1. In this case, the plaintiff one Bisweswar brings his suit for the enforcement of a simple mortgage bond for a sum of Rs. 500 with interest. The defendant is one Guru Charan who is the nephew of one Bam Durlav, the plaintiff's father. The facts found by the learned District Judge are, in substance, these : Guru Charan bought certain land and, as regards that land, Bam Durlav was his bargadar. This land appears to have been let out to tenants and the management of the land and the receipt of the part of the produce which belonged to Guru Charan were committed to Ram Durlav who was his uncle. In these circumstances Guru Charan, at the time of the mortgage in question having got into litigation, had been in need to raise a loan and commissioned Rim Durlav to arrange a loan for him. Rim Darlav represented that ha hid arranged the loan from one Satish Kabiraj; but in truth and fast, the money that WM being lent was being lent not by Satish Kabiraj at all but by Rim Darlav himself, the plaintiff Bisweswar being a mere benamdar for Rim Darlav and not as Garu Oharan was told banamdar for Satis Kabiraj. Now, on these facts, the equitable principle is reasonably clear that, if A is B's agent for arrangement for a loan, it is his duty to got that loan on the best terms possible. He cannot put himself in a position in which his interests conflict with his duty and, without full disclosure to his principal he cannot validly lend his own money to his principal upon terms which he has adjusted. Such a transaction is exactly like the transaction of an agent for sale buying the property for himself or like the transaction of a stockbroker who sells his own shares instead of the shares of a third person. The effect of the breach of this fiduciary relationship which is inherent in all agencies is that the principal is entitled to regard the transaction as a voidable transaction and to have it set aside in the usual way. The consequence is not that the mortgage in a case of this sort is void altogether but it is voidable and equity will avoid it in all cases where the parties can be remitted to their former position.
2. It is quite clear, therefore, tint when Guru Charan was sued upon the mortgage in question in this case he was entitled to take the equitable defence that this mortgage was voidable and to say:
So fat as I am concerned here is your money back with interest at a reasonable rate and the mortgage mast be set aside.
3. The question is whether, in these circumstances the right of Guru Charan is not something further. The learned Judge has held that Ram Durlav, acting as an agent for the managament of Guru Charan's land, had received the produce and dealt with it and had not accounted to Guru Charan at the time of the mortgage. He has further found that the reason why the name of Satish Kabiraj was put forward was that it was impossible to suppose that at that time Guru Charan would execute a mortgage in favour of Ram Durlav without finding out how much of his owe money Ram Durlav hid in his hand. In these circumstances, it seems to me that it is only right that the amount advanced upon this mortgage with interest should not be ordered to be brought into. Court by Guru Charan and handed over to Ram Darlav without Ram Durlav first accounting for the various sums of money that he had received on behalf of Guru Charan. In my judgment the equity in this case is that the mortgage is liable to be set aside and that the mortgages can only be given a charge upon the mortgaged subject for the net balance that is now due to him from Garu Charan account being taken of all moneys of Guru Gharan in Ram Durlav's hand.
4. In my opinion, the learned I Judge was wrong in dismissing the suit. It will be necessary to allow this appeal and to make an order declaring that, in the opinion of this Court, the mortgage sued upon should be set aside and that an account must be taken of the sums due from Ram Durlav to Guru Charan on all accounts and also that that account must include on the other side the sum of Rs. 500 which was lent and a proper rate of interest thereon not necessarily the contractual rate and that Ram Durlav is entitled to a charge upon the land comprised in the mortgage for the ultimate balance due to him if that sum be less than Rs. 500 plus interest. The suit will be remitted to the trial Court for taking the account and making the proper decree.
5. I think, however, on consideration, on the question of costs that, as the whole matter has been, on these findings, brought, about by the conduct of Rim Durlav, it would be only right that Guru Charan should have his costs in the trial Court, before the District Judge and in this Court. Rim Durlav cannot in any event have a charge for more thin Rs. 503 plus reasonable interest.
6. I agree.