Kunchi Pillai vs Sunny Rebella

Govinda Pillai, J.—The suit was on a hypothecation bond Ex. A dated 11-3-1095 executed in favour of Louis the father of the Plaintiff by the 1st Defendant and one Variathu Chandy the father of Defendants 2 to 5. The hypotheca was a property jointly acquired in the name of the two hypothecators. Subsequently, in 1096, there was a partition between these two hypothecators and under this the hypotheca vas given to the share of the second hypothecator Variathu Chandy. This Variathu Chandy had executed a mortgage with possession relating to the hypotheca in favour of the 7th Defendant on 10-3-1102. Ex. I is the document. For the principal and interest due under the bond, the present Plaintiff and his father filed O.S. 709 of 1106 in the Munsiff''s Court of Parur. Both the hypothecators were parties to the same. But the 7th Defendant had not been impleaded in that case. Though the plain till obtained a decree for the principal amount and interest as seen from Ex. D judgment and Ex. E decree in that case, it was not possible for him to proceed against the hypotheca as the 7th Defendant had not been impleaded as a party in that case. The original hypothecatee is dead, and his son in whose favour the decree Ex. E had been passed by the consent of the father filed the present suit on the identical hypotheca bond making the 7th Defendant also a party. The suit was filed on 10-2-1118. Since it was filed more than 12 years after the date of Ex. A, the Plaintiff relied on the ac knowledgment of the liability under Ex. A by the present 1st Defendant in his written statement Ex. C on 20-12-1106 in O.S. 709 of 1106.

The 7th Defendant alone contested and her contentions were that the decree and the execution proceedings in O.S. 709 of 1106 would not be binding on her, and that the suit was barred by limitation. The courts below have concurrently found against the 7th Defendant and decreed the suit.

The only question that arises for consideration in this appeal is whether the acknowledgment of the liability under the debt made by the 1st Defendant in his written statement Ex. C in 1106 after he had completely parted with his interest in the property would be binding on the 7th Defendant who had secured the interest in the property in 1102, that is, four years before the acknowledgment was made.

When this second appeal came up for argument before a Division Bench, it was considered proper to refer the question of the validity of the acknowledgment for decision by a Full Bench as there was considerable conflict of judicial opinion on this question, though the High Courts of Travancore and Cochin had taken the view that the acknowledgment even under the circumstances mentioned above would be valid and binding on the mortgagee like the 7th Defendant.

From the facts mentioned above, it would be seen that the 1st Defendant had parted with all his interest in the hypotheca in 1096, long before he had acknowledged the liability in 1106. He had therefore no interest in the hypotheca after 1096 while he made the acknowledgment. A proper acknowledgment of liability would keep alive the said liability for a further term as prescribed in the Limitation Act. The necessary provision relating to this is in Section 19, Limitation Act, VI of 1100 (Tr.). It is the same as Section 19, Indian Limitation Act so far as Clause 1 and 2 are concerned. The relevant portion in Section 19 (Tr) runs as follows:

Where, before the expiration of the period prescribed for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by some person through whom he derives title or liability or by some person who is, either by operation of law or by contract, entrusted with the general management of the affairs of a family, in so far as such acknowledgment relates to transactions binding on such family, a fresh period of limitation shall be computed from the time when the. acknowledgment was so signed.

In- ''Subrahmanya Iyer v. Ouseph'' 33 Trav LR 237 (A), it was held following the decisions in - ''Krishna Chandra v. Bhairab Chandra'' 32 Cal 1077 (B) and- "Domi Lal Sahu v. Roshan Dobay'' 33 Cal 1278 (C) that, whatever the hypothecator might do with the property hypothecated, the hypothecatee was entitled to ignore such transactions and to look only to the hypothecator for the payment of interest or for making an acknowledgment of the transaction, and that the acknowledgment made by the hypothecator was, therefore, binding on the transferee. Though the question decided in ''33 Trav LR 237'' (A), did not directly arise for consideration before the Full Bench case in-''Subrarnonia Iyer v. Thorhman'' 37 Trav LR 186 (D), their Lordships seem to have doubted the correctness of the decision in - 33 Trav LR 237'' (A). Their Lordships at pages 191 and 192 of 37 Trav LR had mentioned thus:

Another argument advanced by Mr. Subramonia Iyer is that a payment having the effect of taking a case out of the operation of the Law of Limitation is in effect of an acknowledgment of liability, and upon the authority of - ''33 Trav LR 237'' (A)., which related to the legal effect of an acknowledgment, made by a hypothecator who at the date of the acknowledgment had no subsisting title to the property, a conclusion in his favour should be arrived at in this case. We are not sure that the premise, though it may be true under English Law (vide - Harlock v. Ashbarry'' (1802) 19 Ch D 539 (E) is equally true here; but accepting the premise, we feel considerable difficulty in regarding the ruling relied upon as a safe guide. With all respect to the learned Judges who decided that ease, we venture to suggest that as regards the effect of an acknowledgment in similar circumstances, the view advanced by Mookerjee J. in-''Surjiram v. Barhamdeo'' 1 Cal LJ 337 (F) is the correct one.

This observation was in the order of reference and when the case came before the Full Bench it was stated that it was not necessary for their Lordships to express in that case any opinion as to the soundness or otherwise of the decision in - ''33 Trav LR 237 (A), for that case had to be decided on an interpretation of the provisions in Section 20 Limitation Act.

The soundness of the decision in ''33 Trav LR 237'' (A), was again doubted by Anr. Full Bench in - ''Philipose v. Parameswaran'' 1946 Trav LR 497 (G). The decision in-''33 Trav LR 237'' (A) had been followed in a later decision reported in-''Kumaravelu Chettiyir v. Sivan Pillai'' 30 Trav LJ 648 (H). Krishnaswami Aiyar C.J. expressed at page 501 of 1946 Trav LR 497 (G), thus:

All that need be said in the present case is that the question is considerably complicated, and as Lord Atkin said in the Privy Council case ''Much can be said on both sides''. I think it is well that we refrain from expressing any inclinations in respect of this point of limitation. I leave it to be considered when it is raised in proper time.

This matter again came up for consideration before a Division Bench in-''Isahak v. Yohannan Kuruvilla'' 1948 Trav LR 933 (I) to which one of us was a party. The decisions of the Full Bench particularly that reported in - ''30 Trav LJ 648 (H), were in favour of the view that the acknowledgment, even if made by the hypothecator after he had parted with his interest in the hypotheca, would be binding on the assignee. It was therefore held in the case reported in-''1948 Trav L.R. 933'' (I) that the acknowledge by the hypothecator was sufficent to save the limitation bar in respect of both the remedies against the as against the person. That was the view taken by the Cochin High Court also in - ''Lanappan v. Subramania Iyer'' 26 Cochin LR 590 (J). Even though the hypothecate have parted with his right over the property hypothecated, as the law stood in Travancorc, ho had still the personal liability to discharge the debt. So, even if the rammed against the property was barred the creditor could enforce his right against the person of the debtor. But as regards the right of the creditor to proceed against the property by virtue of the acknowledgment made by the debtor after he had parted with his interest in the property, and after the period of limitation from the date of the original transaction there were conflicting decisions in the Indian High Courts. This was set at rest only in 1942 by the Privy Council decision in- ''Bank of Upper India v. Skinner'' AIR 1942 PC 67 (K).

Harington J., and Mookerjee J., in-''1 Cal LJ 337'' (F), held that an acknowledgment by the mortgagor in favour of a prior mortgagee does not preclude a puisne mortgagee whose title accrued before the acknowledgment was given, from relying on the Statute of Limitation as a bar. The proposition here is laid down in wider terms. To what extent the acknowledgment made by a mortgagor regarding the prior mortgage, while having an interest on the mortgaged property, would be binding on puisne mortgage, does not arise here and we advisedly do not express ourselves on that point. We are now considering only the question, whether after parting with the entire interest over the mortgaged or hypothecated property, the mortgagor or hypothecator could, after such transfer, validly acknowledge a debt prior to the date of transfer so as to affect the rights of the transferee to rely on the Statute of Limitation as a bar.

This question came up for consideration before a Full Bench of the Madras High Court in- Pavayi and Others Vs. Palanivela Goundan and Others, Several conflicting decisions on the subject were referred to. It was held that a mortgagor who had lost all interest in the mortgaged property, could not, by an acknowledgment within the meaning of Section 19 or by the payment of interest or principal, within the meaning of Section 20, bind the person on whom his interest had devolved. The Privy Council decision referred to above has laid down the same principle. Lord Atkin at pages 68 and 69 of the report in - '' AIR 1942 PC 67'' (K), has given his reasons as follows:

The question is whether the acknowledgment by a transferor in order to bind the transferee can be given after the transfer of title, or whether the section only applies where the acknowledgment has been made before the transferee has derived his title from the acknowledgor. The matter has been frequently discussed in the Courts in India with conflicting decisions. Their, Lordships have had the advantage of having the principal decisions discussed before them by counsel and have no doubt that much can be said on both sides. But it must be remembered that the section is perfectly general, it is not confined to mortgages: it applies to every form of property moveable and immovable; and it would appear strange that a man in wrongful possession of property may transfer it to a bona fide purchaser and that the latter is not quieted in his possession by the lapse of time, but may be defeated by acknowledgments made without his knowledge by tie person from whom he derived title. This is n doctrine which Lord Westbury in-''Holding v. Lane'' (1863) 1 De GJ&S 122 (M) said leads to very extraordinary and alarming consequences. He was dealing with a suggestion that under the Real Property limitation Act of 1943 an acknowledgment of the mortgagor entitles the first mortgagee to recover ail the arrears of the interest out of the land as against the second and subsequent mortgagees who would otherwise be protected by statute. ''The Court'' he says, is bound by every principle of judicial interpretation to find if possible a construction of the statute which does not involve consequences so inconsistent with natural justice.'' This principle was applied to this very section by Mukerji J. - ''1 CLJ 337 at pp. 343-348'' (F) and their Lordships are prepared to adopt the reasoning of that very learned Judge in the present case. In addition to the analogy used by Mukerji J. of Section 13, CPC there might be adduced the analogy of admissions under the Evidence Act which are binding if made by persons from whom the parties to the suit have derived their interest but only if they are made during the continuance of the interest of the person making the statements. The fact that the statute expressly limits the nature of the admission does not detract from the general proposition that any different result would effect serious injustice. On the whole therefore their Lordships come to the conclusion that the acknowledgments made in this case by the mortgagors after they had parted with all their interest to the purchaser do not bind the purchaser; and that the High Court came to a correct conclusion on tins point.

The decisions in the Indian High Courts after 1942 are practically uniform and since the Statute of Limitation is now the same for all the High Courts in India, it is only proper that we also fall in a line with the views taken by the other High Courts. Whatever might have been the prevailing idea taken by the High Courts of the Travancore and Cochin States, we would respectfully follow the line of reasoning given in the Privy Council case of 1942 already referred to above. We hold that an acknowledgment of liability by the mortgagor after having parted with the equity of redemption possessed by him in respect of the property mortgaged will not be a valid acknowledgment so as to bind the assignee.

Applying the principle thus laid down, we have to hold that the present suit is barred as against the Plaintiff''s right against the hypotheca. The Plaintiff can in this case enforce only the liability against the person of the 1st Defendant. To the above extent in regard to the remedy against the hypotheca we set aside the decree of the lower court and allow this appeal. Since the courts below were only following the decisions of the High Court, we do not think that the Appellant can get her costs here or in the courts below. The result would be that the suit would stand dismissed against the hypotheca and the 7th Defendant without costs.