Appu vs N.V. Sivaramakrishna Ayyar and Others

Stone, J.—In this appeal which is from the learned Subordinate Judge of Palghat, the plaintiff is the appellant. The plaintiff sued for the

specific performance of an agreement to grant a mortgage. The facts are in a very narrow compass. The agreement is evidenced in two ways : (1)

by Exit D and (2) by the oral testimony of the plaintiff''s clerk. The essential part of Ex. D is as follows:

If the amount is not paid to you, without much delay, I shall execute to you a mortgage -deed in stamp paper.

That follows after the particulars given of documents deposited to secure lands. The amounts of the loans are known. The terms of the loans are

known. The oral testimony, which is uncontradicted, is to the effect that at the time of the giving of Ex. D defendant 1 who then owed at that time

under two notes Rs. 4,000 and Rs. 3,000 less Rs. 1,000 paid on account, was being pressed to re-pay. He was being pressed by the clerk who

gives the following evidence:

He did not repay the amount. I went to his house often to demand the amount. On one occasion he gave me the letter Ex. C. Again I went when

he gave me the letter Ex. D and with it he sent the documents Ex. E series. I asked him to give security. He then said he would give a mortgage.

The last sentence in Ex. D was inserted at my instance. We accepted the agreement evidenced by Ex. D.

In cross-examination:

I asked defendant 1 to give me the money. Ha said he had no money. Then I asked him ""Give mo a mortgage"".

Then he said:

Give mo ten days time; in the meantime here are my documents, take them. If I do not give in ton days, I shall give a registered mortgage of the

properties. Then I took the documents. Then I asked him to give me a voucher. Then he wrote Ex. D and he gave it to me. I dictated to him the

recitals of Ex. D. He wrote accordingly. The first three sentences in Ex. D were written by defendant 1 at my dictation. Because I thought all that

was not enough I caused him to write the last sentence in Ex. D.

So that we have here a case where money has been lent, where demands were being made, where the borrower asks for time and where the

lender says : ""I will give you time only if you will grant me a mortgage."" The mortgage ?of certain property was specified in respect of a loan the

quantum of which is known, the terms of interest are known, the same being ascertained from the promissory notes given at the time. The word

parayam"" which I have translated as ""mortgage"" is a word that means simple mortgage. The nature of the mortgage security is also known. The

learned Editor of Coote in the Law of Mortgages, Edn. 9, at p. 78, says as follows:

To constitute valuable consideration for the giving of a security there must be not only an existing debt but an agreement, express or implied, to give

time or some other consideration, or the security must be communicated to the creditor, and he must in fact forbear on the strength of it to sue for

the debt. Where there is such consideration, the Court will specifically enforce an agreement to give a security for a debt, or for money actually

advanced before or at the time of the agreement, unless the borrower is prepared to pay off the money.

In Meenakshi Sundaram Mudaliar v. Ratnaswami Pillai 1919 Mad. 322 , Abdur Rahim, J., observes:

But supposing money has already been advanced and the borrower refuses to execute a mortgage according to the agreement, the lender would

apparently be prejudiced if the loans were to remain without security, and it is difficult to see what difference it would make in this respect whether

the entire loan had been advanced or only a portion, if in the latter case the lender has been ready and willing to advance the remaining sum

according to the agreement,

and it is there decided that in a case of that nature specific performance will be decreed. Now it is said here that the agreement that is sought to be

specifically performed is not an agreement to lend money on condition of being granted a mortgage. The advance had long since been made. It was

not part of the agreement of loan to grant a mortgage. The loan was made on promissory notes. There is a simple agreement to grant a mortgage

apart from the agreement to grant a loan. That is true, and this case is distinguishable on the facts from Meenakshi Sundaram Mudaliar v.

Ratnaswami Pillai 1919 Mad. 322. It falls directly within the passage that I have cited from Coote. Then it is next said that Ex. D does not amount

to a contract at all (and indeed that seems to be the point on which the learned Judge has laid most stress) because the terms are uncertain. For the

reasons already given, it appears that all the essential terms are certain and that the parties intended to make an agreement - on the evidence that

seems to be abundantly plain the matter was not in the stage of negotiation at all. It was a case where one side was saying : ""I demand payment or

execution of the document,"" and the other man says : ""I agree to pay within ten days or execute a simple mortgage."" There is a clear agreement.

The terms are sufficiently precise for us to specifically enforce then. Then it is said that here specific performance is not the appropriate remedy,

damages alone should be given. Khoo Sain Ban v. Tan Ghant Tean 1929 P.C. 141 is relied upon. That was a case of a contract to sell. As the

Court pointed out a claim for specific performance can only be granted or refused. If it is granted, that must be performed, which is promised, not

something less or something more but the thing itself. You cannot have a partial grant of specific performance. Consequently if, since the time when

the agreement was made, the party claiming specific performance of that agreement has received in part the benefits provided for by that

agreement, it would make it impossible in fairness to the other side to decree fully specific performance of the agreement. In such a case specific

performance will be refused.

It is said that here, after this contract was made, the borrower called together his creditors and entered into a deed of composition to which

deed of composition it is first said the plaintiff is a party and it is next said if not a party he has received benefits under it and having received

benefits under that deed it would be impossible for the Court to grant specific performance of this contract of mortgage without doing injustice to

the borrower. On the question whether the plaintiff has in any way become a party to the deed of composition it is necessary to mention a few

facts: Ex. D is dated 6th September 1930. The deed of composition is dated 26th September 1930. On 30th September 1930 there came into

existence Ex. G. That was led up to apparently by a conversation that took place on the 23rd September according to para. 7 of the plaint. On

23rd September three of the persons who were going to be trustees under the trust deed of composition came to the plaintiff to talk about it. They

asked him to agree to the terms. The plaintiff mentioned this agreement to grant this mortgage and said that subject to his rights to set that

agreement he was prepared to come in. Pursuant to that Ex. G came into existence. It is a letter and is in these terms:

Without prejudice to my right to get a mortgage of the properties comprised in the title deeds mentioned in and handed over to me as per the

voucher executed by the aforesaid Sivaramakriahna Ayyar on 6th September 1930, I agree to the provisions of the trust deed in your favour.

It seems that that document makes it perfectly clear that the plaintiff was taking up this attitude:

I declare that I have this right to a mortgage. I am asserting that right. I am not abandoning it in any way. If however it should appear that I cannot

enforce that right, then I am content to come in with the other creditors.

Then he litigated for the present relief and pending the determination of this suit a payment is said to have been made by the trustees to him

under the deed of composition, and he is said to have received it. On what terms it is made and on what terms it is received we have no

information. Granted that it is received, it is still possible in fairness to grant the specific performance of this agreement because the grant can be

made conditional upon the return of whatever he has received under the deed of composition and such an order would be carrying out the

declared intention of the plaintiff as accepted by the trustees, of this composition deed. He has throughout been taking up the position that if he is

entitled to this mortgage he claims the mortgage; if he is not entitled to the mortgage then he will receive monies under the composition deed.

Owing to the delay of litigation, not very serious in this case, it would be to nobody''s interests to hold up the whole matter pending the

determination whether he is entitled to a mortgage or not. Therefore, the payment is made. We are told it must be repaid now because he has got

the relief which he was claiming and if he got it, it would exclude him from any rights under the deed of composition according to the position he is

taking up. It is necessary to mention that an objection was taken to Ex. D on the ground that it amounted to undue preference. There are a variety

of reasons why it does not. For one thing undue preference is a ground for setting aside a transaction of this nature under the Insolvency Law. But

the Insolvency Law cannot be applied to this case, because defendant 1 has never become an insolvent. If instead of calling it undue preference

you call it a transfer to defraud creditors then that principle does not apply because there is no suggestion here that there is any screening of

property. This is a perfectly bona fide transaction.

It is not the debtor that is going to benefit but it is the creditor. One creditor is perfectly entitled to get in or secure his debt in the best way that

he can think of and as was pointed out in Hakim Lal v. Mooshahr Sahoo (1907) 34 Cal. 999 he is under no obligation to regard the interest of the

other creditors : see also Mushehar Sahoo v. Hakim Lal 1915 P.C. 115. In these circumstances the appeal succeeds. In the result, there will be no

personal decree against defendant 1 but the plaintiff will be decreed specific performance of the contract to grant a simple mortgage for the amount

of Rs. 6000 over the properties mentioned in the documents of title referred to in Ex. D. The plaintiff will further be ordered as a condition of the

proper execution and registration of the mortgage deed to return any amount that he may have received under the deed of composition with

interest at a like rate to that reserved in the mortgage instrument. Two months will be allowed for the execution of the mortgage deed. By consent

of the plaintiff in lieu of the rate of interest reserved in the promissory notes which is 12 per cent compound with three monthly rests, the interest

will be 12 per cent simple. Consequently the amount, if any, received under the composition deed will be repayable with like rate, 12 per cent

simple interest. The plaintiff is entitled to costs. The memorandum of objections succeeds with costs.

ORDER

The mortgage will operate as from the date on which it should lave been executed, namely, 6th September 1930. Time for execution extended

one month. Appellant will pay the court-fees due to Government on the memorandum of objections.