P.B. Mukharji, J.
1. On this notice of motion takenout by the defendant Company, the applicationis made to stay the suit and all proceedingsherein until the plaintiff has exhausted all hisavailable remedies against the mortgaged property or until he abandons his mortgage security. The application is made under Section 68(2),T. P. Act read with Sub-section (1) and Clause (a)thereof.
2. In order to appreciate the point advanced by the applicant and in order to determine the point raised, it is necessary to refer to the nature of pleadings in this suit which the applicant wants to stay.
3. This suit was instituted by the plaintiff on or about 9th January 1952. In para. 1 of the plaint the claim against the defendant company is made only on the basis of its alleged liability as drawer of a Promissory Note dated 11th January 1949 for the sum of Rs. 40,000/- carrying interest at the rate of 6 per cent, per annum payable on demand to the plaintiff or order. That is the only claim made in the plaint. In para 3 of the plaint the plaintiff pleads that the defendant also created an equitable mortgage by deposit of title deeds in respect of a cinema house situate at Rajpur outside the jurisdiction of this Court but that is only pleaded to ask for leave under Order 2. Rule 2, C. P. C. to file a separate suit to enforce the mortgage if and when necessary. In this suit the plaintiff asks for a decree for a sum of Rs. 47,200/- inclusive of interest due on the promissory note. That is the only decree claimed by the plaintiff on this plaint.
4. In the written statement the defendant company takes the defence of complete denial of the promissory note, denying that it drew the promissory note or it authorised the drawing of the promissory note. What is more the defendant company pleads further to deny the creation of any equitable mortgage and has particularly denied that it deposited or authorised anybody to deposit the title deeds in respect of the cinema house with intent to create any security. The written statement proceeds in the defence by the submission that if it is held contrary to the pleading that there has been a mortgage then this Court should stay all proceedings in this suit until the plaintiff has exhausted his remedy against the mortgaged property or abandons his claim for the mortgage security. Even a momentary reflection will show that this submission is pointless because this Court cannot determine the validity of the mortgage in this suit in which the mortgage is not in issue and which suit again the applicant himself want's to stay. The applicant, therefore, is in the paradox of wanting to stay this suit and at the same time wants this Court to determine in this suit the validity of the mortgage first. The effect of this paradox will be of importance when I discuss the question of discretion under Section 68(2), T. P, Act,
5. The defendant now applies to stay this suit under Section 68(2), T. P. Act on these materials. The only ground on which the application is made is that this suit is one under Section 68(1)(a), T. P. Act. No question under Clauses (b), (c) or (d) of Section 68(1), Transfer of Property Act is involved in this case. The defendant company can only succeed if it satisfies in the first instance that it comes within the meaning of Section 68(1)(a), T. P. Act and secondly if it satisfies me that 1 would, in my discretion, given to the under Sub-section (2) of that section, stay the proceedings.
6. I propose to deal first with the argument advanced on behalf of the applicant that the requirements of Section 68(1)(a). T. P. Act are satisfied in this case. It is argued that this is a case where the mortgagor company has bound itself to repay the mortgage-money and therefore it comes within the meaning of this section. This argument raises a very important question of law and requires careful analysis.
7. On behalf of the respondent some argument was advanced that an equitable mortgage does not carry with it any personal liability of the mortgagor to pay the mortgage-money. Ihave no hesitation in rejecting that argument. An equitable mortgage by deposit of title deeds is by the Indian law placed on a similar footing as a simple mortgage. The rights and liabilities of ,a mortgagor and a mortgagee under such an equitable mortgage are the same as far as may be as those under the simple mortgage. That is plain from the clear provision made in Section 96, T. P. Act. The necessary consequence is that a mortgagor under an equitable mortgage must be regarded as having personal liability to pay the mortgage-money. If it is necessary for me to be more explicit on this point I will put my reasons in this way, without referring to the cases cited at the bar to establish mortgagor's personal liability in an equitable mortgage. I consider it quite unnecessary to refer to such cases because in my view Section 58(b), T. P. Act in defining a simple mortgage expressly says that in a simple mortgage the mortgagor binds :himself personally to pay the mortgage-money. Therefore by the combined operation of Sections 96 and 58(b), T. P. Act an equitable mortgage must be held to be a mortgage where the mortgagor binds himself personally to pay the mortgage-money. It has been contended on the authority of the Patna decision in -- 'Raj Kumar Bharathi v. Surajdeo Sahi', reported in 17 Pat 737 that the personal covenant to repay the loan contemplated in Section 68(1)(a), T. P. Act refers to an express contract in contradistinction to a contract implied by law. That case concerned a usufructuary mortgage & it turned on the construction of the particular deed before that Court, and cannot be taken as an authority on equitable mortgage. I do not wish to express any opinion on the point whether Section 68(1)(a), T. P. Act must mean an express contract and not a contract implied by law as Wort A. C. J. in that Patna case seems to suggest. I consider that point will in future in a proper case require a more careful and intensive consideration, and all that need be said now is that the word 'express' is not used in 9. 68 (1) (a), T. P. Act. But so far as equitable mortgage is concerned I have no doubt in my mind that a mortgagor in such an equitable mortgage does personally bind himself to repay the mortgage-money within the meaning of Section 68(1)(a), T. P. Act and that in my view is the irresistible consequence of the joint operation of Sections 96 and 58(b) of that Act. In the case of equitable mortgage the Statute imports personal liability. It is equally no answer as against such clear statutory provision to put forward English legal notions of the differences between legal and equitable mortgages. It is settled law, as I understand it, after Lord Dunedin's observation in -- 'the Imperial Bank of India v. U Rai Gyaw Thu and Co. Ltd.', 50 Ind App 283 (PC), that a mortgage by deposit of documents of title is a good and valid mortgage and there is no distinction in India between legal and equitable mortgages as in English law. I, therefore, hold that in an equitable mortgage, the mortgagee has a right to sue for the mortgage-money within the meaning of Section 68(1)(a), T. P. Act. I also hold that under such an equitable mortgage the mortgagor binds himself to, repay the mortgage money within the meaning of Section 68(1)(a), T. P. Act.
8. The real difficulty, however, on the way of the applicant in this case is the nature of the suit. In order to stay the proceedings in a suit under Section 68(2),. T. P. Act, the suit must be a suit by the mortgagee for the mortgage-money. The real question is then, is the present suit a suit by the mortgagee for the mortgage-money and, therefore, a suit of the nature contemplated in Section 68(1), T. P. Act
9. On a construction of Section 68, T. P. Act it appears to me that the words and the context in which the words are used indicate a suit which the mortgagee prosecutes qua mortgagee for the recovery of this mortgage-money. Section 68 occurs in Chap. 4, T. P. Act marked 'of mortgages of immovable properties and charges' and this particular section appears with a group of sections under a sub-heading, marked 'Rights and liabilities of mortgagee'. The context, therefore, circumscribes the subject of this section to the mortgage and the rights and liabilities of the mortgagees. The word 'mortgagee' and the words 'mortgage-money' must in my view on a proper construction of Section 68(1), T. P. Act indicate that the 'right to sue' mentioned in that section is the right which belongs to the mortgagee only in. his capacity as a mortgagee and not in a totally different capacity such as a payee of a promissory note as in this case. Equally to my mind the words 'mortgage-money' on a proper construction having regard to the definition contained in para 2 of Section 58(a), T. P. Act mean, the money secured by the mortgage and not a promissory note. The other words 'the mortgagor binds himself to repay' in Section 68(1)(a), T. P. Act can in that context only mean that this binding is with reference to the mortgage and its terms. In order, therefore, to find out whether the mortgagor binds himself to repay the mortgage-money within the meaning of Section 68(1)(a), T. P. Act, the terms of the mortgage itself are the only indicia. In other words the personal liability must be discovered to arise on the mortgage itself and not dehors the mortgage. This construction is enforced also by reference to Clauses (b), (c) and (d) of Section 68(1), T. P. Act. A perusal of these clauses unmistakably points out that in each one of the eventualities mentioned there the reference is invariably to the mortgage security. In Clause (b) it is the whole or partial destruction or insufficiency of mortgage property, in Clause (c) it is the deprivation in whole or in part of the mortgage security and in Clause (d) the reference is to delivery of possession of the mortgaged property. This analysis leads to the conclusion that when in Clause (a) of Section 68(1), T. P. Act the language used is 'mortgagor binds himself to repay' that should be read as a term of the mortgage itself, and refers to the personal liability that inheres in the mortgage.
10. One more word before I leave the topic of construction of Section 68, T. P. Act. A suit under Section 68, T. P. Act is a suit for money due on a mortgage and the only decree that can be passed under this section is a decree for money, unlike a suit on the mortgage itself under Section 67, T. P. Act. Under Sub-section (2) of Section 68 of that Act only a particular type of suit can be stayed. Before Section 68(2), T. P. Act can at all be applied the suit must answer the description of a suit by a mortgagee for the recovery of the mortgage-money. No other class or type of suit is intended to be stayed. That therefore is the fundamental postulate which must be satisfied and it is only when it is such a suit, then alone further enquiry is necessary under Clause (a) or (b) or (c) or (d) of Section 68(1), T. P. Act. Sec. 68 first confers a right on the mortgagee to sue for the mortgage-money. Clauses(a), (b), (c) and (d) of Sub-section (1) specify the instances where the mortgagee has the right to sue for such mortgage-money. It also provides that in no other cases the mortgagee shall have such right to sue for the mortgage-money. The Court's power to stay such a suit under Sub-section (2) of Section 68, T. P. Act is limited again only to the two instances mentioned in Clauses (a) and (b) and in no other.
11. Reverting now to the nature of the plaint in this suit before me I find that this is a suit on the promissory note and not on the mortgage .at all. The promissory note is a distinct cause of action, independent of and apart from the mortgage. No doubt the equitable mortgage in this case carries with it a personal liability of the mortgagor to repay the mortgage-money. Had it therefore been a suit to recover money due on that equitable mortgage then the argument made on behalf of the applicant for stay might have prevailed. But the position here is entirely different. The suit before me is not a suit where the mortgagee is suing qua mortgagee for his mortgage-money. In this suit the plaintiff is suing only as a payee of the promissory note and nothing else. Such a suit in my opinion and ,on the construction that I have arrived at is not within Section 68(1)(a), T. P. (Act. If the personal liability to repay a loan arises independently of any existing mortgage and the suit is not by the mortgagee for mortgage-money, then in my view Section 68(1)(a), T. P. Act is not attracted.
12. The argument that the consideration of the promissory note is the same as the consideration for the mortgage cannot in my view, make a difference in the construction of Section 68(1)(a), T. P. Act or in the result of this application. Every mortgage represents both a loan and a security. The nature and terms of the security must be considered in each case in order to find out whether they support or negative the personal liability for repayment of the loan. In my view as I have already expressed, the personal liability referred to in Section 68(1)(a), T. P. Act is a personal liability inherent in the mortgage and not dehors the mortgage or independent of the mortgage. The principle behind this statutory provision, as I understand it, is the law's reluctance to make the mortgagor personally liable so long as his security is there to answer for the debt. But if the mortgagor chooses to create a. personal liability by independent transaction like a promissory note, a cheque or other independent engagement completely dissociated from the mortgage, then he is not within the meaning of Section 68(1)(a), T. P. Act as I construe it nor within the principle that security should be called up first before personal liability is enforced. The reason is that by engaging into an independent contract for a debt as evidenced by a promissory note the debtor indicates to the creditor by such a contract that he brings an independent personal liability to answer the loan apart from what inheres in a mortgage with personal liability. To repeat what I have already said the promissory note in this case on which alone the suit is based is an independent and distinct cause of action apart from the mortgage. The juristic difference in this respect is as similar as the difference between a suit on the promissory note and a suit on the original consideration. Although the consideration is the same for the promissory note and the originalloan they are regarded in law as distinct and separate causes of action, so that although a suit on the promissory note has failed a suit on the original loan may be competent as pointed out by the Privy Council in -- 'Payana Reena v. Pana Lana', 41 Ind App 142 (PC). The English Court of Appeal decided the same principle in, -- 'Wegg Prosser v. Evans', (1895) 1 QB 108 in respect of a cheque & a guarantee, although the consideration for both was the same. Therefore although the consideration is the same both for the promissory note as well as the mortgage the debtor in such a suit on the note, cannot turn round and say that creditor must exhaust the security first before enforcing the personal liability which he has created independently of the terms of the security. To allow him to do that will be to confound one cause of action with another independent, and distinct cause of action.
13. I am, therefore, of the opinion that the applicant on the plaint in this suit cannot invoke the principle provided in Section 68, T. P. Act.
14. I have another reason why this application must in any event fail. That is founded on my construction of Sub-section (2) of Section 68. T. P. Act. In Sub-section (2) the power to stay the suit is entirely discretionary with the Court. The language used in this sub-section is 'the Court may at its discretion'. This discretion of the Court has undoubtedly to be exercised on cogent grounds and not arbitrarily. I will presently state the cogent grounds on which in this case I should refuse to exercise my discretion in favour of the applicant. But before I do so it is necessary to observe that the Court's power to stay the suit at its discretion is 'notwithstanding any contract to the contrary.' Any contract, therefore, between the mortgagor and the mortgagee excluding the relief conferred on the mortgagor under Section 68(2) cannot override or fetter the discretion of the Court if the Court is of the opinion that in spite of such contract to the contrary the suit should be stayed. In that case the discretion of the Court will prevail over any such contract to the contrary.
15. Now I propose to state the reason why the discretion in this case should never be exercised in favour of the applicant by staying the suit even if the applicant were able to come within Section 68(1)(a), T. P. Act. In the written statement the applicant takes the plea of denying the mortgage altogether. The defendant company who is the applicant before me denies in para 3 of its written statement that it created any equitable mortgage or deposited or authorised anybody to deposit title deeds in respect of the said cinema house with intent to create a charge. In my view the applicant cannot have it both ways. If the mortgagor choose to deny the mortgage altogether, he cannot be heard to say that he will invoke the statutory relief under Section 68(2), T. P. Act by asking the mortgagee to exercise his remedies first against the disputed security before proceeding to enforce the personal liability of the mortgagor In my judgment a mortgagor who wishes to avail of the benefit of Section 68(2). T. P. Act can only do so on the tacit assumption that there is a valid mortgage. He cannot deny the mortgage and at the same time invoke to apply the discretionary relief under Section 68(2), T.P. Act relating to the mortgage. On this ground I would, therefore, in any event, refuse to exercise my discretion in favour of the applicant
16. For these reasons I dismiss this application with costs.