Balmakund Sahay and Others vs Bhagwat Narayan Singh

Fazl Ali, J.—The facts which have given rise to this appeal are briefly these: On 5th May 1918, the defendant borrowed a sum of Rs. 3,000

from the plaintiff and executed a usufructuary mortgage-deed in his favour in respect of certain property. The defendant''s estate had been under

management under the Encumbered Estates Act 6 of 1876 previous to this mortgage-deed; but it had been released at the time when this

mortgage-deed was executed. The plaintiff brought a suit on the mortgage-deed and he also prayed that in case it was held that he was not entitled

to a mortgage decree, a money decree might be passed. The main defence in this case was that in view of the provision of Section 12(a), Chota

Nagpur Encumbered Estate Act 6 of 1876 the plaintiff was not entitled to either a mortgage decree or a money decree. The learned Subordinate

Judge who tried the suits held that in view of the clear provisions of Section 12(a), Chota Nagpur Encumbered Estates Act, the plaintiff was not

entitled to a mortgage decree but he took the view that as every mortgage carried with it a personal covenant to pay the money borrowed, a

money decree could be passed in the circumstances of the case and so he granted a money decree for the amount claimed. The defendant

thereupon appealed to the Judicial Commissioner who held that the mortgage being void, the covenant to repay was also void, as the two parts of

the transaction were not separable. He accordingly allowed the appeal and dismissed the plaintiff''s suit. The plaintiff has now appealed to this

Court.

In my opinion the view taken by the Judicial Commissioner cannot be upheld in law. Section 12(a), Chota Nagpur Encumbered Estates Act,

runs thus:

When the possession and enjoyment of property is restored under the circumstances mentioned in the first or the third clause of Section 12 to the

person who was the holder of such property when the application u/s 2 was made, such person shall not be competent without the previous

sanction of the Commissioner.

(a) to alienate such property, or any part thereof in any way, or

(b) to oreate any charge thereon extending beyond his lifetime.

It is clear from the words used in this section that all that was prohibited or meant to be prohibited was the alienation of the property or the

creation of any charge upon the property without the sanction of the Commissioner. Now, there is nothing in this section to suggest that a person

who is affected by the Act is debarred from borrowing money altogether. It follows, therefore, that though the mortgage cannot be enforced

against the property under the terms of the Act, there seems to be no reason why the plaintiff should be held to be debarred from enforcing the

personal covenant by the mortgagor to repay the money borrowed. This view finds support from a decision given by my learned brother in the

case of Ladu Narain Singh v. Goverdhan Das AIR 1925 Pat. 470. Mr. Pugh appearing for the respondent relies on the case of Moti Chand v.

Ikramalah Khan AIR 1916 P.C. 59. That was a case under the Agra Tenancy Act (Act 2 of 1901) and the facts were that the proprietors of

certain villages in the district of Azamgrah while selling their proprietary rights in those villages also attempted to sell their prospective exproprietary

rights in the sir and khudkasht lands which they could not do under the Act. In order to give the attempted sale of these lands the appearance of an

independent transaction, the vendors stipulated in the sale-deed that they would execute a separate deed of relinquishment in respect of the sir and

khudkasht lands on a subsequent date; otherwise they would be liable to pay damage at the rate of Rs. 16 per bigha; Three days later they

executed atdeed of relinquishment, but subsequently refused to relinquish the lands or give up possession. The vendors thereupon brought a suit for

damages on the basis of the agreement in the sale-deed. It was held by the Judicial Committee that the agreement could not be enforced ba"" cause

it was in effect an arrangement for the reduction of the purchase money on the vendor''s failure or refusing to relinquish such lands and thus it was

no more than an ingenious device to defeat the policy of Act 2 of 1901. In considering the effect of this agreement their Lordships of the Judicial

Committee observed as follows:

The policy of the Act is not to be defeated by any ingenious devices, arrangements, or agreements between a vendor and a vendor for the

relinquishment by the vendor of his Sir land or land which he has cultivated continuously for 12 years at the date of the transfer; for a reduction of

purchase money on the vendor''s failing or refusing to relinquish such lands, or for the vendor being liable to a suit for breach of contract on his

failing or refusing to relinquish such lands. All such devices, arrangements, and agreements are in contravention of the policy of the Act and are

contrary to law and are illegal and void, and cannot be enforced by the vendee ''in any civil Court or in any Court of revenue.

This case which the Judicial Committee had to deal with is easily distinguishable from the present case in which there is neither any ingenious

device nor any attempt to defeat the policy of the Encumbered Estates Act which does not prohibit the taking of loans. As I have already pointed

out, the covenant to repay the money borrowed is implied in the mortgage and it is open to the plaintiff to enforce this covenant without in any way

interfering with the policy of the Act.

I would, therefore, allow this appeal, set aside the judgment and the decree of the lower appellate Court, and restore the decree of the first

Court. The plaintiff will be entitled to his costs throughout.

Das, J.

I agree.