanna - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1944Cal320
AppellantJadu Nath
RespondentJagat Prasanna
Cases ReferredChethambaram Chettiar v. Loo Than Poo
Excerpt:
- .....dated 24th october 1916 and that the security then consisted of the properties mentioned in that mortgage deed (ex. a) save and except no. 5 elgin road and the musjidbari street property which had been sold before. the rate of interest was reduced to 7 1/2 per cent., compound, with half yearly rests and the mortgagors covenanted to pay the said sum of rupees three lacs ' due and outstanding on the said mortgage,' (ex. a) with interest at that rate on or before 24th february 1929. the agreement by express terms preserved all the other terms and conditions of the mortgage deed of 24th october 1916. this agreement was stamped with a stamp of annas twelve only. after the execution of this agreement the mortgagors made further payments. it is admitted that the mortgagors had paid a total.....
Judgment:

1. The father of the respondents Rai Bahadur Girija Prossono Mukherjee borrowed on 24th October 1916 from the appellants' predecessors-in-title, Rai Bahadur Janaki Nath and Sita Nath Roy a sum of Rs. 3,15,000. To secure the sum of Rs. 3,00,000 he executed a mortgage bond (Ex. A) on that date in favour of the lenders. The mortgage comprised five items of property. Two of those were situate in Calcutta -- one in Masjidbari Street and the other in Elgin Road being premises No. 5 of that street, and the remaining three were mufassil properties. Interest stipulated for w.s at the rate of 7 per cent, per annum (compound) with quarterly rests. The due date for repayment was 24th October 1919. The remaining sum of Rs. 15,000 was secured by a deed of further charge (Ex. B) executed on the same date which secured the self same properties. The stipulation for interest was the same as in the mortgage bond, but the due date of repayment was 24th October 1917.

2. The mortgagor, Girija Prossona, died in June 1918. On his death his estate devolved upon his sons, Jagat Prossono and Sailaja Prossono who, being wards of Court are the respondents to the appeal represented by the Manager, Court of Wards, Gobordanga estate. One of the mortgagees, Sita Nath, died in April 1920, and his two sons, Jadu Nath and Priya Nath, along with the heirs of the other mortgagee, Raja Janaki Nath who died shortly before the commencement of these proceedings in the Court below, are the appellants. In consideration of the mortgagees giving them time to repay the loan Jagat Prossono and Sailaja Prossono executed a registered agreement in favour of the former on 2nd July 1920 (Ex. C) by which they covenanted to repay the mortgage money and the money secured by the deed of further charge at an enhanced rate of interest (7 3/4 per cent, compound, with quarterly rests) the mortgagees undertaking not to call in their dues before 31st December 1921. By a further registered instrument (Ex. D) they agreed to pay the dues of the lenders at a further enhanced rate of interest, 10 per cent., compound, with quarterly rests in consideration of the lenders undertaking not to call in their dues before 31st May 1923.

3. On 4th July 1923, Jagat Prossono and Sailaja Prossono were declared disqualified proprietors by a notification issued under the Bengal Court of Wards Act and the Court of Wards assumed management of their estate. By a verbal agreement between the lenders and the manager, Court of Wards, dated 18th May 1924, the lenders agreed to reduce the rate of interest from 10 per cent, as provided for in Ex. D to 8 per cent. Before 25th February 1928 the mortgaged property situate in Masjidbari Street in the town of Calcutta was sold by the mortgagors with the concurrence of the mortgagees who released their security on it. This follows from the recitals of Ex. F, a registered instrument executed by the parties on 25th February 1928. This is an important document in the case. On that date the mortgagors sold to the mortgagees for a sum of Rs. 1,17,000 premises No. 5, Elgin Road. Out of this sum Rs. 27,000 was paid by the mortgagee purchasers to the mortgagor vendors in cash and the balance, Rs. 90,000 was applied by the former in reduction of their claims under the mortgage bond and the deed of further charge. By this all their dues on the deed of further charge and all the arrears of interest due on the mortgage up to that date were wiped off.

4. It is admitted by the mortgagees that a total sum of Rs. 3,18,739-11-6 had been paid by the mortgagors on different dates up to 25th February 1928 as interest on the sum of Rs. 3,00,000 which had been secured by mortgage Ex. A. The agreement, Ex. F, recited the previous agreements by which the rate of interest had been changed from time to time and the date of repayment had been extended. It also recited the sale of premises No. 5, Elgin Road to the mortgagees and the manner in which its price had been applied. It then stated that sum of Rupees three lacs was then due on the mortgage (Ex. A) dated 24th October 1916 and that the security then consisted of the properties mentioned in that mortgage deed (Ex. A) save and except No. 5 Elgin Road and the Musjidbari Street property which had been sold before. The rate of interest was reduced to 7 1/2 per cent., compound, with half yearly rests and the mortgagors covenanted to pay the said sum of rupees three lacs ' due and outstanding on the said mortgage,' (Ex. A) with interest at that rate on or before 24th February 1929. The agreement by express terms preserved all the other terms and conditions of the mortgage deed of 24th October 1916. This agreement was stamped with a stamp of annas twelve only. After the execution of this agreement the mortgagors made further payments. It is admitted that the mortgagors had paid a total sum of Rs. 4,82,035-4-3 on the said mortgage (Ex. A) from its date till 30th August 1941 when they filed an application under section 38, Bengal Money-Lenders Act (10 of 1940). The learned Subordinate Judge passed his Order on the said application on 24th February 1942. He declared that a sum of Rs. 1,17,964-11-9 only was due to the mortgagees. Against the said Order the mortgagees have preferred this appeal.

5. It cannot be disputed, and that fact is also admitted by the appellants' advocate, that the learned Subordinate Judge's Order would be right, if the Court an go behind the adjustment and agreement as embodied in Ex. F. He however contends that that document cannot be touched and so accounts must be taken on the footing that rupees three lacs was the outstanding principal of the loan on the date of that document. In support of his contention he contends that Ex. F is protected by reason of proviso (i) to section 36 (1), Bengal Money-Lenders Act. The respondents' advocate contends that (i) that proviso is not applicable to a proceeding Under Section 38 of the Act, and (ii) in any event that document Ex. F does not come within the terms of the said proviso. We do not accept the first contention of the respondents' advocate and hold that that section 36 (1) together with that proviso is applicable to a proceeding lunder section 38 of the Act for the reasons which we have given in our judgment delivered on 28th March in First Appeal No. 199 of 1941. We, however, agree with his second contention. Section 36 (1) (a) empowers the Court to reopen any transaction between the lender and the borrower and to take an account between them and notwithstanding any agreement purporting to close previous dealings and to create new obligations, to reopen any account already taken. The proviso is that any adjustment or agreement purporting to close previous dealings and to create new obligations cannot be reopened if it is more that 12 years anterior to the date mentioned in that proviso, which, in the case before us is 30th August 1941, the date when the borrowers made the application Under Section 38 of the Act. We will have to see if Ex. F (which is beyond 12 years of that date) is an adjustment or agreement which purports to close previous dealings and to create new obligations. It is clear that mere taking of accounts is not enough to attract the proviso. The adjustment must close previous dealings and create new obligations. Nor would a mere agreement to pay on the basis of the original obligation what is found to be the amount due on the taking of accounts be enough to attract that proviso, for the reason that it would not create new obligations. To bring Ex.F within the proviso the learned advocate for the appellants contends that it amounts to afresh mortgage. We cannot accept that contention. That document does not extinguish the mortgage (Ex. A) of 24th October 1916. That is kept alive, only some of its terms are modified. The parties state that rupees three lacs was due 'thereunder' and that 'now' the zamindaries, etc., set out in the schedule were included in that mortgage (Ex. A) as No. 5 Elgin Road and the Musjidbari Street property had been released from the mortgage by the consent of the mortgagees. The deed expressly provides that all other terms of that mortgage deed (Ex.A) save and except those which were expressly modified by Ex. F, shall continue to be operative.

6. There is no transfer of an interest in the immovableproperties mentioned in the schedule, which is essential for a mortgage in view of Section 58, Transfer of Property Act, and document is not stamped with stamps of the value that would be required for mortgage for rupees three lacs, but is stamped with a stamp necessary for an agreement. Moreover the memoranda of agreement beginning with Ex. C dated 2nd July 1920 and ending with Ex. G dated 5th October 1937, which was executed long after Ex. F form a series and have to be considered together. The last mentioned document makes it quite clear that even in 1937 the parties proceed on the footing that the mortgage created by Ex. A was still alive and ruled the field but only with some of its terms modified. We hold that the phrase 'purporting to create new obligations' used in the proviso cover only the case where original obligation undertaken by the borrower at the time of the loan is completely superseded and a substituted obligation created. Any other interpretation would defeat the object of the Act. By Ex. F the past accounts were no doubt closed but the security and the obligation created by the mortgage Ex. A was continued, not extinguished and substituted. By that document a new obligation was not created. The learned advocate for the appellant has drawn our attention to the decision of the Judicial Committee in Chethambaram Chettiar v. Loo Than Poo a case from the Federated Malay States. Their Lordships of the Judicial Committee had to consider the effect of the Usurious Loans Statute in force there.

7. The provisions of the statute which were relevant in that case were that if the Court had reason to believe that interest was excessive, or the transaction between the parties was substantially unfair it may (1) re-open a transaction, take accounts and relieve the debtor of all liability of excessive interest and (2) notwithstanding any agreement purporting to close previous dealings and to create a new obligation, re-open any account. Their Lordships held that 24 per cent, interest was excessive interest but there was nothing unfair in a transaction by which arrears of interest was capitalised. That case therefore does not touch the question which we have before us. There was no occasion to consider a provision similar to proviso (i), Bengal Money-Lenders Act. Where in the agreement on the basis of which the original loan was given does not contain a stipulation for compound interest but later on the arrears of interest on the loan is by agreement between the parties added to the principal then outstanding and the borrower agrees to pay interest on it on the footing that it is to be the principal this new transaction is certainly one which creates a new obligation for it creates a completely substituted obligation on the closing of the previous dealings and so would come within the proviso, but the case before us is not of that type. On the view we take of Ex. F the mortgagees canriot get in excess of what is provided for in Section 30 (1) (a) of the Act. As theiprincipal of the original loan, what was actually advanced, was Rs. 3,00,000, the mortgagees cannot get more than Rs. 3,00,000 as interest. As Rs. 4,82,035-4-3 had been paid by the borrowers Rs. 1,82,035-4-3 must be credited towards the principal and so the mortgagees cannot recover more than Rs. 1,17,964-11-9 no matter on what date they may bring their suit for enforcement of the mortgage. We accordingly affirm the Order of the learned Subordinate Judge and dismiss the appeal with costs. Hearing-fee is assessed at ten gold mohurs.


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