Govind Dani vs Purusottam Mahapatra and Others

Agarwala, J.—This appeal is by defendant 15 and arises out of a suit on a mortgage, The mortgage was executed by defendant 6, for self and as guardian of his minor son, defendant 7 on 7th March 1910, to secure a loan of Rs. 400. The stipulated rate of interest was Rs. 25 per cent, simple. The object of the loan was to secure money for the purpose of reconstructing or reconditioning the residential house of the mortgagor''s family which was staled to be in a dilapidated condition. In the year 1923, one Abdul Karim purchased the mortgaged property in execution of a money decree obtained against the mortgagor, defendant 6. His heirs, defendants 1 to 5, sold the property to the appellant. It has been contended on behalf of the appellant that the mortgage is not binding on the property, not being for legal necessity. The evidence in the case and the findings of the Court below show that out of Rs. 400 Rs. 150 was spent in the construction of a pucca privy and Rs. 175 in repairs effected to the residential house. With regard to Rs. 150 spent on the privy it has been contended that there was no necessity to build a pucca privy as a kutcha privy would have sufficed for the needs of the family. I am not prepared to take this view of the matters. A pucca privy cannot be regarded in the light of a mere luxury. It is essential for sanitary purposes that a privy should be constructed as well as it can be. With regard to the sum of Rs. 175 spent on repairs, this was challenged on the ground that the object of the loan stated in the bond was reconstruction of the residential house and not its repairs. Nor am I prepared to accept the contention that this amount was not for legal necessity.

The evidence shows that the house was in a very dilapidated condition at the time of the loan and the term ''construction'' used in the bond covered repairs on such a scale as might be regarded as practically reconstruction of the house. Then it was contended that in any case Rs. 175 has not been shown to have been required or spent on the house, With regard to that the evidence discloses that the mortgagee was satisfied that the house was in a dilapidated condition and that repairs were urgently needed. In these circumstances it was not necessary for him to see that every rupee of the money advanced was spent for the purpose for which it was apparently required.

The last contention with regard to the point of legal necessity was that the rate of interest was excessive, and we have been re-ferred to two decisions of the Privy Council, in Nazi Begum v. Roa Raghunath Singh AIR 1919 P.C. 12 and Mannulal v. Karu Singh AIR 1919 P.C. 108 , in which it was held that it is obligatory on the mortgagee to show in a case where a high rate of interest has been charged that there was necessity not only for the loan but also for the rate of interest agreed upon. In the present case the Courts below were not satisfied that at the time when the loan was contracted and in the circumstances in which it was contracted, the amount of interest agreed was excessive. Finally, the appellant sought to take advantage of the provisions of Section 10, Money Lenders Act, which limits the amount of interest recoverable by a money lender in a suit on a loan. The material part of the Section provides as follows:

No Court shall in any suit brought by a money lender in respect of a loan pass a decree or an amount of interest greater than the amount of loan originally advanced.

To obtain the benefit of this Section it is necessary for the defendant to show that the plaintiff is a money lender and that the suit is in respect of a loan. The Act was introduced while the present appeal was pending in this Court, so these two questions were not raised at the trial or in the Court of appeal below, and it was suggested that the appeal should be remanded to the Court below for a finding whether the plaintiff is a money lender or not. That course might be necessary were we satisfied that the suit is in respect of a loan.

That term, however, has been defined in Clause (i) of Section 2, Orissa Money Lenders Act, which declares that loan shall not include the amount payable under a mortgage by the purchaser of the properties subject to the mortgage, the purchase having been prior to the coming into force of this Act. The object of this legislation was to lessen the burden of debtors generally in respect of loans from money lenders. But Section 2(i)(3) deprives a purchaser of mortgaged properties of the benefits of the Act if he purchased the properties prior to the coming into operation of the Act. When a person buys properties subject to a mortgage the real consideration for the sale is the amount paid by the vendee to the vendor plus the liability of the vendee to repay the mortgage debt. The vendee having undertaken to repay the mortgage debt and having as a consideration for this undertaking obtained the advantage of not having to pay the vendor the full price of the property the Legislature has not been fit to relieve him in respect of this undertaking.

The reason is obvious, namely, the object was to relieve the burden of persons obliged by circumstances to borrow from money lenders and not to relieve purchasers from liabilities which they have undertaken to perform. To take any other view would result in the purchaser not paying the full consideration for his purchase and the vendor not receiving the full consideration for his property. To take an example, a property worth Rs. 400 is mortgaged to secure a loan of Rs. 100. The interest is not paid and when it amounts to Rs. 200 the mortgagor sells the property for Rs. 100 the vendee undertaking to discharge the mortgage liability of Rs. 300 that is to say, the real consideration agreed upon is Rs. 400 consisting of Rupees 100 payable to the vendor and Rs. 300 payable to the mortgagee for capital and interest. If the vendee were entitled to the benefit of Section 10 of the Act he would be exonerated from paying more than Rs. 100 as interest, that is to say, the amount of the consideration would be automatically reduced by Rs. 100 and the benefit of the Act would go to the purchaser and not to the borrower for whose benefit it was enacted.

In the case of a purchase after the Act the Legislature has excluded the operation of Section 2(i)(3) because, since the enactment of the Money Lenders Act, both the vendor and the vendee now know exactly how much interest is realisable in respect of the mortgage loan and therefore they are in a position to calculate with precision the price of the mortgaged property, taking into consideration the mortgage charge. But this was not possible before the Act came into force.

If the contention of the appellant in this case were accepted it would amount to the terms of contract between the parties being altered and the benefit of the alteration would not be going to the person for whose advantage the Legislature enacted it but to the advantage of another who, in most cases, is merely a speculative purchaser. There is nothing in the language of the Act which necessitates our taking this view of it.

In the result. I would dismiss this appeal with costs.

Chatterji, J.

I agree.