Kesava Bhagavathar vs Vardayya Bhagavathar and Others

The plaintiff is the appellant. The suit was on a mortgage to recover a sum of Rs. 9,035. The mortgage was executed on 5-8-1966 by

defendants 1 to 3 in favour of the plaintiff for a sum of Rs. 6,500. The 4th defendant purchased the property from defendants 1 to 3 under a

registered sale deed date 27-8-1969 for a sum for Rs. 9,750. In defence to this suit on mortgage, the 4th defendant contended that out of the sale

consideration of Rs. 9,750, he was directed to pay a sum of Rs. 6,500 to the plaintiff and that it was represented to him that only that much

amount was due. He accordingly paid the amount on 29-8-1969 and got an endorsement of payment in the mortgage deed itself and the cancelled

mortgage deed was taken delivery of by him along with other documents of title. The plaintiff stated in the plain that at the time of the sale

transaction, the defendants required the mortgage deed to be given to them undertaking to discharge the mortgage out of the sale consideration.

Since the first defendant was his brother and he had confidence in the 4th defendant, he gave the original mortgage deed to the defendants. But

taking advantage of the custody of the original deed, the 4th defendant had forged an endorsement of discharge on the back of it. Both the courts

below after consideration of the evidence came to the conclusion that the endorsement of discharge on the original mortgage deed was made by

the plaintiff on receipt of a suit of Rs. 6,500 and that the entire mortgage had been discharged. In that view, the suit was dismissed. In this second

appeal, though the learned counsel could not challenge the finding that the endorsement was signed by the plaintiff, he advanced an argument that

the endorsement, in so far as it stated that the plaintiff had waived the interest, is inadmissible in evidence for want of registration and that at best

the defendants could get credit for the payment of a sum of Rs. 6,500 and for the balance amount, he would be entitled to a decree. On the other

hand, the learned counsel for the respondents contended that the waiver of the interest is not the one that discharges the mortgage, but it is the

payment of the sum of Rs. 6,500 that discharges and that, therefore, the endorsement does not require any registration at all.

The endorsement of discharge on the original mortgage deed stated that remitting the interest up to date out of grace, a sum of Rs. 6,500 was

received towards principal and the mortgage has been discharged and the document handed over to the 4th defendant. This endorsement is not

registered. Under S. 17(1)(b) of the Registration Act, any non-testamentary instruments which purport or operate to create, declare, assign, limit

or extinguish, whether in present or in future, any right, title or interest, of the value of Rs. 100 and upwards to or in immovable property shall be

registered and under S. 49 unless it had been registered, it cannot be received as evidence of any transaction affecting such immovable property.

The question for consideration is whether the endorsement limits or extinguishes any rights, title or interest in immovable property so as to make it

inadmissible in evidence for want of registration.

Number of cases have come up for consideration and the Supreme Court had to consider a similar question in the decision reported in

Kashinath Bhaskar Datar Vs. Bhaskar Vishweshwar Karve, . In that case, there was an agreement between the mortgagor and the mortgagee

between subsequent to the execution of the mortgage in view of certain circumstances, for reduction of the rate of interest in respect of one

mortgage and an agreement to receive a lesser amount than that was due under another mortgage. The entire amount due as per this agreement

was paid to the mortgagee. In spite of it, the mortgagee filed a suit for the recovery of certain sums of moneys as being due as per the original

terms of the mortgage deed ignoring to give effect to the agreement. The defence was that there was full satisfaction of the mortgage. The main

evidence on which the defendant relied to prove satisfaction was the agreement and the payment of the money as per the agreement. The

agreement was not registered. The Supreme Court had therefore to consider the question whether the agreement required to be registered and

whether there was a discharge of the mortgage. The Supreme Court held that the agreement is a document which limits or extinguishes interest in

immovable property within the meaning of S. 17(1)(b) of the Registration Act, and since that has not been registered, payments made under that

agreement could not be relied on as having effected a full discharge of the mortgage. The Supreme Court further held--

One part of the ''interest'' which a mortgagee has in mortgaged property is the right to receive interest at a certain rate when the document

provides for interest. If that rate is varied, whether to his advantage or otherwise, then, in our judgment, his ''interest'' in the property is affected. If

the subsequent agreement substitutes a higher rate, then to the extent of the difference it ''creates'' a fresh ''interest'' which was not there before. If

the rate is lowered, then his original ''interest'' is limited.

The learned counsel for the respondents relying on Balasundara Naicker and Another Vs. Ranganatha Aiyar and Others, , contended that in the

case where there is an agreement to waive interest or receive a lesser amount and give a discharge and the mortgagor paid the money as per the

agreement it is not the agreement that limit or extinguishes the mortgage, but it is the payment as per the agreement that extinguishes the mortgage.

If at all it is the agreement that will have to be registered, if it is in writing, and not the payment or the endorsement of payment.

In Balasundara Naicker and Another Vs. Ranganatha Aiyar and Others, , the suit was on a mortgage. The mortgage deed provided for interest

at 9 per cent to be paid by 11-1-1906, and in default penal interest at 10 1/2 per cent. Some amounts were paid towards this mortgage and there

were endorsements of payments. Sometime in 1909, there was some litigation between the mortgagor and one of the mortgages for partition. A

Receiver was appointed in that suit. It appears that the Receiver took objection to the payment of penal interest at 10 1/2 per cent. Thereupon, the

mortgagees agreed to take interest which would roughly work out compound interest at 9 per cent and thus calculated the amount due on the bond

came to Rs. 12,960. On that basis the mortgagors paid the entire amount. These payments were accepted in full discharge of the debts due on the

mortgage. But in spite of this the mortgagees filed the suit claiming the amount as per the original terms of the mortgage deed itself ignoring the

agreement to take interest at the compound rate of 9 per cent as against the penal interest at 10 1/2 per cent. the question for consideration was

whether there was a discharge of the mortgage. It was contended on behalf of the plaintiffs-mortgagees that the agreement to receive interest at

compound rate of 9 per cent was oral and in view of S. 92(4) of the Evidence Act, the plea of oral agreement varying the terms of the registered

mortgage deed was inadmissible in evidence. In support of this contention, two decisions of this Court reported in Lakshmiammal v. Srinivasa

Iyengar, 27 Ind Cas 269 : AIR 1916 Mad 481 and Lakshmana Setti v. Chenchuramiah, 34 MLJ 79 : AIR 1918 Mad 331 were relied on. It was

held in these cases that an agreement in writing by the mortgagee to relinquish a sum of money more than Rs. 100 due under a mortgage bond was

held inadmissible for want of registration. These two decisions were distinguished by the learned Judges who decided Balasundara Naicker and

Another Vs. Ranganatha Aiyar and Others, on the ground that in those two cases the agreement was in writing and the agreement purported to

extinguish the mortgage bond; but in the case before them, there was no question of any writing being admissible or inadmissible with reference to

the provisions of the Registration Act. But they further observed that if the writing itself does not purport to extinguish the mortgage bond, it would

be admissible in evidence. With reference to the facts of that case, the learned Judges were of the view that the agreement to receive a lesser

interest than provided in the mortgage deed itself does not extinguish the mortgage bond; but the fact that the amount was paid in pursuance of that

agreement and an endorsement was taken in full discharge is the one that extinguishes the mortgage. Relying on the decision of the Calcutta High

Court in Mahim Chandra Dey Vs. Ramdayal Dutta and Others, in preference to the decision of the Bombay High Court in Jagannath v. Shankar,

ILR 44 Bom 55 : AIR 1920 Bom 115, the learned Judges held that it is the payment in pursuance of the agreement that discharge the mortgage an

not the agreement itself and that, therefore, the endorsement of full discharge by payment of lesser amount does not require any registration. In C.

Vaidyanatha Rao Vs. Kandappa Chetty and Others, this court applied the decision in Balasundara Naicker and Another Vs. Ranganatha Aiyar

and Others, . A similar view was also taken by the Full Bench of the Allahabad High Court in Collector of Etah Vs. Kishori Lal and Another . But

all these decisions, in my opinion, are no longer goods law in view of the decision of the Supreme Court in Kashinath Bhaskar Datar Vs. Bhaskar

Vishweshwar Karve, . In fact, the Full Bench decision of the Allahabad High Court in Collector of Etah Vs. Kishori Lal and Another and the

decision of the Calcutta High Court in Mahim Chandra Dey Vs. Ramdayal Dutta and Others, , were relied on before the Supreme Court in

support of the contention that it was always open to the mortgagee to release or remit a part of the debt and when he does so, he does not limit or

extinguish an interest in immovable property any more than when he passes a receipt acknowledging payment of the whole or part of the money.

The Supreme Court rejected this argument and held:

There is a difference between a receipt and a remission or a release. A receipt is not the payment, nor does the document in such a case serve to

extinguish the mortgage or limit the liability. It is the payment of the money which does that and the receipt does no more than evidence the fact.

Not so a release. The extinguishment or diminution of liability is in that event effected by the agreement itself and not by something external to it. If

the agreement is oral it is hit by proviso 4 to S. 92, Evidence Act, for it ''rescinds'' or ''modifies'' the contract of mortgage. If it is in writing, it is hit

by S. 17(1)(b), Registration Act, for in that case, the writing itself ''limits'' or ''extinguishes'' the liability under the mortgage.

The Supreme Court also held that it is the agreement to receive the lesser interest that limits the mortgagee''s interest and serves to extinguish the

mortgage and not the mere payment at the reduced rate. In the words of the Supreme Court--

Assume that the mortgagor repaid the whole of the interest at the altered rate and the whole of the principal; would those repayments by

themselves effect an extinguishment of the mortgage? Clearly not, because unless the subsequent agreement is called in aid more would be due

under the terms of the bond on account of the higher rate of interest. It is evident then that it is the agreement which limits the mortgagee''s interest

and serves to extinguish the mortgage and not mere payment at the reduced rate.

Thus, if there is an agreement to receive a lesser amount than that was due under the mortgage deed, it will be hit by the proviso to S. 92(4) of the

Evidence Act. If it is in writing, unless it is registered, it will be hit by S. 17(1)(b) of the Registration Act. In this case, the waiver of the interest

noted in the endorsement not having been registered is inadmissible in evidence. But the endorsement is inadmissible in evidence sort far as it

related to the acknowledgment of receipt of Rs. 6,500 paid on that date.

It was then contended by the learned counsel for the respondents that the original discharged mortgage bond was delivered by the mortgagee to

the mortgagors and the production of the original deed by the mortgagors raises a presumption under S. 114 of the Evidence Act, that the

mortgage is discharged. In support of this contention the learned counsel relied on a decision reported in Pandit Ram Kumar Missir and Another

Vs. Pandit Ram Nath Missir, . In that case while finding that the endorsement of discharge was inadmissible in evidence, on facts the court came to

the conclusion that the full amount of the mortgage money was paid and that therefore the mortgage had been discharged. In coming to the

conclusion that the mortgage had been discharged, the court also relied on the fact that the mortgage bond was produced from the custody of the

mortgagor and the presumption under S. 114 of the Evidence Act. But this does not mean that the plaintiff is not entitled to prove the

circumstances under which the mortgage deed came to the possession of the mortgagor. As pointed out by the Privy Council in Mohamed Mehdi

Hasan Khan v. Mandidas, ILR (1912) All 511, the production by the defendant of the bond with the endorsement of payment only cast on the

plaintiff the burden of proving that the debt was still outstanding. In other words, the perception under S. 114 of the Evidence Act in such cases is

only a rebuttable presumption and not a conclusive evidence. The plaintiff therefore could not be non-suited solely on the ground that the original

bond was produced by the defendants.

Even so, I am of the view that the suit is liable to be dismissed. Though the endorsement on the mortgage deed referred to a waiver of interest

out of grace, we find in the registered sale deed executed by defendants 1 to 3 in favour of the 4th defendant on 27-8-1969, a recital to the effect

that the first defendant had paid the interest due on the mortgage up to date. The document was attested by the plaintiff. In fact the evidence is that

both the sale deed and the endorsement on the mortgage were prepared at the same time and the amount that was found due as on the date of sale

was only Rs. 6,500 since the interest due had been paid in full. The learned counsel for the appellant pointed out that the first defendant as D.W. 1

in his evidence stated that the statement in the sale deed that the entire interest had been paid was not correct and that the statement in the

endorsement that the interest was waived out of grace was correct. In view of this statement, the learned counsel for the appellant contended that

there was no payment of interest and the waiver could not be relied on for want of registration. It is true that D.W. 1 has stated that the statement

in the endorsement of discharge was only correct and not the statement in the sale deed. Since the endorsement, as I have already held, is not

admissible in evidence, it is not open to the defendants to rely on that endorsement. Then we are only left with the oral evidence of the defendants

as against the recitals in the registered sale deed. The plaintiff had attested the sale deed and in those circumstances, I am unable to rely on the oral

evidence as against the written statement in the sale deed. I have therefore to take it that there was payment of the interest full up to the date of

endorsement on, which date the principal sum of Rs. 6,500 was also paid. Since the entire amount due under the mortgage thus having been paid,

there is a full discharge and the defendants are not liable to pay any amount even as per the terms of the original mortgage deed itself.

The second appeal accordingly fails and the decrees of the courts below dismissing the suits are confirmed. But there will be no order as to

costs. No leave.

Appeal Dismissed.